The Dim-Post

September 4, 2012

Love amoungst the ruins

Filed under: Politics — danylmc @ 7:57 am

With all the half-assed attempts at triangulation and general strategic buffoonery we get from Labour’s front-bench, it’s heartening to see that there are Labour MPs like Louisa Wall and, writing on his Minimum Wage Bill in the Herald today, David Clark:

The truth is New Zealand is a low wage economy. Despite National’s promise of a brighter future and closing the wage gap with Australia, every week a thousand kiwis leave New Zealand for Australia.

Not only is the unemployment rate much lower across the Tasman, and the average wage much higher, the minimum hourly wage is almost $NZ20.

Of course, increasing the minimum wage will come at a cost to business. All up, it’s likely to add about $427-million dollars to the country’s annual wage bill. But that money will not disappear from the economy, it will quickly be spent on essentials, from food, to clothing to school fees.

Inevitably, some business will say they can’t afford to pay more in wages. There will be dire warnings of job losses and a lack of opportunity for young people looking to break into the job market. And if we were talking about a radical increase – to say $30 an hour – that would undoubtedly be true.

But a $1.50 an hour increase is not going to force hundreds of employers around the country to suddenly go bust and sack their workers. In fact, no direct link between lifting the minimum wage and job losses has ever been proved.

From memory the most meaningful studies have been on states in the US that raised the minimum wage while their neighbor states didn’t, and saw no relative increase in unemployment. Anyway, it’s nice to see Labour MPs confronting real issues, and saying stuff because they actually believe it, not because the market research indicates it might be advantageous, or because Paula Bennett said it and it worked for her.

47 Comments »

  1. One example (and this could be correlation not causation…) is that Washington State in the USA has the highest minimum wage and yet its unemployment rate is only marginally above the national average. Though Wyoming has the lowest fixed minimum wage and their unemployment is well below national average.

    Comment by David C — September 4, 2012 @ 8:25 am

  2. The truly sad thing however if that the ‘logic’ of anti-minimum wage pundits is rarely challenged in the public domain.

    These same rocket surgeons also complain about excessive corporate taxation and its misuse as transfers to the welfare system, but signally fail to recognize that welfare in the form of WFF is a direct subsidy to the low wage economy.

    I’m honestly surprised that that the “increased wages destroy the economy” trope ever gets airtime given that it’s manifestly false.

    Comment by Gregor W — September 4, 2012 @ 9:44 am

  3. I’ve always loved your dry sarcastic wit.

    Comment by Andrew M — September 4, 2012 @ 9:59 am

  4. For actual information on minimum wages and there effect on the economy go to http://offsettingbehaviour.blogspot.co.nz/search/label/minimum%20wages Eric has looked at this a bit,and that includes looking at meaningful studies that are just so fashionable these days.

    Comment by WH — September 4, 2012 @ 10:43 am

  5. True that most US studies find little effect these days; also true that minimum wages there are trivially low. Non-binding constraints don’t bind….

    Comment by Eric Crampton (@EricCrampton) — September 4, 2012 @ 10:57 am

  6. “In fact, no direct link between lifting the minimum wage and job losses has ever been proved”

    “GAO questionnaire responses show that tuna canning employment fell 55 percent from 2009 to 2010, reflecting the closure of one cannery and layoffs in the remaining cannery………
    The employers reported taking cost-cutting actions from June 2009 to June 2010, including laying off workers and freezing hiring. The employers attributed most of these actions largely to the minimum wage increases.

    Some workers said they were disappointed by the 2010 minimum wage increase delay; however, more workers expressed concern over job security than favored a wage increase with potential for layoffs”

    http://www.gao.gov/products/GAO-11-427

    That took about 2 minutes. Who is this David Clark clown?

    Comment by Simon — September 4, 2012 @ 11:07 am

  7. @Simon

    Perhaps the clown can read. “The employers attributed ..”. (See: Mandy Rice-Davis).

    That took about 2 seconds.

    Comment by sammy 2.0 — September 4, 2012 @ 11:41 am

  8. These sensible discussion threads don’t generate much from the commentariat do they? I think another global warming/Maori/Paul Henry piece is in order….or at the very least another “write like X” competition.

