Macroeconomic Policy and Economic Stability - Adair Turner Keynote at INET Hong Kong


INET Senior Fellow Adair Lord Turner delivers the day 1 keynote address at the Institute for New Economic Thinking's "Changing of the Guard? Conference in Hong Kong, with an introduction by George Soros.
Speaking during a session titled "Macroeconomic Policy and Economic Stability: Lessons of the Historical Experience with Fiat Money and the Implications for the Future," Turner lays out the case for Overt Monetary Finance.
His conference paper and presentation slides are attached below.
Adair Turner conference paper INET HK249.79 KB
Adair Turner Keynote Slides INET HK1.57 MB



Seems to me that the slides and pdf file relates to an earlier speech?


It's all speculative Keynesian nonsense, like most current economic theory. Arguments are taken as truths. Adair Turner, as well as Bernanke and other establishment economists, were in charge at the FSA, the Fed and other central banks before the crisis. Several years later they seem to have caught up, without honest acknowledgement of others, with what many of their critics had been saying well before the crisis. Now the same phoney economists are still in charge and foisting unproven ideas on the world.


Adair turner comes from the perspective of nominal demand. I come from the perspective of effective demand, which was probably Keynes' core concept. Effective demand stipulates limits on capacity utilization of labor and capital. When the economy is up against the effective demand limit, there is no more spare capacity.

My calculations now say that the US and probably Great Britain are up against the effective demand limit. Thus, as Adair Turner says, if there is spare capacity, you will see an effect in real output from OMF. However, due to the limit of effective demand, OMF would translate into higher aggregate prices instead of increased real output.

I explain further my views about Adair Turner's speech at this link...


I can't and won't argue with Turner's overall points (they are largely spot on), other than to say I believe he vastly underestimates the political implications of breaking the OMF taboo. Economics may not be able to completely factor political science into its models, but it should not completely ignore it. The reality in a democracy is most politicians will do whatever it takes to get reelected, and all too often that means spending more money to keep the electorate happy and the economy growing in the short run. There is a horizon problem though when politicians have 2-4 year terms, whereas taxpayers have 80 year terms (lives), and an economy has a virtually unlimited "term" for as long as a country stays intact. In my opinion, therefore, OMF would almost surely be overused and would certainly lead to dramatic overspending in the long run, and would therefore lead to suboptimal resource allocation due to oversized public sectors, inevitable crowding out, and so on.


Yes, they are all caught up in theories and fail to see what happens in the real world, they are fractional humans..

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