Trumponomics looks more and more like Voodoo Economics

Posting has been slow. Last weeks of classes and too many things to do. At any rate, this is the tax plan (below Trump's, above Laffer's infamous napkin plan; no big difference though).

Nothing much to say. It's vague, as his campaign promises. The only certain thing is lower taxes for the wealthy. As I noted before, there is no big stimulus in his budget (the big infrastructure spending he promised), and most of the stimulus comes from tax cuts for corporations and the wealthy (which shouldn't do much for the economy, other than increase inequality).

Trumponomics: Neocon-Neoliberalism Camouflaged with Anti-Globalization Circus

By Thomas Palley

A key element of Trump’s political success has been his masquerade of being pro-worker, which includes posturing as anti-globalization. However, his true economic interest is the exact opposite. That creates conflict between Trump’s political and economic interests. Understanding the calculus of that conflict is critical for understanding and predicting Trump’s economic policy, especially his international economic policy

As part of maintaining his pro-worker masquerade, Trump will engage in an anti-globalization circus, but the bark will be worse than the bite because neoliberal globalization has increased corporate profits, in line with his economic interests.

Read rest here.

Ricardo's Principles turns 200!

On Saturday, April 19th 1817 , David Ricardo published The Principles of Political Economy and Taxation (price was 14s, and 700 copies were printed; later editions had 1000 copies each; my copy above is of the 3rd and definite edition published in 1821, and had at least two previous owners, a college and someone in Philly that signed it in 1901). Most comments on the book tend to emphasize things like rent theory and comparative advantage, but those are not central to the main point of the book (the Wikipedia entry is specially bad). The central question in the book, which follows Ricardo's Corn Essay of 1815 (An Essay On the Influence of a Low Price of Corn on the Profits of the Stock), is that there is an inverse relation between wages and profits, and, distribution is conflictive. That is the essence of the Ricardian theory, and the reason why Marx was a Ricardian, not a minor one as suggested by Samuelson though.

The inverse relation between wages and profits is what led Ricardo to criticize Adam Smith's problematic adding up theory of prices, and abandon the notion of labor commanded for the concept of labor incorporated (to keep the labor theory of value), which then led to the search for absolute value. The solution of the problem was elusive and was only provided by Piero Sraffa, the editor of his Works. For more read this entry on the Labor Theory of Value and this one on Sraffa's Standard Commodity.

Central Bank Independency

Nothing much to say about this really. I don't think I discussed it much here, but I'm certainly skeptical. I don't see why fiscal policy, which is discussed in congress and is an eminently political affair (budgets are negotiated between the executive and the parties in the legislative in most countries), should be different than monetary policy in this respect. But at any rate, the Lacker affair reveals how much the Fed is not independent from the financial sector, and that should be more troublesome than the lack of independence from the executive.

It's a bit of old news, but I've been thinking about it, both because of the new configuration of the Fed will have an impact on monetary policy, and also, since I'm teaching this course on central banking history. Btw, Jeffrey Lacker, passed confidential information to Medley Global Advisors, a research firm, and was essentially forced to resign. His successor, as per Fed rules, will be chosen by the board of directors, which are appointed by member banks. That is, the financial sector appoints the officials that are in charge of monetary policy, and of regulating them. Perhaps cronyism is in belt in the institutional structure of capitalism.

PS: Yes, Lacker was a hawk and for faster hikes in the Fed Fund rate.

Economic Regularities and "Laws" and the Riksbank Prize too

I've been reading The Nobel Factor: The Prize in Economics, Social Democracy, and the Market Turn by Avner Offer, Gabriel Söderberg, an interesting critique of the use of the Nobel Prize to undermine the Welfare State, essentially by conservative groups in Sweden, that were influential within the Central Bank (Riksbank), that disliked the Social Democratic policies in place in the 1960s. I have been critical of the Riksbank prize before (see, for example, here or here; check also Lars Syll's blog who often discusses the limits to the Nobel in economics), and this book is an interesting discussion of the socio-political forces behind the creation of the prize. I highly recommend it.

