[wat0n]

Again Lurkers, I had asserted that classical deductive logic proves things because its system never gives the wrong truth value as long as all the premises are actually true. He asserted that classical deductive logic can at times prove statements that are false as true when the proof uses only true premises and the proof is otherwise valid. I asked him to support that assertion.

I did not say that.

Please quote me on it in case you didn't understand (I wouldn't be surprised).

The only thing I'm saying, is that you can logically conclude a true statement from a false premise.

His response to support that assertion is to talk about propositional logic. It is non-responsive.

He asserts above that the point is not about proofs. However, I asserted that MS Econ. theories are not supported by the scientific method. They are proved using deductive logic.

MMT does the same - it does reach its conclusions based on deductive reasoning. So do other schools.

But, many of the premises are false. They are often called simplifying assumptions. But, they are false anyway. For example, IIRC, the proof that the free market sets the things correct price at all times, includes the assumption that all players in the market know everything about the thing being sold, it may also include that all the players have an equal ability to choose not to make the deal.

Like for all models, I have yet to see a model that doesn't use simplifying assumptions - even if some don't say it explicitly.

"All models are wrong, but some are useful" - George Box (not an economist).

Here, he seems to be asserting that it doesn't matter that MS Econ's conclusions are not proven. It doesn't matter that, for example, a given policy choice can increase inflation or decrease it, because of unknown factors. It is still a valid theory to assert that that policy choice is the best to reduce inflation in all cases. [Note, this is just an example. I'm not saying it is true or false.]

I actually said, explicitly, the limits of purely logical proofs are why we need to contrast models to the data.

[Steve_American]

OK, Lurkers, I'll go back to the previous page to where he said.

It's not about a proof but whether reasoning assuming a false premise will always lead to a false conclusion.

For instance, take the following:

"When it rains and I'm outside in the open while naked (A), I get wet (B)". Using propositional logic, you can express it as A => B.

It's not raining while I'm outside in the open and naked (A is false). Can I ever get wet regardless? (Can B be true?)

If I am in fact wet, because I went to a nudist beach, swam a bit and just came outside the water and it did not rain at any time, is this statement illogical? Is this inference really wrong? (Is A => B false?)

OK, I'll use his example with classical deductive logic.

"If it is raining (=A) and if I'm outside in the open while naked (=B), I will always get wet (C)". Using deductive logic, you can express it as A and B therefore C.

If it's not raining (=/A) and if I'm outside in the open and naked (=B) you can't conclude that therefore I will not ever get wet (because you may be playing in the sprinkler. Nor can you say that you will always get wet, because you may not be playing in a sprinkler or some other cause may get you wet.

He asked, "Can I ever get wet regardless? (Can B be true?)" and

"If I am in fact wet, because I went to a nudist beach, swam a bit and just came outside the water and it did not rain at any time, is this statement illogical? Is this inference really wrong? (Is A => B false?)"
. . It doesn't matter at all if you can get wet some other way.

He asks if the statement is illogical?
. . My reply is yes, it is illogical. That is, you got wet because of some other cause not mentioned in the set of Premises. It is illogical to claim that your proof is logical because of some cause not mentioned in the premises.

I assert again, his system is illogical and useless to prove anything to guide policy makers.

It is useless to guide policy makers because it doesn't list all the possible causes of getting wet and showing that they do or do not apply in this case.

Also, Lurkers, NOTE that he doesn't call me out for my assertions about false premises that are actually being used by MS Econ. to prove, for example, that the free market always sets the real price at all times.
Obviously, no player in the market ever knows everything about the thing being sold.

[wat0n]

He asks if the statement is illogical?
. . My reply is yes, it is illogical. That is, you got wet because of some other cause not mentioned in the set of Premises. It is illogical to claim that your proof is logical because of some cause not mentioned in the premises.

And you're wrong, the statement is still logical.

What matters for deciding if the statement is logical is that, if the premises are true, the conclusion is also true.

That can of course make the statement useless ("it's obviously true, duh") but that's not the same as making it illogical.

Get it?

Applied to economics, formal models will usually be logical (if their premises are true, their conclusions will also be true) but that, by itself, doesn't mean they're good models: Maybe in the real world we know their conclusions are not true, so we know their premises are false. Or perhaps we know their premises are false but we have no idea whether their conclusions are true or not, making them fairly useless for practical applications.

Yet that formal modeling is still useful, since it allows us to understand our models better and write better models.

I will also note that mainstream economics does not actually conclude "the free market always sets the real price all the time", whatever that's supposed to mean. There are plenty of models where markets are not free and also models where free markets can actually be inefficient.

In fact, this is actually a good example of what I'm saying. Toy classical models where completely free and unregulated markets lead to efficient outcomes (e.g. prices) are wrong as we know the prices we observe could in theory be Pareto improved yet such models are not illogical. In fact, they're useful as benchmarks to define and subsequently understand market failures by way of comparison. Since this helps define and understand concepts, that alone makes them an useful construct even if no one believes completely free unregulated markets are literally the most efficient way to allocate resources in real life.

[Steve_American]

And you're wrong, the statement is still logical.

What matters for deciding if the statement is logical is that, if the premises are true, the conclusion is also true.

That can of course make the statement useless ("it's obviously true, duh") but that's not the same as making it illogical.

Get it?

Applied to economics, formal models will usually be logical (if their premises are true, their conclusions will also be true) but that, by itself, doesn't mean they're good models: Maybe in the real world we know their conclusions are not true, so we know their premises are false. Or perhaps we know their premises are false but we have no idea whether their conclusions are true or not, making them fairly useless for practical applications.

Yet that formal modeling is still useful, since it allows us to understand our models better and write better models.

I will also note that mainstream economics does not actually conclude "the free market always sets the real price all the time", whatever that's supposed to mean. There are plenty of models where markets are not free and also models where free markets can actually be inefficient.

In fact, this is actually a good example of what I'm saying. Toy classical models where completely free and unregulated markets lead to efficient outcomes (e.g. prices) are wrong as we know the prices we observe could in theory be Pareto improved yet such models are not illogical. In fact, they're useful as benchmarks to define and subsequently understand market failures by way of comparison. Since this helps define and understand concepts, that alone makes them an useful construct even if no one believes completely free unregulated markets are literally the most efficient way to allocate resources in real life.

I'm not wrong, you are the one who is wrong.

Lurkers note that wat0n often replaces proved with concluded. I'm not sure why. It seems like he knows his system doesn't actually prove things, it just concludes they are true.
. . It is sort of like the guy in another thread who claimed that one can theine the total net worth of a person to be the sum of all his incomes (modified in some way) over infinite time. He agreed that income is a flow and wealth is a stock. But, he said one can define a stock as the infinite sum of a flow. OK, I agree that can be done, I just disagree that it makes any mathematical sense. And so, it is wrong.

