Archive for December, 2009


December 29, 2009 1 comment

from          Lewis L. Smith

Afghanistan is economically, ethnically, geographically and politically one of the worst places in the world for an outsider to try to accomplish anything. This is especially so after Pres. Bush let Usama bin Laden “slip through his fingers” and then wasted six years  floundering around in that country, making more enemies than friends for the USA.

Indeed your correspondent believes that no matter what strategy the USA [or any other outsider] adopts, the odds are against a successful outcome. If this appraisal is correct, the best that we can say about Pres. Obama’s new strategy for Afghanistan is that it is the least worst of the alternatives. Moreover, he is likely to pay a severe price in electoral abstentions if things go badly, as they more are likely to do than not.

However, Read more…

Two quotes, three questions

December 27, 2009 2 comments

Question 1: In the first quote, what is the missing word?

            Above all, we —————- have a responsibility to the future of our craft.  Science, as I shall later argue, is based on an ethic, and that ethic requires good faith on the part of its practitioners.  It also requires that each scientist be the judge of what he or she believes, so that every unproved idea is met with a healthy dose of scepticism and criticism until it is proved.  This, in turn, requires Read more…

Is Malthus relevant post-Copenhagen?

December 23, 2009 17 comments

Is Malthus relevant post-Copenhagen?

Thomas Malthus died on December 23rd 1834. The work of Malthus raises two important questions. First, are there now too many of us? Second, are there now too many of us doing things we shouldn’t be doing? These are problems of fact and value. The problem for economics has always been how to conjoin the two. The positive-normative distinction has always been a curious one for a social science since its ultimate unit of analysis is an evaluating being that lives immersed in systems of values.

The positive-normative distinction derives much of its authority from Hume’s guillotine. The guillotine is: Read more…

10 Suggested Resolutions for Real-World Economist in 2010

December 23, 2009 12 comments

As 2010 approaches, real-world economists should be thinking about what they can do in the New Year to advance the cause of real world economics. Here, I offer 10 suggestions to add to the exhortations of Fred Lee in his outgoing editorial of the Heterodox Economics Newsletter. Since I’m Read more…

Circuit Theory and the state of Post Keynesian Economics

December 18, 2009 7 comments

I gave a presentation at the 4th Dijon Money conference,  December 10-12 2009.   (A podcast of it is available here.)  Briefly, my paper explained how various conundrums that have stymied the development of Circuit Theory for 20 years were in fact the result of confusing a stock (an initial loan) with a flow (the economic transactions that loan could initiate over a year). With a proper dynamic approach, Read more…

Fred Lee’s departing words of wisdom

December 17, 2009 2 comments

Fred Lee, the much-loved founder of the Heterodox Economics Newsletter, is stepping down as its editor. In his final editor’s message he offers non-neoclassical economists the following advice. Read more…

One act of censorship overcome

December 15, 2009 Leave a comment

Clive Spash’s paper “The Brave New World of Carbon Trading”, which the Australian authorities suppressed, is now available at: 
For background see:
Censorship of Critique of Emissions Trading and Carbon-Offsets Schemes
Update on Censorship of Critique of Emssions Trading Schemes

Oz and Paul

December 15, 2009 3 comments

Dear Prof. Davidson,

My name is Oz Gore and I’m a first-year economics graduate student living in Israel. My B.A was in PPE (Politics, Philosophy, Economics), an interdisciplinary program at Hebrew U.

As part of the program we were required to write a personal paper on a topic of our choosing and I chose Keynes. Working on my paper I came across your work and was greatly inspired. Feeling that mainstream economics is extremely narrow, I was contemplating a lot on what kind of graduate studies to pursue. Reading your work made me realize that economics can (and should) be a subject of deep philosophical discussion and that some schools of thought treat it hands-on as oppose to the way I was taught (which is to wear mathematical gloves each time I want to study the world).

So, I began my graduate studies at the Hebrew U hoping that I would acquire tools that will help me understand the world better, and hopefully enable me to say something positive about it. However, Read more…

Samuelson dies- but his economic errors live on (from Paul Davidson)

December 14, 2009 6 comments

Paul Davidson writes:

Perhaps a slightly different view  (vis-à-vis the N.Y. Times obit) of Samuelson’s role in  economics could be gleaned from both Pasinetti’s and my contributions to the Festschrift in honor of Samuelson entitled “Samuelsonian Economics and The Twenty-First Century” edited by M. Szenberg, L. Ramarattan and A.A. Gottesman (Oxford University Press, 2006). 

In essence, my piece provides evidence (including Samuelson’s own words) that Samuelson gave “Keynesianism” a bad  rap by indicating that he did not understand the paradigm of the GENERAL THEORY and therefore Read more…

Allow Brazil to Help Itself

December 13, 2009 1 comment

In an effort to stem the appreciation of its currency, the real, Brazil has twice resorted to capital controls. In response to these measures, IMF head Dominique Strauss-Kahn says capital controls are “not something that come from hell”, but the IMF won’t be recommending them any time soon to remedy the current crisis.

