Asymptosis: Always Approaching

Search results for: “constraint”

  • Innovation and Market Constraints: The Case for Artificial Selection

    Bruce Wilder had an excellent comment recently in the Crooked Timber thread on markets, economic rents, and the constraints on economic actors, excerpted by Dan here, and more with comments by Jazzbumpah here. (If you like the thinking there, run don’t walk to read this windyanabasis post and comments.) The emphasis on constraints prompts me…

  • The Real (Real) Wealth Effect: Do Wealth Changes Change Spending and Cause Recessions?

    My gentle readers who have followed me over time will have seen this graph and statement far too many times by now: Since 1970 in the U.S., (almost) every time you saw a year-over-year decline in real household assets or net worth, you were either just into or about to be into a recession.* It’s…

  • The Economy Is a Ponzi Scheme

    I don’t think there’s anything eye-popping or revolutionary this post, but it’s thinking that I’ve been finding useful. Long before Larry Summers bruited his recent ideas about secular stagnation and the need for bubbles, I came up against this great line from Nick Rowe (April 2011): The economy wants a Ponzi scheme. I’ve been pondering…

  • “Businesses Hire When They are Swamped with Demand, Not When They Have High Profits”

    Mike Sankowski has been banging his spoon on the high chair about this forever. And rightly so. Repeat after Mike. And keep repeating it to anyone who will listen. The “higher-corporate-profits = jobs” meme is perhaps the most pernicious falsehood in political economics. How Business Owners Think For almost ten years I was co-founder and…

  • “Supply” and “Demand” for Financial Assets

    Okay, once again I’m going to sacrifice my body here, risk looking stupid by asking what seems to me to be a vexatious question. Here’s the setup: When you exchange some of your money (bank deposits) for some shares of Apple stock, those shares aren’t removed from the supply of Apple shares. (Likewise your “money”;…

  • What’s “Scarce” These Days? Borrowers, Spenders, and (Hence) Profitable Investments

    For the moment, let’s go with old saw that “economics is the study of scarcity.” (Though I disagree with it; the proper study of economics is human reaction functions.) What’s scarce these days? Certainly not supply. In an 80%-service economy suffering high unemployment and a unprecedentedly low labor/population ratio, higher demand for massages is not…

  • Specifying “Demand”: Nick Rowe Meets Steve Keen on His Own Ground

    You might well ask: “Whaddaya mean by ‘his,’ buster?” Nick does a full-faith effort here (including the comments) to characterize Steve Keen’s position (aggregate demand = GDP + change in debt), using Nick’s preferred language and mental modeling. It’s a darned good effort, but I think it’s crippled (as is Steve’s construct) by a conceptual failing…

  • Understanding Effective Demand with Edward Lambert

    A few people have asked me to provide a quick introduction to Edward Lambert’s recent work on Effective Demand, which work I’ve mentioned a few times. That’s ironic, because I made those mentions  in hopes that more-accomplished others would do the same for me. That help hasn’t been forthcoming, because quite a bit of work…

  • The Fed is not “Printing Money.” It’s Retiring Bonds and Issuing Reserves.

    Update 5/21: See two updates to this post here. Mark Dow had a great post the other day: There is zero correlation between the Fed printing and the money supply. Deal with it. He points out (emphasis mine): From 1981 to 2006 total credit assets held by US financial institutions grew by $32.3 trillion (744%).…

  • Identity Games: Saving ≠ Saving? Whodathunkit?

    I finally figured out a simple way to explain my confusion (and that of many others, including many economists) with the whole Saving issue. I may also have figured out a useful solution to that confusion, which I present at the bottom here for my gentle readers’ delectation and denunciation. Econ profs: I’m really curious.…

  • Do Businesses Borrow to Invest in Productive Assets? Does the Business-Interest Tax Deduction Encourage That?

    J.W. Mason at The Slack Wire gives us a telling and trenchant analysis of that question: Short answer: They used to, but not any more. The correlation in the U.S. between fixed-capital investment and a) debt levels and b) change in debt levels has been vanishingly small since the late eighties. …in the 1960s and 70s,…

  • Wealth and Redistribution Revisited: Does Enriching the Rich Actually Make Us All Richer?

    Update: There is a revised and corrected version of the model and spreadsheet here, with discussion. In a recent post I built a model with one rich person and ten poorer people to ask: does redistribution from rich to poor make us all more wealthy? The conclusion was Yes. Jump back there to see a quick…

  • The Money Confusion

    The always-brilliant J. W. Mason’s response to what in my opinion is a quite befuddled Mike Beggs review in Jacobin of David Graeber’s Debt: The First Five Thousand Years prompts me to tackle a subject that I’ve been worrying at for a long time: Money. I’ve been worrying at it despite (or because of) endless reading spanning…

  • No: Saving Does Not Increase the Supply of Loanable Funds

    Or: It’s The Velocity, Stupid. I got quite a bit of blowback on my recent post suggesting that economists don’t understand accounting. In response I give you Exhibit A: the almost-ubiquitous notion that more saving increases the supply of “loanable funds” — hence that more saving causes or at least allows more investment. (The absolute classic…

  • A Surfeit of Dearth Revisited: The Global Shortage of Safe Assets

    David Beckworth: global economic growth over the past few decades has outpaced the capacity of the world economy to produce truly safe assets Really? The U.S. could have just deficit-spent more, crediting people’s/businesses’ checking accounts and thereby increasing the global stock of the world’s safest asset: U.S. dollars. It could (by U.S. law is required…

  • How Accounting “Constrains” Economics

    There’s been a running discussion of this on various blogs (sorry if I missed linking some!), inflated simultaneously by Krugman and by magisterial and mysterious commenter JKH’s “paradigm riff,” here. That discussion has brought me to the following conclusions. Assuming you have a coherent and accurately representative System of National Accounts*: • Accounting, and accounting identities,…

  • Full-Reserve Banking and Loanable Funds

    Richard Williamson asks a sensible and straightforward question: If, as Modern Monetary Theorists propose, banks’ reserve levels put no significant constraints on their lending, why don’t we have 100%-reserve banking — and presumably no runs on banks as a result? First an explanation — I hope simple, clear, and generally accurate (if simplified): Say you…

  • Financial Markets Are the Real Barter Economy

    As (mis)conceived by most economists, money (which they confute here with currency) emerged as a solution to the time problem of barter economies: my spinach is ready now, but your apples won’t be ripe for months. How can we trade? Answer: you give me money for my spinach, and I give it back to you…

  • The Upper Bound in the Fed’s Head: Inflation

    Continuing with one of my current hobbyhorses: Ryan Avent reports on the American Economic Association meeting, with special attention to a presentation by Robert Hall: Monetary policy: The zero lower bound in our minds | The Economist. Mr Hall argued that: A little more inflation would have a hugely beneficial impact on labour markets, And…

  • Savings Equals Investment Equals … Zero?

    Update: See a follow-up post to this post and the comments, here. Randall Wray bills this image — in wonkish humor that I know many of my Modern Monetary Theory (MMT)-savvy readers will get — as “The Most Subversive Sign Seen at the ‘Occupy Wall Street’ Protest.” Love it! Which prompts me to finally publish this post,…

  • No Kidding: Loan Demand, Not Credit, Is the Problem

    Alert the media. William Dunkelburg, chief economist for the National Federation of Independent Business (NFIB) since 1971, tells us what we already know: If lending is picking up, it is because customers are showing up and there is a reason to invest and hire. The reverse doesn’t work – you can’t force feed the credit…