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Keynes on people who have their heads fuddled with nonsense

March 29, 2015 1 comment

from Lars Syll

The Conservative belief that there is some law of nature which prevents men from being employed, that it is “rash” to employ men, and that it is financially ‘sound’ to maintain a tenth of the population in idleness for an indefinite period, is crazily improbable – the sort of thing which no man could believe who had not had his head fuddled with nonsense for years and years … 0616_ig-john-maynard-keynes_1024x576Our main task, therefore, will be to confirm the reader’s instinct that what seems sensible is sensible, and what seems nonsense is nonsense. We shall try to show him that the conclusion, that if new forms of employment are offered more men will be employed, is as obvious as it sounds and contains no hidden snags; that to set unemployed men to work on useful tasks does what it appears to do, namely, increases the national wealth; and that the notion, that we shall, for intricate reasons, ruin ourselves financially if we use this means to increase our well-being, is what it looks like – a bogy.

John Maynard Keynes (1929

Ancient to Modern Mashriq

March 29, 2015 2 comments

from Ali Kadri

The earliest places to develop into sedentary cultures were to be found in the present-day Mashriq (Ancient Syria and Mesopotamia) pursuant to the early agricultural revolution. The crevice at the end of the Great African rift known as the Fertile Crescent is a natural gathering ground for domesticable animals; it enjoyed regular rainfall and a variety of easily cultivable cereals. Good soil quality circa 2000 B.C. produced about the same tonnage of barley as in early 1970 (Hilou, 2004). The steady development of tools and modes of social organisations required regulation and the pacification of the labouring class. Measures for trade and laws to attenuate repression and limit the appetite of the clergy represent the first set of written rules intended to steady the course of development – the Code of Ur-Nammu, 2100 B.C. The code addresses three vital points: the ruling on weight for trade, a limit to what the clergy could extract in tribute and, a statement ensuring the protection of the vulnerable from the transgression of the powerful. These precepts crown the notion of the ‘Just Man’ of the East (Al-Alawi, 2009).  Read more…

Categories: Uncategorized

A detailed program proposal for creating a parallel currency in Greece

March 28, 2015 6 comments

from Trond Andresen and Robert W. Parenteau

The premise for the proposal to be presented in the following is that the government has a breathing space of a couple of months. At the end of that period a parallel electronic currency shall be put into circulation.

But first, how does a parallel currency (to the euro) work?

Proposals resembling the following have been put forth earlier by Andresen, for instance in [1], and recently by Hillinger [2]. The additional (“parallel”) circulating medium of exchange to be proposed may be designated a Tax Anticipation Note (TAN), a term introduced by Parenteau [3]. The TANs are used by the government to partly pay wages, pensions and for domestic purchases. The TAN enjoys confidence since anyone can use it to pay taxes with one TAN counting as one euro (more on this below). Transactions are done via mobile phone/SMS, and automatically received and accounted for on a server with ample capacity at the country’s Central Bank or perhaps preferably, for political reasons, at a bank-like facility established for this purpose at the Treasury – from now on just called the TB: “Treasury Bank”.  Read more…

Categories: Greece

Economics as Superstructure

March 26, 2015 3 comments

Norbert Häring‘s presentation for the seminar “Economics and Power” on 23 March 2015, House of Lords, London:

Ladies and Gentlemen, To pay tribute to the Marxist jargon, in which Lord Skidelsky has phrased the title of my subject, I would like to start with a quote from Karl Marx: “The ideas of the ruling class are in every epoch the ruling ideas. … The ruling ideas are nothing more than the ideal expression of the dominant material relationships, … the relationships which make the one class the ruling one, therefore, the ideas of its dominance.” In my own words, that says that not all economic ideas are created equal. Some ideas make it into the leading academic journals, others can hardly be published. Some ideas make those who develop them successful in academics or even famous and influential. Other ideas sentence those who develop them to a life at the margin at best.

Ideally, this would all be a function of how convincing the idea is and how good the academic is at developing the idea, writing it down and marketing it. But we all know, that excellence by itself does not get you very far. Another important ingredient for a successful career is how convenient your subject of study and your results are for powerful interests in society.

Read more…

Why Paul Krugman is no real Keynesian

March 26, 2015 4 comments

from Lars Syll

Keynes’s insights have enormous practical importance, according to Lance Taylor and Duncan Foley (who jointly received the Leontief Prize for Advancing the Frontiers of Economic Thought at Tufts University’s Global Development and Environment Institute on Monday.)

But isn’t Keynes now mainstream? No, say Foley and Taylor. The mainstream still sees economies as inherently moving to an optimal equilibrium … It still says demand causes short-run fluctuations, but only supply factors, such as the capital stock and technology, can affect long-run growth.

