tag:blogger.com,1999:blog-17232051.post7862017679876648212..comments2024-03-28T03:16:14.104-04:00Comments on Noahpinion: Examining an MMT model in detailNoah Smithhttp://www.blogger.com/profile/09093917601641588575noreply@blogger.comBlogger31125tag:blogger.com,1999:blog-17232051.post-75678143651509438942020-07-23T23:17:38.227-04:002020-07-23T23:17:38.227-04:00IMO, jobs aren't intrinsically good, though so...IMO, jobs aren't intrinsically good, though some people may genuinely like their jobs. For many others, and perhaps for most workers, jobs are good only in a world where one either has a job or dies of starvation and exposure. Hence the argument for the wonderfulness of colonialist labor conditions. A person who takes a job because she or he must prevent their family from starving, works in desperation. <br /><br />IMO, also, mathematics has an intense dulling effect on the science of economics, a science that otherwise would be far more enjoyable (and I write as a mathematician).<br /><br />An interesting read, Noah. Thank you.Daniel Brockmanhttps://www.blogger.com/profile/11556499271927089855noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-44347863866115546912019-04-09T18:19:41.543-04:002019-04-09T18:19:41.543-04:00Seems people are worked up over a simple model tha...Seems people are worked up over a simple model that one can read a little or a lot into. <br /><br />Ok, Government says firefighters only fight residential fires, and corporations will not be serviced. Now corporations need firefighting staff. What will they pay them? Will the public firefighter pay scale be used in determining those salaries? So couldn't government possibly be setting the price of a firefighter? <br /><br />I have friends that are volunteer firefighters, and many locales pay nothing for these workers. That is interesting too, but the fire incidence is less, and there are tax credits, plus many corporations support these employees in this volunteer time off. I think it is an interesting model - not saying it is right, just interesting.<br /><br />Regarding the colonial tax, that may only be necessary to "jump-start" a currency - get it accepted. Once accepted it can become more entrenched as a mechanism to facilitate trade, so maybe the taxes are not as important at that point.mmcoskerhttps://www.blogger.com/profile/09340832287496890370noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-49076938717746899202019-04-09T18:05:02.399-04:002019-04-09T18:05:02.399-04:00People don't hold much money for taxes because...People don't hold much money for taxes because of withholding and required quarterly tax payments. Most mortgage companies have escrow for property tax payments. So, I am a bit confused by this statement.mmcoskerhttps://www.blogger.com/profile/09340832287496890370noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-39338579355646627452019-04-08T10:23:08.079-04:002019-04-08T10:23:08.079-04:00The people fighting fires now have money (tax cred...The people fighting fires now have money (tax credits) that are in demand by others. Others can do non-fire services to earn those from firefighters. So long as the government doesn't tax out of existence all the tax credits and there are enough to circulate around, the system can work.Matthttps://www.blogger.com/profile/00492483558319742535noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-30716968833511343392019-04-04T23:14:04.450-04:002019-04-04T23:14:04.450-04:00"Note the part that I've marked with a re..."Note the part that I've marked with a red arrow. This economy produces only one service, which is firefighting. But you can't eat firefighting. So if that's literally the only thing anyone does in this economy, everyone will starve to death."<br /><br />And unless they're going to spit or urinate on the fires, they'll probably need some equipment to actually fight the fires...before they die of starvation.Mark Bahnerhttps://www.blogger.com/profile/05768989010234358695noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-38628748261865069172019-04-04T12:59:17.645-04:002019-04-04T12:59:17.645-04:00The rigor of String Theory math is irrelevant in t...The rigor of String Theory math is irrelevant in the absence of testable hypotheses. Is the math in ST anything more than the candle flame that draws the moth?Sir Barken Hyenahttp://uncouthreflections.comnoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-49098561329330279142019-04-04T10:53:14.026-04:002019-04-04T10:53:14.026-04:00MMT and the canonical macroeconomic model
