Response to Bill Mitchell

[UPDATE: There are a few updates to this post, marked as so in the text]

This blog post is a reply to what became and should have remained a Twitter spat, between myself and Bill Mitchell, over Chris Williamson and MMT. I would have liked to have replied just on Twitter and to keep it short and simple except that Bill has taken it to another level, responding on his blog in a highly questionable manner, so I am forced to reply this way too.

I do not know who will read this, even though this will probably be no one, since I do not promote this blog and it is pretty much inactive anyway (no posts for over a year), but on that basis I need to add some detail for those who do not know the parties involved.

Anyway, given this, I will first provide sufficient notes on our shared economic views, followed by my concerns on Labour in the UK. Then I will summarise the discussion between myself and another twitter MMT advocate which will also cover my concerns over Chris Williamson. I will then expand it to the discussion between myself and Bill which led to some questions for Bill to answer which he sort of answered in a post and to which this is the response. Still I will try and be as concise as possible hopefully without losing any nuance.

Modern Monetary Theory

Bill Mitchell is one of the founders of a macroeconomic framework called Modern Monetary Theory or MMT. This post is not about this theory per se. If one peruses previous posts here, in this dormant blog, you will see I support this approach.  My concern here is about PR and marketing of MMT in the UK, at this point in time in 2019.

For those of you who are unfamiliar with MMT, all you need to know for this discussion is that we argue it is a descriptive framework,  one that is available to anyone, whatever political values or location that they take in a political spectrum or compass: Left, centre or right; Authoritarian or libertarian; racist, including anti-semitism and also anti racist. Even if they are not consciously aware of this framework. That is, it is above and beyond any political value set anyone might have. Critics might disagree but that is beyond the scope of nor relevant to this discussion.

This is the same as a position over the theory of gravity. It does not matter what one’s political values are the theory of gravity still applies. There is an obvious difference to that analogy since, if one groks MMT, then one’s political values are likely to be altered or modified e.g. one could no longer use “neoliberalism” to support one’s position, however one could keep that position but need different arguments. (I put neoliberalism in scare quotes but again as to what that is not relevant to the substance of this discussion, I use it here and elsewhere for illustrative purposes only). Still the fundamental point remains, disputed by critics or not, that any political values can be congruent with MMT.

This means that differing MMT academics and advocates can operate within this framework with differing political values. So I fully expect to disagree with others within this framework.

A case in point is the UK remaining or leaving the EU. One cannot tell merely from knowing that one uses this framework, as to what their position is over the EU. In Bill’s case he is, what I call, a Hard Lexiter. Some founders of the first formal MMT advocacy group in the UK (I was in the meeting where the seeds for this were sown but was not involved in it’s creation) the Gower Initiative for Money Studies (GIMMS) voted Remain. I, if anyone is interested, support a soft Lexit position: Efta/EEA. Reasons why and for these differences are, again, not relevant and outside the scope of this post but the point is all these positions can be made within an MMT framework combined with everyone’s differing political values.

Labour and Antisemitism

That all being said both myself, Bill, GIMMS and others that might be mentioned here are of the left persuasion. I like to say I am  left but not of The Left. I am critical of Labour for the same reasons that Bill is, they are still under the influence of “neoliberalism”, not just what I call the social neoliberals – called by the democratic socialist wing of Labour e.g. Corbyn et al. “Blairites” – but also the democratic socialists themselves, with, for example, their Fiscal Rule.

Where we differ is that I am also concerned over Labour Antisemitism, on which Bill and GIMMS has pretty much remained silent. That is fine, he and they are making economic critiques of all parties, there is no need, expectation or obligation to get involved in that, certainly nothing within MMT should be affected by remaining silent on that. That issue, I would put it, is orthogonal to economics.

I have been more than happy for him and the official MMT body in the UK to ignore this and not take sides. The bone of contention that is the primary trigger for this post is that this is no longer the case.

James Tapper,the Brighton August and the GIMMS Fringe Labour Conference Meetings

The issue started when James Tapper, a Twitter advocate for MMT, drew my attention to a meeting on MMT to be held by Chris Williamson  in Brighton on August 8th 2019. Now, as most people are aware, in the UK at least, Chris Williamson is a highly controversial Labour MP who has been stirring the mud in the Labour Party over a range of antisemitic issues and more, but specifically was suspended over comments he made over Labour being “too apologetic” over anti-semitism.

