mirror mirror

)

triumph of the corporate will

on a lower spending track ???

now show me the sudden declining rate of growth circa 1973

deleveraging amway householders

 

input hours time their wage rate ???

so what is VA a vector of units x the prices and fees and wages and borrow rates and lease rates

always units and rates
old rates compared to new rates
last period units compared to this period units
composite units recomposited are new units not existent last period

if in the recombination of  elemental units additial usefulness emerges ???
who caputres the expression of that added use value as captured in a higher price ie producer surplus
rather then in consumer surplus

and even if extruded at "cost"  thru one transaction node how about extrusion all the way to the final products surplus realized in consumption by the final consumer ???
ie as the commodity form is disolved into  not reproduction of "labor power " but mere over plus surplus
luxury ???

late ike to barry

b4 ronnie and ever since reagan it might be  partitioned
the morning in america share climb
from what
around both sides of  62 to  nicking the bottom of  64 as early as 60  but  always well under 65
but come morning in america
---usury properlled ??-- a nearly unbroken rise    to plus 70
 and held there more or less since the arrival of the baby bush

------------------------------
new housing expenditures ??

the health cost distributed

Share of health care spenders	Cumulative share of US medical spending
Top 1%	30%
Top 5%	58%
Top 10%	72%
Top 30%	90%
Total population	100%

the universal language of a plan or the incoherent unintelligable babble of markets voiced

the parallels between these two great social contrivances
markets and written languages
are unendingly diverting and filled with fruitful analogy

the tower project damned  to doom
 by its artificially segmented willfully partitioned
ultimately mutually  un intelligable cacophony

viva gosplan II

the next leap
the next essay in social re-totalization

likely as bold and  no  doubt as hazardous as the last

but there is no choice but to greatly leap again across the dark unknown
no way else to discover
the deeper truths of our future's  right and righeous path
the truths essential that only leaps and their attendent
 practical failures and short falls reveal
in the process
building the new us out of the existing we



the bold mad scientist stumbling forward
thru one frankensten monster after another

okay
looking back
yes we can project a far far straighter path
clean of blood and tragedy and farce

a path decidely not taken
but now ridiculously  visible in hind sight
  all the way up to here today
from those first eves and adams one hundred millenia ago

but looking on....looking as we must look forward
and with faith hope and charity
ought we not to  expect a crooked twisted backward swooping course
much like we indeed did trod that original and alas only real time
we travelled  cross the past's unreturnable timescape

  behind us
 and between us and our originating parents
 is a existence in motion
thru 5 thousand  essentially
un mutated generations
each agency the work
of  one original natural complex composite set of  organismic conditions
that yet miracle of miracles
produced out of themselves a thousand   cultural transitions

a thousand !!! disntict  cracked totalizations
to get  us  from  scattered forest or savanah bands
 to the urbanite  class cloven  mega formations of today

   from mother nature's
  inceptional   contradictory makings of us 
what amazing outputs

a thousand brave new worlds each inside the last

if we had a constant short fall of effective demand

then deficit dollars  would over time convert  from expenditures and transfers
to interest payments but continue to fill the ED gap

uncle would become the bailiff of a class of risk averse rentiers funds foundations  and institutions

institutional entrepreneurs

abba lerner's definition of realytic economists

MAP as market based anti DIS -inflation plan

the warrants of course run the other way  when the macronauts at the helm want higher inflation
under  that regime
 those firms reducing unit  prices or simply not increasing them enough  period to period
ie end up with a "delta" that is below the  period's  GPLC ( the general price level change  )
must BUY  warrants from those who EXCEED the GPLC

tale of two "economies"

...

MARK UP MARKETS FACE THE UNITS PROBLEM

value added taxes don't care what combo of p's and q's make up a firms va
but the mark up market warrant match does

what's to stop firm level  p and q fudging ???

one has the prior periods declared unit pricing
and this periods declared unit pricing
and one has the two periods patterns of unit inputs and outputs
all this can be hooked into the vendors and customers "numbers "

a massive input output  firm  to firm matrix emerges

can computers flag unusual changes  in "real  "imputs  and outputs ???

at any rate step one has to be a brutal penalty for fraud

compelling ???

krug gets to the real policy control target : wage rate change

"Headline prices actually down, as predicted, but core inflation running above the Fed target

 about that core: it’s important to make a distinction between core-as-concept and core-as-usually-measured.

The concept is that of inertial prices, which are set for extended periods and can get into a leapfrogging pattern of sustained inflation that’s hard to undo."

 The usual measure is just consumer prices less food and energy.

 it’s clear that core-as-measured prices are “adulterated” by commodity prices.
 Looking at the forest instead of the trees


and in particular

NOTING THAT WAGES ARE STILL FLAT

 it’s hard to see an inflation problem looming here. "

qed

altig ...what ????

"The Beveridge curve appears to have shifted out over time, meaning that the amount of unemployment relative to the number of job openings has increased over the past several years relative to the patterns of the decade or so prior to the beginning of this recovery. "


"This shift in the Beveridge curve is usually interpreted as representing a change in the efficiency with which workers looking for jobs are matched with employers looking to fill jobs "

what ????
we have a huge imbalance
a horrid B ratio
and its not effective demand driving it ???
its inefficiency ???
and or
poor job to skill match ups ??

what's in the water cooler down there hoss ???
--------------------
"There is a debate about whether the recent shift in the Beveridge curve
                                is a normal cyclical feature of recoveries"

debate ???
why the sentence makes no sense
are you saying over the employment cycle
the ratio oughta stay constant ???
simply bob up and down along some line ???
what is it about thses numbers
you find worthy of debate ???

now one might look at employment cycles versus employment cycles
to see how the change in the ratios over the cycle compare
cycle versus cycle
but you ain't got a cycle here yet pard
the hot house agonizing over
is this huge jobless army structural ??
pure misdirection
plain and simple
and
its hard to imagine you take it seriously

ny fed blog tells all

http://libertystreeteconomics.newyorkfed.org/2011/07/would-a-stronger-renminbi-narrow-the-us-china-trade-imbalance.html

message
pay no attention to exchange rates

let differential national "growth " rates rebalance trade

the forex arbitrage must be  maintained


"We find that a stronger renminbi would have a relatively small near-term impact
on the U.S. bilateral trade deficit with China and an even more modest impact on the overall U.S. deficit..
......we think that the gap will shrink.... primarily as a consequence of the high rate of economic growth in China"

the dream of a perfect mechanism

the market as perfect mechanism ???

mark up markets have merely a distributive task
the target is centrally  determined
in the sumner system

  absolute prices set   freely by firms
get guessed at as to outcome by this sumners dollar futures market

scott sumner's money supply rule

"The Fed  defines  the dollar as a given fraction of 12- or 24-month forward nominal GDP, and make dollars convertible into futures contracts at the target price."


" If the public expected NGDP to veer off target, purchases and sales of these contracts would automatically adjust the money supply and interest rates in such a way as to move expected NGDP back on target."

". The public, not policymakers in Washington, would determine the level of the money supply and interest rates most consistent with a stable economy."

taylor rule follies

andy harmless on  Taylor  rules :

1. It’s not really a rule at all. The Taylor rule depends on an estimate of potential output. In practice, most of the discretion that goes into central banking is in the estimate of potential output. Even “discretionary” central bank policy is effectively constrained by the consensus of what would be considered reasonable policy actions, and any of those actions can be rationalized by changing your assumption about potential output. Usually, a central bank that has committed to following a “strict” Taylor rule has roughly the same set of options available as one that is ostensibly operating entirely on its own discretion.
2. It doesn’t self-correct for missed inflation rates. Since the inflation rate in the Taylor rule is over the previous four quarters, the rule “forgets” any inflation that happened more than four quarters ago. This is a problem for four reasons:
   
   • It leaves the price level indeterminate in the long run, thus interfering with long-term nominal contracting and decisions that involve prices in the distant future.
   • It leaves the central bank without an effective tool to reverse deflation when the expected deflation rate exceeds the natural interest rate.
   • It reduces the credibility of central bank attempts to bring down high inflation rates, because the bank always promises to forgive itself when it fails.
   • It aggravates the “convexity” problem described below, because the central bank effectively ignores small deviations from its inflation target, even when they accumulate.
3. It doesn’t allow for convexity in the short-run Philips curve. If the estimate of potential output is too low, for example, and the coefficient on output is sufficiently low, then, if the short-run Philips curve is convex, the central bank will allow output to persist below potential output for a long time before “realizing” that it has made an error. In the extreme case, where the short-run Phillips curve is L-shaped, the central bank may allow actual output to be permanently lower than potential output. More generally, the convexity problem can be aggravated by hysteresis effects, in which lower actual output leads to lower potential output, so that the central bank’s wrong estimate of potential output becomes a (permanently) self-fulfilling prophecy.
4. It can prescribe a negative interest rate target, which is impossible to implement. This appears to have been the case for at least part of 2009 and 2010, although there is disagreement about the details.

