Yves here. The post below does not quite nail the rather large topic it opens up, that of how financial markets differ from markets for goods and what the implications are for regulation (George Cooper’s The Origin of Financial Crises is very crisp on these topics) but I thought it would provide for conversational grist for NC readers.
Read more...By Paul Davidson,the author of “The Keynes Solution: The Path to Global Economic Prosperity” and the editor of the Journal of Post Keynesian Economics. Cross posted from Alternet
Recently I went to a well-known restaurant in Evanston, Illinois. This restaurant has a reputation for providing excellent food and service. But the night I was there, it was less than half full. I asked the manager if he would he hire more waiters and chefs if his taxes were reduced and/or government removed the existing regulations controlling the way his restaurant could operate. His answer was that even if his taxes were reduced and regulations eliminated, he would only hire more staff if more customers came in for dinner. On the other hand, if there were twice as many customers for dinners than there were on this night (and there were many more customers before the recession began in 2007) he would gladly double the number of workers he employed even if his taxes were not reduced or regulations changed.
That’'s how things work in the Real World.
Read more...By Douglas K. Smith, the co-founder of Econ4 and author of “On Value and Values: Thinking Differently About We In An Age Of Me. Cross posted from Alternet
The long-running General Electric slogan sums up what capitalist cheerleaders love to say about markets: "We bring good things to life."
But is it really true? In reality, some capitalists have figured out how to profit by actually bringing bad things to life.
Read more...Although various commentators (including our Marshall Auerback) have raised warning flags about the long-term viability of China’s growth model, the middle kingdom’s performance during the crisis seemed to prove skeptics wrong. Never mind that creditors like China tend to suffer most in the aftermath of major financial crises, or that no country has ever sustained such a high combination of exports plus investment (over 50% of GDP) for very long. And the ongoing reports of all those vacant cities seemed to be irrelevant.
The critics have been looking less off base of late.
Read more...An article in the Boston Review by professor of sociology Claude Fischer falls prey to a pattern that is all too common: attributing social/political outcomes to American attitudes without bothering to examine why those attitudes came to be.
Let me give you a bit of useful background before I turn to the Fischer article as an illustration of a lack of curiosity, or worse, among soi disant intellectuals in America, and how it keeps Americans ignorant as to how many of our supposed cultural values have been cultivated to inhibit disruptive thought and action.
Read more...Yves here. I’m dwelling on the spectacular failure of Latvia in part because readers like the writings of Michael Hudson, but more important, because a major push is on to reimage the implosion of that economy as some sort of success, not unlike the claims the Chicago Boys made for their efforts in Chile. It also doesn’t hurt that this account, which is a considerably expanded version of a recent Financial Times op-ed, is vivid and pointed.
By Jeffery Sommers and Michael Hudson, a associate professor at the University of Wisconsin-Milwaukee and distinguished professor at the University of Missouri-Kansas City respectively, who have both advised members of Latvia’s government on alternatives to austerity. They are also contributors to the forthcoming book by Routledge Press: The Contradictions of Austerity: The Socio-Economic Costs of the Neoliberal Baltic Model. Cross posted from Counterpunch by permission of the authors
Austerity’s advocates are declaring victory with Latvia’s battle against the European economic crisis and advocating it as the model for Greece & Spain to emulate. Curiously, Latvians have been declaring this “win” by exiting their country.
Read more...By Philip Pilkington, a writer and journalist based in Dublin, Ireland. You can follow him on Twitter at @pilkingtonphil
Convictions are more dangerous foes of truth than lies
– Friedrich Nietzsche
Heterodox economists – that is, those that do not subscribe to the neoclassical research program – often claim that they are marginalised within the profession. Anyone who has had dealings with academia would instinctively take such complaints with a pinch of salt. Indeed, academic quarrels often have as much to do with who said what at a dinner party as they have to do with questions of high theory. Academics, for better or for worse, are often characterised by their independent-mindedness… and with it: their stubbornness. This often leads them to partake in intellectual factionalism.
However, when I started studying economics and talking to heterodox economists, it quickly struck me that something wholly different was going on.
