More For The Ignorant And Incompetent To Whine About
Robert Vienneau
much of mainstream economics is junk:
<http://www.debunking-economics.com/>
I like the one on neoclassical growth theory. Keen suggests this part
of neoclassical theory is on its deathbed. He explains that the
equilibrium interest rate is not equal in theory to the marginal
product of capital. This inequality results from price Wicksell
effects. He explains that, given stable shares of wages and
profits in income, the obvious regression results do not provide
empirical evidence that the theory has passed potentially falsifying
tests. Rather, they are fitting an accounting identity. And Keen
references the literature, including relevant recent results.
--
Try http://csf.colorado.edu/pkt/pktauthors/Vienneau.Robert/Bukharin.html
To solve Linear Programs: .../LPSolver.html
r c A game: .../Keynes.html
v s a Whether strength of body or of mind, or wisdom, or
i m p virtue, are found in proportion to the power or wealth
e a e of a man is a question fit perhaps to be discussed by
n e . slaves in the hearing of their masters, but highly
@ r c m unbecoming to reasonable and free men in search of
d o the truth. -- Rousseau
John Weatherby
"Robert Vienneau" <rv...@see.sig.com> wrote in message
news:rvien-3F9B31....@news.dreamscape.com...
> Steve Keen has put some new Powerpoint slideshows up explaining how
> much of mainstream economics is junk:
>
> <http://www.debunking-economics.com/>
>
> I like the one on neoclassical growth theory. Keen suggests this part
> of neoclassical theory is on its deathbed. He explains that the
> equilibrium interest rate is not equal in theory to the marginal
> product of capital.
Perhaps Keen should study some growth theory. If he did he would realize
that the interest rate plays no formal role in the Neo-Classical Growth
model. The Inada conditions have been used to imply that when capital is low
the interest rate is high. However this comes from the interpertation that
the interest rate is equal to the marginal product of capital. The interest
rate plays no role in the Solow-Swan model. See Solow 1956.
Perhaps Keen may be refering to the optimal growth model also know as
the Ramsey-Cass-Koopmans model. However this is not the neo-classical growth
model.
This inequality results from price Wicksell
> effects. He explains that, given stable shares of wages and
> profits in income, the obvious regression results do not provide
> empirical evidence that the theory has passed potentially falsifying
> tests.
Again profits in income play no role in the Neo-classical growth model.
Read the literature and learn what you are talking about before you comment.
The same goes for Keen he thinks he is bringing down the Solow model because
of this. Who cares anyway, the neoclassical growth model is only an
introductary model to sort explain the concepts about growth. It is not
really used as a tool for analysis and has not been for at least 10 years.
>Rather, they are fitting an accounting identity. And Keen
> references the literature, including relevant recent results.
>
Perhaps next time he will find out what is revelant to the Solow model
before spouting this babel. There are real problems with the neo-classical
growth model but this is not one of them.
John
John Weatherby
capital accumulation model and leaves out the capital accumulation part. The
Cobb-Douglass Production function is not a growth model. Keen speaks of the
inconsistency of the growth model and fails to realize it is not a growth
model without an equation of motion. He leaves out the important equation
for the neoclassical growth model which is K dot = s*y(t) - (n+ delta) k(t).
That is what gives you growth not a production function.
Even funniet Keen states the Growth model is static!! Of course his is. He
has not figured out what a growth model is. The function can not cope with
changes in output because he does not mention the bloody equation of motion.
Finally towards the end Keen corrects himself and admits he is talking about
the neo-classical aggregate production function and not the neo-classical
growth model.
Did Keen ever read anything other than Mankiw 1995 when he sought to see
what mainstream growth theory is. For Christ sake this was written too soon
to even know about Jones 1995 and the effect it has had on growth models.
Ahh how refreshing a review of growth theory that cites one outdated survey
article and 7 papers other papers that discuss nothing about growth. 3 of
these papers come from one person and one of them is really has more to do
with RBC theory than growth. The Solow residual no longer applies to the new
growth models. The Solow residual assumes technology changes exogenously.
John
"Robert Vienneau" <rv...@see.sig.com> wrote in message
news:rvien-3F9B31....@news.dreamscape.com...
John Weatherby
further than Mankiw 1995. If Keen was up on the literature he may see that
the quotation is dated due to, lets see, Stokey 1997, Jones and Williams
2000, Jones and Williams 2001, and coming very soon Weatherby 2002 which all
tackle the problem mentioned here. It seems Keen suffers from the problem on
being behind on the literature just as you do Rob.
.Recommendations of such a theory likely to be very different to those from
a neoclassical perspective:
-"The implications of recent work on economic growth for policymakers are
far from clear. some recent work on economic growth suggests that a more
activist government could be beneficial. [but] . the problem is that
economists have not yet produced a persuasive way of measuring the magnitude
of these externalities. Without a solution to this measurement problem,
modern growth theory does not offer any clear policy prescriptions.
policymakers . would do well to heed the first rule for physicians: do no
harm. This may seem like a modest conclusion from an ambitious literature.
But sometimes modesty is all that economists have a right to offer." (Mankiw
1995: 309)
John
"Robert Vienneau" <rv...@see.sig.com> wrote in message
news:rvien-3F9B31....@news.dreamscape.com...
Dennis O'Dea
typos, heh.
"John Weatherby" <jweat...@houston.rr.com> wrote in message
news:TnAe9.229034$Yd.93...@twister.austin.rr.com...
Robert Vienneau
Weatherby" <jweat...@houston.rr.com> wrote:
> "Robert Vienneau" <rv...@see.sig.com> wrote in message
> news:rvien-3F9B31....@news.dreamscape.com...
> > Steve Keen has put some new Powerpoint slideshows up explaining how
> > much of mainstream economics is junk:
> >
> > <http://www.debunking-economics.com/>
> >
> > I like the one on neoclassical growth theory. Keen suggests this part
> > of neoclassical theory is on its deathbed. He explains that the
> > equilibrium interest rate is not equal in theory to the marginal
> > product of capital.
> Perhaps Keen should study some growth theory. If he did he would
> realize
> that the interest rate plays no formal role in the Neo-Classical Growth
> model.
The above is untrue.
> The Inada conditions have been used to imply that when capital is
> low
> the interest rate is high. However this comes from the interpertation
> that
> the interest rate is equal to the marginal product of capital.
Due to price Wicksell effects, the interest rate is not equal to
the marginal product of capital.
> The interest
> rate plays no role in the Solow-Swan model. See Solow 1956.
The Solow model attempts to explain the ratio of the price of
output delivered one year hence to the price of the output
commodity. This price ratio is a simple transformation of
the interest rate. The Solow model explains the returns to
wages and capital by the exploded aggregate marginal productivity
theory.
> Perhaps Keen may be refering to the optimal growth model also know as
> the Ramsey-Cass-Koopmans model. However this is not the neo-classical
> growth model.
The Solow model does not explicitly model intertemporal utility
maximization. Thus, it does not contain a utility function with
a term like e^(-r t).
But it does contain the price ratio mentioned above.
> > This inequality results from price Wicksell
> > effects. He explains that, given stable shares of wages and
> > profits in income, the obvious regression results do not provide
> > empirical evidence that the theory has passed potentially falsifying
> > tests.
> Again profits in income play no role in the Neo-classical growth
> model.
Mr. Weatherby does not know what he is talking about. These sort
of models include the accounting identity
Y = W + P
where Y is net national income, W is total wages, and P is the
return to capital. P is called profits. (It is not pure economic
profits.) These models also include the equation:
P = r K
where K is the value of capital. At this level of abstraction,
there is no distinction between the rate of profits and the
interest rate. r is sometimes called both.
> Read the literature and learn what you are talking about before you
> comment.
> The same goes for Keen he thinks he is bringing down the Solow model
> because
> of this. Who cares anyway, the neoclassical growth model is only an
> introductary model to sort explain the concepts about growth. It is not
> really used as a tool for analysis and has not been for at least 10
> years.
Whatever.
> >Rather, they are fitting an accounting identity. And Keen
> > references the literature, including relevant recent results.
> Perhaps next time he will find out what is revelant to the Solow model
> before spouting this babel. There are real problems with the
> neo-classical
> growth model but this is not one of them.
Ad hominen and argument by assertion.
Notice Mr. Weatherby has said nothing substantial about price Wicksell
effects and the failure of the interest rate to equal the marginal
product of capital. Nor has he said anything substantial about
Shaikh's humbug production function argument.
In article <NhAe9.228972$Yd.93...@twister.austin.rr.com>, "John
Weatherby" <jweat...@houston.rr.com> wrote:
> Truly incompetent piece of trash. Keen talks about the neo-classical
> capital accumulation model and leaves out the capital accumulation part.
> The Cobb-Douglass Production function is not a growth model.
Strawperson. Keen never says it is. The Cobb-Douglass aggregate
production function, though, is central to how the neoclassical growth
model has been applied in practice.
> Keen speaks of the
> inconsistency of the growth model and fails to realize it is not a growth
> model without an equation of motion.
Strawperson. Mr. Weatherby is just making things up.
> He leaves out the important equation
> for the neoclassical growth model which is K dot = s*y(t) - (n+ delta)
> k(t).
Irrelevancy. By the way, notice the time index in Keen's slides
stepping one through Shaikh's "humbug" results.
> That is what gives you growth not a production function.
Irrelevancy.
> Even funniet Keen states the Growth model is static!! Of course his is.
> He
> has not figured out what a growth model is. The function can not cope
> with
> changes in output because he does not mention the bloody equation of
> motion.
Mr. Weatherby is being stupid. Whether Keen's mentions the equation
of motion or not is irrelevant to whether the production function can
or cannot cope with changing levels of output.
Those who have some familiarity with the literature know that the
Solow model with Harrod-neutral technical change can be described
as "quasi-stationary". Those who had actually understood Keen's
slides might constrast his description of the neoclassical model
as "inherently static" with his call for "A Really New Growth
Theory" with a "genuine model of production (multi-sectoral, dynamic)".
Pasinetti, for example, has made some steps in that direction.
> Finally towards the end Keen corrects himself and admits he is talking
> about
> the neo-classical aggregate production function and not the neo-classical
> growth model.
I don't know what Mr. Weatherby thinks he is talking about. I don't
find any such "admission" in Keen's slides.
> Did Keen ever read anything other than Mankiw 1995 when he sought to see
> what mainstream growth theory is. For Christ sake this was written too
> soon
> to even know about Jones 1995 and the effect it has had on growth models.
> Ahh how refreshing a review of growth theory that cites one outdated
> survey
> article and 7 papers other papers that discuss nothing about growth.
Mr. Weatherby continues to make things up. For example,
Shaikh, A. M., (2001). ³Nonlinear Dynamics and Pseudo-Production
Functions²,
fits data to Goodwin's growth cycle model. This is a model of growth.
Or consider:
"The aggregate production function, complete with the neoclassical
marginal productivity theory of factor pricing, lies at the heart
of much macroeconomic theorizing. Ever since Solow's and Swan's
seminal papers, the concept has been widely used in both theoretical
and applied analysis of economic growth... The recent interest in
endogeneous growth theory is also based on the aggregate production
function... The neoclassical growth accounting approach...has
recently been used putatively to determine the proximate sources of
growth of the East Asian Tigers..."
-- John S. L. McCombie, "The Solow Residual, Technical Change,
and Aggregate Production Functions".
If you don't understand the papers by Felipe, Shaikh, and McCombie,
for example, you cannot competently discuss the evidence for
neoclassical growth theory.
> 3 of
> these papers come from one person and one of them is really has more to
> do
> with RBC theory than growth. The Solow residual no longer applies to the
> new
> growth models. The Solow residual assumes technology changes exogenously.
Notice that aside from ad hominems, intellectually dishonest denials
of the role of the aggregate production function in neoclassical
growth theory, strawpersons, and falsehoods about Keen's references,
Mr. Weatherby says nothing at all about Keen's comments on new
growth theory.
In article <TnAe9.229034$Yd.93...@twister.austin.rr.com>, "John
Weatherby" <jweat...@houston.rr.com> wrote:
> One more note. Keen states this next passage because he has not read any
> further than Mankiw 1995.
