Re: Equilibrium, rest and nonergodic systems.

[BMOORE@xxxxxxxxxxxxxxxxxx]

> Received: from eagle.wesleyan.edu by pacnet.pac.wesleyan.edu (Mercury 1.1);
>     Sat, 29 Oct 94 0:19:03 GMT-0500
> Received: from csf.Colorado.EDU by EAGLE.WESLEYAN.EDU (PMDF V4.2-11 #5526) id
>  <01HITND06ONK8Y5RBR@xxxxxxxxxxxxxxxxxx>; Fri, 28 Oct 1994 20:47:03 EST
> Received: from  (localhost [127.0.0.1]) by csf.Colorado.EDU
>  (8.6.9/8.6.9/CNS-3.5) with SMTP id SAA19876; Fri, 28 Oct 1994 18:43:18 -0600
> Date: Fri, 28 Oct 1994 18:43:18 -0600
> From: Paul Davidson <PB108928%UTKVM1.BITNET@xxxxxxxxxxxxxxxxx>
> Subject: Equilibrium, rest and nonergodic systems.
> Sender: pkt@xxxxxxxxxxxxxxxx
> To: Multiple recipients of list <pkt@xxxxxxxxxxxxxxxx>
> Reply-to: pkt@xxxxxxxxxxxxxxxx
> Message-id: <01HITHNLY5MK0008C7@xxxxxxxxxxxxxxxxx>
> Content-transfer-encoding: 7BIT
> Originator: pkt@xxxxxxxxxxxxxxxx
> Precedence: bulk
> X-Listprocessor-Version: 6.0c -- ListProcessor by Anastasios Kotsikonas
> X-Comment:  POST-KEYNESIAN THOUGHT
>
> FROM:  Paul Davidson
> "      Economics Department
> "      523 Stokely Management Center  (615) 974-4221
> Dear Basil: First we missed you at the Conference on Bretton Woods Revisited at
>  Bretton Woods.
>      Second, you suggest that a nonergodic system is inherently restless and th
> erefore the concept of equilibrium as a state of rest is not applicable.
> I disagree. As Keynes pointted out given a "state of expectations" then "the
> steady level of employment thus attained may be called the long-period employme
> nt corresponding to that sate of expectation" (p. 48 GT).    Thus there can be
> an equilibium level of employment (which may involve involuntary unemployment)
> as long as the state of expectations does not change! And even in a nonergodic
> world it is possible to have periods of time (e.g., during portions of The Grea
> t Depression) when the economy actually gets stuck at some relatively unchangin
> g level of involuntary unemployment!
>    What you are talking about, Basil, is what Keynes noted on p. 50 oftheGT
> where he noted "An uninterprupted process of transition...to a new long period
> position can be complicated in detail. But the ACTUAL course of events is more
> complicated still. For the state of expectation is liable to CONSTANT CHANGE,
> a new expectation being superimposed long before the previous change has fully
> worked itself out; so that the economic machine is occupied at any given time w
> ith a number of overlapping activities, the existence of which is due to variou
> s past states of expectation." (Emphasis added).
>       But as my earlier posting on equilibrium suggested, the equilibrium
> concept is essential to imitate the design of a laboratory "controlled
> experiment". Without any logical basis for designing experiemnts to indicate
> a test of what exogeneous variable is assoiciated with what endogenous effect
> we can explain NOTHING!
>    Basil, you indicate that "in a credit money economy we cannot even define ge
> neral equilibrium". If true that implies that a credit money economy can
> never achieve, even momentarily, a full employment equilibrium position where
> all markets clear. Now, as a logical "experimental design" I can always think
> of some state of expectations that, given whatever you want to specify as the e
> ssential characteristics of a "credit money economy", can be associated with
> a "long period employment"  where all who want to work at the going real wage
> can find employment. Are you therewfore claiming that this "hypothesize"
> state of expectations is LOGICALLY incompatible with a credit money economy?
> Or are you claiming that as a "stylized fact" monetary economies NEVER achieve
> AND NEVER CAN achieve full employment? I would disagree with both the logical a
> nd stylized fact rhetorical questions that I have posed? Wouldn't you?
>       The supply of money --even if it is entirely endogenous -- can be made
> compatible with a full employment equilibrium. (IF you disagree, then why
> bother having any monetary and fiscal policy perscriptions to achieve
> a better (closer to full employment) economic performance?)
>        Surely you are not implying there is nothing that
> can be done to improve economic performance of the US credit money economy if
> only policy makers would listen to Post Keynesians (e.g., Basil Moore for
> Chair of the Fed, Mr. Clinton, rather than Greenspan, Blinder, and/or Yellin;
> and perhaps PD for Secretary of Treasury when Bentsen steps down!)?
>      Third, I do not understand why you believe that nonlinearities remove
> the necessity of having a logically consistent microeconomics and macro-economi
> cs. (When people talk about microfoundations, they are really saying that the
> macro functions must be logically consistent with the micro -- although they
> need not be identical. To fall back on my biological background, the economy
> of the forest must be logically consistent with the biology of the tree --
> even though the forest may continue to function perpetually while individual
> microtrees might die!) Non linearities may make the relationships
> more complex but that doesn't releive those who argue that nonlinearities
> are THE cause of all our macroeconomic maladies the onus of demonstrating
> lofgical consistency.
>     For myself I do not believe that nonlinearities are a necessary condition
> for underemployment equilibrium; nor are they a sufficient condition for
> underemployment equilibrium!
>
> Have a good day!____Paul Davidson
> ))))_ fax # (615) 974-1686


Dear Paul
    My point that a general equilibrium is impossible in a credit
money economy is simply that as long as money is the good that is
generally accepted in exchange for all other goods, no agent can be
in monetary equilibrium. She will always be willing to accept
additional money balances, ceteris paribus. She will never say, "No
thank you, I've got all the money I want, unless you reduce its
price."  In this sense money is unique: an excess supply of money
cannot occur.

    Trust you have now received my comments on the manuscript. ASgain
sorry to be so late.
Basil