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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

Galbraith on the Texas Energy Debacle

February 23, 2021

This piece shows very clearly the limits to deregulation in the case of energy markets. Jamie’s oped was published in Project Syndicate, and a slightly different version is available here at INET, in which we find out that radical free market policies ended up in what he termed ‘selective socialism.’ The relevant paragraph:the price mechanism failed completely. Wholesale prices rose a hundred-fold – but retail prices, under contract, did not, except for the unlucky customers of Griddy, who got socked with bills for thousands of dollars each day. ERCOT was therefore forced to cut power, which might have been tolerable, had it happened on a rolling basis across neighborhoods throughout the state. But this was impossible: you can’t cut power to hospitals, fire stations, and other critical

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10 Years of Naked Keynesianism

February 15, 2021

A day like today back in 2011. First post here. I was at the University of Utah back then, and blogging had been going for a while, but nothing that was close to the kind of heterodox economics that mattered to me. Also, the Review of Keynesian Economics (ROKE) did not exist yet. More than 2000 posts and 4 million visits later the blog has certainly passed its peak. Interestingly enough the post with more visits is about Venezuela, but the second is less of a surprise, the one on the capital debates. Then there are popular posts on Brexit, Capitalism and MMT. It is less an instrument for teaching to me know than it was at the beginning, and I have often thought of just stop blogging. Yet at different times when I debated what to do, I would get an email, or meet a student at a conference

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New Intro to Macro with a classical-Keynesian approach

February 15, 2021

New textbook by Alex M. Thomas, from Azim Premji University, Bengaluru, India. From the back cover:Macroeconomics: An Introduction provides a lucid and novel introduction to macroeconomic issues. It introduces the reader to an alternative approach of understanding macroeconomics, which is inspired by the works of Adam Smith, David Ricardo, Karl Marx, John Maynard Keynes, and Piero Sraffa. It also presents a critical account of mainstream marginalist macroeconomics. The book begins with a brief history of economic theories and then takes the reader through three different ways of conceptualizing the macroeconomy. Subsequently, the theories of money and interest rates, output and employment levels, and economic growth are discussed. It ends by providing a policy template for addressing the

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Prebisch’s Critique of Bretton Woods Plans

February 11, 2021

Prebisch, Williams and KaleckiNew Working Paper with Esteban Pérez at the networkideas. From the abstract:The name and work of Raúl Prebisch are often associated with the problem of long-term economic development in Latin America. Less well known and explored is Prebisch’s contribution to the study of the monetary and financial problems of the countries of the periphery in relation to those of the center. Prebisch analyzed the post-WW-II monetary plans of John Maynard Keynes and Harry Dexter White from the perspective of their compatibility with his national autonomous monetary policy proposal. He thought that both plans had important shortcomings that would prevent the achievement of their intended objective, international equilibrium in the balance-of-payments. The plans ignored the

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The New IMF and the Covid Crisis

February 5, 2021

[embedded content]Video of the roundtable sponsored by the Review of Keynesian Economics on the changes (or lack of) at the IMF with Ilene Grabel, Marc Lavoie, Esteban Pérez Caldentey and Florencia Sember.

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‘Rethinking capacity utilization choice: the role of surrogate inventory and entry deterrence’

February 1, 2021

By Thomas PalleyThis paper presents a macroeconomics-friendly Post Keynesian model of the firm describing both an inventory theoretic approach and an entry deterrence approach to choice of excess capacity. The model explains why firms may rationally choose to have excess capacity. It also shows the two approaches are complementary and reinforcing of each other. Analytically, the paper makes three principal contributions. First, it provides a simple framework for understanding the microeconomics of capacity utilization choice. Second, it reframes the Post Keynesian discussion of capacity utilization by making excess capacity choice the key to understanding normal capacity utilization. Third, it implicitly challenges Neo-Kaleckian wage-led growth theory as the model shows choice of the

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The Worldly Philosophers go to Washington: Bankers and Generals

January 5, 2021

[embedded content]Fourth episode, where I discuss the Bank Wars, in particular the disputes between Biddle and Jackson, its relation to the Bullionist Controversy in England, and the ideas of Henry Carey, of whom Marx said: “bourgeois society in the United States has not yet developed far enough to make the class struggle obvious and comprehensible is most strikingly proved by H. C. Carey (of Philadelphia), the only American economist of importance."

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From Regulation to Deregulation and (Perhaps) Back: A Peculiar Continuity in the Analytical Framework

December 29, 2020

New working paper with Bill McColloch, published by the Centro di Ricerche e Documentazione "Piero Sraffa." From the abstract:The rise of the regulatory state during the Gilded Age was closely associated with the development of Institutionalist ideas in American academia. In their analysis of the emergent regulatory environment, Institutionalists like John Commons operated with a fundamentally marginalist theory of value and distribution. This engagement is a central explanation for the ultimate ascendancy of neoclassical economics, and the limitations of the regulatory environment that emerged in the Progressive Era. The eventual rise of the Chicago School and its deregulatory ambitions did constitute a rupture, but one achieved without rejecting preceding conceptions of competition and

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Leo Panitch and the Lessons from Socialist Defeats