EVEN PAUL KRUGMAN, a self-described Keynesian, Nobel laureate, and New York Times columnist, writes in the 2012 edition of his textbook: “In the long run the economy is self-correcting: shocks to aggregate demand affect aggregate output in the short run but not in the long run” …

KeynesUpsidedownKrugman does point to one exception: If interest rates are nearly zero, as during the financial crisis, markets lose restorative force. But, Taylor asks, what’s the logic?

Keynes saw capitalism’s general state as allowing almost arbitrary unemployment: hence his “General Theory.” Full employment was a lucky exception.

To Taylor, calling full employment the general state and allowing one unlucky exception turns Keynes upside down. And look where this confusion has brought us, he adds. Take the current eurozone disaster. For two decades, the European Union bureaucracy in Brussels, the German Council of Economic Experts, and a chorus of others, branded Germany, the “sick man of Europe,” as suffering from a sclerotic supply side: rigid labor unions, impediments to layoffs, a burdensome welfare state. But German labor costs to produce output sank steadily, and Germany generated huge trade surpluses — hardly signs of a sclerotic supply side. Yet growth has barely averaged 1 percent a year since 2000.

Jonathan Schlefer

I can’t but agree with Taylor and Foley here. To a large degree one does get the impression that Krugman thinks he is a Keynesian because he is a stout believer in John Hicks IS-LM interpretation of Keynes.  In a post on his blog, self-proclaimed “proud neoclassicist” Paul Krugman has argued that Read more…

Categories: New vs. Old Paradigm

Herman Daly: “Essays Against Growthism”

March 25, 2015 3 comments

Essays Against Growthism

Herman Daly

Published 25 March 2015 by WEA Books, $10.00
This book is available to download in PDF, EPUB (for iPad etc.) and MOBI (for Kindle etc.)

Contents

  1. The Economy as Subsystem of the Ecosphere
  2. An Economics Fit for Purpose in a Finite World
  3. Integrating Ecology and Economics
  4. Dualist Economics
  5. Three Limits to Growth
  6. Depletion of Moral Capital as a Limit to Growth
  7. A Population Perspective on the Steady-State Economy
  8. The Guardian and Monbiot versus Forbes and Worstall
  9. Use and Abuse of the “Natural Capital” Concept
  10. Cold War Left-Overs
  11. Krugman’s Growthism
  12. Full Employment versus Jobless Growth
  13. The Negative Natural Interest Rate and Uneconomic Growth
  14. Top 10 Policies for a Steady-State Economy

Read more…

Categories: WEA Books

On the value of theoretical models in economics

March 24, 2015 9 comments

from Lars Syll

Chameleons arise and are often nurtured by the following dynamic. First a bookshelf model is constructed that involves terms and elements that seem to have some relation to the real world and assumptions that are not so unrealistic that they would be dismissed out of hand. monocle_chameleon_2The intention of the author, let’s call him or her “Q,” in developing the model may be to say something about the real world or the goal may simply be to explore the implications of making a certain set of assumptions. Once Q’s model and results become known, references are made to it, with statements such as “Q shows that X.” This should be taken as short-hand way of saying “Q shows that under a certain set of assumptions it follows (deductively) that X,” but some people start taking X as a plausible statement about the real world. If someone skeptical about X challenges the assumptions made by Q, some will say that a model shouldn’t be judged by the realism of its assumptions, since all models have assumptions that are unrealistic …

Read more…

Categories: methodology

The rise and decline of US median family income

March 23, 2015 Leave a comment

Economic Policy Institute

Alternative theoretical practice

March 22, 2015 7 comments

If theoretical models assume uncertainty, however, and assume that agents have epistemic and ontological beliefs consistent with this state of affairs, the proper way to approach the course of economic phenomena should be very different. Particularly in place of mechanisms or economic regularities that keep running independently of agents’ expectations, the decisive role of lobbyists within open-ended processes based on expectations should be incorporated into the analysis. Such an alternative approach to economics could be based on the following set of assumptions which focuses on the lobbyist role of agents and the special kind of practical knowledge and skills they need. Choosing this approach means abandoning the pretense of scientific status desired by Lucas, which is obtainable at the price of assuming PTF. I suggest that the following assumptions could be the philosophical core of a new conceptual framework for economics:  Read more…

Categories: New vs. Old Paradigm

The functions of the lobbying industries

March 22, 2015 Leave a comment

Before the industrial era, was the agrarian era, when the chief type of property whose inheritances determined the aristocracy consisted of land.  With the onset of industrialization, after around 1600, corporate stock emerged increasingly to become the chief form of property whose inheritance determined the aristocracy. No longer was the aristocracy the possessor of the landed estates, which collectively constituted the given nation; the aristocracy increasingly became instead the possessor of the vast corporations, which collectively controlled the nation’s economy. Instead of a nation consisting primarily of its land, it came to consist increasingly of its corporations.

