monetarism & paranoia

[Michael Perelman]

So the Jobs Report Is Dismal. The Fed Has No Place to Go but Up. By JONATHAN
FUERBRINGER
New York Times
August 8, 2004
That will Fed policy makers do this week in the face of surprisingly weak job growth
in the last two months? Raise interest rates, of course.
Despite the awkward timing of the Fed meeting, so soon after Friday's report that
only 32,000 new jobs were created in July, the Fed has little maneuvering room. "The
Fed is going to raise rates," said Richard Yamarone, director of economic research at
Argus Research.  He said that one reason Alan Greenspan, the chairman of the Federal
Reserve, would go ahead was that "he has got to raise rates so he can cut them again
if there is a terrorist attack."



--
Michael Perelman
Economics Department
California State University
Chico, CA 95929

Tel. 530-898-5321
E-Mail michael at ecst.csuchico.edu

narco-monetarism

[Chris Burford]

It is almost incredible from this side of the Atlantic to see the 
Republicans and Democrats falling over themselves to tear up decades of 
sado-monetarism, to which we were told there is no alternative throughout 
the years dominated by Reagan and Maggie Thatcher's influence. Money? Now 
it seems like you cannot inhale too much of it.

Presumably most members of this list would think abolishing the tax on 
dividends is socially regressive, but has anyone got a deeper analysis 
either from a post Keynesian, or a marxist point of view? The BBC this 
morning featured one out of work New York analyst, in a leafy suburban 
home, arguing that government deficit spending should really go on 
providing tax breaks to stimulate new investment by business, rather than 
in cutting taxes on dividends. An interesting contradiction between 
shareholders and real finance capitalism, when the analysts job is on the line.

Are these all pirouettes around the falling rate of profit, the need for 
still more capital to be destroyed and the fundamental contradiction 
between the inherent drive for capital to accumulate and the limited 
purchasing power of the masses?

But while Bush scrambles, desperate not to be a one term president, and the 
Democrats manoeuvre, will the net result be that the USA pulls it off again 
- reflation of its economy at the expense of the rest of the world, who 
have no alternative but to extend massive credit to the only superpower 
while it recovers its competitive position on the basis of an even more 
advanced set of productive forces?

Where is the incisive marxist analysis?

Chris Burford

London

The limits to monetarism

[Louis Proyect]

[This is a passage from an interesting NY Times op-ed piece that explains
why lowering interest rates is no elixir to the American stock market woes.
As Garten, dean of the Yale School of Management, explains, if the price of
a T-Bill comes down, Japanese investors might take their money elsewhere.
In other words, Greenspan is caught between a rock and hard place. What the
article does not discuss, but what I have been running across constantly in
my readings on airline deregulation, is that such US corporations ran into
a big decline in profits in the 1990s. Eventually the stock market caught
up with the profit crunch, just as it did when Japanese investors figured
out that Tokyo real estate was as overpriced as Yahoo.com.]

NY Times Op-Ed, March 18, 2001 

The American Risk in Japan

By JEFFREY E. GARTEN

NEW HAVEN — We have often seen how the fate of the American economy cannot
be divorced from global markets, and how even a spark abroad can create a
fire at home. In 1987, for example, the stock market crash was precipitated
in part by a dispute between Washington and Bonn over interest rates and
trade. In 1998, a financial crisis that began in Thailand ultimately spread
until it forced a dramatic bailout of one of America's largest hedge funds
— a rescue that prevented an implosion of many American banks. Now Japan is
the trouble spot that ought to keep us up at night. . .

Japanese entities still own some $350 billion of Treasuries, about 25
percent of all such holdings outside of the United States, not to mention
hundreds of billions of other marketable bonds and stocks. Japanese firms
own some $150 billion in direct investments in America, more than those
held by any other foreign country except for the United Kingdom. And
Japanese companies employ over 550,000 Americans.

A Japanese sell-off of American assets could mean more downward pressure on
our softening economy — more surplus property, more layoffs. It could mean
that the Japanese would exchange dollars for yen, weakening the dollar,
which in turn would lead to increases in the price of imports that are now
crucial to our economy. Rising prices in a no-growth economy — stagflation
— may be more possible than we think.

Everyone wants and expects the Federal Reserve to bail out the economy, not
only by lowering interest rates on Tuesday when the Open Market Committee
meets, but also by lowering rates over the next several months. But if
Japanese investors sell off their American assets and cause the dollar to
sink, the Fed could face an agonizing dilemma. On the one hand, cutting
interest rates could help revitalize the economy and the stock market. But
it could also further weaken the dollar by making dollar- based returns
less attractive, thereby discouraging European and Latin American investors
from continuing to invest in American securities.

We have seen how herd-like markets can run wild, and were there to be a
precipitous decline of the dollar, the Fed would have to consider holding
rates steady or even temporarily raising them. This is not a position that
Alan Greenspan would want to be in. As consumers, investors, employers and
employees, neither would we. 

Full article at: http://www.nytimes.com/2001/03/18/opinion/18GART.html 


Louis Proyect
Marxism mailing list: http://www.marxmail.org/

Re: Re: Moses and Monetarism

[Jim Devine]

(Stick a fork in it (or in me). I think this thread is done.)

I wrote:
> > I didn't say that "a single abstraction" could do so.

Tom Walker writes:
>Why do I get the feeling that your favorite tropes are "I didn't say" and
>"what you said implies . . ."

On the first, communication is very important to me. If I don't say "a 
single abstraction," I think that people shouldn't think that I did say so.

On the second, it's important to think about the implications of our ideas. 
It's part of thinking, no?

> > I agree with Levins & Lewontin, in their DIALECTICAL BIOLOGIST, that
> > neither the whole not the parts have ontological priority. To
> > paraphrase, they say that the whole makes the parts, while the part
> > makes the whole. I see this relationship as a dynamic one.
>
>We're not talking about ontological priority, we're talking about cause
>and effect. Does a negative correlation between unemployment and inflation
>indicate a causal relation between the two or simply an association of
>each with some other common variable (such as heterogenous
>industrial capacity thresholds).

In terms of what you were talking about -- and I was responding to -- 
that's irrelevant. You were talking about the role of heterogeneity, not 
the issue of correlations between unemployment and inflation.

The heterogeneity of industrial thresholds fits with -- and complements -- 
most other theoretical explanations of the Phillips Curve. As aggregate 
demand speeds up (lowering unemployment rates), more and more industries 
hit their capacity constraints, encouraging more and more inflation.

> > if one is looking at _nominal_ GDP, it's simply price times quantity for
> > all final products. There aren't really any "weights" since it's not a
> > weighted average.
>
>You're the one who raised the issue of "looking at _nominal_ GDP". I don't 
>see the point of doing so. Nominal GDP isn't calibrated finely enough to 
>tell us anything about the unemployment/inflation correlation.

"I didn't say" that. First, you said that "aggregate demand" was an 
abstraction that was subject to problems of shifting weights. So I pointed 
to a measure of aggregate demand that wasn't subject to this criticism, 
though you'll note that I was clear that I wasn't totally happy with this 
measure (nGDP). The issue of the unemployment/inflation correlation was a 
different issue that I wasn't talking about here.

>For that matter "unemployment" and "inflation" are pretty gross as far as 
>I'm concerned. If you want to start talking at least about a two sector 
>model,  then I might be more interested. I would be even more interested 
>to see "unemployment" disaggregated. As it stands, unemployment is a 
>moving army of metaphors.

_Of course_, it's useful to disaggregate. But rejecting aggregation 
altogether is simply to return to the pre-Keynesian perspective. I think 
that would be a loss.

Further, though there are distinct trends in different measures of 
unemployment (including different groups of people, etc.), over the cycle, 
almost all unemployment rates move in step (at least in the US). So though 
disaggregation gives a more complete picture of what's going on -- as usual 
-- it doesn't really add anything to issues concerning the cyclical 
behavior of the economy, which includes the PC.

> > No, it's [Say's Law] not tautological. It assumes that sum of the excess
> > supplies for each good or service (that are in excess supply) equals
> > the sum of the excess demands for all of the other goods and services.
>
>I thought Keynes said it more simply, something like supply creating its
>own demand.

yeah, but the version I put forth indicated something about the role of 
money, something that JMK thought was very important.

> > It ignores the fact that there may be an excess demand for _money_, so
> > that excess supplies for goods and services may persist.
>
>Basically hoarding, right?

right.

Jim Devine [EMAIL PROTECTED] &  http://liberalarts.lmu.edu/~jdevine

Re: Re: Re: Re: Re: Moses and monetarism (fwd)

[JKSCHW]

Rorty, an old teacher of mine, views himself as a left liberal. His Achieving Our 
Country is advertised as a way of rethinking reformist (we might say) politics. He 
writes for Dissent. He is an anti-Marxist, but that is not enough to make you not on 
the left. Dewey was an advocate of worker control and extended democracy, and 
therefore on the left as well. And I am a neopragmatist myself. Of course, there are 
many who would think that I am not on the left either. --jks

In a message dated Wed, 7 Jun 2000  8:09:01 PM Eastern Daylight Time, 
[EMAIL PROTECTED] writes:

<< 
Justin,

Please see my reply to Tom Walker where I both criticize hermeneutics and
empiricism. 

btw, to my knowledge, Richard Rorty has nothing do with left. He is a new
pragmatic following the footsteps of Dewey...

thanks,

Mine

 
>Mine,

>I am actually a "philosophy person"--used to be a philosophy professor
before I was a lawyer. Although I do not necessary share the vehemence of the 
rejection of  (the very different, as you remark) approaches of deconstruction or 
hermeneutics, I am fairly suspicious of their value when applied in a cookie cutter 
manner to scientific questions. The Sokal hoax shows what happens when scientifically 
illiterate postmodernists try to talk about science. I don't know enough about 
hermeneutics (Gadamer, Otto-Appel, that lot) to say whether scientific illiteracy is a 
defect of that tendency, although it wouldn't surprise me if it was. (However, I will 
remark that Heidegger, of all people, an important influence on both decontruction and 
hermeneutics, wrote some excellent philosophy of science based in obviously solid 
knowledge of early modern science.) 

