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Modern Monetary Theory

 
EN
 
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14 March 2019 14:06
 
Garret - 14 March 2019 01:53 PM
EN - 14 March 2019 08:35 AM
Garret - 13 March 2019 08:20 AM
EN - 13 March 2019 07:51 AM
Jefe - 13 March 2019 07:42 AM
GAD - 13 March 2019 06:57 AM

Destroying the economy to try and stop climate change is ludicrous and pointless.  The 3 billion people who will added to the earth by 2050 will by far surpass what the the US could ever do. The only real hope is that technology can keep up enough to mitigate the changes, but the changes will happen is any case.

Which is to say that Humanity is not the master of it’s domain in the way it may think it is.
We are caught by our own biology and our own shortsightedness, and locked into obsolete methods of thinking and organizing ourselves as a civilization and a species.

Most of the top 30 polluted cities in the world are in India.  India keeps having kids.  India is not going to stop polluting any time soon, nor is China, nor is Bangladesh, Pakistan, etc.  We are going to be pumping more and more shit into the atmosphere for the foreseeable future, irrespective of how green we become over here.  The population growth is a major driver of climate change.  India and Paki getting into a major nuclear war is about the only way they are going to stop long-term pollution.

Whenever I see comments like this on global population, I immediately know that you have not bothered to look at relevant statistics on child births recently.  If you had, you’d know that China’s birth rate is one of the lowest in the world, and that India’s is far from being a problem.  India’s birth rate has fallen by more than half since 1970.  Their birth rate is barely above the replacement rate, but if you combine them with China, you have a population that is below replacement.

The majority of the world’s population growth right now is not due to childbirth, but rather longer life span.

For a primer on the topic, I recommend watching some Hans Rosling lectures, and use his data website Gapminder.  For one, it’s probably one of the prettiest data websites that exist. 

Here’s a chart of countries by income and babies per woman. You can move the year slider all the way to the left and hit play.  It’s easy to spot when major world events happen, like WWI and the flu epidemic, or the Great Chinese Famine.

Are you denying that India keeps having kids?  That’s all I said.  I’m not denying that longer life span is the primary driver.

 

Bold where I deny that any country has kids, or even just bold which sentence led you to believe that I held that opinion.

I was trying to figure out what statement I made that you felt was factually incorrect.

 
Garret
 
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Garret
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14 March 2019 16:05
 
EN - 14 March 2019 02:06 PM
Garret - 14 March 2019 01:53 PM
EN - 14 March 2019 08:35 AM
Garret - 13 March 2019 08:20 AM
EN - 13 March 2019 07:51 AM
Jefe - 13 March 2019 07:42 AM
GAD - 13 March 2019 06:57 AM

Destroying the economy to try and stop climate change is ludicrous and pointless.  The 3 billion people who will added to the earth by 2050 will by far surpass what the the US could ever do. The only real hope is that technology can keep up enough to mitigate the changes, but the changes will happen is any case.

Which is to say that Humanity is not the master of it’s domain in the way it may think it is.
We are caught by our own biology and our own shortsightedness, and locked into obsolete methods of thinking and organizing ourselves as a civilization and a species.

Most of the top 30 polluted cities in the world are in India.  India keeps having kids.  India is not going to stop polluting any time soon, nor is China, nor is Bangladesh, Pakistan, etc.  We are going to be pumping more and more shit into the atmosphere for the foreseeable future, irrespective of how green we become over here.  The population growth is a major driver of climate change.  India and Paki getting into a major nuclear war is about the only way they are going to stop long-term pollution.

Whenever I see comments like this on global population, I immediately know that you have not bothered to look at relevant statistics on child births recently.  If you had, you’d know that China’s birth rate is one of the lowest in the world, and that India’s is far from being a problem.  India’s birth rate has fallen by more than half since 1970.  Their birth rate is barely above the replacement rate, but if you combine them with China, you have a population that is below replacement.

