Social anthropologist David Graeber claims that barter economies never operate the way that economists assume.
James Kahn and Robert Rich worry that the U.S. has entered a phase of weak productivity growth.
Matt O’Brien
(hat tip: Mark Thoma) wonders why Republicans have become so hostile towards the Federal Reserve.
Hal Cole and Lee Ohanian debate Paul Krugman on the recovery from the Great Depression.
“Matt O’Brien wonders why Republicans have become so hostile towards the Federal Reserve.”
Aside from conservatives’ natural, and right, aversion to central planning, there’s the little matter of the Fed’s track record of being absolutely wrong about absolutely everything.
Oh, and blowing up the economy.
Can’t see how those Republicans could have a problem with that!
If you think that the major reason trend productivity growth slowed from 1973 to 1995 was firms shifting their capital spending from primarily targeting labor savings to primarily targeting energy savings the recent increase in energy prices should lead to the conclusion that trend productivity growth should be slowing again.
Hal & Cole start by saying “The main point of our op-ed, as well as our earlier work, is that most of the increase in per-capita output that occurred after 1933 was due to higher productivity – not higher labor input.”
How else can you get rising per-capita output at any time except through greater productivity?
It look like they are creating a straw man to disprove.
Barter in early colonial societies worked like economists would expect it to. That is before settlers organized to alleviate many aboriginal communities of their fish & game resources. In its place open-access rules of access were implemented.
Graeber sets up a straw man for his analysis of barter and the origin of money. Menger established the dynamic of the origin of money but Graeber, a non-economist, analyses form an all or nothing position. His concept of the origin of money makes no economic sense.
When resources are used to “dig holes and then fill them up” is it any surprise that productivity suffers. Nothing is being produced. So much for shovel-ready jobs. Shovel-ready jobs are out there, but the government keeps preventing the resources from being used for that purpose. With most of the TARP and stimulus money being shoveled to state governments, SEIU, and Solyndra how do you expect productivity to not suffer.
Apparently Matt O’Brien is a production of academic economic teaching. All he knows is demand side Keynesian or monetarist thinking. He cannot break free of the illusions of demand side thinking to understand incentives and disincentives.
Thankfully the Republican party is slowly changing away from the economic thinking of Richard “we are all Keynesians” Nixon and moving toward the thinking of Robert Mundell.
The more unbiased academic study that is done on the Great Depression the more the liquidity myths fall as scales from our eyes.
How else can you get rising per-capita output at any time except through greater productivity?
By increasing employment or hours of work per capita.
If you think that the major reason trend productivity growth slowed from 1973 to 1995 was firms shifting their capital spending from primarily targeting labor savings to primarily targeting energy savings the recent increase in energy prices should lead to the conclusion that trend productivity growth should be slowing again.
The timing more or less works, but I don’t think oil, or even energy more broadly, is as big a cost share now as it was 40 years ago (perhaps in part due to the phenomenon you describe in the 70s), so I’m not sure the same explanation works this time. Also, people who examined the oil price explanation for the 70s slowdown found it wanting–for example, the price of used (supposedly obsolete) capital didn’t fall.
Some further analysis has lead to a conclusion-explained here:
http://saposjoint.net/Forum/viewtopic.php?f=14&t=2860#p34267
That:
an interesting hypothesis emerges that , starting from q2 2012, in H2 2012 commodity prices in USD will rapidly converge towards a certain Bancor equilibrium for the first time, and than fluctuate around it in future, where:
1) the price of paper USD will be de facto determined by amount of a commodity it can buy in this equilibrium rather then the commodities price is as to today will be determined by the value of a certain currency set by exchange rates;
2) In fact, it will be the basket of all commodities that will serve as the ultimate reference medium of exchange for all paper currencies, and will de facto replace thus USD as world reserve currency;
3) the USD price ratios between different commodities will change so that to reflect the monetary ability (i.e. availability, longevity) of a given commodity to be the part of this world reserve currency, exchange medium for trade, not only its utility. Hence the price ratios IN USD between different commodities may differ quite radically ( as seen in example with gold/silver ratio and silver/copper price ratio) from what they are today;
4) if the logic of exchange medium effect on USD price ratio formation between commodities in USD can be discovered, the prices of commodities in USD can be quite accurately predicted after H2 2012, and ratios may not fluctuate as much as in USD as reserve currency time;
5) In such case, the prices in USD of other assets (land, houses, food, produce, etc) relative to commodities (and, of course, USD ) will also move from their current ratios to represent their potential as exchange medium for trade.
The signal for such conscious or partly conscious move to de facto Bancor system of international reserve currency will be triggered by official data of recession in q1 2012 in the USA and the resulting obvious unsustainability of USA debt ( it has already entered bubble precrash phase in 2000) which will continue to grow superexponentially ( that is , in equivalent subsequent periods of time increases of debt value in USD will continue to grow) and imminent default (crash correction ) of the USA on its debt in near future.
I have not been able to explain to many people the following:
The Fed was fueling the boom after 2003 through low policy rates, and the world’s central banks were steering bank lending into RMBS and sovereign debt with the Basel II rules. In summary central banks printed too much money and steered it into certain classes of loans.
If they accept the first premise, then I cannot convince them that when deflation is stalking it is a very good idea for the Fed to stoke inflation expectations. This is not limited to conservatives. Where I live conservatives are hard to find. People just do not get deflation and the need to combat it.
In general everyone I talk to thinks that Congress and the Fed and Obama are bed with the banks and they universally despise the bailouts. I don’t know who O’Brien talks to but if he listened to the liberals I listen to in coffee shops he would not see too much difference of opinion with Boehner on the Fed.
The GOP is on to something that resonates with the people. One could accuse them of cynically trying to disrupt the economy to chase out the Democrats. But given my experience talking about inflation and deflation with physics PhDs and bankruptcy lawyers, highly educated professionals who end up literally shouting, “Maybe the Depression was good because banks learned a lesson that they didn’t forget for years!” I can’t be that critical of the GOP leaders.
colonelmoore,
The problem is with the definition of deflation. Deflation when it is understood as an increase in the value of money makes sense, but when deflation is understood in monetarist terms as a general rise in the price level due to monetary expansion then our current conditions make no sense.
If the contraction that we are experiencing has little to nothing to do with the current level of the money supply but everything to do with excess leverage during the prior decades, then manipulating the current money supply is not going to prevent the deleveraging we are all seeing.
What we need to do is more to a new prosperity. That means that production has to increase. As long as government policies are more focused on chrony capitalism than they are on actual free market production neither Republicans nor Democrats are going to free us from our economic bondage.
391,000 initial unemployment claims. Quite an improvement and support for Jim’s earlier slow-growth-but-no-recession outlook. At this point, oil prices are not so high (at least on a RAC basis) that they would necessarily lead to a recession. So if we run another 60 days without the economy toppling over, a recession might just be avoided–based on oil prices (without consideration of other factors).
One large candies manufacturer, located at the periphery of the former soviet union had to go through restructuration in size and equipment modernization.
The main hurdle came from the barter perverse effects,taxes,sugar,and sometimes salaries were paid in kind that is candies.
Payments beneficiaries would rush to sell the candies to the same market competing in price among each other.The company’s bankrupcy was made nearer by the barter.