by Roger Erickson
This is just astounding. Was there ever another peep from Barro?
If this occurred in the field of physics – or any other science/engineering field – they’d IMMEDIATELY change the theory … to fit experimental facts.
But not us!!! We just pretend it never happened, and try twice as hard to make the failed experiment-on-ourselves work “right” – right?
There are a number of astounding findings Bill Mitchell is dredging up about the Monetarist backlash against reality. I’ll only mention one, for the sheer lack of imagination it shows.
“[Imaginary] multipliers and marginal propensities to consume ordinary goods and services would be relatively larger under [imaginary settings] than under quantitative easing/new bond financing of budget deficits.”
Wow! We’re trying to let ad hoc accounting rules dictate to unpredictable reality? What would Maxwell, Boltzmann, Einstein & Planck say? Or Alfred Nobel? Is there an Ignoble Prize in Economics?
What to do about the “banking reserves” which our fiat currency accounting methods throws off as a nominal side effect of any economic growth? How about some imagination? If we can run Carbon Credit Markets which trade Carbon Credits for reducing greenhouse gases, why not a Public Purpose Market that trades PublicPurpose Credits for draining nominal banking “reserves” as well?
If you listen carefully, you can actually hear the sound of reality re-entering the faint minds of double-entry accounting gnomes. Despite all odds, they haven’t made an entry for net national growth on their ledgers, opposite the entry for net banking reserves.