"The words and concepts we use influence the way we think and act. Therefore, an essential attribute of a real science is its use of consistent, precise, and analytically incisive definitions."
IEA's innovative conceptual framework makes it possible to "complete the Keynesian Revolution" by functionally integrating the NIP and FOF national accounts, thus bridging the financial gap between saving and investment. This unified database provides the empirical basis for a more credible and easier to understand macroeconomic science, more effective analytical tools, and more systematic coordination of policy tools for maintaining stable full-employment growth, low inflation, low interest rates, a more equitable and sustainable distribution of income and wealth, and a more stable stock market.
 
Annotated Lists of Documents
   

File update: April 13, 2008   Site update: April 13, 2008
 
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The Conceptual and Analytical Framework
for Macroeconomic Science and Policy
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"Visual Analysis" Graphic Summary of Its Main Elements
Diagrams and equations for those who like to think in visual terms -- "One picture is worth a thousand words."

The Integrating Dynamic Money Flow (IDMF) Model
These texts have some duplication because they were written at different times for different purposes, but are included here for their different focuses.

  1. Briefest Text Summary (revised 4/11/99)

  2. Completing the Keynesian Revolution (revised 4/15/99)
    How the empirical "financial gap" in traditional Keynesian analysis is caused by its link to the National Income and Product Accounts (which are unable to deal with money and credit), and a brief summary of the IDMF conceptual framework for fully integrated economic accounts, analysis and policy.

  3. The IDMF Conceptual Framework and its Policy Implications (revised 4/21/99)
    This brief summary was written in July, 1998, as an IDMF introduction to the article, "Rx for the Japanese Economy," now posted here in the section on "Current Public Policy Issues -- World Economic Recovery."

  4. Toward the Integration of Economic Science (1990)
    This is the most comprehensive on-line presentation of the IDMF framework.

  5. Static vs. Flow Perspective in Flow-of-Funds Accounts and Financial Analysis
    This was the first published description of the this conceptual model. Written during the 1959 CRIW conference on "The Flow of Funds Approach to Social Accounting," it was published by the NBER in 1962. (See IEA history.)

  6. Key Analytical Errors in Keynesian Theory (9/58, not yet scanned on-line.)

The Full-Employment Growth-Trend Standard of Reference
For analyzing fluctuations and managing performance.

  1. The Full-Employment Growth-Trend Conceptual Framework.
    This diagram and these definitions provide more functionally-precise perspective on recession, depression, stagnation and recovery, and recovery-policy implications.

  2. The NBER/BEA/Conference Board "Leading" Indicators Don't Really "Lead."
    For most series the lead is only apparent, not functional. On a conceptually appropriate growth-trend standard of reference they are merely coincident with the economy's operating rate.

Structural and Dynamic Macroeconomic Equilibrium Analysis

These are different aspects of overall economic balance which must be maintained -- at full-employment levels -- in order to maintain stable, sustainable, full-employment economic growth. There are complex interrelationships among them. But for incisive analysis and effective policy, it is essential to distinguish clearly between them.

Key Macroeconomic Policy Tools
and Their Coordination in Systematic Economic Management
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Monetary Policy -- the effect of money growth on economic growth

    "Monetary Forecasting" of Economic Growth (1982, not yet on line)
    Use of money-growth formula, with precisely-adjusted trend values of M1 and the Money Demand Ratio, to estimate current trend of GDP growth even before end of quarter -- often more accurately than official preliminary estimate a month later.

Fiscal Policy -- the effect of federal deficit/surplus on the economy.

  1. A Twin Deficit Perspective on the Federal Budget. Functionally, the present unified budget (and deficit) has two distinct components:
    • Policy Budget -- controlled by congressional tax and spending policies.
      To clarify that responsibility and its management, this should be a "stabilized-employment" ("full employment" -- 4% unemployment) version.
    • Economic Stabilization deficit or surplus -- the effect of the economy on the budget, and vice versa.
      In passive mode, this deficit component is traditionally called the "automatic stabilizer," but is actually controlled mainly by Federal Reserve-controlled unemployment rates. However, since this is a key component of the economy's National Credit Balance (between total Primary Financial Saving and total Primary Borrowing), it should be explicitly managed proactively by FASTA (below) to compensate for destabilizing swings in private borrowing and financial saving.
    Full-length article (12/94, revised 7/97)
    Shorter version (1/95)

