> -----Original Message-----
> From: [EMAIL PROTECTED] [mailto:[EMAIL PROTECTED] On
> Behalf Of John Williams
> Sent: Monday, September 22, 2008 5:47 PM
> To: Killer Bs (David Brin et al) Discussion
> Subject: Re: Free Market
>
> Dan M <[EMAIL PROTECTED]>
>
>
> > There are rigorous ways to look at correlations and to ask questions
> > precisely that decrease the chance at false correlations.
>
> Yes.
>
> > But, before I apply the toolbox of techniques I've learned such
> techniques
> > to analyzing your and my hypotheses, I'd like to know if it would mean
> > anything to you. Are you convincible by numbers?
>
> Of course, but you do not seem to have understood what I wrote.
I understood. It is true that I cannot prove my assertions beyond a shadow
of a doubt, just as one cannot prove global warming and the rise of CO2
levels are not just coincidence. But, I will make a
> There are
> dozens of important variables that could be relevant, and you have only a
> few years of data points during FDR. Are you seriously suggesting that you
> can prove that 1 or 2 variables are responsible for the majority of
> the change in GDP over a period of a few years? If you can achieve
> that, you surely missed your calling as an economist.
There is nothing new in what I'm writing. I've seen these arguments from
well respected economists. It's true that economists tend to overstate
their understanding. But, I have much less ambitious goals. It is
theoretically possible that small causes are the real source of big effects,
but it is very reasonable to look at big causes for big effects.
Your statement about monetary policy places you in opposition to just about
everything I've read by or heard from economists. It could be blind luck
that increasing the supply of money increases GDP, and can cause inflation
if and only if the increase in money exceeds the increase in goods and
services.
Me, I believe that something between the understanding of fiscal economists,
and monetary economists is closest to the best model. I agree that a great
deal of humility is needed by these folks, because things like the "rule of
7" are not valid, nor is the idea that monetary policy alone can handle
inflation. But, there are enough data, including the timing of the changes
in the economy after changes in Fed. policy that matches expectations
repeatedly to come up with a reasonable phenomenology.
Your view, on the other hand leads to predictions that counter data. Yes,
there could be a wealth of unseen effects, etc. But, allowed that type of
latitude, I could claim just about anything.
Now, for the first order data: government intake, output, inflation and GDP
growth since 1929 (1930 is listed first because it reflects growth/shrinkage
from '29 to '30.
fed fed real GDP
recp expen inflate growth
1930 4.2% 3.4% -3.7% -8.6%
1931 3.7% 4.3% -10.4% -6.4%
1932 2.8% 6.9% -11.7% -13.0%
1933 3.5% 8.0% -2.7% -1.4%
1934 4.8% 10.7% 5.6% 10.8%
1935 5.2% 9.2% 1.9% 9.0%
1936 5.0% 10.5% 1.1% 12.9%
1937 6.1% 8.6% 4.3% 5.3%
1938 7.6% 7.7% -2.9% -3.5%
1939 7.1% 10.3% -1.2% 8.1%
1940 6.8% 9.8% 1.4% 8.5%
1941 7.6% 12.0% 6.8% 17.1%
1942 10.1% 24.3% 7.9% 18.4%
1943 13.3% 43.6% 5.3% 16.4%
1944 20.9% 43.6% 2.3% 8.2%
1945 20.4% 41.9% 2.7% -1.2%
1946 17.6% 24.8% 12.1% -11.1%
1947 16.5% 14.8% 10.7% -0.7%
1948 16.2% 11.6% 5.7% 4.3%
1949 14.5% 14.3% -0.1% -0.6%
1950 14.4% 15.6% 1.1% 8.7%
1951 16.1% 14.2% 7.2% 7.6%
1952 19.0% 19.4% 1.6% 4.0%
1953 18.7% 20.4% 1.3% 4.6%
1954 18.5% 18.8% 1.0% -0.7%
1955 16.6% 17.3% 1.7% 7.1%
1956 17.5% 16.5% 3.4% 2.0%
1957 17.8% 17.0% 3.3% 2.0%
1958 17.3% 17.9% 2.4% -1.0%
1959 16.1% 18.7% 1.1% 7.2%
1960 17.9% 17.8% 1.4% 2.5%
1961 17.8% 18.4% 1.1% 2.3%
1962 17.6% 18.8% 1.4% 6.0%
1963 17.8% 18.6% 1.1% 4.3%
1964 17.6% 18.5% 1.5% 5.8%
1965 17.0% 17.2% 1.9% 6.4%
1966 17.4% 17.9% 2.9% 6.6%
1967 18.3% 19.4% 3.1% 2.5%
