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ilure s embrace fallacy of composition fcm fed policy federal spending feedback loops final spending financial cost financialization five words five digit years forget about debt fpi fred free banking era full disclosure fun with the mpc gang8 gds gold shortage gresham s law gross domestic spending growth rate calc growth phase growth historical revisionism hoarding hodrick prescott household debt hover craft how to pay for it humor because you might not know if i didn t say i couldn t sleep iceberg inflation introduction is it ego captain jerry says krugman laffer curve limits long and variable loops malaise matched set fekete math problems medium of account military spending milton friedman mmt money multiplier more debt than money is policy motives moving average new tools of policy non linear not only household debt oil parameters for debt pfi policy predicting recession price controls printing vs spending problem x productivity questions r reading and writing red and green reduction reviews scott sumner sequence 2 serfdom simulacron simulated evidence slack special report spreadsheeting stagflation standard deviation star trek stimulus sumner symmetry in deception taxes taylor rule the difference between debt and credit the economy is transaction the k r shift the long decline the supply side the tint knob they don t know timeline tongue in cheek tot ulc umic unsustainable urgency verdoorn waste fraud abuse withering shoots zoho the new arthurian economics copyright 2010 2018 arthur shipman thursday march 31 2016 chain of causality roger farmer i do not know why growth is low there are a number of promising candidate theories my own favorite explanation is that the fed has lost control of inflation and that firms are not creating new technologies at a pace that is fast enough to generate high growth because uncertainty has increased but i do not have a good economic model that links that idea in a coherent way with economic data when it comes to economic growth i have very little to say about why growth is currently slow i am not unusual in that regard if secular stagnation means that unemployment can be permanently high if we don t do something about it i see secular stagnation if secular stagnation means that we will be in trouble when the next recession hits because the fed will not be able to lower interest rates further i see secular stagnation but if secular stagnation means that a massive bout of government investment in roads and infrastructure will cause firms to start producing better blueprints i say show me the theory and the evidence that leads you to believe that that is so well before you start gathering theory and evidence for roger farmer i want to talk about analyzing problems i want to say that we don t need a massive bout of government investment in roads and infrastructure or we probably do need it but not because it will give us better blueprints we need it because we need it this however is terribly far from the point if you say a massive bout of government investment will solve the problem of slow growth then you are saying that government underinvestment is what caused the slow growth and i don t think that s right we don t need a massive bout of government investment to solve the problem that s because slow growth is not the problem slow growth is a consequence of the problem the thing that s causing slow growth is the problem the first task is to understand what the problem is most people see a consequence and identify the consequence as the problem slow growth inequality trade imbalance among others these are consequences of the problem or maybe not but this is always the first question that must be answered the first task is to understand what the problem is the second task is to understand the problem the third task is to elevate the cause of that problem and follow the chain of causality to its root don t be surprised if you end up at policy posted by the arthurian at 4 00 am 2 comments wednesday march 30 2016 how do you know money is tight some people say money is tight and you ask how do you know and they say money must be tight because the economy isn t growing that s not a theory that s just the mistaken idea that there is no such thing as an economic crisis how do you know if money is tight you have to compare it to something to what i compare money to total accumulated debt compare the money we have the money we use for spending the money that is the only money we can use to pay down debt compare that money to the size of debt that s how i know if money is tight graph 1 tight money caused the great depression fdr loosened things up and then we had a golden age tight money caused sluggish growth in the 1970s and 80s an accident of policy loosened things up a little in the early 1990s and then we had good years in the latter 1990s and tight money caused our late crisis but things have loosened a bit since then posted by the arthurian at 4 00 am 0 comments tuesday march 29 2016 sometimes i need an example in a comment on his recent occult mysteries of the heterodox noah smith linked to jw mason s couple year old crit of something in steve keen s work one of mason s complaints is that keen mis applies the concept of aggregate demand i thought i knew what aggregate demand was so this brought my mental process to a sudden halt mason considers a detail from keen s view compliments its clarity and says with all this i am in perfect agreement after that comes the problem but then he tries to formalize these ideas mason says keen repeatedly says that aggregate demand is income plus change in debt there are many variations on this through his writing he evidently regards it as a central contribution but what does it mean to a non economist it appears to be a challenge to another presumably orthodox view that aggregate demand is equal to income but if you are an economist you know that there is no such view whether neoclassical keynesian or radical there is no such view mason says that s what stopped me mason the term aggregate demand is shorthand for the argument that causality runs from aggregate expenditure to aggregate income whereas pre keynesian orthodoxy held that causality ran strictly from income to expenditure it s worth noting that in this debate krugman is solidly with keen and me on the keynesian side but there isn t any separate variable called aggregate demand ad is just another name for aggregate expenditure insofar as it determines output so that sums up mason s view of that detail and i think i understand what he said now i ve got lars p syll who says the basic explanation for unemployment is insufficient aggregate demand and there it is there is causality in syll s statement insufficient aggregate demand causes unemployment that s what mason was talking about sometimes i just need to see these things now i can go back to mason s old post and wonder whether including change in debt in aggregate demand somehow throws a monkey wrench into the insufficient aggregate demand argument i can t see it from here posted by the arthurian at 4 00 am 4 comments monday march 28 2016 volunteers scott sumner in keynes stole my musical chairs model but what is so obvious about involuntary unemployment as defined by keynes we all agree that there were lots of people without jobs we all agree that lots of them wanted to be working we all agree that lots of them were miserable i call that involuntary unemployment by way of contrast