Regulars may have noticed that I have gone relative quiet recently. It is true! The reason is that I am struggling to put the finishing touches on an academic book entitled ECONOMIC INDETERMINACY: A personal encounter with the economists’ most peculiar nemesis (to be published by the good people of Routledge). As I have well and truly exhausted my (most-understanding) publisher’s patience, I thought I should leave the Crisis alone for a few weeks and concentrate on finishing the damned book. I think that I can now safely say that it will be dispatched to London before this weekend’s expiry. Meanwhile, in case anyone is interested, here is the table of contents and the (very personal) Preface.
Table of contents
PREFACE
1. INTRODUCTION: Economic Indeterminacy and The Dance of the Meta-axioms
2. UNITY IS STRENGTH (It is also the cause of indeterminate wage and employment targets)
3. RATIONAL CONFLICT (On the impossibility of a determinate theory of costly disagreement)
4. NO BLUFFS PLEASE, WE ARE ECONOMISTS (Why bluffs and other subversive acts preclude determinate game theoretical analyses)
5. BARGAINING BY RULES OF THUMB (When strategic indeterminacy forces the rational negotiator to fall back on myopic rules of thumb)
6. MARXISTS AND THE SIRENS’ SONG (When disgruntled Marxists reach for game theory’s toolbox they get more than they bargained for)
7. A THEORY OF SOLIDARITY (Why indeterminacy is a prerequisite for genuine solidarity)
8. ON THE POWER OF WHAT OTHERS THINK (How indeterminacy takes over when our preferences are influenced directly by other people’s beliefs)
9. THE SOCIAL FOUNDATIONS OF CORRUPTION (On the indeterminate power of what others think)
10. EVOLVING MORALS IN THE LABORATORY (The roots of distributional justice principles in indeterminacy)
11. EVOLVING DOMINATION IN THE LABORATORY (The spontaneous creation of hierarchies and the patterned beliefs that support them)
12. ON THE DISTINCTION BETWEEN EVOLUTION AND HISTORY (The impossibility of modelling behavioural mutations amongst political animals)
13. CONCLUSION: Dealing with indeterminacy on the stage of social life
PREFACE
This is a book about failure and power.
Most of us were raised to imagine that power stems from success, not failure. It thus seems odd to be focusing on failure and power, especially when suggesting, as this book strongly does, that massive failure has been the cause of spectacular success. Yet, the world we live in has made possible this sad, odd causality which stands Charles Darwin on his head.
The reader is, at this point, excused to think that the alluded power-through-failure phenomenon refers to the post-2008 spectacle of tremendous taxpayer-funded rewards for the deeply insolvent bankers. While this is not my book’s theme, the association is not baseless. For just as the financial sector’s implosion yielded its custodians, the bankers, gargantuan rewards (in terms of bailout funding but also of political influence), so too the theoretical failure of mainstream economics has helped solidify and propagate the dominance of these same economists in academia and in the corridors of power.
In this sense, the theme of the present book is very much in tune with our post-2008 age. Yet its origins go back to the 1980s when, as a young, green-behind-the-ears economist, I attempted to build a research program on several attempts to civilise mainstream economic models that had arrested my attention. It all began at a time when the takeover of economics by a particularly narrow economic method (which I, and many others, refer to as ‘neoclassical’) had been completed. Those of us who were coming through the academic production line in the UK of the early Thatcher years faced a stark choice: Either work within the neoclassical mindset or seek alternative careers. It was that simple.
Determined to master the discipline which in our times represents the highest form of ideology, I was reluctant to abandon economics just because its assumptions and models seemed problematic, if not downright barbaric. In view of the profession’s intolerance of any challenge to its neoclassical method, I decided I would attempt two things: To investigate the logical coherence of the received models (i.e. to see if their results were truly consistent with their own assumptions) and to explore ways and means of ‘civilising’ these models (by relaxing some of their more obnoxious assumptions).
