tag:blogger.com,1999:blog-5362801348602268473.post1946451632493859934..comments2023-11-22T00:49:32.887-08:00Comments on Reflections on Monetary Economics: An SFC Version of the Diamond Growth ModelNick Edmondshttp://www.blogger.com/profile/15342983814699700396noreply@blogger.comBlogger14125tag:blogger.com,1999:blog-5362801348602268473.post-18561101961705145062019-11-28T03:30:37.922-08:002019-11-28T03:30:37.922-08:00I like this information Thanks for sharing this. I...I like this information Thanks for sharing this. I would like to these articles and I have confusion but I read your news and I easy understood<br /><a href="http://blog.divinesolitaires.com/diamonds/the-asset-value-of-diamonds-true-in-practice/" rel="nofollow">The asset value of diamonds</a><br />Ram Waghhttps://www.blogger.com/profile/10000907650497756635noreply@blogger.comtag:blogger.com,1999:blog-5362801348602268473.post-15461201333846546962015-12-19T01:27:05.208-08:002015-12-19T01:27:05.208-08:00ICYMI
The common usage including SNA is provably ...ICYMI<br /><br />The common usage including SNA is provably false as demonstrated in ‘The Common Error of Common Sense: An Essential Rectification of the Accounting Approach’<br /><br />http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2124415<br /><br />Your appeal to authority is beside the point. The fact of the matter is that ‘the EC, the IMF, the OECD, the UN and the World Bank’ employ Humpty Dumpty economists who even messed up the elementary mathematics of accounting. Ever wondered why economics never got above the level of silly model bricolage?AXEC / E.K-Hhttps://www.blogger.com/profile/10402274109039114416noreply@blogger.comtag:blogger.com,1999:blog-5362801348602268473.post-40906825151320190272015-12-18T05:43:58.428-08:002015-12-18T05:43:58.428-08:00Doesn't it strike you as slightly ironic to us...Doesn't it strike you as slightly ironic to use the Humpty-Dumpty criticism and then reject the common usage definition (as set out in the SNA) in favour of your own?<br /><br />If you have a problem with the meaning of the term "operating surplus" I suggest you take it up with the organisations responsible for the SNA (the EC, the IMF, the OECD, the UN and the World Bank) rather than me.Nick Edmondshttps://www.blogger.com/profile/15342983814699700396noreply@blogger.comtag:blogger.com,1999:blog-5362801348602268473.post-18758834374956114622015-12-18T05:05:48.556-08:002015-12-18T05:05:48.556-08:00Urgent: your methodological check-up
Comment on Ni...Urgent: your methodological check-up<br />Comment on Nick Edmonds on ‘An SFC Version of the Diamond Growth Model’<br /><br />You maintain “You can’t say it’s false, because it’s no more than a definition.” This is what Humpty Dumpty always said, and it is pure methodological nonsense. See ‘The Humpty Dumpty methodology’<br />http://axecorg.blogspot.de/2015/08/the-humpty-dumpty-methodology.html<br /><br />and ‘Humpty Dumpty is back again’<br />http://axecorg.blogspot.de/2015/11/humpty-dumpty-is-back-again.html<br /><br />There is no such thing as freedom of definition. This freedom is restricted by the requirement of consistency. Logical consistency, though, has never been a strong point of economists. For more on scientific incompetence see the cross-references<br />http://axecorg.blogspot.de/2015/07/incompetence-cross-references.html<br /><br />So, indeed, I can say it is false, because it is provably false. No room for the usual wish-wash.<br /><br />Egmont Kakarot-HandtkeAXEC / E.K-Hhttps://www.blogger.com/profile/10402274109039114416noreply@blogger.comtag:blogger.com,1999:blog-5362801348602268473.post-41721001013927643302015-12-18T02:51:58.961-08:002015-12-18T02:51:58.961-08:00You can't say it's false, because it's...You can't say it's false, because it's no more than a definition. I'm defining operating surplus as NGDP less the wage bill. In fact this definition is consistent with SNA definitions (look it up).<br /><br />I think maybe you object to the term "profit". Although I've suggested that OS can be thought of profit, I'm not using a defined term for profit here, so the best thing would be if you ignored that and stuck with OS as meaning NGDP less the wage bill. Then you can take "profit" to mean whatever you want.Nick Edmondshttps://www.blogger.com/profile/15342983814699700396noreply@blogger.comtag:blogger.com,1999:blog-5362801348602268473.post-55119051310326920172015-12-17T13:24:37.107-08:002015-12-17T13:24:37.107-08:00The brain-dead blunder with profit
