Bob Murphy Gets His Debate With Warren Mosler

     He'd been agitating to get Krugman to debate him for a while, to no avail. Krugman, as best as I can see, doesn't much like debates. He may not be great at them either-though he showed some improvement against Scarborough on Charlie Rose recently.

    Then too, let's be honest. There's the element of status. Krugman's high status means there isn't necessarily much for him to gain in debating Murphy. What it does for both Mosler and Murphy comparatively is at least increase visibility. Either of them probably have more to gain than Krugman would have.

     Here's the announcement:

     "Charles Hayden has informed me that both parties have accepted the invitation to debate, since it appears that Paul Krugman has decided not to accept Robert Murphy's challenge"

      "Details to be announced when the venue is settled. Stay tuned. It's on.

      http://mikenormaneconomics.blogspot.com/2013/03/robert-murphy-and-warren-mosler-to.html

      Lord Keynes suggests one very fertile area for Mosler is Murphy's own position on interest rates: in contradiction to most Austrians he sees interest rates as a monetary phenomenon:

      Murphy is something of a maverick who thinks that the interest rate is a monetary phenomenon, both in his PhD Unanticipated Intertemporal Change in Theories of Interest (2003) and in this post. That is, he rejects the widespread Austrian theory of interest: pure time preference theory.

       http://socialdemocracy21stcentury.blogspot.com/2013/03/warren-mosler-to-debate-robert-murphy.html

       This certainly is a big deal. One of the major ways that Keynes was revolutionary was in seeing interest rates not as compensation for "waiting" or "abstinence" from consumption but rather for giving up liquidity. So how exactly is Murphy able to reject Keynesianism out of hand while conceding such a major point?

       "Sorry kids–Major Freedom in particular–but I think Keynes is brilliant in Chapter 13 of the General Theory:

It should be obvious that the rate of interest cannot be a return to saving or waiting as such. For if a man hoards his savings in cash, he earns no interest, though he saves just as much as before. On the contrary, the mere definition of the rate of interest tells us in so many words that the rate of interest is the reward for parting with liquidity for a specified period. For the rate of interest is, in itself, nothing more than the inverse proportion between a sum of money and what can be obtained for parting with control over the money in exchange for a debt for a stated period of time.

        "As I put it in my neglected dissertation, the rate of interest is an exchange rate between present and future dollars (or euros or ounces of gold or whatever the money commodity is). Austrians wouldn’t explain the exchange rate between the USD and the Japanese yen by reference to “proximity preference,” or the fact that consumers subjective prefer, other things equal, American goods to Japanese goods."

        "Obviously, I don’t endorse Keynes’ nutjob “socialization of investment” stuff in the final chapter, or any of his policy recommendations for that matter. But on his neutral, scientific assessment of what interest is, I actually agree with him more than Mises."

        "Believe me, it pains me to say that. I feel like this guy."

         http://consultingbyrpm.com/blog/2011/07/is-keynes-from-heaven-or-hell.html

        LK suggests Mosler go right here in the debate: how is he so able to reject Keynes' "nutjob" policy reccomendations so easily in light of agreeing with him on interest rates?

     " Mosler should point out that Murphy agrees with Keynes on the nature of the interest rate. So does Murphy admit that Keynesians are right in their interest rate theory?"

      "The instant Murphy attempts to explain recessions in terms of the Austrian business cycle theory (ABCT), Mosler should demand to know what version of the ABCT Murphy is using."

       Of course, Major Freedom was on the warpath after the above piece by Murphy:

       "Nooooooooooooo!"

       "That’s Bob as he realizes that in his slip into the dark side, he lost the most important thing."

       "Yes, the nominal rate of interest on loans is the difference between money received in the future versus money given up in the present. But this difference cannot possibly be a product of liquidity preference, for this difference is not between what is hoarded and what is consumed and invested. It is the difference between what is consumed and invested only."

         Major then starts talking about two different economies-can you make sense of this?

         " Imagine everyone in the economy hoarding maximum cash, and investing the minimum and consuming the maximum out of the remainder, versus an economy where everyone is hoarding minimum cash, and investing the minimum and consuming the maximum out of the remainder."

         "To give some numbers to this, imagine in the first economy everyone comes to hoard $900 each, and they earn $100 per period, which they invest $10 and consume $90. In the second economy, everyone comes to hoard only $100, and they earn $900 each period, which they invest $100 and consume $900."

            I don't get this division between hoarding and earning. After all, just because you're hoarding money doesn't mean you didn't earn it. He then goes on and on and on-if you know the Major this is no surprise. Murphy himself answers him:

            "MF, I’m just being honest with you here, I come to my blog when I’m taking a break from “real work.” Your posts are too long for me to even read, because I know it would take me longer than the 5 minutes I want to devote to the break. So that’s why I don’t grapple with you often (esp. on the Sunday posts). If you have 18 reasons that I’m wrong, just post the top 2."

             I guess however Bob will answer Mosler if he questions him on interest rates, he won't be using Major's.