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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

Public vs private debt

12 hours ago

I was teaching about deficits and debt this last week. If you know me and follow this blog, you’d know that I always emphasize the importance of the distinction between debt in domestic currency and debt in foreign currency. Functional finance authors (and MMT too) are correct in noting that a country cannot default on debt in its own currency (for a model of a currency crisis and default, in foreign currency go here; as afar as I know the only formalization of a PK alternative to the Krugman model).At any rate, teaching about the US for mostly US kids, that is not an important distinction, since the US has only debt in its own currency. Most of them thought that the current levels of public debt are too high (with respect to what you may ask, the ability to repay or the kind of society

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Savings Glut, Secular Stagnation, Demographic Reversal, and Inequality: Beyond Conventional Explanations of Lower Interest Rates

4 days ago

New Working Paper published by the Political Economy Research Institute (PERI). From the abstract:Interest rates have declined over the last 40 years, a period of increasing inequality. The steady decline in interest rates has been interpreted by and large as resulting from a decline of the natural rate of interest. This paper surveys the main explanations associated with the notion of a decline in the natural rate of interest, including the savings glut and the secular stagnation hypothesis. It analyzes the views according to which demographic forces were behind the decline, and might perhaps be associated to a future rise of the same natural rate. It also discusses the view according to which the role of inequality has been also to affect the natural rate of interest. Finally, views

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Lula’s election and what lies ahead

21 days ago

It’s been a while since I wrote about the Brazilian crisis (a summary of the previous catastrophic election here). In part that election and the continued crisis explains why I have written less, not just about Brazil. This has been a long economic depression that started in 2015 (see graph), with a coup in 2016 and since 2018 the added problem of a right-wing authoritarian regime that won an election that was only possible with the political proscription of Lula. But at least the political problems have started to be solved with this election. Source: IMF. Peak in 2014 (2022 estimated)The Lula election last Sunday is a redemption story, no doubt. Not only because there was no prove of his corruption, even if corruption existed,* and even though the international press, including the

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Comments on the history of the Review of Keynesian Economics on its tenth anniversary

21 days ago

By Thomas Palley This Fall (October/November 2022) marks the tenth anniversary of the founding of the Review of Keynesian Economics (ROKE). The founding co-editors were Louis-Philippe Rochon, Matias Vernengo, and I. At the beginning of 2018 Louis-Philippe Rochon stepped down to become sole editor of the Review of Political Economy and he was replaced by Esteban Pérez Caldentey.Since then, ROKE has further enhanced its reputation, becoming a leading heterodox economics journal as measured by its Clarivate citation score. It also has premier standing for official research assessment purposes in France, Italy, and Brazil.Active plans for the journal were set in motion in late 2011 and the first issue was published in Autumn 2012. That first issue includes a founding statement by the three

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Palley on the history of the Review of Keynesian Economics

22 days ago

Here a short video. I do offer a few remarks. I would add that Louis-Philippe was central not just in the initial discussions that we had going back two decades now, to when we were at Kalamazoo College, but in getting Elgar into the journal business. Not sure Elgar would have done that without LP convincing them. This happened at the time that the JPKE was transitioning from Paul Davidson editorship, to the Jan Kregel and Randy Wray period. [embedded content]I suggested Tom to LP, since he had been our teacher at the New School, and I thought three would be a better setting for adjudicating differences between the editors. Tom wanted a journal more open to other traditions. I would say in my view the reasons are not exactly connected to pluralism, as Tom discusses in the clip, and more

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Some thoughts on radical environmentalism and heterodox economics

October 26, 2022

Ecological economics emerged in the 1970s, as a sub-field of mainstream economics, using some of the conventional tools of neoclassical economics, but trying to move away from it, not only regarding some of the theoretical choices, but also distancing from some of the ethical concerns of the mainstream (Holt and Spash, 2009). Even though there were precursors to ecological economics, in particular the work of Kenneth Boulding, Nicholas Georgescu-Roegen and Karl William Kapp, it is clear that the profound crisis of capitalism in the early 1970s, and the preoccupations with population growth, famine, and exhaustible resources, exacerbated by the oil shocks, were central for the sudden prominence of environmental concerns within the economics profession.  Paul Ehrlich’s book, The Population

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Thinking about Inflation: A conversation with Marc Lavoie

September 21, 2022

[embedded content]The conversation on inflation with Marc Lavoie at the Fields Institute in Toronto. I think that there was an agreement, between us, and most people in the room that the oligopolistic view of inflation does not hold water. I tried to discuss the Argentinean case on the basis of a piece that I co-wrote with Fabián Amico and Franklin Serrano, published in the local version of Le Monde Diplomatique online. A longer version, also in Spanish, here. An English version is in the works, btw.

