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Updated: 2017-12-15T05:17:16.298-05:00


The issue as I see it is how the progressive side ...


The issue as I see it is how the progressive side of the political spectrum can shift the population's incentives to support and promote the progressive agenda ... meaning move the fence sitters decidedly to the Left on a continual basis as well as perhaps moving some from the moderate Right (or those who vote that way simply because their family has always voted that way).

This is in its essence a division of incentives for cooperative social and economic fairness (equalities if you will) vs individualism and it's "freedoms".

These are mutually exclusive in the U.S.

So shifting incentives away from individualism and it's "freedoms" to a cooperative social political system is what is actually necessary to achieve by political majority consensus -- which btw, also has to be able to withstand the fact that half the electorate is not even remotely willing to do so ... and will perhaps decide on apolitical solutions (as history demonstrates is always the case).

Peter, I can see and understand your proposed mea...


I can see and understand your proposed means to create a factionalized group identity. I think of it in terms a group of tribes forming a coalition... to contain the factions. This has the already existing counterpart on the right as exemplified by what used to be referred to as the "Southern" Block or which is now more broadly understood to be the white supremacist individualism block extending across the U.S. with a concentration in the south or perhaps better stated a concentration in the former confederate states.

Membership criteria is formalized by dues, local block captain elections, etc. with some rules to maintain the boundaries within which the factions must adhere to be members. This is also, parenthetically, the Chinese Communist Party's tribal membership methodology -- membership within the rules describing the boundaries of membership factions, prevent in-filtration by those who would seek to undermine it, etc. The only difference is that this tribal organization has taken political control as well.

I don't see a problem in the concept but do see a problem in practice of maintaining the tribal coalitions on the Left.

Since membership is of course voluntary with the local elections (which are its foundation and supporting infrastructure) being required independent of other political activities -- local, state, national elections, the members must have a stake in the outcome as they see it, otherwise why bother? This leads to immediate politicization since the stake in any outcome depends entirely on political actors being elected to positions of legislative authority to enact the changes which are at stake.

So even before the economic clout & propagandizing machines of the Right come into play, and the Achilles heal of the "media" issues, the fundamental nature of people will break up the enlarged tribal unity on the Left that you envision.

The fundamental in any system of gov't is that changes sought can only come from either an overwhelming consensus of the entire population independent of other ideologies, OR by political party power. Even the Alabama election illustrates this principle... the margin of far Right to moderates and progressives was only 1.5% ... as shift of just 0.76% to the Far Right would have elected Moore instead. The effect of the people to come out and vote at all was to obtain an objective that was at stake... and the means of obtaining it is always and only about political power in the halls of government.. .which is to say it's always a political struggle so politicization is inherent and thus cannot be "ruled" out of the tribal organization's different factions seeking their own faction to be primary.

JDM - I'm not concerned about the level of the...


JDM - I'm not concerned about the level of the debt either. My concern has more to do with income flows. If the Trump tax cut for the rich leads them to consume more - this means either the rest of us will get to consume less (slashes in transfer payments perhaps) or we will have less national savings. The notion that one can have more growth via an alleged investment boom when one cuts the national savings rate strikes me as not only bogus economics but also an indication that Team Republican flunked first grade arithmetic.

unions supported and support the Democrats, but Bi...


unions supported and support the Democrats, but Bill Clinton and Obama didn't support labor and liberal pundits didn't call them out on it b/c Republicans are worse. That's their easy excuse for every betrayal: the Republicans are worse. The center left led us here.

So now the Republicans are going after the public unions.

But the Laffer thing's wrongness has nothing t...


But the Laffer thing's wrongness has nothing to do with debt per se, which Dean is pointing out. And he pointed that out a lot, especially that the cost of debt service now is very low, and that accepting the idea that our federal government carrying debt is inherently bad is wrong - not just wrong as in inaccurate but wrong as in trapping ourselves because we accepted this bogus federal debt is horrid framing.

Probably a very simplistic thing to say, but polit...


