Alternatives aplenty | 115 comments (115 topical, editorial, 0 hidden)

Re: The Assertion of Absurdity (none / 1)

The idea that we will be poorer in the long term because we did not increase employment during a cyclical economic downturn contradicts the mainstream assumption that an economic downturn represents a departure from a growth track, but if we allow market forces to function, they will return us to that growth track.

I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Thu Nov 3rd, 2011 at 10:28:01 AM EST
[ Parent ]

Re: The Assertion of Absurdity (none / 0)

I disagree. Even when you look at the short term view Keynes had, there are very clear losses in waiting for the market to return to equilibrium. Having an economy operating under potential capacity will result in less output than if it ran at full capacity. It's perfectly straightforward - idle labour will just sit around instead of creating value. This is mainstream, at least if you consider Krugman mainstream.

The thing you refer to as mainstream seems like nothing but Austrian morality play ("we've spent more than we have - now we must face the painful but healthy catharsis").

Peak oil is not an energy crisis. It is a liquid fuel crisis.

by Starvid on Thu Nov 3rd, 2011 at 12:24:20 PM EST
[ Parent ]

Re: The Assertion of Absurdity (none / 1)

You know, I remember wandering around the spa town on the German/Austrian border that we stayed near for a week on our honeymoon and being somewhat disturbed by the number of businesses offering things like enemas and colonic irrigation and whatnot.

by Colman (colman at eurotrib.com) on Thu Nov 3rd, 2011 at 12:27:31 PM EST
[ Parent ]

Re: The Assertion of Absurdity (none / 0)

Cleanliness is next to godliness. Your body is a temple. Scourge the money-changers, purify the temple gates. Retain within the gold refined by fire.

From a lost essay by Freud on anal Austerianism.

by afew (afew(a in a circle)eurotrib_dot_com) on Thu Nov 3rd, 2011 at 12:59:45 PM EST
[ Parent ]

Re: The Assertion of Absurdity (none / 1)

Yes, but it the central tradition pretends that this cost only imposes itself during the recession itself, and has no influence on, say, GDP ten years from now (assuming the depression does not last ten years, which theoclassicals are swift to assure us that it will not, based on historical data from back when we were actually doing something about industrial depressions).

Yes, they really do believe this. I'd quote you chapter and verse, but I don't have my textbooks at hand.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Thu Nov 3rd, 2011 at 12:33:42 PM EST
[ Parent ]

Re: The Assertion of Absurdity (none / 1)

But those are only short term losses. Once we get to the "long run" growth path, there is no further losses under the mainstream models, no matter how much short term costs were imposed.

Whereas, in the real world, there is no distinct long-run growth path, and we are living inside a permanently smaller opportunity frontier if we pursue austerity policies.

I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Thu Nov 3rd, 2011 at 02:47:19 PM EST
[ Parent ]

Re: The Assertion of Absurdity (none / 1)

Even if you return to the growth track in the long run, there will still have been a shortfall of value created in the mean-time. Please observe my beautiful graph. :p

Peak oil is not an energy crisis. It is a liquid fuel crisis.

by Starvid on Thu Nov 3rd, 2011 at 12:43:50 PM EST
[ Parent ]

Re: The Assertion of Absurdity (none / 0)

Yes, but the neoclassicals assume that doing something about the short-run loss of output comes with the cost of lowering the slope and/or offset of the long-run growth path. And since the long-run path continues indefinitely, there exists a discount rate at which it makes sense to accept the short-run cost.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Thu Nov 3rd, 2011 at 12:58:37 PM EST
[ Parent ]

Re: The Assertion of Absurdity (none / 1)

Yes, but I'm not defending the neclassical view of the short term... Both me and Keynes and all saltwater economists believe in contracyclical actions to manage the business cycle!

Peak oil is not an energy crisis. It is a liquid fuel crisis.

by Starvid on Thu Nov 3rd, 2011 at 01:24:55 PM EST
[ Parent ]

Re: The Assertion of Absurdity (none / 0)

However, unlike most "saltwater" economists today, Keynes did not believe in the existence of the long run growth track independent of the short term actual utilization of productive resources, including labor.

I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Thu Nov 3rd, 2011 at 02:57:04 PM EST
[ Parent ]

Re: The Assertion of Absurdity (none / 0)

Yes, but I still haven't claimed that you automatically return to the trend! I said that even if you believe in that idea, there will be lost output if you don't act contracyclically. And returning to a full employment equilibrium in the long run by doing nothing (through wage deflation and without stimulus), does not necessarilly mean you catch up to the trend. You might fall behind the trend permanently, but still reach an equilibrium, just one where GDP is lower, lagging timewise, compared to if you had intervened in the short term.

Peak oil is not an energy crisis. It is a liquid fuel crisis.

by Starvid on Thu Nov 3rd, 2011 at 05:19:50 PM EST
[ Parent ]

Re: The Assertion of Absurdity (none / 0)

That is the assumption of the mainstream theory, that the original growth trajectory is still there to return to.

If you don't buy that assumption ~ good.

I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Fri Nov 4th, 2011 at 01:16:17 PM EST
[ Parent ]

Re: The Assertion of Absurdity (4.00 / 2)

Seems the chairman of the Bank of Sweden, Stefan Ingves, doesn't belive that. And he's not even the most Keynesian guy on the board, that would be Lars E. O. Svensson.


