## Saturday, April 30, 2011

### ue update

"As of March, about 14 million people were unemployed... At the time..., about 8.5 million were receiving some kind of unemployment payments... That leaves about 5.5 million people unemployed without benefits, up 1.4 million from a year earlier. ..."

### job rents versus talent or skill rents

job rents are position based

like a ceo that by implicit arrangement gets 10% of expected medium run corporate profits

### simple observation # 137899

when an elected official or officials
claim they're "taking  effective action " to address  society wide problem n

most folks lack the quantitative framework  sense of scale etc
ie the informal loose  model to figure out
whether this action  has any chance  at effectiveness

any chance to make  a signifigant difference

this  mass  incapacity to evaluate a policy
can segment itself
and still exist
simply by   operating with added octane  at a number of higher levels of relative citizen  sophistication

you get  the ascending  great chain of clown being

in the end
can we rely on the  ballot box
to provide  majoritarian self interets   feed back  to steer  policy

in short

does our  periodic duopoly choice mechanism work  for ...the people ???

doe it even curb anti majoritarian state action ???

if that anti majoritarian state action is deemed  by policy circles
to be crucial to  the sustemance of corporate hegemony

in a word

NYET !!!!!!

the biggest ignorance is of course about the global market structure
in products and funds
and the hegemonic role of  trans nat free range corporations

why even academic macro nauts like pk
one's that know better
refuse to isolate the MNC policy pov
before speculating on the motives behind apparently
"anti majoritarian  welfare "  in say .. cyclical macro policy
or tax and transfer modification

---------------

tedious maxim :

forget the struggle of the ideologians

as a first cut
take on
why this policy path might benefit a powerful policy bending group or class

example trap and stag

paine patent pending thesis :

no forex moves
no fast recovery of job markets
no adequate transfer system pay outs
for the planet's   major advanced  national market systems

stag - boom  contrasting absorption rates only
to  adjustments  chronic imbalances in  cross  N/S hemi trade and fund flows

boom south stag north
this is better
for the medium and long run  as well as short run international corporate profits

and  if we face a trade off

because

corporate profit margins  are higher on cross border and overseas busimess

----------------
gedanken Rx... for enlightenment

find  opr build  an open macro model
with specified international firms IFs
with n bordered local market
give these  IFs pricing power and border crossing ability
that allows  them  to capture
what in under specified models
pass thru  as vague  "national gains from trade "
or at best
"national factor gains from trade "

then starting with a stylized "present structure  and condition " sim run
with each alternative policy path
then look for the IF profit  maxer  over the m periods

if you want to look at national factor effects of various policies kool
but must use  a well defined economic class
like the  IFs  "stockholders"
or  greater refinement
like the national skill or  skill less gains

even a sim of   income gains ..changes
to a simple unified labor factor has its virtues
despite submerged distributional complexity
so long as niche and positional  job rent receivers
are removed first

crass mechanical  most dollars for us  determinism

is better then  a review and evaluation
of class sponsored ideologians clashing by ....rights

.

### the trap is crap

the liquidity trap is really a credit ration contraction

if you talk like joe stig about a damaged set of credit  channels
you are playing cover up
even if without intention

the existing private channels "could" loan to various applicants
they don't
because  their  narrow horizon own bottom profit calc cum default  uncertainty
in a time like now of stagged effective demand
kills loans that in the event would create the very effective demand conditions to justify themselves

co ordination problem

really all these post crisis bs moves from a purely technical model maximizer agent pov
cry out for default protection from "above "
much like the implicit protection the big bail made flesh
the toxic bubble inside the big boys
was  nasty in consequence
but that's not relevent eh ??

nothing prevents using same  means to a higher not lower end

### see the sedate red line

now unit labor costs are  the real  policy impacting " tracked  data stream"
at least by the fed's number cruncher elves
of course they are
what is controled is a wage price spiral

avoid circularity here
whether indeed the first move is a price move or a wage move it perpetuates itself
in the absence of  sufficient credit flow de - accommodation

interestingly
inquiring public eyes
and even  deeper proding ---maybe even sceptical --
cross comparing causal fit operations
using credit policy and the various possible "governing " data streams
even if conducted by independent  "researchers"

prolly can't torture out a signifigant difference
in fit

i suspect
the diff is not all that discern  able

if we take any core  price change numbers however barbered

---and we have a plethora of  barber shops clipping out  shape charged  data streams --

we'll  prolly never  isolate the unit labor cost data stream
convincingly as THE prime mover  of credit flow policy
particularly
if we restrict ourselves to  data since say
the on set of post volcker dammerung
ie  the great moderation and on thru the  fall 08 crisis and
the  following contraction and present  trap and stag act

given the speed of adjustment on the price side this follows

only when wages stag even as core  prices accelerate could we "see" the unit labor cost  determination  emerge
as motivator from the price clusters

such an event hasn't as yet occured only commodity prices are sufficiently unhinged from
domestic  labor costs
perhaps import prices rising and flowing thru the domestic final product price structure
say after relentless changes in forex
could trick out this truth :

its about nominal wage control stupid

## Friday, April 29, 2011

the dispersal of the service workers
over large areas
breaks their power of resistence

while concentration increases that of industrial workers

has Clio turned this upside down
in the globalized market place

non traded products seem  now a better basis for rent sharing
with certain sectors and strata of the job class
in the metropole   eh ??

## Thursday, April 28, 2011

### viewing interest payments on pub debt as a transfer system

who is the transfer  going to
today ??

the graph a few stops below here is pre crisis  debt freshet

obviously we could  tax these issues at point and time of issue
and  allow  the  amount of withheld funds to be used as a credit  against  other taxes owed
this could be fractionalized and targeted on the credit side
to what ever part of that tax we wished and to which ever payees we wish

conceptually we create a ricardian equivalence
if we tax  away the income from interest   on borrowings
ie for those subject to the 100% witholding and with zero credit
we  in effect create  for the holders
default risk free
zero coupon bonds
that decay at the rate of inflation
and for uncle a expending zero cost source of funds
that does not require monetization and can be sold to qualified credit  entitlers

ya ya some logical holes here no viable market could emerge to support such issues
..just sketching folks ...just doodling and sketching
trying to divise a system where rentiers as a class unwilling to pay adequate  taxes
and substitutiing loans to gubmint instead get caught on the back side while not losing their safe store of value

### fortunately no change in the prevailing direction but not improvement in wind speeds

:April 27, 2011, 3:16 pm

## Tuesday, April 26, 2011

### envelope theorem

Envelope theorem
Consider an arbitrary maximization (or minimization) problem where the objective function $f(\bold x,\bold r)$ depends on some parameters $\bold r$:
$f^*(\bold r) = \max_{\bold x} f(\bold x,\bold r)\,$
The function $f^*(\bold r)$ is the problem's optimal-value function — it gives the maximized (or minimized) value of the objective function $f(\bold x,\bold r)$ as a function of its parameters $\bold r$.
Let $\bold x^*(\bold r)$ be the (arg max) value of $\bold x$, expressed in terms of the parameters, that solves the optimisation problem, so that $f^*(\bold r) = f(\bold x^*(\bold r), \bold r)$. The envelope theorem tells us how $f^*(\bold r)$ changes as a parameter changes, namely:
$\frac{d\ f^*(\bold r)}{d\ r_i} = \frac{\partial f(\bold x,\bold r)}{ \partial r_i} \Bigg|_{\bold x = \bold x^*(\bold r)}$
That is, the derivative of $f^*(\bold r)$ with respect to ri is given by the partial derivative of $f(\bold x,\bold r)$ with respect to ri, holding $\bold x$ fixed, and then evaluating at the optimal choice $\bold x = \bold x^*(\bold r)$.

