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Friday, December 7, 2012

Add money and stir

Macro-economics seem largely devoted to coming up with justifications for why micro-economics don't apply to certain aggregates. I’m not sure why people who agree you can’t mess with the supply-demand curve for bread think you can with money and credit. But then, I’m not an economist and they assure me they know what they’re doing.

Exhibit A.

Here's the article at The American Conservative that's got academic economists like Scott Sumner so upset - How the Rich Rule - and my comment at TAC (spoiler - the befogged readers at TAC don't get it either).

'Monetary policy' is important; the elites know how important, hence the uproar whenever some nobody like Sheldon Richman starts criticizing the Great And Good Fed. Please click the links for some contrarian perspective.

4 comments:

bluto said...

You sure you're not an economist? That's exactly right. They still make a little bit from controlling access to capital (how they made their money when we were on the gold standard).

Visibilium said...

A-G, all you were saying was that money is non-neutral over the short run and approaches neutrality over the long run. This observation is thoroughly Misesian.

The Anti-Gnostic said...

Sumner seems to have backpedaled to that position leading me to wonder just what exactly is the goal of monetary policy.

Visibilium said...

One's view of monetary policy depends on whether one is a methodological individualist. Saying that money is neutral over the short-run presupposes that economic actors are omniscient and that information is symmetric. Of course, an economic actor could benefit early in the monetary policy cycle just by being in the right place at the right time with the right business plan. Call it asymmetric blind luck, if you wish.