Having said that, I should note that the alternative to mainstream marginalist (neoclassical) economics is not Social Democracy. I guess one can actually be Social Democratic (Liberal in the US  New Deal sense of the word) and neoclassical. A good chunk of the Old Keynesians of the Neoclassical Synthesis sort were, and there are a few New Keynesians that are like that (many are simply Neoliberal). The alternative to marginalism, in my view, is a combination of the old surplus approach (classical political economy), particularly regarding value and distribution, and the Keynesian (and Kaleckian) analysis, regarding macro.

Also, I'm somewhat troubled by Offer and Söderberg tendency to read the Kuhnian ideas on the growth of knowledge in a nihilistic way, suggesting that economics cannot be seen as 'scientific' (surely a loaded term with more than one definition), and that there are no regularities in economics. They, for example, say that:

Feynman began by ‘looking for a new law’. But after three centuries, economics has yet to come up with a single non-obvious ‘law’, or universal regularity.

Don't get me wrong, regularities in economics are historically constrained, but there are more than a few. As any regular reader of this blog would know, I'm particularly fond of Okun's Law (and also of its inseparable fraternal twin Verdoorn's Law). I do think there is an important regularity behind the so-called Thirlwall's Law (that developing countries without a reserve currency face a balance of payments constraint more often than not), even if I don't think it is a "law" like the other two. In particular, I think that if one thinks of the persistent forces that operate within a particular mode of production, there are many other regularities that should (and to some extent are) part of economic analysis.

There are many mechanisms that capture the workings of those regularities in the economic system, like the multiplier and the accelerator. Theoretical constructs that are measurable, even if that is difficult and open to criticism. I guess I'm okay with the use of the term economic law, in a certain context. I suppose Marx also thought that capitalism, and other modes of production, were to some extent amenable of analysis on the basis of certain regularities, certain laws of motion, if one prefers (and, yes, that opens a discussion about determinism, but I'll leave that for another post).

Kindleberger (who I was lucky to see giving a talk in honor of Heilbroner years ago) wrote a little book on economic laws. The Iron Law of Wages, that Kindleberger discusses in his book, is very problematic (some discussion of that here), like the law of supply and demand, or the law of diminishing returns (they are not laws in my view, if that needs to be clarified). The other two Kindleberger discusses are much better, namely: Engel's Law and Gresham's Law. At any rate, for what is worth, I do think that there are many regularities that make economics scientific. Yes, sure social sciences are not like the hard sciences, but we do not live in post-modern world in which no regularities exist. But that does not undermine the authors' critique of the Riksbank prize, I might add.

On the blogs - Hassett edition

A brief guide to Kevin Hassett, Trump's new chief economist -- Dylan Matthews at Vox

Let's Talk About CEA-Chair Nominee-Designate Kevin Hassett! -- Brad DeLong on his track record

The Hassett Test -- Paul Krugman, a bit older, but worth reading 

The danger of a recession

So the BLS has the new job numbers for March. Recovery continues at slow pace, as expected. 98k jobs created, considerably below the 200k average of the last couple of years, and unemployment rate  reduced to 4.5% with the participation rate up a little bit, but still below its previous peak, at 63% of the labor force.

The danger is that many more will suggested that we are now below the natural rate of unemployment (yes, that is a very problematic concept, something discussed here many times, too many to link). The figure above uses the data on the natural rate from the Congressional Budget Office (CBO).

The danger is that because of this view that the labor market is too tight, we end up hiking the rate of interest too much, and at the same time if Trump does not come up with his promised fiscal stimulus and spending on infrastructure we might have just monetary contraction with no significant fiscal stimulus (I'm sure he will reduce taxes for the wealthy, but I wouldn't hold my breadth for the expansionary effects of trickle-down economics). And that might be how we end up having a Trump recession. To be seen.

The Godley-Tobin Lectures

The Review of Keynesian Economics (ROKE) is honored to announce the creation of the Godley-Tobin Lectures, an annual lecture to be delivered at the Eastern Economic Association meetings.