    Comment by David C — September 4, 2012 @ 11:55 am

  9. Quite right. No relationship between price and demand has ever been proven.

    Comment by Swan — September 4, 2012 @ 1:46 pm

  10. “In fact, no direct link between lifting the minimum wage and job losses has ever been proved.”
    What’s youth unemployment like these days?

    Comment by Clunking Fist — September 4, 2012 @ 2:08 pm

  11. “What’s youth unemployment like these days?”
    What’s the government’s economic growth package like these days ?

    FTFY.

    Comment by mikaerecurtis — September 4, 2012 @ 2:10 pm

  12. “What’s the government’s economic growth package like these days ?”
    Well, they’re running an expansionary fiscal and monetary policy and our economy is relatively okay compared to most of the world except Australia. Thanks for asking.

    Comment by Clunking Fist — September 4, 2012 @ 2:18 pm

  13. The minimum wage should be lowered to $12.50 and the youth wage should be something like $11.25 for 16 – 18 year olds. Increasing the minimum wage all the time is a bit like a dog chasing its tail. Prices for goods and services also rise, which prompts the minimum wage lobbyists to voice their opinions that it should be raised again and on it goes. By reducing the minimum wage and putting price caps on goods and services, in sensible ways, such as exempting fresh fruits and veges from GST, unemployment will decrease, living expenses will be more affordable, and our country will benefit in the long run. Raise the minimum wage again, but not now, wait until the global economy is more stable. Until then, decrease it.

    Comment by Dan — September 4, 2012 @ 2:46 pm

  14. @ Dan

    To disabuse you of a few notions:

    Prices for goods and services do not necessarily rise with wages. They follow different demand and supply functions.
    Principally, because increasing the minimum wage affects the lowest earners, costs relating to services provided by those lowest earners might rise.
    However, given that lowest earners work in sectors where there is already a ‘race to the bottom’, service driven and already subject to stiff pricing competition (i.e supermarkets, cleaning services, age healthcare workers) the effect is not global.

    Re price capping, your assumption is false around GST exemptions.
    Removing a marginal tax will not necessarily reduce a price. A new equilibrium will merely be set based on the supply and demand characteristics of various goods.
    A bunch of bananas @ $2 incl. GST will be a $2 bunch of bananas ex. GST.

    Lastly, reducing the minimum wage to stimulate employment will only work if welfare is also reduced.
    The same effect can be generated by raising the minimum wage to differentiate it from welfare. It’s the degree of utility (benefit per hour of working vs not working) that is important, not the rate itself.
    CAVEAT: This assumes jobs exist in the broader economy to soak up low-wage, low-skilled, high-mobility labour.

    Comment by Gregor W — September 4, 2012 @ 3:22 pm

  15. “it’s heartening to see that there are Labour MPs like Louisa Wall and … David Clark”
    Aaaah, back to satire, eh Danyl? Because the wage slaves of South Auckland are so heartened to see Louisa Wall championing a law change that will …. ummm … give a name change that she and a tiny handful (based on the miniscule number of gay civil unions) of her chums want, because it will give them … errr … no legal benefit whatsoever … ummm, yeh. That’ll show southside how valuable it is to have Louisa and Labour on their side!

    Oh, and ever notice how Labour has to be dragged kicking and screaming into any minimum wage rise when they are in power, but suddenly ‘rediscover’ their peasant roots and concern for their worker comrades when they are booted out of office? Cue Darien Fenton with another member’s bill enhancing worker rights doomed to fail (because, you know, Labour have a minority of votes in the House, and Labour won’t compromise on worker’s rights…). At least Sue Bradford was effective at negotiating member’s bills that she could get through when in opposition.

    Sigh. Sometimes satire is so depressing.

    Comment by bob — September 4, 2012 @ 4:09 pm

  16. I knew David Clark slightly back when he was a clergyman in Dunedin. The church’s loss would appear to be the Labour Party’s gain: he’s a great guy, and definitely one to watch. The Labour benches are not exactly over-stuffed with staggering talent just at present, but Clark is a notable exception. He is at least far more promising than any of the current Trinity of Davids.

