Archive for the ‘Political Economy’ Category

Inequality and Growth in Neo-Kaleckian and Cambridge Growth Theory

Thursday, April 21st, 2016

This paper examines the relationship between inequality and growth in the neo-Kaleckian and Cambridge growth models. The paper explores the channels whereby functional and personal income distribution impact growth. The growth – inequality relationship can be negative or positive, depending on the economy’s characteristics. Contrary to widespread claims, inequality per se does not impact growth through macroeconomic channels. Instead, both growth and inequality are impacted by changes in the underlying forms and pattern of income payments. However, inequality is critical at the microeconomic level as it explains differences in household propensities to consume which are at the foundation of neo-Kaleckian and Cambridge growth theory. READ MORE.

Year of the Outsider: Why Bernie Sanders’ Democratic Rebellion is so Significant

Tuesday, April 5th, 2016

2016 was supposed to have been the year of Jeb Bush versus Hillary Clinton: the year when the established Bush dynasty confronted the upstart rival Clinton Dynasty. But the year of the insider has turned into the year of the outsider. On both sides, voters have unexpectedly given vent to thirty years of accumulated anger with neoliberalism which has downsized their incomes and hopes.

Though the Republican rebellion has been more clear-cut in its dismissal of insider candidates, it is Bernie Sanders’ Democratic rebellion that is of potentially far greater historic significance. (more…)

Bernie Slanders: How the Democratic Party Establishment Suffocates Progressive Change

Monday, March 21st, 2016

The Democratic Party establishment has recently found itself discomforted by Senator Bernie Sanders’ campaign to return the party to its modern roots of New Deal social democracy. The establishment’s response has included a complex coupling of elite media and elite economics opinion aimed at promoting an image of Sanders as an unelectable extremist with unrealistic economic policies.

The response provides a case study showing how the Party suffocates progressive change. Every progressive knows about the opposition and tactics of the Republican Party. Less understood are the opposition and tactics of the Democratic Party establishment. Speaking metaphorically, that establishment is a far lesser evil, but it may also be a far greater obstacle to progressive change. (more…)

Self-Protectionist Moment: Paul Krugman Protects Himself and the Establishment

Thursday, March 10th, 2016

Paul Krugman has a new op-ed (“A Protectionist Moment?”) in which he tries to walk away from his own contribution as an elite trade economist to the damage done by globalization, while also continuing to lend his political support to Hillary Clinton and the neoliberal globalization wing of the Democratic Party.

His article inadvertently spotlights all that is wrong with the economics profession through the lens of the trade debate. (more…)

Zero Lower Bound (ZLB) Economics: The Fallacy of New Keynesian Explanations of Stagnation

Thursday, March 3rd, 2016

This paper explores zero lower bound (ZLB) economics. The ZLB is widely invoked to explain stagnation and it fits with the long tradition that argues Keynesian economics is a special case based on nominal rigidities. The ZLB represents the newest rigidity. Contrary to ZLB economics, not only does a laissez-faire monetary economy lack a mechanism for delivering the natural rate of interest, it may also lack such an interest rate. Moreover, the ZLB can be a stabilizing rigidity that prevents negative nominal interest rates exacerbating excess supply conditions. [READ MORE]

The Relevance of Keynes’s General Theory after 80 years

Tuesday, February 9th, 2016

By Thomas Palley, Louis-Philippe Rochon and Matías Vernengo

This year marks two important anniversaries in macroeconomics: the 80th anniversary of the publication of Keynes’s The General Theory of Employment, Interest and Money, and the 70th anniversary of Keynes’s premature death, at the age of 63. To mark these anniversaries, the first issue of the fourth year of the Review of Keynesian Economics is dedicated to Keynes.

The issue contains a symposium of papers titled “The Relevance of Keynes’s General Theory after 80 years” and some previously unpublished archive material on Keynes. The unpublished material is notes from a 1936 University of Chicago course taught by Frank Knight in which The General Theory was discussed, and a memorandum written by Lauchlin Currie, who is considered the first and most combative Keynesian in the Roosevelt administration during the early phases of the New Deal.

The 80th anniversary of The General Theory takes place at a time when the global economy is struggling with economic stagnation that set in after the financial crisis of 2008. In some regards, these conditions have parallels with the 1930s when the Great Depression followed the financial crisis of 1929. However, this time economic depression was avoided by timely economic policy interventions that either bore the direct hallmarks of conventional Keynesian thinking or were inspired by Keynesian thinking about the economy’s limited self-stabilizing capacity. [READ MORE]

Website 10th Anniversary: 10 Things I Got Right

Sunday, September 27th, 2015

Ten years ago (September 2005) I launched my website. To mark this anniversary, here are ten postings that I think got it right. Many of them are included in my book, The Economic Crisis: Notes From The Underground (2012).

1. Keynesianism: what it is and why it still matters (September 18, 2005). My first post. What was intellectually unfashionable back then is now in.

2. The Questionable Legacy of Alan Greenspan (October 16, 2005). Raining on the Maestro’s parade was not popular.

3. Winner’s curse: The Torment of Chairman-designate Bernanke (November 4, 2005). I suspect Mrs. Bernanke wishes Mr. Bernanke read this before accepting the job.
(more…)

Stop Fearing Full Employment

Friday, September 4th, 2015

August’s Employment Report showed the unemployment rate fell to 5.1 percent and creation of 173,000 new jobs. Predictably, the decline in the unemployment rate has triggered calls for higher interest rates from Wall Street Hawks on grounds that higher core inflation is just around the corner. That is the same call we heard when the unemployment rate was much higher, and it is the same call we heard in the past two business cycles.

Federal Reserve policymakers should ignore the Hawks and stop being afraid of tight labor markets. In a market economy, that is the way workers get a raise. There is no reason for the Fed to rock the boat and risk confiscating the raise working families have waited for so long. That is the message this Labor Day weekend. (more…)

American capitalism, globalization & possibilities for reform

Wednesday, August 12th, 2015

An interview with Andrew Mazzone, President of the Board of Trustees, Henry George School of Social Science [VIEW HERE].

The US Economy: Explaining Stagnation and Why It Will Persist

Friday, August 7th, 2015

This paper examines the major competing interpretations of the economic crisis in the US and explains the rebound of neoliberal orthodoxy. It shows how US policymakers acted to stabilize and save the economy, but failed to change the underlying neoliberal economic policy model. That failure explains the emergence of stagnation, which is likely to endure. Current economic conditions in the US smack of the mid-1990s. The 1990s expansion proved unsustainable and so will the current modest expansion. However, this time it is unlikely to be followed by financial crisis because of the balance sheet cleaning that took place during the last crisis. [READ MORE]