Re: Greenspan's cristal balls and data base,

["John Gelles" <johng@xxxxxxxxxx>]

[The following comment today carried the wrong subject.
  It is corrected by this message.  -- by John Gelles]

    Henry Liu's message read:

The US has the world's most efficient economic data collection mechanism
with
the shortest lag time and the highest accuracy.  The problem is not the
mechanics of data collection which Greenspan implies, but the conceptual
relevance of the conventional data base. Greenspan has repeatedly told
Congress
that bigger budgets for government data collection will be well worth the
money, yet it seems obvious that the system is already suffering from
information overload.  Kant insightfully asserted that the definition and
organization of data are affected by subjective bias.  Alice in Wonderland
asks
: "How do you know what questions to ask if you don't know what answer you
want?"  Biases are unavoidable, even for scientists. Some biases are
socially
useful and others are socially harmful.  Thus bias towards full employment
is
good and bias toward the intrinsic value of money is bad, though both biases
can be sustained by "scientific" construction.  The Keynesian starting point
is
that full employment is the basis of good economics.  It is through full
employment that all other economic inefficiencies can best be handled,
through
an accommodating monetary policy.  Say's Law turns this bias up side down
with
its bias toward supply/production.  Monetarist in support of Say's Law thus
develop a bias against inflation, claiming unemployment to be a necessary
tool
for fighting inflation and that in the long run, sound money produces the
highest possible employment level. It is hard to see how sound money can
ever
lead to full employment when unemployment is necessary to maintain sound
money.  Within limits and within reason, unemployment hurts people and
inflation hurts money.  And if money exists to serve people, then the choice
becomes obvious.

Greenspan has been seeking to cover his tracks and his behind by claiming
that
life is unknowable, which is probably true, but the cure for unemployment
and
economic disaster is not a mystery.   Greenspan cannot deal effectively with
unemployment not because of any deficiency in data collection, but because
he
refuses to identify full employment as a worthwhile goal.

The fact is that if a central banker sets his goal on full employment, any
high
school graduate holding the post can achieve full employment.  There is no
mystery, only denial.

Henry C.K. Liu

John Gelles wrote:

----- Corrected Subject and Referenced Message -----
From: John Gelles <johng@xxxxxxxxxx>
To: Post Keynesian Thought <pkt@xxxxxxxxxxxxxxxx>
Cc: John Gelles <johng@xxxxxxxxxx>; Henry C.K. Liu <hliu@xxxxxxxxxxxxxx>;
<Stephen.Dunn@xxxxxxxxxxxxxx>
Sent: Thursday, March 29, 2001 1:53 AM
Subject: Greenspan's cristal balls and data base,


    Chairman Greenspan's speech to the National Association
    for Business Economics, (copied to us by Stephen Dunn
    yesterday,) did reflect thinking by staff at the US central bank.

    It also revealed the Chairman's bias against reaching full
    employment:  he went so far as to say, "monetary policy
    could not permanently influence the level of the
    unemployment rate" -- with no added comment of what
    additional policy might be brought to bear to accomplish
    that goal, or something like it.

    The Chairman took his audience, (now including ourselves,)
    down history's path -- from the age of "steel, fabrics and
    grain" right up to our own "age of the microprocessor,
    fiber optics, and the laser". He took us in quest of price
    -- that most ambiguous measure to reveal or obscure
    what we do in quest of what we need.

    He was not happy with price as a measure of medical
    output or as a measure of output in the information
    industries -- so important to economic power in the
    world now under financial stress wherever we look.

    If price was a problem, the solution was more data.
    Not just price but data that might relate today to
    tomorrow -- in terms of the struggle for high tech
    prowess, eventually as it may contribute to military
    and financial superpower status in coming decades.

    The Chairman opined, "If we had the appropriate
    database, of course, who knows?"   By which he
    meant it might make us rich and reliable as guardians
    of freedom on the planet -- or maybe not. Who
    knows?

    One of us who knows is Henry Liu. Henry knows
    the Chairman was offering "the application of motifs
    without content", not anything to do with Keynes --
    just Greenspan's post modern greenspanism.

    In my view, the Chairman took the measure and
    model of our profession (your profession, if you
    prefer,) and in spite of the fact that "the financial
    system appears to be capable of reaching myriad
    equilibria...[and] the fundamental forces that
    determine which of these equilibria will be selected
    may themselves be inherently unpredictable," he
    agreed to chair the US central bank in quest of
    praiseworthy results no matter the absence of
    cristal balls and meaningful prices, and a data base
    strong enough to make up for it.

    What else could he do? He's too young to retire.
    And the Challenge of Measuring and Modeling a
    Dynamic Economy to achieve a stated purpose
    is not being met by a competitor. So it is his,
    like it or not.

    It seems to me Joseph Stiglitz is more up to the
    challenge, but Susan George said Larry Summers
    did him in. He, the Chairman and Susan might all
    agree "greater payoffs will come from more data than
    from more technique", (which seems to echo our own
    Paul Davidson and the students behind post-autistic
    economics,) but Susan and Joseph would better
    define what is a "greater payoff" -- in terms of food for
    the hungry, and shelter, and freedom from the rule of
    price, profit and debt (monetized or not), at strategic
    levels of decision where vision counts.

        John Gelles