    Comment by Higgs Boatswain — September 4, 2012 @ 5:07 pm

  17. @bob: Let’s play Privilege Bingo. Would you by chance be: straight, white, male, middle class ? ‘Cos only people who already enjoy privilege are unable to see the value in Louisa Wall’s bill.

    Anyway, Danly’s point is not so much that her bill is game-changer for the wider electorate (it’s not, it’s only useful gays and lesbians), it is that she is able to do so in an articulate manner. She even got one MP to change his mind at the last minute (can’t remember who it was) by presenting him with facts about same-sex marriage.

    Comment by mikaerecurtis — September 4, 2012 @ 5:31 pm

  18. It was Paul Hutchison.

    Comment by Steve Parkes — September 4, 2012 @ 8:32 pm

  19. Good grief! The Labour caucus cabal allowed a Labour MP to speak about something that matters?
    The last flickering twitch of a corpse or a possible hint of struggling life in the party?
    The November Conference should prove interesting.

    Comment by peterlepaysan — September 4, 2012 @ 9:49 pm

  20. The bill to simply raising the minimum wage by an arbitrary number is foolhardy and inflationary. A better option would be to raise the minimum wage through tying it to the average wage.

    Comment by alex — September 4, 2012 @ 10:32 pm

  21. “She even got one MP to change his mind at the last minute (can’t remember who it was) by presenting him with facts about same-sex marriage.”

    Bear in mind that Louisa had a slightly easier time with her Bill than Clark would when trying to push through a minimum wage Bill because, for whatever reason, the convention is that votes on anything related to marriage and sexuality are conscience votes, but matters relating to economics aren’t.

    Comment by Hugh — September 5, 2012 @ 9:49 am

  22. Yeah
    Reduce welfare, that’s important. There should be a limit on how many children you can have that the Government will support, say two.
    Also, I understand wholeheartedly what you’re saying regarding the bunch of bananas scenario, Gregor W, but I’m envisioning a system where the GST is taken out, literally, so that there are price controls for fresh fruits and veges (the cost has to reduce at at least the same amount as what the GST would have been).

    Comment by Dan — September 5, 2012 @ 9:54 am

  23. @alex

    While your second statement is correct, your first is dubious.
    Firstly, the $15/hr proposition is not arbitrary – it’s actually a bit low at around 55% of the average wage. I believe that the popular benchmark set for what is regarded a subsistence or ‘living wage’ or subsistence is about 60% of average within any given economy.

    Also as I noted in #14 above given that the beneficiaries of any minimum wage rise are by default close to or below subsistence level already, the effect is not necessarily broadly inflationary.

    It’s in fact extremely beneficial to for the economy to have redistribution towards low level spending rather than saving particularly if like NZ, your economy is moribund or recessionary (that is, assuming one holds to the idea of a positive effect of the velocity of money).

    Comment by Gregor W — September 5, 2012 @ 9:59 am

  24. Read something interesting recently. The amazing supply/demand curves that are the basis of almost all mainstream economics are not actually proven to hold in any situation other than a single commodity available and a single buyer doing the buying. Change either of those strictures, and all of the maths falls apart. Outlined in the first few chapters of Debunking Economics by Steve Keen, who is visiting NZ at the end of the week. I’m looking forward to going to one of his lectures.

    Things are far more complicated than that, and in reality, as price rises, demand can rise, and vice versa, and that’s not even irrationality at work. It’s an acknowledgement that different people value different things differently. So arguments from supposedly proven economic relationships between the supply of labour and the demand for it are actually bunk. It’s quite possible that raising the minimum wage will actually put more people in work, because it will become more affordable to work instead of…any number of other options – buggering off to Oz, going on the dole, stealing shit, etc. Which probably explains why in reality, a clear connection hasn’t actually been found between unemployment and low minimum wages. If it were an ironclad economic law, it would be observed in reality. It isn’t, so it isn’t.