Now since Chris Williamson is promoting MMT, it is inevitable that he will gain some converts to MMT in his talks. After all advocacy is one of his goals. This also means whether due to Chris directly or not there will be MMT twitter advocates who stand with Chris Williamson. It is to be expected. I don’t like it and will happily challenge them, in the hope that they are more rational than others of his supporters unaware of MMT.

So I was concerned that he promoted Chris Williamson without qualification. For myself, I often quote, with qualification, writers that I or just others  find problematic or controversial, who still make specific good and well supported arguments, ones  that I can endorse without meaning I endorse anything else they say. Far from wanting to qualify his support for Chris Williamson’s meeting, he made the absurd claim denying that Chris is not even controversial and that there was nothing to qualify!

Then it turns out that Chris is not only giving a talk on MMT but he is also substantiating the moniker applied to him by the many in the Jewish community of “Jew Baiter”, by auctioning the infamous antisemitic Steve Bell cartoon that the Guardian refused to publish!

It is a bone of contention as to whether Chris is currently the most notorious provocative (suspended) Labour MP when it comes to the issue of institutional antisemitism in Labour  but no one could deny that he is controversial. Anyway far from being contrite over his suspension, here was Chris belligerently clearly stepping over the line and linking what should have been a much valuable discussion and advocacy of MMT with his notorious Jew baiting behaviour. It was his choice to mix these two entirely distinct and orthogonal issues. This should have drawn pause by anyone seeking to promote an understanding of MMT in the public arena, even if this was not an officially supported meeting. There is still to date has been no condemnation even any comments about from any significant MMTers involved.

After all our banter James then posted a promotion of a a GIMMS organised Fringe (i.e. unofficial) Labour Conference event which was hosting Bill Mitchell and Chris Williamson! It was here that Bill got involved but I first want to complete my twitter discussion with James Tapper.

[UPDATE: The following paragraph is incorrect, I was trying to understand why I responded to that particular tweet and not another. I thought I was mistaken over the meeting it referred to hence that is why I  missed that Bill and GIMMS were included in the tweet. I will add the proper explanation after this paragraph]

After all our discussion James continued to promote the original August 8th meeting without qualification – when James undeniably knew that Chris was specifically and deliberately merging advocacy of MMT and Jew baiting in one meeting.  And he re-promoted the GIMMS meeting. I  got them confused (UPDATE: I literally only noticed this after I first published this post) but, regardless, I responded specifically to him with an acerbic and ironic piece of rhetoric.

[UPDATE: The previous paragraph is incorrect. I have reread the tweet flow and links after getting over the surprise of Bill’s over the top response.  I was specifically responding to James denial that Chris Williamson was controversial and my concern that I did not want that controversy to affect the GIMMS meeting. He then linked to that Independent article that made my case in both aspects! Everything else follows. I responded with an acerbic ironic joke not realising he would not be the only one directly addressed by it. If instead I had said “QED” or equivalent none of this mess would have occured. But it is twitter and was a individual spat between two no names.]

Here is the conclusion of our banter

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That I thought was that. Two no names on twitter, big deal. (Note it just looks like I am replying James alone. More on that later.)

Questions for Bill and GIMMS

Bill became involved in our discussion and provided two tweets, which led to these questions from me. His tweets are included in this tweet thread

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Bill’s Blog post response

So what was his answer? It was in a blog post not a tweet. The full post is here but here is the relevant section:

Thugs try to derail MMT presentation

We learned overnight that an event in Brighton tonight, where British Labour MP Chris Williamson will talk about Modern Monetary Theory (MMT) has been compromised by mindless thugs who have threatened violence to staff at the proposed venue should the event go ahead.

The full story is here in the Morning Star (August 6, 2019) – Williamson refuses to bow to thuggery after venue threatened by two men.

One of the tactics fascists deploy is to bully people with threats of violence in order to curb ideas they cannot counter.

The last week on Twitter has seen a continuation of the barrage of anti-Semitic accusations being made.

They seem to keep coming. I wrote about them recently in this blog post – When the Left disgraces itself(July 30, 2019).

But the dirt continues to be aired.

One creep went so far as to Tweet this week:

So apparently MMT is “For the many, not the Jew”.

I have been roped into the fuss because I am appearing at an upcoming – GIMMS Fringe Event – at the British Labour Party Conference in Brighton on September 23, 2019.

I will be sharing the stage with Chris Williamson to discuss MMT and the Green New Deal.

