Re: Communicating with Randy Wray

[Doug Henwood <dhenwood@xxxxxxxxx>]

And look what happened to poor Luke.

Doug

Doug Henwood [dhenwood@xxxxxxxxx]
Left Business Observer
212-874-4020 (voice)
212-874-3137 (fax)


On Tue, 4 Oct 1994, Paul Davidson wrote:

> FROM:  Paul Davidson
> "      Economics Department
> "      523 Stokely Management Center  (615) 974-4221
> As Cool Hand Luke said "What we have here is a lack of communication".
>      Randy suggests I have not been responsive to his queries and attributed po
> sitions, quotes, etc to him that were not his.
>    I have already apologized for misattributing a quote of Steve Keen's to
> Randy. To that I plead guilty. But otherwise I thought I responded as best
> as I could to the poorly-framed queries of Randy. Obviously Randy disagrees.
> I leave it for others to decide - for one can not convince one of error if
> there is a lack of communication.
>    But I must alt least respond to Randy's suggestion that given my theoretical
>
> definition of Inflation, "then inflation is almost be definition not a public
> policy problem....in the real world it is very difficult to measure inflation b
> ecause... identical units are nmot sold year after year; baskets change; purcha
> ses at discount houses increase". etc.  All this is true and is nothing
> more than PART of the index number problem. (I am surprised that Randy didn't
> raise the base-reversal type problem; the Lespeyre's vs Paache index problem,
> etc. or even the "Hershey-Bar" problem of World War II (for those of you
> who, like me, were consumers of Hershey Bars during World War II and had to
> worry about "disguised" inflation.) . What about the elasticity of
> substitution effect forcing consumers to buy a changing market
> basket of goods as long as all prices do not change by the identical amount?
>  Yes these are all problems, I confess. Empirical measurements are
> often deficient compared to the theoretical ideal. But were consumers in
> between 1973-1980 buying bigger and better products when the CPI registered
> increases as high as double digits? Is inflation not a public policy problem
> as long as product names and qualities change at by at least one iota from one
> year to the next?
> Who believes inflation is not a public policy problem because in the real world
> the market basket of goods really does change each year (whether there are rela
> tive prices changes or not)? After all a 1993 HOOVER Vacumn is not the same
> as the 1994 model -- since it has a different model number, even if Consumer
> Reports states it appears to be the same mechanically. (Ask your Brazilian
> students if the market basket was identical(!) between June 1993 and June 1994-
> =and if not tell them that the quadruple (or more) digit inflation over the
> period was not a public policy problem because Brtazilians were buying
> some better goods!  And the fact that since July 1st and the currency
> conversion inflation rates have only been 5 per cent or so per month
> --does not mean that inflation has been significantly reduced!! It may
> mean that more people are buying at discount stores.
>   But why stop at the poor measure of inflation to dismiss inflation
> as a serious problem. What about unemployment rates?  We all know that
> the official unemployment rate is a poor measure of unemployment in the real
> world  (remember discourages workers, etc). Therefore when the unemployment
> e rate measurement went up to 10.7 % in the early 1980s, there really wasn't
> any public policy problem of unemployment. Perhapos all that happened were
> that workers on their Lucas-Rapping supply curve and choosing intertemporal
> leisure that period in anticipation of higher real wages in future periods.
> (And, of course, if the government is stupid enough to pay them for their i
> leisure in terms of unemployment benefits who can blame these leisure
> prefers to tell government enumerators that tey are actively looking for jobs.
> After all that would be in their own self-interest!)
>
>
> About all Randy and I appear to agree upon, is that these arguments are not inc
> reasing own's productivity. I am willing to admit it may be my expositional
> powers at  fault for the failure of Randy to pick up the clues I was sending
> to him. I can only hope that perhaps there were others on the network who
> did get a glimpse of what I was arguing -- and even if they do not fully agree
> with me, they have been encouraged to rethink their positions.  If that
> has occurred then, unlike Randy, my productivity has been enhanced.
>
> Have a good day!____Paul Davidson
> ))))_ fax # (615) 974-1686
>