So how do we fix these problems? I suggest the following solutions:

1. Adopt a fixed method for estimating potential output. (One might allow future changes to the method, but they should be implemented only with a long lag: otherwise, they’ll interfere with the central bank’s credibility, since they can be used to rationalize discretionary policy changes.) Since I like simplicity, I suggest the following method: take the level of actual output in the 4th quarter of 2007 (when most estimates have the US near its potential) and increase it at an annual rate of 3% (the approximate historical growth rate of output) in perpetuity.
2. Replace the target inflation term with a target price level term. In other words, express it as a deviation from a target price level that rises over time by the target inflation rate. To be clear what I mean by the “target inflation term,” take Taylor’s original equation
   r = p + .5y + .5(p - 2) + 2 (where p refers to the inflation rate)
   and note that I am referring to the “p – 2” term but not to the initial “p” term, which is not really a target but part of the definition of the instrument (an approximation of the real interest rate). In my new formulation, “p – 2” becomes “P – P*,” where “P is (100 times the log of) the actual price level and P* is (100 times the log of) the target price level (i.e., what the price level would be if the inflation rate had always been on target since the base period).
3. Increase the coefficient on output. If you wish, in order to avoid a loss in credibility, you can also increase the coefficient on the price term by the same amount. What we have then is a more aggressive Taylor rule. It doesn’t solve the convexity problem completely, but it does assure that, when output is far from target, the central bank will take aggressive action to bring it back (unless the price level is far from target in the other direction). That way at least you don’t end up with a long, unnecessary period of severe economic weakness. (John Taylor claims that, according to David Papell’s research, there is “no reason to use a higher coefficient, and…the lower coefficient works better.” But that research only looks at changing the coefficient on the output term without either changing the coefficient on the inflation term or replacing it with a price term, as I suggest above. Having a too-small coefficient on the output term, as in the original rule, is only a second-best way of achieving the results that those other changes would achieve.)
4. “Borrow” basis points from the future when there are no more basis points available today. In other words, if the prescribed interest rate is below zero, the central bank promises to undershoot the prescribed interest rate once it rises above zero again, such that the number of basis-point-years of undershoot exactly cancel the number of basis-point-years of (unavoidable) overshoot. This method will only work, of course, if the market knows what rule the central bank is following, hence (among other reasons) the need for a rule that really is a rule. If the rule is well-defined, the overshoot will be well-defined, the market will expect the central bank to “pay back” the “borrowed” basis points, and the central bank will be obliged to do so in order to maintain its subsequent credibility.

what's sublational about rat ex modeling

the indirection required to centrally and socially "produce "
certain firm level actions  forces a deeper understanding of objective optima

unforced moves that are globally rational require autonomy combined with solidarity
thru overtly   constructed systemic bounds like the mark up market
or  wages and hours laws or tax subsidy auto stab

once the absolute price level is socially determined ....

once that becomes a controled dynamic
then firm level pricing becomes purely a matter of relative motions

combined with certain "market making " intersticial non linear state contingent
 tax /subsidy moves .....

the irony is of course gosplan I
nationalized  production itself  where as gosplan II will nationalize only the hi fi credit cloud
 the payment system and the obligation grid

the key to firm change

the zeroed out  average rate of profits of  enterprise

the full socialization of firm funding

the firm faced  funds rate
as a complex interactive system wide algorithm

price level stablization and its zero change implicit optimal

the policy universe was created with a notion of stable zero change price levels
when the existence of forward obligations nominally fixed implies an optimal relationship between
absolute product prices and thos obligations that likely requires price level adjustments

these adjustments suggest a paradigm built on dynamic principles not static optima
like constant purchasing power of a unit of currency over time

credit money has no predisposition to value change built into it
no anchor in intrinsic  "real costs" of additional production
however the hang time well into the era of credit money
 of notions inherited from the earlier epoch  of  commodity money is substantial

the price level as a  fact given "spontaneous uncertainty " remains
like a persistent  fog  we can't see thru sharply enough
a fog produced by our own minds
utterly unrelated to the possibilities of the pure credit money based exchange economy
of today and tomorrow

macro telekinesis woodford

We have argued that the key to dealing with a situation in which monetary

policy is constrained by the zero lower bound on short-term nominal

interest rates is the skillful management of expectations regarding the

future conduct of policy. By "management of expectations" we do not

mean that the central bank should imagine that, if it uses sufficient guile,

it can lead the private sector to believe whatever the central bank wishes it

to believe, no matter what it actually does. Instead we have assumed

about. But we do contend that it is highly desirable for a central bank to be

able to commit itself in advance to a course of action that is desirable

because of the benefits that flow from its being anticipated, and then to

work to make that commitment credible to the private sector.

In the context of a simple optimizing model of the monetary transmission

mechanism, we have shown that a purely forward-looking approach

to policy—which allows for no possibility of committing future policy to

respond to past conditions—can lead to quite bad outcomes in the event

of a temporary decline in the natural rate of interest, regardless of the kind

of policy pursued at the time of the disturbance. We have also characterized

optimal policy, under the assumption that credible commitment is

possible, and shown that it involves a commitment to eventually bring the

general price level back up to a level even higher than would have prevailed

had the disturbance never occurred. Finally, we have described a

type of history-dependent price-level targeting mle with the following

properties: that a commitment to base interest rate policy on this mle

determines the optimal equilibrium, and that the same foim of targeting

mle continues to describe optimal policy regardless of which of a large

number of types of disturbances may affect the economy.

Given the role of private sector anticipation of history-dependent policy

in realizing a desirable outcome, it is important for central banks to

develop effective methods of signaling their policy commitments to the

private sector. An essential precondition for this, certainly, is for the central

bank itself to clearly understand the kind of history-dependent behavior

to which it should be seen to be committed. It can then communicate

its thinking on the matter and act consistently with the principles that it

wishes the private sector to understand. Simply conducting policy in

accordance with a mle may not suffice to bring about an optimal, or

nearly optimal, equilibrium, but it is the place to start.

the temple of wishes and spells managing expectations of firms and households

that is the macronautics of new keynesianism

it amounts to a timeless model
where the future markets are side by side  by sondheim
with present markets
in a connected simultaneous globality of time region based  market areas
 interests rate are time travel costs .... inter temporal transportation costs
and the macronauts provide the travel cost
how this  construction of virtual markets notional markets shadow markets
" related  " to the real forward obligation grid
 is as schein surrounds and interpenetrates essence

the macronauts like conjured gods
to be puisant must be believed 
as much as believed in

when they set "targets "
targets as oughts in a world so surely about is
 targets they can not enforce
"in this world " nor punish the transgressors

any gaming of the system must be believed to lead agents and principals
  to   an inferior outcome
only that belief enforces  that outcome
if the macro nauts have  no lightening bolts  to loose upon the   transgressors


fragile ???

magically miraculously so...... eh ??


the talk of price level targets is indeed a move in the right direction
but until price levels are social managed the entire macro nautic enterprise
 is something even less then a house of  straw 

a temple of wishes and spells

food stamps are paultry

there's a program that oughta gallop these days eh ???

temporary expansion of eitc ??

