In 2007 Naomi Klein got quite a bit of attention and mostly favorable comment for her book, Shock Doctrine. It promulgated that global elites used periods of crisis around the world to force damaging neoliberal policies derived from the Chicago School and Washington Consensus upon unhappy populations that suffered greatly as a result. This was "shock therapy" that was more like destructive electroshock than any sort of therapy. There is a lot of truth to this argument, and it highlighted underlying ideological arguments and outcomes.
The argument largely seems to hold for the original poster boy example in Chile with the Pinochet coup against the socialist Allende regime. A military coup replaced a democratically government. Whiole Chlle was experiencing a serious inflation, it was not in a full-blown economic collapse. The coup was supported by US leaders Nixon and Kissinger, who saw themselves preventing the emergence of pro-Soviet regime resembling Castro's Cuba. Thousands were killed, and a sweeping set of laisssez faire policies were imposed with the active participation of "Chicago Boys" associated with Milton Friedman. In fact, aside from bringing down inflation these rreforms did not initially improve economic performance, even as foreign capital flowed in, especially into the copper industry, although the core of that industry remained nationalized. After several years the Chicago Boys were sent away and more moderate policies, including a reimposition of controls on foreign capital flows, the economy did grow quite rapidly. But this left a deeply unequal income distribution in place, which would largely remain the case even after Pinochet was removed from power and parliamentary democracy returned.
This scenario was argued to happen in many other narions, especially those in the former Sovit bloc as the soviet Union disintegrated and its successor states and the former members of the Soviet bloc in the CMEA and Warsaw Pact also moved to some sort of market capitalism imposed from outside with policies funded by the IMF and following the Washington Consensus. Although he has since expressed regret for this role in this, a key player linking what was done in several Latin American nations and what went down after 1989 in Eastern and Central Europe was Jeffrey Sachs. Klein's discussion especially of what went down in Russia also looks pretty sound by and large, wtthout dragging through the details, although in these cases the political shift was from dictatorships run by Communist parties dominated out of Moscow to at least somewhat more democratic governments, although not in all of the former Soviet republics such as in Central Asia and with many of these later backsliding towards more authoritarian governments later. In Russia and in many oothers large numbers of people were thrown into poverty from which they have not recovered. Klein has also extended this argument to other nations, including South Africa after the end of apartheid.
Having said all that it must also be recognized that in some parts of the book Klein overstated her argument even to the point of including outright false informaation. The casse that really sticks out in thie regard is Poland, arguably especially important as it was the place where the term "shock therapy" was first used. As it turns out, many observers have an inaccurate perception of what happened there, with Klein's account not helping. It is understandable that many might be misled given that it was the Polish finance minister during the worst of the crisis and shock in 1990-91 when economic output fell sharply and unemployment rose, Leszek Balcerowciz, who coiined the term and said that it was being applied in Poland. But this turns out to be an exaggeration, with much of what he wanted with the support of Jeffrey Sachs and the IMF at the time not happening due to an election in 1993 that threw out the shockers and mitigated the policies substantially. The upshot ultimately was that Poland ended up performing better than any other of the former socialist transition economies of the former Soviet bloc, becoming in fact one of the best economic performers in the entire continent of Europe, the only nation there not to go into recession in 2009 and now further ahead than any of the others economically. While inequality and unemployment are somewhat higher than in 1989, they are not dramatically so while many other economic variables are strongly better. The unemployment rate in August 2018 was 3.4%, higher than the less than 1% of 1989 but lower than in the US or most other European nations. The Gini coefficient is now somewhere in the .32 to .34 range, higher than ..25-.28 of 1989, higher than in Sweden or the Czech Republic but about the same as in Germany and much lower than in Russia, the US, or China.
The vast majority of the population is unequivocally better off economically now than in 1989. Comparing 2013 to 1989 as a ratio, real per capita GDP in Poland was 2.98, higher than any Soviet bloc transistion econoomy aside from Turkmenistan (whose data is unreliable), wih Russia at 1.44, the Czech Republic at 1.68, Hungary at 2.17, and Moldova at 0.82, now Europe's poorest economy falling below Albania at 2.55. Poland suffered an inflation rate of 6905 in 1989 but this is was brought down fairly rapidly and is now barely above zero. It had the least level of graft of any of these economises as of 2013, There has been major environmental cleanup, especially in its southwestern corner, formerly part of the "dirty triangle," one of the most polluted locations ever on this planet. The rato of measured happiness between 2013 and 1989 is 1.44, higher than in any of the other transition nations.
