tag:blogger.com,1999:blog-6245381193993153721.post4444348074270640375..comments2024-03-17T00:23:24.896-07:00Comments on Social Democracy for the 21st Century: A Realist Alternative to the Modern Left: Rothbard Refutes Rothbard on the Effects of DeflationLord Keyneshttp://www.blogger.com/profile/06556863604205200159noreply@blogger.comBlogger28125tag:blogger.com,1999:blog-6245381193993153721.post-27680985382225090312015-02-09T14:18:26.933-08:002015-02-09T14:18:26.933-08:00"unstable nature of poorly regulated financia..."unstable nature of poorly regulated financial markets, the deflation of an asset bubble fuelled by excessive debt"<br />Although I won't deny this statement, my question is won't a central bank policy of inflating the currency necessarily increase the potential for asset bubbles due to excessive speculation by reducing interest rates and ensuring cheap financing for speculators and their activities?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-35417994026175353122011-02-06T05:36:01.626-08:002011-02-06T05:36:01.626-08:00So Pierre-Cyrille Hautcoeur was wrong ? I'm ve...So Pierre-Cyrille Hautcoeur was wrong ? I'm very sad.<br />http://img155.imageshack.us/i/sdc12967d.jpg/<br />And what about the recession of 1981 ?<br />http://econlog.econlib.org/archives/2010/02/reply_to_delong.html<br />(Don't forget to check Tom Dougherty's posts.)MHhttps://www.blogger.com/profile/10656881172906444719noreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-36093319799499488962011-02-05T15:35:00.973-08:002011-02-05T15:35:00.973-08:00""Wage flexibility"... this is what...<i>""Wage flexibility"... this is what distinguishes the Great Depression from the crisis of 1921"</i><br /><br />You are wrong about 1920-1921:<br /><br /><i>"in contrast to the story that gets handed out, there was no comparable decline in wages, according to the one source I could find, the National Industrial Conference Board. Wages rose slightly, and did so again in 1921, the worst year of the recession, when the unemployment rate peaked in July of that year. It is true that finally in 1922, wages fell by 8% before returning to rising in the following year, but the turnaround had come already in late 1921."</i><br /><br /><a href="http://econospeak.blogspot.com/2010/11/does-1920-21-recession-really-prove.html" rel="nofollow">Barkley Rosser, Does The 1920-21 Recession Really Prove That Laissez Faire Saves Us From Recessions?, November 8, 2010</a>Lord Keyneshttps://www.blogger.com/profile/06556863604205200159noreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-42653756025797541542011-02-05T10:27:25.458-08:002011-02-05T10:27:25.458-08:00"Wage flexibility"... this is what disti..."Wage flexibility"... this is what distinguishes the Great Depression from the crisis of 1921 (where a sharp drop in prices led to a rapid and sharp decline in wages, allowing a quick recovery). So why wages don't fall during the GD ? Because Hoover prevented them from falling.MHhttps://www.blogger.com/profile/10656881172906444719noreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-30994069058048383042011-02-05T03:18:03.691-08:002011-02-05T03:18:03.691-08:00Correction:
"then that kind of slump will NO...Correction:<br /><br />"then that kind of slump will <b>NOT</b> necessaily be fixed by people's accepting lower wages."Lord Keyneshttps://www.blogger.com/profile/06556863604205200159noreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-67848584844243083332011-02-04T16:33:25.097-08:002011-02-04T16:33:25.097-08:00If you are already in a depression, then that kind...If you are already in a depression, then that kind of slump will be necessaily be fixed by people's accepting lower wages. <br /><br />In a depression of the 1929-1933 type, there was a massive collapse in aggregate demand due to bank runs, failing banks, loss of people's life savings, collapse of investment and debt deflationary spiral - with a massive fall in business confidence.<br /><br />The picture you paint is a riduculous oversimplification of what goes on in severe recessions or depressions.Lord Keyneshttps://www.blogger.com/profile/06556863604205200159noreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-26138892742426868502011-02-04T08:07:51.829-08:002011-02-04T08:07:51.829-08:00Lord Keynes,
Joanna makes a lot of good points : ...Lord Keynes, <br />Joanna makes a lot of good points : "However, in a depression, employees are happy and super-productive if they can keep their jobs even after salary decrease." That's my opinion too. Employees accept less wages and they will work harder because they refuse to stay unemployed and uninsured, relying on unemployment insurance. There would be no loss of productivity.MHhttps://www.blogger.com/profile/10656881172906444719noreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-57725014850316275602011-02-03T06:24:29.545-08:002011-02-03T06:24:29.545-08:00oxymoron = contradiction in termsoxymoron = contradiction in termsLord Keyneshttps://www.blogger.com/profile/06556863604205200159noreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-22013389915557742632011-02-03T05:41:08.165-08:002011-02-03T05:41:08.165-08:00"This is an oxymoron."
