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How not to deal with a debt crisis

4 days ago

In the 1920s and early 30s, John Maynard Keynes was embroiled in a controversy with the ‘austerians’ of his time, who believed that balancing the government budget, even in a time of economic volatility and decline and financial fragility, was necessary to restore ‘investor confidence’ and therefore provide stability. Keynes was horrified by the idea.
Zachary Carter’s brilliant biography notes that Keynes felt a package of government spending cuts and tax increases would be ‘both futile and disastrous’. It would be an affront to social justice to ask teachers and the unemployed to carry the burden of deflating a doomed currency, in the name of balanced budgets. Even worse would be imposing austerity on debtor countries, as American banks were then demanding of several European

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Victoria Chick (1936-2023) – RWER 2018 paper “Industrial policy, then and now”

10 days ago

Abstract
After 40 years of neoliberalism, even governments believe that they are inefficient when compared to the private sector. And economics, in its swing to the right, reinforces this view. The philosophy behind public expenditure for social purposes and the criteria for judging such projects has not been a subject for public debate until recently. In particular, industrial policy was very simple: leave it to the private sector to allocate resources as the market prompts. In Keynes’s time this was not the case. This article reviews some of the issues concerning industrial policy that were aired in the interwar period. The debate needs to be revived, revisited and, where appropriate, revised to suit the present day, but on basic principles there is much to learn from the

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Inflation in an unequal world economy: How the Fed’s policies are doubly perverse for the Global South

11 days ago

From C. P. Chandrasekhar and Jayati Ghosh 
Tight monetary policies in rich countries obviously affect people in the countries where they are applied, but they also cause ripple effects across the world. We were already in a very unequal world before the most recent global price increases. Most developing countries were not able neutralize the damage inflicted by the pandemic, largely because they had much weaker fiscal stimuli. Of nearly $14 trillion in additional fiscal spending by the end of 2021, more than 80 percent was from just ten advanced economies, and more than half was from the U.S.
This fiscal inequality worsened after the start of the Ukraine War. Governments of low- and middle-income countries were constrained by declining revenues and externally or self-imposed

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Social protection for the self-employed

17 days ago

The Covid-19 pandemic highlighted the urgent need for a universal social protection floor—something that has been talked about and even internationally accepted for more than a decade now, but has still received relatively little serious attention from policy makers in most countries. The challenge is to ensure basic levels of food, health, income and livelihood security, not only in periods of crisis like the pandemic or economic shocks but also in the “normal” course of economies and societies.

This has become a major concern because of the dramatically increased economic inequality and greater vulnerability of people to adverse events and processes, as well as the heightened fragility of material life. It has been compounded by the large (and growing) share of informal workers in

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The debt-trap and self-reliance

December 28, 2022

From Asad Zaman and the WEA Pedagogy Blog
Why does “Sovereign Default” become a hot topic with annoying regularity in Pakistan? The fundamental problem is the huge imbalance between our exports and imports. In 2021, our exports were USD 30 Billion, while our imports were around USD 62 Billion. In general, since 1960 onwards, our imports have averaged about 18%, while exports have been around 12% of the GNP. After reaching a high of 16.9% in 1996, the export ratio has been declining steadily, varying between 8% to 10% over the past five years. The dollar difference between the imports and exports is the ever-increasing amounts that we must borrow. This trade-gap serves as a brake on any growth spurt. As soon as the economy grows, the trade gap grows even faster, and we are forced to

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new issue of RWER

December 20, 2022

Real-world economics review
 Please click here to support this journal and the WEA 
Issue no. 10218 December 2022
download whole issue
Ecological Economics in Four ParablesHerman Daly          2
The Paradigm in the Iron Mask: Toward an Institutional Ecology of Ecological EconomicsGregory A. Daneke         16 
The Towering Problem of Externality-Denying CapitalismDuncan Austin          30 
Have We Passed Peak Capitalism?Blair Fix          55
A Probabilistic Theory of Supply and DemandJohn Komlos          89
Unicorn, Yeti, Nessie, and Neoclassical Market – Legends and Empirical EvidenceIbrahim Filiz, Jan René Judek, Marco Lorenz, Markus Spiwoks          97
On the Efficacy of SavingGeorge H. Blackford          119
Occupation Freedoms: Comparing Workers and SlavesM. S.

