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Matias Vernengo

Matias Vernengo

I was Associate Professor at the University of Utah, Senior Research Manager at the Central Bank of Argentina, and external consultant for the ECLAC, ILO, UNDP and UNCTAD. Taught also at the Federal University of Rio de Janeiro, Kalamazoo College and the Graduate Faculty of the New School for Social Research.

Articles by Matias Vernengo

The slow recovery in historical perspective: 10 years after the Great Recession

4 days ago

It’s hard to believe, but it has been almost a decade since the Great Recession. The official recession started in December 2017, but everybody remembers the collapse of Lehman in September of 2008. When you look at the recovery from the last recession in historical perspective, two things are clear. If you take GDP fall, or increase in unemployment, the Great Recession does not compare to the Great Depression, and that means that fiscal policy (automatic stabilizers and stimulus package) did work. The other is that 10 years into it, we are more or less were we where after 10 years of the Depression (which means the New Deal worked too, since the decline in GDP back then was much more pronounced, and recovery started in 1933).

But what I think is crucial, if one extends the historical

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The Latin American Crisis

5 days ago


I have not written on the problems in the region for a while now (last stuff that is more comprehensive here in the talk at Keene, for example), in part, because the whole theme is a bit depressing (more recently the Honduras crisis, and the return of the right in Chile). As I have noted before, there is no doubt that the collapse of commodity prices has played a significant role in the downturn in the region, but it is also true that a lot of the problems are political in nature, and the resurgence of neoliberalism (with the support of the US, btw) has played a significant role too. In my view, the latter is far more relevant.Two recent issues that I wanted to note, and that prompted my return to the issue of the crisis in the region. One is the downgrading of the Brazilian

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On mainstream Keynesianism

9 days ago

Looking up to Galbraith

The ASSA Meeting was this last weekend in Philadelphia. It was the bomb… cyclone (Nate Cline’s joke; I’m sure many others too came up with that one). I don’t have much to report actually. I did participate in one section, and will post a link to a preliminary version of my paper soon. I was at the Economists for Peace and Security (EPS) dinner, that honored Jamie Galbraith. This blog was named Naked Keynesianism, as you may know, because years ago Fox News accused him of teaching naked Keynesianism, and I thought that was both funny and a reasonable name for the stuff I did.Anwar Shaikh was at the dinner, and suggested that Jamie has one foot in each side of the heterodox/orthodox divide, as a result of his paternal influence (Richard Parker noted that as

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The IMF and fiscal policy

27 days ago

This is a topic I discussed several times here (for example, here, here, here, here or here). Now there is a paper by Marc Lavoie (with co-author) in Intervention, on the same topic. The paper notes that: "There is a paper by Vernengo/Ford (2014) that covers some of the same ground. Their conclusion is that the 2008 crisis prompted only some cautious change in the views being entertained at the IMF" (my paper with Kirsten is here). Just to clarify, that’s not exactly our point. The point we make is that while the research department has changed some of their views, without discarding the crucial concept of the natural rate of unemployment in their analytical framework, the policies pursued by the IMF changed very little indeed. So that there is a kind of double discourse. I referred

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Review of Shaikh’s Capitalism

29 days ago

Woof, woof

I haven’t posted in a while. As I noted before, it’s harder to post new things after almost 7 years. Also, I’ve been both busy and not particularly fond of talking about economics (a certain degree of pessimism about the economy and the profession, I guess). But not yet ready to shut the blog down.Anwar Shaikh was here at Bucknell and gave a lecture on his new book (Capitalism). Here a review by Susan K. Schroder, who was my micro TA back in graduate school a little more than 20 years ago."It has long been recognized that the state of economic theory, particularly modern macroeconomics, is in disarray. With the release of Capitalism: Competition, Conflict and Crises, Anwar Shaikh attempts to place the discipline on a more secure footing. Without doubt, this is a very large

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Hyperinflation and inequality

November 10, 2017

I’m still reading The Great Leveler: Violence and the History of Inequality from the Stone Age to the Twenty-First Century, which is fun, well-written and in my view less controversial than what most reviews have suggested. Yes, inequality tends to fall mostly by violent means during periods of crisis. Note, also, that Walter Scheidel uses in this book the concept of surplus, and as noted earlier here (or here and here) before is part of this broader group of social scientists that still use the concepts of the old and forgotten classical political economists. There are significant advantages to this approach (see here, for example).