A particularly controvrsial issue is that of the poverty rate in Poland, for which there are competing meassures. Depending on the measure, the poverty rate in the 1980s was probably in the 5-10% range. In 2012, 6.7% of the population was below a living wage level, while alternative measuures had it at around 11% or even as high as 16%. The poverty rate certainly rose sharply as did income inequality in the crisis years of 1990-91, but then fell and rose again before falling aftrwards. A low point after the transition was 2003, the year before Poland entered the EU and began receiving substantial agricultural subsidies that helped the poor largely rural southeastern region long marked by small unproductive farms (Poand had mostly private fram ownership throughout the communist period), with by one measure thr poverty rate possibly getting as high as 24%.. This is a point where Naomi Klein's analysis basically went completely off the rails. Her story on Poland basically stops with 2003, which can be understood given her book came out in 2007. But she claims a poverty rate in 2003 of 59% (pp. 241-242), and declares strongly that the economic quality of life in Poland had completely collapsed. This is simply false, a wild exaggeraton,
So, how did Poland end up doing so well, actually one of the best performing economies in Europe over the last quarter century? Crucial is that in fact it did not follow through on important parts of its supposed shock therapy, although most people (including Naomi Klein) do not seem to know this. Very important was that it did not undo its generous social safety net, especially its generous pension system. This was a central issue in the 1993 election, with both Blacerowicz and Sachs unhappy about this outcome. I remember well the 1994 ASSA convention at which Sachs gave a major speech in which he basically whined about this election outcome and essentially accused the Polish people of being a bunch of spoiled brats for wanting to hang onto their suppposedly overly generous pension system. I note that he has since changed his tune and now recognizes the stabiliing and humane nature of maintaining a decent social safety net in these economies.
The other area where Poland did not follow through on its shock policies involved privatization, which was supposed to be rapid and complete. It was not and has never been completed. Indeed, today Poland has the highest rate of state owneed production in its economy at around 30% of GDP of any OECD economy, another little known fact. Privatization was resited, especially because of fear of German companies taking over Polish firms, and what privarization that happened tended to be gradual, with a laege part of the private sector consisting of brand new firms owned by Poles, arguably the most dynamic part of the economy.In this areas, Poland actually resembles China substantially, a comparison made by a number of careful observers. The current populist government of the Law and Justice Party has if anything tighteened restrictions on foreign ownership of banks and land, if not having engaged in any outright renationalizations as we have seen in Russia and Hungary.
Given that much of the shock therapy program did not happen or did not do so shockingly, where was there shock therapy. This did indeed happen with respect to macro policy, driven by the problem of getting the incipient hyperinflation that had developed by 1989 in largely market socialist Poland under control. This did involve sharp pain with falling output and rising unemployment and poverty in 1990-91, but Poland was the first of the Soviet bloc tranition economies to turn arond, with most still having declining output in 1994 and quite a few until well after that. The pain in Poland was sharp, but it was short, and the onger run state has outperformed the others and put Poland far above where it was in 1989.
The politics of all this has been quite complicated and involved some important and curious twists and turns. From 1989 on there has been a broad "left-right" split with probably the most important constant in this being attitudes towards the Roman Catholic Church in famously devout Poland, with being pro-Church being on the right, with people coming out of the old Commuinst Party veing on the left. But the positions on economic policy regssrding these groups have changed over time. in the 1989-93 period, the supporters of the shock therapy were on the right, although including the workers of the Solidarity movement. However, by now the rightist Law and Justice Party that is in power and attacks its rivals for being leftover communists and also strongly opposed Russia (in contrad to the populist rightist regime of Orban in Hungary who is friends with Putin), has in it populism become more the defender of both the social safety net and and supporting the state-owned enterprises compared to the supposedly crypto-communist left, now out of power.