The majority of the world’s population growth right now is not due to childbirth, but rather longer life span.

For a primer on the topic, I recommend watching some Hans Rosling lectures, and use his data website Gapminder.  For one, it’s probably one of the prettiest data websites that exist. 

Here’s a chart of countries by income and babies per woman. You can move the year slider all the way to the left and hit play.  It’s easy to spot when major world events happen, like WWI and the flu epidemic, or the Great Chinese Famine.

Are you denying that India keeps having kids?  That’s all I said.  I’m not denying that longer life span is the primary driver.

 

Bold where I deny that any country has kids, or even just bold which sentence led you to believe that I held that opinion.

I was trying to figure out what statement I made that you felt was factually incorrect.

You said this: India keeps having kids.

And in the same paragraph, bracketed by statements about India, you said:
The population growth is a major driver of climate change.

This implies that India’s birth rate is a primary driver of population growth.  The ONLY cause you cite for population growth is birth rate in that post. If you didn’t intend to send that message, don’t get mad at me.  You wrote it.  If you want to change your statement and say something else, don’t get mad at me, just write what you really intend.

 
TheAnal_lyticPhilosopher
 
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TheAnal_lyticPhilosopher
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15 March 2019 09:11
 

Some ideas are so simple in their originality that no one ever thought of them, despite being so obvious in retrospect—like Coase’s transaction costs.  Others are so simple in their stupidity that virtually no one has ever contemplated them, their stupidity being so obvious from the get go—like MMT.  Here’s an account of why it is an utterly crackpot idea, one that makes the Laffer curve look like genius.

Just what MMT proposes depends on the context, and the audience, but in general it claims two things: 1) government spending can be financed by creating new money, so there is no need to increase taxes to cover deficits, and 2) inflation won’t be a problem because the US economy is not at full capacity, but when it does reach full capacity, the government can step in and increase taxes to control prices, i.e. to prevent inflation.  There’s more to the idea—such as “the government can spend an unlimited amount of money,” and to prevent the usual inflationary effects of simply creating this money as needed it must put in place “structural macroeconomic programs that directly manage the labor force, pricing mechanisms, and investment projects,” and it must “constantly monitor financial developments” to insure that these programs are controlling the economy as planned (Tymoigne and Wray, 2013, emphasis added).  But, central economic planning aside, 1 and 2 cover its core idea.  To finance spending, governments can simply print money, and to prevent inflation, they can simply tax excess money out of the system.

The idea is total bullshit—as crackpot an idea as has ever been proposed—as a simple model should make clear.

Say there are nine citizens and a government in an economy.  Say there is an $800 “money supply” for $1000 in transactions of goods and services.  Also, say the government’s share of consumption and spending on goods and services is $200, that the citizens’ share is $800, and that the government runs a $50 deficit.  Stipulate further that economic output grows at a rate of 3% annually (this is its annual surplus, or its “internal speed limit), and assume, lastly, that inflation is around its target rate of 2%. This more or less reflects the US economy as it exists today, though it simplifies things into one government, not separate Federal, state and local governments, and it uses manageable numbers.

To see what MMT proposes, say from one year to the next the economy grows from $1000 to $1030 (its 3%), inflation is stable at 2% during this growth, and the government prints its $50 to cover its deficit spending.  What will happen? Well, since the economy grew from $1000 to $1030 and inflation stayed at 2%, the money supply grew as well.  That is, the amount of money in circulation grew to facilitate the total transactions for goods and services, keeping prices stable at the 2% inflation.  But note: with MMT policy makers in place, the government has also added an additional $50 above and beyond what the economy needs at current prices, i.e. it has created new money to fund its deficit.  This cannot but put an upward pressure on prices.  That is, inflation has to rise above 2% unless one, or both, of two things happens: the supply of goods and services in the economy (miraculously) increases above and beyond the 3% real growth rate, absent new injections of money into the system, and/or the added money goes into some kind of non-circulating asset, i.e. into a transaction where it is held, not spent or made available for spending on goods and services.  There are simply no alternatives to this dual destiny of the added money vis-à-vis prices.  Absent either contingency, once the economy is at full capacity, inflation will rise, period (ASD has indicated the reasons for this).