Read more...While Adam Davidson’s current New York Times column, “How to Make Jobs Disappear” refrains from blatant advocacy of the interests of the 1%, his “Let Dr. Pangloss explain it” approach to economic news is still flattering to the established order. To the extent that anyone in the officialdom pays attention to his work, he’s holding up a rosy-colored mirror to their stewardship. And for the rest of us, his relentless “see, everything really is fine, now take your Soma” denies the reality of the hardships and stresses most ordinary Americans face.
It’s hitting the point where I’m getting such sharp, annoyed commentary about Davidson’s columns by e-mail that I have to work to read his columns with a fresh eye. From one correspondent:
Read more...By Michael Hudson and Jeffery Sommers, a distinguished professor at the University of Missouri-Kansas City and associate professor at the University of Wisconsin-Milwaukee respectively, who have both advised members of Latvia’s government on alternatives to austerity. They are also contributors to the forthcoming book by Routledge Press: The Contradictions of Austerity: The Socio-Economic Costs of the Neoliberal Baltic Model. Cross posted from the Financial Times by permission of the authors
Austerity’s advocates depict Latvia as a plucky country that can show Europe the way out of its financial dilemma – by “internal devaluation”, or slashing wages. Yet few of the enthusiastic commentators have spent enough time in the country to understand what happened.
Read more...Marc Lavoie is a professor in the Department of Economics at the University of Ottawa. He is the author of numerous books on post-Keynesian economics. His latest work ‘Monetary Economics’, written with the late Wynne Godley, is now available in paperback from Amazon.com.
Interview conducted by Philip Pilkington. Part I of this interview can be found here
Philip Pilkington: If you don’t mind I’d like to move onto some more practical issues. The models set out in the book lead to some very different conclusions than the mainstream models as far as the effects of macroeconomic policy go. This has enormously important implications for both policymakers and people working in the financial markets.
Read more...Bloomberg has a useful piece up tonight describing how markets are reacting in no consistent way to ratings agency actions on sovereign debt. The story is long and prominent enough that it looks to be an indicator of shifting stances in the media on deficit cutting.
Read more...Marc Lavoie is a professor in the Department of Economics at the University of Ottawa. He is the author of numerous books on post-Keynesian economics. His latest work ‘Monetary Economics’, written with the late Wynne Godley, is now available in paperback from Amazon.com.
Interview conducted by Philip Pilkington
Philip Pilkington: Monetary Economics quite consciously departs from the neoclassical paradigm while at the same time setting itself the high task of producing concise and coherent models. So, let’s start from the beginning: why did you and Godley feel the need to depart so forcefully from the neoclassical paradigm? T
Read more...By Philip Pilkington, a writer and journalist based in Dublin, Ireland. You can follow him on Twitter at @pilkingtonphil
What the bourgeoisie therefore produces, above all, are its own grave-diggers. Its fall and the victory of the proletariat are equally inevitable.
– Karl Marx and Friedrich Engels ‘The Communist Manifesto’
Calls for balanced budgets in the present environment have long appeared somewhat confused, of that we have had little doubt for some time now as balanced budgets seem to exacerbate the problems they target rather than solve them and may lead to higher debt-to-GDP levels due to the reduction in real economic growth that they lead to.
Read more...Yves here. Readers reacted positively to the inaugural report of the S.H.A.M.E Project on Malcolm Gladwell. S.H.A.M.E. , stands for “Shame the Hacks who Abuse Media Ethics.” Its approach is to provide information about the background and funding sources of well-recognized journalists and pundits so that the public will be in a better position to recognize bias and hidden agendas in their reporting and analysis.
This second report is on the widely-read economist Steve Levitt
Read more...By Philip Pilkington, a writer and journalist based in Dublin, Ireland. You can follow him on Twitter at @pilkingtonphil
In 1936 Keynes wrote a forward to the German edition of his General Theory. Since then it has, as far as I can see, been ignored by his defenders and held up by his most virulent detractors (notably, Austrian School ideologue Henry Hazlitt).
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