Wynne Godley and James Tobin represent the best among Keynesian economists. Both scholars insisted they were non-hyphenated Keynesians, meaning Keynesianism transcends the political disputes that often accompany economics. There is a deeper scientific validity to Keynesianism, something we reaffirmed in our inaugural statement of purpose for ROKE [see Palley, Rochon, and Vernengo, 2012].

Wynne Godley was an Oxford-trained economist, influenced by Philip Andrews and the views of the Oxford Economic Research Group on full-cost pricing. He was also a Treasury economist and Head of the Department of Applied Economics, University of Cambridge. He is remembered for the sophistication of his stock-flow consistent macroeconomic models that gave him a prescient sense of the unsustainability of the dot.com and housing bubbles in the 1990s and 2000s. Godley died in May, 2010.

James Tobin was educated at Harvard University and spent most of his career at Yale University. He was also a member of the celebrated Council of Economic Advisers (1961-62), during the Kennedy administration. His accomplishments and contributions to the profession are too many to cite, but it is specifically worth mentioning that he won both the John Bates Clark Medal (1955) and the Nobel Memorial Prize in Economic Sciences (1981). Tobin died in March, 2002.

Tobin and Godley shared an interest in stock–flow consistent macroeconomic modelling, a belief in the appropriateness of macroeconomic modelling based on aggregate functions rather than microeconomic parable models, and a belief in the importance and feasibility of full employment.

The Godley-Tobin lectures are intended to celebrate the intellectual achievements of Wynne Godley and James Tobin. We also hope the lectures will contribute to advancing their macroeconomic approach and interests, and help rescue macroeconomics from the narrow theoretical frame within which it is currently trapped.

As the Editors of ROKE, we are also pleased to announce that James K. Galbraith has accepted to give the inaugural Godley-Tobin Lecture, at the 2018 meetings of the Eastern Economic Association in Boston. Professor Galbraith will also join the Editorial Board of the journal.

James K. Galbraith was a colleague of Wynne Godley at the Levy Economics Institute and a student of James Tobin at Yale University.

Thomas Palley, Louis-Philippe Rochon and Matías Vernengo
Co-editors of ROKE

Fixing the Euro’s Original Sins: The Monetary-Fiscal Architecture and Monetary Policy Conduct

By Thomas Palley

The euro zone (EZ) was created in January 1999. Its weak economic performance is significantly due to the euro’s neoliberal monetary architecture and the design of monetary policy. Those features undermine national political sovereignty and consign the EZ to severe economic under-performance, which in turn fosters political demands for exit from the euro. Escaping this dynamic requires restoring fiscal space to EZ countries, and also changing the design of EZ monetary policy. The paper shows how this can be done. It decomposes the challenge of reform into generic problems related to the neoliberal construction of monetary policy, and specific problems concerning the euro as a currency union. The currency union problems are further decomposed into “money – fiscal policy” architecture problems and specific monetary policy conduct problems.

Read rest here.

Global Brands

I'm not sure the value of global brands should be taken too seriously, as compared to other more tangible assets. At any rate, for what is worth, below is the change in the list of Interbrand's Top 10 most valued brands between 2005 and 2016.

Two auto companies left (unless you count Google). Nokia is gone, and Apple and Samsung (for now) are there. Also, no Marlboro, which is not a surprise, or McDonald's. In 2005, Apple was 41, Google 28, and Amazon 68. And Amazon is the fastest growing (in the Top 10 list, overall is Facebook).

Who pays for the Welfare State?

The source of the graph is here. The data can be downloaded here. I think Anwar Shaikh had a paper with a title similar to this post. And the point is well illustrated in the graph. The working class itself pays for it.

The Global Political Economy of Raúl Prebisch

Book edited by Matias Margulis is now out in print. From the blurb:

The Global Political Economy of Raúl Prebisch offers an original analysis of global political economy by examining it through the ideas, agency and influence of one of its most important thinkers, leaders and personalities. Prebisch’s ground-breaking ideas as an economist – the terms-of-trade thesis and the economic case for state-led industrialization – changed the world and guided economic policy across the global South. As the head of two UN bodies – the Economic Commission for Latin America and the Caribbean (ECLAC) and later the United Nations Conference on Trade and Development (UNCTAD) – he was at the frontline of key North–South political struggles for a fairer global distribution of wealth and the regulation of transnational corporations.

