Category Archives: The dismal science

Public Money for Public Purpose: Toward the End of Plutocracy and the Triumph of Democracy – Part IV

By Dan Kervick, a PhD in Philosophy and an active independent scholar specializing in the philosophy of David Hume who also does research in decision theory and analytic metaphysics. Cross posted from New Economics Perspectives

I have set out a simplified model of a monetarily sovereign government. But near the end of the previous section, I began to suggest that the United States government is indeed a monetary sovereign by this kind. The reader might now suspect that I have yielded my rational mind over to a simplistic fiction of my own creation. And by this point, the reader is probably thinking that however interesting it might be to imagine this fictional entity, the so-called monetary sovereign, such fictions have nothing to do with the complexities of the real world, because actual governments maintain accounts that are indeed constrained by the amount of money in those accounts and by the external sources of funding to which they have access. After all, can’t a government default on its debt? What about the recent debt ceiling debate in the US? What about what is happening in Europe with the sovereign debt crisis? Also, if a government like the United States government was a monetary sovereign of the kind I have described, the consequences would seem to be enormous. Surely if a democratic government possessed this kind of power, we would make much more use of it than we do. In short, monetary sovereignty as described seems both too simple to be real and too good to be true.

These skeptical intuitions are reasonable, so they need to be addressed.

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Public Money for Public Purpose: Toward the End of Plutocracy and the Triumph of Democracy – Part II

By Dan Kervick, a PhD in Philosophy and an active independent scholar specializing in the philosophy of David Hume who also does research in decision theory and analytic metaphysics. Cross posted from New Economics Perspectives

Reflections on Modern Money

Before considering what it would mean to make our monetary system more democratic, let’s begin by calling to mind a few familiar features of money and modern monetary systems in general, features we all intuitively understand as users of money in a modern monetary economy.

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The Trouble with Principles: Or, How to Not Lose Friends and Alienate People When Learning Economics (#OccupyWallStreet, #OWS)

By Jake Romero, an economics student at Portland State University. You can reach him at jvc613 (at) gmail.com

Economics has always been something of a battleground, but in November a group of about seventy Harvard students opened a new front in the ongoing hostilities: its introductory pedagogy. In solidarity with the Occupy movement, the students staged a walkout of their principles course to protest what they called its “inherent bias.”

In his rebuttal in the New York Times, Greg Mankiw countered that his teaching is careful to avoid policy conclusions and that its subject matter falls squarely within the current mainstream of the discipline. Narrowly correct, he nonetheless profoundly missed the broader points that his students, to be fair, seemed unable to articulate fully.

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Public Money for Public Purpose: Toward the End of Plutocracy and the Triumph of Democracy

By Dan Kervick. Cross posted from New Economic Perspectives

A new year is upon us. And even before its first hour has been rung in, 2012 is already taking shape before us as a pivotal year in global politics. We can all feel the awakening under way. A revived longing for equality, shared prosperity and democratic solidarity is inspiring a vibrant new politics around the world. This new activist spirit is quickened by the keen apprehension of young people on every continent that something is very, very wrong with the present economic and political order. The rising generation, heirs to sick and damaged societies that have been unbalanced by decades of plutocratic rule and antisocial cupidity, have now begun to rouse themselves – and in the process they have rallied the moral outrage of their fellow citizens.

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Philip Mirowski: The Seekers, or How Mainstream Economists Have Defended Their Discipline Since 2008 – Part IV

By Philip Mirowski, Carl Koch Professor of Economics and the History and Philosophy of Science University of Notre Dame. Professor Mirowski has written numerous books including More Heat than Light, Machine Dreams and, most recently Science-Mart

Edited and with an introduction by Philip Pilkington, a journalist and writer living in Dublin, Ireland

The debates surrounding the Dynamic Stochastic General Equilibrium [DSGE] models are perhaps some of the most interesting and important to have surfaced in the wake of the crisis. Of course, they, too many debates within the economics profession after the crisis, are deployed in order to insulate the research program from any fundamental criticism. But it is in the nature of the material that the critical observer can see something more interesting going on. And that is the contradiction at the heart of economics: the dichotomy, the abyss that opens up by necessity between macroeconomics and microeconomics.

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Wray: Krugman has shined the headlights on the crucial currency issuer-currency user difference

Edward Harrison here. The post by Randall Wray below is an interesting one because it points out how the world has changed since the end of the gold standard and why the sovereign debt crisis is centered in the euro zone. While I have an Austrian bias overall, for me, MMT is the best way […]

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Philip Mirowski: The Seekers, or How Mainstream Economists Have Defended Their Discipline Since 2008 – Part III

By Philip Mirowski, Carl Koch Professor of Economics and the History and Philosophy of Science University of Notre Dame. Professor Mirowski has written numerous books including More Heat than Light, Machine Dreams and, most recently Science-Mart

Edited and with an introduction by Philip Pilkington, a journalist and writer living in Dublin, Ireland

The previous parts of the series can be found here and here, while a bibliography can be found here

Perhaps the best defence for a failed set of ideas is to have critics that will engage in only superficial critiques. This provides the audience – in this case, the educated general public – with a spectacle by which they can console themselves that the edifice is being shaken up by brave and innovating insiders. The critiques of the Efficient Markets Hypothesis (EMH) currently pouring out of the discipline and into the mediasphere is precisely such a spectacle. (A spectacle which, I must admit, I have partaken in to some degree).

