Archive for October, 2010

Thought for the day: on scarcity (of clothes)

October 31, 2010 3 comments

from  Merijn Knibbe

Nowadays we’ve got these DSGE models. DSGE: that’s Dynamic Stochastic General Equilibrium. Part of the rhetorics of these intensely neo classical articles is a ritual phrase that they have ‘sound’ or ‘non trivial’ micro foundations. As ‘micro’ in economics means: the individual man of woman, the individual household or the individual company one might expect models which, though neo-classical and therefore not allowing for lasting connections between atomistic individuals, still start at the individual level – to work their way up to the macro level. Wrong.  Read more…

Thought for the day: why didn’t we look under the streetlamp

October 29, 2010 17 comments

from Merijn Knibbe

There is a famous joke about the drunk who, at night, lost his watch and started to search under the streetlamp, not because he lost it there but because he could see something.  But economists did not even bother to look under the lamppost. Dean Baker complains about the inability of economists to spot the housing bubble. He’s right. Economists did not only fail to construct a  ‘bubble indicator’ (see Shiller and Baker, however), they did not even bother to look at available information. Read more…

The economy is a goddamn disaster and . . . .

October 29, 2010 1 comment

from Dean Baker

The economy is a goddamn disaster and President Obama deserves much of the blame. Sorry, I am not on the Dems’ payroll so I couldn’t contain myself when I read Bernard Avishai’s trashing of Paul Krugman.

Avishai’s basic narrative is about 150 percent wrong. He describes the differences between Krugman and the Obama Administration as “small.” Right, and it depends on what your definition of “is” is.

Let’s pick just a few of these differences.  Read more…

Faulty towers

October 28, 2010 4 comments

from David Ruccio

The current foreclosure mess has nothing to do with deadbeat borrowers. It’s all about the banks trying to clean up the mess they themselves made as quickly and cheaply as possible. And damn the consequences for homeowners and the rest of society.

(Click on the image to enlarge)  Read more…

Thought for the day: automatic stabilizers do work (in the Euro area)

October 28, 2010 2 comments

from Merijn Knibbe

A staple of traditional macro economics are ‘automatic stabilizers’. When people loose their job or income, they receive some kind of welfare, which leads to additional spending, which mitigates the macro consequences of a downturn. The unusual severity of the 2008 – … downturn can be seen as a ‘natural experiment’ of this theorema: would household income and demand have been lower if these stabilizers would have been absent (or less generous)? Read more…

“The Stock Market Economy” and 10 reasons to be pessimistic

October 27, 2010 5 comments

That’s what Forbes’ columnist Robert Lenzner calls it, and he gives 10 reasons why its near to long term future looks bleak.

1. Economic growth in the US unlikely to pass 2% for the next 3 to 5 years — and maybe even up to 10 years. There can be no stimulus program in light of the expected Republican victory in November. “This is going to be a period of pain,” said Joseph Stiglitz, Columbia University professor. …. Read more…

Keeping Fear Alive: The Deficit Hawks Push Their Agenda

October 27, 2010 4 comments

from Dean Baker

The deficit hawks must believe that they are in the home stretch of their drive to cut Social Security and Medicare benefits since they seem to be pulling out all the stops. The attack on Social Security and Medicare is heating up with the opponents of these programs going the route of straight up xenophobia and racism.

The latest shot from the deficit hawks is an ad sponsored by the Citizens Against Government Waste. This ad Read more…

Shrinking wages, growing surplus

October 26, 2010 2 comments

from David Ruccio

The recovery continues, but only for those at the top. For everyone else, it’s a continuation of the Second Great Depression.

How do we know? Because wages are declining—both total and average—while top salaries—distributions of the surplus—are rising.  Read more…

Photos from Berkeley

October 26, 2010 5 comments

from Adbusters

In anticipation of November’s Carnivalesque Rebellion, a memewar salvo has been opened on the University of California – Berkeley’s prestigious Economics department. The first act was a defiant challenge. The Kick It Over Manifesto was boldly pinned to the door of Daniel McFadden, a Nobel Prize winner in economics, along with bulletin boards throughout the department. Read more…

French Protesters Have It Right

October 25, 2010 5 comments

from Mark Weisbrot

The demonstrations that have rocked France this past week highlight some of its differences from the United States. This photo, for example, shows the difference between rioting in baseball-playing versus soccer-playing countries. In the U.S., we would pick up the tear gas canister and THROW it – rather than kick it — back at the police.

More importantly the French have decided to take to the streets in the millions to defend hard-won retirement gains – including large-scale strikes and work stoppages. French populist rage is being directed in a positive direction, unlike in the United States where it is most prominently being mobilized to elect political candidates who will do their best to increase the suffering of working and middle-class citizens. Read more…

The “Kick It Over Manifesto” and 31 supporting links

October 24, 2010 7 comments

An international student movement to free the economics curriculum from its neoclassical straightjacket was launched last week at the University of California at Berkeley.  For its first action, students worldwide are being encouraged to post the following manifesto, preferably printed on brightly coloured paper, on the doors and bulletin boards of their univeristy’s  economics department.    