I would refrain from broad brush statements about "empiricism." What do you have in 
mind when you say that empiricists "support the status quo by distorting the facts in 
the name of science"? Empiricism in its broadest sense is quintessentially respect for 
the facts as established by scientific research. This is not an approach that is for 
or against the status quo. Now, logical empiricism, the philosophy expounded by 
Carnap, Hempel, Reichenbach, Ayer, and so forth, has been pretty thoroughly 
discredited in most of its details, and has not had any serious exponents for a 
quarter century, even among those who consider themselves in some sense 
empiricists--like me.  The closest is perhaps Larry Sklar, although I wonder whether 
Michael Dummett isn't really a  logical empiricist. Still, he doesn't advertise that 
he is one. G.A. Cohen, a leading (former?) analytical Marxist is pretty close to 
logical empiricism in his philosophy of science.

It was, however, deeply respectful of facts, and, for what it was worth, thought to be 
consitent with the left social democratic politics of those figures. Ayer, in fact, 
was a pretty radical left Labourite. One of the key logical empiricists, Otto Neurath, 
was a Marxist who made substantial contributions to the theory of the planned economy.

Contemporary empiricism tends
 to be of two main types, which are not necesasrily inconsistent. One is
neopragmatism of the sort represented by W.V. Quine (a reactionary),
Wilfred Sellars (a radical), and the new Hilary Putnam (a former Marxist),
as well as by Richard Rorty (a left liberal). The other is scientific
realism, represented, e.g., by the old Putnam and his students, Michael
Devitt, Richard Boyd, Richard Miller, Peter Railton--Marxists or former
Marxists of some stripe all, Quine and Sellars are also scientific
realists. I consider myself both a neopragmatist and a scientific realist.
Railton was on my dissertation committee.

--jks


In a message dated Wed, 7 Jun 2000  2:23:56 PM Eastern Daylight Time, 
[EMAIL PROTECTED] writes:

<< 
>
>>References to hermeneutics and deconstruction don't convince me. I've
never

>>been into that kind of lit crit sh*t. I prefer logic, empirical
research, 
>>and the philosophy of science (methodology).

If there would be a philosophy or literature person here, s(he) would
*really* be pissed, not only  by the unprofessional use of language but
also by ignorance.  I am not a big fun of hermeneutics and deconstruction
either, but I never make the mistake of considering those theorists
writing outside the realm of philosopy of science. Science, by its nature,
requires *some form* of hermeneutical understanding-- the question of what
is that we are studying? why and how?  Many people who have written
about hermeneutics have also written about the philosophy of social
sciences: nature of understanding, nature of inquiry, different
methodologies, interpretation (don't we interpret facts in economics.
oh!), the status of the relationship between positive and social
sciences, etc, etc..okey I have not seen very many critical studies in
hermeneutics (mind you that hermeneutics and deconstruction are very 
different things). I have not seen among *empricists* or pure logicists
either. Empricists are well known to be supporti

Re: Re: Re: Re: Re: Moses and monetarism

[Rob Schaap]

Hi again, Jim,

Sed I:

>>I'd've thought you could make a case for a logical, empirically tenable
>>methodology that allows for what a symbol/institution/action might mean in
>>the context of its day, or of any particular time and place?!

Sed you:

>I'm not sure what that has to do with literary criticism (which is
>basically supposed to help us understand the fiction we read). It is true
>that the meaning of a theory varies with context, but that says we have to
>be very clear by what _we_ mean by the theory. The sociology or psychology
>of its writing and interpretation is interesting, but doesn't say much if
>anything about a theory's validity.
>
>BTW, I think it's quite possible that the disagreement between myself and
>Tom Walker arises because he attaches different meaning to the PC (and the
>NAIRU) than I do.

What I was getting at was this


"Dilthey initially followed Schleiermacher in identifying understanding as
empathy guaranteed by the notion of a common human nature. Although he
recognized that the outlook and values of people varied over different
historical periods and cultures, Dilthey argued that, because historians
themselves thought and acted, they could relive and understand what people
in the past were trying to express and accomplish in their writings,
speeches, actions and art. Nevertheless, many of his contemporaries
criticized this position because it relied on introspection and an
underspecified, non-critical
psychology. Stung by this criticism and influenced by the neo-Kantian idea
that works of art and literature embodied the formal values of their
respective
periods, Dilthey revised his position. *He began to emphasize that texts
and actions were as much products of their times as expressions of
individuals*,
and their meanings were consequently constrained by both an orientation to
values of their period and a place in the web of their authors' plans and
experiences. In this revision, *meanings are delineated by the author's
weltanschauung, or world-view reflecting a historical period and social
context*.  Understanding (verstehen), the basis for methodological
hermeneutics, involves tracing a circle from text to the author's biography
and immediate
historical circumstances and back again. *Interpretation, or the systematic
application of understanding to the text, reconstructs the world in which
the
text was produced and places the text in that world.*"

I'm pretty sure you'd happily wear that, and I think this is what the
hermeneutic position is when it comes to critical social theory (of which
Marx's critique of political economy is a salutary portion, imho).

>My handy-dandy dictionary defines "hermeneutics" as "the study of the
>methodological principles of interpretation (as of the Bible)."

That was what its meaning in the context of a Europe run by the Church.  It
means something bigger than that now.  All of human construction is a text,
instantiated within a context.

>That's not
>the same as the simple empirical test, i.e., rejecting someone's viewpoint
>because they believe in the universal efficacy of a theory that just
>doesn't apply in all situations. It's not hermeneutics, though I should
>consult my friend Hermen.

I wasn't clear then.  It's not the empirical test I was stressing, but the
meaning of a learned economist's deployment of the notion as a universal
truth, which, in the year 2000, might be a function of one's suspicion that
s/he'd know full well (being learned and being in the year 2000) that the
PC ain't what s/he's calling it.  Thus the likes of you would be suspicious
of 'em, and mebbe look at the institutional setting that might explain the
tendentious allusion.  I reckon that can be called a hermeneutic approach
to the text in question, that's all.

And I don't want to talk about deconstruction as I'd get bored and anyway,
I suspect it makes Doug cross with me.

Cheers,
Rob.

Re: Moses and Monetarism

[Timework Web]

Jim Devine wrote,

> I didn't say that "a single abstraction" could do so.

Why do I get the feeling that your favorite tropes are "I didn't say" and
"what you said implies . . ."

> I agree with Levins & Lewontin, in their DIALECTICAL BIOLOGIST, that
> neither the whole not the parts have ontological priority. To
> paraphrase, they say that the whole makes the parts, while the part
> makes the whole. I see this relationship as a dynamic one.

We're not talking about ontological priority, we're talking about cause
and effect. Does a negative correlation between unemployment and inflation
indicate a causal relation between the two or simply an association of
each with some other common variable (such as heterogenous
industrial capacity thresholds).

> if one is looking at _nominal_ GDP, it's simply price times quantity for
> all final products. There aren't really any "weights" since it's not a
> weighted average.

You're the one who raised the issue of "looking at _nominal_ GDP". I don't
see the point of doing so. Nominal GDP isn't calibrated finely enough to
tell us anything about the unemployment/inflation correlation. For that
matter "unemployment" and "inflation" are pretty gross as far as I'm
concerned. If you want to start talking at least about a two sector model, 
then I might be more interested. I would be even more interested to see
"unemployment" disaggregated. As it stands, unemployment is a moving army
of metaphors.

> No, it's [Say's Law] not tautological. It assumes that sum of the excess
> supplies for each good or service (that are in excess supply) equals
> the sum of the excess demands for all of the other goods and services.

I thought Keynes said it more simply, something like supply creating its
own demand. 

> It ignores the fact that there may be an excess demand for _money_, so
> that excess supplies for goods and services may persist.

Basically hoarding, right?


Tom Walker

Re: Re: Re: Re: Moses and monetarism (fwd)

[md7148]

Justin,

Please see my reply to Tom Walker where I both criticize hermeneutics and
empiricism. 

btw, to my knowledge, Richard Rorty has nothing do with left. He is a new
pragmatic following the footsteps of Dewey...

thanks,

Mine

 
>Mine,

>I am actually a "philosophy person"--used to be a philosophy professor
before I was a lawyer. Although I do not necessary share the vehemence of the 
rejection of  (the very different, as you remark) approaches of deconstruction or 
hermeneutics, I am fairly suspicious of their value when applied in a cookie cutter 
manner to scientific questions. The Sokal hoax shows what happens when scientifically 
illiterate postmodernists try to talk about science. I don't know enough about 
hermeneutics (Gadamer, Otto-Appel, that lot) to say whether scientific illiteracy is a 
defect of that tendency, although it wouldn't surprise me if it was. (However, I will 
remark that Heidegger, of all people, an important influence on both decontruction and 
hermeneutics, wrote some excellent philosophy of science based in obviously solid 
knowledge of early modern science.) 

