hi fi squeeze out ...discovering hidden inefficient corporate rent sumps

recall this can be seen
as
a use of the greenwald stiglitz model

applied here in practice by the hi fi ers
to extract reproductively  un neccesary rents in the social market mediated  production platform

a rudolf meidner tax ?

the failure to implement this beuatiful tax
pretty well ended the swedish dash toward eden
at least by way of tax and transfer systems

under the paine soviet system
the commanding heights would operate with similar isle of Laputo savagery
 toward the underlying production archipeligo

difference ?

the extractions would get tossed in the general social surplus melder

bob solow on debt burdens

"Roughly half of outstanding debt owed to the public, now $11.7 trillion, is owned by foreigners"


". This part of the debt is a direct burden on ourselves and future generations. "


"Foreigners are entitled to receive interest and principal and can use those dollars to acquire goods and services produced here. If our government had used borrowed money to improve infrastructure or to improve the skills of workers, the resulting extra production would have made repayment easier. Instead, over the last decade, it used the money for wars and tax cuts. "

      

"The Treasury owes dollars, America’s own currency"

 

 

" So the Treasury can always make payments when due ... no foreign lenders

 realistically expect us to default. If they did, they would be insisting on higher interest rates,

which they aren’t."

 

.

"One way to effectively repudiate our debt is to encourage inflation. "

 

 

"When prices rise, interest and principal are repaid in dollars that are worth less than they were when they were borrowed. "

 

.

"Treasury bonds owned by Americans are different from debt owed to foreigners."

 

" Debt owed to American households, businesses and banks is not a direct burden on the future."

 

" Some of our grandchildren would be paying off others of our grandchildren;"

 

      

"The real burden of domestically owned Treasury debt is that it soaks up savings that might go into useful private investment."

 

" Savers own Treasury bonds because they are seen as safe, default-free assets, and the government can borrow at lower rates than corporations can. If there were less debt, and fewer bonds for sale, savers seeking higher returns would invest in corporate bonds or stocks instead. Business investment would expand and be more profitable. "

 

      

"But in bad times like now, Treasury bonds are not squeezing finance for investment out of the market"

 

". On the contrary, debt-financed government spending adds to the demand for privately produced goods and services, and the bonds provide a home for the excess savings. When employment returns to normal, we can return to debt reduction. "

      

"In the long run we need a clear plan to reduce the ratio of publicly held debt to national income. "

 

ahh dear old bob

like most neo classical synthetics

he adds nothing even as he clearly states everything

i would offend him by compressing this to:

"please ...just borrow all you want today today today


but bob what of  tomorrow and tomorrow and tomorrow ?

feel free my people
            to inflate as much as you please away away away  away

two post WWII "flation" motions

dirty deed numero uno : winter 1951 THE ACCORD !!!

http://www.richmondfed.org/publications/research/economic_quarterly/2001/winter/pdf/hetzel.pdf

"In April 1942, after the entry of the United States into World War II, the

Fed publicly committed itself to maintaining an interest rate of 3/8 percent

on Treasury bills. In practice, it also established an upper limit to the term

structure of interest rates on government debt. The ceiling for long-term

government bonds was 2 1/2 percent......since its meeting on June 13, 1950, the FOMC had chafed

at the straitjacket imposed by the rigid regime of rate pegging......."


truman
"[T]he Federal Reserve Board should make it perfectly plain. . . to the New

York Bankers that the peg is stabilized.. . . I hope the Board will. . . not

allow the bottom to drop from under our securities. If that happens that

is exactly what Mr. Stalin wants. (FOMC Minutes, 1/31/51, p. 9)"

"The prospect of a prolonged war created the likelihood of government

deficits and the issuance of newgovernment debt. Additional debtwould force

down the price of debt unless the Fed monetized it. That is, to prevent yields

from rising above the 2 1/2 percent rate peg, the Fed would have to buy debt

and increase bank reserves. Banks would then fuel an inflationary expansion

through increases in credit and the money supply"
2.

The

threat of a major, protracted war created the real possibility that the bond rate

would rise to its 2 1/2 percent ceiling. Life insurance companies, which held

the bonds, then had an incentive to sell them immediately to avoid a capital

loss as bond prices declined.

12 The Fed did not want to monetize an avalanche

of bond sales. For that reason, it wanted to eliminate the above-par price on

the bonds. The Treasury, in contrast, saw the problem as one of the Fed’s own

creation. If the Fed would only publicly commit to maintaining indefinitely

the current price of bonds, it believed, bond holders would no longer have an

incentive to sell.

