Home > economics, political-economy, shorter work time > Unemployment: The bizarre prescription of L. Randall Wray – Final
  1. December 8, 2009 at 1:48 pm

    Unemployment, both in the U.S. and the world as a whole, marches ever higher because the field of economics doesn’t account for the relationship between population density and per capita consumption.

    Following the beating the field of economics took over the seeming failure of Malthus’ theory, economists adamantly refuse to ever again consider the effects of population growth. If they did, they might come to understand that once an optimum population density is breached, further over-crowding begins to erode per capita consumption and, consequently, per capita employment.

    And these effects of an excessive population density are actually imported when a nation like the U.S. attempts to trade freely with other nations much more densely populated – nations like China, Japan, Germany, Korea and a host of others. The result is an automatic trade deficit and loss of jobs – tantamount to economic suicide.

    Using 2006 data, an in-depth analysis reveals that, of our top twenty per capita trade deficits in manufactured goods (the trade deficit divided by the population of the country in question), eighteen are with nations much more densely populated than our own. Even more revealing, if the nations of the world are divided equally around the median population density, the U.S. had a trade surplus in manufactured goods of $17 billion with the half of nations below the median population density. With the half above the median, we had a $480 billion deficit!

    If you‘re interested in learning more about this important new economic theory, then I invite you to visit either of my web sites at OpenWindowPublishingCo.com or PeteMurphy.wordpress.com where you can read the preface, join in the blog discussion and, of course, buy the book if you like. (It’s also available at Amazon.com.)

    Pete Murphy
    Author, “Five Short Blasts”

    • charley2u
      December 10, 2009 at 11:06 am

      I would disagree that the cause of this crisis is Malthus’ revenge. It is a classic over-accumulation of capital, which has to lead to an implosion.

  2. phil
    September 27, 2011 at 6:25 am

    It may come as a shock to whoever wrote this article that they have actually failed to understand the basic element in Wray’s argument. Wray argues that countries can run deficits without having to ‘fund’ those deficits with borrowing or taxation. He argues that so long as government expenditure leads to increased productivity it can be done simply by spending money into existence (by ‘fiat’) without having to generate an additional debt. Wray argues that the purpose of borrowing should be to control interest rates and credit creation, and that the purpose of taxation should be to reduce excess demand, thereby controlling any potential inflation that may arise from unproductive spending.

    • September 27, 2011 at 10:37 am

      I am more or less familiar with Wray’s argument, Phil. But, I think he is wrong: Wray says certain countries can run deficits. My argument isn’t that they can’t, but that it is never necessary to run a deficit, nor fund that deficit by borrowing, taxing or spending the money into existence. The same impact on productivity can effected by reducing hours of work, which forces the economy to conserve on labor costs by substituting machinery for manual labor; and more complex labor for less complex labor. Moreover, government does not have to control interest rates or credit in an economy running at “full employment”. “Full employment” would always be true if hours of work were reduced until everyone had a job.

      This article is old, so it does not represent my view as of this time. It was a first attempt to understand Wray’s argument.

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