tag:blogger.com,1999:blog-6245381193993153721.post5003446848503386548..comments2024-03-28T17:08:15.784-07:00Comments on Social Democracy for the 21st Century: A Realist Alternative to the Modern Left: The Profit Deflation of the 1890sLord Keyneshttp://www.blogger.com/profile/06556863604205200159noreply@blogger.comBlogger18125tag:blogger.com,1999:blog-6245381193993153721.post-45269243232598503832013-06-15T06:54:28.696-07:002013-06-15T06:54:28.696-07:00"Post Keynesianism obviously doesn't deny..."Post Keynesianism obviously doesn't deny that, empirically, as you approach full employment it is likely inflation will increase."<br /><br />Depends how you define 'full employment'.<br /><br />You can bring economic expansion to a halt well ahead of any significant supply side tightening, and as long as you have something for everybody unengaged in that expansion to do then you have 'full employment'. <br /><br />The solution to the inflation brought about by the Phillips curve is "don't push it that far then".<br /><br />NeilWhttps://www.blogger.com/profile/11565959939525324309noreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-46253314682878078602013-06-15T01:56:45.602-07:002013-06-15T01:56:45.602-07:00Post Keynesianism obviously doesn't deny that,...Post Keynesianism obviously doesn't deny that, empirically, as you approach full employment it is likely inflation will increase.<br /><br />But the Phillips curve is rejected in Post Keynesianism as too simplistic, partly because of the widespread existence of fixprice/administered price markets.Lord Keyneshttps://www.blogger.com/profile/06556863604205200159noreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-45860469029783713052013-06-14T13:05:54.873-07:002013-06-14T13:05:54.873-07:00Thanks for the clarification. What's the post ...Thanks for the clarification. What's the post Keynesian view on the Phillips Curve?Tomhttp://www.creditcapitaladvisory.comnoreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-22662773402438751932013-06-14T12:08:58.631-07:002013-06-14T12:08:58.631-07:00"new capital issues averaged £102 million dur..."new capital issues averaged £102 million during 1880–89 and £154 million during 1889-90 but fell to an average level of £70 million during 1891–96."<br /><br />The main driver behind the drop off in capital issues from 1890 was due to the collapse of Barings because of their exposure to Argentina. It had severe knock on effect in the London market for the first part of the 90s. You might want to take a closer look at this effect.<br />Tomhttp://www.creditcapitaladvisory.comnoreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-88307830096723623132013-06-14T08:32:08.859-07:002013-06-14T08:32:08.859-07:00Rob,
There is no such thing as society (c). Well,...Rob,<br /><br />There is no such thing as society (c). Well, maybe there is, but I think that evaluating some outcome as 'good' for an abstract entity puts us on a treacherous ground. If most are better off when some are worse off as a result of productivity increase, then how you balance their interests is a question of ethics (and politics). It's probably not a problem to produce a lot more stuff even with higher levels of unemployment, or with most of the population living in increasingly miserable living conditions, but it is usually recognized by the social consensus that some basic rights of population must be prioritized over just producing more.<br /><br />The question is, why adhere to such monetary theory? Though, again, it all depends on definitions: since recessions happen basically because agents don't have enough money on their hands, giving them more will in some sense solve their main problem. But that's not what orthodox economical theory usually means by 'increasing money supply'. It's either doing some open market operations to increase bank reserves (for those who believe in money multiplier) or setting an interbank interest rate (endogenous money). But even creating the best conditions for the banking system is not very helpful, as we could see now: even with a lot of excess reserves and interest rates basically at zero AD is still depressed in a lot of countries. I think it is pretty obvious that even setting some optimal monetary regime is not sufficient for quickly correcting market discoordinations. If somebody is unemployed and in debt, what good does him do a 0% interbank interest rate? Roman P.https://www.blogger.com/profile/17384153967221979673noreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-12800518131187994542013-06-14T06:35:10.659-07:002013-06-14T06:35:10.659-07:00"Productivity growth leading to lower prices ..."Productivity growth leading to lower prices will make some agents better off - but also some agent worth off," <br /><br />I agree with this, though for society as a while surely being able to produce more output with the same inputs has got to be good, right ? <br /><br />Monetary theory does indeed claim that if the money supply can be adjusted appropriately then the effects of AD shocks (such as you envisage following an improvement on the supply side) can be minimized and full employment maintainedRob Rawlingsnoreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-61144804816158171552013-06-14T02:52:50.898-07:002013-06-14T02:52:50.898-07:00Rob,
Assuming you replied to me - yes, I envisage...Rob,<br /><br />Assuming you replied to me - yes, I envisage something like this. But my point is not that productivity increases are potentially dangerous(they could be), my point is that things that happen on the micro-level could not be independent of what happens on the larger scale, so 'good' and 'bad' effects of deflation (or, conversely, inflation) are, in effect, inseparable. <br /><br />Productivity growth leading to lower prices will make some agents better off - but also some agent worth off, as shown by JN Keynes. No monetary regime could alter this situation quickly enough for AD or employment to remain unaffected. Roman P.https://www.blogger.com/profile/17384153967221979673noreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-150514668528801732013-06-14T01:49:45.599-07:002013-06-14T01:49:45.599-07:00Since I support trade unions and rises in wages in...Since I support trade unions and rises in wages in line with productivity growth, with income policy, I do not see a problem.<br /><br />I am not sure if you are clear on this, but I advocate non-neoclassical, Post Keynesian economics:<br /><br />https://en.wikipedia.org/wiki/Post-Keynesian_economics<br />Lord Keyneshttps://www.blogger.com/profile/06556863604205200159noreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-42550496748562751182013-06-14T01:23:50.290-07:002013-06-14T01:23:50.290-07:00That would be ideal, but you are assuming that hig...That would be ideal, but you are assuming that higher profits necessarily leads to higher real wages. The data does not support this view (Gavyn Davies piece) which shows higher profits leading to increasingly unequal income distribution because lower income workers have not been able to benefit from rising productivity growth. The reality is that nominal wage levels are not determined in a closed economy. tomhttp://www.creditcapitaladvisory.comnoreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-46352619076923945892013-06-14T01:13:40.191-07:002013-06-14T01:13:40.191-07:00Why can't it be both at the same time?
