Friday, August 30, 2013

Poverty, Cognition, and Human Potential: Another Crack in The 'Bell Curve' Myth

New research published in Science on how poverty affects mental capacities, in many respects, supports Maslow's pyramid of needs theory, namely, less demands for basic needs opens the mind to higher-order cogitation and creativity. Economic deprivation imposes such a massive cognitive load that little brain bandwidth is left over to maximize human potential.
In a series of experiments run by researchers at Princeton, Harvard, and the University of Warwick, low-income people who were primed to think about financial problems performed poorly on a series of cognition tests, saddled with a mental load that was the equivalent of losing an entire night’s sleep. Put another way, the condition of poverty imposed a mental burden akin to losing 13 IQ points, or comparable to the cognitive difference that’s been observed between chronic alcoholics and normal adults. 
The finding further undercuts the theory that poor people, through inherent weakness, are responsible for their own poverty – or that they ought to be able to lift themselves out of it with enough effort. This research suggests that the reality of poverty actually makes it harder to execute fundamental life skills. Being poor means, as the authors write, “coping with not just a shortfall of money, but also with a concurrent shortfall of cognitive resources.”
Read rest here.

Thursday, August 29, 2013

A Tale of Two Depressions?

Eichengreen & O'Rourke wrote back in 2009 a very popular post on here, updated in 2010 (and here) which suggested the different nature of the two events (one depression and a recession really). Their data was global. Looking at GDP, rather than industrial output, in the US alone, we have something like the figure below (data from Measuringworth).
Note that it's hard to compare the two events. Clearly automatic stabilizers like unemployment insurance do work. Also, the Fed reaction and the fiscal stimulus worked quite well, at least in precluding a collapse of output of the same proportions. And yes the pace of the recovery is much slower now than what it was when it finally started in the 1930s.

Introduction to the Second Edition of "The Theory of Monopoly Capitalism"

Introduction to the Second Edition of "The Theory of Monopoly Capitalism" by John Bellamy Foster:
The Theory of Monopoly Capitalism: An Elaboration of Marxian Political Economy was initially written thirty years ago this coming year as my doctoral dissertation at York University in Toronto. It was expanded into a larger book form with three additional chapters (on the state, imperialism, and socialist construction) and published by Monthly Review Press two years later.2 The analysis of both the dissertation and the book focused primarily on the work of Paul Baran and Paul Sweezy, and particularly on the debate that had grown up around their book, Monopoly Capital: An Essay on the American Economic and Social Order (1966).3 In this respect The Theory of Monopoly Capitalism was specifically designed, as its subtitle indicated, as an “elaboration” of their underlying theoretical perspective and its wider implications. 
My original motives for the analysis were twofold: (1) to provide a more thoroughgoing explanation of the economic surplus concept and the theory of accumulation to which it was related, and (2) to correct certain misconceptions of Baran and Sweezy’s analysis that had arisen as a result of the “back to Marx” intellectual movement of the 1970s—and that had led to various traditionalist or “fundamentalist” Marxian criticisms of their work.
See rest here.

Wednesday, August 28, 2013

Central Banking in Theory and Practice: Roundtable

 The Modern Money Network (MMN, check their blog here) has updated their "Money Series schedule here. This event might be of interest (but all of them are worth your time, if you're near New York City).

Central Banking in Theory and Practice
Date: Monday, September 23th, 6.15pm
Location: Room 103, Jerome Greene Hall, Columbia Law School

Moderator: Richard Clarida, C. Lowell Harriss Professor of Economics and International Affairs, Columbia University

Speaker 1: Lord Adair Turner, Senior Fellow, Institute for New Economic Thinking and former Director, U.K. Financial Services Authority

Speaker 2: James K. Galbraith, Lloyd M. Bentsen Jr. Chair in Government/Business Relations and Professor of Government, University of Texas at Austin

Speaker 3: Matias Vernengo, Associate Professor, Bucknell University & former Senior Research Manager, Central Bank of Argentina

Tuesday, August 27, 2013

Is India on the verge of a BOP crisis?

Last week Krugman pointed out quite correctly that India is NOT on the verge of a Balance of Payments (BOP) crisis. Yes the rupee has depreciated sharply and the current account deficit is somewhat larger than what would be the comfort zone. Yet as he noted, foreign denominated debt is very low and, one should add, reserve coverage is reasonably large.

That does not mean that everything is fine. As noted here before (and here by Suranjana Nabar-Bhaduri, and a longer paper here), the development strategy in India, based on service-led growth, does suffer from significant limitations.

But obviously it is preposterous to argue, as the The Economist does, that more liberalization can in the long run, by attracting investors, reduce the limitations of the BOP constraint. In particular, services (think of call centers as the exemplar case) do not lead to higher wages for Indian workers in the long run, but rather to lower service costs for foreign corporations. Besides, even service exports have been unable to promote exports, and India has depended on remittances to finance the persistent trade deficits.

So contrary to what The Economist says India is NOT particularly vulnerable to the financial turbulence in developing countries financial markets. The graph below from The Economist should have made that clear.
Note that almost all developing countries, China being the exception, have had significant depreciations in more recent months. This has more to do with the increasing interest rates on long term bonds in the US after the Fed indicated that the bond buying policy might be close to an end, that with the particular situation of any of these countries.

A Freedom Budget for All Americans: Recapturing the Promise of the Civil Rights Movement in the Struggle for Economic Justice Today

New Book by Paul Le Blanc and Michael D. Yates from the Monthly Review Press
While the Civil Rights Movement is remembered for efforts to end segregation and secure the rights of African Americans, the larger economic vision that animated much of the movement is often overlooked today. That vision sought economic justice for every person in the United States, regardless of race. It favored production for social use instead of profit; social ownership; and democratic control over major economic decisions. The document that best captured this vision was the Freedom Budget for All Americans: Budgeting Our Resources, 1966-1975, To Achieve Freedom from Want published by the A. Philip Randolph Institute and endorsed by a virtual ‘who’s who’ of U.S. left liberalism and radicalism.
See rest here

INET PhD student workshop in Foz do Iguaçu - Brazil

Foz do Iguaçu, Brazil
December 8-10, 2013

The Institute for New Economic Thinking will offer a PhD student workshop in Foz do Iguaçu, Brazil. The event will take place on December 8-10, 2013, right before the 41st Brazilian Economics Meeting, the largest annual convening of the Brazilian economics academy. The workshop is being organized in cooperation with ANPEC, the Brazilian Association of Graduate Programs in Economics, and will consist of lectures by selected senior scholars as well as paper presentations by young scholars.