MMT proponents acknowledge this—sort of—but they say it’s not a problem because the government can simply tax the excess inflationary money back out of the system (Kelton).  In other words, if there is too much money in circulation because the government created it, the government can just tax that money back out of the economy, just as it put it in.  But note: under the normal meaning of “tax” this can’t work because a tax doesn’t take money out of circulation; it only changes who spends a given amount of money on what.  So, if the government raises taxes in year two or later to prevent the inflationary effects of having created excess money in year one, this only means that it doesn’t run a deficit that year, not that the inflationary money ‘leaves’ circulation.  And God forbid some MMT clown (like Ocasio-Cortez) thinks that in addition to this new tax, new spending can be financed with new money.  That will only exaggerate the inflationary pressure of the first excess money, and inflation will be a bigger problem.  And so on and so on.  So, obviously, the only way a “tax” can work to offset the inflation-causing excess money is if that money is “held” by the government, not spent.  In effect, then, by putting money ‘in’ and taking money ‘out’ of circulation, the government through creation and “taxation” would take direct control over the money supply—hence all the central planning cited above.  In other words, “taxes” to control for inflation under MMT are essentially the ‘backdoor’ for centralized control over the entire economy, for—as they know fully well—that’s the only way a government can both print the money it needs to fund its programs and control for inflation.

It’s no wonder, I think, that proponents of MMT are vague on the details of how creating money to finance spending won’t lead to inflation—beyond some hand waiving about the economy not being at “full capacity” (a non-sequitur in any case).  The only way it won’t is if the government takes direct control over the money supply, as opposed to “tweaking” its natural growth, as the Fed does now.  So, the only way the government printing the money it needs to finance its programs isn’t a total crackpot idea is the proposal of another total crackpot idea—that the government “directly manage the labor force, pricing mechanisms, and investment projects,” in effect controlling the whole economy through central planning.  It’s not for nothing politicians who embrace MMT declare their socialism, for MMT is the economic basis for socialism and its government control over the economy as such (as opposed to its current role as a privileged player who can tweak its direction).  MMT is socialism—the whole bottle of medicine, not just a single dose to cover deficit spending.

I’ll leave it to forum members to debate the relative merits of that idea.  For me it’s enough to point it out.  MMT either leads to rampant inflation by printing money to finance government spending, or it leads to centralized control over the economy, where the government can both print all the money it needs and prevent the otherwise inevitable inflation.  It’s not, therefore, just an idea for a new way of government spending: it’s a radical reworking of the entire economy.  It has to be because based on what we know about how this one works, MMT can’t work.  Increasing the money supply for a given level of output, growth, and investment has to lead to more inflation, and MMT advocates know this, which is why they argue for centralized control over output, growth and investment in order to prevent it.  For my part, that’s just one crackpot idea to support another crackpot idea, one we’ve seen fail every time it’s been tried.  So why the fuck would we want to try it again?

[As a footnote, I’ll point out that one can show how one of the two above contingencies did in fact occur during the Fed’s “quantitative easing”; therefore inflation did not rise.  That, and the money supply needed an injection of stimulating liquidity, of which it got a dose.  In any case, the majority—even the vast majority—of the “new money” from the Fed’s quantitative easing went into “held” assets—gold, bonds, and stocks—not spending on goods and services.  That destiny of the “new money” poses its own set of potential problems, ones that have nothing to do with the viability of MMT.]

(Tymoigne and Wray (2013).  Modern Money Theory 101: A Reply to Critics.  Levey Economics Institute Working Paper No. 778.  https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2348704&#41;


 

.   

