Re: Economic Dimensions

["John B. O'Donnell" <jackodonnell@xxxxxxxx>]

Harry Veeder wrote:
>
> John O'Donnell wrote on Oct. 25:
>
> >
> > I believe Basil Moore's error is confusing the measure used to
> > judge what to do with the control used to do it. Yes, money
> > interest rates are affected by the actions of a central bank that
> > restrict the availability of credit. But, it is not the only
> > consequence of those actions and it is definitely a measure, not
> > a control.
>
> The issue of "confusing" measures with controls depends on what system
> one is studying. If "the economy" is understood in terms of many
> *interacting* systems, rather than one system, what is considered a measure
> for one system might function as a control for another. Since every
> system can be distinquished by a purpose, the confusion will lessen
> if people state the purpose or intent of their system along with a
> list of "measures" and "controls" associated with their system.

Not quite. A control is the thing you can do or change to
accomplish your purpose. In this case the control is the FED's
open market activities of buying and selling securities. The
measure is the indicator used to decide whether to buy or sell
and, if there is a reliable quantitative relationship in the
response of the measure to the control, how much to buy or sell.

[The FED also has the much cruder control of changing reserve
requirements that can cause very large changes in credit
availability, but it is not used for such delicate changes as are
ordinarily done.]

			-- jbod
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