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Neoliberal economics, Big Pharma and pandemics

December 9, 2022

From Imad Moosa  

The spread of the virus has been aided by the neoliberal drive to privatise everything under the sun, including healthcare. Forty years of the privatisation of public health institutions (allegedly in the name of efficiency and for the benefit of consumers) has resulted in a disastrous situation as private healthcare providers have no commercial interest in preparing for or preventing emergencies. The spread has been aided by the lack of staff and material capacities in underfunded public hospitals, and the complete inability of the private, profit-motivated healthcare industry to provide even the most basic medical equipment and treatment when they are needed. The followers of neoliberal thinking disagree with this proposition and suggest that only the private

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Stress, a negative externality, is ubiquitous

December 7, 2022

From John Komlos 

Stress, the body’s biological response to external threats, is generated in the economic system as a negative externality through countless pathways, that include long working hours, being underpaid, being evicted, income insecurity, unhealthy work environments, tight deadlines, being fired, long spells of unemployment, underemployment, low income relative to the median, reduction of earnings, unexpected medical expenses, college tuition, being victim of predatory loans, financial pressure, inadequate work-life balance, being underinsured, excessive child-care costs, inflation, incarceration, and inadequate government safety net programs, to name some contributing factors.
The relevant literature is humongous: a search of the National Library of Medicine (PubMed)

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The real economy is never in equilibrium

December 5, 2022

From Philip George

What are vectors?
. . . we defined a vector as a quantity having both magnitude and direction and represented it by an arrow. This makes sense in Euclidean 3-dimensional space. But in higher dimensions the idea of direction is not intuitive and we need a more formal definition that is consistent with the definition in three dimensions. In mathematics, an object is defined as a vector if it is an element in a vector space. This seems a circular definition but the additional requirements make it clear why it is defined in this way. Thus, when a vector is multiplied by a scalar (a real number, for our purpose) the result must be an element of the vector space, i.e., another vector. And a vector added to another vector must also be a vector in that vector space.

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Knowledge and growth

December 4, 2022

From Lars Syll

If you have an apple and I have an apple and we exchange these apples then you and I will each have one apple.
But if you have an idea and I have an idea and we exchange these ideas, then each of us will have two ideas.
George Bernard Shaw

Adam Smith once wrote that a really good explanation is “practically seamless.” Is there any such theory within one of the most important fields of social sciences — economic growth?
In Paul Romer’s Endogenous Technological Change (1990) knowledge is made the most important driving force of growth. Knowledge (ideas) are presented as the locomotive of growth — but as Allyn Young, Piero Sraffa and others had shown already in the 1920s, knowledge is also something that has to do with increasing returns to scale and therefore not

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Free trade theory fails to correspond to reality

December 3, 2022

From Jeff Ferry 

For the last 90 years, the United States has pursued and advocated free trade. For the last 60 of those 90 years, American workers and other observers have watched America lose high-paying jobs to imports and asked: can this really be good for the American economy?
Professional economists have answered, virtually unanimously, that yes, it is good, due to something called the Law of Comparative Advantage.
They are wrong. Their free trade theory, based on the so-called Law of Comparative Advantage, does not work for the U.S. or for many other countries.  We know this because dozens of economists have published studies of the empirical results of import penetration showing that the Law of Comparative Advantage, and the modern economic theory built around it is

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Twitter temporarily suspends Dean Baker’s account after his “right-wing jerk” article

December 2, 2022

Dean Baker’s article is two posts below this post. 
Here is an article from CEPR about the suspension.

Washington, DC — The Center for Economic and Policy Research (CEPR) expresses concern at the sudden and disturbing temporary suspension of Dean Baker’s Twitter account today. Baker, who co-founded CEPR with Mark Weisbrot in 1999, and who currently works with CEPR as a senior economist, had his Twitter account, @DeanBaker13, “permanently suspended” without warning earlier today, only to see it reinstated a short time later, but with only a small fraction of the over 66,800 followers it had before it was suspended. Baker was not given any explanation for the suspension other than a boilerplate notification, and had never been warned that he had violated any of Twitter’s rules of

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The monetary policy fallout for developing countries

November 16, 2022

From C.P. Chandrasekhar and Jayati Ghosh
The monetary policies of the major advanced economies have been obsessively nationalist for more than two decades now, with hardly any genuine international cooperation beyond some coordination among G7 economies. These policies in turn have had all sorts of impacts—often very negative—in the rest of the world, and particularly in the low and middle income countries referred to collectively as emerging and developing economies (EMDEs).
After the Global Financial Crisis, the advanced economies unleashed historically loose monetary policies, with major liquidity expansion and very low or even negative interest rates of their central banks. This enabled and encouraged massive increases in debt both within their own economies and in the rest of the

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new from WEA Books – “Heterodox Economics: Legacy & Prospects”