Needless to say, there is much discussion about how it is that Poland has been by so many measures so economically successful, yet since 2015 has cmoe to be ruled by a reactionary populist party that has beeen restricting media and judicial independence, although it may be that it is going to hold back on some of this compared to Russia, Hungary, and Turkey. I think two things are important. One is that although Poland avoided going into recession in 2009 (largely due to staying out of the euro and also being strongly linked into the supply chains of neighboring Germany), its growth rate has slowed in more recent years while remaining positive, something happening throughout all of Eastern Europe, which has stopped catching up to Western Europe. And the second is that the frame of reference has changed. Whereas Poland has done well compared to its formerly socialist neighbors, the population now ccompares rhemselves to those in Western Europe, especially nighboring Germany, whom they are clearly well behind. Maany young Poles have left for the West, with a cliche in the Brexit debates in UK being about the supposed problem of "the Polish plumber" coming in to take away British jobs. The Poles may be much happier than they were 30 years ago, but the bloom is off the rose as the transition has been long over. Where they will end up is uncleat.
A final irony is that for all his advocacy in 1989-93 (and later as Director of the Polish central bank) for the hardline version of shock therapy that many think happened in Poland, Balcerowicz himself at one point advocated something pretty much like what came to pass, a gradual privatization and maintaining most of the sociaal safety net while advocating shock monetary policies to bring inflation under control. This was before the transition started and Communist Party was still in control. Indeed, I met him in this period and heard him advocate pretty mch this approach, which he also advocated in print. It was 1988 and I was teaching summer school at the University of Wsconsin-Madison when he showed up in town as part of a general wandering around the US tlaking to people and giving talks. We had some beers on the famous Union Terrace there by beautiful Lake Mendota. I confess thinking him a naive dreamer with all his plans for Poland that at the time seemed so unlikely and utopian. But that was one of those lessons for me: one should never discount a wandering prophet wihout position. He can end up running the show and making at least some of his dreams become reality.
Poland, and China, both followed a more "gradualist" path: keep the SOE dinosaurs alive to maintain some employment, and wait for the private sector to grow and sop up the labor force from state to private sectors. Taking it more slowly worked better. That said, don't understate how badly local elites screwed things up (often enough for their own gain) elsewhere. There was also getting governance right before privatizing full-blown; if you get it the other way around, you're asking for distributional conflicts.
The funny thing is that because of all the rhetoric about "shock therapy" coming out of Balcerowicz and others in connection with Poland, many observers simply did not realize that Poland actually pursued a seriously gradualist policy in several important areas. The usual comparison in the early 90s was with Hungary, generally identified as the "gradualist" nation and with whom comparisons with China were also made. In some respects the two of them had it easier than the rest of the Soviet bloc in that both had largely relaxed command central planning in favor of market forces, meaning they had fewer changes to make and it was easier to be gradualist. Hungary also pursued a fairly gradualist privatization, although more open to foreign investment and takeovers than Poland. Hungary did have collectivized agriculture, but it was actually more productive than the small private plots in Poland, which were (and still are to some extent) a real problem.
The other major difference is that while both were basically market socialist by 1989, Hungary had managed to avoid getting a serious inflation in contrast with Poland. So they were able to carry out a non-shock gradualist macro policy in contrast with Poland in that area, and as my post noted, it was in the macro policy area that the "shock therapy" was really carried out in Poland. As it was Hungary probably had the shallowest decline in the early 90s of any of the Soviet bloc economies, shallower than Poland, but it took longer to stop declining and turn around than did Poland, still having declining GDP in 93 and 94. Both contrast with Russia and other Soviet bloc economies that arguably had more shockingly shock therapy policies with their sudden, often highly corrupt, privatizations, as well as wild outbreaks of hyperinflation after they ended the price controls associated with command central planning. In the case of Poland, its inflation peaked prior to the ending of socialism, not right after it.