[ Edited: 17 March 2019 06:34 by TheAnal_lyticPhilosopher]
 
Garret
 
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15 March 2019 10:11
 

What if the economy is capable of producing an extra $100 of goods, but is currently not doing so?  What does the extra $50 in the money supply encourage to happen?

 
Antisocialdarwinist
 
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15 March 2019 10:58
 
TheAnal_lyticPhilosopher - 15 March 2019 09:11 AM

Just what MMT proposes depends on the context, and the audience, but in general it claims two things: 1) government spending can be financed by creating new money, so there is no need to increase taxes to cover deficits, and 2) inflation won’t be a problem because the US economy is not at full capacity, but when it does reach full capacity, the government can step in and increase taxes to control prices, i.e. to prevent inflation.  There’s more to the idea—such as “the government can spend an unlimited amount of money,” and to prevent the usual inflationary effects of simply creating this money as needed it must put in place “structural macroeconomic programs that directly manage the labor force, pricing mechanisms, and investment projects,” and it must “constantly monitor financial developments” to insure that these programs are controlling the economy as planned (Tymoigne and Wray, 2013, emphasis added).  But, central economic planning aside, 1 and 2 cover its core idea.  To finance spending, governments can simply print money, and to prevent inflation, they can simply tax excess money out of the system.

That’s pretty much the way I remember MMT being first explained to me seven or eight years ago. But the links posted earlier in this thread (Ezra Klein interviews Stephanie Kelton—MMT’s foremost proponent—and Jason Furman, Obama’s chief economist; Stephanie Kelton explains MMT; and MMT Versus Austrian School Debate) seem to explain it a little differently. Maybe MMT is still evolving; maybe I misunderstood it the first time, or maybe I’m misunderstanding it now. Kelton takes pains to point out that MMT is not a way for governments to simply print as much money as they need to finance spending. The gist of it is more benign: that there are certain conditions under which printing money will not lead to inflation. This isn’t controversial; MMT and traditional economists agree, and as you point out, QE was empirical evidence of this. The main point of disagreement seems to be over how we determine whether the economy is operating at full capacity. But as far as I can tell from the videos, MMT agrees that there are also certain conditions under which printing money will lead to inflation.

TheAnal_lyticPhilosopher - 15 March 2019 09:11 AM

[As a footnote, I’ll point out that one can show how one of the two above contingencies did in fact occur during the Fed’s “quantitative easing”; therefore inflation did not rise.  That, and the money supply needed an injection of stimulating liquidity, of which it got a dose.  In any case, the majority—even the vast majority—of the “new money” from the Fed’s quantitative easing went into “held” assets—gold, bonds, and stocks—not spending on goods and services.  That destiny of the “new money” poses its own set of potential problems, ones that have nothing to do with the viability of MMT.]

This is the part that’s interesting to me even if MMT as a whole turns out to be bullshit. What is the impetus for “unwinding” QE now? Is there something about the “destiny” of that new money that still poses its own set of potential problems if we don’t “unprint” it?

 
 
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15 March 2019 11:12
 
Garret - 14 March 2019 04:05 PM

You said this: India keeps having kids.

And in the same paragraph, bracketed by statements about India, you said:
The population growth is a major driver of climate change.

This implies that India’s birth rate is a primary driver of population growth.  The ONLY cause you cite for population growth is birth rate in that post. If you didn’t intend to send that message, don’t get mad at me.  You wrote it.  If you want to change your statement and say something else, don’t get mad at me, just write what you really intend.

I’m not mad.  The point is that India and China etc. are the greatest polluters and keep growing. I did not intend to imply that “India’s birth rate is a primary driver of population growth”, only that the nation keeps having children and keeps growing.  It won’t grow without children. But I’ll remove the “children” sentence to avoid confusion.

 
Garret
 
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15 March 2019 11:22
 
EN - 15 March 2019 11:12 AM
Garret - 14 March 2019 04:05 PM

You said this: India keeps having kids.

And in the same paragraph, bracketed by statements about India, you said:
The population growth is a major driver of climate change.

