Archive for April, 2010

Beyond MaxU

April 29, 2010 2 comments

from David Ruccio

Much of contemporary neoclassical economics remains wedded to an analytical approach based on utility-maximizing individuals. And, as Nick Krafft discovered, neoclassical economists just don’t want to give it up.

Notwithstanding all the criticisms of the idea of MaxU over the years, including the exceptions to utility-maximizing behavior discovered by behavioral economists, the official line is “don’t throw out the baby with the bathwater.” Why? Because they just can’t imagine doing economics without rational, self-interested, utility-maximizing economic subjects. The fact is, letting go of MaxU probably involves moving beyond neoclassical economics but it certainly doesn’t mean the end of economic analysis.  Read more…

The Rise of the Economics Underdogs

April 28, 2010 Leave a comment

Handelsblatt, the German equivalent of the Wall Street Journal and the Financial Times, today featured an article on the Revere Prize in Economics.  Here is an English translation.  Read more…

What is the social cost of carbon?

April 27, 2010 2 comments

from Frank Ackerman

The social cost of carbon may be the most important number you’ve never heard of. U.S. climate legislation is stalled in Congress, but in the meantime, the Obama administration is trying to fill the gap by considering climate impacts in the regulatory process: from the tailpipe emissions limits and gas mileage standards unveiled April 1, to energy-efficiency standards for many types of residential appliances and commercial equipment.

This is important work; U.S. action to reduce greenhouse-gas emissions is long overdue, and it’s crucial in the global picture, both because of our large share of total emissions, and because of our ability to influence other nations. But it’s also important to do this right, and a look at how the administration has handled the social cost of carbon (SCC) raises some serious concerns.  Read more…

The Deficit and Our Children: Just the Facts

April 26, 2010 2 comments

from Dean Baker

This is deficit-fest week with President Obama’s deficit commission scheduled to have their big public kickoff on Tuesday, followed by an all-day affair sponsored by the Peter G. Peterson Institute the next day. If the deficit hawks succeed, everyone should be really really scared about the deficit by the end of the week and just dying to cut Social Security and Medicare for the sake of our grandchildren.

While there will be many facts about the debt and deficit tossed out at these gala events, there are some important tidbits of information that are likely to go unmentioned. So, courtesy of billionaire investment banker Peter G. Peterson (not) we bring these facts to you here.  Read more…

Return of the IMF

April 26, 2010 2 comments

from David Ruccio

To judge from last weekend’s meeting, the International Monetary Fund is back from the dead. And it’s still a menace.

The fact is, the mission of the IMF has changed. For decades, it represented the imposition on a host of Third World nations of policies drawn from neoclassical economics and the finance ministries of the advanced capitalist nations. Then, in recent years, it all but died, with few countries seeking to borrow from the IMF and to suffer through IMF conditionality (Turkey being one of the few exceptions). Now, the IMF has found a new lease on life, starting with Greece and expanding to the rest of the advanced capitalist nations themselves. Read more…

Kevin Gallagher and Jayati Ghosh on Financial Reforms

Keen begins his 230 km trek

April 15, 2010 1 comment

About now Steve Keen is beginning his 230 km (140 mile) nine day jog-and-walk from Australia’s Parliament House to Australia’s highest mountain peak. Renowned for his analysis and prediction of the Global Financial Collapse, Keen will be accompanied by 40 people, including journalists.  He is making his walk because he lost a bet on another prediction he made that has not yet come true.

At the height of the global financial crisis in late 2008, Keen predicted house prices in Australia, like those in the United States and Britain, would fall as much as 40 percent. When a hedge fund economist, Rory Robertson, said the collapse would never happen, he and Keen in a public debate agreed that the one who was proven wrong would trek to the top of Mount Kosciuszko.  Since then, Australian house prices have gone up, due in large part to the Australian government’s strenuous efforts to keep what Keen still maintains is a bubble inflated.

The New York Times yesterday reported: Read more…

What’s Missing in Paul Krugman’s Climate Economics Primer

April 15, 2010 9 comments

from Peter Dorman

But let’s start by accenting the positive.  Krugman’s explanation of mainstream environmental economics is clear and powerful.  He recognizes that there really are a lot of free energy lunches lying around uneaten, in the form of potential efficiency improvements.  He knows that predictions of economic disaster due to carbon policy are without foundation and fail to take into account the potential for innovation.  Above all, he understands that investments in minimizing climate change offer valuable insurance against potentially catastrophic outcomes—the ice-sheet meltoffs and methane megabelches that we have little ability to predict and from which we would have little chance to recover.