that oughta be a big part of auto stab

if you want to copunter the increased dis incentive to get a job when jobless benefits rise
then super jack the eitc
and as top health premiums a rebate program tied to fed income tax earned income might be kool too eh ???

how much did transfers need to expand in 09

July 11, 2011
	Recommend

" Total government payments rose to $2.3 trillion in 2010, from $1.7 trillion in 2007, an increase of about 35 percent"


up 600 billion ???


try 2 trillion on for size

right now transfers from gub amount to 20% of personal income that oughta be more like 37%
and weightened way toward bottom feeders
retireds unemployeds and wagelings

massive paying of health premiums would help

its simple really
what amount of household spending and induced corporate spending
gets us 7 million additional jobs .....quick !!!!

konjunkturforschung !!!!!

britain looks worse

uncle at least oughta have a monopoly on asset collateralized loans

since only uncle has the limitless liquidity to hold forfeited assets poff the market

is pressuring the pub sec a wally world "policy" as big as the trade re-balance ??

well if you look at the north economy as a whole squeezing the pub sec seems on the agenda
but is it mere vehicle or prime objective

the ratio norms for an optimal MNC  dominated national system
 may well call for a relatively smaller transfer system
but i doubt it
look at the present array of institutional arrangements
lots can be done thru either
 pub sec transfers or corporate  or union mediated transfers

hey a loan is a transfer just like a grant
a tax no worse then an interest payment

in particular i doubt the social "wage" is too big even in nordic systems
or the auto stabs too effective
the reserve army seems well enough managed despite these socialized transfer systems
but hacking away at the over head cost of education and health ???
sounds "sensible"  eh ???

90k per month ??

"the Congressional Budget Office projects that the underlying rate of labor force growth is now just 0.7 percent annually. This comes to roughly 1,050,000 a year or just under 90,000 a month"
--dino--

hmmm

controling product price level moves relative to equity and lot market price level moves

the ability to socially and reliably adjust the product price level to the price levels
of various  asset markets ---including the debt grid ---

example
todays federal debt to gdp ratio can be rectified by a combo of pinned nominal interest rates
and faster price level increases
a repeat of the glorious 40's but under precise control

this bench mark suggests the stag has worked  very well since the winter of 2010
keeping the job market in steady state expansion ...err till recently at least ..
for the moment  pub sec axing seems  to threaten that balanced absorption

adjusting the product price level to the debt grid

greece has a euro denominated debt grid

a reduction in its price level will indeed cut the trade gap
but what about the increased burden of the existing debt grid
there greece faces the same problem any deval of the national currency
 system faces if burdened with a debt grid denominated in  foreign currencies

the ability to expand foreign earnings faces the marshall lerner effect short term

original purpose of MAP

cure inflation

this very targeted purpose perhaps missed the greater use of such a mark up market
to socially control the changes in the price level

greece today needs such a social mechanism design
to allow orderly reduction of its relative price level within the euro zone
compared to its "partner systems "
the national economy can not adjust its trade balance by a simple if grave deval
the system is multinational
at the same time greece devals germany a major surplus trader vis a vis greece
 must  virtually reval ...not possible eh ??
within  a unified currency zone
so it has to come thru relative rates of change in either  import absorption or price level moves

now forex allows a very precise adjustment to a trade imbalance by
incentivizing a rise in  import prices and a lowering  of export prices on trade able products
ie getting the substitution effect working
while leaving non trade ables "as is "  at least in terms of  their own  va

the price level mechanism however can by broader means  get the system the real system to the same place

map frame work part II

5) additional credits equal to estimated  next period  general rate of real growth
(net output per unit of input )

6) period net sales must equal period credits by changes in prices or credit purchases

7) map system  tracks firms "ins and outs " of employees
changes in capital investments  purchases and sales of credits


8) gub firms  and np firms all in same system with  profit  firms

part I  http://earthmart.blogspot.com/2011/07/map-frame-work.html

nominal wage increases career and careen

notice anything round about 1979-1983 ???

1965 to 1979 might be called the age of the great nominal wage hurri-keynes

yes martha  corporate amerika  had a problem

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

a recent estimate of the distribution of  wage rate increases



hard to make those nominal cuts

better to fire and replace

america's goods economy

includes agricultural and mining  as well as industrial products
and from production to  truckers and on  to the  dealerships

tales of taylor

On the 10th Anniversary of the Keynesian Revival: Echoes

taylor shows two tales of recovery thru the change in percentage of people working

noisy noise and clean lines and bars

columbian calender this is year 519

present date minus 1492
20011 - 1492  = 519


see original posting

http://www.kapshow.com/houseofpaine/archives/2000_12.html

the map frame work part I

here's the original map frame work

1 fed empowered by congress to maintain "price stablity"

-------------------------
2    set up within the fed a MAP credit office issue map credits to each firm
 equal to "net sales " in the prior year
< net sales =  (gross sales   +  cost of inventory change)   - (purchases from other firms ) >
ie
                profits + wages = net sales


 profits
  broadly defined to include interest dividends fees rental payments

and
wages
broadly defined to include all other payments that constitute income to individuals including fringe benefits

note:
national net sales must (by identity )
equal
total national spending on final products (goods and services)
----------------------------

3      firms making additional  hires are   credited at the hire's prvious wage
and firms reducing staff surrender the equivalent credits

------------------------
4      new investment entitles firms to credits equal to interest  payments
              ( at the current borrowing rate ) imputed to the investment
-------------------------------

part II http://earthmart.blogspot.com/2011/07/map-frame-work-part-ii.html

map a narrow vision expended

market anti inflation plan MAP
was one of  the immediate responses
 to the  chronic emergence of wage price spirals from  the late 60's thru the  full 70's

the earlier respones in effect administrative  mechanisms  for price control
income policies  failed in peace time or more generally over the long haul
   there ws chatter about a pigou like  inflation tax
but MAP joined a short list of  proposed  "intentionally "designed market mechanisms

cap and trade mechanisms

by the end of the 70's traditional credit constraints were applied
ending the spirals everywhere  and as anticipated ended them
  with  large  contractions  of output and jobs

since then credit policy has in essence crimped off expansions as they reached the taboo line where
wage rate increases  begin to exceed  horly value added increases
ie  crunch  out the nominal expansion  on the demand side by reducing its credit supply
ie a contrived  output cycle with all its  gaps
all its episodic
implied waste of existing productive capacity

the  long term  dismal integeral of
lost output
      lost welfare
                    lost happiness

mark up mart

the objective :  manage  price levels

 create an institutional set up at the national level
 that does for price level dynamics
in the trinity markets  (product commodity and asset)

what the fed does for the dollar   and interest rates

end the equivalent for price levels
  of the wild and wooly  reign of precious metals
over the credit flows of the national economy
ie
end the anarchy of absolute  pricing within market types
and the relative levels between market types

the absolute and relative price levels of  various genre of markets
 explicitly  and socially determined by  democratic policy processes

flash back: a look at the core of the crisis

index fiddle

.

if it could be so easily demonstrated

rogoff blue sky's it on mind automation ...with a few comments

nut shell version:

"Many commentators seem to believe that the growing gap between rich and poor is an inevitable byproduct of increasing globalization and technology. In their view, governments will need to intervene radically in markets to restore social balance.
I disagree....... the past is not necessarily prologue: given the remarkable flexibility of market forces, it would be foolish, if not dangerous, to infer rising inequality in relative incomes in the coming decades by extrapolating from recent trends."



----------------------
long form:



"Until now, the relentless march of technology and globalization has played out hugely in favor of high-skilled labor, helping to fuel record-high levels of income and wealth inequality around the world."

okay
but simple point right there

china and india can are now and will in the future build  minds with these marketable high skill sets cheaper by far then  norte amigo

and that puts aside this issue :

how true this proposition anyway ??
 after a proper sorting out of income sources here in america

first we remove property income and talent or positional rents hey ??

artificial society constructed relative scarcity unrelated to "supply price "

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

the professional class may indeed have opened a bigger spread between its median
and say
 the median income of the unskilled
but a clean set of numbers i've not seen ...which of course isn't saying it doesn't exist
only that it gets  little mass media broadcasting

at any rate back to the ken doll of harvard econ con


" Will the endgame be renewed class warfare, with populist governments coming to power, stretching the limits of income redistribution, and asserting greater state control over economic life?"

provoked fans ??