November 8, 2022

Kindle edition $5.99   US UK DE FR ES IT NL JP BR CA MX AU IN
paperback $14.99    US UK DE FR ES IT NL PL SE JP CA AU
“The pressing need for alternative approaches in economics that is evident in the wake of the global pandemic, has also signalled an opening of space for the ideas and prescriptions of heterodox economics. This timely volume interrogates the rich diversity of the legacy of the heterodox economics, the institutional context and constraints that determine its influence, while addressing important questions about appropriate and desirable strategies and practices for fostering a vibrant constructive heterodox tradition . . .”
Edited by Lynne Chester & Tae-Hee Jo

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Weekend read – How to be an Academic Hyper-Producer

November 4, 2022

From Blair Fix 
Are you an aspiring academic? If so, this manual will reveal the secret to maximizing your scholarly output. Follow my advice, and you too can become an academic hyper-producer.

The golden rule: Don’t do research
Newcomers to the academy typically think that the recipe for success is to ‘do high-quality research’. Nothing could be more false. ‘Doing research’ (and writing papers about your ‘results’) is a tedious waste of time. It is no way to be hyper-productive. Savvy academics know that their true goal is to have their name stamped (as author) on stacks of published papers.
Here is a jingle to help you remember the golden rule:

Productive academics neither research nor write,
That is their subordinates’ plight.
To inflate their way up the productivity ramp,

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Weekend read – Can university education in economics contribute to strengthened democracy and peace?

October 21, 2022

From Peter Söderbaum and WEA Commentaries current issue
Introduction
In all societies there is a tension between democracy and dictatorship. In some countries democracy is well institutionalized and the threat of dictatorship is successfully kept at a distance. In other societies, a system close to dictatorship is quite established and democracy is regarded as a threat. Today, we witness a confrontation between Russia, a nation close to dictatorship and Ukraine which appears to move toward strengthened democracy.
In this essay it is assumed that a strengthened democracy is preferable to dictatorship if one aims at a sustainable and peaceful relationship between single nations and regional assemblies of nations. Does the economics taught in universities play a positive role in

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What is money?

October 17, 2022

From Tony Lawson and real-world economics review issue no. 101
What is money?  Two sorts of answer to this question can be found in the modern literature.  One locates money’s nature in the organising structure of human communities, the other in intrinsic properties of particular (money) items (like commodities, debts, precious metals and so on). If accounts of money that draw on social positioning theory are instances of the former, a currently very popular and seemingly increasingly influential version of the latter takes the form of modern money theory (MMT). Notably, however, whilst contributors to social positioning theory have regularly concerned themselves with elaborating explicitly a conception of money’s nature, proponents of MMT rarely address the matter explicitly; mostly

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Neoliberalism as an enabler of the spread of coronavirus

October 14, 2022

From Imad A. Moosa and real-world economics review issue no. 101
The spread of the Coronavirus was aided by unpreparedness, the fact that the private sector cannot deal with a pandemic, neoliberal policy makers who could not care less about ordinary people, and years of dismantling public health systems through privatisation. Since the 1980s, belief in the power of the market has led to a status quo where governments take a back seat, allowing the private sector to steer the economy for the benefit of the oligarchy. As a result, governments have been put in a position where they are not always properly prepared and equipped to deal with crises such as Covid-19. Free markets cannot deal with a crisis of this magnitude. The economy is like the human body: a person who cuts himself

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new issue of real-world economic review

September 22, 2022

Real-world economic review

issue no. 101   –   September 2022download whole issue

Two conceptions of the nature of money Tony Lawson          2
How power shapes our thoughtsAsad Zaman         20
SARS-CoV-2: The Neoliberal VirusImad A. Moosa          27
The giant blunder at the heart of General Equilibrium TheoryPhilip George          38
A life in development economics and political economy: An interview with Jayati GhoshJayati Ghosh and Jamie Morgan          44
John Komlos and the Seven DwarfsJunaid B. Jahangir          65
A three-dimensional production possibility frontier with stressJohn Komlos           76
Free trade theory and reality:
How economists have ignored their own evidence for 100 yearsJeff Ferry          83
The choice of currency and policies for an independent

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WEA Commentaries 

September 6, 2022

WEA CommentariesVolume 12, Issue 2
download the whole issue
Can university education in economics contribute to strengthened democracy and peace? Peter Söderbaum
The Irish anomaly. Rethinking the concept and operationalization of ‘Gross Fixed Capital Formation’ Merijn Knibbe
Benefits of fathers caring for children remain underestimatedin several European contexts Mitja Stefancic
The WEA Textbook Commentaries Project
What’s Capitalism got to do with it? David F Ruccio
Please click here to support the World Economics Association

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Markets are only a sub-set of economic life

