Tape 194 - The course of the recovery
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Instructor | Welcome once again as MIT professor | 0:01 |
Paul Samuelson discusses the current economic scene. | 0:05 | |
This series is produced by | 0:08 | |
Instructional Dynamics Incorporated. | 0:09 | |
Samuelson | There is a great deal to discuss right now | 0:14 |
about current economic developments. | 0:17 | |
We've had now all of the presidential | 0:20 | |
State of the Union and budget messages. | 0:23 | |
We've had the economic report of the president. | 0:25 | |
We've had a complete revision of the national income | 0:28 | |
accounts | 0:34 | |
and we have had in | 0:37 | |
recent weeks | 0:39 | |
a very surprising | 0:41 | |
drop in the rate of unemployment. | 0:42 | |
So, this is a good time to take stock and see | 0:45 | |
where we are in the recovery from the recession | 0:49 | |
of 1973, | 0:54 | |
1975 or 1974, | 0:57 | |
1975. | 1:00 | |
The recovery in the states | 1:08 | |
has now become apparent to even the doubters. | 1:09 | |
It occurred before the middle of 1975, | 1:16 | |
perhaps in April, perhaps in March will be the dating | 1:20 | |
by the economic historians of the future. | 1:24 | |
It is still ahead of recovery | 1:27 | |
in the other principal countries | 1:31 | |
although in talking just recently to | 1:36 | |
an economist from one of the largest French Corporations | 1:38 | |
I learned that the | 1:42 | |
French economy in his view | 1:45 | |
also very soon after mid year | 1:48 | |
in fact had touched bottom and was on its way up. | 1:51 | |
The story is somewhat to say my think for | 1:56 | |
Germany. | 2:01 | |
And for some of the other countries in Western Europe. | 2:03 | |
But with respect to Japan, an important part of the | 2:07 | |
world international trade picture, | 2:10 | |
the story is a bit more complicated. | 2:12 | |
Japan grew in | 2:15 | |
1975, | 2:17 | |
it didn't grow though | 2:19 | |
as much as had been expected and really | 2:20 | |
for the Japanese | 2:25 | |
the calibration of what you call an expansion | 2:28 | |
what you call a recession, what you call | 2:30 | |
a growth recession is all important. | 2:34 | |
And what we have to say, that although the Japanese | 2:38 | |
are now growing | 2:40 | |
they are growing at a very low rate compared to | 2:41 | |
what they themselves consider to be the absolutely | 2:45 | |
minimal necessary amount and | 2:47 | |
therefore, of all the countries in terms of | 2:51 | |
what it's been used to. | 2:54 | |
Japan is still in one of the worst situations. | 2:56 | |
You would think from all that I've been saying | 3:00 | |
that | 3:04 | |
the problem of forecasting for this next year | 3:07 | |
for 1976 would be easy. | 3:10 | |
That the signals are all | 3:15 | |
green for go. | 3:18 | |
And in a sense that's true. | 3:20 | |
It's never easy to forecast a modern economy. | 3:22 | |
But some periods are harder than others. | 3:26 | |
And usually in the early part of an economic expansion | 3:30 | |
you are in an easier | 3:34 | |
period than at any other time. | 3:36 | |
Therefore, I don't think it's very difficult | 3:39 | |
to make a bet that 41976 | 3:43 | |
the real GMP will grow. | 3:48 | |
Nor, for that matter if you wanna push your | 3:51 | |
risk a little bit, | 3:54 | |
to say and also 41977. | 3:57 | |
However, for reasons which I'll discuss in a moment | 4:01 | |
it becomes a bit more difficult to make a prediction | 4:03 | |
about the third year of the recovery | 4:08 | |
than about the first and second year of recovery. | 4:12 | |
This is quite aside from the fact | 4:15 | |
that it's always more difficult to predict with precision | 4:16 | |
20 months ahead | 4:20 | |
as against 10 months ahead or as against five months ahead. | 4:23 | |
The important problem is not whether we are | 4:30 | |