"There is no doubt that income inequality is the single biggest threat to social stability around the world, whether it is in the United States, the European periphery, or China. "

nonsense the threat is crisis and break down o0f the various national market based hi fi fueled social production systems
because of the "contradictions" inside a  fully cross border financialized
multi national corporation  dominated global economy

"Yet it is easy to forget that market forces, if allowed to play out, might eventually exert a stabilizing role. "

"Simply put, the greater the premium for highly skilled workers, the greater the incentive to find ways to economize on employing their talents."
       fine
  

examples follow from his "world" ie competitive chess and grading papers .
then this:
"Expert computer systems are also gaining traction in medicine, law, finance, and even entertainment. "

that comrades is lovely

"Given these developments, there is every reason to believe that technological innovation will lead ultimately to commoditization of many skills that now seem very precious and unique."

good show kenny
then he comes in with this  hay maker :

".. once studied the relative price movements of a number of goods over a 700-year period. ...
 found that the relative prices of grains, metals, and many other basic goods tended to revert to a central mean tendency over sufficiently long periods. "



"...conjectured that even though random discoveries, weather events, and technologies might dramatically shift relative values for certain periods, the resulting price differentials would create incentives for innovators to concentrate more attention on goods whose prices had risen dramatically."


" people are not goods, but the same principles apply. As skilled labor becomes increasingly expensive relative to unskilled labor, firms and businesses have a greater incentive to find ways to “cheat” by using substitutes for high-price inputs. The shift might take many decades, but it also might come much faster as artificial intelligence fuels the next wave of innovation."

"Perhaps skilled workers will try to band together to get governments to pass laws and regulations making it more difficult for firms to make their jobs obsolete. But if the global trading system remains open to competition, skilled workers’ ability to forestall labor-saving technology indefinitely should prove little more successful than such attempts by unskilled workers in the past."

"The next generation of technological advances could also promote greater income equality by leveling the playing field in education. ..... If the commoditization of education eventually extends to at least lower-level college courses, the impact on income inequality could be profound."

conclusion offered from a nice private  office near the flexing grays and steel blues of the  charles basin
.
 "we need genuinely progressive tax systems, respect for workers’ rights, and generous aid policies on the part of rich countries"
". But the past is not necessarily prologue: given the remarkable flexibility of market forces, it would be foolish, if not dangerous, to infer rising inequality in relative incomes in the coming decades by extrapolating from recent trends."

dangerous ???

pangea to today

a national industrial policy

the last time we had one was the arsenal of democracy
-- some say the NRA was the only real full blown INDUSTRIAL POLICY
 ..fair enough ---

okay we had a partial policy e after
the kold war hit warp drive
post nsa 68

the point remains we as global hegemon
 have sublated our narrow national interests
foor generations now

since 1945 uncle sam has more or less
operated official policy
with the larger earth wide interests
of our multi national trans border corporations
upper most in his mind

in fact so much upper most
even secondary MNC  concerns
trump primary DOMESTIC JOB CLASS  concerns

to pull this off
 within the formalities of a two party liberal democracy
is really quite a feat  ..no ??

housing a totalizing  global security state
completely inside
a liberal  nation state
like a matryoshka doll  ???

the mind gapes
and rattles itself
in an aweful trembling

the rationality assumption is just useful short hand

human units learn and developments lop off the most egregious sub maximizers
if you are doing simple comp stat modeling why not metaphor the deciders as rational
its only the acompanying story

the point is this
relying on irrational elements within the flocks of deciders  to counter an inner optimality course
as defined by a certain class economic  interest ... for a signifigantly  extended period is ....a bad bet

assuming rational units as agents is a short cut method

of course reifying that method annointing a class interest based rationality
    with global "rationality "24/7 365
 is just class pushed agit prop
and often transparently so
   and yet even at its most idiotic it serves a consolidating purpose
like doing your roasry as a hurricane approaches

--------------
i hasten to add

the lop process that is market mechanics as mediated by existing institutiuons
not only lops off the most egregious sub maximizers but lots of other agents too

as w h auden sez of long term cultural retention of works by artists

nothing that is bad survives very long
 but  of course
 much good may well be lost  in   Clios ever finite  wake 

WHEN ( X) - (M) = 0 THEN (G) - (T) = 0

talk of the structural  budget balance
                                  requires
                            talk of the structural trade balance
example

prime question:

if trade were balanced  at full employment
 what would be the remaining budget imbalance at full employment  ???

next ??

the imbalances between  (after tax and debt service) gross income
of operating production firms and  firm gross  spending




and then and only then 

imbalances in household (after tax and debt service ) income and  household spending


note the interlacings here provided by  movements up and down to and from the  credit cloud are omitted

omitted
but hardly irrelevent
for a start
cloud net domestic income must equal net domestic new lending

growth ???


expanded reproduction ???

oh more complexity

sinn on the pigs sin

he calls em the gips
but he considers them pigs


"...Some 90% of the refinancing debt that the commercial banks of the GIPS countries (Greece, Ireland, Portugal, and Spain) hold with their respective national central banks served to purchase a net inflow of goods and assets from other eurozone countries."


" Two-thirds of all refinancing loans within the eurozone were granted within the GIPS countries, despite the fact that these countries account for only 18% of eurozone GDP. "

"Indeed, 88% of these countries’ current-account deficits over the last three years were financed via the extension of credit within the Eurosystem."

"By the end of 2010, ECB loans, which originated primarily from Germany’s Bundesbank, amounted to €340 billion."

" This figure includes ECB credit that financed capital flight from Ireland totaling €130 billion over the past three years."

nasty fact roll eh ???


conclusion:


" The ECB bailout program has enabled the people of the peripheral countries to continue to live beyond their means, and well-heeled asset holders to take their wealth elsewhere."


sinn's  loop  misses the obvious  mobius strip like  gambits availible to the ECB :
 he prefers to act as if money creation powers do not exist :


"The capacity for continuing this policy will soon be depleted, as the central-bank money flowing from the GIPS countries to the core countries of the eurozone increasingly crowds out the money created through refinancing operations there. If this continues for two more years as it has for the past three, the stock of refinancing loans in Germany will disappear altogether."



" If German banks drop out of the refinancing business, the European Central Bank will lose the direct control over the German economy that it used to have via its interest-rate policy. "

"The main refinancing rate would then only be the rate at which the peripheral EU countries draw ECB money for purchases in the center of Europe, which ultimately would be the source of all the money circulating in the euro area."

 the real nexus:

"The GIPS’ enormous current-account deficits"

which along with  "...the massive exodus of capital from Ireland "

"... would not have been possible without ECB financing. "

"Without the additional money that GIPS central banks created in excess of their countries’ requirements for internal circulation, trade deficits could not have been sustained, and the GIPS’ commercial banks would have been unable to prop up asset prices "

.

" the longer bailout loans continue, the longer the GIPS’ current-account deficits will persist, and the more their external debts will grow. Eventually, these debts will become unsustainable."


"The sole exception is Ireland, which is suffering not from a lack of competitiveness, but from capital flight. Ireland is the only country that has lowered its prices and wages, and its current-account deficit is about to swing into surplus. By contrast, Spain’s external deficit is still above 4% of GDP, while Portugal and Greece recently recorded astronomical figures of around 10%."

how impossible is produced by chopping away the relevence of the possible :
.
"Apart from China, central banks don’t intervene to protect their currencies anymore. "

"Europe, too, will get a bloody nose if it keeps trying to artificially prop up asset prices in the periphery."


really why ??? by whom ??

" The sums required for this could ultimately run into trillions.... This would shatter Europe."

again really ??

why ???

we are left holding a mere assertion in our mitts

the rectification sinn style ??

