USA income growth for the 1% vs the 90% 1917 to 2012

source: http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2015/02/gold%20standard%20inequality_0.jpg

Summary of the Great Transformation by Polanyi

Although this post was published on this blog over five years ago, it continues to be downloaded a thousand times a month.  (editor)

from Asad Zaman

An earlier post by Mady provided an introduction to Polanyi’s classic work The Great Transformation. This book is crucial to understanding both HOW and WHY we need to re-structure economic education today. Unfortunately, the book is quite complex, a bit dry and technical at times, and consequently hard to follow. Although many leading economists have praised it, I did not see any glimmer of understanding of its central arguments anywhere in orthodox arena. Even among heterodox economists, it is not frequently mentioned or cited.

Mostly for the purposes of understanding it for myself, I set out to write a compact summary of the key arguments in the book. The central theme of the book is a historical description of the emergence of the market economy as a competitor to the traditional economy. The market economy won this battle, and ideologies supporting the market economy won the corresponding battle in the marketplace of ideas. I quote from the introduction of my article:  read more

Yearly hours worked per capita in USA, Europe and rest of the world

Punching the clock

Most read RWER papers

Most downloaded RWER papers from current issue

Who is behind the campaign to rid the world of cash?, Norbert Haering
The trouble with human capital theory, Blair Fix
A progressive trade policy, Dean Baker
The enigmatization of economic growth, Bernard C. Beaudreau

Most downloaded RWER papers from last 4 years

Trump is Obama’s legacy. Will this break up the Democratic Party?, Michael Hudson
China’s communist-capitalist ecological apocalypse, Richard Smith
Inequality, the financial crisis and stagnation, Thomas Palley
Explaining money creation by commercial banks, Ib Ravn
The market economy: Theory, ideology and reality, C. T. Kurien
Income inequality in the U.S. from 1950 to 2010, Holger Apel
Divine belief in Economics at the beginning of the 21st century, Emil Urhammer
Capital accumulation: fiction and reality, Shimshon Bichler and Jonathan Nitzan
Trends in US income inequality, Pavlina R. Tcherneva
The double discipline of neoclassical economics, Michel Gueldry
Ten years after the crisis: a lost decade?, Steven Pressman and Robert Scott
On the current state of game theory, Bernard Guerrien
Why game theory never will be anything but a footnote in the history of social science,
Lars Pålsson Syll

Please support the RWER and the WEA

Economic internetization

from Constantine Passaris and the current issue of RWER

I have coined the word internetization for the purpose of circumventing the drawbacks of the concept of globalization. These drawbacks commence with the fact that globalization is not a new concept. The international outreach between nations has taken place since time immemorial. Furthermore, globalization does not reflect the contemporary digital empowerment of civil society and the electronic facility for modern financial transactions.

In effect, internetization denotes a combination of two contemporary features. These are global outreach and electronic connectivity. There is no denying that internetization has had a significant impact on the new global economy and the scope and substance of economic governance. The electronic prefix that is appearing before an increasing number of our daily interactions such as e-commerce, e-mail, e-learning, e-banking, e-travel, e-democracy and e-government is a tangible expression of the pervasive influence of the information technology and communications revolution (Passaris, 2014A).

Increasingly, internetization has become a driving force in the business strategy pursued by corporations in the 21st century. Internetization embraces the transformative powers of the world-wide-web and the electronic information high way and serves as a catalyst for the evolving dynamics of interconnectivity in the new global economy. Furthermore, internetization captures the pervasive influence of technological change and electronic innovations on the global economic landscape as well as on all aspects of human endeavour for our civil society (Passaris, 2017).

Internetization has also impacted upon economic governance by facilitating public scrutiny of government documents, enhancing the accessibility of data and generally promoting the electronic connectivity between civil society and government. 

The Great Recession

from Constantine Passaris and the current issue of the RWER

The Great Recession commenced during the second decade of the new millennium. It was triggered by the global financial crisis of 2008 and developed in its aftermath. I believe the Great Recession is an important economic governance milepost. To my way of thinking the Great Recession is the defining economic event that revealed the fault lines in economic governance and the dysfunctional nature of our economic policy tool kit for the 21^st century. In effect, our inherited economic governance model had developed structural deficiencies and public policy shortcomings (Passaris, 2015B).

Furthermore, the Great Recession was a tangible acknowledgement that the economic governance landscape was no longer an effective mechanism for delivering the desired outcomes for the new economy. Indeed, it served as a wakeup call that the economic policies that were effective in the old economy of the 20^th century are no longer potent for the new economy of the 21^st century.

