The Lens
How (Not) to Fight Inflation
Stephanie Kelton | Professor of Public Policy and Economics at Stony Brook University, formerly Democrats' chief economist on the staff of the U.S. Senate Budget Committee, and an economic adviser to the 2016 presidential campaign of Senator Bernie Sanders
https://stephaniekelton.substack.com/p/how-not-to-fight-inflation
“ Unfortunately, our economic system is a lot more complicated.”
ReplyDeleteLOL no it’s not….
“ But there’s a reason your thermostat is so dependable. It’s called science.”
ReplyDeleteSo just convert the discipline over to Science from its current Art and then it will become dependable too…
So just convert the discipline over to Science from its current Art and then it will become dependable too…
ReplyDeletePerhaps you could write the function.
Mechanical thermostats are dependable. One minute you're freezing, five minutes later you're sweating.
ReplyDelete“ Perhaps you could write the function.”
ReplyDeletePerhaps you’d could “write the function” of the semiconductor industry?
(Your statement doesn’t make sense)
Functional equations are a component of Science … Science is a methodology…
Pete thermostat don’t exist to make you comfortable they exist to switch your HVAC system on and off..,
ReplyDeleteWe don't need a thermostat for the economy, we need a weather compensator and a system stabiliser with a large modulation range.
ReplyDeleteI wonder what that might be.
The language that is coming out of the KC crew makes me wonder if they have followed Lerner up the Monetary Policy dead end.
“ thermostat don’t exist to make you comfortable they exist to switch your HVAC system on and off..,”
ReplyDeleteLOL! Sure you have thermostats ONLY for that reason. Amazing what one person can write even when having time to contemplate it.
That’s what they do… they are a temperature activated switch …
ReplyDeleteIf he is uncomfortable in his house it not due to the thermostat it’s due to distributional aspects of his HVAC system design…
He may need separate zones … or a relocation of the thermostat etc…
And this is employment of another ineffective analogy (btw not a Metaphor Prof Hale) from the MMT academics…
Let’s see “scoreboard” “myth” “thermostat” how many more until they figure out figurative language isn’t going to work?
No mention of the unprecedented $985b govt spending in March 2021… current cash basis fiscal SURPLUS … etc…
Even if you have a fiscal theory of “inflation!” don’t you have to eventually look at the fiscal quantitatively?
Mike is THE ONLY one doing this…
These people allegedly have a fiscal theory of “inflation” and yet they never look at fiscal…
Instead they try to use figurative language to no effect…
I don’t get it…
I have a baseboard heater controlled by a thermostat.
ReplyDeleteAn electronic thermostat would provide a narrower temperature range.
Matt, the "function" of monetarism is the equation of exchange, an identity. They interpret it causally to turn it into a function.
ReplyDeleteFriedman took V and Q to be constant so that P was the dependent variable and M the independent. Didn't work so well, so they changed the assumptions to use interest rate to influence V, velocity (liquidity preference) being dependent on the cost of borrowing. Didn't work much better because the cost of borrowing is not a primary factor in liquidity preference. Rather, it is historical conditions. So "confidence" and ""expectations, "uncertainty" etc. (psychological factors) were introduced into monetarism.
SK is saying that the causal factors are more complicated than monetarism assumes. These factors are historical and psychological rather than natural so different conditions will be operative over time. There is no general case like “Inflation is always and everywhere a monetary phenomenon in the sense that it is and can be produced only by a more rapid increase in the quantity of money than in output." — Friedman (1970) The Counter-Revolution in Monetary Theory. Special cases abound, often as a result of quantity (Q) rather than money (M).
So far no one has come up with a "scientific" solution that is predictive. Same with exchange rates. Of course, if one could do that, one would be a very wealthy person and that is why the Big Finance employs so many top physicists and mathematicians, paying them far more than they could make elsewhere. If they have a solution, they aren't talking.