"Shock therapy" as a recipe for dealing with hyperinflation, if not by that name, was first applied by Sachs in Bolivia in the 1980's. It was 1st applied in Europe in the former Yugoslavia at the end of 1988, with disastrous results. If Poland was the exception compared to all the other cases, it was because of the unusual degree of political solidarity among the population exiting communism and the fact that Solidarity, as a working class movement, limited the extent to which the full "therapy" could be implemented. Also IIRC, Poland unusually had 1/2 its foreign debt forgiven by the West. Hungary, which was much further along in marketization since Kadar, received no such largess. I think the fair conclusion should be that institutions matter to the effectiveness of economic policies rather than it simply being about markets as an institutionless mathematical construct.
I'm not a fan of Naomi Klein, who's just a journalist and who I find often muddle-headed. But her "shock doctrine" is not the same as "shock therapy". And it does have a fair amount of applicability. Just consider the current plight of Puerto Rico or the fantasies of the hard Brexiteers.
Econogenics in action
Comment on Barkley Rosser on ‘How Shocking Was Shock Therapy?’
Barkley Rosser reports: “Very important was that it [Poland] did not undo its generous social safety net, especially its generous pension system. This was a central issue in the 1993 election, with both Blacerowicz and Sachs unhappy about this outcome. I remember well the 1994 ASSA convention at which Sachs gave a major speech in which he basically whined about this election outcome and essentially accused the Polish people of being a bunch of spoiled brats for wanting to hang onto their supposedly overly generous pension system.”
Note first of all that the organization of the Polish economy is the business of the Legitimate Sovereign of Poland. The economic stand-up comedian Jeffrey Sachs does NOT by any stretch of the imagination come close to something resembling a Legitimate Sovereign. So, his whining at the ASSA convention about the Polish people is a non-event, except perhaps for the retarded members of the American Economic Association.
What economists have not fully realized to this day is that they have no mandate to dabble in politics because (i) this violates the principle of the separation of politics and science, (ii) they lack the true theory of how the economy works.
That economist in their utter incompetence make matters worse is a regularly repeated experience throughout history: “Late in life, … Napoleon claimed that he had always believed that if an empire were made of granite the ideas of economists if listened to, would suffice to reduce it to dust.” (Viner)
To this day, economists do not know how the economy works. Employment Theory and Profit Theory are provably false.#1, #2 The belief that economists can make a contribution to social welfare is patently absurd. It is just the opposite.#3
Well-informed people know by now that economists are not trustworthy scientists but stupid/corrupt agenda pushers.#4
#1 Macro for dummies
#2 Rethinking the Profit Law
#3 How to minimize econogenic outcomes
#4 Trust in economics as a science?
Terrific and sorely necessary essay.
Generally agree. Out of the disaster of Yugoslavia, at least Sovenia came out pretty well, but that is a very complicated situation and place, with the conflicts there (see Serbia and Kosovo and Bosnia) still going on. The shock doctrine certainly focused on shock therapy but also went and goes well beyond, and I agree is relevant to the awful situation in Puerto Rico today.
It is simply ridiculous to say that econoists should say nothing about politics. What makes you think political scientists are so smart? As it is, it seeems you think economists should not even say anything about economics unless they buy your vacuous garbage theory. The joke is that you do occasionally make actual empirical claims, always absolutely. Those are simply not generally true. Example: relation between wages and employment. Sure, sometimes higher wages are associared wirh higher employment, but sometimes not. Very complicated, with you not remotely getting any of that, just repeating your same old nonsense. Pathetic.
You say: “Example: relation between wages and employment. Sure, sometimes higher wages are associared wirh higher employment, but sometimes not. Very complicated, with you not remotely getting any of that, just repeating your same old nonsense.”
After 200+ years of research, this is what the representative economist has to say about one of the most fundamental relations of his subject matter. And he does not even realize that this absolutely vacuous statement is the open declaration of scientific bankruptcy.#1
As Feynman made clear: “By having a vague theory it is possible to get either result. ... It is usually said when this is pointed out, ‘When you are dealing with psychological matters things can’t be defined so precisely’. Yes, but then you cannot claim to know anything about it.”
And that is the simple fact of the matter, economists do not know anything about how the economy works. It’s all wish-wash. From this, though, follows that economists are not qualified to give economic policy advice.
