tag:blogger.com,1999:blog-5713178645208582139.post6546162821428169290..comments2024-03-22T02:37:15.030-05:00Comments on Macro Musings Blog: Observational EquivalenceDavid Beckworthhttp://www.blogger.com/profile/04577612979801459194noreply@blogger.comBlogger23125tag:blogger.com,1999:blog-5713178645208582139.post-22250692569391703432014-05-06T16:27:49.163-05:002014-05-06T16:27:49.163-05:00Thank you for that reference! That's a good on...Thank you for that reference! That's a good one. These two ideas might be the same thing. Interestingly, I managed to take the information idea and and match it up (sorry for the pun) with matching theory ...<br /><br /><a href="http://informationtransfereconomics.blogspot.com/2014/03/information-transfer-and-cobb-douglas.html" rel="nofollow">http://informationtransfereconomics.blogspot.com/Jason Smithhttps://www.blogger.com/profile/12680061127040420047noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-30312412597655628242014-05-06T11:39:44.000-05:002014-05-06T11:39:44.000-05:00Jason, sorry, I botched your idea by by not proof ...Jason, sorry, I botched your idea by by not proof reading my comment... I meant to write<br /><br />"And actually he thinks that it may be very difficult to beat expectations with a "maximally ignorant" prior... you can beat it with an expectation which is very accurate..."Tom Brownhttps://www.blogger.com/profile/17654184190478330946noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-83664552260665414912014-05-06T05:22:40.364-05:002014-05-06T05:22:40.364-05:00Jason, you should appreciate this famous article, ...Jason, you should appreciate this famous article, "Money is memory" http://www.minneapolisfed.org/research/sr/sr218.pdfDavid Beckworthhttps://www.blogger.com/profile/04577612979801459194noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-59095369679953940812014-05-06T01:16:06.399-05:002014-05-06T01:16:06.399-05:00It's not necessarily difficult to use the leas...It's not necessarily difficult to use the least informative prior as your model -- humans just have a tendency to be wrong when trying to predict the future :)Jason Smithhttps://www.blogger.com/profile/12680061127040420047noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-86335356188425912342014-05-06T01:13:48.852-05:002014-05-06T01:13:48.852-05:00The $100 is a device to move the information of wh...The $100 is a device to move the information of who owes money to whom around the town; the town had been suffering from inefficient information flow that likely could have been cured with looser monetary policy (more money). However the monetary base = $100 is now large compared to NGDP = $500, so an additional $100 likely would not have as big of an effect.<br /><br /><a href="http://Jason Smithhttps://www.blogger.com/profile/12680061127040420047noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-40012270330731965092014-05-05T11:26:15.367-05:002014-05-05T11:26:15.367-05:00The way Jason Smith is thinking in terms of the pl...The way Jason Smith is thinking in terms of the plucking model is that expectations, either too pessimistic, or too optimistic, can destroy information in the market, which is a bad thing. And actually he thinks that it may be very difficult to approach expectations with a "maximally ignorant" prior... you can beat that with an expectation which is very accurate, but the consequences ofTom Brownhttps://www.blogger.com/profile/17654184190478330946noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-90221931333961021672014-05-05T02:09:49.940-05:002014-05-05T02:09:49.940-05:00Thanks for your response David. Bizarrely enough, ...Thanks for your response David. Bizarrely enough, this is the second time today I'm reading about the "plucking model"... here's the 1st instance (which caused me to do a little research to see what was being "plucked"):<br />http://informationtransfereconomics.blogspot.com/2014/05/the-effect-of-expectations-in-economics.htmlTom Brownhttps://www.blogger.com/profile/17654184190478330946noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-83632041318030696532014-05-04T19:37:55.860-05:002014-05-04T19:37:55.860-05:00Prakash, I have been thinking a lot about Gross Ou...Prakash, I have been thinking a lot about Gross Output lately. Though it is no substitute for what GDP measures--value added economic activity--it does better measure total transactions. The original equation of exchange was actually stated MV=PT where T is transactions. Typically, we use MV=PY where Y is real income or real GDP. I do think there is something here.David Beckworthhttps://www.blogger.com/profile/04577612979801459194noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-70360227777722553032014-05-04T19:35:19.181-05:002014-05-04T19:35:19.181-05:00Tom, the question is tougher than it first seems. ...Tom, the question is tougher than it first seems. For example, my knee jerk response is yes, the Fed could push actual interest rate (i) below the natural interest rate (i*)--only if i* is greater than 0--and that is what I think they did in 2002-2004. This was too loose policy. However, it is not clear that doing this should necessarily lead to the huge bust like we had over the past five years.David Beckworthhttps://www.blogger.com/profile/04577612979801459194noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-45614735172562057002014-05-03T11:56:28.209-05:002014-05-03T11:56:28.209-05:00Hi David,
