The economics profession is a disgrace

It is funny being part of a profession which doesn’t deserve to exist in its current form. The fact is that I might have better helped the world if I was an anthropologist or perhaps just stayed being a professional musician. My profession is a total disgrace and our arrogance leaves us blind to reality. The latest survey by the National Association for Business Economics reinforces how far removed from reality my profession is. They think the most pressing problem in the US at the moment is the deficit and the public debt and downplay the importance of the entrenched unemployment. When pressed to explain this crazy set of priorities they invent a fantastic (as in fantasy) narrative about the dangers of deficits (which are?) and emphasise that unemployment is largely a voluntary choice by the individuals involved. The academic members of the profession teach their students this nonsense. They talk about the virtues of efficiency but ignore the huge losses that arise from unemployment. The reality is that the economics profession is a disgrace.

First, I was interested in this article in the UK Guardian (March 2, 2011) – The business press must prove its economic literacy – which seemed to echo a concern that I often express in this blog.

The author said:

The media reported the financial crisis and stimulus poorly. Now the story is deficit and cuts, is it equal to the task? The drama of Wisconsin and the fights down in DC about the state of government finances are a chance for US journalists to write about an economic story that affects everyone. It would be good to see more articles on the big picture questions of what sort of policies make sense, rather than just ones about the political processes of what sort of legislation will get passed.

We should all be able to relate to that.

The mainstream finance and economics media is divided into two types of journalist. First, the interesting writers who mostly do not fully understand the way the monetary system operates and who have been educated only in the language and reasoning of orthodox macroeconomics but try to offer some sort of balance. They usually get a “deficit dove” to reflect the progressive viewpoint and usually fail to understand that that the doves are part of the problem.

Second, the lazy journalists who do not understand very much and choose mostly to rehearse press releases from organisations or from politicians in an uncritical way. They become mouthpieces for the conservative think-tanks and have zero credibility.

I often get called up by journalists (most days) and some of them astound me with the questions they ask – such is the level of ignorance. Others are well-intentioned and closer to reality.

So it would be good to “see more articles on the big picture questions” in the current macro debate. The biggest picture is unemployment and rising inequality. But even articles that attempt to provide more than rabid political posturing such as “the US has run out of money” etc fail dismally to represent the situation as it is.

The Guardian author holds out an example of what she thinks is a good reporting approach:

A recent report in the Christian Science Monitor was a good example of the kind of drill-down coverage we need more of. By contrast, it’s been disappointing to see the news pages (though not the opinion columns) of the New York Times report on the deficit as though there is no room for debate about whether cutting spending is even a good idea right now.

The article she referred to (February 22, 2011) – Why the budget deficit is so hard for Congress to shrink – is not a model for accurate reporting.

The CSM article notes that even if the US Congress:

… takes a machete to … discretionary spending – it will barely make a dent in the budget deficit. That’s because a growing share of the US budget is dedicated to entitlement programs for retirees and the indigent and to paying interest on the national debt – none of which is part of Congress’s annual budget cycle or easy to reduce.

But it doesn’t provide any analysis of why it is a non-issue to worry about any of these things …

It chooses to reiterate the erroneous statements of neo-liberal organisations such as the Committee for a Responsible Federal Budget which it calls “bipartisan”. What does “bipartisan” mean when both major political parties are neo-liberal? Answer: nothing. So why include it as descriptor that we should take into account and attribute increased credibility to anything the organisation says?

The article suggests that the National Commission on Fiscal Responsibility and Reform (Obama’s neo-liberal organisation to advise the government on fiscal policy) has been prescient in bringing what they call the impending fiscal disaster to our attention.

So we read statements like this:

If current policy does not change, rising retiree health costs and claims on Social Security will propel mandatory spending to levels never seen before, squeezing out room for future discretionary spending.

That is a total lie. Even if outlays increase for health and pensions as a result of an ageing population the US government is not squeezed for future discretionary spending. To suggest that US government has to make “financial” trade-offs is a lie. All trade-offs when there are underutilised resources are political.

The US government can and will always be able to purchase anything that is available for sale in US dollars and can always pay their pension obligations as well as purchase other things that are available for sale.

The only issue will be whether there are real resources available to be purchased. But that is not a consequence of any financial constraint.

