tag:blogger.com,1999:blog-6245381193993153721.post4278125872331212498..comments2024-03-17T00:23:24.896-07:00Comments on Social Democracy for the 21st Century: A Realist Alternative to the Modern Left: Price Rigidity in New Keynesianism and Post KeynesianismLord Keyneshttp://www.blogger.com/profile/06556863604205200159noreply@blogger.comBlogger8125tag:blogger.com,1999:blog-6245381193993153721.post-26561782600779136182012-07-01T10:47:25.612-07:002012-07-01T10:47:25.612-07:00As I said, the problem is also that Say's law ...As I said, the problem is also that Say's law is invalid.<br /><br />As Frank H. Hahn argued, “It is therefore not money which is required to do away with a Say’s Law-like proposition that the supply of labour is the demand for goods produced by labour. Any non-reproducible asset will do. When Say’s law is correctly formulated for an economy with non-reproducible goods it does not yield the conclusions to be found in textbooks. As I have already noted Keynes was fully aware of this and that is why he devoted so much space to the theory of choice amongst alternative stores of value” (Hahn, F. H. 1977. “Keynesian Economics and General Equilibrium Theory: Reflections on Some Current Debates,” in G. C. Harcourt (ed.), <i>The Microeconomic Foundations of Macroeconomics</i>, Macmillan, London. p. 31).<br /><br />Secondary financial asset markets (and even secondary real asset markets) divert income from purchasing of final goods and services, leading to leakages in the value of total annual aggregate supply.<br /><br />That is why annual net new flows of private debt are fundamental to capitalist economies.<br /><br />Once the instability of investment is thrown in, with the dynamics of debt deflation, it is clear that market economies do not necessarily converge to full employment equilibrium.Lord Keyneshttps://www.blogger.com/profile/06556863604205200159noreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-19402163513686960982012-07-01T10:41:29.844-07:002012-07-01T10:41:29.844-07:00It is not just because the aggregate level of inve...It is not just because the aggregate level of investment is unstable owing to subjective expectations, but also because Say's law, in all its forms, is a myth<br /><br />http://socialdemocracy21stcentury.blogspot.com/2010/10/myth-of-says-law.htmlLord Keyneshttps://www.blogger.com/profile/06556863604205200159noreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-41683004889391165512012-07-01T10:08:55.392-07:002012-07-01T10:08:55.392-07:00"Wouldn't this OR an NGDP growth level ta..."Wouldn't this OR an NGDP growth level target solve uncertain subjective expectations"Edwardnoreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-13225319001230125682012-07-01T09:41:40.319-07:002012-07-01T09:41:40.319-07:00"Post Keynesians, following Keynes himself, r..."Post Keynesians, following Keynes himself, reject the view that perfectly flexible wages, prices and perfect competition would lead to full employment equilibrium. Even if there were perfectly flexible wages and prices, there could still be failures of aggregate demand (Davidson 1992)."<br /><br />Because of subjective expectations? Whats the mechnism involved then? Unstable deflation expectations? Because expectations theories are not unique to Post Keynsians New Keynsians or even New Classicals. Theoretically, what if the CB or government wanted deflation to roll back years of previous inflation, say 20%. It would then promise that once that price level has been reached, it would relax monetary policy again. Wouldn't this of an NGDP growth level target solve uncertain subjective expectations?Edwardnoreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-71071275349695765142012-07-01T08:13:47.972-07:002012-07-01T08:13:47.972-07:00"Most businesses are cost plus operations and..."Most businesses are cost plus operations and spend 99% of their time fretting about their sales pipeline."<br /><br />Right.HiddenBaithttps://www.blogger.com/profile/06901488356749798440noreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-38101618385218147292012-07-01T00:01:47.388-07:002012-07-01T00:01:47.388-07:00LK:
Regarding price adjustments, here's anoth...LK:<br /><br />Regarding price adjustments, here's another study that finds evidence that firms will adjust quantity before price:<br /><br />Price and Quantity Adjustment over the Business Cycle: Evidence from Survey Data<br />Author(s): V. Bhaskar, Stephen Machin, Gavin C. Reid. Oxford Economic Papers, New Series, Vol. 45, No. 2 (Apr., 1993), pp. 257-268<br /><br />The works it cites in turn may also be of value.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-33565377263428479572012-06-30T23:33:12.130-07:002012-06-30T23:33:12.130-07:00Anybody who believes the NK line really ought to s...Anybody who believes the NK line really ought to spend some time operationally running a smaller business (large enough to be more than a one man band, but still small enough so one person can overview all the functions).<br /><br />Then you will see on the ground that the PK description is correct. Most businesses are cost plus operations and spend 99% of their time fretting about their sales pipeline.NeilWhttps://www.blogger.com/profile/11565959939525324309noreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-50086604880484782332012-06-30T20:35:44.857-07:002012-06-30T20:35:44.857-07:00I would think that transaction cost provides a sim...I would think that transaction cost provides a simple explanation for why firms set prices and use layoffs or cut hours instead of making wage adjustments. <br /><br />In "The Nature of the Firm" (1937), Coase observed that there are costs involved in using the price mechanism. Many firms have probably figured out that it is more cost-effective not to adopt purely market solutions but to set prices — which is likely why we now have the modern firm instead of bazaar stalls and traditional haggling in goods markets. Only assets markets are actually "markets" in the sense of value being determined by changes in the marginal price. <br /><br />Greater standardization accommodated this, and it is also why we are headed toward automation and robotics. Technology is a lot more tractable than human resources.Tom Hickeyhttps://www.blogger.com/profile/08454222098667643650noreply@blogger.com