The claim that MS Econ. Theories have many models doesn't matter to me. Which one they are usually using is what matters. If they are usually using one in which the current price is not the real price seems like the wrong model to be using, most of the time.

I asserted that they are usually using a model in which they have proven that the current price at any time is the best, real, correct price taking all factors into account. The price can be constantly changing as factors change, but the claim is that the market price is always the right price, but only if everyone knows everything.
That proof includes the premise that every player in the market knows everything about the stuff they are buying or selling. This is a false premise. Obviously.

On MMT using deductive proofs. MMTers will always very soon point to a fact from economic history. They don't rely on the logical proofs to prove things. They rely on deductive type statements to educate and explain their points. They rely on economic history to show they are right.

A philosophical point is that math proves things deductively, science does not claim to prove anything. Science asserts that it is impossible to prove things about reality (maybe because it is so complicated). Science instead tries to prove things are wrong by comparing them to reality. If they don't match reality they are rejected. MS economics tries to be like Math and prove things about reality deductively. This is pseudoscience because science asserts that this is impossible (maybe because it is hard to show the premises are all true). Therefore, MS economics is not a science, because it isn't based on reality.

MS econ. uses its false premises to build a fantasy world. Whether or not their conclusions would work perfectly if we lived in that fantasy world doesn't matter. We don't live in that fantasy world.

[wat0n]

I'm not wrong, you are the one who is wrong.

Lurkers note that wat0n often replaces proved with concluded. I'm not sure why. It seems like he knows his system doesn't actually prove things, it just concludes they are true.
. . It is sort of like the guy in another thread who claimed that one can theine the total net worth of a person to be the sum of all his incomes (modified in some way) over infinite time. He agreed that income is a flow and wealth is a stock. But, he said one can define a stock as the infinite sum of a flow. OK, I agree that can be done, I just disagree that it makes any mathematical sense. And so, it is wrong.

No, you don't understand calculus which is different. Your reasoning sounds like Zeno's turtle and Achilles paradox:

https://en.wikipedia.org/wiki/Zeno%27s_ ... e_tortoise

The claim that MS Econ. Theories have many models doesn't matter to me. Which one they are usually using is what matters. If they are usually using one in which the current price is not the real price seems like the wrong model to be using, most of the time.

I asserted that they are usually using a model in which they have proven that the current price at any time is the best, real, correct price taking all factors into account. The price can be constantly changing as factors change, but the claim is that the market price is always the right price, but only if everyone knows everything.
That proof includes the premise that every player in the market knows everything about the stuff they are buying or selling. This is a false premise. Obviously.

That premise is not necessary. There's a whole field on information asymmetries:

https://en.wikipedia.org/wiki/Information_economics

On MMT using deductive proofs. MMTers will always very soon point to a fact from economic history. They don't rely on the logical proofs to prove things. They rely on deductive type statements to educate and explain their points.

Economic theory is deductive itself.

They rely on economic history to show they are right.

Firstly, no - they cherry-pick which history to consider.

Secondly, mainstream economists rely on economic history as well. And on data too.

A philosophical point is that math proves things deductively, science does not claim to prove anything. Science asserts that it is impossible to prove things about reality (maybe because it is so complicated). Science instead tries to prove things are wrong by comparing them to reality. If they don't match reality they are rejected. MS economics tries to be like Math and prove things about reality deductively. This is pseudoscience because science asserts that this is impossible (maybe because it is hard to show the premises are all true). Therefore, MS economics is not a science, because it isn't based on reality.

MS econ. uses its false premises to build a fantasy world. Whether or not their conclusions would work perfectly if we lived in that fantasy world doesn't matter. We don't live in that fantasy world.

This presumes economists don't contrast their models to data, which is also a lie.

[Steve_American]

1] No, you don't understand calculus which is different. Your reasoning sounds like Zeno's turtle and Achilles paradox:

https://en.wikipedia.org/wiki/Zeno%27s_ ... e_tortoise


2] That premise is not necessary. There's a whole field on information asymmetries:

https://en.wikipedia.org/wiki/Information_economics


3] Economic theory is deductive itself.


4] Firstly, no - they cherry-pick which history to consider.

Secondly, mainstream economists rely on economic history as well. And on data too.


5] This presumes economists don't contrast their models to data, which is also a lie.

It is unfortunate that the system here erases the parts in quotes, and just keeps the replies. So, you need to look at his reply to see what he was replying to. I'll be copying and pasting key parts.

1] 1a] I wrote and he ignored, "Lurkers note that wat0n often replaces proved with concluded. I'm not sure why. It seems like he knows his system doesn't actually prove things, it just concludes they are true."
. . Maybe he will reply to this now.

1b] He wrote, "No, you don't understand calculus which is different. Your reasoning sounds like Zeno's turtle and Achilles paradox:" and he added a link.

OK, I know this one. It has the same flaw as the claim that a runner can't score a touchdown because he never reaches the goal line.
. . The flaw is that each increment of time is shorter than the one before. Short enough that the sum of all the increments of time is a finite number. So, it is like asserting that the runner can't reach ti goal line in 0.1 sec., therefore he can never reach it. We know that time keeps going, so the runner can reach the goal line because he is not limited to any finite time to do it.
. . He didn't respond to my objection to the point he was making, wwhich is that just like you can't add a scalar number (for example 10 feet) to a vector number (for example 100 feet/sec.) and get a meaningful result, you can't sum any infinite series of flows (for example 1/4 of the previous number plus the 1st number where these are all XXX $/year) and claim to have gotten a meaningful stock (meaning a number like XXXXX $ period, not $/year).
. . In Engineering school, we learned how to add or multiply & divide numbers that had units attached. Adding $/year and not dividing by years always gives a result in $/year. The flows are in $/year and the result he claimed to get is just in $, his net worth is $10 billion.
. . Note that to avoid getting an infinite result when he adds an infinite number of years of income (he adds an infinite number of terms), he must discount each term after the 1st one (like I did when I multi. them by 1/4 above. The amount they discount could be modified to change the result as long as it makes each term small enough to avoid an infinite answer.

2] He wrote, "That premise is not necessary."
. . OK, then why do they use it. I have seen this, I did not make it up. But, I don't remember where.

3] He wrote, "Economic theory is deductive itself."
. . I don't understand his point. Science asserts that it is impossible to prove anything about reality. Instead, science tries to prove claims to be false. I have asserted that MS Econ. attempts to prove its truth deductively, using just premises that are assumed to be true, but many are actually false. Is he here conceding my point?

