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Restructuring

I've restructured the article significantly. I am still not comfortable with it in-so-far as it presents a Friedmanite theory as the modern quantity theory, and in-so-far as the “Principles” subsection over-simplifies even that Friedmanite take. Also, I have not really gone over the criticism section, to ensure that it is logically well-group. Glancing at it, it seems to be padded by inefficiencies. —SlamDiego 16:31, 19 February 2007 (UTC)

a rudimentary theory

${\displaystyle P={\frac {M\cdot V}{Q}}}$

If ${\displaystyle V}$ and ${\displaystyle Q}$ were constant, then:

${\displaystyle \Delta P=\Delta M\,}$

Can this be correct? If it is, can it be better explained? As calculus, it's not true. It would be true if dP and dM were expressed as percentages ie dP/P = dM/M. I'll add a note or make a change if no one disagrees. JBel 22:53, 8 April 2007 (UTC)

Good catch! —SlamDiego 04:15, 11 April 2007 (UTC)

Confusing article

The criticism section needs some editing. Several different criticisms are all written together in one paragraph, and they are not clear to begin with. Also there should be an explanation of the difference between the old quantity theory of money and the modern one pionered by Milton Friedman.

How's this for a leftist slant: "For instance recent disinflation is less due to monetarist policies than to free trade and anti labor policies which boost profits while depriving labor of their pricing power."

Also the criticism section seems to mostly address Friedmenesque monetarism and/or money supply targeting by central banks rather then the Quantity Theory per se. It's perfectly feasible for someone to believe in the Quantity Theory but oppose monetarism. I tried to clean it up a bit, but it could definetly use a re-write.radek 21:06, 11 April 2007 (UTC)

Please don't place comment sections out of order!

Amyway, yeah, there's plent of room for improvement. Note my comment on restructuring above. Things used to be worse. —SlamDiego 21:12, 11 April 2007 (UTC)

I don t see any leftist slant, in the sentence you comment (and I wrote) it is a rather objective one. the money supply has barely changed, M3 continues to rise some 8-10% each year passing in Europe and USA (and that does not change if you take M1, M2 or any agregate), yet consumption goods prices used to grow some 6-10% before 1980 and rise now some 2-4%. Disinflation hence has nothing to do with monetary policies and all to do with anti labor policies. Inflation has simply be redirected from inflation in consumption goods prices to inflation in capital goods prices (see how housing and stocks have risen way beyond their fundamental value) Panache 11:34, 7 June 2007 (UTC) I edited the critics section, it now follows the 5 hypotheses above. I just had trouble developping the source of demand for money. the part written about stocks seemed counter intuitive to me (when stocks increase demand for money increase so one should expect deflation all things being equal, but usually when that happens theres is inflation, as production is forced to increase, and when they unload stocks in fact it creates deflation because more goods come in the market, producers are driven into bankrupcies etc. So its not a good line of critic and if anyone has another idea about the demand for money, please go for it. adide from that the article should I think include the recognition by friedman himself that his theory was proven a failure in explaining the recent desinflation Panache 11:34, 7 June 2007 (UTC)

It is evident that English is not your first language, and that your English reach somewhat exceeds your grasp. It is hard to read your edits, and hard to read your comments here. —SlamDiego_←T 23:00, 7 June 2007 (UTC)

thanks slam diego, your contribution is very helpful Panache I made the critics section clearer. ANd left a blank, one for the demand of money.

money demand

The quantity theory is the basis for the Keynesian Liquidity Preferance theory of money demand, so I put it in because I think it's relevant and important. In fact I'd like to see this section a expanded a bit (not too much though). If the fact that QT is a basis for a theory of inflation is relevant so is, IMO, this other aspect. Currently there's no article in wiki on Money Demand (at least none that I can find, the closest is this Transactions demand), which is a shame. But if and when this article is created we could perhaps just link to it, rather then have the statement here, if someone really really objects.radek 21:16, 11 April 2007 (UTC)

You seem to be treating the equation of exchange as identical to the quantity theory of money. But the quantity theory hold that there is a positive relationship between ${\displaystyle P}$ and ${\displaystyle M}$, whereas some economists have believed that all of the response (long-term as well as short-term) to ${\displaystyle \Delta M}$ will be in ${\displaystyle Q}$; that belief (albeït certainly not one that I hold) is compatible with the equation of exchange but contrary to the quantity theory of money.

