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Merijn T. Knibbe

Merijn T. Knibbe

Economic historian, statistician, outdoor guide (coastal mudflats), father, teacher, blogger. Likes De Kift and El Greco. Favorite epoch 1890-1930.

Articles by Merijn T. Knibbe

We’re killing it.

January 11, 2024

Right-wing ranters in my Twitter timeline are pooh-poohing the whole climate discussion without doing their homework. So, here’s a little reader to aid and abet (sorry, early retired teacher and that all).Let’s start at the beginning:1. CO2 is measured at the Manua Loa station. Results are clear, robust, and stark: CO2 is increasing.

And no, CO2 is not ‘following temperature’ as the latest lazymeme from the lazyright wants to have it. It’s following us. We’re causing it. A ‘mass balance’ approach yields that {human production of CO2} = {Δ CO2 in the atmosphere + Δ CO2 in the oceans}. Human production is, by the way, increasing. To dispel one myth about the interpretation of these results: sometimes it’s stated that gross flows are thus large that small net additions do not

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The 9th principle. Meticulous administration.

December 24, 2023

No Christmas celebration on this blog this year. But a story about communities: the Commons of Buren and Hollum on the Waddensea island of Ameland. Commons have been studied by Elenor Ostrom. Studying Commons is of prime importance: we only have one earth. Reading Ostrom makes one optimistic. One of the things she mentions is the age of commons. Often, they survived centuries. Commons, which invariably voluntarily set limits on the use of resources, are sustainable. The Ameland Commons are no exception. They were also democratic and based on at least some measure of equality. Just like in other commons, on Ameland there were systems to appoint the managers. In Ballum, these were elected in a yearly election in a local pub, every head of a household had one vote. In Hollum there was a

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Something about prices (IV). Gift exchange prices.

December 18, 2023

Not all prices are market exchange prices. I’ve been writing about administered prices (here and here) and ‘commons’ prices (here). In January, I hope to make a first small step towards a badly needed periodic table of prices. Today a new element, Gift Exchange Prices. Gifts are like the Greeks. They come in many varieties. But always, something is transferred from somebody to somebody, even when there often is no market price or even transfer of ownership. There might be a transfer of honor, prestige, and risk. Or goods like a diamond ring or services like helping somebody to move. The difference between Gift Exchange and Market Exchange is spelled out in the table below. It’s important to realize that it’s not always the giving but accepting that counts. Accepting a gift often leads

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Credit in the Euro Area: a recession has arrived

November 30, 2023

According to the Monetary Statistics of the European Central Bank, the credit impulse to the Euro Area economy is getting even weaker (graph 1, the yellow part of the bars). Which not only forbodes a recession but already is a recession.

Graph 1. Monetary developments in the Euro Area. Source.

This interpretation (the EA is in a recession) gains credibility when we realize that most of the remaining net credit is used to finance the purchase of existing houses and not to finance new investment or consumption.

The blue part of the bars shows that households and companies are moving deposit money to savings accounts (with a higher interest rate), which are not included in M3 money. Net external assets are, at the moment, however increasing. What does this mean? First, we

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The European Central Bank, “Fisher dynamics” and the dire plight of Euro Area households.

November 15, 2023

Will lower central bank interest rates at this moment lead to lower consumer rates? No, they won’t. The, at this moment, low rates on existing debt will continue to increase for years on end, cutting in household spending and hampering the possibility of households to pay down their debt.

Figure 1. Interest rates for new mortgage contracts, the Netherlands.

At this moment, Central Banks seem to take a break when it comes to increasing their interest rates. Maybe they will even lower rates. This, however, won’t stop consumer debt interest rates from increasing. Graph 1 shows interest rates for new mortgage contracts in the Netherlands. These are, thanks to the recent and feverish increase in central bank rates, up. However… looking at households and legacy debt, rates on

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Claudia Goldin, inspirational

October 11, 2023

Claudia Goldin won the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel. I can write about her work. But here, I will be inspired by her work. One of the events she emphasizes is that women’s participation in the ‘GDP’ labor market became less after say 1860, as shown in the figure. Below I will investigate if this model (this is a model) can be used for the interpretation and analysis of my data on long-term agricultural development (yes, it can).

