ECONOMICS Despite the obvious political import, my particular interest in economics is derived from a study of literature. I noticed in Shakespeare’s Sonnets and the short stories of F. Scott Fitzgerald insights that seemed to anticipate the unfolding of economic processes. The authors did not simply reflect the manners of the times. They were tapped into a deeper predictive network about human activities. I wanted to enlarge on my discovery in a more formal way. In Robert Mundell’s critical revision of Keynes, I observed affinities with the narrative theory of Greimas. From that point on I was off to the races. I am fairly clear on my perspectives about economics. But it is a difficult step to move from such realization to actually formalizing my understanding in a way appropriate to economic scholarship. Not only do particular economists have a repertoire of vaunted notions that underlie their theories, but the theoretical elaborations are replete with mathematical formulations to support their beliefs. As I have worked my way through the mathematics, my own thoughts have developed in sophistication. This is difficult because the mathematics is often sloppy and full of assumed calculations that are only partially explained in the texts. Beyond the connections that I have noticed between economics and literature, I have also extended the intersection to areas of philosophy and cognition. I often refer to this perspective as a formalism since it often describes what is not properly cognized and, in a sense, precedes any philosophy. As I have noticed that some economists engage in a less than rigorous philosophy, I wanted to avoid practicing a less than rigorous economics, even if I do intend to challenge some commandments of the discipline. Taking a page from his predecessors such as Albert Marshall, Paul Samuelson wanted to ground economics as a theoretical discipline in the same manner as physics. If such a project is to succeed, price theory needs to be established with the same rigidity as physical laws. The social implications are vast. Price needs to be able to fluctuate to respond to changes in demand, and, conversely, price changes need to be applied universally enough to make needed changes in demand. In his influential Economic History of the United States (1963), Milton Friedman extended this intuition to money by maintaining that a sufficient supply of money was needed at a critical point in the twenties. His monetarist theories argue for the ability of changing interest rates to affect the price of money so that inflation can be harnessed. It is little wonder that theories like this attempt to fit multiple points of view into a single narrative line. There is obvious frustration when the social environment will not yield to the dictates of physical law. However, there is a political and military component to the theory as the striking mine workers of England would have testified. Or the wake of dead, that followed Pinochet’s seizure of power. But what good is sacrifice if it cannot help guarantee the application of universal law. Sanity seems to have coalesced the radical differences between competing schools of thought ( such as monetarist vs. Keynesians). Although there are some radical monetarists out there in the wild frontier, there now is only a thin line that separates the thought influenced by Dornbush-Mundell. This compromise seems to be one of rendering to Caesar what is Caesar’s and to God what is God’s. In Robert Mundell’s own words, "the principle of effective market classification": instruments (that is, variables) should be directed at those targets (that is, markets) on which they have the most direct influence. On the one hand Ben Bernake advocates the limited intervention of the hand of government which helps him accord with the moreconservative advocates of the present administration. On the other side, Kenneth Rogoff, BradDelong and Larry Summers recognize the need for targeted fiscal policy once monetary policy isestablished on a sound footing. Friedman could have hardly hoped for anything more. Rationalexpectation guides the policies of the both the Fed and the IMF. No wonder Greenspan appearedso critical of the irrational exuberance that he helped to create. At the same time, Greenspan andRogoff argue for a wide range of prescriptions that involve limiting social welfare programs,most particularly in other countries. GROWTH: The post Reagan booms that have all been fueled by some nature of asset price bubbles. Thishas been the impetus to shape contemporary economics into a somewhat unified vision. Although some might argue on more traditional terms, the forefront of scholarship attempts toanoint the successes of the boom years. The heady Clinton years provided a number ofconfirmations of these self-fulfilling prophesies. If the SUV is to be seen on a par with the latest fighter plane, then such technological advancesseem to spur absurd growth rates. In a world that senses its imminent destruction, why put offsuch purchases to tomorrow? So the excesses of consumption seem to fuel the growth engine. They create the believability of the model. Our function for growth needs to account for enhanced technological advances and the increasesin labor input. GROWTH ( METHOD, MADNESS ) Once crazy levels of output have been achieved, it