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Showing posts from June, 2015

Greece on the verge

Jean François Ponsot, Jonathan Marie and @NakedKeynes
I'm in France for a talk at the Université de Paris XIII, invited by Jonathan Marie and Dany Lang. The Greek crisis looms large in everybody's minds. I gave a talk based on two papers, one published here, and the other (specifically on the Spanish crisis) just finished, which will soon come as a working paper. But I discussed to a great extent the debate between Sergio Cesaratto and Marc Lavoie on the nature of the European crisis, that is, whether it is a balance of payments crisis or a monetary sovereignty one.

Cesaratto argues that a balance-of-payment crisis is possible in a currency union, and that the financial crisis of the Eurozone is indeed such a balance-of-payment crisis. Arguably Pérez and Vernengo (2012; the one linked above) suggest the same, even though the paper was written to argue that the crisis was not fiscal, as per the mainstream hypothesis, and the actual policies pursued by the Troika, which require …

Stiglitz and Krugman on Troika’s Attack On Greek Democracy

By Joseph Stiglitz
The rising crescendo of bickering and acrimony within Europe might seem to outsiders to be the inevitable result of the bitter endgame playing out between Greece and its creditors. In fact, European leaders are finally beginning to reveal the true nature of the ongoing debt dispute, and the answer is not pleasant: it is about power and democracy much more than money and economics. Of course, the economics behind the program that the “troika” (the European Commission, the European Central Bank, and the International Monetary Fund) foisted on Greece five years ago has been abysmal, resulting in a 25% decline in the country’s GDP. I can think of no depression, ever, that has been so deliberate and had such catastrophic consequences: Greece’s rate of youth unemployment, for example, now exceeds 60%. Read rest here.

By Paul Krugman
It has been obvious for some time that the creation of the euro was a terrible mistake. Europe never had the preconditions for a successfu…

Bielschowsky on Furtado's "Economic Growth of Brazil"

Celso Furtado (1920-2004)
The International Journal of Political Economy, edited by Mario Seccareccia, had a special issue on Celso Furtado. There were articles by Ricardo Bielschowsky, James Cypher, and Rosa Freire d'Aguiar, Furtado's widow, among others. Below Bielschowsky's paper on Furtado's opus magnus, titled "Furtado's Economic Growth of Brazil: Masterpiece of Structuralism."
From the abstract:
This survey article reviews Celso Furtado’s most famous book and argues that he convincingly used the central elements of the Prebisch-ECLAC analytical construct—strucuturalism—to organize and study the economic history of Brazil from its discovery until the mid-twentieth century. Furtado shows how, throughout Brazilian history, successive cycles of economic growth before industrialization (mainly, the production of sugarcane in the Northeast in the seventeenth century, the gold cycle in Minas Gerais in the eighteenth century, and coffee production in the So…

Greece Has Made Tough Choices. Now It's the IMF's Turn

By James K. Galbraith

The International Monetary Fund's chief economist, Olivier Blanchard, recently asked a simple and important question: "How much of an adjustment has to be made by Greece, how much has to be made by its official creditors?" But that raises two more questions: How much of an adjustment has Greece already made? And have its creditors given anything at all?

In May 2010, the Greek government agreed to a fiscal adjustment equal to 16 percent of GDP from 2010 to 2013. As a result, Greece moved from a primary budget deficit (which excludes interest payments on debt) of more than 10 percent of GDP to a primary balance last year -- by far the largest such reversal in post-crisis Europe.

Read rest here.

On Keynes and the Quantity Theory

Slow posting will continue for quite a while. Backlogged with work. At any rate, I've been reading (almost done now) Richard Davenport-Hines new book on Keynes, Universal Man: The Lives of John Maynard Keynes. Nothing new really. And that should not be a surprise after the biographies by Skidelsky and Moggridge.

There are many little issues here and there, which is inevitable, given Keynes' own contradictions, and the overwhelming number of interpretations of his work. There is one point, which is repeated by Davenport-Hines, based on a monetary interpretation of the development of the Principle of Effective Demand (PED), which I think is completely misguided. He says that: “Keynesian economics developed from its progenitor’s rejection of the quantity theory of money [QTM].” Not really. The theory developed from the rejection of Say's Law. The rejection of the QTM is a side effect.
In fact, in terms of the monetary views, Keynes had moved from the QTM in his Tract in 1923…

Inequality, the Financial Crisis and Stagnation

By Thomas Palley

This paper examines several mainstream explanations of the financial crisis and stagnation and the role they attribute to income inequality. Those explanations are contrasted with a structural Keynesian explanation. The role of income inequality differs substantially, giving rise to different policy recommendations. That highlights the critical importance of economic theory. Theory shapes the way we understand the world, thereby shaping how we respond to it. The theoretical narrative we adopt therefore implicitly shapes policy. That observation applies forcefully to the issue of income inequality, the financial crisis and stagnation, making it critical we get the story right.
Read rest here.

Beyond Laissez-faire? Seriously?

As I noticed, posting will continue a bit slow for a while. So this is a bit old. Noah Smith suggests that the profession is leaning in a liberal, meaning moderately lefty, direction. He tells us, however, that: "although there’s a growing consensus that something about U.S. economic policy needs to be changed in a more liberal direction, there isn't any consensus on what. Laissez-faire may have reached the end of its shelf life, but we don’t yet know what is going to replace it." He praises Reagan-Thatcher's policies for their simplicity. I guess Occam's Razor is the criteria here. Not uncommon, as I noted before, that was Krugman's defense of free trade not long ago. He might be right on the lack of consensus on what to do, even though his minimal program from the discontented seems plausible enough, more fiscal expansion, less free trade agreements, higher wages (start with the minimum) and more regulation of finance.

Note, however, that this policy conse…

More on the War on Tenure

From Inside Higher Ed:
It’s been a tumultuous year for faculty members within the University of Wisconsin System, from threats to the Wisconsin Idea to a proposed $300 million budget cut to Governor Scott Walker’s suggestion that professors do more work to compensate for the slash. But many professors and other observers said the roller coaster hit a new low Friday afternoon when the state Legislature's powerful Joint Finance Committee approved, by a vote of 12-4, the elimination of tenure from state statute, along with adding new limits to the faculty role in shared governance and procedures for eliminating faculty members in good standing outside of financial exigency. Read rest here.