Re: Conference on Saving and Investment

[ECWFM@xxxxxxxxxxxxxxxxxxx]

Dear paul - my lack of capitals in the places you might find acceptable is not
to be intrepreted as being meaningful - merely i can't be bother using a shift
function when i am trying to minimise the time spent writing emails.

further, i note you refer to me as William F. when i actually sign my email as
bill (usually with a kind regards - which over here refers to a relatively
informal and friendly offering of dialogue). the "William F. tone" is a bit over
the top i reckon. but never mind the trivia. here is some more talk.



>Secondly, perhaps I have misinterpreted Cotrell but he appears to conflate
>the NAIRU concept which involves ACCELORATING  inflation with the possiblity
>of some (stable?) rate of inflation before full employment. Or some inflation
>occuring as we move to full employment but ending once there! If inflation
>due to diminishing returns
>occurs with expansion because  of either the classical law of variable
>proportions, or what I have called "hiring path dimishing returns" due
>to hiring less efficient labor and capital equipment inputs them the same time rate of nominal price as earlier hired inputs), then
>this is a ONCE-FOR-ALL rise in the REAL COST of a greater flow of output.


a nairu concept in orthodoxy involves both an accelerating (with an e)
component and a stable component depending upon the growth of the money
supply in relation to real output growth. I mentioned some earlier published
work of my own (Australian Economic Papers june 1987) which defined a concept
not unalike the nairu - in the meagre sense that there was a relation between
activity and the unemployment rate which could be steady or not - which i
called the MRU (macroequilibrium rate of unemployment). the importance of this
conept is that the steady inflation rate could occur at any number of
unemployment rates and would likely to occur at high rates of invol. un (IU),
given the type of mechanisms (conflicting bargaining powers) which i see as
being important in understanding inflationary processes.

you seem keen to talk about inflationary  pressures emerging from cost factors
in a diminishing returns world (a message strongly appearing in the passages of
the GT that you referred allan (and hence all of us too). i took the trouble to
re-read the selections, although i knew them reasonably well, and it is a
diminishing returns world that is being considered by keynes. my view of
inflation (my in the sense that i am saying it here - not in the sense of
ownership or exclusive claims to it development) is therefore considerably more
GENERAL than a view based on diminishing returns. because if in the GT, the
production function is not described by variable proportions then have we got a
theory of inflation left. NO. In my world, diminishing returns could exist and
squeeze margins and force a struggle of real shares to emerge.


>There need not be any Accelorating rate of inflation associated with  any
>rate of involuntary unemployment. This does not require a "radical" change
>in the distribution of income; it requires an inccomes policy as described
>in Davidson, G. and Davidson, P. 's book ECONOMICS FOR A CIVILIZED SOCIETY.
>Civilized people can negotiate how the fruits of the INCREASE in output
>
>(but not necessarily equal) increase in absolute real income.

an incomes policy requires legislation and tribunals to administer it. i live
and have grown up in a country with a unique arbitration and wage setting
system and a long (the longest?) history of wage determination under the aegis
of incomes policies. in our case the federal govt can control wages but not
prices.

now i remind you of what keynes thought about incomes policies - on p.270 he
said, interestingly when talking about OZ, that "the escape was found ...[never
mind the context of what the escape was from]...., partly of-course in the
inevitable inefficasy of the legislation to achieve its object...."

now i do not happen to agree with this. within limits defined by the class
struggle (rememember CHILE 1973 - i certainly will never forget that lesson of
my youth), legislation can assist to moderate income claims. but ultimately, in
an open economy some shiek or other is going to want a few more mercedes benz's
and a shock to the cost structure is going to emerge. who pays? well in your
world, all groups, sit down and negotiate to share the real losses to the
economy implied. that is a wonderful vision of humanity and may i add the
perfect philosophical basis for a true socialistic collective environmentally
protective production society. we are civilised after all.

i just do not share that faith in the groups in this type of economy who are
essentially at odds with other although it is disguised often by overlapping
categories of existence. your world fits nicely in with all that nonsense
called Total Quality management (TQM) where production is not about wage and
profits determination but it about quality. civilised agents (no longer defined
in terms of their relation to capital) merely interact to produce quality and
agree amicably with some legislative guidelines to share the receipts out in a
manner which exactly exhausts real income. i just do not have such faith.
capitalism is essentially a system of distributional conflict. workers in first
world nations may improve their living standards at the expense of those in the
third world (i am aware that the third world terminology is somewhat poor and
possibly captive of another paradigm). and now with freer trade, waht do the
capitalists do, not sit around and negotiate nice deals with the unskilled in
their own countrys, no way mate, their in to the poor nations as fast as they
can get their operations organised. competing interests, competing outcomes,
resolution requires costs on one or the other or both. that is my understanding
of the system we both live in.

