House of Paine

why the man poisoned bill vickrey INTRO

lady eve guest shot:

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the work below 
    was   
completed
in the very short interval
 between the announcement
          that 
 bill had finaly gotten his   nobel
and the   briskly blowing fall nite
  only  three days later
  when bill was discovered slumped
 over the wheel
        of his Saab 

clearly 
  it was intended 
    to be his prize lecture 

it  reflects
 not the work 
he received his prize for 
but 
 his more recent work
           on  policy oriented
             macro economics 

his growing concern with
  clintonomics 
and its 
 "Irrational budget accounting
 excessive concern with inflation
 and insufficient attention 
to wasteful unemployment"


" themes on which Vickrey hoped 
to capture more attention 
because of the notoriety
   of the Nobel award"
 




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Fifteen Fatal Fallacies of Financial Fundamentalism 
A Disquisition on Demand Side Economics 

William Vickrey 

October 5, 1996 



--------------------------------------------------------------------------------

Much of the conventional economic wisdom
 prevailing in financial circles, 
largely subscribed to
 as a basis for governmental policy, 
and widely accepted by the media and the public, 
is based on incomplete analysis,
 contrafactual assumptions, and false analogy.

 For instance, encouragement to saving 
is advocated without attention 
to the fact that for most people encouraging saving 
is equivalent to discouraging consumption 
and reducing market demand,
 and a purchase by a consumer 
or a government is also income 
to vendors and suppliers,
 and government debt is also an asset. 

Equally fallacious are implications 
that what is possible or desirable for individuals
 one at a time
 will be equally possible or desirable
 for all who might wish to do so 
    or for the economy as a whole. 


And often analysis seems 
to be based on the assumption 
that future economic output 
is almost entirely determined 
by inexorable economic forces 
independently of government policy
 so that devoting more resources 
to one use inevitably detracts
 from availability for another

 This might be justifiable 
in an economy at chock-full employment
 or it might be validated 
in a sense by postulating 
that the Federal Reserve Board 
will pursue and succeed in a policy 
of holding unemployment strictly
 to a fixed "non-inflation-accelerating" 
or "natural" rate. 
But under current conditions
 such success is neither likely nor desirable. 

Some of the fallacies 
that result from such modes 
of thought are as follows.
 Taken together their acceptance 
is leading to policies 
that at best are keeping us 
in the economic doldrums 
with overall unemployment rates 
stuck in the 5 to 6 percent range.
 This is bad enough merely in terms 
of the loss of 10 to 15 percent 
of our potential production, 
even if shared equitably,
 but when it translates into unemployment
 of 10, 20, and 40 percent 
among disadvantaged groups, 
the further damages 
in terms of poverty, family breakup
, school truancy and dropout,
 illegitimacy, drug use, 
and crime become serious indeed.
 And should the implied policies
 be fully carried out 
in terms of a "balanced budget," 
we could well be in for a serious depression. 

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