Jim, Thank you for your comment. Certainly, an "average real interest rate" can be expressed as a vector, or as several related vectors. But what data and weightings you use, to compute the vectors, is not incontestable. At that point you might well say, as I did, well who really knows what it is? It is at best a fairly arcane statistical convention.
I agree that the elements of a vector of nominal interest rates are "very observable"; I am merely arguing that the inflation-adjusted composite rate is not truly "real". It is a symbolic representation, which is indicative of a situation, assuming some standard conditions. I agree also that different types of interest rates are generally positively correlated, and that differences in rates applying to different borrowing terms are fairly predictable. The distinction between nominal and real is perfectly acceptable. The only problem is, I think, that the average real interest rate is a composite that doesn't truly exist in the real world. The distinction between "actual prices" and "ideal prices" I intend, is not the same as that between "real" and "nominal". *The former refers to the difference between the actual money that ends up changing hands (valued nominally or in real terms or whatever), and various symbolic representations of possible, likely, average, imputed or computed amounts which do not directly refer to any real transaction. *The latter refers to pre-inflation/post-inflation (and possibly pre-tax/post-tax, and/or, with/without ancillary charges - "what you really end up paying"). You argue that "the real interest rate is an estimate of an unmeasured (or perhaps even unmeasurable) number that likely influences real-world economic behavior (especially in housing, at least in the US). It's not the estimate that affects behavior, but the number that it's an estimate of." I guess that is where we have a slight epistemic and ontological disagreement. Your idea is that the measured real interest rate is indicative of a really existing number that influences real-world economic behavior. What I am arguing is, that the latter number doesn't have any real existence or influence as a social force, all that really exists are the different actual interest rates charged, which are associated with various economic functions. Of course the conceptualizations of the actual interest rates (e.g. their computation as averages) are also "real" in a sense, since you can prove somebody really has an idea, but they are idealizations. The idealizations can also influence behavior, since when people they are influenced by ideas in their heads. But the idealizations themselves are not real transactions, nor are they directly related to real transactions. I suppose an economist could be like Plato and regard the "real interest rate" as a "pure form" about whose real and eternal existence we can only know through its shadowy appearance, but there is really no proof that the pure form exists at all, other than on a graph of coordinate points. I think it is only a theoretical generalization or convention. I think that, if I would say that this theoretical entity "really exists", I would actually reify things. If the estimated real rate falls to zero, it doesn't just encourage extra borrowing of tangible assets, but also intangible assets, I think. Certainly, in Europe, banks borrowed cheap from the ECB and then invested in other banks at a higher return. The ECB knew very well that they would do that, but thought that this would limber up the banking system and encourage a return to normal. When the financial crash occurred, there was great dismay about the mathematical models, their failure to track critical relationships or predict outcomes and so on. But what was the real cause of the dismay? I think it was, ultimately, that all kinds of economic relationships and entities had been projected through models, which do not really exist. What I mean by "actual credit costs" is the actual monetary cost of credit, the actual money that changed hands. That is different to some "imputed cost" which is calculated according to some theory. Somebody might say e.g. "you paid 10 dollars interest on a hundred dollars, but in reality you should value that cost differently, it was really 15 dollars because of such-and such". But the ten dollars is the actual cost, the basis, irrespective of whether I later decided to factor in inflation, tax rates or ancillary charges. I don't object at all to idealizations as such, or "other things being equal" models. They are often necessary and useful. What I specifically object to, is when it is proposed, without any warrant, verifying procedure or proof, that the idealization itself is "real", in the sense that its content really exists. In chapter 48 of Cap. Vol. 3, Marx says about vulgar economics: "Vulgar economics actually does nothing more than to interpret, to systematize and turn into apologetics - in a doctrinaire way - the ideas of the agents who are trapped within bourgeois relations of production. So it should not surprise us that, precisely within the estranged form of appearance of economic relations in which these prima facie absurd and complete contradictions occur - and all science would be superfluous if the form of appearance of things directly coincided with their essence - that precisely here vulgar economics feels completely at home, and that these relationships appear all the more self-evident to it, the more their inner interconnection remains hidden to it, even though these relationships are comprehensible to the popular mind". (translation corrected). This passage is interesting, because Marxists have almost always misinterpreted it. Marx never claims the essential relationships remain completely hidden. If that was the case, no science would be possible, only metaphysical speculation about what might be out there. To the contrary, Marx says ordinary people can understand the essential relationships quite well, in some or other way, even although these relationships are mystified in the theoretical concoctions (the ideology) by the vulgar economists. Why can ordinary people understand the essential relationships? Ultimately, because in practical life people can distinguish quite well between estranged relationships or the outward appearance of things, and the real human reality involved - even if they do not have the literary or numerical ability of a scholar. So the essence does not refer to a mysterious unobservable entity, but with the main and true significance, or the "real meaning", that something has, placed in a broader context. That is quite a different story from the "Rorty versus the essentialists" debate. For example, you could say to me "you just haven't understood the real essence of the real interest rate", because in a test I cannot formalize it, and explain its macroeconomic significance with regard to capital transactions, investments, economic growth and so forth. What you do not mean, in this case, is that there is a real interest rate out there which I have failed to discover. What you mean is that I "have not grasped the true quantitative and qualitative significance of the real interest rate". The problem with the vulgar economists is that they take the way things observably appear as "given" and do not inquire any deeper into their meaning or origin. They create categories more or less eclectically or diplomatically out of the descriptions and interactions just as they appear in everyday life, and then try to amalgamate the categories in some way that seems to be a reasonably credible story. But the categorization is never consistent, and therefore results in constant paradoxes and tautologies. Is the approach of vulgar economics due to commodity fetishism? I think it could be, insofar as the societal relationships behind the relationships between economic goods remains unseen. But it could also be due to the fetish of money, or the fetish of capital. Or, it could be due to what I would call "price fetishism" - the reification of the meaning of prices.
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