I would refrain from broad brush statements about "empiricism." What do you have in 
mind when you say that empiricists "support the status quo by distorting the facts in 
the name of science"? Empiricism in its broadest sense is quintessentially respect for 
the facts as established by scientific research. This is not an approach that is for 
or against the status quo. Now, logical empiricism, the philosophy expounded by 
Carnap, Hempel, Reichenbach, Ayer, and so forth, has been pretty thoroughly 
discredited in most of its details, and has not had any serious exponents for a 
quarter century, even among those who consider themselves in some sense 
empiricists--like me.  The closest is perhaps Larry Sklar, although I wonder whether 
Michael Dummett isn't really a  logical empiricist. Still, he doesn't advertise that 
he is one. G.A. Cohen, a leading (former?) analytical Marxist is pretty close to 
logical empiricism in his philosophy of science.

It was, however, deeply respectful of facts, and, for what it was worth, thought to be 
consitent with the left social democratic politics of those figures. Ayer, in fact, 
was a pretty radical left Labourite. One of the key logical empiricists, Otto Neurath, 
was a Marxist who made substantial contributions to the theory of the planned economy.

Contemporary empiricism tends
 to be of two main types, which are not necesasrily inconsistent. One is
neopragmatism of the sort represented by W.V. Quine (a reactionary),
Wilfred Sellars (a radical), and the new Hilary Putnam (a former Marxist),
as well as by Richard Rorty (a left liberal). The other is scientific
realism, represented, e.g., by the old Putnam and his students, Michael
Devitt, Richard Boyd, Richard Miller, Peter Railton--Marxists or former
Marxists of some stripe all, Quine and Sellars are also scientific
realists. I consider myself both a neopragmatist and a scientific realist.
Railton was on my dissertation committee.

--jks


In a message dated Wed, 7 Jun 2000  2:23:56 PM Eastern Daylight Time, 
[EMAIL PROTECTED] writes:

<< 
>
>>References to hermeneutics and deconstruction don't convince me. I've
never

>>been into that kind of lit crit sh*t. I prefer logic, empirical
research, 
>>and the philosophy of science (methodology).

If there would be a philosophy or literature person here, s(he) would
*really* be pissed, not only  by the unprofessional use of language but
also by ignorance.  I am not a big fun of hermeneutics and deconstruction
either, but I never make the mistake of considering those theorists
writing outside the realm of philosopy of science. Science, by its nature,
requires *some form* of hermeneutical understanding-- the question of what
is that we are studying? why and how?  Many people who have written
about hermeneutics have also written about the philosophy of social
sciences: nature of understanding, nature of inquiry, different
methodologies, interpretation (don't we interpret facts in economics.
oh!), the status of the relationship between positive and social
sciences, etc, etc..okey I have not seen very many critical studies in
hermeneutics (mind you that hermeneutics and deconstruction are very 
different things). I have not seen among *empricists* or pure logicists
either. Empricists are well known to be supportive of status quo by
distorting facts in the name of science. They present ideology as science. 
I would not be too quick to accept empricist methodology at face value.


Regarding *critical* hermeneutics, one should have a look at Paul Ricour's
works, not Gadamer's. Paul R. tries to abridge the gap between Marxism and
understanding, and the role of marxist methodology in interpretation. 

Why do economists constantly make the claim that what they are doing are
objective science given that it is not-- given that distribution of
resources is by definition a political act!


Mi

Re: Re: Moses and Monetarism

[Jim Devine]

i wrote:
> > Some sort of abstraction is needed if you believe that the macroeconomy
> > is more than the sum of its parts. The measure of aggregate demand is an
> > abstraction, but without it one is stuck with a pre-Keynesian vision of
> > the world (which basically saw the macroeconomy as the microeconomy writ
> > large, applying what's now called the "representative agent model," and
> > applied Say's bogus "Law").

Tom W. writes:
>I agree that abstraction is needed. I don't agree that a single 
>abstraction captures both the "more than the sum" and the "of its
>parts" perspectives.

I didn't say that "a single abstraction" could do so.

>To sum up our differences, it seems to me that you are saying inflation 
>arises from the aggregate as conditioned by its heterogeneity. I'm saying 
>it arises from heterogeniety as it is influenced by the aggregate. The 
>whole may be more than the sum of its parts, but the parts have to come 
>before the more.

I agree with Levins & Lewontin, in their DIALECTICAL BIOLOGIST, that 
neither the whole not the parts have ontological priority. To paraphrase, 
they say that the whole makes the parts, while the part makes the whole. I 
see this relationship as a dynamic one.

> > If one measures aggregate demand using nominal GDP, by the way, the
> > relative weights of demand are irrelevant, since nominal GDP is simply
> > the amount of money spent buying newly produced goods and services
> > supplied through the market.

>But if one is thinking about change in aggregate demand, the relative 
>weights aren't irrelevant.

if one is looking at _nominal_ GDP, it's simply price times quantity for 
all final products. There aren't really any "weights" since it's not a 
weighted average.

> > this doesn't make sense to me. Say's Law was shown to be inadequate by 
> Marx and Keynes, among others. That is, the "Law" is wrong, untrue. It 
> should be discarded. The Phillips Curve is not on the same level of 
> abstraction. It's an empirical generalization that has several theories 
> attached to it.<

>My impression was that Say's Law is one of those tautologies that is 
>trivial to the extent that it is true and misleading when it is stretched 
>beyond its short reach.

No, it's not tautological. It assumes that sum of the excess supplies for 
each good or service (that are in excess supply) equals the sum of the 
excess demands for all of the other goods and services. It ignores the fact 
that there may be an excess demand for _money_, so that excess supplies for 
goods and services may persist. If further ignores the way in which the 
excess supplies of commodities leads to cutbacks in employment and/or wages 
that lead to falls in income that end the excess demand for some 
commodities and for money by reducing incomes (a recession). (This 
statement is in the general spirit of Clower & Leijonhufvud, though my 
terminology is different.)

>There may well be good uses to which the Phillips Curve may be put, but it 
>seems to me it has mainly been used as an after
>the fact and beside the point justification for good ol' fashioned 
>Treasury conventional wisdom.

hey, I use the Force for good rather than for evil! One can use the PC 
without accepting the Treasury View or the Washington Consensus.

Jim Devine [EMAIL PROTECTED] & http://clawww.lmu.edu/~JDevine
"It takes a busload of faith to get by." -- Lou Reed.

Re: Moses and Monetarism

[Timework Web]

Jim Devine wrote,

> Some sort of abstraction is needed if you believe that the macroeconomy
> is more than the sum of its parts. The measure of aggregate demand is an
> abstraction, but without it one is stuck with a pre-Keynesian vision of
> the world (which basically saw the macroeconomy as the microeconomy writ
> large, applying what's now called the "representative agent model," and
> applied Say's bogus "Law").

I agree that abstraction is needed. I don't agree that a single
abstraction captures both the "more than the sum" and the "of its
parts" perspectives. To sum up our differences, it seems to me that you
are saying inflation arises from the aggregate as conditioned by its
heterogeneity. I'm saying it arises from heterogeniety as it is
influenced by the aggregate. The whole may be more than the sum of its
parts, but the parts have to come before the more.

> If one measures aggregate demand using nominal GDP, by the way, the
> relative weights of demand are irrelevant, since nominal GDP is simply
> the amount of money spent buying newly produced goods and services
> supplied through the market.

But if one is thinking about change in aggregate demand, the relative
weights aren't irrelevant. 

> this doesn't make sense to me. Say's Law was shown to be inadequate by
> Marx and Keynes, among others. That is, the "Law" is wrong, untrue. It
> should be discarded. The Phillips Curve is not on the same level of
> abstraction. It's an empirical generalization that has several theories
> attached to it.

My impression was that Say's Law is one of those tautologies that is
trivial to the extent that it is true and misleading when it is stretched
beyond its short reach. There may well be good uses to which the Phillips
Curve may be put, but it seems to me it has mainly been used as an after
the fact and beside the point justification for good ol' fashioned
Treasury conventional wisdom.


Tom Walker

Re: Moses and monetarism (fwd)

[Jim Devine]

Christian wrote:
>As for PC [the Phillips Curve], Jim said its empirical data waiting for a 
>theory. Certainly. But it's not treated as such, generally--least of all 
>by people like Greenspan and Co., who treat it as a full blown theory that 
>needs to be disproved...

Frankly, I think that once one gets beyond his Ayn Rand-worship, Alan 
Greenspan is a full-blown empiricist of the sort that used to dominate the 
National Bureau of Economic Research. My impression is that these days, 
he's always groping in the dark, trying to figure out whether or not 
inflation is about to take off.

There was interesting article on the PC at the Fed web-site awhile back (at 
http://www.federalreserve.gov/pubs/feds/1999/index.html) that indicated 
that what is restraining inflation from taking off even though unemployment 
is low by historical standards is the fact that profits are really high 
(just as in the mid-to-late 1960s). The Fed-heads who wrote the article 
assume that businesses raise prices when profit margins are too low (by 
historical standards); given this adjustment, the standard PC -- or the RJ 
Gordon "triangle model" -- applies.  This view fits, by the way, with the 
conflict theory of inflation, which among other things says that the 
victory of the war against inflation in the 1980s and 1990s is tightly 
bound with the victory of capital over labor during the same period.

