On Keynes and Hayek: Macroeconomics is Geographical rather than Political

Both the traditional Kenyesian and Hayekian macroeconomic policies are no longer effective in this current world where the systemic risk in the global market is high. Unless it stimulates all countries' economy simultaneously, Keynesian stimulus package does not work. Unless there is an extremely universal consensus, Hayekian structural reform does not work. The universal government is less likely to be wanted so that both policies won't be accepted. Nowadays, the world economy seems to be turning back to focus on more Microeconomics like in the past. We are no longer able to expect the aggregate level to be either up or stabilised. Each economic agent now has to rely on his/her own risk management analysis, which is a microeconomic subject, in order to survive in this unpredictable macroeconomic environment.....



I admire Keynes himself because he accused Ricardo's theories for his misunderstanding of how the real world economy actually functions. Keynes was successful to offer the theories which are more correlated to the real world situation unlike Ricardo's ones. His critical analyses about the aspect that all classical economists ignored are very clear and sophisticated.

However, Keynes' fault is that he did not clearly mention "how exactly and effectively" pour their stimulus money into economy. This was the crucially weak characteristics of Keynesian theory.

I don't see Hayek as an economist; He is more likely a political economist / political philosopher.

I strongly argue that macroeconomics is more geographical rather than political i.e. passive than positive



Speaking of Monetary Economy, both Keynes and Hayek do not answer fully about how individual economic agents respond to the interest rate. The central bank's interest rate is (as long as it is operated rationally without any politicised ideological bias) merely determined to adjust the real interest rate to be zero as much as possible. If it is deviated from zero, it of course negatively affects macroeconomic environment. But, it does not mean the zero rate stimulate economy: The stimulus is very different from the central bank's interest rate.

Neither the animal spirit nor the long term expectation is fallacy. The right answer to describe the investment motive in the monetary economy is "There is nothing to specify a factor that stimulates in the macroeconomic level"! There is even a possibility that in a chaotic depression, the investment motive dramatically increases because of the possibility to win the gamble! Furthermore, in the economic boom, the interest rate tends to be "lowered" because the "risk of bankruptcy" of borrowers goes down.

This does not mean irrational; This is actually a very rational acts by economic agents because they act owing to their own surrounding environment, information obtained from their own sources, and psychological preference. Thus, Keynes' animal spirit fails. In addition, these economic agents do not too much care about the structural issues so much.

They decide their investment plan by means of the "form of contract" with their clients, rather than the structure of the borrowers' business. The contract differs across different types of borrowers. So, as long as the contract ensures to bring some business gain, investors are quite happy to lend money to mal-structured businesses. Thus, Hayek's focus on the long term structural issues fails.

On Augustine, Aquinas, and the transition from Roman Empire to the medieval, and to the pre-modern

Unlike Aquinas, Augstine was very autocratic and dogmatic. Augstine believed that how human-beings, at the current (contemporary) time, are not how they ought to be. Therefore, they need a strict principle like the "idea" (This indicates Augstine was strongly influenced by Plato) to guide them to how they should be. The problem of his idea is that there is "no stop point" where all human-beings are fulfilled in what God, the idea, claim. That's why Augstine stated. Aquinas was more realistic and Augustine. Aquinas at least knew how human-beings are at the current (contemporary) is what God initially planned them to be. So, we can neither complain nor expect them to be at the ideal state. Aqunas argued that we coexist with our sins but we have to resist against it as much as possible. However, from my point of view, sin is a reality, and sin can be necessary. I do not see sin to be always something to be avoided; it is often a necessary to enjoy our life !!