The Institute will offer the mini course Growth in Developing Countries, taught by Nelson Barbosa from Universidade Federal do Rio de Janeiro, and Lance Taylor from the New School for Social Research. The course will analyze the growth experience of developing countries from a structuralist perspective. A detailed course description will be posted here soon.

More info here (h/t Laura Carvalho).

Sunday, August 25, 2013

Unemployment, welfare and the budget battles

As part of the plan to 'end welfare as we knew it' (Clinton, remember?) the new Temporary Assistance for Needy Families (TANF) program replaced the New Deal era Aid to Families with Dependent Children (AFDC). As shown by the Center on Budget and Policy Priorities (CBPP) during the last recession TANF did not increase hand in hand with unemployment.
While unemployment almost doubled, TANF cases increased by slightly more than 10% during the crisis. The program that expanded the most during the crisis was the Supplemental Nutrition Assistance Program (SNAP), which used to be called food stamp program. But hey, no worries, Republicans want to cut the program significantly.

Friday, August 23, 2013

Geography, culture, institutions and economic growth

Acemoglu, Johnson and Robinson (p. 406) used a very effective visual aid to show that institutions and not culture of geography are the main or fundamental determinants of economic growth. A version of the graph using Maddison's data is shown below.
The graph does show that even though South and North Korea share the same culture and geographic conditions, they do have significantly different growth patterns after the 1970s, with GDP per capita in South Korea reaching more than US$20,000 by 2008, while North Korea never takes off, and after the collapse of the Soviet block reverts to the initial levels. This would suggest that institutions are central for growth.

There is the whole issue of which institutions are relevant, of course. Acemoglu et al. emphasize private property rights and the rule of law, which would allow entrepreneurs to invest. In their view, supply side factors are central. I would argue that demand forces are more relevant, and that symbiotic relation with US has played a role in South Korean success, in particular in lifting the balance of payments constraint that is the major hurdle for developing countries. At any rate, the figure below is meant to put the notion of South Korean success in perspective.
Note that both Koreas are unified in the graph (again using Maddison's data). Chile is a good comparison in Latin America in terms of GDP per capita. Yes Korea, both of them, were catching up in the 1950s and 60s, but from the mid-1980s onwards, all the growth of South Korea means that they keep the pace with Chile.

I am certainly not suggesting that the Chilean model, which relies on the export of commodities (fundamentally copper), which the neoliberals never privatized after Allende's nationalization by the way, and strict integration to world markets with Free Trade Agreements (FTA) with the US and everybody else, is a good strategy. Yet, the alternative of diving your country in two and becoming a satellite of the dominant hegemon at best makes you a middle income country. And of course is not open to all.

Thursday, August 22, 2013

Canes, I mean Keynes for Kids

And when you think you've seen everything... There is a website on Keynes for Kids (h/t Alberto Vázquez for the link)! Not sure how many kids would get the 45o degree Keynesian Cross (renamed after Samuelson in the site), but it's worth a try. If there are tons of sites about evolution for kids, why not one about Keynesianism.

Larry Summers as Ineffectual Regulator: Tall Tales From the White House

From Dean Baker:
The Obama administration push to get Larry Summers as Federal Reserve Board Chair is moving into overdrive, as they pull out all the stops. Last week they gave the public the story of Larry Summers as a prescient but frustrated regulator. Summers saw the problems in the subprime housing market way back in 2000, but couldn’t get anything through an obstructionist Republican Congress.
Exhibit A in this story is a joint report on predatory lending by the Treasury Department and the Department of Housing and Urban Development (HUD) that was issued in June of 2000, back when Larry Summers was Treasury Secretary. The report lists many of the abuses that underlie the explosion of bad loans in the housing bubble years.  Unfortunately the report’s recommendations were blocked...
Read Rest here.

Krugman vs. Galbraith via Lars Syll

Lars dug up this on-line debate from the 1990s between Paul and Jamie. He linked to the full debate here. The part he posted is about the use of math and models in economics. There are other interesting parts in the debate, even if it is dominated by a discussion of the effects of free trade policies on manufacturing wages in the US (these was after the publication of Adrian Wood's book on North and South trade; mind you my problem with Wood's book is that it still uses Heckscher-Ohlin, but that is a different discussion).

Here is a brief comment by Jamie on two other topics that are quite relevant today, and that 'serious' economists did not (and still don't) agree.
"The merits of cutting the budget deficit. Do serious economists all agree that cutting the budget deficit will raise savings and investment, and increase the rate of productivity growth? They do not. The late, great Bill Vickrey, who died just three days after receiving this year's Nobel Memorial Prize in Economic Sciences, was only one of many who think our present preoccupation with deficit reduction is dangerously counterproductive. I'm another. 
The 'natural rate of unemployment.' Do serious economists agree that there exists a 'natural rate of unemployment?' No. Do those who do believe in this concept agree on what the natural rate is? No. Do those who have estimated the natural rate agree on how quickly inflation will accelerate if unemployment goes below the natural rate? Again, no. (The next issue of the Journal of Economic Perspectives will carry a symposium airing this argument.)"
I actually think that on the second most 'serious' economists do agree on the existence of the natural rate (including Paul), but not on what it is. As I referred to before, Bob Solow once said during a talk at the New School that the natural rate of unemployment didn't exist, but then by the end of the talk he suggested that it was 5.2% (this was in 2000).

The natural rate is actually the key issue for the mainstream suggestion that markets are efficient, and the more reasonable policy activists within the mainstream (like Paul or Brad DeLong, that are for fiscal activism, even if in very limited conditions) that think that imperfections (price or wage rigidities, lack of information, etc) preclude markets left alone to be self-regulating.

PS: Philip Pilkington has also posted on this here. Worth reading.

Wednesday, August 21, 2013

A Decade of Flat Wages: Protracting The Long-term Trend

Wages for the typical U.S. worker did not rise at all in the 2000s, and annual compensation only grew slightly, protracting a long term trend (since roughly the early 1970's) of declining labor share of the total product of the US economy. An extensive analysis has been produced by Lawrence Mishel and Heidi Shierholz in a new EPI briefing paper, which can be seen here.

The sanctity of contracts, or why some contracts are more equal than others

Dean Baker on the crisis of pension system in Detroit (discussed before here) on "All In with Chris Hayes" last night.
The message from the White House is that AIG contracts are sacrosanct while worker's pensions can be broken anytime. It does have implications for North like notions of the role of institutions, and contractual security, in promoting economic development (also discussed here before). And yes it is part of the push for privatization of Social Security.

