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Statement by Yanis Varoufakis on the FinMin’s Plan B Working Group & the parallel payment system

July 29, 2015 Leave a comment

Statement by the Office of Yanis Varoufakis, former Minister of Finance, Member of Parliament, Hellenic Republic

During the Greek government’s negotiations with the Eurogroup, Minister Varoufakis oversaw a Working Group with a remit to prepare contingency plans against the creditors’ efforts to undermine the Greek government and in view of forces at work within the Eurozone to have Greece expelled from the euro. The Working Group was convened by the Minister, at the behest of the Prime Minister, and was coordinated by Professor James K. Galbraith. (Click here for a statement on the matter by Professor Galbraith).

It is worth noting that, prior to Mr Varoufakis’ comfirmation of the existence of the said Working Group, the Minister was criticized widely for having neglected to make such contingency plans. The Bank of Greece, the ECB, treasuries of EU member-states, banks, international organisations etc. had all drawn up such plans since 2012. Greece’s Ministry of Finance would have been remiss had it made no attempt to draw up contingency plans.

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Categories: Greece

Professor James K. Galbraith’s statement on the Ministry of Finance Working Group convened by former finance minister Yanis Varoufakis

July 29, 2015 1 comment

I spent five months from early February through early July in close association with the Greek Finance Minister, Yanis Varoufakis, and was part of the Working Group that did contingency planning for potential attempts to asphyxiate the Greek government, including aggressive moves to force the country out of the euro. Since a great deal of public confusion has now arisen over this effort, the following should be stated:

(1) At no time was the Working Group engaged in advocating exit or any policy choice. The job was strictly to study the operational issues that would arise if Greece were forced to issue scrip or if it were forced out of the euro.

Read more…

Categories: Greece

Why Real Business Cycle models can’t be taken seriously

July 28, 2015 3 comments

from Lars Syll

tobin_2049712cThey try to explain business cycles solely as problems of information, such as asymmetries and imperfections in the information agents have. Those assumptions are just as arbitrary as the institutional rigidities and inertia they find objectionable in other theories of business fluctuations … I try to point out how incapable the new equilibrium business cycles models are of explaining the most obvious observed facts of cyclical fluctuations … I don’t think that models so far from realistic description should be taken seriously as a guide to policy … I don’t think that there is a way to write down any model which at one hand respects the possible diversity of agents in taste, circumstances, and so on, and at the other hand also grounds behavior rigorously in utility maximization and which has any substantive content to it.

James Tobin

Real Business Cycle theory basically says that economic cycles are caused by technology-induced changes in productivity. It says that employment goes up or down because people choose to work more when productivity is high and less when it’s low. This is of course nothing but pure nonsense — and how on earth those guys that promoted this theory (Thomas Sargent et consortes) could be awarded The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel is really beyond comprehension. Read more…

Categories: methodology

Death of a Great Australian: Hugh Stretton 1924–2015

July 27, 2015 3 comments

from Steve Keen

The great poly­math and human­i­tar­ian Hugh Stret­ton died this week­end. I can do no bet­ter than to repro­duce another great Australian’s trib­ute to him.

The fol­low­ing is from Geoff Har­court.

Hugh died last Sat­ur­day at the age of 91 after a long ill­ness. I had known him since 1958 when I first came to Ade­laide where he was the much-admired Pro­fes­sor of His­tory. In later years we became firm friends, though I con­tin­ued to regard him with awe and admi­ra­tion. He was a giant intel­lect, eas­ily Australia’s most deep and pro­gres­sive thinker, and a remark­ably kind and humane man who lived up to his ideals in many prac­ti­cal ways.