The decline of women’s work in agriculture is well-known for farm production of butter and cheese. In many areas, women (the farmers’ wife [no, Grammarly, not ‘wifes’], servants, sometimes daughters) produced butter and, in areas specialized in dairy production on larger farms, butter and low-fat cheese or

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Broad unemployment in Southern Europe. Down, but…

October 6, 2023

Eurostat recently published new data on EU unemployment. The question: how is Southern Europe doing, after the Great Financial Crisis of 2009 when unemployment rates in Spain and Greece were above 20 and even 25%? Compared with the years directly after 2009 Spanish and Greek rates are down a lot, even when levels are still above 10%. But this is not all there is. Next to ‘normal’ unemployment, which is still at a crisis level, economic statisticians also define broad unemployment as ‘people working part-time who want more hours’, ‘people seeking a job but not directly available’, and ‘people available but not seeking’. The reason to define these categories is that people are classified as ’employed’ even when they work 1 hour per week and want to work much more hours. Normal

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Inflation: bumps, potholes, the government and a 3D analysis

September 17, 2023

At this moment, there’s quite some ‘graphology’ when it comes to inflation. Here, an example by Paul Krugman. Here, Larry Summers. And an example by a younger chap, Joey Politano. (Caveat: ‘X’ kicked out some links when I was writing this blog (or at least they disappeared), it might happen again)). All of these economists are really ahead of the pack when it comes to knowledge of economic statistics (methodology as well as results). They also know a thing or two about economic theory. Look here for a paper by Bolhuis, Cramer, and Summers (the same!) in which they argue that inflation around 1980 inflationary spell was not as bad as indicated by their measure of consumer price inflation and (as they admit) about as high as indicated by the data in the graph below (meaning, in their

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Core prices? More prices! Understanding inflation means looking at numerous sets of prices.

August 15, 2023

Producer prices in the UK are declining. Does this mean inflation is over? Hmmm… Many economists have difficulties understanding the present aftermath of an inflationary episode (which might be followed by new episodes…). Which is, considering their theoretical framework, understandable. They look at only one set of prices: consumer prices (or, in the case of derivatives ‘core prices’ and many others‘, even only at a subset of this set). Instead, they should expand their frame of reference and look at more sets of prices and, consistent with economic theory, at the relations between these sets.

We do have the data. Here, you will the ‘inflation dashboard’ of the Dutch CBS, which is not just based on consumer prices but also on wages, interest rates (‘translation not available’).

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Something about prices (III). ‘Commons prices’ which are prices fostering the reaping of the Blessing of the Commons.

July 27, 2023

As nobody else bothers, I’m tinkering with designing a (badly needed) periodic table of prices. Look here and here. Economists are fond of ex post market prices – i.e. prices paid for actual transactions. But other kinds of prices abound. Administered prices, shadow prices, cost prices and more. Each of these prices are important and are used to influence the production and distribution of goods and services. Each of these are, separately, defined on all kind of webpages. but an intelligent overview and categorization is lacking. Hence this series. Today: insurance prices for hay and milk cows in Friesland, 19th century. What kind of prices were these? The answer: ‘commons-prices’, to introduce a neology.

After 1810, Frisian farmers established mutual fire insurance companies.

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Something about prices II. The introduction of Multi Component Pricing for milk…

May 28, 2023

I’m tinkering with the idea of a kind of periodic table for prices. Below, a very rough sketch of what I have in mind relating to administered prices and market prices as well as the sectors of the national accounts (cost prices, shadow prices etcetera have to be added).

Gardiner Means defined the difference between market and administered prices (quoted in Gu (2012) on p. 13):

“In an engineering economy prices are fixed by administrative action for periods of time. Price is determined before a transaction occurs. In a trading economy prices are developed in the process of trading andprice is not determined until the transaction occurs. In an engineering economy supply and demand never equate except by coincidence“.