## General envelope theorem

There also exists a version of the theorem, called the general envelope theorem, used in constrained optimisation problems which relates the partial derivatives of the optimal-value function to the partial derivatives of the Lagrangian function.
We are considering the following optimisation problem in formulating the theorem (max may be replaced by min, and all results still hold):
$\max_{\bold x} f(\bold x,\bold r) \;\; s.t. \;\; \bold g(\bold x,\bold r) = \bold 0$
Which gives the Lagrangian function:
$\mathcal{L}(\bold x,\bold r) = f(\bold x,\bold r) - \boldsymbol{\lambda} \cdot \bold g(\bold x,\bold r)$
Where:
$\boldsymbol{\lambda} = (\lambda_{1},\dots,\lambda_{n})$
$\bold g(\bold x,\bold r) = (g_{1}(\bold x,\bold r),\dots,g_{n}(\bold x,\bold r))$
$\bold 0 = (0,\dots,0) \in \mathbb{R}^n$
$\cdot$ is the dot product
Then the general envelope theorem is:
$\frac{d f^*(\bold r)}{d r_i} = \frac{\partial \mathcal{L}(\bold x,\bold r)}{\partial r_i} \Bigg|_{ \bold x = \bold x^*(\bold r), \ \boldsymbol{\lambda} = \boldsymbol{\lambda}(\bold r) }$
Note that the Lagrange multipliers $\boldsymbol{\lambda}$ are treated as constants during differentiation of the Lagrangian function, then their values as functions of the parameters are substituted in afterwards.

## Sunday, April 24, 2011

### the dollar palladin of arbitrage profit questing

note where the damage was done

clintons second term
undone by bush prior to the flight to safety during the recent credit crisis

## Saturday, April 23, 2011

### usually as simple as finding this

$(\triangle q )(\triangle p)$

### green-stig theorem -- ubiquitous pareto hierarchies--

$u^{h} ( x^{h} , z^{h}) , h = 1,....,H$

where

$x^{h} = ( x_{1}^{h}, x\bar{}^{h} )$

$x_{1}^{h} + q . \bar{x}^{h\leq }I^{h} + \sum _{F}a^{h}^{f}.\pi ^{f}$
blah blah blah
...............................................
after lots more specification

---to be slipped in later ---
Arrow type welfare theorems about spontaneous market pareto optima only hold
in this model

IF IF IF

$\prod \equiv \sum _{F}\pi _{z}^{f}\frac{dz^{f}}{dt}$

equals

$B^{t\equiv }\sum _{H}E_{z}^{h}\frac{dz^{h}}{dt}$

ie

$\frac{dR}{dt}=\left ( \prod -B^{t} \right )=0$

## Friday, April 22, 2011

### concentrate concentrate the law of moses and the prophets

Table 1. Percentage of Sales for Four Largest Firms in Selected U.S. Retail Industries
 Industry (NAICS code) 1992 1997 2002 2007 Food & beverage stores (445) 15.4 18.3 28.2 27.7 Health & personal care stores (446) 24.7 39.1 45.7 54.4 General merchandise stores (452) 47.3 55.9 65.6 73.2 Supermarkets (44511) 18 20.8 32.5 32 Book stores (451211) 41.3 54.1 65.6 71 Computer & software stores (443120) 26.2 34.9 52.5 73.1

## Thursday, April 21, 2011

### uncle milty won

the upshot of the uncle milty offensive circa 67-79
was a switch to credit policy driven macro

is this a horror
the death of fiscal macro ??
well obviously the recent zero bound  contraint has shown the limits of credit
with the loan out string
now in push mode
but were greater grounds lost

i mean if ...if you can induce firms and households to borrow enough
is that any worse macro wise then uncle  borrowing more

well yes
because if for no other reason
uncle's debt level and rate of climb
can't trigger a valid self fulling default panic

-----------
the hideous public goods versus private goods fetish of most pwogs
was nevef a good reason to prefer juicing uncles borrowing over
juicing the borrowings
of homer
and
Fuckuverymuch  inc

### new money versus new bonds notes iou's etc

this distinction has to do with one point
the payments grid neutral nature of money
all the others have a future foot print in the payments grid
in fact that's all they are

money paid out by the issuer of legal tender ie the   (CB)
casts no shadow on the future at all

money  completely present and potentially immortal
if not removed by the CB in exchange for  some instrument
that does add to the payment grid
and  is indeed quite finite in its foot print

------------

the beauty of the payments grid
it is what it  is
regardless of movements in the various price levels around it

that is unless it has some payment streams have  indexed obligation
which render them  neutral to the potential impact of  price level change
of the indexed price level

in the case of price level change thru endogeonous money growth
ie  thru net credit creation in a fractional reserve system
or  exogenous infusions ie monetizing actions  by the CB
or of course the reserve of either of these

interestingly we have no sub zero index adjustments usually

### when invisible agency runs your model

will we ever get past factors to firms in cross border trade theory
for that matter will we ever really have a cross border firm based flow of funds/credit  theory

### incentives and tax theory

the twin gag liners of econ con

## Monday, April 18, 2011

### my plan

.

Do you think that I'm crazy?
Out of my mind?
Do you think that I creep in the night
And sleep in a phone booth?

Lemme take a minute &
tell you my plan
Lemme take a minute & tell who I am
If it doesn't show,
Think you better know
I'm another person

Do you think that my pants are too tight?
Do you think that I'm creepy?
Lemme take a minute &
tell you my plan
Lemme take a minute & tell who I am
If it doesn't show
Think you better know
I'm another person

better look around before
you say you don't care
the length of my hair
How would you survive
If you were alive
Shitty little person?

We are the other people
We are the other people
We are the other people
You're the other people too
Found a way to get to you

Lemme take a minute &
tell you my plan
Lemme take a minute & tell who I am
If it doesn't show
Think you better know
I'm another person

## Wednesday, April 13, 2011

### basic clash of models resumes

plenty for the government to do
or not to do

as far as the range of  academic main stream models

ultimately because
models  can co exist with each other

like angels
models can squeeze together
on almost anything in almost any number

at the point where model meets policy
and policy must take action..
there's the rub

there it's always
to do or not to do
even if  the question is only
how much

the fork in the road never disappears

the no contact tournaments
yes they are fair parallels

between two merlins like
say taylor and krugman
we have enough of a conflict
to keep snarls and nips alive.... for now

what  dastardly models unbuilt
lurk on the far margins
only the shadow of clio knows

