Brief visit to Argentina to visit my dad. Some brief reflections here. At any rate, it was perfectly timed with the news of the collapse of exports associated to the draught, which will lead to a decline in export revenues of the order of somewhere between 15 to 20 billion dollars. A problem, since Argentina already doesn’t have reserves and dollars are tightly controlled. This came with the news that the IMF had eased the international reserve targets, which were somewhat hard to reach even before the export news.The drama was heightened by the banking crisis, and the additional rise of interest rates in the US, which makes a recession in the US, with global consequences, more likely. That was followed by the defense, by some well-known economists, of the notion that the country will not

Everybody in the heterodox community, in the United States at least, seems very happy with Jon Stewart’s performance interviewing Larry Summers. And of course, Stewart is very good at this kind of stuff. But in all fairness, in this he is canalizing some of the ideological views of the left, which on inflation are fundamentally incorrect. Stewart presents at the beginning the adding up theory of inflation, thirty percent demand, twenty five percent wages and the rest corporate greed. His argument is that not all of inflation was caused by demand (I would say none of it was). He is correct on the fact that the stimulus during the pandemic was good and not exaggerated, and that monetary policy (the interest rate hikes are wrong). But he accepts the notion that the labor market is tight,

By Thomas Palley(1) The origins of the Ukraine conflict lie in the ambitions of US Neocons. Those ambitions threatened Russian national security by fuelling eastward expansion of NATO and anti-Russian regime change in the Republics of the former Soviet Union.(2) The Ukraine conflict is now a proxy war. The US is using Ukraine to attack and weaken Russia.(3) Russia will eventually prevail. We may already be approaching “game over” because Ukraine’s forces have been eviscerated. Ukraine is now press-ganging military conscripts in Kiev and Lviv.(4) Once Russia imposes its will, the US will be forced to step back but it will have achieved its strategic goal of weakening Russia and separating Western Europe (especially Germany) from Russia.(5) Ukraine will be effectively destroyed. It will be

Q&A Session The lecture here. Note that it missed a few minutes at the beginning and the slides are not showing, with Professor Stiglitz at the upper right corner. It is still pretty engaging and wroth reading. There is a link to the slides that are not showing up. The actual lecture will be published in the first issue of ROKE in 2024. [embedded content]I’ll post link to the published version when it’s done.

If Cohen and De Long (2016) are to be believed, there is an American Political Economy tradition, that harks back to Alexander Hamilton, that goes against the free market canon of the profession. In their view, the American Political Economy tradition consist of an interventionist approach to economic policy, that arguably should be seen as neomercantilist [1]. Classical political economy, as represented by their main figures in the United Kingdom, Adam Smith and David Ricardo, upheld the laissez-faire and free market tradition, and in this view the same would be true for the marginalist or neoclassical tradition. In that respect, some might see a continuity between both schools of thought and the American Political Economy tradition would be a somewhat heterodox tradition from its

The issue is back in the news. This time in Brazil (it was briefly an issue here when Trump did not reappoint Yellen, and then complained about Powell’s interest rate where too high). At any rate, I always thought that there were good reasons for skepticism about central bank independence (CBI). As noted by Massimo Pivetti in this old piece on the Maastricht Accord and the, at that time, plan for the euro, the main reason to be doubtful is related to the interaction of monetary policy and fiscal policy. And as Quantitative Easing in the post-Global Financial Crisis has shown, central banks have become again fiscal agents of the state (never stopped being that, in all fairness).The other important reason alluded by Pivetti for doubting CBI is the effects of the interest rate on the

Working paper on the Post Keynesian Economics Society website. From the abstract: The current debate on the causes of inflation is dominated by a particular view of what caused the inflationary acceleration in the 1970s, the so-called Great Inflation. In this view inflation is always and everywhere a demand phenomenon and requires contractionary monetary policy to be kept under control. The alternative view put forward by many heterodox authors emphasize what might be termed the oligopolistic view of inflation. In this paper we trace the limitations of both views for the center and the periphery. Download paper here.

At the ASSA in San Diego, before the pandemic It is hard to believe that Barkley has passed away. I met Barkley long ago, when I was still a PhD student in the 1990s, at the Eastern Economic Association Meeting, which still is one of the organizations that congregates both mainstream and heterodox economists with some degree of interaction. Perhaps the only such conference that still exists in the US. Barkley moved in between the mainstream and the heterodoxy. He should be seen, to a great extent, in the way he described the heterodoxy, as trying to break away from orthodox thinking. Although I disagreed about that definition as a description of heterodox economics, I think his definition reflected very well what he was trying to do.His view of heterodoxy was based on the idea that the

Krugman and the editors of ROKE  Paul Krugman’s lecture, reflecting on the contributions of James Tobin is now published by the Review of Keynesian Economics. The paper can be downloaded here.