here is one of syll s two reasons dsge models are such spectacular failures in the basic dsge models the labour market is always cleared responding to a changing interest rate expected life time incomes or real wages the representative agent maximizes the utility function by varying her labour supply money holding and consumption over time most importantly if the real wage somehow deviates from its equilibrium value the representative agent adjust her labour supply so that when the real wage is higher than its equilibrium value labour supply is increased and when the real wage is below its equilibrium value labour supply is decreased in this model world unemployment is always an optimal choice to changes in the labour market conditions hence unemployment is totally voluntary syll is perfect sumner can t even keep straight which is his own definition and which is by keynes sumner s story is embarrassingly bad that s why i keep pointing it out posted by the arthurian at 4 00 am 1 comments sunday march 27 2016 total debt back to 1834 found it by accident source bawerk net i don t have numbers for debt before 1916 but i have a graph now and the idea to look for banks balance sheets in the historical statistics maybe i can put some numbers together that s all for now posted by the arthurian at 4 00 am 0 comments saturday march 26 2016 the exquisite tragedies of hinterland i know you don t come here for my good taste in television shows but i have no economics today so i thought i might put the space to use a different way hinterland cop show on netflix they have season one four episodes each about an hour and a half long and they re getting season two on 1 april i can t wait i found the show last fall a couple months before i retired watched all four episodes in a couple nights loved it for a while there i would watch an episode again every weekend while my wife was shopping since retiring i try to watch an episode every day here s how the wife described the stories even the criminals are victims the stories are tragedies magnificent exquisite tragedies episode four i think rivals romeo and juliet episode one is better you know the british cop hierarchy detective chief inspector dci on top detective inspector di next then detective sergeant ds and detective constable dc at least that s what i figured out since getting netflix hinterland is set in wales west wales watching the show i feel like i ve been let in on a well kept secret oh the camera work is good you know those grand views in almost every scene of the lord of the rings movies well it s something like that only not overdone you watch dci mathias driving to a crime scene and his car is tiny on the screen sit back and enjoy the view best part the eyes the eyes of dci mathias and the eyes of di mared rhys mathias walks up to a crime scene stops and looks at everything he s inspecting he s detecting he s doing his job then he walks into the crime scene and stops to inspect and detect some more i don t know if it s the directing or the acting or the writing or dumb luck or what but it s perfect di rhys has great eyes too they can be stone cold when she s questioning a suspect who has earned it but at other times often rhys will show empathy for victim and suspect alike you never saw such empathy in a cop show i think there s less dialog in hinterland than most other shows another reason i like it many things get done with the eyes or the slightest nod of the head my favorite scene that s easy in the opening moments of the first episode we see dci mathias out for a jog returning home from a jog he approaches his caravan the little trailer he calls home the camera changes from outside the caravan to inside we see mathias walk up to the front entrance turn and sit down hard the whole trailer shakes i laugh every time there s more but let me summarize hinterland makes me wish i was welsh posted by the arthurian at 4 00 am 0 comments friday march 25 2016 when would you know not happy with steve keen s spreadsheet as noted yesterday he predicts recession and shows it in a spreadsheet but in the spreadsheet he makes recession happen by suddenly changing the growth rate of credit now that s probably practical and realistic and it sounds exactly like what happened back in 07 but it didn t happen because somebody changed a number on a spreadsheet it happened in the economy you could argue that people were looking at their spreadsheets and playing with the numbers and suddenly said to themselves hm this doesn t look good i m going to have to cut my borrowing and unload some debt maybe that is what happened something like that but i always separate the decision making process from the economy the decisions arise within us in response to economic circumstance sure but within us and the decisions we make emerge from us from our nature human nature and i don t think it s good for economists to muck with human nature you can t change human nature that s what was wrong with from each according to his abilities to each according to his needs if you want to change the economy you have to do it without trying to change human nature you have to induce people to make the decisions you want them to make you have to create the economic circumstance that makes people want to do the things you want them to do that s what economic policy is all about if you re not good at it you end up making a circumstance in which people are induced to do things out of fear and desperation the whole trick is to understand the economy anyway the sudden change in the growth of credit the one that had an effect on the economy it wasn t a change in a spreadsheet it wasn t a change in plans it was a change in actions it was the sudden cutback in borrowing in the economy but when would you know how soon can you see it happening graph 1 private debt quarterly data percent change from previous quarter there is no hint on this graph as of 2007 q2 what would happen over the next year how far to the right would you have to look on this graph before you had an idea what was happening edit 25 march changed the economic circumstance that makes people want to do what you want them to do to the economic circumstance that makes people want to do the things you want them to do posted by the arthurian at 6 50 am 1 comments thursday march 24 2016 the australian recession of 2017 disappointing almost came in my jeans when i saw the link to steve keen s get ready for an australian recession by 2017 keen claims to be one of the few who says of the crisis that he saw it coming and now he s predicting recession next year this has to be worth a click in australia recession in australia keen writes for the last 25 years australian politicians of both liberal and labor hue have been able to brag that under their stewardship australia has avoided a recession those bragging rights are about to come to an end during the life of the next parliament and probably by 2017 australia will fall into a prolonged recession that s it except for the graph oh and down under the graph he writes click here to read the rest of this post and here to download the excel file showing the link between a slowdown in the rate of growth of debt and a recession he can do it in an excel file oh oh excuse me while i go change my jeans according to recognition lag at investopedia followers of the market are familiar with the phenomenon of when economists signal a recession in the economy several months a...
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