### open minds about close economies

if there's one outcome wildly attacked by the cosmos its

emerging market economies must not close in on themselves
not just economically but politically

open for business and open for non violent interventions

"my my what big teeth you have grandma ..."
keep an open mind about closed societies

recall given the internal nature of the decisive contradictions
missing that point is
the 1984 fallacy

closed borders can't close interiors

there are no  ultimately stable
closed social orbits

## Monday, April 11, 2011

### history drives out equilibrium

market systems though creatures  of time and place are not like buildings
they are always in motion always changing

like oral languages

more later

### as long as people are starving somewhere on earth

cosmo humanitarians can' t  be overly bothered
about low stagnating wage rates and high unemployment here

ameliorate ...at the margin

### one task taxes/subsidies thru the two way street of the transfer system does better then households

extract any funds  necessary to reach optimal  social accumulation goals
or inject any funds necessay to reach socially optimal consumption levels

we don't need no damn  home front  prudence here
between the system state based transfer system and the system state based credit system

we can automate the systemic adjustment to many  agent actions and  transactions
that have external effects
think of the interest rate as a pigou tax or subsidy a registration of the externality effect
of any  units choice of expenditure  on    consumption or investment  goods
in particular durable goods

obviously a tax/subsidy  on expenditures is a full symetrical system that a borrowing rate isn't
unless the borrowing rate can be both charge in one system state and  discount in another

### bottom twenty blues ...more or less true every where in the advanced market sections of the planet

"Households in the top 20 percent of the income distribution spend 11.6 percent of total expenditures on food and energy, which adds up to 7.9 percent of disposable income. For the bottom 20 percent these shares rise to 20.4 percent of expenditures and a whopping 44.1 percent of after-tax income!"

these are recent US  numbers but ...

the point ??
for the bottom 20%
the transfer system is critical
consider this

approximately  20% of E  = 45% of  D I *

right ??

do  the math

---* " percent of after tax income " =  DI ---

without these elastiic contingent earned  income triggered  transfer payment mechanisms
dropping into the bottom 20
would  feel like a belly flop into a pool ...from 15   feet up

### max hardon strikes one for intertemporal trade

"The global imbalances are widely seen as a problem, especially by the US government and US economists. Sometimes they are even seen as a cause of the financial crisis (Suominen 2010). "

like the note of airy expository delivery ???

"Yet ..."

"...such imbalances – i.e. current-account surpluses and deficits – reflect international intertemporal trade, and there should be gains from such trade as from “ordinary” trade, on the basis of standard arguments for free trade (see Obstfeld and Rogoff 1996, Chapter 1)."

there you have it ..why in a model   market earth  where something called "intertemporal tadre" ...trade
is real ie a done deal  contracted  and barter based too i assume ....
ie not simple  a choice process to contract for some trade now with unit agent  expectational  notions of trade tomorrow and tomorrow and tomorrow.. all quite collectively unresolved beyond the barest futures markets and proxy markets ie forex and national long run interest rates ..
oh i could go on but reification triumphs right here in the front hall eh ...like lots of good magic tricks the fix
is  in from jump street

" Furthermore..."

"... an advantage of the present system is that an international general equilibrium is established which yields a set of current-account imbalances that do not require international central planning or coordination, but which respond to particular circumstances in different countries. "

wonderful ..the lack of overt central "coordination" is not a basis for concern in the face of chronic spontaneous "bop imbalances " but a feature of the systems iemergent ptovidential feature
the miracle of the  planets markets.... once liberated ie  the borders  opened  wide to exchanges
of products and ....assets comrades assets
entendez vous
"The system depends, of course, on a relatively free international capital market."

depends ??? sounds like the degree of relative capital market free ness might be the stinger
on this moral tail eh ??

the  emeritus meistro  calls his ".. approach .."
" a neoclassical way of looking at the international system "

"... has to be subject to qualifications. These qualifications provide possible rationales for the common concern with global imbalances."

"A key issue is that funds from countries that are net savers called the savings-glut countries (where savings exceed domestic investment) have been lent to borrowers (notably the US) who have used these funds unwisely, namely for current consumption and for investment that is not “fruitful.” "

unfruitful  C and I ????

"The main form of “unfruitful” investment has been in excess housing construction. "

don't you mean house lots here ..how could we seriously over build housing it self ??

now after that wag of calvin's finger the shoulda

"The funds coming from the savings-glut countries should have financed fruitful investment in the US and elsewhere."

besides house lots  there's lending " to the US government, financing a war and tax cuts. "

"the result "

"...the US, have failed to build up resources out of which interest, dividends, and necessary repayments can be made."
we didn't spend our international borrowings to  build some domestic future export producing capacity

" Yet such debt service or returns from purchases of equity are an essential feature of intertemporal trade."

and apparently they don't emerge out of any inner necessity of this global trading and investing process eh ??

but now we begin to turn down the long long home stretch

"Above all, we have to explain why more funds did not go to finance  ..."

get your belt buckle tight as hell here

".. fruitful investment, whether in the US or elsewhere, notably in developing countries. "
ie we at least in part needed to take those incoming funds and buy /build productive capacity in the emerging world
lets say thats all we needed to do  fruitful investments are fruitful investments if we own em in the long run the where of it doesn't matter to ...us ...us ...US ..err meaning  the amerikan investor class

now we see just how much this is about fruitful over there investment by US
"... In developing countries there is often an aversion to incur current-account deficits for two reasons – namely the instability of capital inflows and the dislike of real appreciations. These are understandable motives, but have created a problem when there was a worldwide search for sound investments to place the funds coming from the savings-glut countries."

get that  the savings glut countries ...not US face barriers to investment in the emerging markets because...well the inflows lead to ...outflows hot money wise
and yes the glut is in hot money ..right ??? hot money chasing liquid investment  ie investment in obligatory paper denominated in some one elses currency or ...your own

the pivot
obligations of one zones agents  to another zones agents  in  the other or a third zones currency

that said
now we get ...keynes !!!
"A useful concept, originating with Keynes, is the “paradox of thrift”. This idea suggests that an increase in savings motivated by the admirable Victorian virtue of prudence – which involves foregoing consumption today for the sake of more consumption tomorrow – does not necessarily lead to greater capacity to consume tomorrow. It may just lead to a current decline in aggregate demand."
closed system keynes  circa 1947 samuelson !!!!

but watch

" Extended to the world economy"
ie going to a network of inter connected market sustems with heterogenious characteristics etc
not the simplicity of the closed  K system

" it helps " that is the keynes C model i guess
"to explain the common criticisms of those countries, notably China, that have had large current-account surpluses."
they aren't spendng enough on exports

" But the increase in net savings by the savings-glut countries did not actually lead to a decline in worldwide aggregate demand, as the simple Keynesian approach would imply. "

"Rather it led to borrowing for consumption and for unfruitful investment."

yikes  this is muddle eh
aggregate demand isn't necessarily inadequate its just not fruitful
keynes just got his walking papers  exit stage left
"Hence"
hence indeed

"the effect was indeed adverse. " but not keynesian eh ??
just the result of unfruitful expenditure
looked at inter temporally that is

the climactic proposition:
"The recognition of this adverse effect, as well as various well-known inefficiencies in the world’s financial sector, led to the world financial crisis."
recognition of this effect ??

you mean suddenly collective market expectations revalued the  future outcome of existing
international
and that hit the global asset markets  and that led to contracting  trade in products ??