“In order to tell the politicians and practitioners something about causes and best means, the economist needs the true theory or else he has not much more to offer than educated common sense or his personal opinion.” (Stigum)
Economists do not have the true theory. Their good luck is that in the political realm scientific qualities are not in great demand but propaganda and entertainment qualities are.
So, at an early stage in the development of their discipline, economists threw scientific principles out of the window and started think-tanking for some businessman/billionaire or some three-letter government agency. The Cowles Foundation for Research in Economics is one prominent example of this and it produced General Equilibrium Theory and many Nobel Laureates.
It is common knowledge by now that GE is one of the worst scientific failures of all time. However, what arrived at the general public is the impression that it has been rigorously proved by the finest thinkers with the most advanced mathematical tools that the market economy is a stable system and produces maximum welfare.
The Cowles Foundation is only the tip of the iceberg. It is unknown at present to which degree economics has degenerated to mere journalism/propaganda/agenda-pushing. It is a bad omen, indeed, that fake scientists like Paul Krugman are considered as thought-leaders.#2
If there is still some scientific spirit around in the profession, you have not been blessed with it. That much is absolutely certain.
#1 For details of the big picture see cross-references Employment/Phillips Curve
#2 Mr. Keynes, Prof. Krugman, IS-LM, and the End of Economics as We Know It
Thee real issue with shock therapy in Russia wasn't economics. It was politics. The Gaidar team wanted, first and foremost, to bury the command economy, and shock therapy promised best to deliver that. David Hoffman notes all this is his book on the oligarchs. The wager on the market was more taking advantage of an open window to destroy what those reformers found evil.
So yes, there's a lot that was missed back then, and ignored now, since post-socialism seems relegated by too many social scientists to "history."
This post was about Poland. My only comment on Russia was to basically say that Klein was right. Your comment seems oversimplified. Why is getting rid of the command economy not about economics but only about politics? You sound almost as vacuous as Egmont with this declaration.
The bottom line here is that comparative economics is ultimately political economy. It is not just politics; it is not just economics. It is political economy, and it predares both political science and economics.
Barkley, I'd leave you a more detailed comment about Russia (and you'd find out we are much in agreement), except your last two posts reveal pretty convincingly that you don't want to engage. You prefer to dictate (or rant). But watching your comments previously, this should not be a surprise. (By the way, you know precious little about post-socialism, as past posts have also revealed. Your hubris does you little good.)
And I'll remain "anonymous," so that you can invoke your equivalent of the fallacy of appeal to authority. Would also spare my JMU colleagues from your misplaced ire.
You are a disappointment, and in a way, no better than Egmont.
I woudd hope that you understand that when you ID yourself as you have you lump yourself in with worthless garbage who has also called themselves this, such as the individual who made a big fuss here recently claiming that any criticism of Naomi Klein was "vicious sexism." As far as I am concerned you a, re that individual.
If you want me to take you seriously and actually have a conversation with you, then please provide an ID, even if it is some dumbass fake one. Are you ashamed to actually debate with under your own name?
Tobin said: “We economists have all learned, and many of us teach, that the remedy for excess supply in any market is a reduction in price.”
You say: “Sure, sometimes higher wages are associared wirh higher employment, but sometimes not.”
The macroeconomic Employment Law states unambiguously: “Overall employment INCREASES if the average wage rate W INCREASES relative to average price P and productivity R.”#1
The Employment Law consists of measurable variables and is testable.
After 200+ years of blather, the representative economist does not know one of the most fundamental relations of his subject matter. Because of this, his policy advice is counter-productive.
Economists are a hazard to humanity. Economic crises are econogenic. The difference between iatrogenic and econogenic is that doctors are sued but economists are not.
#1 No doubts about wage-led growth
firstname.lastname@example.org: Though I think all here could do with more calm and kindness, I came across this phrase and word, which so aptly expresses your complaint above I couldn't resist mentioning it:
"Rail away, my little libelous anonymuncule."
I plan to use it when the right situation arises. :-)
Funny how you declare something is an absolute "Employment Law," but then admit that it is "testable," which suggests the possibility that it might not be true. As a matter of fact, the relationship between wages and employment is one that has had so much empirical testing that I have lost count, and, sorry, but there is no agreed upon conclusion, with this getting into all sorts of messes over data ets and econometric techniques, and on and on.
