We have so much in common that is uncommon that we might be identical twins. George W Bush’s version of the Latin is “Ubi, ubi sub ubi” which also appeals to me. Must get a picture of myself from the same spot to put up although what’s remarkable about his is that it is painted and not a photo and it was painted by the former President himself.
I was pointed in the direction of this article at Mises.org on “The Errors of Keynes” by Philipp Bagus. It is a review of a book written in Spanish by Juan Ramón Rallo and titled, Los Errores de la Vieja Economía part of which deals with Say’s Law.
The really interesting part is that it is becoming better understood that the road to unwind Keynesian economics travels through Say’s Law. Keynes himself could not have been clearer on this, that he was reversing the conclusion of those who believed Say’s Law to be true. Thus, there are two things that need to be done. First you have to know what Say’s Law is. Then you then have to show it is valid.
But the problem, and it is such a massive obstacle that it gets in the way of many such attempts, is that all economists are brought up on Keynesian demand side theory and it infuses every aspect of their thought. Even while recognising that it is the structure of demand that is the key they still hang onto the level of demand as an integral part of how they approach economic problems.
Let me therefore put it this way. If one is to understand the classical theory of the cycle, this is what one must know in one’s very bones. Hoarding NEVER causes a recession. Too much saving is NEVER the problem. An economy NEVER suffers from demand deficiency. If you want to say that after a recession begins people become tentative because of a lack of confidence, this you can find absolutely everywhere on the classical side of the Keynes-classics divide. .
Here is the reviewer’s discussion of Say’s Law.
Let’s have a look of some of Rallo’s arguments, beginning with Keynes’s famous critique of Say’s Law. Keynes’s distorted version of Say’s Law in TGT states that supply creates its own demand. Rallo vindicates Say’s Law in its original version: In the long run, the supply of a good adjusts to its demand. Ultimately, goods are offered to buy other goods (money included). One produces in order to demand, which implies that a general overproduction is impossible [in the long run].
Say’s Laws leads us straight forward to the most innovative argument in Rallo’s book that addresses the old argument against hoarding. Even harsh critics of Keynes, for example from the monetarist or neoclassical camp, admit that Keynes was at least right in that hoarding is a destabilizing and dangerous activity.
Rallo, however, proves and emphasizes the social function of hoarding. To demand money is not to demand nothing from the market. Hoarding is the natural response of savers and consumers to a structure of production that does not adjust to their needs. It is a signal of protest to entrepreneurs: ‘Please offer different consumer and capital goods! Change the structure of production, since the composition of offered goods is not appropriate.’ (My bolding and my additional text in square brackets)
This is how he controverts Keynes by confirming everything he wrote. People really do hoard, Rallo argues, store money rather than spend. There really is a deficiency of demand in the short to medium term which may finally work itself out in the long run, eventually, in five to ten years perhaps. Overproduction is impossible but only ultimately. Involuntary unemployment does apparently occur because of some problem on the demand side of the economy due to hoarding cash. However, rather than this deficiency of demand being a bad thing, it’s a good thing since the hoarding allows business to think about what to do next. But if you are Krugman, it also allows the government to come to the rescue with a stimulus package that will short circuit this delay. Here is the example Rallo uses of how hoarding can work:
In a situation of great uncertainty, it is even prudent to hoard and not immobilize funds for the long run. Rallo provides us a visual example. Let’s assume that uncertainty increases because people expect an earthquake. They start to hoard, i.e., they increase their cash balance, which gives them more flexibility. This is completely rational and beneficial from the point of view of market participants. The alternative is to immobilize funds through government spending. The public production of skyscrapers is not only against the will of the more prudent people; it will also prove disastrous if the earthquake is realized.
A government should not build skyscrapers when everyone expects an earthquake! But if the economy has gone quiet and there are useful things a government can do – perhaps reinforcing existing buildings – why wouldn’t that make sense? I’m afraid it’s a metaphor that doesn’t necessarily make sense and certainly won’t explain why Keynes is wrong and would never convince a Keynesian.