Mr. Weatherby cannot know that. His ad hominem is based on making things
up.
> If Keen was up on the literature
Ad hominem.
> he may see that
> the quotation is dated due to, lets see, Stokey 1997, Jones and Williams
> 2000, Jones and Williams 2001, and coming very soon Weatherby 2002 which
> all
> tackle the problem mentioned here.
Argument from authority.
> It seems Keen suffers from the problem on
> being behind on the literature just as you do Rob.
Ad hominem.
Mr. Weatherby seems ignorant of how to say anything substantial.
John Weatherby
> > "Robert Vienneau" <rv...@see.sig.com> wrote in message
> > news:rvien-3F9B31....@news.dreamscape.com...
> > realize
> > that the interest rate plays no formal role in the Neo-Classical Growth
> > model.
>
> The above is untrue.
>
Really Rob where does the interest rate play a role in the following model.
Y/(L^(1-alpha)*A) = (K/(L^(1-alpha)*A)^alpha
K/(L^(1-alpha)*A) dot = sY(t) - (n+g+delta)*(K/(L^(1-alpha) *A)
where K = capital, Y= output, L= labor, s = an exogenously determined
savings, n= the growth rate of population, g = exogenous technology growth,
and delta is the deprication rate of capital which is also exogenous?
The interest rate does not enter anywhere in this model. It has no
effect and yes this is the neo-classical growth model.
> > The Inada conditions have been used to imply that when capital is
> > low
> > the interest rate is high. However this comes from the interpertation
> > that
> > the interest rate is equal to the marginal product of capital.
>
> Due to price Wicksell effects, the interest rate is not equal to
> the marginal product of capital.
>
I never said it was. Standard theory would tell you the rental rate on
capital is equal to the marginal product of capital not the interest rate.
They are closely related but not the same. None the less the Inada
conditions are conditions on how MPK behaves not the interest rate.
> The Solow model attempts to explain the ratio of the price of
> output delivered one year hence to the price of the output
> commodity. This price ratio is a simple transformation of
> the interest rate.
Not necessarily in theory. Theoritically output need not be in terms of
price. In fact empirical this does not imply, real and not nominal GDP is
used.
> The Solow model explains the returns to
> wages and capital by the exploded aggregate marginal productivity
> theory.
>
No returns to wages do not enter into the model. The model says absolutely
nothing about returns to wages. Returns to capital do not exactly enter into
the model. The model says nothing about the MPK, later the Inada conditions
on MPK were applied to make sure corner solutions did not result.
> But it does contain the price ratio mentioned above.
>
I gave you the Solow Model just where do you see a price ratio?
> Mr. Weatherby does not know what he is talking about. These sort
> of models include the accounting identity
>
> Y = W + P
>
> where Y is net national income, W is total wages, and P is the
> return to capital. P is called profits. (It is not pure economic
> profits.)
No this is identity is not included in the Model. Learn how to do growth
accounting and maybe you will understand.
>These models also include the equation:
>
> P = r K
>
> where K is the value of capital.
No there is only one neo-classical model not several. There is only one
model and it does not contain this equation. See above I have given you the
entire model.
At this level of abstraction,
> > Read the literature and learn what you are talking about before you
> > comment.
> > The same goes for Keen he thinks he is bringing down the Solow model
> > because
> > of this. Who cares anyway, the neoclassical growth model is only an
> > introductary model to sort explain the concepts about growth. It is not
> > really used as a tool for analysis and has not been for at least 10
> > years.
>
> Whatever.
>
Codification of your ignorance I love it.
> > >Rather, they are fitting an accounting identity. And Keen
> > > references the literature, including relevant recent results.
>
> > Perhaps next time he will find out what is revelant to the Solow model
> > before spouting this babel. There are real problems with the
> > neo-classical
> > growth model but this is not one of them.
>
> Ad hominen and argument by assertion.
>
It is not an assertion. I have shown you what the neo-classical model.
Keen nor you have even begun to show what the model is nor do either of you
understand it.
> Notice Mr. Weatherby has said nothing substantial about price Wicksell
> effects and the failure of the interest rate to equal the marginal
> product of capital.
That is because they have absolutely nothing to do with the
Neo-classical model.
> Nor has he said anything substantial about
> Shaikh's humbug production function argument.
>
The problem is not with the accounting identity. The problem Shaikh
finds is with the data. When the data is very smooth it is difficult to
estimate things correctly. When the data does not change much it is hard to
estimate factor shares.
>
>
> In article <NhAe9.228972$Yd.93...@twister.austin.rr.com>, "John
> Weatherby" <jweat...@houston.rr.com> wrote:
>
> > Truly incompetent piece of trash. Keen talks about the neo-classical
> > capital accumulation model and leaves out the capital accumulation part.
> > The Cobb-Douglass Production function is not a growth model.
>
> Strawperson. Keen never says it is. The Cobb-Douglass aggregate
> production function, though, is central to how the neoclassical growth
> model has been applied in practice.
>
No but he gives a Cobb-Douglass production function and that is what he is
discussing. He shows no knowledge of what the neo-classical growth model is.
> > Keen speaks of the
> > inconsistency of the growth model and fails to realize it is not a
growth
> > model without an equation of motion.
>
> Strawperson. Mr. Weatherby is just making things up.
>
No I am not where is the equation k dot = s Y(t) - (n+g+delta) K(t) in
Keen's work. It is absent and this equation of motion is the Neo-Classical
growth model. Where is it? Does Keen know what the Neo-Classical Growth
model is? It does not look like it.
> > He leaves out the important equation
> > for the neoclassical growth model which is K dot = s*y(t) - (n+ delta)
> > k(t).
>
> Irrelevancy. By the way, notice the time index in Keen's slides
> stepping one through Shaikh's "humbug" results.
>
It is not irrevelant. This is the frigging model.
> Mr. Weatherby is being stupid. Whether Keen's mentions the equation
> of motion or not is irrelevant to whether the production function can
> or cannot cope with changing levels of output.
>
No it is not. The equation of motion gives you growth it tells you how
output changes. It changes in two ways with increases in A (technology) and
increases in K (capital) without this the function is static. You need a
differential equation to make output change.
> Those who have some familiarity with the literature know that the
> Solow model with Harrod-neutral technical change can be described
> as "quasi-stationary".
Qasi-stationary is not stationary. The quasi-stationary comes from the
steady state.
> I don't know what Mr. Weatherby thinks he is talking about. I don't
> find any such "admission" in Keen's slides.
>
Perhaps you should read them then.
> Mr. Weatherby continues to make things up. For example,
>
No there is nothing about mainstream growth theory other than Mankiw 1995.
It may be a decent survey article but reading one survey article does not
make one an expert.
>. The recent interest in
> endogeneous growth theory is also based on the aggregate production
> function...
Stop while you are this far behind. You have only recently picked up Romer
1990 and still do not understand the paper. The R&D models use firm level
production functions. Some assume a representive firm, something different
from an aggregate production, others are talking about one firm (quality
ladder models), while others deal with many many firms and make assumptions
like symmetry to solve the model. Read about endogenous growth before
commenting on it.
> If you don't understand the papers by Felipe, Shaikh, and McCombie,
> for example, you cannot competently discuss the evidence for
> neoclassical growth theory.
>
If you do not understand what growth models are you can not discuss the
evidence for growth models. So far you nor Keen understand even as much as
what the Solow model is. Perhaps now that I have given it to you, you maybe
can figure it out.
> Mr. Weatherby says nothing at all about Keen's comments on new
> growth theory.
>
That is because Keen says nothing about new growth theory. He does not even
know what it is. The only comment on new theory comes from Mankiw 1995,
which was about the time when New Growth theory really exploded. Almost all
the important papers where published 1995 and after. Mankiw could not have
dealt with what he had not yet to see nor can Keen.
>
> In article <TnAe9.229034$Yd.93...@twister.austin.rr.com>, "John
> Weatherby" <jweat...@houston.rr.com> wrote:
>
> > One more note. Keen states this next passage because he has not read any
> > further than Mankiw 1995.
>
> Mr. Weatherby cannot know that. His ad hominem is based on making things
> up.
>
That comes from Keen's references. The only mainstream growth theory cited
is a survey by Mankiw in 1995. No I do not know about his personal reading
but I do know what he cites and discusses and his references are limited.
Any paper on growth generally cites at least 20 significant papers, not one
of those are cited here.
> > he may see that
> > the quotation is dated due to, lets see, Stokey 1997, Jones and Williams
> > 2000, Jones and Williams 2001, and coming very soon Weatherby 2002 which
> > all
> > tackle the problem mentioned here.
>
> Argument from authority.
>
No not from authority, although I know quite a bit about the issue. This
argument can easily be confirmed by looking at the JEL. 3 of these papers
dealing with Mankiw's quote are in print. Stokey's article is in the Review
of Economic Studies and Statistics. Jones and Williams' articles are both in
the QJE. Keen could have done a little research and found from the title
alone that the passage is being addressed. Yet he did not. Considering these
are important papers in the literature any serious researcher should know
about them.
John
Robert Vienneau
<do...@uiuc.edu> wrote:
> Did you also check out his forthcoming Theory of the Firm paper? Full of
> typos, heh.
Dennis O'Dea has a nice sense of irony to follow up a post from John
Weatherby with such a comment.
I'd like to commend Mr. O'Dea for his clearly stated opinion on
whether or not intro micro textbooks promote error with the claim
that the firm demand curve is perfectly flat for perfectly competitive
product markets. His comments can only increase the reputation
around here of economists for engaging in substantial and intellectually
honest discussions.
John Weatherby
> around here of economists for engaging in substantial and intellectually
> honest discussions.
>
You are no one to talk about substantial and intellectually honest
discussion after trying to state the Neo-classical Growth model was
something entirely different than what it is. Your comments on the model had
nothing to do with Solow '56. I wonder if you have any read Solow 1956. I
suggest trying David Romer's Advanced Macroeconomics from an explanation of
the Neo-Classical Growth model.
It also puzzles me that after being such a stuanch supporter of the
Keynesian methodology you would have such problems with Solow 1956. This is
the only growth model that uses the Keynesian methodology. There is no
optimality and everything is explained in terms of how aggregate variables
related to each other. The savings rate is the same approach used to find
MPS. Then again it does not surprise me becuase you choose to comment on
literature you have never even bothered to read.
John
Robert Vienneau
Weatherby" <jweat...@houston.rr.com> wrote:
> > > "Robert Vienneau" <rv...@see.sig.com> wrote in message
> > > news:rvien-3F9B31....@news.dreamscape.com...
> > > Perhaps Keen should study some growth theory. If he did he would
> > > realize
> > > that the interest rate plays no formal role in the Neo-Classical
> > > Growth model.
> > The above is untrue.
> Really Rob where does the interest rate play a role in the following
> model.
> Y/(L^(1-alpha)*A) = (K/(L^(1-alpha)*A)^alpha
The Cobb-Douglas production function is
Y = A * L^(1 - alpha) * K^alpha
Or, per worker:
Y/L = A * (K/L)^alpha
(Presumably, this is what Mr. Weatherby is trying to write.) Or
y = A * k^alpha
where y is output per worker and k is capital per worker.
> K/(L^(1-alpha)*A) dot = sY(t) - (n+g+delta)*(K/(L^(1-alpha) *A)
Should be:
dK/dt = s*Y - delta*K
d(K/L)/dt = ((dK/dt)*L - dL/dt*K)/L^2 = (dK/dt)/L - dL/dt * K/L^2
d(K/L)/dt = s*(Y/L) - delta*(K/L) - [(dL/dt)/L]*(K/L)
Or:
dk/dt = s*y - (n + g + delta)*k
(Technical change has the effect of augmenting the labor force.)
> where K = capital, Y= output, L= labor, s = an exogenously determined
> savings, n= the growth rate of population, g = exogenous technology
> growth,
> and delta is the deprication rate of capital which is also exogenous?
> The interest rate does not enter anywhere in this model. It has no
> effect and yes this is the neo-classical growth model.
