tag:blogger.com,1999:blog-8595404115121834255.post2787274059923720066..comments2024-03-18T03:53:27.368-04:00Comments on NAKED KEYNESIANISM: So? None of your conclusions follow from your argumentsMatias Vernengohttp://www.blogger.com/profile/09521604894748538215noreply@blogger.comBlogger12125tag:blogger.com,1999:blog-8595404115121834255.post-18247097836244138462013-01-08T18:51:01.650-05:002013-01-08T18:51:01.650-05:00ALL labor can be liquidated. And it can be done hu...ALL labor can be liquidated. And it can be done humanely. And it can drive WalMart wages higher:<br /><br />http://pegobry.tumblr.com/post/21427545322/morgan-warstler-via-steve-randy-waldman<br /><br />more later...Morgan Warstlerhttps://www.blogger.com/profile/16938589106562557110noreply@blogger.comtag:blogger.com,1999:blog-8595404115121834255.post-34771431983573616082012-12-12T15:30:05.295-05:002012-12-12T15:30:05.295-05:00Also, I should note, as Genaro is suggesting, that...Also, I should note, as Genaro is suggesting, that the point made by Felipe and Fisher is that you cannot prove from an empirical point of view the existence of a production function, since you always measure the identity of income. The Solow Residual (TFP) is not productivity, but the weighted average of the rate of growth of wages and profit. Again a simple algebraic fact. Not open to controversy really.Matias Vernengohttps://www.blogger.com/profile/09521604894748538215noreply@blogger.comtag:blogger.com,1999:blog-8595404115121834255.post-91951763475640009772012-12-12T15:27:50.654-05:002012-12-12T15:27:50.654-05:00Again Ivan his point is that technological progres...Again Ivan his point is that technological progress leads to in income distribution given the changes in relative prices associated with relative scarcity of factor of production (the marginal productivities). That is simple not logically correct. Admited by Paul Samuelson. No point of revisiting the capital debates. That's algebra. Mind you, you are right that the point that technical change may affect income disttribution is important, but the channels must deal, as Paul has noted in a more recent post, with social relations (who owns capital and who doesn't, his words by the way).Matias Vernengohttps://www.blogger.com/profile/09521604894748538215noreply@blogger.comtag:blogger.com,1999:blog-8595404115121834255.post-77179879132174442052012-12-12T08:46:14.587-05:002012-12-12T08:46:14.587-05:00That's not true. Either the economy has only o...That's not true. Either the economy has only one sector [which is unreal], or you get one 'jelly' K. You say that competitive equilibrium implies determining prices and distribution [prices of factors] following their marginal productivity, ie, the return to the owners of K should be the marginal productivity of K. But you don't know what K means. You are solving the math, but you're not solving the economic part. Economically, there is a logical contradiction in aggregating capital goods into K by using relative prices [and distribution] to determine... relative prices and distribution¡.<br />And when that can be said to be true and useful? Only when capital intensity between branches of production are equal. And this, of course, never happens.<br />Now, you're saying that technological progress [A?, the Solow residual?]may lead to changes in distribution. Well, if you can't use K to determine prices, you cannot use either A. There is no Y as f[A,K,L]; there is only Y as wL+rK once you've determined prices, and that only happens when you have determined distribution as an exogenous variable.Genaro Grassohttps://www.blogger.com/profile/00208520798867606189noreply@blogger.comtag:blogger.com,1999:blog-8595404115121834255.post-28898106574789891632012-12-11T23:08:06.886-05:002012-12-11T23:08:06.886-05:00I have to disagree. Bit more formally, let's c...I have to disagree. Bit more formally, let's consider assumptions: one-sector model (A), neoclassical production function (B), competitive equilibrium (C), and claim: "higher capital intensity is associated with lower interest rate" (D). Then implication A + B + C ==> D is true (so conclusions of Solow model _do_ follow from its assumptions). What capital debates showed is that if we drop A, the result may no longer follow, i.e. implication B + C ==> D is false. However, none of this tells us by itself whether D is true or false.