Prebisch increasingly came to view political power, not just economic capabilities, as pivotal to shaping the institutions and rules of the world economy. This book contextualizes his ideas, exploring how they were used and their relevance to contemporary issues. The neoliberal turn in economics in North America, Western Europe and across the global South led to an active discrediting of Prebisch’s theories and this volume offers an important corrective, reintroducing current and future generations of scholars and students to this important body of work and allowing a richer understanding of past and ongoing political struggles.

Student Debt, Auto Loans and Trump's Economic Policies at the Rick Smith Show

The link for the show, if you have trouble listening, is here.

Robert Wade on Trumponomics vs. Free Trade

Echoing some of the arguments discussed here in the blog (for a list of posts on free trade go here, and for the effect of free trade on the Trump election here, here and here) Robert Wade suggests that the economics profession defense of "Free Trade" might have something to do with the election of Trump.

Wade's phrase is perfect (apparently Adrian Wood came up with it): "Like Gresham’s Law, 'alternative facts' drive out facts." The alternative fact here is the theory of comparative advantage and the notion that free trade is the best of all possible policies for all countries (and people within the country) at all times. As Keynes, quoted in Wade's epigraph, said:

Free trade assumes that if you throw men out of work in one direction you re-employ them in another. As soon as that link is broken the whole of the free-trade argument breaks down (J. M. Keynes, evidence to the Macmillan Committee on Finance and Industry, 1930)

Read paper here.

50+ Economists Warn Against Neoliberalism's Return in Ecuador

Ahead of upcoming elections, a call for austerity and economic policies structured for the elites to be left in the nation's past

by Ha-Joon Chang, James K. Galbraith

Over the past ten years, Ecuador has achieved major economic and social advances. We are concerned that many of these important gains in poverty reduction, wage growth, reduced inequality, and greater social inclusion could be eroded by a return to of the policies of austerity and neoliberalism that prevailed in Ecuador from the 1980s to the early 2000s. A return to such policies threatens to put Ecuador back on a path that leads not only to a more unequal society, but to more political instability as well. It is important to recall that from 1996 to 2006, Ecuador went through eight presidents.

Unfortunately, there is much confusion and misinformation about Ecuador’s achievements in recent years. It has all but become conventional wisdom that the economic and social progress in Ecuador, such as it is recognized, resulted simply from a commodities boom and a spike in oil revenues. This explanation ignores the innovative and important reforms that the Ecuadorian government has enacted that have played an instrumental role and allowed the country to emerge, relatively unscathed, from the 2009 Global Recession and the more recent collapse in oil prices. These reforms included bringing the central bank into the government’s economic team, a tax on capital exiting the country, a large increase in public investment, re-regulation of the financial sector, and countercyclical fiscal policy.

Read the rest here.

Master of Arts degree in Economics at John Jay College

The Master of Arts degree in Economics at John Jay College is a new graduate program providing both practical skills for work in economic policy, and a foundation for study at the PhD level. Located in the heart of Manhattan, it is one of a handful of graduate economics programs in the country that makes alternative perspectives a core part of the curriculum. Students at John Jay will study the history of economic thought, Marxian and Post Keynesian theory, economic history, the economics of gender, environmental sustainability, and global inequalities of income and wealth; as well as learning the core technical skills they need for a profession or further academic work in economics.

This is a 36-credit, two year program. Tuition and fees are approximately $4,000 per semester for New York State residents, and $7,250 per semester for out-of-state students.

To apply online, visit here.

Latin America's Crisis: The End of the Commodity Super-Cycle, or the Return of Neoliberalism

Video of the talk at Keene State College on March 20th, 2017.

How Capitalism is Killing Itself

Short documentary on the limits of capitalism mostly based on an interview by Richard Wolf. I find the simplistic explanation of exploitation at the end (around minute 27:30) based on the time of work (prices proportional to labor incorporated) to be problematic (for a discussion of the Labor Theory of Value, LTV go here). At any rate, worth watching whether you agree with Wolf's interpretation of Marx and capitalism or not.