Running a deficit now does not diminish the capacity of a sovereign government to run a deficit next period or the period after next. If the economy reaches full capacity and non-discretionary government spending pushes the economy beyond the inflation barrier (that is, pushes demand (spending) beyond the capacity of the firms to respond in real terms (increase output) then political choices have to be made. There are no financial constraints involved here.

The article which the Guardian author thinks is a model for financial and economic commentary then articulates a number of “scary” financial ratios. For example, we read that “(b)y 2025, Medicare, Medicaid, Social Security, and interest on the federal debt would claim all federal revenues”. So what?

What is the point? There is no point that we should be worried about from a monetary perspective. We might not want the recipients to have that standard of living – but that judgement will reflect political considerations. We might not be able to provide that standard of living – from the perspective of available real resources. But again this is not a financial constraint.

Please read my suite – Deficit spending 101 – Part 1Deficit spending 101 – Part 2Deficit spending 101 – Part 3 – for more discussion of these issues.

There is no discussion in the CSM article questioning the monetary basis of the discussion about deficits and public debt. There is no critical argument.

I found the “model” article to be appalling.

Then I was sent the latest survey conducted by the National Association for Business Economics (NABE) who describe themselves by way of understatement (not!) as:

… the premier professional association for business economists and those who use economics in the workplace. Since 1959, NABE has attracted the brightest minds and the most prominent figures in economics, business, and academia to its membership with highly-regarded conferences, educational and career development offerings, industry surveys, and its unrivaled networking opportunities.

All those brightest minds must be quite glaring – as in shining intensely! Don’t you just love an organisation that has to actually tell you – in your face like – that they are the brightest, most prominent people who are clearly so important and unrivalled. I suppose when there is little substance to hang on to the rhetoric becomes all you have.

But the only thing that is glaring about NABE (as in patently obvious or blatant) is the degree to which the NABE panel is incapable of predicting anything with any accuracy.

For example, CNN who came up with the Brainstorming the Deficit segment this week only to put three commentators and a presenter in front of us whose collective grey matter in relation to macroeconomics is questionable to say the least had previously waxed lyrical about the NABE panel’s predictive capacity.

On May 19, 2008, CNN Money noted that:

A survey to be released Monday by the National Association for Business Economics found a majority of economists now believe the economy is in a recession or will be in one this year. A February survey found a slight majority still expecting to avoid a recession.

The latest survey also found and that forecasters expect unemployment to continue to rise, but that they believe the economy has already weathered the worst of the housing downturn and credit crunch.

May 19, 2008! What happened after that? We all know.

The NABE panel was hopelessly wrong – they were oblivious to the dynamics that had been building for some years that a financial disaster was coming. By the third-quarter of 2008 that is what happened. The US credit market worsened crisis and the US housing market collapsed. Unemployment not only rose – it skyrocketed as the recession deepened and persisted well into 2009.

The problem is that it is the likes of these characters who were incapable of seeing the worst recession in 80 years that was looming up before them but who are now lecturing us from behind the desks of their secure jobs that the deficit is the number one problem.

We should discount their predictions by 100 per cent – that is, ignore them. They are charlatans to say the least. The reason they continually make errors in their outlook is because they do not have models that reflect an understanding of the way the system actually works.

CNN Money was at it again this week when the NABE put out its February 2011 forecasts from its “brilliant” panel. they are running a series which it is calling “America’s Debt Crisis”. It is public debt they are referring to when the crisis was (and probably still is) the private debt. But whoever produces CNN Money clearly is incapable of appreciating that obvious point.

In the recent news report (February 28, 2011) within this series – Economists’ biggest worry: Federal budget deficit – the senior CNN Money writer reports that:

Government deficits are the biggest long-term worry of top U.S. economists, according to a survey released Monday.

The survey of 47 top economists by the National Association of Business Economics predicted that the Federal deficit will jump to $1.4 trillion in the fiscal year ending in September. In the November survey, the economists had forecast a $1.1 trillion deficit.

What does it take to be a top economist? Answer: the more errors you make the higher you will be ranked as long as you make your predictions with an air of authority and clothe them in jargon no-one will know the difference. Once your predictions go awry (as they always do) it is a simple matter of blaming one or more pieces of government policy as the culprit.

