Friday , July 20 2018
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Matias Vernengo

Matias Vernengo

Econ Prof at @BucknellU Co-editor of ROKE & Co-Editor in Chief of the New Palgrave Dictionary of Economics

Articles by Matias Vernengo

IMF Programs: Past and Present

10 days ago

A roundtable with Daniela Gabor, Roberto Lampa and Pablo Bortz, on the IMF and its Programs this Thursday in Buenos Aires, organized by the Masters in Economic Development at the Universidad de San Martín (UNSAM).

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A crisis gone to waste

13 days ago

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My interview with INET from January 2017 at the ASSA meetings in Chicago. From the INET link:After the Great Depression, global capitalism underwent serious reform. Why didn’t that happen after 2008?Matias Vernengo, Professor of Economics at Bucknell University, explains how a crisis can reveal that the dominant neoliberal orthodoxy is in fact based on a shaky theoretical foundation. But for new economic thinkers to capitalize on that requires a clearly articulated alternative—one that existed during the Cold War, but is just coming into public discourse now.

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Classical Political Economy and the Evolution of Central Banks

15 days ago

Casa di San Giorgio, an early central bank?

Paper presented twice is now published in the RRPE. It tries to bring the surplus approach tradition ideas to discuss the historical origins and the definition of what a central bank is and should do.From the abstract:
The paper analyzes briefly the changing ideas on the role of money and banks from William Petty to Thomas Tooke, including the works of Adam Smith, David Ricardo, and Karl Marx. It analyzes the role of ideas in shaping the evolution of central bank regulation. Particular importance is given to the Bank of England’s inconvertibility period, from 1797 to 1821, and the ensuing debate in shaping Robert Peel’s Bank Act of 1844, which is often seen as the birth of modern central banking. The importance of the Say’s Law, and the

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Path Dependency and Football

21 days ago

So now that we are to the round of 16, I think my reply to Sanjay Reddy’s question can be evaluated. Note that from the 16, 5 are from Latin America (Argentina, Brazil, Colombia, Mexico, and Uruguay), one from Asia (Japan) and 10 from Europe (Belgium, Croatia, Denmark, England, France, Portugal, Russia, Spain, Sweden, and Switzerland). Of those 6 have already won a World Cup (Argentina, Brazil, England, France, Spain and Uruguay) and 1 played at least a final (Sweden, lost against Brazil in 1958). Note that no countries from the Middle East or Africa passed the initial phase.There is a good chance that the winner will be a previous champion. I wouldn’t discount the possibility of a new champion, but in that case the likelihood is that it would be another European team (my bets would

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Why Manufacturing Still Matters

June 19, 2018

I’ve been reading in the spare time (not as much as I would like, and worse with the World Cup) Louis Uchitelle’s Making It: Why Manufacturing Still Matters. I tend to agree with the general idea of the book and with many of the policy conclusions, even though I have some problems with minor points (for another post). As a result of this I went to check manufacturing output. There are many different statistics to check in the FRED database. Below a measure of industrial output.

And yes, it is below the peak from the previous recession. We were talking about this with Tom Palley, and it is clear to me that this statistics played an important role in the rise of left (Bernie) and right-wing (Trump) populism in the US. The failure of the Obama recovery to lift manufacturing, not just jobs,

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Raúl Prebisch: Peripheral Development

June 12, 2018

Our book is out (in Spanish). You can buy it here. We have written a few papers in English if you are interested available here, and here, for example. my review of Dosman’s biography is available here.

