There’s also another imperative here: market share drives corporations, it comes from the math governing manufacturing costs. The largest factor is fixed costs (the factory). The more they sell, the lower fixed costs becomes to the capital investment. This motivation can be seen as ‘natural’, in the sense of making the most of any effort. The impulse to efficiency is another dynamic. It drives avarice (market share).
#SteveKeen worked out the correct math governing profits
Finance and Economic Breakdown: Modeling Minsky's "Financial Instability Hypothesis"
Minus the math, which can be skipped over, for his discussion, the paper lays out the basics of modern economics wrt to economic cycles and labor v capitalist v creditor (banks) income.
It’s the basic model to reason about our economy and its state.
“ One look at this chart should be sufficient to understand why the Great Crash of 1929 was both great, and a major cause of the Great Depression which followed it, and why levered speculation, rather than rational calculation, dominates the behaviour of asset markets.”
I’m kind of curious what the system response (of housing prices) to a deceleration of interest rates. If price changes reflect acceleration of home loan interest rates, how does a deceleration propagate into the economy? The US economy is built upon the housing sector. It plays an outsized role in economic health.
The remarkable aspect of mainstream economists is their persistence treating values in (digital) ledgers as actual instances of banknotes (physical paper) as their mental model, then selectively dropping the model.
"The Neoclassical (and Austrian) economics vision of free market capitalism is one of an anarchist utopia. When free of non-market distortions—government intervention, unions and externalities—and bereft of monopolies, the Neoclassical model of capitalism achieve “Pareto Optimality”: a point at which no-one can be made better off without making someone else worse off. "
Tim Lenton and Steve collaborated on another report for which those with pensions or those who have those with pensions can press their funds to respond to. It's their fiduciary responsibility to accurately assess risk (see pdf below)
Steve’s macro from macro derivations are solid (because mainstream theory of macro from micro is equivalent to saying tennis is just atomic electrostatic interactions)
but still, there’s a different kind of place small scale could effect macro, if they exist
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.”
“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.
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.
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.
"Before I show why he fails, I want to clarify what it means to say that banks create money “out of nothing” (Schumpeter 1934, p. 73). It definitely does not mean that banks create money via magic. What it means instead is that there is no other account from which a bank loan is financed, whereas there is such an account for a non-bank loan."
For Joseph Stiglitz (reinforcing yesterday's post on the problems of economists dealing with 'econoworld' not the real world);
Most economists are suffering from “cognitive dissonance: you spend your life proving markets are efficient & then you spend the rest of life dealing with the obvious inefficiencies of the market economy'!
It'd be better if economics started with the real world not the world in theory.
To be fair, many have they just are barely ignored/downplayed
Lending support to #SteveKeen helps with that. His models model economics from accounting identity for starters and also mathematically proves credit matters.
I’ve taken up to posting updates from his substack under that hashtag. Heterodox economic thinking needs more visibility.
More general grousing can be had under @economics@a.gup.pe
I want to emphasize the urgency to repudiate mainstream economics because of their role in climate trivialization.
So you're in social sciences and mainstream economists giving you grief? How about some ammo?
"Therefore, empirical data and mathematics, the weapons that Neoclassical economists like to wield to intimidate other social sciences, can instead show that their paradigm is based on myths rather than science.