Re: Ownership and Growth

["Keith Wilde" <kwilde@magi.com>]

  -----Original Message-----
From: IPGmail@aol.com <IPGmail@aol.com>
To: ownership@cog.kent.edu <ownership@cog.kent.edu>
Date: Tuesday, November 09, 1999 12:26 PM
Subject: Re: Ownership and Growth

................................... I am
>drawing on objections I have seen from economists.  It seems they are
arguing
>that Kelso's plans either try to make something out of nothing (both
>consumption and investment go up at the same time) or is expanding credit
in
>an inflationary way.  I think they are wrong, but don't know how to refute
>them.  (Not even sure I fully understand the arguments.)

It would be useful if you and others who have alluded to "other economists"
could be more explicit in terms of the numbers of such comments you have
encountered.  I have not myself encountered many economists who were at all
familiar with Kelso's ideas.  We have a very thin list of published
critiques; most of the rest seems to be a low-intensity grumble of
misunderstanding.  I think it will be quite helpful to our general goal to
be able to quantify and identify the objections and objectors with a bit
more precision.

But to come to the substance of your comment/query:  Your experience with
economists does not surprise me.  I could easily have made a response of
that kind myself a few years ago.  Economists are not necessarily
specialists in money and finance, and if they are not, the interpretations
you report are rather to be expected.  It does seem counter-intuitive for
consumption and investment to be rising at the same time if investment is
assumed to come out of savings from current income, which is to say at the
expense of consumption.  But investment and consumption can rise
simultaneously by means of money creation  by lending institutions.  The
savings can come out of future earnings, and normally does. So long as new
money is used productively, as investment, it is not inflationary because
the consumption demand it stimulates is met by an increased supply
attributable to the new investment. This rationale is available in economics
writings additional to those of Moulton, but it seems that it was not well
understood even by central bankers as recently as the 1920s. I had my own
head turned by picking up an essay written by Joan Robinson in the
seventies.


Keith Wilde
Ottawa, Canada
kwilde@magi.com
613 990-8125
613 747-6847