Chris is a friend and a dedicated Labour MP who has been courageous in embracing MMT and seeking to advance those ideas within the policy space.

Apparently, for all these diehard defenders of freedom, my association to Chris proves I hold anti-Semitic views, and, in turn, proves that Modern Monetary Theory (MMT) comes out of the same dark origins.

It is an absurd proposition and reflects the desperation that people within the Labour Party or sympathetic to it are willing to go to undermine the leadership and purge progressive economic thinking.

The Tweet was grossly disrespectful of my academic work and the work of my MMT academic colleagues.

It was plain wrong because in the body of literature that defines our work you will never find anything that one could remotely infer as being consistent with that statement.

After all, MMT is not a regime (“for the many” or otherwise).

But to try to slur our work with the anti-Semitic tag is disgusting and the person should be ashamed of himself.

As is clear – the hate talk of US Republicans against minorities has spawned gun massacres – the ‘manifesto’ of the El Paso murderer contains sentences that you can trace to various Tweets from Trump and his gang.

Relentless misuse of anti-Semitic accusations to make political points not only degrades the Jewish people but also spawns more extreme behaviour.

We cannot rule out the proposition that these thugs in the UK have been emboldened by this Twitter and social media onslaught against Chris and MMT (dragging me into the fray).

Let me state this clearly – the event that I am involved in on September 23 will go ahead, even if we have to stand on Brighton beach or in a park with a loud hailer.

Interlude

Before I respond to what was addressed to me, here is a comment I made on Labour Reddit:

screenshot-www.reddit.com-2019.08.08-11_10_13

There had been some speculation there and elsewhere that Chris or Greg Hadfield – the organiser of this event and also twice suspended from Labour over… go on guess… antisemitism issues – had been making this up. Unlike many on Twitter, I did my best to actually find out. Only 10 minutes and two phone calls is all it took.  (By the way both Chris and Greg have blocked me so I have no idea what they might be tweeting.)

UPDATE: I still have seen no evidence for the “two thugs” claim and nothing Bill provided supported that allegation. This been further exaggerated by Jackie Walker claiming there was a bomb threat, although that is quite independent from anything Bill asserted – presumably his claim was via the ever reliable unbiased Morning Star. Note  the Holiday Inn Brighton has not confirmed to any journalist that the email was real, were they telling me the truth but then instructed to remain silent after my query? I will assume that is the case. Still one cannot infer the “two thugs” claim from that.

What happened

Well I was very surprised that Bill even saw my tweet to James. I know he has an impressive and  prodigious capacity for high quality work but where would he find the time to even see this tweet? I assumed that James Tapper had been a cry baby and DM’d the tweet saying look what Martin said to me.

I was wrong. 

After my cynical comment and long after his post the tweet thread continued:

screenshot-twitter.com-2019.08.08-11_36_28

The penny dropped on my second reply.  Usually when, such as in this case, a tweet is misread in some form or other, the injured party responds, politely or not and I can redress it there and then.

Now realising that Bill received this directly he would understandably be extremely upset. In his shoes, I would be too. However it would never occur to me to amplify it to a blog (if I had an active one) without first seeking a response or redress on the original medium. Even more so if I had a far greater reach than my respondent. If he had responded, however irately, I am sure we could have quickly unravelled that that comment was not aimed at him nor the MMT community, that him seeing it all was an innocent mistake due to replying too swiftly to the wrong post on twitter and that I would have more than happily apologised for any confusion or upset caused, including deleted this tweet. 

He did not do that. Instead he responded in a quite despicable fashion in that post quoted above.

That is a real dick move.

Given the way he did respond, I will not delete the text but it should be quite clear it is not aimed at him nor the MMT community. 

He owes me an apology for his appalling behaviour, in particular insinuating that this tweet  was somehow contributed or helped trigger the obnoxious behaviour that led to the event being cancelled. Apart from anything else,  look how many people have even read that tweet:

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He adds a most disgusting and near libellous rant when he knows I have defended him from accusations of anti-semitism from well know economists on Twitter. I have also said that I have never seen any antisemitism from any MMT academic (I have done enough screenshots for one post but you can check my timeline).

All I have said is that it is not a good look for MMT officially to be associated with  someone as controversial as Chris Williams.  The fact that he might be only Labour MP who groks MMT and defend it is sad. Bill has spent many years of effort trying to gain traction but I fear and hope that this has just blinded him to Chris’ other failings.