So let me get to the problem as expressed in this para in the review:
As Rallo points out in contrast to TGT, it is not aggregate supply or aggregate demand that is important, but their composition. If, in a depression with a distorted structure of production, in a liquidity trap situation, aggregate demand is boosted by government spending, the existing structure cannot produce the goods that consumers want most urgently. The solution is not more spending and more debts, but debt reduction and the liquidation of malinvestments to make new and sustainable investments feasible. (My bolding)
I can certainly agree with that the solution is to leave recovery to the private sector as they find their way towards profitable outcomes. But to use “aggregate demand” in the same sentence as “structure of production” must leave the argument confused. Even more certainly, to include mention of “a liquidity trap” will bar entry to the classical world. Demand is constituted by supply: supply is demand. Aggregate demand and aggregate supply are not two separate entities. There is no such thing as an independent force that can be described as aggregate demand.
If you want to get to the essence of Say’s Law you must NEVER think in terms of aggregate demand. Just drop it from all conceptual discussions of the economy and I think, although I can’t be sure, you will find yourself necessarily thinking about issues in the same way as the classics. If you want to defeat Keynesian economics, you need to wage war on the idea of aggregate demand. Nothing else will do.
This is the number one Superbowl ad which extols the virtues of a farming life. But if you watch it, which is quite an extraordinary piece of craftsmanship, what it is really extolling is the ethic that applies across the board to all forms of business. There is a sentiment about farmers, perhaps, but the same as is said here could be said about anyone who is trying to keep a business together in the heart of the city. But if they ran an ad about how hard it is to make a living by employing others in a business enterprise you would not get the same response, not by a long chalk.
Citation: Bourne PE, Chalupa LM (2006) Ten Simple Rules for Getting Grants. PLoS Comput Biol 2(2): e12. doi:10.1371/journal.pcbi.0020012 [Taken from the Alfred P. Sloan Foundation Website]
This piece follows an earlier Editorial, “Ten Simple Rules for Getting Published” [1], which has generated significant interest, is well read, and continues to generate a variety of positive comments. That Editorial was aimed at students in the early stages of a life of scientific paper writing. This interest has prompted us to try to help scientists in making the next academic career step—becoming a young principal investigator. Leo Chalupa has joined us in putting together ten simple rules for getting grants, based on our many collective years of writing both successful and unsuccessful grants. While our grant writing efforts have been aimed mainly at United States government funding agencies, we believe the rules presented here are generic, transcending funding institutions and national boundaries.
At the present time, US funding is frequently below 10% for a given grant program. Today, more than ever, we need all the help we can get in writing successful grant proposals. We hope you find these rules useful in reaching your research career goals.
Rule 1: Be Novel, but Not Too Novel
Good science begins with new and fresh ideas. The grant writing process should be a pleasure (no, we are not kidding), for it allows you to articulate those ideas to peers who have to read your grants but not necessarily your papers. Look at grant writing as an opportunity to have an impact. Feel passionate about what you are writing—if you are not passionate about the work, it is probably not a good grant and is unlikely to get funded. “Me-too” science will not get funded when funding levels are low. On the other hand, science that is too speculative will not be supported either, particularly when funds are tight—sad but true.
Rule 2: Include the Appropriate Background and Preliminary Data as Required
You need to convince reviewers that the work you propose needs to be done and that you are the best person to do it. Different granting programs require differing amounts of preliminary data. For certain programs, it can be said that the work must be essentially done before the grant is awarded, and that the funds are then used for the next phase of the research program. There is some truth in this. So where appropriate, do provide some tantalizing preliminary result, making sure to tell the reviewers what these results imply with respect to the specific aims of your proposal. In formulating the motivation for your proposal, make sure to cite all relevant work—there is nothing worse than not appropriately citing the work of a reviewer! Finally, convince the reviewer that you have the technical and scientific background to perform the work as proposed.
Rule 3: Find the Appropriate Funding Mechanism, Read the Associated Request for Applications Very Carefully, and Respond Specifically to the Request
Most funding organizations have specific staff to assist in finding funding opportunities, and most funding agencies have components of their Web sites designed to help investigators find the appropriate programs. Remember, programs want to give away money—the jobs of the program’s staff depend on it. The program staff can help you identify the best opportunities. If your grant does not fit a particular program, save your time and energy, and apply elsewhere, where there is a better programmatic fit.
Rule 4: Follow the Guidelines for Submission Very Carefully and Comply
Many funding bodies will immediately triage grants that do not comply with the guidelines—it saves the program time and money. This extends to all the onerous supporting material—budget justification, bibliographies, etc. Get them right and keep them updated for future applications. Even if it goes to review, an inappropriately formulated application may aggravate the reviewers, and will have a negative impact even if the science is sound. Length and format are the most frequent offenders.
