The video of the Podcast from the Centro Celso Furtado. To some extent this conversation follows the promises by some of the members of the economic team of Fávio Bolsonaro to follow the Milei model for Brazil, if he wins the election.
It should be noted that it is doubtful that he would follow Milei's draconian fiscal adjustment. His more likely model is Trump and the use of the government machine for personal gains. In Portuguese, but you can watch with closed captions.
Tom's last post deals with how Putin has been portrayed in Western media. He argues that the hostile coverage reinforces what audiences already believe and raises the risk of an open conflict with Russia and its allies. This comes from his thinking of similar issues in economics. As he says:
"I have been grappling with the problem of ideology (economic, political, geopolitical). How do we get people to reconsider narratives and beliefs which are held with such deep conviction, they automatically dismiss other ways of understanding?"
In other words, he thinks the media and political establishment also reinforce neoliberal beliefs despite their harmful effects. Worth reading.
Read full article here.
The 2026 Sveriges Riksbank Prize in Economic Sciences (aka the Nobel) went to Robert Hall and Michael Woodford, for their contributions to the microeconomic foundations of macroeconomic stabilization. The prize is, in many ways, a celebration of the return to pre-Keynesian macroeconomics (including the Keynes of the Treatise on Money, before the General Theory). Not much of a Keynesian revolution left in what is called New Keynesian economics, if anyone had doubts.
Woodford is perhaps the most important representative of the Neo-Wicksellian model that dominates modern macroeconomics (misnamed New Keynesianism). As I noted before, the central idea is that the monetary rate of interest, controlled by the central bank, must be adjusted to the natural rate, determined by the real forces of productivity and intertemporal preferences. I discussed the return of the natural rate of interest a decade ago, noting that Woodford was particularly prominent in its rehabilitation (after it had been largely abandoned following the Keynesian Revolution and the capital debates).
The political implications were considerable. Independent central banks, committed to price stability and capable of credibly anchoring inflation expectations, would also provide the conditions for prosperity. The so-called divine coincidence suggested that price stability would be essentially compatible with full employment (and, with a little more wishful thinking, financial stability too). Fiscal policy was relegated to a secondary role. The central bank would do the heavy lifting. Keynes, of course, had abandoned the natural rate in the General Theory, precisely because there was no reason to believe that monetary policy could guarantee full employment. But who reads that book anymore? See also my discussion of Friedman and Lucas, and why the former was more important for this counter-revolution.
Hall's contribution was central to a parallel transformation of consumption theory. His rational expectations version of Friedman's permanent income hypothesis suggested that consumption followed a random walk, responding to unexpected changes in permanent income rather than current income. This was taken as a major advance over the old Keynesian consumption function. Yet, as I discussed in a post on Duesenberry, the earlier relative income hypothesis had considerable empirical support and provided a socially grounded explanation of consumption, with important implications for income distribution and effective demand. Hall's subsequent work also found very little evidence of intertemporal substitution in consumption (rather inconvenient for the theoretical foundations of the New Keynesian IS curve).
The older structural macroeconometric tradition was also discarded, even though, as Ray Fair has argued (and I noted in my discussion of Romer's criticism of modern macro), it offered a more promising framework for studying actual macroeconomic relationships. Evidence on the importance of housing, household debt for consumption, not to mention the permanent effects of demand on output, suggests that much was lost in that transition.
It is worth remembering that even the old Neoclassical Synthesis (before the 1970s) retained important elements of the Keynesian Revolution. The Keynesian consumption function, and the relevance of income distribution for aggregate demand, remained central to macroeconomic analysis. And while the Synthesis accepted the existence of a natural rate of interest and a tendency toward full employment in the long run (at least in principle), it took seriously the imperfections and institutional obstacles that prevented the economy from getting there. The old structural macroeconometric models reflected precisely that pragmatic concern with the actual functioning of the economy. In that sense, the rational expectations counter-revolution was a step backward even from the rather limited Keynesianism of the Neoclassical Synthesis. It replaced imperfect but empirically grounded models with theoretical (supposedly elegant; whatever that means) ones grounded on individual behavior that assumed away many of the problems the older tradition tried to understand (not exactly an improvement, if the objective is to explain how capitalist economies actually work). And, perhaps more importantly, it derailed potentially more fruitful directions of research.
None of this means that Hall and Woodford made no significant contributions. They have certainly been very influential. But technical sophistication and scientific progress are not necessarily the same thing. The irony is that the “Nobel” celebrates as a revolution what was, fundamentally, a return to the ideas that the Keynesian Revolution had challenged. A counter-revolution, indeed (and one that has been remarkably successful in shaping economic policy).