See the whole video here.

Tuesday, August 20, 2013

Economists with K, or rediscovering something never lost

So there is a certain buzz about the two old Ks, Keynes and Kalecki, and what Krugman and Konczal, the new Ks, have been saying about their theories. Mike is more of a journalist, and it is certainly good that journalists get Keynes right. And even better if they get Kalecki. On Krugman I said enough. He should take a page from Keynes and learn that by 1936 he was:
"no longer of the opinion that the concept of a 'natural' rate of interest, which previously seemed ... a most promising idea, has anything very useful or significant to contribute to our analysis."
In all fairness, for heterodox economists this rediscovery of Keynes/Kalecki is both welcome and a bit frustrating (check the comments in Quiggin post; someone thinks that DeLong was the first to point the relevance of Kalecki's "The Political Aspects of Full Employment").

But here is my advice to recovering neoclassical economists, check these other economists with K, you might learn something: Kahn, Kaldor, Keyserling, Klein, Knapp,  and Kondatriev. Kuznets is often remembered, so no need for rediscovering him, I think. And you can always go back to Gregory King, if you're so inclined. A good active economist with K, that understands both Keynes and Kalecki and how their theories are related to the old classical economists and Marx is Heinz Kurz. I have a list with the Ms and Ss for you to 'rediscover' too.

PS: Just three books on Kalecki published a few years after he passed away that you may want to check out are George Feiwell's The Intellectual Capital of Michal Kalecki: A Study in Economic Theory and Policy, Malcolm Sawyer's Macroeconomics in question: the Keynesian-monetarist orthodoxies and the Kaleckian alternative, and The Economics of Michał Kalecki. For a discussion of Kalecki's views on economic development see this paper by Jayati Ghosh.

Monday, August 19, 2013

The Quality of Monopoly Capitalist Society: Culture and Communications

From the editors of Monthly Review:
Below is a hitherto unpublished chapter of Paul A. Baran and Paul M. Sweezy, Monopoly Capital (New York: Monthly Review Press, 1966). The text as published here has been edited and includes notes by John Bellamy Foster. The style conforms to that of their book. Part of the original draft chapter, dealing with mental health, was still incomplete at the time of Baran’s death in 1964, and consequently has not be included in this published version. 
The culture of a society includes the education of its young, its literature, its theater, music, the arts—in short whatever contributes to the “training and refinement of mind, tastes, and manners…the intellectual side of civilization.” To inquire further into the culture of monopoly capitalism, we have here selected for attention two areas which offer a larger body of specialized research and which we judge to be decisive for the quality of culture as a whole: book publishing and broadcasting. These are both now big businesses, and they therefore demonstrate the striking extent to which culture has become a commodity, its production subject to the same forces, interests, and motives as govern the production of all other commodities. 
The development of big business in the cultural field has of course been possible only because of the enormous increase in the productivity of labor under advanced capitalism. In earlier times culture was the monopoly of a tiny minority, while the vast majority had to work most of their waking hours to keep body and soul together. 
Read Rest here

Tax wars (Episode I, the Payroll Menace)

A long time ago in a galaxy far, far away... Oh well, in the US in the last 80 years or so the structure of taxes changed quite a bit. The figure below shows the share of individual and corporate income taxes, excise and payroll taxes since 1934 to 2013 (last year is an estimate; source here).
Excise taxes fall from high levels to relatively low levels, making the whole tax structure more progressive. On the other hand, corporate income tax revenues fell from the 40% peak of the WW-II period, to around 10% [but remained above 20% until the 1970s, one should note] making it less progressive. Also, changes in the marginal tax rates in the individual income tax, particularly after the 1980s, made the system more regressive.

Note, however, that the largest increase as a source of revenue is the payroll tax. This suggests that increasingly the social safety net is paid by workers. That, of course, will not stop the conservative political forces to continue to try to privatize social security and eliminate other programs associated with the safety net.

Saturday, August 17, 2013

Recovery in the US and Europe

Yep, the recovery has not been great in the US, with employment levels still below the previous peak. But compared to Europe (see graph below; source here).
The Euro Area is 3% below the previous peak, while the US is slightly more than 4% above. The magnitude of the collapse in Europe is incredible. Note that Germany, the successful European story, is far from good.

Friday, August 16, 2013

Internet access and relative economic development

There are a few alternative measures of economic well being. GDP per capita is one, and a measure of output (Gross National Income) was complemented in the 1990s with life expectancy and education in the well-known index of Human Development (HDI). The figure below shows access to internet around the world.
Note that this measure shows a very similar result to the HDI. US, Canada, Western Europe, Australia and Japan (South Korea too and some of the Gulf States) have high levels of access to the internet. The Southern Cone in Latin America, Russia, Eastern Europe and a few Arab counties are in the middle, with China, part Eastern Europe not far behind. Then the low access countries are in Africa and Southern Asia.

Krugman on Friedman, Austrians, and Paradise Lost

I was a bit busy this week and did not weigh in on Krugman's latest incursion (and here too) on the history of economic ideas. He correctly dismisses Conservative economists in pre-Keynesian times, and particularly Hayek (and Austrians), who suggested that recessions and depressions were useful, as not relevant. And also, notes Friedman was more sophisticated. He also notes correctly (as was pointed out here before), that Friedman used when he was forced to present a complete model and ISLM with a Phillips Curve, that was not very different from the more Keynesian versions of the model done by the Neoclassical Synthesis authors.

He is more positive about Friedman because:
"He [Friedman] was willing to give a little ground, and admit that government action was indeed necessary to prevent depressions. But the required government action, he insisted, was of a very narrow kind: all you needed was an appropriately active Federal Reserve... [But Krugman does not ] want to put Friedman on a pedestal... [since] the experience of the past 15 years, first in Japan and now across the Western world, shows that Keynes was right and Friedman was wrong about the ability of unaided monetary policy to fight depressions."
Note that Krugman also notes Friedman's critique of Austrian business cycle theory (see here), which shows that in spite of being marginalist and part of the mainstream, still the extreme laissez faire view makes them part of the fringes  of the profession. In other words, Austrians stand for the mainstream as the Tea Party stands for the more moderate right wing.

Perhaps the most important point in Krugman's reflection on the state of the profession is his confession that he used to consider himself "a free-market Keynesian — basically, a believer in Samuelson’s synthesis. But [he is] far less sure of that position than [he] used to be." Good enough. Note, however, that what he means by a 'free market' Keynesian is a peculiar mix.