Earlier I discussed how the Dutch central bank

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The representative consumer has to die

May 19, 2023

Recently, Robert Lucas, who was called an economist, died. This is not about him, but about his kind of economics as tweets and obituaries show that it is not yet generally understood what kind of science the neoclassical macro-economist like him produced. Their most egregious failure: after decades of work, they do not even have a shimmer of anything which could pass for a neoclassical way to estimate the macro economy, even when their ideas are squarely at odds with the macro economy as we measure it. Theory without measurement.

Lucas used – like many others – the concept of the representative consumer. A macro economic model which presupposes that the economy consists of 1 person, A Robinson Crusoe model – or fantasy? Which is faulty, as the essence of a macro economy – its

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Something about prices I. ‘Risk free’ rates as administered prices in the sense of Gardiner Means.

May 4, 2023

On this blog, I’ve stated that economics needs a ‘periodic table of prices’. There are many different prices beyond ‘market prices’: Cost prices, Administrated prices, Government prices, Factor prices and whatever. We need a grid which enables a classification. As I, clearly, do not seem to be your average inspiring charismatic direction setting economists, nobody followed up on my statements…. With this blog, I want to start my journey towards the framework, to boldly go from where people like Frederic Lee, Philip Pilkinton and Gyun Cheol Gu have brought us. More about them in later blogs. Today (and in two blogs to follow): the prices which I encounter in my own research.

I’ll focus on three topics: multi factor pricing of milk, risk free (not) interest rates and cost-, market,

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Modern Monetary Statistics

March 31, 2023

This ECB graph below, showing the interrelation between credit and money in the Euro Area (source) is thoroughly (Post-)Keynesian in nature: Modern Monetary Statistics (MMS). I’ll return to that. First, what does it tell?

For some months, a gentle Euro Area ‘liquidity crunch’ has been going on. The yellow and the orange bars are getting smaller meaning that year on year growth rates of ‘M3’ money creating ‘credit’ are declining. Three month flow data are already negative. Loans are payed back, money is moved from checking accounts to savings accounts (which are not included in the M3 definition of money, the blue bar). Mind: ‘credit to general government’ does not mean: lending to governments. It means: purchasing government debt from anybody except system banks, pension funds

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Modern money, 1579 edition.

March 19, 2023

Old charters still shed light on recent monetary developments…
While in the Leeuwarden archive, investigating 19th century quantities and insurance prices of clay soil hay in central Friesland (a coastal part of the Netherlands) I got sub-focused and found myself thumbing through the Frisian ‘Charter books’ (internet version here). These books contain all Frisian government ‘oorkonden’ from the end of the fifteenth century onwards. ‘Oorkonden’ literally translates as ‘ear messages’. And they were: before Sunday mass or, later, sermon, they were read aloud in churches. These charters sometimes have a monetary nature. I happened to stumble upon some from 1579, the most revolutionary year in the entire history of Friesland (but see also this). Why and how did the new, revolutionary, and,

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Eurobonds – there they are.

December 20, 2022

The EU-commission issued a tweet (below). Another step towards EU statehood. A large one. Since around 1500, access to credit was key for European (later: all) states waging war. The early development of central banks was intertwined with the history of national wars. Look here for the Wikipedia page on the history of the Bank of England -it literally starts with a ‘crushing defeat’ of England by France. Credit was needed to win. Government borrowing had to be enabled by central banks, the monetary system had to be able to function as a ‘weapon of war’. The ECB, however, is not allowed to provide credit to governments (even when it can keep interest rates low and make government debt ‘risk free’). And the EU is, or was, not allowed to issue its own bonds. A peaceful union. Which

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Inflation and policy: conceptual models matter

December 11, 2022

Summary: to understand inflation we should not use the neoclassical ‘one good, one worker, one sector, one piece of physical capital’ or Y = f(K,L) concept of production. We should use a concept looking at nominal production (Y(n)) with multiple interrelated sectors (‘S’), multiple products and capital conceptualized not as a physical entity but as ownership rights of land (including natural resources), depreciable capital and ‘non produced’ capital like patents and marketing rights: K’. These ownership rights enable as well as restrict access to and use of land, natural resources, depreciable capital, patents, markets and financial capital while the relations between sector show how shocks are propagated: Y(n) = f(S K’, L). Estimated models using such a concept exist and lead to