Rule 5: Obey the Three Cs—Concise, Clear, and Complete
The grant does not have to fill the allotted page count. Your goal should be to provide a complete reckoning of what is to be done, as briefly as possible. Do not rely on supplements (which may not be allowed) or on Web sites (review may be actively discouraged since it has the potential to compromise anonymity). Specify the scope up-front and make sure it is realistic with respect to the funds requested. A common temptation for inexperienced grant writers is to propose to do too much. Such applications are usually judged as overly ambitious and consequently poorly rated.
Rule 6: Remember, Reviewers Are People, Too
Typically, reviewers will have a large number of grants to review in a short period. They will easily lose concentration and miss key points of your proposal if these are buried in an overly lengthy or difficult-to-read document. Also, more than likely, not all the reviewers will be experts in your discipline. It is a skill to capture the interest of experts and nonexperts alike. Develop that skill. Unlike a paper, a grant provides more opportunity to apply literary skills. Historical perspectives, human interest, and humor can all be used judiciously in grants to good effect. Use formatting tricks (without disobeying rule 4), for example, underlining, bolding, etc., and restate your key points as appropriate. Each section can start with a summary of the key points.
Rule 7: Timing and Internal Review Are Important
Give yourself the appropriate lead time. We all have different approaches to deadlines. Ideally, you should complete a draft, leave sufficient time to get feedback from colleagues, and then look at the grant again yourself with a fresh eye. Having a spectrum of scientific colleagues who are similar to the likely reviewer pool critique your grant is very valuable.
Rule 8: Know Your Grant Administrator at the Institution Funding Your Grant
At the end of the day, this person is your best advocate. How well you understand each other can make a difference. Many grant administrators have some measure (limited to complete) discretionary control over what they fund. The more they know and understand you and your work, the better your chances of success. Do not rely just on E-mail to get to know the grant administrator. Do not be intimidated. Talk to them on the telephone and at meetings where possible—they want to help.
Rule 9: Become a Grant Reviewer Early in Your Career
Being on review panels will help you write better grants. Understanding why grants get triaged before complete review, how a panel reacts to a grant, what the discretionary role of program officers is, and what the role of oversight councils is provide valuable lessons for writing successful grants of your own and for giving others advice about this process.
Rule 10: Accept Rejection and Deal with It Appropriately
Rejection is inevitable, even for very good grants when funding levels are low. Learn to live with rejection and to respond appropriately. Do not be defensive; address each criticism head on and respond with facts and not emotional arguments. When resubmission is necessary, make it very clear to the reviewer that you understand what was wrong the first time. Indicate precisely how you have fixed the problems. In the resubmitted application, never argue with the validity of the prior review. If the grant was close to being funded the first time around, remind the reviewers of that fact by including the previous score if appropriate, and make it crystal clear why this version is much improved.
There are no previously unrevealed secrets to grant writing presented here. Rather, it is a concise picture intended to help our early career readers take the next step. If you feel like you need more detail, take a look at Kraicer’s article [2]. Good luck on getting those grants.
Copyright: © 2006 Bourne and Chalupa. This is an open-access article distributed under the terms of the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited.
Shame she only adopted the glasses and not the economic theory.
I see that the Australian Broadcasting Corporation Act 1983 contains a provision which more or less instructs the ABC to provide equal time to the government and the opposition when we have entered into an election period. The present question is whether we are in an election period of not. But why debate this question. We should make this a permanent obligation on any publicly financed media outlet in Australia, and not just during an official election period.
The Act as it happens is pretty clear that so far as equal time is concerned, we are definitely into that zone. Here is the key provision:
‘election period’ means:
(a) in relation to an election to the Legislative Council of Tasmania, or an ordinary election to the Legislative Assembly for the Australian Capital Territory–the period that starts 33 days before the polling day for the election and ends at the close of the poll on that day; and
(b) in relation to any other election to a Parliament–the period that starts on:
(i) the day on which the proposed polling day for the election is publicly announced; or
(ii) the day on which the writs for the election are issued;
whichever happens first, and ends at the close of the poll on the polling day for the election.
I think this provision for equal time provides the perfect answer to the problem that has beset right side parties in dealing with the ABC almost since its start. However, the ABC is not a privately owned broadcaster, it is a publicly owned, taxpayer-funded organisation. It is we the people who are the owners.
