tag:blogger.com,1999:blog-5154389358831836369.post2537975845969364933..comments2024-03-28T02:00:36.854-04:00Comments on The Slack Wire: Minsky on the Non-Neutrality of MoneyJW Masonhttp://www.blogger.com/profile/10664452827447313845noreply@blogger.comBlogger25125tag:blogger.com,1999:blog-5154389358831836369.post-39124136620150099542021-12-07T06:32:19.443-05:002021-12-07T06:32:19.443-05:00สล็อตpg The highest standard of casinos and entert...<a href="https://g2gcyber.com/" rel="nofollow">สล็อตpg</a> The highest standard of casinos and entertainment.g2g123https://www.blogger.com/profile/03114725113273620618noreply@blogger.comtag:blogger.com,1999:blog-5154389358831836369.post-1464009494262408472015-02-05T12:36:30.566-05:002015-02-05T12:36:30.566-05:00But, given the assumptions that created the need f...<i>But, given the assumptions that created the need for policy in the first place, there is no reason to think that the projects funded as a result of this intervention wil be exactly the same as in the perfect-information case. And there is no reason to think there are not lots of other unrealized projects whose non-undertaking happens not to show up as unemployment. [5]</i><br /><br />I would agree even if you removed the double negative. Picture the balance sheets of commercial banks, and ask yourself what they would do more of with a lower cost base, versus innovation by an entrepreneur (which is what I think you mean in the higher-up story about a person who can't get funded).<br /><br />Particularly, I think of commercial-bank balance sheets as being, in shorthand, car loans + home loans. Entrepreneurs (and stock-market investors) do use home equity both as savings and as a collateralised source of capital -- but this is a few steps away from what the bank itself is doing. (eg, insert their ideas of who is creditworthy, their risk models, etc.)<br /><br />cf, Carolyn Sissoko: http://writingcapital.tumblr.com/post/21255474235/equity-capitalisomorphismeshttp://isomorphism.esnoreply@blogger.comtag:blogger.com,1999:blog-5154389358831836369.post-42070946678425144222015-02-05T10:17:33.513-05:002015-02-05T10:17:33.513-05:00And sorry, I've become a cantankerous snob whe...And sorry, I've become a cantankerous snob whenever the word "continuum" is deployed. You mean something like: "Several tools do the same job in different ways"?isomorphismeshttp://isomorphism.esnoreply@blogger.comtag:blogger.com,1999:blog-5154389358831836369.post-76922751595730862742015-02-05T10:16:00.712-05:002015-02-05T10:16:00.712-05:00Yes I liked that as well, precisely because I had ...Yes I liked that as well, precisely because I had bought the standard speculators + farmers story.isomorphismeshttp://isomorphism.esnoreply@blogger.comtag:blogger.com,1999:blog-5154389358831836369.post-33716752725492486502015-01-12T01:27:34.817-05:002015-01-12T01:27:34.817-05:00How about we restate that thesis as "Money, c...How about we restate that thesis as "Money, credit, and derivatives exist on a continuum of financial devices for trading off income and liquidity."<br /><br />What I really liked about that piece was the point -- correct IMO -- that financial contracts are not, in general, used to hedge real risks. It's not farmers who trade corn futures, etc.JW Masonhttps://www.blogger.com/profile/10664452827447313845noreply@blogger.comtag:blogger.com,1999:blog-5154389358831836369.post-78247913807018627782015-01-12T00:43:27.526-05:002015-01-12T00:43:27.526-05:00They at least avoid sign errors ;)
But yeah, is h...They at least avoid sign errors ;)<br /><br />But yeah, is his thesis that "Derivatives have replaced credit money" true in the sense of the larger economy? Aaron Brown is wicked smart, but I think that thesis encroaches in the realm of Big Questions (theory), not personal experience.isomorphismeshttp://isomorphism.esnoreply@blogger.comtag:blogger.com,1999:blog-5154389358831836369.post-19595379429412295182015-01-11T13:18:42.407-05:002015-01-11T13:18:42.407-05:00You're right, that is really interesting. It s...You're right, that is really interesting. It seems like practitioners often have a better grasp of this stuff than economists.JW Masonhttps://www.blogger.com/profile/10664452827447313845noreply@blogger.comtag:blogger.com,1999:blog-5154389358831836369.post-5855121607813185332015-01-11T12:53:05.198-05:002015-01-11T12:53:05.198-05:00Also, regarding the role of credit and money, this...Also, regarding the role of credit and money, this is the most thought-provoking thing I've read in the last while (ever?) on the topic:<br /><br />http://www.minyanville.com/business-news/editors-pick/articles/2527The-Physics-of-Wall-Street2527253A-The/1/22/2013/id/47336isomorphismeshttp://isomorphism.esnoreply@blogger.comtag:blogger.com,1999:blog-5154389358831836369.post-67970316607316193562015-01-11T12:43:12.860-05:002015-01-11T12:43:12.860-05:00I'm also short nitpicking orthodoxy, and long ...I'm also short nitpicking orthodoxy, and long observing and learning about reality.