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Showing posts from September, 2015

Capitalism: six part documentary by Ilan Ziv

Ilan Ziv's documentary. I appear in chapter 3 on Ricardo. But other than that, there is an impressive list of names, including Robert Boyer, Ha-Joon Chang, Noam Chomsky, David Harvey, James Galbraith, David Graeber, David Harvey, Kari Polanyi Levitt, Eric Mielants, Thomas Piketty, Robert Skidelsky and Yanis Varoufakis among others. It should be good for courses on history of ideas, history and about the crisis.

Clarida on Fed policy: or how does the Fed affect inflation

Richard Clarida gave an interview (right at the beginning of the podcast) on why the Fed should increase the rate of interest. He also said that the Fed can affect inflation, which, he correctly points out, is denied by several economists. However, the degree of confusion on this subject is significant, and modern monetary theory, and its implications for central banking behavior, is, in part, responsible for that.

The conventional wisdom on what central banks can do (and one can think of Clarida's contribution with Galí and Gentler as a good summary of the dominant position) suggests that central banks can only target inflation efficiently in the absence of cost-push inflation or if they do not care about deviations from the natural rate of unemployment (or output, depending on whether the unemployment gap or the output gap is used for the central bank's policy rule). And some authors believe that inflation is in the long run really always caused by excess demand, and that th…

What Tom Palley Got Right: 10 year edition

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By Tom Palley

Ten years ago (September 2005) I launched my website. To mark this anniversary, here are ten postings that I think got it right. Many of them are included in my book, The Economic Crisis: Notes From The Underground (2012).

1. Keynesianism: what it is and why it still matters (September 18, 2005). My first post. What was intellectually unfashionable back then is now in.

2. The Questionable Legacy of Alan Greenspan (October 16, 2005). Raining on the Maestro’s parade was not popular.

3. Winner’s curse: The Torment of Chairman-designate Bernanke (November 4, 2005). I suspect Mrs. Bernanke wishes Mr. Bernanke read this before accepting the job.

Read rest here.

On the blogs

Imperialism and World War I -- Branko Milanovic, which suggests the usefulness of Marxist theories of Imperialism. There is a nice book on the topic by Anthony Brewer

The workplace Panopticon, or beware of companies whose names end in yze -- A bit older post by David Ruccio on supervision and control of the labor force. Have been teaching David Gordon's Fat and Mean in the Political Economy class, and this is on topic

Economics: What went right -- Paul Krugman again on why conventional macro (New Keynesian style) has done well explaining the crisis (I did comment on this before here, and here)

Grenoble Winter School-- December 7-9

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Material well being and morality

Wall Street Journal's logic. They say:
"In the Americas 'thousands of persons are led to travel north in search of a better life for themselves and for their loved ones, in search of greater opportunities,' the pope said. 'Is this not what we want for our own children? We must not be taken aback by their numbers, but rather view them as persons, seeing their faces and listening to their stories, trying to respond as best we can to their situation. To respond in a way which is always humane, just and fraternal.'

The pope’s call to a common humanity is much-needed, but to our ears the most striking word in that passage is 'north.' Here is the Latin American pope acknowledging that the migrants are moving north to the United States, not the other way around. This is the same United States that practices the capitalist economics the pope has excoriated on so many other occasions. There must be something moral to free-market economics if it creates so much …

What's in an index? Heterodox and Developing Country Journals in Economics

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Nope not about index numbers. About Rankings. Below a list of several heterodox and mainstream journals as ranked by the Thomson-Reuters citation index (the Web of Science-Social Science
Citation Index, SSCI) in the last citation report. As it can be seen heterodox journals have a considerably lower impact factor than mainstream journals. The leading heterodox journal in my list* (the Cambridge Journal of Economics) is comparable to a lower ranked mainstream journal (certainly not the bottom of the line, since it's above Economica, but low). Worse several important heterodox journals are not even ranked.

The index is calculated on the basis of the following formula (adapted from here):

A= total cites in 2014
B= 2014 cites to articles published in 2012-13 (this is a subset of A)
C= number of articles published in 2012-13
D= B/C = 2014 impact factor

The universe of of published articles (C) is what really matters for heterodox journals, it would seem. Heterodox journals would have …

How is austerity working for you?