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Lance Taylor (1940-2022) and his legacy

September 10, 2022

With Lance in Beijing (2001)I took Lance’s macro class in the Fall of 1995 at the New School for Social Research (NSSR), and then was his Teaching Assistant for two years. The book we formally used was Income Distribution, Inflation and Growth: Lectures on Structuralist Macroeconomic Theory, in which the terms (not the concepts) for wage-led and profit-led economies were first used (at least that’s what I think; profit-led does not appear in the index, I must note). But classes were based on his notes, on what became his next book Reconstructing Macroeconomics (he thanked me for all the input in my copy; I had to learn how to read his handwriting, which was not easy). In many ways, my thinking was influenced more by the Sraffian professors at the NSSR, both John Eatwell (I was also his TA

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Modern Money Theory in the Tropics: A Reply to Agustin Mario

June 23, 2022

Our reply to a very inaccurate discussion of our views on MMT by Agustin Mario. From the abstract:This paper responds to some inaccuracies on the discussion of our views on Modern Money Theory (MMT), as discussed by Agustin Mario. We believe that while is correct in noting that autonomous spending generates taxes, and fiscal balances are a result, MMT authors overlook the difficulties in pursuing expansionary fiscal policy in the developing countries. These are limited by the existence of an external constraint that cannot be solved with a flexible exchange rate policy regime. Foreign reserves and capital controls are needed.In particular, I want to emphasize that the notion that we said in any place, or that it is implied that Esteban and I believe in supply side constrained growth is

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Course/discussion: A very short Introduction to the theory of value and distribution

May 30, 2022

A few years back in Colombia, we discussed with a group of students about a possible reading group of Sraffa’s Production of Commodities by Means of Commodities (PCMC).  After the pandemic I thought that the experience with Zoom perhaps created the conditions for that. But I also have a concern expressed here several times (see here and here) about the lack of understanding of the theory of value and distribution and its importance for policy analysis, and not just among mainstream economists.At any rate, I decided to give 6 Lectures online (that I will record and post eventually) on the theory of value and distribution. It will cover from before Adam Smith to modern times. Authors discussed will include Smith, Ricardo, Marx, Marginalist ones (Clark, Marshall, Wicksell), Sraffa, Samuelson

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The economic and social consequences of the war on Europe and Italy

May 12, 2022

By Sergio CesarattoWith a certain pride I remember having already mentioned for some years, within the framework of my economic courses, political realism in international relations and International Political Economy. I did so in academic contexts in which an uncritical Europeanism based on liberal thinking prevailed (and prevails) according to which the world is divided into good and bad. The book, which I suggested for reading to my students (Sorensen 2005), published in Italian by Bocconi University Press (Egea), had some pages dedicated to the enlargement of NATO to the East, dutifully presenting the opposite thesis. In particular, an important letter addressed in 1997 to President Clinton by 50 eminent personalities opposed to such an enlargement was cited (McGuire 1998). Since

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What is heterodox economics? Some clarifications

May 6, 2022

Long ago I wrote on the meaning of heterodox economics. I suggested that it should be defined in its own terms, not as a reaction to the mainstream or orthodox approach, and as a unified set of propositions.[1] In other words, heterodox economics would be a set of principles that would be backed by a certain community. Of course, the sociology of that community would lead to some degree of debate and dissent within heterodoxy, as it is in fact the case within the mainstream. There is, one might add, significant confusion about the meaning of marginalist and neoclassical economics, and also there is no monolithic and consensual approach within the orthodoxy. The mainstream is somewhat fragmented, and there are more than a few neoclassical or marginalist schools. Some, like the Austrians,

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A new Pink Tide in Latin America?

April 20, 2022

[embedded content]Episode 52 of the Podcast Missão Desenvolvimento with Paulo Gala and Eduardo Crespo discussing the possible new Pink Tide in Latin America (in Portuguese).

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Blog Moving to Substack (and first post)

April 11, 2022

"Where is Everybody?"The blog will continue here for announcements, messages and links to more substantive pieces. But those will be posted from now on at Substack. I might also post videos in another platform. But more on that later. Link for first post (on whether the US is a failed State, something that got some traction during the pandemic, particularly in the aftermath of the January 6 riot) here.

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Some thoughts on inflation and what not to do about it

March 13, 2022

I have written extensively over the years on inflation and some of that is here in the blog (see this or this, or this more recently on Volcker the inflation dragon slayer, if you believe in fairy tales; there’s way more if you search the blog; I also highly recommend this paper by Perry and Cline in ROKE, which is open, btw). My more recent piece on inflation came out recently in Catalyst, just before the war in Ukraine (on the war see this by Palley, and this old piece by Gary Leupp after the Crimean crisis in 2014), and the spike in oil, and foodstuff prices. But although this exacerbates things, the gist of my argument remains the same.Inflation which had accelerated because of the supply constraints, and not because of the recovery or excess demand (sure the economy recovers fast in

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Beyond Vulgar Economics: Conceição Tavares and Heteredox Economics

March 10, 2022

My paper (in Spanish) for a book on social thinkers in Latin America edited by Marcelo Rougier and Juan Odisio, and that I presented in a few venues since 2020, is now revised and done. The book includes chapters on Raúl Prebisch, Aníbal Pinto, Víctor Urquidi, Celso Furtado, Juan Noyola Vázquez, Helio Jaguaribe, Aldo Ferrer, and Osvaldo Sunkel, besides mine on Maria da Conceição Tavares. A version available here.