August 15, 2022

From Ken Zimmerman  (originally a comment)
Economic life is the activities through which people produce, circulate and consume things, the ways that people and societies secure their subsistence or provision themselves. Activities by which communities sustain themselves. ‘[T]hings’ is, however, an expansive term. It includes material objects, but also the immaterial: labor, services, knowledge and myth, poems, religion, names and charms, and so on. In different times and places, different ones of these will be important resources in society, and when they are important they come within the purview of economic anthropologists. That is, where some economists have identified economic life in terms of the sorts of mental calculus that people use and the decisions that they make (for

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A coherent alternative has to be proposed

August 10, 2022

From Nikolaos Karagiannis and Issue 94 RWER
The practical use of the term “neoliberal” exploded in the 1990s, when it became closely associated with two developments. One of these was financial deregulation, which would culminate in the 2008 financial crash and in the still-lingering euro debacle. The second was economic hyper-globalization, which accelerated thanks to free flows of finance and to new, more ambitious types of trade agreements. Financialization and hyper-globalization have become the most overt manifestations of neoliberalism in today’s world.[1]
That neoliberalism is a highly biased concept does not mean that it is irrelevant or unreal. Who can deny that the world has experienced a decisive shift towards markets from the 1980s on? Or that centre-left politicians –

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The reinjection of empirical ideas

August 1, 2022

“As a mathematical discipline travels far from its empirical source, or still more, if it is a second and third generation only indirectly inspired from ideas coming from ‘reality’, it is beset with very grave dangers. It becomes more and more purely aestheticizing, more and more purely l’art pour l’art. This need not be bad, if the field is surrounded by correlated subjects, which still have closer empirical connections, or if the discipline is under the influence of men with an exceptionally well-developed taste.
But there is a grave danger that the subject will develop along the line of least resistance, that the stream, so far from its source, will separate into a multitude of insignificant branches, and that the discipline will become a disorganized mass of details and

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Book Review by Jayati Ghosh : The journey to greater equality

July 26, 2022

From Jayati Ghosh

Economic inequalities have increased substantially across the world in the past three decades and have deepened during the COVID-19 pandemic. Thomas Piketty and his colleagues at the World Inequality Lab at the Paris School of Economics (PSE), France, have been at the forefront of tracking these changes, providing extremely useful analyses based on careful aggregation of national data on income and wealth inequality from a multitude of sources. They have shown that globally, inequality is now as entrenched as it was during the first part of the 20th century.
Despite this sobering assessment, A Brief History of Equality by Piketty, who is Professor at the École des Hautes Études en Sciences Sociales and the PSE, is, in many ways, an optimistic account of long-term

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What is really going on?

July 21, 2022

Yanis Varoufakis
. . . what is really going on? My answer: A half-century long power play, led by corporations, Wall Street, governments and central banks, has gone badly wrong. As a result, the West’s authorities now face an impossible choice: Push conglomerates and even states into cascading bankruptcies, or allow inflation to go unchecked.
For 50 years, the US economy has sustained the net exports of Europe, Japan, South Korea, then China and other emerging economies, while the lion’s share of those foreigners’ profits rushed to Wall Street in search of higher returns. On the back of this tsunami of capital heading for America, the financiers were building pyramids of private money, such as options and derivatives, to fund the corporations building up a global labyrinth of ports,

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Economics is always ‘political economics’

July 11, 2022

From Peter Söderbaum
Mainstream neoclassical economics is attacked by many and from different angles or vantage points. Neither the defendants nor the critics can claim value-neutrality. “Values are always with us” (Myrdal 1978) and economics is always ‘political economics’. The neoclassical attempt to construct a ‘pure’ economics has failed. Neoclassical theory may still survive as a theory that is specific in scientific and ideological terms and useful for some purposes. But this survival has to be accompanied by the admission that neoclassical theory is built on assumptions that are specific in terms of ethics and ideology and that alternatives to these assumptions exist. The future of neoclassical theory is therefore not only a matter of its usefulness to solve economic problems in

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The magnitude of the required reductions

July 10, 2022

From Ted Trainer
It is not commonly understood how large the reductions would have to be to enable a society that is globally sustainable and just. The World Wildlife Foundation’s Footprint measure (2018) estimates the average Australian per capita use of productive land at 6–8 ha. Thus, if the 9–10 billion people expected to be on earth by 2050 were to live as Australians do now, up to 80 billion ha of productive land would be needed. But there are only about 12 billion ha of productive land on the planet. If one third of it is set aside for nature then each Australian would be living in a way that would require about 10 times as much productive land as all people could ever have. Some other measures taking into account factors such as materials consumption (Wiedmann et al., 2015)

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