New York Times

: “[L]ast  Thursday constituted the first occasion in history on which the head of the

Exchequer of a great nation had either the effrontery or the ineptitude, or both,

to deliver a public address in which he has so far usurped the function of the

central bank as to tell the country what kind of monetary policy it was going

to be subjected to.”

Truman had compelling reasons to freeze interest rates. On January 25,

1951, he froze wages and prices, apart from farm prices. Raising the cost of

borrowing, especially on home mortgages, while freezingwageswas poison.

14

More important, in January 1951 Truman confronted the possibility of world

war. Treasury communication with the Fed referred to a possible Soviet attack

on the United States “within the foreseeable future” (FOMC Minutes, 3/1/51,

p. 119). Truman and Snyder wanted to keep down the cost of financing the

deficits that would emerge from a wider war

Truman and the leadership in Congress believed that deficit financing

had caused the World War II inflation (Goodwin and Herren 1975, p. 70;

Donovan 1982, p. 325). At the urging of the Administration, Congress raised

taxes sharply in September 1950 with the Revenue Act of 1950 and again in

January 1951 with an excess profits tax (Goodwin and Herren 1976, p. 71).

However, if the war widened to include China and possibly the Soviet Union,

there would be government deficits

eccles january 51

"As long as the Federal Reserve is required to buy government securities

at the will of the market for the purpose of defending a fixed pattern of

interest rates established by the Treasury, it must stand ready to create

new bank reserves in unlimited amount. This policy makes the entire

banking system, through the action of the Federal Reserve System, an

engine of inflation. (U.S. Congress 1951, p. 158)"


--------------------------------------------------------------
exchange  congressman patman / eccles

Patman: Don’t you think there is some obligation of the Federal Reserve

System to protect the public against excessive interest rates?

Eccles: I think there is a greater obligation to the American public to

protect them against the deterioration of the dollar.

Patman: Who is master, the Federal Reserve or the Treasury? You know,

the Treasury came here first.

Eccles: How do you reconcile the Treasury’s position of saying they

want the interest rate low, with the Federal Reserve standing ready to

peg the market, and at the same time expect to stop inflation?

Patman: Will the Federal Reserve System support the Secretary of

the Treasury in that effort [to retain the 2 1/2 percent rate] or will

it refuse?. . .You are sabotaging the Treasury. I think it ought to be

stopped.

Eccles: [E]ither the Federal Reserve should be recognized as having some

independent status, or it should be considered as simply an agency or a

bureau of the Treasury. (U.S. Congress 1951


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

more eccles

"We are making] it possible for the public to convert Government securities

into money to expand the money supply.. . .We are almost solely

responsible for this inflation. It is not deficit financing that is responsible

because there has been surplus in the Treasury right along; the whole

question of having rationing and price controls is due to the fact that we

have this monetary inflation, and this committee is the only agency in

existence that can curb and stop the growth of money.. . . [W]e should tell

the Treasury, the President, and the Congress these facts, and do something

about it.. . .We have not only the power but the responsibility.. . . If

Congress does not like what we are doing, then they can change the

rules"---------------------------

ny fed president and major mephisto sproul

"[T]he Committee did not in its operations drive securities to any price or

yield.. . . [M]arket forces had been the determining factor, and that only

in resisting the creation of reserves had the committee been a party to

an increase in interest rates. That. . . was the result of market forces, and

not the action of the Committee. "

 

 

 

"the FOMC’s letter to Senator O’Mahoney. The

initial substantive paragraph began with the famous quote from John Maynard

Keynes: “[T]hat the best way to destroy the Capitalist System was to debauch

the currency” (FOMC Minutes, 2/14/51, p. 87). The letter expressed hope for

an agreement with the Treasury, but ended by saying that if such agreement

were not possible “[W]e will have no defensible alternative but to do what, in

our considered judgment, is for the best interests of the country, in accordance

with our statutory responsibilities” (FOMC Minutes, 2/14/51, p. 89)."

The Fed then forced resolution of the dispute. It informed theTreasury that

as of February 19, it “was no longer willing to maintain the existing situation

in the Government security market” (U.S. Treasury 1951, p. 266). Sproul

(1952, p. 522) recounted that the Fed informed the Treasury that “unless there

was someone at the Treasury who could work out a prompt and definitive

agreement with us. . . we would have to take unilateral action.” At the time,

the Treasury faced a sizable need to refund existing debt. For the first time,

it also faced the prospect of issuing new debt. To quiet uncertainty in themarkets, the Treasury believed it had no choice but to end the public dispute

On the morning of February 26, McCabe and Sproul attended a meeting

in the White House with the President and other government policymakers.