going to grow but just how fast it is that in fact | 4:35 | |
we are likely to grow. | 4:41 | |
Every business decision, every success, | 4:43 | |
in | 4:47 | |
guessing what's gonna happen with interest rate or what's | 4:48 | |
gonna happen in the stock market must sensitively | 4:50 | |
depend upon where you believe the quantitative | 4:53 | |
positive growth will be. | 4:58 | |
And that's the general subject | 5:01 | |
which I want to discuss today. | 5:03 | |
First, a brief word about the revisions of the | 5:07 | |
gross national product accounts. | 5:10 | |
These came early in the calendar year. | 5:13 | |
They were promised us | 5:17 | |
sometime ago but were delayed, | 5:19 | |
perhaps there were a few complications that | 5:22 | |
had not been anticipated by the Department | 5:24 | |
of Business Economics in the Department of Commerce. | 5:28 | |
By and large, | 5:32 | |
to an economist the revisions are extremely interesting | 5:34 | |
to a non economist you nearly have to say | 5:37 | |
that they pretty much conform the previous pattern. | 5:41 | |
There are some differences in definition, | 5:44 | |
there are some differences in factual findings. | 5:47 | |
But by and large, it's only to a specialist | 5:52 | |
that these differences are important. | 5:55 | |
As I recall, | 5:58 | |
the growth rate in the third quarter | 6:01 | |
of the year was marked down a bit from over 13% | 6:03 | |
to 12% well that's in the right direction | 6:07 | |
in terms of | 6:10 | |
what instinct told us would probably be the revisions. | 6:13 | |
And it's in the right direction in that | 6:16 | |
the economy has no need for any add on | 6:19 | |
when you're already at 12% | 6:21 | |
and it's better for the health of the recovery | 6:24 | |
than it had been 12% than not be 14%. | 6:28 | |
In addition, it turns out that the recession wasn't quite | 6:34 | |
as deep once the figures were revised | 6:38 | |
as had earlier been thought. | 6:41 | |
Nevertheless, the revisions are not large enough to wipe out | 6:43 | |
the recession as threatened to be the case | 6:48 | |
on some of the past revisions of figures with respect to | 6:52 | |
very minor | 6:55 | |
past | 6:56 | |
recessions. | 6:57 | |
Final demand, that is gross national product | 6:59 | |
demand purged of inventory, | 7:03 | |
speed ups, or slow downs | 7:07 | |
has been remarkably steady even from the first quarter | 7:11 | |
of 1975 the trough quarter | 7:16 | |
of the recession. | 7:19 | |
It's been of the order magnitude of 3%, 4%, 5% per annum. | 7:21 | |
In real terms. | 7:28 | |
And even in that 12% prodigious sprint | 7:31 | |
third quarter it was only that order of magnitude. | 7:35 | |
The fourth quarter is reassuring | 7:38 | |
to learn came in terms of final demand | 7:42 | |
as a little bit better than the third quarter, | 7:45 | |
but the overall figures under revision are now | 7:48 | |
as I recall something more than 5% which | 7:51 | |
taken by itself is a bit on the disappointing side. | 7:56 | |
The consensus forecasters I am referring now to | 8:03 | |
towns in Greenspan to chase Chase Econometrics to | 8:08 | |
DRI of Dr. Otto equip. | 8:14 | |
The Wharton Model. | 8:19 | |
Those generally still cluster | 8:20 | |
for the fourth quarters of 1976 | 8:24 | |
much too closely in terms of | 8:28 | |
the actual dispersion which is intrinsic in | 8:30 | |
the data themselves and in our ability to forecast. | 8:34 | |
The lowest numbers that I know of | 8:40 | |
are monetarist numbers by the Citybank. | 8:44 | |
These average for the fourth quarters, I don't have the, | 8:48 | |
the forecast in it's detail right in front of me and I speak | 8:55 | |
from pretty accurate memory. | 8:58 | |
These average something over 4%, in fact, | 9:01 | |
you'd only have to remember four and four. | 9:04 | |
4% on the rate of real growth | 9:07 | |