Latin America’s Crisis: The End of the Commodity Super-Cycle, or the Return of Neoliberalism?

From this announcement about my talk at Keene State College today at 7pm.

"Professor Vernengo will offer a public lecture and discussion of the recent slowdown in economic growth. The talk will consider the degree to which these events reflect the fall in primary commodity prices, particularly oil, or are instead the result of a return to neoliberal policy prescriptions.

Dr. Vernengo is currently Full Professor of Economics at Bucknell University. He is the former Senior Manager of Economic Research at the Central Bank of Argentina, and has acted as an external consultant for the International Labor Office (ILO), United Nations Development Program (UNDP), the Economic Commission for Latin America and the Caribbean (ECLAC), and the United Nations Conference on Trade and Development (UNCTAD)."

Latin American corner: Neo Fisherism, New Keynesianism and monetary policy in Latin America (II)

By Naked Keynes (Anonymous Guest Blogger)

The positive relationship between nominal interest rates and inflation is not a new stylized fact in economic theory. In the 19th Century Thomas Tooke (1774-1858) considered it a general rule illustrated by the data presented in his History of Prices and the State of Circulation, 1792-1856 (published over the period 1838-1857).

Tooke rationalized the positive relationship between inflation and interest rates by postulating that the interest rate is part of the cost of production of commodities As a result when interest rates rise so does the cost of production and hence prices. As he put it in his Inquiry into the Currency Principle (1959 (1844) p.81: “A general reduction in the rate of interest is equivalent to or rather constitutes a diminution in the cost of production…the diminished cost of production hence arising would…inevitably cause a fall of prices of all the articles into the cost of which the interest of money entered as an ingredient.” Tooke dismissed the existence of a negative relation between interest rates and commodity prices. A fall in interest rates may be synonymous with liquidity but as Tooke remarked (Ibid, p.79):“A power of purchase might thus doubtless be created; but why should it be directed to the purchase of commodities if there was nothing in the state of supply, relatively to the rate of consumption, to afford the prospect of gain on the necessary eventual resale?..The error is in supposing the disposition or will to be co-existence with the power. The limit to the motive for the exercise of the power is in the prospect of resale with a profit.” By the way the assumption of equating the disposition with the power of purchase is a fundamental tacit assumption underlying the monetarist, New-Classical and New Keynesian monetary transmission mechanisms. It´s the whole story behind real cash balances and the transactions demand for money. Tooke went further he assimilated the effect on interest rates on asset markets (Ibid, p.86):“A low rate of interest is almost synonymous with a high price of securities…”

Tooke´s views were challenged by Knut Wicksell (1851-1926): “Tooke´s thesis is certainly wrong…The argument is based on the inadmissible, not to say impossible, assumption that wages and rent would at the same time remain constant, whereas in reality a lowering of the rate of interest is equivalent to a raising of the shares of the other factors of production in the product” (Wicksell, Lectures on Political Economy, II, p. 183). Wicksell´s criticism of Tooke and his disciples led him to explain the rise in prices and inflation by the gap between the natural rate of interest (“the rate of interest at which the demand for loan capital and the supply of savings exactly agree”, Ibid, p. 193 and which depends on real as opposed to monetary factors including “the efficiency of production…the available amount of fixed and liquid capital, on the supply of labour and land…” Wicksell, Interest and Prices (1936 (1898) p. 106)) and the money rate of interest. Assuming full employment, a pure credit system and that banks respond endogenously to the demand for credit Wicksell showed that when the natural rate of interest exceeded the money rate of interest an inflationary process ensued. The inflationary process led eventually to an increase in the money rate of interest to match the natural rate of interest at which point inflation would stop. In this way Wicksell was able to resurrect the positive relation between the money rate of interest and inflation while rejecting Tooke´s theses.

