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 , and recently by Hillinger . The additional (“parallel”) circulating medium of exchange to be proposed may be designated a Tax Anticipation Note (TAN), a term introduced by Parenteau . 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…
from David Ruccio
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.
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” …
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.
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…
1) Do we know how rich we are? One of the problems with the (invaluable) work of Piketty is how to value assets. GDP accounts basically use transaction prices – but many assets are not traded and we have to use other values or prices like book value, assessed market prices, rebuilding value or something like that. Think of the valuation of natural reserves of oil or dikes (the discounted value of assessed future streams of income is not used by statisticians, as this measure is too fickle – if measurable at all, as in the case of dikes). This means that assessed asset values can be quite volatile – as shown by the estimated value of Dutch net international assets (graph) – using another assessment method of the stock value leads to a 100 billion difference – even though estimated current account surpluses (a flow) stayed basically stable. Not that despite decades of current account surpluses in 2008 the Netherlands had a negative international investment position (the ‘Dutch black hole’, caused by bad investments…). The large change in the net position is also caused by the fact that it is… a net position. A relatively small change in total assets or liabilities can show up as a relatively large change in the net position. Even then, 100 billion is a lot…
from Peter Radford
Willford King has written:
“It is easy to find a man in almost any line of employment who is twice as efficient as another employee, but it is very rare to find one who is ten times as efficient. It is common, however, to see one man possessing not ten times but a thousand times the wealth of his neighbor … Is the middle class doomed to extinction and shall we soon find the handful of plutocrats, the modern barons of wealth, lined up squarely in opposition to the propertyless masses with no buffer between to lessen the chances of open battle? With the middle class gone and the laborer condemned to remain a lifelong wage-earner with no hope of attaining wealth of even a competence in his old age, all the conditions are ripe for a crowning class-conflict equaling in intensity and bitterness anything pictured by the most radical follower of Karl Marx. Is this condition soon coming to pass?” [Emphasis in original]
That was in 1915. My how times change.
Well maybe not. That comment about the middle class has a very contemporary ring to it.
A couple of things pop out at me when I read that quote – no doubt you will find your own emphasis. Read more…
Essays Against Growthism
- The Economy as Subsystem of the Ecosphere
- An Economics Fit for Purpose in a Finite World
- Integrating Ecology and Economics
- Dualist Economics
- Three Limits to Growth
- Depletion of Moral Capital as a Limit to Growth
- A Population Perspective on the Steady-State Economy
- The Guardian and Monbiot versus Forbes and Worstall
- Use and Abuse of the “Natural Capital” Concept
- Cold War Left-Overs
- Krugman’s Growthism
- Full Employment versus Jobless Growth
- The Negative Natural Interest Rate and Uneconomic Growth
- Top 10 Policies for a Steady-State Economy
Troika economists have a problem. It’s huge: cutting wages clearly did not work as intended, which goes against their deepest convictions. In such a situation people tend to rationalize. To quote Goethe: “intelligent people are sharpest when they are… wrong“. Some recent publications enable us to investigate the rationalization process of among others ECB economists. One of these is a Voxeu piece by Eric Bartelsman (head of the department of economics of the Vrije Universiteit van Amsterdam), Filippo di Mauro (senior advisor in the research department, ECB) and Ettorre Durucci (head of the convergence and competitiveness division, ECB) which clearly shows that cutting wages did not work as intended (see their figure 1). How did they cope with this?
Figure 1. Relative prices and activity in selected Eurozone countries (change between the year of the ULCT-deflated REER peak and 2014 projected)
Figure 1 shows that
* As a consequence of austerity the ‘Real Effective Exchange Rate (REER)’ of countries like Spain, Ireland, Greece, Latvia and the like declined a lot (i.e.: exports became much cheaper). This was totally intended.
* But this did not lead to the expected increase in net (!) exports Read more…
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. The 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 …
1) Simon Wren-Lewis looks at the facts and finds that The UK prime minister lies about Greece. The truth:
“The real travesty however is in the implication that somehow Greece failed to take the ‘difficult decisions’ that the UK took. ‘Difficult decisions’ is code for austerity. A good measure of austerity is the underlying primary balance. According to the OECD, the UK underlying primary balance was -7% in 2009, and it fell to -3.5% in 2014: a fiscal contraction worth 3.5% of GDP. In Greece it was -12.1% in 2009, and was turned into a surplus of 7.6% by 2014: a fiscal contraction worth 19.7% of GDP! So Greece had far more austerity, which is of course why Greek GDP has fallen by 25% over the same period“.