Jim Devine [EMAIL PROTECTED] &  http://liberalarts.lmu.edu/~jdevine

Re: Re: Re: Re: Moses and monetarism (fwd)

[christian a. gregory]

> If there would be a philosophy or literature person here, s(he) would
> *really* be pissed, not only  by the unprofessional use of language but
> also by ignorance.  I am not a big fun of hermeneutics and deconstruction
> either, but I never make the mistake of considering those theorists
> writing outside the realm of philosopy of science.

As something of a litcritter myself, I find denunciations of "lit crit sh*t"
kinda banal. Like, okay, it's *just* literature (or fiction)---whatever. The
basic point of such "sh*t" is that knowledges, like other things, are
historical. There are no hidden meanings in texts--there are meanings
generated in one way or another, by readers, schools, listservs, etc.

(There are, btw, plenty of reasons to regard decon and other stuff as
"sh*t": the things mentioned in this discussion are not among them.)

As for PC, Jim said its empirical data waiting for a theory. Certainly. But
it's not treated as such, generally--least of all by people like Greenspan
and Co., who treat it as a full blown theory that needs to be disproved.
There could be other uses, but I don't see them manifest very widely--though
maybe I'm not looking hard enough.

Christian

Re: Re: Moses and Monetarism

[Jim Devine]

I wrote:
> > But when real GDP grows quickly (and unemployment falls), that represents a
> > _general_ increase in aggregate demand.

Tom Walker writes:
>Aggregate demand is a reification. An increase in the aggregate of demand 
>would, except by a fluke, also change the relative weights of demand for 
>different commodities.

Some sort of abstraction is needed if you believe that the macroeconomy is 
more than the sum of its parts. The measure of aggregate demand is an 
abstraction, but without it one is stuck with a pre-Keynesian vision of the 
world (which basically saw the macroeconomy as the microeconomy writ large, 
applying what's now called the "representative agent model," and applied 
Say's bogus "Law"). This abstraction is necessary, but the danger is that 
it can become reified when people treat GDP, aggregate demand, the 
unemployment rate, and similar concepts as material or concrete things. I 
don't do so. I treat GDP, aggregate demand, and the unemployment rate as 
efforts to _measure_ some hard-to-measure real-world factors that are 
relevant if one understands the macroeconomy as more than a bunch of 
markets. (BTW, I don't treat GDP as a measure of what's good for the country.)

If one measures aggregate demand using nominal GDP, by the way, the 
relative weights of demand are irrelevant, since nominal GDP is simply the 
amount of money spent buying newly produced goods and services supplied 
through the market.The measures of nGDP are hardly perfect, but if one is 
trying to understand the world rather than simply preaching about it, an 
imperfect measure is better than none.

>If today I have enough income to buy a hamburger and a milkshake and 
>tomorrow my income doubles, that doesn't mean I'm
>going to want two milkshakes and two hamburgers.

of course.

>  I think the mental discipline of Say's Law would help here. At the level 
> of abstraction where you claim the Phillips Curve holds true, aren't 
> aggregate demand and aggregate supply the same thing, according to The 
> Law? And who is Phillips to put himself above The Law?

this doesn't make sense to me. Say's Law was shown to be inadequate by Marx 
and Keynes, among others. That is, the "Law" is wrong, untrue. It should be 
discarded. The Phillips Curve is not on the same level of abstraction. It's 
an empirical generalization that has several theories attached to it. It 
doesn't apply in all situations (and if people said it did, that would say 
something about the lack of understanding by those people).

Jim Devine [EMAIL PROTECTED] &  http://liberalarts.lmu.edu/~jdevine

Re: Re: Re: Re: Moses and monetarism

[Jim Devine]

At 01:25 PM 6/7/00 -0700, you wrote:
>Robert Leeson has shown that Phillips' work lay dormant until Samuelson 
>and Solow popularized it is a way to give a the Democratic presidential 
>campaign cover to show that Keynesian-inspired Democratic policies would 
>not create runaway inflation.

That makes sense to me from my understanding of the history of the idea. 
(Phillips' work didn't lie dormant for very long, though. It's only a 
couple of years between his publication date and the 1960 presidential 
campaign.) It was part of the Samuelsonian idea that there are trade-offs 
in the world so that the enlightened planner can express the social welfare 
function by choosing a point on the trade-off curve. The modern "Natural" 
rate hypothesis type rejects the trade-off and says we should just let the 
economy do its thing.

Jim Devine [EMAIL PROTECTED] &  http://liberalarts.lmu.edu/~jdevine

Re: Re: Re: Moses and monetarism

[Michael Perelman]

Robert Leeson has shown that Phillips' work lay dormant until Samuelson and
Solow popularized it is a way to give a the Democratic presidential campaign
cover to show that Keynesian-inspired Democratic policies would not create
runaway inflation.  I think the reference can be found in Leeson. Robert. 1997.
"The Political Economy of the Inflation-Unemployment Trade-Off." History of
Political Economy, 29: 1 (Spring): pp. 117-56.

Jim Devine wrote:

> The PC is a concept that arose simply from empiricism (of Irving Fisher and
> later A.W. Phillips) rather than being ground out by the application of NC
> theory. --

Michael Perelman
Economics Department
California State University
Chico, CA 95929

Tel. 530-898-5321
E-Mail [EMAIL PROTECTED]

Re: Moses and Monetarism

[Timework Web]

Jim Devine wrote,

> But when real GDP grows quickly (and unemployment falls), that represents a
> _general_ increase in aggregate demand.

Aggregate demand is a reification. An increase in the aggregate of demand
would, except by a fluke, also change the relative weights of demand for
different commodities. If today I have enough income to buy a hamburger
and a milkshake and tomorrow my income doubles, that doesn't mean I'm
going to want two milkshakes and two hamburgers. I think the mental
discipline of Say's Law would help here. At the level of abstraction where
you claim the Phillips Curve holds true, aren't aggregate demand and
aggregate supply the same thing, according to The Law? And who is Phillips
to put himself above The Law?


Tom Walker

Re: Re: Re: Re: Moses and monetarism (fwd)

[JKSCHW]

Mine, 

I am actually a "philosophy person"--used to be a philosophy professor before I was a 
lawyer. Although I do not necessary share the vehemence of the rejection of  (the very 
different, as you remark) approaches of deconstruction or hermeneutics, I am fairly 
suspicious of their value when applied in a cookie cutter manner to scientific 
questions. The Sokal hoax shows what happens when scientifically illiterate 
postmodernists try to talk about science. I don't know enough about hermeneutics 
(Gadamer, Otto-Appel, that lot) to say whether scientific illiteracy is a defect of 
that tendency, although it wouldn't surprise me if it was. (However, I will remark 
that Heidegger, of all people, an important influence on both decontruction and 
hermeneutics, wrote some excellent philosophy of science based in obviously solid 
knowledge of early modern science.) 

I would refrain from broad brush statements about "empiricism." What do you have in 
mind when you say that empiricists "support the status quo by distorting the facts in 
the name of science"? Empiricism in its broadest sense is quintessentially respect for 
the facts as established by scientific research. This is not an approach that is for 
or against the status quo. Now, logical empiricism, the philosophy expounded by 
Carnap, Hempel, Reichenbach, Ayer, and so forth, has been pretty thoroughly 
discredited in most of its details, and has not had any serious exponents for a 
quarter century, even among those who consider themselves in some sense 
empiricists--like me.  The closest is perhaps Larry Sklar, although I wonder whether 
Michael Dummett isn't really a  logical empiricist. Still, he doesn't advertise that 
he is one. G.A. Cohen, a leading (former?) analytical Marxist is pretty close to 
logical empiricism in his philosophy of science.

It was, however, deeply respectful of facts, and, for what it was worth, thought to be 
consitent with the left social democratic politics of those figures. Ayer, in fact, 
was a pretty radical left Labourite. One of the key logical empiricists, Otto Neurath, 
was a Marxist who made substantial contributions to the theory of the planned economy.

Contemporary empiricism tends to be of two main types, which are not necesasrily 
inconsistent. One is neopragmatism of the sort represented by W.V. Quine (a 
reactionary), Wilfred Sellars (a radical), and the new Hilary Putnam (a former 
Marxist), as well as by Richard Rorty (a left liberal). The other is scientific 
realism, represented, e.g., by the old Putnam and his students, Michael Devitt, 
Richard Boyd, Richard Miller, Peter Railton--Marxists or former Marxists of some 
stripe all, Quine and Sellars are also scientific realists. I consider myself both a 
neopragmatist and a scientific realist. Railton was on my dissertation committee. 

--jks


In a message dated Wed, 7 Jun 2000  2:23:56 PM Eastern Daylight Time, 
[EMAIL PROTECTED] writes:

<< 
>
>>References to hermeneutics and deconstruction don't convince me. I've
never

>>been into that kind of lit crit sh*t. I prefer logic, empirical
research, 
>>and the philosophy of science (methodology).

If there would be a philosophy or literature person here, s(he) would
*really* be pissed, not only  by the unprofessional use of language but
also by ignorance.  I am not a big fun of hermeneutics and deconstruction
either, but I never make the mistake of considering those theorists
writing outside the realm of philosopy of science. Science, by its nature,
requires *some form* of hermeneutical understanding-- the question of what
is that we are studying? why and how?  Many people who have written
about hermeneutics have also written about the philosophy of social
sciences: nature of understanding, nature of inquiry, different
methodologies, interpretation (don't we interpret facts in economics.
oh!), the status of the relationship between positive and social
sciences, etc, etc..okey I have not seen very many critical studies in
hermeneutics (mind you that hermeneutics and deconstruction are very 
different things). I have not seen among *empricists* or pure logicists
either. Empricists are well known to be supportive of status quo by
distorting facts in the name of science. They present ideology as science. 
I would not be too quick to accept empricist methodology at face value.


