By Gerald Friedman, Professor of Economics, University of Massachusetts at Amherst
Differences between my evaluation of the impact of the Sanders economic program from that of the Romers reflect different views of the economy, the difference between a static model where national income and employment are largely fixed and a dynamic one where these are shaped by effective demand and are, therefore, susceptible to change in response to economic policy. There are no errors in arithmetic.* It is a fundamental difference in vision that divides our approaches; the same distinction that divided John Maynard Keynes from those he labelled the Classicals in his General Theory of Employment, Interest, and Money.
Followers of Say’s Law, the Classicists believed that the economy always operates at full employment equilibrium except to the extent that price rigidities or failures in the financial system might cause temporary unemployment. For this classical view, the level of output, therefore, is determined exogenously with respect to employment levels; it is set by the supply of factor inputs and technology under the assumptions that the economy will always operate more-or-less at full employment and growth rates are determined exogenously by an exogenous rate of technological progress and an exogenously determined rate of savings and investment.
Under these “Classical” assumptions, policy can do little. It can mildly speed recovery from a shock, but recovery would occur in any case even without government policy, perhaps a little slower. Policy can do little or nothing to raise the long-run growth rate. Because the economy moves naturally towards its full-employment equilibrium, persistently low output must be due to a shock to technology or to the supply of factor inputs rather than to a failure of policy or to a shortfall in demand. Thus, in the Classical view, the appropriate response by policy makers is to adjust downward expectations for economic capacity rather than seek to raise output to a higher level of income and employment.
The Romers critique of my work comes from this old, pre-Keynesian model where the economy tends towards full employment equilibrium and moves to full employment on its own without need for government intervention or stimulus. They can acknowledge the need for government action on occasion, such as after a severe negative shock like the financial crisis of 2007-9. But even then, government stimulus spending is only expected to slightly speed recovery, bringing the return of full employment forward by about 6 months. Without stimulus, the economy will return on its own to full employment at a capacity output set without regard to the level of output and employment reached under the stimulus; and the stimulus itself does nothing to raise output after it is withdrawn. Instead, output levels gravitate towards a full employment level set by factor endowments, by preferences, and by the level of exogenous technology without regard for the level of employment and production. This is a static model in the sense that output is determined outside of the model itself; increasing economic output now has no lasting benefit.
Seen from this perspective a period of prolonged measured slow growth cannot be caused by involuntary unemployment; by a priori assumption, it must be due to a decline in the exogenously determined growth rate in capacity. Like mosquitos on an otherwise delightful summer afternoon, slow growth is unfortunate but there is little that can safely be done about it.
I think that we can find safe ways to enjoy even buggy summers. Instead of the static Classical model, I would use that developed by John Maynard Keynes for periods of slow economic growth in the 1920s (in the United Kingdom) and the 1930s (throughout the world), models extended by him and by his students and colleagues, including Nicholas Kaldor, Joan Robinson and Michael Kalecki, into a general theory of growth. Having observed a period of slow growth similar to what we have experienced in the last six years, and a period of severe recession, Keynes rejected the Classical view and Say’s Law. Instead, he argued that an economy can have a low-employment equilibrium where a lack of effective demand constrains demand, and policy can increase growth by encouraging increased consumption and investment to increase output and employment to full employment. With Kaldor, Kalecki, Robinson, Petrus Verdoorn, and Joseph Schumpeter, he went further to reject the very idea that capacity output is fixed without regard to the past level of employment and production: faster growth promotes faster growth by encouraging investment, greater labor force participation, and more technological innovation with higher productivity growth. Drawing on these theories, I would argue that in the United States today, productivity and the growth rate of capacity can be raised by policies that push the economy, drawing more into the labor force and by increasing investment and productivity.