or call it four and a quarter if you'd like, | 9:10 | |
four and a half, and | 9:12 | |
something a bit above 4% on the rate price increase. | 9:16 | |
The inflation estimate implicit in this Citybank | 9:26 | |
monetarist forecast is also about as low | 9:26 | |
as any number in my collection, | 9:33 | |
of numbers from people who are worth | 9:35 | |
following in terms of their past batting averages. | 9:39 | |
You could always call the public press | 9:42 | |
for somebody who says that next year we're gonna | 9:45 | |
have steady prices. | 9:47 | |
But that fellow has never been right in recorded history. | 9:49 | |
And why should we give any particular credence to him. | 9:54 | |
Similarly, you and I know people who are crying | 9:58 | |
the wolf of two digit price inflation | 10:03 | |
for next month or next quarter. | 10:05 | |
But again, are these people | 10:08 | |
with any kind of replicable | 10:12 | |
verifiable batting average have been worth listening to | 10:14 | |
in the past and the answer is generally not. | 10:17 | |
The consensus forecasters cluster rather | 10:21 | |
much around 5.5%. | 10:26 | |
In fact if you will take 5.5% real growth | 10:28 | |
and put 1.5% on either side of that | 10:33 | |
you will be able to | 10:37 | |
catch in that corral practically | 10:39 | |
all of the consensus of forecasters. | 10:42 | |
The same thing is true about their price inflation forecast | 10:45 | |
except that it isn't five and half and five and half | 10:49 | |
you probably would take five and a half and six | 10:52 | |
and then if you put a spread of a couple of percent | 10:57 | |
on either side of that you will catch most of the | 11:02 | |
consensus forecasters. | 11:07 | |
Now, the exceptions are interesting. | 11:10 | |
Hard cases make bad law. | 11:14 | |
Somebody once perhaps foolishly said. | 11:16 | |
But it's an exceptional forecast | 11:22 | |
and it'd make for good journalism | 11:23 | |
and the interesting testing of the pudding. | 11:25 | |
Surprisingly, somebody like Walter Heller, | 11:29 | |
is on the optimistic side. | 11:35 | |
Walter Heller, | 11:37 | |
in cooperation with George Perry | 11:39 | |
of the Brooklyn's Institution, | 11:43 | |
Walter Helle of course, is the former chairman of the | 11:44 | |
Kennedy Council of Economic Advisers and the Johnson Council | 11:47 | |
who is regent's professor at the University of Minnesota. | 11:51 | |
He believes that the system under the scenario he thinks | 11:55 | |
most likely for policy | 11:59 | |
is going to grow at about 7% so that's five and a half | 12:02 | |
plus my one and half. | 12:06 | |
On the other hand we have the Citibank, | 12:08 | |
which believes in, | 12:10 | |
only a bit above 4%. | 12:12 | |
The work model which is anything but a monetarist model | 12:16 | |
or a simple monetarist model | 12:19 | |
is also on the somewhat restrained and pessimistic side | 12:23 | |
but not as pessimistic as the | 12:27 | |
as the Citibank | 12:30 | |
The government itself is right there | 12:34 | |
in the middle with the consensus forecasters | 12:37 | |
if we use | 12:40 | |
the | 12:41 | |
economic rapport of the president and the implicit | 12:44 | |
and explicit numbers | 12:47 | |
that are involved in the budget estimates. | 12:48 | |
You know that the budget estimates have always had in them | 12:50 | |
an official government forecast of what was gonna happen | 12:53 | |
to GMP in real terms and in the price level because | 12:56 | |
you can't make an estimate of the revenue | 12:59 | |
which will be collected under our federal corporate income | 13:03 | |
tax and personal income tax without having such data. | 13:07 | |
However, in the past, | 13:12 | |
now happily gained to be the distant past | 13:15 | |
we were never told | 13:18 | |
what those implicit forecasts were, you had to, | 13:19 | |
try to infer from the revenue estimates | 13:24 | |