"Apart from financial restructuring, which is crucial, Greece and Portugal must become cheaper in order to regain their competitiveness. Estimates for Greece assume that prices and wages need to come down by 20-30%. Things won’t be much different in Portugal."

there you have it the teutonic climax the orgasmic thought

real wage cuts  equal to 20-30 % !!!!

hey herr sinn
 why not send  pigs wages   back to the fuckin  post war years ???

and this is really delightful


"If these countries lack the political consensus they need to pull this off, they should in their own interest consider leaving the eurozone temporarily to depreciate their currencies. "

but alas reality pulls him back from the rapsody of ravishment

"The banking system would not survive this without help, so the EU’s bailout activities should be refocused accordingly."

yikes the euro harnesss will become a haulter  ....the debt structure a gibbet

so how exactly will  the pigs "... benefit from a furlough from the eurozone." ???
no way out by staying in either since

"Depreciation inside the eurozone in the form of deflation...
 would drive large parts of the real economy into excessive debt "

  "only the value of  (pigs) assets, not that of bank debts, would decline."


after providing the assurity of misery without  any real up side

the sum up:

"It is time to face the fact that Europe’s peripheral countries have to shrink their nominal GDP to regain competitiveness. "

and then the implicit advice to jetison the fuckers now

" The only question is whether they will take the euro down as well."

Hans-Werner Sinn is Professor of Economics and Public Finance, University of Munich, and President of the Ifo Institute

tensions versus contradictions

the end of liberal thought
ie respectable academic thought
   is the posing of a tensional relationship(s)

antinomy to use another word for it
    with at least large  over lapping signifigance

why the non use of the word  contradiction ??
or dialectical

one might venture a guess

neo classical developments in a nut shell

some time in the late 60's the neo classicals abandoned the real economy
the production systems markets for the financial cloud economy above it

there they set up camp with all the old verities restored to full honors

the spell over both pk and taylor

permanent income hypothesis uncle milty
    one of akerloffs big five

the independence of consumption and current income
 (the life-cycle permanent income hypothesis);

the irrelevance of current profits to investment spending (the Modigliani-Miller theorem);

the long-run independence of inflation and unemployment (natural rate theory);

the inability of monetary policy to stabilize output (the Rational Expectations hypothesis);

 the irrelevance of taxes and budget deficits to consumption (Ricardian equivalence)

pk joins hands with taylor

"the tax cuts that made up much of the stimulus were probably largely saved"

  the transfer system ineffective at system stablizing

that must include auto stabs how could it not ??

nothing is less perminent in income flux then auto stab action eh ???

not sure why this hasn't received direct address

more taylor

"Small or unreliable multipliers, the legacy of increased debt, the unpredictability and temporariness of such policies "

taylor in contradiction ????

"The theory that a short-run government spending stimulus will jump-start the economy is based on old-fashioned, largely static Keynesian theories. These approaches do not adequately account for the complex dynamics of a modern international economy"
"In a simple Keynesian model, all the government has to do to combat a recession is quickly increase government purchases, but the difficulty with doing so in practice is one of the classic arguments against discretionary fiscal policy"

"automatic stabilizers ...help stabilize the economy,"

john taylor projects

was QEII anticipated by market ??

Source: Bullard (2011).

was the higher  expected rate of inflation   after announcement of QEII "priced into markets ???

Source: Bullard (2011).

Source: Bullard (2011).

.

Source: Bullard (2011).

bending taylor rule meets ground zero => dirty stability region

.note the japan green circles trapped in  zone of inefffective liquidity injections

Source: Bullard (2011).

assume fisher linear relation between expected inflation and nominal rate
withtaylor rule

two "solutions"

clean  pathway forward and ...dirty trap

death to all new keynesians

corporate cash flow versus business investment spending

global stall speed ??

roach  sez  
when G is >  3%

roach clip

"The global economy is in the midst of its second growth scare in less than two years. Get used to it. In a post-crisis world, these are the footprints of a failed recovery."

The reason is simple. The typical business cycle has a natural cushioning mechanism that wards off unexpected blows. The deeper the downturn, the more powerful the snapback, and the greater the cumulative forces of self-sustaining revival. Vigorous V-shaped rebounds have a built-in resilience that allows them to shrug off shocks relatively easily.
But a post-crisis recovery is a very different animal. As Carmen Reinhart and Kenneth Rogoff have shown in their book This Time is Different, over the long sweep of history, post-crisis recoveries in output and employment tend to be decidedly subpar.
Such weak recoveries, by definition, lack the cushion of V-shaped rebounds. Consequently, external shocks quickly expose their vulnerability. If the shocks are sharp enough – and if they hit a weakened global economy that is approaching its “stall speed” of around 3% annual growth – the relapse could turn into the dreaded double-dip recession.
That is the risk today. There can be no mistaking the decidedly subpar character of the current global recovery. Superficially, the numbers look strong: world GDP rebounded by 5.1% in 2010, and is expected to rise another 4.3% in 2011, according to the International Monetary Fund. But because these gains follow the massive contraction that occurred during the Great Recession of 2008-2009, they are a far cry from the trajectory of a classic V-shaped recovery.
Indeed, if the IMF’s latest forecast proves correct, global GDP at the end of 2012 will still be about 2.2 percentage points below the level that would have been reached had the world remained on its longer-term 3.7% annual-growth path. Even if the global economy holds at a 4.3% cruise speed – a big “if,” in my view – it will remain below its trend-line potential for over eight years in a row, through 2015.
This protracted “global output gap” underscores the absence of a cushion in today’s world economy, as well as its heightened sensitivity to shocks. And there have certainly been numerous such blows in recent months – from Europe’s sovereign-debt crisis and Japan’s natural disasters to sharply higher oil prices and another setback in the US housing recovery.
While none of these shocks appears to have been severe enough to have derailed the current global recovery, the combined effect is worrisome, especially in a still-weakened post-crisis world.
Most pundits dismiss the possibility of a double-dip recession. Labeling the current slowdown a temporary “soft patch,” they pin their optimism on the inevitable rebound that follows any shock. For example, a boost is expected from Japan’s reconstruction and supply-chain resumption. Another assist may come from America’s recent move to tap its strategic petroleum reserves in an effort to push oil prices lower.
But in the aftermath of the worst crisis and recession of modern times – when shocks can push an already weakened global economy to its tipping point a lot faster than would be the case under a stronger growth scenario – the escape velocity of self-sustaining recovery is much harder to achieve. The soft patch may be closer to a quagmire.
This conclusion should not be lost on high-flying emerging-market economies, especially in Asia – currently the world’s fastest-growing region and the leader of what many now call a two-speed world. Yet with exports still close to a record 45% of pan-regional GDP, Asia can hardly afford to take external shocks lightly – especially if they hit an already weakened baseline growth trajectory in the post-crisis developed world. The recent slowdown in Chinese industrial activity underscores this very risk.
Policymakers are ill prepared to cope with a steady stream of growth scares. They continue to favor strategies that are better suited to combating crisis than to promoting post-crisis healing.
That is certainly true of the United States. While the US Federal Reserve Board’s first round of quantitative easing was effective in ending a wrenching crisis, the second round has done little to sustain meaningful recovery in the labor market and the real economy. America’s zombie consumers need to repair their damaged balance sheets, and US workers need to align new skills with new jobs. Open-ended liquidity injections accomplish neither.
European authorities are caught up in a similar mindset. Mistaking a solvency problem for a liquidity shortfall, Europe has become hooked on the drip feed of bailouts. However, this works only if countries like Greece grow their way out of a debt trap or abrogate their deeply entrenched social contracts. The odds on either are exceedingly poor.
The likelihood of recurring growth scares for the next several years implies little hope for new and creative approaches to post-crisis monetary and fiscal policies. Driven by short-term electoral horizons, policymakers repeatedly seek a quick fix – another bailout or one more liquidity injection. Yet, in the aftermath of a balance-sheet recession in the US, and in the midst of a debt trap in Europe, that approach is doomed to failure.
Liquidity injections and bailouts serve only one purpose – to buy time. Yet time is not the answer for economies desperately in need of the structural repairs of fiscal consolidation, private-sector deleveraging, labor-market reforms, or improved competitiveness. Nor does time cushion anemic post-crisis recoveries from the inevitable next shock.
It’s hard to know when the next shock will hit, or what form it will take; otherwise, it wouldn’t be a shock. But, as night follows day, such a disruption is inevitable. With policymakers reluctant to focus on the imperatives of structural healing, the result will be yet another growth scare – or worse. A failed recovery underscores the risks of an increasingly treacherous endgame in today’s post-crisis world.