I often use Randall Collins’ book Four Sociological Traditions in my class discussions and in my own work on the history of economic ideas. Collins’ discussion of economics as the first social science is instructive about how disciplines become autonomous from other fields. Economics emerged earlier than the other social sciences as an independent discipline, in his account, because states had practical reasons to collect information about taxation, trade, population, and public finance. Mercantilism created a body of empirical and administrative knowledge, and later writers, starting with William Petty (he cites François Quesnay and then Adam Smith rather than Petty), transformed these concerns into a more systematic intellectual discipline. Economics was able to establish itself institutionally before sociology because it had both practical applications and a relatively clear object of study.
Collins then shows how economics became increasingly professionalized during the nineteenth century. There is an extensive literature on that (on the American case see Coats, 1988). Classical political economy initially developed partly outside the universities, especially in Britain. In Germany, however, economics became more firmly tied to state administration and university training (on the German Historical School see Kurz, 2016). Later, marginalism and neoclassical economics helped turn economics into a more abstract and specialized academic discipline. Collins’s broader point is that the content of economic theory cannot be separated entirely from the institutional settings in which economists worked.
For Collins, ideas are produced inside social networks and institutions. Intellectual change occurs when institutional spaces open up, when new professional roles become available, and when communities of scholars compete over problems, methods, and prestige. In that sense, the rise of the social sciences – economics and, more interestingly, sociology itself – is a sociological phenomenon. The community makes the discipline.
Read rest here.
I was very saddened to hear of Anwar Shaikh’s passing. Anwar was one of the most important Marxian economists of his generation, perhaps together with David Gordon and Duncan Foley, at least in the US, both his colleagues at the New School.* He spent his career defending and developing the surplus approach in the broadest sense, against both mainstream economics and much of heterodox economics.
I disagreed with him on many things. On the theory of value, on Marx’s law of the tendency of the rate of profit to fall, on Say’s Law, and particularly on the determination of real exchange rates and purchasing power parity. In fact, an entire chapter of my PhD dissertation was devoted to his theory of exchange rates, which I regarded then, and still regard, as the main Marxist approach to the subject. The thesis was also critical of both mainstream and Post Keynesian theories of exchange rate determination, btw. I also disagreed with him on a number of policy questions, including the causes of inflation in many Latin American countries. These were not minor differences.
I also think that some of his work was creative and important in many respects, and closer to my views (not just issues of conflictive distribution associated to the surplus approach). His critique of comparative advantage influenced my understanding of the topic (also here). His work on the welfare state is something I often cite and use in classes. And his paper on the humbug production function was perhaps his most famous work.
Whether I agreed or disagreed with him, that never diminished my respect for him. Anwar was intellectually honest, genuinely pluralistic, and always willing to engage seriously with arguments with which he disagreed. That is rarer than it should be in economics. He believed deeply that alternative traditions in political economy had to be developed rigorously and confronted with both theory and evidence.
His work kept alive a broad classical and Marxian tradition centered on production, distribution, competition and the social surplus. The questions he insisted on asking were important ones, and his willingness to argue about them openly made heterodox economics better. He will be greatly missed.
PS: Bard College has an archive with his papers that is worth exploring.
* Sam Bowles would be another possible name, but I don't think he considers himself a Marxist anymore (and he might be right). I would also not put analytical or post-modern Marxists at this level. These are obviously debatable views.
Osvaldo Sunkel, one of the last great figures of the original Latin American structuralist tradition, has passed away. A central figure at ECLAC, his work ranged from the structuralist theory of inflation and the historical-structural method to dependency, transnational capitalism, and environmental questions. Esteban Pérez Caldentey's biographical essay rightly presents him as an essential reference for Latin American economic thought, whose work remained concerned throughout with the specific historical and institutional conditions of development in the periphery.
Sunkel belonged to the extraordinary generation formed around ECLAC in the 1950s. His recent oral history for ECLAC is a wonderful account of that intellectual milieu: of studying development when there was barely yet a literature on the subject, and of the emergence of a genuinely Latin American way of thinking about development. ECLAC.
For me, the loss is also personal. One of the reasons I decided to study economics was reading Sunkel's little book on the historical process of development and underdevelopment while still in high school in Rio, assigned by the geography teacher, Clóvis Dottori. The idea that development and underdevelopment were part of the same historical process, not stages in a linear progression from one to the other, was a revelation. The industrialization of England, and the deindustrialization of India were part of the same process. That was in the 1980s.
In the early 2000s we invited Sunkel to a conference in Rio, and I was fortunate to get to know him more closely afterward. The book Esteban and I wrote together is dedicated to him. A major loss for Latin American economics, and for me the passing of someone whose ideas helped set me on the path I followed.