Curiously enough, even from their static framework, these are ideas that should be familiar to the Romers. Certainly, they accept the idea that periods of prolonged unemployment and underutilization of capacity can lower capacity by discouraging workers and reducing the incentive to invest, to innovate, and to raise productivity. They are quite ready to apply this idea to the United States economy over the last few years, as did the Congressional Budget Office when it applied a sharp downward revision to its estimate of the trend growth rate in output after the Great Recession. We agree that people leave the labor force, investments are deferred, and productivity growth falls because of slow growth. Why not then the contrary? Why not have a period where high employment raises output by drawing more into the labor force, and by upgrading skills, promoting investment, and raising productivity through learning-by-doing? If recession induces a decline in productivity, could a boom raise productivity growth through induced investment in equipment and facilities, and when employers seek to increase the efficiency of their operations to reap profits from expanding sales opportunities? This is a model consistent with some of the giants in the economics profession, including not only Keynes, Kaldor, and Verdoorn, and Schumpeter.
For a time leading up to the current Great Recession, economists were enamored of the Classical models favored by the Romers. In recent years, however, a growing number are taking a new look at models like those developed by Keynes and Kaldor, and are seeing merit in dynamic approaches that recognize the link between output levels and growth rates. Reviewing the state of the discipline after nearly a decade of slow economic growth and high unemployment, Olivier Blanchard, Chief Economist at the IMF, stated that macroeconomics was in an “existential crisis.” Fortunately, he observes,
….a hundred intellectual flowers are blooming. Some are very old flowers: Hyman Minsky’s financial instability hypothesis. Kaldorian models of growth and inequality. Some propositions that would have been considered anathema in the past are being proposed by “serious’’ economists: . . . fundamental assumptions are being challenged, for example the clean separation between cycles and trends: Hysteresis is making a comeback. Some of the econometric tools, based on a vision of the world as being stationary around a trend, are being challenged. This is all for the best. Finally, there is a clear swing of the pendulum away from markets towards government intervention….
My report is in the spirit of Blanchard’s openness to new dynamic models. In contrast with the Classical view espoused by the Romers, my model sees a dynamic effect from faster growth that pushes the economy to higher levels of output, employment, and productivity. An economic stimulus not only reduces involuntary unemployment caused by the previous shortfall in effective demand, but it can lead to a higher level of employment, investment, and productivity growth, increasing economic capacity and raising the trend growth rate of income. Rather than dismiss evidence of a growing output gap, as some orthodox macro economists have done by assuming that the United States suffered a great loss of efficiency since 2007, I see an economy at low-employment equilibrium where discouraged workers have abandoned the labor market and firms have had little incentive to innovate or to raise productivity.
In this situation, additional stimulus not only raises output temporarily, but by priming the pump and encouraging additional private spending and investment, it can push the economy upwards towards capacity. And, capacity itself will grow more quickly when higher levels of employment lead more people to look for work, more businesses to invest, and businesses to find new ways to raise productivity to match growing demand. All this will push up the growth rate in capacity. That is why I see lasting effects from a government stimulus.
If the Romers were right that the economy is at full employment at capacity utilization, and capacity utilization grows independently of the level of output, then there could not be a lasting stimulus effect at a fully employed economy. In their model, a stimulus can raise output only temporarily because output depends on capacity and the economy is always at or moving towards capacity. But, if the economy can be stuck at an unemployment equilibrium, if it does not move to a full employment equilibrium, or if a higher employment and output level can trigger a higher growth rate, then a Keynesian-style government stimulus can have lasting effects. Even a one year stimulus can push employment and output to a permanently higher level, and at that higher level it can generate faster growth by pulling more into the labor force and stimulating higher productivity growth. In this Keynes-Kaldor case, with equilibrium unemployment and growth dependent on the level of the output gap, a one year stimulus can lead to permanently higher output both by reducing unemployment and by raising the growth rate of capacity.
In this debate, there are important empirical questions dividing me and the Romers: are we 11% below capacity, as I would estimate, or are we 2-4% below, as the Romers suggest? But the larger theoretical issue goes beyond this: is capacity set, is productivity growth exogenously determined, or are these endogenous with respect to output levels? In short: does capacity rise when the economy expands?