Slightly Offtopic.(left the same questi...Hi David,<br /><br />Slightly Offtopic.(left the same question at Nick Rowe's place as well)<br /><br />It seems like the need for money is a positive function of the number of participants in the wicksellian circle, keeping communication, laws and trust constant, since every step will want to maintain a cash balance. Doesn't this imply that Nominal Gross output level targeting might be Prakashhttps://www.blogger.com/profile/10227431671018440503noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-57702407247348546882014-05-02T08:31:41.762-05:002014-05-02T08:31:41.762-05:00To say that recessions are caused by "an exce...To say that recessions are caused by "an excess demand for money" comes to the same as Keynes's point about the "paradox of thrift": i.e. if saving rises, then all else equal, demand falls.<br /><br />And that's a point with which MMTers have no quarrel.Ralph Musgravehttps://www.blogger.com/profile/09443857766263185665noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-81453731171596632122014-05-02T06:57:00.346-05:002014-05-02T06:57:00.346-05:00That's simple: the motel owner accommodates hi...That's simple: the motel owner accommodates him, the butcher butchers him and give the corpse to the pig farmer. The Co-op guy and the prostitute go out to celebrate.<br />I would say it is a daring solutions recessionAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-91307433136686973892014-05-01T17:51:03.961-05:002014-05-01T17:51:03.961-05:00David, nice article. I'm glad Nick Rowe highli...David, nice article. I'm glad Nick Rowe highlighted it... I almost skipped over it except for that. Question: your parable illustrates a tight money problem, and it's resolution. Is it possible to extend this same basic story to illustrate a problem in the other direction (money which is too loose?), and it's solution. If so, what's the most ...er... insightful way to do that? AnyTom Brownhttps://www.blogger.com/profile/17654184190478330946noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-66946294989666559362014-05-01T15:00:45.916-05:002014-05-01T15:00:45.916-05:00This is spot on! The (converse) collary is: debt ...This is spot on! The (converse) collary is: debt was piled up in the town in the first place, because of a lack of "real money". If there were more $100 bills floating around the town earlier, then the debts would have been discharged much earlier. <br /><br />What you are saying is that tight -- not loose -- monetary policy creates debt and credit! Most of the profession has this Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-49407286746842852202014-05-01T10:23:32.224-05:002014-05-01T10:23:32.224-05:00The fictional story always works fine up til one o...The fictional story always works fine up til one of the people being paid with the $100 was a net creditor.Yancey Wardhttps://www.blogger.com/profile/16427042729449397357noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-35572163357283418922014-05-01T08:56:34.974-05:002014-05-01T08:56:34.974-05:00Thanks Nick. I will take a look.Thanks Nick. I will take a look.David Beckworthhttps://www.blogger.com/profile/04577612979801459194noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-2150795489033364832014-05-01T08:16:05.120-05:002014-05-01T08:16:05.120-05:00The tourist provided incremental “liquidity” in th...The tourist provided incremental “liquidity” in the form of a deposit with the hotel owner.<br /><br />The deposit is simply the (contingent) transfer of a bank balance.<br /><br />That provides impetus for the subsequent chain-deleveraging of balance sheets.<br /><br />Excess money demand was a temporary freeze on money velocity – a local liquidity trap.<br /><br />Then money velocity suddenly JKHhttps://www.blogger.com/profile/06322177539880818556noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-85189254304381788082014-04-30T22:47:08.033-05:002014-04-30T22:47:08.033-05:00David: I think this is an important post. I have s...David: I think this is an important post. I have some further thoughts on it: http://worthwhile.typepad.com/worthwhile_canadian_initi/2014/04/money-barter-the-clearing-house-and-balance-sheet-recessions.htmlNick Rowehttps://www.blogger.com/profile/04982579343160429422noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-28990346690045901572014-04-30T16:43:54.200-05:002014-04-30T16:43:54.200-05:00Money is a clearing house, where circles of offset...Money is a clearing house, where circles of offsetting obligations are cancelled out.Nick Rowehttps://www.blogger.com/profile/04982579343160429422noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-32990199846062950942014-04-27T22:31:31.597-05:002014-04-27T22:31:31.597-05:00I have another version of the small town. A histor...I have another version of the small town. A historical novel of sorts.<br /><br />In the Old West, a handsome stranger comes to town. He heads for the local saloon-hotel, and places a crisp $20 on the counter. "Drinks, food and rooms, until that it used up."<br /><br />The keeper pockets the money and hires a man to fix his leaky roof. The roofer hires a crew for a day to improve the Benjamin Colehttps://www.blogger.com/profile/14001038338873263877noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-9688122840674163852014-04-27T22:27:05.913-05:002014-04-27T22:27:05.913-05:00This comment has been removed by the author.Benjamin Colehttps://www.blogger.com/profile/14001038338873263877noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-24640408418563935092014-04-26T13:43:12.319-05:002014-04-26T13:43:12.319-05:00Why wouldn't the butcher and pig farmer borrow...Why wouldn't the butcher and pig farmer borrow the recently "repaid" $100 to expand their meat distribution business? Maybe they think the investment opportunity is poor (i.e. expanding their balance sheet for little prospect for return)? I think it is very difficult to pick one over the other; it's observationally equivalent as you noted on another post.jt26noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-43034563191858669902014-04-26T03:32:20.044-05:002014-04-26T03:32:20.044-05:00Whatever the answer , it's a bad analogy for t...Whatever the answer , it's a bad analogy for the current U.S. economy.<br /><br />Here's how you fix it :<br /><br />Rich tourist visits town , looking for the motel owner , the butcher , the pig farmer , the Co-op supplier , and the prostitute - each of whom owes him $100 , plus interest and late fees. <br /><br />So what say you? Is this a balance sheet recession or an excess money Anonymousnoreply@blogger.com