Well, you have to imagine what the community was like in the early medieval age. Collapse of Roman Empire, havoc everywhere, and so people lost their direction in their life. Unlike nowadays when we can access to various information resource and be educated with Copernican world view, people at the medieval age were disparate to believe in something superstitious.... oh it should be said the superstitious worship was "necessary" to give people a certain principle as the "natural law", the universal invincible law. But, this explanation does not mean I support it: Actually I think of this divine rule was necessary evil at the contemporary time period. As a matter of fact, I reckon the late medieval age (about from the 3rd Crusader period) when people gradually became independent from this Christian autocracy. This was the sign that that part of the world became more stabilised, the technology advanced, and the information flow grew.

Furthermore, I highly admire all 3 Palestinian religions, Judaism, Christianity, and Islam. These religions enlightened people to think independent from the nature surrounding them. Neither all ancient religion nor all oriental religions have ever done in such a way! The Palestinian religions enabled individual human-beings to think rationally (beyond their surrounding nature and their box of thought), and established strongholds! Augstine and Aquinas definitely contributed in this great work!

US Political Compass (American Political Compass)

Reference:

http://www.lts.com/~cprael/Meade_FAQ.htm

http://paulbrazeau.com/?p=484

Quotes from “Special Providence: American Foreign Policy and How It Changed the World” by Walter Russell Meade

