File this under the heading economics is not even a dismal science, because mainstream economics isn’t even science. Economics could actually be a rigorous discipline, if orthodoxy can be kicked out.
“ In contrast to its attitude to private debt, which it ignores, mainstream economics obsesses about government debt. But this volte-face doesn't besmirch its record of being 100% wrong.”
The charts and the discussion of them remind me of the Bank of England publishing a report on something similar.
McLeay, Michael, Amar Radia, and Ryland Thomas. “Money Creation in the Modern Economy.” Bank of England Quarterly Bulletin 54, no. 1 (2014): 14–27. https://ideas.repec.org/a/boe/qbullt/0128.html.
"The analysis in this chapter is entirely derived from accounting identities, and it is also completely consistent with the analysis of "Modern Monetary Theory" as laid out by Stephanie Kelton in The Deficit Myth (Kelton 2020). What this chapter adds to MMT is firstly a proof that MMT's analysis of government money creation is derived from a correct application of the rules of accounting, and is therefore better called "Modern Monetary Fact" as a result. "
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"Secondly it enables an integrated analysis of both fiat and credit money creation, which the MMT movement itself has not as yet provided, while mainstream Neoclassical economics ignores credit completely."
@GhostOnTheHalfShell@economics@a.gup.pe Economics is in the 19th century bloodletting and leeches stage because it cannot do controlled experiments.
Except now it can. Multiplayer video games with convertible currency, and discrete event simulations with all NPCs, can produce real world economic behavior.
And then you can start trying out all the alt-money theories and see which ones work and which are bunk.
We'd also have to get the Wall Street influences out of economics.
It goes beyond that and doesn’t need game simulation (although it’s a great teaching tool).
#SteveKeen has modeled macro from accounting identities which follow closely empirical economic behavior and has debunked mainstreamers for 50 years (as others have).
The mainstream’s refusal has as much to do with an the established thinkers refusing to budge as it does the immense ideological interests of wealth that uses them to legitimize their dominance.
In other words, it take more than proof, which has been on offer for decades, but social mobilization to cast out the mainstream. This is why Keen seeks to rally academics from a broad range of fields to subject economists to academic review, especially on climate.
@GhostOnTheHalfShell@economics@a.gup.pe Well if you could build a large scale economic simulation that predicts economic outcomes better than the mainstream, you could fund the operation by trading.
With Curie and radium, or germ theory, what overcame the skeptics of the day? When you could SEE it. The microscope, or purified glowing stuff you could show people.
Simulations would let us SEE the problems with current economic theory.
"A new scientific truth does not triumph by convincing its opponents and making them see the light, but rather because its opponents eventually die and a new generation grows up that is familiar with it ..."
Non Orthodox economists have contended with this for a half century and longer.
@GhostOnTheHalfShell@economics@a.gup.pe The "old guard" problem exists in all disciplines, sure. Right answers eventually win.
Economics is uniquely positioned in that someone with a better theory (in terms of predictive power) could get filthy stinking rich, without fighting the patent office or large corporations first.
Michael Milken and the founders of Long Term Capital Management show the hazards of doing that. Both had valid insights, both met with disaster in the real world.
Applied MMT or at least Doug doesn't operate that way. It'd tell you how to position in the market wrt to the economic cycle and it only forecasts a few months out.
@mike805
The problem is it's not enough to have a correct theory to make money, you also have to know facts about what people are doing. For example, if I jump out of an airplane without a parachute you would probably imagine I would die, but then they did a randomized controlled trial and NOONE who jumped without a parachute died... it's a published research paper @GhostOnTheHalfShell@economics@a.gup.pe
@mike805
Anyway, the whole "if you're so smart why aren't you rich" falls apart when you realize that you can be 100% correct and still not have the information needed to put into your model to make good predictions... And people who have insider trading info can be dumb as a brick and make money. @GhostOnTheHalfShell@economics@a.gup.pe
@GhostOnTheHalfShell@economics@a.gup.pe I suppose my main summary of my understanding of canes is that he said the government should collect surpluses when the economy is good, then spend them like crazy in deficit when the economy is bad, so that in the end the budget is roughly balanced but no one is truly obsessing about deficits.
Keynes was wrong in this sense: government deficits are private deposits.
So there should be no surplus because government is deleting the credit potential of the economy; taxes deletes fiat currency and a surplus is a state shrinking private wealth.
That said, spending when the economy is bad is creating credit.