<br /><br />So a follow-on question: isn't the desire to have "a coherent programme" not only premature, but also needless? "Schools of thought" are handy for freshmen or for those who want to sweep away a large group of people with a unitary motion of the hand.<br /><br />But it seems to me that the desire to totalise is the opposite of "humble, competent people"—studying specifics rather than looking over the shoulder for a method of interpretation even while looking and listening.isomorphismeshttp://isomorphism.esnoreply@blogger.comtag:blogger.com,1999:blog-5154389358831836369.post-60568497142762054952014-12-28T04:17:18.853-05:002014-12-28T04:17:18.853-05:00The 'you' was referring to whichever party...The 'you' was referring to whichever party was making the 'do you have an alternative' argument, not to yourself. Unlearningeconhttps://www.blogger.com/profile/13687413107325575532noreply@blogger.comtag:blogger.com,1999:blog-5154389358831836369.post-43773690389822002332014-12-20T22:43:06.777-05:002014-12-20T22:43:06.777-05:00Minsky's Kaleckian side is very interesting. O...Minsky's Kaleckian side is very interesting. One of the best chapters in Stabalizing an Unstable Economy was chap 7 where he analyzed the price level using Kalecki's profit equation. I have been surprised that this method isn't used more by hetrodox economists. It is directly relevent to the arguments around market moneterists and NGDP targeting. From an empirical prespective it would be interesting to see how the mark up has changed over time as well.A Hhttps://www.blogger.com/profile/06916657901677009228noreply@blogger.comtag:blogger.com,1999:blog-5154389358831836369.post-14912407449393540012014-12-20T22:41:42.891-05:002014-12-20T22:41:42.891-05:00This comment has been removed by the author.A Hhttps://www.blogger.com/profile/06916657901677009228noreply@blogger.comtag:blogger.com,1999:blog-5154389358831836369.post-16698907356799024242014-12-18T01:00:42.286-05:002014-12-18T01:00:42.286-05:00Man, it's one blogpost. Cut me some slack.Man, it's one blogpost. Cut me some slack.JW Masonhttps://www.blogger.com/profile/10664452827447313845noreply@blogger.comtag:blogger.com,1999:blog-5154389358831836369.post-55336959276419020082014-12-17T05:18:17.305-05:002014-12-17T05:18:17.305-05:00No, I think they're different questions.
It i...No, I think they're different questions.<br /><br />It is probably true that if you believe a monetary economy can be analysed as a barter economy, then you necessarily believe that the quantity of money has no real effect. However, I don't think that believing in money neutrality in the second sense requires believing it in the first sense.<br /><br />In a barter economy, no special value attaches to particular assets due to their liquidity attributes, since it is implied that all assets are equally liquid as they can all be used in exchange. There is therefore no need to hold something like money balances purely for liquidity purposes. However, even accepting that people do desire to hold money for its liquidity attributes and that this desire may vary from time to time, the actual amount that people want to hold is determined in real terms. It is therefore still coherent to believe that changes in the money supply only effect prices.<br /><br />I think the distinction matters, because I feel that attempts to question money neutrality by focussing on the first question sometimes miss the point.<br /><br />I agree with you that it can be difficult to interpret what an exogenous change in the money supply might mean, which is why I used the rather awkward wording: "the impact of different policies differentiated by their intended impact on the money supply".