Regarding *critical* hermeneutics, one should have a look at Paul Ricour's
works, not Gadamer's. Paul R. tries to abridge the gap between Marxism and
understanding, and the role of marxist methodology in interpretation. 

Why do economists constantly make the claim that what they are doing are
objective science given that it is not-- given that distribution of
resources is by definition a political act!


Mine Doyran
SUNY/Albany

 >>

Re: Re: Moses and monetarism (hermeneutics)

[Jim Devine]

I wrote:
> > I'm not sure what that has to do with literary criticism (which is 
> basically supposed to help us understand the fiction we read).<

Tom Walker writes:
>I wish I could remember who it was who referred to Marx as an heir to the 
>intellectual tradition of Swabian Pietism.

wasn't it Engels who was the Pietist?

>Critical theory refers not to literary criticism but to one of the major 
>traditions of non-Soviet marxism.

I didn't know we were discussing Critical Theory. Hermeneutics and 
deconstruction are only slightly related to Critical Theory.

>One need not agree with everything that, e.g., Adorno, Horkheimer, Marcuse 
>or Habermas say to find it intellectually and
>politically irresponsible when they are summarily dismissed as "lit crit 
>sh*t".

I wasn't talking about Adorno, _et al_.

>Hermeneutics does refer to the interpretation of biblical texts but by 
>extension also refers to textual interpretation in general.

the dictionary used the Bible as only an example.

>Much of the methodology developed for the interpretation of biblical texts 
>carried over into German Idealism and subsequently to Marx, by way of 
>critique. I think the reference to Marx as a Swabian Pietist referred to 
>the similar conjunction of hermeneutics (dialectics) and worldly concern 
>(materialism).

I wouldn't say that Marx's critique of Hegel or of the "holy family" was a 
matter of hermeneutics. It's more a matter of a critique of their idealism, 
of their one-sidedness (dialectical incompleteness), etc. Hermeneutics 
involves much more of "what did the author _really_ say or _really_ mean to 
say?" whereas Marx usually looked at what the authors said explicitly and 
then criticized its meaning and implications.

Where do you get the implicit equation of analysis/criticism of texts 
(hermeneutics) with dialectics?

> > BTW, I think it's quite possible that the disagreement between myself 
> and Tom Walker arises because he attaches different meaning to the 
> PC  (and the NAIRU) than I do.<
>
>Yes. See above comment about "understanding the fiction".

what does that say about the meaning you attach to the PC?

Jim Devine [EMAIL PROTECTED] &  http://liberalarts.lmu.edu/~jdevine

Re: Re: Moses and Monetarism

[Jim Devine]

[Tom Walker's] theory: bottlenecks not tides

 >Inflation happens because industries have discrete requirements for 
specific kinds of labour and other inputs, not continuous requirements for 
generalized inputs. <

But when real GDP grows quickly (and unemployment falls), that represents a 
_general_ increase in aggregate demand.

 >Bottlenecks occur in discrete industries as they reach full capacity 
before the aggregate economy experiences full employment. <

What is "full employment"? The early post-Keynesian Abba Lerner pointed to 
two different levels (with a continuum between). High full employment 
indicates the level of employment above which inflation tends to take off 
(accelerate), whereas low full employment refers to the level of employment 
below which inflation slows down. It's like drawing the "vertical long-run 
PC" as a fat line covering a range of unemployment rates, with a low 
unemployment rate below which inflation accelerates and a high unemployment 
rate above which inflation slows down. (See, for example, his FLATION, 
1972, ch. 15.) I think his ideas are very useful; I think you'd find them 
useful, too. He and his student David Colander argued that with the right 
kind of institutional change -- including tax-based incomes policies (TIPs) 
-- the high full employment rate could be attained with no bad inflationary 
effects.

(The "fat long-run PC" theory has been endorsed recently by such mainstream 
sorts as Staiger, Stock, and Watson in the Winter 1997 Journal of Economic 
Perspectives. They find the error of estimating the NAIRU as so large that 
NAIRU estimates are useless for policy-making.)

There's also Beveridge's definition, where the number of job vacancies is 
slightly higher than the number of job-seekers. This seems like Lerner's 
high full employment.

We could also point to a normative definition of full employment. The one I 
use would be where all unemployment is frictional and voluntary, rather 
than being structural or cyclical. I call it the "best unemployment rate" 
to distinguish it from other notions of "full employment." One of the 
problems with capitalism is that most measures of the "full employment 
unemployment rate" are higher than the "best unemployment rate."

There may be other definitions of "full employment," but the term has 
stopped being used.

 >These bottlenecks could be labour supply shortages, but they don't have 
to be. They could be limitations imposed by plant capacity, infrastructure 
or raw materials. <

Right. Most PC theories outside of textbooks allow for other kinds of 
bottlenecks besides labor supplies. The argument is that measures of 
general increases in demand (rises in real GDP, falls in unemployment) 
indicate the general prevalence of bottlenecks. So the PC vision hardly 
contradicts the notion of bottlenecks.

(BTW, it may seem that there is nothing left to the PC if it can absorb so 
much criticism. But the bottom line is that _all else equal_,  a fall in 
the unemployment rate implies higher inflation rates. Of course, "all else" 
is never "equal," but that's why the PC shifts. The shifts of the PC are 
just as much parts of the PC theory as are the movements along it, just as 
shifts in a demand curve are just as much part of supply and demand as are 
movements along the demand curve.)

 >A localized excess of demand over supply would imply, first of all, price 
increases and secondly a contest between labour and capital for division of 
the resulting rent. It may be politically expedient for each party to blame 
the other for the price increase even though they are really only 
contending for the division of spoils that are a fait accompli -- a market 
signal.<

That's part of the heterodox PC theory (associated with such prestigious NC 
names as Peter Diamond). (see his 1982 "Wage Determination and Efficiency 
in Search Equilibrium" in the Review of Economic Studies.)

 >It is not surprising that supply bottlenecks would tend to occur more 
frequently as the economy approaches full employment. But it would be 
teleological and one-sided to conclude that low unemployment leads to wage 
pressure, which then causes of inflation. <

Not all PC theories start with wage pressure. In fact, many Chicago-school 
visions simply start with the "excess demand for goods" (associated with 
the actual output being above the presumed "natural level of output") and 
say that prices rise with that excess demand (as is normal in Walrasian 
theory). The wage is simply seen as one kind of price, just as labor is 
simply one kind of commodity. (In fact, they don't treat the unemployment 
rate or the level of GDP as the key "given" variable. Rather, it's the rate 
of growth of the money supply which causes inflation, which "buys" low 
unemployment and high GDP.)

-

The first thing that a bottlenecks theory has to add is that the economy is 
_heterogeneous_, so that general increases in demand would hit different 
indus

Re: Re: Re: Re: Moses and monetarism (fwd)

[md7148]

>I'm not sure what that has to do with literary criticism (which is 
>basically supposed to help us understand the fiction we read). It is true 
>that the meaning of a theory varies with context, but that says we have
>to 
>be very clear by what _we_ mean by the theory. The sociology or
>psychology 
>of its writing and interpretation is interesting, but doesn't say much if 
>anything about a theory's validity.


WHY? In what sense does sociology differ in saying about "theory's
validity" from let's say economics? How do you judge theory's validity?
According to which criteria? The best works in business cycles, economic
crises, world systemicy trends are done by *sociologists* like
Wallerstein, Arrighi, Frank etc.. Are you gonna say that their works are
fiction, or not scientific enough?

okey, I will send a post about how Wallerstein views the methodology of
social sciences. wait!
 

Mine Doyran
SUNY/Albany

Re: Re: Re: Moses and monetarism (fwd)

[md7148]

>
>>References to hermeneutics and deconstruction don't convince me. I've
never

>>been into that kind of lit crit sh*t. I prefer logic, empirical
research, 
>>and the philosophy of science (methodology).

If there would be a philosophy or literature person here, s(he) would
*really* be pissed, not only  by the unprofessional use of language but
also by ignorance.  I am not a big fun of hermeneutics and deconstruction
either, but I never make the mistake of considering those theorists
writing outside the realm of philosopy of science. Science, by its nature,
requires *some form* of hermeneutical understanding-- the question of what
is that we are studying? why and how?  Many people who have written
about hermeneutics have also written about the philosophy of social
sciences: nature of understanding, nature of inquiry, different
methodologies, interpretation (don't we interpret facts in economics.
oh!), the status of the relationship between positive and social
sciences, etc, etc..okey I have not seen very many critical studies in
hermeneutics (mind you that hermeneutics and deconstruction are very 
different things). I have not seen among *empricists* or pure logicists
either. Empricists are well known to be supportive of status quo by
distorting facts in the name of science. They present ideology as science. 
I would not be too quick to accept empricist methodology at face value.


Regarding *critical* hermeneutics, one should have a look at Paul Ricour's
works, not Gadamer's. Paul R. tries to abridge the gap between Marxism and
understanding, and the role of marxist methodology in interpretation. 

Why do economists constantly make the claim that what they are doing are
objective science given that it is not-- given that distribution of
resources is by definition a political act!