This implies that India’s birth rate is a primary driver of population growth.  The ONLY cause you cite for population growth is birth rate in that post. If you didn’t intend to send that message, don’t get mad at me.  You wrote it.  If you want to change your statement and say something else, don’t get mad at me, just write what you really intend.

I’m not mad.  The point is that India and China etc. are the greatest polluters and keep growing. I did not intend to imply that “India’s birth rate is a primary driver of population growth”, only that the nation keeps having children and keeps growing.  It won’t grow without children. But I’ll remove the “children” sentence to avoid confusion.

Are you aware that “birth rate” refers to the number of children that are being born?

[ Edited: 15 March 2019 11:28 by Garret]
 
EN
 
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15 March 2019 11:51
 
Garret - 15 March 2019 11:22 AM

Are you aware that “birth rate” refers to the number of children that are being born?

Yes.

 
EN
 
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15 March 2019 11:53
 

http://www.populstat.info/Asia/indiac.htm

The population of India is projected to rise to 1.7 billion by 2050.

Birth & death rate:

http://www.economicsdiscussion.net/articles/birth-rate-and-death-rate-in-india-statistics/4497

Both birth rate and death rate have declined.  The article concludes: “Birth rate being more than the death rate, growth rate has been rising rapidly.”

Also, “Birth rate and death rate in India are very high as against many countries of the world.” 

Update on birth rate: as of 2015:  “According to Census of India 2011, India has a Crude Birth Rate of 21.8.”  The USA birth rate for the same year was 12.4.

 

[ Edited: 15 March 2019 12:45 by EN]
 
TheAnal_lyticPhilosopher
 
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15 March 2019 11:58
 

Garret and ASD,

This “full capacity” business is a red herring.  As MMT invokes it, it is economic metaphysics, not economics. 

For instance, in 2009 the US economy was clearly producing and consuming under its capacity, as GDP fell by 2.5% from its 2007 high, but obviously factories, workers and technologies etc. didn’t just disappear.  So in that case ‘unrealized capacity’ has a pretty clear meaning, one I don’t think MMT advocates can mean, since GDP is now increasing, meaning that usual sense of “capacity” is not only being realized; it is also expanding.

So what is this stipulation “capable of producing an extra $100 of goods?”  That workers could work harder if asked?  That too many potential workers aren’t working?  That there is a shortage of money to cover both investment and spending?  That factories are running at 90% instead of 100%?  That technology that could increase productivity isn’t being implemented?  What exactly? 

Knowing where this unrealized “capability” is coming from bears directly on the answer to any question about “full capacity.”  In fact, that specificity offers the only answers, and few of them relate to the money supply.  As far as I can tell, absent the specifics ‘unrealized capacity’ is just MMT hand waiving around the problem their proposal produces, like when a magician gestures around the booth before showing his assistant has “disappeared.”  With its questions about “full capacity” MMT proponents are simply making the inflationary consequences of their proposals “disappear.”

As for the ultimate “destiny” of QE, the majority of that new money went into non-circulating assets (first gold, then bonds and stocks), where its inflationary effect on prices was avoided.  For recall: in addition to the ~$1.4 trillion in US Treasuries the Fed bought (which insured money was freed up to lend to consumers and businesses, not just the government, which happened), it also bought ~$2.4 trillion in (mostly risky) assets from US banks.  Since then, the banks have gone on a field day lending to institutional investors (including hedge funds), and institutional investors have gone on a field day borrowing, since money has been all but free.  The gold “bubble” burst, but the bond and stock “bubbles” have yet to—and believe me, the Dow didn’t go from 15,000 in 2013 to 26,000 in 2019 because corporate fundamentals or the underlying economy has changed!  As I see it, the best way to insure the inflationary impact of QE never comes about is either that money stays in stocks and bonds, only slowly trickling back into the real economy over decades; or that the stock bubble bursts and all that money just “disappears.”  Far better that some hedge funds and institutional investors go broke than those of us in the real economy suffer.