Whatever has happened between myself and Bill,  I am and will be an advocate for the best realistic macroeconomic theory and to date I hold that is Modern Monetary Theory. I will continue to refer to the 20 odd years’ body of work including papers, posts and tweets by Bill.

I do not need to repeat the questions already stated above. Has he or GIMMS answered them? I think not but I will let you be the judge.

UPDATE: Given the disaster of the August 8th Brighton meeting, I fear for the GIMMS Fringe Labour Party meeting.

Whilst I think both Bill and GIMMS are one the wrong side of history on this, I also sincerely hope that the issue remains solely on the Jew Baiting of Chris Williamson. I hope it does not spill over to give critics giving  ammunition and another excuse to dismiss MMT, GIMMS and/or Bill. That was and is my primary concern.

I have no active interest in Labour Antisemitism, suffice that I wish it will eventually be dealt with and resolved, until then I cannot support Labour. I track it due to the sterling work of a few diligent volunteers. However since I repeatedly see support for Chris Williamson across my MMT timeline, I will address that as and when it occurs.

UPDATE 2:

So Bill  has deleted my reply merely pointing to this post to  resolve the confusion He has never done this before. Bill claims to support Freedom of Speech and is against No Platforming yet he he denies me the right to reply on the medium that he chose. In all my 30 years+ online debating, I have never been denied the right to reply on the medium of choice of my opponent. This is a first.

Further he has allowed at least two comments that look very antisemitic (but we have no idea if he blocked anything more blatantly antisemitic but there is a clear bias here) . This is getting beyond me complaining it is “not a good look”. The evidence is there for all to see.

Hypocrisy or what?

 

 

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Issues with “Issues in the Design of Fiscal Policy Rules”

Bill Mitchell drew my attention to a paper that has purportedly influenced the economic policies of the UK Labour Party. This is Discussion Paper No. 429 from the National Institute of Economic and Social Research – Issues in the Design of Fiscal Policy Rules – written by the then Director of the NIESRJonathan Portes  and the well-known Oxford economist and blogger Simon Wren-Lewis.

Before I examine this paper, please permit me a prelude.

We are all very familiar with the common trope “glass half empty/glass half full”. If you think the glass of water is half empty, you are a pessimist; if you think it half full, you are an optimist. Which one are you?

I have long thought that there are two problems with this “insight”.

The first is that it excludes any alternatives, if you are not one, then you are necessarily the other. When viewed this way, one should look for other alternatives, in this case there is (at least) one. I say ‘at least’, because a single other alternative is all that is required to show this is not a real dichotomy. The realist view is that it is just half a glass of water, with reference to being half full or half empty adding nothing. Now it appears the dichotomy is false, so if you reject one view, it does not automatically follow that you endorse the opposite.

The second issue expands on the realist view in showing is that this is simply the wrong way to look at a glass of water. If I am thirsty the question is: is the half glass of water sufficient to satiate my thirst? Maybe it is, maybe not.  If I am in a country with near deficient water issues, they do not leave the tap running when washing their teeth but, often, use a partly filled glass of water. In that case, a mother might tell off her child for using a glass of water that is half full – now that means it is too much and more empty would be better. Nothing to do with being an optimist or pessimist. In other words, in order to establish the relevance of a half glass of water, context is required.

These two points of a false dichotomy and context are sufficient tools to examine this paper. You will be relieved to know that no great maths skills nor economic training required. Let us proceed.

The key question the paper seeks to address is

there was no equivalent for fiscal policy of the Taylor rule for monetary policy: no simple rule to guide fiscal policymakers…This paper is about the search for such a rule.

The Taylor rule is a simple algorithm to guide Central Banks in setting their interest rate to manage inflation, which is the primary tool for a nation’s Monetary Policy.  In reality Central Banks do not blindly implement this rule, although in the type of economic models that JP and SWL colleagues use, this is often used as a  ‘simplifying assumption’ when modelling Central Bank policy settings.  To the degree that Central Bankers do use the Taylor Rule as guidance that might be a reasonable simplification in modelling an economy, or maybe not.

Ok then, this paper is about fiscal rules. Now there are a few approaches to this, one I am very familiar with is Abba Lerner’s Functional Finance. Now, whilst I had zero expectation that SWL and JP would be advocating anything like this, what I did expect in something called a ‘paper’ on this very topic, was an examination of alternative rules and why they do not apply compared to the rule that the paper’s authors argue for. However there was no even a mention of this (or others), if only to be dismissed by, say, referencing another paper which did the presumed actual refutation. Nothing. In the whole paper. Nada.