The Neoclassical Synthesis, was based on Hicks ISLM and Modigliani's fixed wages. The fundamental idea is that with wage flexibility the system would lead to full employment, a proposition that Keynes denied in the General Theory. In addition, the capital debates have shown, and Samuelson admitted in 1966, two years before Friedman re-introduced the Wicksellian notion of a natural rate, that the neoclassical parable in which substitution led to full employment of factors of production does not hold.

So, beyond the ideological stance (which made more sense at the time of the Old Neoclassical Synthesis, during the Cold War) Free Market Keynesianism was always kind of a misnomer. Remember that Keynes in 1926 suggested that Liberalism (in the traditional European sense of Laissez Faire) was dead.

Monday, August 12, 2013

Print version of the paper on the dollar is now out

The full paper is here (previous post here). The abstract says:

This paper suggests that the dollar is not threatened as the hegemonic international currency, and that most analysts are incapable of understanding the resilience of the dollar, not only because they ignore the theories of monetary hegemonic stability or what, more recently, has been termed the geography of money, but also as a result of an incomplete understanding of what a monetary hegemon does. The paper argues that the dominant view on the international position of the dollar has been based on a Metallist view of money. In the alternative Cartalist view of money, the hegemon is not required to maintain credible macroeconomic policies (i.e., fiscally contractionary policies to maintain the value of the currency), but to provide an asset free of the risk of default. Further, it is argued that the current crisis in Europe shows why the euro is not a real contender for hegemony in the near future.
My affiliations are now dated, but that's not a problem. 

Political Economy of the Environment: A Conference of the Union for Radical Political Economics Co-sponsored by New Politics

A Conference of the Union for Radical Political Economics
Co-sponsored by New Politics
St. Francis College, Brooklyn, NY • Saturday, October 5, 2013
Call for Workshop Presentations

If you would like to make a workshop presentation related to the theme of this conference, please send an email to the URPE National Office at

We are living in a period of increasing environmental crisis and growing inequalities within and between the countries of the world. The obstacles to sustainable development and the equitable distribution of the products of our labor lie in the ways in which our political economic system operates. The necessary technology is already available, and the resources required to end the use of fossil fuels, for example, exist. But multinational corporations, and the governments they control, base their decisions on the maximization of profits, not on the well-being of the world’s people. Understanding and challenging capitalism is therefore essential for the building of local, national and international environmental movements.

The goal of this conference is both to clarify areas of agreement among progressive environmental activists and to promote friendly discussion of disagreements. Thus we would like the plenaries and workshops of the conference to address questions such as the following:
  • What would a sustainable and just future look like? 
  • What short-run reforms, if any, can enable us to survive the climate crisis until fundamental change can be achieved? 
  • Would sustainable development necessitate a reduction in living standards? 
  • What have been the main successes of environmental movements and how were they achieved? 
  • How do we promote environmental justice, making sure that environmental movements in the US address the specific concerns of African American and Latino/a communities? 
  • Is there a conflict between the environmental movement and the labor movement? 
  • How are people in the US and other countries responding to the challenge of fracking? 
  • How do we assess the Kyoto Protocol? Why did the Copenhagen summit fail? 
  • How should we address hazardous waste disposal -- locally, nationally, and internationally? 
  • What are the relative merits of carbon taxes and tradable carbon-emission permits as ways of reducing worldwide emissions of greenhouse gases? 
  • What are “green taxes” and how could the imposition of taxes on pollutants be made “revenue neutral” or used to make a tax system more progressive? 
  • Does environmental regulation result in the loss of jobs, the creation of jobs, or is this the wrong question to ask? 
  • How does the changing balance of international power, such as the rise of the BRICS, affect the prospects for reducing environmental damage? 
For updates on the conference program, please visit the program page. For a flyer announcing this call for workshops, click here.

Sunday, August 11, 2013

Introductory Essay for Newsletter of Marxist Sociology Section of ASA

Below is the introductory essay that I wrote for the recent relaunching of the newsletter for Marxist Sociology Section of the American Sociology Association, which can be seen here.

Over the years, the intellectual agendas of critical social scientists have taken a decidedly pluralist turn. Leading thinkers have begun to move beyond established alternative paradigms opening up new lines of analysis, manifesting a turn to a more cross fertilization of ideas, which seemingly suggests that the once powerful embracement of Marxism by the infamous Radical Caucus has waned. The relaunching of the newsletter of the Section on Marxist Sociology of the American Sociological Association is a testament to the fact that this supposed decline in radical scholarship is certainly not the case. On the contrary, the praxis of the Sociology Liberation Movement carries on as unquestionably substantive in the assessment and articulation of pertinent contemporary and historical social, political, economic, and environmental problems.

Hence, the ambition of the newsletter is to accentuate the perseverance of Marxist social scientific enquiry, especially since it is quite clear that in today’s day in age the oppressive forces of capitalism perpetually act as battering rams that subject humanity to a “dis-embedded” social world, in which collective action problems ensue persistent socioeconomic inequity. We wish to make palpable how the insights of Marxism widely make apparent how the global socioeconomic system does not automatically generate efficient situations whereby unique organizations of production, exchange, and distribution guarantee the attainment of maximum social welfare.

The idea that humans are simple instrumentally rationalists, who supposedly oscillate like a homogenous globule of Hobbesian brutes, is conclusively a fiction. The radical political economy of Karl Marx is ripe to concretely expose the underlying complex fractures embedded in capitalism, which limit the capability of humans to safeguard social assets, social claims, and social ties requisite for sustaining an institutional nucleus of society for human survival. It is our goal to embrace first-rate scholarship that evinces capitalism’s impingement upon the accruement and management of resources vital for catholic cogitation, and realization, of conscious desires for humans to reach their full potential.

The relaunching of the newsletter is thus an attempt to make clear how the Marxist Sociology Section of the American Sociological Association offers not only the effective communicative space, but matchless intellectual tools, capacities, and resources that enable radical social scientists to formulate the methodological lenses that critically challenge the nature of current world dynamics. The general inclination is to pave that tortuous royal road to an emancipated sociological imagination.

Saturday, August 10, 2013

The natural rate in pure exchange, intertemporal models

One more clarification on the previous discussion about the natural rate in Austrian models. In his reply,  Mr. Rallo suggests (in Spanish) that I confused the natural rate that can be derived from a barter economy with the one derived from intertemporal equilibrium model. So let's start by clarifying that barter refers to whether there is money or not, while the notion of intertemporal equilibrium is associated to the nature of equilibrium, whether it is short-term or long-term.  You can have an intertemporal model of equilibrium with barter as several Arrow-Debreu models actually are.

