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I tried to read Great Transformation as a grad student, trying to get some sense of critiques and alternatives to the standard economic approaches. Gave up after a couple of chapters. Far too unclear and far too long. Then I read a short clear article saying that peasants are rational economic decision-makers and therefore Polanyi was all wrong. And I really couldn't tell whether that did or did not contradict what Polanyi was saying.
Thanks! I think I would start with Fisher (with M fixed), then go on to Wicksell by making M endogenous. A Wicksellian central bank offers an unlimited amount of loans of M at an interest rate r, and the AD curve either becomes vertical (for a downward-sloping IS), or becomes very thick (for a horizontal IS).
Well, for one thing, I=S is a bad place to start doing macro because it leads even very smart and competent people like Philip Cross to get muddled! But there are other reasons too. I give some in my old post that is linked in this post.
Commented Dec 7, 2016 on Links for 12-07-16 at Economist's View
Damn. Gotta be careful using > Trying again: Keynesian macro assumes Ys > Y = Yd (except at full employment, where Ys=Y=Yd)
Commented Dec 7, 2016 on Links for 12-07-16 at Economist's View
Instead of the ex ante ex post distinction, I prefer to think of it this way: Think of the market for apples, in micro. There are 3 quantities: Qd (quantity buyers want to buy); Qs (quantity sellers want to sell); and Q (actual quantity bought-and-sold). And if exchange is voluntary, so Q=min{Qs,Qd}, then either Q=Qs or Q=Qd, so we are down to 2 quantities being different. Keynesian macro assumes Ys
Commented Dec 7, 2016 on Links for 12-07-16 at Economist's View
Yes it's backwards. Just a typo.
It was a typo. Swap "high" with "low".
Consider a more general model, in which (unlike the NK model) agents are not identical (so their expenditures and receipts of money are not perfectly synchronised willy nilly), and each agent has a chequing account at the central bank. At any point in time, some agents will have a positive balance, and some a negative balance (overdraft). Define "gross money stock" as positive plus negative balances. Define "net money stock" as positive minus negative balances. (Both are zero in the NK model). The central bank has 4 monetary policy instruments: 1. Open market operations, which change the net money stock. 2. Overdraft limits/colateral constraints, which change the gross money stock. 3. Interest paid on positive balances, which changes net money demand. 4. The interest spread (or premium) charged on negative balances, which changes gross money demand. This is roughly how central banks (like the Bank of Canada) can conduct monetary policy, except they only allow commercial banks, not the general public, to hold chequing accounts at the central bank. I *think* this might be the way to integrate the NK perspective with the ISLM perspective.
One useful thing we didn't know in 1978 was how to do sticky-price macro properly with monopolistically competititive firms. NK macro deserves credit for figuring that out, in the late 1980's.
Hard to answer a question about what people thought would happen in circumstances ZLB, if they hadn't thought about it much (if at all). I think if you had asked me this in 2007, I would have answered: a mix of 2 and 4. [1 is problematic, because by assumption you can't follow 1. Also, for the Bank of Canada at least, they weren't strictly following a Taylor Rule, but looking at everything to target their internal forecast of inflation to 2% at an 18 month horizon.]
The Cuban government did seem rather good at finding a sequence of patrons willing to give or lend it money.
Played with pencil and paper. What I said above seems wrong; and what I wrote in my original post seems right. It seems it could go either way. Given strategic complementarities, it seems a priori equally likely there could be positive or negative externalities, at the margin, in equilibrium.
Thanks Brad. "But is there reason to think that such situations are in any sense typical in the case of human agglomeration?" Hmmm. Yes, I think there is. But I can only offer a geometric "proof" of my intuition (at least, I think I can). Unless you rig the indifference curves, I think the general case is that you end up with a PD, at the margin. I'm not sure though. Need to play with pencil and paper.
anne: in my defence, I wrote that post (mostly) for finance people. And finance people will be very familiar with the particular math I do there (more familiar than I am). I was speaking the language they understand best (or trying to).
Commented Jul 25, 2016 on Links for 07-25-16 at Economist's View
Thanks Brad. By the way, this was my way of modelling what Morgan Ricks was saying in his book.
Suppose you had an account at the "bank", in which you held shares in that same "bank". Like holding shares in a mutual fund. Is it really obvious you wouldn't be able to write checks on that account? (In the olden days the technology wouldn't be able to handle the frequent changes in the nominal value of your account balance whenever the share price changed, but nowadays?)
Commented May 3, 2016 on Links for 05-03-16 at Economist's View
My theory: "Political economy" means "as opposed to domestic economy; the management of the resources of the polis not the domos". So "political" is now redundant. Am I right?
"And as production falls businesses stop paying the workers they have laid off: incomes fall." I think it is best to delete that bit. Because income from production of goods would fall when production falls, whether or not businesses stop paying the workers they have laid off, and whether or not they lay workers off or keep them idle on the payroll. The only difference that makes is to the distribution of income. Capitalists' profits are people's incomes too. "They decide that they want to spend less and so build up their holdings of financial assets." And we could have another round of our old argument about "financial assets" vs "medium of exchange". Maybe they want to build up their holdings of land? What matters is that they spend less medium of exchange to build up (at least temporarily) their holdings of medium of exchange.
I Googled "dispositive", but it didn't help. Fair enough, but a much more useful way to create accountability would be to replace inflation targeting with price level path (or NGDP level path) targeting. The Fed knows in advance it will be required to fix its past "mistakes". Bygones will not be allowed to be bygones. Permahawks (plus permadoves too, by symmetry) will become an endangered species.