Where PD/GF Dialog Leads

[John Gelles <jjgelles@xxxxxxxx>]

	On Tuesday, 25 April, Paul Davidson was talking to
	Gonzalo Fonseca.

	In one paragraph, Paul rejected the Austrian view of
	uncertainty. I have re-written the comment -- and wonder
	if Paul would still object to the view expressed as I
	present it:

  "Finally, you implicitly accept the Austrian view of uncertainty,
   namely that the future is to some degree deterministic but even where
   determinism is relevent, the world, as such, remains too complex for
   human forecasting."

	If this is what the Austrian's mean -- is it OK?

	Paul then goes on in his own words --

  "I prefer a general theory which permits an explanation that
   there is no endogenous logical forces (no matter whether
   associated with linear or nonlinear relationships) that will
   return a money-using system automatically to full employment
   if the system departs from full employment.

  "You apparently prefer the additional assumption that only in
   nonlinear systems will such endogenous forces be missing, while
   classical economists prefer a different special case that says
   as long as prices are less than perfectly flexible, there will
   be no endogenous forces that will restore full employment.

  "Your claim to superiority over the classical system is that reality
   is nonlinear. Their claim (at least as the short-run New Keynesians
   are concerned) is that reality is not perfectly competitive.

  "My claim is that it doesn't matter, whether relations are linear
   or nonlinear, monopolistic or perfectly competitive, the existence
   of liquidity in a money-using contractual society can explain the
   absence of endogenous forces that automatically restore full
   employment.

  "Paul D."

	The existence of liquidity!  How about changing that to:

	"The absence of automatic credit to maintain full employment
	 is what denies a money-based work and trading system the
	 benefits of constant full employment. The absence of
	 contingent anti-inflationary law is what fosters fear
	 in the system's producers to provide the necessary auto-
	 matic credit feature."

	These missing features in an economic system that uses
	money and private enterprise and property the way ours
	does, but uses people badly, can go on forever. As reform
	gets rid of debtors prison, tries out safety nets, and
	eventually makes employees' and self-employers' rights
	effective in the on going quest for social justice and
	domestic tranquility, so too, will new features be found
	to be missing to further improve the system.

	The concept that the system improves automatically, by
	installing in the beginning a perfect self-correcting
	mechanism, will have been disgarded -- but only as
	legislated reforms cure some of the major faults in
	the legislative system, as well. Our economic rights
	are inadequate because our political rights need
	constant reform and attention too.

	There is nothing wrong with words and numbers in trying to
	model how we make a living. But there is danger in abstract
	models that model other abstract models. They may never
	tell how to make a living or make a better living. They
	may end up describing how many angels can fit on the head
	of a pin. If they are a necessary part of reform, their
	connection to reform ought to be presented by way of
	concrete example -- like with real pin heads and real
	angels.

	      John Gelles