"The basic neoclassical model really requires increased net savings to lead – induced by the decline in the real interest rate – to borrowing for more fruitful investment. "

i think we got you on that ..the key is fruitful
ie productive of future  gain ...profit ...surplus value
just to de mystify it here

"There was a failure of the world’s financial sector in turning increased savings into fruitful investment"

why was there a car crash at the coner of hollywood and rose ??

failure to drive correctly

" and that meant -- to repeat-- that the savings glut led to a debt crisis. The crisis was thus caused by an interaction of the particular global imbalances that led to low interest rates and high credit availability with the failure of the financial sector."

the circle is not unwinding  if you borrow real monety and buy lots that will lose mucho value post purchase and blow the rest on beer and wide screen s for sports watching ....you got nothing more on the future income side to service the added debt ??

"Here we should just mention that if there had been an increase in US savings rather than in other countries, there would also have been a decline in world interest rates, but this would have actually reduced the US current-account deficit and thus reduced (and not increased) the global imbalances.
"

in other briefer words
if it had   all  gone down different  if uncle and his people had ben the planets biggest savers not biggest borrowers and over consumers
then it would have worked out  lot different

"The basic problem has been not the global imbalances as such, but rather the sharp and prolonged decline in real interest rates, when combined with the inadequacies of the financial sector."

oh no a sudden swerve  here ..warning there's an emertus at the wheel here
not a swerve into on coming traffic just off an exit ramp and onto a utility road  not running
exactly parallel to the fruitful investmant turnpike  in fact its more like a weighing station without the scales

now the basic problem don't exist along the  frutful non frutful axis

now its the low real rated funds themselves
presumably thrown up by the trade imbalances
flowing into a waco system of international  hi fi fun houses
and  i guess blowing balloons that burst

"Going back to what actually happened in the period that ended in 2008, we might then ask: “were net savings of the savings-glut countries too high or were sound, fruitful investments in the rest of the world too low?”
gosh now we're off on another quest is x too high or y too low ?
often that has no signifigant answer

"The particular global imbalances caused by the increase in savings (plus declines in investment in some cases) in the savings-glut countries led to the decline in the world real interest rates and high credit availability. This provided an investment opportunity for the rest of the world. But the inefficiency of the world’s financial sector and other factors led to an inadequate response in fruitful investment in the rest of the world, notably the US. "
for what now the fourth time we get this ??

to be fair  a restatement is part of communication eh ??
i'll only note "and other factors " that can no doubt cover a lot of unmapped ground

then comes this:

"As noted above, one of the other factors was the reluctance of some developing countries with good investment opportunities to run current-account deficits."

" There could also have been more fruitful investment – notably in infrastructure – by governments, especially in the US."
infrastructure including the merit class  system of pyramids no doubt

health education research
the arts and parks even

of course he's a  citizen haut borgeois
a goo goo a public sector investment guy not just a corporate  private investment hack
there's fruit trees to be grown in the pub sec too
starting with human capital
produced in part right there at the hopkins

"I would also add here that the reluctance to run current-account deficits by various smaller economies – whether Latin American, Asian or European – is thoroughly understandable when we take note of the instability of capital inflows that have caused so many crises, notably the Asian crisis of 1997-98 but also the current European ones. And this instability is yet another manifestation of a weakness in the world’s financial sector."

parting shot at
the WFS
implict we need a freer but more stable WFS to emerge out of emergence

how ???

## Sunday, April 10, 2011

### ziffle's idiocy

larry calls for more equity less debt
as if this was either a stylistic option or a moral failing

debt  build up ie fast flowing universal credit
accelerates development

and consquent high leverage concentrates  and amplifies the profit rates  of enterprise

----------------
his counter to public utility models for the credit system

"look at gosplan "

he is more clever about  fully socialized public enterprise  and unit level externalities
without realizing the own bottom fallacy that high equity ap[proximates
ie less and less equity is the progressive motion of the system
just as less and less cash sales versus credit sales is progress

### different employments

"The whole of the advantages and disadvantages of the different employments of labour and stock must, in the same neighbourhood, be either perfectly equal or continually tending to equality. If in the same neighbourhood, there was any employment evidently either more or less advantageous than the rest, so many people would crowd into it in the one case, and so many would desert it in the other, that its advantages would soon return to the level of other employments"

just labor and stock in the  same  neighborhood  how concise  L and  K

with that evil  triade of abstractions
pandora's box is prised open
and yet the shade of a dynamic races thru the tableau of equal outcomes

"continually tending to equality "

the driver of equity is the profits of arbitrage

note :
there is no innovation here no product differentiation  no  process innovation
no continual race to escape the morphing processs  from unique product to commodity
nor any  sense of how well  the continuing race  to rub out profits closes the gap
between the transaction  price reality  with its   quasi rent surplus  and the  grail price
the true instantaneous as if all markets cleared edgeworth core  price set
the rule  of value  over the price of that commodity

between the continual  relative movements among the prices of marketed  commodity products
the  lowering and risng  of  one against the other  and the gains from trade in any one commodity product

what if the system convulses if the general rate of profit passes zero
and as a result of that convulsion profits are restored
the comvulsion that is the final blow to the positivity of too many   quasi rent  profits
produces its opposite
the return ...with time and suffering of ...quasi rent profits of enterprise

and we no where speak of wage markets eh

## Saturday, April 9, 2011

### the human intention

We are creatures of our built in intentionality
Its inevitable that we have purposes its hard wiring
We're complex and contradictory enough as a mentating self  motivating passion producing activistic creature
That we are not only at cross purposes at all times but we can super impose a rationalization
Over our actions that is at odds even opposed to our deeper dominant intentions

Now we get to human intention as a social product of our interactions as unit intenders
A collectively shared overt or covert group intention
Ie unserialized
an intention a priori collective in it's structure even if modeled in each unit and often inconsistently modeled

### my old eureka circa 1995

during my twenty year intellectual slumber
i had a few bright awakenings
one was what amounts to stochastic agent generated economies
which might have emergent laws like statistical mechanics

if agents with intentions are extensively like particles are essentially

and they aren't obviously
--------------

my eureka was simply to have m  inner agent decision models that were distributed into n agents heads
the agents get an initial bundle of commodities assets jobs skills and money and theres a set of existing prices and wages

### the great strateeegerry of the neoclassical GET

the GET models are all about unspecfied dynamics
ie winners and losers that are darlings or victims of sheer fortune not the  merit or demerit of their own effort skill and wisdom

not that this isn't in the back of their minds they know market systems have to solve themselves by groping a bit
and sure wind falls happen
sometimes the wind drops a safe full of money on your door step

get to panglosville ...somehow
lesson must be
at the end of the day
markets
if left to their own devices more or less
are  always and everywhere a  B of APS  phenomenon

### john rawls trumps lou rawls

the veil of impersonality
in a system of justice doesn't care about the hairs on every head as part of unique creatures
ie what a personal god would care about

nope this justice is nothing personal

if the market system produces a certain specified set of individual outcxome
to hell with who gets what ....specifically eh ???

gods mysterious ways are his careles ways made  into goodness and light

back up system that re personalizes everrything
judgement dau heaven hell and the whole razzle dazzle of saved and unsaved immortal souls
immortalk state ever after state despite any discount will obvious flood out the finite misery of this existence

### market globes have bounded spaces

the theory of exchange takes on an intrinsic spacial dimension of regions can border themselves and articulate local  all market differences

the basics of gem are simple
a sherical market world all inter connected where firms can go any where to buy sell  produce or extract

all that exists in the origanal edenic egg is firms and  located labor  facilities and resources

