tag:blogger.com,1999:blog-2546602206734889307.post8060844590421035815..comments2024-03-28T04:29:22.717+00:00Comments on mainly macro: Underestimating the impact of austerityMainly Macrohttp://www.blogger.com/profile/09984575852247982901noreply@blogger.comBlogger9125tag:blogger.com,1999:blog-2546602206734889307.post-65901874333351588352017-05-13T19:45:15.717+00:002017-05-13T19:45:15.717+00:00Very interesting. Thanks for that, Mervyn. I am al...Very interesting. Thanks for that, Mervyn. I am also a redundant engineer. I always advise young people to steer clear of industry and to try and get a government, or government backed, job.<br /><br />Prof Richard Werner also comes to mind. He explains the easier access to credit for German firms from the many local German banks - by contrast to the few London based UK banks which cannot be bothered with small loans - other than to housing and real estate speculation of course.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-42872590341408956732017-05-12T10:35:32.776+00:002017-05-12T10:35:32.776+00:00I think you are making a crucial point that I wish...I think you are making a crucial point that I wish was made more often. A couple of years ago there was a related interfluidity post http://www.interfluidity.com/v2/4366.htmlstonehttps://www.blogger.com/profile/16420341212847543229noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-9685709785433501182017-05-10T19:58:55.542+00:002017-05-10T19:58:55.542+00:00As I took early retirement due to redundancies and...As I took early retirement due to redundancies and that was the best offer, I found a job for a small engineering company that somewhat underinvested, paid probably the lowest wages you could possibly imagine and had very few skilled employees. The vast majority were trainees of dubious quality.<br /><br />I had from time to time made suggestions about the poor state of machines and that CNCs would be a better bet than a traditional lathe, instead of buying new they preferred second hand which were almost as bad as the machines they replaced.<br /><br />I once again rocked their little boat and told them as much, then they took me up on my big idea, and bought a brand new lathe from China. <br /><br />Companies and this one in point, really like employees that don't know a lot and just jump where ever they are told to, investment can be expensive but old machines correspond to the Bath tub graph principle, but explaining that to people who think spending on investment is just a cost, forget new machines can repay for themselves whereas old ones continue to be a cost. <br /><br />From my working experience British Industry doesn't look to the long term, it's and always has been the case, of grab as much profit as you can here and now, it's numbers that matter not quality, and you can always blame the stupid workers when things don't work out well.<br /><br />Unfortunately for economists you can't derive a formula for industry that says one thing but then in practice does the other.<br /><br />A story I often tell is when I was working for a well known German Brewery in Bavaria in 1969, Herzoglich Tegernseer Brauhaus, I lived with other worker friends in an old part of the Schloss, when one day a friend reading from "Das Bild" said look at this, all British workers are lazy, Britain's products and cars are shoddily built,and I said to him, "you are reading from Das Bild, don't believe everything you read in papers like that", yes he said but they are quoting the daily express, that's an English paper isn't it?" "Yes I said but that paper is as bad as the one you are reading from." I also asked him if he thought I was Lazy being a typical Englishman," No he said.<br /><br />A personal deduction of mine from that little encounter was the absolute damage right wing newspapers have done to our industries reputation, I had worked in several German companies before returning home, and in the industrial sector there were some good and some not so good as you would expect, but Germans always advertised that their products were the best in the world, from my experience although limited I saw no better in Germany than here in England, Management was better over there, they didn't play power politics like managers do over here. The workers were much more cooperative than British workers who think they have to compete with everybody else in order to climb the slippery pole, Germans are much more rigid in the manner people progress through the system, each must have the right qualification to move beyond next stage. Here in Britain it's almost a free for all. The highest qualification for advancement is your ability to stab your workmate in the back.<br /><br />None of this of course can accounted for in productivity or GDP output. Because no-one will own up to it.<br /> <br /> <br /><br /><br /><br /><br /> <br /><br />Mervyn Hydehttps://www.blogger.com/profile/10509054505553883594noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-76265391251739188372017-05-10T19:40:22.610+00:002017-05-10T19:40:22.610+00:00If austerity implies increased unemployment, and w...If austerity implies increased unemployment, and we are currently in a 'second period' of austerity in the UK, why is unemployment so low? Are you making a prediction here that unemployment is going to rise?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-70050431481592653302017-05-09T14:46:15.697+00:002017-05-09T14:46:15.697+00:00Imagine that an economy spends a decade-and-a-half...Imagine that an economy spends a decade-and-a-half off-loading its manufacturing activities to other countries, along with all the problem-solving activity and innovations associated with actually doing stuff. Instead it reports 'productivity' and 'growth' based on importing cheap goods from overseas, (miss)selling each other needless insurance products, trading wrongly-calculated financial products, property speculation etc etc.