And on...Why can't it be both at the same time?<br /><br />And one effect -- depressed business investment -- also hurt workers by causing higher unemployment?<br /><br />The solution was avoiding deflation.Lord Keyneshttps://www.blogger.com/profile/06556863604205200159noreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-43812032772472109062013-06-14T00:47:11.250-07:002013-06-14T00:47:11.250-07:00"British money wages, however, actually rose ..."British money wages, however, actually rose by several percentage points, so the rise in real wages was striking."<br /><br />I can't work out from your piece whether you think this is a good thing because it makes workers wealthier so they spend more increasing aggregate demand or a bad thing because it decreases profits and hence investment. Tomhttp://www.creditcapitaladvisory.comnoreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-67860713461628210882013-06-13T16:37:19.121-07:002013-06-13T16:37:19.121-07:00"(e) because the fall in prices increased the..."(e) because the fall in prices increased the burden of debt, transferring wealth from borrowers to lenders."<br /><br />There in no obvious reason why this would decrease AD, and even if it did an appropriate monetary regime would adjust the money supply to prevent it having adverse effects.Rob Rawlingsnoreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-45995060080653383922013-06-13T13:26:20.359-07:002013-06-13T13:26:20.359-07:00So your envisaging something like a productivity i...So your envisaging something like a productivity increase for a good whose demand is relatively inelastic leading to less workers being employed in that industry - leading to some sort of AD shock ?<br /><br />I guess that's possible (though empirical evidence does not show much correlation between high productivity growth and high unemployment). But remember even if that was the case then an appropriate monetary regime would always allow AD and employment to remain at the optimum level.Rob Rawlingsnoreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-59754592779161769252013-06-13T13:20:49.994-07:002013-06-13T13:20:49.994-07:00Rob,
Changes in prices (and costs) do not affect ...Rob,<br /><br />Changes in prices (and costs) do not affect the society homogeneously, so it may be difficult to separate the 'good' and 'bad' deflation. It is never the case that all humans suddenly become more productive at the same type. For example, what for a factory might be a boon (lower costs of labor leading to the lower price of product allowing to expand market share) for the trader might be ruinous if he expected to sell at high price. <br /><br />If, for example, the owner of factory lays off half of his workers due to their improved productivity, then it is certain that while searching for a job those workers will have greatly reduced effective demand (sans government transfers) for some indeterminate time. Even if factory owner is better off and workers are able to find work quickly, that simply must affect macroeconomical situation to some extent. <br /><br />I don't even think that this is an anti-Austrian idea - especially since Austrian economics always considered heterogeneity of agents and capital and distortions in price systems to be very important. Roman P.https://www.blogger.com/profile/17384153967221979673noreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-45947617356837466732013-06-13T11:51:01.814-07:002013-06-13T11:51:01.814-07:00"I don't see how this could be he case if...<i>"I don't see how this could be he case if the fall in price was due to productivity improvements. In this case the supplier chooses to lower prices as a result of lower costs."</i><br /><br />So "good deflation" is being defined as any price reduction from productivity growth that does not cause reduced income or profit?<br /><br />Yet presumably many types of productivity growth will result in more unemployment and worker income, which is likely to induce a fall in AD.Lord Keyneshttps://www.blogger.com/profile/06556863604205200159noreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-32376478642768288032013-06-13T11:26:56.444-07:002013-06-13T11:26:56.444-07:00Its entirely possible for nominal incomes, both co...Its entirely possible for nominal incomes, both corporate and worker, to remain steady or even increase, with a general fall in prices, with businesses making it up on increased volume and productivity. <br /><br />Of course this didn't happen during the 1890's because of the gold standard, a suboptimal monetary system if there ever was one.<br /><br />NGDPLT (Nominal Gross Domestic Product Level Targeting) allows for good deflation while eliminating or at least minimizing the badEdwardnoreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-69779354419622671072013-06-13T11:21:40.058-07:002013-06-13T11:21:40.058-07:00Rob Rawlings.
Agreed.
A decline in investment s...Rob Rawlings. <br /><br />Agreed.<br /><br />A decline in investment spending is by definition a decline in MV because NGDP (which is a rough proxy) consists of C+I+G+NX<br /><br />Any decline in nominal INCOMES, which include worker and corporate, means demand induced or bad deflation Edwardnoreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-8234947826423084322013-06-13T11:01:55.515-07:002013-06-13T11:01:55.515-07:00"(a) because a fall in price between the star..."(a) because a fall in price between the start and the completion of a transaction involved the trader in loss;"<br /><br />I don't see how this could be he case if the fall in price was due to productivity improvements. In this case the supplier chooses to lower prices as a result of lower costs. Other (less productive) suppliers may experience what you describe but their losses would be offset by others gains so this could not be a general phenomenon.<br /><br />What is being described is more consistent with a fall in AD related to changes in money demand (bad deflation in Selgin's model)<br />Rob Rawlingsnoreply@blogger.com