Showing posts from December, 2016

Economists who passed away in 2016

These (below) are the ones I remember, but there are certainly more. Here, with links to obituaries: Karl Case, Aldo Ferrer, Lloyd Shapley, Thomas Schelling, Charles L. Schultz, Lester Thurrow, Robert Tollison. The only one I met was Ferrer, in a few conferences in Argentina and Brazil. Two "Nobel" (Central Bank of Sweden) Prize winners among the departed. Interesting that Shapley said about his prize that: "I consider myself a mathematician and the award is for economics. I never, never in my life took a course in economics." So I'm not sure he should be on this list (or there should be a prize like that one). Of the non-economists discussed in this blog, the most prominent loss in 2016 was the historian William McNeill. He is one of the authors from other social sciences that I suggest, like say Jared Diamond or David Graeber, that use the surplus approach analytical framework, more akin to old classical political economy than modern marginalist (neoclassica…

Special issue of Nova Economia on Austerity and (Lack of) Growth

History of Central Banks Tutorial - Before Central Banks II

As promised, one more installment on the history of central banks, and why the early Italian (and Spanish and Dutch) public banks were not seen as central banks. We must start with Italian banking. Even though the Medici Bank is probably the most well-known of the Italian banks of the Renaissance period the two key cities to understand the development of modern banking, and the precursors of central banks, are Genoa and Venice. And as noted before, central to the story is the emergence of public debt, one of the few innovations that was not known in antiquity.

The records for the floating of public debt go back to 1149 in Genoa and to 1164 for Venice. Local governments essentially sold the rights to collect taxes for a determinate period in exchange for a fixed amount of money.Public debt was originally compulsory,since the city-states were always hard-pressed for funds, and constantly fighting for their very survival in economic and political terms, in the complicated and unstable p…

On the blogs: End of Year, Before Doom, Edition

How the Obama Coalition Crumbled, Leaving an Opening for Trump -- Nate Cohn, and sorry, but it wasn't Putin or Comey, it was white working class people in the Rust Belt. In one word, Neoliberalism. And yes Cohn uses the term working class. And it wasn't turnout. Cohn says: "Mr. Trump made gains in white working-class areas, whether turnout surged or dropped." Facts should matter.

The Revival of the Working-Class Concept: Trump, the Class Struggle and the (Somewhat Overstated) Specter of Fascism -- Gary Leupp on the only positive thing of this campaign season, the return of class analysis. The US is not classless, and the working class is not happy with Neoliberalism.

A BRIEF TIMELINE OF VERY BAD YEARS, FROM 2016 TO 65,000,000 B.C -- Ryan Bort and 65 million bad years. I'm sure 2017 will suck too!

History of Central Banks Tutorial - Before Central Banks

Central banks can be seen as the culmination of the long process of financial development in Western Europe. Starting with the Italian City States, in particular in Genoa, Venice, and Florence, followed by the Dutch Republic and finally reaching its apex with the Financial Revolution in England, to use Dickson famous expression.Many of the financial innovations pioneered in the early stages were central for the latter development of modern central banks. But, the relatively small scale of the pioneering economies limited the effects their inventions on the global economy.

Most accounts of the emergence of banking suggest that merchants dealing in foreign exchange and metallic currencies started to discount bills of exchange, accept deposits and make loans as a side development of their commercial activities. In this view, it was the advantages of reducing transaction costs that the practice of safekeeping metallic currency as deposits that allowed goldsmiths to lend money beyond thei…

10 papers from ROKE

As Review of Keynesian Economics comes to the end of its 4th year, I thought of reminding you that there are 34 free-access articles we have published so far. Below a list of 10 articles that I think are worth reading with no particular criteria (but a representative sample), in alphabetical order by author.

Wage-led versus profit-led demand regimes: the long and the short of it
Robert A. Blecker

The neoclassical sink and the heterodox spiral: political divides and lines of communication in economics
Gary A. Dymski

Developmental central banking: winning the future by updating a page from the past
Gerald Epstein

Endogenous money and effective demand
Steve Keen

Cambridge and neo-Kaleckian growth and distribution theory: comparison with an application to fiscal policy
Thomas I. Palley

What caused the great inflation moderation in the US? A post-Keynesian view
Nathan Perry and Nathaniel Cline

Keynes, family allowances, and Keynesian economic policy
Steven Pressman

How Keynes came to Britain

Will Trumponomics be expansionary?

Deficit vultures
A few days ago, Trump announced South Carolina Rep. Mick Mulvaney to be the director of the Office of Management and Budget. He is a Tea Party nut (he was for Rand Paul, and might have libertarian tendencies), and more importantly a fiscal hawk, and for a balanced budget amendment. Mulvaney is really for cutting spending, including, somewhat surprisingly, military spending, even if he thinks that defense is the first priority of the federal government.

So this has created a certain uncertainty about what direction fiscal policy will take in the next administration. Tyler Durden at Zero Hedge has said that: "it is difficult to reconcile this appointment, with the market's increasingly conventional view of Trump as an "out of control" spender." I may be wrong, but I think Mulvaney would be as adept to balanced budget, and strict debt-ceiling limits as a budget director, as an old fashioned tax and spend Democrat. But without the taxes, of course.…

On the blogs

Keynes Betrayed -- Roger Farmer's, from his new book, critique of the Neoclassical Synthesis

The Case Against the Universal Liberalisation Model for Economic Growth -- Jenny Tue Anh Nguyen at Developing Economics
Where does all the surplus go? -- David Ruccio on income inequality

The Federal Reserve Must Rethink How it Tightens Monetary Policy

Thomas I. Palley

After more than 7 years of economic recovery, the Federal Reserve is positioning itself to tighten monetary policy by raising interest rates. In light of the wobbly reaction in financial markets, an important question that must be asked is whether raising interest rates is the right tool.