Or so the Anus thinks. 

[ Edited: 17 March 2019 06:38 by TheAnal_lyticPhilosopher]
 
Antisocialdarwinist
 
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15 March 2019 12:59
 
TheAnal_lyticPhilosopher - 15 March 2019 11:58 AM

This “full capacity” business is a red herring.  As MMT invokes it, it is economic metaphysics, not economics. 

For instance, in 2009 the US economy was clearly producing and consuming under its capacity, as GDP fell by 2.5% from its 2007 high, but obviously factories, workers and technologies etc. didn’t just disappear.  So in that case ‘unrealized capacity’ has a pretty clear meaning, one I don’t think MMT advocates can mean, since GDP is now increasing, meaning that usual sense of “capacity” is not only being realized; it is also expanding.

So what is this stipulation “capable of producing an extra $100 of goods?”  That workers could work harder if asked?  That too many potential workers aren’t working?  That there is a shortage of money to cover both investment and spending?  That factories are running at 90% instead of 100%?  That technology that could increase productivity isn’t being implemented?  What exactly?

I think this is the crux of the disagreement between traditional economic theory and MMT. My take: The economy is capable of producing more if workers could work “harder” (more hours) if asked; if too many potential workers aren’t working; and/or if factories are running at 90% instead of 100%, to pick from your list.

I see using technology to increase productivity as an example of increasing capacity. That’s what I took you to mean by the “internal speed limit” of 3% in your example: that’s the fastest that the economy can increase capacity. The increase in economic output in any given year is limited by a combination of how fast capacity can increase and how far below capacity the economy is running.

(Not sure about the money shortage—that seems like it would have to happen in conjunction with the other conditions, or maybe the shortage itself implies that the other conditions are true.)

The Fed has two mandates: keep inflation low and keep unemployment low. Keeping unemployment low is desirable in and of itself, but maybe it’s also being used (possibly wrongly) as an indicator of economic utilization. Is the Fed assuming that when the unemployment rate drops to 4% (the so-called “natural” unemployment rate) the economy must be operating at full capacity? Which means that inflation is imminent? Which means they have to raise interest rates? It sure seems that way. But what if 4% unemployment in and of itself is a “false positive?” In that case, the Fed should look to some other indicators to tell when the economy is operating at full capacity and inflation is nigh, and possibly keep interest rates low (and/or print money) even when unemployment falls to 4%.

I’ll have to think about your QE explanation. There’s no question that QE was like crack cocaine for the market. I’m less certain about the potential effects of not unwinding it now.

 
 
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15 March 2019 13:35
 
EN - 15 March 2019 11:53 AM

http://www.populstat.info/Asia/indiac.htm

The population of India is projected to rise to 1.7 billion by 2050.

Birth & death rate:

http://www.economicsdiscussion.net/articles/birth-rate-and-death-rate-in-india-statistics/4497

Both birth rate and death rate have declined.  The article concludes: “Birth rate being more than the death rate, growth rate has been rising rapidly.”

Also, “Birth rate and death rate in India are very high as against many countries of the world.” 

Update on birth rate: as of 2015:  “According to Census of India 2011, India has a Crude Birth Rate of 21.8.”  The USA birth rate for the same year was 12.4.

And in 2015, it dropped to 19.0.

Meanwhile China’s has been below 13 since 2002.

Notice how as we’ve updated by year though that India’s birth rate has fallen pretty dramatically.  My point earlier is that if you haven’t looked at recently population statistics, you can have a very distorted view of what the current demographic trends are.  I highly recommend the gapminder site, it has a ton of data, is easy to use, and it looks pretty too.

Also, I’m curious about your list of “polluted cities.”  Are we concerned with which cities have the most polluted environment locally, or which cities cause the most pollution world-wide.  For example, if a city is wealthy enough to pay for a coal plant to be built far away, then the city itself is less polluted, by the city is still causing pollution.

