Sunday, April 12, 2009

Don't know much about history

I have never taught macro-economics, but I can dream. I would start with MV=PY. One can spend the rest of the semester discussing all of its implications. Which M do we use? Can we measure it? What is V all about? But, most of all, the expression evokes an ideal world in which wealth and credit are determined concurrently. And then we can discuss the many cases where this does not occur. And before you know it, it's the credit-induced downturn we are now in.

According to a piece in today's NY Times by Eric Zencey ("Mr. Soddy's Ecological Economy"), a chemist named Frederick Soddy had once figured this all out. I had never heard about Soddy or this work (and Mr. Zencey does not mention MV=PY or Irving Fisher, but he does allude to Georgescu-Roegen's work), but it appears that Soddy and Fisher were contemporaries. The plot thickens.

Zencey's discussion of Soddy would be another way to introduce the problems of the macro-economy. One can never learn enough history -- or chemistry, it seems.