The global economy is in the midst of its second growth scare in less than two years. Get used to it. In a post-crisis world, these are the footprints of a failed recovery.
The reason is simple. The typical business cycle has a natural cushioning mechanism that wards off unexpected blows. The deeper the downturn, the more powerful the snapback, and the greater the cumulative forces of self-sustaining revival. Vigorous V-shaped rebounds have a built-in resilience that allows them to shrug off shocks relatively easily.
But a post-crisis recovery is a very different animal. As Carmen Reinhart and Kenneth Rogoff have shown in their book This Time is Different, over the long sweep of history, post-crisis recoveries in output and employment tend to be decidedly subpar.
Such weak recoveries, by definition, lack the cushion of V-shaped rebounds. Consequently, external shocks quickly expose their vulnerability. If the shocks are sharp enough – and if they hit a weakened global economy that is approaching its “stall speed” of around 3% annual growth – the relapse could turn into the dreaded double-dip recession.
That is the risk today. There can be no mistaking the decidedly subpar character of the current global recovery. Superficially, the numbers look strong: world GDP rebounded by 5.1% in 2010, and is expected to rise another 4.3% in 2011, according to the International Monetary Fund. But because these gains follow the massive contraction that occurred during the Great Recession of 2008-2009, they are a far cry from the trajectory of a classic V-shaped recovery.
Indeed, if the IMF’s latest forecast proves correct, global GDP at the end of 2012 will still be about 2.2 percentage points below the level that would have been reached had the world remained on its longer-term 3.7% annual-growth path. Even if the global economy holds at a 4.3% cruise speed – a big “if,” in my view – it will remain below its trend-line potential for over eight years in a row, through 2015.
This protracted “global output gap” underscores the absence of a cushion in today’s world economy, as well as its heightened sensitivity to shocks. And there have certainly been numerous such blows in recent months – from Europe’s sovereign-debt crisis and Japan’s natural disasters to sharply higher oil prices and another setback in the US housing recovery.
While none of these shocks appears to have been severe enough to have derailed the current global recovery, the combined effect is worrisome, especially in a still-weakened post-crisis world.
Most pundits dismiss the possibility of a double-dip recession. Labeling the current slowdown a temporary “soft patch,” they pin their optimism on the inevitable rebound that follows any shock. For example, a boost is expected from Japan’s reconstruction and supply-chain resumption. Another assist may come from America’s recent move to tap its strategic petroleum reserves in an effort to push oil prices lower.
But in the aftermath of the worst crisis and recession of modern times – when shocks can push an already weakened global economy to its tipping point a lot faster than would be the case under a stronger growth scenario – the escape velocity of self-sustaining recovery is much harder to achieve. The soft patch may be closer to a quagmire.
This conclusion should not be lost on high-flying emerging-market economies, especially in Asia – currently the world’s fastest-growing region and the leader of what many now call a two-speed world. Yet with exports still close to a record 45% of pan-regional GDP, Asia can hardly afford to take external shocks lightly – especially if they hit an already weakened baseline growth trajectory in the post-crisis developed world. The recent slowdown in Chinese industrial activity underscores this very risk.
Policymakers are ill prepared to cope with a steady stream of growth scares. They continue to favor strategies that are better suited to combating crisis than to promoting post-crisis healing.
That is certainly true of the United States. While the US Federal Reserve Board’s first round of quantitative easing was effective in ending a wrenching crisis, the second round has done little to sustain meaningful recovery in the labor market and the real economy. America’s zombie consumers need to repair their damaged balance sheets, and US workers need to align new skills with new jobs. Open-ended liquidity injections accomplish neither.
European authorities are caught up in a similar mindset. Mistaking a solvency problem for a liquidity shortfall, Europe has become hooked on the drip feed of bailouts. However, this works only if countries like Greece grow their way out of a debt trap or abrogate their deeply entrenched social contracts. The odds on either are exceedingly poor.
The likelihood of recurring growth scares for the next several years implies little hope for new and creative approaches to post-crisis monetary and fiscal policies. Driven by short-term electoral horizons, policymakers repeatedly seek a quick fix – another bailout or one more liquidity injection. Yet, in the aftermath of a balance-sheet recession in the US, and in the midst of a debt trap in Europe, that approach is doomed to failure.
Liquidity injections and bailouts serve only one purpose – to buy time. Yet time is not the answer for economies desperately in need of the structural repairs of fiscal consolidation, private-sector deleveraging, labor-market reforms, or improved competitiveness. Nor does time cushion anemic post-crisis recoveries from the inevitable next shock.
It’s hard to know when the next shock will hit, or what form it will take; otherwise, it wouldn’t be a shock. But, as night follows day, such a disruption is inevitable. With policymakers reluctant to focus on the imperatives of structural healing, the result will be yet another growth scare – or worse. A failed recovery underscores the risks of an increasingly treacherous endgame in today’s post-crisis world.



The global economy is in the midst of its second growth scare in less than two years. Get used to it. In a post-crisis world, these are the footprints of a failed recovery.
The reason is simple. The typical business cycle has a natural cushioning mechanism that wards off unexpected blows. The deeper the downturn, the more powerful the snapback, and the greater the cumulative forces of self-sustaining revival. Vigorous V-shaped rebounds have a built-in resilience that allows them to shrug off shocks relatively easily.
But a post-crisis recovery is a very different animal. As Carmen Reinhart and Kenneth Rogoff have shown in their book This Time is Different, over the long sweep of history, post-crisis recoveries in output and employment tend to be decidedly subpar.
Such weak recoveries, by definition, lack the cushion of V-shaped rebounds. Consequently, external shocks quickly expose their vulnerability. If the shocks are sharp enough – and if they hit a weakened global economy that is approaching its “stall speed” of around 3% annual growth – the relapse could turn into the dreaded double-dip recession.
That is the risk today. There can be no mistaking the decidedly subpar character of the current global recovery. Superficially, the numbers look strong: world GDP rebounded by 5.1% in 2010, and is expected to rise another 4.3% in 2011, according to the International Monetary Fund. But because these gains follow the massive contraction that occurred during the Great Recession of 2008-2009, they are a far cry from the trajectory of a classic V-shaped recovery.
Indeed, if the IMF’s latest forecast proves correct, global GDP at the end of 2012 will still be about 2.2 percentage points below the level that would have been reached had the world remained on its longer-term 3.7% annual-growth path. Even if the global economy holds at a 4.3% cruise speed – a big “if,” in my view – it will remain below its trend-line potential for over eight years in a row, through 2015.
This protracted “global output gap” underscores the absence of a cushion in today’s world economy, as well as its heightened sensitivity to shocks. And there have certainly been numerous such blows in recent months – from Europe’s sovereign-debt crisis and Japan’s natural disasters to sharply higher oil prices and another setback in the US housing recovery.
While none of these shocks appears to have been severe enough to have derailed the current global recovery, the combined effect is worrisome, especially in a still-weakened post-crisis world.
Most pundits dismiss the possibility of a double-dip recession. Labeling the current slowdown a temporary “soft patch,” they pin their optimism on the inevitable rebound that follows any shock. For example, a boost is expected from Japan’s reconstruction and supply-chain resumption. Another assist may come from America’s recent move to tap its strategic petroleum reserves in an effort to push oil prices lower.
But in the aftermath of the worst crisis and recession of modern times – when shocks can push an already weakened global economy to its tipping point a lot faster than would be the case under a stronger growth scenario – the escape velocity of self-sustaining recovery is much harder to achieve. The soft patch may be closer to a quagmire.
This conclusion should not be lost on high-flying emerging-market economies, especially in Asia – currently the world’s fastest-growing region and the leader of what many now call a two-speed world. Yet with exports still close to a record 45% of pan-regional GDP, Asia can hardly afford to take external shocks lightly – especially if they hit an already weakened baseline growth trajectory in the post-crisis developed world. The recent slowdown in Chinese industrial activity underscores this very risk.
Policymakers are ill prepared to cope with a steady stream of growth scares. They continue to favor strategies that are better suited to combating crisis than to promoting post-crisis healing.
That is certainly true of the United States. While the US Federal Reserve Board’s first round of quantitative easing was effective in ending a wrenching crisis, the second round has done little to sustain meaningful recovery in the labor market and the real economy. America’s zombie consumers need to repair their damaged balance sheets, and US workers need to align new skills with new jobs. Open-ended liquidity injections accomplish neither.
European authorities are caught up in a similar mindset. Mistaking a solvency problem for a liquidity shortfall, Europe has become hooked on the drip feed of bailouts. However, this works only if countries like Greece grow their way out of a debt trap or abrogate their deeply entrenched social contracts. The odds on either are exceedingly poor.
The likelihood of recurring growth scares for the next several years implies little hope for new and creative approaches to post-crisis monetary and fiscal policies. Driven by short-term electoral horizons, policymakers repeatedly seek a quick fix – another bailout or one more liquidity injection. Yet, in the aftermath of a balance-sheet recession in the US, and in the midst of a debt trap in Europe, that approach is doomed to failure.
Liquidity injections and bailouts serve only one purpose – to buy time. Yet time is not the answer for economies desperately in need of the structural repairs of fiscal consolidation, private-sector deleveraging, labor-market reforms, or improved competitiveness. Nor does time cushion anemic post-crisis recoveries from the inevitable next shock.
It’s hard to know when the next shock will hit, or what form it will take; otherwise, it wouldn’t be a shock. But, as night follows day, such a disruption is inevitable. With policymakers reluctant to focus on the imperatives of structural healing, the result will be yet another growth scare – or worse. A failed recovery underscores the risks of an increasingly treacherous endgame in today’s post-crisis world.