 
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15 March 2019 13:58
 
Garret - 15 March 2019 01:35 PM

And in 2015, it dropped to 19.0.

Meanwhile China’s has been below 13 since 2002.

Notice how as we’ve updated by year though that India’s birth rate has fallen pretty dramatically.  My point earlier is that if you haven’t looked at recently population statistics, you can have a very distorted view of what the current demographic trends are.  I highly recommend the gapminder site, it has a ton of data, is easy to use, and it looks pretty too.

Also, I’m curious about your list of “polluted cities.”  Are we concerned with which cities have the most polluted environment locally, or which cities cause the most pollution world-wide.  For example, if a city is wealthy enough to pay for a coal plant to be built far away, then the city itself is less polluted, by the city is still causing pollution.

The 30 cities info comes from this:

https://www.theguardian.com/cities/2019/mar/05/india-home-to-22-of-worlds-30-most-polluted-cities-greenpeace-says

Maybe it’s subjective, but having been to India 3 times, I am not surprised.  The air in Mumbai made me sick.

So, as I said, India continues to have babies. Yes, the birth rate is dropping, but it’s still high, and with a low death rate, that equals population growth. 1.7 billion by 2050.  Hopefully, they will get their pollution under control, but I won’t hold my breath (unless I’m in Mumbai).

 
TheAnal_lyticPhilosopher
 
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15 March 2019 14:19
 
Antisocialdarwinist - 15 March 2019 12:59 PM
TheAnal_lyticPhilosopher - 15 March 2019 11:58 AM

This “full capacity” business is a red herring.  As MMT invokes it, it is economic metaphysics, not economics. 

For instance, in 2009 the US economy was clearly producing and consuming under its capacity, as GDP fell by 2.5% from its 2007 high, but obviously factories, workers and technologies etc. didn’t just disappear.  So in that case ‘unrealized capacity’ has a pretty clear meaning, one I don’t think MMT advocates can mean, since GDP is now increasing, meaning that usual sense of “capacity” is not only being realized; it is also expanding.

So what is this stipulation “capable of producing an extra $100 of goods?”  That workers could work harder if asked?  That too many potential workers aren’t working?  That there is a shortage of money to cover both investment and spending?  That factories are running at 90% instead of 100%?  That technology that could increase productivity isn’t being implemented?  What exactly?

I think this is the crux of the disagreement between traditional economic theory and MMT. My take: The economy is capable of producing more if workers could work “harder” (more hours) if asked; if too many potential workers aren’t working; and/or if factories are running at 90% instead of 100%, to pick from your list.

I see using technology to increase productivity as an example of increasing capacity. That’s what I took you to mean by the “internal speed limit” of 3% in your example: that’s the fastest that the economy can increase capacity. The increase in economic output in any given year is limited by a combination of how fast capacity can increase and how far below capacity the economy is running.

(Not sure about the money shortage—that seems like it would have to happen in conjunction with the other conditions, or maybe the shortage itself implies that the other conditions are true.)

The Fed has two mandates: keep inflation low and keep unemployment low. Keeping unemployment low is desirable in and of itself, but maybe it’s also being used (possibly wrongly) as an indicator of economic utilization. Is the Fed assuming that when the unemployment rate drops to 4% (the so-called “natural” unemployment rate) the economy must be operating at full capacity? Which means that inflation is imminent? Which means they have to raise interest rates? It sure seems that way. But what if 4% unemployment in and of itself is a “false positive?” In that case, the Fed should look to some other indicators to tell when the economy is operating at full capacity and inflation is nigh, and possibly keep interest rates low (and/or print money) even when unemployment falls to 4%.

I’ll have to think about your QE explanation. There’s no question that QE was like crack cocaine for the market. I’m less certain about the potential effects of not unwinding it now.

You left out the part that gets at the crux of the “disagreement”—which really isn’t a disagreement any more than astrology is a “disagreement” with astronomy.

