1) Amazing companies, sustainable ice cream edition.
On the upside: Ben and Jerry’s is an ice cream company owned by Unilever. They use milk produced by CONO, a farmers cooperative in the Netherlands. CONO is owned by about 600 farmers and has developed, together with Ben and Jerry’s, the ‘caring dairy‘ concept, a sustainable production concept based upon scoring multiple dimensions of eleven sustainability indicators (soil, erosion, fertilizer, water, profit, family, the local economy, energy, animal welfare, biodiversity, sustainable crops). CONO members who take part in the program get more for their milk and take part in a program which continuously searches for ‘best practices’ and helps farmers to introduce these best practices. This works.
On the downside: not all CONO members like the lack of independence inherent to the program (CONO is sensitive to these critiques, by the way). It can be understood as a case of ‘empire’ as described by Wageningen University professor Jan Douwe van der Ploeg, the new way to control labour as well as capital which takes part in global value chains: Read more…
from Lars Syll
Paul Krugman has often been criticized by people like yours truly for getting things pretty wrong on the economics of John Maynard Keynes.
Surely we don’t want to do economics via textual analysis of the masters. The questions one should ask about any economic approach are whether it helps us understand what’s going on, and whether it provides useful guidance for decisions.
So I don’t care whether Hicksian IS-LM is Keynesian in the sense that Keynes himself would have approved of it, and neither should you.
The reason for this rather debonair attitude seems to be that history of economic thought may be OK, but what really counts is if reading Keynes gives birth to new and interesting insights and ideas.
No serious economist would question that explaining and understanding “what’s going on” in our economies is the most important task economists can set themselves — but it is not the only task. And to compare one’s favourite economic gadget model to what “austerians” and other madmen from Chicago have conjured up, well, that’s like playing tennis with the nets down, and we have to have higher aspirations as scientists. Read more…
The graph below shows that Italy might have serious labour supply rigidities, in this case defined, operationalized and measured as discouraged ‘unemployed’. But Greece? Forget it.
Considering the level of ‘normal’ unemployment in Greece – an unprecedented 25+% – one of the indicators of broad unemployment (people available to work but not seeking, not counted as ‘normal’ unemployed) is surprisingly low. Normally, one would, considering the level and tenacity of Greek unemployment, expect that many unemployed would just quit searching for a job – but not in Greece! Italy, however, Read more…
from Lars Syll
The Conservative belief that there is some law of nature which prevents men from being employed, that it is “rash” to employ men, and that it is financially ‘sound’ to maintain a tenth of the population in idleness for an indefinite period, is crazily improbable – the sort of thing which no man could believe who had not had his head fuddled with nonsense for years and years … Our main task, therefore, will be to confirm the reader’s instinct that what seems sensible is sensible, and what seems nonsense is nonsense. We shall try to show him that the conclusion, that if new forms of employment are offered more men will be employed, is as obvious as it sounds and contains no hidden snags; that to set unemployed men to work on useful tasks does what it appears to do, namely, increases the national wealth; and that the notion, that we shall, for intricate reasons, ruin ourselves financially if we use this means to increase our well-being, is what it looks like – a bogy.
John Maynard Keynes (1929
from Ali Kadri
The earliest places to develop into sedentary cultures were to be found in the present-day Mashriq (Ancient Syria and Mesopotamia) pursuant to the early agricultural revolution. The crevice at the end of the Great African rift known as the Fertile Crescent is a natural gathering ground for domesticable animals; it enjoyed regular rainfall and a variety of easily cultivable cereals. Good soil quality circa 2000 B.C. produced about the same tonnage of barley as in early 1970 (Hilou, 2004). The steady development of tools and modes of social organisations required regulation and the pacification of the labouring class. Measures for trade and laws to attenuate repression and limit the appetite of the clergy represent the first set of written rules intended to steady the course of development – the Code of Ur-Nammu, 2100 B.C. The code addresses three vital points: the ruling on weight for trade, a limit to what the clergy could extract in tribute and, a statement ensuring the protection of the vulnerable from the transgression of the powerful. These precepts crown the notion of the ‘Just Man’ of the East (Al-Alawi, 2009). Read more…
The latest ECB Economic Bulletin states: “In Portugal, the 2009-13 reforms have already raised the levels of productivity and potential GDP. According to OECD estimates the reforms will have resulted in a 3.5% increase in these variables by 2020″. This quote, from an article titled “Progress with structural reforms across the euro area and their possible impacts”, reminds one of the 1947 Isaac Asimov story about the endochronic nature of thiotimoline, the compound which “will dissolve before the water is added“. I mean – is it 2020 already?