For a moment I t...<i>"This is an oxymoron."</i><br /><br />For a moment I thought the culprit was I was not a native english speaker, but just checked Merrian Webster and it says tendency is a "direction or approach toward a place, object, effect, or limit", so looks like I'm good, you can't really approach toward a place you've already reached, can you?<br /><br /><i>"Post-WWII Keynesians were able to manage economies so well that it went below 3% in many countries."</i><br /><br />And post-WWI socialists were able to manage economies so "well" that the unemployment disappeared completely. Beat this.Joanna Liberationhttps://www.blogger.com/profile/03683439858840562847noreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-36822131342251583802011-02-03T05:23:12.945-08:002011-02-03T05:23:12.945-08:00"The tendency exists precisely because it nev..."The tendency exists precisely because it never reaches what it tends to, basics."<br /><br />This is an oxymoron.<br /><br /><i>"I know Keynesians would love to achieve such equilibrium</i><br /><br />What? Full employment equilibrium? Many countries have experenced that under Keynesian systems of demand management since 1945.<br /><br /><i>"because only then their models would finally reflect reality, but that would also mean mean a full stop to all economic and technological progress."</i><br /><br />A non sequitur.<br /><br />I suspect you probably don't even know what full employemnt is in Keynesian economics.<br /><br />A "full employment equilibrium" means an<br />equilibrium state where real GDP equals potential GDP, and where unemployment is close to or even below about 3%, and where inflation does not accelerate significantly.<br /><br />This means of course that there will be some unemployment - seasonal, frictional etc or where people are changing jobs.<br /><br />Keynes thought full employment was when unemployment was about 5%. Post-WWII Keynesians were able to manage economies so well that it went below 3% in many countries.Lord Keyneshttps://www.blogger.com/profile/06556863604205200159noreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-24571139089860788922011-02-03T05:11:36.670-08:002011-02-03T05:11:36.670-08:00Lachmann has merely said that "equilibrium of...Lachmann has merely said that "equilibrium of the economic system as a whole will thus never be reached", not that there is "no tendency to full employment equilibrium". The tendency exists precisely because it never reaches what it tends to, basics.<br /><br /><i>"With no equilibrium (full employment and optimum use of resource) there is a space for government intervention"</i><br /><br />I know Keynesians would love to achieve such equilibrium because only then their models would finally reflect reality, but that would also mean mean a full stop to all economic and technological progress. Of course in a capitalist reality, keynesians can never achieve the equilibrium, such efforts suffer from precisely same information problems as of socialist central planning.Joanna Liberationhttps://www.blogger.com/profile/03683439858840562847noreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-30762175576581390682011-02-03T04:40:42.818-08:002011-02-03T04:40:42.818-08:00"Market clearing is a self correcting mechani...<i>"Market clearing is a self correcting mechanism,</i><br /><br />There is no tendency to full employment equilibrium in free market systems:<br /><br />http://socialdemocracy21stcentury.blogspot.com/2011/01/f-h-hahn-in-candid-moment-on-neo.html<br /><br />And as to the Austrian idea of plan/pattern co-ordination - the sly Austrian replacement for neoclassical full employment equilibrium - that too is a myth, just as your fellow Austrian Ludwig Lachmann understood:<br /><br /><i>“In a kaleidic society the equilibrating forces, operating slowly, especially where much of the capital equipment is durable and specific, are always overtaken by unexpected change before they have done their work, and the results of their operation disrupted before they can bear fruit. Restless asset markets, redistributing wealth every day by engendering capital gains and losses, are just one instance, though in a market economy an important one, of the forces of change thwarting the equilibrating forces. Equilibrium of the economic system as a whole will thus never be reached. Marshallian markets for individual goods may for a time find their respective equilibria. The economic system never does.”</i><br />(L. M. Lachmann, 1976. “From Mises to Shackle: An Essay on Austrian Economics and the Kaleidic Society,” Journal of Economic Literature 14.1: p. 60-1).<br /><br />What Lachmann says here is much the same as what Keynes and Post Keynesians say.<br /><br />The “plan coordination” imagined by Hayek and other Austrians will not occur under these conditions of uncertainty, subjective expectations and money with a store of value function.