### money income and utlity

its a great magic trick of econ con to conflate these two
a cardinal utlity ie a phlogiston with the humble market based  cash income of a household

the medium of exchange has certain very useful characteristics
that even a well behaved utlity function cardinal or ordinal lacks

money value = utility value

much mischief starts with this only semi concious  act
that the firm which is motivated by net income max
is somehow analogous to a household that is utliity maximizing
takes a certain rationalized stylized "realism " and makes it dissapear
the for proft firm mediating exchange gets vanished
in particular  if the market system can  zero out  profits at equilibrium
even if equilibrium is only at the end of a path of accumulation

firms are reduced to the socially  minimzed cost of transactions
the transactions that are producing by exchange pareto improving
maybe even socially maximized  prior constrained aggregate utlity

now if in the market place one can only bring ones laboring capacity
skilled or not
then pareto improvement occurs at any hiring above some dreadful minimum

## Friday, April 8, 2011

### what is socialism ?

Socialism in it's many morphs and various different class  based conceptions
fleshes out rather compactly

iobviously quite conciously
socialism is an  attempt by some class or other
to use the state to complete or  to thwart
the necessary remaining world historical tasks of The bourgeois stage of class cloven social evolution
tasks that lead one way or another toward class cloven society's  own sublation ... class-less society

Ie
it is a means  by implementaion of  legal force
to progress socially ie by other means then pure volitional private property based capitalism

In fact despite this intention
it is capitalism   in other guises

capitalism pretending to be not itself
or not seeing itself  for what it is or will become
capitalism
pretending  or tricking itself in some cases
into thinking its being anti capitalism

...begging the big question...

this goes for  any form of socialism other then the prole dictatorship form of socialism
which by exception as agent of the wage class might embody ...might ..
world historical measures that accelerate the trip time to communism

sum up
in the last analysis most socialism is simply or complexly capitalism by other means
means that  in time come back around on themselves and become eventually
once again   really the same means

such is clio's rubber railed  road system
elastic but only finitely so

### lesson

use of analogy here never got to the clear one to one map
between the two formal models elements
that is until the analogy  fell apart
because a market system is not analogous to a classical thermo dynamic ideal gas system
its more like granular systems that are indeed path dependent hysterisus ridden etc etc

the intent is clear  the researchers wanted certain propertties found in the classical gas to hold in a real free market system

because it made that free market system

Bof APS

### the final dope out

"Though some aspects
of the utility/potential correspondence
can be salvaged ...."

"the lack of a natural cardinalization for general utilities
reflects the deeper fact that welfare functions simply do
not exist for general path-dependent economies."

and real economiies ARE  path dependent

### more flaw

for all the equilibria of arbitrarily composed economies.
Such a condition is equivalent to requiring that equilibria
be maxima of "

a global cardinalized welfare function

ie

the sum of all agent utilities in the economy is arrived at by adding up comensurate pools of utiles
consumed or stored by the constituent maximizing units

"The fatal flaw in the Walrasian correspondence was
the assumption that cardinal forms for utilities could be
constructed"

and
:"a universal addition rule for unit utilities"  existed

just not so eh
at least not beyond crazy imaginary
substance  abuse
utility cardinalize able utility
amounts to  postulating  a unicorn

### walras's conflation and bad analogy

walras  according to dunc :

d foley sez wrong !!!

his thermo-con paper:
"A mechanical analogue in
economics would require not only forces, but dynamical
equivalents to inertia."

a mechanical system at rest ie with all forces initially in balance absent a shock willl stay in balance
ie  in equilibrium ie at  rest
and will stay at rest a mechanical system in motion will stay in motion

you gotta go thermal if you want an analogy to utility based exchange systems
fisher found that out thanks to mentor gibbs :

"thermodynamics, and not mechanics, is the correct physical theory
to explain how disequilibrium systems can converge to equilibrium
and remain there."

the original thermo con trickster  mr W
was actually  a  simple newtonian mechanist
without a dynamic theory to get him to equilibrium
and on top of that  operating with a nasty conflation of his the unit level  the trader
and the aggregate level the market system and its total  utility state

come now statistical mechanics

but another errorfisher thinks his agents are analogous to  innocent stocastic objects
particles insideless  balls  in stochastic  motion
AND
Tto the deterministic state arrived at by these particles in mutual and interacting motion
walras/fishers  unit was an optimizing utiliton a simple  maximizer of a substance
it stores or eats
loose in a  free for all  vol-trade  market opportunity full of other  such concious maximizer units

"The potential minimized at physical equilibria is not the energy,
as was believed in Walras’s time, but a quantity called free energy
which also receives contributions from the entropy"

"Fisher was ...drawing analogies of the economic agent to both stochastic
and deterministic physical objects at the same time"

"utility .. a measurable
quantity analogous to potential energy in mechanics"

## Thursday, April 7, 2011

### foley on path dependent market motion

dunc's a careful guy and a wonderland type too
this paper worries the thermo-util axis pretty hard
but he [produces the essential result
there's nothing remotely like a  one product one price rule in  actual  market driving
and there's no way to form a unique and robust social welfare function
in anything remotely like a realistic exchange system

this adds fill to the skeptical blitz or relative blitz that has over run the samuelson paradigm

yes paul's best work and his heart  remained with keynes and macro management
but did he press hard enough in the 70's and 80's ???

at any rate his foundations that choild prodigy magnum o
has long since  drifted  off the continent of the dismal science
like a calved ice berg
and as for fellow in law kenny straight arrow
he's the  old toothless eskimo  floating away on that   calf

what does it profit you to be a socialist and never get past fixed point proofs
and the red queens deck of cards

going down with the  ss rigorous proof   ??

err melting away toward  the  equator  ??

i wonder at 90 is he  too out of it to notice
his waste ???

not that the younger of the older generations  has much to crow about

take my main man
cousin it
joe   lamb chop  stiglitz
progressive poli econ  happy sad sack

why the guy's  stared into the teeth  of so many  genteel neck tied audiences
and said basically the same damn thing to em  so many times
he's become like that  cement pancho they used to have at  taco bell drive thru

" welcome too dah bell  ladieeese and yentelmennnss todays espechals are ... so jew want to order  now ??
den yust speeek into my mouwwwth "