When things get dire – that is, some progressive corners you and is about to reveal how bereft your understanding of the economy is you can always pull out the “the facts are wrong” defence which usually works.

If things going really bad – you can just lie low – take whatever public handouts are forthcoming which allow you to keep your job and high salary – and when the air is a bit clearer – resume your attack on public handouts. You can also do this while away down or up the coast while holidaying in your nice seaside home with boat. Or whatever!

Anyway, with reference to the February 2011 NABE Survey, CNN Money says that:

Asked to rank the seriousness of various economic problems, with one meaning no concern and five equaling extreme concern, the federal deficit was the biggest worry, with an average score of 4.1.

State and local government budget deficits and debt was the second biggest worry with a score of 3.4.

The Survey itself (which I cannot link to because you have to pay for it – mine came off the back of the truck) actually said:

Panelists continue to characterize excessive federal indebtedness as their single greatest concern

So unemployment was ranked well down the list of concerns yet a non-issue – the size of the federal deficit and related build-up of federal debt is “their greatest concern”.

Unemployment is a real problem in the sense that it summarises a massive daily loss of income (production). Most people do not understand the daily scale of the losses that arise when there is mass unemployment. The lost income is never regained – it is what economists call deadweight losses.

If you are unsure I recommend you read this blog – The daily losses from unemployment – which provides further detail.

In addition to the economic losses (real output foregone and lost income) there are huge social costs associated with entrenched unemployment which spans the generations. A child growing up in a jobless household tends to inherit that disadvantage and display problematic labour market outcomes as adults. So a poor policy choice now – not to target low unemployment – commits the society to a diminished future.

The inherited disadvantage is easily prevented – direct public sector job creation. But my colleagues do not think it is a high priority. They prefer to focus on so-called microeconomic inefficiencies and alleged public finance issues.

The microeconomic inefficiencies inasmuch as they arise are always measured by agencies that do that sort of thing (for example, the Productivity Commission in Australia) to be relatively minor compared to the macroeconomic losses associated with unemployment.

But while my professional academic colleagues hector students who are forced to listen to them in lecture theatres in order to graduate in economics about the need for “optimal allocation” of resources and the primacy of “efficiency in resource use” they overlook the largest inefficiency of them all – mass unemployment.

My professional academic colleagues spend an inordinate amount of time writing about optimal policy frameworks which then form the basis of the lobbying efforts which pressure governments to privatise, deregulate, cut benefits, attack the poor etc. Yet when it is clear that governments can actually avoid these massive macroeconomic losses they claim that the “deficits” are the number one problem.

Question: What demonstrated costs are there relating to on-going budget deficits? Answer: none excepting the bright officers who are tied up in the unnecessary process of issuing debt to match the rise in the deficit ($-for-$) when they could be doing something useful.

Question: Who is worse off when the government runs a deficit? Answer: no-one, everyone is better off.

Question: What would have happened if the governments around the world had have followed the advice of my professional colleagues to let the market sort the financial crisis out? Answer: the total collapse of the financial system and the real production system.

My professional colleagues didn’t even see the collapse coming. So what would they know about anything that is important to the welfare of our communities. Answer: nothing.

I also note that in its November survey, the NABE panel said that the US Federal Reserve’s purchase of bonds would be inflationary. Some months later when it is clear that the only inflationary pressures are on the supply side (food and oil) the economists are backtracking in the February 2011 survey.\\

Conclusion

The majority of financial and economics journalists are part of the problem and fail the test of journalists – to ask questions and get to the bottom of things. Most of the reports are meagre reiterations of what some conservative (read majority) economist has said.

The same economists failed to even see the crisis coming even as it was already manifesting. These economists should be brought to justice for the statements they make and the policy influence they have. Their record of prediction is appalling and their policy advice leads to damaging policies.

That is enough for today!

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    28 Responses to The economics profession is a disgrace

    1. jrbarch says:

      eco – region of space where livings things exist

      no – a negative interface with that which follows

      mist – blurred sight down to tears

      eco-no-mist: practitioner of the dismal science who needs cheering up!

      Cheers ….
      jrbarch

    2. Neil Wilson says:

      Efficiency is irrelevant if what is proposed is socially ineffective.