4a] He wrote, "Firstly, no - they cherry-pick which history to consider."

Here he asserts that MMTers are dishonest.
. . OK, fine. I have asserted the same about MS Economists.

Let's unpack the situation, OK? When using history to support an assertion, one must use just some examples, because there are hundreds to millions of examples in history.
. . Cherry-picking means just-only pointing out the examples that support your claim.
. . Being honest means also pointing out the counter examples and showing why they are different and so do not falsify the claim you are making.
. . I guess he and I just disagree on who is being honest and who is cherry-picking.

I note that, as usual, he just makes the assertion with not one example to support it.

4b] He wrote, " Secondly, mainstream economists rely on economic history as well. And on data too."

Maybe they do, but he doesn't give an example.

5] I wrote: "A philosophical point is that math proves things deductively, science does not claim to prove anything. Science asserts that it is impossible to prove things about reality (maybe because it is so complicated). Science instead tries to prove things are wrong by comparing them to reality. If they don't match reality they are rejected. What can't be shown to be wrong is accepted as true, but just until it is found to be not quite right (for example how Einstein's gravity has replaced Newton's gravity). MS economics tries to be like Math and prove things about reality deductively. This is pseudoscience because science asserts that this is impossible (maybe because it is hard to show the premises are all true). Therefore, MS economics is not a science, because it isn't based on reality.

MS econ. uses its false premises to build a fantasy world. Whether or not their conclusions would work perfectly if we lived in that fantasy world doesn't matter. We don't live in that fantasy world."

He replied, "This presumes economists don't contrast their models to data, which is also a lie."


My MMT sources are still claiming that MS Econ. is not basing its claims on economic historical examples, but are still basing the proofs on deductive logic. He, wat0n, above, as much as agreed with my MMT sources. My MMT sources are Prof. of Econ. at a Univ., except for Warren Mosler. So, they see every day what other Econ. Prof. are doing.

Also, his reply is not really to most of what I wrote.

At best, I can assume that the word This, that I highlighted, refers just to the last 2 sentences. [He used a pronoun without a clear antecedent, so it's confusing, and I have to guess what the antecedent is.] I think that by "contrast" he meant "test". But, again, he gives no set of examples. He quotes no authority. He provides no evidence at all.

I admit that I have not really supported my assertion well either. I will now do a little more to support it.

First, I did site 2 studies done way back in around 1992, that asked econ. graduate students if it was important in their class work to look at the real world. IIRC, in both, around 70% said no. OK, this was 30 years ago. [Also, the wording is what I remember.]
OTOH, wat0n ought to be able to point to a claim that the teaching of econ. had been changed to base its conclusions on reality and not on models.

Second, I just spent about 2 hours on google. I found this to support my assertions. It is dated 2020, so it's recent. The [on], underlines and bolds are added by me.

This author asserts that some economists have abandoned empirical evidence of reality in favor of mathematical type proofs from premises, that he agrees are false.

The link is -> http://www.paecon.net/PAEReview/issue91/Zaman91.pdf

Models and reality: How did models divorced from
reality become epistemologically acceptable?
Asad Zaman1
[Pakistan Institute of Development Economics, Pakistan]
Copyright: Asad Zaman, 2020
You may post comments on this paper at
https://rwer.wordpress.com/comments-on- ... sue-no-91/

1. From surrogate to substitute models
The problem at the heart of modern economics is buried in its logical positivist foundations
created in the early twentieth century by Lionel Robbins. Substantive debates and critiques of
the content actually strengthen the illusion of validity of these methods, and hence are
counterproductive. As Solow said about Sargent and Lucas, you do not debate cavalry tactics
at Austerlitz with a madman who thinks he is Napoleon Bonaparte, feeding his lunacy.
Modern macroeconomic models are based [on] assumptions representing flights of fancy so far
beyond the pale of reason that Romer calls them “post-real”. But the problem does not lie in
the assumptions – it lies deeper, in the methodology that allows us to nonchalantly make and
discuss crazy assumptions. The license for this folly was given by Friedman (1953,
reproduced in Maki, 2009A): “Truly important and significant hypotheses will be found to have
‘assumptions’ that are wildly inaccurate descriptive representations of reality”. In this article,
I sketch an explanation of how economic methodology went astray in the 20th Century,
abandoning empirical evidence in favor of mathematical elegance and ideological purity.
Many authors have noted this problem – for instance, Krugman writes that the profession (of
economists) as a whole went astray because they mistook the beauty of mathematics for
truth.

.12296 views now

[wat0n]

1] 1a] I wrote and he ignored, "Lurkers note that wat0n often replaces proved with concluded. I'm not sure why. It seems like he knows his system doesn't actually prove things, it just concludes they are true."
. . Maybe he will reply to this now.

Simple, you are rarely ever able to prove anything beyond reasonable doubt if it relies on data in most sciences.

1b] He wrote, "No, you don't understand calculus which is different. Your reasoning sounds like Zeno's turtle and Achilles paradox:" and he added a link.

OK, I know this one. It has the same flaw as the claim that a runner can't score a touchdown because he never reaches the goal line.
. . The flaw is that each increment of time is shorter than the one before. Short enough that the sum of all the increments of time is a finite number. So, it is like asserting that the runner can't reach ti goal line in 0.1 sec., therefore he can never reach it. We know that time keeps going, so the runner can reach the goal line because he is not limited to any finite time to do it.
. . He didn't respond to my objection to the point he was making, wwhich is that just like you can't add a scalar number (for example 10 feet) to a vector number (for example 100 feet/sec.) and get a meaningful result, you can't sum any infinite series of flows (for example 1/4 of the previous number plus the 1st number where these are all XXX $/year) and claim to have gotten a meaningful stock (meaning a number like XXXXX $ period, not $/year).
. . In Engineering school, we learned how to add or multiply & divide numbers that had units attached. Adding $/year and not dividing by years always gives a result in $/year. The flows are in $/year and the result he claimed to get is just in $, his net worth is $10 billion.
. . Note that to avoid getting an infinite result when he adds an infinite number of years of income (he adds an infinite number of terms), he must discount each term after the 1st one (like I did when I multi. them by 1/4 above. The amount they discount could be modified to change the result as long as it makes each term small enough to avoid an infinite answer.

Exactly, and that's what the discount rate does - which is denominated (following your example) in %/year, as the discount rate is an annual rate. Get it?

2] He wrote, "That premise is not necessary."
. . OK, then why do they use it. I have seen this, I did not make it up. But, I don't remember where.