<br />Nick Edmondshttps://www.blogger.com/profile/15342983814699700396noreply@blogger.comtag:blogger.com,1999:blog-5154389358831836369.post-2192488341169493192014-12-16T10:38:30.778-05:002014-12-16T10:38:30.778-05:00I'm sure some do. But something is clearly wro...I'm sure some do. But something is clearly wrong when an argument that "Minsky was right" does not include a passage comparing Minsky with reality. Thornton Hallhttps://www.blogger.com/profile/11402495641975262697noreply@blogger.comtag:blogger.com,1999:blog-5154389358831836369.post-84973362734199821722014-12-16T00:18:49.860-05:002014-12-16T00:18:49.860-05:00Which one is supposed to be "my own" the...Which one is supposed to be "my own" theory?JW Masonhttps://www.blogger.com/profile/10664452827447313845noreply@blogger.comtag:blogger.com,1999:blog-5154389358831836369.post-19705170346990223772014-12-16T00:17:57.203-05:002014-12-16T00:17:57.203-05:00That's right. However, I think it's import...That's right. However, I think it's important to avoid the temptation of thinking that the non-monetary relations of production and interface with the natural world has the same quantitative character as money values -- that the monetary economy is a reflection of an underlying "real" economy. The relation of economic activity to the climate, say, is real and vitally important, but it can't be quantified in the same way that, say, the evolution of debt-income ratios can be. JW Masonhttps://www.blogger.com/profile/10664452827447313845noreply@blogger.comtag:blogger.com,1999:blog-5154389358831836369.post-31341907974035641812014-12-16T00:11:44.835-05:002014-12-16T00:11:44.835-05:00What makes you think that heterodox economists don...What makes you think that heterodox economists don't try to "go into the world and find out"? JW Masonhttps://www.blogger.com/profile/10664452827447313845noreply@blogger.comtag:blogger.com,1999:blog-5154389358831836369.post-47049930559723934292014-12-16T00:10:56.819-05:002014-12-16T00:10:56.819-05:00I think this is exactly right. To get from the dom...I think this is exactly right. To get from the dominant Walrasian paradigm to the story we want to tell, there are two steps. First, we have to recognize that economic transactions are carried out in terms of money and take the form of money payments and money commitments; and that the dominant actors have the goal of accumulating wealth measured in money, not consuming real goods. But that's only the first step -- and you could fairly criticize Perry Mehrling (not so much Minsky) for stopping there. The second step is to ask how the organization of economic life in terms of this money game transforms the social activity of production. How does accumulation of money-value develop the division of labor, revolutionize the organization of labor, and so on? Because historically it certainly has.JW Masonhttps://www.blogger.com/profile/10664452827447313845noreply@blogger.comtag:blogger.com,1999:blog-5154389358831836369.post-70434956275613363872014-12-16T00:07:27.836-05:002014-12-16T00:07:27.836-05:00Aren't these really the same question? If you ...Aren't these really the same question? If you assume that the long-run trajectory of the economy is unaffected by monetary factors (including presumably credit and balance sheets) then aren't you analyzing the long-run path of the economy as if it were a barter economy?<br /><br />I'm also not sure what it means to talk about exogenous changes in the money supply in a modern credit economy. JW Masonhttps://www.blogger.com/profile/10664452827447313845noreply@blogger.comtag:blogger.com,1999:blog-5154389358831836369.post-9027214734708284362014-12-15T07:34:05.352-05:002014-12-15T07:34:05.352-05:00As usual, a great post about an interesting subjec...As usual, a great post about an interesting subject. I agree that there is still no coherent heterodox theory of economics, but at least the modern heterodox schools are in position to possibly create it. <br /><br />I find the following incomplete: the vision of economy as a hierarchy of units linked by financial relations. I think that what is missing from this vision, and what is crucial, is the flow of 'real' resources: from fossils to high-tech electronics. We live in the world where commodities produce commodities, but if we rise to the level of planetary economics, we have to account even for such factors as climate and influence of catastrophes. And there is no way to reduce our globalized world to isolated economies, and as such things as supply of oil, energy and metals deeply affect everything else.<br /><br />So it follows that a good theory and good model of economy must consist of this interwoven sides: 'financial' and 'industrial', tied together. I am optimistic that such models will eventually be made, and perhaps our understanding of economies will be furthered by that. Anonymoushttps://www.blogger.com/profile/13978734648230292076noreply@blogger.comtag:blogger.com,1999:blog-5154389358831836369.post-21169610408247550352014-12-15T04:07:42.004-05:002014-12-15T04:07:42.004-05:00Great post, really enjoyed it.