Now I have read many papers in many fields in my time, including physics, biology, cognitive science, quantitative finance, philosophy, public health, paranormal studies and alternative medicine amongst others. Without any attempt at some coverage of views on this and arguments in favour of their approach, this paper is already beginning to look like the papers in the certain fields that are full of junk science and pseudo-scientific arguments.

This concern is further confirmed when I read in the second paragraph of the introduction that

basic theory suggests that fiscal policy actions should be very different when monetary policy is constrained in a fundamental way, while the reverse is not in general the case. There are two major examples of where this will be true. The first is when interest rates are at the zero lower bound”[My emphasis].

Basic theory”? “Basic Theory”!!

Now one cannot make all the arguments for a theory to apply to it a particular problem in every paper. That would be an absurd demand. However having studied various macro-economic models such as VARs, ISLM, AD/AS, DSGEs, CGEs and SFCs, to create a hidden or implicit presupposition that their approach is so far from being debatable that it is “basic” is very, very dubious. I knew in advance that  they were never going to argue for it, but to call it “basic” is quite underhand but would, of course, be accepted as standard gospel within the echo chamber of fellow orthodox economists and their acolytes or dupes (if Bill Mitchell’s concern re the Labour Party is correct) in political parties they are addressing. (I have concerns over the Zero Lower Bound argument but will not address that further in this post)

The second is where a country is part of a monetary union or a fixed exchange rate regime.

Here I can agree. The currency regime of a Eurozone economy is quite different to that if the UK’s. However my patience in examining their later policy analysis as a result of their core model will have run out long before I get to that and I will not discuss this any further here.

They complete their introduction, by noting the proposal of an optimum fiscal rule has to, most of the time, be ameliorated by managing “non-benevolent” government’s fiscal policies creating a “deficit-bias”. That is one might have to diverge from the rule to explicitly prevent profligacy and so on. However this is beginning to look like that false dichotomy is discussed in my prelude.

Everything they are doing is to preclude seeing what alternatives there are to their approach. The subtle (but not so subtle later) is that a government is either benevolent or not with respect to deficits and so, therefore “deficit-bias”. Is this the correct thing to be looking at in the first place? Where is the context, productivity (never mentioned), unemployment (mentioned once in passing), inflation – ok that is mentioned 18 times in this paper, you are beginning to see a bias – in the authors.

This post is beginning to turn into a fisk of their paper but I have neither the inclination nor the time to do that for the whole paper, nor  do I think would my readers have the patience! I am going to instead complete my analysis of section 2 on Optimum Fiscal Policy.

Suppose social welfare declines as taxes rise, because taxes are distortionary.

(They discuss a 1% from 20% and 50% base – the 50% base being worse in their view – but that is really irrelevant here). Well I would like to see their definition of social welfare, it is a key concept mentioned 6 times but with no explanation.

I can easily imagine two scenarios where a tax increase can increase social welfare.  The first is when the nation has demand  pull inflation – too much money chasing too few goods – in which case a tax increase reduces aggregate disposable income and reduces demand-driven inflation pressure. The second is with a nation around full employment and there are not sufficient real resources for the government to fulfill its elected social welfare agenda, a tax increase reduces demand – for real resources – and so frees up those resources – people, goods and services – that can be employed by the government to achieve those goals. In both cases, a tax increase serves to increase social welfare.

Now one can posit various objections to my points such as the lead/lag relationships with respect to inflation – but this same objection can also be made with respect to monetary policy with interest change lag effects on inflation. The point I am making is that they are again making assumptions, with many hidden presuppositions,  leaving no room for analysis or debate. A key ever-present, at least in my view, tacit dichotomy implying that if you reject these arguments you must be for non-benevolent government;s and their “deficit-bias”. In fact I am waiting for them to establish that their way of looking at this problem is the correct way to look at it. As I proceed, it appears I am waiting in vain.

They then derive or, rather mostly state but do not argue for, a  straightforward difference equation to minimise as their basic optimum fiscal rule. One that any  A-Level Maths student should be able to comprehend. I understand that many readers may have not studied A-Level Maths but do appreciate that this is not even of university level difficulty. (OK, we might not teach Lagrange multipliers – a technique to help solve minimisation problems – at A-Level but the maths itself, we do)

My unplanned fisking of this paper will be finished when I have completed analysis of this equation.

