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Graphics from 4 empirical muckrakers – 1. Nitzan and Bichler’s Buy-to-Build Indicator

1 day ago

From Blair Fix
During the 1990s, corporate mergers became part of the public zeitgeist. But what is the deep history of mergers and acquisitions?
Jonathan Nitzan and Shimshon Bichler piece together the puzzle with their ‘buy-to-build’ indicator. This indicator measures the dollar value of mergers and acquisitions expressed as a percentage of gross fixed investments. It tells us how much corporations are spending on buying other companies, relative to how much they are spending on actually building things. Nitzan and Bichler muckrake to put together a century of US data:
Nitzan and Bichler’s Buy-to-Build Indicator (Source)More recently, Joe Francis compiled an open source update of the buy-to-build indicator. This is great empirical muckraking.

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Facts, fallacies and echo chambers

7 days ago

From Iconoclast
The above discussion “The new minds of young people will be open to the new empirical evidence.” illustrates the difficulties encountered by heterodox thinkers. Orthodox thinkers share a dogma, or at least a set of a priori assumptions, and usually a methodology. In essence, this makes orthodox thinking an echo chamber where basic ontology is never questioned. When the heterodox argue, as in the economically heterodox here, the argument eventually descends (or ascends?) into metaphysics; into ontology and epistemology. This is both the benefit and drawback of thinking and arguing from any kind of heterodox position.
While we are all drawn here by our rejection of orthodox economics, each of us has a particular perspective. That perspective is drawn from our

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The tyranny of meritocracy

8 days ago

From Blair Fix
Like many Canadians, I grew up with a faith in meritocracy. Do your best, I believed, and the world would reward you.
In school, this idea seemed self-evidently true. I worked hard, and was rewarded with good grades and praise from teachers. And those students who didn’t get good grades? Well they had less skill — less merit — than me. Or so I thought.
In hindsight, I cringe at my naivety. Like many successful people, I was blind to something important. There is no objective standard by which we judge merit.
Instead, merit is judged in a social context. What counts as deserving merit is what other people think deserves merit. This social context is why meritocracy can be a tyranny. If you’re good at something that isn’t valued by other people, you won’t be rewarded.

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The US vs. Western Europe 1980 – 2016

12 days ago

In 1980 the bottom 50% of the population in the US received 20% of the national income and 23% in Western Europe. By 2016 the share of the bottom 50% of the US population received declined to 13% while in Western Europe the bottom 50% held on to 22% of the national income. The top 1% in Western Europe increased their share to 12% in 2016. Meanwhile in the US the top 1%increased their share of the national income from 10% in 1980 to 20% in 2016.
A key question is what policies and forces are at play in Western Europe that maintained the bottom 50%’s share?

from American Delusions

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MMT has become part of the mainstream conversation, but . . .

25 days ago

From David Colander
MMT has done what few heterodox economic theories have done; it has become part of the mainstream conversation. It is talked about by pundits and politicians, which means that standard macro economists have felt compelled to respond to its arguments. That’s an enormous accomplishment that will, I hope, lead to improvements in macroeconomic theory and policy. Its creators deserve to be congratulated. But I am not too hopeful. MMT is more of a marketing success than an intellectual success that has caused standard economists to rethink their theory or policy views, and I suspect that, once MMT’s political usefulness to progressive politicians diminishes, standard economists will push MMT back into the heterodox wilderness, and settle back into their unwarranted

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Can a service transition save the planet?

26 days ago

From Blair Fix
Let’s talk sustainability. Unless you’re an anti-science crank, you probably agree that we’ve got a problem with carbon emissions. We need to drastically cut emissions to avoid catastrophic climate change. On this we should all agree.

The question that’s open for debate is how to cut emissions. I think we actually know very little about how do to this. But even worse than knowing little is thinking we know a lot when we don’t. As the old saying goes, “It ain’t what you don’t know that gets you into trouble. It’s what you know for sure that just ain’t so.”
This post is about false solutions to climate change. These are ideas that seem like plausible ways to reduce carbon emissions, but that fall apart when we look at the evidence. If we’re serious about sustainability,

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As it dies, we talk about the ‘free market’ more

27 days ago

From Blair Fix
In The Growth of Hierarchy and the Death of the Free Market, I argued that economic development involves killing the free market. What was the evidence? As energy use increases, so does the relative number of managers.

