The Revere Award for Economics is named in honour of the American revolutionary hero Paul Revere, who rode through the night to warn of the approaching British army. In this its inagural year, it will be awarded to the 3 economists who first and most clearly saw the Gobal Financial Collapse coming and whose work is most likely to prevent another GFC in the future. Read more…
Steve Keen concludes his JPKE paper “Finance and economic breakdown: modelling Minsky’s ’financial instability hypothesis’” as follows:
There are, however, severe doubts as to whether the kind of government that has been constructed over the last thirty years is a sufficiently powerful or balanced stabilizer to capitalist investment behaviour.
From the perspective of economic theory and policy, this vision of a capitalist economy with finance requires us to go beyond that habit of mind that Keynes described so well, the excessive reliance on the (stable) recent past as a guide to the future. The chaotic dynamics explored in this paper should warn us against accepting a period of relative tranquillity in a capitalist economy as anything other than a lull before the storm. [emphasis added]
Wynne Godley in a paper with L. Randall Wray argued that the current stability in the US economy was unsustainable, because it was driven by the growth of households’ debt, which in turn was fuelled by real estate capital gains. Using an accounting framework of the US economy developed by Godley, they predicted that when debt growth slowed down – as it inevitably would within years -, growth would stop.
Kurt Richebächer in September 2001 wrote:
the new housing boom is another rapidly inflating asset bubble financed by the same loose money practices that fuelled the stock market bubble.
2002 Read more…
This Award is named in honour of the American revolutionary hero Paul Revere, who rode through the night to warn of the approaching British army. In this its inagural year, it will be awarded to the 3 economists who first and most clearly saw the Gobal Financial Collapse coming and whose work is most likely to prevent another GFC in the future. Read more…
from Edward Fullbrook
Kevin Gallagher has called my attention to a brilliant interesting piece in today’s New York Times on the past, present and future of modern economics. It comes from an unlikely source, Republican commentator David Brooks. Titled “The Return of History”, it declares that the change currently taking place in economics “is clearly one of the most consequential things happening in the world today.” Brooks divides the history of modern economics into five acts: scientism, splintering and slowly emerging sophistication, exposure of the shortcomings of the whole field by its “causing untold human suffering”, soul-searching (today), and the blowing up of the whole field to become a subsection of history and philosophy. Read more…
from Dean Baker
The media have been bombarding the public with scare stories about the country’s “record” budget deficits. Newspapers and news shows that never bothered to mention the growth of the $8 trillion housing bubble that eventually crashed the economy are giving us an endless barrage of stories claiming that current and projected future deficits will bankrupt our grandchildren. The implication of most of these stories is that we have to cut back Social Security and Medicare for all those high-living seniors as a matter of generational equity.
Most of these deficit stories feature a potpourri of wrong or misleading information. One item that is especially effective at raising fear levels in the public is the warnings from Moody’s, the huge bond-rating agency, that it may downgrade its rating of U.S. government debt. U.S. government debt has always held Moody’s highest AAA rating. If Moody’s were to lower the rating on government debt it would be a huge embarrassment to the country; essentially an indictment of the government’s poor financial practices. It would also have the practical effect of raising the government’s interest burden as a downgrade could lead to higher interest rates on U.S. government debt. Read more…
from David Ruccio
In attacking Austrian economics (and other schools of heterodox economics), John Quiggin invokes the mainstream distinction between talking about economics—so-called meta-issues—and doing economics.
A focus on meta-issues is a characteristic problem for heterodox schools of all kinds, but Austrian economics takes it to an absurd extreme. At some point, surely, they need to stop worrying about methodology and history of thought and start actually doing some economics.
Leaving aside the obvious silliness of worrying about epistemology in the context of a massive financial crisis. . .
Such a position is exactly what mainstream economists pronounce, since they have little use for such topics as history of economic thought, economic methodology, epistemology, and so on. Little use, at least officially, but of course they invoke such topics all the time: Read more…
from Lewis L. Smith
Unlike some of the debates in the 20th Century, the debate over peak oil in the 21st [2004-2008] was not at all theoretical. It was very practical. It turned on two questions — What is the condition and actual production of Saudi Arabia’s active oil reservoirs ? How accurate are the projections of future production?
Despite recent op-ed articles in some of the principle media, the debate is over, and the pessimists won. In 2008, the King said that future confirmations and discoveries would be reserved “for our children” [not your SUV]. Subsequently managers at Saudi Aramco, the country’s oil company, stated — for the first time in history — that oil production would peak in a few years, plateau for a decade and then decline, until the wells were capped. Read more…
from Mark Weisbrot
Alan Greenspan had a dream, or rather a nightmare. Greenspan seems to have woken up in a cold sweat one morning in fear that the period of “disinflationary pressures” that had kept inflation low since the 1990s was about to end. This was 2007, when he published his auto-biographical economic treatise, “The Age of Turbulence.” Despite his well-known love for economic data, and poring over the latest reports from every statistical agency, he did not realize that he was sitting on a housing bubble of epic proportions. Not seeing the bubble (he also missed the prior stock market bubble that accumulated and burst on his watch, causing the 2001 downturn), he could not know that it would soon collapse and cause a very ugly recession, in which inflation would be irrelevant. Read more…
The Department of Economics and Policy Studies at the University of Notre Dame has been officially dissolved.
from David Ruccio
It’s done! The Department of Economics and Policy Studies at the University of Notre Dame has been officially dissolved.
On 25 February, the Academic Council approved the dean’s proposal to eliminate ECOP and to rename the remaining department the Department of Economics. Now, the members of ECOP need to find positions for themselves elsewhere in the university—or to leave the university entirely. There will be no place for them in the other department. Read more…
from Dean Baker
The housing bubble and subsequent crash were the result of extreme incompetence on the part of the country’s top economic policymakers. Somehow these people could not see, or did not care about, the dangers of an $8 trillion housing bubble.
Unfortunately, economic policymaking is not like most jobs where workers get fired when they make serious mistakes. In economics, they just keep getting promoted. Therefore, the people who sank the economy are for the most part the same group of people still designing policy today. Now this group of incompetent economists is telling the rest of us that we are going to have to endure five more years of high unemployment. Read more…
from Kevin P. Gallagher
In 1942, when working to establish the International Monetary Fund, John Maynard Keynes said the “control of capital movements, both inward and outward, should be a permanent feature of the post-war system.”
In his new book Capital Ideas: The IMF and the Rise of Financial Liberalization, Jeffrey Chwieroth argues that despite the fact that the economics profession largely maintained their support of Keynes’s position, by the late 1990s the IMF motioned to change its articles of agreement in order to outlaw capital controls across the world.
The about-face in IMF thinking, according to Chwieroth, was due to a change of position among IMF staff. In yet another about-face, the IMF staff just released a position paper where they retract their rejection of Keynes ideas. Now it’s time to practise what they preach. Read more…