In all probability, most elements of the model are inappropriate for developed economies. It has proven highly successful for developing nations however.

China’s politics are not really relevant, and the originators of the ‘98 collapse did not employ the model. S Korea and Taiwan only caught the blowback and were able to pick themselves up without too much difficulty in any case.

As regards Japan’s disaster, no matter what the economic theories a country employs its government will still need to display basic competence.

Your doubts about China are shared. But look at Fallows again. After 30 years of economic growth in China, and the entire post-war miracle in Japan, I couldn’t possible say that it doesn’t work, at least for a while.

“…the English-speaking world should stop ignoring the existence of this system—and stop pretending that it doesn’t work.

Now, the Asian collapse may or may not have been related to the coordination strategies in the markets but Korean and other countries have changed their approaches since then, and I will retain some doubts about the Chinese economic miracle until China has politically matured and has survived another decade or two without a political implosion.

“Today’s Americans and Britons may not like this new system, which makes their economic life more challenging and confusing than it would otherwise be. They are not obliged to try to imitate its structure, which in many ways fits the social circumstances of East Asia better than those of the modern United States or Britain. But the English-speaking world should stop ignoring the existence of this system—and stop pretending that it doesn’t work.”

Truly, the intersection of the (wacky) internet and (presumably staid) mainstream media has never hit me with such force. (Well, the reimagining of usenet troll as political pundit is also rather remarkable).

http://krugman.blogs.nytimes.com/2010/10/30/sex-and-drugs-and-markets-role/

In any case, if I wanted to make a point about the power of a dead economist’s approach I would try to find an article that was less unfortunately placed in time. Praise of the Japanese economic miracle in 1993 is not good timing.

I hadn’t heard of Niederhoffer, but read the reviews of his book on Amazon. He gets lots of 5* reviews and most of the rest are 1* and 2* — these ones are the funny ones, well worth a read.

With unconscious irony, the people giving the bad reviews complain that a book specifically designed to show the usefulness to an investor of a general education and broad knowledge of human life doesn’t focus enough on investment tips. The top ranked negative review even mentions the horse-racing analogy and complains Niederhoffer doesn’t give the statistical basis for it.

QED as regards market movers’ often limited ability to process information about the world I think.

Admittedly, Ireland is not sovereign in monetary terms as is the US, UK or Australia but we could still try Option 1: demand the ECB makes an adjustment to Euro Member State accounts on a population basis to the tune of 1 trillion (a new Lisbon referendum might be just the opportunity). That would reduce Ireland’s need to beg from the masters of the universe bond by about 14 trillion. If the ECB will not play ball, the government could try Option 2: announce that it is happy to accept the bonds it issues at face value in payment of Irish taxes. That eliminates the default risk thus reducing the coupon spread to a more acceptable level. It would also encourage more Irish people to buy Irish bonds (currently we hold al low confidence 15% of the total). The ECB wont like it because they would be terrified the other so called PIIGS might copy and they couldn’t bully us around anymore…but hey, they could then do Option 1, which actually give them great control over any EMU government that strays from the Stability and Growth pact terms.

If you want to learn more go to http://www.smarttaxes.org where we have been documenting our learning curve on MMT for the past year. The foregoing does not mean we do not have to reform our dysfunctional public service and benefits systems and readjust the taxes on work and investment with better kinds of taxes, especially Land Value Tax, Carbon Tax and other environmental taxes. These Monetary Options (1 more so than 2) will give us the time and clear direction so that that we can reform while maintaining full employment through a ‘Job Guarantee’ scheme of needed environmental and community works so that domestic demand is strengthened sufficiently to overcome the devastating debt-deflationary pressures that have already been set in train.

Given the consequent overweighting of US MNCs in our financial economy, and the historic underevelopment of our industrial sector, and the idiosyncratic role of the state, it is hard for the political system to get traction on economic reform. Joe Lee has it right. We need more economically and socially literate politics.

Following from the excellent comments immediately above, is it also a question of finding ways to make markets work better and more appropriately within Ireland, Europe and beyond ?

http://clausvistesen.squarespace.com/http://clausvistesen.squarespace.com/

which rightly links the impasse at global macroeconomic level to development economics. In the long run at least, we are all in the same boat.

http://edwardhughtoo.blogspot.com/

Various Euro govts’ approach to things like the single market in Europe is destructive and asinine in the extreme and they have no excuse. Many markets that are over regulated should be thrown open. Some markets that are under-regulated are like that for all the wrong reasons. Then we have other areas where misaligned market regulation or tax policy creates deadweight losses of huge scale.

One can expect a proportion of cheats, thieves and liars in any market but at least with market players their motives are fairly easily understood and detected. Caveat emptor is still a valid, if hugely imperfect, approach to market regulation. However, one cannot avoid the government and governments are so far from trustworthy and their motives so murky that it does almost seem safer to trust that we’ll get good outcomes from an unregulated market than one which is excessively, badly, and/or dishonestly regulated.