<br /><br />With no equilibrium (full employment and optimum use of resource) there is a space for government intervention on both moral and economic grounds.Lord Keyneshttps://www.blogger.com/profile/06556863604205200159noreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-62243257613326155152011-02-03T04:19:15.693-08:002011-02-03T04:19:15.693-08:00"People in general object to having their nom...<i>"People in general object to having their nominal wages cut. Even managers often dislike across-the-board pay cuts. Recent studies suggest that employers actually avoid pay cuts"</i><br /><br />LK, employees always <i>prefer</i> higher wages, even employers often <i>prefer</i> higher wages, provided higher wages reduce staff turnover (that is basically the reason why wages rise at all). However, in a depression, employees are happy and super-productive if they can keep their jobs even after salary decrease. If they are not, the higher unemployment follows, and then they are finally happy, the circle closed. Market clearing is a self correcting mechanism, not only it does not need a benevolent economic tsar (the position you all keynesians aspire to), but it precisely needs the <i>lack</i> of such tsar. In other words, it's like the computer joke, keynesians always try to fix problems they have created in the first place.Joanna Liberationhttps://www.blogger.com/profile/03683439858840562847noreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-1740873353446668462011-01-31T13:37:35.150-08:002011-01-31T13:37:35.150-08:00I re-re-re-repeat : In "normal situation"...I re-re-re-repeat : In "normal situation", people don't buy more and more assets. And recession is caused by an excess supply of fiduciary media. Lower interest rates give incentives to inflate bubble, buying more and more assets (because consumption goods prices don't fall) while entrepreneurs expand their productive capacity, thanks to lower interest rates again; after that, bubble will burst. Then, and only after bubble burst, recession comes. And "not" before, whatever you think.MHhttps://www.blogger.com/profile/10656881172906444719noreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-63175843217100843152011-01-30T17:57:54.351-08:002011-01-30T17:57:54.351-08:00"Market clearing will force entrepreneurs to ...<i>"Market clearing will force entrepreneurs to readjust their actions because unemployed are scrambling to find jobs."</i><br /><br />When ecnomonies are struck by severe recessions or depressions, entrepreneurs will NOT engage in sufficient investment because of low or poor expectations<br /><br /><i>"They accept less wages and they will work harder because they refuse to stay unemployed and uninsured, and to die from starvation."</i><br /><br />Again you assume wages are flexible and that markets will clear. They won't:<br /><br />http://socialdemocracy21stcentury.blogspot.com/2011/01/f-h-hahn-in-candid-moment-on-neo.htmlLord Keyneshttps://www.blogger.com/profile/06556863604205200159noreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-90512074467988370852011-01-30T15:43:32.028-08:002011-01-30T15:43:32.028-08:00Lord Keynes,
I don't see the problem you point...Lord Keynes,<br />I don't see the problem you pointed out. Are you trying to refute my argument ?<br />I don't know much about "free silver" but there is no reason no one couldn't use and accept another medium in the face of a scarcity of the actual medium (gold, silver...). You seem to admit that there is no choice. No choice whatever they do, no choice whatever they try. You "know" that's not true. There is no choice because of government intervention. Have you ever heard about legal tender laws ? I suggest you read "The Ethics of Money Production" from Guido Hülsmann (chapter 9 and 10).<br />Maybe I'm wrong. In that case, prove it. Prove that your conclusion is correct in assuming the fact that no one can choose and use another medium, while people are demanding more money.<br /><br />Oh, and about deflation, I'm starting to read Bewley's book. You (and he) said "stickiness" is natural. But there is always economic forces. When you layoff your employees, you are just increasing unemployment rate. Market clearing will force entrepreneurs to readjust their actions because unemployed are scrambling to find jobs. They accept less wages and they will work harder because they refuse to stay unemployed and uninsured, and to die from starvation. They "just" want a job, not a higher wage. So where is productivity losses ?MHhttps://www.blogger.com/profile/10656881172906444719noreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-39159426659571054812011-01-29T06:42:10.662-08:002011-01-29T06:42:10.662-08:00Correction:
In one of the most significant and po...Correction:<br /><br />In one of the most <b>significant and popular</b> attempts to use "another medium of exchange" in America,Lord Keyneshttps://www.blogger.com/profile/06556863604205200159noreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-6722571315664899722011-01-29T06:38:48.572-08:002011-01-29T06:38:48.572-08:00"If people really want more money, more coins...<i>"If people really want more money, more coins to hold, and supposing the gold supply cannot be expanded, why people cannot choose another medium of exchange?"</i><br /><br />The answer to your question can be given by history.<br /><br />What you describe actually happened in the United States in the late 19th century, as the deflation from 1873-1896 caused a popular movement to demand a increased money stock by free silver:<br /><br />"Free Silver was an important United States political policy issue in the late 19th century and early 20th century. Its advocates were in favor of an inflationary monetary policy using the "free coinage of silver"; its supporters were called "Silverites". It largely pitted the financial establishment of the Northeast, who were creditors and would be hurt by inflation, against the more rural areas of the country, who were debtors and would benefit from inflation: farmers in the Midwest, miners in the West, and Southerners still chafing against federal government control.<br /><br />The debate lasted from the Coinage Act of 1873, which demonetized silver, to the Federal Reserve Act of 1913, which radically overhauled the US monetary system, coming to a head in the presidential election of 1896, most memorably in the Cross of Gold speech. Throughout, Free Silver was consistently defeated"<br />http://en.wikipedia.org/wiki/Free_Silver<br /><br />So to answer your question: "why people cannot choose another medium of exchange?"<br /><br />In one of the most attempts to use "another medium of exchange" in America, the "free silver" movement was defeated by gold standard fundamentalists - the sort of people, I suspect, who would be cheered on by modern Austrians.Lord Keyneshttps://www.blogger.com/profile/06556863604205200159noreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-4648776871978467172011-01-29T06:18:33.260-08:002011-01-29T06:18:33.260-08:00"Mr Bewley concludes that employers resist pa..."Mr Bewley concludes that employers resist pay cuts largely because the savings from lower wages are usually outweighed by the cost of denting workers’ morale: pay cuts hit workers' standard of living and lower their self-esteem. Falling morale raises staff turnover and reduces productivity." <br /><br />If entrepreneur A refuse to cut its wages, there are more unemployed. So entrepreneur B can increase the production with the new employees he recruits. In non-union environments, employers will increase or stabilize wages "only" if they are having trouble attracting people (i.e. if there is scarcity of labour supply). Why we should fear deflation ? <br />Perhaps Bewley is right. During a depression, the act of lowering wage will depress worker's morale and productivity. Why not. Why not. But in "normal situation" there is no reason to fear deflation, if nominal wage fall because of productivity gains : in "this" situation, the standard of living will go up. (see Guido Hülsmann)<br /><br />Lord Keynes,<br /><br />You're wrong again in citing Paul Davidson. If people really want more money, more coins to hold, and supposing the gold supply cannot be expanded, why people cannot choose another medium of exchange ? Why they cannot pay with silver ? Or platinum ? Or anything else ?MHhttps://www.blogger.com/profile/10656881172906444719noreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-72356412530039826352011-01-29T06:08:46.847-08:002011-01-29T06:08:46.847-08:00Also, I have already discussed this subject on ano...Also, I have already discussed this subject on another blog post:<br /><br />"Financial assets are not gross substitutes for commodities. The neoclassical gross substitution axiom is wrong. In both a commodity money and fiat money world, savings are held in the form of money and non-producible financial assets. An increase in demand for money and non-producible financial assets and rising prices of such liquid assets will not spill over into a demand for relatively cheaper commodities, because the elasticity of substitution of money and liquid assets is zero or near zero (Davidson 2010: 256–257; Davidson 2002: 44–45; see also Hahn 1977: 31). Even if wages and prices were perfectly flexible, there could still be “leakages” in aggregate supply in the form of speculation on financial asset markets which would be “non-employment inducing demand” (Davidson 2010: 257; Hahn 1977: 37)."<br /><br /><a href="http://socialdemocracy21stcentury.blogspot.com/2010/10/myth-of-says-law.html" rel="nofollow">http://socialdemocracy21stcentury.blogspot.com/2010/10/myth-of-says-law.html</a>Lord Keyneshttps://www.blogger.com/profile/06556863604205200159noreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-25055084554599271022011-01-29T05:11:25.591-08:002011-01-29T05:11:25.591-08:00"Wages are not "naturally" sticky.&...<i>"Wages are not "naturally" sticky."</i><br /><br />A statement blatantly contradicted by the empirical evidence.<br />And what do you mean by "naturally"? Do you mean "what generally happens in the real world"?<br />If so, then wages <i>are</i> "naturally" sticky.<br /><br />And again regarding this comment:<br /><br /><i>"if you buy more and more assets, commodity prices will go down, and people readjust their spendings. They buy less assets and more commodities."