    Comment by Ben Wilson — September 5, 2012 @ 2:36 pm

  25. @ mikaere – Bingo! Oh, no wait, I’m not straight & white & male & middle class. What will I do? Then again, nor is Sua William Sio – Labour MP for Mangere, who said what I said… But then I’m guessing you are following Prof Margaret Mutu’s definition of racism right? That if I’m white, I share in the privilege created by rich, predominantly white capitalists? Ditto for male, straight, etc. Strange to say, I tend not to agree with that kind of absurd generalisation.

    And I would have said Louisa’s Bill fits under what Danyl called general strategic buffoonery, given it’s likely impact in driving away core Labour voters (as pointed out by staunch Labour man Efeso Collins, but I suppose he is straight & white & male & …. you get the drift😉 )

    Finally, I didn’t see much in the way of articulate argument from Louisa, or any gay marriage proponents – mostly just a load of foam-flecked hate for anyone who disagreed with them. Cue Kevin Hague’s attacks on the Catholics and Christians generally (see his FrogBlog posts, and he seems to be commenting on Kiwiblog in similar vein). Louisa’s argument just boiled down to ‘gay marriage makes everyone equal and if they consent, why not?’ which fails to address obvious rejoinders like ‘why not triples or family marriages or under-age marriages’; nor did Louisa’s claim that churches won’t be forced to marry gay couples stack up with legal rulings and prosecutions in Britain and Canada.

    Comment by bob — September 5, 2012 @ 3:48 pm

  26. Dear Ben – The observation by Steve Keen is pretty much chapter and verse from any mainstream microeconomics text book – it is important not to put too much confidence in the apparent precision of supply and demand graphs. Supply and demand analysis is a useful precisely formulated conceptual tool that people have devised to help us gain an abstract understanding of a complex world. It does not—nor should it be expected to—give us in addition an accurate and complete description of any particular real world market.

    But please do go to Steve’s lectures, he is worth listening too and there is a lot of value in different perspectives, insight, value judgements and frameworks for analysis in this fun, mad, busy, complex, rational and irrational world. Enjoy.

    Comment by WH — September 5, 2012 @ 3:49 pm

  27. I didn’t see much in the way of articulate argument from Louisa, or any gay marriage proponents

    @ bob

    I guess you didn’t actually didn’t read much of the commentary then – by ‘reading’ I mean consciously evaluating a differing POV against your preconceived notions as opposed to observing a differing POV then restating your existing position.

    Plenty of people on this site alone picked logical holes in your “Making marriage rights equal between consenting adults means bestiality and incest should be legal too” proposition. You just chose not to take it on-board which is absolutely your prerogative. Just don’t conflate it with a lack of articulate arguement.

    Comment by Gregor W — September 5, 2012 @ 4:38 pm

  28. Aaaah, Gregor – bringing the ad hominem attacks😉 Which kinda proves the whole foam-flecked claim…

    I did read all the comments here, and on other threads. But just because someone responds to my comment, doesn’t mean they have advanced a rational argument. Sometimes, their claims just raise more questions than they provide answers.

    For example, mikaere responded to my first claim above by claiming that Louisa’s gay marriage Bill is “only useful gays and lesbians”, but gave no evidence to support that. How does a Bill that just gives a different name to a civil union give gay couples anything useful? The Bill does not claim to give greater legal rights than already given by civil unions, so why is it ‘useful’? Goodwill only?

    You see? I’m actually responding to mikaere’s comment by trying to draw out what he meant, so I can fully understand his argument and respond to that if I can. Which is quite different to yourself and Andrew Geddis *thinking* you have ‘picked logical holes’ in my arguments😉 One of the perils of your apparently liberal world view – if there is no such thing as absolute truth, how can you ever prove anything true? Truth just becomes another opinion, and we determine facts by majority vote.

    Comment by bob — September 5, 2012 @ 5:01 pm

  29. Bob – do you know what ad hominem means?

    I’m not impugning your character as a rhetorical device; I’m pointing out that your numerous comments (as opposed to a specific rejoinder to mikaere) on the issue don’t really make any logical sense and have been fairly effectively debunked by various commenters.

    Like I say, you can continue to ignore that criticism. Just don’t expect that by merely repeating your position, it makes it any stronger.