Comment on Nick...The brain-dead blunder with profit<br />Comment on Nick Edmonds on ‘An SFC Version of the Diamond Growth Model’<br /><br />Your profit equation (6) is false and because profit is the pivotal concept in economics it holds without exception: if profit is ill-defined the whole theoretical superstructure falls apart.<br /><br />For details see the related comment on David R. Richardson’ RWER No 73 article ‘What does “too much government debt” mean in a stock-flow consistent model?’<br />http://axecorg.blogspot.de/2015/12/it-is-shrinking-debt-which-eventually.html<br /><br />For the comprehensive critique of the ubiquitous profit blunder and its final rectification see ‘How the intelligent non-economist can refute every economist hands-down’.<br />http://axecorg.blogspot.de/2015/12/how-intelligent-non-economist-can.html<br /><br />Egmont Kakarot-HandtkeAXEC / E.K-Hhttps://www.blogger.com/profile/10402274109039114416noreply@blogger.comtag:blogger.com,1999:blog-5362801348602268473.post-26711053019185107862015-02-15T01:54:24.709-08:002015-02-15T01:54:24.709-08:00I don't know whether that equation is correct,...I don't know whether that equation is correct, but I see no reason why the value of alpha1 should be constrained by accounting consistency. Even if that equation is correct, all it implies is that the relationship between the endogenous variables WB, i and p depend on alpha1, which is not suprising.Nick Edmondshttps://www.blogger.com/profile/15342983814699700396noreply@blogger.comtag:blogger.com,1999:blog-5362801348602268473.post-74383985365962697592015-02-14T10:12:52.169-08:002015-02-14T10:12:52.169-08:00You're right. But it doesn't change the pr...You're right. But it doesn't change the problem afaik, as the equation changes to:<br /><br />α1 = 1 – ( kt-1 + it + ( 1 + rt ) · Bt-1 / pt + gt – tt ) / ( WBt / pt – tt )Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-5362801348602268473.post-32362714441971672872015-02-14T03:45:34.688-08:002015-02-14T03:45:34.688-08:00Your first line is wrong. Take away the delta sig...Your first line is wrong. Take away the delta signs and it is right. At the end of the period, the workers own all the assets.Nick Edmondshttps://www.blogger.com/profile/15342983814699700396noreply@blogger.comtag:blogger.com,1999:blog-5362801348602268473.post-65721441846134179622015-02-14T02:24:12.508-08:002015-02-14T02:24:12.508-08:00OK, but if I am correct, that would mean that:
α1...OK, but if I am correct, that would mean that:<br /><br />α1 · ( WBt/pt – tt ) = WBt/pt – tt – Δkt – ΔBt / pt <br />α1 · ( WBt/pt – tt ) = WBt/pt – tt – it – rt · Bt-1 / pt + gt – tt<br />α1 · ( WBt/pt – tt ) = WBt/pt – tt – ε1 · ( kTt – kt-1 ) – rt · Bt-1 / pt + gt – tt<br />α1 = ( WBt/pt – tt – ε1 · ( kTt – kt-1 ) – rt · Bt-1 / pt + gt – tt ) / ( WBt/pt – tt )<br />α1 = 1 – ( tt + ε1 · ( kTt – kt-1 ) + rt · Bt-1 / pt – gt + tt ) / ( WBt/pt – tt )<br /><br />Maybe it is possible to further reduce the last equation to only exogenous parameters (which I doubt a little bit), but anyhow α1 will be dependent on the other exogenous parameters. And if this is not taken into account, the model may well be stock-flow inconsistent, as far as I can see.<br /><br />AntonAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-5362801348602268473.post-34937930487222073172015-02-13T13:11:03.855-08:002015-02-13T13:11:03.855-08:00I have lumped together the consumption function fo...I have lumped together the consumption function for workers and retireds here. Looking at them seperately:<br /><br />For each group their budget constraint requires that consumption plus closing assets equal income plus opening assets. Given income and opening assets, we have to decide how they split this between consumption and closing assets.<br /><br />For retireds, we say there are no closing assets. So their spending is equal to their income (operating surplus plus bond interest) plus their opening assets. This wold make alpha2 and alpha3 both equal to 1.<br /><br />Workers have no opening assets but have income (wages less taxes). We have to decide how they split this between consumption and closing assets. This is what the alpha1 parameter does. The value depends on the rate of time preference (it could also depend on the intetest rate, but itr doesn't here because of the functional form Diamond uses for the utility function).<br /><br />We could still change alphas 2 and 3 and retain stock-flow consistency, but not whilst being true to Diamond's model.<br />Nick Edmondshttps://www.blogger.com/profile/15342983814699700396noreply@blogger.comtag:blogger.com,1999:blog-5362801348602268473.post-86985037715491147432015-02-13T12:12:39.144-08:002015-02-13T12:12:39.144-08:00Nick, thanks for your reply.