Traditional notions of equilibrium, like the classical authors had, are not intertemporal, but several of those were based on barter ideas. Equilibrium in classical economics is a tendency associated to the process of competition that leads to a uniform rate of profit. Some authors had the real (meaning non-monetary) rate of profit govern the system and also the rate of interest, like Ricardo, while others like Tooke suggested that the rate of interest governed the rate of profit, and arguably there are elements in Marx analysis that suggest the possibility of an independent rate of interest.*

The notion of intertemporal equilibrium is relatively new and was developed by Hayek, Hicks, Lindahl, and Myrdal (see Milgate here; subscription required)  in the 1920s and 1930s, before it become common after the capital debates on the basis of the Arrow-Debreu model. Intertemporal models do not require the notion of a uniform rate of profit, and some authors have suggested that as such they are not open to the capital critique. Because they do not require a uniform rate of profit these models are short-term.

So the relevant point is the notion of equilibrium and not whether it is a barter or credit system [additionally that would bring about the way money is introduced in the economy, as mere toke for exchange, or as a unit of account in which agents want to accumulate, but that is a different issue]. Mind you, one might think that Mr. Rallo is suggesting that in a short-term model (with no tendency ot a uniform rate of profit) there is no need in marginalist models for a natural rate of interest (although we'll see that's not his point).

Yet, the point made by Garegnani and Petri is that in an intertemporal model with disaggregated means of production (capital goods), it is still necessary for the equilibration of aggregate investment to full employment savings, and that requires a measure of the quantity of capital, and that means, and by necessity a rate of interest. That rate of interest that equilibrates savings and investment is a natural rate.

Mr. Rallo seems to believe that there is a difference between a situation in which there are "lenders (savers) lending at 5% for a year, and investors that demand 5% for 30 years" (or in Spanish "ahorradores que prestan al 5% a 1 año e inversores que piden prestado al 5% a 30 años"), which would be different if both lenders and borrowers had the same time period in mind, but different rates.
Again, this involves not the intertemporal nature of the model, but the term structure of interest rates.

So taking away the adjustment for risk associated to the longer-term that financial capital would be tied to investment, in the neoclassical theory arbitrage should still work. So presumably the rate would be more than 5% for the 30 year loan. This has nothing to do with the necessity in Austrian theory, as in any type of marginalist model, of a quantity of capital and a natural rate of interest. Neither barter nor the term structure of the rate of interest (or the more relevant discussion of the short-term nature of intertemporal models) relieves the marginalist (and Austrian) theories from a need for a natural rate of interest.

The only consistent way to get rid of the notion, is to abandon the marginalist approach, and like Sraffa assume that one distributive variable, in his case the monetary rate of interest, is given exogenously. Savings then is adjusted to investment by the multiplier process (i.e. Keynes and Kalecki's Principle of Effective Demand).

* Panico (1980, p. 269 here; subscription required) argues that: "Marx's analysis of the factors determining the rate of interest, he rejected any attempt to explain the determination of the average rate of interest on the basis of'laws of necessity'. He proposed instead, to investigate it by means of qualitative description, of those economic, conventional and institutional factors that, from time to time, affect this variable." So while its clear that Marx thought that the rate of profit determined the rate of interest, it is also reasonable to argue that there are contradictory propositions that suggest a determination of the normal rate of interest that is independent from the rate of profit.

PS: Thanks to Franklin Serrano for pointing my mistake on Quesnay (deleted; yes there is money in the Tableau as there is in Marx's simple reproduction system, derived from Quesnay) and the causality in Marx. Also, forgot the link to Milgate's paper, which is now in place.

A note on profit-led/wage-led growth models

By Sergio Cesaratto (Guest blogger)

As a follow up on Matías' post on real exchange rate (RER) and growth I want to make a point about "profit/wage led growth", although this is not central in the discussion about RER/Exports.

1) Profit-led growth:

Variations of the normal rate of profit, as such, have no direct and mechanic influence on gross investment, as often argued by post-Keynesian authors of various persuasions. As such, variations of rn only concern the sphere of income distribution. The latter can in turn influence investment decisions:
  • by affecting expected effective demand: a higher/lower rn might, for instance, negatively/positively affect consumption demand if this is affected by lower/higher real wages; or 
  • by being connected to the relative bargaining power of the working class and to the necessity for the ruling class to discipline it by regulating the labour reserve army; but this is generally done by using fiscal, monetary and exchange rate policies and not as a coordinated decisions of capitalists to regulate the accumulation rate.
Therefore, a rise of rn, as such, for no reason would positively affect investment. Likewise, a lower rn will, in general, leave gross investment unaffected as long as capitalists fear to bequeath market shares to competitors: each capitalist is homo homini lupus with respect to her classmates. Ça va sans dire that a rise/fall of ra above/below rn will just signal that actual capacity utilization, ua is above/below the normal one, un. In both cases gross investment will vary in order to readjust the degree of capacity utilization and normal profitability - while the long trend of investment is still set by demand for products associated to normal profitability).

A quote from Franklin Serrano* is timely here: “although politically entrepreneurs prefer higher profit margins and normal profit rates, capitalists do not ‘invest as a class’ but according to the existing investment opportunities and the pressure of competition. Their investment decisions are not an inverse function of the level of the normal rate of profits but a positive function of the size of the market. In the long run the size of lucrative investment opportunities depends on the level and rate of growth of effective demand- the demand of those who can pay normal prices (that price that allow firms to obtain the normal rate of profits, which defines the minimum accepted standard of profitability). If effective demand is expanding, whether normal profit margins and rates happen to be ‘high’ or ‘low’, competition and the search for maximum profits impel the firms collectively to expand productive investment.”

2. Wage-led growth:

Level effects, but not the growth effects as in the neo-Kaleckian model. A lower marginal propensity to save will induce be a temporary faster growth, but once capacity has adjusted to the new higher level of effective demand entailed by the stronger Supermultiplier , the economy will return to the former normal growth rate determined by the growth rate of autonomous expenditure. Of course, "temporary faster growth" might be very relevant. But no-wage-led growth, at least in the long run. The reason: wages are an induced component of aggregate demand, therefore they cannot be the driver. Given the other, well known, shortcomings of neo-Kaleckian models, I would conclude that the very concept of profit/wage led growth should be abandoned (sorry!). So Matias is totally correct on this point.