    Comment by Gregor W — September 5, 2012 @ 5:30 pm

  30. just because someone responds to my comment, doesn’t mean they have advanced a rational argument. Sometimes, their claims just raise more questions than they provide answers.

    Indeed. For instance, your claim that Louisa Wall’s marriage equality bill will drive away core Labour voters.

    Can you back this up with anything at all? Examples would be: previous pieces of legislation – the ones followed by Labour election victories, and National not reversing the law, and nobody proposing to now.

    Or any relevant polling – every single published poll has shown clear majorities in favour.

    If you can “advance a rational argument” for Labour being more conservative than John Banks, feel free to do so. But empty assertions won’t cut it.

    Comment by sammy 2.0 — September 5, 2012 @ 5:43 pm

  31. @WH “Chapter and Verse” is a good way of putting it, I’d say, since so much of what’s in the bible is contradictory with other parts, and the desired parts are cherrypicked to suit an argument, or to build an entire religion on. Everyone I know who has studied economics says that supply and demand analysis forms the lion’s share of it, that they get thoroughly sick of the idea being layered on, building large models on what anyone attentive knows is a shaky foundation.

    Comment by Ben Wilson — September 6, 2012 @ 3:36 am

  32. I’m no economist but wouldn’t the increased money circulating result in increased prices. The end result is just an inflationary spiral isn’t it? Which of course makes it harder for exporters and therefore increased unemployment.

    Comment by Stuart Mathieson — September 6, 2012 @ 11:28 am

  33. >I’m no economist but wouldn’t the increased money circulating result in increased prices

    So the theory goes. However, in the US, over the last 4 years, the money backed by the Federal Reserve increased massively, but Inflation has been very low. The connection is therefore not straightforward at all. A lot of the problem is equating money with some formula against this reserve. Money can and is created mostly by banks lending out multiple times (anyone giving credit is creating money, with or without coin of the realm being actually involved). If they can’t or won’t do this, because of either they or the borrowers becoming conservative, then you could get deflation at the same time as increasing the amount of cash in supply. In fact, we’ve already *had* the inflationary spiral because of lending at lower and lower rates for decades, stimulating massive property inflation. So the current period of “deleveraging” is deflationary, and it could go on for a very long time. Our economy could be stagnant for a decade, or more, if the only way we can inject inflation to stimulate growth is by dropping the rate at which banks can get money, and it’s already near zero. Which is “capitalism balancing itself”, and wonderful for theorists, but a fucker to live through if you’re not already rich, particularly when there are so many other options. I don’t want to lose the entire decade because no government has the guts to challenge the economic plans of neoliberal theorists. I don’t want the entire welfare state gutted because we can’t think for ourselves, and to simply wait until the entire third world reaches the same level of poverty as us before sensible economics can resume. That’s some fucked up version of socialism. I want the real thing, a state that decides that being a state involves actually having economic sovereignty, and therefore has the power to fix itself.

    Comment by Ben Wilson — September 6, 2012 @ 2:44 pm

  34. It also depends what it’s spent on, Stuart.

    Poor people will spend money on necessities / FMCGs. There tends to be considerable elasticity in supply and demand for these types of low-value finished and unfinished goods anyway, in spite of the price fixing engaged in by our main distributors (Foodstuffs and Progressive).

    In other words, given that there’s already a lot of fat built into the FMCG pricing, the aggregate price is unlikely to change as the major vendors continue to engage in spot price ‘competition’.

    Comment by Gregor W — September 6, 2012 @ 3:00 pm

  35. Gregor W at 14, thanks for disabusing us of notions.

    “…reducing the minimum wage to stimulate employment will only work if welfare is also reduced. The same effect can be generated by raising the minimum wage to differentiate it from welfare.”
    Funny that studies show the opposite. You see, benefits are paid out of tax receipts and shortfall can be borrowed or other govt services curtailed. Whereas wages are paid out of business income streams. Once business income streams are insufficient to pay wages, other expenses and loan repayments, the business becomes insolvent and must close. So jobs are then lost.

    “assuming one holds to the idea of a positive effect of the velocity of money”
    Economists show that money which changes hands without equivalent value transferring in the opposite direction, or changes that occur under duress, do not add to overall ‘welfare”.

