We’re now in the process of clearing up an interesting blogoshere miscommunication. Paul Krugman made a gracious reply to a remark in Links on a post of his on OccupyWallStreet that I was very keen about (Krugman gets it) and a related New York Times op ed that I liked save one paragraph which rubbed me the wrong way:
Read more...By Philip Pilkington, a journalist and writer living in Dublin, Ireland
Store clerk in transsexual shop: “Oh, look who’s back… are you going to buy something this time, or are you just curious?”
Tobias Funke: “Well, I guess you could say that I’m buy-curious!”
– Tobias Funke, Arrested Development
Mitch Hurwitz, the creator of Arrested Development – possibly the best comedy show ever produced for television – once said that the funniest things about people are their blind spots. We all possess these psychological blind spots and yet we usually have no idea. Caught up in our own little worlds we see or hear one thing while just about everyone else sees or hears something else. Just like poor, confused Tobias Funke – except, hopefully, in most instances a little less extreme.
Read more...By Gal Noir, an undercover investigator of hijacked economic truths and an occasional blogger at New Economic Perspectives
In his Congressional testimony on October 4th, Federal Reserve Chairman Bernanke uncharacteristically praised the benefits of fiscal policy, calling it “of critical importance” and conveying concerns with the looming deficit reductions. He cautioned: “an important objective is to avoid fiscal actions that could impede the ongoing economic recovery.”
Many economists expressed worry that such advocacy of fiscal policy will erode America’s (already) wavering confidence in the Fed and will further weaken their support for austerity measures. More troubling still, the economists said, was the possibility that the public may follow suit and start demanding from Congress bolder government action on the jobs front.
A few dissenting scholars thought that it was high time for Bernanke to put his money where his mouth was, so to speak.
Read more...We’ve been a bit hard on the left of late, so we figured we’d take some steps to balance our programming. Mark Ames, who has been doggedly on the trail of the Koch brothers, found a delicious failure to live up to his oft-repeated standard of conduct by a god in the libertarian pantheon, Friedrich Hayek. And this fall from grace was encouraged one of the chief promoters of extreme right wing ideas in the US, Charles Koch.
Read more...By Michael Hudson, a research professor of Economics at University of Missouri, Kansas City and a research associate at the Levy Economics Institute of Bard College. Edited Interview by Bonnie Faulkner September 2, 2011 (first aired on Pacifica, September 14, 2011).
“Without consumption, markets are going to shrink. Companies won’t invest, stores will close, “for rent” signs will spread on the main streets and local tax revenues will fall. Companies will lay off their employees and the economy will shrink more. Why aren’t economists talking about these effects of debt deflation, which are becoming the distinguishing phenomenon of our time? They advocate giving more money to the banks, hoping that somehow everything will be okay, as if the banks would lend out the money to fund new production and employment. Mainstream economics and political leaders in both parties are failing to ask why the banks are using these giveaways to speculate abroad, pay their managers bonuses and high salaries or to pay dividends rather than to lend to small businesses or do other things to actually get the economy moving again. This phenomenon cannot be explained without seeing that debt service is siphoning off revenue into the financial sector, which is not recycling it back into the production-and-consumption economy.”
Read more...Yves here. Before reacting reflexively to the thesis of the article, consider this corroborating view from the former chairman of Goldman, John Whitehead, back in 2007:
“I’m appalled at the salaries,” the retired co-chairman of the securities industry’s most profitable firm said in an interview this week. At Goldman, which paid Chairman and Chief Executive Officer Lloyd Blankfein $54 million last year, compensation levels are “shocking,” Whitehead said. “They’re the leaders in this outrageous increase.”
Whitehead went even further, recommending the unthinkable, that Goldman cut pay:
Whitehead, who left the firm in 1984 and now chairs its charitable foundation, said Goldman should be courageous enough to curb bonuses, even if the effort to return a sense of restraint to Wall Street costs it some valued employees. No securities firm can match the pay available in a good year at the top hedge funds.