However, just as there was an agrarian-era conflict between the masters and their serfs; that is, between the aristocrats and the public; there came now to be an industrial-era conflict between the corporate owners and their hired servers; that is, between the aristocrats and their workers.

In both eras, there has been this same conflict for control of the government, or of the “State” – the body-politic. Dictatorships during the agrarian era were kingdoms, in which the owners of the landed estates chose the king or equivalent monarch as the supreme ruler. Dictatorships during the industrial era are instead nations, in which the owners of the corporations choose the Duce, Fuehrer, Shah, or other supreme ruler.

Both during the agrarian era, and during the industrial era, there have been political movements for the public, or the demos, to control the government, via democracy – no dictatorship at all. Read more…

Varoufakis vs. Piketty

March 21, 2015 3 comments

“The rich… divide with the poor the produce of all their improvements. They are led by an invisible hand to make nearly the same distribution of the necessaries of life which would have been made, had the earth been divided into equal proportions among all its inhabitants and thus without intending it, without knowing it, advance the interest of the society, and afford means to the multiplication of the species.” Adam Smith, The Theory of Moral Sentiments, Part IV Chapter 1 

“For he that hath, to him shall be given: and he that hath not, from him shall be taken even that which he hath.” Mark, King James Bible, 1611, 4:25

Adam Smith’s optimism and its vulgar neoliberal reincarnation, the ‘trickle down effect’, are thankfully on the back foot these days, steadily losing ground to a more ‘biblical’ narrative (see Mark 4:25 above[1]). The Crash of 2008, the bailouts that followed, and the ‘secular stagnation’ which is keeping the wage share at historic lows (at a time of conspicuous QE-fuelled, bubble-led, asset-price inflation), have put paid to the touching belief that the ‘invisible hand’, left to its own devices, distributes the fruits of human endeavour more evenly across humanity.

Read more…

Categories: Economic Thought

The unmistakable legacy of the plantation

March 19, 2015 1 comment

from David Ruccio

7

Yesterday during my office hours, on the eve of the 2015 NCAA tournaments, I spent some time with a student discussing the “unmistakable whiff of the plantation” associated with major-college athletic programs. I then sent them to read Taylor Branch’s 2011 article in The Atlantic.

It just happens that, today, George Yancy published his conversation with Noam Chomsky about the unmistakable legacy of slavery and “slavery by another name” in the United States. I reproduce the first part of that conversation below.

Here are a few charts to put the current situation (with respect to racial disparities in poverty, unemployment, wealth, and incarceration) in perspective:  Read more…

Categories: inequality

Green Capitalism: The God that Failed

March 19, 2015 5 comments

Green Capitalism: The God that Failed

Richard Smith

Published 18 Mar 2015 by WEA Books, $10.00 This book is available to download in PDF, EPUB (for iPad etc.) and MOBI (for Kindle etc.)

This book deals with the prime threat to human life on earth: the tendency of global capitalist economic development to develop us to death, to drive us off the cliff to ecological collapse. It begins with a review of the origins of this economic dynamic in the transition to capitalism in England and Europe and with an analysis of the ecological implications of capitalist economics as revealed in the work of its founding theorist Adam Smith. I argue that, once installed, the requirements of reproduction under capitalism – the pressure of competition, the imperative need to innovate and develop the forces of production to beat the competition, the need to constantly grow production and expand the market and so on, induced an expansive logic that has driven economic development, and now overdevelopment, down to our day.

Read more…

Categories: WEA Books

An ordered Grexit is economically desirable for everyone willing to lose political face

March 18, 2015 5 comments

from David Hollanders

Many ponder the desirability of a Grexit. There is a heterogeneous group, including the right-wing German party Alternative for Deutschland and the left-wing of Syriza, who agree that a Grexit is optimal. On the other hand, Greek finance minister Varoufakis and the European Commission – for all their other differences – agree that a Grexit is to be avoided. The optimality-question of a Grexit can be broken down into three questions. Should Greece have entered the EMU? Now that it has, is an ordered exit optimal? If so, can the same be said of an unordered exit? Even if one disagrees about the answer to the third question, the first two questions should be answered affirmative. All parties involved – Greece, banks, the EC, ECB and the E(M)U – should thus agree on it. That is, if they are willing to lose face, for they have always pleaded against what is now optimal. Read more…

Categories: Greece

‘Sound finance’ — a sign of obstinate ignorance

March 18, 2015 Leave a comment

from Lars Syll

To many conservative and neoliberal politicians and economists there seems to be a spectre haunting the United States and Europe today — Keynesian ideas on governments pursuing policies raising effective demand and supporting employment. And some of the favourite arguments used among these Keynesophobics to fight it are the confidence argument and the doctrine of ‘sound finance.’