Enough is enough. Given the economic evidence and in the wake of the current crisis, the IMF should change more than its rhetoric and do away with its Washington consensus policies by encouraging Brazil to strengthen its capital controls, not eliminate them. Read more…

4 Years of Calling the GFC

December 10, 2009 2 comments

I first realised that the world faced a serious financial crisis in the very near future in December 2005, as I prepared an Expert Witness Report for the NSW Legal Aid Commission on the subject of predatory lending.

My brief was to talk about the impact of such contracts on third parties, since one ground to overturn a loan contract was that it had deleterious impacts on people who were not signatories to the contract itself. I was approached because the solicitor in the case had heard of my academic work on Hyman Minsky’s “Financial Instability Hypothesis”.

Minsky’s hypothesis argued that a capitalist economy with sophisticated financial institutions could fall into a Depression as an excessive buildup of private debt occurred over a number of financially-driven business cycles. I had built Read more…

Adbusters looking for volunteers in Atlanta, January 3-5

December 10, 2009 Leave a comment

As you probably know, Adbusters recently published a special issue titled “Thought Control in Economics”.  Its many articles include those by real-world economics review contributors Paul Ormerod, Joseph Stiglitz, Herman Daly, Simon Jenkins, Deborah Campbell, Benjamin Mitra-Kahn and Gilles Raveaud.  Adbusters are looking for people attending the annual American Economics Association meeting to distribute copies of their economics issue and to hand out posters. Read more…

A new framework to address overshoot

December 8, 2009 1 comment

As an independent economic thinker rather than an affiliated academic, I can perhaps offer a fresh approach to our ecological predicament.

The current approach is typified by recent posts regarding cap-and-trade, including Edward Fullbrook’s request that economists evaluate James Hansen’s “fee and dividend” proposal.  These posts are attempts to reform the current system – that is, to improve on business-as-usual.  Such reforms are worthwhile, but strikingly inadequate to prevent the collapse that Fullbrook and many others rightly fear.

Climate change is clearly a major threat to ecosystems, but it is only a symptom of the underlying problem we face – ecological overshoot.  For the first time in history, humankind has violated environmental limits on a global basis.  This situation is unprecedented, and therefore requires an unprecedented solution. Read more…

Carbon credits: Britain’s richest man cleans up

December 7, 2009 2 comments

The climatologist James Hansen opposes the cap and trade scenario being considered at Copenhagen on two grounds: one, at the real-world level it is essentially a programme for fraud and corruption, and two, it is essentially greenwash and thus serves to postpone, yet again, serious attempts at carbon reduction. Yesterday’s Sunday Times provides supporting evidence for Hansen assertion that cap and trade is a system for “paying off numerous special interests”.  Read more…

Update on Censorship of Critique of Emssions Trading Schemes

December 6, 2009 4 comments

There have been major developments in the story (Censorship of Critique of Emissions Trading and Carbon-Offsets Schemes) about the attempts of Australia’s CSIRO to prevent Dr Clive Spash from publishing his critical review paper on  emissions trading and carbon offset schemes.  On 2 December, as reported in Nature News, The Australian and ABC Radio National, Clive decided he had been through enough bullying and resigned from his professorial-level position as a Science Leader at CSIRO. That Clive should take such a brave public stand on this matter will probably come as no surprise to Real World Economists who know him as an ecological economist of the highest principles who is concerned about the potential catastrophic irreversibility of climate change if inappropriate polices are adopted. In resigning, Clive called for Read more…

Fee and dividend vs. cap and trade

December 2, 2009 6 comments

James Hansen is not an economist.  But after Lovelock he is arguably the most eminent climatologist ever and currently director of Nasa’s Institute for Space Studies.  Like others of his profession, Hansen knows that the Earth’s climate is close to tipping points and that it “is a dead certainty that continued high emissions will create a chaotic dynamic situation for young people, with deteriorating climate conditions out of their control.”

But Hansen has what he thinks may be – if we are lucky – an eleventh hour escape.  It is economic in nature.  As economists we might want to do our part and develop and promote it further.  Hansen Read more…

Cleaning house at the WTO

(with Timothy A. Wise)

This week, the 10th anniversary of the infamous “Battle in Seattle,” ministers assembled in Geneva with renewed hopes of reviving world trade talks. To dampen expectations, World Trade Organisation chief Pascal Lamy bills the event as a mere “housekeeping session,” rather than full-fledged negotiations.

There is no question the WTO needs to clean house. The organisation charged with developing a fair and legitimate multilateral trading system has been left in the dust of world economic events. Read more…