Wednesday, 13 August 2014

Ann Pettifor still thinks full reserve equals monetarism.

There is a big problem in claiming that a set of ideas in economics is similar to or equal to monetarism, as follows. Monetarism is at its simplest just the idea that the QUANTITY of money is of some relevance: that the quantity of money has some sort of effect. And it is pretty obvious that the quantity of money must have SOME SORT OF effect. About 95% of economists are agreed on the latter very simple and obvious point. If government printed a billion tons of £20 notes and distributed them to the population, the average mentally retarded five year old should be able to see that there’d be some sort of effect.
Milton Friedman was famous of course for taking that to an extreme: claiming that economies can be regulated JUST BY adjusting the quantity of money. In fact he went even further and claimed that that quantity should be expanded by the same small amount year in year out regardless of whether the economy was booming or in a recession.
Thus to criticise a set of ideas because those ideas are similar to monetarism is an almost vacuous accusation unless one is VERY SPECIFIC as to what the similarities are. To illustrate, if the accusation is simply that the relevant ideas include the above simple assumption that the quantity of money has some sort of effect, then that is a non-accusation because (as just explained) almost everyone agrees that the quantity of money has SOME EFFECT.
Unfortunately Ann Pettifor has not told us EXACTLY what the similarities are. Too much like hard work probably.

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