They assume in the multiplier that there is a government budget constraint not to default on its debt. Well that can come out of a simple balance sheet analysis, as a constraint they make it appear it is of a behavioural consequence but the whole point of their analysis is that it is not.

They examine the interest rate as a cost on the Government, but fail to consider that the interest rate channel is an income source to the private sector, in addition the primary budget balance (which excludes government debt interest payments), both increase private sector sterling reserves – which are not discussed. Of  course, they are fully aware of the difference between the primary budget balance and the fiscal balance (which includes transfer payments – payments not exchanged for goods and services – such as debt interest payments)

They do not explain how the  government can control their deficits, they assume that a benevolent Government can – although they do pay some lip service to automatic stabilizers but these are not in their model! They acknowledge that plans can be disrupted by shocks but that is a woefully deficient approach.

They note that the debt is a stock and the deficit is a flow. However they fail to develop a proper stock-flow view on the relation between Government and Non-Government – the Private and International sectors together.  Their model assumes away by not even considering the level of control that the Government can have on its deficit. There is no  discussion on the effect that the savings desires of the private sector can have on the deficit. No discussion on the Government – Non Government financial flows. No discussion on how trade and capital flows and real terms of trade can affect the Government deficit. No discussion on the goals of government policy that affects the deficit – reducing unemployment, increasing productivity, improving real terms of trade or any such like – only GDP and inflation are discussed – in other words the social welfare considerations that premised the motivation for this paper.

There is scant empirical evidence provided for supporting their view on managing Government Debt or even what it is. Should we just consider outstanding Treasury Issued Gilts or the net outstanding liabilities of the Whole Government – there is zero mention of Japan and its debt/gdp ratios.

However when they end up taking one version of their minimisation process to an, admittedly by them extreme, they say

If 𝛽(1 + 𝑟) > 1, then we get a very different and equally surprising result. Taxes gradually fall over time, until they eventually decline to zero. How can this happen, given that the government has spending to finance? The answer is that debt gradually declines to zero, and then the government starts to build up assets. Eventually it has enough assets that it can finance all its spending from the interest on those assets, and so taxes can be completely eliminated.

So what they are saying is that the private sector becomes in debt to the Government, after all if the Government can perform all its services through assets they own and the revenue they generate, then these assets can only come from the private sector, since, on the pain of double entry accounting, they are also liabilities of the private sector. The government does not tax us, partly since none of us have any ‘money’  issued by the government to pay its tax in! That is the previous now retired government debt (or its net financial liabilities)  were financial assets, issued by the Government to purchase goods and services from the private sector, that had not yet been reclaimed in tax – that is equivalent to all taxes not yet paid – these, on the pain of double entry accounting, were our assets and they have now all been paid. How does the Government build up assets? Somehow we have to pay the government taxes even though there are no longer any reserves from which to pay them and the Government continues (presumably it was already doing this before ‘s debt was retired) to buy our assets – presumably from bank issued credit? But there are no reserves so how do banks settle!  I could go but lets stop! (A proper analysis of is really needed but is outside the scope of my critique, I was only being very simplistic and brief in my comments just above).

Now it is one thing to develop a model and realise it has unusual and surprising consequences. These might very well be worthwhile pursuing and understanding. However in this case, even though it is an extreme outcome, it should tell the modeller there is something wrong with their model.

There may be some interesting things they say in the following sections but I cannot accept their model to use as a basis to consider any of that. Further they immediately provide add a  number  ad hoc assumptions – to the model  (not the policy arguments which follow) which makes this whole enterprise initially based on a clearly stated model, as far as I can see, completely pointless.

So are most everyone is a pessimist about government debt, and everyone should be concerned about a government’s deficit bias. Otherwise you are, or believe or want to be,  beneficiary of a non-benevolent government’s deficit bias.

And it is here I have to stop. There is much more I could say but I am out of time. For further critique of these please see Bill Mitchell’s posts, the one noted at the beginning of this post, one published today and one to come tomorrow.

The whole framing of this discussion is entirely misleading. Where is the context? What is the purpose of Government? What is social welfare? What are the macroeconomic implications, measures and tools? How do the price level (inflation), unemployment, productivity, poverty, terms of trade, taxes and other more specific concerns relate to social welfare. When looked this way the concerns of deficits and debts are secondary, not be ignored but not be the drivers either. Does it matter if a fiscal committee take over driving from politicians, if both are trying to drive by steering with the rear view mirror?!

