Letter to My Brother
by J.D. Alt, New Economic Perspectives
My brother, Jeff, is a very smart guy who went to West Point, got a masters degree at Purdue, had a successful career as a business man and now, in his retirement, can sometimes beat his wife at golf. I sent him the NEP link to Playing Monopolis Monopoly and the other two essays I wrote as well, Men on a Wall and New Sense Common Sense. Since then we’ve been corresponding about MMT—with me trying to get him to “see” it, and he, to his credit, actually doing his best to “see” it while also collecting a lot of other opinions on the topic. Recently he sent me one of these other opinions, which included a textbook circular flow diagram that seemed to prove that MMT was impossible.
The dialog I’m having with my brother might well be representative of other inter-family debates going on in the MMT community. It occurred to me, therefore, that it might be useful to submit my latest brotherly correspondence for comments and suggestions. Here it is:
by Rodger Malcolm Mitchell, www.nofica.com
After I wrote the post about “Go Big,” (the Committee for a Responsible Federal Budget’s demand that the deficit be reduced by even more than the deficit reduction “super committee” mandate), I initiated the following correspondence with the CRFB, thinking in advance it would be useless. (But I felt like pecking them a bit).
From RMM: Now that the “fiscal cliff” (a puny $500 billion reduction) has everyone alert to the dangers of deficit reduction, whatever happened to your famous “Go Big” deficit reduction of $4 trillion?
Surprisingly, I received an answer:
Written by Brent Wayne
With the world still recovering from the 2008 global financial meltdown, the Federal Reserve is using every means necessary to stave off any potential threats to the U.S. economy. On September 13 Chairman Ben Bernanke announced another round of quantitative easing to further stimulate the economy which is suffering from sustained unemployment above 8% and little growth in GDP. As seen on CNNMoney the next morning (the 14th), world markets were reacting with positively, pushing U.S. stock indices to their highest levels in five years. QE3, this round involving purchase of mortgage-backed securities by the Fed, continues the aggressive stimulus program it began after the financial crisis.
What Are Capital Goods?
In chapter 5 of Organizing Entrepreneurial Judgment, Nicolai Foss and Peter Klein articulate the real nature of capital goods. They explain how the treatment of capital goods has varied among different schools of economic thought, as well as the implications for the firm and the entrepreneur resulting from differing conceptions of capital goods. Foss and Klein (FK) argue that the Austrian School of economics offers the most realistic conception of heterogeneous capital and thus lays the best framework for developing a connection between a sound theory of entrepreneurship and a sound theory of the firm.
by Michael Pettis
I recently “debated” twice with senior Chinese officials on the future prospects for China. In both cases they made the argument that Chinese growth rates were going to rise in the next few years and that the current deep pessimism is unwarranted. I argued, of course, that growth would slow even more.
Neither of the debates, I thought, was wholly satisfying. It seems to me that while a number of officials – at least among those with limited economic backgrounds – acknowledge that perceptions of China’s economic prospects have changed dramatically in the past few years, they don’t always understand why. There seems to be a worried resistance to the idea that we may have reached a major and difficult transition. The unwillingness to acknowledge the difficulty of the transition, however, can only make the transition all the more difficult.
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