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You have heard of differential equations? (You seem to realize that mentioning calculus). Differential equations are all about rates of change.
Toggle Commented yesterday on Links for 09-28-16 at Economist's View
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Actually most countries have VAT and when two countries with VAT trade, then VAT is always raised on all goods where they are sold to an end consumer. Simple. The issue comes when a country has no VAT and relies almost only on income tax. Income tax is then levied on exports but not on imports, so that the exports from such a country are at a relative disadvantage UNLESS the real exchange rate adjusts (as it should). Because the real exchange rate should adjust to equalize such effects, this argument is really just hot air. But of course, if he really wanted to do something about it, he could offer to institute a VAT himself, as most countries have.
Toggle Commented yesterday on Trump On Trade at Economist's View
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I sort of wonder how many people realize that economic equilibrium depends critically on the "initial distribution of wealth", and the distribution of wealth is PATH DEPENDENT, and so "EQUILIBRIUM" is not in fact path independent. If you change the path - you change the equilibrium. We should be concentrating much more of the direction that things are going, and much, much less on what the "end-point" (that is never reached) is.
Toggle Commented yesterday on Links for 09-28-16 at Economist's View
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"http://www.rogerfarmer.com/rogerfarmerblog/2016/9/27/the-liquidity-trap-and-how-to-escape-it-time-for-a-new-approach" I'm not a fan of Roger Farmer's because he insists on using an "equilibrium" framework where as I think we need a dynamic framework (I prefer to call "animal spirits" - "expectations of the future"). Whatever. We agree sort of on a program, but I think he doesn't point the finger in the right place. High leverage is the problem, and it is what has driven returns to be so low that negative real interest rates are needed to encourage any more borrowing. We need to shift the load of expansion (i.e. a dynamic process, not an equilibrium point) from increased lending to increased government spending. Same policy, but quite a different diagnosis. It is also very important that the dynamics shift from concentrating net wealth in very few hands, towards spreading net wealth widely. Let's talk in terms of DYNAMICS. PLEASE!
Toggle Commented yesterday on Links for 09-28-16 at Economist's View
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"Moreover, the small increase in the share of people with jobs has been neutralized, as far as its effects on how prosperous we are, by much slower productivity growth since 2010 than America had previously seen, had good reason to anticipate, and deserves." ?????? The rate of (measured) productivity growth is not all that important. What has happened to real median income. And why are quoting from Robert Barro who is basically a freshwater economist. Couldn't you find somebody sensible?
Toggle Commented 2 days ago on Links for 09-27-16 at Economist's View
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I have repeatedly pointed out that if country A mostly uses VAT (which taxes imports but not exports) and country B mostly uses income tax (which taxes exports but not imports) then that affects the effective exchange rate. IN PRINCIPLE the exchange rate should adjust for this. The question is whether it does (but note also the incentive to export effects). The problem with all these issues is that it is complicated and for people who can't think in terms of more than 15 words at a time it is difficult.
Toggle Commented 2 days ago on Links for 09-27-16 at Economist's View
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http://oecdinsights.org/2016/09/26/complexity-theory-and-evolutionary-economics/ "So where should we go with complexity? I believe that a core component of complexity is and should be evolution. In an evolutionary view, an economy is an “organism” that is constantly developing new industries, technologies, organizations, occupations, and capabilities while at the same time shedding older ones that new technologies and other evolutionary changes make redundant. This rate of evolutionary change differs over time and space, depending on a variety of factors, including technological advancement, entrepreneurial effort, domestic policies, and the international competitive environment. To the extent that neoclassical models consider change, it is seen as growth more than evolution. In other words, market transactions maximize static efficiency and consumer welfare. As Alan Blinder writes, “Can economic activities be rearranged so that some people are made better off, but no one is made worse off? If so we have uncovered an inefficiency. If not, the system is efficient.” In complexity or evolutionary economics, we should be focusing not on static allocative efficiency, but on adaptive efficiency. Douglass North argues that: “Adaptive efficiency…is concerned with the kinds of rules that shape the way an economy evolves through time. It is also concerned with the willingness of a society to acquire knowledge and learning, to induce innovation, to undertake risk and creative activity of all sorts, as well as to resolve problems and bottlenecks of the society through time.” Likewise, Richard Nelson and Sidney G. Winter wrote in their 1982 book An Evolutionary Theory of Economic Change, “The broader connotations of ‘evolutionary’ include a concern with processes of long-term and progressive change.” This provides a valuable direction. It means that a key focus for economic policy should be to encourage adaptation, experimentation and risk taking. It means supporting policies to intentionally accelerate economic evolution, especially from technological and institutional innovation. This means not only rejecting neo-Ludditism in favor of techno-optimism, it means the embrace of a proactive innovation policy. And it means enabling new experiments in policy, recognizing that many will fail, but that some will succeed and become “dominant species.” Policy and program experimentation will better enable economic policy to support complex adaptive systems. " Yes, I basically agree with this because it is specifically directed towards policy thinking in the broadest sense. I was suspicious of the article at first because of this: "However, despite what Larry Summers has written, economics is not a science that applies for all times and places." This seems to me wrong headed. Do we need a new biology every time there is some genetic change or do we need a biology that can cope with genetic change?