Not sure about his view about the main issue RER/exports. I may agree that sound and fair growth cannot be led by RER devaluation. Though, growth depends also on preserving a competitive RER, as we well (and sadly) now in Italy after the Euro.

PS: My paper on "Neo-Kaleckian and Sraffian controversies on accumulation theory" is here (version June 2013).

* Serrano, F. (2006), "Power Relations and American Macroeconomic Policy, from Bretton Woods to the Floating Dollar Standard," available here.

Friday, August 9, 2013

Paul Krugman's The Phony Fear Factor

Much has been said on how economic demagoguery continues to reign supreme, particularly by heterodox writers, so I won't delve much into this topic. Nevertheless, it is interesting to see that in his NYT op-ed, Paul Krugman, a pretty mainstream economist, disparages the 'confidence fairy' by citing Kalecki's “Political Aspects of Full Employment” (a Monthly Review link, interestingly enough). Though, Krugman somehow can't see much of Marx in Kalecki...does he not want to see it?

From the article:
"We live in a golden age of economic debunkery; fallacious doctrines have been dropping like flies. No, monetary expansion needn’t cause hyperinflation. No, budget deficits in a depressed economy don’t cause soaring interest rates. No, slashing spending doesn’t create jobs. No, economic growth doesn’t collapse when debt exceeds 90 percent of G.D.P. And now the latest myth bites the dust: No, “economic policy uncertainty” — created, it goes without saying, by That Man in the White House — isn’t holding back the recovery. 
First, however, I want to recommend a very old essay that explains a great deal about the times we live in.The Polish economist Michal Kalecki published "Political Aspects of Full Employment" 70 years ago. Keynesian ideas were riding high; a “solid majority” of economists believed that full employment could be secured by government spending. Yet Kalecki predicted that such spending would, nonetheless, face fierce opposition from business and the wealthy, even in times of depression. Why?"
Read rest here.

PS: Check also this earlier entry on Kalecki's paper.

Thursday, August 8, 2013

"The Endless Crisis" reviewed in Marxist Sociology Section (ASA) Newsletter

Book Review: The Endless Crisis: How Monopoly-Finance Capital Produces Stagnation and Upheaval from the USA to China, by John Bellamy Foster and Robert W. McChesney

Review by David Fields and Daniel Auerbach
The Monthly Review, since its inception, has been carrying on some of the best works in Marxism. The analytical foundations of what has come to be called the Monthly Review School were set out by the economists Paul Baran, Paul Sweezy, and Harry Magdoff. The lucidly rich works like Monopoly Capital by Baran & Sweezy and Magdoff’s piece on Imperialism (along with Harry Braverman’s work on Labor and Monopoly Capital) have sustained Marx’s invaluable insights into the twentieth and twenty-first centuries.
Read rest here.

Innagural Issue of Marxist Sociology Section of American Sociological Association Newsletter

I am sure many of you would be interested to know that the Marxist Sociology Section of the American Sociological Association has relaunched its monthly newsletter, of which yours truly is a co-editor (and wrote an introductory essay). Our inaugural issue can be seen here. Our website is here

Why did Marx understand America better than Europeans do today

I somehow didn't see this one before. On June 28, James Galbraith delivered a keynote lecture to the 50th anniversary symposium of the John F. Kennedy Institute for North American Studies, Freie Universität Berlin. The talk is titled "How Come Europeans Understood the Political Economy of America So Much Better in 1861 than Today, and What Did Karl Marx Have to Do with That?" Listen to the audio here.

On Austrians and the natural rate of interest

I don't often write about Austrians. As I noted before the reason is that, as a school of thought, Austrians are kind of irrelevant. They are part of the marginalist mainstream, but are often confused as heterodox (sometimes even Austrians don't know that they are neoclassical). In fact, Hayek was for the most part forgotten after Sraffa and others showed the inconsistencies of his theories in the 1930s, and if Austrians understood the consequences of the capital debates, their come back in the 1970s would seem even less reasonable.

Throughout their underground period, from the 1940s to the 70s, they were part of 'secret' societies in which only the initiated (complete adherence to the ideology) could participate, like the Mont Pèlerin Society, and creating think tanks, like the conservative Institute for Economic Affairs (IEA), to promote the laissez faire ideology (note this had no basis in theory, since they cannot prove that markets produce efficient allocation of resources with a uniform rate of profit, but I'll get back to that below).

It was the rise of the conservative movement, a sort of Polanyian reaction to the Welfare State, that brought back all sorts of laissez faire cranks, and brought in the coattails Hayek and his disciples. In contrast to Milton Friedman, that used a fairly regular ISLM cum Phillips curve model, with the added natural rate, Hayek produced no relevant innovation, besides some poetry about the complexity of markets and uncertainty (which is why some confuse him with an heterodox author; blame Shackle for this).

Sissela Bok, the daughter of Gunnar Myrdal,* co-winner of the Sveriges Riksbank Prize with Hayek in 1974, recounts in her biography of her mother Alva [Alva Myrdal, Gunnar's wife received a real Nobel, the peace one in 1982] that the prize was given to Hayek by the Swedish economics establishment as a way to demean the prize. And if this is not enough, the guy that was supposedly for freedom, and for economic freedom because that one is central for political freedom, defended Pinochet. So really there is no economic or moral reason to take Austrians too seriously.

In sum, Austrians are really the most ideological wing of the neoclassical school, with all the other theoretical problems that the mainstream has. There is not much relevant to discuss there. So you might ask what is the post doing here. The reason is that there has a been a debate between Lord Keynes (nope not that one, the author of the very good blog Social Democracy for the 21st Century) and a Spanish Austrian author, and I was asked about my opinion. So here it is.

Some Austrians seem to think that their theory does not require a natural rate of interest. This might be the result of an incomplete understanding of Sraffa's 1932 critique of Hayek, in which he showed that there were as many own rates of interest (Sraffa's term) as commodities. At any rate, in the this recent debate the Austrian author says that in order to have a cycle Austrian don't need a natural rate and that:
"it suffices with showing that there is a mismatch between the term and risk structure that the marginal lenders (savers) are willing to fund and the term and risk structure associated with investment taking place in the economy." Or in Spanish in the original post: "le basta con mostrar que existe una descoordinación entre el plazo y el riesgo de las inversiones que están dispuestos a financiar los ahorradores marginales y el plazo y el riesgo asociados a las inversiones que se están efectuando en la economía."
So basically you need a mismacth between savings and investment. And dude, yes at the actual intersection of these two curves (often well behaved with savings being upward-sloping and investment downward-sloping) is an equilibrium interest rate, that would eliminate the mismatch. That's your natural rate. So, yes Austrians do have a natural rate**, even if they don't know it. Note that the capital debates show exactly that the idea of natural rate of interest inversely related with capital abundance (supply and demand) is not tenable. The poetry on market efficiency depends on being able to prove that. That's why the neoclassical project, and with it Austrians, has been derailed. It is really zombie economics.