A closely related, although not identical, matter is that of the impact on employment of raising the minimum wage. Standard textbooks have long claimed that raising the minimum wage tends to lower employment, but then a couple of decades ago Card and Krueger did a study where they found that in one particular case doing so may have actually increased employment at least a bit compared to not doing so. That triggered a massive debate and round of studies since, about which some here have strong feelings, but again I shall simply note that many have disputed Card and Krueger's findings, including some criticizing how they did their study itself, while others have defended them or found similar results elsewhere (or in some cases, not much impact on employment either way of raising the minimum wage). And this highly politicized debate goes on without any clear resolution or conclusion.
If you do not want to get into the swamp of debating about data sets and econometric techniques, Egmont, which I do not think you wish to do, then you should admit that your "Law" has been tested and not clearly found to be true or false in general. Sorry.
A funny economist you are, indeed. You are very vague about the all-decisive relationship between wage rate and employment but you are absolutely certain about MbS’ role in the Khashoggi affair: “He is guilty guilty guuilty”.
It is quite obvious that you are not a qualified scientist but some retarded political agenda pusher.
While the scientist seeks a clear true/false answer to a given problem, the political economist tries to keep everything in the bottomless swamp of inconclusive blather. Inconclusiveness is what Popper called an immunizing stratagem because: “Another thing I must point out is that you cannot prove a vague theory wrong.” (Feynman) This methodological message was not lost on fake scientists. They deliberately keep everything in the swamp of inconclusiveness where “nothing is clear and everything is possible” (Keynes).
You argue: “Funny how you declare something is an absolute ‘Employment Law,’ but then admit that it is ‘testable,’ which suggests the possibility that it might not be true. As a matter of fact, the relationship between wages and employment is one that has had so much empirical testing that I have lost count, and, sorry, but there is no agreed upon conclusion, with this getting into all sorts of messes over data ets and econometric techniques, and on and on.”
Funny that you seem to never have heard of Popper’s: “A theory that is non-refutable is not scientific.”#3 So, testable is a quality criterion that every theory must meet.#4
The Employment Law is a macroeconomic relationship. What indeed has been tested ad nauseam is microeconomic relationships. The inconclusive results of this wrong approach say NOTHING about the validity of macroeconomic relationship which states unambiguously: “Overall employment INCREASES if the average wage rate W INCREASES relative to average price P and productivity R.” This tells one that wage-cutting was the wrong policy in the Great Depression. Thank you, economists!
So why do you not simply try to empirically refute the macroeconomic Employment Law?
I see, your main job as scientist and economist is foreign policy and your most urgent task is to punish MbS: “I think being prevented from becoming the King of Saudi Arabia will be for him the worst punishment.”
That’s academic economics after 200+ years of “scientific” research.
#1 John Hicks, fake scientist
#2 And the answer is NCND ― economics after 200+ years of Glomarization
#3 See summary charts
#4 Go! ― test the Profit and Employment Law
Outside of KSA, the only person claiming MbS is not guilty of ordering the murder of Khashoggi is Donald J. Trump.
The people who push definite answers on the wage-employment relation are the people with political agendas. I have strong political views, Egmont, but I also have a strong respect for facts. As it is, it is hard to get a clean test of what you claim is your Law, although it was previously formulated by Keynes, whom you mostly disparage. The Law depends on lots of things you do not mention that must be accounted for, and it is hard to make a clean test because they are hard to clearly account for. Nobody sais economic science was easy.
BTW, if your macro version of the law is a true testable law, then tell us about all the tests that have been done that verify it, making sure that there are none that question those tests.
Also, btw, Egmont, I am not at all interested in pursuing a debate here over your "Law." We have had more than enough of you taking over threads here to repeatedly spout your stuff. But I am curious to see if you actually can name any empirical studies that might supposedly support your argument, anything, however cherry picked. m You never have.
You say: “As it is, it is hard to get a clean test of what you claim is your Law, although it was previously formulated by Keynes, whom you mostly disparage.”
The point at issue is neither “my Law” nor the psychological profiling of Keynes. Economics is about how the economy works and not gossiping about economists.
