Re: US Trade Deficit As 'World Engine Of Growth'?

[Gunnar Tómasson <gunnar.tomasson@xxxxxxxxxxx>]

Re. the following:

> What if one begins with a different "conviction"?
> e.g. Income = saving + investment

Comment:

In the context, I construe Keynes' use of the term "conviction" to denote
intuitive certainty.

Schumpeter underscored this aspect of Keynes' thinking in _History of
Economic Analysis_, suggesting that his work in economics after 1920 or
thereabouts was designed to give concrete form to an intuited "vision" of
the economic system.

The like phenomenon is well-known in other fields - for example, in Johannes
Kepler's work on solar system structure which laid the foundations for
Newton's synthesis.

Gunnar


----- Original Message -----
From: "Harry Veeder" <eo200@xxxxxx>
To: "post keynesian thought" <pkt@xxxxxxxxxxxxxxxx>
Sent: Wednesday, September 24, 2003 5:36 PM
Subject: Re: US Trade Deficit As 'World Engine Of Growth'?


>
>
> > From: Gunnar Tómasson <gunnar.tomasson@xxxxxxxxxxx>
> > Date: Wed, 24 Sep 2003 14:38:49 -0400
> > To: Gang8 <gang8@xxxxxxxxxxxxxxx>
> > Cc: pkt@xxxxxxxxxxxxxxxx
> > Subject: US Trade Deficit As 'World Engine Of Growth'?
> >
> >
> > Dear Gang:
> >
> > In and after the mid-1970s, I made a nuisance of myself with the IMF
Research
> > Department through comments on their working papers on world economic
issues
> > to the point that, as one of the IMF's most senior officials (then and
now)
> > put it:  "Gunnar thinks the world is wrong and he alone is right."
> >
> > The alternative, as I saw it at the time, was to play dumb and acquiesce
in
> > the conventional wisdom embraced by leading academics, the G7
governments, and
> > the IMF itself according to which a large U.S. trade deficit represented
> > output- and employment-enhancing World Engine Of Growth.
> >
> > And so it did - much like the proverbial punch bowl which enlivened
> > yesterday's party at the cost of today's hangover.
> >
> > And where did the conventional wisdom go wrong?
> >
> > The brief answer is indicated in the following passage from Keynes'
letter to
> > John Hicks, dated September 8, 1936:
> >
> > "I wish you would analyse in what way our discontent with my income
concept
> > arises.  In my book [the General Theory - insert] it looks, I think,
more
> > queer and complicated than it really is.  It is the final outcome of a
greater
> > amount of bad attempts and destroyed drafts than any other section.  But
all
> > it comes to is really the following: I commence with the conviction that
one
> > has in some way to identify income with the value of output."
>
> What if one begins with a different "conviction"?
> e.g. Income = saving + investment
>
> Harry Veeder
>
> > This is where the conventional wisdom parts company with Keynes.
> >
> > First.  It is not rooted in any intellectual "conviction" as distinct
from
> > transient fashion; and
> >
> > Second.  It ignores the implications for monetary economics of Keynes'
> > "conviction" that one must "commence [by] identify[ing] income with the
value
> > of output."
>
>
>
>
>
> > When "income is [identified] with the value of output," it is
immediately
> > clear that the putative World Engine Of Growth is a misnomer for the
U.S.
> > trade deficit become World Engine of Inflation.
> >
> > In turn, once that is recognized, the fact that World Inflation remains
under
> > "control" conveys a strong signal that structural aspects of world
economic
> > growth and development have been massively deflationary in the past
thirty
> > years.
> >
> > And where does that leave us?
> >
> > Briefly, any reduction in the U.S. trade deficit in the period ahead
would
> > create non-inflationary room for instituting Marshall-Plan type
expenditures
> > on social and economic development projects along the lines proposed by
Joseph
> > Stiglitz.
> >
> > Gunnar
> >
> >
>
>
>
>
>