“ is and can be produced only by a more rapid increase in the quantity of money”
ReplyDeleteLOL it reduces the regulatory position of Depositories and causes a asset price crash …
They’re doing it RIGHT NOW…
Equity prices are down 3% THIS MORNING…
These monetarist morons are worried about prices being up 7% IN A WHOLE YEAR…
We’re down 10% in the last MONTH…
“ These factors are historical and psychological rather than natural”
ReplyDeleteThey are FINANCIAL Tom…. They are simply FINANCIAL factors…
Why did they SUSPEND the regulations if it doesn’t matter?
ReplyDeleteWhy?
If Pete’s house is too hot in winter so he turns the thermostat off then temp drops to where he is comfortable what dies he think “gee! It didn’t matter that I turned it off!” ? When he just turned it off?
I don’t think so…
Why has no one been able to write a function that explains price stability and exchange rate fluctuation causally in such as way as to enable precise prediction?
ReplyDeleteWhat is the scientific definition of "uncertainty" in finance. (Even stochastic functions don't work very well.)
BTW, Brian Romanchuk has explained the math behind all this, e.g, in terms of control theory, in posts that have been linked to here at MNE.
“ Why has no one been able to write a function ”
ReplyDeleteBecause the people working in this area are not trained to do that or even think like that…
They try to use figurative language like “take away the punch bowl!” and analogies, metaphors, etc…
“Inflation!” , “money!” “money supply!”, etc..
Properly trained technicians don’t think or act like that…
Then, please enlighten us to the causal function that predicts "inflation" to counter my claim that there is none.
ReplyDeleteI don't buy your view that the "right people" are available but not being hired to solve the problem "scientifically" when Wall Street is mightily invested in hiring the best scientific and mathematical talent available.
I'm all ears for a Goldilocks function.
ReplyDeleteYou can’t even define “inflation!”…
ReplyDeleteYou can’t even define “inflation!”…
ReplyDeleteThat's the point. What is the "scientific" definition when it is not an observable?
"Inflation" is defined arbitrarily and the criteria change over time historically.
No one has figured out a satisfactory solution, even stochastic. A satisfactory solution would be one that reliably works to inform either policy or financial decision making, these being the major areas of interests. Monetarists won't admit this. They are still pursuing the holy grail of monetary rules.
There are no reliable fiscal rules either. Another snipe hunt.
These matters are condition dependent, that is, they are historical rather than natural. So it is not about discovering some invariant structure that can be expressed formally in equations tbat provide causal explanation in terms of a theory in which they are embedded.
Right Tom
ReplyDeleteRising food or gas prices are termed inflation but rising house, stock or crypto prices are called appreciation. It’s claimed without any sense of uncertainty that more govt spending feeds inflation and should be stopped….. maybe what you are calling inflation is actually driving the spending….. in fact I only spend what price the vendor posts …. He doesn’t know how much I have. The vendor can have any number of reasons to raise his prices some of which are illegitimate or gouging in my view but most are what I would consider rational responses to changes in real economic factors of production. If only we could get the Fed to bump the rates up to 5% we would take care of this!
The law reads: “stable prices”, no mention of the figure of speech “inflation!”…
ReplyDeleteAnd even that is complementary to the former “maximum employment”…
iow the law reads “maximum employment WITH stable prices”, the secondary “stable prices” complement the primary “maximum employment”..
And then Art degree morons say “dual mandate!” … when the conjunction is WITH not AND….
They will actually reword it when they speak they will say “low unemployment and low inflation!” you can see them do this all the time…
It’s as bad as Christendumb with their “trinity!”…
with
ReplyDelete/wiT͟H,wiTH/
Learn to pronounce
preposition
preposition: with
1.
accompanied by (another person or thing).
"a nice steak with a bottle of red wine"
Similar:
accompanied by
in the company of
escorted by
2.
possessing (something) as a feature or accompaniment.
It doesn’t imply duality…
Yeah check that it’s not even a conjunction it’s a preposition in the first place…
ReplyDeleteSo they should be working towards getting us back to 162M working (or more) FIRST, and THEN work towards stable prices to complement that previously achieved employment condition once achieved…
Instead they are giving priority to the accompanying condition… ie complete unqualified morons,.,
So if you look at it used in the sentence above they are forgoing the steak and going directly to the bottle of red wine… probably Mogen-David or Thunderbird..,