when the indy left press looks at the academic eco con

the outcome is often cream of wheat...example:


" Science is often thought to proceed from a theory to experiments that test its predictions. If new data are discovered that cannot be explained by the theory, eventually a new theory arises to replace it. If the new theory can explain everything the old one did plus the new phenomena, sooner or later every scientist will adhere to the new paradigm."

there you have it the  formal project of  " a science "

"Neoclassical economics is taught in every college classroom in the United States and in almost every country in the world. Graduate students learn no other approach to economics. They are taught that neoclassical economics is a science, on a par with physics and the other natural sciences......This proves to them that economics is as applicable to society as physics is to the universe. There are, after all, immutable laws in both. The laws of demand and supply are no different, in principle, than the law of gravity. David Orrell, in Economyths, quotes Lawrence Summers as saying, “Spread the truth—the laws of economics are like the laws of engineering. One set of laws works everywhere.” "

"but ...."
drum roll



"... the authors of the three books under review deny categorically that neoclassical economics is a science."

and we're off  after the hare apparent
in fact all is lost at jump street ..we are chasing a decoy
a decoy we built ourselves in fact

but to the bill of indictment:


" Economists have taken certain scientific concepts (such as equilibrium, stability, efficiency, feedback loops) and certain mathematical and statistical techniques and notions (such as calculus, probability, normal distribution, randomness, independence) and applied them to society in ways both inappropriate and simple-minded. "

"Each of these writers concludes that, while economics has scientific pretensions, it is primarily an ideology that supports the interests of the rich and powerful, and in the process, confers prestige, influence, and money on its practitioners."


Modern Political Economics gives us the most sophisticated account of the surreal character of neoclassical economics. This book is not for beginners; a prior understanding of economics is required to get through it. And patience, as it is more than five hundred pages long. However, its deconstruction and demolition of neoclassical economics is devastating. Yanis Varoufakis, Joseph Halevi, and Nicholas J. Theocaratis show us in superb detail how economists have constructed a model of the capitalist economy that assumes it is exactly analogous to a flawlessly operating machine system (they use the movie The Matrix to good effect as an example).

s definbition of a paradigm:


"Neoclassical economists assume that society is made up of independent, self-interested, and all-knowing human beings, who come together in marketplaces over which they exert no control, and all at once arrive at agreements in such a way that every market clears. That is, a price is established at which the supply of every single commodity equals the demand for it. Furthermore, the general equilibrium achieved is one of maximum social efficiency. It is what economists call “Pareto efficient,” after the Italian economist Vilfredo Pareto; it describes an equilibrium such that no change away from it can make at least one person better off without making anyone else worse off."

critique of paradigm:

"Such an economy bears no resemblance to any actual existing economy, nor could it. There is no money in it, no government, no notion that there is a natural world in which production occurs, no workplaces. It is constructed in abstraction from the distribution of wealth and income. It is like a Georgio de Chirico painting, timeless and idealized. Yet, in an act of stunning legerdemain, neoclassical economists employ this imaginary model as if it were the ideal system of production and distribution, the only one that can be used to judge how well any contemporary capitalist economy is performing."


Since the notion of social efficiency has been defined prior to its building, and the equilibrium set of prices satisfies this definition, it follows that any deviation from equilibrium will be inefficient. Economists use this model to argue the undesirable consequences of minimum wage laws, labor unions, price controls, rent controls, income taxes, environmental regulations—indeed just about anything a government does. Because government actions will almost surely harm at least one person, they, by definition, must be ruled out. In addition, all attempts by governments to counteract unemployment (which can only be caused by some external and temporary shock to the economy, such as a drought or a flood) will be self-defeating, since the all-knowing buyers and sellers will immediately act to nullify the desired results of the government policymakers.


hector defeays achilles:


"Economist Robert Pollin put it well in a stinging critique of neoclassical luminary, Robert Lucas..."

"To begin with, Lucas assumed that people carried in their heads a fully worked out and accurate model of how the macro economy functions. In the event that the Federal Reserve tried to stimulate the economy and expand job opportunities by lowering interest rates, all rational people, working with the accurate macroeconomic models in their heads, would know that this initiative would end up causing inflation. More precisely, they would calculate how much inflation would be produced by the Feds intervention, and as such, they would also know that this acceleration of the inflation rate would erode how much they could buy at the given wage they were being paid. The workers would therefore realize that they would be foolish to deliver the same level of work effort until their wages were raised to compensate them for the rise in inflation. The unemployed would similarly refuse job offers whose wages did not account for the erosion of their buying power that would result through the inflation that they would have accurately anticipated.

I remember in the 1980s challenging my Ph.D. students to help me carry out accurately even one of the multiple calculations Lucas claimed anyone could and did perform on a regular basis. Needless to say, we all failed the assignment, and I have no doubt that Lucas himself would have failed. The reason was simply that there was no possible way anybody could know all the things that Lucas blithely asserted everyone knows as a matter of course. (“The Wall Street Collapse and Return of Reality-Based Economics,” Monthly Review 62, no. 4 [September 2010]: 6)

There is much more to Modern Political Economics than a skewering of neoclassical economics. It is, in fact, an exceptional history of economic thought. The authors explicate the economic ideas of every major thinker: Aristotle, the Physiocrats, Adam Smith, David Ricardo, Karl Marx, Leon Walras, Alfred Marshall, Kenneth Arrow, Gerard Debreu, Paul Samuelson, John Nash, John von Neuman, John Maynard Keynes, Milton Friedman, Friedrich Hayek, Michal Kalecki, Paul Sweezy, Robert Lucas, Eugene Fama, and many more. Their intellectual history is the prelude to an examination of the Great Recession triggered by the bursting of the housing bubble. The authors argue that the failure of mainstream economists either to see that an economic collapse was coming or to know what to do about it was due in large part to what they call “lost truths” and “inherent errors.”

poor dickie R takes a pranging :

".. Ricardo’s model of the capitalist economy has considerable logical purity. But following his attempt to show, within one grand framework, both how the economy grows over time and what determines the ratio of one price to every other price (something the authors say is impossible and represents the “inherent error” of all general economic theories), Ricardo concluded that there could not be an economic crisis caused by insufficient aggregate demand for goods and services."