Is this witless crusade against economic reason new? Not at all. In 1943 a famous Polish economist wrote the following in a classic essay on ‘sound finance': Read more…

Trade and the Fed: Making the rich richer

March 17, 2015 Leave a comment

from Dean Baker

One of the greatest scenes in movie history occurs at the end of Casablanca. Humphrey Bogart is standing over the gestapo major’s body with a smoking gun. When the police drive up, the French colonel announces that the major has been shot and orders his men to “round up the usual suspects.”

Nearly all Democrats, and even many Republicans, now agree that inequality is a serious problem. They are desperately struggling to find ways to address the problem. Meanwhile, they will likely stand by and watch as the Fed raises interest rates. They will mostly like jump on board of the Trans-Pacific Partnership (TPP) and other trade deals that may come before Congress. While these policies go into effect, which are designed to redistribute income upward, we can count on our political leaders rounding up the usual suspects: looking for reasons why most workers are not sharing in the gains from economic growth.

Starting with the Fed, the purpose of raising interest rates is to slow economic growth and to keep workers from getting jobs. The ostensible rationale is that if the unemployment rate gets too low, then wages will start rising more rapidly and then we could have a problem with inflation. In order to ensure that inflation doesn’t become a problem, the Fed raises rates and keeps the unemployment rate from falling further.  Read more…

David K. Levine’s sad gibberish

March 16, 2015 2 comments

from Lars Syll

50cf9626f2deeIn the wake of the latest financial crisis many people have come to wonder why economists never have been able to predict these manias, panics and crashes that haunt our economies.

In responding to these warranted wonderings, some economists – like theoretical economist David K. Levine in the article Why Economists Are Right: Rational Expectations and the Uncertainty Principle in Economics in the Huffington Post – have maintained that

it is a fundamental principle that there can be no reliable way of predicting a crisis.

To me this is a totally inadequate answer. And even trying to make an honour out of the inability of one’s own science to give answers to just questions, is indeed proof of a rather arrogant and insulting attitude.

Fortunately yours truly is not the only one racting to this guy’s arrogance: Read more…

Feudalism, Fascism, Libertarianism and Economics

March 15, 2015 2 comments

Feudalism, Fascism, Libertarianism and Economics

Eric Zuesse

Published 9 Mar 2015 by WEA Books, 288 pages, $10.00
This book is available to download in PDF, EPUB (for iPad etc.) and MOBI (for Kindle etc.)

Eric Zuesse has written a provocative and challenging volume, though in my opinion he sometimes goes too far in his criticisms and claims. This book proposes two new postulates to replace existing ones that are at the foundation of microeconomic theory. It cites the existing body of empirical findings in economics as being the reasons for them, and it presents a strong empirical case for each of its two new postulates as being true and the one that it is replacing as being false. I regard his book as the work of a serious, committed scholar whose views deserve to be taken seriously.
Geoffrey Harcourt

Read more…

Categories: WEA Books

The obsession with equilibrium

March 14, 2015 8 comments

The changes to economic theory beyond the micro level involve a complete recanting of the neoclassical vision. The vital first step here is to abandon the obsession with equilibrium.

The fallacy that dynamic processes must be modelled as if the system is in continuous equilibrium through time is probably the most important reason for the intellectual failure of neoclassical economics. Mathematics, sciences and engineering long ago developed tools to model out of equilibrium processes, and this dynamic approach to thinking about the economy should become second nature to economists.  Read more…

Categories: New vs. Old Paradigm

Wealth and Illfare

March 14, 2015 Leave a comment

Wealth and Illfare: An Expedition through Real Life Economics 

C. T. Kurien

Published 27 Feb 2015 by  WEA Books, 270 pages, $10.00

WEALTH and ILLFARE is intended for readers who do not have much knowledge in economics, but are eager to know how economic systems function.

In particular, it deals with the phenomenon that many find disturbing, the soaring affluence of the few and the continuing misery of the many that is increasingly becoming evident globally and in our country.

Ownership and control over resources, different forms of mediation and asymmetry of information are identified as clues for any interested reader to develop skills to study real life economic problems.

It is a unique and timely contribution by a reputed practitioner who, over the past half a century, has influenced generations of students and through his earlier writings the general public as well.

Read more…

Categories: WEA Books
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