Hav­ing estab­lished an excel­lent His­tory depart­ment, he resigned from his chair so that he could write. The first prod­uct of this new phase was The Polit­i­cal Sci­ences, pub­lished by Rout­ledge in 1969, and named in the Times Lit­er­ary Sup­ple­ment as a work of ‘near genius’. It con­tains a most pro­found analy­sis of the insep­a­ra­bil­ity of analy­sis and ide­ol­ogy in the social sci­ences. He pub­lished pri­vately his ground-breaking book, Ideas for Aus­tralian Cities in 1970, which then became a best­seller. Hous­ing and Gov­ern­ment, his Boyer Lec­tures, were pub­lished in 1974. His Cam­bridge Uni­ver­sity Press book, Cap­i­tal­ism, Social­ism and the Envi­ron­ment, (1976), was so far ahead of its time that it has not received the atten­tion it should have. His vol­umes of essays analyse vital social, polit­i­cal and eco­nomic issues in Aus­tralian soci­ety. His ‘anti-Samuelson’ eco­nom­ics text­book, Eco­nom­ics: A New Intro­duc­tion (1999), presents to stu­dents a viable alter­na­tive to main­stream economics.

Most of all, he was a lov­ing and lov­able per­son, always extra­or­di­nar­ily gen­er­ous and sup­port­ive to his many friends and admir­ers (over­lap­ping sets), and lov­ingly sup­port­ive and proud of his chil­dren. He and Pat had many years of deep love and sup­port for one another. I doubt that we shall see his like again.

Geoff Har­court Pro­fes­sor Emer­i­tus G C Har­court School of Eco­nom­ics, UNSW Busi­ness School

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On rational expectations and playing games of whack-a-mole (wonkish)

July 27, 2015 2 comments

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Categories: methodology

The Keynes-Ramsey-Savage debate on probability

July 22, 2015 5 comments

from Lars Syll

Neoclassical economics nowadays usually assumes that agents that have to make choices under conditions of uncertainty behave according to Bayesian rules, axiomatized by Ramsey (1931) and Savage (1954) – that is, they maximize expected utility with respect to some subjective probability measure that is continually updated according to Bayes theorem. If not, they are supposed to be irrational, and ultimately – via some “Dutch book” or “money pump”argument – susceptible to being ruined by some clever “bookie”.

calvin-math-atheist3-2Bayesianism reduces questions of rationality to questions of internal consistency (coherence) of beliefs, but – even granted this questionable reductionism – do rational agents really have to be Bayesian? As I have been arguing elsewhere (e. g. here, here and here) there is no strong warrant for believing so.

In many of the situations that are relevant to economics one could argue that there is simply not enough of adequate and relevant information to ground beliefs of a probabilistic kind, and that in those situations it is not really possible, in any relevant way, to represent an individual’s beliefs in a single probability measure.  Read more…

Categories: methodology

Capitalism, green or otherwise, is ”Ecological Suicide”

July 22, 2015 2 comments

Green Capitalism: The God that Failed is essential reading for
anyone opposed to planetary suicide.”

from Truthout and David Klein

Green Capitalism: The God that Failed, by Richard Smith,
World Economics Association eBooks

The climate crisis is the greatest threat humanity has ever faced. At the current rate of global greenhouse gas Industrial pollutionemissions, warming of the planet will shoot past two degrees Celsius by mid-century and reach 4°C to 6°C beyond pre-industrial averages by 2100. The magnitude of the impending catastrophe was eloquently described by Hans Schellnhuber, director of the Potsdam Institute for Climate Impact Research, when he said, “the difference between two and four degrees is human civilization …” Adding to that, the biosphere faces massive pollution, resource depletion, species extinctions, ocean acidification, among other looming dangers.