The 6th Godley-Tobin Lecture will be delivered by Professor Joseph Stiglitz. More information will be made available soon.

Over the past twenty years there has emerged a compelling new discourse on varieties of capitalism. That discourse has an appealing common sense which challenges the view there is no alternative to free market capitalism. The initial view had a microeconomic focus that made firms the fulcrum of analysis. It distinguished between liberal market and coordinated market economies. Subsequently, there has emerged a second-generation literature which adopts a macroeconomic perspective that emphasizes differences in drivers of growth. This book provides a collection of essays that engage those second-generation concerns and questions. More info here.

Pasinetti, Garegnani and the president of Italy in 2010Last week, in my senior seminar on the history of economic thought, I made the kids read a paper by Pasinetti on "Progress in Economic Science", which was published in a book edited by Boehm, Gehrke, Kurz and Sturn. It’s a short defense of pluralism in economics on the basis of the co-existence of Kuhnian paradigms, with a relatively optimistic view of the possibility of progress, in a discipline in which, as he noted, the object of analysis is changing continually, the ideas of the researchers might affect the functioning of the object of study, and value judgments cannot be avoided, in part because they affect everyday material conditions. As he said: "It is enough to think of the devaluation of a currency, or of the movements of

Actual proposal by Haddad and Galípolo at Folha de São PauloLula’s visit to Argentina, during the  Community of Latin American and Caribbean States (CELAC) meeting, brought about a brief discussion of the possibility of a common currency. I have discussed here (as well as many guest bloggers) both currency unions, in particular the euro, and it’s consequences. Note that the FT piece linked suggested that the common currency was the first step in a long process. I doubt it, in part because, if the end goal is a real currency union, it would be a terrible idea. The actual proposal by the current finance minister, Fernando Haddad, and one of his collaborators, Gabriel Galípolo, falls short of a common currency area. It is still a bad idea.The idea is to reduce the use of the dollar for

Teaching two history of thought classes this semester. One more traditional, focusing on the evolution of the theories of value and distribution, and another one, my regular senior seminar, on the co-evolution of ideas and policy in the United States. For the former I used a short piece by Peter Boettke on the reasons for reading the original sources (and they do read a fair amount in my class). The blackboard (pictured above) is based on his discussion. I changed the titles and the definition of the logic a little bit.The archeological approach tries to understand the analytical views of authors in their own historical context, while the theoretical reconstruction tries to understand its relevance for modern theory. BTW, the divide between archeological and theoretical reconstruction was

Calvin Coolidge and Andrew Mellon A new paper by Ahmad Borazan on the 1920-21 recession, often seen in libertarian and Austrian circles as an example of a laissez-faire recovery. From the abstract:The US recovery from the 1920–21 recession has been presented as a triumph of laissez-faire policies and a serious challenge to Keynesian economics. This study interrogates this claim by using previously unutilised data and examines the historical development of the early 1920s recession and recovery. The study refutes the laissez-faire view and shows that the recovery indeed fits Keynes’s perspective. The deflationary recession was largely engineered by the Federal Reserve a la 1980s Volker disinflation. The recovery closely followed the reversal of tight monetary policy and was propelled by

The book (in Spanish) titled "Economía en crisis : la enseñanza de la economía en Latinoamérica y los límites de la teoría ortodoxa" [Economy in Crisis: The teaching of economics in Latin America and the limits of orthodox theory] is edited Andrés Jose Maria Lambertini; Ignacio Silva Neira. The introductory chapter on the role of neoliberalism and its resilience in the region is by Esteban Pérez and myself. There’s a webinar with Carolina Alves and Gabriel Porcile, besides the editors.It will be in Spanish with English subtitles. You can register here.

New paper on the empirical evidence of the relevance of the supermultiplier for explaining economic cycles by Ricardo Summa, Gabriel Petrini, and Lucas Teixeira. From the abstract:The demand-led supermultiplier growth model proposes that business investment is induced by income while autonomous expenditures determine economic growth. The most known versions of the model are presented at high levels of abstraction, focusing on general analytical properties and dynamic stability conditions. Based on those versions, Nikiforos et al. (2021) argue that the supermultiplier model cannot generate business cycles compatible with the empirical observation. In this paper, we show that this conclusion is a consequence of the misspecification of the variable chosen to represent the investment share,

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Partial video (my fault) of the conference about the book edited by the late Jerzy Osiatynski and by Jan Toporowski published by Oxford University Press. Our chapter on Prebisch with Esteban Pérez is available in a preliminary version here.

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

Webinar on Kalecki and his views on the Bretton Woods agreement. To register go here.

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

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

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

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

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

This will be part of the 10 year anniversary of ROKE. Register here.

My paper, in Italian, which was a modified version of a talk last year, has been published in Moneta e Credito, and is available for download here.

[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.

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

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