Thus emerged a research project that lasted thirty odd years. Its aim was to add to mainstream models dimensions (in the form of carefully selected equations) that humanise them and, generally, to experiment with their capacity to embrace parts of the social dimension of life that economics had hitherto not even tried to reach. Each of the chapters that follow (after the first, introductory, chapter) revolves around one of these models, telling a story of some attempt to infuse them with a degree of realism, and internal logic, that they lacked.
In retrospect, the research program which I embarked upon in the early 1980s, and whose models populate the rest of this book, resembled… invading Russia: a brisk and enthusiastic start, followed by a slowdown as General Winter mounted his hideous counter-attack, ending up with exhaustion, disappointment and metaphorical blood on the snow. Less allegorically, my initial tampering with my new profession’s models was met with distinct approval, from professors and editors alike, and job offers that allowed me to claim a place on the academic ladder as a bona fide economist. However, from a very early stage, I realised that the profession’s welcoming arms would be quickly withdrawn the moment one’s model-tampering yielded indeterminacy.
Put simply, while the profession was more than happy to allow newcomers to toy with their assumptions (as the method remained fully neoclassical), it was adamant that models should be ‘closed’ come-what-may; that our equations should procure a narrow range of ‘solutions’ even if the only way of achieving such ‘closure’ was to abandon the project of civilising the theory. As far as the economics profession was concerned, logical incoherence and a deep chasm between the models and really-existing capitalism were infinitely preferable to an admission that the models were indeterminate.
At first, my peers’ profoundly anti-scientific attitude disturbed me no end. Until, that is, it all started making sense in a broader political economics context. To begin with, I noticed an interesting paradox develop from the time I was an undergraduate in the late 1970s: the more dominant economics was becoming within academic social science the more students were being turned off economics. Instead of magnetising the young, courtesy of its indubitable discursive success, economics was putting them off.
And it was not just students. Economists of renown were lambasting their discipline’s irrelevance and theoretical feebleness. Nevertheless, and there is the rub, the greater the mainstream economists’ theoretical failure the stronger their dominance everywhere. How come? A major clue to this puzzle came in the form of the observation that these same models, precisely because they turned a blind eye to the indeterminacy that oozed out of them, were also the models underpinning the financial derivatives that the financial sector was beginning to invent at that time (which it soon flooded the world of finance with), as well as the neoliberal doctrines which were used as a pretext for engineering the most regressive income redistribution in the history of capitalism.
Faced with this disturbing, but also deliciously ironic, reality I chose to tread a thorny path: I would continue to tamper with the mainstream models’ assumptions, in a bid to explore their explanatory potential to the full. At the same time, I would expose the logical contradictions of the models that my profession deemed beyond analytical reproach. And, lastly, I would attempt to provide an explanation of the manner in which neoclassical economics was building impressive discursive power on a foundation of large-scale theoretical failures.
Naturally, my project’s failure was predetermined, at least in the sense that it was never going to cause a shift in the attitudes and demeanour of a profession which operates like a priesthood, dedicated solely to the preservation of its dogmas (which I call meta-axioms in Chapter 1) as well as to the recapitulation of its authority within the universities, the financial sector and government. Indeed, at no point did I harbour any significant hope that this priesthood would take kindly to the demons of doubt and indeterminacy which my work was bound to give rise to. But it did not matter, at least not at a personal level. My intimate familiarity with the neoclassical models was sufficient to keep me on the roster of neoclassical economics departments were a capacity to teach these models, and produce academic papers based on them, is all that matters.