- P.g.11: It was only when Germany and Japan began to take lessons from the lecklessly idealistic United States – An emphasis on commerce rather than military
- P.g.12: The …. Statemen of the U.S. often devoted more of their attention to foreign policy questions before and … the Civil War
(The chart shows that only Eisenhower and Bush Sr. have had experience in foreign affairs)
- P.g.13: Their children and grandfather never forgot their dependence on foreign customers and on the means of transporting their … (production) to the market
- P.g.18: Unlike Jackson, politicians like the Hamiltonian Daniel Webstar who were seen as “Soft on Great Britain.
- P.g.24: After indeed usually, the American government was more pacific and isolationist …. opinion
- P.g.25: Jefferson’s dispatch to Tripoli and Algiers of a … mission against the Berbary privates was ….
- P.g.59: Debt from the Civil War: Borrowed from Europe
- P.g.73: Both the liberal democrats who care to power with President Jimmy Carter and the Conservative Republicans who came in with Ronald Reagan focus years later moved …. Away from the Nixon & Kissinger approach
- P.g.78: Economics, Morality, and Democracy are these things that Continental Realism largely seeks to banish from the realm of high international politics
- During the Bretton Wood acting, the U.S. economic policy affected the entire world economy. The globalisation is new to America and the U.S.A. is actually an endebted nation.
- P.g.87: Hamiltonians against the treaty of Versailles E.g. Bush Sr.
- Continental Realism more during the Cold War
- Hamiltonian learns from British imperial order
- P.g.110: Hamiltonian economic policy changes fluctuately
E.g. opentrade ←→ protectionism owing to American economic interest
- P.g.110: Hamiltonians have never believed in using tarrifs simply as a revenue tax nor lowering tariff in line with the fiscal needs of government
• Read upto p.g.123
- P.g.126: Hamiltonians were quick to grasp the implication for American interest of British decline and they understand how to build a new hegemony as the old one collapsed
- P.g.130: The Hamiltonian grandfather had been contest to be free riders as long as British hegemony was ….
- P.g.131: As long time free riders in the British system American industries had enjoyed a …. of domestic production and global markets
- P.g.135: British liberal fought against the pragmatic tilt toward the Ottoman Empire that British imperial interests seemed to require ….that Ottoman aristocracies in the Balkans demanded what we would now call a human rights
- P.g.135: (Wilson’s) his strongest foreign affairs were found in the British Labour party, and the most savage attacks on the shortcoming of the Versailles treaty were …ed by John Maynard Keynes, the towering intellect of British Liberal thought in the 20th century
- P.g.136: More broadly the New Labour government. (Tony Blair) he has built is attempt to reconstruct the Old Labour party and tradition on the ruins of British socialism ……… voice recalling fro “idealistic” politics on
• Wilsonian is also related to the “non-conformist”
- P.g.158: Basically ………… with the modern Middle East plus much of South-Eastern Europe, this regain was the object of the first great missionary endeavour of the American missionary movement.
- P.g.161: The secular contributions of the missionary movement may, on a global scale. ultimately have more impact than do their religious achievements
- P.g.180: The Jeffersonian view of the U.S.A. as a revolutionary nation with a revolutionary mission runs deep … The Jeffersonian party locks of American Revolution with something of the same emotion with the USSR good Bolsheviks once viewed Lenin’s October revolution.
- The original Jeffersonians were steeped in the rich tradition of English & Scottish descent. They often saw the American Revolution as the least something as a secular – step in the British Reformation and they saw themselves as Cromwellian Round-Heads attempting to complete that Reformation against the opposition of the Hamiltonian Cavaliers
- P.g.181: Wilsonian could be called the Trotskyites of the American Revolution. They believe that the securities and success of the Revolution at home demands its universal expansion thought the world
- Jeffersonians take the Stalinist point of view. Building democracy in one country is enough challenge for them, and they are both sceptical about the prospects for revolutionary victories abroad and concerned about the dangers to the domestic revolution that might result from excessive …… in foreign ….
- P.g.182: (Jeffersonians) They believe that democracy is a fragile plant – difficult to grow, harder to propagate. Looking lack at long struggle in Britain – The Magna Carta, the Reformation, the Civil War, the Glorious Revolution, etc
- P.g.204: The Great Dilemma after the collapse of British Empire their ideality and the Homeland Security especially during the cold war.
- P.g.209: Jeffersonians used to be anti-federalism. But, …. The human right activity, they standed supporting the federal government power
- P.g.210: Both Jeffersonians and Wilsonians against …. With a tyrannical regime for anti-commercialism case
- P.g.212: Jeffersonian voice was minority during the Cold War
- P.g.224: Like Jeffersonians, Jacksonians are profoundly suspicious about elites. They generally prefer a loose federal structure with as much power as possible retained by states and local government
- Suspicious of ….. federal power, sceptical about the prospects for domestic and foreign do-gooding (Welfare at home, foreign aid abroad,) opposed to federal taxes but obstinately fond of federal programs seen as primarily helping the middle class (Social security, Medicare, mortgage interest subsidies)
- But, the difference between the two movements run very deep, so deep that during the Cold War: Jeffersonian = Dovish: Jacksonian = Hawkish
- P.g.225: Both Jeffersonians and Jacksonians are civil libertarians, passionately attached to the constitution and especially to the Bill of Right. But, Jeffersonians are most profoundly devoted to the First Amendment, protecting the freedom of speech and prohibiting a federal establishment of religion
- Jacksonians join the National Rifle Association (NRA)
- Jeffersonians join the American Civil Liberty Union (ACLU)
- P.g.232-233:
• Jacksonians support regional social securities such as discounting transportation prices for elderies, and caring communities.
• Jacksonians also believe in equality among community members: Supporting socialism in small community
• Many American Labour Unions are Jacksonians

Wish A Happy New Year in 2012 although this year will be dread full for the majority of people in this world...!

The proverb for this year:


"Live like we die tomorrow; Talk like we live forver" (Mahatma Gandhi)


This year will be even tougher than the last year! Everyone has got to prepare for it!! The majority of people are in a bloody hell condition this year!!!

But, I still wish us A Happy New Year even though we may have got to prepare for this dreadful time period!

Lord of Mercy....... Amen!

The Irony of Fate: Russian New Year Tradition Movie

This is the movie strongly recommended by my female friend from a Russian speaking country.

According to her, almost all Russian speaking people watch this movie in the night between the new year eve and the new year day. The reason why this movie is popular is that watching this movie before the new year comes makes people really happy, content, pleased, and entertained, and happily welcome the new year.

This movie is a love romance movie which contains Russian humours. Russian humours are quite unique. We see the humours from experiencing a little bit of pains in a funny incidence. Russian people seem to know how to laugh at unexpected incidences with some pains. We can see a strong pleasing humour from their natural ability to overcome any unexpected incidence and always expect a better outcome afterward by making fun of it instead of remaining the pain hurting them.

