Tuesday 15 May 2018

Predictions and Economic Debate.

Before going into matters, I want to register my protest against the massacre perpetrated by the Israeli racist government of Benjamin Netanyahu against Palestinian demonstrators.

I also want to protest against the jaw-dropping hypocrisy of Australian Prime Minister Malcolm Turnbull and Foreign Minister Julie Bishop, who as always are ready to spin excuses for the inexcusable.

You don't speak for me. I don't condone crimes against humanity.


The Job Guarantee MMTers promote seems to be getting some public attention in the US. Not only that, recently Prof. William “Bill” Mitchell and co-author Thomas Fazi had an article in the popular Jacobin Magazine.

Personally, I can see the attraction of a JG, and I myself am not immune to it, although as a Marxist I have doubts about its political feasibility and its longer-term implications. But I am no expert.

Neither is The Sandwichman (aka Tom Walker), which doesn’t mean he can’t, without dismissing the conception, ask some quite relevant questions (“Job Guarantee versus Work Time Regulation”; “Job Guarantees, Collective Bargaining and the Right to Strike”). Commentator Calgacus offered answers, but a more academic approach, by the leading MMTers would not be out of place, particularly for those less than imbued in the details.

From the other side of the pond, Chris Dillow has his own observations about the JG. I think they are reasonable. That’s how he concludes:
“What we have there, then, are two different conceptions of a JG. On the one hand, it might be a policy which helps capitalism function better. But on the other, it might be a form of transitional demand – a policy which whilst fulfilling human needs is one that cannot actually be sustainably adopted by capitalism and is instead a stepping stone towards socialism.
“I’m honestly not sure which it is.”

Another debate going on in the backdrop is the endlessly inconclusive one about the merits or lack thereof of neoclassical economics. You know the drill: someone writes something against neoclassical economics (the list may vary somehow, but inevitably includes its failure to predict the GFC/housing bubble crash), a bunch of people gang up against him/her. Typically, neither side covers itself in glory.

Same old, same old.

Well, not quite. This time, Jason Smith did something creative. He turned the table on the critics: he read Dirk Bezemer’s well-known papers claiming that some heterodox economists predicted the housing collapse and the ensuing recession. (Full disclosure: I myself have quoted those papers and I used to be a bit of a Steve Keen fanboy). Smith could not find the quotes attributed to Wynne Godley, Michael Hudson, Steve Keen, Jakob Brøchner Madsen, and Jens Kjaer Sorensen.

Bezemer replied to Smith: the quotes, he explained, were not verbatim statements copied and pasted, as it were, from the works of the mentioned authors; instead, they were Bezemer's summation of their views. The quotation marks, in other words, were unwarranted. But the summation itself, Bezemer says, was accurate.

In the particular case of Godley, Bezemer added:
“There is no problem in the fact that Godley et al note the collapse is already underway. That does not detract from their correct projection of consequences of the crisis that was underway, which at that time many still saw as a bad but local housing market crisis. It is the perception of the macro consequences that makes their analysis remarkable, don’t you think?”
So, Godley et al did not predict the housing bubble collapse, but the consequences of it: once the fire had started Godley et al, unlike others, understood things would get burnt. Fair enough.

In the case of Steve Keen, Bezemer writes in his response to Smith:
“Steve Keen’s projection (like Godley’s) was made on the assumption of unchanged policy. Australia however implemented a housing credit expansion program and suffered a major growth slowdown which fell only just short of a technical recession (one quarter negative growth, not two). So Keen’s assessment of recession was overtaken by later policy facts, as can always happen; but his reasoning at the time was correct and consistent with the near-recession.”
Again, fair enough. But let’s call a spade a spade: prediction, not projection. All predictions, as Bezemer surely agrees, are contingent upon nothing happening to negate them. That’s little more than a tautology: it goes without saying. Or, to put things plainly, Keen's prediction failed ten years ago because the government made him fail.

The question Bezemer doesn't seem to consider is what’s the point of making predictions every other week if they come with a built-in get out of jail free card? I mean, other than getting some free publicity?

Like this: Steve Keen in August, 2016, as I noted then.


We're in mid 2018. It's been almost two years since that interview and one since this review. What explains that now?


Given the way that second debate goes on and on, shedding little light but generating plenty of heat, Smith deserves recognition for his contribution. I don't expect it should put an end to it, but at least it should reduce some of the hype. Unfortunately, it took too long for someone to come up with that idea.

Had Smith thought of that earlier, it would have spared us a good deal of “buyer’s remorse”.


Speaking of predictions. Ross Wolfe, who has kept himself well clear of that debate, has some very frank and thought-provoking reflections on prediction, history, and Marxism.

1 comment:

  1. Hi, just noticed you noticed my ranting. Dillow basically has it right. But what the JG does is both of those things. It makes capitalism function better. And it is a transitional demand. I find it a bit odd to have to argue this to Marxists. A Job Guarantee was considered a very important example of "transitional demand" by old-fashioned Marxists like Trotsky etc. Marx himself basically said that once there was a JG, the game was up - for capitalism. And capitalist supervillains and their cheerleaders have said the same through the ages.

    To think that it doesn't make capitalism work better, e.g. worries that it might be Ponzi-ish or inflationary - is farfetched, preposterous - against common sense and Marxist and many other economic schools of thought. Not to speak of an enormous amount of real world experience that would be conclusive in any other field. On its political feasibility, well for a while I have been saying that the country it is most likely to take off in first is my own, the US, and that seems to be coming true; I'm curious as to your thoughts on political feasibility.