(Snyder remained in the hospital.) Truman read a memorandum stating that

“Changing the interest rate is only one of several methods to be considered for

curbing credit expansion.” He then asked the Fed chairman and other policymakers

“to study ways and means to provide the necessary restraint on private

credit expansion and at the same time to make it possible to maintain stability

in the market for government securities” (FOMC Minutes, 2/26/51, p. 102).

As an alternative to a rise in interest rates, Truman asked for selective credit

controls (“direct Government controls”) to limit credit extension (FOMC Minutes,

2/26/51, p. 102). When Chairman McCabe “commented on the situation

created by the continued purchase by the System of. . . bonds,” Treasury Under

Secretary Foley countered “that the proposed action by the Federal Open

Market Committee might cause a crisis which should be avoided.” While the

meeting was underway, the White House released the contents of the President’s

memorandum to the press.

The Treasury maintained the position that direct controls on credit were

preferable to increases in interest rates (FOMC Minutes, 3/1/51, p. 117). However,

the Treasury also believed that an end to the dispute with the Fed would

restore market confidence and allow it to continue to sell bonds at 2 1/2 percent

(FOMC Minutes, 3/3/51, p. 153). Moreover, as became apparent later,

the Treasury still had another weapon to use.

When Snyder went into the hospital, he left negotiations with the Fed

in the hands of the Assistant Secretary of the Treasury, William McChesney

Martin.

22 Martin notified the Fed that he desired negotiations based on the

FOMC’s February 7 letter. He reestablished staff contact between theTreasury

and the Fed, which Snyder, as Leach recalls, had forbidden some years earlier.

William McChesney Martin and Fed staff members Robert Rouse, Woodlief

Thomas, and especially Winfield Riefler, negotiated an agreement between

the Treasury and the Fed (FOMC Minutes, 2/26/51, p. 93; FOMC Minutes,

3/1/51, pp. 112–13).

As presented to the FOMC on March 1, the resulting agreement reflected

Riefler’s original ideas. The Fed would keep the discount rate at 1 3/4 percent

through the end of 1951. The Treasury would remove marketable bonds

from the market by exchanging them for a nonmarketable bond yielding 2 3/4

22

Martin had exceptional qualifications. In 1938, at age 31, he became president of the

New York Stock Exchange. Newspapers called him the “boy wonder of Wall Street.” After the

Army drafted him in World War II, he helped run the Russian lend-lease program. In 1946, he

became head of the Export-Import Bank. In December 1948, Treasury Secretary Snyder, a fellow

Missourian, convinced Martin to join the Treasury. Finally, Martin’s father had been Governor of

the Federal Reserve Bank of Saint Louis.

R. L. Hetzel and R. F. Leach: New Narrative Account 51

percent.

23 To make those bonds liquid and thus more attractive to the market,

the Treasurywould exchange them upon request for a 1 1/2 percent marketable

five-year note. During the exchange, the Fed would support the price of the

five-year notes. That support was central because the value of the nonmarketable

bonds depended upon the price of the five-year note. However, the

Fed made no commitment to support the note’s price beyond purchases of

$200 million.

On March 1, Martin presented the compromise to the FOMC. The minutes

make clear that he displayed the charm for which he is legendary. He began by

saying, “Iwant to say for the Treasury people we could not have had pleasanter

or more frank or more open discussions” (FOMC Minutes, 3/1/51, p. 118).

The main sticking point for theFOMCwas whether theTreasury had accepted,

during the bond exchange, a limitation both on the duration and dollar amount

of its intervention in support of the five-year note (FOMC Minutes, 3/1/51,

p. 136). Also, theFOMCwanted to make sure that its commitment to maintain

“orderly markets” did not imply a rate peg.

The FOMC met again on March 3, 1951. Chairman McCabe said that

Mr. Murphy, Special Counsel to the President, had inquired on behalf of

President Truman whether long-term bonds would drop below par. McCabe

had replied to Murphy that he could not say. During the meeting, Riefler

received a telephone call from Martin informing him that Secretary Snyder,

who was still in the hospital, had accepted limitations on Fed support during

the exchange of the marketable for the nonmarketable bonds. However, Martin

requested that there be no written record of that point (FOMC Minutes, 3/3/51,

p. 158).

The FOMC then voted to ratify the Accord and to issue the following

statement the next day: “The Treasury and the Federal Reserve System have

reached full accord with respect to debt-management and monetary policies

to be pursued in furthering their common purpose to assure the successful

financing of the Government’s requirements and, at the same time, to minimize

monetization of the public debt” (FOMC Minutes, 3/3/51, pp. 156, 163).