This also involves a secret rhetoric to criticise the extravagant USSR administration by using an example of their housing development plan. The great ability of Russian film makers is that they produced a love romance movie which does not look like harshly criticing the USSR administration. They simply made a fun of the negative influence of the administration in the Russian humours! The USSR government official would have never felt being criticised at all, and they would have simply enjoyed seeing the funny humour and unique charming personalities of the characters in this story!

This love romance is so diffrent from cheesy movies which always show provocative sex scenes in order to attract mobs to watch. This Russian movie is a traditional love romance which shows having experiencing dilemas and struggles to acquire a loving relationship with each other. Unlike the films shown nowadays, this Russian movie expresses the complicated feelings these young adults face, and how this complication developed their romantic mood. The story in this movie takes place in the contemporary time when majority of young adults still had a naive attitude toward loving relationship. This story may make young adults, and even teenagers, nowadays think these young adults in this story are too naive and jevenile. Nowadays, the romance these characters in this story experience seems to no longer exist so that some young generations may find difficult or even impossible to understand the meaning of the love of these characters in this story. However, I am happy to introduce these young generations to watch this movie as well.

This is educational to learn that openness of sexual relationship and having a big love romance are different from each other. At the contemporary period, people might not have been to flexible to express their emortion to each other unlike nowadays. These contemporary people have struggles in expressing their emortions and then suffer from dilema and regrets more than those nowadays. I do not mean the feeling and attitude toward love nowadays is faded. In fact, I embrace the flexibility and openness of expressing love, by means of physically and mentally, nowadays, and detest the reluctancy on expressing love in the old days. Nevertheless, the feeling of romance becomes bigger when the obstacle of expressing and/or obtaining love becomes bigger. Therefore, in this movie, we can discover the love romance which grows in the sorrow, the struggle, and the achievement after overcoming the reluctancy and the obstacle in the old day men&women relationship!!


Well, I hope everyone enjoys watching this video. This is a really good asset of people having lived in the communist Russia period! Click the following link to go to the website to watch "The Irony of Fate"!!

* Russian New Year Tradition Movie:
- The Irony Of Fate
http://video.kylekeeton.com/2008/12/russian-video-new-year-tradition-movie.html





* The image of this picture is from http://darim.info/59870-ironiya-sudby-ili-s-legkim-parom-saundtreki.html.

The Prisoners' Dilemma in the EU Parliament concerning the Fiscal Unification

Last day, Ms. Merkel said "At least, this is the second best outcome" in the treaty concerning the EU fiscal unification. She wished if all EU nations had agreed to participate the fiscal unification plan as the best outcome. However, there are some nations, such as the U.K., who objected to the participation in the rescuing the European economy by the fiscal unification. Although there are substantial numbers of the EU countries agreed to participate in rescuing the European economy by their unified fiscal stimulus plan, the best outcome (all the EU nations participate) was not accomplished.

The matrix shown above is the Prisoners' Dilemma matrix modified to explain the Prisoners' Dilemma in the EU parliament concerning this treaty on the fiscal unification. At this time, this Prisoners' Dilemma matrix is based on the mixed strategy which considers all agents do not act like the prisoner in the Prisoners' Dilemma theory. In the pure strategy of the Prisoners' Dilemma theory, all agents decide to take their action 100% rationally, do not trust each other to cooperate together, and cannot exchange the information between them. By contrast, the mixed strategy takes the possibility of agents not acting 100% rationally, cooperating together, and exchanging information between agents. Therefore, we never know how these agents select their choice.

In this matrix, there are two groups of EU nations, Pro-Europeanists, such as Germany, France, and Benelux nations, and Euro-Sceptics, such as the U.K., Sweden, and Czech. This model generalised to suppose all EU nations belong to either groups, and both groups' decision has a 50% influence over European economy.