This growth of managers, I argued, indicates that economic development involves the growth of hierarchy. I showed that a simple model of hierarchy could explain why the number of managers increases with energy use. To get a sense for this model, try the app below.

A web app showing how the growth of hierarchy leads to the growth of managers. Click the image to use the app.So as societies develop, they replace small-scale competition with large-scale hierarchy. In other words, economic development means killing the free market and replacing it with

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Resources for recovering academic writers

October 18, 2019

From Blair Fix
Hello, my name is Blair Fix. I’m a recovering academic writer.
Let me explain. I’m convinced that a major part of grad school is learning to decipher academic prose. Let’s face it — academic writing is usually bad. It’s dense. It’s jargon filled. It’s often monotonous. In short, academic writing begs the reader not to read it.
So a big part of grad school is learning how to read prose that was designed not to be read. This takes great effort and a healthy dose of masochism. If you’ve learned how to read academese, I commend you.
Having learned how to read academic prose, the next step in grad school is to learn how to write this way yourself. Writing like fellow academics signals that you’re ready to join the guild. Your lofty ideas belong in the academic pantheon.

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Some constructive remarks on Wray’s “Alternative paths to MMT”

October 16, 2019

From Arturo Hermann
Dear Randall, I appreciate your article “Alternative Paths to Modern Money Theory” and the novel perspective put forth by MMT in respect to the very narrow views of Austrian and neoclassic theories. Starting from this, I would like to make some constructive remarks around the following aspects: 
(I) In the article you stress that (p.6), when there is a “sovereign national currency” (p.5) and flexible exchange rates, “The sovereign currency issuer:
 does not face a ‘budget constraints’ (as conventionally defined). [Later you clarify that “a sovereign government can impose on itself a ‘budget’ and that “this is normal practice and probably a good idea”, but anyway this path seems to be in your view fairly optional.];
cannot ‘run out of money’;
can always meet its

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No, productivity does not explain income

October 14, 2019

From Blair Fix
Did you hear the joke about the economists who tested their theory by defining it to be true? Oh, I forgot. It’s not a joke. It’s standard practice among mainstream economists. They propose that productivity explains income. And then they ‘test’ this idea by defining productivity in terms of income.
In this post, I’m going to show you this circular logic. Then I’ll show you what productivity differences look like when productivity is measure objectively. They’re far too small to explain income differences.

Marginal productivity theory
The marginal productivity theory of income distribution was born a little over a century ago. Its principle creator, John Bates Clark, was explicit that his theory was about ideology and not science. Clark wanted show that in capitalist

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MMT: eliding foundational principles in the interests of journalistic simplicity

October 13, 2019

From Anne Mayhew
I count myself as one of those friendly critics who applaud several of the major MMT contributions to our understanding of the modern American economy. Among these contributions are the emphasis put on
the endogeneity of money;
the importance of using of a flow-of-funds approach in analysis of the macroeconomy;
detailed descriptions of how the FED (Federal Reserve System) actually operates, details usually missing from texts.
And from these three emphases the central conclusion of MMT is that the availability of space for fiscal expansion is larger than commonly understood. These three emphases are used to construct a forceful rejection of the argument that financial constraints can require austerity in economies with unused non-financial resources. Although much of

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Radically misleading calculations

October 11, 2019

From Geoff Davies
The point of a theory or model is to provide a useful guide to understanding the world. People like Paul Krugman are fond of claiming simple equilibrium models provide a useful first cut or first approximation to understanding. Others put their faith in more elaborate equilibrium models. But do equilibrium models, simple or elaborate, offer any useful guidance to actual economies, or are they perhaps radically misleading? Is this
a useful guide to this?

Or this?

The difference between these examples is feedback. Feedback is powerful. It can generate exponential growth, which can take over the world (or try to). In special circumstances, feedback can generate a steady state, an equilibrium. Some living systems begin their life undergoing exponential growth but then

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What is MMT?

