Archive for December, 2011

The triumph of the death of methodology and the history of economic thought

December 31, 2011 18 comments

from David Ruccio

Just this past semester, students in one of my classes wanted to know why they hadn’t been taught anything about economic methodology or the history of economic thought in any of the other courses they’d taken in economics.

The explanation I gave them was similar to what my colleague Philip Mirowski has recently written:  Read more…

On the problems facing the world in 2012

December 30, 2011 7 comments

Steve Keen

Every year, The Age publishes a survey of economists’ opinions on the year ahead. Most of these are “market economists” rather than academics—working for banks, insurance companies and the like. Three academics are surveyed—myself, Jacob Marsden of Monash and Neville Norman of the University of Melbourne—and one economist working for a trade union, Brad Crofts of the AWU.

Peter Martin does an overview of the results each year, as well as providing snippets of the answers given to supplementary questions. He made one slip-up this year when he summarised views on achieving a surplus as:

“All think a return to surplus matters, although most think it is not crucial that it happens in 2012-13.”

That is decidedly not the opinion I gave, so I’m publishing the answers that I gave to the supplementary questions below. Read more…

Chart of the day: Public vs. private US debt to GDP ratios

December 30, 2011 12 comments

from Steve Keen

Separating out private sector and public sector debt in the USA  Read more…

Krugman considers Baker (with graphs)

December 29, 2011 3 comments

Paul Krugman has a column on Dean Baker’s post David Brooks is projecting his self indulgence again.  It includes a couple of interesting graphs.  Note that Krugman excludes from consideration financial debt.

Below are two series, both expressed as percentages of GDP: total domestic nonfinancial debt (public plus private), and U.S. net foreign debt, as measured by the negative of the net international investment position: Read more…

Mis and mins (graph)

December 29, 2011 2 comments

from David Ruccio

I have no particular objection to highlighting “the vast shift in national income toward our richest 1 percent,” even if it means focusing, for the umpteenth time, on the fate of the “middle-class” instead of on workers and the working-class.

That’s what Ian Ayres does, in utilizing the Brandeis Ratio to measure the growing gap between the average income of the richest 1 percent and median household income. Read more…

David Brooks is projecting his self indulgence again

December 28, 2011 Leave a comment

from Dean Baker

Undoubtedly projecting from the fact that he can draw a nice 6-figure income for little obvious work, David Brooks complained in his column:

” Today, the country is middle-aged but self-indulgent. Bad habits have accumulated.”

For the most part the column is a confused diatribe against the Obama administration’s economic policies with a lecture on moral rectitude thrown in for good measure. He starts by condemning the efforts to stimulate the economy by telling readers: Read more…

Krugman considers Koo

December 28, 2011 3 comments

Paul Krugman devotes his New York Times column to Richard Koo‘s RWER paper The world in balance sheet recession: causes, cure, and politics.  It includes the following. Read more…

Richard Koo’s RWER paper “has gone viral on the Web” says the New York Times”.

December 28, 2011 3 comments

Richard Koo’s RWER paper The world in balance sheet recession: causes, cure, and politics already looks set to become a classic.  In its first two weeks it was full-text downloaded over 30,000 times from  Koo’s paper, reports the New York Times, “has gone viral on the Web”

Here are some key passages from Koo’s paper.  Read more…

US corporate profits after tax, as a percentage of GDP

December 27, 2011 Leave a comment

from David Ruccio


A tale of 30 corporations

December 27, 2011 1 comment

from David Ruccio

When we look back on this period, someone will have to write a novel that begins with the following sentence: it was the best of times (for corporations), it was the worst of times (for the 99 percent).

And, of course, the best and worst of times are connected.

According to a recent report by Public Campaign [pdf, ht: sm], 30 multi-million-dollar American corporations spent more money lobbying Congress than they paid in federal income taxes between 2008 and 2010, ultimately shelling out approximately $400,000 every day—including weekends—during that three-year period to lobby lawmakers. And, in both 2008 and 2010, they paid even more than that to their top 5 executives.  Read more…

The ECB’s high wire act

December 27, 2011 6 comments

from Dean Baker

At this point the sovereign debt crisis in Europe is almost getting boring. We’ve seen the same script played out over and over with country after country. The basic story is the markets begin a run on the debt of a country: Greece, Ireland, Italy, Spain etc.

The troika, the European Central Bank (ECB), the European Union (EU), and the International Monetary Fund (IMF) then demand a series of austerity measures. In addition, they sometimes demand measures unrelated to fiscal policy, such as a lower minimum wage in Ireland or weaker employment protection legislation in Italy, that are intended to weaken workers’ bargaining power. As a quid pro quo, the troika then arranges enough bond purchases or other supports to get through the immediate crisis. Read more…

Historic Grumpiness

December 27, 2011 17 comments

from Peter Radford

I am not sure how to react to the drift of events. It seems as if our leaders, both here and in Europe, are determined to re-create the Great Depression. I guess it must have been fun the first time through. Why else would they be so steadfast in their lunacy?