Looking back at these long years of tampering with, and delving into, the complex models of the neoclassical tradition, I cannot but interrogate my decision to keep pushing, Sisyphus-like, the theoretical rock up the neoclassical hill. Why did I stick to this task, when I knew it would end up in failure? In retrospect, there were two reasons, neither of which was predicated upon any hope of influencing a profession utterly uninterested in the truth-status of its models. First, I deeply enjoyed toying with these models as an end-in-itself, just as a clockmaker enjoys taking apart and then re-assembling some old clock for the hell of it. Secondly, and more importantly, I felt it necessary and important to make it hard for my colleagues to pretend to themselves that the models they were being forced to work with, by a particularly authoritarian profession, were logically coherent. Bringing them, even fleetingly, to the point when they had to confess to their models’ internal contradictions was, I felt, a victory of sorts; the equivalent of a lone sniper behind enemy lines making life difficult for an army of occupation.
At the end of the day, I now realise that failure is indeed packed with power, not just for bankers and the economics profession but for us mere mortals too. Chapters 2 to 11, in effect, explore theoretical failures. Indeed, while working on these models I often caught myself at the intersection of many failures: mathematical, philosophical, conceptual. However, coming to terms with these failures was essential in understanding the irrationality of the world we live in. For these failures are not the result of substandard skills or erroneous manipulations but, rather, a mere reflection of the dead-end forced upon us by an ideologically driven pseudo-science whose power comes from successfully hiding, as opposed to revealing, the true nature of our social, political and economic relations.
Acknowledgments
The story of how neoclassical economics profits from its failure to deal with complexity, with radical indeterminacy beckoning at each and every turn, was told fully in a recent book co-authored by myself, Joseph Halevi and Nicholas Theocarakis (Modern Political Economics: Making sense of the post-2008 world, also published by Routledge in 2011). It is, therefore, incumbent upon me to begin by thanking Joseph and Nicholas for having helped in creating the context which the present book builds upon. Indeed, the book you are now holding can be seen as a natural addendum to Modern Political Economics, as the following chapters demonstrate, one by one, the manner in which neoclassical economics turns failure into power once all attempts to civilise its models yield radical, irrepressible indeterminacy (an adage that our joint book foreshadowed; see its Chapters 9 and 10 in particular). Christian Arnsperger, another friend and colleague, has been responsible for the impetus behind Chapter 1, as well as being the co-author of a paper on which Chapter 7 is based. Shaun Hargreaves-Heap played a major part in joint work on which I have based Chapters 8 and 11. Lastly, I must thank the good people at Routledge, Simon Holt and Robert Langham in particular, for bearing with me during long delays in the production of this manuscript, which I blame on the European Crisis that has kept me ‘otherwise engaged’ for too long.
Yanis I am somewhat confident that you will address this in your work. Could hidden failure be used as a means of control as that seems to be the purpose of modeling in the “real world”. Logic itself seems a standin or shortcut for amputation(I read about this in understanding Media by M Mcluhan) as a social amputation cutting off the flow of circulation to isolate and work with phenomena as in economic theory not as an ends but as a means to power. This means that the finacial derivatives are like talismans given power by these social amputations (“economic theory”) or more generally “beliefs” themselves. I just read about edison taking failure as a cue for success of a sort isolating 9999 failures from one success for the light bulb. I’m not applauding this “groping in the dark method” of inovation just trying to understand it.
Regards
Futurist Positive
Bravo Yani.
http://www.iefimerida.gr/news/89099/%CE%B2%CE%B1%CF%81%CE%BF%CF%85%CF%86%CE%AC%CE%BA%CE%B7%CF%82-%CF%83%CF%84%CE%BF-iefimeridagr-%CE%B5%CE%AF%CE%BC%CE%B1%CE%B9-%CE%B1%CF%80%CE%B1%CE%B9%CF%83%CE%B9%CF%8C%CE%B4%CE%BF%CE%BE%CE%BF%CF%82-%CE%B3%CE%B9%CE%B1-%CF%84%CE%B7%CE%BD-%CF%80%CE%BF%CF%81%CE%B5%CE%AF%CE%B1-%CF%84%CE%B7%CF%82-%CE%B5%CE%BB%CE%BB%CE%AC%CE%B4%CE%B1%CF%82-%CF%84%CE%B1-%CF%87%CE%B5%CE%B9%CF%81%CF%8C%CF%84%CE%B5%CF%81%CE%B1-%CE%AD%CF%81
As another “regular” I will use my (at least a bit^^) more knowledge about economical matters to read the new book too.