“I would take the chance of losing a lot of them and let them see what happens when the hedge fund bubble, as I see it, ends,” Whitehead, 85, said….
By Bruno S. Frey, Professor of Economics at the University of Zurich and Margit Osterloh, Professor (em.) for Business Administration and Management of Technology and Innovation, University of Zürich; and Professor, Warwick Business School. Cross posted from VoxEU
Read more...I found this video by the Institute for New Economic Thinking, in which a number of prominent economists discussing the use of models, more than a bit frustrating, with Jamie Galbraith’s comments at the very end a notable exception.
Mainstream fetishizes the use of models.
Read more...Jeff Madrick is a journalist, economic policy consultant and analyst. He is also the editor of Challenge magazine, which seeks to give alternative views on economics issues, as well as a visiting professor of humanities at The Cooper Union, director of policy research at the Schwartz Center for Economic Policy Analysis, The New School, a senior fellow at the Roosevelt Institute and the author of numerous books. His latest book, The Age of Greed, is available from Amazon.
Interview conducted by Philip Pilkington, a journalist and writer based in Dublin, Ireland.
Philip Pilkington: Your book The Age of Greed is a detailed historical survey of some of the key figures that facilitated — broadly speaking — the transition away from the progressive, government-regulated economy of the post-war years and toward the finance-driven, deregulated economy in which we now live. In this interview I don’t want to focus on all the figures that crop up in the book as that is done so there in great detail. Instead I want to explore the broad sweep of this history focusing both on some of the more recognisable of these figures and on the actual cultural, political and economic shift that took place over this period.
Read more...Readers gave high marks to Andrew Dittmer’s summary of a dense but very important paper by Claudio Borio and Piti Disyatat of the BIS and asked if he could produce more of the same.
While Andrew, a recent PhD in mathematics, has assigned himself some truly unpleasant tasks, like reading every bank lobbying document he could get his hands on to see what their defenses of their privileged role amounted to, he has yet to produce any output from these endeavors that are ready for public consumption.
However, I thought readers might enjoy one of Andrew’s older works.
Read more...Admittedly, my RSS reader is hardly a definitive check, but it does cover a pretty large number of financial and economics websites, including those of academics. And from what I can tell, an extremely important paper by Claudio Borio and Piti Disyatat of the BIS, “Global imbalances and the financial crisis: Link or no link?” has been relegated to the netherworld. The Economist’s blog (not the magazine) mentioned it in passing, and a VoxEU post on the article then led the WSJ economics blog to take notice. But from the major economics publications and blogs, silence.
Why would that be? One might surmise that this is a case of censorship.
Read more...The IMF has a passel of articles up on income inequality. “Unequal = Indebted,” by Michael Kumhof and Romain Rancière, focused on macroeconomic effects.
It stars with the observation that countries showing a significant increase of income inequality (defined as the share going to the top 5%) have deteriorating current accounts (note these are all advanced economies; they discuss the glaring exception of China later in the article).
Read more...By Richard Alford, a former New York Fed economist. Since then, he has worked in the financial industry as a trading floor economist and strategist on both the sell side and the buy side.
When you compare Bernanke’s “Deflation: Making Sure It Doesn’t Happen Here” speech of 2002 with his recent Jackson Hole speech, you cannot help but notice changes in his view of the economy and the financial system as well as a significant decline in his confidence in the ability of monetary policy to insure full employment,. The changes between the speeches and the possible explanations for the changes have implication for the course of Fed policy in the near and medium terms as well as the long-run health of the US economy. They suggest that the FOMC sees less upside to further stimulative policy actions and at the same time sees possible downsides where it had not seen them before. This, in turn, suggests that the FOMC will be more tentative in adopting further nonconventional stimulative measures than past behavior would indicate.