Having said there is an issue that is a bit annoying in the book, which is it simplistic Monetarist view of hyperinflation. For example, he says about

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More on “Why Latin American Nations Fail”

November 6, 2017

Brief summary of the content of the book published in the newsletter of the World Economics Association.Institutions are central to explaining the way in which, nations grow and develop. Traditionally the study of institutional economics focused on a very broad range of interests and made contributions in several different areas, including the structure of power relations, the beliefs systems, and also social norms of conduct. Contrarily the New Institutionalist turn in mainstream economics places the weight of its explanation on property rights.Within the logical construct of neoclassical economic theory, the contribution of the New Institutional Economics is a necessity, basically because exchange and production in a market economy requires the prior definition of property rights

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Monitoring the evolution of Latin American economies using a flow-of-funds framework

November 2, 2017

New paper by Esteban Pérez. From the abstract:

Flow-of-funds accounting permit to monitor the financial sector in terms of flows and stocks and to analyze its relationship with the real sector. These show inter-sectoral financial flows, capture balance sheet positions and all financial transactions by instrument, type and economic sector. The construction of flow-of-funds accounts has been traditionally spearheaded by the central banks of developed nations including the Federal Reserve, the European Central Bank and the Bank of Japan. In spite of its usefulness, flow-of-funds accounting has not experienced a parallel development for developing countries including for those of Latin American, In order to start filling this gap we undertook the construction of a data base of

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The General Theory at 80: Reflections on the History and Enduring Relevance of Keynes’ Economics

November 1, 2017

New paper by Tom Palley. From the abstract:

This paper reflects on the history and enduring relevance of Keynes’ economics. Keynes unleashed a devastating critique of classical macroeconomics and introduced a new replacement schema that defines macroeconomics. The success of the Keynesian revolution triggered a counter-revolution that restored the classical tradition and now enforces a renewed classical monopoly. That monopoly has provided the intellectual foundations for neoliberalism which has produced economic and political conditions echoing the 1930s. Openness to Keynesian ideas seems to fluctuate with conditions, and current conditions are conducive to revival of the Keynesian revolution. However, a revival will have to overcome the renewed classical monopoly.

Read full

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Why Latin American Nations Fail

October 16, 2017

Book has finally been published. I just got my copies. And yes it is a critique of New Institutionalist views and the title a play with the Acemoglu and Robinson’s book title. From the back cover."The question of development is a major topic in courses across the
social sciences and history, particularly those focused on Latin
America. Many scholars and instructors have tried to pinpoint, explain,
and define the problem of underdevelopment in the region. With new ideas
have come new strategies that by and large have failed to explain or
reduce income disparity and relieve poverty in the region. Why Latin American Nations Fail
brings together leading Latin Americanists from several disciplines to
address the topic of how and why contemporary development strategies
have failed

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The Passage of Time, Capital, and Investment in Traditional and in Recent Neoclassical Value Theory

October 15, 2017

New paper by Fabio Petri published in Œconomia. From the abstract:
With the shift from traditional analyses
where capital is a single value factor of variable ‘form’ to the
neo-Walrasian versions, general equilibrium theory has encountered new
problems pointed out by P. Garegnani (1976, 1990): impermanence problem,
price-change problem, substitutability problem radically question the
right to consider neo-Walrasian equilibria as approximating the actual
path of real economies. The paper briefly summarizes these problems and
then concentrates on a fourth problem, the savings-investment problem,
arguing that neo-Walrasian general equilibrium theory assumes that
investment is adjusted to full-employment savings but cannot justify
this assumption. The attempt to justify it in

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Anwar Shaikh at Bucknell

October 6, 2017

[embedded content]

Anwar will give a lecture at Bucknell next week (Thursday, October 12 at 4pm, in Academic West 112). Open to the public, and if you are in central PA you should NOT miss it up. Above a talk he gave last year at SOAS based on his recent book of the same title available here.

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Masters & Sindicalists: Growth, Investment and Productivity in Argentina, from Perón to Kirchner

October 4, 2017

New paper published in Ensaios FEE. In all fairness, this was the paper that should have been published in 2013 in the volume organized by Ricardo Bielschowky and available here. But the revisions took longer than expected. It is in Portuguese, however. Below the English abstract.
This paper analyzes the three phases of Argentine economic development since the end of the 19th century, namely: the commodity export model, the period of state-led industrialization and the neoliberal reforms initiated in the 1970s, and complemented in the 1990s. The main argument is that the commodity export model had run its course, given the geopolitical changes in the world, and that the abandonment of the industrialization project had less to do with its own limitations, and more to do with the

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Marx Capital turns 150

September 14, 2017

Marx’s capital (Volume 1) was published September 14, 1867, exactly 150 years ago. Below a few links to posts on Marx written over the years.What makes capitalism capitalism? (on the definitions of capitalism as a mode of production)

Sraffa and Marxism or the Labor Theory of Value, what is it good for? (on the labor theory of value)

Was Marx right? Nice of you to ask, but… (on common misconceptions about Marx)A Note on the Concept of Vulgar Economics (an important idea, often neglected)Garegnani on Sraffa, Ricardo and Marx (on the relation of Marx with classical economics)The last Marxist? Or shortchanging Hobsbawm (a critique of The Economist’s obituary)