If the real economy is growing, in general you will need the size of the money supply to grow too, or prices will decline and this often causes people to misallocated production. So you should run deficits. If the economy is not growing but the interest rate isn't particularly high then you should probably reduce your deficits. If the economy is not growing but interest rates are high you should increase them... 1/
If I understand correctly, MMT and Keen by his math, would say that reducing the deficit removes money (credit) from the system, not a good thing if commerce is fading.*
Here, raising interest could be an option, but I'd say helicopter money into people's pockets.
note here I do not think growth should be necessary, because Bractaete system doesn't need, but we don't have it and monetary system needs interest and inflation to "work".
@GhostOnTheHalfShell
Well, the limiting factor for monetary growth is inflation, if the economy is lackluster but interest rates are low (therefore money is relatively easy to get) you won't get improved output from helicoptering money, you'll just get inflation. But if interest is high, yeah helicoptering money could help. @msbellows@economics
because in that case money is probably a limiting factor... If prices of goods are going up but real production isn't increasing, you should tax money out of the system and run a "government surplus" because people are demanding things with money that just aren't produceable. 2/
“Figure 42: A Government Deficit increases the net financial worth of the private sector”
On another note, Laffer doesn’t want the Fed chairman position. For good reason, he’d ruin the economy. I think we should run the experiment and have a different school of economic thought heading it. Laffer sounds absolutely mental.
Coolidge in his final State of the Union address. Sounds awfully familiar to Laffer, although the Reagan admin famously exploded the deficit to fund Star Wars.
“ We have substituted for the vicious circle of increasing expenditures, increasing tax rates, and diminishing profits the charmed circle of diminishing expenditures, diminishing tax rates, and increasing profits.”
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I have to wonder about standard political talking points.
Dems crow of their budget cutting prowess to explain why the economy does better under them while hissing at Republican’s raising the deficit as an explanation of why the economy does less well. But MMT explains the opposite and I have to ponder that the reason is there’s a lag of a couple years.
The point of my comment is Bill Clinton crowed he balanced the budget. He famously cut spending. Reagan simply expanded the deficit to fund SDI, even now and under Trump gov spending is lavished on defense.
But the deficit is private wealth. Cutting taxes simply cuts down on money destruction of taxes.
In finishing out Keen’s latest post, I observe he references Coolidge and the dynamics that lead to the Great Depression and also the Panic of 1837 (there was also a long Depression of 1873). For the 20s the interplay of private and public debt lead the roaring 20s but set the stage for the Great Depression.
@GhostOnTheHalfShell@economics@a.gup.pe
read keen more closely, and remember the Liability and Equity columns of his Godley tables have the opposite sign of the Asset column. Kinda part of double entry that always trips me. You "add/enter" an entry in two places... The "opposite sign" nature is what makes sure it is a net-zero transaction.
I like to SEE the opposite signs spelled out; 11th century monks, accountants and economists like to enter the same entry in both places.
@video_manager@economics@a.gup.pe TBH I don't see what your remark is addressing. Dems claim fiscal responsibility by slashing the deficit and ancheiving balanced budget. My observation is that 1) that claim as virtue is mainstream thinking 2) the GOP is blamed for larger deficits which are aided by expanding military spending 3) taxes delete debt money and credit. The budget and debt grows in size. The talking points ate cute but ass
So I finally get where the disconnect is here. The main point Keen makes is balancing the budget and cutting deficit can push macro dynamics into crisis state. It’s where the ratio of credit v GDP plummets.
Unfortunately lost in this exchange: crowing about cutting the deficit is wrong headed. Slashing the deficit and balancing the budget, which Coolidge was so proud of in the 20s, set the stage for the Great Depression. Dems bragging about nosing deficits down is no virtue. MMT is far more nuanced about public and private credit and debt.
Both parties cling to mainstream thinking which is deadly.
Prolly better to ignore economy and work on the moral sentiment of Trump as evil.
Directly challenge the myth and call him Satan’s servant. Call his infidelity Sin. Call his worship of money and lack of empathy Evil. Change the dialogue to them proving that he isn’t.
Go on the moral attack and make defend themselves .
Biden is more a man of faith than Trump will ever be.
but also, when the MAGA morons go "trump and republicans good for economy/ deficit, biden and democrats bad" hit them with something simple clean and hard: {image}
most won't care, they're brainwashed dum dums. but you might hit a few
Walk into room of GOP and take a page, rage about Reagan blowing up the deficit (even though it’s stimulative) and RAGE about him gushing money on SDI. Most won’t know what it was these days. Howl that it destroyed the economy. Rage that he destroyed high paying American jobs (FAA) and he caused college tuitions to explode, so fat ass bureaucrats could collect fat salaries (mostly true). Then demand that they explain why they support it.
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