Probably a very simplistic thing to say, but politics, whatever side they express, are a lot about ego and less about what is really good for people. Some politicians have a touch of the poetic (Obama). Some have an unusual amount of honesty (Bernie). There are people on the left who actually do care (Aviva Chomsky). But it can’t just be about positions on this and that, and paying dues,etc. There has to be some Earth, Wind, and Fire to it too. (Ha-ha). And some kindness. Otherwise, it’s headed for the usual power struggles... -Mel (Hope that made some sort of sense)..


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JDM - his close was spot on. Granted that the real...


JDM - his close was spot on. Granted that the real GOP agenda is not fiscal stimulus but starve the beast. They talk the talk of deficit neutrality and if they accomplish this goal via starve the beast - maybe we would see a very modest increase in real income. But the median American would see his income go down as the Hampton crowd would get more than 100% of the rise in aggregate income.

My point is as long as they are playing this Laffer free lunch nonsense - let's not concede any of it as it is nonsense.

"not because of any economic reality"? C...


"not because of any economic reality"? Can you say "government budget constraint" - I knew you could!

Robert, Transversality is only relevant for an in...



Transversality is only relevant for an infinitely lived agent. Not relevant in either an OLG model or the real world.

Hyperinflations are not bubbles, they are collapses of value, not escalations based on greater fools or self-fulfilling sunspots or whatever.

Yeah, about the money. The recent change afaik cam...


Yeah, about the money. The recent change afaik came about 30 odd years ago when Tony Coelho, as a Democratic party official, turned ardently toward fundraising from business, and therefore proportionally less from labor.

Dean's statement then would put him squarely (...


Dean's statement then would put him squarely (or at least nearby) the MMT camp (which as many MMT friendlies claim is nothing more than fairly orthodox Keynesian ideas). Many liberal economists (including PK) simply write it off as nonsense.
So while not taking a side on this, I do wonder (if naively) how any statistics from 1981 are particularly dispositive given the outside influence of the Volcker recession confounding everything in sight.

I was a card-carrying member of the Democratic Par...


I was a card-carrying member of the Democratic Party at one time. And, a lot of Party activity, from Jackson thru FDR -- rallies, conventions, etc -- involved trying to get people to identify with the Party, to think of themselves as Democrats.

The American political Parties were historically very weak on ideology and flexible on policy. When the country had reached a consensus on a divisive issue, both Parties endorsed that consensus; great reform campaigns and movements with specific policy agendas tended to run orthogonally to the Parties, which were, as you observe in the OP, organizations tending to factionalism.

The thing that held the historic Parties together -- their core constituency as it were -- were politician office-seekers and those seeking usually petty patronage appointments. The politicians and the patronage seekers had interests in policy, but not only policy. The thing that is dividing the Parties today is that the interests of the majority of the electorate is opposed to and by the donors that finance Party activity, lobbying, and the the networks of "policy" think-tanks that generate propaganda and policy entrepreneurship.

The challenge for your vision isn't just factionalism, but insulating the organization from the money of business corporations and billionaires -- the very problem that needs to be solved.

The factionalism can be dampened by bringing in "good soldiers" from the ranks of authoritarian followers. Lots of people on the left would fight against that kind of importing of nationalism, racism, religiosity, etc.

The money? That is very hard to fight effectively.

I thougt Dean was pretty clear. Look at his endin...


I thougt Dean was pretty clear. Look at his ending two paragraphs:

To be clear, there will be ways in which the debt can actually make our kids worse off. For example, if we want universal pre-K education or free college, the tax cutters will turn back into deficit hawks and say we can't afford these programs that will help our kids. But, this is not because of any economic reality about debts or deficits being too large, it is about lying politicians who don't want to do anything to help anyone's kids but their own.

Let's keep our eye on the ball here. The problem is lying politicians who work for the rich, not the size of the debt.

Pyramid schemes, Ponzi schemes ect are what econom...