  2. FASTA -- Formula-Administered Automatic Stabilization Tax Adjustments
    Systematically coordinated with monetary policy, FASTA is a potential main key to reducing interest rates, inflation, federal deficits and unemployment, and ensuring stable money growth and stable full-employment economic growth in a "free enterprise" economy.
    Full-length article (9/81)
    Shorter version (1/81)

Monetary and Fiscal Policy Coordination

  1. Monetary and Fiscal Policy Sunshine Act (summary, 1st legis. version 5/83; revised 5/98, 1/00) Fed is required to publish recommendations for a specific real GDP "soft landing" approach to full employment, and explain how it is trying to achieve this. Congress and the President are required to prepare a "standardized employment" (4% unemployment) Policy Budget as the main basis for budget discussion and legislation. Combined with FASTA credit stabilization policy, this provides for more systematic coordination of monetary and fiscal policy.

Anti-Inflation Policies

  1. Inflation Causes (1980)
    Initiating causes, inflation spiral, "tax-in-COLA syndrome," etc. (Detailed outline for several chapters in an unfinished book.)

  2. Full-Employment Anti-Inflation Tools (1998)
    Written to accompany the Monetary and Fiscal Policy Sunshine Act.

  3. Key Role of a "Soft Landing" (asymptotic) Recovery Path
    Key relationship of economic growth rate to operating rate. (No text online yet.)

What's New?
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Coordinated Macroeconomic Management Tools
(1) Growth-trend revision of NBER "leading" indicators;
(2) 4%-unemployment-standardized federal budget Policy and High-Unemployment components;
(3) 4%-unemployment-standardized Social Security projections;
(4) Basic formula for money-growth/economic-growth relationship;
(5) "Visual Analysis" of other policy-significant macroeconomic relationships.

Job Opening -- Research Associate, Macroeconomic Analysis and Policy

Current Policy Issues
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Most of these articles were written to clarify some of the key policy issues being debated in the 2004 election campaign, and some aspects may require minor adaptations appropriate to the current situation.

General

  1. Protecting Social Security and Maintaining Fiscal Responsibility in Time of Crisis -- a New Approach

    Proposes 4 basic changes:

    1. Take SS completely "off budget" -- end the "unified" budget.
    2. Separate the budget effects of tax & spending decisions from the "automatic stabilizer effect of recessions.
    3. Insulate SS Baby-Boom reserves from both recessions and diversion to other purposes.
    4. Take the interest cost of SS Baby Boom reserves out of the budget by allowing the SS Trust Fund to buy private mortgages & bonds (not stock)

  2. Thoughts on "The Next Progressive Agenda:"
    Federal Budget & Social Security Reform

    8 pages. Key Points:

    FEDERAL BUDGET

    SOCIAL SECURITY

Social Security

  1. A Social Security Strategy to Preemptively Counter Bush's Attack
    Executive Summary
    Full version (coming)

  2. Four Keys to REAL Social Security Reform

  3. The Most-Needed Social Security and Budget Reforms:
    A Challenge to Congress, the President and Political Candidates     (6/27/00 Op-Ed)

  4. Social Security, the Federal Budget & Their Relationship to the Economy:
    How to Resolve Confusions and Refocus Policy"     (4/00 -- 30 pages, with charts.)

  5. The Phony Social Security "Crisis" (11/96)
    The much-heralded 2029 (or 2032) "bankruptcy" is caused mainly by the SS Commission's own inappropriate economic assumptions; their 5% unemployment projections have no financial problems for the forseeable future, and there is no need for the government to permit unemployment to go above that again if it adopts responsible economic policies.

  6. The Phony Social Security Crisis and the Privatization Scam (9/96)
    The basic falsehood in the arguments for privatization of Social Security -- they fail to take into account (or deliberately ignore) the inappropriate economic assumptions which project SS "bankruptcy." A 4% unemployment projection (as mandated legally by the Humphrey/Hawkins "Full Employment and Balanced Growth Act of 1978") could probably even safely permit a FICA tax reduction!

  7. Links to other good Social-Security related sites

Monetary Policy

"Flying Blind" -- How the Fed Lost Control, and How to Regain it

Greenspan admits his money management is based on personal judgment, not a clear analytical/conceptual framework. His problem has 3 main aspects -- a failure to distinguish clearly between money and credit, a failure to recognize the real "transmission mechanism" between money growth and economic growth, and a required reserve ratio now so low that the needed direct control of money growth is impossible. This article gives a precise conceptual and empirical definition of money, explains how money growth finances economic growth, explains the need for a 100% reserve system (and how to get there), and the need for systematic coordination of monetary and fiscal policy.