    Comment by Clunking Fist — September 7, 2012 @ 7:56 am

  36. Ben Wilson 24, could you supply a link to what you read? My economics learning was all on the basis of demand and supply curves relying on multiple sellers AND buyers. I even remember seeing the amalgamation of individual’s own demand expectations into the demand curve for that commodity. These individual demand curves took into account the price of substitute commodities. There are not too many single buyer scenarios in the real world EXCEPT when the buyer is government (or Fonterra in some parts of the country).
    “However, in the US, over the last 4 years, the money backed by the Federal Reserve increased massively, but Inflation has been very low. The connection is therefore not straightforward at all.”
    Too true: monetary policy has been extraordinarily loose, fiscal policy has been extraordinarily loose, yet the economy steadfastly refuses to grow. What could be lacking? Possibly confidence that throwing money at problems is a workable solution. After all, it hasn’t worked either for the Japanese. (And don’t be fooled by the apparent lack of inflation, we all know CPI measures seldom seem to capture the real-world price rises we seem to face.)

    Comment by Clunking Fist — September 7, 2012 @ 7:58 am

  37. Gregor 34 “In other words, given that there’s already a lot of fat built into the FMCG pricing,”
    You may want to look at gross margins that supermarkets make.
    http://smallbusiness.chron.com/industry-standard-gross-margin-groceries-38121.html

    Comment by Clunking Fist — September 7, 2012 @ 8:00 am

  38. >Ben Wilson 24, could you supply a link to what you read?

    I read it in Debunking Economics, which I got out of the library. So sorry, no, I don’t think Keen just gives whole chapters away online. I’m certainly no economist myself, but my understanding of Keen’s point about supply and demand was that this stuff had actually been disproved a very long time ago by the neoclassical economists themselves, and the disproof essentially ignored because it was highly inconvenient. In order to apply the model more widely, assumptions have to be made which he unpicked as essentially being unreasonable. Their unreasonableness was hidden in the highly mathematical language. When you hear something put in what sounds like gobbledegook, you can easily miss that it’s a rewording of “Presuming only one buyer, seller and product”.

    Comment by Ben Wilson — September 7, 2012 @ 11:33 am

  39. Yeah yeah yeah, CF.
    Owning a supermarket is all a charity.

    Comment by Gregor W — September 7, 2012 @ 12:12 pm

  40. Not too many favourable reviews of that book I’m afraid.
    http://www.gmu.edu/depts/rae/archives/VOL16_4_2003/6_BR_Murphy.pdf
    ”Embarking on this review, we had suspected we might find large
    areas of agreement with a fellow apostate. However, Keen’s work suffers from many of the
    very faults of which he accuses the mainstream. The most troublesome is that Keen’s work
    is quite frequently ideologically motivated, even while criticizing neoclassical practitioners
    for ideological economics. In the end we find it a brave but flawed effort to dethrone the
    current economic orthodoxy.

    A favourable one: “This is a very good book–in my opinion.” Jon Thomas (sic, lol!)

    “Steve Keen argues that the current global economic crisis is the result of too much debt.” Wow, ya think? It’s interesting that Keen cites a major influencing on his economics thinking is J M Keynes (presumably before Keynes recanted and said “I find myself more and more relying for a solution of our problems on the invisible hand which I tried to eject from economic thinking twenty years ago.”).
    At the moment, it is still the Keynesian economists in the ascendancy, especially in America “spend, spend, spend, stimulate, stimulate, stimulate, and fuck the debt”. You might argue that the europeans are doing the opposite (cut, cut cut) except that classical economists know that, unless you devalue (i.e. give up on the deutschmark euro) nothing will help the private sector emerge competitive again.