2) Norbert Häring looks at the facts and finds that the ARD (German television) lies about Greece (In German, a whole list of inaccuracies, outright mistakes, wrong data and dishonest reporting)
3) Bill Mitchell goes the additional theoretical and empirical miles to take down a crucial austerity document from Brussels. The truth: lowering wages did not work anymore once everybody started to do this (and not just Germany).
Soon, I’ll write a little about ‘inside the neoliberal mind’. To be able to do this I have to establish my credentials: no, I’m not just an armchair economists but also do know a little about lots of real life companies (largely thanks to the internships of my students) and I will blog about these so now and then. Lots of these companies are truly amazing and worth telling about. Not all companies are amazing – but I tell my students that even crappy ones are survivors which in a competitive economy is quite an accomplishment.
A) Meet Avonturia. Even a pet shop can be an experience. A constructionworker became disabled which made him turn his hobby -birds- into a living. His sons wanted to join this trade – which meant that they had to expand. The options: three large ‘normal’ pet shops at an A location – or ‘Large and Loony’, i.e. Avonturia Their secret: push it to the limit: inside the shop they have a ‘brasserie‘. Which has the best tea bar I’ve seen in my life. In a pet shop… Also: Schulp fruit juices, again the best. Like the whole shop, including this. Read more…
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…
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…
The most famous Keynes quote is no doubt:
“But this long run is a misleading guide to current affairs. In the long run we are all dead. Economists set themselves too easy, too useless a task if in tempestuous seasons they can only tell us that when the storm is past the ocean is flat again.”.
But ECB economists clearly do not grasp the wisdom of these words. I was reading the recent ECB document: “Progress with structural reforms across the Euro Area and their possible impacts“. I’ll write more about this. For now: after seven years of continuous decline and/or deflation of the Greek economy and an about 25% contraction the ECB economists dare to state (based upon a 2013 IMF report):
“A number of structural reforms were implemented in Greece. The IMF estimates that policies which close roughly half the gap in product and labour markets with the rest of the euro area – which seems to be what Greece achieved … according to changes in the OECD’s product market regulation (PMR) and employment protection legislation (EPL) indicators – could raise real GDP by about 4% after five years and by 10% in the long run.”
About these reforms: the article shows that of all Eurozone countries Finland scores about the highest when we look at ‘product market regulation’ and ’employment protection legislation’ (‘high’ meaning: approved by neoclassical economists). That’s the template for Greece! But it seems that for Finland, too, the tempestuous season still hasn’t ended…. (graph).
I do think – but in this case my opinion is humble, as I did not talk with Greek business owners – that Greece should make doing business and more reforms and changes are welcome, like finally completing the cadastral survey. But this alone won’t solve the problems. Not anytime soon. And not in the long run, either.
“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). 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.
A long post from Erwan Mahé – but immensely readable. It shows how ideas from academic scribblers (especially about the nature of money and (un)employment) directly guided central bank discussions and policies in a crucial period (some articles are even explicitly mentioned by Yellen!). Don’t forget, however, the anonimous data produced by economic statisticians, which with their strengths, weaknesses and unavoidable biases guide policy too. In the end it’s about wich theory is, at a central bank, used to understand this data. MK. Read more…
from David Ruccio
The discussion of capital and labor shares puts the issue of class at the top of the agenda. No wonder, then, that mainstream economists are expending so much effort these days attempting to define away the problem.
Let me explain. Read more…
from Dean Baker
Last fall, India’s new Prime Minister, Narendra Modi, met with President Obama in Washington. According to the public accounts, the meeting was friendly with both sides hoping for stronger diplomatic and economic ties. The Obama administration was eager to report that India had agreed to set up a working group to re-examine its patent laws, with the implicit goal of making them stronger.
This item got little attention in the United States, but it was big news in India. India has the world’s leading generic drug industry. It not only supplies the billion-plus population of India; it also provides high-quality, low-cost generic drugs to much of the developing world.
A large part of the reason for the success of India’s generic industry is its treatment of patents. It had eliminated patents on drugs back in the 1970s in order to promote the development of the generic industry. As required by the TRIPS accord, India reintroduced patent protection in 2005, however it typically applies much stricter standards than in the United States and Europe. Read more…
The Greek ‘accomodation and food service’ sector last tuesday intentionally insulted the Troika by showing the highest rate of job growth of this sector of the entire Eurozone. Flabbergasted economists in Brussels and Frankfurt were heared shouting “:we’ve never experienced anything like this” and “this ruins our reputation as serious economists”! According to anonimous sources they even stated: “this has to stop, these cheaters do not play according to our rules and are giving us the finger!” as well as “don’t you understand it, a demand led recovery in Greece flies in the face of our models, that just can’t be”.