The article is profoundly researched when it comes to neoclassical models – but lacks a proper diagnosis of the present situation and totally ignores even ECB papers which, when looking at the present day situation in the Eurozone in a serious way, produce results which makes the neoclassical view of events crumble. Read more…
from Trond Andresen and Robert W. Parenteau
The premise for the proposal to be presented in the following is that the government has a breathing space of a couple of months. At the end of that period a parallel electronic currency shall be put into circulation.
But first, how does a parallel currency (to the euro) work?
Proposals resembling the following have been put forth earlier by Andresen, for instance in , and recently by Hillinger . The additional (“parallel”) circulating medium of exchange to be proposed may be designated a Tax Anticipation Note (TAN), a term introduced by Parenteau . The TANs are used by the government to partly pay wages, pensions and for domestic purchases. The TAN enjoys confidence since anyone can use it to pay taxes with one TAN counting as one euro (more on this below). Transactions are done via mobile phone/SMS, and automatically received and accounted for on a server with ample capacity at the country’s Central Bank or perhaps preferably, for political reasons, at a bank-like facility established for this purpose at the Treasury – from now on just called the TB: “Treasury Bank”. Read more…
from David Ruccio
Norbert Häring‘s presentation for the seminar “Economics and Power” on 23 March 2015, House of Lords, London:
Ladies and Gentlemen, To pay tribute to the Marxist jargon, in which Lord Skidelsky has phrased the title of my subject, I would like to start with a quote from Karl Marx: “The ideas of the ruling class are in every epoch the ruling ideas. … The ruling ideas are nothing more than the ideal expression of the dominant material relationships, … the relationships which make the one class the ruling one, therefore, the ideas of its dominance.” In my own words, that says that not all economic ideas are created equal. Some ideas make it into the leading academic journals, others can hardly be published. Some ideas make those who develop them successful in academics or even famous and influential. Other ideas sentence those who develop them to a life at the margin at best.
Ideally, this would all be a function of how convincing the idea is and how good the academic is at developing the idea, writing it down and marketing it. But we all know, that excellence by itself does not get you very far. Another important ingredient for a successful career is how convenient your subject of study and your results are for powerful interests in society.
from Lars Syll
Keynes’s insights have enormous practical importance, according to Lance Taylor and Duncan Foley (who jointly received the Leontief Prize for Advancing the Frontiers of Economic Thought at Tufts University’s Global Development and Environment Institute on Monday.)
But isn’t Keynes now mainstream? No, say Foley and Taylor. The mainstream still sees economies as inherently moving to an optimal equilibrium … It still says demand causes short-run fluctuations, but only supply factors, such as the capital stock and technology, can affect long-run growth.
EVEN PAUL KRUGMAN, a self-described Keynesian, Nobel laureate, and New York Times columnist, writes in the 2012 edition of his textbook: “In the long run the economy is self-correcting: shocks to aggregate demand affect aggregate output in the short run but not in the long run” …
Keynes saw capitalism’s general state as allowing almost arbitrary unemployment: hence his “General Theory.” Full employment was a lucky exception.
To Taylor, calling full employment the general state and allowing one unlucky exception turns Keynes upside down. And look where this confusion has brought us, he adds. Take the current eurozone disaster. For two decades, the European Union bureaucracy in Brussels, the German Council of Economic Experts, and a chorus of others, branded Germany, the “sick man of Europe,” as suffering from a sclerotic supply side: rigid labor unions, impediments to layoffs, a burdensome welfare state. But German labor costs to produce output sank steadily, and Germany generated huge trade surpluses — hardly signs of a sclerotic supply side. Yet growth has barely averaged 1 percent a year since 2000.