## Wednesday, April 6, 2011

### the advance of political economy after class antagonism is patent

famously marx drew a conceptual as well as  empirical line
between  the pro active  progressive science stage of bourgois political economics
and the  reactionary regressive purely  ideologically motivated stage of the same class project
called bourgeois political economics

the  empiracal line
br and ar
before and after ricardo
the conceptual line
the point where the two great and final classes of cloven society
self conciously face off
in open struggle  perhaps france in the summer of 1848
perhaps the  late 1820's in jolly old england

example of the two combined
the ricardian worker poli econs of the 1820-30's

but we've had a lot more bourgeois political economics since then

well first there's the bi forcation
into
pure ideological three card montee  scam  --bastiat personfies this --
and the reconcile the unreconcliable  school ---js mill --
both of these tendencies over lap with km and the near end of his own investigations
presumeably proletarian political economy or is that recipes for cook shops of the future and thus prole class activity is limited to critiques and agit prop

but since capital  1867
we have the deepening of the original  discoveries  of the classical bourgeois school of poli econ
the formalizations that at least  in micro economics are considered the ruling  neo classical  paradigm
these innovations that slightly over lap with km at the far end  do not represent an advance over the classicals  merely a  deepening of the results

a process that now after another hundred years of fresh starts and  impass stops
ie points where old knots lare untied and yet lead  on to new knots
in the plenum of strings within strings
that goes both toward a bigger string  higher more general string structure  and a smaller more specific and fine  string  structure
--note this mixed string metaphor ---
since jevons we had one big even  the great depression and one big guy keynes

the big event of my life time is of course a lot of little events between say 1970 and 1985
that put  the final and complete end to  the neo classical  micro paradigm
nearly exactly one hundred years after its inaugural triumphs

but it leaves guys like stiglitz  akerloff the makers of this destructive set of discoveries
in a position much like js mill i think trying to reconcil the unreconcilable
where his generations bastiats lucas barro simply panglos on
its as fun to be the bastiat in this comedia del arte as its grim to be the js mill
obviously eaxctly opposing temporaments are best suited to each project
hence the slap happy glow of cousin joe
and the hemroidal wince of   doc lucas

# Moody's Seasoned Baa Corporate Bond Yield (BAA)

### by sammo request

http://www.thenation.com/article/159288/beyond-austerity

http://en.wikipedia.org/wiki/Chartalism
chartalism it used to be called
this guy is one of the so called new chartalists
or modern monetary theorists

consequently he hasn't a worry about peak debt
a sovereign state with debt payable entirely  in its own costlessly augmentable  un gold tied currency
can never go bankrupt if it don't want to
this means he hasn't idiotic long run burdens of short term gaping deficits to drag down his mind
as it does even the best non party line non neo liberal/neo classical poli econs ie the new post samuelson eclectics  like joe stiglitz
chumps that  still retain unexamined attachments to prudent fiscal finance for uncle
http://www.vanityfair.com/society/features/2011/05/top-one-percent-201105

mostly out of inflation fear of course

but he hasn't much else on  his mind either on that front
he's a one trick pony
ie
"The greatest lie—endlessly repeated by neoliberal economists and uncritically echoed by the mainstream media—is the claim that if governments cut their spending, the private sector will “crowd in” to fill the gap. British Prime Minister David Cameron’s austerity campaign and President Obama’s foreshadowed budget cuts are built around these lies."

true enough but ...
oh ya there's this line you've seen  else

"In the past, real wages grew in line with productivity, ensuring that firms could realize their expected profits via sales. With real wages lagging well behind productivity growth, a new way had to be found to keep workers consuming. The trick was found in the rise of “financial engineering,” which pushed ever increasing debt onto the household sector"

that begs the question why not use uncle's transfer system as is done now ??

behind this is a notion of greed pushing ever higher the rate of exploitation
as if that itself is a cyclical animal spirit
some how subdued by the great depression the world at war and the subsequent  pax americana
hmmm
i think it had more to do with changes in the global structure of capitalism
but that's for another day

in the ike ewra rads claimed the chronic shortage of investment against nominal "acc\umulation"
was relieved by kold war military budgets
that were nice  employment builders and effective demand maintainers

but no more that cry not after say 1975

btw
this  type of  magic bullet crusader  usually fails to notice open systems like national economies
are operating in a web of trading nations and even if their currency is still taken in exchange for products
their foreign exchange rate and their inevitable  trade gap  creates another set of macro problems
often called de industrialization

solving domestic under employment by simply stimulating demand thru massive deficit financing
can often make this problem far worse

in fact you notice he does have inflation and possibly exchange rates in the back of his head
as he  pops in that pinko favorite

"I would introduce an open-ended public employment program—a Job Guarantee—that offers a job at a living (minimum) wage to anyone who wants to work but cannot find employment. These jobs would “hire off the bottom,” in the sense that minimum wages are not in competition with the market-sector wage structure. By not competing with the private market, the Job Guarantee would avoid the inflationary tendencies of old-fashioned Keynesianism, which attempted to maintain full capacity utilization by “hiring off the top” (making purchases at market prices and competing for resources with all other demand elements). Job Guarantee workers would enjoy stable incomes, and their increased spending would boost confidence throughout the economy and underpin a private-spending recovery. There is no reason the government could not afford this program. The labor is available for work, and the government can easily supply the jobs. There were no questions asked when the government, in the early days of the crisis, instantly provided billions for the banks. Let me repeat: the government has no financial constraint on its spending and should immediately allocate funds to a massive job-creation program."

yup ...the uncle job gulag

despite not needing it according to pure MMT
err in a closed system mate
but open -ness
it comes from a back door limit on market driven employment created here not by import explosion
but by high job demand by firms leading to a wage price spiral ala the infamous  70's
birth place of the mass adherence to the nairu line taboo
which is buried in this bit of fandango

the gulag is kool because

" minimum wages are not in competition with the market-sector wage structure"
oddly he fails to notice making that gulag wage a living wage would indeed lift all market earned wages right ??

" By not competing with the private market," dubious point
" the Job Guarantee would avoid the inflationary tendencies of old-fashioned Keynesianism"

here it comes
" which attempted to maintain full capacity utilization by “hiring off the top” (making purchases at market prices and competing for resources with all other demand elements)."
this  conflates demand pull inflation something impossible  with the type of capacity slack thst would trigger macro policy in the first place
with wage push inflation which happens because of corporate price cost pass thru power
he is buying into the nairu gig
without admiting it if he even clearly understands it
nairu woulsd keep the market the rate of unemployment just high enough to prevent an acceration of wage rates
now as a good rad matey
billy boy here wants to soak up  the reserve army so he offers them a iron floor wage rate job
that he flat out guarantees won't set of a wage explosion
cause he's drawing form the bottom not the top

instead of injecting enough  purchasing power into the system thru the transfer system ala 12 cylinder macro ala wild bill vickrey
letting tight markets pull wages where they may thhis plan has uncle's contrived  jobster gulag soak up the surplus labor pool
wpa a go go
and all i repeat without triggering a wage boom

how ??
its possible but only by  making sure the jobster gulag is no place any one wants to be
both wage rate wise and i suspect  conditions wise

obviously the diect necessity here
is to design and imlement a mechanism with the ability to regulate inflation set the price levl quarter by quarter
as a key and essential  part of the full  advanced solution that this guy tries to run from
ie
enter the mark up market along with the trade balancing dollar exchange rate

neither semms to be arrows in his quiver

solve  the fear of run away inflation and de industrialization
that  lurk like ghouls  in the hearts of white hats like joe stgilitz and paul krugman
and is why they never get to bill vickrey land

### more halls hiring hall chitter

"Job value is strongly pro-cyclical. New workers pay their employers|in the form of a wage
below their marginal products|more in good times, such as the middle of the decade of
the 2000s, and less during slumps, such as 2001 to 2003 and 2008 to 2011."

job value
value of jobsters output minus cost of jobster input

a rough out of the locally extracted surplus
the local part of the exploitation rate ..right

nice and simply  eh ???

and pro cyclical

### the voluntary is sacred

what is this nash equilibrium shit ??