Toggle Commented 2 days ago on Links for 09-27-16 at Economist's View
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http://www.nber.org/papers/w22676#fromrss Didn't read the paper, but in the conclusions this was important "Our quantitative results suggest that both corrections are nonnegligible: trade-induced increases in inequality of disposable income erode about 20% of the gains from trade, while the gains from trade would be about 15% larger if redistribution was carried out via non-distortionary means. "
Toggle Commented 2 days ago on Links for 09-27-16 at Economist's View
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https://www.stlouisfed.org/on-the-economy/2016/september/great-moderation-vacation I don't like the way this is written. Is low volatility in measured GDP growth and inflation a good thing in and of itself? I would think that this needs justification. I have the feeling this is a clear case of proxy creep. We try to control a proxy for something we care about, and in the end we forget what it is that we actually care about and the proxy becomes useless, misleading even. What if the decline of the middle class that we are so concerned about is the result precisely of the policies we are using to reduce volatility?
Toggle Commented 2 days ago on Links for 09-27-16 at Economist's View
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On what planet are you, currently?
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And the alternative is? Increasing the chances of the greater of two evils. Wow, now that really is moral superiority.
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Maybe it should have provoked some more thought. And to be honest a student of Minsky should not have thought that lowering interest rates (especially after a recession) was the cause of the more risky investment, but would have thought that the causation ran in fact in the other direction (more risky investment being the consequence of an absence of recessions). The problem here is the concentration on "investment" meaning physical investment and not asset prices - as in leveraged purchase of existing assets. The emphasis is totally wrong. And where the idea comes that the disappearance of "Zombie firms" (can he name some) will stimulate a new wave of investment, I can only vaguely speculate (this is perhaps the metaphysical ideal equilibrium that seems to drive magical "Austrian" thinking). New investment comes from prospective new demand - nowhere else. And if a recovery comes, then "Zombie" firms will disappear soon enough, driven into receivership by increased rents and increased wages.
Toggle Commented 3 days ago on Links for 09-26-16 at Economist's View
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Maybe it should have provoked some more thought.
Toggle Commented 3 days ago on Links for 09-26-16 at Economist's View
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"RGC did you post these because they were from Michael Hudson, who as I said used to say sensible things, or because you really thought the content was good?"
Toggle Commented 3 days ago on Links for 09-26-16 at Economist's View
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I didn't think he was, but I don't care about what labels people attach to themselves. He was using arguments that I only otherwise hear from "Austrian economists" or Edward Lambert (who admits to often dealing with "Austrians") and reflect their exclusive and peculiar pre-occupations. Maybe he had absorbed these ideas inadvertedly (and he was quoting somebody else this passage was not from him directly), but it makes my blood boil when somebody thinks more people being unemployed is a good idea (and if you cut out the jargon that is what it means).
Toggle Commented 3 days ago on Links for 09-26-16 at Economist's View
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I made it very clear that his talk of "more risky investment" and "Zombie companies" was Austrian influenced bullshit. (There is NOTHING wrong with more risky investment - but there is no logical reason for lower interest rates to favour it - in fact the complete opposite - only low interest rates make very safe but low yielding investments feasible alternatives. The problem is he confuses the interests of passive investors with the interests of banks and makers of physical investments.) And the bit about China was where he included China in some comments about democracy and organized labour and growth where China was an example of the complete opposite in every point.
Toggle Commented 3 days ago on Links for 09-26-16 at Economist's View
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cm - but this I think also misses a point. The point being that all that traffic is going somewhere and, those end-points will inevitably become bottlenecks. Several times, I have pointed out that an extra car on the road requires not one but (something like) three extra parking spaces. Have you read Jane Jacobs? She points out that wide and fast roads increase the length of average trips (so road miles increase faster than number of cars) as people take less direct routes and that more parking spaces also has the same effect. There is really a choice between designing like Los Angelos and designing like Holland.
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What has this all got to do with hours of work or with technology sharing? I never said I wanted a command economy.
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I knew you were Germany, but depending on how long you are in US you may have not had a precise memory for latitudes. Whatever, Rhein-Main Gebiet is a great place to live. All that it needs is the sea.