Read more...By Satyajit Das, the author of Extreme Money: The Masters of the Universe and the Cult of Risk
Roddy Boyd (2011) Fatal Risk: A Cautionary Tale of AIG’s Corporate Suicide; John Wiley & Sons Inc, New Jersey
Justin Cartwright (2010) Other People’s Money; Bloomsbury, London
Nicholas Dunbar (2011) The Devil’s Derivatives: The Untold Story of the Slick Traders and Hapless Regulators Who Almost Blew Up Wall Street…And Are Ready To Do It Again; Harvard Business Press, Boston, Massachusetts
Barry Eichengreen (2011) Exorbitant Privilege: The Rise and Fall of the Dollar; Oxford University Press, Oxford
Diana B. Henriques (2011) The Wizard of Lies: Bernie Madoff and the Death of Trust; Times Books/ Henry Holt & Company & Scribe Publications, Melbourne
Graeme Maxton (2011) The End of Progress: How Modern Economics Has Failed Us; John Wiley, Singapore
In his novel, Justin Cartwright writes that: “There are beginning and there are ends, and there are also many ways of telling the same story.” The problem is that the great 2007 financial crisis shows no signs of ending. Far from ending, the crisis has shown a virus’ capacity to reconstitute itself. Given the literary difficulty of an uncertain end, publishers and editors have improvised in telling the story – a multiple points of the compass approach to “credit lit”.
Yves here. I thought this discussion of Baumol’s disease would be of interest to NC readers because the issues are relevant for advanced economies generally, not just Australia.
By Cameron Murray, aka Rumplestatskin, a professional economist with a background in property development, environmental economics research and economic regulation. Cross posted from MacroBusiness
Why does the wage of a musician in a string quartet rise over time at roughly the same pace as wages in other areas of the economy, despite the lack of productivity gains in the performance of music?
William J Baumol solved this riddle in the 1960s. His insight, known as Baumol’s cost disease, is fundamental to understanding changes in the economy over time. If we are going to debate the shift towards a service economy, productivity, unemployment, health and education costs and government intervention in markets, we need to fully appreciate his insight. Unfortunately you won’t find his ideas in many introductory economics textbooks.
Read more...A Reply to Robert Murphy’s ‘Have Anthropologists Overturned Menger?
By David Graeber, who currently holds the position of Reader in Social Anthropology at Goldsmiths University London. Prior to this he was an associate professor of anthropology at Yale University. He is the author of ‘Debt: The First 5,000 Years’ which is available from Amazon
Last week, Robert F. Murphy published a piece on the webpage of the Von Mises Institute responding to some points I made in a recent interview on Naked Capitalism, where I mentioned that the standard economic accounts of the emergence of money from barter appears to be wildly wrong. Since this contradicted a position taken by one of the gods of the Austrian pantheon, the 19th century economist Carl Menger, Murphy apparently felt honor-bound to respond.
In a way, Murphy’s essay barely merits response. In the interview I’m simply referring to arguments made in my book, ‘Debt: The First 5000 Years’. In his response, Murphy didn’t even consult the book; in fact he later admitted he was responding at least in part not even to the interview but to an inaccurate summary of my position someone had made in another blog!
We are not, in other words, dealing with a work of scholarship. However, in the blogsphere, the quality or even intention of an argument often doesn’t matter. I have to assume Murphy was aware that all he had to do was to write something—anything really—and claim it rebutted me, and the piece would be instantly snatched up by a right-wing echo chamber, mirrored on half a dozen websites and that followers of those websites would then dutifully begin appearing across the web declaring to everyone willing to listen that my work had been rebutted. The fact that I instantly appeared on the Von Mises web page to offer a detailed response, and that Murphy has since effectively conceded, writing an elaborate climb-down saying that he had no intention to cast doubt on my argument as a whole at all, only to note that I had not definitively disproved Menger’s, has done nothing to change this. Indeed, on both US and UK Amazon, I have seen fans of Austrian economics appear to inform potential buyers that I am an economic ignoramus whose work has been entirely discredited.
I am posting this more detailed version of my reply not just to set the record straight, but because the whole question of the origins of money raises other interesting questions—not least, why any modern economist would get so worked up about the question
Read more...