"Who gives two [esses] what Robert Vienneau thinks about anything?"and
"...and Robert Vienneau is a self-published hack."
And last week, Econ Job Market Rumors witnessed this typically enlightening exchange:
"Robert Vienneau is a [effing] retard."I don't know what that response is about. I follow Barkley Rosser, Jr., in thinking that reswitching points to the possibility of some interesting dynamics in General Equilibrium models. And I know of no adequate response to Fabio Petri's critique of General Equilibrium theory, particularly what he calls the impermance problem.
"Why?"
"Still complaining that GE theory doesn't deal with reswitching and other sraffian critiques when it clearly does."
This has nothing to do with me. But I thought I'd quote it for an illustration of a completely wrong opinion:
"A related paper of interest is Mas-Collel (1989), 'Capital Theory Paradoxes: Anything Goes,' which notes that the 'problems' coming from aggregating capital are very much related to the Anything Goes theory of Sonnenschein-Mantel-Debreu, and about as problematic to neoclassical theory (meaning, not very problematic)."
Robert your are justly famous! :)
ReplyDeleteAd hominem arguments simply indicate the other party feels threatened.
-Ian.
"The resolution, then, is thus: continue writing Y=f(K,L)"
ReplyDeleteI love how he writes this yet nowhere actually justifies such a position!
That´s fine with your assessments of CCC.
ReplyDeleteBut the golden rule still holds, undermining sraffians' assertions about long run growth. Another related question: what are your views on long run growth? Moreover, do you have a better theory for income distribution than marginalism? Or you´d rather keep fixed the wage rate (because political powers do it) when modelling the economy? I bet you don´t.
Take a look at the first graph:
http://www.econbrowser.com/archives/2006/09/productivity_an.html
Thanks Ian.
ReplyDeleteI don't know what are "Sraffians' assertions about long run growth". In his theory of transformational growth, Edward Nell generally assumes a tendency towards equality between the rate of profits and the rate of growth. Of course, I have plenty of models of distribution to choose from in traditions I like.
I don't really understand Rafael's "Take a look at the first graph". The graph says productivity and real wages follow a common trend. So what?
ReplyDelete"I don't really understand Rafael's "Take a look at the first graph". The graph says productivity and real wages follow a common trend. So what?"
ReplyDeleteIf wages were exogenously determined this would not necessarily happen. An increase in productivity would not be completely captured by workers.
Common trend is something very different from what you see in the data. I think you understand what I mean.
"I don't know what are "Sraffians' assertions about long run growth"."
There a big literature on this issue. However, some of them think savings are not important.
"Of course, I have plenty of models of distribution to choose from in traditions I like."
Your models assume that workers consume all their earnings. This reminds me of Kalecki´s models. But keep in mind that chinese households save 30% of their income. Hence, such class of models don´t seem to me to represent reality (of course this example is singular -- or perhaps not, they are 1/5 of humanity).
There are richer models out there.
In response to Rafael, and without having followed up the links that Robert posted, I have two points to make.
ReplyDeleteFirst, there are indeed plenty of theories of income distribution in the post-Sraffian/post-Keynesian literature that do not assume that wages are exogenously determined. Rather, they tend to assume that the interest rate is exogenously determined, in the sense that the supply of credit always adjusts to meet the demand at a given interest rate; i.e., the level of "savings" is a red-herring since a constant stock of savings can service any level of credit. And the interest rate does not ration "capital": the price of capital goods does that. But Keynes told us this years ago.
Second, it is easy to accept that the conditions in the labor market affect a wage/unemployment trade-off without in the least buying in to the idea that the solution to unemployment and/or an increased scale of production requires low wages. That's because, in post-Keynesian models, equilibrium is often defined as a "monetary equilibrium" in which the aggregate distribution of income between wages, interests and profits is determined by monetary variables, such as the interest rate policy and propensities to spend nominal income. In these models workers do not necessarily consume all their income. In other words, the frontier of the wage/unemployment trade-off is determined outside, and logically prior to, the conditions in the labor market. High interest rates is then a fundamental cause of unemployment and low growth: it's the financial rentiers who are throttling back the economy.
However, this is a complex area, and I do not wish to argue for any particular position. But I do want to point out that there are clearly superior alternatives to marginalism in the context of theories of income distribution. In fact, I am non-plussed that by the suggestion that marginalism is the only game in town, given its well-known internal incoherence (capital controversies) and its well-known ideological and apologetic content.
-Ian.
"Your models assume that workers consume all their earnings." This is false. The first link in my previous comment is to a model in which workers may save.
ReplyDelete"Common trend is something very different from what you see in the data. I think you understand what I mean." Nope. But as far as I do, it sounds false.
"Your models assume that workers consume all their earnings." This is false. The first link in my previous comment is to a model in which workers may save."
ReplyDeleteSorry, but there is no model in this post.
