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Strategies & Market Trends : ahhaha's ahs -- Ignore unavailable to you. Want to Upgrade?

To: GraceZ who wrote (893)	1/29/2001 11:49:00 AM
From: ahhaha	Respond to of 24758

Not Godley again. He says "total private expenditures exceed private disposable income". What is total private expenditure? Godley wrote a paper last year in which at the end he said: This paper has so far been written as though it were more or less self-evident that total private expenditure has a systematic and predictable relationship with total private disposable income and the flow of net lending to the private sector. A relationship of this kind (once known as the New Cambridge equation) was presented in Fetherston and Godley (1978) and criticized by Alan Blinder (1978) on the grounds that the aggregation of consumption with investment did not make sense in terms of any known theories of consumption and investment taken individually. Blinder did, however, generously conclude that To the credit of the New Cambridge group ... the one feature of the model that Fetherston and Godley clearly label as absolutely essential to New Cambridge is also the one feature that should elicit the greatest interest on this side of the Atlantic: the unusual specification of aggregate private expenditure. I rather doubt that the sum of consumption and investment spending can be explained very well by the sum of disposable income plus retained earnings, and its lagged value, in the U.S. But, if it can be, American Keynesians will have to reexamine the prevailing models of consumer and investor behavior. An empirical study of this question in the U.S. would be most welcome, and would really decide whether there is anything in New Cambridge that we in America should import. I agree with Blinder. Besides, private consumption expenditure always exceeds disposable income during a recession. Is Godley saying we've never had a recession in 50 years? If things really got tight, people wouldn't pay their taxes and then you would have a de facto tax cut. The IRS couldn't do anything and they wouldn't. The time to do tax cutting was 1996 so that in the intervening years any slowing would be mitigated, but the Democrats needed to worship a public debt elimination goal at the cost of the private sector. Their plan was to rapidly eliminate the debt so that they could then keep the tax bite and on in order to launch new do good programs.