Meanwhile from the Eurozone-problems Yanis teaches us so much about – a little link to a heart-warming spanish video, a kind of message to the german people not to follow the german right-wing-government (in fact all german parties like green, neolibs, christ-democrats and the still so-called “social-democrats”, who are in a kind of bizarre process to make themselves unnecessary).
For spanish and german-speaking people, but a kind soul in the comments translated into english. Not a mind-breaking new economical theory, but an outcry that could well be supported.
OMG the poor Spanish people… Welcome to reality!
Yanis, no offence, but…
“Those who can read it, and who cannot read the English version, can be counted by the fingers of one hand;” Really…? Maybe so; if that is the case however, then this is the problem, and it’s a big one, for sure. In my view, it is your duty to go public, in Greek that is, as a Greek influential academic. Say no resources are available, I suppose many people could offer their assistance in translating and it would thus go on-air, on-line, whatever… for free. Hell, I am a native speaker in both languages and would be thrilled to help; I imagine several others might volunteer as well, which I suppose nowadays is common practise. Which brings me on to what I am about to say…
Is this “music for musicians” only? Rhetoric… I mean, who would dare suggest that Franz Liszt is brilliant and Schumann is not, just cause of the increased technical difficulty in performing! Another case: Arturo Sandoval Vs Miles; only this time it’s jazz, and Sandoval is Latin, Cuban. Which brings me on to another issue…
No doubt, research is invaluable, for reasons not limited to the fact that it merely sharpens our reflexes. Plus, for what it’s worth, I don’t think most “neoclassicals” would pass the “Ockham’s razor”, however… I would truly appreciate, to say the least, I would long for a certain something that would actually construct a fiery argument rather than oppose to an existing one only. Don’t get me wrong, I would not fall head over heels for “novelty” just for the grace of its name. I suppose it takes more than just a pretty face… Alas, worst case scenario, personally speaking: I would stick to earning a living, or at least try to, pursuing modern corporate solvency; then again, this is just me, not being identified neither as the general, nor as a captain.
By the way, I think you dominated Max Keiser, of whom I don’t think much highly in any case. Silver-drachma… Really? Please; this is the world 2013, not the middle ages with a couple of feudal lords claiming royalties they haven’t paid for as war-stakes to get fought over in the meantime.
Your thoughts…
Alex Dimitrakopoulos
PS: I would call as “indeterminacy” the mere failure to acknowledge the very nature of assumption making, per se, while modelling. I suppose in my line of business this is often exhibited as “y-o-y growth”, taken for granted.
As a classically trained pianist, I really cannot say whether Liszt or Schumann presents the greater technical difficulties; arguably it is Schumann, but still… I don’t get the analogy anyway.
Yanis is right: a serious and accurate translation of a major text takes 1-2 years, unless you have a professional team of experienced translators who are being paid a fortune. I once had to translate a shortish edited book into French, because the journal publjshing it was in French. They paid their expert translators to do this (which took about 4-5 months), and the result was not very good. I had to go through every single phrase with a colleague who has near-native French to correct the serious errors as well as fine-tune the subtleties of language to make sense to informed readers. Translation is a big effort, and when almost everyone with a decent education can read English, the only point is a nationalistic one (or making the book into a popular seller).
By the way, although English is my native language, I am not that happy that it has become the global language — or at least a bowdlerised version of it. This is simply a fact…
How could I possibly reply to a reply? I don’t even know if this will be placed below in the right section. Anyhow…
Dear Guest,
I suppose I couldn’t argue with you; a translation presents significant difficulties and is a task to be taken seriously, indeed. The point I wished to make here is that not only is Yanis born Greek -and thus a native speaker- he also teaches political economy at the University of Athens. Let me stress this a bit and elaborate. How many Greeks do you think are there with Yanis’ background (and brains may I humbly add, though risking here a bit, thinking of a potential expurgation)? Explicitly put: not many! Actually, very few. How big a problem is this? It is huge, trust me, and I suppose I do want to stress this!