    3. apj says:

      getting a little sick of hearing the (beat-up) projections….2025 this….2030 that….all they do is fall into the most basic of recency bias traps and extrapolate, extrapolate, extrapolate. In 1990 the economists thought there’d never be a surplus ever again…..in 2000, economists thought deficits would never be seen again (led by their commander in chief who thought the business cycle had been ‘repealed’). 10yrs later…..

    4. Tristan Lanfrey says:

      Hello Bill,

      first many thanks for this really interesting blog. Thanks to you, I can now claim that I understand macroeconomics to some extent, although I still have to score more than 2 out of 5 at any Saturday quizz…

      I am probably a good example of how the non-educated public have been brain-washed by mainstream economics thinking and the media that just repeat what they hear from the propaganda. It’s so simple to understand everything else once you’ve been told (and proven) that governments are not financially constrained like households are.

      I am pretty sure that some of these journalists who don’t understand what’s happening would be delighted to be shown the right direction. I agree that it is normally their job to understand what they write/talk about, but maybe it is worth pointing them to, at least, the blogs criticising their work. Because your blogs contain constructive criticisms (although sometimes the tone you use show some understandable frustration) any person of good faith would at least appreciate the feedback.

      Do you usually try to contact them? At least the ones that ask “deficit doves” about their opinion show some relative journalistic integrity. I refuse to believe that they all intentionnally lie to us. Or maybe I am too naive.

    5. Andrew says:

      I concur with apj, it’s obvious the economists are talking a crock of shit. When the deadly calamity that awaits us because of the budget deficit is always 5-10 years away, it never gets any closer. We are supposed to believe in a Zimbabwe style runaway inflationary episode……… Lord take me now!

      Moodys think Japan are imminently close to disappearing down a black hole. Gawd bless ‘em. I think Moodys will totally disappear up their own backsides before that happens.

      So Bill, give the economists some credit for the contortions they can perform. Some are so advanced they are just an anus with feet and ears sticking out.

    6. Some Guy says:

      The fact is that I might have better helped the world if I was an anthropologist or perhaps just stayed being a professional musician.
      The first bit of nonsense I’ve read on this blog.

      My profession is a total disgrace
      It is. You aren’t. At most a partial disgrace.:)

      and our arrogance leaves us blind to reality.
      I’ve often thought that the leading MMTers need more arrogance. Of course the absolute height of it is indistinguishable from the greatest humility.

      Towards this end, I suggest we all chip in for full length mirrors, for Bill et al to preen in front of each morning, while singing “I am the very model of the modern monetary theorist ..”

    7. Vassilis Serafimakis says:

      Bill writes “The academic members of the profession … talk about the virtues of efficiency but ignore the huge losses that arise from unemployment.” I wonder what an industralist would respond to a suggestion by his managers to decrease output in their plant, meaning to leave part of the machinery idle, and this despite having orders more than enough for full capacity. I believe the industrialist would demand a serious justification for such a crazy proposal. The manager who came up with the idea could, of course, (in order to avoid being sacked on the spot) retort that leaving machinery idle puts pressure on the machinery supplier who is thus forced to lower his prices.

      I think he would still get sacked.

    8. Tom Hickey says:

      Neil; Efficiency is irrelevant if what is proposed is socially ineffective.

      Bingo!

    9. Benedict@Large says:

      It is unsurprizing to see NABE rate the federal deficit as a 4.1 problem. It is shocking to see them then rate state and local deficits at only 3.4. Clearly, they have ZERO CONCEPTION of how the currency works.

      What exactly is the problem here? Are economists simply not trained to understand the natures of various currency forms? I understand that they are trying to pound economics history into the dirt, and that they consider basic accounting to be beneath them and better left to working “slobs”, but what is their excuse for not even knowing what money is?

      P.S. “Slobs” is my new word du jour. It is how Wisconsin Senator Glenn Grothman describes those protesters staying overnight in their state Capitol rotunda, people, he claims, like teaching assistants and others without “serious jobs”.

      @Andrew: An anus with feet and ears sticking out? That’s funny, but I’m not sure about the ears.

    10. Tom Hickey says:

      I’ve often thought that the leading MMTers need more arrogance.

      You haven’t been reading Randy Wray’s recent. He and cohort UMKC Bill Black are getting more strident.