well once partiues each  get there at once they don't voluntarily want something else
they accept this as the best possible looked at from inside

under normal neo classical neo liberal market conditions
if a  third party intervenes trying to  create improved outcomes
its cano only be done only  by  use of force  (tax ) or bribe  ( subsidy )

they either impose on the rest of us to pay for the bribe
or on the parties at hand or both

on net
they either help  us or the parties at hand  r hurt us or the parties at hand
or in certain circumstance they hurt both
to help both
to  get to win win
that requires  extra ordinary conditions

to show infact these win wins  are low hanging fruit
held form us only by taboo
would be to blow up the system

### when no one can find an exchange that will improve her position

http://www.princeton.edu/economics/seminar-schedule-by-prog/macros11/pdfs/FPFU032411.pdf

this paper suggest we attach a search model to the jobs market to end the following short cut to policy

"The product-market-only models that have been the exclusive mode of analysis of the
zero lower bound to date make no claim to describe an equilibrium. Rather, they view the
bound that keeps the interest rate too high as causing excess supply in the current product
market. In the excess-supply view, rms could hire unemployed workers for a wage low
enough to make production pro table. For reasons not explained in the models, firms are
unable to nd customers for the resulting output. The diagnosis that these models describe
an outcome that is not an equilibrium would be going too far. Rather, the models lack
su cient description of what is preventing rms from hiring workers or expanding sales to
understand how the models relate to the concept of equilibrium."

"The standard general definition of equilibrium
is the absence of unilateral or bilateral opportunities
for one or a pair of agents to improve their payoff(s)
The solution to the model developed in this paper satisfies this definition.
No firm or worker has an unexploited opportunity for self-improvement and all firm-worker
and firm-customer relationships are bilaterally efficient."

"The DMP model is one
way to augment the model in a way that is clear about frictions that limit an expansion of
employment, but other approaches might answer the question as well"

no keynesian free lunch

" In the conditions created by a binding lower bound on the interest rate, firms face constraints on the amount they can sell. To incorporate the DMP analysis of the labor market in
that setting, one must take a stand on the benefit that accrues to a constrained firm by hiring
another worker. I'm not aware that the issues involved in characterizing the benefit have
yet been thought through the literature on the labor-market aspects of zero-lower-bound
macroeconomics is nonexistent at this writing."

dare i eat this peach ??

## Sunday, April 3, 2011

### potus cea report on rebalancing and us export charge

http://www.whitehouse.gov/sites/default/files/microsites/2011_erp_chapter4.pdf

its called

it includes

"robust enforcement " of  "market access"

and

a continued "unusually large "  gap in EM vs DM expansion rates
--close to five points --
7.0 versus 2.5

---average prior thirty years
4.5 versus 2.8

recall 2.8 is an average over the cycle rate
the present 2.5 is a recovery rate !!!

### Exports, Growth Prospects and Rebalancing

Exports in Context
Anybody who follows forecasts of GDP growth for 2011Q1 will notice that over time, estimates have been revised down (this is true for Macroeconomic Advisers, for instance). The dimmed prospects for GDP growth throws in high relief the importance of net exports. From the WSJ, "Foreign Shocks Temper America's Export-Led Rebound":
To an extent unique in post-World War II history, the U.S. economy's climb out of recession has been led by selling crops, natural resources and manufactured goods to the rest of the world.
...
Now that important engine for U.S. growth—the rest of the world—is damping the improving outlook. The world's No. 3 economy, Japan, is reeling from an earthquake and nuclear crisis. Unrest in the Middle East has sent oil prices—and global anxiety—soaring. Fast-growing China, anxious about inflation, and other emerging markets are trying to tap the brakes. And fiscal strain looms over Europe.
The contribution of export spending to GPD growth in an accounting sense (q/q, SAAR) is illustrated in Figure 1.

Figure 1: Real GDP growth, q/q SAAR (black bars) and contributions to GDP growth from exports (blue bars) and from imports (red bars). NBER defined recession dates shaded gray. Source: BEA, 2010Q4 third release, and NBER. The importance of exports was also highlighted in Chapter 4 of the recently released Economic Report of the President. The report notes (p. 102):
U.S. export growth also benefits from changes in relative prices caused by faster inflation in growing emerging markets because faster inflation abroad means U.S. goods are cheaper on world markets relative to goods from these countries. These price and growth relationships suggest that if the United States is to double exports, an overwhelming portion of that new export growth will come from faster-growing emerging and developing economies. Figure 4-12 shows the share of projected growth of U.S. nominal exports by region using IMF forecasts for GDP and price growth in different regions.
Here is Figure 4-12.

Figure 4-12 from Economic Report of the President, 2011, Ch. 4. These projections depend on projections of growth abroad, and the elasticity of [nominal] export demand with respect to income.
How Big Are Export Elasticities Now?
These projections are based upon elasticites of [nominal] exports with respect to growth of around 2, and one of the cited sources is Chinn (2005). Those estimates were based upon time series data up to 2001Q2, [and pertain to real exports]. My subsequent work (see [1] and [2]) has taken into account potentially important supply side factors (that is, the quantity of exports depends on foreign demand as well as domestic supply). I obtain some slightly lower estimates of income elasticities imposing equality on supply and demand factors, but that result is suspect given the co-trending nature of rest-of-world growth and proxy measures for US capacity. Moreover, the fact that the [nominal export] elasticity estimates cited in the ERP are around two for cross section-based estimates does suggest that the elasticities are fairly high (the ERP notes that dropping Singapore pushes up the income elasticity to three).
In any case, I wanted to re-investigate this question, using the most recent data, up through 2010Q4. Figure 2 shows log real exports and log real rest-of-world GDP, rebased to 0 in 1999Q1.

