Re: Fw: [gang8] Fw: RATIONAL EXPECTATIONS

["Gunnar Tomasson" <gunnar.tomasson@xxxxxxxxxxx>]

Dear Paul:

Re. the following:

> Gunnar you are clearly an "Old [classical] Testament" economist who
> believes that before you fix a problem in society you must completely
> punish the sinners even if that causes many innocents to suffer.

Comment:

This is not my view.

Instead, I have been of the view since the mid-1970s

(a) that post-Bretton Woods world monetary arrangements were driving the
world economy towards ultimate disaster;

(b) that vested economic and financial interests would not heed any warnings
to that effect;

(c) that mainstream and monetarist economic scholars were irrationally
exuberant insofar as the plus side of post-Bretton Woods world monetary
arrangements are concerned; and

(d) that, as I have made clear in Gang8 messages over the years, NOTHING
would persuade (b) and (c)  - the only "sinners" in all this - that a
disaster was in the offing until it was upon us.

Gunnar



----- Original Message -----
From: "Paul Davidson" <pdavidson@xxxxxxx>
To: "Gunnar Tomasson" <gunnar.tomasson@xxxxxxxxxxx>
Cc: <pkt@xxxxxxxxxxxxxxxx>
Sent: Wednesday, May 14, 2003 3:28 PM
Subject: Re: Fw: [gang8] Fw: RATIONAL EXPECTATIONS


> At 01:33 PM 5/14/03 -0400, you wrote:
> >Paul:
> >
> >Re: the following:
> >
> >Right Gunnar! The way to go is for reduction of aggregate global demand
> >and a world-wide depression!!   Right?
> >
> >Comment:
> >
> >Today's world economic situation is fraught with danger - the onset of
> >world-wide depression is one of them.
> >
> >But the problem did not arise overnight.  Instead, it reflects
> >aggregated-demand sustaining monetary inflation of the post-Bretton Woods
> >era which, by now, has lost its potency.
> >
> >And, while unforeseen by the great majority of contemporary economists,
> >this very danger was underscored by Hayek's title of his IEA 1972/1978
> >booklet - A Tiger by the Tail - The Keynesian legacy of inflation.
>
>
> Aha!  Now I see where you are coming from !!
>
> >
> >A dose of aggregate global demand stimulation may prolong the world
> >economy's ride on the tiger's back, making a future dismounting that more
> >unpleasant.
> >
> >In other words, world economic policy makers have painted themselves -
and
> >the rest of us - into a corner over the past three decades.
>
>
> Nonsense.
>
> Gunnar you are clearly an "Old [classical] Testament" economist who
> believes that before you fix a problem in society you must completely
> punish the sinners even if that causes many innocents to suffer.
> Accordingly you, like Hayek(?), believe the solution to the tiger by the
> tail  problem is to depress  the global economy    so as to keep workers
in
> their place  i.e., to create enough slack in the labor markets (the
natural
> rate of unemployment?)  globally as to prevent workers from truculently
> demanding wage and fringe benefit increases in excess of productivity
gains
> and/or slack in the product markets to prevent producers from demanding
> higher mark-ups over labor costs.
>
>
> There is instead a "New Testament" economists ' civilized solution  to the
> tiger by the tail problem Gunnar-- but why should you bother to read books
> such ECONOMICS FOR A CIVILIZED SOCIETY by Greg Davidson and Paul Davidson
> to  see that it is more important to develop civilized solutions to the
> problems of society -- even if that means that former sinners are NOT
> punished for their previous sins -- but instead are encouraged to reform
> and work in their own self-interest in tandem with the civic interest of
> society.
>
> The remedy for a boom is not too engineer a bust! as Keynes noted "The
> right remedy for the trade cycle is not to be found in abolishing booms
and
> thus keeping us permanently in a semi-slump; but in abolishing slumps and
> thus keeping us permanently in a quasi-boom" [ GT, p.322.].
>
> And that Dear Gunnar is very possible if you would follow the
prescriptions
> of FINANCIAL MARKETS MONEY AND THE REAL WORLD.
>
> But, alas, I fear you will never do the necessary readings.
>
> Paul
>
> Paul
>
> Paul Davidson
> Editor, Journal of Post Keynesian Economics
> Economics Department - 523 SMC
> University of Tennessee
> Knoxville, Tennessee 37996-0550
> phone # (865) 974-4221
> fax # (865) 974-1686
> home phone  (865) 692-0802
> http://econ.bus.utk.edu/davidsonextra/Davidson.html
>
>
>
>
>