The FOMC then voted to ratify the Accord and to issue the following

statement the next day: “The Treasury and the Federal Reserve System have

reached full accord with respect to debt-management and monetary policies

to be pursued in furthering their common purpose to assure the successful

financing of the Government’s requirements and, at the same time, to minimize

monetization of the public debt” (FOMC Minutes, 3/3/51, pp. 156, 163).

The Administration had one more hope that it would prevail.

24 While in

the hospital, Snyder conveyed to Truman the message that he felt he could no

longer work with McCabe. Without a working relationship with the Treasury,

McCabe could not function as Chairman of the Board of Governors. McCabe

sent in a bitter letter of resignation, but resubmitted a bland version when asked

to do so by the White House. McCabe, however, conditioned his resignation

on the requirement that his successor be acceptable to the Fed. On March 15,

23

About $40 billion in 2 1/2 percent bonds were outstanding (U.S. Treasury, 1950 Annual

Report,

Table 17).

24

Donovan (1982, p. 328) wrote, “Truman forced McCabe out as chairman of the Board of

Governors.” This paragraph summarizes Donovan (1982, p. 331).

52 Federal Reserve Bank of Richmond Economic Quarterly

the President appointedWilliam McChesney Martin to replace McCabe. The

Senate confirmed Martin on March 21. McCabe left office on March 31, and

Martin took office April 2.

Leach recalls that the initial reaction both among Board staff and onWall

Street to Martin’s appointment was that the Fed had won the battle but lost the

war. That is, the Fed had broken free from the Treasury, but then the Treasury

had recaptured it by installing its own man. However, as FOMC Chairman,

Martin supported Fed independence. Some years later, Martin happened to

encounter Harry Truman on a street in NewYork City. Truman stared at him,

said one word, “traitor,” and then continued.

25 Leon Keyserling (1971, p. 11),

chairman of the Council of Economic Advisers from 1950 through 1952, said

later: “[Truman] was as strong as any President had ever been in recognizing

the evils of tight money.. . . He sent Martin over to the Treasury to replace

McCabe. Martin promptly double-crossed him.”

In his speech accepting an appointment to the Board of Governors, Martin

(1951, p. 377) said:

Unless inflation is controlled, it could prove to be an even more serious

threat to the vitality of our country than the more spectacular aggressions

of enemies outside our borders. I pledge myself to support all reasonable

measures to preserve the purchasing power of the dollar.

The Treasury’s offering of the new 2 3/4 percent nonmarketable notes in

exchange for the 2 1/2 percent marketable issues took place from March 26

through April 6. During this period, as provided for in the Accord, the Fed

purchased the five-year notes as needed to support their price. However, the

Fed spent the entire amount agreed to in the first three days. “[D]ismayed

Treasury officials asked for continued support. The request was refused, and

there was nothing more the Treasury could do about the matter” (Hyman

1976, p. 351). The Fed just said “No.” Thereafter, the Fed bought only small

amounts of the bonds to prevent “disorderly conditions in the market.” Their

price went from around 100 3/4 before the Accord to around 97 in the last

half of the year “when the bond market was on its own” (Board

1951 Annual

Report,

p. 5).

Under its new leadership, the FOMC had issued its ultimate challenge to

the White House. Why did Truman finally walk away from the conflict? For

Truman to triumph over the Fed, he would have had to prevail in Congress;

however, his precarious political position in early April 1951 made that impossible.

Truman’s political popularity had plummeted in part because of scandal.

Earlier that year, Senator Fulbright (D. Arkansas) had released a report

25

Telephone interview, Robert Mayo, April 10, 1998.

R. L. Hetzel and R. F. Leach: New Narrative Account 53

accusing two directors of the Reconstruction Finance Corporation (RFC), one

a politically well-connected Democrat, of favoritism (Donovan 1982, p. 333).

More important, shortly after the conclusion of the Accord, a much more

serious and long-simmering crisis boiled over: the tension between President

Truman and General Douglas MacArthur. MacArthur had opposed Truman’s

policy of limited war, saying that it amounted to “surrender.” Truman had

made the decision to seek peace in Korea through its partition at the 38th

parallel rather than to engage China in a wider war, which he feared would

involve the Soviet Union and atomic weapons. On February 13, MacArthur

called Truman’s policy “unrealistic and illusory.”