The Wicksellian distinction between the natural and money rate of interest is at the heart of the New Keynesian model. It appears in the aggregate demand equation (IS) and in the Taylor rule and in fact the Central Banks that have explicit inflation targeting regimes (as well as some that do not) must obtain estimates of the natural rate for their models to be operative. Without the natural rate there would be no New Keynesian monetary models. However, it is odd, that the relation they postulate between the money rate of interest and inflation is exactly opposite to that of Wicksell.

Needless to say, New Keynesian inflation targeting models do not have scope or space to include the type of causality between interest rate and asset markets envisage by Tooke (which is an essential component of Keynesian economics). These models do not include the banking system or asset markets. This is due to their firm commitment to the upgraded “divine coincidence”: price stability (equating the market and natural rate) is equivalent to full employment and to financial market stability.

To be continued

Trump's Budget and Fed's interest rate hike at the Rick Smith Show

Trump's budget

The figure from the New York Times shows the changes in spending by category. More defense and less social spending. Not a surprise there. Schumpeter long ago (in his The Crisis of the Tax State) suggested that it is the fiscal history of a society that explains the spirit of the people and the character of the government, since it is there plain to see by those that can read it what they are trying to achieve.

The surprise to me, at least so far, is that the increase in defense seems to be more or less cancelled by the cuts in social spending. I suppose the stimulus part of his fiscal plan will come just from the tax cuts. If that is the case, I would not be too optimistic about the Trump boom.

Latin American Corner: Neo-Fisherism, New Keynesianism and monetary policy in Latin America (I)

By Naked Keynes (Guest Blogger)*


Since the 2000s, like other countries in the region, Brazil adopted inflation targeting. The results are not encouraging. Brazil has, without doubt, the highest interest rate levels of Latin American economies. Brazil also has probably the widest interest rate spread in the region. In the first months of 2017, the monetary policy rate stood at 12.25%. Available data for interest rates for the year 2016 show that the deposit rate is around 12.43%, while the lending rate nears, 50 %. In addition, between 2013 and 2016 the Central Bank steadily raised its monetary policy rate bringing it to the highest level in seven years.

The stylized fact that is even more disturbing is that at least since the beginning 2010, the monetary policy rate is positively related to the rate of inflation (Figure 1).

This stylized fact contradicts the very basis on which Brazil´s inflation target regime is founded and has sparked an important debate in monetary policy involving well known Brazilian economists including, among others, Lara Resende  Eduardo Loyo, and Luiz Carlos Bresser-Pereira. At the conceptual level the debate centers around New Keynesianism and Neo-Fihserianism. 

The inflation targeting framework is founded upon New Keynesian principles (rational expectations plus market rigidities) rests on three simple equations (in its reduced and essential form), aggregate demand and supply equations (IS and Phillips curve) and a Taylor rule. These are shown below.

(1) Yg=f(rn-rt, et), where Yg is the output gap and rn and rt are the natural and current interest rates.

(2) πt=f(Et(πt+i),Yg, vt), πt=inflation rate; Et=mathematical expectation formed in t.

(3) it=f(Et(πt+i), θπ πg, θY Yg, ut), where it=policy rate of interest, θπ,θY=policy parameters associated with the inflation and output gaps, and et, vt, ut are random errors, independently distributed with mean zero and constant variance.

The aggregate demand equation (1) specifies a negative relation between the real interest rate (or to be more precise the gap between the real and natural rate of interest) and the output gap (the difference between the actual level of output and the potential, i.e., natural, level of output). The aggregate supply equation (2) specifies a positive relation between inflation (or the difference between actual inflation and the target inflation rates) and the output gap. Finally, the Taylor Rule (3) introduces the policy reaction of the Central Bank by postulating a positive relationship the nominal policy rate of the Central and the inflation and output gaps.

The logic of the model is simple: an increase in the output gap brings about a rise in the rate of inflation (aggregate supply equation, (2)) which triggers an increase in the policy rate (Taylor rule, (3)) by the authorities and this reduces the output gap (aggregate demand, (1)). In turn, the reduction in the output gap narrows the inflation gap. Thus the model is stable.