Knowing where this unrealized “capability” is coming from bears directly on the answer to any question about “full capacity.”  In fact, that specificity offers the only answers, and few of them relate to the money supply.  As far as I can tell, absent the specifics ‘unrealized capacity’ is just MMT hand waiving around the problem their proposal produces, like when a magician gestures around the booth before showing his assistant has “disappeared.”  With its questions about “full capacity” MMT proponents are simply making the inflationary consequences of their proposals “disappear.”

Any claims about the “capacity” of an economy absent specific assertions about its configuration of resources—be they technology, knowledge, labor, money, land, raw materials…whatever—is just hand waiving around the fundamental issue that all economies face, namely: how to utilize scarce resources to produce goods and services.  The idea that adding more money to an already well-functioning economy is a natural way to do this, i.e. that it’s an effective way to realize the best possible configurations of those scarce resources, is so dumb no one has bothered to propose it.  Yet to dodge the problem of inflation, MMT proposes it.  It’s right there in their proclamations that increased government govern spending funded by created money is going to mobilize the resources required to implement extensive new social programs, all while avoiding the otherwise inevitable consequence of inflation. It’s just the liberals’ version of supply-side magic, which is why Summers called it “voodoo economics” as well.

Just because money connects all economic activities together doesn’t mean that increasing the money supply is the lever that gets you the specific results you need.  And increasing “capacity” is always about getting specific results—more labor, more investment, better technology, more knowledge, greater productivity, etc. MMT avoids these specifics just as “supply side economics” avoids the specifics of how lower taxes increases economic output, and therefore increases tax revenue, despite lower tax rates.  Only this time it is government created money, not lower tax rates, that’s going to work the magic.

I think your problem, if I may be so bold to call it that, is that you are taking this charade far too seriously; you’re giving it too much intellectual integrity.  MMT is a political idea, not a theory in economics (having a PhD. in economics is not enough to be a serious addition to economic theory, nor is a smattering of partially digested economic concepts, like kernels of corn in a turd).  In any case, as I think I’ve shown above, as an economic idea MMT is a turd—a crackpot idea among crackpot ideas.  Total bullshit, if you will…

 

[ Edited: 15 March 2019 14:40 by TheAnal_lyticPhilosopher]
 
Garret
 
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Garret
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15 March 2019 14:20
 
EN - 15 March 2019 01:58 PM
Garret - 15 March 2019 01:35 PM

And in 2015, it dropped to 19.0.

Meanwhile China’s has been below 13 since 2002.

Notice how as we’ve updated by year though that India’s birth rate has fallen pretty dramatically.  My point earlier is that if you haven’t looked at recently population statistics, you can have a very distorted view of what the current demographic trends are.  I highly recommend the gapminder site, it has a ton of data, is easy to use, and it looks pretty too.

Also, I’m curious about your list of “polluted cities.”  Are we concerned with which cities have the most polluted environment locally, or which cities cause the most pollution world-wide.  For example, if a city is wealthy enough to pay for a coal plant to be built far away, then the city itself is less polluted, by the city is still causing pollution.

The 30 cities info comes from this:

https://www.theguardian.com/cities/2019/mar/05/india-home-to-22-of-worlds-30-most-polluted-cities-greenpeace-says

Maybe it’s subjective, but having been to India 3 times, I am not surprised.  The air in Mumbai made me sick.

So, as I said, India continues to have babies. Yes, the birth rate is dropping, but it’s still high, and with a low death rate, that equals population growth. 1.7 billion by 2050.  Hopefully, they will get their pollution under control, but I won’t hold my breath (unless I’m in Mumbai).

Define “high”.  Because that birth rate is actually very low compared to most historic birth rates.  It’s less than half of India’s own birth rate just 40 years ago.  Considering how in the 1990’s people were predicting we’d hit 10 billion in 2010, and massively more in 2050, I wouldn’t take anyone’s prediction for 2050 as gospel.

 
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