I can’t but agree with Taylor and Foley here. To a large degree one does get the impression that Krugman thinks he is a Keynesian because he is a stout believer in John Hicks IS-LM interpretation of Keynes. In a post on his blog, self-proclaimed “proud neoclassicist” Paul Krugman has argued that Read more…
1) Do we know how rich we are? One of the problems with the (invaluable) work of Piketty is how to value assets. GDP accounts basically use transaction prices – but many assets are not traded and we have to use other values or prices like book value, assessed market prices, rebuilding value or something like that. Think of the valuation of natural reserves of oil or dikes (the discounted value of assessed future streams of income is not used by statisticians, as this measure is too fickle – if measurable at all, as in the case of dikes). This means that assessed asset values can be quite volatile – as shown by the estimated value of Dutch net international assets (graph) – using another assessment method of the stock value leads to a 100 billion difference - even though estimated current account surpluses (a flow) stayed basically stable. Not that despite decades of current account surpluses in 2008 the Netherlands had a negative international investment position (the ‘Dutch black hole’, caused by bad investments…). The large change in the net position is also caused by the fact that it is… a net position. A relatively small change in total assets or liabilities can show up as a relatively large change in the net position. Even then, 100 billion is a lot…
from Peter Radford
Willford King has written:
“It is easy to find a man in almost any line of employment who is twice as efficient as another employee, but it is very rare to find one who is ten times as efficient. It is common, however, to see one man possessing not ten times but a thousand times the wealth of his neighbor … Is the middle class doomed to extinction and shall we soon find the handful of plutocrats, the modern barons of wealth, lined up squarely in opposition to the propertyless masses with no buffer between to lessen the chances of open battle? With the middle class gone and the laborer condemned to remain a lifelong wage-earner with no hope of attaining wealth of even a competence in his old age, all the conditions are ripe for a crowning class-conflict equaling in intensity and bitterness anything pictured by the most radical follower of Karl Marx. Is this condition soon coming to pass?” [Emphasis in original]
That was in 1915. My how times change.
Well maybe not. That comment about the middle class has a very contemporary ring to it.
A couple of things pop out at me when I read that quote – no doubt you will find your own emphasis. Read more…
Essays Against Growthism
- The Economy as Subsystem of the Ecosphere
- An Economics Fit for Purpose in a Finite World
- Integrating Ecology and Economics
- Dualist Economics
- Three Limits to Growth
- Depletion of Moral Capital as a Limit to Growth
- A Population Perspective on the Steady-State Economy
- The Guardian and Monbiot versus Forbes and Worstall
- Use and Abuse of the “Natural Capital” Concept
- Cold War Left-Overs
- Krugman’s Growthism
- Full Employment versus Jobless Growth
- The Negative Natural Interest Rate and Uneconomic Growth
- Top 10 Policies for a Steady-State Economy
Troika economists have a problem. It’s huge: cutting wages clearly did not work as intended, which goes against their deepest convictions. In such a situation people tend to rationalize. To quote Goethe: “intelligent people are sharpest when they are… wrong“. Some recent publications enable us to investigate the rationalization process of among others ECB economists. One of these is a Voxeu piece by Eric Bartelsman (head of the department of economics of the Vrije Universiteit van Amsterdam), Filippo di Mauro (senior advisor in the research department, ECB) and Ettorre Durucci (head of the convergence and competitiveness division, ECB) which clearly shows that cutting wages did not work as intended (see their figure 1). How did they cope with this?
Figure 1. Relative prices and activity in selected Eurozone countries (change between the year of the ULCT-deflated REER peak and 2014 projected)
Figure 1 shows that
* As a consequence of austerity the ‘Real Effective Exchange Rate (REER)’ of countries like Spain, Ireland, Greece, Latvia and the like declined a lot (i.e.: exports became much cheaper). This was totally intended.