what they must have been assuming. | 13:26 | |
There was such secretiveness in the treasury | 13:29 | |
at one time or another they wouldn't even tell you | 13:31 | |
what their methods were, | 13:33 | |
whether they used least-squares | 13:34 | |
which is secrecy carried to excessive degree. | 13:36 | |
Well, the last two or perhaps three administrations | 13:40 | |
we have been told explicitly and I do not find any fault | 13:45 | |
with the current administration as I'd have to find | 13:51 | |
with some past administrations including democratic | 13:55 | |
administrations with the openness with which | 13:58 | |
they give their particular forecasts. | 14:02 | |
The government forecast as I say, | 14:07 | |
although you could imagine there is often | 14:09 | |
a temptation for an administration to gloss over | 14:12 | |
bad news and to kind of juice up good news. | 14:15 | |
This time is right there in with the consensus forecasters. | 14:19 | |
The only | 14:24 | |
gloss being put on the data | 14:28 | |
when I looked at a recent round up | 14:31 | |
was that I found that if you look ahead | 14:33 | |
for 1977 last part of 1978 | 14:38 | |
the government forecast suddenly drops its unemployment | 14:42 | |
number to 6.9%, | 14:44 | |
whereas other forecasters are about in the same ballpark | 14:47 | |
with respect to real growth and productivity | 14:50 | |
and everything else, | 14:52 | |
are just a shade over 7% | 14:53 | |
and almost looks as if somebody said | 14:55 | |
well, since 6.9% can be defended as well as | 14:58 | |
seven and since it sounds much better because | 15:03 | |
it takes you out of those awful high numbers | 15:07 | |
which uninformed laypeople | 15:11 | |
will react to adversely | 15:14 | |
why don't we call it 6.9% rather than 7%, | 15:16 | |
while that'd be a sin, | 15:18 | |
I think we have to regard that as a very venial sin. | 15:21 | |
The anomaly | 15:29 | |
which comes out from my discussion of the Heller forecast | 15:31 | |
is that although Heller is at least 1% | 15:36 | |
more optimistic than the govern forecast | 15:42 | |
and I believe that's actually an understatement, | 15:44 | |
as far as as his positivistic | 15:48 | |
betting odds as to what's gonna happen, | 15:50 | |
Heller thinks that the policy recommendations | 15:53 | |
of the government | 15:55 | |
are | 15:58 | |
too conservative. | 15:59 | |
Now, part of the paradox or contradiction disappears | 16:03 | |
when I tell you that Heller's positivistic forecast | 16:08 | |
like the positivistic forecast | 16:12 | |
of all the consensus forecasters | 16:14 | |
second guesses the president's recommendations. | 16:17 | |
Nobody, who is really betting real money | 16:21 | |
believes that the administration believes | 16:24 | |
that its recommendations will materialize | 16:28 | |
but it's aside from that. | 16:32 | |
Walter Heller as I understand it | 16:35 | |
wants a more expansionary monetary policy | 16:37 | |
and a more expansionary fiscal policy. | 16:41 | |
Then he thinks | 16:43 | |
the second guessing of the president by congress | 16:44 | |
is going to bring us | 16:47 | |
and this even though | 16:50 | |
he is already optimistic in comparison with | 16:52 | |
a lot of other forecasters. | 16:56 | |
Now why is this? | 16:57 | |
Well, it's a matter of targets, | 16:59 | |
it's a matter of value judgements | 17:01 | |
and not just of scientific positivistic judgments. | 17:03 | |
People are divided. | 17:07 | |
I mean policy recommended are divided | 17:09 | |
as to what would be the desirable rate of real growth of the | 17:11 | |
economy for the four quarters of 76. | 17:17 | |
To illustrate I have been at meetings | 17:21 | |
and I have read speeches | 17:24 | |
by | 17:27 | |
people like Henry Kaufman and people lik Walter Heller. | 17:30 | |
Now, Henry Kaufman is much more pessimistic | 17:33 | |