Though I am not myself, as it seems, an aspiring motivational speaker, my remark here aims to motivate, solely. If not Yanis, then who else, please, shall bear “my” trust upon his shoulders, to educate hordes of youngsters seeking to navigate their way in and out of the Greek, European, and somehow global financial crisis? See, in my view Yanis is not a “Greek export” but really a “product to import”. For what it’s worth, this is not about making a nationalistic comment, nor is it about suggesting a fancy idea to capitalize from by striking a popular seller. It pertains to the very “responsibility”, dear guest; something not to be taken lightly; that and the translation issues of course.
After all, quoting the “popular” Katerina Moutsatsos, most Greeks do speak several foreign languages, indeed; predominately English, or at least a bowdlerized version of it, as you elegantly put it… What I am trying to suggest here is that the problem is what they actually read, in Greek or English.
That said… I would just love a comment on the silver drachma! Plus, of course, an understatement on the “indeterminacy” of y-o-y growth on most financial projections; brutally put… maybe so. Yet it cannot escape me, that this is one of the reasons we monetize debt nowadays in a frenzy manner. What else could we do though…? I wonder.
Alex Dimitrakopoulos
PS: Strictly a formality, still, signing with a real name would in my opinion be more appropriate, or else one shall identify him/herself as a “xenos” indeed.
What about the silver drachma? I have one. A couple of years ago, I was offered (and I declined) a hundred dollars for it. Of course this silver drachma is dated to at least three centuries before the birth of Christ
PS: Alex, if you’ve followed xenos’ postings here as closely as I have (because I enjoy reading them), you should have a pretty good idea as to who he is if you search online for his published work — on occasion mentioned by him here — online. I respect his privacy, but I will give you a hint: he is a man.
Dear Alex, I take your point. I must apologise, since I had not meant to attribute nationalism as your motive. Indeed, I agree with your sentiments. But personally I have given up this idea of educating Greek students (as, it seems, has Yanis) owing to the disgusting behaviour of mainstream Greek academia. Not only are most Greek university professors incompetent and vain-glorious, they work very hard not on research or teaching quality, but on actively blocking talented people. You have only to look at the tiny number of weak publications that most possess, to realise that the standards are non-existent. Patronage and corruption are the criteria.
I no longer sign my name on any internet discussion site. After some very nasty experiences, personal threats, emails to my Greek university demanding my dismissal (from my own research centre!) and being listed on Chryssi Avgi websites as a “foreign professor who should be deported from Greece”, and also with personal attacks on me on a Greek website targeting politicians (I appeared on a page with Alogoskoufis), I will not ever put my name again. Greek people do not respect honesty, scientific standards or accountability: in such a context, you either conform to the prevailing party political corruption (who will then protect you) or you are a misfit foolishly trying to do serious research in Greece.
Guest (xenos),
The problem you describe with regard to academic hostility is not a “Greek” problem, it is the same, (with admitted variation), throughout the world of science. It is a function of a combination of government funding and feudalism. In a feudal system, those with access to power and thus funding will do anything to retain their access. They have arrived, not through being fully creative and successful as thinkers; instead, they arrived from being given access; which in turn again, comes from not being someone that will rock the boat of everyone else within the system.
The longer a feudal system is left in place to breed that “insider” mindset, the worse the effects become. In the end, as you so well describe, all outside thinking is repelled with vigour and you have no option but to walk away; which, again, is exactly what those inside want.
The really sad part is that, traditionally, the only way out is through revolution, when many of us, (I can only truthfully speak for myself), will not have anything to do with any form of violence.