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So and old post was getting lots of hits. Turns out some guy linked to it a while ago. Not sure why this happened only now, after 2 years. If Google Translate is accurate (my experience is that it's not always the case) this is what he says:
"Social geographer Ewald Engelen is a Keynesian. Throw money at the economy and everything will be fine, is his theory. He fulminates and tweets all day that the government must spend. This morning Ewald put a link to the Naked Keynesianism, a site that is pro-spending money. Critics on this blog believe that the Netherlands is sick, sicker than in the mid-seventies, when our production lagged behind because we had found gas and with our backs to the sun lay staring. Look at that chart. Go to it!" I love that Keynesian is like a dirty word (that's actually the reason the blog has its name). I should change the subtitle of the blog to "a pro-spending money blog." The it is this post.

Take away the obvious confu…

Robert Shiller on media misinformation and monetary policy

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Yesterday I listened to this interview on the radio (Bloomberg's Surveillance) with Robert Shiller (you can jump to the last 9 minutes, that's when Shiller starts talking). He is for fiscal stimulus to get us out of the funk, but for higher rates to deal with outline asset prices. No discussion of using regulation to preclude speculation and bubbles in asset markets.

PS: The piece cited at the beginning of the interview is this one.

The end of the Gold Standard

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NYTimes September 21, 1931
84 years ago Britain left the Gold Standard. Some thought it was the end of Western civilization. Keynes thought it was the beginning of the end of the Depression, at least in Great Britain. He was certainly happy. He said: "There are few Englishmen who do not rejoice at the breaking of our gold fetters. We feel that we have at last a free hand to do what is sensible. The romantic phase is over, and we can begin to discuss realistically what policy is for the best." On the functioning of the Gold Standard and why the conventional view, which according to Eichengreen can still be roughly understood with Hume's specie-flow mechanism, is incorrect go here.

On the blogs

Rate Rage -- Paul Krugman is right, the cry for higher rates comes from a "narrow business interest group": banks.

Fed Fails to Raise Rates in Timely Manner, End of the World Is Imminent -- Dean Baker on the same issue. And no it won't end, don't worry.

Guess Who? -- By Sandwichman. A bit old, but a few quotes that show how much the GOP has changed.

On the Fed's decision at the Rick Smith Show

Fed keeps interest rate close to zero

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The Fed has left the interest rate unchanged... for now. One dissident vote for raising the rate now. The main reason according to the press release is that: "Recent global economic and financial developments may restrain economic activity somewhat and are likely to put further downward pressure on inflation in the near term." Pressures for a hike in October or December will increase significantly, even if the official position is vague enough. They say: "The Committee anticipates that it will be appropriate to raise the target range for the federal funds rate when it has seen some further improvement in the labor market and is reasonably confident that inflation will move back to its 2 percent objective over the medium term."

Even The Economist is against raising the interest rate

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In the last issue, The Economist suggests that the Fed should not be concerned too much with inflation, and that they should not raise the interest rate for now. They say: "Weak wage growth suggests that there is still lots of slack in the labour market. Underemployment, which includes workers who are part-time but want a full-time job, and discouraged workers who might be tempted back into the labour force, stands at just over 10%, higher than before the crisis. This measure probably has further to fall before wage growth picks up. The Fed may also be underestimating how far unemployment can fall without stoking inflation." Instead of raising it now, Yellen should wait until the December meeting. In their words: "A rate rise would cause a big market reaction, because it is not fully expected. Markets place roughly a one-third probability on it happening. Were Ms Yellen to hold off, she would have time to lay the groundwork for a more predictable rise in December."…

Interest rates, terms of trade and currency crises

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Tomorrow, for those around Lewisburg, I'll present my paper on “Interest rates, terms of trade and currency crises” at the economics department's brown bag seminar series in ACWS room 116 from 11:45 to 12:50.

Minimum wage at historic low

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Or close to. The figure below is not just the real minimum wage, which I posted before (most recently here). It is as it says the ratio of the minimum wage to the average wage.
The figure neatly shows that while in the 50s and 60s the minimum wage was about 50% of the average wage, since the 1980s it has been closer to a third. Read rest here.