    11. Bernard Leikind says:

      Dr. Mitchell,

      It appears that someone has already taken the film rights for this post.

      Film Says Professors Share Blame For Wall Street Crash

      Who put millions out of work, destroyed hundreds of billions of dollars in net worth, nearly toppled countries and the world economy? In the new documentary, “Inside Job,” filmmaker Charles Ferguson says business school and economics professors share the blame. In addition to out-of-control Wall Street financiers and asleep-on-the-job regulators, Ferguson’s documentary shows how some professors played a key role in the crisis by lauding financial industry practices that weren’t working, as they took home millions from Wall Street firms.

      The film won the Oscar for best documentary.

      Here you can listen to an informative interview with the filmmaker:

      http://hereandnow.wbur.org/2010/11/10/inside-job-blames-professor

      I believe that you will enjoy the interview in which your, er, colleagues, some of them very famous, show up as clueless (and corrupt) in excerpts from the movie.

    12. phil armstrong says:

      Great stuff!! I’ll give my students a copy each to ponder on….

    13. Dismayed says:

      “When pressed to explain this crazy set of priorities they invent a fantastic (as in fantasy) narrative about the dangers of deficits (which are?) and emphasise that unemployment is largely a voluntary choice by the individuals involved. The academic members of the profession teach their students this nonsense. They talk about the virtues of efficiency but ignore the huge losses that arise from unemployment. The reality is that the economics profession is a disgrace.”

      Absolutely! The profs who ‘taught’ me economics at U Chicago have their heads so far up their a$$e$ that they can see daylight!

    14. rvm says:

      Dear Bill,

      When can we expect the release of your and Prof. Wray textbook?

    15. AFewThings says:

      Very good post. One thing that I think really needs to be addressed, though, is this:

      “The US government can and will always be able to purchase anything that is available for sale in US dollars and can always pay their pension obligations as well as purchase other things that are available for sale.”

      The idea behind this is that sovereign nations are never revenue-constrained. We know this. How do you deal with the possibility that actually DOING this (i.e., buying whatever needs buying/making up shortfalls/printing money/whatever) will cause people to lose trust in the system? Doesn’t that seem to be the main fear for those who aren’t Neoliberal /ideologues/, but actually buy the economic arguments? The idea goes something like this:

      - People expect the economic system to be relatively stable in terms of its underlying rules. My dollar is as good as yours. If I put it in the bank it will not magically disappear/be confiscated/become worthless overnight. If it’s for sale, I can buy it. My currency is good all over the country. Very basic assumptions like that.

      - Bad things happen, and there’s a shortfall in demand, recession, depression, whatever. Government has to decide what, if anything, to do to help.

      - Government steps in to help. They pour huge amounts of money into Krugman-style super-stimuluses, Bernanke Helicopter drops, the works. Now, things might eventually get better, even much better, BUT there’s a big problem in interim – people lose trust. Even ones you think /might/ know better. Food prices go up, people protest, people try to recall/vote politicians out of office because they “seem” irresponsible, and all sorts of other things happen which no politician wants. People threaten to pull their money from banks. They strike. They say “I won’t participate in a system where the rules can change anytime/my money’s value can disappear overnight!” All this happens while the economic picture, if people stuck with it, would be getting better. It doesn’t, though, because people have lost trust and PANICKED, so what would have worked if they were calm now does NOT work.

      The basic fear that politicians/central bankers are “messing with the system”, which undermines trust, is what these people fear. It doesn’t matter that the fear of what the politicians/CBs ACTUALLY DO may be useful or helpful; the mere fact that it’s /believed/ that they are wrong/stupid/irresponsible/screwing up the system can make it a self-fulfilling prophecy! That is the underlying issue that needs to be confronted, IMO.

    16. Odizzle says:

      Vassilis Serafimakis – Bad analogy. Your factory is just a place that utilises resource to turn a profit.

      People don’t live in your factory, they earn their money there, then they go home and they vote in their interests to decide what sort of nation they want to live in (well, that’s the idea).

      The argument is that if you have resources idle in your national economy, you can direct stimulus towards utilising those resources. The hard part is finding the growth to show for it, and the wherewithal in the population so we can formulate policy to do so. Oh, and if you stuff up just a smidge, the public will slaughter you at the polls.