All we can do is keep on bringing the subject into open discussion; while all the time doing everything we can to encourage the young people coming in to reject the siren call of a feudal system that traps you inside a thoughtless mindset that has no true spirit of innovation.
@Chris: I have worked in and with universities in quite a few European countries. Although I accept your structural argument about access (and have collected damning evidence about corrupt practices in Sweden and Denmark, for example), the problem in Greece is far worse. This is primarily because of the role of party politics in Greek universities, allied with clientelism and patronage at more personal levels. The result is that the standards are so low, that really it is a joke. Full professors with no publications, more or less (and low IQ to boot); self-publishing of books that nobody reads because they are crap, but the students are forced to read them; wholesale copyright theft, such as translating an American text into Greek and passing it off as your own book… This is the Third World level of corruption that I am describing in Greek universities.
Of course, there are many exceptions. I have worked with such, and count them as friends. However, my former colleague Thanos Veremis told me when he was Chair of the Education Reform Committee that their view was that a mere 1% of Greek university teachers are of international quality, and only 10% of an acceptable standard. That implies (he dared not say it) that 90% of the professors are unfit to be in a university. You can understand that the Greek fake academics made sure he was kicked out and no reforms will ever be made here.
… a mere 1% of Greek university teachers are of international quality …
Correction, xenos — with Varoufakis gone, it should read “less than 1% of Greek university teachers are of international quality.”
Dear Yianni,
I am very delighted to hear about your book release next week. Rest assured that i will be one of the very first people to read it.
While taking my Bachelor Degree in Speech and Language Therapy, i’m studying journalism and i also like Economics. I strongly believe that my co-journalism friends will appreciate your book as well.
On the end of every semester, we present an Interview with a Figure of our own choice. It would be an honor for me, to take a personal interview from you on a personal level without the usage of cameras etc.
If you believe that this is a thing-can-do please let me know and i will be at your disposal as soon as you tell me.
Your Fan
John Hadjianestis
Sure. But I am in Austin, Texas!
Looking forward to it. Any chance for a Greek version?
Not really. It would take two years to translate properly. And those who would read it, and who cannot read the English version, can be counted by the fingers of one hand!
Yanis,
I am looking forward especially to Chapter 7. The great contribution of the Austrian School was their emphasis on indeterminacy. They felt this fully justified their dogma that only a “free market” could accommodate that indeterminacy. The fact that there have never been nor never will be “free” markets was the unpleasant fact that they ignored. The exchange of papers between von Mises and Karl Polanyi in the “Socialist Accounting” debates in the 1920s would be an interesting backdrop for a discussion of indeterminacy and solidarity. Polanyi goes unmentioned in MPE or TGM. I wonder if he will make it into this new book.
Another perspective on this comes from the poet Paul Valery. A series of his talks and papers from the 1920s to the 1940s is published Iin English translation) in the Bollingen Series XLV, The Collected Works of Paul Valery. There is talk from 1944 titled “Unpredictability” in which he says, “Since, henceforth, we must deal with the new, of the irreducible type I have mentioned, our future is endowed with essential unpredictability, and this is the only prediction we can make.” There is a very ironical piece from 1897 on “A Conquest by Method” which is an interesting preview of what was to come in Germany (and America).
Another favorite quote from Valery comes at the end of the essay “The Crisis of the Mind” from 1919 (!), “A drop of wine falling into water barely colors it, and tends to disappear after showing as a pink cloud. That is a physical fact. But suppose now that some time after it has vanished, gone back to limpidity, we should see, here and there in our glass – which seemed once more to hold pure water – drops of wine forming, dark and pure – what a surprise! . . . This phenomena is not impossible in intellectual and social physics. We then speak of genius, and contrast it with diffusion.”
Best wishes on seeing this through to publication. Looks like a great start. I am sure it will be a work of genius.
Randal
The referenced talks are from Volume 10 of Valery’s Collected Works, titled History and Politics.