<br /><br />In the end, this is of second-order importance. The point of Krugman's post was that technological progress may lead to changes in distribution of income between capital and labor (which of course doesn't rule out other explanations), and direction of the effect will depend on characteristics of the particular change in technology. Generally speaking, this seems pretty uncontroversial even if you reject neoclassical models.ivansmlhttps://www.blogger.com/profile/00955626621561436702noreply@blogger.comtag:blogger.com,1999:blog-8595404115121834255.post-16116824675560811402012-12-11T21:18:38.281-05:002012-12-11T21:18:38.281-05:00By the way, that is the problem. No model that tri...By the way, that is the problem. No model that tries to prove that prices (normal long term prices are determined by supply and demand) is consistent, meaning that its conclusions do not follow from the assumptions. That is a result of the capital debates.Matias Vernengohttps://www.blogger.com/profile/09521604894748538215noreply@blogger.comtag:blogger.com,1999:blog-8595404115121834255.post-48151941749796218362012-12-11T21:16:22.285-05:002012-12-11T21:16:22.285-05:00Nope, people did not overlook it and it is inconsi...Nope, people did not overlook it and it is inconsistent. See Samuelson (1966). The model presupposes that higher capital intensity is associated with lower rates of interest, and you have marginal decreasing returns to capital. Substitution works and you get with cheaper capital more demand for the factor of production. All features that the capital debates show that are not general, as admitted by Samuelson.Matias Vernengohttps://www.blogger.com/profile/09521604894748538215noreply@blogger.comtag:blogger.com,1999:blog-8595404115121834255.post-76198995951887740592012-12-11T20:26:31.576-05:002012-12-11T20:26:31.576-05:00I've read it. Unless people have been overlook...I've read it. Unless people have been overlooking mathematical mistakes for half a century, Solow model is consistent, given its assumptions. I agree that conclusions from one-sector models are not general in the sense of being robust to relaxing some of those assumptions, but that's not the same thing as logical inconsistency per se.<br /><br />For example, say that I claimed that raising minimum wage will lead to increase in unemployment. This is not general conclusion, since there are models like monopsony which would predict opposite outcome. But that by itself doesn't mean I'm making a logical mistake - after all, it's still possible that minimum wage will increase unemployment. I would be making a logical mistake only if I claimed that my prediction is true in the same sense that mathematical theorems are true (in which case even a hypothetical counterexample would indeed prove me wrong), but that's not how most economists think.ivansmlhttps://www.blogger.com/profile/00955626621561436702noreply@blogger.comtag:blogger.com,1999:blog-8595404115121834255.post-6327457973940578532012-12-11T20:02:46.138-05:002012-12-11T20:02:46.138-05:00Hi Ivan. The problem is that the models you cite a...Hi Ivan. The problem is that the models you cite are not logically consistent. Solow depends on the inverse relation between capital intensity and remuneration. That is not a general case, and its conclusions are not general. I suggest you read the link I posted on the capital debates.Matias Vernengohttps://www.blogger.com/profile/09521604894748538215noreply@blogger.comtag:blogger.com,1999:blog-8595404115121834255.post-74756476692740048092012-12-11T20:00:55.297-05:002012-12-11T20:00:55.297-05:00This is funny indeed.This is funny indeed.Matias Vernengohttps://www.blogger.com/profile/09521604894748538215noreply@blogger.comtag:blogger.com,1999:blog-8595404115121834255.post-38903394301293806942012-12-11T19:57:48.299-05:002012-12-11T19:57:48.299-05:00"The problem is far worse; it is that it lead..."The problem is far worse; it is that it leads to logical mistakes."<br /><br />Does it? It's easy to construct a logically-consistent model where Krugman's arguments would hold (basic one-sector Solow growth model with CES production function should do). Capital controversies showed that it's also possible to construct models where they wouldn't hold. So what? Krugman didn't claim that his arguments follow automatically from pure logic alone, just that they might be a reasonable approximation to reality. He could be wrong, but that's question that cannot be decided by logic alone.ivansmlhttps://www.blogger.com/profile/00955626621561436702noreply@blogger.comtag:blogger.com,1999:blog-8595404115121834255.post-12390730608784619152012-12-11T19:35:08.072-05:002012-12-11T19:35:08.072-05:00I wrote my last post before reading this. I find t...I wrote my last <a href="http://robertvienneau.blogspot.com/2012/12/krugman-promoting-zombie-horror-not-sf.html" rel="nofollow">post</a> before reading this. I find this somewhat freaky.Robert Vienneauhttps://www.blogger.com/profile/00872510108133281526noreply@blogger.com