Pyramid schemes, Ponzi schemes ect are what economists call "greater fool" schemes/bubbles. The thing they have in common is no final condition or price. Technically this whole thing came out of the "necessity of transversality" discussion, which is technical talk for "yea but if there is a bubbles people can't be maximizing - so if people are really maximizing there can't be bubbles." BTW, that is why Garber and I looked at the German hyperinflation since price level is the only case where the econ maximizing assumption does not imply no bubbles.

That is not obvious, Anonymous. A blockchain is n...


That is not obvious, Anonymous. A blockchain is not a pyramid scheme, per se. Transactions do not depend on each other in the way those in a pyramid do.

Bruce, the Dems were never, as far as I know, a me...


Bruce, the Dems were never, as far as I know, a membership organization. And they ran candidates and took positions. There has been a vibrant left, on and off, outside the DP for the last 100 years. Taking over the DP is a plausible project (this has been DSA's for some time, yes?), but that's an entirely different kettle of fish.

What you are describing hypothetically sounds a lo...


What you are describing hypothetically sounds a lot like what the Democratic Party largely was for most of its history.

better described as a pyramid scheme than a bubble...


better described as a pyramid scheme than a bubble

Fair enough, Robert, although you have written on ...


Fair enough, Robert, although you have written on the misspecified fundamental problem with him, I believe, JPE 1980 if I am not mistaken, and I have always taken the critique seriously, hence the interest in such cases as closed-end funds where it looks like one might actually be able to get pretty close to pinning down an actual fundamental. While I poked at him for not showing up at that conference, Garber's "Tulipmania," both the article and book versions, are interesting and informative.

If I have misrepresented your position at all (aside from appearing to include you as a coauthor on Tulipmania), I apologize.

BTW, I have never written anything about Tulipmani...


BTW, I have never written anything about Tulipmania. That's Peter's thing. I gave some lectures on bubbles at ND - before retiring - and read Peter's work. Peter's puzzling about the common tulip varieties in the final month or 6 weeks always seemed odd to me. As you know, the tulip contracts were voided by the king - or someone - so actual settlement was just "cents on the dollar." My point is that people might well have anticipated the probabilistic voiding of the contracts. So when one sold the bulb future there were two possible payments - so expected price was: (prob no king intervention)* nominal price agreed + (prob of king intervention)* some unknown low price. So if I were a drunk dutchman in a bar, I'd put the nominal agreed price up pretty high to compensate (in expectation) to the chance that the king would void. The king did void, of course, and I can see the prob of voiding rising as the voiding approached, which would account for the so-called bubble in common bulb prices.

Economists rude awakening Comment on Peter Dorman ...


Economists rude awakeningComment on Peter Dorman on ‘The Great Awokening’There are TWO economixes: political economics and theoretical economics. The main differences are: (i) The goal of political economics is to successfully push an agenda, the goal of theoretical economics is to successfully explain how the actual economy works. (ii) In political economics anything goes; in theoretical economics, the scientific standards of material and formal consistency are observed.Economics claims to be a science but is NOT. Theoretical economics (= science) had been hijacked from the very beginning by political economists (= agenda pushers). Political economics has produced NOTHING of scientific value in the last 200+ years.From Adam Smith/Karl Marx up to the “Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel” economists claim that their economic policy guidance has ― in contrast to those of politicians, cranks, demagogues, preachers, snake-oil sellers, agitators, impostors, etcetera ― scientific foundations.Fact is that there is NO greater embarrassment in the history of modern science than economics. The four main approaches ― Walrasianism, Keynesianism, Marxianism, Austrianism ― are mutually contradictory, axiomatically false, materially/formally inconsistent, and all got the foundational concept of the subject matter ― profit ― wrong. What we actually have is the pluralism of provably false theories.Both orthodox and heterodox economics is scientifically unacceptable. Because of this, economics has nothing to offer in the way of a well-founded advice: “In order to tell the politicians and practitioners something about causes and best means, the economist needs the true theory or else he has not much more to offer than educated common sense or his personal opinion.” (Stigum)Fact is that economics has by now degenerated to pure political agenda pushing. A short visit of the econoblogosphere suffices to realize that economic content has virtually evaporated:• Tolerance And Terrorism In Saudi Arabia#2• John Davidson’s Bad Faith Defense of General Kelly#3• If we treat plutocracy as democracy, democracy dies#4• Republican Class Warfare: The Next Generation#5Since the founding fathers, economists violate the principle of the separation of science and politics. Economics is what Feynman famously called a cargo cult science.#6Economics is currently completing its career from failed science to fake science to political fraud.#7 It is time now to expel economists officially from the sciences. The first step is to abolish the fake economics Nobel.Egmont Kakarot-Handtke#1 Why is economics such a scientific embarrassment? EconoSpeak Uneasy Money mainly macro Economist’s View What is so great about cargo cult science? or, How economists learned to stop worrying about failure For details see cross-references Political economics[...]