Figure 2: Log real exports, in Ch.2005$SAAR (blue line) and log real rest-of-world GDP, measured as a Divisia index (red line). Source: BEA, 2010Q4 third release; Federal Reserve up to 2009, updated using data from Economist thereafter; and author's calculations. Note: Extrapolation incorporates GDP for 80% of US exports. Notice that real exports are 18.4% above their trough in 2009Q2 (and 1.1% above their pre-recession peak in 2008Q2), while rest-of-world GDP was up by 15.2% relative to that same period. Nominal exports are 26.7% above trough levels; this figure is of interest given the President’s goal of doubling exports, as discussed in this post. In order to more formally assess the export-income relationship, I disaggregated into goods and services. For each, I estimated the following error correction model with up to two lags. (The approach follows that outlined in this post.) Δ exp t = β 0 + φ exp t-1 + β 1 y t-1 + β 2 r t-1 + γ 0 Δ exp t-1 + γ 1 Δ exp t-2 + γ 2 Δ y *t-1 + γ 3 Δ y *t-2 + γ 4 Δ r t-1 + γ 5 Δ r t-2 + u t For goods exports, only one lag of each variable was necessary. I find that the long run elasticity of goods exports over the 1975Q1-2010Q4 period is 1.84 (while the long run price elasticity is 0.92). Both coefficients are statistically significantly different from zero at conventional levels, using robust standard errors. The error correction specification seems adequate, with the adjusted-R2 = 0.34, the standard error of regression at 0.024, and the usual tests for serial correlation in residuals failing to reject at conventional levels (Q(4), Q(8), LM test with 2 lags). The long run elasticity of services exports over the 1975Q1-2010Q4 period is 1.59 (while the long run price elasticity is 0.49). In this case, only the long run income coefficient is statistically significantly different from zero at conventional levels, using robust standard errors. The error correction specification seems a bit less successful, with the adjusted-R2 = 0.13, the standard error of regression at 0.028, and the usual tests for serial correlation in residuals failing to reject at conventional levels (Q(4), Q(8), LM test with 2 lags). Dealing with the supply capacity is difficult. One could try to measure the size of the goods exports capacity using the capital stock. I’ve tried to capture the trend using manufacturing output. This variable is of course endogenous, but if one is trying to get the long run effect, might not be a problem. One way to see if statistically manufacturing production is endogenous with respect to the cointegrating vector is to see if log manufacturing production is weakly exogenous. I estimate a VEC(3) (consistent with a VAR specification with 4 lags), and check the statistical significance of the reversion coefficient on manufacturing production. A likelihood ratio test restricting the reversion coefficient to be zero fails to reject. Re-estimating the goods export equation yields a slightly lower income elasticity, of 1.3. On the other hand, while the supply elasticity is positive (as anticipated) at 0.62, the long run coefficient is not statistically significant. (The adjusted R2 rises only slightly to 0.36.). Do these results imply an elasticity of [nominal exports] of 2 is too high? Using this error correction specification's point estimates, the top of the one standard error band places the long run coefficient at 2.3 [for real exports], and the bottom at 0.7; in other words, a demand elasticity of 2 is still quite plausible given the imprecision of the estimates. Cross-checking, I used dynamic OLS (allowing in a linear time trend, two leads and lags). This leads to a point estimate of 1.74, with (long run) standard error of 0.80, once again easily encompassing the 2.0 estimate [and since prices typically rise, easily validates the assumption of a nominal export elasticity of 2]. Limitations of the Preceding Analysis Even though I've broken down exports into goods and services, clearly one could disaggregate further. In this paper, I do; the conclusions are not particularly clear, given the sensitivity of results to trends. The income and price elasticities vary over categories (and income elasticities can easily exceed 2, depending on the assumptions regarding time trends). In addition, the composition of exports is changing over time, which implies changes in the sensitivity of trade flows to both income and exchange rates. Figure 3 illustrates the changes in the (nominal) flows of exports by category, since 2009Q2. Figure 3: Change in exports, in billions of$, SAAR, relative to 2009Q2. Source: BEA, 2010Q4 third release. It's hard to say what this changing composition of exports implies for the aggregate income elasticity. To the extent that services are a rising share of total exports, the income elasticity might decline in aggregate (goods and services). On the other hand, the composition of services is shifting toward other private services (and away from travel and passenger fares). If service sectors abroad are liberalized, one could see measured income elasticities rise.
Global Rebalancing and Partial Equilibrium Analysis
There is a tendency to dismiss the partial equilibrium/static approach that is central when discussing the impacts of policies on trade flows. I agree that these types of elasticities are only part of the story, when one wants to discuss the prospects for global rebalancing. Aggregate saving (both public and private) and investment also matter; however, it would be wrong to take those as variables as strictly exogenous. Focus on those aggregates can also lead to analytical mis-steps. As Manoj Pradhan (Morgan Stanley) and Alan Taylor (Morgan Stanley and UC Davis) noted in an provocative blogpost yesterday:
we see lasting consequences beyond those unfolding in the immediate aftermath of the financial crisis:
• A huge rise in demand for capital in EMs with a more moderate increase in DMs. Talk of a savings glut or an investment drought may recede. The global real interest rate is likely to rise.
• Less saving flows out of EM economies. Growth prospects are the main driver but risk premia for newly resilient EMs may fall. If investment demand is muted in DMs, and saving flat, the shift is weaker in DMs. Global imbalances moderate, reinforcing the trends after the crisis.
• These current account shifts cannot be an "immaculate transfer" without real exchange rate adjustment. Recent real appreciation of EMs took the form of relative inflation and managed currencies (the latter creating political distractions). But EMs are likely to absorb further adjustment through nominal appreciation, given a triple whammy of cyclical reflation, growth differentials pushing nontradable inflation and oil/commodity price shocks. [Emphasis added -- mdc]
Tracing out how income and relative price changes translates concretely into changes in flows requires some insight on these elasticities, even when acknowledging the partial nature of the analysis.
In addition, to the extent that there are nominal rigidities, monetary shocks could induce short run movements in trade flows that are partially unrelated to changes in savings and investment.
Note: Minor edits in [brackets], 4/1/2011.
Posted by Menzie Chinn at March 30, 2011 03:02 PM

### design yourself a better market system

"finding situations where a market is failing — often, a place that most people wouldn’t even recognize as a market — and making it work better. ..."

the interactions of pricing decisions themselves can cause system wide failure ...eh ??
we call it inflation
and treat it as if its fire and we're  spider monkeys not humans

we face this ...all the time
its not just my bete noir
its in one sense the whole ball of wax

the class impacts explain the irrationality of our market world itself

in simple:

underemployment of productive capacity

-- in particular human resources ---

profit  motivated  market mediated and sustained
unit level own bottom supported  decentralized price setting production systems
chronically run with excessive slack
even with the super imposition of a pervasive credit system

in the end this this anarchy of pricing
makes it practically   necessary
to crawl on all fours
just to avoid a pricing state
that runs away from itself

and to think
this pervasive problem could be eliminated
with a little market design ...if implemented

market based production systems that go sub optimal because
credit agents over seeing the system
know that if  hyper credit mechanisms are not throttled
if the system is pushed by its credit flows  beyond certain
sluggish rates of reproduction
they'll "blow themselves up"

in production systems  that aren't about "how much each unit can profit "
one often finds  designers are hired  to hit the drafting boards
build a better mouse trap

but ...not if its the whole damn market economy itself

or even one huge sub system like ...health care
or commodity pricing
ie markets based on natural resource extraction
or bigger still the interface between
the domestic production system
and product imports
or
the system and product exports
or credit flows between currency zones
or simple accross borders ..etc etc
mechanism design needs to go after
whole hogs
not
simply sticking to a few low hanging pork chops

## Saturday, April 2, 2011

### nowhere's ville

Employment to Population Ratio

### pk is reverting to cyclops macro

"... some people find this hard to understand — perhaps because they don’t want to understand — but people like me have never claimed that fiscal expansion is always and everywhere the right policy, even in response to recession."

pk what about the automatic stablizers ??  that's fiscal side macro no ??
are they always by divine providence  just right in their contribution  to counter cyclical policy ??

" Nor are other arguments, like the argument that falling wages reduce, not increase, unemployment, universal."
this  covers a multitude of  graces and sins eh ??

" All of the unorthodox policy recommendations and conclusions are contingent on the economy being in a liquidity trap  in which short-run nominal interest rates are up against the zero lower bound and can’t go lower."
in other words if loans could have payment schedules that could be arbitrarily lower then full nominal pay back ...
corporate and household spending could never get hung up on some credit rationing reef  like its on now ??

amazing
no trade gap constraints ...no bop issues ..nothing a high enough negative real rate couldn't fix

" liquidity-trap conditions are rare; in fact, they’ve only happened twice in US history. Unfortunately, we’re living in one of those episodes right now."

double amazing

only twice would classic keynes be applicable

yikes what a horror he's reverting to neo liberalism's use the policy rate its the nutz
for  all "normal "  macro driving conditions
like the entire interval between 1946 thru 2007