While economists from different perspectives will differ on these fundamental issues, we have experience in the United States that demonstrates the lasting effect of government stimulus spending. Emerging from the depths of the Great Depression, New Deal stimulus spending (including monetary easing) nearly doubled the GDP growth rate from pre-1929 levels to 7% per year, 1933-40, and nearly 10% a year from 1933-44; between the 1929 peak and 1944, output grew to a level 25% higher than it would have been at the pre-1929 growth rate. Active Keynesian policy maintained faster growth rates for the next quarter century as well. From 1947-73, the unemployment rate averaged 4.7% and annual GDP growth averaged 4.0%; output in 1973 was 13% higher than it would have been at earlier growth rates. Only when we abandoned Keynesian policies after 1973 did growth rates fall. From 1973-2014, annual growth has averaged only 2.6%, almost a full percentage point below the pre-1929 rate, while unemployment has risen to 6.5%. Because of the slowing of growth rates after jettisoning Keynesian policies, output in 2007 was almost 30% less than it would have been at the growth rates of the 1947-73 period.
Economic models matter because they guide policy. For a time after World War II, we had effective economic policy which reduced unemployment and raised growth rates. We turned our backs on this success at the suggestion of economists who adopted older, Classical models premised on assumptions of full employment and exogenously determined growth. The Congressional Budget Office is now projecting growth rates of income and employment significantly slower even than those of 1973-2014. To accept that we cannot do better is to give into counsels of hopelessness whose fruits have been economic desolation and depression.
My initial estimates of the effects of the Sanders program may have been optimistic, and I am preparing alternative estimates on “pessimistic” assumptions of the values of the multipliers and the effect of wage growth that give slower growth rates in income and employment. But even on the most pessimistic assumptions, a Keynes-Kaldorian model would suggest that a large government stimulus program like that proposed by Senator Sanders will dramatically raise income and employment and improve the condition of most Americans. Such policies as Senator Sanders proposes have worked in the past to promote growth. We have done better in the past; my work only seeks to show how we can do better again.
______
* Please note There is no “bad math” as described by Justin Wolfers. Differences between my analysis and that of the Romers, or others favored by Wolfers, come from my use of a different economic model. I am open to the possibility that I have made mistakes, perhaps by over- or under-estimating some of the effects that I describe (technically, the choice of parameter values); as a check, I am currently performing sensitivity analysis of my results, for example, with different values of the multipliers.
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Investment in the commons would raise employment. The commons being the habitability of this planet among other important aims. Economically speaking, we need appropriate/just tax/revenue policy that favors productive work as opposed to favoring finacialization. Without a just revenue system, any employment gains and productivity gains will be siphoned out of the commons and into the hands of gamblers anotherwords, continued mis-allocation and privatization to the detriment of the commons.
This is simply getting farcical.
I really don’t get how they manage to mix static economics and eternal growth, without some light coming on about how much of paradox it is.
I’ll be surprised if the Romers or anyone else responds to this because it would mean a serious discussion about the efficacy of the models they use.
Agreed.
I side with Gerald Friedman and the Sanders campaign. The Romer/Goolsbee/Krugman response has been that Reagan-era growth rates are impossible. Whereas most conventional economists believed in the not too distant past that the economy was recovering to previous rates of growth, they have backed off and now proclaim that our economic potential is lower, because of demographics.
The Sanders’ proposals obviously change the bounds of what is possible. Not only can we have higher growth (as Friedman discusses), but also improved societal well-being at lower rates of growth. This is the discussion we should be having, but the response from Krugman et al has been to distract attention from what is important.
It’s worse than that–egos are at stake. Krugman took a stand where he basically said that his side (the Clintonites) represented Reason and Truth and Intellectual Honesty and everyone on the other side was an irrational idiot. If he admitted that there was any legitimacy at all to the Friedman point of view, any thing which could be discussed in a calm manner without political posturing, he would look like a bully and a partisan hack. Worse, he has all these followers who believed him.
It’s very hard to climb down from what Krugman wrote, and I’ll be very pleasantly surprised if he does the classy thing and admits he went too far.
“Bully” and “hack”. That’s right.