You are looking at simpler models. It is possible to extend them to account for imperfect information and, yes, that can change efficiency results.

3] He wrote, "Economic theory is deductive itself."
. . I don't understand his point. Science asserts that it is impossible to prove anything about reality. Instead, science tries to prove claims to be false. I have asserted that MS Econ. attempts to prove its truth deductively, using just premises that are assumed to be true, but many are actually false. Is he here conceding my point?

Yes and no. The theories are deductive yet they ought to be checked against the data, the theory (by itself) isn't enough to establish a fact. This doesn't make them useless, if a model isn't working well you can often use it as a starting point, change some of the assumptions (which normally make it more complicated to understand) and try again.

This is applicable to all economic theories, including heterodox ones like MMT.

4a] He wrote, "Firstly, no - they cherry-pick which history to consider."

Here he asserts that MMTers are dishonest.
. . OK, fine. I have asserted the same about MS Economists.

Let's unpack the situation, OK? When using history to support an assertion, one must use just some examples, because there are hundreds to millions of examples in history.
. . Cherry-picking means just-only pointing out the examples that support your claim.
. . Being honest means also pointing out the counter examples and showing why they are different and so do not falsify the claim you are making.
. . I guess he and I just disagree on who is being honest and who is cherry-picking.

I note that, as usual, he just makes the assertion with not one example to support it.

You actually conceded ITT MMT isn't useful for all or even most of the world's economies, didn't you?

4b] He wrote, " Secondly, mainstream economists rely on economic history as well. And on data too."

Maybe they do, but he doesn't give an example.

5] I wrote: "A philosophical point is that math proves things deductively, science does not claim to prove anything. Science asserts that it is impossible to prove things about reality (maybe because it is so complicated). Science instead tries to prove things are wrong by comparing them to reality. If they don't match reality they are rejected. What can't be shown to be wrong is accepted as true, but just until it is found to be not quite right (for example how Einstein's gravity has replaced Newton's gravity). MS economics tries to be like Math and prove things about reality deductively. This is pseudoscience because science asserts that this is impossible (maybe because it is hard to show the premises are all true). Therefore, MS economics is not a science, because it isn't based on reality.

MS econ. uses its false premises to build a fantasy world. Whether or not their conclusions would work perfectly if we lived in that fantasy world doesn't matter. We don't live in that fantasy world."

He replied, "This presumes economists don't contrast their models to data, which is also a lie."


My MMT sources are still claiming that MS Econ. is not basing its claims on economic historical examples, but are still basing the proofs on deductive logic. He, wat0n, above, as much as agreed with my MMT sources. My MMT sources are Prof. of Econ. at a Univ., except for Warren Mosler. So, they see every day what other Econ. Prof. are doing.

Also, his reply is not really to most of what I wrote.

At best, I can assume that the word This, that I highlighted, refers just to the last 2 sentences. [He used a pronoun without a clear antecedent, so it's confusing, and I have to guess what the antecedent is.] I think that by "contrast" he meant "test". But, again, he gives no set of examples. He quotes no authority. He provides no evidence at all.

I admit that I have not really supported my assertion well either. I will now do a little more to support it.

First, I did site 2 studies done way back in around 1992, that asked econ. graduate students if it was important in their class work to look at the real world. IIRC, in both, around 70% said no. OK, this was 30 years ago. [Also, the wording is what I remember.]
OTOH, wat0n ought to be able to point to a claim that the teaching of econ. had been changed to base its conclusions on reality and not on models.

Second, I just spent about 2 hours on google. I found this to support my assertions. It is dated 2020, so it's recent. The [on], underlines and bolds are added by me.

This author asserts that some economists have abandoned empirical evidence of reality in favor of mathematical type proofs from premises, that he agrees are false.

The link is -> http://www.paecon.net/PAEReview/issue91/Zaman91.pdf


.12296 views now

You could search a repository of economics papers if you want to see economics research that's focused on real world data.

Here's one when you search "evidence from":

https://ideas.repec.org/cgi-bin/htsearc ... =R&db=&de=

As for the 1992 survey, the field used to be more focused on theory than it is now. Yet that has changed quite dramatically since then:



Furthermore, it also depends on which students were surveyed. Many first year students won't work with data, you need to learn theory (economic and econometric/statistical) before doing so.

It is also fair to say many papers do both i.e. present a fact and then provide a model to account for it or present a model and test it against the data. So theoretical and data-driven research are not mutually exclusive anyway.

[Steve_American]

1a] Simple, you are rarely ever able to prove anything beyond reasonable doubt if it relies on data in most sciences.


1b] Exactly, and that's what the discount rate does - which is denominated (following your example) in %/year, as the discount rate is an annual rate. Get it?


2] You are looking at simpler models. It is possible to extend them to account for imperfect information and, yes, that can change efficiency results.


3] Yes and no. The theories are deductive yet they ought to be checked against the data, the theory (by itself) isn't enough to establish a fact. This doesn't make them useless, if a model isn't working well you can often use it as a starting point, change some of the assumptions (which normally make it more complicated to understand) and try again.

This is applicable to all economic theories, including heterodox ones like MMT.


4a] You actually conceded ITT MMT isn't useful for all or even most of the world's economies, didn't you?


4b] You could search a repository of economics papers if you want to see economics research that's focused on real world data.

Here's one when you search "evidence from":

https://ideas.repec.org/cgi-bin/htsearc ... =R&db=&de=

As for the 1992 survey, the field used to be more focused on theory than it is now. Yet that has changed quite dramatically since then:



4c] It also depends on which students were surveyed. Many first year students won't work with data, you need to learn theory (economic and econometric/statistical) before doing so.

It is also fair to say many papers do both i.e. present a fact and then provide a model to account for it or present a model and test it against the data. So theoretical and data-driven research are not mutually exclusive anyway.

1a] OK, that is a good explanation for why you changed prove to conclude.

1b] The question is, how should a person's net worth be determined?
He should not just assume that the definition he used is a good one. He should have said something like, Experts have done aa lot of work on this, and for rich people they have found that this system works well if and only if this discount rate of 0.47%/years is used.
What he said was, "A person's net worth can be defined as the infinite sum of his/her income discounted by $o.x/year, summed for infinite years."

I still don't like them confusing flows and stocks like that.