is critical that there is no backsliding in themarket. If this means that prescription drug prices have to be fixed in revisions of Medicareprograms so be it. The technological argument is thus self-sustaining. PRICE: There really can be no model accorded its explanatory power if there is no constraint on pricetheory elaborated in its formulation. In its most constrained form, price is liberated any sort ofgovernmental control. Price must be able to effect the conditions of demand. Of course, this is atotal fiction. Where price appears inelastic, it is not quantity but external factors that determineprice. MONEY AND EXCHANGE From the traditional Keynesian ISLM model, money provides another order on which toarticulate price theory. As such, money emerges as a prime commodity from which all others canbe compared. The degree to which the price of particular commodities can elude shifts in theprice for money is the method by which preference is articulated. Money registers these shift byfits and starts and this gives dynamic to the overall movement of money. The gradual adjustmentto changes in money supply and exchange rate guarantee the systematic nature of the model. Credit is grounded on an independence of the value of money from the determination of price ina particular commodity transaction. CONSUMPTION: Consumer behavior is the lifeblood of economic growth. A consumer living beyond his means isthe anathema of sound economic policy. But any successful model has to turn a blind eye to suchexcesses. Preference rears its head in the lag between adjustments in money supply and changesin price. In more formal terms, this dynamic is what provides the stability at the saddle point. The consumer reacts much more quickly to changes in the price for elastic items where the rangeof substitutes abound. Price fluctuations impose a dearer cost on most favored commodities. Millions get hooked in the roller coaster rides attributable to real estate bubbles. The alternativeis homelessness. In Exchange Rate Dynamics Redux (1994), Maurice Obstfeld and Kenneth Rogoff offer anelegant tribute to the cultures of the consumer. More as a treatise of philosophy than a work ofeconomics, the work serves as an optimistic response to the bleak desperation offered by theconsumer price index. In the latter case, there are helpless citizen, awaiting an unresponsive markets decisions about their fate by making another necessity too expensive for their shrinkingwages. On the other hand, Obstfelds and Rogoffs hero is the ever aware consumer whosenarrative proceeds through life stages with greater and greater ability to acquire formerlyunattainable commodities. INVESTMENT AND SAVINGS Consumption is primarily a function of investment and the adjustment of assets in the portfolio. Granted, the shift of capital into the manufacturer of durable goods appears related to aburgeoning demand for consumer products. Such anticipatory behavior has to make use ofcapital to magnify the significance of minor shifts in preference. The players in this game needsubstantial amounts of disposable income to effect these changes. And the role of easy creditcannot be underestimated. This credit is collateralized by the massive control of existing assets. And so the house of cards permits further expansion into the sky.
INVENTORY, ASSETS, AND DEBT Economic thought appears to flow from an inherent belief in the scarcity in nature. Whether such myths are drawn from primitives wrestling in the wilderness for food or the nightmarish scenarios of Hobbes and Hume, the intent is pretty much the same. But the recent closures at the Ford plants indicate the reality of this lie. Scarcity appearsto be the last thing on the manufacturers minds. The workers at these plants couldproduce Ford Foci until the end of time. Its not the scarcity that characterizes thismarket but overabundance. At the same time, it is critical for corporations to insurethat the demand outpaces the supply, so the manufacturer is not left with a stock ofunsaleable merchandise. Sarkovsky seems to be one of the victims of this myth, Money is a legitimate reward for extrawork or taking risks. It is a means of creating other wealth, which will permit more growth andthen more employment. The current ideology concerning money and success only leads toimpoverishment, leveling-down and egalitarianism. The Wall Street Journal EMPLOYMENT AND WAGES An economic model worth its salt has to offer a model of employment that permits a readyconvertibility of any implied value in labor contracts with other assets in the firm. This permitscoordination of an inflation averse policy which is the clear bedrock of neo-liberalism. To keepinterest rates low, the owner must be able to void troublesome labor contracts and seize anybenefit funds that might prove to be a cushion against the cost-cutting procedures. Libertarian thought appears driven by a neanderthal argument against all government programsand the efficacy of fiscal policy. But a neo-liberal program takes a cue from this perspective.Whereas lower interest rates seem particularly related to reduction of employment costs, the so-called inflation averse behaviors, the cutting of taxes appear essential in this model so thatgovernment does not maintain alternative sources of employment at the previously higher wagerate. |