if that's the right adjective to use, | 17:37 | |
in his estimates of what will be the actual | 17:39 | |
rate of expansion of the economy. | 17:42 | |
Henry Kaufman is a partner in Solomon Brothers, | 17:44 | |
He's an expert on the money market. | 17:48 | |
He's a man who has been worth listening to in the past, | 17:49 | |
and who is very much listened to at the present time. | 17:53 | |
And when he says that the interest rates still | 17:59 | |
have a way to go down | 18:01 | |
let's say at a year end speech | 18:03 | |
and will reach bottom only sometime | 18:07 | |
early say, in the spring of 1976, | 18:10 | |
that is premised upon a certain degree of weakness | 18:15 | |
in the housing market, | 18:18 | |
which he foresees, which perhaps is greater than | 18:19 | |
the weakness in the housing market | 18:22 | |
which is foreseen by Heller. | 18:23 | |
The same with respect to business loans. | 18:26 | |
Now, the paradox if you wish to call it that | 18:28 | |
is that Henry Kaufman | 18:32 | |
who thinks the economy is weaker than Walter Heller | 18:33 | |
is in favor | 18:39 | |
of less fiscal monetary stimulus than Walter Heller | 18:40 | |
is in favor of. | 18:44 | |
And the explantation for that | 18:46 | |
has to do with the cost benefit value judgments | 18:48 | |
of the two men | 18:53 | |
how much Heller considers | 18:55 | |
short term high unemployment | 18:58 | |
to be in terms of cost of human suffering | 19:00 | |
and how important Henry Kaufman | 19:05 | |
thinks that rebuilding of liquidity | 19:08 | |
and altering of inflationary expectations | 19:12 | |
is in the money market | 19:14 | |
in comparison with these other matters. | 19:15 | |
And I aught not to spend very much of my time, | 19:20 | |
on this tape in boring you | 19:22 | |
with my particular valued judgments | 19:25 | |
and my way of resolving this matter, | 19:28 | |
but for | 19:34 | |
for orientation | 19:36 | |
I aught to tell you about where I stand. | 19:40 | |
I testified | 19:41 | |
some time ago and I don't really have reason to change that | 19:44 | |
testimony that taking other things into consideration | 19:47 | |
I thought that in this first year and a half of | 19:52 | |
the recovery we aught to aim at real growth | 19:56 | |
of about 7% | 19:59 | |
and augtha to be seriously concerned as we fall below 7%. | 20:00 | |
Now, for that view I have been denounced as a conservative. | 20:06 | |
Some of you may have seen Economic Diary in Business Week | 20:13 | |
a fortnight ago or so, | 20:17 | |
and there is a picture of me | 20:19 | |
a likeness I fear. | 20:22 | |
And it says that Samuelson is turning conservative | 20:25 | |
and some Keynesians are asking themselves | 20:29 | |
who needs Samuelson etc. | 20:31 | |
That's the kind of | 20:34 | |
publicity which hurts. | 20:36 | |
It's like having somebody put up your picture | 20:40 | |
in the post office. | 20:42 | |
What is establishable, | 20:49 | |
I don't know want to really criticize that criticism | 20:51 | |
is that I am more conservative in my target | 20:54 | |
than somebody like professor James Tobin | 20:59 | |
a very good economist at Yale University, | 21:01 | |
a good friend of mine, a person whom I respect. | 21:03 | |
He thinks if I understand him correctly | 21:07 | |
and I think I do, that we augtha to be aiming | 21:09 | |
at about 10.5% | 21:12 | |
rate of real growth, | 21:15 | |
in these early recovery quarters. | 21:17 | |
He thinks that this will not have a substantial | 21:20 | |
upward effect upon the rate of price increase | 21:23 | |
and there is a scientific | 21:27 | |
difference of opinion between him and me. | 21:31 | |
I think there is a risk | 21:32 | |
of a velocity of growth effect upon the price level | 21:34 | |
which he thinks is smaller than I do. | 21:39 | |
He may be right. | 21:43 | |
I may be right. | 21:44 | |