<br />Then the whole sham collapses in, say, 2008. The fictional 'productivity' and 'growth' gains from the previous 15 years just evaporate, and we are left staring at reality.<br />Just imagine.<br />Or read about it in future history books.StuartPhttps://www.blogger.com/profile/13748038209546648459noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-29219298611935655892017-05-09T11:28:56.281+00:002017-05-09T11:28:56.281+00:00Austerity and the total disconnect between economi...Austerity and the total disconnect between economic policy and science<br />Comment on Simon Wren-Lewis on ‘Underestimating the impact of austerity’<br /><br />All confusion about economics derives from the fact that 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 scientific standards are observed.<br /><br />The sole criterion of science is true/false with truth defined as material and formal consistency: “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)<br /><br />The fact of economics is that neither Orthodoxy nor Heterodoxy has the true theory. Therefore, the economic policy proposals of BOTH orthodox AND heterodox economists lack sound scientific foundations: Walrasianism, Keynesianism, Marxianism, Austrianism is mutually contradictory, axiomatically false, and materially/formally inconsistent.#1<br /><br />The discussion about austerity delivers the proof of the utter scientific incompetence of political economists. Until this day, the representative economist has NOT gotten the fundamental concept of his subject matter, i.e. profit, right. To make the argument short, the correct profit equation for the economy as a whole is given here as Qm≡Yd+(I-Sm)+(G-T)+(X-M) which reduces to Qm≡G-T for Yd, I, Sm, X, M = 0. The reduced macroeconomic profit equation says that the monetary profit of the business sector Qm is equal to the deficit G-T of the public sector.<br /><br />So, from the standpoint of simple self-interest the 1-percenters and their useful academic spokespersons should argue FOR deficit spending and the 99-percenters and their academic spokespersons should argue AGAINST it. Just the opposite happens since Adam Smith railed at public debt.<br /><br />Fact is that the measured increase of the relation between profit and wage income in the past decades has no other cause than the increase of public and private deficit spending. It has NOTHING AT ALL to do with greed, productivity, the smartness of business people, or class struggle. These factors only influence the DISTRIBUTION of overall profit Qm BETWEEN the firms.<br /><br />Because neither Orthodoxy nor Heterodoxy has the true profit theory#2 their economic policy proposals are often counter-productive for the social groups/classes they speak for. The fact of the matter is that nobody has done more for the 1-percenters than deficit spending heterodox economists who claim to defend the peoples’ interests.<br /><br />Economic disasters happen since 200+ years because political economists lack the true theory.#3 The general public is taken away by good-guy-bad-guy storytelling without realizing that economics has NO scientific foundation at all. Where the true theory should be merely the pluralism of silly models is to be found.<br /><br />Egmont Kakarot-Handtke<br /><br />#1 For details, references, and proofs see Meta-references<br />http://axecorg.blogspot.de/2016/11/fakenews-fakescience-economics-in.html<br />#2 “A satisfactory theory of profits is still elusive.” (Palgrave Dictionary, Desai, 2008)<br />#3 See ‘Mass unemployment: The joint failure of orthodox and heterodox economics’<br />http://axecorg.blogspot.de/2017/01/mass-unemployment-joint-failure-of.htmlAXEC / E.K-Hhttps://www.blogger.com/profile/10402274109039114416noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-77692995553679194162017-05-09T02:28:25.407+00:002017-05-09T02:28:25.407+00:00It seems to me that the more productivity increase...It seems to me that the more productivity increases, the fewer or more poorly paid your customer base becomes, making them less productive as customers. Austerity measures (I.e. fewer benefits to the citizens) act to intensify that process.<br /><br />The whole productivity/austerity cycle reminds me of a man cutting off one end of a piece of string and tying it to the other end, in an attempt to make the string longer.<br /><br />Noni MausaAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-63159161560173472832017-05-08T08:08:58.005+00:002017-05-08T08:08:58.005+00:00One problem with your thesis is that I don't t...One problem with your thesis is that I don't think it's necessary for demand to increase as a precondition for investment. In a prior life I was an accountant evaluating projects and most were of the cost saving variety rather than being built on the back of increased demand. If a project saves ten people and returns,say, 25% DCF return then it's worth while, whatever the state of demand. Such projects enable firms to lower costs and perhaps capture greater market share.<br /><br />Availability of credit may be another factor; banks are more interested in lending on property than machinery.<br /><br />Then again does Edith Penrose have an explanation in that management, or more precisely lack of it, is a substantial factor? In dealing with the UK economy many would say that management is a major factor.<br /><br />Using austerity as an indirect argument to reduced investment may have some validity, as you say, but I would have doubt that it is the main, or even a substantial, explanation of this phenomenon.Robert Joneshttps://www.blogger.com/profile/03593742130088640939noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-88039858315400611212017-05-07T13:18:03.280+00:002017-05-07T13:18:03.280+00:00I was expecting to see something about a Venetian ...I was expecting to see something about a Venetian merchant traveller, or the Florida senator beaten by Trump in the Republican primary, or the New York Italian restaurant on Oxford High Street - but then I realised I misread the title of the blog as "Mainly Marco" ...Anonymousnoreply@blogger.com