What an incoming Coalition Government must therefore do is make this provision for equal time not just a necessity during an official election period however defined but a permanent provision that must be adopted at all times and in all circumstances by any broadcaster financed more than 50% by public monies.
It may not appeal to an incoming Coalition government to provide such a forum to Labor, but truth to tell, they have it anyway. Such an amendment to the Act that covers the ABC, SBS and Radio Australia would not only appear fair and reasonable but would be. The ABC and SBS could have its Leigh Sales and George Negus to its heart’s content but they would also have to balance this with a fair dose of Andrew Bolt and Alan Jones.
And I don’t mean this as a bit of whimsy. This ought to become hard and fast Coalition policy. Not only will it be seen widely as fair and balanced, but it will actually be a major step towards protecting our democracy. There really will be open debate on all issues that is fostered by our public broadcaster.
A Government such as this one which has actively sought to reduce the media’s ability to report and criticise can have nothing to say about a provision that will insist that all sides of every policy issue are heard and debated in the public forum.
It should also be a component of this Act that the ABC, SBS and Radio Australia demonstrate in their Annual Reports exactly how it has complied with this provision, by showing that equal time has been devoted to presenting both sides of every major political question.
From Dismissive on an earlier thread with thanks. Not at all what you might expect. I suspect the economics lesson you will find embedded would be taught in few economics classes today but seems quite to the point. Bored by high living standards? Try the opposite for a while. It’s the perfect cure.
I was guided towards John Cochrane’s blog, The Grumpy Economist, by a post at Catallaxy and what should greet my eyes Cochrane’s latest post on Three views of consumption and the slow economy. The man, for all his self-description as a free market economist, is a Keynesian. He wonders why consumption growth has failed to recover and provides three possible explanations under the following headings:
Here is Cochrane’s conclusion:
Enough history of thought, though. The relevant choice today is between the first two alternatives. Are we in a situation where the long run is just fine, but the zero bound is forcing us to have too high interest rates, so consumption growth is too high and the level is depressed? Or are we in a situation that consumers doubt the long-run productive capacity of the economy, and are consuming little today because they expect to consume little tomorrow and little 10 years from now?
The answer matters: whether the economy can be stimulated merely by more solemn promises from the Fed about future interest rates and inflation, by broken-window interventions that reduce supply today to engender some inflation, or whether the economy must be stimulated today by ignoring short-run stimulus, fixing the long run, and counting on the permanent income model to increase consumption, and the present value model (q theory) to increase investment today.
The idea that anything is dependent on consumer beliefs about how the future will pan out is a very farfetched way of thinking these problems through. I fear he will never understand how things work so long as he believes that it is the will of demanders that makes the difference when the beliefs about the future makes as close to no difference whatsoever to the level of consumption growth as anything I could possibly imagine.
Look, forget the Superbowl. The Argos, the beloved Toronto Argonauts, won the Grey Cup this year. OK, it was in November. They hold the game a bit earlier in Canada since if you waited for February it would be a bit frosty. But let me however point out that Canadian rules football is a more open and exciting game but why get into an argument. What American even knows the Canadian game exists.
As for the Superbowl, it was a quite extraordinary game but that is not the most notable event of the afternoon by any means. What really is of interest was the failure of the stadium lighting system in the middle of the third quarter. The United States is developing a third world infrastructure because it is wasting its capital in various government-directed forms of expenditure of which the loss of lights is merely an example of what will become a more general case in many different areas.
The maddening uselessness of modern macroeconomics, which looks almost entirely at current production, ignores the deterioration of capital stock and thinks that just because private sector inflation is low for the moment things are on the right track. It’s not inflation per se that will kill you but the public spending that the government-controlled money creation system allows to go on almost till an economy is over the cliff.
Losing the lights in the middle of a football game is the least of it. As the capital stock and infrastructure crumble the US will find itself poorer and its population less wealthy than in the past. But as I continuously try to point out, it’s economic theory that is fundamentally at fault. If the Treasury, here or in the US, keeps insisting that worthless forms of public spending are good for growth, you can be sure that politicians as economically unsophisticated as a Gillard or an Obama are not going to go against such advice since this is exactly what they believe and anyway want to hear. But it is terrible advice and we will pay for it well and truly.
Law of Markets 