2] I think that it doesn't matter that there are a lot of better models. What matters is what model the policy makers are using. I just saw Nikki Haley asserting that US Soc. Sec. will be bankrupt in 10 years. As if this isn't easy to fix.
During covid billions of dollars were given to the rich (lent and then forgiving the loans). Something similar can be done with SS. All we have to do is increase the interest being paid on the remainder of the SS Trust Fund to a high enough rate. Then it gets more interest income and will never go bankrupt.
She also said that the US will go bankrupt. But, MMTers assert that because the US issues the dollar it can always create dollars to pay any bill it owes. Alan Greenspan said the same thing under oath to Congress. So, it is true. I've provided the link to this recently.

3] I keep seeing experts on line saying the MS Econ. has a terrible record for its predictions.
If they have improved their models, why are they still failing to make accurate predictions?
. . For example, as soon as I became aware of how serious covid would be, I predicted that there would be inflation. I based that on the fact the covid would cause shortages in the economy, and shortages have caused inflation every time they've happened, except when a Gov. freezes prices.
. . So, I beat the experts to that one. The experts seemed to be surprised that inflation started when it did. wat0m did they predict it as soon as I did?

4a] The fact the MMT really only applies to all advanced nations that are not in the EU doesn't make it wrong. Except for the foolish nations who did listen to the MMT experts who told them not to join the EU or EZ, MMY applies to every nation that matters. It does or could easily apply to China, Russia, US, UK, NZ, Canada, Aust., Japan, etc.

AFAIK. MS Econ. Theories do not apply to any nation. They only apply to a fantasy world that no one lives in.

4b] And yet, their predictions have not improved yet. I still see Nikki Haley predicting that the US will go bankrupt.
I still see the Fed raising interest rates to fight inflation that is causing just 33% of the inflation we see. Interest rates don't get oil prices down, they don't solve the problem with food exports from Ukraine and Russia being slashed, or that corps are using their monopoly pricing power to price gouge their customers and suppliers (like of steers and cows).
. . Raising interest rates moves money from non-banks to banks. Non-banks include many corps who feel a need to pass this additional cost on to their customers, as higher prices, which fuels continued inflation. Non-banks also includes the workers and retired people. They are the ones being hurt, not corps and their owners.
. . The method mostly damages the people who are laid off, don't get hired, or are unemployed and not the rich or super rich, and it makes bankers much richer.
. . Tyere are other methods. If Congress is locked down, then we can just let inflation go and hope the COLA of Soc Sec. is enough for retired people. If the rich don't like inflation, the can make the choice to stop raising their prices and let their profits go down a little.

4c] I said the econ. students are graduate students. Are the 1st year students you referred to, 1st year grad students?

.

[wat0n]

1b] The question is, how should a person's net worth be determined?
He should not just assume that the definition he used is a good one. He should have said something like, Experts have done aa lot of work on this, and for rich people they have found that this system works well if and only if this discount rate of 0.47%/years is used.
What he said was, "A person's net worth can be defined as the infinite sum of his/her income discounted by $o.x/year, summed for infinite years."

I still don't like them confusing flows and stocks like that.

I don't think the capitalization method confuses flows and the stock. Most stocks are, after all, just the sum of net flows.

I agree with you that the capitalization method is not necessarily the best one, but it does have a major advantage over alternatives: You need less data to calculate wealth.

Yes, you could try other approaches, like appraising all assets a person owns to determine wealth. But even that process will often involve capitalization in some cases (e.g. how else can you valuate a college degree financially?) and it is prohibitively hard to do so for many (thousands, even millions) of people. Those practical considerations definitely matter, you often work with the data you can get, not with the data you'd like to get.

But, yes, the capitalization method is far from perfect. I think I posted John Cochrane's take on how to calculate wealth and wealth inequality.

2] I think that it doesn't matter that there are a lot of better models. What matters is what model the policy makers are using. I just saw Nikki Haley asserting that US Soc. Sec. will be bankrupt in 10 years. As if this isn't easy to fix.
During covid billions of dollars were given to the rich (lent and then forgiving the loans). Something similar can be done with SS. All we have to do is increase the interest being paid on the remainder of the SS Trust Fund to a high enough rate. Then it gets more interest income and will never go bankrupt.
She also said that the US will go bankrupt. But, MMTers assert that because the US issues the dollar it can always create dollars to pay any bill it owes. Alan Greenspan said the same thing under oath to Congress. So, it is true. I've provided the link to this recently.

If policymakers don't use the best models built by other MS economists, is that the latter's fault?

Although models dealing with e.g. information asymmetry are definitely used. Not for monetary policy perhaps (most macroeconomic data is public anyway) but it definitely is used for e.g. antitrust.

3] I keep seeing experts on line saying the MS Econ. has a terrible record for its predictions.
If they have improved their models, why are they still failing to make accurate predictions?
. . For example, as soon as I became aware of how serious covid would be, I predicted that there would be inflation. I based that on the fact the covid would cause shortages in the economy, and shortages have caused inflation every time they've happened, except when a Gov. freezes prices.
. . So, I beat the experts to that one. The experts seemed to be surprised that inflation started when it did. wat0m did they predict it as soon as I did?

For 3 reasons:

1) Economic models are not designed to predict economic variables in the short term. Purely statistical models (which are often atheoretical) normally do a better job.

2) Some shocks are not just unpredictable but can't be modeled by economists. Economists can't predict climate phenomena or how a virus will expand, it's outside their field of expertise (in fact, please abstain and let those who know way more about those do their job).

3) Some shocks may affect demand and supply differently. You said you could tell inflation would go up with COVID, yet if you look at the data inflation actually came down and went negative at the early stages of the pandemic. Why? Because the negative demand shock of lockdowns was more pronounced than the negative supply shock, even if it was short-termed. This makes even conceptual predictions hard.

Also, some economists did predict inflation would go up. Not just because of supply side issues but due to demand pressures as well (due to stimulus).

4a] The fact the MMT really only applies to all advanced nations that are not in the EU doesn't make it wrong. Except for the foolish nations who did listen to the MMT experts who told them not to join the EU or EZ, MMY applies to every nation that matters. It does or could easily apply to China, Russia, US, UK, NZ, Canada, Aust., Japan, etc.

AFAIK. MS Econ. Theories do not apply to any nation. They only apply to a fantasy world that no one lives in.

How could it apply to those, particularly Russia?

4b] And yet, their predictions have not improved yet. I still see Nikki Haley predicting that the US will go bankrupt.

Is she even an economist?