* But this did not lead to the expected increase in net (!) exports Read more…
from Lars Syll
Chameleons arise and are often nurtured by the following dynamic. First a bookshelf model is constructed that involves terms and elements that seem to have some relation to the real world and assumptions that are not so unrealistic that they would be dismissed out of hand. The intention of the author, let’s call him or her “Q,” in developing the model may be to say something about the real world or the goal may simply be to explore the implications of making a certain set of assumptions. Once Q’s model and results become known, references are made to it, with statements such as “Q shows that X.” This should be taken as short-hand way of saying “Q shows that under a certain set of assumptions it follows (deductively) that X,” but some people start taking X as a plausible statement about the real world. If someone skeptical about X challenges the assumptions made by Q, some will say that a model shouldn’t be judged by the realism of its assumptions, since all models have assumptions that are unrealistic …
1) Simon Wren-Lewis looks at the facts and finds that The UK prime minister lies about Greece. The truth:
“The real travesty however is in the implication that somehow Greece failed to take the ‘difficult decisions’ that the UK took. ‘Difficult decisions’ is code for austerity. A good measure of austerity is the underlying primary balance. According to the OECD, the UK underlying primary balance was -7% in 2009, and it fell to -3.5% in 2014: a fiscal contraction worth 3.5% of GDP. In Greece it was -12.1% in 2009, and was turned into a surplus of 7.6% by 2014: a fiscal contraction worth 19.7% of GDP! So Greece had far more austerity, which is of course why Greek GDP has fallen by 25% over the same period“.
2) Norbert Häring looks at the facts and finds that the ARD (German television) lies about Greece (In German, a whole list of inaccuracies, outright mistakes, wrong data and dishonest reporting)
3) Bill Mitchell goes the additional theoretical and empirical miles to take down a crucial austerity document from Brussels. The truth: lowering wages did not work anymore once everybody started to do this (and not just Germany).
Soon, I’ll write a little about ‘inside the neoliberal mind’. To be able to do this I have to establish my credentials: no, I’m not just an armchair economists but also do know a little about lots of real life companies (largely thanks to the internships of my students) and I will blog about these so now and then. Lots of these companies are truly amazing and worth telling about. Not all companies are amazing – but I tell my students that even crappy ones are survivors which in a competitive economy is quite an accomplishment.
A) Meet Avonturia. Even a pet shop can be an experience. A constructionworker became disabled which made him turn his hobby -birds- into a living. His sons wanted to join this trade – which meant that they had to expand. The options: three large ‘normal’ pet shops at an A location – or ‘Large and Loony’, i.e. Avonturia Their secret: push it to the limit: inside the shop they have a ‘brasserie‘. Which has the best tea bar I’ve seen in my life. In a pet shop… Also: Schulp fruit juices, again the best. Like the whole shop, including this. Read more…
If theoretical models assume uncertainty, however, and assume that agents have epistemic and ontological beliefs consistent with this state of affairs, the proper way to approach the course of economic phenomena should be very different. Particularly in place of mechanisms or economic regularities that keep running independently of agents’ expectations, the decisive role of lobbyists within open-ended processes based on expectations should be incorporated into the analysis. Such an alternative approach to economics could be based on the following set of assumptions which focuses on the lobbyist role of agents and the special kind of practical knowledge and skills they need. Choosing this approach means abandoning the pretense of scientific status desired by Lucas, which is obtainable at the price of assuming PTF. I suggest that the following assumptions could be the philosophical core of a new conceptual framework for economics: Read more…
Before the industrial era, was the agrarian era, when the chief type of property whose inheritances determined the aristocracy consisted of land. With the onset of industrialization, after around 1600, corporate stock emerged increasingly to become the chief form of property whose inheritance determined the aristocracy. No longer was the aristocracy the possessor of the landed estates, which collectively constituted the given nation; the aristocracy increasingly became instead the possessor of the vast corporations, which collectively controlled the nation’s economy. Instead of a nation consisting primarily of its land, it came to consist increasingly of its corporations.
However, just as there was an agrarian-era conflict between the masters and their serfs; that is, between the aristocrats and the public; there came now to be an industrial-era conflict between the corporate owners and their hired servers; that is, between the aristocrats and their workers.
In both eras, there has been this same conflict for control of the government, or of the “State” – the body-politic. Dictatorships during the agrarian era were kingdoms, in which the owners of the landed estates chose the king or equivalent monarch as the supreme ruler. Dictatorships during the industrial era are instead nations, in which the owners of the corporations choose the Duce, Fuehrer, Shah, or other supreme ruler.
Both during the agrarian era, and during the industrial era, there have been political movements for the public, or the demos, to control the government, via democracy – no dictatorship at all. Read more…