Certainly ${\displaystyle M_{D}}$ is very important to economic theory, but I think that the discussion may be misplaced. —SlamDiego 21:24, 11 April 2007 (UTC)

I guess you have a point - both the quantity theory and liquidity preferance are based on the equation of exchange but there's no necessary relationship between them. Still, seeing as there's no article on money demand, nor a separate article on 'equation of exchange' (and I don't think there should be) I think the edit, short as it is, provided one is careful with the wording, should stay. But if you feel very strongly about it then go ahead and remove it.radek 21:32, 11 April 2007 (UTC)

Well, why don't you leave it but begin working on an article in which it would be better located, move the equation there soon, and make sure that each article includes the other in its “See also”? —SlamDiego 00:22, 12 April 2007 (UTC)

Sure, I've been meaning to write the money demand article for awhile anyway. Gimme the weekend. radek 21:31, 12 April 2007 (UTC)

I just fleshed-out the article on the equation of exchange. Please look at it and see what edits you want to make, especially to the subsection on ${\displaystyle M_{D}}$. —SlamDiego 19:26, 14 April 2007 (UTC)

Looks good. Thanks, I'll take the ref here. radek 23:38, 14 April 2007 (UTC)

final expenditures

could some one explain final expenditures. If final expenditures is only consumer spending, then what happens to all the transactions on assets ? Are they excluded from the equation ? How come ? If they are not, then, would it not be wise to state clearly that Q is very different from Y (the annual production level) since Q includes transactions on the capital goods produced in the preceding periods. Panache 11:57, 12 June 2007 (UTC)

1. Purchase of a share or of a bond isn't treated as a claim on goods or of services; it is treated as buying money with money. (Indeed, it isn't all that functionally different from starting an interest-bearing account.)

   uh sorry, I did not mention bonds, bonds are not assets, but liabilities. And shares are clearly not money. How could you believe this ? An interest bearing account is saving. A share is an investment. In an account, the money is stored or lent, in a share the money you pay gives you an ownership over a good : the company, its trademarks patents. etc. Indeed a share is a capital good.

   So your explanation is false. Panache

   Why in the world are you lecturing me, if you are so sure that you have the answers? Unfortunately for all concerned, your answers are wrong.

   1. A bond is a liability for the issuer, but it is an asset for the holder.

Of course but a bond is just a credit instrument, it does not give you property rights. A share does. You can own a company through shares.

1. 1. Everything of market-value is money, to some extent. That extent is called “liquidity”. Shares have a high degree of liquidity, and hence shares have a high degree of money-ness (and it is, literally, called “money-ness” in much of the literature).

This is getting ridiculous. If everything of market value is money to some extent, why talk about money supply. Stop this blable. Shares may have money ness, not more than tons of wheat by the way, but they are not money, and not considered in the money supply. By the way, in case you do not know, interest bearing accounts are.

1. 1. Interest-bearing accounts are funded by investment; the bank is really just brokering. In the case of a classic savings & loan association, ownership is formally in the hands of those who have such accounts. (Similar arrangements exist for some insurance firms.) Even in the case of a bank, if push came to shove, then the liabilities to account holders could be resolved by a surrender of the assets (including physical capital, bonds, and stock shares) of the bank.

Yes but it still is different to loan money to some one, or to own a company.

1. 1. The relationship between Jacques buying a share in a firm and production of goods or services is virtually identical to the relationship of Jacques purchasing a certificate of deposit, or setting up a savings account.

No. Jacques can control the production of goods through his shares and he gets access to profits, this has nothing to do with endogeneous creation of money through credit.

1. —SlamDiego_←T 13:29, 12 June 2007 (UTC)

2. The article makes it plain that, once one moves to the equation of exchange, one has presumed a distinction of “real” values from nominal values. It is does not seem particularly necessary to labour the distinction in this article, which links in its body to that on “real” and “nominal” values, and whose “See also” section encourages readers to read the article on the classical dichotomy.

   I did not see when I made any reference to this distinction. Panache

   That's because you don't even understand what you're actually saying and asking. —SlamDiego_←T 13:29, 12 June 2007 (UTC)

You talk much but do not bring much data...

2. Do not edit the discussion of an economist's theories, as you did the discussion of Friedman's theories, so that it instead presents your own theories, attributed then to him.

—SlamDiego_←T 18:00, 9 June 2007 (UTC)

can you tell me when I did that ? Panache Oh OK I got it (followed the link). But then do you mean that THese transactions on stocks of goods produced in earlier time periods are not included in Friedman's theory ? This can t be. Stocks have to be traded also and that requires money. If they were not traded, then what s the meaning of replacing good old MV= PY with a transaction equation ? What s the meaning of replacing Y by Q ? If you have a transaction equation it is precisely because there is more to trade than the annual production. Can t you see that ?

I mentioned before that your grasp of English is not good. Production is not simply flows, nor is it, in an economic context, the same thing as generation;

Great you pretend to speak plain english, and you present a new word "generation" give it no meaning and pretend that it may make sense of your non sense.

