Bill takes down the foundation of neoclassical economics, equilibrium at full employment. Neoclassical economics posits equilibrium at full employment, while Keynes posited equilibrium at less than full employment under capitalism unless government intervenes to increase effective demand.
Bill Mitchell — billy blog
A chicken in every pot!
Bill Mitchell
3 comments:
Bill quotes from the physicist Buchanon which Tom posted recently here:
"The author suggests that
We’ll never understand economies and markets until we get over the nutty idea that they alone — unlike almost every other complex system in the world — are inherently stable and have no internal weather. It’s time we began learning about the socioeconomic weather, categorizing its storms, and learning either how to prevent them or how to see them coming and protect ourselves against them."
So our "economies" have "weather"?
WTF is this guy talking about?
Look at the word itself: "economy" from the Greek oikonomia which is translated as "house-LAW".... ie "LAW"... where do "LAWS" come from?
Maybe in pagan Physics they come from "mother nature", but in "house-LAW" they are established via authority of human governing institutions...
Bill refers to the depression Dust Bowl, which was caused by morons running the "house-LAW" and spoiling the soil, as there was a soils scientist at the time that was warning of future problems which later indeed became manifest.
Hey physicist: Our economy, or our approach to our "house-LAW" can be INFLUENCED BY weather, as is the case of our Dust Bowl, but it DOES NOT have it's own "weather", this is some pagan/magical thinking/invisible hand type stuff you have going on here.... very libertarian...
Granted with morons at the controls, "we never know what could happen..." and these results could deceive us into thinking that "our economies are unstable by nature..."
Matt, Most of the economic literature in places like here. make implicit and explicit assumptions in their models about the existence of equilibrium. The formulas they use, the type of math, the relations -- everything is dedicated to explaining and finding equilibrium. What baffles people from other disciplines, like science, statistics, math and philosophy or social science is that more accurate explanations using other tools could be applied to observations; but they aren't used in favor of equilibrium descriptions. Not because equilibrium exist or are the best explanation but because that is how economics has always done it. It is just assumed to be the case, common sense. They have had nuanced arguments about the finer points of equilibrium ad nauseum. They have used square wheels forever (think stickiness, friction, multiple equilibria, agents, granularity... lots of goofy ideas to try and find and justify elusive equilibrium) and don't want to reinvent a round one. The square one works just fine, thank you. Everyone else is morons and just can't see what economists can, apparently. The weather analogy is simply a device to explain to a non-economist audience in bloomberg how other complex math can be used to explain the world quite accurately without all the unobservable, unmeasurable superstitions. The newer toolkits used in other professions seem to do the job quite well when there aren't stable observable equilibrium. Tom Hickey has done a tremendous job illustrating how other more complex logical and philosophical and social science descriptions can explain the economy. The same is also true of computation, math, and statistics. Poking fun at ignorance of an academic is usually the most effective way to get them to look into their areas of blindness and ignorance. Because they consider themselves to be experts they often are not curious and aware of large swaths of knowledge outside their specialty. Their ignorance is on full display to others and is sometimes obvious from the outside. This is a small nudge to economists that they need to de-throne, remove the tiara and temporarily learn a few new things before they continue embarrassing themselves and more importantly causing more damage to the world.
Ryan,
I agree with everything you say here... just dont want this guy to make the same mistake and think that our "house-LAW" systems are "beyond our control" or something (like the weather...)
rsp,
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