Mine Doyran
SUNY/Albany

Re: Moses and monetarism (hermeneutics)

[Timework Web]

Jim Devine wrote,

> I'm not sure what that has to do with literary criticism (which is
> basically supposed to help us understand the fiction we read).

I wish I could remember who it was who referred to Marx as an heir to the
intellectual tradition of Swabian Pietism. Critical theory refers not to
literary criticism but to one of the major traditions of non-Soviet
marxism. One need not agree with everything that, e.g., Adorno,
Horkheimer, Marcuse or Habermas say to find it intellectually and
politically irresponsible when they are summarily dismissed as "lit crit
sh*t". Hermeneutics does refer to the interpretation of biblical texts but
by extension also refers to textual interpretation in general. Much of the
methodology developed for the interpretation of biblical texts carried
over into German Idealism and subsequently to Marx, by way of critique. I
think the reference to Marx as a Swabian Pietist referred to the
similar conjunction of hermeneutics (dialectics) and worldly concern
(materialism).

> BTW, I think it's quite possible that the disagreement between myself
> and Tom Walker arises because he attaches different meaning to the PC
> (and the NAIRU) than I do.

Yes. See above comment about "understanding the fiction".


Tom Walker

Re: Moses and Monetarism

[Timework Web]

Jim Devine wrote,

> To beat an empirical generalization, you have to show that the data can
> be explained better by another generalization or a different deductive
> theory, i.e., show that the correlation isn't based on any reasonable
> causation that it is instead is an accident which can be explained in
> other terms. So what is your theory of the relationship between
> unemployment and inflation? 

'My' theory: bottlenecks not tides

Inflation happens because industries have discrete requirements for
specific kinds of labour and other inputs, not continuous requirements for
generalized inputs. 

Bottlenecks occur in discrete industries as they reach full capacity
before the aggregate economy experiences full employment. These
bottlenecks could be labour supply shortages, but they don't have to
be. They could be limitations imposed by plant capacity, infrastructure or
raw materials. 

A localized excess of demand over supply would imply, first of all, price
increases and secondly a contest between labour and capital for division
of the resulting rent. It may be politically expedient for each party to
blame the other for the price increase even though they are really only
contending for the division of spoils that are a fait accompli -- a market
signal.

It is not surprising that supply bottlenecks would tend to occur more
frequently as the economy approaches full employment. But it would be
teleological and one-sided to conclude that low unemployment leads to wage
pressure, which then causes of inflation. 

Planned full employment v. "unplanned" soft landings

There are two potential ways for policy to respond to the inflationary
pressure of supply bottlenecks. One is to increase overt macro-economic
planning capacity through, for example, price controls and rationing. The
other is to target fiscal and monetary policy to maintain a considerable
degree of slack in the economy (the fabled "soft landing"). We all know
the criticism of overt planning: a central planning agency can't aspire to
the complexity of knowledge possessed by individual agents operating in a
free market. 

If we concede that criticism of overt planning, it still begs the question
of why a regime of policy-induced general under capacity should be
conceived of as "unplanned". This is a bit like saying somebody isn't an
alcoholic because he never drinks anything stronger than beer. Or the
canard about being "just a teensy-bit pregnant." The soft landing is
planning that dare not speak its name.

In fact, the NAIRU era has witnessed the proliferation of a motley
supply-side planning apparat of continuing education, career counseling,
workfare, prisons, retirement savings tax schemes, public-private
partnerships, social marketing campaigns and so on. Much of the direction
giving by these directive institutions is incoherent. But that's not
really the point -- planning doesn't cease to be planning just because it
is _bad faith_ planning. Or, to paraphrase the lightbulb jokes, how many
free-market economists does it take to run a free-market economy?

"Not planning as such, but planning by the government in the public
interest is the *bete noire* of the opponents of a full-employment
program." Given that the soft-landing is a planned occurence and given
(for the sake of argument) that planning can't aspire to the complexity of
market transactions, how much confidence should we place in the ability of
monetary policy to engineer the feat of gently easing the prospective
bottlenecks without clumsily trampling aggregate economic performance?

Tom Walker

Re: Re: Re: Re: Moses and monetarism

[Jim Devine]

I wrote:
> >References to hermeneutics and deconstruction don't convince me. I've 
> never been into that kind of lit crit sh*t. I prefer logic, empirical 
> research,  and the philosophy of science (methodology).<

Rob writes:
>Strong words, Jim!

that's what pen-l is for.

>I'd've thought you could make a case for a logical, empirically tenable 
>methodology that allows for what a symbol/institution/action might mean in 
>the context of its day, or of any particular time and place?!

I'm not sure what that has to do with literary criticism (which is 
basically supposed to help us understand the fiction we read). It is true 
that the meaning of a theory varies with context, but that says we have to 
be very clear by what _we_ mean by the theory. The sociology or psychology 
of its writing and interpretation is interesting, but doesn't say much if 
anything about a theory's validity.

BTW, I think it's quite possible that the disagreement between myself and 
Tom Walker arises because he attaches different meaning to the PC (and the 
NAIRU) than I do.

>  I reckon the PC meant something different to Phillips (was it in 1950?)

It was 1958, in ECONOMICA.

>than it does to, say, someone who deploys it as ultimate universal 
>explanation in argument today, after the PC's universal efficacy has been 
>tested, and empirically found wanting, by half a century and a couple of 
>hundred economic trajectories over that time.  I mean, you'd feel less 
>generously inclined to the latter, wouldn't you?  And, if so, wouldn't 
>that constitute a hermeneutic manouvre on your part?

My handy-dandy dictionary defines "hermeneutics" as "the study of the 
methodological principles of interpretation (as of the Bible)." That's not 
the same as the simple empirical test, i.e., rejecting someone's viewpoint 
because they believe in the universal efficacy of a theory that just 
doesn't apply in all situations. It's not hermeneutics, though I should 
consult my friend Hermen.

>And deconstruction goes along with this insofar as a symbol means 
>according to the moment in which it is allocated meaning.  Where I think 
>it goes wrong is that it doesn't afford a theoretical limit to the meaning 
>of something, even in a real-time conversation.  And a symbol that can 
>mean anything is no symbol at all, for no communication can be said to 
>have taken place, for mine.

I'm not clear what you mean here (not being a deconstructionist). My 
feeling for decon is that it's trying to understand a text (its hidden 
meanings) simply by looking at the text itself. (Please correct me if I am 
wrong.) I would say that this is an artificial restriction of inquiry. If I 
want to understand the hidden meanings of a text, I'd also look at the 
social context that the author wrote in, her upbringing, her other 
writings, etc.

cheers,

Jim Devine [EMAIL PROTECTED] & http://clawww.lmu.edu/~JDevine "Segui il tuo 
corso, e lascia dir le genti." (Go your own way and let people talk.) -- K. 
Marx, paraphrasing Dante A.

Re: Re: Re: Moses and monetarism

[Rob Schaap]

>The only way to beat the PC is by developing a better theory.
>
>>BTW, this is not something I dreamed up by myself. There is a rich 
>>literature on it ranging from critical theory to hermeneutics to 
>>deconstruction.
>
>References to hermeneutics and deconstruction don't convince me. I've never

>been into that kind of lit crit sh*t. I prefer logic, empirical research, 
>and the philosophy of science (methodology).

Strong words, Jim!  I'd've thought you could make a case for a logical,
empirically tenable methodology that allows for what a
symbol/institution/action might mean in the context of its day, or of any
particular time and place?!  I reckon the PC meant something different to
Phillips (was it in 1950?) than it does to, say, someone who deploys it as
ultimate universal explanation in argument today, after the PC's universal
efficacy has been tested, and empirically found wanting, by half a century
and a couple of hundred economic trajectories over that time.  I mean, you'd
feel less generously inclined to the latter, wouldn't you?  And, if so,
wouldn't that constitute a hermeneutic manouvre on your part?

And deconstruction goes along with this insofar as a symbol means according
to the moment in which it is allocated meaning.  Where I think it goes wrong
is that it doesn't afford a theoretical limit to the meaning of something,
even in a real-time conversation.  And a symbol that can mean anything is no
symbol at all, for no communication can be said to have taken place, for
mine.

You may not allocate the meaning to these words I allocated them when I
selected them, but I know you don't think I'm talking about influenza rates
in 19th century Silesia - well, I am now, but ya know what I mean ...

Cheers,
Rob.

Re: Re: Moses and Monetarism II

[Jim Devine]

At 04:37 PM 06/06/2000 -0700, you wrote:
>I can't help mentioning an article that I view as the classic statement
>of the moral sentiment underlying NAIRU, J. Laurence Laughlin's "The
>Unions Versus Higher Wages," _Journal of Political Economy_, Vol. 14,
>Issue 3 (March 1906) pages 129-142.

How could this be a "moral sentiment underlying NAIRU" when the NAIRU 
theory was developed only in the 1960s?

Further, why do you deny that there may be other theories -- with other 
moral sentiments -- that could underlie the NAIRU?

For example, Marx might say that the NAIRU is simply another name -- a cold 
academic name -- for the reserve army of the unemployed. It's an evil 
that's only necessary under an exploitative social institution such as 
capitalism. Only a system that dominates workers using hierarchical and 
undemocratic systems of alienated labor needs to threaten them with 
competition from unemployed workers in the reserve army of labor (NAIRU) or 
some other punishment (direct coercion).