But in addition he would disregard | 21:45 | |
the increase in prices | 21:49 | |
if it came about | 21:50 | |
due to this factor or any other factor. | 21:52 | |
And I'm a little bit different in this regard. | 21:56 | |
It's not that I in my ultimate social welfare function | 21:58 | |
put a | 22:03 | |
penalty on inflation as such | 22:05 | |
and consider an increase in the rate of inflation | 22:09 | |
as such as bad as an increase in the rate of unemployment | 22:12 | |
but I believe that in the feasibility, | 22:18 | |
of influencing policy and periods to come that | 22:24 | |
the system will pay very heavily | 22:27 | |
for any worsening of inflation which takes pace right now. | 22:29 | |
You may say that I'm departing from my role as | 22:33 | |
economic, economist sage and I'm pretending to be | 22:37 | |
a tactician sage, well I wouldn't want to | 22:43 | |
make too much pretense that I am any particular political | 22:47 | |
savvy that others don't have but, | 22:51 | |
every economist must form a judgment in these | 22:56 | |
matters and professor Tobin forms one judgment | 22:58 | |
and I form another. | 23:01 | |
10.5% Tobin, 7% Samuelson, | 23:03 | |
Walter Heller I understand from a recent | 23:08 | |
testimony in Washington and another meeting there | 23:11 | |
he is for about 8.5%. | 23:15 | |
Well, My 7% | 23:23 | |
is | 23:25 | |
higher than that rate | 23:27 | |
which many, maybe the majority | 23:31 | |
of the economic experts in fact favor. | 23:33 | |
I believe you can make sense of federal reserve policy | 23:36 | |
and doctor Arthur Burn's recent changing | 23:41 | |
of the lower limit for the target zone, for rate of | 23:45 | |
growth and the money supply of M1 | 23:48 | |
from 5% to 4.5%. | 23:51 | |
In the following terms namely | 23:54 | |
that | 23:56 | |
Doctor Alan Greenspan at the Council of Economic Advisors | 23:58 | |
Dr. Arthur Burns, | 24:01 | |
believe | 24:04 | |
along with Henry Kaufman | 24:06 | |
that the desirable rate of real growth | 24:07 | |
in these first recovery years | 24:12 | |
is a lot lower than the Tobins, Hellers | 24:14 | |
and Samuelson's believe | 24:17 | |
And | 24:20 | |
there are other economists, I won't name them, | 24:27 | |
who believe this | 24:29 | |
even more to the point | 24:32 | |
where they don't find that there is any useful purpose | 24:33 | |
satisfied by announcing this belief. | 24:37 | |
It is their private belief. | 24:40 | |
And it guides their policy recommendations | 24:42 | |
and makes sense of their predictions. | 24:44 | |
But it will be misunderstood they feel | 24:49 | |
and will be inflammatory and there is no need for them | 24:50 | |
to state that matter. | 24:53 | |
I only emphasize this to indicate that the difference | 24:56 | |
of opinion about objective facts are not as great | 25:00 | |
as the differences of opinion about | 25:05 | |
value judgments and what to happen. | 25:09 | |
Now, I haven't very much time left, | 25:13 | |
I aught to | 25:14 | |
address myself | 25:16 | |
to one new | 25:17 | |
doctrine in economics | 25:21 | |
which is a matter for current discussion. | 25:25 | |
I associated with the name primarily of Alan Greenspan | 25:28 | |
the chairman of the Council of Economic Advisors | 25:33 | |
and perhaps President Ford's primary and chief | 25:35 | |
economic advisor but I associated in a degree | 25:39 | |
but in a lesser degree also with governor | 25:44 | |
Arthur Burns of the federal reserve. | 25:48 | |
In the Greenspan version it goes something like this | 25:51 | |
Change in theory | 25:55 | |
may have been right in its day | 25:57 | |
but probably even in its day it was oversimplified. | 26:01 | |
And in any case in our day | 26:03 | |
it needs to be modified. | 26:05 | |
According to oversimplified gains in theory | 26:07 | |
and I'm giving a rough paraphrase in quote | 26:11 | |