Regulation has come, falsely, to be a discussion of left and right because the left usually wants to use regulation to protect producers instead of consumers and to allow featherbedding and an easy life on the back of the consumer (let’s call it the French approach), while the right gets election funding from people who want to use regulations or a lack of regulation to enable fiddling of another sort (let’s call it the Wall Street approach). Sad and wrong, in both directions.

Those are sensible and frank sentiments that find little echo among politicians unfortunately. The message seldom rises beyond “markets good” in sophistication. This permits vested interests to present any constraint on markets — even those designed to help them function such as information rules — as somehow amounting to attacks on enterprise. The market fundamentalist position is receiving every encouragement from the right in the USA at the present time.

On market fundamentalists and their opposite, I also remember watching with amazement transatlantic discussions on markets and governments during the last decade. The level of appropriate market regulation was topic and the primary characteristic of the discussion was that neither side was actually listening to the other. All markets are regulated, even if it’s just that they are given permission to exist. If you bring in a 10% rule on money flows, in advance, then that may limit the inflow a little but may bring long term benefits. Up to the govt.

Govt decides what market will be allowed to exist and should take that task very, and I mean VERY, carefully. The problem is that govts often approach the task with an agenda of local protection at the forefront. This is not helpful.

Elizabeth Warren’s toaster analogy is hardly complete, but it’s pretty good.

I found the Atlantic article excellent, although I know nothing of List. While they were market based economies, the Asian tigers were neither doctrinaire neoliberals nor deregulation fanatics. As the article points out, Adam Smith himself was neither of those things either.

China meanwhile has developed by making minimalist if persistent market-based modifications to what was originally a communist system. It’s still a long way from what would be called deregulated by the standards of the anglophone world.

Without question, functioning markets have unique properties; they’re the best way to correctly price goods. This fact has taken on the aura of holy writ in too many minds, however, typically minds with no understanding of things like market failure and with little grasp of the actual evidential basis for their opinions.

Questioning of markets in any way is greeted with suspicion — it’s assumed there’s a covert objective to hike up taxes or otherwise strip people of their wealth. The fact that markets can give self-contradictory messages is seldom considered, as when rent-multiples and sale prices valued property differently during the boom here.

The weight of evidence supports the South Korean model of development for poor countries. It further supports modest, pragmatic restrictions such as the 10% tax on ‘hot money’ in Chile that served to insulate the country from the emerging market hysteria in the late 90s. Still further, there are reams of historical and theoretical information about bubbles, monopolies and cartels, insider dealing and other kinds of market failures of different sorts.

These are issues politicians handle with the delicacy they might use with a live bomb for fear of upsetting the market fundamentalists; instead they should tackle their delusions head-on. All the evidence is on their side.

1993? Ehm…1993?

http://krugman.blogs.nytimes.com/2010/10/30/sex-and-drugs-and-markets-role/

Squeeze and release is well known to non-Anglo economists.

No doubt none of the economists teaching will reorganize their lectures to incorporate Steve Keen. To do so, or to teach Hayek too well, will release more of the Morgan Kellys on the world.

Why do that if we can steal all the production from the world every three generations? Have to keep that knowledge suppressed as much as possible!

Again, the analogy with credit raises its head. When usury laws are enforced, credit is very thin on the ground? No bubbles to burst. Oddly, the bubble only forms when the drug is cheap! It clearly underestimates the risk of lending at such time! So how come? It seems someone is able to steal money and thereby risk it at a low percentage return. Stealing it or making it? All credit formation is supposed to be regulated. Absence of enforcement means that we can buy illegal drugs for quite low amounts, such that it competes with fully taxed drugs sold by state regulation.

As the depression progresses, all forms of regulation will suffer degradation. Services will break down. Taxes will increase. Markets that are grey and black will increase in number and complexity. The academic from TCD who scores coke for the weekend will be offered RU486 and Viagra as well? Perhaps she places her order over the internet? The internet is so cheap, it has to be the backbone for new markets and social interactions, including education and entertainment. Savings will accelerate. Markets require intelligent savvy buyers. See any of those lately? Theft will increase. As prospects of the future become more widespread how will we keep the unemployed from becoming predators? Employ those who fit the profile to become Gardai and service providers? Start a war? It worked for Iraq and Iran. Getting rid of the young is easy when there are wars to fight. Sop beneficial to the economy too! There is a market for war as many benefit in different ways. Where will we draw the line? What should we get involved in as the depression bites?
I expect to see many more solicitors going to the wall as their bets fail. A market in honesty?

It would be so different, there would be no blog like this, if Ireland had not let itself be fooled so thoroughly? Much more to learn, by being so thick, eh?

http://www.theatlantic.com/magazine/archive/1993/12/how-the-world-works/5854/

Ireland flogged the productive horse into the ground so far that only its ears protrude from the bog. While the private sector will self correct the public sector is drifting to a sorry end. The ECB while giving the gov’t plenty of rope did not foresee that the gov’t would use it to strangle the country. At a point in the very near future the ECB will pull the plug and the gov’t will be negotiating with the ECB and IMF. Only then will we see concrete and positive action. Unfortunately the more it is delayed the worse the pain will be.

As we say in Kerry ‘To hell with poverty, we will kill a duck’.

There’s a hole in the bucket !