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Ukraine: what will be done and what should be done?

March 1, 2022

By Thomas PalleyWhile rightly condemning Russia for its invasion, the mainstream media continues to selectively report the history behind these events. In my view, its omissions are intentional and contribute to the tragedy. They inflame public understanding, render a diplomatic resolution more difficult, and lock us into a worse trajectory. Let me make further clear my argument: (1) President Putin is head of the Russian state which is under slow-motion implacable attack by US-led NATO. (2) After failing to secure a satisfactory diplomatic resolution, he has taken action to head off that attack.If you accept those two propositions, the Ukraine story is massively more complicated than simply claiming Putin is an aggressor and we (the US) are good. There will be no lasting peace until

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American Exceptionalism and the Liberal Menace: the US and Ukraine

February 14, 2022

By Tom PalleyAmerican exceptionalism is the most dangerous doctrine in the world, and it has been on full display in the current Ukraine crisis. Worse yet, the loudest advocates have been America’s elite liberal class.The doctrine of exceptionalism holds that the US is inherently different from and superior to other nations. That superiority means the US is subject to a different standard. Its actions are claimed to be benevolent and above international law, and the US is entitled to intervene at will around the world, including building a global network of military bases and garrisons that it would never permit another power to have.Read rest here.

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Review of Keynesian Economics is out!

February 12, 2022

We are delighted to announce the publication of Volume 10, Issue 1 of the Review of Keynesian Economics. We invite you to visit the website where you can read all the article abstracts and download two free articles.The issue focuses on monetary macroeconomics. The lead article is Professor Marc Lavoie’s 2021 Godley-Tobin Memorial Lecture titled Godley versus Tobin on monetary matters. That is followed by an article by Federal Reserve economist Jeremy Rudd titled Why do we think that inflation expectations matter for inflation? (And should we?). Additionally, there is an article on the role of risk and uncertainty in Keynes’ and Kalecki’s interest rate theory; an article providing a modern theory of animal spirits founded on contemporary psychological theory; an article on pre-Keynesian

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JERZY OSIATYŃSKI 1941-2022

February 11, 2022

By Jan Toporowski*Jerzy completed his matriculation at Juliusz Słowacki Liceum in Warsaw and went on to study economics in the elite foreign trade faculty of the Main School of Planning and Statistics (Szkoła Główna Planowania i Statystyki SGPiS – now reverted to its pre-War name of the Main School of Commerce Szkoła Główna Handlowa). He completed his PhD there and by then had fallen into the circle of economists around Michał Kalecki, who lectured on the economics of capitalism and convened seminars on economic planning and development economics. Jerzy started teaching, and was remembered as a charismatic teacher who made himself available to students and was willing to explain, instead of just repeating dogmas. His brother Wiktor became a well-known writer. A concert-pianist sister

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Classical Political Economy or the Surplus Approach

February 11, 2022

[embedded content]Here our other conversation with LP Rochon, about the chapter on Classical or Surplus approach authors. My co-author, Suranjana Nabar-Bhaduri and I talk about the Real Bills Doctrine, Bullionism, Say’s Law the implications for theories of crisis. And about several authors, Smith, Ricardo, Tooke and more.

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2022 Godley-Tobin Memorial Lecture: Paul Krugman

January 20, 2022

The editors of ROKE are pleased to announce that Professor Paul Krugman has agreed to give the 2022 Godley–Tobin Memorial Lecture. Professor Krugman is Distinguished Professor of Economics at the Graduate Center of the City University of New York. He has also taught at MIT, Princeton University, and Yale University. Like James Tobin, Professor Krugman was awarded the Nobel Memorial Prize in Economics (2008) and the American Economics Association’s John Bates Clark Medal (1991). Professor Krugman’s work has focused on international economics and macroeconomics. He is a prominent American public intellectual who is widely recognized for his regular column in The New York Times. The title of Professor Krugman’s lecture is “The enduring relevance of Tobinomics”.The lecture will be held at

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What’s Left of Cambridge Economics?

January 15, 2022

A new piece by Jamie Galbraith on Project Syndicate, that reviews some recent books, but deals essentially with what happened to heterodox economics, a theme that has been treated here often (on the definition of heterodox economics go here). Jamie provides an apt definition, on the basis of what he got at Cambridge back in the 1970s. In his words:When I attended the University of Cambridge in 1974-75, I read Keynes, met Piero Sraffa, listened to Joan Robinson, and studied with Kaldor, Luigi Pasinetti, Richard Goodwin, Ajit Singh, Wynne Godley, Robin Marris, and Adrian Wood. Back then, it was understood at Cambridge that markets do nothing like what Coyle claims they do. Just as Einstein had erased Euclid’s axiom of parallels, Keynes’s General Theory had long since obliterated the supply

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