The above only show quantity relationships. However, the neoclassical
long run assumption is that the initial value of k is a choice
variable selected as the result of perfectly-competitive profit
maximization. Furthermore, income shares drop out of the model
along a growth path. Consider,
"When someone claims that aggregate production functions work, he
means (a) that they give a good fit to input-output data WITHOUT
the intervention of data deriving from factor shares; and (b) that
the function so fitted has partial derivatives that closely mimic
observed factor prices."
-- Robert Solow (1974)
The partial derivatives of the Cobb-Douglas production function are:
dY/dL = (1 - alpha) * A * (K/L)^alpha
dY/dK = alpha * A * (L/K)^(1 - alpha)
The neoclassical claim is that
w = (1 - alpha) * A * (K/L)^alpha
r = alpha * A * (L/K)^(1 - alpha)
where w is the wage rate and r is the interest rate. Or:
w L = (1 - alpha) Y
r K = alpha Y
Or, the wage share is (1 - alpha) and the profit share is alpha.
> > > The Inada conditions have been used to imply that when capital is
> > > low
> > > the interest rate is high. However this comes from the interpertation
> > > that
> > > the interest rate is equal to the marginal product of capital.
> > Due to price Wicksell effects, the interest rate is not equal to
> > the marginal product of capital.
> I never said it was.
"this comes from the interpertation that the interest rate is equal
to the marginal product of capital."
> > The Solow model attempts to explain the ratio of the price of
> > output delivered one year hence to the price of the output
> > commodity. This price ratio is a simple transformation of
> > the interest rate.
> Not necessarily in theory. Theoritically output need not be in terms of
> price. In fact empirical this does not imply, real and not nominal GDP is
> used.
I think of the above arithmetic as entirely in real terms. I
would think Mr. Weatherby's bringing up the Fisher identity was
a deliberate distraction if everything he says weren't so muddled.
> > The Solow model explains the returns to
> > wages and capital by the exploded aggregate marginal productivity
> > theory.
> No returns to wages do not enter into the model. The model says
> absolutely nothing about returns to wages.
Notice the second statement, which is a falsehood, does not follow
from the first.
> Returns to capital do not exactly enter into the model.
This statement too is a non sequitur.
> > But it does contain the price ratio mentioned above.
> I gave you the Solow Model just where do you see a price ratio?
Right where I say. Perhaps Mr. Weatherby can tell us what Solow's
appendix is about.
> >These models also include the equation:
> >
> > P = r K
> >
> > where K is the value of capital.
> No there is only one neo-classical model not several.
The Solow model is one of several with the above equation. For
example,it appears in models developed by Kaldor and Pasinetti.
> There is only one
> model and it does not contain this equation. See above I have given you
> the entire model.
Nope. The Solow quote says there's more to it.
> > Nor has he said anything substantial about
> > Shaikh's humbug production function argument.
> The problem is not with the accounting identity. The problem Shaikh
> finds is with the data. When the data is very smooth it is difficult to
> estimate things correctly. When the data does not change much it is hard
> to
> estimate factor shares.
In other words, when income shares are stable (as they are) high
goodness-of-fit coefficients cannot be cited as evidence for the
neoclassical growth model. In other words, Keen's exposition of
Shaikh's argument is correct.
(Solow's comment about the fit of factor shares is misleading,
as later literature shows. I like Shaikh's later article fitting
the neoclassical model to data from the Goodwin growth cycle model.)
> > > The Cobb-Douglass Production function is not a growth model.
> > Strawperson. Keen never says it is. The Cobb-Douglass aggregate
> > production function, though, is central to how the neoclassical growth
> > model has been applied in practice.
> No but he gives a Cobb-Douglass production function and that is what he
> is
> discussing. He shows no knowledge of what the neo-classical growth model
> is.
When one corrects Mr. Weatherby's arithmetic, one finds the Cobb-Douglas
production function is part of the neo-classical growth model, as
Mr. Weatherby explains it.
> > > Keen speaks of the
> > > inconsistency of the growth model and fails to realize it is not a
> > > growth
> > > model without an equation of motion.
> > Strawperson. Mr. Weatherby is just making things up.
> No I am not where is the equation k dot = s Y(t) - (n+g+delta) K(t) in
> Keen's work. It is absent and this equation of motion is the
> Neo-Classical
> growth model. Where is it? Does Keen know what the Neo-Classical Growth
> model is? It does not look like it.
That's Mr. Weatherby's fantasy and ad hominem. Keen stated what he
needed in his slide show to make his points.
Notice Mr. Weatherby does not adequately point out where the equation
of motion is needed for Keen to make his points. He just produces an ad
hominem.
> > Mr. Weatherby is being stupid. Whether Keen's mentions the equation
> > of motion or not is irrelevant to whether the production function can
> > or cannot cope with changing levels of output.
> No it is not. The equation of motion gives you growth it tells you how
> output changes. It changes in two ways with increases in A (technology)
> and
> increases in K (capital) without this the function is static. You need a
> differential equation to make output change.
One does not have to formally model the change in output to make
Keen's claim that the neoclassical aggregate production function
cannot handle changing output.
> > Those who have some familiarity with the literature know that the
> > Solow model with Harrod-neutral technical change can be described
> > as "quasi-stationary".
> Qasi-stationary is not stationary. The quasi-stationary comes from the
> steady state.
Notice Mr. Weatherby's editing. He deleted my noting a contrast Keen
makes.
> > I don't know what Mr. Weatherby thinks he is talking about. I don't
> > find any such "admission" in Keen's slides.
> Perhaps you should read them then.
Notice Mr. Weatherby has nothing substantial to say.
> No there is nothing about mainstream growth theory other than Mankiw
> 1995.
> It may be a decent survey article but reading one survey article does not
> make one an expert.
Keen's slide show is a slide show. Naturally, he is limited in what
references he can show.
> >. The recent interest in
> > endogeneous growth theory is also based on the aggregate production
> > function...
> Stop while you are this far behind.
Ad hominem.
Notice Mr. Weatherby has disappeared any suggestion that I am quoting
something. It would not necessarily be me that is "this far behind".
> You have only recently picked up Romer
> 1990 and still do not understand the paper...
Ad hominem.
I understand it is vulernable to Cambridge criticism, e.g., based
on price Wicksell effects.
> The R&D models use firm level
> production functions. Some assume a representive firm, something
> different
> from an aggregate production, others are talking about one firm (quality
> ladder models), while others deal with many many firms and make
> assumptions
> like symmetry to solve the model.
> > If you don't understand the papers by Felipe, Shaikh, and McCombie,
> > for example, you cannot competently discuss the evidence for
> > neoclassical growth theory.
> If you do not understand what growth models are you can not discuss the
> evidence for growth models. So far you nor Keen understand even as much
> as
> what the Solow model is. Perhaps now that I have given it to you, you
> maybe can figure it out.
But Mr. Weatherby did not state it correctly.
> > Mr. Weatherby says nothing at all about Keen's comments on new
> > growth theory.
> That is because Keen says nothing about new growth theory.
This is false. He makes some assertions.
> He does not
> even
> know what it is. The only comment on new theory comes from Mankiw 1995,
> which was about the time when New Growth theory really exploded. Almost
> all
> the important papers where published 1995 and after. Mankiw could not
> have dealt with what he had not yet to see nor can Keen.
> > > One more note. Keen states this next passage because he has not read
> > > any
> > > further than Mankiw 1995.
> > Mr. Weatherby cannot know that. His ad hominem is based on making
> > things
> > up.
> That comes from Keen's references. The only mainstream growth theory
> cited
> is a survey by Mankiw in 1995. No I do not know about his personal
> reading
> but I do know what he cites and discusses and his references are limited.
It is a slide show.
> Any paper on growth generally cites at least 20 significant papers, not
> one of those are cited here.
And there we see Mr. Weatherby's documentation of the intellectually
dishonest norms of his community. There are other papers than the
one Keen selected for describing price Wicksell effects. However,
empirical papers in growth SHOULD cite some papers in the line of
Shaikh's "humbug" article.
John Weatherby
> In article <xR0f9.216603$eK6.6...@twister.austin.rr.com>, "John
> Weatherby" <jweat...@houston.rr.com> wrote:
>
> > > > "Robert Vienneau" <rv...@see.sig.com> wrote in message
> > > > news:rvien-3F9B31....@news.dreamscape.com...
>
> > > > Perhaps Keen should study some growth theory. If he did he would
> > > > realize
> > > > that the interest rate plays no formal role in the Neo-Classical
> > > > Growth model.
>
> > > The above is untrue.
>
> > Really Rob where does the interest rate play a role in the following
> > model.
>
> > Y/(L^(1-alpha)*A) = (K/(L^(1-alpha)*A)^alpha
>
> The Cobb-Douglas production function is
>
> Y = A * L^(1 - alpha) * K^alpha
>
> Or, per worker:
>
> Y/L = A * (K/L)^alpha
>
Yes but the intensive form is per a unit of effective labor not per worker.
This gives a steady state in terms of units per effective worker. The
implication is that the growth rate of output per units of effective workers
is 0. Therefore output per a worker grows at the rate of technological
change. See David Romer's Advanced Macroeconomics or Barro and
Sala-i-Martin's Economic growth. Both show this formation in chapter 1.
> (Presumably, this is what Mr. Weatherby is trying to write.)
No.
> > K/(L^(1-alpha)*A) dot = sY(t) - (n+g+delta)*(K/(L^(1-alpha) *A)
>
> Should be:
>
> dK/dt = s*Y - delta*K
>
No this is wrong. It does not take into account that capital per worker is
decline as population grows at the rate of n. In my formulation the
(n+g+delta) shows that capital per a unit of effective labor is declining as
technology grows and the labor force grows. In other words if you are
looking at the ratio K/L this gets smaller when L gets bigger. L grows at
the rate of n. The ratio K/AL gets smaller as L and A grow. A grows at the
rate g.
Perhaps you should catch up with the reading before commenting more. Romer
or Barro and Sala-i-Martin are excellent starts. Learn the model before
commenting on it.
> The above only show quantity relationships. However, the neoclassical
> long run assumption is that the initial value of k is a choice
> variable selected as the result of perfectly-competitive profit
> maximization.
No it is not. Solow never mentions this. He uses a Keynesian approach. There
is no restriction on initial values of capital. Later the initial conditions
proposed these restriction that MPK approaches infinity as K approaches 0.
That does imply that profit maximizing firms will never have 0 K. However
this is not a necessary part of the model. Solow, Romer, nor Barro and
Sala-i-Martin even mention this. I believe it comes from Jones and Manueli
during their attempt to make the Solow model look more like the
Ramsey-Cass-Koopman but it may be another paper I am thinking of.
> "When someone claims that aggregate production functions work, he
> means (a) that they give a good fit to input-output data WITHOUT
> the intervention of data deriving from factor shares; and (b) that
> the function so fitted has partial derivatives that closely mimic
> observed factor prices."
> -- Robert Solow (1974)
>
This is an empirical test not a theoritical constraint. This says that
empirical the theory can be supported if factor shares match the fitted
partial deritives. Theoritical this is meaningless in that money does not
enter the model so therefore there are no dollar value measurements. This is
an empirical issue of using dollar denominated variables as proxies for the
variables in the model.
> The neoclassical claim is that
>
> w = (1 - alpha) * A * (K/L)^alpha
>
> r = alpha * A * (L/K)^(1 - alpha)
>
> where w is the wage rate and r is the interest rate.
This has nothing to do with the model. This refers to test that were devised
to test the theory becuase we do not have data on pure units of output or
units of machines per an effective worker. Or even an effective worker for
that matter. You are debating an empirical not a theoritical issue.
> I think of the above arithmetic as entirely in real terms. I
> would think Mr. Weatherby's bringing up the Fisher identity was
> a deliberate distraction if everything he says weren't so muddled.
>
It only seems muddled becuase you have not a clue about what the model says.
You are convinced that something else is true. Therefore a statement of the
model is percieved by you as muddled simply because it does not fit your
false preconceived notion of the way things should work.
> Nope. The Solow quote says there's more to it.
>
No it does not. You still must learn the difference between theory and
econometrics. The quotation from Solow is not from a contribution to
economic growth it comes from a paper addressing whether aggregate
production functions are appropiate. Solow is refering to empirical issues
not the model.
> In other words, when income shares are stable (as they are) high
> goodness-of-fit coefficients cannot be cited as evidence for the
> neoclassical growth model. In other words, Keen's exposition of
> Shaikh's argument is correct.