All I have to add ...Great post, really enjoyed it.<br /><br />All I have to add is a comment on something you said in the introduction:<br /><br />"To which you can fairly respond: OK, but where is the alternative economics you're proposing instead?"<br /><br />I actually don't think this is a far response at all. You're effectively conceding that your own theory is not up to the task, but are using excuses to continue using it anyway. Would you use a map of New York in London, just because you didn't have an alternative? No! You'd fall back on rules of thumb, observation and probably ask someone for assistance. Theory is supposed to advance our understanding, and if it can't do that I see no point in using it just for the sake of it.<br /><br />Having said that, the response is obviously easy to fall back on from a position of hegemony, which is why it's so widespread.Unlearningeconhttps://www.blogger.com/profile/13687413107325575532noreply@blogger.comtag:blogger.com,1999:blog-5154389358831836369.post-84715196147905580942014-12-12T13:30:21.090-05:002014-12-12T13:30:21.090-05:00One think I simply don't get about the heterod...One think I simply don't get about the heterodox: you realize the orthodoxy, by reclining in their chairs and imagining equilibrium, has gotten it wrong. And yet you write:<br />"Once we have admitted that money and money contracts are necessary to economic activity, and not just an arbitrary numeraire, it no longer makes sense to make simulating a world without money as the goal of policy. If money is useful, isn't it better to have more of it, and worse to have less, or none?"<br /><br />Why isn't the next step: "let's go out into the world and find out"?<br /><br />Why the orthodox devotion to the reclining in ones chair method of empirical investigation?Thornton Hallhttps://www.blogger.com/profile/11402495641975262697noreply@blogger.comtag:blogger.com,1999:blog-5154389358831836369.post-14155996646928222992014-12-12T11:13:21.362-05:002014-12-12T11:13:21.362-05:00My two cents:
An important problem of the view of...My two cents:<br /><br />An important problem of the view of the economy as "a set of agents exchanging goods", is that these agents are implicitly assumed to be motivated just by consumption. If every actor is motivated just by consumption, then "everyone produces to sell in order to buy (and consume) something else", that is another way to state Say's law.<br />If we think in terms of intertemporal maximization, this means, for example, that China today is running an account surplus because it plans to have a consumption binge sometime in the future, which is clearly very irrealistic.<br />A more realistic view is that China runs an account surplus because it accelerated China's technologic growth; this implies that Chinese economy can grow faster if the chinese consume less than what they produce; this is consistent with the idea that some big economic actors (enterpreneurs, multinationals,etc., in short capitalists) are motivated by a drive for accumulation of abstract value, not for consumption of goods.<br />Since "abstract value" is often (but non exclusively) stored as money or credit, this idea of a "drive for accumulation" can explain how a continuous rise in debt levels (whose other side is credit, aka abstract value) can be beneficial and possibly necessary to keep the economy running. In short the drive for accumulation requires some fort of continuous umbalance, that often takes the form of credit.<br />Then a "money view" can be useful to understand the effects of continuous increases in debt levels, increasing fragility etc.<br />But IMHO if you take out the "drive for accumulation", and you give less space to the "drive for consumption" that is implicit in the "materialist view", you end up with a lot of equation that end up being accounting identities where it isn't obvious who is doing what and why.<br /><br />From this point of view, I think that while the "money view" is more realistic than the "materialist view", most monetary problems should be seen as distributional problems at their hearts.MisterMrnoreply@blogger.comtag:blogger.com,1999:blog-5154389358831836369.post-78915568859332834482014-12-12T09:44:16.872-05:002014-12-12T09:44:16.872-05:00Very interesting. (I should say that I have also ...Very interesting. (I should say that I have also enjoyed a number of your other recent posts.)<br /><br />It sometimes seems to me that there are two different aspects of the question of money neutrality.<br /><br />First, there is the question of whether a monetary economy can be analysed by considering a barter economy. Part of the problem here is determining what actually constitutes each. A barter economy might well include contracts for future delivery of goods and services (i.e. deliver good A now, receive good B next year). These have an implicit credit element - the party due to deliver at the later date may fail to do so. So we might expect to see some of the same sort of issues due to information asymmetry that you described. But I wouldn't see this as a monetary economy. What you can have in a monetary economy, but not a barter one, are contracts denominated in abstract units, i.e. contracts that, even ignoring credit risk, have no guarantee of conversion into anything of inherent value, so that the ongoing acceptability depends on faith.<br /><br />The other aspect of money neutrality takes it as read that a monetary economy is different to a barter economy, but is simply the idea that the (nominal) quantity of money is irrelevant "in the long run". In some sense, it is obviously true that if all the nominal quantities and prices were scaled up or down by the same factor, then nothing interesting would change. The more difficult question concerns the impact of different policies differentiated by their intended impact on the money supply. Would we reach a time (in a meaningful timeframe) in which there was no differences in the real outcomes of these policies, merely a difference in the price level? (My own feeling is not.)<br />Nick Edmondshttps://www.blogger.com/profile/15342983814699700396noreply@blogger.com