Jim Devine [EMAIL PROTECTED] & http://liberalarts.lmu.edu/~JDevine

Re: Re: Moses and monetarism

[Jim Devine]

I wrote:
> > In a passage which seems to summarize his message, Tom Walker 
> wrote: >>The NAIRU story and the Phillips curve story make sense if one 
> assumes that capital's brief is efficiency and labour's is waste.<<
>
> > Tom, that sure seems like you're mixing normative concepts (efficiency) 
> and  positive concepts (NAIRU, Phillips curve) in a strange way.<

Tom ripostes:
>No, I'm saying that the supposedly positive concepts are covertly grounded 
>in normative judgments and they simply don't wash if you make those 
>judgments explicit and challenge them.

The PC is a concept that arose simply from empiricism (of Irving Fisher and 
later A.W. Phillips) rather than being ground out by the application of NC 
theory. (In fact, that's the main criticism that the NC economists have of 
it, i.e., that it didn't spring full grown from the head of Walras.) That 
doesn't mean that  no normative assumptions crept in (especially since old 
Irving was really horrible on issues like eugenics). But those normative 
judgements don't automatically undermine the empirical generalization, just 
as references to Isaac Newton's search for the Philosopher's Stone don't 
undermine his physics. (I can also imagine that old Isaac's attitidues 
toward non-Europeans was not politically correct. Should we then reject his 
physics?)

More importantly, as I said, it's possible to attach more than one 
normative meaning to the empirical generalization. If there's not a unique 
mapping between normative preconceptions and empirical generalizations, 
then a normative critique is pretty weak if not totally bogus.

To beat an empirical generalization, you have to show that the data can be 
explained better by another generalization or a different deductive theory, 
i.e., show that the correlation isn't based on any reasonable causation 
that it is instead is an accident which can be explained in other terms. So 
what is your theory of the relationship between unemployment and inflation?

I don't think empirio-criticism of the PC will go far in the US, since 
there are several major periods in which the unemployment rate falls 
(rises) and inflation goes up (falls). Worse, like other generalizations in 
economics, it's a _ceteris paribus_ relation. The PC only works in an 
unvarnished fashion if what I call "hangover inflation" (Tobin's "inertial 
inflation" with an overlay of "conflict inflation") stays constant, there 
are no supply shocks, and the parameters of the PC itself (such as the 
NAIRU) never change.

The only way to beat the PC is by developing a better theory.

>BTW, this is not something I dreamed up by myself. There is a rich 
>literature on it ranging from critical theory to hermeneutics to 
>deconstruction.

References to hermeneutics and deconstruction don't convince me. I've never 
been into that kind of lit crit sh*t. I prefer logic, empirical research, 
and the philosophy of science (methodology).

> > Are you saying that if we reject the normative view that "capital's 
> brief  is efficiency and labour's is waste," we should reject both the 
> Phillips  Curve and the NAIRU, _even if_ they fit the empirical data? <

>1. The Phillips Curve and the NAIRU do not unambiguously "fit the 
>empirical data".

That point is irrelevant to what I said, because the empirical validity of 
the PC was in the independent clause. That is, I was saying: (1) _assume_ 
that the theory fits the data. Then, (2)  given this assumption, is it 
reasonable to reject the theory because it doesn't fit one's normative 
likes? (I don't like the way the aging process is affecting my body and 
mind. Does that mean I should reject its existence, even though empirical 
evidence suggests that it's happening?)

>2. Fitting the empirical data is not prima facie evidence of a causal 
>relationship.

Right. Obviously, I agree, because I reject the NC theory of the PC (one 
specific causal relationship) but see that the PC might easily be seen as 
the result of the workings of  the reserve army of labor in an economy with 
fiat money (another causal relationship).

>3. We should reject the Phillips curve and the NAIRU if a. they don't fit 
>the empirical data or b. we can find a better
>explanation for why they do (if and when they do).

Okay. Of course, what I'm trying to do is (b).

>4. The SOP [standard operating procedure] in economics has been to assume 
>that the geocentric theory is right and to search for
>subsidiary explanations for the "perturbations" in the orbits of the 
>planets. One can explain away quite a bit that way.

I am in no way responsible for what orthodox economists do. (Perhaps I 
should add that to my signature file.)

> > (Mind you, I am quite conscious that the empirical data reflect the 
> power of capital and institutional framework of the country being 
> studied. But we live under that power and that framework.) Are you saying 
> that one should reject a positive theory based on the fact that you don't 
> like its mo

Re: Re: Re: Moses and monetarism

[Jim Devine]

I had written:
> > > But the positive/normative mix could be very different: it seems to 
> me that the NAIRU theory could easily be interpreted as an argument for 
> overthrowing capital. "Capitalism requires a reserve army THAT BIG to 
> keep it from punishing us with accelerating inflation??"<<



Christian Gregory writes:
>The way the PC gets explained in macro textbooks, though, there's no 
>reserve army, and there is no "it" that punishes "us." The PC is a graphic 
>representation of empirical evidence supporting an economic law. If you 
>start using a different lexicon ("capitalism," "reserve army," 
>"punishment," etc.), you're not talking PC any more. You're talking about 
>the uses of PC, which is a different kettle of fish.

I'm not responsible for the way it shows up in textbooks. Nor should we 
reject something for the way it's presented in orthodox macro textbooks. In 
intro texts, supply and demand are presented as if they were natural laws 
(and they're even referred to as "laws") -- but that doesn't mean that we 
should reject supply and demand out of hand. (Marx, for example, didn't do 
so.) I don't see any reason why we can't see the PC as a manifestation of 
capitalism's laws of motion (workers' inability to negotiate directly about 
real wages, capitalists' ability to punish workers, etc.) if and when it 
exists.

Anyway, most serious orthodox textbooks describe the PC as an empirical 
generalization in search of a theory rather than as an economic law. Even 
though the laughable neoclassical model of the PC dominates the textbooks, 
there are really several different competing theories (Tobin's etc.)

>How do people who believe in PC make sense of Japan? Does it work all that 
>well with European numbers?

my understanding is that the PC doesn't work well at all except in a large, 
largely integrated, economy such as that of the US. (This means that the US 
is _it_ unless the European Union gets big and well-integrated; 
unfortunately or fortunately, the US is where I live, so it dominates my 
consciousness.)  Brad deLong, pen-l's resident NC economist, said so in his 
column  in the NY TIMES (though I don't remember him inquiring about _why_ 
the PC doesn't work outside the US). Anyway, this should remind us that the 
PC is NOT a law of nature of any sort. Thus Marxian or other non-orthodox 
theories might explain the empirical data seen in the US without sinking to 
the level of asserting natural laws or the like.

Jim Devine [EMAIL PROTECTED] & http://liberalarts.lmu.edu/~JDevine
"From the east side of Chicago/ to the down side of L.A.
There's no place that he gods/ We don't bow down to him and pray.
Yeah we follow him to the slaughter / We go through the fire and ash.
Cause he's the doll inside our dollars / Our Lord and Savior Jesus Cash
(chorus): Ah we blow him up -- inflated / and we let him down -- depressed
We play with him forever -- he's our doll / and we love him best."
-- Terry Allen.

Re: Moses and Monetarism II

[Timework Web]

Michael Perelman wrote,

> The timing of this quote is extraordinary, since it comes after the great
> merger wave put an end to much competition.  Combinations work for industry;
> not for workers.

It would be petty of me to point out that Laughlin was a paid spokesman
on behalf of the Chicago traction monopoly. Of course, previously
unions were outlawed as "combinations in restraint of trade". Presumably,
monopoly corporations are combinations for the promotion of trade. I
sometimes wonder if Thorstein Veblen was aiming some of his sarcasm in
_The Higher Learning in America_ and _The Engineers and the Price System_
at his former mentor, Laughlin. 

> Timework Web wrote:
> 
> > 8. "In these days few people realize the grinding, eager, intense, and
> > minute competition which goes on between producers in the same
> > business. It is about as impossible for a laborer who looks out for his
> > own interests, to escape being rewarded for growing efficiency, as for a
> > man who is honest to escape the respect of his neighbors." (141)


Tom Walker

Re: Re: Moses and monetarism

[christian a. gregory]

>
> > But the positive/normative mix could be very different: it seems to me
that
> > the NAIRU theory could easily be interpreted as an argument for
> > overthrowing capital. "Capitalism requires a reserve army THAT BIG to
keep
> > it from punishing us with accelerating inflation??"
>

The way the PC gets explained in macro textbooks, though, there's no reserve
army, and there is no "it" that punishes "us." The PC is a graphic
representation of empirical evidence supporting an economic law. If you
start using a different lexicon ("capitalism," "reserve army," "punishment,"
etc.), you're not talking PC any more. You're talking about the uses of PC,
which is a different kettle of fish.

How do people who believe in PC make sense of Japan? Does it work all that
well with European numbers?

Christian

Re: Re: Moses and Monetarism II

[Michael Perelman]

The timing of this quote is extraordinary, since it comes after the great
merger wave put an end to much competition.  Combinations work for industry;
not for workers.

Timework Web wrote:

> 8. "In these days few people realize the grinding, eager, intense, and
> minute competition which goes on between producers in the same
> business. It is about as impossible for a laborer who looks out for his
> own interests, to escape being rewarded for growing efficiency, as for a
> man who is honest to escape the respect of his neighbors." (141)
>
> Tom Walker

--
Michael Perelman
Economics Department
California State University
Chico, CA 95929

Tel. 530-898-5321
E-Mail [EMAIL PROTECTED]

Re: Moses and Monetarism II

[Timework Web]

I can't help mentioning an article that I view as the classic statement
of the moral sentiment underlying NAIRU, J. Laurence Laughlin's "The
Unions Versus Higher Wages," _Journal of Political Economy_, Vol. 14,
Issue 3 (March 1906) pages 129-142.