of the new doctrine, | 26:12 | |
the more | 26:15 | |
expansion you have the more in | 26:16 | |
fiscal policy and monetary policy, | 26:20 | |
the greater will be the | 26:24 | |
total effect on GMP expansion. | 26:26 | |
You'll have a secondary effect which reinforces | 26:30 | |
the primary effect. | 26:32 | |
The bigger the primary effect | 26:34 | |
the bigger its contribution to the total effect. | 26:35 | |
But in addition, you get a full secondary effect | 26:38 | |
and maybe according to the simplified Keynesians | 26:41 | |
doctrines some pass through on an amplified basis. | 26:44 | |
Now, | 26:49 | |
Mr. Greenspan contrasts his view which is | 26:51 | |
in a way that more is less. | 26:55 | |
That if you expand by more instead of getting more spending | 26:58 | |
you simply create | 27:02 | |
in a predictable fashion, | 27:05 | |
in a determinable fashion | 27:08 | |
a deterioration of | 27:11 | |
expectations on the part of private spenders | 27:13 | |
and therefore, an extra dollar of fiscal stimulus | 27:18 | |
or monetary stimulus instead of resulting in | 27:22 | |
two dollars or three dollars extra | 27:25 | |
of GMP effect | 27:28 | |
it results in | 27:31 | |
minus a dollar and a half or so | 27:33 | |
of private spending | 27:37 | |
with the result that plus one minus | 27:39 | |
one and a half gives you a minus one and a half | 27:44 | |
and the effect of that is directly | 27:48 | |
and perhaps with some secondary amplification | 27:51 | |
a reduction in GMP. | 27:53 | |
What evidence is there for this view? | 27:57 | |
I've tried to study the economic record | 28:01 | |
of the quarter since Mr. Greenspan first quoted this | 28:07 | |
theory but I've also tried to do it against the background | 28:10 | |
of history and | 28:13 | |
since my time is short I have to be very brief | 28:15 | |
and say that the factual pattern | 28:19 | |
and in particular the residuals of what needs | 28:22 | |
to be explained from | 28:25 | |
the ordinary monetaristic theories | 28:28 | |
and post Keynesians theories | 28:32 | |
have not been in the direction | 28:33 | |
of lending credence to either Greenspan | 28:36 | |
or Burn's versions of this doctrine. | 28:39 | |
Now this is not to | 28:42 | |
say that the University of Michigan findings are wrong | 28:45 | |
when they claim that an increase in the rate of inflation | 28:49 | |
tends other things being equal, | 28:53 | |
to increase the savings ratio, | 28:54 | |
and tends to have some adverse effects upon | 28:58 | |
plant, equip and investment plans and so forth. | 29:03 | |
That relationships can be true without it yet | 29:07 | |
being the case that all the Keynesian multipliers | 29:11 | |
go negative rather than positive. | 29:13 | |
One has to work out as I've done | 29:16 | |
the actual numerical values | 29:19 | |
that are plausible for these relationships. | 29:21 | |
When I said plausible I don't mean in a fine tuning basis | 29:23 | |
but using | 29:26 | |
deep judgments in the matter | 29:29 | |
and so, | 29:30 | |
what I think we really have here | 29:33 | |
is not some new valuable finding | 29:35 | |
about positivistic economics worth exploring further | 29:39 | |
although everything is worth exploring further, | 29:44 | |
but rather a reflection of the underlying valued judgements | 29:47 | |
which Mr. Greenspan is very candid and having | 29:52 | |
and which I think governor Burns | 29:54 | |
has shown himself to have | 29:57 | |
in a long and very candid lifetime of making clear | 30:00 | |
just what it is he does stand for | 30:04 | |
and what it is he disapproves of. | 30:05 | |
Narrator | If you have any comments | 30:10 |
or questions fro professor Samuelson | 30:11 | |
address them to Instructional Dynamics Incorporated | 30:13 | |
450 East Ohio Street, Chicago Illinois 60611. | 30:16 |
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