Conference on Saving and Investment

[Paul Davidson <PB108928%UTKVM1.BITNET@xxxxxxxxxxxxxxxxx>]

FROM:  Paul Davidson
"      Economics Department
"      523 Stokely Management Center  (615) 974-4221
I find Lynn Turgeon's comments regarding the Economic Policy Institute conferen
ce on Saving vs Investment interesting. I am not sure, however, who in the list
 he meant by Post Keynesians -- as opposed to others that are heterodox but app
arently not Post Keynesians. By the way how would you classify Alan Blinder or
Janet Yellen? Certainly not heterodox and certainly not Post Keynesian.
       In some correspondence that Alan Blinder and I had (we were neighbors
when I lived in Princeton), I chided Alan (in a letter dated April 1, 1992). As
one of the 100 hundred economists (including mainstream Tobin and Solow) that
signed a letter to President Bush urging a multi-year $60 billion deficit
spending on "infrastructure" , I indicated that I was "a bit surprised that
I did not see" his name on the letter.  Ala did not change his position on
fiscal stimulus till August 1992 -- after Clinton's "Putting People First" mani
festo had endorsed the infrastructure deficit and Clinton had won
 the nomination. At that time Clinton was searching for potential economic
advisors. In the autumn of 1992, Alan wrote indicating that he had "publically
recanted the error of his previous ways....My previous view was that the stimul
us should come from the monetary side rather than the fiscal side". (In March
1992 unemployment was at 7.2 per cent  -- and even Alan Greenspan believed that
 the stimulus should come from the monetary side and not the fiscal side --as
the Fed continued to reduce interest rates since 1991.)
  Question: Can we Post Keynesians be happy with the nomination of Blinder and
Yellen to the Fed?  Once on the Board can anyone predict how they will vote
in terms of interest rates? (Or if they could vote now?)
  Let me suggest a quick litmus test. Do the nominees believe in a NAIRU? If
the answer is "yes" be very wary.  IF you believe in a NAIRU, what rate of
unemployment do you think this NAIRU is? If they say 6-6.5 % they are nothing
more than Alan Greenspan clones in New Democrat clothing. If they say 5-6%
they are left-of-center mainstream economists who have not yet understood the
message of Keynes's GT.
   Anyone out there willing to venture what Blinder's and Yellin's
estimates of NAIRU are?

Have a good day!____Paul Davidson
))))_ fax # (615) 974-1686