>
When income shares do not change much the econometric evidence has a tough
time proving or disproving anything. Shaikh's argument is mistaken and comes
to a conclusion that may be close but for the wrong reason. The problem
remains with Goodwin's model too. The difference is those ugly neo-classical
economist as you call them have spent decades working out the problems with
measurement error and dealing with production functions. The econometric
literature would suggest a much different approach to estimation.
> When one corrects Mr. Weatherby's arithmetic, one finds the Cobb-Douglas
> production function is part of the neo-classical growth model, as
> Mr. Weatherby explains it.
>
The aggregate production function is only one equation. Keen shows no
knowledge of knowing the rest of the model and you only show that you a
little about the model.
> > > > Keen speaks of the
> > > > inconsistency of the growth model and fails to realize it is not a
> > > > growth
> > > > model without an equation of motion.
>
> > > Strawperson. Mr. Weatherby is just making things up.
>
Really where does he give the Solow model in its entire. In that
presentation where is the equation of motion? I could throw up a cobb
Douglass function and claim I am countering a study about utility theory.
Without a model to show the implications or even any indication that I know
anything about the model other than it has a Cobb Douglass function in it, I
would be laughed at.
> That's Mr. Weatherby's fantasy and ad hominem. Keen stated what he
> needed in his slide show to make his points.
>
He speaks of a model he does not show. I question if he knows what the model
looks like. He should have entitled this problem with the aggregate
production function that would have been more aggregate. However, Keen does
not show the Solow model nor does he say anything substantial about it.
> One does not have to formally model the change in output to make
> Keen's claim that the neoclassical aggregate production function
> cannot handle changing output.
>
Yes they do. They have to identify the channels that output changes. Then
identify why this channel does not work. Keen shows no knowledge of how
output changes under the model. How can he therefore say the mechanism is
theoritically flawed. If Keen knew what he was doing he would have shown the
model and its predictions then attempted to show the predictions were not
shown in the data. However Keen attacks a strawperson and shows no knowledge
that he even knows what the model predicts.
> Keen's slide show is a slide show. Naturally, he is limited in what
> references he can show.
>
Perhaps but in other sildeshows he list twice as many references.
Unfortunately his ability for analysis is no better.
> I understand it is vulernable to Cambridge criticism, e.g., based
> on price Wicksell effects.
>
You understand wrong. You can not understand anything about a model you have
never seen.
> > If you do not understand what growth models are you can not discuss the
> > evidence for growth models. So far you nor Keen understand even as much
> > as
> > what the Solow model is. Perhaps now that I have given it to you, you
> > maybe can figure it out.
>
> But Mr. Weatherby did not state it correctly.
I am always happy to see your ignorance of the literature Rob. Again just
read chapter 1 of David Romer's Advanced Macroeconomics or Chapter 1 of
Barro and Sala-i-Martin's economic growth. It should not be that
challenging.
> This is false. He makes some assertions.
>
Oh so I am supposed to accept Keen's assertions. Thinks for the admission
this is not serious work.
>No I do not know about his personal
> > reading
> > but I do know what he cites and discusses and his references are
limited.
>
> It is a slide show.
>
Care to point to a place where he list all his references. Other of Keen's
slideshows list 20 or more references. Why does he only list 10 here?
> > Any paper on growth generally cites at least 20 significant papers, not
> > one of those are cited here.
>
> And there we see Mr. Weatherby's documentation of the intellectually
> dishonest norms of his community. There are other papers than the
> one Keen selected for describing price Wicksell effects. However,
> empirical papers in growth SHOULD cite some papers in the line of
> Shaikh's "humbug" article.
>
Why becuase Rob thinks it is a good paper. I can not take someone who claims
to talk about growth seriously when they do not even cite a basic text on
growth or for heaven's sake Solow 1956 which he is refering to. I know it is
a slide show but do you not think if you want to comment on Bob Solow you
would want to read his work and cite it. Why read Greg Mankiw if you want to
seriously comment on Bob Solow. Do not get me wrong. I am sure Mankiw gives
a good summary but in a survey article you can not get to far in depth. Not
even bothering to cite the paper in which you are commenting on is just
plain bad research.
John
Robert Vienneau
Weatherby" <jweat...@houston.rr.com> wrote:
> "Robert Vienneau" <rv...@see.sig.com> wrote in message
> news:rvien-9ED5F9....@news.dreamscape.com...
> > In article <xR0f9.216603$eK6.6...@twister.austin.rr.com>, "John
> > Weatherby" <jweat...@houston.rr.com> wrote:
> >
> > > > > "Robert Vienneau" <rv...@see.sig.com> wrote in message
> > > > > news:rvien-3F9B31....@news.dreamscape.com...
> >
> > > > > Perhaps Keen should study some growth theory. If he did he
> > > > > would
> > > > > realize
> > > > > that the interest rate plays no formal role in the Neo-Classical
> > > > > Growth model.
> >
> > > > The above is untrue.
> >
> > > Really Rob where does the interest rate play a role in the following
> > > model.
> >
> > > Y/(L^(1-alpha)*A) = (K/(L^(1-alpha)*A)^alpha
> > The Cobb-Douglas production function is
> >
> > Y = A * L^(1 - alpha) * K^alpha
> >
> > Or, per worker:
> >
> > Y/L = A * (K/L)^alpha
> Yes but the intensive form is per a unit of effective labor not per
> worker.
That's what the above formula shows (see below).
> This gives a steady state in terms of units per effective worker. The
> implication is that the growth rate of output per units of effective
> workers
> is 0. Therefore output per a worker grows at the rate of technological
> change.
As shown below. Although everything's spelled out, what's below
is trivial.
> See David Romer's Advanced Macroeconomics or Barro and
> Sala-i-Martin's Economic growth. Both show this formation in chapter 1.
Clearly Mr. Weatherby's 'rithmetic is wrong. Consider the special
case in which there is no growth in technology (g = 0). So there is
no distinction between the amount of labor employed and the amount of
effective labor employed. Notice that his nonsensical equation
for Y/(L^(1-alpha)*A) does not reduce to an equation for Y/L.
Now I was unclear about the distinction between labor and
effective labor units. I did note that (Harrod-neutral) technical
change has the effect of augmenting the labor force. And I had noted
that the rate of growth of the effective labor force was n + g:
(dL/dt)/L = n + g
where L is the number of effective labor units. So
L(t) = L(0) exp((n + g) t)
Let L1(t) be the labor force employed. We have
(dL1/dt)/L1 = n
Thus,
L1(t) = L1(0) exp( n t )
Define the effective labor force at time zero to be the same as
the labor force:
L(0) = L1(0)
Then L(t) = L1(t) exp(g t)
I wrote the Cobb-Douglas production function as:
Y(t) = A * L(t)^(1 - alpha) * K(t)^alpha
where I have added time subscripts as needed. Substitute:
Y(t) = A * exp((1 - alpha)*g*t) * L1(t)^(1 - alpha) * K(t)^alpha
Divide through by effective labor units, L1(t) exp(g t):
Y(t)/L(t) = A*exp(-alpha*g*t) * (K(t)/L1(t))^alpha
Or:
Y(t)/L(t) = A * (K(t)/( L1(t) * exp(g t) ))^alpha
Y(t)/L(t) = A * (K(t)/L(t))^alpha
Here's the Cobb-Douglas production function written in intensive
form per units of effective labor:
y = A * k^alpha
(The constant A could be incorporated in the measure of effective
labor units.)
Since in the steady state, the capital per effective labor units, K/L,
is a constant, the above formula shows that the growth rate of steady
state output per units of effective workers is zero.
How about output per (actual) labor units? We have for the steady state:
L1(t) = L1(0) exp( n t )
K(t) = K(0) exp((n + g) t)
Substituting in the Cobb-Douglas production function,
Y(t) = A * exp((n + g)*t) * L1(0)^(1 - alpha) * K(0)^alpha
Y(t)/L1(t) = A * exp(g*t) (K(0)/L1(0))^alpha
d(Y/dL1)/dL1 = g * (Y(0)/L1(0))
In other words, output per (actual) labor units grows at the rate g.
> > (Presumably, this is what Mr. Weatherby is trying to write.)
> No.
If Mr. Weatherby understood what he was talking about, it should
be what he was trying to write, given appropriate definitions of
units.
> > > K/(L^(1-alpha)*A) dot = sY(t) - (n+g+delta)*(K/(L^(1-alpha) *A)
The errors above are that Mr. Weatherby seemingly doesn't know what
are effective labor units and that he writes output, Y, where he
should write output per effective labor units, y.
> > Should be:
> >
> > dK/dt = s*Y - delta*K
> No this is wrong. It does not take into account that capital per worker
> is decline as population grows at the rate of n.
It is correct. K and Y are not normalized per either the labor force
or the effective labor force. To go further, one has to apply
some trivial calculus:
[>> d(K/L)/dt = ((dK/dt)*L - dL/dt*K)/L^2 = (dK/dt)/L - dL/dt * K/L^2 ]
[>> ]
[>> d(K/L)/dt = s*(Y/L) - delta*(K/L) - [(dL/dt)/L]*(K/L) ]
[>> ]
[>> Or: ]
[>> ]
[>> dk/dt = s*y - (n + g + delta)*k ]
[>> ]
[>> (Technical change has the effect of augmenting the labor force.) ]
> In my formulation the
> (n+g+delta) shows that capital per a unit of effective labor is declining
> as
> technology grows and the labor force grows. In other words if you are
> looking at the ratio K/L this gets smaller when L gets bigger. L grows at
> the rate of n. The ratio K/AL gets smaller as L and A grow. A grows at
> the rate g.
Consider steady states. Output per effective labor unit grows at the
rate g. The labor force grows at the rate n, while the effective labor
force grows at the rate n + g. To be consistent, capital must grow at
the rate n + g so the ratio of capital to effective labor unit is
constant. Since the size of the labor force falls below the size of
the effective labor force, the ratio of capital to the (actual) labor
force gets larger. Once again, Mr. Weatherby's comments are backwards,
given his understanding of the variables he is talking about.
Notice that Mr. Weatherby originally had the effective labor
force (in my notation) as L1^(1-alpha)*A. Here he has it as A*L1.
Mr. Weatherby clearly does not know what he is talking about.
> Perhaps you should catch up with the reading before commenting more.
> Romer
> or Barro and Sala-i-Martin are excellent starts. Learn the model before
> commenting on it.
Mr. Weatherby got his 'rithmetic wrong. Yet he makes such stupid
comments.
> > The above only show quantity relationships. However, the neoclassical
> > long run assumption is that the initial value of k is a choice
> > variable selected as the result of perfectly-competitive profit
> > maximization.
> No it is not. Solow never mentions this. He uses a Keynesian approach.
> There
> is no restriction on initial values of capital. Later the initial
> conditions
> proposed these restriction that MPK approaches infinity as K approaches
> 0.
> That does imply that profit maximizing firms will never have 0 K. However
> this is not a necessary part of the model. Solow, Romer, nor Barro and
> Sala-i-Martin even mention this. I believe it comes from Jones and
> Manueli
> during their attempt to make the Solow model look more like the
> Ramsey-Cass-Koopman but it may be another paper I am thinking of.
Mr. Weatherby does not understand the problem domain that Solow
was addressing. Consider a steady state above:
d(K/L)/dt = dk/dt = 0
s*y = (n + g + delta)*k
So at Harrod's natural rate of growth the capital-output ratio is
s/(n + g + delta)
where all these parameters are exogeneous constants. Why should this
capital-output ratio be such that this is also a Harrod warranted
rate? Harrod had the all the parameters determining both the
warranted and natural rates as exogeneous constants. Aside from
flukes, these two rates would not be equal. Solow treated the
capital-output ratio as an endogeneous parameter. By connecting up
the capital-output ratio with distribution, Solow showed that, given
the aggregate neoclassical theory of distribution, the Harrod natural
rate of growth can also be a warranted rate.
The differential equation above for dk/dt defines a warranted growth
path that converges to the Harrod natural rate. (This leaves aside the
Keynesian problem of the stability of warranted rates.) There is an
alternate Keynesian solution to this problem of the divergence between
warranted and natural rates. Pasinetti's mid-seventies collection of
papers is interesting on these topics.