The prize-fighters that step into the public arena in this regard are none other than Paul Krugman and Joseph Stiglitz, both of whom have won the Nobel Prize in Economics – a sort of official sanction by the profession that these are people worth listening to on the state of economics. Their critiques, which attack some of the outlandish excesses of neoclassical thought, merely tiptoe around the edges of the neoclassical research program and do not take on the more fundamental issues.

The EMH is thus set up as a sort of arch-villain of the Bond film variety which, by some readings, led directly to the financial excesses and collapse that we have witnessed. Thus all it needs is a suave hero to do away with it and all will be right with the world once more.

And that is how the critics become the system’s best defenders.

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Europe Braces for Long Winter

By Delusional Economics, who is horrified at the state of economic commentary in Australia and is determined to cleanse the daily flow of vested interests propaganda to produce a balanced counterpoint. Cross posted from MacroBusiness.

Well, it looks like Santa finally stuck his head out of the dark cave for a look around. It is yet to be seen if he rams it straight back in again because he doesn’t like the weather, but at least he has appeared for one night.

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Global Savings Glut or Global Banking Glut?

Yves here. It has been striking how little commentary a BIS paper by Claudio Borio and Piti Disyatat, “Global imbalances and the financial crisis: Link or no link?” has gotten in the econoblogosphere, at least relative to its importance.

As most readers probably know, Ben Bernanke has developed and promoted the thesis that the crisis was the result of a “global savings glut,” which is shorthand for the Chinese are to blame for the US and other countries going on a primarily housing debt party. This theory has the convenient effect of exonerating the Fed. It has more than a few wee defects.

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Philip Mirowski: The Seekers, or How Mainstream Economists Have Defended Their Discipline Since 2008 – Part II

By Philip Mirowski, Carl Koch Professor of Economics and the History and Philosophy of Science University of Notre Dame. Professor Mirowski has written numerous books including More Heat than Light, Machine Dreams and, most recently Science-Mart

Edited and with an introduction by Philip Pilkington, a journalist and writer living in Dublin, Ireland

What follows is Mirowski’s account of the behaviourist defence of neoclassicism after the crisis. While behaviourism does not occupy a central position within the discipline it stabalises it in a different way, in that it allows certain neoclassicals who have a nagging feeling that the whole edifice of the research program is based on shaky and unrealistic foundations to think that they have found some new and exciting way of doing research. They then conclude that if they can only get their colleagues to see the light all will be well and the neoclassical research program can continue. In addition to this it allows them to take a sleeping pill with regards to the recent crash; after all, surely it was the result of some sort of irrational behaviour and not due to inherent structural imbalances within a capitalist economy, right?

As Mirowski points out, the behaviourist research program is largely a sideshow – one might be tempted to say: a sideshow for left-wing economists making excuses.

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Philip Mirowski: The Seekers, or How Mainstream Economists Have Defended Their Discipline Since 2008 – Part I

By Philip Mirowski, Carl Koch Professor of Economics and the History and Philosophy of Science University of Notre Dame. Professor Mirowski has written numerous books including More Heat than Light, Machine Dreams and, most recently Science-Mart

Edited and with an introduction by Philip Pilkington, a journalist and writer living in Dublin, Ireland

During a recent interview with the eminent historian of economic thought, Philip Mirowski, I raised a series of questions relating to how mainstream economists had dealt with the crisis on an intellectual level and what this might mean for the discipline in the coming years.

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From Bad to Worse for the IMF

By Delusional Economics, who is horrified at the state of economic commentary in Australia and is determined to cleanse the daily flow of vested interests propaganda to produce a balanced counterpoint. Cross posted from MacroBusiness.

For some time now I have been pointing out poor economic policy implementations within the European economy and how those policies are likely to effect the real economies of European nations. As I re-stated on Monday, my major concern with the current thinking from European economic leaders is their misguided belief that implementing austerity before credit write-downs/offs is a credible policy for a highly indebted, non-export competitive nation with a non-deflatable currency.

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Philip Pilkington: The Austrian Disease – Poor Scholarship, a Priori Bias

By Philip Pilkington, a journalist and writer living in Dublin, Ireland

Recently I wrote an essay claiming that Austrian economics provided a metaphysical-theological basis for what is today called ‘libertarianism’ – a popular, dogmatic political cult in the vein of Marxism-Leninism. The essay was abstract and, quite possibly, a bit obtuse – for that I apologise, but such is the nature of the material.

If I am correct and libertarianism is a political cult and its foundations were laid by the Austrian economists, what real world effects does this have?

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Satyajit Das: School for Economists

By Satyajit Das, derivatives expert and the author of Extreme Money: The Masters of the Universe and the Cult of Risk Traders, Guns & Money: Knowns and Unknowns in the Dazzling World of Derivatives – Revised Edition (2006 and 2010)

Nicholas Wapshott (2011) “Keynes/ Hayek: The Clash That Defined Modern Economics”; Scribe Melbourne

John Mauldin and Jonathan Tepper (2011) Endgame: The Debt Supercycle and How It Changes Everything; John Wiley, New York

To borrow from David Letterman, there might be no business like show business, but there are many businesses like economics.

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Philip Pilkington: A Scribbler’s Response to Marc Lavoie on MMT

By Philip Pilkington, a journalist and writer living in Dublin, Ireland

Recently the eminent monetary economist Marc Lavoie published a paper engaging with Modern Monetary Theory (MMT). The paper was interesting for a number of reasons, not least the discussion of the European banking system; speculation about which in the media has generated much mythology in the past few months.

Lavoie is largely supportive of MMT and sees it as being essentially correct. However, he also finds that it has much ‘excess baggage’ that he thinks it needs to do away with.

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