Category Archives: The dismal science

Philip Pilkington: Three Reasons Why Endogenous Money Matters

By Philip Pilkington, an Irish writer and journalist living in London. You can follow him on Twitter at @pilkingtonphil

There’s been a bit of confusion of late in blogland about whether endogenous money really matters all that much. Endogenous money is, of course, the theory that, contrary to what mainstream economics would have you believe, private banks in modern capitalist economies actually create money out of thin air. In my experience, theoretical economists grasp very quickly how much of an impact such a theory would have if it were accepted as true. Less theoretically inclined commentators who are generally more interested in policy and practical matters, however, often express confusion over what exactly all the fuss is about. “Does endogenous money really matter?” they ask.

In what follows I will lay out the three leading reasons why endogenous money does, in fact, matter.

Philip Pilkington: The 19th Century Long Depression: How it Fostered Oligopolistic Capitalism and Serves as a Model for Austerity

By Philip Pilkington, a writer and journalist who is in the process of moving to London. You can follow him on Twitter at @pilkingtonphil

You can live in this illusion
You can choose to believe
You keep looking but you can’t find the woods
While you’re hiding in the trees

– Nine Inch Nails ‘Right Where it Belongs”

Many people that I meet who are vaguely interested in economics – usually people in academia outside of the economics departments or working in lower tier sectors of banking and finance – are enamoured with libertarianism and its economic doctrines. Meanwhile the Republican Vice Presidential nominee – an Ayn Rand obsessive – has channelled such ideas into a truly otherworldly budget proposal.

Libertarianism-lite has become the last refuge for the ideological conservative.

Yanis Varoufakis: The Game of the Two Marios

Yves here. Yanis called this post “Europe’s Modern Titanomachy: How Europe’s future is being shaped by large battles on seemingly small matters (Part C)” but that title obscures the point. His piece works though how the choices of ECB chief Mario Draghi and Italy’s prime minister Mario Monti interact with each other, and what that means for the future of the Eurozone: “Today’s Great Expectations (regarding the ECB’s intervention, banking union, Brussel’s federal moves etc.) are more likely to prive Dickensian than literal.”

Eugene Linden: In a World of Underpriced Risk, What Could Possibly Go Wrong?

By Eugene Linden, a journalist and author of seven books who has written extensively about animal behavior, environmental issues, and markets

On a recent conference call, the strategist of a major international bank (it was an off-the-record call for clients only) laid out the bare bones of what he called the world’s “giant experiment” in debt and interest rates. Never before have so many countries maintained such low base rates for so long; never before in peacetime have so many countries had such huge deficits and debt burdens; never before in U.S. history had long term rates been so low; never before has the U.S. gone so many decades without deflation following inflation. Because we live in these unprecedented times, it’s easy to lose sight just our strange they are… and how dangerous.

Dan Kervick: Shamanistic Economics

By Dan Kervick, who does research in decision theory and analytic metaphysics. Cross posted from New Economic Perspectives

The Fed did something on Wednesday: it announced a new program of open-ended quantitative easing, and it announced that it likely won’t pull back on the new round of monthly asset purchases once the economy begins to recover more strongly, but will keep the purchases going for some indefinite period of time afterward.

This announcement has greatly pleased all of those people who have been calling for the Fed to do something….

On Economic Methodology: An Interview with Sheila Dow

Sheila Dow is Emeritus Professor of Economics at the University of Stirling, Scotland, and Convener of the Scottish Centre for Economic Methodology. Her latest book ‘Foundations for New Economic Thinking’ is available from Amazon.com

Interview conducted by Philip Pilkington

Philip Pilkington: Your book is all about the importance of methodology in economics. Up until now methodology has largely been side-lined. I recall, for example, that Paul Samuelson made a comment to the tune of “Those who cannot do science do methodology”. That strikes me as being broadly the mainstream attitude to any discussions of methodology in economics. In the face of this why do you find methodology to be so important?

The Euro as Idealist Project or: How I Learned to Stop Worrying and Love Pragmatic Elites

By Nathan Tankus,s a member of Occupy Wall Street Alternative Banking working group. He is also deeply involved in the heterodox economics community and plans to have a PhD in economics before the decade is done. Cross posted with View From the Metropole.

In accounts of American economic history, the early days of banking are typically described as chaotic, contradictory and many decisions are depicted as awful, stupid mistakes. That period certainly included all these things, but looking at Europe now, one can’t help but feel that many back then (especially the elites) understood money better and were much better pragmatists.

Exchange Rates and Modern Trade Theory: An Interview with John Harvey

John Harvey is Professor of Economics at Texas Christian University. He blogs at Forbes and is the author of the book ‘Currencies, Capital Flows and Crises: A Post-Keynesian Analysis of Exchange Rate Determination’

Interview conducted by Philip Pilkington

Philip Pilkington: Your book seeks to outline an alternative theory of what determines exchange rates in our world today.

Pavlina Tcherneva: Economists for Romney – A Closer Look

Yves here. Paul Krugman already pounced on a major, and disturbing, deception on behalf of the Romney economics team: that Glenn Hubbard, Greg Mankiw, and John Taylor (along with Kevin Hassett) published a white paper which grossly misrepresented the research of multiple economists. In other words, they are willing to flat out lie to create the impression their policies ideas have wide-spread support among economists.

Pavlina Tcherneva makes separate observations about the key advisors in Romney’s camp and how well their ideas have fared in our depression-in-the-making.

Philip Pilkington: Divine Mathematics – Neoclassical Economics as Spiritual Meditation

By Philip Pilkington, a writer and journalist based in Dublin, Ireland. You can follow him on Twitter at @pilkingtonphil

The influence that mathematics has had on neoclassical economics is obviously quite profound. However, when looked at in detail it appears that a certain type of modern mathematics was in fact highly suited to the direction many in the economics profession took after the work of Leon Walras – the Frenchman who founded modern neoclassical economics – appeared on the scene. So, it should not be thought that it was simply the formal tools of mathematics that transformed neoclassical economics into the obscurantist doctrine it is today. Instead it should be understood that its obscurantist skeleton was ready and waiting for its mathematical flesh.

Is an Anti-Austerity Alliance of Left Neo-Classicals and Post-Keynesians Possible? Is it Desirable? (Part 1)

Yves here. The discussion of tribal allegiances in economics in this post helps illustrate why it is so difficult to push back against failed ideas when they are dear to the mainstream. It is also a useful ethnographic guide.

By Michael Hoexter. Cross posted from New Economic Perspectives

I drafted the “Mixed Economy Manifesto” as one attempt to create a common basis for anti-austerity economists and non-economists to argue against, in the clearest terms possible, the waves of government spending cutbacks that are advocated by misguided elites, by the right-wing and by right-leaning neoclassical economists.

Risk is Always With Us

By Sell on News, a global macro analyst. Cross posted from MacroBusiness

A question that has been asked, but not nearly often enough, is why did the complex risk defrayal methods fail so completely during the global financial crisis?