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Monies

November 12, 2022

What’s money? Wrong question. The right question: ‘which kinds of monies do we use for which purposes?’ as there are different kinds of money which are used for different purposes. Here, I want to stress that ‘receivables’ are: money. And are, at the moment, mainly used for inter-company purchases. The quarterly balance sheets (below) of Alphabet (formerly Google) show that, as of September 2020, Accounts Receivable had a value of almost 35 billion dollar. Accounts receivable are privately issued money. They are backed by the law but not created by banks or governments. They are created when a buyer promises to pay and a seller accepts this promise, a promise which can be legally enforced. But it’s not the payment by the debtor which defines the moment of the sale. The actual sale is

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Graph of the day. Youth unemployment in the EU

November 7, 2022

Unemployment in the EU is still going down a little. But youth unemployment, a slightly more sensitive cyclical indicator, is rising. The most distinct geographical pattern behind the average: the combination of high levels of youth unemployment (>20%) with clear increases in Greece, Italy and Spain, even when total unemployment in these countries is still going down or stable. France shows a remarkable decline in youth unemployment but is still in double digit territory. Average youth unemployment is lower than in 2008 but the >20% rates in several countries are unacceptable. The EU labour market is not tight, at this moment.

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What’s Left?

November 6, 2022

One of the successes of the right is their identification of the left with a sorry pastiche of ‘woke’. But the left is more than outspoken, individual awareness of the role of identities, however constructed and defined, whoever constructs and defines them and whatever role they plays in group dynamics of power and in- and exclusion. Which leads us to the question: What’s Left? I’ll state some points. Some points (many of which are related to social , economic and political in- and exclusion):

One person, one vote and universal unrestricted suffrage (incarcerated people should have the right to vote too, for instance). Voting rights should not be tied to income, wealth, property, race, gender or education (all of these variables have been used to restrict voting rights). Universal

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Inflation and wages in Greece

November 5, 2022

Consumer price inflation in Greece is, at the moment, 12% (graph 1). This is high and surely bankrupting quite some families. The high level of inflation is surprising, as Greek inflation was quite low and often even negative in the 2012-2022 period. The questions are: (A) what caused this sudden increase? An overheated labour market and runaway wages increases? And: (B) how can we get inflation down again? Does the ECB have to tank the economy to crush wages? Below we will investigate these questions.

Graph 1. Consumer price inflation in Greece. Source: Elstat.

Question A. Is the labor market overheated? Looking at graph 2 the answer is clearly: no. Unemployment is falling but still high, the number of people inside the labour market increases and there is no sign at all that

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Neoclassical induced financial fragility. Central bank pension fund regulation edition.

October 23, 2022

Financial wizardry recently caused massive problems for UK pension funds and the Bank of England. The Bank of England forces pension funds to take part in ‘LDI’ contracts which aim to insure possible future liquidity problems. These contracts however lead to real liquidity problems, which forced the Bank of England to intervene to prevent a market melt down. The solution became the problem.

Deputy Governor John Cunliff of the Bank of England stated:

“The Bank was informed by a number of LDI fund managers that, at the prevailing yields, multiple LDI funds were likely to fall into negative net asset value. As a result, it was likely that these funds would have to begin the process of winding up the following morning… In that eventuality, a large quantity of gilts, held as

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Liz Truss. Or: how not to pay for the war

October 1, 2022

The Dutch September HICP inflation rate was 17,1%. One year ago it was 3,0%. Below, I will argue that this is a sign of kind of war economy, not of a cyclically overheated economy. Ways to mitigate inflation were pioneered by the English economist John Maynard Keynes in his ‘How to pay for the war‘. it’s useful to go back to his ideas.