* Myrdal coined the term monetary equilibrium to refer to the Wicksellian notion of an equilibrium between the natural and monetary or bank rates of interest. He also was a proto-Keynesian, and the key economist in the initial social democratic governments of the 1930s.

** According to Garegnani, in fact, even the inter-temporal Arrow-Debreu models, which supposedly do not have a uniform rate of profit, require a natural rate of interest to bring about the equilibrium of investment with full employment savings.

Wednesday, August 7, 2013

Where is the elasticity? (or more on devaluation and growth)

Since 2007 mainstream economists, and often some heterodox (or more precisely eclectic) authors, have suggested that the Argentine economy is on the verge of collapse (see for example my good friend Bresser-Pereira here or this). A typical argument made by both orthodox economists (some of which favored the Convertibility Plan of the 1990s) and the more unconventional is that real exchange rate (RER) appreciation is at the heart of the Argentine problems and the more recent lack of growth.

I have discussed this before here with respect to the so-called Sustainable and Stable Competitive Real Exchange Rate literature (see here). The argument for a SSCRER was put forward by Frenkel and Taylor in a well-known paper, but the notion has many defenders (see the good paper by Blecker and Razmi from Setterfield's essential book on growth), including more conventional authors like Rodrik. At the risk of being repetitive let me point out the pros and cons of the arguments for devaluation.

Depreciation protects local industry and leads to a boost to domestic production, and also, by leading to an increase in exports, reduces the external constraint of the economy. That would be the substitution effect associated to the change in the relative prices. Yet depreciation also (everything else constant) reduces wages, increases the profits of exporters, and leads (yes, the economy is wage-led) to a reduction in spending and lower levels of activity. In this case, a depreciation does help reduce your external constraint, but by leading to a contraction. The second effect, associated to an income effect, was well-known by heterodox authors, having been developed by Albert Hirschman and Carlos Diaz-Alejandro (for the Argentine case) and then formalized by Krugman and Taylor (see here; subscription required).

At the end of the day it is an empirical question. All the evidence seems to suggest, at least for the Argentine case (here paper by Fiorito and others in Spanish; but it seems to be more general, see here) that income effects tend to be larger than substitution effects, and hence one might be concerned about possible contractionary effects of a depreciation.

In the case of Argentina, it is clear that the expansion of the volume of exports goes hand in hand with the expansion of the world GDP (Figure below).
The relation between the real exchange rate and exports is less clear. As it is shown below after the large real depreciation in 2002, growth in the volume of exports goes hand in hand with significant appreciation.
No doubt defenders of depreciation will argue that the big depreciation in 2002 was essential for export growth afterwards (see Rapetti here who argues that "competitive RER was a key factor behind Argentina’s recovery and growth"). But if you put the depreciation in the wider macroeconomic context of 2002, and compare with the current one, you are bound to have second thoughts.

The depreciated nominal exchange rate in a context of high unemployment (around 22%) did not lead to inflationary pressures, since wage demands were subdued (and hence the nominal depreciation translated into a large real one). Second, spare capacity meant that the protection afforded by the real depreciation led to a huge expansion of domestic production, spurred by the expansion of domestic demand (higher real wages and expansion of fiscal spending, particularly in social programs). Exports actually don't seem to move much with the depreciation. There is no econometric evidence for large elasticity of exports with respect to the exchange rate, in the short or long-run (if someone has it please, please, pretty please with a cherry on top share it; it's been frustrating to have an argument with people that argue a point for which there is no known evidence).

Note that all the above mentioned conditions are not in place now. Unemployment is considerably lower (around 7% or so), and the expansion of real wages and government spending have slowed down (so much so, that in the last year the economy has stalled). So maybe we need less Frenkel and Taylor and more Krugman and Taylor to understand what is going on in Argentina right now.

Tuesday, August 6, 2013

What killed theory? What theory?

So Noah Smith and Paul Krugman are again trying their hand at the history of economic ideas to understand what happened with the profession in the last three decades. Noah calls the changes in theory "more evolution than revolution," and suggests that the dominant view is still compatible with neoclassical economics, which is I think correct, even if it is more involution than evolution.

His understanding of the changes in economics is colored by his views on neoclassical economics, which are fundamentally flawed (see more here). He then brings back the issue of lack of theoretical papers and now refers to it as the "death of theory." He suggests that what led to the demise of conventional theoretical developments within the mainstream is behavioral economics (he might as well have said information economics; sure enough that's what Stiglitz claimed with his post-Walrasian/post-Marxist notion; subscription required).

In his words:
"Why did this happen? I'm not sure, but my guess is that the meteor that hit the economics dinosaurs, and set the field's evolution off in a new direction, was named Daniel Kahneman."
Again, utterly incorrect, and proof of why PhD students should get some history of economic thought (particularly with so many coming from other disciplines). Behavioral economics, as much as information economics, and all the new theories of the 1970s onwards (New Classical, New Trade, New Growth, New Economic History) are a response to the crisis of the mainstream brought by the capital debates (and Samuelson's admission of the failure of the research program), and go hand in hand with the demise of the political Keynesian consensus that allowed for progressive policies.*
The mainstream abandoned the core model, for the most part, and research was dedicated to the analysis of a series of imperfections, from information, to alternative ideas of rationality and so on. Krugman is in fact wrong to argue that in New Trade and Business Cycle the reasons for change differed. Yes the Dixit-Stiglitz model allowed for the formalization of imperfect competition, but the point remains that New Trade theory corresponded in the trade field to the New Keynesian imperfectionist arguments in macro.

The fact that the death of neoclassical theory (and the post-mortem was written by Samuelson, even if Sraffa is the one that fired that fatal shot, not Kahneman) led to a period of confusion or fragmentation, as Roncaglia calls it (in his good book on the history of ideas that Noah and Paul should read), is not new. And as I noted before, lack of publications on theory are to be expected for a research program that has been shown to be so problematic by the capital debates.