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Oops - forgot the question is: RGC did you post these because they were from Michael Hudson, who as I said used to say sensible things, or because you really thought the content was good? I have nothing against people believing that in the current circumstances a more expansive fiscal policy would be a good idea, and would be much preferable than extraordinary monetary policy, I think that myself, but the arguments he made were I think rather dishonest (more marketing than fact).
Toggle Commented 3 days ago on Links for 09-26-16 at Economist's View
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Actually, I have a question for RGC. He has highlighted a couple of posts recently from Michael Hudson that just about caused me to hit the roof. I used to think Michael Hudson said some sensible things, but now I think he is just crazy. First he said something absolutely nuts about China, then he made some comments about the ineffectiveness of monetary policy that was filled with "Austrian economics" talking points - and I think "Austrian economics" is a completely incoherent sect (although these points may have been influenced by Edward Lambert from Angry Bear who also makes me hit the roof).
Toggle Commented 3 days ago on Links for 09-26-16 at Economist's View
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RGC pointed to this post on another thread: https://www.ineteconomics.org/ideas-papers/blog/rethinking-macro-theory A few general thoughts. 1. We need to understand not just what behavior at the zero lower bound looks like, but also how we got there. In particular, I think we need to think about the tax incentives for increased leverage and how increased leverage reduces yields by inflating asset prices. 2. Expansionary monetary policy works by increasing the incentive to go into debt. If you realize that money in modern economies is always someone's debt, why is it better for it to be private debt than public debt (either monetarised or as bonds)? High levels of private debt will inevitably result in higher rates of insolvency, and insolvency is an important and costly asymmetry that is not captured in economic models. Higher private debt makes the economic system less stable. 3. Government spending is not just government spending, there are important differences between transfers, current expenditure and infrastructure spending. 4. The representative agent, is not just experimentally, but also theoretically a disaster, and must be abandoned. https://meansquarederrors.blogspot.de/2016/09/the-microfoundations-hoax.html In fact it is the diversity of households that drives the economic system not their similarities. 5. The housing market is crucial and not only needs to be build into macro-models, it also needs to be better investigated in general. There seem to be lots of widely believed misconceptions in housing http://www.fresheconomicthinking.com/2016/05/time-to-throw-out-standard-urban.html 6. Both Robert Waldmann and Cameron Murray who I both regard very highly have questioned the relationship between real interest rates and investment (they probably will not contest the relationship between asset prices and consumption). http://www.fresheconomicthinking.com/2016/05/the-mysterious-real-interest-rate-of.html This is important as most models don't actually include the real pathways through which monetary policy works (asset prices and consumption).
Toggle Commented 3 days ago on Links for 09-26-16 at Economist's View
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A few general thoughts. 1. We need to understand not just what behavior at the zero lower bound looks like, but also how we got there. In particular, I think we need to think about the tax incentives for increased leverage and how increased leverage reduces yields by inflating asset prices. 2. Expansionary monetary policy works by increasing the incentive to go into debt. If you realize that money in modern economies is always someone's debt, why is it better for it to be private debt than public debt (either monetarised or as bonds)? High levels of private debt will inevitably result in higher rates of insolvency, and insolvency is an important and costly asymmetry that is not captured in economic models. Higher private debt makes the economic system less stable. 3. Government spending is not just government spending, there are important differences between transfers, current expenditure and infrastructure spending. 4. The representative agent, is not just experimentally, but also theoretically a disaster, and must be abandoned. https://meansquarederrors.blogspot.de/2016/09/the-microfoundations-hoax.html. In fact it is the diversity of households that drives the economic system not their similarities. 5. The housing market is crucial and not only needs to be build into macro-models, it also needs to be better investigated in general. There seem to be lots of widely believed misconceptions in housing http://www.fresheconomicthinking.com/2016/05/time-to-throw-out-standard-urban.html 6. Both Robert Waldmann and Cameron Murray who I both regard very highly have questioned the relationship between real interest rates and investment (they probably will not contest the relationship between asset prices and consumption). http://www.fresheconomicthinking.com/2016/05/the-mysterious-real-interest-rate-of.html This is important as most models don't actually include the real pathways through which monetary policy works (asset prices and consumption).
Toggle Commented 3 days ago on Links for 09-23-16 at Economist's View
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The problem with this, is that is putting the cart before the horse. A meaningful and durable increase in growth is what will actually drive an increase in real median wages. I read that and say, we don't need an increase in real median wages, what we do need is an increase in real median incomes. What is so sacred about market distribution?
Toggle Commented 3 days ago on Links for 09-23-16 at Economist's View
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... all businesses SUFFER, including ...
Toggle Commented 3 days ago on Links for 09-23-16 at Economist's View
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