</i><br /><br />Your error is assuming the "the gross substitution axiom", just like the neoclassicals:<br /><br /><a href="http://books.google.com.au/books?id=PJvxe1XCNIsC&pg=PA44&dq=%22+assets+and+the+products+of+industry%22&hl=en&ei=7RBETa3WIoalcbHRoL8O&sa=X&oi=book_result&ct=result&resnum=1&ved=0CDQQ6AEwAA#v=onepage&q=%22%20assets%20and%20the%20products%20of%20industry%22&f=false" rel="nofollow">“The elasticity of substitution between all (nonproducible) liquid assets and the producible goods and services of industry is zero. Any increase in demand for liquidity (that is, a demand for nonproducible liquid financial assets to be held as a store of value), and the resulting changes in relative prices between nonproducible liquid assets and the products of industry will not divert this increase in demand for nonproducible liquid assets into a demand for producible goods and/or services” (Paul Davidson, <i>Financial markets, money, and the real world</i>, p. 44).</a><br /><br />The gross substitution axiom is wrong, and all inferences made from it (like yours) are also wrong.Lord Keyneshttps://www.blogger.com/profile/06556863604205200159noreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-59258698029344004542011-01-29T04:45:04.055-08:002011-01-29T04:45:04.055-08:00Lord Keynes,
People object to having their nominal...Lord Keynes,<br />People object to having their nominal wages cut ? So, unemployment will rise. Then they cannot maintain these wage rates any longer (but Unions and Minimum Wage can !), because unemployed people force them to accept a lower nominal wage. <br />Wages are not "naturally" sticky. And this is why the theory of "efficiency wage" is a fallacy.<br /><br />"People will NOT readjust their spending in an economy hit by a depression, there will be mass unemployment, poverty, and output contraction."<br /><br />You know what I mean. In normal situation, people don't buy more and more assets. Information cascade, animal spirits, or self-fulfilling prophecy cannot explain bubbles.MHhttps://www.blogger.com/profile/10656881172906444719noreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-41353865203734261942011-01-28T18:07:28.070-08:002011-01-28T18:07:28.070-08:00"Let the government stabilize actual wage rat...<i>"Let the government stabilize actual wage rate and unemployment will automatically rise, increasing uncertainty."</i><br /><br />You are proposing government intervention to cut wages and make them flexible?<br /><br /><i>"Guess what : if you buy more and more assets, commodity prices will go down, and people readjust their spendings."</i><br /><br />People will NOT readjust their spending in an economy hit by a depression, there will be mass unemployment, poverty, and output contraction. <br /><br /><br /><a href="http://books.google.com.au/books?id=PJvxe1XCNIsC&printsec=frontcover&dq=davidson+financial+markets&hl=en&ei=vHVDTdTDNMf4cebL0YoO&sa=X&oi=book_result&ct=result&resnum=1&ved=0CDoQ6AEwAA#v=snippet&q=gross%20substitute%20&f=false" rel="nofollow">Financial assets are not gross substitutes for producible commodities</a>Lord Keyneshttps://www.blogger.com/profile/06556863604205200159noreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-88109466301702673382011-01-28T17:32:33.049-08:002011-01-28T17:32:33.049-08:00"I repeat : price-wage flexibility will immed...<i>"I repeat : price-wage flexibility will immediately clear the market."</i><br /><br />In the real world, wages <b>are not flexible</b>.<br /><br />This problem of wage "stickiness" is a well known one in modern economics. People in general object to having their nominal wages cut. Even <i>managers</i> often dislike across-the-board pay cuts. Recent studies suggest that employers actually avoid pay cuts because they diminish workers’ morale, and then the falling morale reduces productivity.<br /><br />See T. F. Bewley, 1999. Why Wages Don’t Fall During a Recession, Harvard University Press, Cambridge, MA.Lord Keyneshttps://www.blogger.com/profile/06556863604205200159noreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-10153844134391780402011-01-28T06:53:02.713-08:002011-01-28T06:53:02.713-08:00Lord Keynes,
Thank for the post.
"The crucia...Lord Keynes,<br />Thank for the post.<br /><br />"The crucial factors ignored by Austrians in regard to the 1929–1933 collapse are the unstable nature of poorly regulated financial markets, the deflation of an asset bubble fuelled by excessive debt, and debt deflationary collapse."<br /><br />I repeat : price-wage flexibility will immediately clear the market. Let the government stabilize actual wage rate and unemployment will automatically rise, increasing uncertainty. <br />You say : financial markets are naturally unstable. Guess what : if you buy more and more assets, commodity prices will go down, and people readjust their spendings. They buy less assets and more commodities.<br />So... why commodity prices don't fall ? Because of money creation (and keynesians).<br />I would suggest you read this article :<br />http://mises.org/daily/3517MHhttps://www.blogger.com/profile/10656881172906444719noreply@blogger.com