 

Debugging Economics?

Why am I calling this blog Debugging Economics? After all I am not an economist, so what can I contribute on this field?

Well, whilst I am not committed to this blog title, this reveals what most of my friends would regard as an unfortunate predilection for puns. Anyway it is specifically a play on economist Steve Keen’s blog and book Debunking Economics and he comes out of the Post-Keynesian tradition from which I too will make my positive arguments. I think it works quite well from where I am coming from, since if my diverse background has a common theme, I could say it is a programming approach to many apparently non-programming topics.

For example, applying scepticism on fields which should have but lack scepticism, as an intrinsic constituent, is akin to debugging them, even if, or especially if, the resultant “programs” are not fit for purpose or failures – as much of, say, alternative medicine or religion is. Note that I am unlikely nor currently interested in blogging on those fields.

More generally I have always loved arguments, discussions and debates, ever since I learnt to read. I have probably committed every formal and informal fallacy and made every bad argument you could imagine. And, whenever this has been pointed out, been most likely defensive and initially refused to accept that point. So I have a lot of experience in arguments and don’t like nor want to commit such fallacies and so on, if I can help it. Does this make me better than others? Absolutely not. I would not be so condescending, everyone’s position should ideally be evaluated on the merits of the arguments in question at that time and this includes me. Whatever I know, I know I can still make mistakes. However what makes this paragraph pertinent to the theme of this post, is that in many scenarios I end up just debugging someone’s arguments – at least that is how I think of it. For sure, it is easier to do so when you disagree with someone’s conclusions but it would be a double standard not to apply the same debugging to conclusions that one does support. Whatever conclusion I support I want the best arguments to support them, even if, in such a search, the conclusion becomes untenable, at least I have learnt something!

And this brings me to what will be the main theme of this blog, economics. I think there is a useful confluence of my prior interests that are relevant to studying this field, in particular macroeconomics. And it is best summed up that from those interests, that I have built a debugging toolkit that can most usefully be applied in this field.

I think economics is an incredibly important topic that from day-to-day, country to country, directly and indirectly, affects policy analysis and recommendations that can beneficially and adversely affect the well-being and lives of many people.

What I have found disturbing is that I have found it easier to study to a reasonable informed depth (I would like to think anyway) quantum physics, cosmology, theoretical biology, quantitive finance, cognitive psychology, neuroscience, ethics, philosophy of science, non-linear dynamic models and artificial intelligence than mainstream macroeconomics! It is only when I looked at mainstream macro as a pseudo-science that I started grokking this topic to my satisfaction. It is disturbing that if it is a pseudo-science, it is the most complex, insidious and damaging one that currently afflicts us. Even if not – this might just be a motivator for me but not a specific theme I will argue for – given its far-reaching effects over many, who do not and maybe do or do not want to understand it, it could certainly benefit from being debugged!

On a positive note I have found the better arguments coming from the Post-Keynesian traditions, appealing more to my ideas of how science is really practised than the mainstream and other alternatives such as, say, Marxism or Austrian economics. So I will not just attempt to debug mainstream arguments but also attempt to offer more theoretically sound and empirically grounded better alternatives.

I am not interested in re-inventing the wheel, there is no point in repeating claims and theories better made by others and will highlight them as appropriate. Sometimes I will need to make these arguments in my own words just to ensure I have really understood them, in others a critical analysis of positions I agree with might be the most edifying approach. One aspect I do wish to explore is to adumbrate otherwise obtuse issues in a way that is comprehensible to those who have the interest but lack the time or skill to understand them. Again there are many who have written for such an audience and I will highlight those as needed too.

I will primarily focus mostly on UK-based issues both politically and economically and bring to bear and apply what I have discovered to such UK issues that I think are currently being under scrutinised. I am posting this introduction just after the latest UK Budget statement and it pains me that I do not have the time yet to perform a debugging of that statement. I have spent some time looking and recreating some of the Office of Budget Responsibility’s models but that work is incomplete. Hopefully next year or sooner, if there is an Autumn Statement.

To finish this introduction and sum up, I want to make my small contribution to making the world a better place and debugging mainstream macro economics I think is the most appropriate way for me to do this at present. Lets see.