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Football (soccer) and Capitalism

June 10, 2018

Not The Economist’s field of expertise

The World Cup is about to start. The Economist has run a piece suggesting that "the World Cup [is] the fulfillment of some of our most cherished values." And yes the cherished values are essentially free trade, the raison d’être for the creation of the magazine (that has a problem of self-image and refers to itself as a newspaper), and more generally laissez-faire capitalism, of which the publication is one of the most important cheerleaders.There are many of these, pardon the directness, garbage pieces that suggest that football (soccer for the gringos) explains the working of capitalism (see, for example, this popular book). And, yes, the most obvious explanation for the confusion is that football does not explain the market or globalization,

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Financialization in Latin America

June 6, 2018

New book edited by Martín Abeles, Esteban Pérez Caldentey and Sebastían Valdecantos. From the description:
The chapters in the book analyze the logic and effects of financialization in developing economies, peripheral financialization so to speak, in particular in Latin America. The first chapters look at the topic from a historical and conceptual angles, and then the latter chapters concentrate on specific manifestations like the influence of financialization on productive investment, spending on Research and Development (R&D), the characteristics of Foreign Direct Investment (FDI), monetary policy management, and the composition of foreign debt. The variety of approaches utilized in this volume reflect ECLAC’s historical preoccupation of analyzing the condition that would make

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Venezuela is about to explode

May 25, 2018

A leftist candidate won a close election in a South American country, threatening US interests in the region. The US president asked the CIA to "make the economy scream" to undermine governance and bring regime change, even if by violent means.I am referring, of course, to Salvador Allende’s election in Chile, and Richard Nixon’s reaction, which eventually led to Augusto Pinochet’s coup, one of the most bloody in the troubled history of the region. The reelection of Nicolas Maduro last Sunday has led to the denunciation of the election in the US, with Vice President Mike Pence calling the elections "a sham", and suggesting the imposition of more economic sanctions.

Read rest here.

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Lula da Silva is a political prisoner. Free Lula!

May 25, 2018

Three hundred academics and public intellectuals joined to launch a manifesto denouncing the detention of the former Brazilian president and current Presidential candidate Lula da Silva. The petition discusses in detail the arbitrary nature of the trial conducted by Judge Sergio Moro against Lula da Silva, stating that he is nothing less than a political prisoner. The document asserts that the international community should treat him as such and demands his immediate release.

Read more here (your truly signed too).

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Integration, spurious convergence, and financial fragility: a post-Keynesian interpretation of the Spanish crisis

May 23, 2018

Here is to another crisis like this one!

Paper co-authored with Esteban Pérez that was a Levy Institute working paper is published. From the abstract: The Spanish crisis is generally portrayed as resulting from excessive spending by households associated to a housing bubble and/or an excessive welfare spending beyond the economic possibilities of the country. We put forward a different hypothesis. We argue that the Spanish crisis resulted, in the main, from a widening deficit position in the non-financial corporate sector and a declining trend in profitability under a regime of financial liberalization and loose and unregulated lending practices. Full paper available here.

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Fernando Cardim de Carvalho – RIP

May 16, 2018

Fernando, Cardim for most in Brazil, and Carvalho in the US and abroad, has sadly passed away. I took his macro class back in 1992 at the Federal University in Rio, before he actually moved there definitely as full professor two years later. We used his book Mr. Keynes and the Post Keynesians (still somewhere here in my bookshelf) as a textbook, even though most of the course was based on several papers.From that period I remember reading his papers on time and expectations, which were two of his main concerns within post-Keynesian economics. Although much of his course was theoretical, most of his later work seemed to be related to the workings of international financial institutions, and real world macro issues. He wrote extensively, and there are papers on the role of the IMF, and

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Top Blogs

May 15, 2018

No ‘On the Blogs’ section last Sunday (was traveling) and slow to react to events (at a pedagogy seminar for a couple of days, learning about teaching techniques). At any rate, the good news is that Naked Keynesianism has been featured in the Intelligent Economist’s Top 100 Economics Blogs of 2018. According to them they have "made an effort to create a well-balanced list which contains blogs of all kinds political affiliations, schools of economic thought, and beliefs, in particular by focusing on smaller blogs and female economists." Pluralism does work, after all.

