Look forward to reading it. The simplicity of notions about money found in much economics continues to surprise me. How far away is the profession from re-thinking about this?
Appears to be quite an interesting book on money. As someone right now intensively studying money related aspects of classical political economy, especially Ricardo’s neutral view of money and - as opposed to that Marxist money theory, I do not quite understand the second part of the quote from the post: ‘that it functions as an objective, quantitative measurement, but there is no external quantity that it is measuring’. Could it mean that money does not measure any physical properties of commodities but would reflect social relations like supply and demand or purchasing power but not physical properties?
What it means is that we treat "real" (inflation adjusted) values as if they were physical quantities, but they do not behave like physical quantities.
Here's an example. If we go back to the early 2000s, productivity in construction was a bit higher than productivity for the economy as a whole. In other words, each construction worker produced slightly more "stuff" than the average worker in the rest of the economy. Over the past 20 years, productivity for the economy has a whole has risen by about 1.5 percent per year, while measured productivity growth in construction has been essentially zero. So, logically, you would expect that productivity in construction would now be substantially below that of the rest of the economy, on the order of 20 or 25% lower.
But in fact, productivity in construction is still slightly *higher* than in the rest of the economy, the same as in 2005. Two decades of slower productivity growth in construction than in the rest of the economy, have not changed its productivity relative to the rest of the economy at all! How is this possible? Simple: the price of the output of construction has risen more rapidly than prices in the rest of the economy. But what this shows us is that the "stuff" we are measuring when we adjust for inflation behaves very different from physical quantities. If the output were an actual physical thing, this sort of paradox would not be possible.
This sounds intuitively appealing. I’m making slow but steady progress through Stephen Marglin’s Raising Keynes. Am I right to detect some overlaps in your views on money and finance with his?
You are right about that. As a matter of fact, I've been meaning to write something about that book -- I have used selections from it a couple of times in my graduate macro class.
Can’t wait to read this.
Look forward to reading it. The simplicity of notions about money found in much economics continues to surprise me. How far away is the profession from re-thinking about this?
There is a lot of diversity among economists. In general, I would say that there has not been much change at the textbook level.
Appears to be quite an interesting book on money. As someone right now intensively studying money related aspects of classical political economy, especially Ricardo’s neutral view of money and - as opposed to that Marxist money theory, I do not quite understand the second part of the quote from the post: ‘that it functions as an objective, quantitative measurement, but there is no external quantity that it is measuring’. Could it mean that money does not measure any physical properties of commodities but would reflect social relations like supply and demand or purchasing power but not physical properties?
An example explaining that would be most helpful.
What it means is that we treat "real" (inflation adjusted) values as if they were physical quantities, but they do not behave like physical quantities.
Here's an example. If we go back to the early 2000s, productivity in construction was a bit higher than productivity for the economy as a whole. In other words, each construction worker produced slightly more "stuff" than the average worker in the rest of the economy. Over the past 20 years, productivity for the economy has a whole has risen by about 1.5 percent per year, while measured productivity growth in construction has been essentially zero. So, logically, you would expect that productivity in construction would now be substantially below that of the rest of the economy, on the order of 20 or 25% lower.
But in fact, productivity in construction is still slightly *higher* than in the rest of the economy, the same as in 2005. Two decades of slower productivity growth in construction than in the rest of the economy, have not changed its productivity relative to the rest of the economy at all! How is this possible? Simple: the price of the output of construction has risen more rapidly than prices in the rest of the economy. But what this shows us is that the "stuff" we are measuring when we adjust for inflation behaves very different from physical quantities. If the output were an actual physical thing, this sort of paradox would not be possible.
Very illustrative example. Thanks for the detailed reply and the great insight. Definitely looking forward to the book.
This sounds intuitively appealing. I’m making slow but steady progress through Stephen Marglin’s Raising Keynes. Am I right to detect some overlaps in your views on money and finance with his?
You are right about that. As a matter of fact, I've been meaning to write something about that book -- I have used selections from it a couple of times in my graduate macro class.