> > "When someone claims that aggregate production functions work, he
> > means (a) that they give a good fit to input-output data WITHOUT
> > the intervention of data deriving from factor shares; and (b) that
> > the function so fitted has partial derivatives that closely mimic
> > observed factor prices."
> > -- Robert Solow (1974)
> This is an empirical test not a theoritical constraint. This says that
> empirical the theory can be supported if factor shares match the fitted
> partial deritives.
Sure, that's Solow's claim - only he is not subliterate.
> Theoritical this is meaningless in that money does not
> enter the model so therefore there are no dollar value measurements.
Obviously there are problems in how to match up the
variables in the model to data one can collect. But I don't think
the problem is converting from numeraire units to dollar units.
> This is
> an empirical issue of using dollar denominated variables as proxies for
> the variables in the model.
Nope. The factor shares arise in Solow's attempt to attack one of the
theoretical problems raised by Harrod.
> > The neoclassical claim is that
> >
> > w = (1 - alpha) * A * (K/L)^alpha
> >
> > r = alpha * A * (L/K)^(1 - alpha)
> >
> > where w is the wage rate and r is the interest rate.
> This has nothing to do with the model.
Nope. This is important in understanding how Solow addressed
one of the problems raised by Harrod.
> [Stupidity deleted.]
> > Nope. The Solow quote says there's more to it.
> No it does not. You still must learn the difference between theory and
> econometrics. The quotation from Solow is not from a contribution to
> economic growth it comes from a paper addressing whether aggregate
> production functions are appropiate. Solow is refering to empirical
> issues not the model.
So what. The neoclassical model implies claims, in theory, about
distribution.
> > In other words, when income shares are stable (as they are) high
> > goodness-of-fit coefficients cannot be cited as evidence for the
> > neoclassical growth model. In other words, Keen's exposition of
> > Shaikh's argument is correct.
> When income shares do not change much the econometric evidence has a
> tough
> time proving or disproving anything. Shaikh's argument is mistaken and
> comes
> to a conclusion that may be close but for the wrong reason. The problem
> remains with Goodwin's model too. The difference is those ugly
> neo-classical
> economist as you call them have spent decades working out the problems
> with
> measurement error and dealing with production functions. The econometric
> literature would suggest a much different approach to estimation.
Mr. Weatherby doesn't make any point whatsoever. I have never referred
to "ugly neoclassical economists". Mr. Weatherby does not point out
any reason to think the neoclassical model is empirically preferable
to Goodwin's model.
> [Stupidity deleted.]
[> > You have only recently picked up Romer ]
[> > 1990 and still do not understand the paper... ]
[> Ad hominem. ]
> > I understand it is vulernable to Cambridge criticism, e.g., based
> > on price Wicksell effects.
> You understand wrong. You can not understand anything about a model you
> have never seen.
Mr. Weatherby's stupidity above contradicts his previous comment.
On page S80, Romer uses a disaggregated production function (equation 1)
in which units of individual capital are measured in dollar or
numeraire units:
"the value of one unit of durable i is the present discounted value
of the infinite stream of rental income that it generates."
Given price Wicksell effects, Romer has made a mistake. He never
corrects it.
> [More stupidity deleted.]
> > > Any paper on growth generally cites at least 20 significant papers,
> > > not
> > > one of those are cited here.
> > And there we see Mr. Weatherby's documentation of the intellectually
> > dishonest norms of his community. There are other papers than the
> > one Keen selected for describing price Wicksell effects. However,
> > empirical papers in growth SHOULD cite some papers in the line of
> > Shaikh's "humbug" article.
> Why becuase Rob thinks it is a good paper.
The following is just more stupid ad hominem that fails to address the
Fisher and Shaikh results:
> I can not take someone who claims
> to talk about growth seriously when they do not even cite a basic text on
> growth or for heaven's sake Solow 1956 which he is refering to. I know it
> is
> a slide show but do you not think if you want to comment on Bob Solow you
> would want to read his work and cite it. Why read Greg Mankiw if you want
> to
> seriously comment on Bob Solow. Do not get me wrong. I am sure Mankiw
> gives
> a good summary but in a survey article you can not get to far in depth.
> Not
> even bothering to cite the paper in which you are commenting on is just
> plain bad research.
--
John Weatherby
> In article <xt8g9.243951$eK6.6...@twister.austin.rr.com>, "John
> Clearly Mr. Weatherby's 'rithmetic is wrong. Consider the special
> case in which there is no growth in technology (g = 0). So there is
> no distinction between the amount of labor employed and the amount of
> effective labor employed. Notice that his nonsensical equation
> for Y/(L^(1-alpha)*A) does not reduce to an equation for Y/L.
There is still a distinction between the amount of labor and employed when
g=0. A is a number. It augments labor. Multiplying A by L gives you the
units of effective. No the equation does not reduce to an equation for Y/L
becuase it should not and it is not nonsensical. Using units of effective
labor means 0 growth in the steady for Y/AL. Your formulation gives 0 growth
in the steady for Y/L. Solow considered this case and this is where the term
Neo-classical growth model comes from. When there is no technological change
there is no growth. This is similar to result that Malthus comes to.
>
> The errors above are that Mr. Weatherby seemingly doesn't know what
> are effective labor units and that he writes output, Y, where he
> should write output per effective labor units, y.
>
No. I know what I am talking about. I am using David Romer's notation.
> It is correct. K and Y are not normalized per either the labor force
> or the effective labor force. To go further, one has to apply
> some trivial calculus:
>
You know these discussion would not come if you knew how to write. You
should always define your terms. I do not think this is what you originally
intended. Looking at past post I would say you sloppily threw up an equation
and did not specificy what it meant just so that you could oh yeah that is
what I meant when someone called you on it.
> Notice that Mr. Weatherby originally had the effective >labor
> force (in my notation) as L1^(1-alpha)*A. Here he has it as A*L1.
> Mr. Weatherby clearly does not know what he is talking about.
>
I never wrote A*L1 would you care to show how I did that. Perhaps the way I
wrote this was unclear would A*(L^(1-alpha) be clearer or (L^(1-alpha))*A. I
think you were interperting the statement as L^((1-alpha)*A) which was not
what was intended at all.
> Sure, that's Solow's claim - only he is not subliterate.
>
I am really suprised you can read him then. By the way entitling this thread
"More For The Ignorant And Incompetent To Whine About" was entirely
appropiate, you have shown nothing more but incomptence and a propensity to
whine.
> Mr. Weatherby does not point out
> any reason to think the neoclassical model is empirically preferable
> to Goodwin's model.
>
There is a wealth of RBC literature that uses much more advanced
econometric techniques that show the neoclassical production function gives
correct evidence. Start with Robert Hall's work.
If you want to look at these things are correctly estimated you may also
want to look to Bronwyn Hall, Jean Jaques Mariesse, Zvi Grilliches, or Ariel
Pakes. All of these have numerous paper on how to deal with problems of how
to estimate a production function. Although this group deals with firm level
data.
>
> On page S80, Romer uses a disaggregated production function (equation 1)
> in which units of individual capital are measured in dollar or
> numeraire units:
>
No there are not. I have explained this to you before. The dollar example is
putting how the model works in plain english. The model has no money in it.
Everything is valued in units of a consumption good. There are no dollars in
the model. You have to read further than S80 to figure this out. I showed
you the page and the exact quotation where Romer explains this last time.
Have you been too lazy to even read it?
John
kenneth couesbouc
> "Robert Vienneau" <rv...@see.sig.com> wrote in message
> news:rvien-20A499....@news.dreamscape.com...
> > In article <xt8g9.243951$eK6.6...@twister.austin.rr.com>, "John
>
no one has the money to buy the extra production. There is no growth,
just deflation.
Growth in demand is fuelled by private, corporate and public debts.
But debts must be repaid (with interest). This means that the growth
rate of global debt encounters the rate of repayment, which tends to
cancel it.
As for unlimited debt growth, the accumulation of interest (which is
a part of added value) does not allow it.
"A Really New Growth Theory" may be called for. But a really new
concept of property will be necessary first. Kenneth
Robert Vienneau
honest, correct, and to-the-point statements.
To recap, according to Mr. Weatherby, the neoclassical growth model is:
Y/(L^(1-alpha)*A) = (K/(L^(1-alpha)*A)^alpha
K/(L^(1-alpha)*A) dot = sY(t) - (n+g+delta)*(K/(L^(1-alpha) *A)
where K = capital, Y= output, L= labor, s = an exogenously determined
savings, n= the growth rate of population, g = exogenous technology
growth, and delta is the deprication rate of capital which is also
exogenous.
He is clearly wrong. The effective labor force is not (L^(1-alpha))*A.
The quotient of output and the effective labor force belongs in the
second equation. Unnormalized output does not belong there where
he writes it.
I describe the quantity relationships in the neoclassical one-sector
growth model with the Cobb-Douglas production function as:
Y(t)/L(t) = A * (K(t)/L(t))^alpha
d(K(t)/L(t))/dt = s*(Y(t)/L(t)) - (n + g + delta)*(K(t)/L(t))
where
(dL/dt)/dL = n + g
So I am using L to refer to the effective labor force, not the actual
labor force.
In simpler notation, the quantity relationships are:
y(t) = A * (k(t))^alpha
dk(t)/dt = s * y(t) - (n + g + delta) * k(t)
where y and k are output and capital, respectively, per effective
labor unit.
Furthermore, I derived the model. I noted
Technical change has the effect of augmenting the labor force.
I acknowledged that
I was [originally] unclear about the distinction between labor
and effective labor units.
And I stated
The constant A could be incorporated in the measure of effective
labor units.
Mr. Weatherby also incorrectly characterized various properties of
the neoclassical model, which I corrected him on. Furthermore,
he refuses to acknowledge the role of the aggregate neoclassical
theory of distribution in Solow's approach to solving one of
the problems raised by Harrod.
In article <Zqwg9.263902$Yd.10...@twister.austin.rr.com>, "John
Weatherby" <jweat...@houston.rr.com> wrote:
> > Mr. Weatherby does not point out
> > any reason to think the neoclassical model is empirically preferable
> > to Goodwin's model.
> There is a wealth of RBC literature that uses much more advanced
> econometric techniques that show the neoclassical production function
> gives
> correct evidence. Start with Robert Hall's work.
Mr. Weatherby does not point out anywhere the neoclassical model
has been shown empirically superior to Goodwin's model.
> > On page S80, Romer uses a disaggregated production function (equation
> > 1)
> > in which units of individual capital are measured in dollar or
> > numeraire units:
^^^^^^^^^^^^^^^
[>> Given price Wicksell effects, Romer has made a mistake. He never ]
[>> corrects it. ]
> No there are not. I have explained this to you before. The dollar example
> is
> putting how the model works in plain english. The model has no money in
> it.
> Everything is valued in units of a consumption good. There are no dollars
> in the model.
If Mr. Weatherby understood what price Wicksell effects are, he would
know that his comments do not address my point.
Robert Vienneau
kencou...@yahoo.fr (kenneth couesbouc) wrote:
> "John Weatherby" <jweat...@houston.rr.com> wrote in message
> news:<Zqwg9.263902$Yd.10...@twister.austin.rr.com>...
> > "Robert Vienneau" <rv...@see.sig.com> wrote in message
> > news:rvien-20A499....@news.dreamscape.com...
> > > In article <xt8g9.243951$eK6.6...@twister.austin.rr.com>, "John
> Whatever the technology of growth, it finaly depends on demand. If
> no one has the money to buy the extra production. There is no growth,
> just deflation.
"Where important issues have been neglected - those connected with
effective demand, for instance..."
-- Robert M. Solow, _Growth Theory: An Exposition_.
> Growth in demand is fuelled by private, corporate and public debts.
> But debts must be repaid (with interest). This means that the growth
> rate of global debt encounters the rate of repayment, which tends to
> cancel it.
> As for unlimited debt growth, the accumulation of interest (which is
> a part of added value) does not allow it.
This debt virus nonsense is not even wrong.