26

On March 24, MacArthur claimed that he could defeat China if only

Washington would stop restricting him militarily. He even offered “to confer

in the field with the commander-in-chief of the enemy forces.” His statements

sabotaged secret negotiations to settle the war. Representative Joseph (Joe)

Martin (R. Mass.) advocated the use of Chiang Kai-shek’s forces in Formosa

to open a second front against China. MacArthur supported Martin in a letter,

which included the phrase “There is no substitute for victory” (Donovan

1982, p. 352). On April 5, Martin read MacArthur’s letter in the House of

Representatives.

On April 10, four days after the end of the bond exchange, Truman fired

MacArthur. Truman biographer Robert Donovan (1982, p. 358) wrote that

Truman “knew well enough that he would awake in a political climate raised

to a pitch of hatred and recrimination so severe that it could not fail to stain the

remainder of his term in office. Of all the storms he lived through as President,

the one about to break was the worst.” To aggravate Truman’s problems,

MacArthur learned from the radio that Truman had fired him. The

Chicago

Tribune

wrote in a front page editorial: “Truman must be impeached and

convicted.. . . [H]e is unfit, morally and mentally, for his high office” (Donovan

1982, p. 359).

Subsequent events gave the Fed time to incubate its fragile independence.

Inflation abated sharply. CPI inflation averaged just over 3 percent from

1951Q2 through 1951Q4 and just less than 1.5 percent in 1952. Also, Dwight

D. Eisenhower, Truman’s successor and President from 1953 through 1960,

and his Treasury secretaries shared the Fed’s goal of price stability (Saulnier

1991).

3. CONCLUDING COMMENT

The March 1951 Accord marked the start of the modern Federal Reserve

System. Under Chairman Martin, the Fed’s overriding goals became price

stability and macroeconomic stability.

26

This paragraph and the next are from Donovan (1982, pp. 349–51).

54

The Administration had one more hope that it would prevail.

24 While in

the hospital, Snyder conveyed to Truman the message that he felt he could no

longer work with McCabe. Without a working relationship with the Treasury,

McCabe could not function as Chairman of the Board of Governors. McCabe

sent in a bitter letter of resignation, but resubmitted a bland version when asked

to do so by the White House. McCabe, however, conditioned his resignation

on the requirement that his successor be acceptable to the Fed. On March 15,

 

Sproul

About $40 billion in 2 1/2 percent bonds were outstanding (U.S. Treasury, 1950 Annual

eccles

 

 

 

martin

"Unless inflation is controlled, it could prove to be an even more serious

threat to the vitality of our country than the more spectacular aggressions

of enemies outside our borders. I pledge myself to support all reasonable

measures to preserve the purchasing power of the dollar."

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

"Some years later, Martin happened to

encounter Harry Truman on a street in NewYork City. Truman stared at him,

said one word, “traitor,” and then continued.

25 Leon Keyserling (1971, p. 11),

chairman of the Council of Economic Advisers from 1950 through 1952, said

later: “[Truman] was as strong as any President had ever been in recognizing

the evils of tight money.. . . He sent Martin over to the Treasury to replace

McCabe. Martin promptly double-crossed him.”


 

 

Fed Debt service burden ...if the FED plays patty cake

"Interest alone could rise  from a current  $224 billion
to a possible  $857 billion 10 years from now"


but why ?

we need
 a bout of financial repression
 when  this snail paced recovery from the job  slump ends

corral comparative wage rate change

the ECB contrived spreads

nine fold master of monetary policy

fiscal flop and yet steady expansion

tysons corner

"The US remains the global leader in R&D investment, spending an estimated $400 billion in 2009 – higher than China, Japan, and Germany combined. in terms of R&D spending as a share of GDP, the US ranked only eighth in 2009 (at 2.9% of GDP). " defense accounted for more than 50% during the last 25 years." " The defense share of R&D – less than 10% in the EU and less than 5% in Japan in 2009 " "between 1999 and 2009, global R&D spending grew at an average annual rate of 7%, accelerating to 8% during the last five years, despite the global recession. " "Over the decade, the US share of global R&D fell from 38% to 31%, the EU share fell from 27% to 23%, and Asia’s share rose from 24% to 32%. Within Asia, R&D spending in China grew at an astounding 20% annual pace – twice the country’s GDP growth rate – and by 2009 China had surpassed Japan to become the world’s second-largest investor in R&D. Spending on R&D also grew rapidly – about 10% annually – in South Korea. By contrast, R&D spending grew by 4% in Japan, 5% in the US, and roughly 6% in Europe." ", In 2009, business accounted for 75% of R&D funding in Japan, 73% in South Korea, 72% in China, 67% in Germany, and 60% in the US, " " multinational companies, whether headquartered in the US or elsewhere, accounted for about 84% of private (non-bank) R&D investment in the US in 2009," "US multinationals locate about 84% of their R&D activities in the US this share has declined during the last decade, as US multinationals have shifted some of their R&D from the US and Europe to Asia in response to rapidly growing markets, ample scientific and engineering talent, and generous subsidies." "global competition for multinational companies’ R&D activity, and for the local benefits that it brings, is likely to intensify in the future, with many countries already offering sizeable tax credits and extended tax holidays. The Asian economies have been particularly aggressive in the use of such incentives. And, recognizing that the availability of a workforce with the necessary skills is a key determinant of where businesses locate their R&D activities, many countries are increasing their investments in tertiary education and training in science, engineering, and technology." "Engineering accounts for only 4% of all bachelor’s degrees in the US, compared to 19% in Asia" "Many countries are changing their immigration laws to make it easier to attract highly skilled workers, especially scientists and engineers, who are increasingly mobile." "Meanwhile, immigration policies in the US and Europe are making it more difficult to attract and retain such workers, compelling companies to shift R&D abroad to find the talent that they need."