>Apparently
>appeal to civilized instincts in humans which would preserve the
>entreprenurial system while eliminating its major faults through expansion and
>continuous full employment growth rubs Marxists such as William F. Mitchell
>the wrong way.  Mitchell wants to be a "post-Keynesian" but he is not a
>"Post Keynesian".  He has not noticed the subtley of this distinction between a
> lower case hypehated post-Keynesian and an upper case non hyphenated
>Post Keynesian.
>   I noted in my PUBLIC INTEREST (1980) paper entitled "Post Keynesian Econ-
>omics: Solving the Crisis in Economic Theory " (reprinted in  MONEY AND EMPLOYM
>ENT, THE COLLECTED WRITINGS OF PAUL DAVIDSON, VOL 1, 1990) that to avoid the
>lack of uniformity in classifying schools of thought "there is no hyphen
>between the words Post and Keynesian".

well the hyphen is not very subtle and i surely noticed it in the literature.
but who says i should accord to it. that would imply i accept its logic,
validity, or whatever. i don't want to be a PK - it just happens i am. post
keynesian is post the samuelson is-lm, 45 degree line decimation of effective
demand notions - which keynes, kalecki and marx wrote sensible things about.

further, in your excellent article in the PUBLIC INTEREST you state three
propostions. I liberally paraphrase here. "The characteristics of the
historical and humanistic models employed by Post Keynesians may be summarised
by  the following three propositions: 1) the economy is a historical process;
2) in a world where uncertainty is unavoidable, expectations have an
unavoidable and significant effect on economic outcomes; and, 3) economic and
political institutions play a significant role in shaping economic outcomes"

i ended up quoting verbatum. now earlier in that article you have "A table of
political economy" and you say it attempts to associate various schools of
modern economic thought with different positions on the political spectrum. now
readers not familiar with this excellent table summary of all of us should
refer to the first 3 columns "socialist-radical" which includes Galbraith (JK i
guess), Bowles, D. Gordon, and ALL MARXISTS, "neo-keynesians" (joan robinson,
kaldor, kregel, sraffa, pasinetti, eichner, harcourt), and "keynes" (harrod,
shackle, weintraub, davidson, minsky, wells and vickers). ALL THREE GROUPS ARE
THEN SUB CLASSIFIED AS POST KEYNESIANS.

so paul, welcome to the club. which makes the next paragraph you offered a bit
odd indeed.

> By Post
>(no hyphen) Keynesians, on the other hand, I mean those whose analysis is based
>on the axiomatical logical foundations that Keynes provided in the GT. If being
>logically consistent is demeaning in the sense that the analysis is
>"tome-bound" as Mitchell insinuates, then I prefer to be logically consistent
>compared to Mitchell's willingness to apparently accept bits and pieces from
>any academic scribbler who strikes his fancy -- whether these scribblers were
>using different axioms or not.

joan robinson certainly read and incorporated a lot of marx in her works.
pasinetti - is he tome-bound? hardly. harcourt (a particular friend of mine)
inspired us as students to read marx and a lot of other scribblers.

it is a little disingenuous of you to write that i seemingly sample any
scribble who strikes my fancy whether using different axiomatic structure or
not. you have failed to understand or give time to appreciate anything i have
written here (or referred you to - i at least read your referrals or have (as
is normally the case) already read them), if you really believe i get my view
by fashionably sampling scribble. give us a break. you clearly could not think
that so why say it. in OZ if you want to insult someone swear at them openly.
no worries mate. but to impute this sort of rubbish is losing the plot of the
discussion.