James A. Donald
On 15 Sep 2002 01:40:17 -0700, kencou...@yahoo.fr (kenneth
couesbouc) wrote:
> Whatever the technology of growth, it finaly depends on
> demand. If no one has the money to buy the extra production.
> There is no growth, just deflation.
If entrepeneurs can produce more than they can sell, then in
due course they cut pricesl, and growth proceeds.
> Growth in demand is fuelled by private, corporate and
> public debts.
Consumption is not production. "Stimulating" demand is always
a bad idea -- there is always too much demand. Sometimes, as
during recessions, it is not as bad an idea as it is during
booms, but it is always bad.
--digsig
James A. Donald
6YeGpsZR+nOTh/cGwvITnSR3TdzclVpR0+pr3YYQdkG
SMjqKEYiUBE0lTiMOhL2+NjkJc/QPWsKzFi1m28j
2f8v9X9WDcywEnQwSD9qgBLyCrQIEH/y5X+Jisern
Michael L. Coburn
> "John Weatherby" <jweat...@houston.rr.com> wrote in message
> news:<Zqwg9.263902$Yd.10...@twister.austin.rr.com>...
>> "Robert Vienneau" <rv...@see.sig.com> wrote in message
>> news:rvien-20A499....@news.dreamscape.com...
>> > In article <xt8g9.243951$eK6.6...@twister.austin.rr.com>, "John
>>
>
> Whatever the technology of growth, it finaly depends on demand. If
> no one has the money to buy the extra production. There is no growth,
> just deflation.
I am acutely aware of the problems that deflation will cause in
economic and financial mobility, but is "growth" the where all and
be all of a "good" economy? More pointedly, why would an
increasing GDP necessarily be a "good" thing?
> Growth in demand is fuelled by private, corporate and public debts.
Growth in demand is fueled by decent wages.
> But debts must be repaid (with interest). This means that the growth
> rate of global debt encounters the rate of repayment, which tends to
> cancel it.
In cases where "interest" cancels out the growth that would have
resulted from _real_ capital development the _real_ capital
was not actually developed and/or the "interest" was actually
a "rent" or a means to collect excessive "rent".
> As for unlimited debt growth, the accumulation of interest (which is
> a part of added value) does not allow it.
> "A Really New Growth Theory" may be called for. But a really new
> concept of property will be necessary first. Kenneth
What is necessary is the recognition and distinction of "interest"
(the return to _real_ capital), from economic rent (the return to
government enforced privilege):
http://GreaterVoice.org/econ/glossary/Real_Capital.php
As you say: It is a new concept of "property" and it has to do with
the idea that _individual_ property is something earned. And wages
are a very good example of property while the right to use certain
frequencies in the airwaves and the right to fish in some particular
place are not.
--
Mike Coburn
"It's the tax system, stupid. No, it's the ludicrous
banking system. Well, actually, its both. With proper
consideration we find these injustices are made
possible by the lack of representation of The People
in their government". -- http://GreaterVoice.org
John Weatherby
> Y(t)/L(t) = A * (K(t)/L(t))^alpha
>
> d(K(t)/L(t))/dt = s*(Y(t)/L(t)) - (n + g + delta)*(K(t)/L(t))
>
> where
>
> (dL/dt)/dL = n + g
>
> So I am using L to refer to the effective labor force, not the actual
> labor force.
>
That is not the effective labor force if you are writing the production
function that way. I suggest you see David Romer's advanced Macroeconomics.
An unit of effective labor is AL. That means the production function takes
the form of Y(K, AL). Effective labor is the labor augmented by the
technology variable A. If you do not want to beleive me you do have to.
However I suggest you read David Romer's book or Barro and Sala-i-Martin.
Until then your comments are uninformed.
However, I do not think you will read these books. These are mainstream
books written after 1960's. For some reason Post Keynesians refuse to read
anything mainstream past this point. The reason is simple the mainstream has
already dealt with these arguments and found new methods. If you learned
what they were you would not have an argument.
John
Robert Vienneau
Weatherby" <jweat...@houston.rr.com> wrote:
> "Robert Vienneau" <rv...@see.sig.com> wrote in message
> news:rvien-5A843A....@news.dreamscape.com...
>
> > Y(t)/L(t) = A * (K(t)/L(t))^alpha
> >
> > d(K(t)/L(t))/dt = s*(Y(t)/L(t)) - (n + g + delta)*(K(t)/L(t))
> >
> > where
> >
> > (dL/dt)/dL = n + g
> >
> > So I am using L to refer to the effective labor force, not the actual
> > labor force.
[>> And I stated ]
[>> The constant A could be incorporated in the measure of effective ]
[>> labor units. ]
> That is not the effective labor force if you are writing the production
> function that way. I suggest you see David Romer's advanced
> Macroeconomics.
> An unit of effective labor is AL.
No. A unit of effective labor is A1(t)*L1(t) where L1 is the actual
labor force and A1(t) is a function of time. The derivative
of the effective labor force is:
d(A1*L1)/dt = dA1/dt * L1 + dL1/dt * A1
Divide through to find the rate of growth of the effective labor force:
(d(A1*L1)/dt)/(A1*L1) = (dA1/dt)/A1 + (dL1/dt)/L1
(d(A1*L1)/dt)/(A1*L1) = g + n
where g is the rate of growth of labor-augmenting technology and
n is the rate of growth of the actual labor force. There's
my equation above where
L(t) = A1(t)*L1(t)
That is, in my notation, L is the effective labor force.
My constant A is not a function of time. It is a scaling factor.
Given that I explicitly noted that it could be incorporated into
the measure of the effective labor force, the following is some
combination of ignorance and intellectual dishonesty:
> That means the production function
> takes
> the form of Y(K, AL). Effective labor is the labor augmented by the
> technology variable A.
The following is Mr. Weatherby continuing to be stupid:
> If you do not want to beleive me you do have to.
> However I suggest you read David Romer's book or Barro and Sala-i-Martin.
> Until then your comments are uninformed.
> However, I do not think you will read these books. These are
> mainstream
> books written after 1960's. For some reason Post Keynesians refuse to
> read
> anything mainstream past this point. The reason is simple the mainstream
> has
> already dealt with these arguments and found new methods. If you learned
> what they were you would not have an argument.
Mr. Weatherby has no argument. At least he seems incapable of presenting
one.
John Weatherby
"Robert Vienneau" <rv...@see.sig.com> wrote in message news:rvien-
> My constant A is not a function of time. It is a scaling >factor.
> Given that I explicitly noted that it could be incorporated into
> the measure of the effective labor force, the following is some
> combination of ignorance and intellectual dishonesty:
>
No it is not. In essence you are using A as some sort of undefined labor
augmentation or growth rate of labor. Generally A is defined as a technology
index that grows over time at the rate of g.
> > That means the production function
> > takes
> > the form of Y(K, AL). Effective labor is the labor augmented by the
> > technology variable A.
>
> The following is Mr. Weatherby continuing to be stupid:
>
> > If you do not want to beleive me you do have to.
Well sorry here this was an lapse of editing on my part I meant to say if
you do want to beleive me you do *not* have to. I still suggest you read
Chapter 1 of David Romer's advanced Macroeconomics. It will explain this in
much more depth than I have time or desire to go into here. My own work is
much more important to me than some silliness over a model no one takes
seriously any more.
If I have time I will post on the modern approach to estimating the
neo-classical production function. It is quite a bit different method than
the techniques that Shaikh uses. One way is to estimate capital's share by
calculating the rate of convergence. By estimating the half-life to steady
state you can get an estimate of alpha. This method put the last nail in the
coffin of the Solow model because the estimate of alpha was twice as large
as it should be.
Robert Hall and others use a different method while trying to calibrate
real business cycle models. Unfortunately the Solow residual is very
important for RBC calibration. As a paper by my advisor showed the Solow
residuals is often miscalculated because it depends on a constant level of
technological change. Also theories about international convergence rest on
the technology index being the same across countries. He showed that a
typical endogenous growth model handled this while the Neo-classical growth
model and the revival of it with Mankiw Romer and Wiel fell apart.
However I still believe I am wasting time writing this because
> > These are
> > mainstream
> > books written after 1960's. For some reason Post Keynesians refuse to
> > read
> > anything mainstream past this point. The reason is simple the mainstream
> > has
> > already dealt with these arguments and found new methods. If you learned
> > what they were you would not have an argument.
>
John
Robert Vienneau
Weatherby" <jweat...@houston.rr.com> wrote:
> "Robert Vienneau" <rv...@see.sig.com> wrote in message news:rvien-
>
> > My constant A is not a function of time. It is a scaling factor.
> > Given that I explicitly noted that it could be incorporated into
> > the measure of the effective labor force, the following is some
> > combination of ignorance and intellectual dishonesty:
> No it is not. In essence you are using A as some sort of undefined labor
> augmentation or growth rate of labor. Generally A is defined as a
> technology index that grows over time at the rate of g.
Mr. Weatherby finds ninth grade math beyond him. I DEFINED A to be
a constant. I DEFINED L to be the effective labor force. I DEFINED L1
to be the actual labor force. And I DEFINED A1 to be a technology
index that grows over time at the rate g.
Anybody can see that I have stated in previous posts, under these
definitions:
L(t) = L1(t) exp(g t)
And
A unit of effective labor is A1(t)*L1(t) where L1 is the actual
labor force and A1(t) is a function of time.
So, in my notation:
A1(t) = exp(g t).
I noted that the Cobb-Douglas production function, when written
in terms of effective labor units, is:
Y(t)/L(t) = A * (K(t)/L(t))^alpha
Substituting, one has:
Y(t)/(A1(t) * L1(t)) = A * ( K(t)/ ( A1(t) * L1(t) ) )^alpha
I have also noted that "The constant A could be incorporated in the
measure of effective labor units".
Divide both sides of the above equation by A^(1/(1 - alpha)):
Y(t)/(A^(1/(1- alpha)) * A1(t) * L(t) )
= (K(t)/( A^(1/(1 - alpha)) * A1(t) * L1(t) )^alpha
where I have made use of the fact:
1 - 1/(1 - alpha) = - alpha * 1/(1 - alpha)
Rescale the technology index, A1(t):
A2(t) = A^(1/(1 - alpha) * A1(t)
The rescaled effective labor force is:
A2(t) * L1(t) = A^(1/(1 - alpha) * L(t)
Thus, the Cobb-Douglas production function, as I expressed it, is:
Y(t)/(A2(t) * L1(t)) = ( K(t)/( A2(t) * L1(t) )^alpha
where L1(t) is the actual labor force and A2(t) is the rescaled
technology index. The above shows output normalized by the
rescaled effective labor force. I doubt David Romer shows
anything different.
To summarize, in my notation, A is a scaling factor.
> > > That means the production function
> > > takes
> > > the form of Y(K, AL). Effective labor is the labor augmented by the
> > > technology variable A.
> > The following is Mr. Weatherby continuing to be stupid:
> > > If you do not want to beleive me you do have to.
> Well sorry here this was an lapse of editing on my part I meant to say if
> you do want to beleive me you do *not* have to.
The whole paragraph, which Mr. Weatherby reproduces below, is
stupid.
> I still suggest you read
> Chapter 1 of David Romer's advanced Macroeconomics. It will explain this
> in
> much more depth than I have time or desire to go into here. My own work
> is
> much more important to me than some silliness over a model no one takes
> seriously any more.
Recall, Mr. Weatherby berated me for not "knowing" that the Solow model
is:
Y/(L^(1-alpha)*A) = (K/(L^(1-alpha)*A)^alpha
K/(L^(1-alpha)*A) dot = sY(t) - (n+g+delta)*(K/(L^(1-alpha) *A)
where K = capital, Y= output, L= labor, s = an exogenously determined
savings, n= the growth rate of population, g = exogenous technology
growth, and delta is the deprication rate of capital which is also
exogenous.
And Mr. Weatherby has still not acknowledged the role of the
aggregate neoclassical theory of distribution in Solow's approach to
solving one of the problems raised by Harrod.
I guess Mr. Weatherby's comment about his "own work being much more
important to" him is way of acknowledging his presentation of
Solow's model was faulty.
Mr. Weatherby does not point out any where the question of the
stability of warranted paths has been addressed in the endogeneous
growth literature that he reads.