It could well be that the world’s leading central bank is going about the process of tightening in the wrong way. Owing to the dollar’s preeminent standing, that could have severe global repercussions.

Just as the Fed has had to rethink how it combats recessions, so too it must rethink how it transitions from an easy monetary policy stance to a tighter stance.
Read rest here.

Slow posting -- Grading


Interest rates are up, and what is the real problem with that

Not by much. To 0.75%, and yes it wasn't necessary because we're not at full employment yet (Krugman thinks we're; his point is that wages are increasing again, but not that much and participation rates remain low). Two things worth mentioning. One is that Yellen agrees with Krugman, and that signals that the Fed doesn't get what's the current state of the economy. She said:
"I believe my predecessor and I called for fiscal stimulus when the unemployment rate was substantially higher than it is now. With a 4.6% unemployment and a solid labor market, there may be some additional slack in labor markets but I would judge that the degree of slack has diminished. I would say at this point that fiscal policy is not obviously needed to provide stimulus to get back to full employment." Again, fiscal policy was needed to get a healthy recovery according to Clinton's plans, and it is also true under Trump. I know Trump won't expand the welfare net, quite t…

On the blogs

South Africa’s Junk Credit Rating was Avoided, But at the Cost of Junk Analysis -- Patrick Bond on the failures of Neoliberalism in South Africa
Employment Going South. Literally -- By Dietrich Vollrath. A bit old, but worth reading, on how jobs moved from the Upper Midwest and Northeast to the Sunbelt
Dismal Jobs Report -- Paul Craig Roberts with a darker view of the employment situation

The end of jobs

I posted about the driverless trucks a while ago. Now Amazon unveiled the no-checkout store, which would threaten the jobs of 3.5 million cashiers according to the Financial Times (subscription required). I was surprised by the figure below.
It shows that one of the growing demands in the future will be statisticians. Statisticians? Oh well. Among the losers not just clerks, but also lawyers that specialize in shoplifting (and DUI in the case of the driverless vehicles, besides the obvious, truck drivers).

Can Trumponomics work?

Work for whom?
That's what Martin Sandbu (subscription required) asks in the Financial Times. In his view, it might. He cites Ken Rogoff -- of spreadsheet fame -- who also has said that it's a possibility. Sandbu cites Summers doubts on Trumponomics, which are all based on supply side factors, but has very little to say about that.* Like Rogoff, Sandbu thinks that what matters is private investment that matters, meaning demand, and, as it must be in these cases, the confidence fairy makes an appearance. In his words: "What matters, of course, is whether business investment will increase under a Trump economic policy. If it does, it could be because regulations are made business-friendly, because fiscal stimulus boosts aggregate demand and expectations of future demand growth, simply because there is something about Trump that changes the "animal spirits" of investors and business decision makers." Keynes' animal spirits, also valued by New Keynesians, b…

Neoliberalism in the Pampas

Soybean Republic
As promised, here are some brief reflections on the situation in Argentina, which I think is not as bad as in Brazil economically or politically, surprisingly, since Argentina had a balance of payments problem that is completely absent in the increasingly chaotic neighbor, and the left actually lost the election, which was not the case of Dilma (a coup was required to defenestrate her). As I suggested in my talk a year ago (for non Spanish speakers go to this text), the economy would experience a recession and higher inflation as a result of the likely (and effectively adopted) economic package of devaluation and fiscal adjustment.
Figure above shows that inflation accelerated from about 25% to about 40%, later figure from IMF estimates, and GDP moved from moderate growth (2.5%) to slightly less than 2% fall (again IMF estimates). It is worth noticing that many, including some that claim to be somewhat heterodox (in particular when they're not in Argentina), sugge…

On the blogs

Was the 20th century long or short? -- Branko Milanovic on the political (Hobsbawm) versus economic (De Long) dating of the 20th century. I prefer the economic, but not Brad's timing, mine would go from the Great Depression to the oil shock (1929-1973), which roughly corresponds to the Keynesian era
Dealing with the Trade Deficit -- Josh Mason on the lack of need for the US of a favorable trade balance and the role of the dollar, something often discussed in this blog
Trump’s Carrier deal could permanently damage American capitalism -- Larry Summers, and I guess the neoliberal wing of the Dems, agree with Sarah Palin that the Carrier deal is crony capitalism

The Strange Death of Progressive Brazil

Strange indeed
I've been off for a few days for Thanksgiving, as you might have noticed. I visited Argentina, and will have something to say about the situation there in a few days. Here is something I was thinking about what is going on in Brazil, that seems to be in a never ending economic and political crisis. I find the situation particularly concerning for the future of the left in the region.

There is a very nice little book about The Strange Death of Liberal England, (oddly enough, it's also the name of a band) written in the 1930s, when Labour took over as the main opponent of the Tories in parliament, and the Liberal Party of Gladstone, Asquith, Lloyd George and Maynard Keynes became irrelevant and vanished. The book, if memory doesn't fail me (I read it many years ago, when I found a used copy in bookstore in New York; I remember Godley telling me he read it around the time it was published), shows how the divisions on the Irish question and the Gold Standard, to…