Ian, thanks for your response.
"Common trend is something very different from what you see in the data. I think you understand what I mean." Nope. But as far as I do, it sounds false."
What I meant is that trending together is something much weaker than being cointegrated.
"i.e., the level of "savings" is a red-herring since a constant stock of savings can service any level of credit."
ReplyDeleteI guess I just don't understand what you mean by that. So far as I know, everyone is agreed that saving means the excess of income over expenditure on consumption. But where exactly is the disagreement about credit?
"And the interest rate does not ration "capital": the price of capital goods does that. But Keynes told us this years ago. "
I'd be grateful for a quotation.
"Sorry, but there is no model in this post."
ReplyDeleteIn every comment above, I've linked to this post. As stated in the first sentence, that is the last of a series of four posts. That series lays out a Post Keynesian model. (It meets at least some of the specifications Ian lays out above.) In that model, workers save.
> But where exactly is the
ReplyDelete> disagreement about credit?
I was alluding to "natural rate" theories of interest, in which the interest rate is the price that equates the supply and demand for loanable funds, and loanable funds are monetary proxies for real capital. This is the theory that Keynes rejected, e.g., "The rate of interest is not the 'price' which brings into equilibrium the demand for resources to invest with the readiness to abstain from present consumption."
I remember a very succinct Keynes quote about interest rates not rationing capital. I'll try to find it for you. But in Keynes theory, of course, the interest rate is determined by liquidity preference, not the supply and demand of "capital".
"I remember a very succinct Keynes quote about interest rates not rationing capital. I'll try to find it for you. But in Keynes theory, of course, the interest rate is determined by liquidity preference, not the supply and demand of "capital"."
ReplyDeleteFine, but central banks can always control the liquidity in the market (except perhaps in extreme cases). So why do not promete the euthanasia of the rentiers? Let´s set the interest rate = zero, and stop this right-wing plot.
If there wasnt a neutral real interest rate, (core) inflation wouldn't accelarate when the Fed set the fed funds rate below it. Real savings matter.
I do promote the euthanasia of the rentiers and socialization of investment.
ReplyDeleteBut before you think civilization will collapse remember that a positive interest rate is not necessary to conservatively transfer consumption through time or ration capital. Most economic theories of the interest rate naturalize a historically contingent social relation of exploitation.
Why do you think that inflation is evidence for a natural rate of interest?
A cheap money policy will increase the demand for credit, via the marginal efficiency of investment, and raise effective demand in the economy. This will cause inflation via an increase in the price of labor and capital goods. But it's not the *interest rate* that is rationing real capital. It's the interest rate that rations the demand for credit. You've got the direction of causality the wrong way around.
I'm not a supporter of Keynesian policies, but he did represent a highpoint of pro-capitalist theoretical understanding of the economy.
-Ian.
"I do promote the euthanasia of the rentiers and socialization of investment."
ReplyDeleteThis worked well in the USSR.
"But before you think civilization will collapse remember that a positive interest rate is not necessary to conservatively transfer consumption through time or ration capital. Most economic theories of the interest rate naturalize a historically contingent social relation of exploitation."
ReplyDeleteRead Wicksell and things will become clearer.
Historically contingent social relation of exploitation?
C´mon. Investments are interest-rate sensitive.
OK, invoking the communist bogeyman and telling someone to "read Wicksell" do not constitute serious arguments. When you're ready to engage rationally I'll be happy to continue the discussion on the nature of interest rates and whether the notion of a "natural rate" is theoretically coherent.
ReplyDelete-Ian.
"OK, invoking the communist bogeyman and telling someone to "read Wicksell" do not constitute serious arguments."
ReplyDeleteFirst: it´s not you who decide which argument is serious or not.
The failure of "socialization of investment" is reality, there´s nothing we can do about it. It obviosuly has to do with the misalignment of incentives, lack of information (remember the calculation debate), but I like to stick with reality, ignoring harsh, abstract debates. The debates were fruitful during the cold war, but nowadays...
When I told you to read Wicksell I thought it would be ok, because the other commenters did the same, linking to posts and models. I can recommend you to read Interest and Prices instead. I find those arguments pretty convincing.
OK, thanks for the clarification.
ReplyDeleteDo you know that many authors in the Post-Keynesian tradition reject the theoretical coherence of Wicksell's "natural rate" of interest, since it is undermined by the Cambridge capital controversies? The tradition you are encountering here has read their Wicksell -- and rejected it, including modern, mainstream neo-Wicksellian theories of the interest rate.
I agree that invocation of the USSR is an anachronism. But it's a failure of imagination to assume the alternatives before us are either capitalism or dictatorial state socialism. There are real questions of comparative economic institutions to consider, which I expect all open-minded, non-ideological economists to be interested in. What is the nature of the interest rate? -- this is actually a deep question, and contested.
-Ian.