An equivalent period in the history of ideas occurred after the demise of Ricardian economics in the 1830s, before the rise of marginalism, in which no coherent or dominant approach was left in place. Stuart Mill represented a hybrid, with too many inconsistencies, and the field was dominated by vulgar economics defending laissez faire policies. Some if this issues are discussed in this paper.

* Note that, in fact, up to the 1970s heterodox groups were no segregated from the profession, and published in the same journals as the mainstream authors (the Journal of Post Keynesian Economics and the Cambridge Journal of Economics are from the 1970s). Also, crazy right wing economists like Hayek, that had vanished and were part of secret societies like the Mont Pelerin were brought back from the dead, in his case winning the Sveriges Riksbank Prize.

Monday, August 5, 2013

Demographic transitions, Malthusian traps and supply constrained growth

Gregory Clark's book The Farewell to Alms re-popularized the Malthusian model (for the relevant chapter go here). The basic idea is that population dynamics and the so-called demographic transition do have an important impact on economic growth. Robert Malthus' idea is relatively well known, even if there is an incredible amount of confusion in the way it is explained by modern neoclassical authors.

As all classical authors, Malthus assumed that real wages tended to be at subsistence levels. He emphasized more than others, eg. Smith or Marx, the physiological elements associated to subsistence, and his theory of population influenced David Ricardo (friends sometimes will push you in the wrong direction, but this should not be exaggerated; Ricardo was no Malthus). And this has nothing to do with some Iron Law of Wages (again this reflects the fact that mainstream authors like Clark have limited, to say the least, understanding of the surplus approach; for Ricardo and other classical authors on real wages see Stirati here).*

At any rate, Malthus notion was that if wages increased, population growth would ensue and bring them back to subsistence levels, hence real wages could not grow. In the mainstream story this is connected with lack of growth of income per capita. The economy would be in a Malthusian trap.** Population growth is bad in this Malthusian world, that is why the good reverend, like modern Republicans (and I would assume more than a few neoclassical economists), was for abstinence and delayed marriages.

The idea is that higher population, for a given technology, leads to more mouths to feed. Classical ideas that suggest that the extent of the market (and, hence, population) might have a positive impact on the division of labor (who said that?) are not discussed by modern neoclassical authors (also explains their dislike of Kaldor-Verdoorn Law). At any rate, the modern theory of economic growth is still dominated by supply-side explanations, in which technological progress is either exogenous (Solow) or endogenously determined by spending on education (or some variation of the topic in the endogenous growth literature).

Demographic transitions, in which the rates of mortality and fertility decline have in this view particular effects on growth. The notion is that the initial fall in fertility leads to a lower youth dependency ratio (less youngsters to feed), and is growth enhancing. Further, mainstream authors assume that workers in the labor force would have a higher savings rate (given life cycle hypothesis arguments) and that would lead to investment (yes, Say's Law). Jeff Williamson suggests (see here) that this, the so-called demographic dividend, in part explains the Economic Miracle in parts of Asia.

On the other hand, the same population dynamics leads to higher old age dependency ratio, and that should have (even if evidence is mixed on that) a negative impact on growth. Note that Eichengreen and his co-authors, suggest that slowdowns in growth are associated to falling productivity (not population dynamics), even if they measure that using Total Factor Productivity (which is not a measure of productivity, but of the changing patterns of functional income distribution; see here).

Mind you there is a more reasonable, demand-led, explanation for why population transitions might have an impact on growth. As the process of structural transformation from agricultural to industrial societies continues, more workers are incorporated in industrial jobs with higher pay, and even if income distribution might worsen, the expansion of urban population (and higher real wages) means an expansion of demand. Obviously once the transition is done, the expansion of real wages (not just from the rural workers moving into cities) must continue. In this case, the main cause for the limits to real wage expansion (demand expansion), and continued growth, come from the balance of payments, since higher wages and consumption lead to increasing imports.

There are many more limitations in the resurgence of Malthusian views in the mainstream. Including the Social Darwinist flavor of Clark's ideas, as noted by Deirdre McCloskey (here). But I'll leave those for another post.

* The main point that mainstream intepretations of classical authors miss is that there is no systematic decreasing relation between real wages and employment in Ricardo and other classical economists, something that Stirati makes clear.

** Note also that some authors suggest that this is the basis for Carlyle's epithet the 'dismal science' for Political Economy. As noted before by Vienneau (see here): "Thomas Carlyle did not coin the phrase 'The dismal science' to refer to Thomas Malthus's anti-utopian theory of population."

Friday, August 2, 2013

New issue of ROKE is now out

The new issue of the Review of Keynesian Economics, with papers by Jerry Epstein, Jane Knodell, Bill McColloch, Valerio Cerretano, Juan Matías de Lucchi and Esteban Pérez and an introduction by the President of the Central Bank of Argentina, Mercedes Marcó del Pont, is out. Papers have, for the most part, been presented at the central bank, and are on the issue of the role of central banks in economic development. Enjoy!

Employment continues to grow too slowly

The BEA released its Employment Situation Summary. Only 162,000 new jobs created, when need more like 400,000 per month for a healthy recovery. Unemployment rate fell to 7.4%, nut mostly for the wrong reasons, that is people leaving the labor force. Graph below shows the steady and slow recovery.
Still below the employment levels of before the crisis. And things are going to get worse in the next couple of months with more pressures, associated to the debt-ceiling again, for fiscal spending cuts.

Madrick on why Summers should NOT be appointed to the Fed

Nap time at the White House

After, Dean Baker and Tom Palley, now Jeff Madrick explains why Summers would not be good for the Fed. Jeff says more directly than others that "inflation is his big concern" and that "jobs will remain hostage to Wall Street needs if he is chairman." And by the way, Dean, Tom and Jeff well aware of the limits of Clintonomics (Rubinomics) and the unsustainable bubbles that drove the 1990s and 2000s booms (if we can call the Bush period a boom), while Summers was clueless.

Jeff also picks up the point about how New Kenesians are more Monetarists than Keynesians. He quotes Summers saying that:
"As for Milton Friedman, he was the devil figure in my youth. Only with time have I come to have large amounts of grudging respect. And with time, increasingly ungrudging respect."
The natural rate, a very anti-Keynesian principle, and Friedman's only really important contribution (a negative one, of course) is what underpins Summers concerns with inflation, at least from a theoretical perspective.

Podcast with about the never ending crisis in Argentina

Podcast with about the never ending crisis in Argentina with Fabián Amico, and myself and interview by Carlos Pinkusfeld Bastos and Caio Be...