Ülo Ennuste majandusartiklid

Kes võiks olla Popi?

  Kes võiks olla Popi?

 PM ühe kirjatüki järgi 16.XII 10, lk 12, kui lugeda seda nt Fr. Tuglas’e novelli „Popi ja Uhuu” (1914),  kontekstis on hullu lakerdliku ahvina ehk Uhuu’na kergesti äratuntav nobelist Milton Friedman (kuigi oli teesõltlane) kellest fotogi samal leheküljel sobivalt lisatud.

 Tõepoolest, Friedman’i surematut teooriat on PM dotseerinud läbi A.T. libeosava sule täiesti majandusteoreetiliselt asjatundmatult järgimiselt:

 „Parempoolsete guru oli Ameerika majandusteadlane Milton Friedman. Eestis on tema ideed, mida nimetatakse ka neoliberalismiks, nii valdavad, et isegi noored, kes ei pruugi olla temast kuulnudki, teavad, mida ta on kirjutanud. Friedman oli arvamusel, et valitsus ei tohiks võtta inimestelt raskelt teenitud raha ja anda seda kellelegi teisele. Peale madalamate maksude pooldamise soovis Friedman täielikult lammutada heaoluriigi.

Tema ideaalses ühiskonnas ei oleks sotsiaalmaju, töötuhüvitisi, miinimumpalka, haridus-, põllumajandus-, sotsiaal- ja tervishoiuministeeriumi, keskpanka, riiklikult rahastatavat tervishoidu, tasuta haridust isegi algastmes, kohustuslikku sõjaväeteenistust, lastetoetusi ega pensione.”

 Kuigi kogu see dotseering on täielik vale, sest kogu Friedman’i  teooria põhineb eeldusel et riik võtab rikastelt niipalju makse kui need on veel nõus ära andma* – vastab see ülalkirjelet PM portree piisavalt purjus ahvile.

 Muidugi võidakse küsida et kuidas Nobel’i preemia anti ahvile. Aga miks mitte kui ammu enne seda juba Fr. Kafka’ ühes novellis nt ahv pidas ettekande tervele Akadeemiale – punases pintsakus, muide, nagu Uhuu kui ta maja õhku laskis.

 Hoopis hvitavam küsimus on see et kes ikka on meil koer Popi kes hullu ahvi teooriatele kuuletub – seda paluks PMil ilusasti tellijatele dissemineerida! 

PS: muidugi ei tohi unustada et nimetet PM’i kirjatüki tegelik eesmärk on eeskätt neljanda võimu hvides lugejate tähelepanu juhtimine olulistelt jaburatele asendusküsimustele – rahvusliku avaliku teadmusruumi risustamine – et nii sogases vees ehk vaegteadmuslikus demokraatias – rohkem rahvast kõlvatult pügada (vt ka nt http://www.isdp.eu/images/stories/isdp-main-pdf/2010_raczkowski_transnational-organized-crime.pdf).

Kuid veelgi tähtsam oleks tegeleda selle sajandi teooriatega nt**


*  http://nobelprize.org/nobel_prizes/economics/laureates/1976/press.html

    14 October 1976


The Royal Swedish Academy of Sciences has decided to award the 1976 Prize in Economic Sciences in Memory of Alfred Nobel to

Professor Milton Friedman, University of Chicago, Illinois, USA,

for his achievements in the fields of consumption analysis, monetary history and theory, and for his demonstration of the complexity of stabilization policy.

Milton Friedman’s name is chiefly associated with the renaissance of the role of money in inflation and the consequent renewed understanding of the instrument of monetary policy. He has given us the terms “money matters” or even, “only money matters”, with the emergence of monetarism as a Chicago school. This strong emphasis on the role of money should be seen in the light of how economists – usually advocates of a narrow interpretation of Keynesian theory – have, for a long time, almost entirely ignored the significance of money and monetary policy when analyzing business cycles and inflation. As far back as the beginning of the fifties, Friedman was a pioneer in the well-founded reaction to the earlier post-Keynesian one-sidedness. And he succeeded – mainly thanks to his independence and brilliance – in initiating a very lively and fruitful scientific debate which has been going on for more than a decade. In fact, the macro-econometric models of today differ greatly from those of a couple of decades ago as far as the monetary factors go – and this is very much thanks to Friedman. The widespread debate on Friedman’s theories also led to a review of monetary policies pursued by central banks – in the first place, in the United States. It is very rare for an economist to wield such influence, directly and indirectly, not only on the direction of scientific research but also on actual policies.