    Comment by Clunking Fist — September 7, 2012 @ 1:25 pm

  41. “39.Yeah yeah yeah, CF. Owning a supermarket is all a charity.”
    Yeah, well, it’s just a bit too much sometimes to let all the bullshit through (“there’s already a lot of fat built into the FMCG pricing”)

    Comment by Clunking Fist — September 7, 2012 @ 1:31 pm

  42. “my understanding of Keen’s point about supply and demand was that this stuff had actually been disproved a very long time ago by the neoclassical economists themselves, and the disproof essentially ignored because it was highly inconvenient”
    And the oil companies are suppressing cold-fusion?
    Having said that, the hockey stick team DID let ideology get in the way (deleting emails subject to FOI requests, ignoring the Medieval Warm Period and the Little Age) in trying to get across the desperate state of earths CO2 levels, so you might be on to something there.

    Comment by Clunking Fist — September 7, 2012 @ 1:37 pm

  43. Tell you what, CF.
    Cite an analysis of the New Zealand supermarket industry (non-lobby) as opposed one from the US, and then I’ll take your point seriously.

    Here’s my anecdata: At my local Pak’N’Save, if day-to-day the price of a loaf of Vogels bread can differ by up to $2 and a dozen Tuborg by up to $10, then I would suggest there is ample fat.
    Either that, or a remarkably subtle marketing campaign where Pak’N’Save stocks a fuckload of items at great expense that they don’t really want to sell in order to flog substitution products at less margin.

    Discuss.

    Comment by Gregor W — September 7, 2012 @ 2:04 pm

  44. >And the oil companies are suppressing cold-fusion?

    Yup, there’s an element of conspiracy theory about it. Not sure what I think about that. Short of double checking the working, and triple checking, etc, which is the work of economists. More telling, I reckon, is the way that despite all the same training, economists come up with wildly different predictions about things, and of course most of them are wrong. I wouldn’t expect that from anything that considered it’s foundations to be scientific. Either the business is inherently unpredictable (in which case they might as well just stop pretending to get it), or the theory is buggered. It’s certainly worth considering it’s buggered.

    Comment by Ben Wilson — September 7, 2012 @ 2:25 pm

  45. >Not too many favourable reviews of that book I’m afraid.

    You tend to get that when you say the opposite of large and established orthodoxy. Not too many favorable reviews of Copernicus’ theory were made in the early days.

    I’m pretty sure Keen refers to himself as post-Keynesian. He’s influenced by Keynes, sure, but that doesn’t mean he buys it wholesale. He’s also influenced by Marx, and the same comment goes. There’s a quite detailed debunking of Marx’s analysis of prices and the cost of labour. In essence, Keen’s saying that economics is developing, and some things that have been considered nearly axiomatic in it just aren’t, and that means a lot more work needs to be done, and a lot of ideas which are considered sound just aren’t, and should not be treated as if they were just because the people saying them have deep training in economics. People had deep training in the Ptolemaic system of astronomy too, when Copernicus challenged it with his heliocentric model. It took a long time and a lot of effort to show them that heavenly bodies don’t have to move in circles or circles on circles.

    Comment by Ben Wilson — September 7, 2012 @ 4:47 pm

  46. >The most troublesome is that Keen’s work is quite frequently ideologically motivated, even while criticizing neoclassical practitioners for ideological economics.

    The problem with this criticism is that it’s a tu quoque fallacy. Even if Keen is also ideologically motivated, that doesn’t mean that the neoclassicists aren’t, or that their ideology thus gets a free pass to place the onus on Keen. I’d agree that he’s ideologically motivated, to some extent – I’d be surprised if any economic theory could fail to be. However, the degree to which it is allowing ideology to override or hide utter failure to predict outcomes is something to judge all theorists on. Yes, Keen thinks debt is the cause of the crisis. What sets him apart is that he’s been saying this for a long time, since well before the GFC. Only a much smaller number of economists foresaw what has happened, and they are well worth listening to at the moment. Maybe they just got lucky. Or maybe they are on the right track. Certainly bad luck is a pretty poor excuse for the economists who have completely failed to see this all coming and have no clear ideas on how to end it.

    Comment by Ben Wilson — September 7, 2012 @ 4:57 pm

  47. “Only a much smaller number of economists foresaw what has happened”
    True, mostly of the Austrian School. Funny how they were right to be concerned, but STILL politicians around the world are listening to the Keynesians and racking up debt in a futile attempt to stimulate economies.

    Comment by Clunking Fist — September 9, 2012 @ 1:08 pm


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