Why ask for more?  Because three enormous concepts are completely missing.  Read more…

Why Is Obama Drilling?

April 14, 2010 2 comments

from Frank Ackerman

Once upon a time, “There’s Only So Much Oil in the Ground” was a popular song that could be heard on the radio. The year was 1974, and Tower of Power, an Oakland-based soul and funk band, was enjoying some commercial success. They made the year’s top 100 with “What is Hip?” In addition to the important topics of being young, hip, and falling in and out of love, they sang about the energy crisis. Following a brief OPEC oil embargo, the price of crude oil (in today’s dollars) jumped from $23 per barrel in 1973 to $41 in 1974. Everyone was thinking about the world’s finite and diminishing supplies of oil. As the song continued, “Sooner or later there won’t be much around.”  Read more…

Fleecing the faculty

from David Ruccio

Academic salaries are being squeezed in the current crises, as colleges and universities attempt to balance their books by fleecing the faculty.

According to the annual salary survey by the American Association of University Professors, overall salaries for this academic year are 1.2 percent higher than last year, the smallest increase recorded in the survey’s 50 years—and well below the 2.7 percent inflation rate from December 2008 to December 2009.

And that’s the good news. The rest of the news is even worse. For example:  Read more…

“Why a complete rethinking of our political economy is necessary”

April 13, 2010 8 comments

Here is review in yesterday’s Irish Times of Out of Crisis: Rethinking Our Financial Markets by recent RWER contributor David A Westbrook

Why a complete rethinking of our political economy is necessary Read more…

IMF and Capital Controls

The Tyranny of the Bond Markets

from Kevin Gallagher

Credit rating agencies played a big role in creating the financial crisis. Now they are slowing the recovery. Financial regulatory reform legislation in the US has finally put the agencies on the radar screen, but the proposals don’t go far enough.

It is now legendary that the mortgage-backed securities structured in the shadow banking system all had AAA stamps of approval by the rating agencies. Of course when the mortgage bubble that propped up those assets burst, we learned that such assets were indeed “toxic” and unworthy of such high grades. The world couldn’t handle the truth and spun into the worst financial crisis since the Depression. Read more…

Why we must break up the banks

April 10, 2010 2 comments

from Dean Baker

It’s not often that I disagree with Paul Krugman, but there are occasions where at least one of us is wrong. And the treatment of too big to fail (TBTF) banks is one of them.

Krugman argued in a column last week that breaking up the TBTF banks is not a necessary part of financial reform. Krugman pointed to the example of Canada as a country with a well-regulated financial system. Canada did not experience a financial crisis in 2008 in spite of the fact that five big banks essentially account for the whole of the Canadian banking system. On the other side, Krugman noted that the collapse of large numbers of small banks can also create a crisis, pointing to the chain of bank collapses at the start of the Great Depression.  Read more…

“New” economic thinking

April 9, 2010 7 comments

from David Ruccio

Given the lineup of speakers and topics, it’s not clear there’s going to be a lot of new economic thinking going on at “The Economic Crisis and the Crisis in Economics” conference this weekend.  Read more…

IMF changing slowly, but how much?

April 6, 2010 2 comments

from Mark Weisbrot

Over the past year or two the IMF has made some positive changes in policy and in their published work, some of which challenges the conventional wisdom among central banks and even the past practice of the IMF itself. The Fund, which prior to the current decade was one of the most powerful financial institutions in the world, has presided over a number of economic disasters and was widely seen – at least in the low-and middle-income countries to which it has lent for the past four decades – as generally doing more harm than good. Now there is debate over how much it has changed, and what these changes mean for the IMF itself and its role in the global economy going forward.  Read more…

DOE sidles up to peak oil

April 2, 2010 2 comments

from Lewis L. Smith

Traditionally, the US Department of Energy has denied the existence [or at least the imminence] of a peak in world production of crude oil. In this regard, it has faithfully followed the traditional oil-industry line, frequently referring to such an event by the pejorative phrase, “the theory of peak oil”.

Suddenly, however, DOE seems to be sidling up to the possibility that this alleged “theory” might actually become a reality. In a recent, largely ignored, semipublic meeting, the US Department of Energy presented, as one of its scenarios of the future, the most pessimistic scenario in the agency’s history,  apparently without assigning it any probability .  Read more…