But can we save ourselves? In his new book, Green Capitalism: The God that Failed, Richard Smith argues compellingly that “sustainable production is certainly possible but not under capitalism” and even more forcefully, “capitalism and saving the planet are fundamentally and irreconcilably at odds.” To this central question, Smith brings an impressive command of economics and an engaging conversational style of writing. He explains and illustrates with devastating clarity the key mechanisms of capitalism that force it to grow unendingly, and these explanations are supported with a broad array of examples of corporate and national economic practices from around the world.  read more

Nonsense economics

July 20, 2015 Leave a comment

from Lars Syll

It is, perhaps, not uninteresting to point to some of the economic implications which are included in “perfect foresight”. It will immediately be recognized that this assumption could never lie at the basis of the theory of equilibrium, and they who attribute this to such authors as Walras and Pareto, who are included as representatives of equilibrium theory, are in error. ln the first place, strange to say, it happens that even material assertions can be made about such an economy on the basis of the assumption of perfect foresight.morgensternThey are fundamentally of the negative type. For example, no lotteries or gambling will exist, for who would play if it were well-established where the profit went? Telephone, telegraph, newspapers, bills, posters, etc. would, likewise, be superfluous, obviously; but, also, the very important industries, based on them, with all their affiliated industries, would be absent. Only packages and letters implying documentary evidence would need to be delivered by post, for to whom would letters be written? The tale need not be carried further, for it is obvious how little considered are the “fundamental assumptions” so frequently employed in theoretical economics, where really a matter of nonsense is at issue.

Oskar Morgenstern

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Between Ideals and Institutions – Armando Ochangco

July 20, 2015 Leave a comment

Between Ideals and Institutions

Armando Ochangco

Published 20 July 2015 by WEA Books

This book critiques economics in the context of ideals such as collective decisions and democracy, freedom, justice, and development. Taking off from the idea that social evaluation using the familiar metric of GDP is extremely limited and drawing inspiration and certain basic insights from the writings of Amartya K. Sen, the work also brings in, within a reconstructive methodology, ideas from various thinkers including those coming from major contemporary philosophers such as Rawls and Habermas, as well as classical thinkers such as Aristotle, Adam Smith, J.S. Mill, and Marx. Within the general reconstructive intention, the author raises questions, old and new, pursues and develops both familiar and original insights, and suggests various linkages and inter-connections, as well as integrative perspectives towards developing conceptions of certain basic social ideals that would be relevant to such a broader and more complex kind of evaluation of various social institutions. Institutional and policy realization and feasibility issues are also considered at length—especially in connection with less developed society contexts—as these relate to the major social ideals being suggested.

Read more…

Categories: WEA Books

Dominique Strauss Kahn: “to my German friends”

July 20, 2015 5 comments

from Yanis Varoufakis

Dominique Strauss Kahn: “to my German friends”

“But the demon that makes us repeat our errors of the past is never far away.”

Hollande stood his ground. Merkel faced up to those who didn’t want an agreement at any price. It’s to their credit. There is a good chance a plan will be put in place, reducing if not removing the risks of a Grexit. It’s not enough, but it’s welcome.

The conditions of the agreement, however, are positively alarming for those who still believe in the future of Europe. What happened last weekend was for me profoundly damaging, if not a deadly blow.

There are of course those who do not believe in that future, who will be rejoicing. And they are many, from two different camps.

Read more…

Categories: Eurozone Crisis

Who owns the public debt?

July 18, 2015 6 comments

from Jonathan Nitzan

While soaring public debts have been front and centre in both the popular media and academic discussion, there is surprisingly little analysis of who owns those debts. One exception is the work of Sandy Hager, a postdoctoral fellow at the Harvard Weatherhead Center for International Affairs. Hager’s PhD dissertation dissected the personal and corporate ownership of the U.S. public debt, showing a remarkable degree of concentration.

The chart below, taken from his 2013 article in New Political Economy, shows the share of the U.S. public debt held by the Top 1%. This share follows the general historical contours of the overall distribution of wealth, and is currently hovering around 45% – approximately the same level as at the turn of the twentieth century.  Read more…

Categories: The Economy

Habermas on the EU/Greece debt deal

July 18, 2015 Leave a comment

from Lars Syll

Guardian: What is your verdict on the deal reached on Monday?

ahabHabermas: The Greek debt deal announced on Monday morning is damaging both in its result and the way in which it was reached. First, the outcome of the talks is ill-advised. Even if one were to consider the strangulating terms of the deal the right course of action, one cannot expect these reforms to be enacted by a government which by its own admission does not believe in the terms of the agreement.