I hope he does, but as the old saying goes, “Hope in one hand and sh*t in the other and see which one gets full first.” He’s admitted he was wrong before, but he’s older now, with more reputation and a more rigid outlook.
Thank you. This is the response that was needed.
Game! Set! Match! to Professor Friedman!
I agree with TiPs, the Romers may not respond, but Paul Krugman will not be able to help himself. He will position himself above the fray, but more than a little to the right.
Before you release another analysis, reconsider the stimulus from single payer. There is no new spending. The savings goes to purchases other than health care but that is reallocation, not new stimulus.
Assume:
US health care expenditures are 20% of GDP
1/2 govt. and 1/2 private
Assume:
Single payer reduces that to 10% of GDP
All paid for by govt, no private
Then:
Govt. expenditures are still 10% of GDP
Private has 10% of GDP to spend on other things
The result:
There is no added stimulus (no extra money in the economy)
The private sector can buy other things (houses, cars, food,
etc.)
The private insurance people will need to get new jobs
Non-health care sectors will expand
I have a question….
My family is spending 20% or more of our post-tax income on various health insurance policies. That is an expense for us, but is it stimulus anywhere? How much of that expense gets back into the economy? (Is that even the right question?)
Bernie’s plan would give us the biggest raise we’ve ever had — almost 20%! To spend, save or give away… It seems to me that nearly all of it would go right back into the world
I’m 100% in favor of single payer. I’m just saying it is not a stimulus measure.
Like pruning is not a stimulus to the orchard?
It seems like it would be a stimulus to my neighborhood though. Where now I window shop downtown (we have a very vibrant downtown) if Bernies’s plan passes, I could actually spend some money
Yes, it would be an excellent thing to do. It would eliminate a lot of waste and bureaucracy and allow people to spend on other, more useful things and give more people health care. But, at the same time, it would eliminate the jobs of those people doing those wasteful things and that takes demand out of the economy and they will have to find new jobs.
So, although it is a very good thing to do, it simply doesn’t increase GDP.
The recent problem we have seen with growth (and ‘growth’ is a can of worms for another time) is the distribution. FIRE, health, Pharma sector CEO’s can only buy so many homes in the Hamptons, so many yachts, so many Rolex’s, so many Manhattan condos with their million-dollar bonuses. After that what? Pieds a terre in Paris? Junior kindergarten in Geneva?
Those bonuses would be much better divided up among ordinary people like you, me and katiebird, who will spend in the ‘real’ economy.
An ‘economy’ based on demand for useless tshotchkes, whether cheap or expensive, is neither sustainable nor moral when people are going hungry.
Perhaps those displaced health insurance workers could grow vegetables? Or become gladiators?
HR 676 Expanded and Improved Medicare for All contains provisions for job training and placement, and salary continuation for displaced administrative workers.
What about the “ripple” effect? Money that is spent in the local economy will be spent again by the recipient, and continue to circulate with new spending resulting in new income leading to new spending. A lot of the profit generated by the insurance and pharmaceutical industries is siphoned off into other holdings and not spent; it does not continue to recirculate through and contribute to the economy.
That may have a small effect if the marginal propensity to consume changes somewhat. But that would be a second-order effect. The money saved with single payer would be spent in other ways but some of that would still go to profit.
HotFlash is correct.
The marginal propensity to consume is much higher for the people that would benefit most from single payer.
Taking extraordinary profits from the current parasitical healthcare structure would have an enormous stimulative impact on the macroeconomy.
There is at least one source of stimulus. A significant number of insurance company workers will be needed to provide the routine work of managing the system of single payer. The business will be a commodity business, one that provides a routine service in a bureaucratic and highly competitive area. That will reduce the excess profits of insurance companies and the bloated returns to shareholders and executives that the current monopolistic/oligopolistic system produces. The need to pay workers enough to attract them to this business will also put pressure on excess profits. Remember, in a fully competitive market, profits are minimized.
The current excess profits are not consumed, but are saved or invested in some other business with excess profits. Putting that money in the hands of consumers is a source of stimulus.
