You’re going to think we are tooting the horn for PG, but I started reading Cullen before I even knew he was a supporter of MMT – before I knew I was a supporter of MMT. The balance sheet recession is nearly over, and the Obama administration is finally noticing it exists! MMR will have tools to develop more about how Balance Sheets impact the economy. One of the major channels of monetary policy is through wealth effects residuals of residential real estate – which act through the Balance Sheet of individuals.
This guy is very smart, but this essay misses an essential element of sound economics – usefulness. How can economics be useful when it can’t tell what what is being measured or how it relates to the accounting at the individual and firm level? We’ve been trapped in thinking about microfounded econ for a long time. I’ll have to try and remember what exactly what Scott F said to me on a late night after a few beers, but it’s something like “most of the papers presented in econ would get laughed out of the PK presentation because they don’t have any link to any accounting.” My strong belief is we don’t need superior math or more accurate assumptions in econ, we just need to start making sure what we measure and count adds up all the time. Once we start doing this, life will get much easier.
I don’t know why this should be the case. Republicans spend more then Dems in general. Perhaps stock prices are more tied to high demand levels, and D Party policies tend to support demand more than R’s? My corporate profits model shows republicans do things which increase corporate profits. Yet, we know corporate profits are not linked to job creation, and also not strongly linked to higher Stock market prices. I’ve known the link between democratic presidencies and stock market returns for a long time, I just never applied the MMR model to the area of politics, stock returns, and the sector balances.