      The BER, for example, worked quite well. Construction stimulates demand for labor and resources across the board, and schools will utilise these resources to educate people. It was an effective capital return for stimulus, just the sort of thing governments are supposed to do when things are a bit tough. The (murdoch especially) media still beat it up, and people complained incessantly about it (it lost votes).

      How do you think we’d go with Bill’s Job Guarantee for the poor in Australia? Think of the rhetoric: “helping all those lazy bastards” and so forth? The first sign that it was having teething problems, and it would be all over red rover for that government. Why would they bother?

      The private sector is tremendously good at directing resources to where they’re needed according to dry economic concepts of supply and demand. But there are no people in economics, that’s the issue.

      We have decided (or I have, at least) over the course of history that we want a nation and a society to consist of human beings, rather than economic interests, the only accountable mechanism we have in society that is charged with protecting that is government.

      This is not to say that the private sector is universally evil, profit hungry and nasty to the detriment of everyone (if it was, economics would be far less controversial), but we need to protect the public sector so that, as a nation, we can look after the less fortunate.

      Taking this to extremes, if you don’t look after people, your systems of control, law and order break down and the conditions under which commerce can take place are destroyed. That’s not an efficient economic outcome.

      I seem to have gone on a bit. But yeah, bad analogy.

    17. Alex says:

      Bill you are better off in the economics profession than you are anywhere else. What you know about the monetary system (and what other don’t) is some of the most important information on earth. In fact, I could argue that nothing, and I really mean nothing, is more important that MMT. Think of what problems can be solved (even partly solved) by MMT. Governments think they can’t afford renewable energy projects to help battle climate change – MMT has the answer.

    18. studentee says:

      “BUT there’s a big problem in interim – people lose trust. Even ones you think /might/ know better. Food prices go up, people protest, people try to recall/vote politicians out of office because they “seem” irresponsible, and all sorts of other things happen which no politician wants. People threaten to pull their money from banks. They strike. They say “I won’t participate in a system where the rules can change anytime/my money’s value can disappear overnight!” All this happens while the economic picture, if people stuck with it, would be getting better. It doesn’t, though, because people have lost trust and PANICKED, so what would have worked if they were calm now does NOT work.”

      this is essentially the hyperinflation scenario, correct? i’m just unconvinced that this can happen in the us. as long as the gov’t can make you pay your taxes, the currency will have someone value. and i think prof. mitchell is skeptical of wacky superstimuli or helicopter drops. smartly done fiscal policy can be made quite sharp. just give those willing to work jobs at the minimum wage. this will help a lot, and i don’t think anyone will start freaking out about it, besides those already freaking out. and the event that food prices go up because of fiscal stimulus is one that would make prof. mitchell start thinking about reigning in deficits.

    19. Min says:

      bill: “The US government can and will always be able to purchase anything that is available for sale in US dollars and can always pay their pension obligations as well as purchase other things that are available for sale.”

      AFewThings: “The idea behind this is that sovereign nations are never revenue-constrained. We know this. How do you deal with the possibility that actually DOING this (i.e., buying whatever needs buying/making up shortfalls/printing money/whatever) will cause people to lose trust in the system?”

      Speaking for myself, the fact that the gov’t meets its obligations instills trust, not distrust. :) What makes me lose trust are those who preach that gov’t is ineffective and then, when in power, govern badly, who say that the gov’t cannot be trusted and then, when in power, betray that trust, who tell people that the gov’t will screw them and then, when in power, screw them.

    20. A Few Things, You’ve identified the central problem. Coincidentally I made much the same point as you on Mike Norman’s blog yesterday:
      http://mikenormaneconomics.blogspot.com/2011/03/republicans-admit-that-their-jobs-plan.html

      The basic mistake made by the anti-stimulus lobby is that they think stimulus or an increased money supply leads immediately to inflation. They don’t get the point that money printing only influences inflation VIA a rise in demand. And a rise in demand is the solution to a recession.

      David Hume actually made the latter point about money supply increases per se having no influence on inflation 250 years ago. (That was in his essay, “Of Money”). So the deficit terrorists are a good 250 years behind the times.

      The only solution is to carry on, till we are all blue in the face, and try to educate our deficit terrorist “friends”.