The estimates I’ve seen have been that some 500,000 people who work in private health insurance would lose their jobs, right? That’s 10% of GDP for a half a million jobs, a mere $3,740,000/job. As make work-programs go, digging holes and filling them, that’s pretty ludicrous.
Robert Reich: ‘3. “What is it about Bernie’s economic plan that will generate this kind of economic performance?”
His proposal for a single-payer healthcare system.’ http://robertreich.org/post/140353623180
Good comeback. The Romers are “old” and the Gang of Four + Krugman et al are pre-Keynesians.
What has been going un-discussed in much of the writing, back and forth about your report is intent.
It’s as if everyone involved has agreed to discuss the matter purely in technical terms, leaving aside what is intended by the various parties.
IMHO, we’ve been living through a dark period where economists are “successful” to the extent they provide useful/feasible rationalizations for the behavior of the FIRE sector.
Taken as a whole, they form the foundation of our current orthodoxy, “Greed is good”, “Creative Destruction” etc….
There are other, alternative views, seldom allowed serious consideration because they challenge this orthodoxy.
What hasn’t been stated clearly enough, is that your report is a useful analysis, the intent being to understand whether Bernie Sanders plan is at all feasible, whereas the intent of your detractors has been to bolster the political fortune of HRC, a clear champion of the status quo.
You/we are not engaged in an honest debate over economic policy, we are mired in a down and dirty political struggle that may determine whether it is the rapacious greed of a few that continues to dominate our economy, or efforts toward the common good.
All evidence, so far, is that your analysis was the result of an honest intent, while your detractors was not.
The Romers and the gang of four have behaved disgracefully, with ill intent.
I’m hoping it’s a sign of desparation.
I’ve got this model that I use to calculate gas mileage in my car, where I assume that the tank naturally tends towards full. Putting gas in the tank may help in the short-run, but it’s unnecessary in the long-run as a full tank of gas is the natural state of the car. Don’t ask me how I know that, I just do…besides, it’s what my model says, so it must be true. Can’t figure out why the dang engine won’t turn-over though…must be the cold weather.
Yup, clearly exogenous. I posit a lack of phlostigon.
++++++ for the utilization of “phlostigon”
Your gas to air ratio is too high. You can lower it by ensuring less gas consumption, eliminating a few excess valves from your engine, and adding excess chassis weight that will trickle down to stimulate engine growth.
Sounds like you really know your stuff! The last mechanic I went to convinced me that I should put gas in his tank instead of my own, on the theory that it would trickle back into my tank (though I never understood how) and that it would be safer with him than with me anyway, since he was a professional and all.
+100
Yes, it’s the cold weather. As we learned in school, cold weather makes the gasoline contract, so the tank is not full enough. When the warm weather comes, the gasoline will expand, and the tank will be full again.
If you missed this, it’s probably because you didn’t think through all the implications of your model.
If we really have been using a classical model since 2007, how do we explain the almost 0% interest rate set by the Fed – isn’t that a stimulus? Also, how is it that our debt has grown to nearly 17-19 trillion dollars from 8 trillion in the last 8-10 years? Isn’t that spending by the government a stimulus? I am not an economist but have studied it a bit. Say’s law makes sense to me. I don’t think we are adhering to it in our governmental policies. To suggest that we are would only give Say’s law a bad name.
I am more confused than ever. To suggest that Romers et al had a valid criticism of your analysis seems like capitulation on your part – when anyone could see that their so called analysis was politically motivated and an argument ad hominem.
Why would you respond to such an attack – is that attack even worth a response?
Finally, for you to suggest that you can run different numbers to show that the Sanders’ plan would yield less growth is the icing on the cake in terms of a capitulation. If your model could yield such wildly different numbers, how valid is it?
What stimulus is provided by a 0% interest rate if there is no demand? In your window of the past 8 to 10 years the growth in the deficit is not reflective of additional spending so much as continued spending with declining revenue due to tax cuts and recessionary impacts on taxable wages.
In short, it’s the demand, stupid.
For the same period, wage compression for the vast majority of workers and tax policies to distribute greater wealth the fewest was, never, ever going to support previous rates of consumption. For the same period, additional diversions of greater and greater portions of what disposable income would remain have gone toward increases in health expenses, college tuition, and financial fees, and this further subtracts from potential demand.