Comment ...MMT and the canonical macroeconomic model<br />Comment on Noah Smith on ‘Examining an MMT model in detail’<br /><br />For the full (8576 character) text see<br />https://axecorg.blogspot.com/2019/04/mmt-and-canonical-macroeconomic-model.htmlAXEC / E.K-Hhttps://www.blogger.com/profile/10402274109039114416noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-38091056999016295012019-04-04T08:23:38.027-04:002019-04-04T08:23:38.027-04:00Though not an economist (maybe a good thing?), I l...Though not an economist (maybe a good thing?), I liken MMT to Supply Side theory. MMT supporters just need the little paper napkin with a nice curve that they can use in support of the theory; it seemed to really help Professor Laffer explain his!Alan Goldhammerhttps://www.blogger.com/profile/07409822556590754421noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-36416235936018440672019-04-04T00:17:09.228-04:002019-04-04T00:17:09.228-04:00I don't know much about MMT except it sounds b...I don't know much about MMT except it sounds bogus, however, in mitigation, so do most of the other schools of economics. So what if there's a model or not? For example, the monetarist model states money is short term non-neutral and prices, employment are sticky. But in reality they do not appear to be very neutral or sticky, and if they're not, all of monetarism goes out the window. Yet to this day you have diehards who believe (faith based economics) that money is non-neutral short term and prices are very sticky. Same with fiscal policy economics, the "Keynesian multiplier" which may in fact be zero or even negative. But it's hard to measure it. Same with the "natural interest rate" or "natural rate of employment" and other such occult variables in various models. So what if you can 'understand' the model? It does not make it less true. The advantage for MMT is precisely that, like communism, they don't need a model nor do they want a model. Since economics is a political process, not a science, they want you to believe. And once you 'believe' their unstated priors, in a way you're no different than a believer in the metaphysics of Milton Friedman or Lord Keynes. Faith based economics is MMT, but without the models that the other schools have.Ray Lopezhttps://www.blogger.com/profile/11134761834999705305noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-74656880546335037382019-04-03T21:34:41.758-04:002019-04-03T21:34:41.758-04:00One more comment: my previous two assumed that the...One more comment: my previous two assumed that the population are possible taxpayers, and the gov't wage reveals how many actual taxpayers there are.<br /><br />Suppose instead that we posit that all of the population are actually taxed, but the gov't pays only a single one of them the 10 dollars, the only money available by construction.<br /><br />The interesting question is then how long the tax period must be, for a legitimate gov't that doesn't force someone to steal in order to fulfill a physical constraint of no legal money available. <br /><br />In this case the answer is that the tax period must be long enough for each of the other nine taxpayers to convince the firefighter to voluntarily give them a dollar for their taxes owed.<br /><br />Two firefighters would roughly halve this tax period for the remainder, and so on.Mickie Dreysenhttps://www.blogger.com/profile/12758145030661710286noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-72716094300993228042019-04-03T21:19:00.847-04:002019-04-03T21:19:00.847-04:00oops, followup to previous comment: the year time ...oops, followup to previous comment: the year time period I used is misleadinh, isn't it? Note simply that the single period could in principle be one day. In fact, by construction the period is the time period it takes to fight a single fire. <br /><br />In which case, positing extended economuc structures that allow money to flow between the whole population, i.e. that the gov't is putting a tax on property owners but providing the means to pay it to only a subset of those property owners becomes a little more strained; having the subset of the population being paid as firefighters as the only tax owing subset seems more parsimonious. Mickie Dreysenhttps://www.blogger.com/profile/12758145030661710286noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-80473050947859470882019-04-03T21:10:51.350-04:002019-04-03T21:10:51.350-04:00The discrete model has an interesting implied resu...The discrete model has an interesting implied result: only existing property owners can be firefighters and be paid by the government as posited.<br /><br />To see it, remember that money can only exist as a creation of the government. As of January 1, no money exists; by construction, December 31 following, all property owners together owe 10 dollars. <br /><br />Thus, a gov't wage of 1 dollar implies ten property owners, 2 dollars 5 owners, and so on, with a ten dollar wage implying only a single property owner.<br /><br />This assumes a legitimate government: one that does not seek to force a tax onto people who, by construction, have no means of paying it via the model mechanisms postulated. <br /><br />Yes, you could subsequently generalize to include a wider economy, but that isn't included in this particular model. <br /><br />I think, while you could probably come up with other social structures that can result consistent with the model, in formal terms they may all need some assumption about further economic structures.Mickie Dreysenhttps://www.blogger.com/profile/12758145030661710286noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-13963295734641222932019-04-03T21:04:57.040-04:002019-04-03T21:04:57.040-04:00Paul Segal,