I still see the Fed raising interest rates to fight inflation that is causing just 33% of the inflation we see. Interest rates don't get oil prices down, they don't solve the problem with food exports from Ukraine and Russia being slashed, or that corps are using their monopoly pricing power to price gouge their customers and suppliers (like of steers and cows).
. . Raising interest rates moves money from non-banks to banks. Non-banks include many corps who feel a need to pass this additional cost on to their customers, as higher prices, which fuels continued inflation. Non-banks also includes the workers and retired people. They are the ones being hurt, not corps and their owners.
. . The method mostly damages the people who are laid off, don't get hired, or are unemployed and not the rich or super rich, and it makes bankers much richer.
. . Tyere are other methods. If Congress is locked down, then we can just let inflation go and hope the COLA of Soc Sec. is enough for retired people. If the rich don't like inflation, the can make the choice to stop raising their prices and let their profits go down a little.

Well, inflation is currently coming down. This will stop being an issue as the process consolidates.

4c] I said the econ. students are graduate students. Are the 1st year students you referred to, 1st year grad students?

.

Yes. The theory you are taught in grad school (PhD) is not the baby version undergrads learn, at least not in mainstream programs.

Also, many economics PhD students don't even have a background in economics. A math grad is as competitive as an economist grad who took all the official and unofficial math requirements. Many programs have the mentality that those math incoming students can learn the economic intuition as they progress in the program.

[Steve_American]

1] If policymakers don't use the best models built by other MS economists, is that the latter's fault?


2] For 3 reasons:

a) Economic models are not designed to predict economic variables in the short term. Purely statistical models (which are often atheoretical) normally do a better job.

b) Some shocks are not just unpredictable but can't be modeled by economists. Economists can't predict climate phenomena or how a virus will expand, it's outside their field of expertise (in fact, please abstain and let those who know way more about those do their job).

c) Some shocks may affect demand and supply differently. You said you could tell inflation would go up with COVID, yet if you look at the data inflation actually came down and went negative at the early stages of the pandemic. Why? Because the negative demand shock of lockdowns was more pronounced than the negative supply shock, even if it was short-termed. This makes even conceptual predictions hard.


3] Also, some economists did predict inflation would go up. Not just because of supply side issues but due to demand pressures as well (due to stimulus).


4] How could it apply to those, particularly Russia?


5] Well, inflation is currently coming down. This will stop being an issue as the process consolidates.


6] Yes. The theory you are taught in grad school (PhD) is not the baby version undergrads learn, at least not in mainstream programs.

1] In some sense, yes. Climate scientists do correct policy makers who do not use the right models. Policy makers just do not listen to them.
. . IMO, because MS Economists are mostly paid shills of the rich, they let policy makers use the wrong models.

2] IMHO, economists would love to have models that did predict in the short term. It isn't that the models are not designed to make short term predictions, it is instead, that their models can't make short term predictions.

Yes, shocks happen, and then all predictions are forgiven or understandably ignored because of the shock.

3] Yes, inflation fell very early in covid. This was almost totally because oil prices fell way down. Most people don't understand why they fell so much. The problem is the just in time delivery system. You see, oil wells often need to be kept pumping or they go "dry". So, the comps that are producing oil need to keep selling it, they don't have empty big storage tanks to store it. But, when people worldwide stopped driving as much, the final sellers stopped ordering oil deliveries. The producers got so desperate that they were giving oil away. But, the world lacked the required number of oil storage tanks. Peter Zeiham says that Russia must keep pumping most of its wells because they go through permafrost. So, if they stop pumping, the oil in the pipe freezes and the well is ruined.

4] Yes, Russia may be a stretch. Does it have debts in dollars, despite being a major oil suppler? It has a fiat currency, it can float it (AFAIK, it pegs it to gold), so the only reason it couldn't use MMT is if it has large debts in dollars or euros.
. . All the other nations meet the 3 requirements I've listed.

5] Except, the damage to those thrown out of work, because the Fed is fighting inflation will already have been done, and there is no intent to help those damaged have their damage repaired. OTOH, when corps get damaged, there are programs to reduce the effect of the damage.
. . There are right now on YouTube a few reports about a super-rich capitalist who is calling for a 40% to 59% increase in the unemployment rate to teach the working class a lesson. To pound the arrogance out of them. He is saying the quite part out load.

6] So, wat0n is accepting that asking grad students if they need to look at reality for their class work is the right group to be asking. But, he also says that since then the field has changed.

I don't see that MS Econ's predictions and policy recommendations have gotten any better.

For example, Prof. Bill Mitchell says, in Aust. the UE rate is 3.7% and the RBofA says the NAIRU rate is 4.8%. So, according to the theory, the UE rate is less than the NAIRU rate, so inflation should be, and is, falling. But the RBofA says it needs to increase interest rates to push inflation lower or to keep it from accelerating upwards.

The theory says that inflation should be falling and it is, yet someone is recommending that interest rates need to go higher "to fight inflation".

.

[wat0n]

1] In some sense, yes. Climate scientists do correct policy makers who do not use the right models. Policy makers just do not listen to them.
. . IMO, because MS Economists are mostly paid shills of the rich, they let policy makers use the wrong models.

You can see economists criticizing policymakers all the time.

2] IMHO, economists would love to have models that did predict in the short term. It isn't that the models are not designed to make short term predictions, it is instead, that their models can't make short term predictions.

Yes, shocks happen, and then all predictions are forgiven or understandably ignored because of the shock.

It's not just that. It's simply that a purely statistical model - which is fitted using algorithms designed for making predictions - will just be the best available alternative.

This isn't just a matter with economics, it's about the nature of making statistical predictions. Many data scientists will use some machine learning algorithm solely for prediction, they don't hope or expect it to provide them with a causal explanation.

3] Yes, inflation fell very early in covid. This was almost totally because oil prices fell way down. Most people don't understand why they fell so much. The problem is the just in time delivery system. You see, oil wells often need to be kept pumping or they go "dry". So, the comps that are producing oil need to keep selling it, they don't have empty big storage tanks to store it. But, when people worldwide stopped driving as much, the final sellers stopped ordering oil deliveries. The producers got so desperate that they were giving oil away. But, the world lacked the required number of oil storage tanks. Peter Zeiham says that Russia must keep pumping most of its wells because they go through permafrost. So, if they stop pumping, the oil in the pipe freezes and the well is ruined.

Indeed, and also many people decided to save as much as possible given the uncertainty. An understandable decision, but it underscores that both demand and supply decreased - and therefore you could be quite certain there would be a drop in economic activity (pretty much obvious) but couldn't be so sure about what would happen to inflation.

4] Yes, Russia may be a stretch. Does it have debts in dollars, despite being a major oil suppler? It has a fiat currency, it can float it (AFAIK, it pegs it to gold), so the only reason it couldn't use MMT is if it has large debts in dollars or euros.
. . All the other nations meet the 3 requirements I've listed.