Vi vet att finansiella kriser har permanenta effekter på tillväxten. Det stora BNP- tapp som blir följden av en djup finansiell kris går oftast inte att ta igen under perioden efter krisen. Normalt får vi ett skift nedåt i BNP-nivåtrend även om goda tider sedan kan innebära en återgång till samma takt för tillväxten.		We know financial crises have permanent effects on growth. The large fall in GDP which results from a deep financial crisis is not usually possible to regain in the period after the crisis. Normally we get a downward shift in the GDP-level trend even if good times later can result in a return to the old pace of growth.

Peak oil is not an energy crisis. It is a liquid fuel crisis.

by Starvid on Fri Nov 11th, 2011 at 07:30:33 AM EST
[ Parent ]

Seems he read this thread! ;D (4.00 / 2)

The quote is from today, as is this graph. I suppose translation is superfluous.

Peak oil is not an energy crisis. It is a liquid fuel crisis.

by Starvid on Fri Nov 11th, 2011 at 07:37:12 AM EST
[ Parent ]

Re: The Assertion of Absurdity (none / 1)

"However, unlike most "saltwater" economists today"

This would not include Krugman, DeLong, Stiglitz, Yves Smith or Thomas, for a start.

I don't really have time to read many more. But really, you can't say "no-one in the mainstream" is saying something that Krugman, co-author of one of the main university manuals, is banging the drums about day and night.

Earth provides enough to satisfy every man's need, but not every man's greed. Gandhi

by Cyrille (cyrillev domain yahoo.fr) on Fri Nov 4th, 2011 at 05:27:36 AM EST
[ Parent ]

Re: The Assertion of Absurdity (none / 0)

Saying it casually, or publishing work developing a model that does not contain that assumption?

Its been a while since I've read Krugman's work, as opposed to his op-eds ~ I'd thought I would have heard it if he had abandoned New Keynesian economics for some other approach, but I'd be happy to have the citation to a paper where he does so.

I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Fri Nov 4th, 2011 at 01:24:20 PM EST
[ Parent ]

Re: The Assertion of Absurdity (4.00 / 2)

Visually, that's pretty much everything you need to know about economics right there.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Thu Nov 3rd, 2011 at 01:48:09 PM EST
[ Parent ]

You mean, that most ... (none / 1)

... economists attach more weight to the fictional "long run growth track" line than to the "Actual GDP" line?

I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Thu Nov 3rd, 2011 at 02:58:01 PM EST
[ Parent ]

Re: The Assertion of Absurdity (none / 0)

In fact, as Richard Koo demonstrated WRT Japan since 1990, the slope of the line can drastically change and the starting point of any new growth can be at or below the maximum level reached before the contraction began. That is how you get "lost decades". The foregone production, if considered as the integral of the volume between a projection of the original growth line and the actual rate experienced, may never even close and may expand indefinitely.

I think that is almost certain to be the case for decades in the USA, whether the slope is taken from the growth rate prior to 1970, 1990, 2000 or 2007. I guess the "mainstream" can just keep redefining the slope forever in preference to admitting their assumptions are fallacious.

"It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sat Nov 5th, 2011 at 11:02:45 AM EST
[ Parent ]

Re: The Assertion of Absurdity (none / 1)

Since the dawn of time people have known that if you destroy something you will have to spend time and resources to repair it before you can start using it again. Apparently this was lost on modern economics.

Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se

by A swedish kind of death on Sat Nov 5th, 2011 at 11:11:51 AM EST
[ Parent ]

Re: The Assertion of Absurdity (none / 0)

An axiomatic-deductive system of thought needs no firm connection to physical reality. Elegance of form and the appeal of the axioms will do nicely.

"It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sat Nov 5th, 2011 at 11:16:35 AM EST
[ Parent ]

Re: The Assertion of Absurdity (none / 1)

And thus the amount of angels on the pinhead can continue to increase according to the longterm growth path after the pin has been tipped over and then return to an upright position.

Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se

by A swedish kind of death on Sat Nov 5th, 2011 at 11:50:44 AM EST
[ Parent ]

Re: The Assertion of Absurdity (none / 0)

funniest comment of the week!

'The history of public debt is full of irony. It rarely follows our ideas of order and justice.' Thomas Piketty

by melo (melometa4(at)gmail.com) on Sat Nov 5th, 2011 at 07:34:00 PM EST
[ Parent ]

Yes, that is the mainstream fantasy ... (none / 0)

... in a nutshell, with requires, among other things, the rejection of the General Theory in order to maintain ...

... that after the short term costs, the assumption that the same long term growth path still exists for the economy to return to.

I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Thu Nov 3rd, 2011 at 02:49:39 PM EST
[ Parent ]

Re: Yes, that is the mainstream fantasy ... (4.00 / 3)

... after having burned the city to the ground and ploughed it with salt.

_{It is rightly acknowledged that people of faith have no monopoly of virtue
- Queen Elizabeth II}

by eurogreen on Thu Nov 3rd, 2011 at 05:26:31 PM EST
[ Parent ]

Alternatives aplenty | 115 comments (115 topical, 0 editorial, 0 hidden)

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