Laughlin's *positive* argument can, I believe, be summed up in the
following series of extracts:

1. "the unions, while seeming to be working in favor of the working-men,
have been acting against the real interests of the laborers, and against
the future improvement of their standard of living." (130-131)

2. "the rate of wages for all in any one occupation can never be more than
that rate which will warrant the employment of all -- that is, the market
rate." (134)

3. "if law and order were enforced, if an employer were allowed without
hindrance to hire any man he chose, if these men could go peacefully to
work and be unmolested in the streets, if their families were not
boycotted, a strike would almost never succeed." (135)

4. "the unions act as if an increase in the rate of wages could be
determined by demands upon the employers, when in reality it is prevented
by the actual facts of the supply of labor." (136)

5. "Productivity, or efficiency, is a reason for higher wages." (138)

6. "The escape from the influence of over-supply, let me insist, can be
effected solely by adopting the principle of productivity." (139)

7. "A sympathetic relation and a helpful attitude between laborers and
employers is an absolute essential to productivity." (140)

8. "In these days few people realize the grinding, eager, intense, and
minute competition which goes on between producers in the same
business. It is about as impossible for a laborer who looks out for his
own interests, to escape being rewarded for growing efficiency, as for a
man who is honest to escape the respect of his neighbors." (141)


Tom Walker

Re: Moses and monetarism

[Timework Web]

Jim Devine wrote,

> In a passage which seems to summarize his message, Tom Walker wrote:
> >The NAIRU story and the Phillips curve story make sense if one assumes
> >that capital's brief is efficiency and labour's is waste.
> 
> Tom, that sure seems like you're mixing normative concepts (efficiency) and
> positive concepts (NAIRU, Phillips curve) in a strange way.

No, I'm saying that the supposedly positive concepts are covertly grounded
in normative judgments and they simply don't wash if you make those
judgments explicit and challenge them. BTW, this is not something I
dreamed up by myself. There is a rich literature on it ranging from
critical theory to hermeneutics to deconstruction.

> Are you saying that if we reject the normative view that "capital's brief
> is efficiency and labour's is waste," we should reject both the Phillips
> Curve and the NAIRU, _even if_ they fit the empirical data? 

1. The Phillips Curve and the NAIRU do not unambiguously "fit the
empirical data". 2. Fitting the empirical data is not prima facie evidence
of a causal relationship. 3. We should reject the Phillips curve and the
NAIRU if a. they don't fit the empirical data or b. we can find a better
explanation for why they do (if and when they do). 4. The SOP in economics
has been to assume that the geocentric theory is right and to search for
subsidiary explanations for the "perturbations" in the orbits of the
planets. One can explain away quite a bit that way.


> (Mind you, I am
> quite conscious that the empirical data reflect the power of capital and
> institutional framework of the country being studied. But we live under
> that power and that framework.) Are you saying that one should reject a
> positive theory based on the fact that you don't like its moral
> implications?

This last question simply restates your initial normative judgment that
_I_ am mixing normative and positive concepts as a positive statement that
I _am_ mixing the normative and the positive. Thanks for illustrating how
it's done.

> But the positive/normative mix could be very different: it seems to me that
> the NAIRU theory could easily be interpreted as an argument for
> overthrowing capital. "Capitalism requires a reserve army THAT BIG to keep
> it from punishing us with accelerating inflation??"

That faint hope relies on your substituting the normative "capitalism" for
the positive "the economy". Nice finesse if you can pull it off. I'll
stick to going for the juglar.

> I am no positivist, but I think that _trying_ to separate positive and
> normative concerns is a useful step in many cases (as is being aware of the
> way in which one's moral commitments shapes the questions one asks, the
> data one looks at, the research methods one uses,  etc.)

That's what I was talking about, looking at the hidden moral judgments
underlying the allegedly positive claims about unemployment and
inflation. And frankly, if you go back just a bit in the history of
American teaching of political economy -- good old late 19th century
laissez faire social darwinism -- the moral judgments are not 
hidden in the slightest. Unemployment is unambigously a sign of the
unemployed's sinful habits.

Have a look at the 1909 book by J. Laurence Laughlin, _Latter
Day Problems_, in which he talks about the Christ-like
"sacrifice" (abstinence) of the capitalist as the creative
source of wealth. I'm not exaggerating. Or see the 1938 labour economics
textbook by Royal Montgomery in which he scrupulously presents the
unions' *stated* position on the hours of work followed by what he
coyly advises the reader is their *real* motivation.

My point -- and I've made it over and over again -- is that if you do a
historical read through of a lot of these "positive concepts" you find out
that they started as explicit and quite extreme moral judgments that over
time got "moderated" by expunging some of the more defamatory or
laudatory premises. But to do such a historical read would lead us
into the temptation of quoting from old books.

Tom Walker

Re: Moses and Monetarism

[Jim Devine]

In a passage which seems to summarize his message, Tom Walker wrote:
>The NAIRU story and the Phillips curve story make sense if one assumes 
>that capital's brief is efficiency and labour's is waste.

Tom, that sure seems like you're mixing normative concepts (efficiency) and 
positive concepts (NAIRU, Phillips curve) in a strange way.

Are you saying that if we reject the normative view that "capital's brief 
is efficiency and labour's is waste," we should reject both the Phillips 
Curve and the NAIRU, _even if_ they fit the empirical data? (Mind you, I am 
quite conscious that the empirical data reflect the power of capital and 
institutional framework of the country being studied. But we live under 
that power and that framework.) Are you saying that one should reject a 
positive theory based on the fact that you don't like its moral implications?

But the positive/normative mix could be very different: it seems to me that 
the NAIRU theory could easily be interpreted as an argument for 
overthrowing capital. "Capitalism requires a reserve army THAT BIG to keep 
it from punishing us with accelerating inflation??"

I am no positivist, but I think that _trying_ to separate positive and 
normative concerns is a useful step in many cases (as is being aware of the 
way in which one's moral commitments shapes the questions one asks, the 
data one looks at, the research methods one uses,  etc.)

Jim Devine [EMAIL PROTECTED] &  http://liberalarts.lmu.edu/~jdevine

Moses and Monetarism

[Timework Web]

To claim that inflation is driven (mainly or generally or typically) by
wage pressure is to forget that capital confronts living labour as dead
labour. In that relationship, neither the chicken nor the egg necessarily
comes first. The relative contributions of labour and capital to an
wage-price spiral is empirically unknowable. 

The only way we could PRETEND to have any empirical confirmation one way
or the other would be by assuming that outcomes express "revealed
performances" on the analogy of measuring utility by revealed
preferences. That's a tautology whose only use-value is ideological.

The NAIRU story and the Phillips curve story make sense if one assumes
that capital's brief is efficiency and labour's is waste. Or, to put less
perjoratively, that capital always seeks to maximize the productivity of
labour whereas labour just cares about its level of consumption. Thus
efficiency is intrinsic to capital and extrinsic to labour.

That story sounds plausible only if we also bracket out class rule and
assume the neutrality of the state. Why would we want to do that when
we're talking about the intentions of the central bank in raising interest
rates? Central bank intervention invariably on behalf of one side in an
exchange calls off all bets about efficiency. One the one hand, if we
assume that market exchange maximizes efficiency, the one-sided
intervention could only detract from efficieny. On the other hand, if we
assume that the central bank's one-sided interventions increase
efficiency, we would have to conclude that without such intervention
labour markets would be inherently inefficient.

Imagine Alan Greenspan as a kind of capitalist Moses parting the waters,
25 basis points at a time, to enable the chosen people to flee from the
Asian crisis to the promised land of the new economy. Then when Pharoah's
pursuing reserve army of the unemployed are half-way across the Red Sea,
he waves his staff -- again, 25 basis points at a time -- and the army is
engulfed. To then say that the preceding sequence of events occured
because wetness is an intrinsic attribute of Pharoah's army is to add
insult to injury.

Tom Walker

Monetarism

[Jim Devine]

Pen-l's Brad deLong has a useful little article on Monetarism in the Winter 
2000 issue of his journal, THE JOURNAL OF ECONOMIC PERSPECTIVES. He makes 
the point I've made many times, i.e., that the "New Keynesian" school that 
currently dominates macroeconomics is basically Monetarism without a 
constant velocity of money or the assumption that the Central Bank controls 
the money supply well. He also makes a useful distinction between "Classic 
Monetarism" (Milton Friedman's scholarly works) and "Political Monetarism" 
(the MF's right-wing libertarian program).

What I missed is any kind of analysis of labor-power markets. To the 
Monetarists and new Keynesians, in absence of government meddling and 
imperfections, labor markets adjust to equate labor-power demand with 
supply, i.e., to attain full employment (the "natural" rate of employment). 
This gives us the vertical long-term aggregate supply curve that litters 
the textbook and the "natural rate hypothesis" (that there's only one 
unemployment rate that can be sustained without accelerating inflation or 
disinflation). This is the theory that Post-Keynesians, Labor economists, 
and Marxists have very good criticisms of. But Brad never gets to that 
issue. I guess his purposes were limited...

Jim Devine [EMAIL PROTECTED] &  http://liberalarts.lmu.edu/~jdevine