    21. Vassilis Serafimakis says:

      Odizzle, thanks for the comment.

      I insist the analogy is apt – though it cannot be extended much. (Macro is not micro.)

      I wrote that keeping workers idle on purpose in the national economy is, as indeed Chartalism proclaims, extremely inefficient. Mainstream economists ignore that gross inefficiency but are ready to pounce on the inefficiencies of “government bureacuracy”, etc. I submitted that a national government that does not realize the major inefficiency it suffers in its economy by keeping idle, on purpose, a portion of its able working populace is akin to an industrailist keeping idle, on purpose, a significant part of his plant’s machinery. There can be no logical reason for such a policy (we presume the industrialist does have a full-order capacity) just as there is logical reason, if logic prevails,for a gov’t to ignore -or even cause- significant, entrenched unemployment.

      If we must extend my analogy, we should do so in the direction of machines vs human workers. But this would be a digression into marxist waters.

      Take care.

    22. Neil Wilson says:

      “The only solution is to carry on, till we are all blue in the face, and try to educate our deficit terrorist “friends”.”

      There is another solution. Let’s try it and see.

      We put the stimulus in and if it causes price inflation we tax it out again. If it doesn’t then lots of people get jobs that didn’t have them before.

      What not to like?

    23. Min says:

      Ralph Musgrave: “The basic mistake made by the anti-stimulus lobby is that they think stimulus or an increased money supply leads immediately to inflation. They don’t get the point that money printing only influences inflation VIA a rise in demand. And a rise in demand is the solution to a recession.

      “David Hume actually made the latter point about money supply increases per se having no influence on inflation 250 years ago. (That was in his essay, “Of Money”). So the deficit terrorists are a good 250 years behind the times.”

      Many thanks, Ralph. :) I’ll have to check out the Hume essay.

    24. Matt Franko says:

      Bill,
      I recently came across this concept of “Mathematical Maturity”: mathematical maturity, in this case the ability to “see”…

      http://en.wikipedia.org/wiki/Mathematical_maturity

      Some excerpts that I think hit the deficit terrorists/inflationistas straight on:

      ‘lack of mathematical maturity manifests itself as the inability to accept non-intuitive results’

      “Mathematical maturity has been defined :
      the ability to communicate mathematically by learning standard notation,
      a significant shift from learning by memorization to learning through understanding,
      improving mathematical intuition by abandoning naive assumptions and developing a more critical attitude,
      draw a line between what you know and what you don’t know,”

      These people do not possess Mathematical Maturity. I believe this is why a lot of folks in quantitative fields and non-economists can understand MMT (the truth) before many economists such as the ones that are the subject of your post here. This maturity may be a rare gift for those who have obtained it or to those it has been given. Maybe we shouldn’t be so hard on these people, we should perhaps feel sorry for them and seek to really focus on helping them overcome this learning “disability” if you will. Some sort of quantitative ‘visualization’ tool may be of help to them.

      They do not possess the math maturity to “see” the dynamics of these operations, then because they are ‘blind’ in this regard, they have to go straight to the “rules” (monetarism) they once learned in college years ago and then, if those rules are congruent with their political beliefs, they become what seems like just impossibly hard cases as human beings, tough nuts to crack.

      It’s like the difference between navigating by “dead reckoning” vs. “way points”. The monetarists use “way points”, MMTers use “dead reckoning”.

      Resp,

    25. Dan says:

      Why isn’t this an article in the times, the economist, or some other national/international publication? Since this has been published I would encourage you to submit some version of this for publication.

      Am I being naive?

      Dan

    26. PG says:

      Most of economy is now as astronomy was at the time of Galileo: an ideological propaganda machine, falsely presenting itself as knowledge, at the service of a hidden political agenda.

      Taking out some brilliant spots of scientists, like MMT, that is what it is.

      Maybe, organizing and simplifying – a book? – what exists now in open access on the fallacies of the “geocentric system of economics” could help?

    27. Stephan says:

      @Dan
      “Am I being naive?” YES.

    28. Vassilis Serafimakis says:

      “The economics profession is a disgrace”.

      In other news, people lie in court. And this just in, about bears in the woods:

      It appears they are NOT house-trained.

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