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A brief comment on the Argentinian Crisis

May 10, 2018

This was faster than even I expected (for my views on what Macri meant as soon as he was elected see this and for a more recent assessment go to this post). Let me first say that I don’t think is quite like the 2001/02 crisis. It is unlikely that there will be a default anytime soon. The level of reserves is at about US$ 56 billion, and the IMF is happy to finance the very Neoliberal government of Macri (because the IMF has changed a lot, remember?).The economy with Macri has not performed very well, as expected. Inflation has remained high, since the depreciation of the peso has persisted, and that was no accident. It allowed to erode real wages, which I noted from the beginning was part of their goals. Also, the rate of growth has been lackluster, and if the IMF is to be believed real

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On the Blogs — The Video Edition

May 6, 2018

Political Economy of World Systems (PEWS) Conference 2018

Steve Keen on Alternative Foundations for Macroeconomics — Lord Keynes posted a video by Steve Keen

Bill Mitchell on the failure of economics — Lars Syll linked to a lecture by Bill Mitchell

Life and Thought – Immanuel Wallerstein — Jan Milch sent me the link to this video about Immanuel Wallerstein (both of us depicted above in the recent PEWS conference)

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Corporate Debt in Latin America and its Macroeconomic Implications

May 5, 2018

New paper by Esteban Pérez and co-authors published by the Levy Institute. From the abstract:
This paper provides an empirical analysis of nonfinancial corporate debt in six large Latin American countries (Argentina, Brazil, Chile, Colombia, Mexico, and Peru), distinguishing between bond-issuing and non-bond-issuing firms, and assessing the debt’s macroeconomic implications. The paper uses a sample of 2,241 firms listed on the stock markets of their respective countries, comprising 34 sectors of economic activity for the period 2009–16. On the basis of liquidity, leverage, and profitability indicators, it shows that bond-issuing firms are in a worse financial position relative to non-bond-issuing firms. Using Minsky’s hedge/speculative/Ponzi taxonomy for financial fragility, we argue

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The end of neoliberalism?

May 4, 2018

A while ago I promised to return to this topic and discuss Mirowski’s reply in the INET debate to my comment on his paper. And yes it’s been quite a while since that debate. At any rate, I was at the Political Economy of World Systems (PEWS) conference last weekend, and we had some time to discuss Wallerstein (with him, I’m glad to say), his views on the structural crisis of capitalism. And someone (can recall who did) said something to the effect that the collapse of the economy in 2008 and the events after that (particularly the European situation with Brexit and the rise of right wing populism) suggest that the Neoliberal era is over (that was the title of a subsection of a chapter in David Harvey now classic book on Neoliberalism).So let me tackle that issue, captured beautifully

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On the Blogs — The Macro Edition

April 29, 2018

Did macroeconomics give up on explaining recent economic history?– Simon Wren-Lewis on the Phillips Curve, the time varying NAIRU, Cowles metrics versus VARs and more. ROKE published a paper by him a while agoFiscal Rules: Make them Easy to Love and Hard to Cheat– From the IMF blog, suggesting limits to spending, and to the size of fiscal deficits as in the European Union. It’s more abut the rules really, but also a reminder of how much the IMF has changed… not! For a discussion on how much the IMF has changed go hereLow Bond Yields Have Little to Do With Lax Monetary Policies– Lars Christensen for Bloomberg on mainstream views about the low natural rate of interest, meaning higher savings from an older population (i.e. a loanable funds theory of interest determination). On the

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The Italian crisis in historical perspective

April 27, 2018

In one graph. Source is this twitt from Gennaro Zezza. Real consumption per capita, not GDP (just making sure nobody gets confused).

Note that while the crisis is considerably less profound (right axis for the current one), it is already going to be considerably more prolonged. Not sure what’s worse really.

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The Wall Street Journal and the future of Greece

April 26, 2018

Greece’s Business Prospects Brighten After Lost Decade. Or so says the Wall Street Journal. I fail to see how. And the graph below is their illustration.

Note that the reason for the brighter situation is merely that it has stopped falling. I had a similar graph not long ago comparing it just with the Depression in the US.