We live in absurd times. We are lead by fools. Our commentariat is stupid, ignorant, badly educated, or simply to darned lazy to pick up a history book. It surely isn’t difficult. Even I can do it.  Read more…

Why is Spanish unemployment the highest in the EU (or: never underestimate the housing market)?

December 27, 2011 3 comments

from Merijn Knibbe

Spanish unemployment is, with about 23% U-3 unemployment, the highest of the entire European Union. And it is still rising. And it has been rising for 53 months in a stretch. Time for a closer look: what happened, what’s still happening? And the answer is sobering: it still is the housing market, five years after the housing boom changed into the housing bust (graph). Read more…

Robert McMaster: “neuroeconomics’ empirical basis is fundamentally underdetermined”

December 26, 2011 1 comment

Robert McMaster’s paper “Neuroeconomics: A sceptical viewin the current issue of RWER outlines neuroeconomics claims and scrutinises them from a non-neoclassical perspective.  He argues that “neuroeconomics’ empirical basis is fundamentally underdetermined” and that “the framing of ‘economics in ‘neuroeconomics’ is profoundly reductionist and incapable of providing the explanatory depth its proponents claim.”  McMaster’s critique focuses on the work of Colin Camerer, P. W. Glimcher, D. Ross, M. Vercoe and P. J. Zak.  Below are three key passages from the paper.  Emphasis in bold has been added by the blog editor. Read more…

Fact of the day: lower inflation in the USA

December 25, 2011 5 comments

from Merijn Knibbe

According to the “GROSS DOMESTIC PRODUCT: THIRD QUARTER 2011 (THIRD ESTIMATE)”, which publishes the broad based price index for gross domestic putchases,  inflation of the price level (not just consumer prices) in the USA is declining:

“The price index for gross domestic purchases, which measures prices paid by U.S. residents, increased 2.0 percent in the third quarter, 0.1 percentage point more than the second estimate; this index increased 3.3 percent in the second quarter. Excluding food and energy prices, the price index for gross domestic purchases increased 1.8 percent in the third quarter, compared with an increase of 2.7 percent in the second”

Some tips for real-world economists in the academic labour market in 2012

December 19, 2011 19 comments

Once upon a time, academic job vacancies for economists focused on filling holes in teaching plans and a promotion was assured if one was prolific, had established a good external reputation and had done one’s bit in collegial terms. Nowadays, things work very differently and real-world economists need to know how to play the game (often against those trained extensively in game theory) in order to get a foot on the career ladder and step up it. In this post I reflect on how things have changed and how real-world economists can try to improve their competitive edge Read more…

Europe’s Crisis and Latvia’s “Success”

December 18, 2011 1 comment

from Mark Weisbrot

In recent months some advocates of Europe’s austerity policies have been touting Latvia as a “success story” that shows how “internal devaluation” can work. This was the theme of a book published earlier this year by the Peterson Institute for International Economics, one of Washington’s most influential think tanks. The book was co-authored by the Institute’s Anders Aslund and Latvia’s Prime Minister Valdis Dombrovskis.

The case study is very relevant to Europe because there are important similarities between Latvia’s economic strategy since 2008 and that now being promoted by the European authorities – the European Commission, the European Central Bank, and the International Monetary Fund (IMF), otherwise known as “the Troika.” Read more…

Student loans: the new bubble? (chart)

December 18, 2011 5 comments

from Merijn Knibbe

At this moment I’m using the work of Reinhart and Rogoff, “This time is different. Eight centuries of financial folly”.

1. To avoid a common misunderstanding: this book is not just about government debt – it is about how all kinds of debt again and again destabilized entire countries. And about the endemic vulnerability of monetary, debt based economies (no single emerging economy ever escaped a phase of default. Not one.). To quote Reinhart:  Read more…

Why Free-Market Economics is a Fraud

December 18, 2011 33 comments

from Ian Fletcher

If there’s one thing everyone in America knows, it’s that free-market economics is true and free markets are best. 

After all, we’re not communists, are we? They starved and lost the Cold War because they believed otherwise. And their watered-down European cousins the socialists? More of the same, only less so. Even liberals get this nowadays. All hail the free market! 

Trouble is, things “everyone” knows are often wrong. And this is no exception.

It’s time to start getting honest about a very simple fact: Nobody, but nobody, really believes in free markets. That’s right. Not the Republican Party, not the libertarians, not the Wall Street Journal, nobody.  Read more…

A Tale of Two Deficit Charts

December 16, 2011 Leave a comment

from Dean Baker

Not long after I first came to Washington 20 years ago I was at a conference dealing with Social Security privatization. One of the panelists used a number for the administrative costs of private accounts that was far lower than the numbers I had seen in the literature. After the panel, I asked one of the other panelists about her best estimate of the administrative costs of private accounts. She said that this depended on whether I was interested in advocacy or policy.

I was somewhat taken aback by her response, but after a moment I told her that I was interested in accuracy. I have always felt that this is the best approach to policy questions.  Read more…