And this one on why Marx and Keynes are essential for a coherent heterodox alternative to the mainstream:

The meaning of

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Seminar in Mexico

September 12, 2017

The 8th international seminar on Coordination of Fiscal, Monetary and Exchange Rate Policies in Developing Countries at the Universidad Nacional Autónoma de México, Facultad de Estudios Superiores Acatlán (UNAM-FES-Acatlán) will take place later this month. Ignácio Perrotini and I will give the opening talks the 26, and Ariel Dvoskin the following day. Many local economists will present too, like Flor Brown, Lilia Domínguez, Noemí Levy, Teresa López, and Luis Ángel Ortiz to name a few. Will post a link to the program soon.

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September 11, 2017

A graph that shows, for a longer span, essentially the same information presented in Robert Allen’s graph of manufacturing production, and discussed before here. It is evident that the rise of China (India is not quite yet visible, even if its share did increase) represents a certain rebalancing, which is inevitable as the income per capita grows in that country, even if it does not scape what mainstream economists refer to as the middle income trap. Source here, and the data is, as expected from Maddison.

Note that the first millennia, where Asia (China and India essentially) is much smaller in terms of the graph, which is a result of the paucity of data. In a sense, the graph shows the relatively brief rise, and now relative decline of Western GDP dominance, as Asia regains a

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Sunday Reading: Economic Letters of Note

September 10, 2017

Rick Holt edited a superb book with John Kenneth Galbraith’s letters from the 1930s until his death in 2006. He wrote to everybody, friend and foe, and displays his usual wit. Here I reproduce parts of his letter to Joan Robinson, that he wrote after having invited her to give the Ely Lecture (subscription required).The letter is from January 12, 1972. It says:Dear Joan:

Many thanks for your note. If the meetings were slightly less stuffy and neoclassical than usual, it was owing more to you than to anyone else…
The president of the Association, as I think I said once in New Orleans, has powers closely paralleling the President of Italy, but perhaps less. Indeed this is the way in which all establishments maintain themselves. One diffuses power through people who are reliably like

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Don’t be evil… oh well, perhaps a little bit

September 9, 2017

Don’t be evil was, of course, Google’s motto. The New York Times had a piece recently on the firing of Barry Lynn from the New America Foundation, a Democratic think tank that, if memory doesn’t fail me, was at least initially connected to the Clintons. The whole thing resulted from the fact that Lynn was favorable to the European Union regulation of Google, a major donor to the think tank.Given that I’ve been writing about the influence of corporate money in academia, I thought it was a good idea to link to this other story about Google’s perverse influence in the public debate. In my view, Google is not on the cancer-denying or climate-change-denying business simply as a result of a market structure phenomena. And in many ways Google and Facebook (don’t get me wrong Amazon is also

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‘Edupreneurs,’ Corporate Universities and Pluralism in Economics

September 8, 2017

I posted recently on the increasing influence of corporate money in academia, specifically the new Marriner Eccles center funded by the Koch brothers at the University of Utah. The piece by David V. Johnson in the Baffler on this subject is worth reading. As he notes, the new breed of private money goes beyond what they used to do in the past, trying to directly influence what kind of research, the curriculum and what ideas should be disseminated, and, indirectly who should be hired and retained. This is all the more problematic in the context of the retreat of public funding and the rise of the the corporate university, which implies that increasingly money equals voice in academia.Johnson says that:
private funding that burrows within the very body of public institutions, the better to

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The Economist and the natural rate of unemployment

September 6, 2017

The Economist new series on ‘big ideas’ tackled in a recent issue the concept of the natural rate unemployment (subscription required; other ideas included Say’s Law and Human Capital, just to give you the broad picture of what they think it’s big). I will only comment very briefly on two issues, one related to the history of ideas and the other to the concept itself.The Economist suggests that the natural rate of unemployment can somehow be connected to the ideas of Keynes. In their words:
John Maynard Keynes, the great British economist, took a first step towards the natural-rate hypothesis when he focused minds on ‘involuntary’ unemployment. In his book ‘The General Theory’.
The idea of a natural rate of interest can be clearly traced back to marginalist economics, and was a central

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Labor share and super firms

August 24, 2017

I discussed on several occasions before the worsening of income distribution and the squeeze of the labor share in total income. Figure below provides updated information.