1968 17.7% 20.6% 4.3% 4.8%
1969 19.7% 19.4% 4.9% 3.0%
1970 19.0% 19.3% 5.3% 0.2%
1971 17.3% 19.5% 5.0% 3.3%
1972 17.6% 19.6% 4.2% 5.4%
1973 17.7% 18.8% 5.6% 5.8%
1974 18.3% 18.7% 9.0% -0.6%
1975 17.9% 21.3% 9.3% -0.4%
1976 17.2% 21.4% 5.7% 5.6%
1977 18.0% 20.7% 6.4% 4.6%
1978 18.0% 20.7% 7.1% 5.5%
1979 18.5% 20.2% 8.3% 3.2%
1980 19.0% 21.7% 9.2% -0.2%
1981 19.6% 22.2% 9.3% 2.5%
1982 19.1% 23.1% 6.2% -2.0%
1983 17.5% 23.5% 4.0% 4.3%
1984 17.4% 22.2% 3.7% 7.3%
1985 17.7% 22.9% 3.2% 3.8%
1986 17.4% 22.4% 2.2% 3.4%
1987 18.4% 21.6% 3.0% 3.4%
1988 18.2% 21.3% 3.4% 4.2%
1989 18.4% 21.2% 3.8% 3.5%
1990 18.0% 21.8% 3.9% 1.8%
1991 17.8% 22.3% 3.6% -0.5%
1992 17.5% 22.1% 2.4% 3.0%
1993 17.6% 21.4% 2.4% 2.7%
1994 18.1% 21.0% 2.1% 4.0%
1995 18.5% 20.7% 2.2% 2.7%
1996 18.9% 20.3% 1.9% 3.6%
1997 19.3% 19.6% 1.9% 4.4%
1998 20.0% 19.2% 1.2% 4.3%
1999 20.0% 18.7% 1.4% 4.1%
2000 20.9% 18.4% 2.3% 4.1%
2001 19.8% 18.5% 2.4% -0.5%
2002 17.9% 19.4% 1.9% 1.2%
2003 16.5% 20.0% 2.0% 2.1%
2004 16.3% 19.9% 2.6% 3.7%
2005 17.6% 20.2% 3.2% 3.1%
2006 18.4% 20.3% 3.3% 2.9%
2007 18.5% 20.2% 2.7% 2.3%
There are a few things to note. First, Keynesian theory predicted that
deficit spending by the government was the only way to counter a
deflationary depression. Look at the size of the deficits from '33 to '37.
Look at the growth in the economy during that time. In '38 FDR was worried
about the Federal deficit, and balanced the budget. The economy failed that
year.
It is true that other countries, Japan and much of Europe, led the US in
government spending to end the Great Depression, and that the US recovery
responded to the massive demand for US goods by strong economic growth
starting in '39. If this is what you refer to, I accept that....but note
that it was still consistent with Keynesian theory.
Also, one would note that FDR did a lot to restore trust in banking in the
first 100 days, which had a psychological effect...with people trusting
banks more after the bank holiday than before. It is theoretically possible
that this is coincidence, but unlikely.
Also note, that the largest rise in GDP coincided with the largest
government outlay...mostly on "wasteful" spending. Well, at least from
economic terms, tanks and air craft carriers are not useful economic
capital.
This was all accomplished without massive inflation, which you're theory
predicts. It's true that there were wage and price controls during the war,
but they were taken off after the war, and the total inflation and economic
growth from say '40 to '50 was significant.
Fast forward to the late '70s and '80s. Monetary theory says that the Fed's
tightening of the monetary supply caused both the big recession of '82 and
the lowering of inflation. Your theory would argue that the increase in
wasteful government spending in the '80s would increase inflation.
Now, let's go to the '90s. We know that federal deficits tend to be
inflationary, and Greenspan worried about this. He also worried about
loosening credit, until Clinton convinced him that the rise in productivity
would result in total goods and services rising to match the increase in the
supply of money. If money increases no faster than goods and services,
there is no inflation. If it rises faster, there is inflation. If it rises
slower, there is deflation. (you have to include velocity too). This is
real standard stuff...remember I'm related to an economist. :-)
So, it is true that I didn't chase down every rabbit hole. But, in
engineering, big causes correlating with big effects is a darned good bet.
Your theory needs unseen small causes with big effects that coincidently
coincide with data to explain your inconsistency. But, given that, I can
prove nearly any theory right.
Dan M.
_______________________________________________
http://www.mccmedia.com/mailman/listinfo/brin-l