Robert, Well, my (non) interaction with PG happen...



Well, my (non) interaction with PG happened in the 90s, the paper being discussed having been based on the closed-end country funds bubble that blew in 1990.

I have not looked at your Tulipmania recently, but my memory is that in the end the bottom line was that the most likely actual bubble was only in the final month for oridnary tulip futures, not the high priced ones that got all the publicity in MacKay and other such sources. There were special enough details and circumstances regarding them that your misspecified fundamentals problem.

My reading of Kindleberger in his various editions involves more cases that are not new commodities or markets, although many of them were.

The thing that puzzled me about your interaction w...


The thing that puzzled me about your interaction with PG involves my recollection of Garber's and my discussions about identification. As I remember this (from 1980, which is 37 years btw) is our saying we could not tell the difference between a greater fool bubble that burst (which we got from Brock/Blanchard)) and a payoff expectation that did not materialize. Have a look at the chart in the back of Kindleberger - his bubbles (suspiciously) occur around new markets and new inventions - some of which pay off and some don't. Also Tulip mania was NOT a greater fool type bubble since the price that 'bubbled' was not a spot price but a futures price so time does not move in the pricing equation. The deal was for delivery of tulip bulbs at a fixed future date. Oh and the point of the UK think was to tout the very cool data the authors used - spot prices for freehold and for leasehold of very similar properties - and they had lots and lots of data.

That may be. I have said nothing about UK housing...


That may be. I have said nothing about UK housing prices, although I fully agree with Shiller that US ones were a speculative bubble, if subject to some question marks about misspecified fundamentals. Anyway, in the US, the price to rent and price to income ratios after 2000 rose to levels never seen before in US history, pretty suggestive of a bubble, and, of course, they fell long and hard later.

I apologize through you to Peter Garber for snarking too much at his failure to show up to discuss a paper he said he would discuss without ever giving any excuse. My remarks overdid it, although the facts are as I stated them.

That paper, eventually published in JEBO prior to when I edited it (with Ahmed, Koppl, and White) was about closed-end country funds, especially the price movements that occurred in late 1989 and early 1990. Without getting into too many gory details, a lot of them, including ones where people could freely buy the underlying assets (not always the case for some countries, such as South Korea at the time), with Spain and Germany prime examples, had their closed-end fund prices soar to about twice the level of their net asset values, before crashing pretty hard in February, 1990. A lot of the action at the time seems to have been driven by Nomura, with much of the money in this particular market fleeing the about to crash and then crashing Japanese stock market.

We did not come up with the idea that closed-end funds are a case where, assuming ability to buy the underlying assets, one can pretty reasonably accept that the fundamental is probably slightly below the net asset value due to tax and fees issues, as I noted in my post. Others have noted this, including Thaler as well as Brad DeLong, who in one paper noted that due to the misspecified fundamental problem we cannot say for sure that the US 1929 stock market was a speculative bubble, but that we can be pretty sure that the closed-end fund market was, where at that time it behaved like closed-end country fund market in 1898-90, with fund prices roughly doubling the underlying net asset values before finally crashing hard.