Friedman has carried out a number of studies, which, scientifically speaking, are both original and weighty, in support of his analysis of the role of money. His empirical studies of the relationship between increases in the supply of money and the consequent changes in incomes and prices are thus founded on a new formulation of the theory of demand for money or liquid resources. His findings on the comparatively great relevance of the quantity theory in explaining developments is, in fact, built on the premise that the demand for money is in fact very stable.

From the purely scientific point of view, Friedman’s other achievements are of greater interest than his monetary analysis. Of primary importance here is his re-fashioning of the theory of consumption based on the hypothesis that “the permanent income” and not year-to-year income is the determining factor when assessing total consumption outlay. He makes the extremely valuable distinction between the temporary and more permanent incomes of households; Friedman has demonstrated that a much greater proportion of the former type of income is saved than the latter.

Another of the important contributions has been studies of “lags” appearing in all areas of economic policy. It was Friedman who coined the terms “observation-lag”, “decision-lag” and “effect-lag” to express a fundamental problem somewhat neglected earlier – and that is, the right timing for stabilization measures during a business cycle. Friedman has demonstrated how both prolonged “effect-lags” and those of varying lengths – of changes in the supply of money, for example – can have a destabilizing effect. The conclusion he draws for economic policy from these findings has been the subject of lively debate, and, to put it briefly, is that monetary policy should be simplified and that its goal should be to ensure a long-range stable growth rate of the supply of money. This view has been accepted to some extent by a few leading central banks.

Friedman was the first to demonstrate that the accepted assumption of a simple trade-off between unemployment and the rate of inflation was only a temporary phenomenon; on the longer term (more than five years), no such trade-off exists. Unemployment below a structural level of balance thus leads, according to Friedman’s theory, to a cumulative increase rate in prices and wages mainly on account of the destabilizing influence exerted by expectations. Modern ideas about the factors determining wage structures are very much based on Friedman’s hypotheses on the importance of expectations of inflation.

At the beginning of the fifties, Friedman was a pioneer among those recommending the reorganization of the international monetary system based on free rates of exchange. He studied the theory of the problem but also used empirical studies to assess how such a system could be made to work. Friedman was among those who first realized – and could explain – why the Bretton Woods System with relatively fixed rates of exchange was bound to break down sooner or later.

His major work, A Monetary History of the United States,1867 – 1960, is regarded as one of Friedman’s most profound and also most distinguished achievements. Most outstanding is, perhaps, his original and energetically pursued study of the strategic role played by the policy of the Federal Reserve System in sparking off the 1929 crisis, and in deepening and prolonging the depression that followed. The critics agree that this is a monumental scientific work which will long stimulate the re-examination of the course of events during this epoch.



The Prize in Economic Sciences 2006 • The Royal Swedish Academy of Sciences • http://www.kva.se


The Prize in Economic Sciences 2006


n f o r m a t i o n f o r t h e p u b l i c

each other? What tradeoff should be made between the consumption of current and future generations?

Edmund S. Phelps

analyses have had a profound impact on economic theory as well as on macroeconomic policy.


Inflation and unemployment

According to the prevailing view during the 1 960s there existed a stable negative relationship
between inflation and unemployment, the so-called Phillips curve. This relationship was
apparently confirmed by data from several countries. The implication was that there was

a choice for economic policy between low inflation and low unemployment. By expanding

demand through fiscal and monetary policy it was possible to reduce unemployment. According

to the Phillips curve, this would come at the price of a one-time increase in the rate of


There were several problems associated with this view. The Phillips curve was a purely statistical

relationship. There was no clear link to microeconomic theories about the behavior

of individual firms and households. There was also no theory about the minimum possible

unemployment. It was of course generally accepted that the unemployment rate could not

be reduced to zero, but there was no clear understanding of what level of unemployment was

compatible with equilibrium in the labor market.

In the late 1 960s,
Edmund Phelps

challenged the earlier view on the relationship betweeninflation and unemployment. He recognized that inflation does not only depend on unemployment
but also on the expectations of firms and employees about price and wage increases. He

formulated the first model of what has come to be known as the


 This says that for a given unemployment rate a one percentage point increase in expectedinflation leads to a one percentage point increase in actual inflation. In setting prices andthe development of prices and wages in general. This hypothesis has received overwhelming


Phelps’s contributions highlighted the importance of analyzing how future possibilities of
reaching the goals of stabilization policy are affected by today’s policy: high inflation today
means higher inflation expectations in the future, thereby rendering future policy choices

more difficult. A policy of maintaining low inflation can therefore be regarded as an investment

in low inflation expectations, enabling more favorable combinations of inflation and

unemployment in the future than would otherwise be available.