As for the validity of models, whose model was used to support George W. Bush’s policies when, once Clinton did deliver a surplus, Bush promised that his tax cuts would generate millions of new jobs, still allow the DEBT to paid off within 10 years, and would secure social security pretty much through our kid’s lifetimes. Bush’s promises only fell, oh, about 20 trillions dollars short, but I am not surprised you would still prefer them as to do otherwise would give Say’s Law a bad name, whereas it being proven hugely wrong over and over will never give it a bad name as long as people like yourself stand by your beliefs, regardless of them not working.
You may not be an economist, but you should be, because like all conservative economists your beliefs are fixed and your models are fixed to your beliefs. But don’t take it from me, because I have small hands.
I am not a conservative either. I am just arguing that Friedman’s response to his attackers is misplaced and wrong. He argues that they are using Say’s law and I beg to differ.
Further, I particularly don’t care for your tone and presumptuous assertions about my position and what I should be or not.
I don’t pretend to understand the underlying economic theory but I can smell capitulation a mile away and this article seems like a capitulat ion to me. In other words I am questioning the motives. The motives of Rome et al is clear and pedestrian greed and payback to the Clinton for past and future favors. What are Friedmans. Hope you can understand that.
Take a look at this chart of commercial and industrial loans by banks. https://research.stlouisfed.org/fred2/series/BUSLOANSNSA
As you can see, loan demand dropped dramatically after the Great Crash, and only rebounded to its previous level in late 2014. Meanwhile, the loans outstanding before the Great Crash all had high interest rates. That’s especially true for mortgages, credit card debt and student loans. There was a bit of relief for consumers just as this chart shows: https://research.stlouisfed.org/fred2/series/CCLACBM027NBOG But there was a tremendous increase in credit card debt after the Great Crash. See this chart: https://research.stlouisfed.org/fred2/series/CCLACBM027NBOG
I’d guess that there was little savings on total interest to act as a stimulus.
No, the Fed did not intend that to be a stimulus. It kept cutting rates in a panic during the crisis to push more liquidity into the financial system, and got to pretty much zero. I had a sinking feeling when they cut the Fed funds rate below 2% that they would regret it, big time.
As economist Ed Kane has pointed out, by lowering interest income to retirees and other savers, it has reduced consumers spending power by about $300 billon year. Those folks at the Fed assumed that those savers would just spend their savings faster to maintain their lifestyles, as opposed to cutting back.
The folk at the Fed also assumed “wealth effect,” that raising asset prices would make everyone feel richer and spend more. But financial wealth is concentrated in the top 20%, so this is another form of trickle-down economics, and the evidence has consistently shown that that it’s a very inefficient way to try to stimulate the economy.
Ok. This makes sense. In other words the thieves not only stole trillions but also increased asset prices (so their portfolio loses could be eliminated) but in the process made everything more expensive and unaffordable. Thus, reducing our standard of living.
There seems to be a distinction between “output” and “outcome”. Where it seems that the former can be “objectively” measured, but the latter can only be “subjectively” pondered…whoever said “better to be roughly right than precisely wrong”, imho, understood this intuitively.
Thank you for this, Professor Friedman. A mini-course in the history of economics with my coffee. Food for thought, and ammo for discussion.
The money quote from GF is “Even a one year stimulus can push employment and output to a permanently higher level, and at that higher level it can generate faster growth by pulling more into the labor force and stimulating higher productivity growth.”
The question is whether this secondary effect can be expected to be as large as the initial stimulus: if the stimulus produces a 5% increase in economic growth in the year following its adoption, will the secondary impetus Friedman envisions maintain that 5% in subsequent years, or will it be smaller? Since Friedman is generating a quantitative prediction for growth, he needs a quantitative estimate of the relationship between the primary and secondary effects of stimulus.