Debtors' prisons are back

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Although it's framed as a public defender issue, it is really about debtors' prisons and the criminalization of poverty.

On the blogs

We are back!

Nathan Rosemberg: 1927-2015 -- An obituary, as promised. This one by Joel Mokyr.

Jeremy Corbyn's opposition to austerity is actually mainstream economics -- This is old news. But Corbyn did win, and several friends signed the letter.

Commemorating Chile's Unidad Popular -- Alejandro Reuss on the other 9/11.

Not sustainable: India’s trade and current account deficits

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New paper by Suranjana Nabar-Bhaduri published by PERI. From the abstract:
India’s trade balance and current account have shown persistent deficits for a major part of its post-independence period. Since the mid-2000s, trade deficits have increased perilously, with a sharp rise in both oil and non-oil imports. This has increased the magnitude of the current account deficit, as net earnings from services and remittances have been insufficient to offset the trade deficits. India has relied on remittances, services exports and capital inflows to finance these deficits. This paper argues that all three sources entail elements of fragility. The recent global economic slowdown, economic recession in Europe, slow economic recovery and low growth forecasts for the US and Europe, and the potential Dutch disease effects of remittances raise questions on whether services exports and remittances can continue to generate sufficient earnings to sustain these deficits, especially if they continue t…

From BBB-razil to BB+razil or the meaning of investment grade

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So Brazil (or here about Petrobras, the State oil company) lost its investment grade status with Standard & Poor's. You would think this is huge given the media attention in Brazil. If you read S&P's actual rationale for the downgrading (here) it is essentially about the fiscal situation. They say: "We now expect the general government deficit to rise to an average of 8% of GDP in 2015 and 2016 before declining to 5.9% in 2017, versus 6.1% in 2014. We do not expect a primary fiscal surplus in 2015 or 2016." They do discuss the political problems too, the corruption investigations,* and the political instability that has plagued the government. There is a discussion of the external vulnerability, but here they are quite sensible and know there is no problem. The report says that: "despite the wider current account deficit, Brazil has low external financing needs compared with its current account receipts and its high level of international reserves compa…

Roundtable on the European Crisis

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If you're around Lewisburg next Tuesday.

Jayati Ghosh on the Poverty-turn in Development Economics

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As much as there has been an institutional turn in mainstream economics, since the 1980s, which is not completely dissociated from the anti-Keynesian turn that started in the 1970s and led to the segregation of heterodox groups within the profession, there has been a poverty-turn in the development economic literature, as noted by Jayati Ghosh.

Particularly important in this shift is that:
"Macroeconomic processes are entirely ignored: patterns of trade and economic activity that determine levels of employment and its distribution and the viability of particular activities, or fiscal policies that determine the extent to which essential public services like sanitation, health and education will be provided, or investment policies that determine the kind of physical infrastructure available and therefore the backwardness of a particular region, or financial policies that create boom and bust volatility in various markets. No link is even hinted at between the enrichment of some a…

More on the Greek Crisis at the Rick Smith Show

Teaching Marx in Lewisburg

I've been teaching an Intermediate Political Economy course, substituting Berhanu Nega, who regularly teaches this course. The text used, and it was already in the bookstore, is Bowles, Edwards and Roosevelt's Understanding Capitalism, which puts an emphasis on individual behavior as the main difference with the marginalist view, and is not the best choice, in my view. At any rate here are a few old posts on Marx, which is central to the first part of the course (towards the end Veblen becomes more important; I guess at Bucknell this is the way we introduce Marxism and Institutionalism; glad I'm teaching it and having a better perspective on our curriculum).

What makes capitalism capitalism? (on the definitions of capitalism as a mode of production)

Sraffa and Marxism or the Labor Theory of Value, what is it good for? (on the labor theory of value)

Was Marx right? Nice of you to ask, but... (on common misconceptions about Marx)

And why not this one, on why Marx and Keynes ar…

Will the Fed hike the interest rate?

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It seems increasingly probable. Stanley Fischer suggested that is possible in his speech last weekend at Jackson Hole. My bet is that unless labor markets numbers are terrible Friday, there is a good chance there will be a minor rate increase in the next meeting. That is a bit of a surprise. It's also not a very good idea, as I noted before, and Mark Weisbrot suggests here.