The problem is that some things are produced or generated (I can t see the difference) before they get traded, and consumption does not destroy durable goods, hence things are traded several times, hence there are more transactions than production. I suppose you call generation the physical production and production the sell of a good or service. If this is YOUR meaning of production, then a good sold several times is produced several times. weird indeed...

that only leaves “stock” in the sense of share.  Goods and services can be generated without being produced, and preëxisting goods and services can be produced long after they were generated. 

—SlamDiego_←T 13:29, 12 June 2007 (UTC)

<If you want to suppress my edits, then you have to add a 6th postulate stating : there is no stock of goods produced in earlier period or there is no trade on those stocks, or trades on stocks produced in earlier period represents a fraction of all trades and can be ignored ... Of course all those statements are false. But that should not be a problem. And then it'll be possible to criticize it. I m no expert in Friedman s theory as I find it too stupid to study, but I doubt he has not included stocks in his transaction equation. Anyway, it s just either or.

Nonsense. Instead of my adding any new postulate, I simply have to tell you to restrict your edits in accordance with your competence. I would not insist in arguing biochemistry in fr.wikipedia.org, and you should not insist on arguing economics in en.wikipedia.org. —SlamDiego_←T 13:29, 12 June 2007 (UTC)

Sorry but your lecturing proves only your own lack of competence. If you can not grasp that there is a problem with stocks, I can not do anything for you.

Either stocks are included and you should not talk about Output, or they are not, and you should mention that stocks are not included.

If transaction on stocks of goods are not included, this excludes : all transactions on existing homes, on existing consumption goods (ebay), on existing companies (stock market). When one think of it, it also excludes all retail sales transaction (as the goods sold were already bough once, only the value added by the retail store is considere).

I thought of an explanation in simple terms for you slamdiego. Suppose 5 pounds of wheat are produced in the economy, there is 100 dollars in the economy, the money is really sticky and can be only used once. What is the price of one pound of wheat ? The most stupid answers are presented first.

Answer 1 : 20 dollars of course. The 100 dollars are spent in wheat acquisition.

Answer 2 : Since there is a stock of another 5 pound of wheat from last year s windfall production, and an annual need for 10 then the price for the pound of wheat is 10, just as it was last year. So we got one year with a production of 15 and one with a production of 5 and yet the same prices !!!

Answer 3 : Since the 10 pounds of wheat are sold by the farmer to 2 main stores, since those main stores sell them to 10 retails stores, since those retail stores sell them to final consumers, there s a need for 30 transactions, the ounce of wheat is 3,33 dollars.

Notice that adding a new level of intermediation would, other things remaining equal, lower prices because it would raise the need for money. This of course is one reason why in deflation eras, people get out of the official market with its long chain of intermediaries and buy directly to the producer.

so back to the topic, either as I believe stocks are included and Q is not output, or they are not, and the equation only takes into account a small fraction of all transactions.Panache 11:57, 12 June 2007 (UTC)

See above. —SlamDiego_←T 13:29, 12 June 2007 (UTC)

By the way you have provided no definition of final expenditures. In wikipedia, the only references to expenditures refer to consumption final expenditure, a part of agregate demand, clearly this can not be what you are referring at, (why would you exclude final investment). THe all passage is misleading, it seems pretty obvious now that by the anecdotal reference to "difficulty of measure" you incidently erase the 90% of transactions, but nowwhere is it specified. So please clarify what transactions are excluded by moving from one equation to the other. If you disregard capital goods, state so, if you disregard all multiple transaction on a same good, state so, if you disregard all transaction on a good produced in an earlier period, state so.

1. There is a standard definition for “final expenditures”; I didn't write whatever definition you found on Misplaced Pages, and I don't particularly care what it says. Final expenditures are consumption, investment, government expenditures, and net exports.

Great.

1. Do not pseudo-quote. The term “difficulty of measure” is not used anywhere in the article, nor in any of the prior comments here.

Yeah, I ll copy paste the passage later. "The previous equation, known as the “transactions form”, presents the difficulty that the associated data are not available. Data for final expenditures are more readily available." Sorry you could not grasp that "the associated data are not available" is a problem of measure.

1. As to what you call “the anecdotal reference”, you appear not to know what “anecdotal” means; in any event, in combination with your pseudo-quoting, one can only guess about to whatever you intend to refer.

I mean you disguise a strong political choice under a technical problem. The transaction forms included multiple transactions that are not recorded in the final expenditure. All those that I mentionned, those on stocks of goods physically produced in earlier periods or sold se

1. It isn't the job of the editors here to write an English-language article so that it may be understood by someone whose grasp of English is poor.

It is not the job of the editors here to write an english language article so that it may be understood by someone whose grasp of economics is poor either.