>    Please note that Mitchell is inconsistent in indicating that in his "versio
>n of the world... being a post keynesian (note he left out the hyphen here but
>used it earlier in his screed) is tantamount to being heterdox".  But
>since Mitchell believes that there were heterodox economists "long before
>Keynes", then he can not mean post-Keynesian in the chronological sense as
>"after Keynes" even though eight lines earlier he says "i (uncapitalized)
>am a post-keynesian (uncapitalized). after keynes (uncapitalized)".

yes  the hypthen or lack of it is due to haste and not lack of thought. the
logical point is very small paul and not really deserving to be made.

however the next is worth commenting on

>    Why does Mitchell not call himself a post-Smithian, or a post-Ricardian,
>or even a post-Hicksian? Why pick on poor old Keynes -- when Mitchell clearly
>thinks Keynes's GT "was neither well written nor without problems inasmuch as
>it aspired to a GT of capitalism but said very little about capitalism
>per se". Maybe I can even convince Mitchell that he should also be called
>a post-Hayekian, the latter not only wrote trying to explain captialism
>per se but also the road to Marxian serfdom!


refer to "Table of Political Economy" by paul davidson (PUBLIC INTEREST - noted
above) for the answer. i am also a student of yours paul in case you do not
appreciate that some of your writing has had influence. and you seem intent
always on shoving the argument of into ad hominem - once before you accused me
of being an austrian - and now once again - a hayekian. give us a break.

the reason i fit more into column one of your TABLE and not column three is
because i cannot accept a framework (as in the GT) where real wages have to be
lower when employment is higher in a short run expansion. the axiomatic basis
of this view is not even remotely similar to SMITH (MS or WON), Ricardo (Who
was a SAY apologist) or HICKS (which one? mr. is-lm disaster or his close
relative?) and i have nothing in common with the austrians ( i am an
econometrician remember - a but then in your eyes that is dismissed as being
faddism). so lets stick to the analytical discussion and avoid the divergences
into non sequiters.


>   Anyone who believes in a macroequilibrium unemployment rate below full emplo
>yment -- and believes that this is somehow natural (Mitchell doesn't say
>his "MRU" is natural but he says it is not "dissimilar to the NAIRU"), can
>not believe that a civilized society can exist which provides the fruits of
>full employment. Given the obvious failures of STATE PLANNING -- both in theory
> and in practice-- I prefer to believe that a civilized entreprenurial
>system can be developed by intelligent peaceful policies.

maybe you should read my early article on the MRU. if you had been following my
discussions over the last 6 months on this column (PKT) you must have gleaned
that i eschew the notion of natural rates in economics. i have talked about
historical path dependence, stochastic non-stationarity, temporary and multiple
equilibria. there is nothing natural about it. i also said yesterday that my
MRU was deliberately named to avoid the long run vertical connotations of the
NAIRU. i also said an important differentia specifica of theMRU is that it is
cyclically dependent. Okay.

>  Regarding Ric Parkin's comments on NAIRU and hysteresis (also implied in
>some of Mitchell's comments), I think he might be interested in the minisymposi
>um on hysteresis with contributions by Rod Cross, Don Katzner (especially Katzn
>er's if you are interested in the mathematics of hysteresis and the
>incorrect interpretation many give it ) in the JPKE, Spring 1993 issue.

i should say i was one of the early macro economists to actually publish
acacademic work about hysteretic processes and the mathematics of the same.
what ric parkin said in his mail was entirely consistent with the mathematics
of state dependent systems with unit roots in the difference functions. the
only question is in this regard is what is the economics of the processes
described by the very special time domain properties of the system. on his
interpretation though - you imply he needs more thought - i think what he said
was fine as it stood. maybe you need to articulate the specific problems you
have with it rather than (once again) refer him (and us) to more reading.


anyway folks that is my lunchtime down.

kind regards

BILL
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* William F. Mitchell           Telephone: +61-49-215027                    *
* Department of Economics                  +61-49-705133                    *
* University of Newcastle       Fax:       +61-49-216919                    *
* Callaghan  NSW  2308          Email: ecwfm@xxxxxxxxxxxxxxxxxxx            *
* Australia                                                                 *
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