Secondly, the outcome does not make sense in economic terms because of the toxic mixture of necessary structural reforms of state and economy with further neoliberal impositions that will completely discourage an exhausted Greek population and kill any impetus to growth. Read more…

Categories: Greece

The marginalisation of morality

July 17, 2015 5 comments

from Asad Zaman and the WEA Pedagogical Blog

Harvard professor Julie Reuben has documented an important historical transition in the life of US universities over the period 1880-1930 in her book entitled, The Making of the Modern University: Intellectual Transformation and the Marginalization of Morality. Rueben describes a variety of intellectual and historical developments that led universities to abandon their longstanding tradition of building character as well as imparting education, and makes the argument that universities’ abandonment of morality caused great social damage to Western society.

Most colleges in the US started out as religious seminaries. The concept of the unity of knowledge led them to embrace scientific and technological teaching within their curricula. Since all knowledge illuminates the Divine, in teaching physics, astronomy etc., teachers were expected to attend to the beautiful truths to be read in the works of God. Many difficulties arose in the execution of this educational programme. One source of difficulty was the conflicts among different denominations of Protestant Christianity.    read more

Categories: Uncategorized

Teaching economic growth: notes on the current financial-led accumulation regime

July 16, 2015 2 comments

from Maria Alejandra Madi and WEA Pedagogy Blog

Deregulated finance has been associated to great transformations in the models of economic growth.  As Bello (2006) warned, in the 1980s, Reaganism and structural adjustment were not successful attempts to overcome the post-war accumulation crisis. One decade later, the Clinton administration embraced globalization as an American strategy. First, this strategy aimed to accelerate the integration of production and markets by transnational corporations. Secondly, it aimed to create a multilateral system of global governance centered on the World Trade Organization, the International Monetary Fund and the World Bank. In this scenario, global liquidity, stimulated by the evolution of the American monetary policy since the early 1990s, favored the expansion of private capital flows and deepened the interconnections between national financial systems (Chesnais, 1998).

Accordingly Stockhammer (2009), the notion of a “finance dominated” accumulation regime highlights that the current global financial set up has decisively shaped a pattern of accumulation where different growth models could be identified. While some countries have presented a consumption-driven growth model fueled by credit, generally followed by current account deficits, other countries have shown an export-driven growth model, mainly characterized by modest consumption growth and large current account surpluses.

In spite of the coexistence of different growth models, the financial-led accumulation regime has presented some distinctive features:  Read more…

Categories: teaching

Greece and Argentina

July 15, 2015 4 comments

from Dean Baker

With the prospect of Grexit increasing, there have been numerous news stories pronouncing this as a disaster for Greece. There have also been many accounts telling us that Greece will not have the same positive prospects as Argentina.

As Paul Krugman reminds us Argentina recovered fairly quickly after it broke the link between its currency and the dollar. As he points out, the real disaster was in the period leading up to the break.

While many people have emphasized ways in which Argentina has advantages in this break relative to Greece, that was not a general perception at the time. The general story back at the end of 2001 and 2002 was that Argentina faced disaster.

For example, on January 1, 2002 we got this NYT piece headlined, “Argentina drifts leaderless as economic collapse looms.”

Here are the first three paragraphs:

Read more…

Categories: Greece

On the Euro Summit’s Statement on Greece: First thoughts

July 14, 2015 8 comments

from Yanis Varoufakis

In the next hours and days, I shall be sitting in Parliament to assess the legislation that is part of the recent Euro Summit agreement on Greece. I am also looking forward to hearing in person from my comrades, Alexis Tsipras and Euclid Tsakalotos, who have been through so much over the past few days. Till then, I shall reserve judgment regarding the legislation before us. Meanwhile, here are some first, impressionistic thoughts stirred up by the Euro Summit’s Statement. Read more…

Categories: Greece, Uncategorized

Dr Schäuble’s Plan for Europe: Do Europeans approve? – Article to appear in Die Zeit on Thursday 16th July 2015

July 14, 2015 2 comments

from Yanis Varoufakis

Pre-publication summary: Five months of intense negotiations between Greece and the Eurogroup never had a chance of success. Condemned to lead to impasse, their purpose was to pave the ground for what Dr Schäuble had decided was ‘optimal’ well before our government was even elected: That Greece should be eased out of the Eurozone in order to discipline member-states resisting his very specific plan for re-structuring the Eurozone.

