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

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

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

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,

[embedded content]Krugman’s lecture which will be published in the Review of Keynesian Economics (ROKE).

Click here.

[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).

"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.

Registration for the 5th Godley-Tobin Memorial Lecture, for those that cannot be at Bucknell University for the event, is now open here.

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

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.

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