The bottom left cells of this matrix are deleted because it is less likely that the Euro-Sceptics sign the treaty whereas the Pro-Europeanists do not.



If this game is based on the pure strategy, the Eurosceptic group would definitely not sign the treaty. The benefit to the Euro-Sceptic group will gain the tremendously high benefit by not signing the treaty when the Pro-Europeanist group sign the treaty. Furthermore, in the pure strategy, the Pro-Europeanist group would have given up signing the treaty as follow:



Because, in the pure strategy, both groups are afraid of the situation that the other group gains the free riding benefit by not signing the treary. The pure strategy does not take account of any action motivated by an intuition, a superstitious belief, altruism, an expectation that the opponent may cooperate, and an anticipation without logics. All groups select their choice completely based on the benefit coming from the rational and logical but selfish interest if it were the pure strategy. Therefore, in the pure strategy, both groups take the possibility that the Pro-Europeanists would not sign the treaty while the Euro-Sceptics would sign the treary (This is a very odd case which would not happen in the real world) into their consideration. So, that is why the Ms. Merkel's wanting outcomes are the least likely in the pure strategy. This is the reason why it would be the case, even in the real world situation, that both would not sign up the treaty even though both groups could maximise the utility if both sign up the treaty if it were based on the pure strategy.


By contrast, the last resolution on the treaty was based on the mixed strategy. Even some Euro-Sceptic leaning nations took account of the possible benefit for themselves coming from signing the treaty by knowing almost 100% of the Pro-Europeanist leaning nations would sign the treaty. In the real world, especially in such a big scale rather than two prisoners in a separated shuttered cell, there are always cheap talks, a flexible flow of information exchange, and irrationality caused by human-emotion and belief in something superstitious, and/or anticipated outcomes rather than the outcomes derived from logical analyses. Thus, everyone knew that all the Pro-European leaning nations were more likely to sign the treaty, and the Euro-Sceptics leaning nations would not make the loss by any choice they could select. This is why Ms. Merkel really wanted all the EU nations signed the treaty.

The matrix of the outcomes in the mixed strategy is as follows:



The outcome of the last resolution could avoid the worst case scenario, in which all the Euro-Sceptic leaning nations did not signed the treaty, and either 100% or 25% of the Pro-European leaning nations signed the treaty. If the worst case scenario took place, all the nations who signed the treaty had to suffer, and the rest of the nations who did not sign the treaty could gain the free-riding benefit. This is what Ms. Merkel was afraid of, and Mr. Cameron would have induced if not only the U.K. but also substantial numbers of nations did not sign the treaty.

The outcome was the second best according to what Ms. Merkel said. Majority of the EU member nations (more than 50%) agreed with the treaty so that the outcome became the middle right cell. Although it could not be in the bottom right cell, it did cause neither the decline of the power of the EU economy (The center cell) nor the collapse of the Eurozone (The top left cell: The collapse would be 100% possible in the pure strategy), nor the free riding by the Eurosceptic leaning nations (The top middle cell and the top right cell).



Nonetheless, it was almost falling into the worst case scenario (either the free riding by the Euro-Sceptic leaning nations or the collapse of the European Integration) unless the Pro-Europeanists had given up signing the treaty by knowing all the other nations would not sign the treaty. This is why Mr. Cameron's reaction caused to significantly lose the trust in the U.K. from the EU. At least, Mr. Cameron should have acted not explicitly like what he has done. He should have been wise enough not let any one to know the U.K. has wanted to keep the distance from the fiscal unification. The way Mr. Cameron acted was to make the Pro-Europeanist nations to think the U.K. is quite happy to sacrifice the EU for her own sake. I did not disagree with the Euro-Scepticism at all. But, I just wanted him to know this Game Theory! All political leaders, diplomats, and any those who have to face a big complicated decision making have got to study this Game Theory!!