This new term, the Great Recession, is an informative play on words on the Great Depression. The Great Depression lasted for about a decade during the 1930s. It was a period of protracted economic downturn, high inflation, soaring unemployment, stagnant income levels and a decline in total output.

Financial and business cycles in the United States

source: https://hackernoon.com/predator-prey-economics-2b2c0272d472

Distribution and redistribution of wealth in USA

Source:
https://en.wikipedia.org/wiki/Wealth_inequality_in_the_United_States#/media/File:Wealth_distribution_by_percentile_in_the_United_States.png 

The harder they fall

from Shimshon Bichler and Jonathan Nitzan

Like most of those subjected to the capitalist mode of power, Toro Molina, the protagonist of Budd Schulberg’s novel The Harder They Fall (1947), knows nothing about the larger scheme of things. Lured to the U.S. on a promise to ‘financialize’ his huge muscles, the Argentine-villager-turned-U.S.-boxing-champion will see none of the yield on his ‘human capital’. His promoters will take it all. They will ‘fix’ his battles into a winning streak to capitalize his victories as he fights his way to the West Coast – and then leverage his serialized losses as he makes his way back to the East. The harder he falls, the higher they rise.

1.  From boom to doom

Until a few months ago, the stock market narrative in the United States could have been summarized by the popular acronym BTFD – or ‘buy the fucking dip’. Analysts and strategists, emboldened by the world’s synchronized recovery, Trump’s pro-business policies and ample liquidity, predicted that equities would continue rising and recommended that investors take advantage of any temporary eakness to augment their stock holdings in anticipation of further upside.

But the atmosphere of boom has since given way to doom and gloom. With equity markets having entered ‘correction’ territory, many observers, including some of the world’s richest investors, now warn of a coming crash and a protracted ‘bear market’.

2. EPS: the stylized facts

Figure 1 sets this shifting sentiment in a long-term context. The chart, which begins in the early 1970s, shows the annual growth rates of U.S. and global earnings per share (EPS), smoothed as 12-month trailing averages, (in this piece, we use the terms ‘earnings’ and ‘profits’ interchangeably). 

Billionaires – 2000 to 2017

USA racial wealth divide

Source: Dreams Deferred, Institute for Policy Studies

62

Nine years with euro crisis – time to think anew

from Trond Andresen, Steve Keen and Marco Cattaneo and the current issue of WEA Commentaries

A new means of payment can be part of the solution for the eurozone’s unemployed.

We have now seen nine years of social crisis and huge unemployment in many euro countries. An entire youth generation has barely experienced anything but being out of work. Still no solution has been found or implemented. The time is overdue to think outside the box. We propose a solution that has circulated internationally for several years: some of us have argued for this since 2011. Both households and businesses should be provided with an additional national means of payment, “Electronic Parallel Money” (“EPM”).

Our proposal works like this: EPM transactions take place via mobile phone, PC and card. The transactions are logged on a server in the country’s central bank. There are no EPM coins and notes in circulation. The government (and local authorities) have EPM accounts in the central bank. These are debited when the public pays wages and pensions, or purchases goods and services. All citizens and enterprises also receive a user account there.

EPM will greatly reduce unemployment and enable people and businesses to exchange goods and services. It will alleviate the social crisis and reduce pessimism in economics and society. Such a solution is now being discussed in Italy, triggered by the acute budgetary conflict with the EU.  read more

The public economy in crisis

from W. Milberg and the current issue of the RWER

With the Trump tax cuts of 2017, the disconnect in popular discourse between government spending and taxing became more or less complete. Rate (and revenue) cuts were considered politically appealing, independent of any imagined social goal that might require public financing. It constituted an end to the debate over the government spending required to attain social goals and the analysis of the tax rates and regulations needed to finance this spending. Whether or not the 2017 tax cuts were merited from a macroeconomic stimulus perspective (they were not), it is important to note that not once in the recent debate over tax cuts did the issue of social protection and public spending become part of the discussion. In the US at the moment, there is little possibility for meaningful discussion of the public good, and specifically of infrastructure needs, educational improvements, broadening access to health insurance, expanding retirement pensions, reducing poverty or even assisting those injured by the introduction of new technologies or foreign competition.

How could such an economically-advanced and financially-sophisticated culture be so completely clueless when it comes to knowing even how to talk about the role of government and the benefit of government programs?