“For these failures are not the result of substandard skills or erroneous manipulations but, rather, a mere reflection of the dead-end forced upon us by an ideologically driven pseudo-science whose power comes from successfully hiding, as opposed to revealing, the true nature of our social, political and economic relations.”
You made my day.
Cheers.
Yani thanks for this post. May I ask please to post once more when the book is actually out as a reminder to buy it.
Reblogged this on Conflicted in America and commented:
The need for an new economic vision.
Reminds me of another, parallel scandal, big bang theory, also deeply embedded within a “profession which acts like a priesthood”.
Perhaps at last we are approaching a great period of a return to accuracy of conclusions drawn from equally accurate observation.
Congratulations! I look forward to reading the new book. Oh, and good on you (as they say down under) for persevering with this excellent project. Who knows? Now that the neoclassical system is indeed in a shambles there may be some impetus for a change in ideology. (Dream on?)
Now as to your silence. Which indeed I am sure we have all noticed. I was afraid that you had just given up in despair. Especially since you are particularly well aware of what is going on in Greece.
No, I have not noticed your silence! With continuing series of articles on lifo.gr, protagon.gr, now also the new greek newpaper and of course this site, not you were not quite silent! My friend, you are a phenomenon. And on your spare time you are working for Valve! You have to explain that to me one time…
Welcome back, Yani.
I just want to say that there is a typo in the last sentence of paragraph 12 of the Preface. It reads:
My intimate familiarity with the neoclassical models was sufficient to keep me on the roster of neoclassical economics departments were a capacity to teach these models …
Should be “where,” not “were.”
And this being the 70 anniversary of the Battle of Stalingrad, your “invading Russia” metaphor was perfect timing.
P.S. I’ve been meaning to mention this for some time now. In one of my first postings here a couple of years ago, I asked you a question about debt, specifically America’s debt — so much debt and not enough money in circulation to pay it off. You replied that we must make a clear distinction between public debt and private debt. I assumed that to mean that private debt was simply more worrisome to the economy than public debt, but that in the long run public debt mattered, too. I now know exactly what you meant. And boy was I off by a country mile in my previous assumption. How did I eventually get what you tried to convey to me? You see, there is this poster here by the username “Crossover” who keeps bringing up Modern Monetary Theory — I even recall one of his postings where he stated that bank loans come before deposits. Well, that counterintuitive bit about bank loans preceding deposits whetted my apetite. So I googled MMT, found Warren Mosler’s website … and now it’s crystal clear: the concepts of public debt and public deficits (yes, deficits, too; someone should remind Krugman of this) for a country that issues its own non covertible currency such as the United States, for example, are meaningless concepts — nothing more than “scorekeping”
@lastgreek
Now that you mentioned Krugman, i was shocked reading what he wrote a couple of days ago.It looks like a major change of direction in his thinking:
“We’re not at all like Greece; we have our own currency, and our debts are in that currency. So we can’t run out of cash, even if the bond vigilantes turn out to be real and lose faith in America.”
http://krugman.blogs.nytimes.com/2013/02/01/moveable-feast-macroeconomics/
By the way:
“so much debt and not enough money in circulation to pay it off. ”
Thats exactly the problem in all debt-ridden countries whether they have their own currency or not.The economy is sinking because debt repayment simply destroys money faster than it is being created (via deficit spending and/or credit expansion).We are starving for the means of exchange.Everything else we have it.Idle capital,idle SKILLED labor etc.But in a modern economy that is completely monetized, you cant expect it to faction properly when there’s not an adequate volume of the means of exchange.
I mean function not faction.
Now that you mentioned Krugman, i was shocked reading what he wrote a couple of days ago.It looks like a major change of direction in his thinking:
It appears to be so. It has not been more than two years that he wrote in the NYT ….