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On the blogs – Labor Theory of Value (LTV) Edition

April 22, 2018

Marx’s Refusal of the Labour Theory of Value– David Harvey on Marx and the LTV

Marx’s law of value: a debate between David Harvey and Michael Roberts– Michael Roberts reply to the post above (Harvey’s further response is also linked)

Sraffa and Marxism or the Labor Theory of Value, what is it good for?– old post by yours truly, which I offer (for now) in lieu of an actual post on the above debate, since I think there are problems with both views

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Business Cycles in the Modern World System: Past, Present and Future

April 18, 2018

In case anybody is in the area around New York, the Program of the PEWS conference below.
Thursday, April 26, 2018 — 4:30 – 5:20 p.m.

Reception in the DiMenna-Nyselius Library Room 107 C

5:20 p.m.

Formal Opening of the Conference Library Multimedia Room

Welcome: Eric Mielants (Sociology)

Katsiaryna Salavei Bardos (Finance)

Introduction of Keynote Speakers

Dean Greenwald (CAS)

Immanuel Wallerstein (Sociology, Yale University)

“Cycles Within Structures versus Structural Crises”

Matías Vernengo (Economics, Bucknell University)

“From Financial Instability to Secular Stagnation”

Friday, April 27, 2018

9 – 10:30 a.m. DiMenna-Nyselius Library Multimedia Room

Panel 1: Theoretical Models and Business Cycles

Moderator: Michael Puleo (Fairfield University)


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Corporate tax cuts use in one graph

April 17, 2018

So it seems that a good chunk of the GOP/Trump tax cuts will go to buybacks, and to fuel the bubble in the stock market, according to Robin Wigglesworth in the FT (subscription required). Bad news for those that think that higher earnings lead to higher investment (meaning gross formation of capital). My impression is that if you want tax cuts to be stimulative, you should target consumption, in particular for lower income groups, which tend to spend a higher proportion of their income.

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On the Blogs—The Inequality Edition

April 15, 2018

Why So Few American Economists Are Studying Inequality—Alana Semuels at the Atlantic provides a nice summary of the problems in the profession, and cites the work by a few economists like Jamie Galbraith and the two cited below (Milanovic and DeLong)Chinese income distribution in 2002-3 and 2013—Branko Milanovic on how Chinese inequality, did not increase much in that period, even though it is high, and how it converged to the US levelsGlobalization: What Did Paul Krugman Miss?—Brad DeLong more on globalization really, but there again, globalization has been at the core of the debates on inequality (how much it hurt the Rust Belt here, or how it raised incomes in the South, China and India mostly)

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More on China and the US

April 12, 2018

So, if there is a reason for concern regarding China in the US, it is definitely the use of their developmental state to promote technological innovation.

And as the graph shows they are catching up on spending, at least. I’m not sure I agree with the WSJ here, but they are certainly moving into high tech areas like AI.

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China and US Trade Tensions in one graph

April 10, 2018

The graph below illustrates the reasons for the concerns in the US and the somewhat erratic, but more combative position of the Trump administration.

Note, also, that China is closing the gap on R&D spending and on the technological front, at a faster pace that I would have predicted (more on that for a later post).

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Modern Money Theory (MMT) vs. Structural Keynesianism

April 9, 2018

By Thomas PalleyA journalist sent me some questions about MMT. My answers are below. 1. What are the major flaws you see within Modern Monetary Theory? (A.) I like to say that MMT is a mix of “old” and “new” ideas. The old ideas are well known among Keynesian economists and are correct, but the new ideas are either misleading or wrong.The essential old idea, which everybody knows, is government has the power to issue money. We used to talk of “printing” money. In today’s electronic world we talk about “keystroke” money created by electronic credit entries.Everyone knows that because government has the capacity to create money, it can always pay its bills and debts by printing money. But having the capacity is not the same thing as saying it should, which is the beginning of where MMT

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On the blogs — The Measurement Edition

April 8, 2018

Here are 15 Common Data Fallacies to Avoid– Jeff Desjardins at Visual Capitalist on some common mistakes. I like the McNamara fallacy, which is probably common in economics

Welfare Versus GDP: What Makes People Better Off– Geoffrey Bannister and Alexandros Mourmouras at the IMF blog on alternative measures of well-being

Inequality and Poverty– Chris Dillow at Stumbling and Mumbling on the limits of the Gini coefficient

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