Saturday, 31 October 2015

Sectoral balances don’t explain anything – what of it?

In response to David Graeber’s recent article on sectoral balances, Ann Pettifor seems to be worried that people will take sectoral balance analysis as being the EXPLANATION for changes in flows of money between different sectors, as distinct from being simply a statement or quantification of those flows.

I agree with Scott Fulwiller's response to Pettifor, namely that I’ve never actually known anyone make that mistake.

The balance sheet of a firm or corporation doesn’t EXPLAIN anything. But balance sheets are nevertheless useful snapshots of the total assets and liabilities of a firm or corporation at a given moment in time.

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