Economics and similar, for the sleep-deprived

A subtle change has been made to the comments links, so they no longer pop up. Does this in any way help with the problem about comments not appearing on permalinked posts, readers?

Update: seemingly not

Update: Oh yeah!

Wednesday, March 14, 2012

Are we still doing this one?

This debate is pointless. The model of the General Theory is a rational expectations model, in which all expectations are borne out in equilibrium and in which all parties optimise intertemporally. Keynes didn't actually believe this was how the economy worked (hence Chapter 15) but his actual model was completely microfounded. He also has Chapter 19 (Changes in Money Wages) which demonstrates that the General Theory model does not depend on price rigidities and so there is no need to have a debate about "microfoundations" for them either.

In general, it is difficult to see why people would have got so excited about Keynes if all he had been saying is that sticky real wages can cause unemployment.

Quote of the day is Geoff Harcourt's: "The term 'price inflexibility' should be abandoned altogether. In [this model] we are in a world where firms can change prices as often and asquickly as they wish, and yet is utterly non-Walrasian. If there are also costs associated with adjusting prices these, interesting though they may be, are to be blunt, irrelevant to the Keynesian theory. It is a hard thing to have to say of thirty years of intellectual fireworks let off by some of the best minds of our profession".
2 comments this item posted by the management 3/14/2012 01:21:00 AM

Friday, March 09, 2012

On the "household finance analogy"?

Still thinking of talking points to shake people out of this way of thinking ... How many households do you know of where everybody works for the family company, which sells nearly all of its output to family members?

Update: And of course, where nearly all of the household debt is owed to family members.
1 comments this item posted by the management 3/09/2012 10:08:00 AM

Thursday, March 08, 2012

Sometimes, it really is political correctness gone bad

Annals of bad decision making by inexperienced promoters. My experience of both benefit gigs and The Green Party is that they tend to promote a slightly disassociative mental state in which people say and do things which they would immediately recognise as lunacy if they were thinking straight.
0 comments this item posted by the management 3/08/2012 07:22:00 AM
DVD bonus content

A pal of the blog emails, with regard to the David Graeber debt seminar at CT, and my part in it.

Graeber’s book is a masterful new look at the past that is
unfortunately extrapolated into a painfully inadequate explanation of
the present. Your account here strikes me as a mirror image: a
wonderful and witty picture of the essential dynamics of the present,
which suffers greatly from being extrapolated into a past essentially

To start with, IIUC the idea that “the majority of debts are always
commercial” is utter tosh before the rise of capitalism. Merchants
were a tiny fraction of the population in Ancient Mesopotamia and
virtually all empires. The vast majority of the ancient population
was at one end or the other or farming, and this remained true pretty
much up until the modern era.

Second, there is a simple reason why merchants are excluded from these
universal jubilees: it’s only land-working debts that get resolved by
poor people getting sold into slavery. This was the underlying
situation that usually needed to get resolved, because eventually the
enslaved (or the about-to-be-enslaved) would start fleeing the land,
causing a food production crisis. And this is why “freed” is so
closely related to “freed from debt” – it means “freed from slavery.”
The most famous and recent version of this kind of system reboot was
that done by Solon, “the father of democracy,” called the
Seisachtheia, the shaking off of debts. Like the man’s moniker says,
it set the necessary foundations for democracy. And it was all about
the slaves. His famous reform not only returned their freedom and
land by repudiating those debts, he made contractual promises to be
someone’s slave illegal, which has remained a principle of free
contract and Western thinking ever since, although people now talk as
we got it from the air. He even promised to buy back Athenians who had
been previously sold into slavery abroad (some of which, the ancient
sources tell us, no longer spoke Athenian, they had been slaves so

Thirdly, the idea that it you could game the system by which debts you
declared as personal and which debts you called commercial, while
crucial to understanding how any similar solution would game out
today, is a complete misunderstanding of how ancient societies work.
These were rigid class societies where everyone’s class was distinct
and visible. The only debts that mattered here were debts secured by
land or your person (or your families person). The only class of
people who contracted such debts were peasants. If you were an
aristocrat, you didn’t have this kind of debt – you extended it. That
was the whole point of it. The ancient jubilee, which happened in
such similar ways in so many places, was a big reorganization of the
food production game in favor of the vastly most numerous but least
powerful class, and against the least numerous but most powerful
class, because it was necessary for society’s survival. Commercial
debts were entirely outside this dynamic. Personal debts were
likewise outside this dynamic (except for personal in the sense of
having sold yourself into slavery.)

Your last paragraph, by contrast, is excellent. IMHO it’s a better
jumping off point for trying to use Graeber’s picture of the past to
illuminate the present than what he does. If anyone wants to use this
book to build on, they’d be much better off starting with the
suggestions in your final paragraph than his final chapter
3 comments this item posted by the management 3/08/2012 04:16:00 AM

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