But I am afraid I s...Nick, thanks for your reply. <br /><br />But I am afraid I still don't understand equation 2. Of course you are right on the terminology errors I made. But what I mean is that:<br />- the retired generation can consume because they sell their assets, kt-1 + Bt-1 / pt<br />- and the working generation can consume because receive income, WBt/pt – tt, plus operating surplus and interest, Ft + rt · Bt-1 <br /><br />But the working generation also buys assets from the retired generation, kt-1 + Bt-1 / pt, and newly issued bonds and new capital investments, ΔB + Δk·pt. And the funds it uses for these purchases cannot be used for consuption. Thus, I would expect that the consumption function would be something like this:<br />ct = wages - taxes - purchases of assets from retireds - new bond purchases (appears as g) - new capital purchases (appears as i) + sales of assets from retireds:<br /><br />ct = WBt/pt – tt – kt-1 + Bt-1 / pt + ΔB + Δk · pt + Ft + rt · Bt-1 / pt + kt-1 + Bt-1 / pt<br /> = WBt/pt – tt + ΔB + Δk · pt + Ft + rt · Bt-1 / pt <br /><br />It seems to me (but I am not sure) that if you use fixed parameters α1 and α2 to correct for these non-consumption purchases, your model may become stock-flow inconsistent. Or is this somehow corrected via price adaptations?<br /><br />AntonAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-5362801348602268473.post-85018073264828397152015-02-13T09:30:10.692-08:002015-02-13T09:30:10.692-08:00Hi Anton,
Thanks for your comments.
Equation 8 i...Hi Anton,<br /><br />Thanks for your comments.<br /><br />Equation 8 is OK, I think. w is the nominal wage, so it doesn't need to be multiplied by a price level, whereas wrt is a real wage target.<br />But, you are right on equation 12 - I'll amend that.<br /><br />The retirng generation fund their spending by selling their assets (note that this gives them cashflow, but is not their "income" in the usual sense of the word.) The working generation buy those assets, but this is just their way of saving, not a reduction in their income. They receive income of WB/p - t, and they spend part of that as consumption and save part. The part they save is equal to the assets they buy - K and B, but note that K and B is not only the K and B sold by the retired generation but also new capital invetsment and new bonds issued by the government.<br />Nick Edmondshttps://www.blogger.com/profile/15342983814699700396noreply@blogger.comtag:blogger.com,1999:blog-5362801348602268473.post-28580916995267255482015-02-13T05:13:51.232-08:002015-02-13T05:13:51.232-08:00Hi Nick, interesting article! But I have some ques...Hi Nick, interesting article! But I have some questions/remarks.<br /><br />First two remarks, it seems to me that there are some typos in the model:<br />- equation 8: the second term should be ( 1- ε2 ) wt-1 pt-1, I assume<br />- equation 12: the last term should be tt · pt (and if not, the first term in equation 2 should be α1 · ( WBt – tt ) /pt<br /><br />Second, maybe I do not properly understand the model, but it seems to me that the term α3 ( kt-1 + Bt-1 / pt) in equation 2 implies income of the retiring generation, from selling assets. But then, someone has to buy these assets, and I assume this can only be the working generation. Wouldn’t that imply the following, adapted equation 2 (with α1 = 1):<br /><br />ct = α1 · ( WBt/pt – tt - kt-1 + Bt-1 / pt ) + α2 · ( Ft + rt · Bt-1 ) / pt + α3 · (kt-1 + Bt-1 / pt)<br /><br />Or did you somehow correct that with a lower α1 value?<br /><br />AntonAnonymousnoreply@blogger.com