Macroeconomic Management
Application of the Integrating Dynamic Money-Flow (IDMF) Analysis and Policies

  1. A Social Security Strategy to Preemptively Counter Bush's Attack
    The best Social Security defense strategy is to "re-frame" the Social Security debate, launching a powerful preemptive counter offensive based on two real reforms -- protecting Social Security from economic mismanagement, and improving federal budget transparency.  2/1/05

  2. The Three Essential Keys to an Effective Recovery Policy
    A checklist for evaluating the credibility of any purported "stimulus" policy.  6/1/03

  3. The Recovery Bonus Plan for Fast Recovery and Monetary Management Reform
    Summary of the Macro Policy Tool Kit and the Recovery Bonus tool, with explanation of how the special Recovery Bonus Bonds can be used to increase monetary reserve ratios. Revised 5/16/03 (10 pages)

  4. A Policy Tool Kit to Stop Irresponsible Tax Cuts
    And Achieve Fast Recovery
    An annotated list, with underlying basic principles.  4/30/03

  5. Economic Agenda for Recovery Now
    A functionally coordinated "tool kit" of federal budget and macroeconomic management reforms to end the present analytical and policy disarray.  12/22/02

  6. Reconciling Fiscal and Economic Responsibility in Time of Crisis -- a New Approach

    Proposed basic policy changes:

    1. Take SS completely "off budget" -- end the confusing and irresponsible "unified" budget.
    2. Separate the budget effects of congressional tax & spending decisions -- the Policy Budget -- from the "automatic stabilizer" effect of recessions -- the Stabilization Account.
    3. "Standardize" the Policy Budget -- and Social Security Projections -- on the 4% unemployment basis mandated by the Humphrey-Hawkins "Full Employment and Balanced Growth Act of 1978."
    4. Use the Policy Budget to maintain a fiscally responsible "balanced budget."
    5. Systematically coordinate monetary and fiscal policy.
    6. Insulate SS Baby-Boom reserves from both recessions and diversion to other purposes.
    7. Take the interest cost of SS Baby Boom reserves out of the budget by allowing the SS Trust Fund to buy private mortgages & bonds (not stock)

  7. Monetary and Fiscal Policy Sunshine Act. (1/00, 5 pages)
    These integrated policy tools are crucial preparation for preventing the widely-expected "post-bubble" recession.
    Fed is required to publish recommendations for a specific real GDP "soft landing" approach to full employment, and explain how it is trying to achieve this. Congress and the President are required to prepare a "standardized employment" (4% unemployment) Policy Budget as the main basis for budget discussion and legislation. Combined with FASTA credit stabilization policy, this provides for more systematic coordination of monetary and fiscal policy.

  8. Full-Employment Anti-Inflation Tools (1998)
    Written to accompany the Monetary and Fiscal Policy Sunshine Act.

  9. Rx for the Japanese (and World) Economy (7/98, revised 4/99)
    Explains how the IDMF conceptual framework can assist understanding of the Japanese and other economic crises, how their recovery can best be promoted, and how the IMF can best avoid the kind of errors it has so often made in the past.

Empirical Analysis and Charts
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Most of the accompanying explanatory and analytical texts for these studies are not yet online, and most of the data obviously badly need updating. But because they illustrate the IEA empirical approach to structural and functional analysis, they are included here as a challenge to others to join in the updating. IEA would be glad to cooperate in any such enterprise.

  1. IDMF Primary Credit Derivation from Flow of Funds Accounts.
    Illustrative tables using two quarters of 1977 FOFA data.

  2. "IEA Pocket Charts -- Key Indicators of Economic Performance and Relationships." (12/79) Web reproduction of selected chart panels from IEA's analytically and technically sophisticated compact monthly chartbook -- which included over 120 series for a 15 year span, in eight 5 1/2" x 8 1/2" pages.

  3. Estimating the Effects of 4% Unemployment on the Federal Deficit -- Chart (12/94). Result -- each 1% increase in unemployment increases the deficit by about 0.7% of GDP.

Notes about this site
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  1. Much of the material in these "working papers" obviously needs to be integrated into book format, but they are published here in this preliminary form for more immediate public accessibility and discussion.
  2. Most long documents are preceded by a brief abstract.
  3. Items not underlined are not yet online, but will be posted here as soon as they can be scanned and edited for this site. Keep in touch.
  4. All material on this web site is copyrighted, all rights reserved. But with e-mail permission and proper attribution it may be freely copied and distributed for nonprofit educational purposes.