Mr. Weatherby still does not point out any where the neoclassical model
has been shown empirically superior to Goodwin's model. Nor does he
point out any where the endogeneous growth models he likes have
been shown empirically superior to Goodwin's model.
Nor does he thank me for implicitly suggesting a paper topic: address
Shaikh's recent paper by demonstrating that the econometric techniques
Mr. Weatherby mentions can distinguish between the endogeneous growth
models he likes and the Goodwin model.
(I refer to "the endogeneous growth models Mr. Weatherby likes"
because there are other endogeneous growth models. For example,
John von Neumann produced one, and Joan Robinson's "banana
diagram" summarizes another.)
John Weatherby
>
There is no need for a scaling factor.
> I guess Mr. Weatherby's comment about his "own work being much more
> important to" him is way of acknowledging his presentation of
> Solow's model was faulty.
>
No it is way of say I am tired of trying to get it through your thick skull
there is no need for a scale factor and the notion you use is strange to say
the least. You refuse to read anything written in the mainstream beyond
1960 or acknowledge that economist have been doing work that has nothing to
do with your dated arguments about the Solow model. A model no one takes
seriously anymore.
> Mr. Weatherby does not point out any where the question of the
> stability of warranted paths has been addressed in the endogeneous
> growth literature that he reads.
>
To do so I would have to teach you endogenous growth literature. I do not
have the time nor desire to do that. I suggest you Start with Lucas 1988.
Work your way through the human capital models. Proceed to Mankiw, Romer,
and Wiel. Then read Rodriguez-Claire and Kleinow to show the problem with
the Solow model is the assumption that the growth rate of technological
change is constant and the same across countries. Then read Dinopolous and
Thompson to see a different approach that shows when the technology
parameter is endogenous the production function gets the right estimates.
Then read about the flaws in measuring human capital.
At that point you are ready for Romer 1986. This gives the argument that
accerelating growth rates might have happened. Romer 1990, Aghion and Howitt
1992, and Grossman and Helpman's book all example R&D. Proceed to Jones 1995
which denies the presence of accelerating growth rates. After that check the
other Jones 1995 that gives a model to solve the Problem. Then move on to
Dinopolous and Thompson, Alwyn Young, and Peitro Pareto.
If you still think this question even remotely applies to the literature
on endogenous growth model we can discuss it then. At this point it is like
to trying to explain comparitive statics to someone who has not had
principles.
> Mr. Weatherby still does not point out any where the neoclassical model
> has been shown empirically superior to Goodwin's model. Nor does he
> point out any where the endogeneous growth models he likes have
> been shown empirically superior to Goodwin's model.
>
Nor have you pointed out any source of credible data that shows a shred
of evidence for Goodwin's model. The calibration Shaikh uses falls victim to
the same problem his estimation of the Solow model does. That is the factor
shares are constant. Another way needs to be used. One way is calculated the
rate of convergence and use the half life to calibrate the parameters.
> Nor does he thank me for implicitly suggesting a paper topic: address
> Shaikh's recent paper by demonstrating that the econometric techniques
> Mr. Weatherby mentions can distinguish between the endogeneous growth
> models he likes and the Goodwin model.
>
Sorry but responses to unpublished papers or papers published outside of
mainstream that use bad techniques are not a way to make a reputation for
one's self. I will pass on this idea.
> (I refer to "the endogeneous growth models Mr. Weatherby likes"
> because there are other endogeneous growth models. For example,
> John von Neumann produced one, and Joan Robinson's "banana
> diagram" summarizes another.)
>
Which of course are the only 2 you know because your reading of the
literature stops at 1960 like all the others who bitch and moan about
mainstream economics. If they would acknowledge anything worthwhile has
happened in the last 40 and god forbid try to respond to any of the current
issues it would be a different story. Lucas and Sargent would never have
even been know had the outside of the mainstream methods and analysis not
applied to a very important problem that was being studied at the time.
Perhaps these so called alternative economicist should learn something from
them.
John
kenneth couesbouc
> --
> On 15 Sep 2002 01:40:17 -0700, kencou...@yahoo.fr (kenneth
> couesbouc) wrote:
> > Whatever the technology of growth, it finaly depends on
> > demand. If no one has the money to buy the extra production.
> > There is no growth, just deflation.
>
> If entrepeneurs can produce more than they can sell, then in
> due course they cut pricesl, and growth proceeds.
>
the interest rate.
> > Growth in demand is fuelled by private, corporate and
> > public debts.
>
> Consumption is not production. "Stimulating" demand is always
> a bad idea -- there is always too much demand. Sometimes, as
> during recessions, it is not as bad an idea as it is during
> booms, but it is always bad.
>
demand and debt. Kenneth
kenneth couesbouc
> kenneth couesbouc wrote:
>
> > "John Weatherby" <jweat...@houston.rr.com> wrote in message
> > news:<Zqwg9.263902$Yd.10...@twister.austin.rr.com>...
> >> "Robert Vienneau" <rv...@see.sig.com> wrote in message
> >> news:rvien-20A499....@news.dreamscape.com...
> >> > In article <xt8g9.243951$eK6.6...@twister.austin.rr.com>, "John
> >>
> >
> > Whatever the technology of growth, it finaly depends on demand. If
> > no one has the money to buy the extra production. There is no growth,
> > just deflation.
>
> I am acutely aware of the problems that deflation will cause in
> economic and financial mobility, but is "growth" the where all and
> be all of a "good" economy? More pointedly, why would an
> increasing GDP necessarily be a "good" thing?
>
I haven't heard anyone suggest that seriously. Are you prepared to
share your income?
> > Growth in demand is fuelled by private, corporate and public debts.
>
> Growth in demand is fueled by decent wages.
>
Demand also concerns investments. Wages have to be more than
"decent", for a part to be invested.
> > But debts must be repaid (with interest). This means that the growth
> > rate of global debt encounters the rate of repayment, which tends to
> > cancel it.
>
> In cases where "interest" cancels out the growth that would have
> resulted from _real_ capital development the _real_ capital
> was not actually developed and/or the "interest" was actually
> a "rent" or a means to collect excessive "rent".
>
The repayment of debts cancels debt growth. Interest just speeds
this up.
> > As for unlimited debt growth, the accumulation of interest (which is
> > a part of added value) does not allow it.
> > "A Really New Growth Theory" may be called for. But a really new
> > concept of property will be necessary first. Kenneth
>
> What is necessary is the recognition and distinction of "interest"
> (the return to _real_ capital), from economic rent (the return to
> government enforced privilege):
>
Proudhon's passage from "property is theft" to "free credit" got a
horse laugh out of Marx. Who is going to lend what they own for
nothing?
> http://GreaterVoice.org/econ/glossary/Real_Capital.php
>
> As you say: It is a new concept of "property" and it has to do with
> the idea that _individual_ property is something earned. And wages
> are a very good example of property while the right to use certain
> frequencies in the airwaves and the right to fish in some particular
> place are not.
Where do you situate the "means of production"? Who is to own them?
Kenneth
Constantinople
news:1c9636fc.02091...@posting.google.com:
> James A. Donald <jam...@echeque.com> wrote in message
> news:<nr89ouss72h89jb1b...@4ax.com>...
>> --
>> On 15 Sep 2002 01:40:17 -0700, kencou...@yahoo.fr (kenneth
>> couesbouc) wrote:
>> > Whatever the technology of growth, it finaly depends on
>> > demand. If no one has the money to buy the extra production.
>> > There is no growth, just deflation.
>>
>> If entrepeneurs can produce more than they can sell, then in
>> due course they cut pricesl, and growth proceeds.
>>
> Cutting prices means cutting profits. But profits can't fall below
> the interest rate.
Yes they can. Business is fundamentally risky, and frequently leads to
financial losses. However a loan is based on a contract, and the contract
will always stipulate that a certain amount of interest is to be paid. So
yes, in a given year, all businesses can lose money, and at the same
time, all loans can demand a certain interest. (Which is not to say that
the loans are paid back, but the interest is what is agreed to, not what
necessarily is paid.)
Prices are set by supply and demand. The price will be whatever it needs
to be to sell the product. You appear to be trying to ignore that.
James A. Donald
kenneth couesbouc:
> > > Whatever the technology of growth, it finaly depends on
> > > demand. If no one has the money to buy the extra
> > > production. There is no growth, just deflation.
James A. Donald:
> > If entrepeneurs can produce more than they can sell, then
> > in due course they cut pricesl, and growth proceeds.
kenneth couesbouc
> Cutting prices means cutting profits. But profits can't fall
> below the interest rate.
Profits fall below the interest rate with great regularity. In
the long term they cannot fall below the interest rate, but in
the long term, supply and demand will always balance.
In the short run, when profits are in large part below the
interest rate, the interest rate will fall.
--digsig
James A. Donald
6YeGpsZR+nOTh/cGwvITnSR3TdzclVpR0+pr3YYQdkG
HNDEyjaWgLU2fXBcjq3d3oKCCkcEssPcVyEDy1gN
4/qlgYhDGat4a6VWluzdqdtAQxlgFnETjD2mz+Jy4
Robert Vienneau
Weatherby" <jweat...@houston.rr.com> wrote:
> "Robert Vienneau" <rv...@see.sig.com> wrote in
> > To summarize, in my notation, A is a scaling factor.
> There is no need for a scaling factor.
Which may have something to with why I explicitly noted that the
scaling factor could be incorporated into the measure of the effective
labor force.
Thus, the Cobb-Douglas production function, as I expressed it, is:
Y(t)/(A2(t) * L1(t)) = ( K(t)/( A2(t) * L1(t) )^alpha
where L1(t) is the actual labor force, A2(t) is the rescaled technology
index, K(t) is the value of capital, and Y(t) is output.
> > I guess Mr. Weatherby's comment about his "own work being much more
> > important to" him is way of acknowledging his presentation of
> > Solow's model was faulty.
Inasmuch as Mr. Weatherby is not acknowledging he was wrong, the
following is silly:
> No it is way of say I am tired of trying to get it through your thick
> skull
> there is no need for a scale factor and the notion you use is strange to
> say
> the least. You refuse to read anything written in the mainstream beyond
> 1960 or acknowledge that economist have been doing work that has nothing
> to
> do with your dated arguments about the Solow model. A model no one takes
> seriously anymore.
Mr. Weatherby, of course, is wrong. One of my points is that, due to
price Wicksell effects, the interest rate is not equal in equilibrium
to the marginal product of capital. Burmeister, a mainstream economist,
explains this in, e.g., a New Palgrave article (not published in 1960)
on Wicksell effects. This observation about price Wicksell effects
allows one to criticize Romer (1990). Romer takes the consumption
good as the numeraire and inserts capital goods measured in
numeraire units into a production function. This is an error.
Mr. Weatherby does not point out anywhere the question of the
stability of warranted paths has been addressed in the endogeneous
growth literature that he reads.
Mr. Weatherby is mistaken when he writes, "the problem with the Solow
model is ..." There is more than one problem with the Solow model.
Solow himself has said one problem is that he did not explore the
stability of warranted paths. He said that in a comment written
after 1960.
> > Mr. Weatherby still does not point out any where the neoclassical model
> > has been shown empirically superior to Goodwin's model. Nor does he
> > point out any where the endogeneous growth models he likes have
> > been shown empirically superior to Goodwin's model.
> Nor have you pointed out any source of credible data that shows a
> shred
> of evidence for Goodwin's model. The calibration Shaikh uses falls victim
> to
> the same problem his estimation of the Solow model does. That is the
> factor
> shares are constant. Another way needs to be used. One way is calculated
> the
> rate of convergence and use the half life to calibrate the parameters.
> > Nor does he thank me for implicitly suggesting a paper topic: address
> > Shaikh's recent paper by demonstrating that the econometric techniques
> > Mr. Weatherby mentions can distinguish between the endogeneous growth
> > models he likes and the Goodwin model.
> Sorry but responses to unpublished papers or papers published outside of
> mainstream that use bad techniques are not a way to make a reputation for
> one's self. I will pass on this idea.
I thank Mr. Weatherby for documenting that some mainstream economists
are socialized to adopt intellectually dishonest and willfully ignorant
norms.