That is the "MMT is nothing new&...Paul Segal,<br /><br />That is the "MMT is nothing new" or maybe the similar "we knew it all along" claim.<br /><br />Those claims do not proceed. Bill Mitchell, in his blog, has already discussed and addressed those criticis, and I believe he is able to explain much better than I could (he is, after all, one of the "founders" of MMT).<br /><br />If you want more details, you should look for his blog entry entitled "Modern Monetary Theory – what is new about it?" (with 3 parts) or maybe another one entitled "The mainstream old guard tell it as it is – and how different that is to MMT". Those posts should answer your questions...Andréhttps://www.blogger.com/profile/10935332922520483975noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-21384591922157183932019-04-03T20:25:32.926-04:002019-04-03T20:25:32.926-04:00MMT is a disaster! Catastrophic! The end of the wo...MMT is a disaster! Catastrophic! The end of the world!<br /><br />Side note: the MMT crowd has been running Washington DC since about 1960. Since then, real incomes per capita in the US have about tripled.<br /><br /> The current day academic MMT crowd and the present-day GOP-MMT crowd are distinguished in two ways: the academics are powerless, and the academics prefer to discuss additional spending as opposed to tax cuts. The academics appear to understand little about public opinion. <br /><br /> I think MMT would work if they would just go to money-financed fiscal programs, rather than borrow and spend.<br /><br />Benjamin Colehttps://www.blogger.com/profile/14001038338873263877noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-60104507686769568142019-04-03T16:09:49.567-04:002019-04-03T16:09:49.567-04:00People who are not able to be employed in the priv...People who are not able to be employed in the private sector would be willing to work as "fire fighters." Drop the neoclasscial assumption that the economy is always at or headed toward full employment and you will see the purpose of the job guarantee.Anonymoushttps://www.blogger.com/profile/14594396551907502341noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-6634933021686848062019-04-03T14:26:42.656-04:002019-04-03T14:26:42.656-04:00Noah, taking the piss out of the economy only prod...Noah, taking the piss out of the economy only produces fire fighting might not be the most constructive way to approach this... quite funny thoughAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-1894477704034105122019-04-03T10:56:05.695-04:002019-04-03T10:56:05.695-04:00Observe how that paper/model links the "finan...Observe how that paper/model links the "financial" world to the "real world": by assuming that the velocity of money is constant. The author doesn't even give importance to that. He simply assumes that and doesn't even discuss or criticise it.<br /><br />It seems just a little detail, but it is a big, enormous thing. Empirical evidence shows that money velocity is not constant. And it is actually quite easy to see that, you don't need to apply any sophisticated methodology to arrive at that conclusion. You just need to calculate the money velocity (with whatever definition of "money" you want) and see that it is never close to something you could call stability.<br /><br />In the real world, the money velocity is a endogenous variable influence by all the others, including C, I, G, S, etc. Also, unused capacity (like unemployment) is not in the model, and it is also influenced by all those variables and it also influence the money velocity.<br /><br />Hence, that paper/model is not useful to analyse the real world...Andréhttps://www.blogger.com/profile/10935332922520483975noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-74013092187081638312019-04-02T21:45:26.244-04:002019-04-02T21:45:26.244-04:00Mathematics is neither a necessary nor a sufficien...Mathematics is neither a necessary nor a sufficient condition for good scientific theory.<br /><br />For example, evolution theory, although very scientific, doesn't rely on mathematical models. You don't need to write a mathematical model to define it or to explain it (although you could). So no mathematics here and still an excellent scientific theory.<br /><br />Another example: an economist made a (more or less) complex mathematical model with differential equations to study the economical dynamics of a population of vampires and non-vampires. The math is perfect and totally coherent. However, it doesn't matter: you couldn't use the model to explain real world phenomena, because there are no vampires in the real world. So here you have a lot of rigorous math and no actual scientific theory.Andréhttps://www.blogger.com/profile/10935332922520483975noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-51765520632469060022019-04-02T21:28:52.253-04:002019-04-02T21:28:52.253-04:00They are very competent.