1. And it isn't the job of this article to provide all of the infrastructure of economic theory necessary to understand it. If, indeed, “final expenditures” is nowhere well explained on Misplaced Pages, that suggests that a specific article on that subject is desirable, not that this article should mushroom into some comprehensive macroeconomic treatise.

—SlamDiego_←T 13:29, 12 June 2007 (UTC)

That s exactly what I meant. 82.232.235.239 05:21, 13 June 2007 (UTC)

Panache, you have thoroughly trashed this discussion. Awful English, awful economics, and awful mark-up. Your behavior cannot be distinguished from that of a troll. I'm not going to clean-up the fouled mark-up a second time in order to reply to you. I have placed warnings on your User_talk page under both of the identities that you have used here. If you persist in attacking the article, then you will be blocked from editing Misplaced Pages. —SlamDiego_←T 06:46, 13 June 2007 (UTC)

Controversy on final expenditures

It is controversial to choose final expenditures to assess transactions. This excludes many transactions : financial transactions (on shares, commodities etc.) Intermediary transactions {{unsigned|82.232.235.239}

This is precisely this exclusion that explains the failure of monetarism and the growing interest of asset price inflation.

1. I keep telling you that you don't know enough English to be rewriting these articles, but you continue to proceed like a bull in a china shop. The fact that a practice or theory is problematic doesn't make it controversial.
2. Further, the fact that you find it problematic doesn't entitle you to in the article raise objections. See the Misplaced Pages policy on “original research”.

—SlamDiego_←T 06:33, 13 June 2007 (UTC)

You keep refering to my english level to avoid facing the purposive errors you make. It is utterly wrong to disguise the exclusion of transactions on capital goods (including old homes for instance if you keep defining shares as money for a strange reason) as a technical measure due to lack of available data. This is simply misleading, illogic, wrong, whatever you name it. If you disagree my english formulation of a solution to the problem your definition has created, please provide another solution to resolve it, or I will have to put a banner stating that this article is not objective. There are houses traded everyday (and factories and many other goods traded and neither invested, nor consumed) money is needed for such trades, one can decide to exclude such trades for several reasons, but it s not possible to state that this is because available data is lacking.

By stating that it is not controversial (even though recent keynesian works have asked that more attention be given to asset prices) the definition seems to imply that this is not problematic. If you really oppose to my addition, then simply suppress the sentence that "this is not controversial" what good does it make ?

As for my being an elephant in a china shop, this is highly possible, but I noticed it helped me clear out very fast where the bug was, I knew the problem with friedman equation came from its exclusion of transaction on capital goods, this comes straight from reading on post keynesians. But I could not see where the trick of the exclusion was done in this article. Everything seemed so logical. Then I found final expenditures and truth is I did not know to what it refered in french, and I was puzzled by the use of Q instead of Y. It was nowhere clear in the article that transactions on capital goods (stocks neither invested nor consumed) were excluded ... I was puzzled. Anyway, by my elephant moves, I quickly discovered where the flaw was. So I think we should now agree that there is a problem in the present formulation as it can not be stated that the exclusion of all transactions on capital goods is due to lacking data. This exclusion has of course other reasons (which it is agreed we may not discuss here). I suggest suppressing the reference to lacking data. But I can not find another way to write this passage so far. I ll give it another try. — Preceding unsigned comment added by Panache (talk • contribs)

Panache, it simply isn't a good use of my time to argue with you, because of the barriers to communication on your side (for example, the Keynesians to whom you refer are referring to financial assets — shares, bonds, &c — where you think that they've been talking about inventories); it has been either arguing with a troll, or something very much like arguing with a troll. I had brought your behavior to the attention of administrators, and will do so again in the future if necessary. —SlamDiego_←T 01:04, 14 June 2007 (UTC)

Residential investment

What is "Residential Investment"?

From the BEA:

   Investment in residential structures consists of new construction of permanent-site single-family and multi-family units, improvements (additions, alterations, and major structural replacements) to housing units, 

expenditures on manufactured homes, brokers'commissions on the sale of residential property, and net purchases of used structures from government agencies. Residential structures also include some types of equipment that are built into residential structures, such as heating and air-conditioning equipment.

As you can see slamdiego, a sale of an old house (a house that was held in inventory if you like) is not recorded in investment. It is not either in consumption. So it is not in final expenditures. Can you tell me why a sale of house is not a source of money demand ?

If americans own their homes on average for 15 years, they need less money than if they own it on average for 5 years. Yet it is not apparent. This is to make clear to you that wether it is financial assets, inventories of consumption goods, or houses it does not matter, it s just that the first equation includes all transactions including those on stocks, whereas the second one is only on flows.

I will mention your action to the administrators also, once I learn how to do it. You clearly are gross and unfair, I have made plain your attemps at distorting the facts and you keep on ranting about my english level.

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