tag:blogger.com,1999:blog-6245381193993153721.post7431592132516943180..comments2024-03-17T00:23:24.896-07:00Comments on Social Democracy for the 21st Century: A Realist Alternative to the Modern Left: Keynes on Deflation and Liquidity Preference in “The Consequences to the Banks of the Collapse of Money Values” (1931)Lord Keyneshttp://www.blogger.com/profile/06556863604205200159noreply@blogger.comBlogger7125tag:blogger.com,1999:blog-6245381193993153721.post-59806463173913959842014-09-22T09:32:27.869-07:002014-09-22T09:32:27.869-07:00Well, the flexible price and wage system is the ma...Well, the flexible price and wage system <i>is</i> the major and most important mechanism in their theory, just as it is in the more extreme forms of neoclassical theory, yes.<br /><br />However, I suppose when pressed, the Austrians will claim that their system can also take account of minor exceptions here and there, e.g., maybe some few firms in a recession might decide to give away their excess stock for free, instead of slashing prices to clear markets, and cut production and equate supply with demand that way, and so on. <br /><br />But you're right that the latter minor exceptions cannot be the widespread and normal way markets are supposed to work under their theory.<br /><br />And none of this changes the fact that a flexible price and wage system just does not provide an effective system for recovering from recessions or for eliminating involuntary unemployment, for reasons explained by Keynes and modern Post Keynesians.Lord Keyneshttps://www.blogger.com/profile/06556863604205200159noreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-28917953860108905472014-09-22T09:09:43.986-07:002014-09-22T09:09:43.986-07:00LK,
in your comment over at Murphy's you wrot...LK,<br /> in your comment over at Murphy's you wrote:<br /><br />"Does the Austrian theory of how economic coordination is achieved in both ideal free market systems and how it should be achieved in modern hampered market systems involve a great emphasis on a flexible price and wage system, in which prices and wages have a tendency to be adjusted towards market clearing levels, even if the whole system never reaches Mises’ final state of rest?"<br /><br />How else is economic coordination supposed to be achieved within the Austrian theory if not through flexible prices?Philippenoreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-35040259152236449192014-09-21T21:50:02.845-07:002014-09-21T21:50:02.845-07:00A better solution is regulation of banks and cutti...A better solution is regulation of banks and cutting down or stopping the flow of credit to reckless asset speculators.Lord Keyneshttps://www.blogger.com/profile/06556863604205200159noreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-15390172614368615162014-09-21T21:22:49.157-07:002014-09-21T21:22:49.157-07:00Roddis was banned from Mike Norman's site abou...Roddis was banned from Mike Norman's site about six month's ago. Not a "privilege" granted to anyone else on that site, far as I know. Ralph Musgravehttps://www.blogger.com/profile/09443857766263185665noreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-60242775733890556142014-09-21T21:08:25.167-07:002014-09-21T21:08:25.167-07:00Lord Keynes’s above article boils down to saying i...Lord Keynes’s above article boils down to saying it’s not a brilliant idea to allow institutions called “banks” which have liabilities that are more or less FIXED IN VALUE and assets that can FALL IN VALUE. Quite right.<br /><br />The TYPE OF fall in value that LK deals with is deflation. But of course there is another potential cause of “falling values”, namely silly loans, e.g. NINJA mortgages, which suddenly turn out to be worth less than their book value. <br /><br />A solution to the above falling value problem is full reserve banking. Under full reserve, banks or other entities which lend must be funded just by shares. In that case, when assets fall in value, it doesn’t matter too much: all that happens is that the shares fall in value. The lending entitiy / bank cannot go insolvent and cause credit crunches, etc.<br />Ralph Musgravehttps://www.blogger.com/profile/09443857766263185665noreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-30347903673928420692014-09-21T12:57:33.050-07:002014-09-21T12:57:33.050-07:00Agreed. And Roddis does not udnerstand basic Austr...Agreed. And Roddis does not udnerstand basic Austrian theories. Lord Keyneshttps://www.blogger.com/profile/06556863604205200159noreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-79443614408526849842014-09-21T12:28:00.633-07:002014-09-21T12:28:00.633-07:00It's obvious from the comments over at Bob Mur...It's obvious from the comments over at Bob Murphy's blog that MF and Bob-a-job are both just engaging in circular reasoning and political rhetoric, sprinkled with a bit of economicky-sounding language, rather than any form of actual economics.<br /><br />According to those buffoons:<br /><br />1. 'undistorted' prices are <i>whatever</i> prices occur in a "free market". <br /><br />2. a "free market" means the imaginary land of ancapistan. <br /><br />3. therefore any government action that has any effect on prices is a 'distortion', by definition.<br /><br />Simple and stupid.Philippenoreply@blogger.com