Sticky prices are a NK metaphor for hayeckian sticky wages

why models grind out good news: we'll get back on track

of course there's the jiggering with the trend line :

 

win with Wynne

we need to make greenwald stiglitz etc into a concrete wonder land

these unstable markets  in particular
that have adverse selections
and inadequate dynamic demand to sustain innovations

shirker markets

reputation rents

rationed credit

inter linked firm financing

list goes on

add your favorites

agents and synthetic modeling fine but....analytic models are abductive too

fine
both contrast with inductive radicalism

play at this open  mind crap
oppose it to practice

a passive mode of  discovery

so long as our rudely empirical types
respect their tools of extraction
act upon the data
and
impact decisively the "findings "
   they  wrench out of the telemetry of any real markets

negative rates or inflation?

adjusting the real value of fixed  nominal obligations requires
use of inflation
of  product prices and of course wage rates

negative or positive changes in  rates of interest
not limited by the zero line
call them in general  occasional real value realigners
could accomplish these adjustments instantaneously

in any closed market system
inflation is meaningless unless its non proportional

ie
 some nominal values move  differently then others
more or less
 including
      in  opposite directions


open systems are inter linked by forex rates
where congruent or just  similar  or  for that matter
contrary adjustments can be made

Linearization and commercial arithmetic

The scale here is critical After all short enough linear intervals in all relevant dimensions Oughta capture the decisions of agents using arithmetic to calculate their actions And reactions

:

Work sharing in the GD

NBER Working Paper No. 18816 Issued in February 2013 NBER Program(s):   DAE During the Great Depression of 1930s, changes in the workweek drove a larger portion of changes in total labor input than in other decades. Work-sharing policies appear to be responsible. Hoover created various work-sharing committees lead by key industrialists, which pushed for shorter workweeks and Roosevelt’s President’s Reemployment Agreement called for sharp cuts in weekly hours. The hope was to spread available work amongst more people. While between 50 and 90 percent of declines in labor input were accommodated by falling hours during these periods, in recent decades employers have primarily relied on layoffs to achieve the same end. During the Great Depression of 1930s, changes in the workweek drove a larger portion of changes in total labor input than in other decades. Work-sharing policies appear to be responsible. Hoover created various work-sharing committees lead by key industrialists, which pushed for shorter workweeks and Roosevelt’s President’s Reemployment Agreement called for sharp cuts in weekly hours. The hope was to spread available work amongst more people. While between 50 and 90 percent of declines in labor input were accommodated by falling hours during these periods, in recent decades employers have primarily relied on layoffs to achieve the same end.

Class assignment : evaluate Paul k's blog

How much did he get right as a Merlin How much did he teach as a mentor All evaluation is relative And requires a numeraire I'd Use brad Delong as numeraire Why I'm I assigning this to u not to moi ! Slow reader lazy compiler Better you absolute comp advant me Use my quick negative thinking and flawless pattern recognition to review your findings I give you till march first

Over looking cost cutting investments in a time of stagnating real demand

Why not look at the return to investing in cost reducing processes ? If your loaded up with cash Hence the fairly reasonable corporate spending on new software and equipment Green field investing of course is utterly absurd and kaputniki

To be the forward guidance equivalent of an All seeing fed ? All power sufficient

What would the fed need to be to be a reliable forward guide? That is the assignment for all institutionally constrained progressive job class oriented macro reformers