"...ignored the challenge ... by Sismondi and Malthus......an important “truth” ... lost for a century, until John Maynard Keynes .."

 Economics for the Rest of Us .... divided into two, interrelated, parts. Part One challenges the use of Pareto optimality.... resurrects (Bentham's ) Utilitarianism... a society should always do those things that give rise to the greatest ... (utility) for the most people. ... assumed... an extra dollar yields a lower utility to the rich than to the poor. Maximum social utility is therefore highest when everyone has the same income. "

"With Pareto... we have no way to judge any public policy... Only when some win and not one person loses does Pareto give the go-ahead. ..since it is impossible to measure utility, we cannot know for sure that an additional dollar will give less pleasure to the rich than to the poor person. Thus, there is no justification for government redistribution schemes."

".. with Bentham, we act whenever the gains to the winners are greater than the losses are to the losers. Combined with the argument that the utility of additional money falls, the more money a person has, Utilitarianism gives us ample justification for many public policies. "

"...eminently good public programs ...routinely condemned by neoclassical economists......
 price controls for necessary medicines, subsidies to those with low incomes, Medicare, rent controls, progressive taxation, and anti-pollution laws.....

",,,some seldom discussed consequences of growing income inequality. ..., the pervasiveness of ... oligopoly
... confers pricing power ...which leads to higher prices and smaller output than when markets are more competitive. "

"....growing inequality interacts with oligopoly  power to deny access to goods and services to those in the middle and at the bottom of the income distribution. "

"....it is more profitable for a monopolist to cater to the rich."

.. if Manhattan apartments were limited in size to 1,200 square feet, then, without constructing even one new building, the supply of apartments for ownership would increase by 35 percent and the supply of apartments for rent would increase by 20 percent.”


." If a few rich patients pay more for a doctor’s services, then, other things being equal, the GDP is higher than it would have been if the doctor had welcomed all patients."

"...inequality is a good thing. What else would keep everyone working so hard?"

"... inequality is but a reflection of unequal productiveness..... "


John Bates Clark. quote:

"The welfare of the laboring classes depends on whether they get much or little; but their attitude toward other classes—and, therefore, the stability of the social state—depends chiefly on the question, whether the amount that they get, be it large or small, is what they produce. If they create a small amount of wealth and get the whole of it, they may not seek to revolutionize society; but if it were to appear that they produce an ample amount and get only a part of it, many of them would become revolutionists, and all would have the right to do so. The indictment that hangs over society is that of “exploiting labor.” “Workmen” it is said, “are regularly robbed of what they produce. This is done within the forms of law, and by the natural working of competition.” If this charge were proved, every right-minded man should become a socialist; and his zeal in transforming the industrial system would then measure and express his sense of justice. If we are to test the charge, however, we must enter the realm of production. We must resolve the product of social industry into its component elements, in order to see whether the natural effect of competition is or is not to give to each producer the amount of wealth that he specifically brings into existence."


" Clark’s formulation... a gross misapplication of Ricardo’s theory of ground rent"

"... workers are paid a wage equal to what they add to their employer’s revenue. "

" Clark and his neoclassical progeny assume that workers can be added, one at a time, to the employer’s land, materials, and machinery, and that we can then measure the amount by which production rises.
 This amount, valued at the market price, is presumed to measure the typical worker’s productivity. "

"Competitive conditions in labor markets will ensure that the wage rate exactly equals this “marginal revenue product.” "

"...dismantles this theory by pointing out that there are no plausible real-world examples of it. "

"Modern production is carried out by groups of workers, and if an employer uses more labor, it has to use more capital as well. "

"... it is impossible to separate the productiveness of one worker from the others, or of labor from capital. "

"... grim predictions flow from Clark’s model: raising the minimum wage will cause an increase in unemployment; union wages will do the same. And mass unemployment (as in the Great Depression) is the consequence of the failure of wage rates to fall enough to induce employers to hire more people."
"... the Great Depression can be explained by so-called “sticky” wages"

". Both free market extremists, such as Milton Friedman, and liberal moderates, such as Joseph Stiglitz, blame workers for mass unemployment. "
"Friedman claimed that workers are unemployed because they will not accept lower wages when the demand for their labor falls. ..."

. Keynes showed us that falling wages and prices can lead to uncertainty about the future, and this is what might keep unemployment high."


"Stiglitz’s ...argued that employees are always trying to “shirk,” that is, work as little as possible. To prevent this, employers must pay a higher wage than is consistent with full employment.The resulting unemployment is just what is needed to keep those employed hard at work"
"; they don’t want to lose their shirking premium. "

"modern workplaces have been so thoroughly Taylorized (designed and monitored to maximize employer control, per the dictates of Frederick Taylor) that shirking is nearly impossible."

" Economyths .. an applied mathematician without formal training in economics. ...
"... a question both obvious and unanswered by mainstream economics. Why did economists not see that the economy was about to implode in 2007? "

".... fault is in the fundamental assumptions "  “efficient market theory,” . ...always “right.” The only deviations from the market price are the result of random, small shocks. Since they are random, they are predictable using the laws of probability and the normal distribution. "
"... there could have been no housing bubble, no bursting of the bubble, and no Great Recession....
 They are ruled out by assumption, the entire chaotic history of capitalism notwithstanding."

 "ten “economyths”...:
(1) the economy can be described by economic laws;
 (2) the economy is made up of independent individuals;
 (3) the economy is stable;
(4) economic risk can be easily managed using statistics;
 (5) the economy is rational and efficient;
(6) the economy is gender-neutral;
(7) the economy is fair;
(8) economic growth can continue forever;
 (9) economic growth will make us happy;
(10) economic growth is always good.

"... traces Summers’s “one set of laws works everywhere” to Pythagoras’s fascination with the regularity of numbers. "

"Isaac Newton and his physics attracted the original neoclassical economists—William Stanley Jevons, Pareto, and Leon Walras"

 ". The beautiful symmetry of supply and demand equilibrium derives directly from nineteenth-century physics."

" Unfortunately, human societies cannot be analyzed using the concepts of physics. They are too messy and complex; power of all kinds is critical to them but has nothing to do with the subject matter of the sciences; and, while the universe is indifferent to happiness, human beings are not."

author orrell's contention:

" Although economies are complex systems and therefore not amenable to one-dimensional theories that aim to explain everything, it is possible to find “pockets of predictability.” "


"If we cannot know when an economic crisis will occur or how deep it will be, we can perhaps predict that when we deregulate our banks, we will have problems. "

"Our economies have much in common with networks, like electrical grids, and we can prevent a breakdown in one part of the grid from spreading and causing catastrophe by taking simple steps, such as insulating one part from another. One example would be to maintain a separation between commercial and investment banking. Another would be to have a backup plan, such as forcing financial entities to keep larger money reserves on hand at all times. "

"In mainstream economics, more production is always good because we assume it will make us happier. However, sociologists, psychologists, medical researchers, and ecologists have found that more consumption and more possessions do not make us happier; that the negative consequences of growing inequality can outweigh any positive results of increasing output; that economic growth is destroying the planet. Economists ignore such research at their peril."

" Marx showed that human labor is not reducible to an ordinary commodity; workers rebel against their exploitation....Marx succumbed to the “inherent error,” of using the labor theory of value to explain relative prices, giving rise to the infamous “transformation problem.” They imply that Marx’s failure here is one reason why his truths about profits and labor have been lost. This is much too simple. Marx’s truths have been lost because the class struggle waged by the working class has not succeeded in effectively challenging the rule of capital. Neoclassical economics is the economics of capital, as Marx’s political economy is that of the working class. As long as capital rules without a radical presence fighting against it, neoclassical economics will rule as well. No such presence exists today in any rich capitalist country, or, with a handful of exceptions, in any poor nation, either."

", stating the obvious stupidities and shortcomings of neoclassical economics will do nothing to weaken its hold. "