In Consumer Choice Model...They are very competent.<br /><br />In Consumer Choice Models, you don't need to detail the color of the hair of the agents, because it doesn't change the outcome of that toy model. Also, the general concepts remain the same no matter whether you put two or a million of goods there, and you don’t even need to name the goods. Of course, if you want to do some actual analysis of the real world, you would need to detail more and add complexity (like multiple periods, durable goods, production, storage, externalities, asymmetrical information, gaming and strategy, risk, long term commercial relationships, transaction costs, market power, political and military power, law, imperfect enforcement, trust, death, ignorance, irrationality, etc etc).<br /><br />In that MMT toy model, you also don´t need to detail exactly the name of the goods, you don´t need to work with thousands of goods, and you don´t need to be specific about the taxes.Andréhttps://www.blogger.com/profile/10935332922520483975noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-15944304870401572952019-04-02T16:52:06.635-04:002019-04-02T16:52:06.635-04:00Most MMT proponents don't like toy models beca...Most MMT proponents don't like toy models because they're not even competent enough to work a simple one out, as this case exemplifies.<br /><br />Yes, she could have detailed more. That's the point of writing down a model: To force you to explain the necessary details.drive-by commenternoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-44105878512798180862019-04-02T16:45:00.059-04:002019-04-02T16:45:00.059-04:00"Because Susan has $10 and everyone else has ..."Because Susan has $10 and everyone else has $0, so the only way the government can get its $10 is to tax Susan $10."<br /><br />If we're being charitable and assuming there is economic activity outside of the model then Susan can exchange her $10 for goods and services from whoever the taxpayers are. Or to someone else who would do the same.<br /><br />The forced labor is still there of course, but only hits those who bear the tax burden after being laundered through the out of model economy, so I guess that makes everything okay.Bumpernoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-82128644570504550182019-04-02T15:57:43.071-04:002019-04-02T15:57:43.071-04:00It seems like the key difference between the "...It seems like the key difference between the "African example" and the alternative (2b) is the lower real value of G and T. Whether they attribute that to organized labor or corruption or counterfeiting or liberal democracy, the forced labor isn't eliminated, only reduced.Bumpernoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-81708137038760743022019-04-02T14:00:38.626-04:002019-04-02T14:00:38.626-04:00Yes, good point. Although not true for Krugman IMO...Yes, good point. Although not true for Krugman IMO. Wasn't long ago where he felt a Japanese debt crisis was around the corner, for example. He's still apparently in a IS/LM world and believes in crowding out, etc. - disproven by MMT logic, etc. He's made progress over the years but is not there yet. Thanks.Charles DuBoishttps://www.blogger.com/profile/17139978413665218618noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-74593967743769408412019-04-02T11:22:07.171-04:002019-04-02T11:22:07.171-04:00Except String Theory is usually based on rigorous ...Except String Theory is usually based on rigorous math, not cultish "we're the ones with revealed truth" attitude.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-89003462266837629692019-04-01T19:08:32.652-04:002019-04-01T19:08:32.652-04:00"Another question arises: Why is anyone willi..."Another question arises: Why is anyone willing to work as a firefighter in this model? According to Tcherneva, they need dollars to pay their taxes. But who pays the taxes? Tcherneva specifies that the tax bill "for the entire community" is $10. But how is this tax bill paid? Does the entire community file taxes jointly?"<br /><br />It is a property tax. Everyone who has property pay taxes, or they will face the consequences of not paying it (enforced through the monopoly of violence enjoyed by the central authority).<br /><br />Of course, Tcherneva could have detailed more: everyone has an identical property so everyone is taxed equal ($1 per person), or maybe two of them have bigger houses and they pay $2.5 each, while the others pay $ 0.625, etc. That doesn't change the general concept. Also, the concept is not changed no matter how many goods you put in the economy (one, ten or millions) nor how many periods you put there. Also, it doesn't need to be about property taxes. Other kinds of taxes would do, but they would also interfere in people's decisions. Houses could be goods, and hence property taxes would affect the decision of people wanting to buy or sell houses.<br /><br />It is a toy model, used for didactical purposes. You cannot hope anything beyond that. Most MMT proponents do not like toy models because they are too limited, and I believe that is why you don't see many MMT mathematical models out there...Andréhttps://www.blogger.com/profile/10935332922520483975noreply@blogger.com