Uncle provided and required Lot insurance

Why not ? The premium would be a george tax

Dropping the AS IF

Think of the. " by an invisible hand " or as if money ...whatever that might be framed into Has something well captured by the word velocity for that matter any of GT Keynes aggregates like Y I C N Trying to drop the " as if " and plowing into making policy can take you right down the rabbit hole On the other hand retaining the "AS IF" brackets Suggests you set up some pretty sharp real time info feed back systems Of course in the public square chatter dropping the as it's can be like playing catch with a Bowie knife

dachs XL at regatta

rescue dachs

thanx brad.... i'll visit again...some day

brad clips GT keynes and bashes the Moor

"I agree with [Silvio] Gesell that the result of [our] filling in the gaps in the classical theory [with our approaches] is not to dispose of the [free-market] ‘Manchester System’,"


" but to indicate the nature of the environment which the free play of economic forces requires if it is to realise the full potentialities of production. The central controls necessary to ensure full employment will, of course, involve a large extension of the traditional functions of government…. "


"But there will still remain a wide field for the exercise of private initiative and responsibility. Within this field the traditional advantages of individualism will still hold good."


"Let us stop for a moment to remind ourselves what these advantages are."


" They are partly advantages of efficiency
 — the advantages of decentralisation and of the play of self-interest."

" The advantage to efficiency of the decentralisation of decisions and of individual responsibility is even greater, perhaps, than the nineteenth century supposed; and the reaction against the appeal to self-interest may have gone too far. "



"But, above all,"

here it comes sports fans


"  if it can be purged of its defects and its abuses,"

the good old angelization assumption


 " individualism  is the best safeguard of personal liberty in the sense that, compared with any other system, it greatly widens the field for the exercise of personal choice"

"It is also the best safeguard of the variety of life, which emerges precisely from this extended field of personal choice,"

 the loss of  personal choice  is the greatest of all the losses of the homogeneous or totalitarian state."

" For this variety preserves the traditions which embody the most secure and successful choices of former generations; it colours the present with the diversification of its fancy; and, being the handmaid of experiment as well as of tradition and of fancy, it is the most powerful instrument to better the future…."

personal choice "the hand maiden of experiment "!!!!!

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

back to reality

"[I]f… demand is deficient, not only is the public scandal of wasted resources intolerable, but the individual enterpriser who seeks to bring these resources into action is operating with the odds loaded against him. "


"The game of hazard which he plays is furnished with many zeros, so that the players as a whole will lose if they have the energy and hope to deal all the cards."


" Hitherto the increment of the world’s wealth has fallen short of the aggregate of positive individual savings; and the difference has been made up by the losses of those whose courage and initiative have not been supplemented by exceptional skill or unusual good fortune."


" But if effective demand is adequate, average skill and average good fortune will be enough."
--------------------------------

back to liberal dog  barking


"The authoritarian state systems ...solve the problem of unemployment at the expense of efficiency and of freedom. "

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

punch drunk sum up:
\
"It is certain"

" the world will not much longer tolerate the unemployment…."

" But it may be possible by a right analysis of the problem to cure the disease whilst preserving efficiency and freedom…"

the ghost of  future '78
              rises to laff

=================================================


brad bashing:


"Let's run through Marx's labor-theory-of-value argument in a simple finger-exercise model:
Start with 100 identical farm families on 100 identical farms, each of which produces 3000 pounds of wheat (and other crops, but let's assimilate them all into wheat) each year.

Now suppose that ten of these families starve themselves for a decade--living on little more than half-rations--to raise the cash to buy farm machinery, irrigation systems, fruit trees, et cetera from the cities.

 As a result of their sacrifice, saving, and investment, thereafter their farms require four times as much labor each year to operate, but also produce crops worth eight times as much because of the capital investment.


 They then hire thirty additional families' worth of workers, leaving the remaining ninety original farmsteads to be worked by sixty families.


If diminishing returns do not set in and if the sixty families that remain in the family-farm sector expand their crops to take over the now-idle land, each of them can now produce 4500 wheat-pound equivalents of product each year: their standard of living has gone up by 50%.


 The owners of the capital-intensive farms have to pay each of the 30 families they hire 4500 wheat-pound equivalents to get them to work in the capital-intensive farm sector. "


"Each of the proprietor families is then left with 24000 - 13500 = 10500 wheat-pound equivalents in income--4500 wheat-pound equivalents of which is the "wages" of the proprietor family, and 6000 wheat-pound equivalents is profit."