October 10, 2019

From L. Randall Wray
MMT provides an analysis of fiscal and monetary policy that is applicable to national governments with sovereign currencies. We argue that there are four essential requirements that qualify a national currency as sovereign in the sense in which we use the term:
the National government chooses a money of account in which the currency is denominated;
the National government imposes obligations (taxes, fees, fines, tribute, tithes) denominated in the chosen money of account;
the National government issues a currency denominated in the money of account, and accepts that currency in payment of the imposed obligations; and
if the National government issues other obligations against itself, these are also denominated in the chosen money of account, and payable in the

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An ideology called consumerism

October 9, 2019

We are guided by an ideology so familiar and pervasive that we do not even recognise it as an ideology. It is called consumerism. It has been crafted with the help of skilful advertisers and marketers, by corporate celebrity culture, and by a media that casts us as the recipients of goods and services rather than the creators of political reality. It is locked in by transport, town planning and energy systems that make good choices all but impossible. It spreads like a stain through political systems, which have been systematically captured by lobbying and campaign finance, until political leaders cease to represent us, and work instead for the pollutocrats who fund them.
In such a system, individual choices are lost in the noise. Attempts to organise boycotts are notoriously

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Tribalism in Science (and Economics)

October 8, 2019

From Blair Fix
If you ask the average person what ‘science’ is, they’ll probably answer something like ‘it’s what we know about the world’. To the lay person, ‘science’ is a body of facts.

To the trained scientist, however, ‘science’ means something different. It’s not a body of knowledge. It’s a method for determining what’s true and what’s not. To determine the way the world works, science appeals to evidence.The ideal of science is beautifully summarized by the motto of the Royal Society: nullius in verba. It means ‘take nobody’s word for it’. In science, there is no authority. There are no gods, no kings, and no masters. Only evidence.
In this post, I reflect on how ‘taking nobody’s word for it’ cuts against some of our deepest instincts as humans. As social animals, we have

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RWER issue 89: Modern monetary theory and its critics

October 8, 2019

Real-world economics review
Please click here to support this journal and the WEA
issue no. 89Modern monetary theory and its criticsdownload whole issue
Introduction: Whither MMT?The editors
Alternative paths to modern money theoryL. Randall Wray
Initiating a parallel electronic currency in a eurocrisis country – why it would workTrond Andresen
An MMT perspective on macroeconomic policy spacePhil Armstrong
Monetary sovereignty is a spectrum: MMT and developing countriesBruno Bonizzi, Annina Kaltenbrunner and Jo Michell
Are modern monetary theory’s lies “plausible lies”?David Colander
What is modern about MMT? A concise notePaul Davidson
Modern monetary theory: a European perspectiveDirk H. Ehnts and Maurice Höfgen
MMT: the wrong answer to the wrong questionJan Kregel
Modern monetary

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Has wealth gone digital?

October 6, 2019

From Blair Fix
A revolution is underway around us and it’s called the digital. And it’s changing everything. More than 80% of wealth is now non-material.
— Charles Foran in Just don’t say his name: the modern left on Karl Marx’s place in politics (41:30)
Both critics and cheerleaders of capitalism claim it has. The critics see non-material wealth as a problem. Digital wealth, they say, is fictitious. It’s lost touch with reality.
The cheerleaders of capitalism see the same thing as a boon. Non-material wealth, they say, will decouple the economy from physical constraints. So the economy can grow forever!
Which side is right?
Neither, in my opinion.
Instead, both sides misunderstand the nature of wealth. Wealth is not becoming non-material. No. Wealth has always been non-material. So

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Understanding statistical distributions

October 4, 2019

From Asad Zaman
In line with the pedagogical mission of this blog, I will be writing up a sequence of posts which explain the concept of a statistical distribution. As has been pointed out by numerous authors, a fundamental mistake in understanding concepts of uncertainty and probability was made in the early 20th Century, when views of Keynes and Knight were rejected, and ideas of Ramsey, De-Finetti, and other subjectivists were accepted. To set things right, we have start from scratch, and build up the concept of probability on new foundations.  read more

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How economists came to ignore the natural world

October 2, 2019

She’s right. One of the reasons nations fail to address climate change is the belief that we can have infinite economic growth independent of ecosystem sustainability. Extreme weather events, melting arctic ice, and species extinction expose the lie that growth can forever be prioritized over planetary boundaries.
It wasn’t always this way. The fairytale of infinite growth—which so many today accept as unquestioned fact—is relatively recent. Economists have only begun to model never-ending growth over the last 75 years. Before that, they had ignored the topic for a century. And before that, they had believed in limits. If more people saw the idea of infinite growth as a departure from the history of economics rather than a timeless law of nature, perhaps they’d be readier to reimagine

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