The first version was published in three parts in The Times of november 1939. It was partly based on his experiences in World War I and partly on the new system of national accounting (extended and improved by Keynes). The ideas weere based upon the idea of a monetary economy where consumer spending and consumer prices, production and producer prices and the use of factors of production and factor prices (wages, profits, interests, rents) are

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Rosa Luxemburg on Czarist Russia

August 29, 2022

After reading her contemporary Alfred Marshall, reading Rosa Luxemburg (born in Poland, 1871-1919) is a joy. The clarity of the prose, the consistence of the arguments, the sheer knowledge of events and facts. She backed an anti-imperialist socialist agenda coupled with – no, based upon – differences of view and discussion in combination with cultural and linguistic diversity. In my view, she would have backed the growth of international food supply chains binding Ukraine, Russia, Turkey and Morocco, among other countries together. But she would have despized the cartelization of the inernational grain trade (five companies rule the roost) and the preponderance of financial and shareholder interests. One of the points where Putin had to back off is the agreement that he will not

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Neoclassical clunkers. How economists’ ideas about risk aversion are duping pension pundits.

July 31, 2022

(Part of) the Dutch pension system will, if everything goes according to plan, soon be replaced with a new neoliberal system based upon, among other things, measured neoclassical ‘risk aversion’. However – economists are not yet able to measure this – which will lead to big problems. let me explain.

The present system consists of:

a social democratic element (the ‘first pillar’), a kind of not means tested basic income for everybody above 67 financed by taxes.
Next to this is the corporatist ‘second pillar’, largely based on Christian social thought, which consists of non-government non-profit sectoral or, sometimes, company based pension funds which pay funded pensions. These are financed by mandatory pension savings by workers and their employers.
The ‘third pillar’

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Towards a ‘periodic table of prices’

July 12, 2022

I do not have ‘physics envy‘. I do not want economics to look too much like physics. But I do have chemistry envy. I want economics to have something like the magnificent periodic table of elements, for prices. Input prices, output prices, mark up prices, shadow prices, market prices, administered prices, government prices, expenditure prices, asset prices, monopoly prices, monopsony prices – all of these and many more neatly ordered in a relatively simple table. Somebody still has to write the book about it but there sure are elements available. One can think of the work on prices by Frederic Lee. Or about the work of Gyun Cheol Gu, who provides us with this extremely useful overview of ideas about pricing (PK means: Post Keynesian):

Interestingly, the ‘Post Keynesian’

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Inflation: should we take away the soup bowl?

July 3, 2022

The graph below has been constructed by economists of the European Central Bank. It’s based on national accounts data. It shows that present day inflation is profit driven, not wage driven. Money flows to profits, not wages. What does this mean for monetary, fiscal and income policy, taking some other aspects of inflation into consideration? Quite a lot.

High central bank interest rates have a dual purpose. First, they are intended to show that central banks are serious. Let’s call this Peacock rates: showing your feathers. This should somehow give people the idea that increasing prices is a bad, costly, unnecessary habit which, people being rational, leads people to stop raising prices. Second, they are meant to increase borrowing costs which should lead to lower investments

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Should Ukraine be part the EU?

June 24, 2022

Ukraine applied for EU membership. The application has been accepted, the long journey towards membership has started. Good? Bad? Let’s first be honest about the EU. And the Russian empire – which of course is the main motivator behind the Ukrainian application.

We can be short about the Russian empire. It is large, resource rich, not exactly a failed state but governed by a closed self- enriching criminal gang of with fantasies about a Russian greatness which never existed. It’s also an economic dwarf, undemocratic, technological regressing, it has dismal demographics and a low life expectancy (especially for males). For the last twenty years of so, been extremely aggressive towards, especially, small neighbors. And its a stated aim of Putin to expand all this beyond the borders

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European life expectancies in times of Covid. A long term story.

May 30, 2022

Life expectancies in Europe went down in 2019 and 2020 in all countries bar Norway (figure 1). They tended to go down more in countries with a relatively low life expectancy (figure 2) – strong and outspoken tendency. Correlation is not causation. But it can be argued that health and morbidity and life expectancy are influenced by health outcomes during, especially, childhood, including in the in-utero environment (look here, especially 3.1 b and 3.1 c. Look also here). If that’s right the data suggest that an important way to mitigate the (long term) consequences of Covid-19 is to have a strong long term public health system and policy (including policies aimed at diminishing poverty).

Aside of this short term health policies should, aside of Covid-vaccination, be broadened to

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