Now in Marx's schema, the first situation--where average labor productivity is 3000 pounds of wheat per family, and each family receives 3000 pounds of wheat in income--is one of no exploitation: labor is paid its average product:

---

Average Labor Product:	3000
Real Wage:	3000
_____	_____
Surplus Value per Worker:	0
Total Exploitation:	0

---

And in Marx's schema, the second situation--where average labor productivity is 5100 wheat-pound equivalents, and each non-proprietor family earns or is paid 4500 wheat-pound equivalents--is a situation of exploitation in which the proprietor class extracts surplus value from the workers by using their market position to pay those that they hire less than the true value of their labor.

---

Average Labor Product:	5100
Real Wage:	4500
_____	_____
Surplus Value per Worker:	600
Total Exploitation:	60000

---

"Now it should be clear that this labor-theory-of-value-based analysis makes no sense at all. "

"The proprietor families starve themselves for a decade, and yet Marx views them as exploiters?"


" The heavy investments of the proprietor class and their resulting demand for labor raises the real wage by 50%, and yet the working class is oppressed?"


 "Something is very wrong here."


"Now at this point the standard response is that the example is rigged: that in the real world those who own property and hire labor and live richly gained their wealth not through sacrifice but through a combination of luck and theft and having chosen the right parents. Thus it is unfair to set forth an example in which the proprietors' moral claim to their higher income is so clear and strong"


no draw your chair up close

here comes the crusher.


"And the rebuttal is :


"yes, this example is rigged: that's the point."

" The aim is to construct useful analytical categories that will help one identify and assess injustice."

"The aim is not to construct analytical categories--like the labor theory of value--that claim to find injustice whether there is in fact injustice or not. The fact that the labor theory of value finds injustice whether it is there or not is a sign that it is not the brightest light on the tree of good ideas."


"Marx's labor-theory-of-value-schema makes no distinctions between profits on capital that have their origins in luck, theft, and choosing the right parents on the one hand; and profits on capital that have their origins in sacrifice, industriousness, or flashes of genius on the other."


" They are all, to Marx, "exploitation," "unjust enrichment," "extraction of surplus value." They are all, to Marx, signs of evil."


" But in this particular example the proprietors are, in reality, not evil. The proprietors are, in reality, public benefactors. The effect of their savings and investment is to raise not just their own incomes (after an extended period of sacrifice) but everyone else's incomes as well."


"Thus the labor theory of value category of "exploitation" does not map onto what either ordinary language or our moral intuitions call "exploitation." "

"There are social and economic changes that are good that are, in Marx's schema, increases in the rate of exploitation."

" There are social and economic changes that are bad that are, in Marx's schema, increases in the rate of exploitation."

" It's simply not a useful tool for either moral philosophy or political action."


"Moreover, the labor theory of value is of little help in predicting
 what average market prices will be."

 "It's not a useful tool for economic analysis either. In my view, the labor theory of value is pretty much useless. "


"If you want to make a compelling criticism of economic and social relationships, you cannot do so by saying that there is Marxian "exploitation"--which exists wherever workers are paid less than the average product of labor. "

"You have to, instead, inquire into the origins of the wealth and property rights on which the proprietor class's income is based. The labor theory of value is simply a red herring."

---

"this is my point: The labor-theory-of-value model is simply not a good or useful model. "

"Marx's measures of "exploitation" and "rates of surplus value" don't tell you
 very much about what is really going on."

" It's a swamp you really don't want to enter. "

April 05, 2005

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

for the record parable 2.0
from
 capitalist primal accuulation

to
socialist primal accumulation

continue to assume terms of trade between farm wheat and mechanization products
remains un changed
and there is no improvement in mechanized technique

THE  farmers form a co op
and  set up a members dues pool
    placed proprtionally on all farmers  out put

the proceeds are again used to buy machines etc from the city
and step by step the co op converts community production
 from hand farming to mechanized farming

along the way
taking the added productivity  partly in higher co op wheat wages
and partly in  a  higher rate of buying new machines etc from the city

this continues till the system is fully  up dated

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

 

now we move from morals to market science

 

"Moreover, the labor theory of value is of little help in predicting
what average market prices will be."

sooooooo

"It's not a useful tool for economic analysis either."

hmmmm:

the law of value common to all classical political economists:


 the relative exchange rates of two products
 will tend to  move thru time expansion and innovations
 roughly in proprtion to the changes in their relative  average  labor content

this is indeed very loose

it makes no clarification about marginal versus average
it has no model of short term demand etc etc

the question becomes
 can this dynamic thesis be extended to cover
the same ground as covered by other theories of exchange value ?

answer

yes



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

" In my view, the labor theory of value is pretty much useless. "