Professor Autor and some of his co-authors suggest this in part might result from the rise of the ‘superstar firm.’ In other words, Facebook, Google (Alphabet), Amazon, Apple, etc and the winner take all economy. This paper (h/t Santiago Capraro) argues that this results from market power reflected in higher mark ups.Note that the paper by Autor et. al. suggests that superstar firms are more efficient and as their share of the market increase, their higher productivity and reduced labor force leads to a lower share for labor in the aggregate. It is mostly a technological effect for them.I have my doubts, of course,

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The Routledge Handbook of Heterodox Economics

August 22, 2017

(click to enlarge)
The Routledge Handbook of Heterodox Economics presents a comprehensive overview of the latest work on economic theory and policy from a ‘pluralistic’ heterodox perspective. Contributions
throughout the Handbook explore different theoretical perspectives including: Marxian-radical political economics; Post Keynesian-Sraffian economics; institutionalist-evolutionary economics; feminist economics; social economics; Régulation theory; the Social Structure of Accumulation approach; and ecological economics. They explain the structural properties and dynamics of  capitalism, as well as propose economic and social policies for the benefit of the majority of the population. You can buy it here.

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A theory of economic policy and the role of institutions

August 19, 2017

Nicola Acocella published a paper in the Journal of Economic Surveys (a free, preliminary version is available here) a paper on the development of the theory of economic policy. Acocella is clearly fully aware of the differences between classical political economics and marginalism (neoclassical economics). And he dismisses the pre-margnialist views on economic policy as being unsystematic and devoid of general principles.
In his words:
Most classical writers and the marginalists had suggested cases where public intervention was in order. This had been so for Smith (1776), Ricardo (1817), Mill (1848), Marshall (1890), Walras (1874-1877, 1898). But these cases were mainly what Walras called ‘examples of empirical policy’ rather than consistent policy. They were certainly dictated on the

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Racism, the election and more

August 15, 2017

After writing on Venezuela last week, Trump suggested that the US might intervene there. And then the predictable happened, violence and death ensued… in the US. I don’t have much to say about what happened in Charlottesville. It is worth noting that even though the city and the University of Virginia are relatively progressive places these days, they do have a long history that ties them to slavery and white supremacy (see this on NPR; h/t URPE blog).*At any rate, it’s not surprise that Trump didn’t condemn his base (and yes the racist voted for him; but as I noticed before 1964 those votes went mostly to Democrats). He certainly is more explicit than previous Republicans going beyond racist dog whistle  politics. I would insist that racism is not the main reason why he won the

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On Venezuela, Democracy, Violence and Neoliberalism

August 9, 2017

Many pieces have been written recently on the situation in Venezuela, including some on the left, that are very critical of the Maduro government (see for example this Jacobin piece that has been widely cited). Interestingly, during the sleepy months of the summer in which I almost didn’t write anything here, this old post on Venezuela has become the most read on the blog (as we approach almost 3 million hits).Let me first say that I am for democracy and against violence, irrespective of who is behind it. Calls to reduce violence on both sides should be at the top of the international agenda. So, any government constraints on the ability of the people to participate in its own government (some form of democracy) and government repression of manifestations (violence) is wrong. As far as I

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The wage share in Argentina

August 8, 2017

In his book, Estudios de Historia Económica Argentina, Eduardo Basualdo has several tables with the data for the share of wages in income. Sources seem to be different and not necessarily compatible (although I ‘m not sure about that). He also published a paper in 2008 with additional data. The graph below adds the numbers shown here, which I think are also from Basualdo (the newspaper only cites CIFRA; I couldn’t find another source in their website).

To the extent that one can trust numbers on functional income distribution, these numbers give a reasonable picture of what happened in Argentina since the first Peronist government back in 1946. It is clear that the military coup in 1976 was implemented to reduce the share of wages. The graph also puts in perspective the last progressive

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Economic Survey of Latin America and the Caribbean

August 7, 2017

The Economic Commission for Latin America and the Caribbean´s (ECLAC) Economic Survey of Latin America and the Caribbean (“Dynamics of the current economic cycle and policy challenges for boosting investment and growth”) for 2016-2017 was published last Thursday (3 of August). It incorporates a number of heterodox concepts and ideas mainly in Part II. These include the notion of center and periphery (which provides the framework for Chapter III “The region’s current economic cycle and its various characteristics are partly a reflection of changes that have occurred in the international economy and in the way forces are transmitted from the more advanced to the developing economies.” p.117 ); the importance of the productive structure (Chapters III and IV) to analyze the impact of the

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The positive profit with negative surplus-value paradox

August 6, 2017

New paper by Lucas (not that one) and Serrano. From the abstract:
This paper explains the “positive profits with negative surplus-value” example of Steedman (1975) and shows that while in joint production systems individual labour values can be negative, the claim that the total labour embodied in the surplus product of the economy (surplus-value) can also be negative is based on assumptions that have no economic meaning (such as negative activity levels). The paper also provides a way to measure the surplus-value of joint production systems which overcomes the problems of the traditional concept and restates the proposition that a positive amount of surplus labour is a necessary condition for positive profits.

Read full paper here. A preliminary version was briefly noted here in 2012.

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