September 22, 2015

The Coppola method: Adam Smith reincarnated?

Comment on ‘What is lending good for? The Frances Coppola view.’

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“... Adam Smith ... disliked whatever went beyond plain common sense. He never moved above the heads of even the dullest readers. He led them on gently, encouraging them by trivialities and homely observations, making them feel comfortable all along.” (Schumpeter, 1994, p. 185)

Frances Coppola correctly identifies the problem: “[She] warns for a simplified view of the primary and secondary market: there are many and complicated micro-economic linkages which should not be ignored.” (See intro)

This, of course, is true but economic analysis does not consist of ‘trivialities and homely observations’ and a heap of examples. What is needed is a consistent big picture of all interconnections. Examples that are not imbedded into a comprehensive analytical framework are worthless. This is what Whitehead called the fallacy of misplaced realism.

What is missing in Coppola’s micro-partial-approach is the interconnection of total saving/dissaving, changes in the stock of money/credit/debt, and total profit/loss for the economy as a whole. For the correct approach see (2011; 2013; 2014).

Egmont Kakarot-Handtke


References
Kakarot-Handtke, E. (2011). Primary and Secondary Markets. SSRN Working Paper Series, 1917012: 1–26. URL
Kakarot-Handtke, E. (2013). Settling the Theory of Saving. SSRN Working Paper Series, 2220651: 1–23. URL
Kakarot-Handtke, E. (2014). Loanable Funds vs. Endogenous Money: Krugman is Wrong, Keen is Right. SSRN Working Paper Series, 2389341: 1–17. URL
Schumpeter, J. A. (1994). History of Economic Analysis. New York, NY: Oxford University Press