A very compelling answer to this question – and an urgent appeal for change – comes from June Sekera, in her book The Public Economy in Crisis: A Call for a New Public Economics, which arrives at a crucial and opportune moment. Sekera argues that the reason the public does not connect taxes to expenditure and does not even know how to discuss the benefits of government spending, is that the economists themselves do not have the conceptual framework to deal with the issue.  read more 

US median household income in the 21st century

A comment on corporations

from Peter Radford and the current issue of RWER

There is a continuum between the abstraction of economics theory and the practice of business. The two, after all, coexist in the same domain. The one seeks to explain phenomena which are consequences of the other. In the past few decades the highly stylized version of the firm that exists in economic theory has deeply influenced the way in which business is practiced. This is despite the detail excluded in theory, and the evident mischaracterization of the main vehicle of business – the corporation. Economics cannot theorize correctly about the firm until it absorbs the reality of the corporate form that dominates business.

Mainstream economics is very good at explaining what might happen with respect to economic transactions in an idealized world. That idealized world is created by expunging all manner of irritants that might make it difficult to model or teach. The entire resultant edifice is the tour de force of abstraction that has dominated economic theorizing for many decades. Unfortunately, it is the irritants, the very things removed in the process of abstraction, that are of most importance and interest to those of us trying to explain the real world. And amongst those the modern corporation stands out as a prime example.  read more

Resolutions to improve debates on economic policy in 2019

from Dean Baker and WEA Commentaries

Okay, it’s that time of year when we are all supposed to commit ourselves to performing nearly impossible tasks over the next twelve months. I will play the game. Here is the list of areas where I will try to bring economics into economic policy debates in 2019.

1) Patent and copyright monopolies are government policies:

This one is pretty simple, but that doesn’t mean it is easy. It should be pretty obvious that these and other forms of intellectual property are government policies explicitly designed to promote innovation and creative work. We can (and have) make them stronger and longer, or alternatively make them shorter and weaker, or not have them at all. We can also substitute other mechanisms for financing innovation and creative work, including expanding those already exist. (Anyone hear of the National Institutes of Health?)

Incredibly, most policy debates, especially those on inequality, treat these monopolies as though they were just given to us by the gods. It is endlessly repeated that technology has allowed people like Bill Gates to get incredibly rich, while leaving less-educated workers behind. But that’s not true. It is our rules on patents and copyrights that have allowed people to get enormously wealthy from technological developments. With a different set of rules, Bill Gates would still be working for a living.

There are a few pieces on the topic here, here, and here (chapter 5).

2) Patent and copyright rents are equivalent to interest payments on government debt: read more

A specific plan to change economics textbooks

from Tim Thornton and WEA Commentaries

1. The importance of economics textbooks

Economics textbooks are central to how the discipline of economics reproduces itself and how it convinces society of the legitimacy of its conclusions. Whilst writing a textbook does not have the glamour or esteem of producing highly cited research, it is perhaps at least as important. As Paul Samuelson, the father of the modern economics textbook remarked,“I don’t care who writes a nation’s laws – or crafts its advanced treatises – as long as I can write its textbooks” (Samuelson cited in Skousen 1997, p. 150). Relatedly, Lamm (1993) points out that the yearly sales of the leading economics textbooks dwarf the lifetime sales of many of the ground breaking books in economics such as Keynes’ General Theory. Furthermore, King (1995) argues that the inability of the first generation of Post Keynesians to produce a satisfactory textbook was a critical factor in allowing neoclassical-synthesis Keynesianism to become dominant.

Clearly, textbooks matter. Indeed, it is quite hard to imagine how there will be major change in economics until there are major changes in economics textbooks. However, we can frame this same point in more positive terms by saying it is quite easy to imagine how changing the textbooks used in economics could precipitate major change in economics. What then are the prospects of change?

2. The difficulties of changing textbooks

Usurping the currently dominant economics texts has proven to be difficult thus far and it appears unlikely that the problem will resolve itself. Why is this?   read more

new issue of WEA Commentaries

WEA Commentaries

Volume 8, Issue No. 5 
Download the issue as a PDF

In this issue

• Raúl Prebish’s Unpublished Manuscripts Esteban Pérez Caldentey
• Resolutions to improve debates on economic policy in 2019 Dean Baker
• A specific plan to change economics textbooks Tim Thornton
• Nine years with euro crisis  – time to think anew Trond Andresen, Steve Keen and Marco Cattaneo
• Support-bargaining and money-bargaining: a restatement Patrick Spread
• Announcements and WEA contact details

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