The point at issue is that Keynesian macroeconomics is provably false. More precisely, Keynes’ Profit Theory is proto-scientific garbage. Because the foundational concepts profit/income/saving are ill-defined the whole analytical superstructure including employment theory is false.#1, #2
To summarize that Keynes was an incompetent scientist who did not understand the foundational concept of his subject matter ― profit ― is a statement of fact.
But Keynes is history and the actual scientific embarrassment is that After-Keynesians have not spotted Keynes’ inexcusable blunder to this day.
It is NOT a disparagement to summarize that economics is a failed/fake science and that contemporary economists are incompetent scientists. That economists are stupid/corrupt agenda pushers since Adam Smith/Karl Marx is a historical fact.
Your posts just prove the rule.
#1 Keynes’ Employment Function and the Gratuitous Phillips Curve Disaster
#2 For more details see cross-references Keynesianism
You say: “BTW, if your macro version of the law is a true testable law, then tell us about all the tests that have been done that verify it, making sure that there are none that question those tests.”
In your economic incompetence, you have not realized that the macroeconomic version of employment theory is embodied in the Phillips Curve. The Phillips Curve has been thoroughly tested and refuted. This is an indirect corroboration of the axiomatically correct Employment Law.
As it happens, there is a new San Francisco Fed study out and I commented on the issue. See
False economic theory makes bad economic policy
Comment on Mish Shedlock on ‘Yet Another Fed Study Concludes Phillip’s Curve is Nonsense’
Mish Shedlock summarizes: “Proponents of the Phillips Curve keep looking for ways in which it works. Yet, another study concludes it doesn’t. The Phillips Curve, an economic model developed by A. W. Phillips purports that inflation and unemployment have a stable and inverse relationship. This has been a fundamental guiding economic theory used by the Fed for decades to set interest rates. Various studies have proven the theory is bogus, yet proponents keep believing.”
The Phillips Curve (better: bastard Phillips Curve) is the centerpiece of standard employment theory. Economists get employment theory wrong for 200+ years. The Phillips Curve has always been the highly visible landmark of economists’ scientific incompetence.
“In order to tell the politicians and practitioners something about causes and best means, the economist needs the true theory or else he has not much more to offer than educated common sense or his personal opinion.” (Stigum)
The materially/formally inconsistent Phillips Curve has to be replaced by the correct macroeconomic Employment Law. For details see
• NAIRU, wage-led growth, and Samuelson’s Dyscalculia
• Keynes’ Employment Function and the Gratuitous Phillips Curve Disaster
• NAIRU and the scientific incompetence of Orthodoxy and Heterodoxy
• Full employment, the Phillips Curve, and the end of Gaganomics
Sorry, Egmont, but refuting the Phillips Curve does not prove your "Law," and the debate over the PC is ongoing anyway. I shall say no more on this thread. Bye for now.
Oh, I will congratulate you for actually mentioning a specific empirical study. Congratulations!
Let us put things into perspective.
In my 2012 working paper, I showed in detail the defects of the bastard Phillips Curve and the standard employment theory.#1 Relating to a recent San Francisco Fed study, a commentator summarized: “Various studies have proven the theory [Phillips Curve] is bogus.” This is a corroboration of the critical part of my working paper.
In about the same period, you wasted your time reading the international press and doing some foreign policy agenda pushing, e.g. “MbS Must Go”.
You are still under the illusion that dabbling in politics is the right and duty of an economist.
To this day, your Profit Theory and Employment Theory is false. This, though, does not matter in an environment with rather low scientific standards.
Your academic colleague and MMT agenda pusher Stephanie Kelton is currently actively deceiving the general public.#2 What about a “Kelton Must Go” from Barkley Rosser?
#1 Keynes’ Employment Function and the Gratuitous Phillips Curve Disaster
#2 Stephanie Kelton’s legendary Plain-Sight-Ink-Trick
I have not heard of Stephanie Kelton oredering people to be killed and then chopped into pieces with bone saws or ordering thousand of bombing raids on innocent civilians that have killed thousands of innocent civilians. If I do hear of such things, I shall without doubt put up a post declaring that she "must go."
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