Kick It Over Manifesto 

We, the undersigned, make this accusation: that you, the teachers of neoclassical economics and the students that you graduate, have perpetuated a gigantic fraud upon the world.  Read more…

The “who could have known” school of economics

October 24, 2010 4 comments

from Dean Baker

It seems the main qualification for being a top economic policy maker is being wrong about economic policy. It certainly is the only trait that this group has had in common over the last three decades.

The latest big item in their proliferation of errors is their failure to take economic security issues seriously in ensuring that the U.S. maintained an adequate domestic manufacturing base. The context is the decision by China’s government to suspend exports of some rare earth materials that are needed in the production of wind turbines, cell phones and other advanced manufacturing processes. The result of this suspension could be a disruption in the normal production schedules in many key industries.  Read more…

Inequality kills

October 23, 2010 3 comments

from Merijn Knibbe

Inequality considered: what do agent based macro data on wealth and health tell us about the consequences of inequality?

1. Introduction

Inequality is back into the limelight. Of course, we already knew that, especially in Anglo Saxon countries, neo liberal policies had caused an increase in inequality (just consult consecutive versions of the UN World Development reports). Piketty and Saez (2003, 2007, 2010 ) showed that, in a long term perspective, the increase in the USA was extraordinary and also confined to the very top. Also, Pickett and Wilkinson (2009) showed that the consequences of inequality (in fact: the consequences of the processes that lead to high inequality) are detrimental: unequal countries as well as unequal states of the USA tend to have high scores on indicators of social as well as individual pathology. Both findings have been challenged.  Read more…

The Nobel family dissociates itself from the economics prize

October 22, 2010 12 comments

From Jorge Buzaglo

On October 11th Peter Nobel, a lawyer and descendent of Alfred Nobel, issued a statement dissociating the Nobel family from the so called Nobel prize in economics.  Below is my translation of Nobel’s statement. 

The Economics Prize in memory of Alfred Nobel should be criticised on two grounds. First, it is a deceptive utilisation of the institution of the Nobel Prize and what it represents. Second, the economics prize is biased, in the sense that it one-sidedly rewards Western economic research and theory.  Read more…

Question of the week: Is special money starting to drive out universal money?

October 22, 2010 3 comments

from Merijn Knibbe

To me the remarkable thing is that the USA stops being ‘the land of the free’ as soon as it comes to the poor. One of the remarkable things about money is that, once you have it, you are free to spend it on whatever you like. People getting food stamps are not given this freedom: they get ‘special purpose money’ – which only buys food. Maybe that’s a good thing. Maybe it’s not. But it does run counter to the ‘it’s a free country’ idea.  Read more…

Globalizing Healthcare: A Prescription with Side Effects

October 21, 2010 Leave a comment

from Grazia Ietto-Gillies

The piece by Dean Baker of 14 Oct 2010 (Globalizing Healthcare: A Prescription with Benefits) is very interesting and, no doubt, well meant. However, it does not take account of the wider implications of his globalizing prescription. There are many side effects of the prescribed medicine.  Read more…

Timothy Geithner has a new fairy tale

October 21, 2010 Leave a comment

from Dean Baker

Treasury Secretary Timothy Geithner is good at telling fairy tales. Mr. Geithner first became known to the general public in September of 2008. Back then he was head of the New York Federal Reserve Board. He was part of the triumvirate, along with Federal Reserve Board Chairman Ben Bernanke and then Treasury Secretary Henry Paulson, who told Congress that it had to pass the TARP or the economy would collapse.

This was an effective fairy tale, since Congress quickly handed over $700 billion to lend to the banks with few questions asked. Read more…

Thought for the day: Neoclassical economics is specific not only in ‘scientific’ but also in ‘ideological’ terms.

October 20, 2010 6 comments

from Peter Söderbaum  

Mainstream neoclassical economics is a standardized language that claims to be helpful in understanding the world. Standardized or not; each language points in specific directions concerning relevant objects, relationships, processes etc. to focus upon. The language is socially constructed for specific purposes, for instance to deal with specific problems in specific ways. Neoclassical economics, as an example, is specific not only in ‘scientific’ but also in ‘ideological’ terms. ‘Ideology’ stands for a ‘means-ends philosophy’ and is not limited to more or less established political ideologies like socialism, social democracy, social liberalism or neo-liberalism. In this sense, neoclassical economics clearly qualifies as an ideology and as such is more specific and precise than the political ideologies mentioned.  Read more…

Neoclassical economists twitter to new low with Paul Krugman spoof

October 20, 2010 4 comments

Thought for the day: Saving capitalism from neoclassical economists

October 19, 2010 4 comments

from Merijn Knibbe

I just read some newspaper articles on the foreclosure disaster in the USA. The problem seems to be larger than we expected:

– left wing Karl Marx
– as well as right wing Friedrich Hayek

would both say exactly the same thing about this crisis: “Capitalism needs rules to function”.  Read more…