Mr. Weatherby still does not point out anywhere the endogeneous growth
models he likes have been shown empirically superior to Goodwin's model.
> > (I refer to "the endogeneous growth models Mr. Weatherby likes"
> > because there are other endogeneous growth models. For example,
> > John von Neumann produced one, and Joan Robinson's "banana
> > diagram" summarizes another.)
> Which of course are the only 2 you know because your reading of the
> literature stops at 1960 like all the others who bitch and moan about
> mainstream economics. If they would acknowledge anything worthwhile has
> happened in the last 40 and god forbid try to respond to any of the
> current
> issues it would be a different story. Lucas and Sargent would never have
> even been know had the outside of the mainstream methods and analysis not
> applied to a very important problem that was being studied at the time.
> Perhaps these so called alternative economicist should learn something
> from
> them.
Mr. Weatherby is being stupid and ignorant. I think the following are
good, for example:
Esther-Mirjam Sent, "The Evolving Rationality of Rational
Expectations: An Assessment of Thomas Sargent's Achievments".
Cambridge University Press, 1998.
Alessandro Vercelli, "Methodological Foundations of Macroeconomics:
Keynes & Lucas". Cambridge University Press, 1991.
John Weatherby
"Robert Vienneau" <rv...@see.sig.com> wrote in message
news:rvien-F7C4E9....@news.dreamscape.com...
> In article <klxh9.274540$Yd.10...@twister.austin.rr.com>, "John
> Weatherby" <jweat...@houston.rr.com> wrote:
>
> Mr. Weatherby, of course, is wrong. One of my points is that, due to
> price Wicksell effects, the interest rate is not equal in equilibrium
> to the marginal product of capital.
Which is not an assumption that is made in modern theoritical literature.
Again I suggest you read the literature so you know what does and does not
apply.
>This observation about price Wicksell effects
> allows one to criticize Romer (1990). Romer takes the consumption
> good as the numeraire and inserts capital goods measured in
> numeraire units into a production function. This is an error.
>
You are assuming the consumption good is valued in dollars. It is not, there
is no money in any growth model. Read the paper again and see what it says.
You still do not understand Romer and trying to respond to a one line
comment I made. Read it throughly before you criticize it.
By the way why do we assume that profits are discounted by the interest
rate? You seem to think there is a problem here I wonder if you know why the
assumption is made.
> I thank Mr. Weatherby for documenting that some mainstream economists
> are socialized to adopt intellectually dishonest and willfully ignorant
> norms.
>
Oh yes of course. In your normal fashion when argument fails you turn to
inciting the crowd by showing how your out of the normal ideas are being
crushed by the big ugly body of some mainstream thought. There is no
intellectualy dishonest or willfully ignorant about ignoring a paper that
has absolutely nothing to do with the models you are writing. The paper has
nothing to do with the literature. In fact the need for endogenous
technically change was proved by the fact the Solow model and the models
that revived it fell apart when technology was not growing at a constant
and was different across nations. If you had Rodriguez-Claire and Klenow you
would realize there are saying something similar to what Shaikh writes but
for a completely different reason.
The problem is not with the functional form Y= A L^(1-alpha) K^(alpha).
The econometric problem is the exogenity of these variables. There is a
classic endogenity problem with the term A and with the measurement of the
capital stock. Empirically the capital stock is prone to error becuase it is
measured in dollars and that shocks to production affect investment in the
current period which in turn effects the current capital stock. The bit
about technology is what Rodriguez-Claire and Klenow along with Dinopolous
and Thompson address. I see that there is nothing dishonest about not citing
Shaikh when we know that the problem is something quite different then he
what he tries to point out. The problem is not with distribution the problem
but because the equation Shaikh estimates keep capital exogenous, which is
contrary to the Solow model, and they treat technology as exogenous which is
why the estimates fall apart.
> Mr. Weatherby still does not point out anywhere the endogeneous growth
> models he likes have been shown empirically superior to Goodwin's model.
>
Nor can because I have never read Goodwin's model nor do I have any
intention on spending my scarce time on reading something that has nothing
to do with my models or the questions I am addressing. Unlike you Rob I
refuse to comment on papers I have never read.
I can not comment on Goodwin but I can comment on Shaikh's technique. His
evidence falls victim to the endogenity problem.
John
Robert Vienneau
Weatherby" <jweat...@houston.rr.com> wrote:
> "Robert Vienneau" <rv...@see.sig.com> wrote in message
> news:rvien-F7C4E9....@news.dreamscape.com...
> > In article <klxh9.274540$Yd.10...@twister.austin.rr.com>, "John
> > Weatherby" <jweat...@houston.rr.com> wrote:
> > This observation about price Wicksell effects
> > allows one to criticize Romer (1990). Romer takes the consumption
> > good as the numeraire and inserts capital goods measured in
> > numeraire units into a production function. This is an error.
> You are assuming the consumption good is valued in dollars.
It pleases Mr. Weatherby to defend his ignorance by fantasy.
kenneth couesbouc
> kencou...@yahoo.fr (kenneth couesbouc) wrote in
> news:1c9636fc.02091...@posting.google.com:
>
> > James A. Donald <jam...@echeque.com> wrote in message
> > news:<nr89ouss72h89jb1b...@4ax.com>...
> >> --
> >> On 15 Sep 2002 01:40:17 -0700, kencou...@yahoo.fr (kenneth
> >> couesbouc) wrote:
> >> > Whatever the technology of growth, it finaly depends on
> >> > demand. If no one has the money to buy the extra production.
> >> > There is no growth, just deflation.
> >>
> >> If entrepeneurs can produce more than they can sell, then in
> >> due course they cut pricesl, and growth proceeds.
> >>
> > Cutting prices means cutting profits. But profits can't fall below
> > the interest rate.
>
> Yes they can. Business is fundamentally risky, and frequently leads to
> financial losses. However a loan is based on a contract, and the contract
> will always stipulate that a certain amount of interest is to be paid. So
> yes, in a given year, all businesses can lose money, and at the same
> time, all loans can demand a certain interest. (Which is not to say that
> the loans are paid back, but the interest is what is agreed to, not what
> necessarily is paid.)
>
engagements on previous loans, its credit rating goes down and new
loans are hard to find. This seems to be happening more and more
frequently.
> Prices are set by supply and demand. The price will be whatever it needs
> to be to sell the product. You appear to be trying to ignore that.
profits fall below the interest rate, there is no dividend and stocks
loose there value. Unless acounts are boosted by trickery or unless
the company is bailed out by banks or by public funding, it usually
goes out of business. Kenneth
kenneth couesbouc
> --
> kenneth couesbouc:
> > > > Whatever the technology of growth, it finaly depends on
> > > > demand. If no one has the money to buy the extra
> > > > production. There is no growth, just deflation.
>
> James A. Donald:
> > > If entrepeneurs can produce more than they can sell, then
> > > in due course they cut pricesl, and growth proceeds.
>
> kenneth couesbouc
> > Cutting prices means cutting profits. But profits can't fall
> > below the interest rate.
>
> Profits fall below the interest rate with great regularity. In
> the long term they cannot fall below the interest rate, but in
> the long term, supply and demand will always balance.
>
slows down.
> In the short run, when profits are in large part below the
> interest rate, the interest rate will fall.
>
The ups and downs of stocks and bonds do tend to even out profit and
interest. But they can't fall below a certain threshold, at which
point everyone prefers liquidities. Kenneth
John Weatherby
>
I am not defending anything. I notice you have no response to the statements
that show that you have no idea of what you speak.
John
James A. Donald
kenneth couesbouc:
> > > > > Whatever the technology of growth, it finaly depends
> > > > > on demand. If no one has the money to buy the extra
> > > > > production. There is no growth, just deflation.
James A. Donald:
> > > > If entrepeneurs can produce more than they can sell,
> > > > then in due course they cut pricesl, and growth
> > > > proceeds.
kenneth couesbouc
> > > Cutting prices means cutting profits. But profits can't
> > > fall below the interest rate.
James A. Donald:
> > Profits fall below the interest rate with great regularity.
> > In the long term they cannot fall below the interest rate,
> > but in the long term, supply and demand will always
> > balance.
kenneth couesbouc
> And bankruptcies will be filed thirteen a dozen when the
> cash flow
> slows down.
As happens with great regularity, for example, right now.
> > In the short run, when profits are in large part below the
> > interest rate, the interest rate will fall.
kenneth couesbouc
> The ups and downs of stocks and bonds do tend to even out
> profit and interest. But they can't fall below a certain
> threshold, at which point everyone prefers liquidities.
> Kenneth
But since everyone has uses for capital, should they fall near
that threshold, lots of people will find reasons to invest.
--digsig
James A. Donald
6YeGpsZR+nOTh/cGwvITnSR3TdzclVpR0+pr3YYQdkG
B+XDczgc8Nu9kZKhkCxxt78BUjYSZOnPmvAWeB70
4MRt3peeFjvF1uN6kgHKi8zTOEC/zupGcqIaiMK7m
Constantinople
I didn't say that businesses who don't profit can't respect their
engagements on previous loans. They can do so by selling parts of the
company.
The interest rate meanwhile is not fixed. If enough businesses cannot
afford a certain interest rate, that is just another way of saying that
demand for loans goes down. Interest follows supply and demand just like
anything else. Interest will reach the point at which the amount of money
that people seek to borrow at that interest rate will equal the amount of
money that people seek to lend at that interest rate.
>> Prices are set by supply and demand. The price will be whatever it
>> needs to be to sell the product. You appear to be trying to ignore
>> that.
>
> I can't help but agree with you on how prices are set. But if
> profits fall below the interest rate,
It won't do that long-term, because the interest rate depends on the
profits. It will often do that for particular companies to an extent that
they go out of business, but that's a good thing - that's competition.
There are winners and losers in a competitive market.
> there is no dividend and stocks
> loose there value. Unless acounts are boosted by trickery or unless
> the company is bailed out by banks or by public funding, it usually
> goes out of business.
Businesses are supposed to go out of business on a regular basis. That is
the health of capitalism. It's capitalism taking out the trash.
kenneth couesbouc
All I can add to this diagnosis is that there's a lot of trash
around at the moment. It may be capitalism itself which is trashy.
And as usual public funding will bail it out. Hard times ahead.
Kenneth
kenneth couesbouc
> --
> kenneth couesbouc:
> > > > > > Whatever the technology of growth, it finaly depends
> > > > > > on demand. If no one has the money to buy the extra
> > > > > > production. There is no growth, just deflation.
>
> James A. Donald:
> > > > > If entrepeneurs can produce more than they can sell,
> > > > > then in due course they cut pricesl, and growth
> > > > > proceeds.
>
> kenneth couesbouc
> > > > Cutting prices means cutting profits. But profits can't
> > > > fall below the interest rate.
>
> James A. Donald:
> > > Profits fall below the interest rate with great regularity.
> > > In the long term they cannot fall below the interest rate,
> > > but in the long term, supply and demand will always
> > > balance.
>
> kenneth couesbouc
> > And bankruptcies will be filed thirteen a dozen when the
> > cash flow
> > slows down.
>
> As happens with great regularity, for example, right now.
>
regularity. We are at the breaking point of the long wave.
> > > In the short run, when profits are in large part below the
> > > interest rate, the interest rate will fall.
>
> kenneth couesbouc
> > The ups and downs of stocks and bonds do tend to even out
> > profit and interest. But they can't fall below a certain
> > threshold, at which point everyone prefers liquidities.
> > Kenneth
>
> But since everyone has uses for capital, should they fall near
> that threshold, lots of people will find reasons to invest.
>
The use of capital is universal. But investors are only concerned by
the return on their investment. Hence the prohibitive threshold of
2/2.5%. However we are probably in for a bout of inflation which will
push up the rates of interest. I'm forecasting huge issues of treasury
bonds next year. In an attempt to get cash flowing again and prop up a
failing system. I don't expect it to be a success. Kenneth
Constantinople
>> Businesses are supposed to go out of business on a regular basis.
>> That is the health of capitalism. It's capitalism taking out the
>> trash.
>
> All I can add to this diagnosis is that there's a lot of trash
> around at the moment.
Yes. There have been lots of investments that turned out to be a complete
waste of time and money. C'est la vie. You can't know the future.