Once more, the problem is that he hasn’t written down his model. Yes, I know that mainstream economics has largely retreated from Keynes’ critique of the classics, and the notion of automatic adjustment to full employment or NAIRU or whatever has taken us a lot further from reality. (I wrote a textbook that tells that story in detail.) But the R&R critique that Friedman has confused one-time and permanent effects of stimulus can be countered only by a model that specifies quantitatively how initial and subsequent effects are supposed to be determined.
We don’t need a history lesson. We need some algebra.
Here’s Friedman’s paper, complete with notes and a lengthy bibliography: http://www.dollarsandsense.org/What-would-Sanders-do-013016.pdf
Feel free to check his algebra.
Ed, there’s no algebra. That’s the point. He jumped right into his spreadsheet — the model was in his head.
Quantum Porosity
Before you set foot on University Campus, understand that you will be looking at RE Neanderthals and upper middle class event horizons already slotted into their future, a future of using other people to exploit natural resources, stealing from each other, and economists begin with that as a given. Before you open those 600 page texts on symptoms, written by professors of authority, learn the basics of chemistry, physics and calculus. If you begin with a footing on quantum mechanics, you can always coast back into position.
All politics is local, local tyrants controlling RE to increase rent relative to natural resource income, employing others to consume into an artificial scarcity equilibrium, leaving them to chase the resulting rent inflation, all depending upon the hoax of energy dependence. The nation/state layers are added for leverage, to bully other associations and protect themselves from being bullied. From the perspective of natural selection, the politics of arbitrary human selection and filtering of DNA is a counterweight, like classical mechanics.
You aren’t going to change the behavior of monkeys and apes, their system can only implode, and pretty soon they have left themselves no choice but to hunt you down, with mandatory participation in the willful ignorance. The economists do you the favor of measuring the counterweight, at least what they can see.
Because empire operation rewards simulated intelligence and penalizes intelligence accordingly, right out of the womb, participants become increasingly myopic, efficient, over time. The collective cannot see natural resource growth for all that dead inventory in the way, deficits and debt confirming themselves. The CBs keep trying to reignite the system and all they get is growing income inequality.
Who isn’t defending the price of oil now, against global trade collapse?
You have explosion and implosion. The explosion is directed in all directions, creating funnels of particles subject to cooling as they decelerate, and all funnels reignite at the base as they travel, open up and create handed fusion/fission vortices, depending upon equilibrium state, frequency. Physics is about the very big and very small, chain branching and diversion separated into quantum frequencies. Chemistry and Biology exist in between (A-4B+2 + A-2B+4 ~ A-4B+4 + A-2B+2 ~ A-4, B+2, A-2, B+4, depending upon other reactants, PVT, and quantum porosity).
That carbon chain has internal molecular leverage, like a spring, waiting for a particular partial charge (quantum), its compliment, to unload. A molecule is like a sheave is like a circuit in that a very small force can produce very big results, order from disorder in the spontaneous coupling of many complimentary reactions, human life in our case. The preamp and power amp is a coupled reaction from the perspective of a circuit.
If anyone was really interested in space exploration, they would identify the common inductor and capacitor, and insert the necessary resistor. What they would not do is travel all the rope distance wrapped around those sheaves, or bother to create a short between parts in the line. You want a particular, complimentary partial charge, a needle in a haystack.
Funny, how compliments find each other, NOT being the haystack. Landlord, government and union want you to work for their kids, while they hold your kids hostage, which is why the dead infrastructure warehousing RE inflation is raising rent directly, and indirectly, with rent costs baked in to every layer between natural resource and consumer, with nothing but stagnant wages to show for it all. The folks at the bottom of the pyramid do the work, and those at the top are credited with the 1s and 0s, as the pyramid inverts.
Hillary, Trump and Fed are just aggregated derivative symptoms, of local RE chain branching producing natural resource income inequality. Policy dissonance is a function of diverting responsibility to distant scapegoats, all blaming each other, for a percentage. Economics is like adding sections to a crane as the building rises, but you can always install a base where you are, because it’s not really about the building.