However, stability (and uniqueness) require two conditions. First, it requires adding to the above three equation model, the Fisher equation ((4) rt=it-Et(πt+i)). Second it requires that the parameter on the inflation gap in the monetary policy reaction function (3) be greater than one (θπ>1). That is, when the inflation rate increases and is off target, the increase in policy rates should be greater than the rise in the inflation rate.

Only in this way can the nominal interest increase bring about a reduction in the output gap (aggregate demand equation). If θπ<1 a nominal increase in the rate of interest would not do the trick: aggregate demand responds only to variations in the real and not in the nominal rate of interest. Thus, within the logic of New Keynesianism the reason why the nominal policy rate and the inflation rate move positively together is due to the simple fact that Brazil has a “dovish” Central Bank (θπ<1).

To be continued.

* Naked Keynes is a generic name used for bloggers that for professional reasons must remain anonymous

Kalecki: Forgotten Genius

A documentary about Kalecki can be seen here (no way to embed, sorry). H/t to Franklin Serrano.

What economists do?

Nothing more profound here on the perils of being an economist. And nothing (not in this post, at least) on the interest rate hike (more on that later; it will be announced at 2pm). Just a table I came across from a paper by Card and DellaVigna (see here) on the fields of papers published in the five top mainstream journals.*

The authors suggest that "the relative shares of the different fields are fairly constant over time: theory is the largest field, accounting for about 30 percent of all articles; macro is next (about 20 percent of papers); labor and microeconomics are tied for third (16–17 percent each); and econometrics, IO, and international each account for about 10–12 percent of papers)." However, you can notice (or so it seems visually) that the Lab Experiment field now appears clearly, and that Development, Health, Finance and IO have grown over time. I would prefer to have the graph with the shares of fields.

Perhaps more interestingly the authors note that "papers in Development and International Economics published since 1990 are more highly cited than older (pre-1990) papers in these fields, whereas recent papers in Econometrics and Theory are less cited than older papers in these fields." More experiments, less citation of theory and more citations of development and and international. That's what mainstream economists have been doing. It would be interesting to see what the heterodox ones have been up to in the same period.

* The top five mainstream journals according to the authors are the American Economic Review, Econometrica, the Journal of Political Economy, the Quarterly Journal of Economics, and the Review of Economic Studies.

Post Keynesian Summer School in Toronto

The Summer School is at the same time than the Annual Meetings of the History of Economics Society, and it is sponsored by ROKE.

Job numbers and more at the Rick Smith Show

Quantitative Easing (QE), changes in global liquidity and financial instability

New paper by Esteban Pérez. From the abstract:

This paper argues that QE led to significant changes in the global financial system, which, are not conducive to greater financial stability. Through a policy of reserve accumulation, QE disconnected base money from the money supply and deposits from loans. Jointly with the deleveraging process of global banks, QE contributed to restrain the supply of bank credit growth throughout the world. Also global banks continued to expand their trading on the basis of opaque instruments such as derivatives. Moreover, by altering the relative profitability of investing in different assets, QE exerted a positive effect on the performance of the international bond market. This not only spilled into emerging market economies expanding the debt of both the financial sector and the non-financial corporate sector but also has reinforced the role of the asset management industry in financial markets. Due to its concentration and interconnectedness, illiquidity, and pro-cyclicality the asset management industry poses important risks to financial stability.

Read full paper here. 

The theory of endogenous money and the LM schedule

By Tom Palley. From the abstract:

Money is at the center of macroeconomics, which makes understanding the money supply central for macroeconomic theory. this paper presents the Post Keynesian theory of endogenous money supply and shows how it is fundamentally different from the conventional money supply theory. the conventional approach relies on the money multiplier and bank lending is invisible. Post Keynesian theory discards the money multiplier and focuses on bank lending which drives money creation. the paper emphasizes the structuralist version of Post Keynesian theory which retains Keynes’ liquidity preference theory of long term interest rates and also recognizes banks are subject to nancial constraints that limit their lending activities. the paper then shows how to derive the Lm schedule in an endogenous money economy, which is a necessary prelude to reconstructing the IsLm model.

Read full paper here. 

More on Trumponomics and Globalization at the Rick Smith Show