Phelps also developed the first model of the determinants of equilibrium unemployment. In

this model, firms set wages in order to affect the number of employees. The more a firm needs

to expand its workforce and the lower the rate of market unemployment, the higher the wages

it will offer. Phelps showed that there exists a unique equilibrium unemployment rate, at

which the average firm will raise its wages at the same rate as wages are expected to rise on

average in the economy. The innovative aspect of Phelps’s approach was that it started from

explicit assumptions about the behavior of individual agents in the labor market. Phelps’s contribution

was also the first to integrate the hypothesis of efficiency wages into macroeconomic

theory. This hypothesis states that it may be in the best interest of a firm to set high wages in

order to improve workers’ morale, reduce labor turnover and attract better qualified employees.

Such mechanisms may help to raise the level of unemployment in equilibrium.

Phelps was not alone in criticizing the Phillips curve in the late 1 960s. Milton Friedman (1976

economics laureate) also emphasized the role of inflation expectations. In contrast to Friedman,

Phelps emphasized that causation runs from unemployment to (unanticipated) inflation.

He derived the expectations-augmented Phillips curve from an explicit model of the wage-setting

behavior of firms in a labor market in which matching the unemployed with vacant jobs

is a time-consuming process.

Phelps’s work has fundamentally altered our views on how the macroeconomy operates. The

theoretical framework that he developed in the late 1 960s soon proved fruitful in understanding

the causes of the increases in both inflation and unemployment that took place during

the 1 970s. He also clarified the limitations of macroeconomic policy. As a result, policy is now

conducted in a radically different fashion from before. One example is that central banks now

routinely base their interest rate decisions on assessments of the equilibrium unemployment

rate and the tradeoffs between the effects of policy at different horizons.

Capital formation

Viewing low-inflation policy as an investment in low inflation expectations was natural to
Phelps against the background of his earlier work on capital formation. There he had asked
what rate of aggregate capital formation (both in the form of physical capital and human capital,

i.e. education as well as research and development) is desirable. What fraction of national

income should be consumed now and how much should be invested in order to increase

the capital stock, thereby boosting future production and consumption? This question is crucial

for the distribution of consumption and welfare across generations. In this area as well,

Phelps’s contributions have opened the doors to later research and had a profound impact on

the debate over economic policy.

The Prize in Economic Sciences 2006 • The Royal Swedish Academy of Sciences • http://www.kva.se
golden rule


of capitalformation. Taking an inter-generational perspective he posited that the goal is to attain the
maximum consumption per capita that is sustainable in the long run. The term golden rule
makes reference to the ethic of reciprocity: “Do unto others as you would have them do unto

you”. Here the interpretation is that the consumption level should be the same for all generations.

According to the rule, the desirable savings ratio fulfills a simple condition: it should

equal the ratio of capital income to national income. An alternative statement is that the

savings rate should be high enough to maintain a capital stock that yields a return (a real rate

of interest) that is equal to the rate of growth in the economy. Similar conditions had been

stated before by Maurice Allais (1988 economics laureate), among others. But it was Phelps’s

analysis that had the greatest influence on subsequent research.

Phelps’s original analysis was restricted to comparing long-run situations, presuming that the

economy was there “from the beginning”. But the process of



the savings ratio fromone level to another may create distributional conflicts. If an increase in the savings rate is
required in order to attain the golden rule, the welfare of future generations will increase
but the current generation will lose. The reason is that the current generation has to reduce

its consumption in order to save more, whereas later generations will benefit from a larger

capital stock allowing them to increase both consumption and saving. However, Phelps later

demonstrated that there may be situations of

dynamic inefficiency,


where the capital stock is solarge that it is possible to increase the welfare of all generations by reducing the savings rate.
The explanation is simple. By reducing the savings rate, consumption can be increased immediately.
If the original savings rate is above the golden-rule level, this reduction also implies a

long-run gain in consumption. Despite a lower capital stock, and hence lower production, the

lower savings rate offers scope for more consumption.

Parents tend to care about the welfare of their offspring. In a contribution from 1 968 that was

long before its time, Phelps (jointly with Robert Pollak) concluded that savings can be too

low if the current generation has a different valuation of its own consumption in relation to

that of the next generation (their children) than it has of the consumption of the children in

relation to their grandchildren. Such so-called time-inconsistent preferences may be expressed

as “my parents think that I should save more for my children than I think myself”. In

these circumstances, public measures in order to increase the savings of all generations, e.g.

through a public pension system, can increase the welfare of all generations. Time-inconsistent

preferences, like those analyzed by Phelps and Pollak, have recently attracted a great deal

of attention in the field of behavioral economics, where insights from psychology have been

introduced into economic analysis.

Phelps also analyzed the role of investment in education (human capital) and research and

development (R&D) in the growth process and shown that the golden rule can be generalized.