Basic Finances: your income minus your expenses is your profit. Some of your profit always goes to increase your savings pool, and the rest goes to increase your standard of living, which puts other people to work, depending upon how YOU direct the investment. Of course RE inflation is about eliminating your discretion, and of course the consumer addicts will help you spend your way into bankruptcy, with a full-time job at minimum wage, or directing you to stand in line for government services, behind them.
Those deficits and debt are none of your concern, other than employing willful ignorance as a counterweight. The money changers printed 1s and 0s in China, inflate RE prices for the Queen, increased rent and wholesale environmental destruction on her subjects, and they voted for the outcome, with compliance. At what point do you cut yourself an exit?
A billionaire just means lots of political 1s and 0s in a computer, with lots of monkeys willing to accept it as money, which means that the monkeys are incapable of recognizing work, and whatever it is that they are doing, it’s not work. Government is all 1s and 0s. Measure the productivity of you time, to increase the standard of living in your chosen community, instead of building a machine to effectively liquidate it.
Central DC computer control is just another in a very long line of technology Titanics, favoring behavior replication to scale. Recycle, by employing the implosion. Trump University is no dumber than Harvard, MIT or Stanford, “for who can study a subject when there are difficulties in the way not belonging to it.”
What makes you you is not what others see at any empire psychographic consumer intersection, but rather what you see that others do not, where you are. State kidnapping of children to enforce addiction to consumption is a weakness, not a strength. And how the accountants play with 1s and 0s is irrelevant.
What kind of morons devise a way to disable apoptosis and trigger chain branching, to print money on cancer? I am not suggesting you go get some dichloroacetate. I am suggesting you keep your distance from willful ignorance simulating intelligence.
An oncologist on the hospital ethics board; why am I not surprised.
A good response, though the Romers’ critique was deficient on other grounds as well. The real danger to Sanders’ plan, if instigated, is from the Fed. As Friedman noted, his estimates assume accommodative monetary policy. But the Fed is in thrall to the same models as the Romers and Krugman. Absent a re-learning we have not witnessed, with even a wisp of inflation, the Establishment will start banging the drums and interest rates will be jacked up. As we have seen, the Fed can crunch the economy with higher and rising interest rates far better than it can restart the economy with low (even zero for six years!) interest rates. Establishment economics will enforce stagnation.
So, kudos to Friedman and I hope this leads to a wider discussion.
You’re right about the Fed, Alan. We need a new constitution for the Fed, where it serves the people and future generations, not the bankers. But we also need a restoration of fiscal policy and massive tax reform.
Agreed.
Friedman’s response shows just how absurdly ideological academic economics is today – ludicrous assumptions that serve an ideological end, like “deregulated free market capitalism”, or that “greed is good”.
Friedman’s models also share an ideology – that “growth is good”. They don’t even consider what’s happening to our ecosystems – that we need to restore many ecosystems, not continue to damage them by increased consumption. From that point of view, yes, full employment would be very helpful if it is used to rebuild our infrastructure to function well with far less fossil fuels and other unsustainable inputs. Except that we should not be consuming more in the process.
Instead we need to reduce over consumption and waste of resources by heavily taxing fossil fuels, luxuries, etc., while keeping the new basics of survival affordable for working people. And to achieve any sort of economic justice on a global scale, and to avoid “ecological overshoot and collapse”, we’ll need radical reductions in both consumerism and global population.
Alyssa Battistoni discusses some of these points in a few incisive articles in Jacobin.
Alive in the Sunshine
“”While making people work shitty jobs to “earn” a living has always been spiteful, it’s now starting to seem suicidal””
and
How to Change Everything
“”Thus the more extreme versions of what Anthony Galluzzo calls Jetsonian leftism aspire to an ultra-modern luxury communism in which everyone can have everything. Meanwhile its opposite, a deep-green outlook fundamentally skeptical of human efforts to control nature, suggests that no one can have very much of anything at all.
Klein aims to navigate a way between the extremes of cornucopia and scarcity. She puts forth a vision of society built by a re-enlightened — or perhaps de-Enlightened — left, one more circumspect about human ability to shape the non-human world to our liking and more accepting of limits to the planet’s capacity.””