General Theory seminar/ Now is so cool.

["Harry Veeder" <veed0001@xxxxxxxxxxxxxxxx>]

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>From: "Ronald Calitri" <calitrir@xxxxxxxxxxxxx>
>To: POST-KEYNESIAN THOUGHT <pkt@xxxxxxxxxxxxxxxx>
>Subject: Re: General Theory seminar
>Date: Sat, Feb 5, 2000, 9:06 pm
>

>
>Harry, followed by some GT text
>
>>Harry Veeder's:
>> Sorry, I was vague. The labels "insecure" and "secure" refer
>> the psychology of the trader, not to their specific objectives
>> or responsibilities. Whatever circumstances serve to create
>> "secure" or "insecure" traders  depends on the personal
>> political-social history  of the individual, and is separate
>> from the job at hand. If a trader is more or less
>> happy with the "social position" he occupies then he
>> will be a secure trader.  The question becomes can one
>> quantify the level of general insecurity and do something
>> socially/monetarily to reduce it?
>> Harry Veeder
>
>   We are better off taking account of the structural finance opportunities
>offered by the business of taking opposing positions. Proving this
>phenomenon  however seems to require an investigation of the data at high
>resolution. In formal terms it should be introduced in a way that conveys
>the intensity of the process. It would be possible to postulate that each
>high-frequency bid and ask is an attempt to obtain a financial position.
>Prices are composed of a balancing of position requests and do not have
>independent existance. An analogy comes to mind from the exploration of
>atomic forces. It was necessary to apply tremendous energy to reveal the
>structures inside; but once the structures were known, there was less
>difficulty thinking about them.

This is true for the history of high energy physics but many wonderful
properties of matter exist in low temperature environments
as well. By altering some of their classical assumptions
about the statistics of particles,  quantum physicists are able
to explain these phenomena.

>    Even the highest frequency investigation however, will have trouble with
>the speed of the psychological operations underlying the statements of bid
>and ask. So, I do agree with what you say; there are opportunities for
>psychological analysis. They may be relatively less fruitful than
>investigations based upon economic prospects of loss and gain given the
>prevalence of the latter exercises. There is after all a greatly discussed
>general analytical perspective being projected to logical micro level
>processes when talking about bubble theory. It will probably be more
>beneficial to conduct some demographic-level psychoanalysis before venturing
>into small group dynamics; otherwise one is possibly going to draw too
>strong conclusions.

What we need is an macroeconomics of the "cool"
economy. Keynesian macroeconomics is the economy
of a highenergy mob. That is not to say that a cool
economy is always in a state of equilibrium.

>For we mortals and unerfunded, 'tis better to say, "They know not what they
>do .... (we had better tell them)."
>    This motivation is put-able it in terms of another analogy, not often
>projected, to the use of firearms. I couldn't help thinking "good" when the
>news story came out that guns are now manufacturable with
>fingerprint-sensitive triggers, and even though it is regulating something
>not so great; I would be very much in favor of legislating a very rapid
>transition to allowing marketing only of such instruments as the technology
>allows. Of course it would have to be able to tell the farmer and his entire
>family through a set of gloves to pass the "All America" test; but hey; we
>got to the moon!
>
>All this raises a very relevant question - What is PK pschology? You know,
>there is a very nice group of "<Marxist>" psychotherapists operating on the
>upper west side, their argument goes something like "remove the
>psychological manifestations of the oppressive apparatus". I kind of like
>their idea; but most therapists think there is a basic human being under
>there, independently of the particular social age.

Yes, and that "basic" human being is capable of being either proactive
or reactive. It is important to develop socio-economic/legal
relations which can recognize and support proactive behaviour.
A lot of proactive behaviour is unfortunately viewed as being stupid
whereas a lot of behaviour that is infact reactionary, is viewed as
being smart...but what's new eh? ;)


> You are welcome to comment, hopefully with a joke or perhaps seriously on
>the question of what were Keynes' "psychological characters" in the GT.

The basic problem with Keynesian psychology is that it is the psychology
of the abnormal or the "irrational". Keynes of course
situates himself outside "the mob". But being outside the mob means he
(like most people) is subject to laws of normal psychology rather than
abnormal psychology. Read about abnormal pyschology and you will
find Keynes' characters.

>     The undertone of current interpretations of the GT is that all Keynes
>meant was a simplistic catalogue of statements strictly relevant to demand
>systems consisting of: a declining marginal propensity to consume across
>incomes, a liquidity function ultimately reflecting economic rather than
>psychological forces, and a time value of money that also declines across
>incomes coupled with an expectation function of future revenue that was
>without a center in conventional opinion.
>    All of these interpretations seem to me more like the kind of
>restrictive assumption made at the start of a paper to see how far it takes
>one, and so perhaps the thought processes of their promulgators rather than
>direct development from GT. On pp. 246-7 the following:
>
>    "Thus we can sometimes regard our ultimate independent variables
>consisting of (1) the three fundamental psychological factors, the
>psychological propensity to consume, the psychological attitude to liquidity
>and the psychological expectation of future yield from capital assets, [(2)
>wage, (3) central bank money];...

The first two are signs of abnormal psychology.
Normal psychology flows from a propensity to produce and
a sense of selfworth rather than the propensity to consume
and the need for liquidity. Under normal
(non-hyperinflationary) circumstances demand is function of
production not consumption.

Note: I am not asserting that aggregate *supply* creates its own
aggregate demand. I am asserting that *production*
creates its own aggregate demand. Aggregate demand may be deficient
relative to aggregate supply or exceed aggregate supply.

Now is so cool.

Harry Veeder