I could go on, but you get the point: once we’re no longer in a liquidity trap, running large deficits without access to bond markets is a recipe for very high inflation, perhaps even hyperinflation. And no amount of talk about actual financial flows, about who buys what from whom, can make that point disappear: if you’re going to finance deficits by creating monetary base, someone has to be persuaded to hold the additional base.
And indeed it was that piece above that had the likes of Bill Mitchell, Marshall Auerback, Warren Mosler, James Galbraith, Cullen Roche, to name just a few, all over Krugman.
Still, I don’t know why he brought up “bond vigilantes” in that piece you quoted from him. The United States could not care less whether anyone buys its bonds — neither does Canada, for that matter — because as Krugman writes, “we’re not as at all like Greece.” And neither like Spain, France, Ireland, Portugal or the other Eurozone countries. Because, unlike the United States, they don’t issue their own currency; they have a bond vigilange problem.
(As you can see, Crossover, these past few months I was doing a lot of reading up on MMT, going back in the archives — way back! — of some the MMT sites. Man was I clueless on money operations. Btw, the pdf version of Mosler’s book The Seven Deadly Innocent Frauds of Economic Policy is available, free, for download from his site. And. oh yeah — thanks for introducing me to MMT.)
“thanks for introducing me to MMT”
The same from me.
Thanks lastgreek and Demetri, its no big deal though.The only reason i keep bringing this up again and again is because, when i started researching MMT,it wasnt that much long after i had passed my macroeconomics classes some years ago.
You say you were clueless about this stuff,you can imagine my shock when i realised that what i had just been taught was utter nonesense and had no actual application in our times.
Its funny when i remember that in one exam that i passed, there was an excercise where you had to explain how the money multiplyer works and give your own example.
Its sad when you realise that you could pass such courses by learning the wrong things.
As many MMT economists say,the whole way the system works changed after we abandoned the gold standard but the bibliography on the system was never really “upgraded”.
You say you were clueless about this stuff,you can imagine my shock when i realised that what i had just been taught was utter nonesense and had no actual application in our times.
And so was Mosler — clueless — when he graduated with a B.A. in Economics. He learned from work experience. (What else is new, right?
) If you read his books or listen to him on youtube, the first thing he does is bring up this work experience: an insider of monetary operations for over 40 years! And, basically, he tells you what only the senior staff — the operations people — of both the Fed and Treasury know.
The same goes for William Black: lots of work experience. He’s not only an academic; he’s worked as a bank regulator. When he says that at least 95% of the subprime loans were “liars loans,” it’s not hyperbole. 95%? Why aren’t the banksters in prison suits? Oh wait, I know — they’re all major financial contributors to both “official” parties. Yes, that would explain why Barry “I Have a Drone” Obama hasn’t allowed the Attorney General to prosecute.
Now, I don’t care for the likes of Mike Norman (mikenormaneconomics.com). Unlike Mosler and Black, he’s loud, rude, obnoxious , and nowhere near as smart. He claims that his site is the number one MMT site on the web. Big deal. He has nothing much to say, and the site provides nothing more than links to other sites. Five years ago, in a debate with Peter Schiff, an adherent of the Austrian School, Norman had his ass handed to him on a silver platter (ironic because Shiff has a silver dealership). Just google Schiff and Norman and watch the youtube clip. It should have been a “walk in the park” for Norman. Anything but. Even Mosler has joked about it. Moreover, Norman is a jealous prick. Following the cancellation of Demetri Kofina’s show Capital Account last month, Norman was beside himself with glee. When he was asked why on his site, he said something about Kofina not returning his emails… lol Really? I don’t know Kofina, but he’s always answered my emails, and, anyway, I wouldn’t have cared either way since I know the guy is super busy. Who knows … maybe he answered my emails because I am not loud, rude, obnoxious — or even jealous! Ironically, I was introduced to Stephanie Kelton’s work when she was guest on … Capital Account!
I look forward to this, you’re one of the few economists who I actually enjoy reading. Thank you for your work!