  • This is no theory.
  • How do I know Grexit is an important part of Dr Schäuble’s plan for Europe?
  • Because he told me so!

I wrote this article not as a Greek politician critical of the German press’ denigration of our sensible proposals, of Berlin’s refusal seriously to consider our moderate debt re-profiling plan, of the European Central Bank’s highly political decision to asphyxiate our government, of the Eurogroup’s decision to give the ECB the green light to shut down our banks.

I wrote this article as a European observing the unfolding of a particular Plan for Europe – Dr Schäuble’s Plan.

And I am asking a simple question of Die Zeit’s informed readers:

  • Is this a Plan that you approve of?
  • Do you consider this Plan good for Europe?
Categories: Greece, Uncategorized

Some important limitations of income inequality data

July 10, 2015 10 comments

from Jonathan Nitzan

Blair Fix, a PhD student in the Faculty of Environmental Studies at York University in Toronto, points to some important limitations of income inequality data. In a recent posting on capitalaspower.com, Fix shows that, in the case of the U.S., the Top 1% income share correlates not with the share of capitalists in national income (profit and interest), but with the share of corporate dividends in national income. This difference means that income-inequality data of the sort reported by Thomas Piketty and others in the World Top Income Database give a very partial and potentially biased picture of ruling class power, power that is much better proxied by all income rather than dividends alone. Blair Fix’s article: http://www.capitalaspower.com/forum/viewtopic.php?t=427&p=1147#p1147

Euro — the antithesis of democracy

July 7, 2015 23 comments

from Lars Syll

That concern for popular legitimacy is incompatible with the politics of the eurozone, which was never a very democratic project. Most of its members’ governments did not seek their people’s approval to turn over their monetary sovereignty to the ECB. When Sweden’s did, Swedes said no. They understood that unemployment would rise if the country’s monetary policy were set by a central bank that focused single-mindedly on inflation (and also that there would be insufficient attention to financial stability). The economy would suffer, because the economic model underlying the eurozone was predicated on power relationships that disadvantaged workers.

NationsOutsideEuro600
And, sure enough, what we are seeing now, 16 years after the eurozone institutionalised those relationships, is the antithesis of democracy: many European leaders want to see the end of prime minister Alexis Tsipras’ leftist government. After all, it is extremely inconvenient to have in Greece a government that is so opposed to the types of policies that have done so much to increase inequality in so many advanced countries, and that is so committed to curbing the unbridled power of wealth. They seem to believe that they can eventually bring down the Greek government by bullying it into accepting an agreement that contravenes its mandate.  Joseph Stiglitz

Read more…

Categories: Eurozone Crisis, Greece

Angela Merkel has a red and a yellow button. One ends the crisis. Which does she push?

July 6, 2015 Leave a comment

from Yanis Varoufakis

Bankruptocracy is as much a European predicament as it is an American “invention”. The difference between the experience of the two continents is that at least Americans did not have to labour under the enormous design faults of the eurozone. Imagine their chagrin if the citizens of hard-hit states (eg Nevada or Ohio) had to worry about a death embrace between the debt of their state and the losses of the banks who happened to operate within the state.

Europe’s architecture was not sound enough to sustain the shock waves from the death throes of neoliberal capitalism

Additionally, Americans were spared the need to contend with a central bank utterly shackled by inner divisions and the German central bank’s penchant for treating the worst-hit parts of the union (the eurozone, that is) as alien lands that had to be fiscally waterboarded until they ceased to obey the laws of macroeconomics.

Read more…

Categories: Greece
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