Why wouldn't other smaller countries that let their currency floats be unable to use MMT? Also, isn't most debt in e.g. NZ denominated in USD?

5] Except, the damage to those thrown out of work, because the Fed is fighting inflation will already have been done, and there is no intent to help those damaged have their damage repaired. OTOH, when corps get damaged, there are programs to reduce the effect of the damage.
. . There are right now on YouTube a few reports about a super-rich capitalist who is calling for a 40% to 59% increase in the unemployment rate to teach the working class a lesson. To pound the arrogance out of them. He is saying the quite part out load.

I think you're overestimating the number of long term unemployed and underestimating the damaging effects of a consistently high inflation. Particularly on the poor, who dedicate a greater percentage of their income to current consumption.

6] So, wat0n is accepting that asking grad students if they need to look at reality for their class work is the right group to be asking. But, he also says that since then the field has changed.

I don't see that MS Econ's predictions and policy recommendations have gotten any better.

For example, Prof. Bill Mitchell says, in Aust. the UE rate is 3.7% and the RBofA says the NAIRU rate is 4.8%. So, according to the theory, the UE rate is less than the NAIRU rate, so inflation should be, and is, falling. But the RBofA says it needs to increase interest rates to push inflation lower or to keep it from accelerating upwards.

The theory says that inflation should be falling and it is, yet someone is recommending that interest rates need to go higher "to fight inflation".

.

If unemployment is below the NAIRU, inflation should be increasing holding everything else constant.

[Steve_American]

1] Why wouldn't other smaller countries that let their currency floats be unable to use MMT? Also, isn't most debt in e.g. NZ denominated in USD?



2] I think you're overestimating the number of long term unemployed and underestimating the damaging effects of a consistently high inflation. Particularly on the poor, who dedicate a greater percentage of their income to current consumption.



3] If unemployment is below the NAIRU, inflation should be increasing holding everything else constant.

1] AFAIK, NZ is like Aust. and has no Gov. debt in US$. I could be wrong. But, why would it need to borrow US$?

2] I think you missed my point. Raising interest rates increases costs due to interest for those working poor you are worried about. So, until the rate increases reduce inflation those workers have to pay the higher prices along with paying higher interest costs.
. . I assert that there is no way to quantify how much inflation is being reduced each week because of the rate increases. You have said as much ITT, when you said that short term predictions are impossible.
. . What we know for sure is that the workers have less disposable income to spend after they pay the higher interest expenses they have, and they must pay higher prices too, until prices fall, if they fall.

3] I know the theory around NAIRU is confusing to me. You are right.

This is what I was trying to say.

On Wed., yesterday, Bill Mitchell wrote:

I gave talks last week in Sydney and yesterday in Melbourne to large groups from the financial markets.

I pointed out that the official line on unemployment is that the NAIRU is 4.5 per cent while the currently unemployment rate is 3.7 per cent.

According to New Keynesian logic, that means that inflation should be accelerating, which is why she claims the unemployment rate has to rise.

But the inflation rate started falling last September and has been systematically declining since.

According to New Keynesian logic, that would lead to the conclusion that the current unemployment rate is above the NAIRU not below it.

And that decline in inflation has been at a time when the unemployment rate has been remarkably stable around 3.5-3.7 per cent.

In other words, even if we believed in the NK logic, we wouldn’t be justified in setting policy in such a way to drive up unemployment.

.

[wat0n]

1] AFAIK, NZ is like Aust. and has no Gov. debt in US$. I could be wrong. But, why would it need to borrow US$?

I'd be surprised if it didn't, to be honest. NZ is a very small economy, it sounds unlikely it can choose the currency investors will denominate the debt in.

2] I think you missed my point. Raising interest rates increases costs due to interest for those working poor you are worried about. So, until the rate increases reduce inflation those workers have to pay the higher prices along with paying higher interest costs.
. . I assert that there is no way to quantify how much inflation is being reduced each week because of the rate increases. You have said as much ITT, when you said that short term predictions are impossible.
. . What we know for sure is that the workers have less disposable income to spend after they pay the higher interest expenses they have, and they must pay higher prices too, until prices fall, if they fall.

You're still ignoring the costs of inflation. Clearly, wages are being eroded by it at least until they're renegotiated or adjusted otherwise.

Which one's larger?

3] I know the theory around NAIRU is confusing to me. You are right.

This is what I was trying to say.

On Wed., yesterday, Bill Mitchell wrote:

.

Honestly, as I think we can agree, estimating the NAIRU level is hard. I wouldn't bother with it.

The key takeaway from that theory is that there's a level of unemployment where, if the rate gets lower, inflation will start accelerating. It's hard to know, in practice, what that rate is but it is something to take into account.

That's why e.g. the Fed often says that their rate decisions will be "dependent on the data". That means they are not sure if unemployment is close to the NAIRU so they'll wait for further developments (if inflation begins to accelerate beyond their target) before acting.

[Steve_American]

I'd be surprised if it didn't, to be honest. NZ is a very small economy, it sounds unlikely it can choose the currency investors will denominate the debt in.


You're still ignoring the costs of inflation. Clearly, wages are being eroded by it at least until they're renegotiated or adjusted otherwise.

1] Which one's larger?


Honestly, as I think we can agree, estimating the NAIRU level is hard. I wouldn't bother with it.

2] The key takeaway from that theory is that there's a level of unemployment where, if the rate gets lower, inflation will start accelerating. It's hard to know, in practice, what that rate is but it is something to take into account.

That's why e.g. the Fed often says that their rate decisions will be "dependent on the data". That means they are not sure if unemployment is close to the NAIRU so they'll wait for further developments (if inflation begins to accelerate beyond their target) before acting.

1] Again, I have no ide what you meant.

2] You are assuming that raising interest rates actually fights inflation.

If it isn't, then raising rates hurts the workers double.

Prof. Mitchell says that he can see no evidence in the data that it does lower inflation.

He thinks inflation would have fallen just as fast or even faster if the Fed had not raised rates. Faster because he says that raising rates increases costs and this shows up in prices.

He points to Japan as an example. It never raised rates (after covid), and its inflation is not worse than the US's.
Europe also raised rates, and its inflation is not falling as fast as the US's. Of course, Europe is being harder hit by increased oil prices after the Ukraine invasion.

In the other thread I started today, the idiot CEO said that all western central banks are raising rates to increase unemployment to kill the arrogance of workers. But, what does he know?

.

[wat0n]

1] Again, I have no ide what you meant.

What's worse, the welfare cost of losing purchasing power due to inflation or a higher unemployment rate?

2] You are assuming that raising interest rates actually fights inflation.