In order to achieve maximum long-run consumption, R&D investments (which raise the technology

level) should also be adjusted to the level where their return is equal to the growth rate

in the economy. In joint work with Richard Nelson from 1 966, Phelps emphasized how a better

educated work force facilitates the dissemination of new technology, thereby making it easier

for poorer countries to “catch up” with richer countries. This may explain why recent empirical

research has found that GDP growth appears to depend on the existing stock of human capital,

not just its growth rate. The Nelson-Phelps analysis also offered a possible explanation

of why the return to education is often high in periods of rapid technological change: during




The Prize in Economic Sciences 2006 • The Royal Swedish Academy of Sciences • http://www.kva.se

such periods a well educated workforce is particularly important for increased productivity.
Such arguments have been put forth in order to explain why the salaries of highly educated
employees have increased significantly in the United States (and in many other countries) in

recent decades, when the IT-revolution has initiated a rapid diffusion of new technology.

links and fuRther reading

Most of Phelps’s articles and books are relatively technical, but he has also written a number of more popular

texts that can be read by laymen. A good example is his book
Inflation Policy and Unemployment Theory

(NewYork: Norton; London: Macmillan, 1972) where he discusses inflation and unemployment policy using the
theories that he developed in the late 1960s.
Another relatively accessible paper is “The origins and further development of the natural rate of unemployment”

published in Rod Cross (ed.)



The Natural Rate of Unemployment, Reflections on 25 Years of the Hypothesis

(Cambridge University Press, 1995).

In the essay “A life in economics” published in Arnold Heertje (ed.),
The Makers of Modern Economics,

vol. II(Edward Elgar, 1995) Phelps gives an account of his research career.
Phelps’s article “The golden rule of accumulation: A fable for growthmen”, in which he analyzes the golden

rule of capital formation is an entertaining classic. It was published in

The American Economic Review,


vol. 51,September 1961.

Another classic is the ‘Phelps volume’, the anthology that Phelps published in 1970 under the title



MicroeconomicFoundations of Employment and Inflation Theory


The address of Edmund Phelps’s homepage at Columbia University, New York, is http://www.columbia.edu/~esp2
The Academy’s website, http://www.kva.se, and http://nobelprize.org have more information on this year’s prize,

including a web-TV broadcast of the press conference and advanced information mainly intended for the

research community.


Edmund S. Phelps

Dept. of Economics
University of Columbia
International Affairs Building

Room 1004, 10th floor

New York, New York 10027



US citizen, born 1933 (73) in Evanston, IL, USA. PhD in economics in 1959 from Yale University, CT,

USA. McVickar Professor of Political Economy at Columbia University, NY, USA.




at which actual and expected inflation coincide. Equilibriumunemployment is only determined by the functioning of the labor market. Attempts to permanently
reduce unemployment below the equilibrium rate will only result in continuously
increasing inflation. Stabilization policy still has an important role to play in dampening the

short-run fluctuations in unemployment around its equilibrium level.


The Prize in Economic Sciences 2006 • The Royal Swedish Academy of Sciences • http://www.kva.se

negotiating wages and salaries, firms and employees base their decisions on their beliefs about

 equilibrium unemployment rate,

Full employment, stable prices and rapid growth are central goals of economic policy. But policy
always faces difficult goal conflicts. How should inflation and unemployment be balanced against
has advanced our understanding of both of these tradeoffs. He has emphasizedthat not only the issue of savings and capital formation but also the balance between inflation
and unemployment are fundamentally issues about the distribution of welfare over time. Phelps’s

 expectations-augmented Phillipscurve.

support in subsequent empirical research (with the possible proviso that the impact of inflation

expectations on actual inflation may be smaller at very low inflation rates).

Phelps’s analysis stood in contrast to the earlier views on the ability of an expansionary fiscal

and monetary policy to permanently increase employment. Instead, his conclusion was that

there is no long-run tradeoff between inflation and unemployment, since inflationary expectations

will adapt to the actual inflation. In the long run, the economy is bound to approach



detsember 17, 2010 - Posted by | Uncategorized

2 kommentaari »

  1. I do believe all the ideas you have presented in your post.
    They’re very convincing and can definitely work. Still, the posts are very short for starters. May you please lengthen them a little from subsequent time? Thank you for the post.

    kommentaar kirjutas bizuteria | september 14, 2012 | Vasta

  2. Aw, this was an exceptionally good post. Spending some time
    and actual effort to make a really good article… but what can I say… I procrastinate a whole lot and never manage to get nearly anything

    kommentaar kirjutas web development agencies Sydney | september 16, 2012 | Vasta

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