Matt Rognlie takes on the monetarists. Note that the comments on the post, including Matt’s comments, are where the debate gets elucidated.
May 4 2011
A Marginal Revolution Reader writes to Tyler: There must be a good, short book out there on economics that illuminates the power of markets and the economic way of thinking. I recommend The Best Book on the Market, by Eamonn Butler. I think it will satisfy the writer's needs, because it is readable and relatively fr...
May 4 2011
Nick Schulz takes on Ezra Klein and me, calling our argument "preposterous." Recall that Ezra and I had both argued that in response to 9/11, which I presume Osama bin Laden was behind, the U.S. government spent a lot of extra money on war and on "homeland security." This spending, we argued, is helping drive the U.S...
May 4 2011
Matt Rognlie takes on the monetarists. Note that the comments on the post, including Matt's comments, are where the debate gets elucidated.
READER COMMENTS
Lee Kelly
May 4 2011 at 4:31pm
I wish people knew what a tautology is. In a sense, “MV = PY” is a tautology. But statements about “MV = PY” are not necessarily tautologies, and since it is primarily these statements that concern us, that “MV = PY” is wholly irrelevant. “F = ma” is also a tautology y’know.
Karl Popper popularised the idea that tautologies were scientific no-nos. Unfortunately, few people seem to understand the context of that prohibition.
“MV = PY” is an abstract object with tenuous connections to reality. By itself, the equation of exchange entails nothing about reality. It is not an empirical claim. Its truth or falsity are determined only by the rules of the formal language in which it is expressed.
If money, prices, and production were observed to behave contrary to their corresponding variables in the equation of exchange, then the equation of exchange would not be shown false. It is a tautology. It cannot be false. However, statements about the equation of the exchange may be false, such as that it describes the actually existing phenomena that we observe, may be false, because they are not necessarily tautologies.
Okay, I’ll read the rest of the post now.
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