If it isn't, then raising rates hurts the workers double.

Prof. Mitchell says that he can see no evidence in the data that it does lower inflation.

He thinks inflation would have fallen just as fast or even faster if the Fed had not raised rates. Faster because he says that raising rates increases costs and this shows up in prices.

He points to Japan as an example. It never raised rates (after covid), and its inflation is not worse than the US's.
Europe also raised rates, and its inflation is not falling as fast as the US's. Of course, Europe is being harder hit by increased oil prices after the Ukraine invasion.

In the other thread I started today, the idiot CEO said that all western central banks are raising rates to increase unemployment to kill the arrogance of workers. But, what does he know?

.

Why did inflation in the US come down after the Fed greatly hiked rates in 1981-1982 under Volcker?

[Steve_American]

1] What's worse, the welfare cost of losing purchasing power due to inflation or a higher unemployment rate?


2] Why did inflation in the US come down after the Fed greatly hiked rates in 1981-1982 under Volcker?

1] Again, some economists claim that there is no discernable relationship between inflation and the unemployment rate. That raising rates also raises costs for many people and many corps. The corps pass the costs on to their customers with price increases. The people must mostly see their buying power decrease. This effect on the people is part of how economists think the Theory works; that is if people have less to spend, they spend less and this reduces demand, so supply and demand operates to reduce prices (in this case reduce inflation).
. . I have asserted that the theory of the Phillips Curve was formulated at a time when economists were in thrall to their idea that they didn't need to look at reality, they could start from premises and prove their conclusions that way. I know that wat0n claims that since then economists have changed and have tweaked their theories to have them match the data better. It is totally possible that this is just an exercise in curve fitting. That the basic idea is flawed.
. . Bill Mitchell claims that he has tried to find a relationship between unemployment and inflation that operates at all times. He did try to find a time delay, or other correction, based on what MS Econ. has thought might tweak the theory. He says he failed.
. . He suggests that in the 70s the aggressive rate increases likely added to the inflationary pressure by adding to corps' costs.

2] I think inflation mostly ended because OPEC let oil prices fall. There was also a recession. AFAIK, there is a clear relationship between recessions and a reduction in inflation. But, OPEC seems to have stopped raising the price of oil in the late 70s.

I found this source for oil prices and when there were recessions.

Note that, mostly after 1981 Reagan increased def. spending and cut taxes on the rich and this increased the deficit and in his 8 years in office saw an increase in the national debt of at least 300%, going from $1T to between $3T and $4T, depending on if you count the bonds in the Soc. Sec. Trust Fund (etc.) as part of the debt. So, inflation only ended after the recession of the early 90s. I never asserted that increasing the debt by 43% per year was not going to cause inflation.

.

[wat0n]

1] Again, some economists claim that there is no discernable relationship between inflation and the unemployment rate. That raising rates also raises costs for many people and many corps. The corps pass the costs on to their customers with price increases. The people must mostly see their buying power decrease. This effect on the people is part of how economists think the Theory works; that is if people have less to spend, they spend less and this reduces demand, so supply and demand operates to reduce prices (in this case reduce inflation).
. . I have asserted that the theory of the Phillips Curve was formulated at a time when economists were in thrall to their idea that they didn't need to look at reality, they could start from premises and prove their conclusions that way. I know that wat0n claims that since then economists have changed and have tweaked their theories to have them match the data better. It is totally possible that this is just an exercise in curve fitting. That the basic idea is flawed.
. . Bill Mitchell claims that he has tried to find a relationship between unemployment and inflation that operates at all times. He did try to find a time delay, or other correction, based on what MS Econ. has thought might tweak the theory. He says he failed.
. . He suggests that in the 70s the aggressive rate increases likely added to the inflationary pressure by adding to corps' costs.

The correlation between inflation and unemployment is unstable but I have yet to see a study claiming unemployment and inflation are positively correlated. This is consistent with the NAIRU hypothesis, the correlation should be low or even 0 if unemployment is high and become negative as unemployment gets lower.

2] I think inflation mostly ended because OPEC let oil prices fall. There was also a recession. AFAIK, there is a clear relationship between recessions and a reduction in inflation. But, OPEC seems to have stopped raising the price of oil in the late 70s.

I found this source for oil prices and when there were recessions.

Note that, mostly after 1981 Reagan increased def. spending and cut taxes on the rich and this increased the deficit and in his 8 years in office saw an increase in the national debt of at least 300%, going from $1T to between $3T and $4T, depending on if you count the bonds in the Soc. Sec. Trust Fund (etc.) as part of the debt. So, inflation only ended after the recession of the early 90s. I never asserted that increasing the debt by 43% per year was not going to cause inflation.

.

Those are concurrent factors. Although world oil prices peaked in 1980, as the effects of the Iranian Revolution become clearer, oil prices truly fell from the mid 1980s onwards. The 1982 crisis had something to do with that.

[Steve_American]

I forgot to include this link to a source for oil prices and other info.
https://www.thebalancemoney.com/oil-pri ... ry-3306200

wat0n wrote,
"The correlation between inflation and unemployment should be low or even 0 if unemployment is high and become negative as unemployment gets lower."

Please note this he is asserting that if the Fed. has driven up unemployment to a "high" level, driving it higher will have zero effect on inflation.
I wonder what level he thinks is high enough to see this effect.

.12580 views now

[wat0n]

I forgot to include this link to a source for oil prices and other info.
https://www.thebalancemoney.com/oil-pri ... ry-3306200

wat0n wrote,
"The correlation between inflation and unemployment should be low or even 0 if unemployment is high and become negative as unemployment gets lower."

Please note this he is asserting that if the Fed. has driven up unemployment to a "high" level, driving it higher will have zero effect on inflation.
I wonder what level he thinks is high enough to see this effect.

.12580 views now

It's hard to know what level of unemployment would make that happen or if that rate is stable over time.

Such rate does exist, however, simply because we know there are hard limits for both the inflation and unemployment rates (the former can't be lower than -100% and the latter can't be higher than 100%).

[Steve_American]

1] It's hard to know what level of unemployment would make that happen or if that rate is stable over time.

2] Such rate does exist, however, simply because we know there are hard limits for both the inflation and unemployment rates (the former can't be lower than -100% and the latter can't be higher than 100%).

1] IMHO, then, it is kind of useless to even talk about them.

2] Actually inflation can't be less than 0%, because then it is deflation.

Anyway, I suppose that if unemployment was over 60%, I doubt interest rate increases would have any effect. Of course, that rate is twice the worst the US has ever had.

And also, if inflation was less than 0.1%, I doubt that interest rate increases would have any effect.

.