December 28, 2020

A few weeks ago I bought the little book on top (a new edition of a previously published one, I think). Sadly not long after I learnt of Leo Panitch’s untimely death (obit by Chibber here). The book tries to account for three recent defeats of the democratic socialist left in recent times, even though it was written before the ultimate defeat of Bernie Sanders by the establishment candidate earlier this year. He and his co-authors discuss the rise of democratic socialism, and the consequences of the defeat, or one might say the caving, suffered by Syriza, which they point out was "the only party to the left of traditional social democracy in Europe that succeeded in winning a national election"* (p. 29), and what they call "the devastating defeat Corbyn suffered at the hand of Boris

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Economics without Gaps: on Ibn Khaldun and non-Western traditions in the history of ideas

December 15, 2020

Ibn Khaldun, Arab scholarA piece* from a few years ago, has again become somewhat popular and it has been making the rounds. It suggests that the Arab scholar Ibn Khaldun developed the ideas of classical political economics in the late XIV century, about half a millennia before Adam Smith, often seen as the father of classical economics, and of modern economics. Some would suggest that Khaldun was the real father of economics (or stepfather in the first essay on top). To a great extent, the discussion of the role of non-western scholars tries to show that an Eurocentric bias has dominated the history of economic thought. This discussion goes hand in hand with the notion that the Rise of the West and the so-called Great Divergence are relatively recent phenomena.There are many elements in

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Heterodox Challenges in Economics by Sergio Cesaratto

December 14, 2020

The English translation of Sergio Cesaratto’s book has been published. A Free chapter is available at the Springer website here.From the promotion pamphlet:This book discloses the economic foundations of European fiscal and monetary policies by introducing readers to an array of alternative approaches in economics. It presents various heterodox theories put forward by classical economists, Marx, Sraffa and Keynes, as a coherent challenge to neo-classical theory. The book underscores and critically assesses the analytical inconsistencies of European economic policy and the conservative nature of the current European governance. In this light, it examines the political obstacles to proposals to reform the European monetary union, as well as those originating in the neo-mercantilist German

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Poor Richard Goes to London: The Economic Ideas of Benjamin Franklin

December 12, 2020

[embedded content]Another episode of my podcast on The Worldly Philosophers Go to Washington: From Alexander Hamilton to Janet Yellen. The ideas of early classical political economists and their influence in America are analyzed in this episode. The role of Sir William Petty’s ideas in the development of Benjamin Franklin’s early policy proposals is discussed. It is noted how Franklin had a firm grasp of the main economic theories of his time, even before some of these ideas were fully developed in Europe, by the Physiocrats and Adam Smith. In fact, some of Franklin’s original ideas influenced European political economists. The notion that the influence of economics is a recent phenomenon cannot be supported by the evidence.

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From Regulation to Deregulation and (Perhaps) Back (Talk in Portuguese)

December 5, 2020

[embedded content]My talk at the Federal University of Rio de Janeiro yesterday, on the rise, fall, and perhaps rise again of the regulatory state in the US, and its relation to ideas, particularly institutionalist, and Chicago School views, as expressed by John R. Commons and George Stigler. In Portuguese, of course.

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Diego Maradona (1960-2020): Some Bittersweet Reflections

November 27, 2020

By Thomas Palley (guest blogger)Maradona was more than just an extraordinary footballer. He was also a complicated social icon. That further distinguishes him from other footballers, though Pele also has some of that… and it is great to see young footballers like Marcus Rashford taking up that mantle.He was both rewarded by and terribly exploited by the system. The system treated him like a “race horse”. They wanted him to play at all cost and pumped him with drugs. They did not care about the physical and psychological costs to him. That contributed to his addiction. Maybe he would have gotten there on his own owing to personality reasons, but the addictive pain-killers they fed him sure gave him a healthy shove in that direction.He came from great poverty, from a shanty town. He never

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Capitalism Alone Against Itself: Liberal Democratic versus Political Capitalism

November 18, 2020

I finished Branko Milanovic’s thought provoking Capitalism Alone this summer. But I haven’t had much time to write on the blog, as you might have noticed. This is certainly not a review, and I would definitely suggest that you go and buy the book as soon as you can and read it. It is a serious discussion of the future of capitalism, that word that, as Heilbroner often reminded us, was at the center of the discipline, but seldom discussed openly by economists. He cited, if memory doesn’t fail me that it didn’t appear in Mankiw’s Principles textbook, at least back then in the 1990s, when it was published. I always note that Allan Meltzer wrote a little book titled Why Capitalism? were he makes no explicit effort in defining it, even though a definition can be gleaned from it.*The definition

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Is the Worldly Philosophy Dead?

November 7, 2020

[embedded content]
Instead of videos a series of podcasts on the history of political economy, and its relation to economic policy in the United States. This is based on a course I teach for undergraduates.

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Esteban Pérez on John Maynard Keynes

October 31, 2020

One of my favorite economists, and John Maynard Keynes too. Don’t miss this lecture, in Spanish of course, on one of the central economists of the 20th century and its relevance for the periphery, particularly during the current pandemic. I’ll post links to the Zoom and Facebook stream soon.

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The problems of Neoliberalism in Latin America

October 27, 2020

[embedded content] My talk with Luis Nassif (in Portuguese) about neoliberalism in Latin America. We didn’t really get to discuss the current cases of Argentina, Bolivia, and Chile, but talked about it more generally.

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Affordable Housing Problems and Solutions: The Utah Case

October 24, 2020

David Fields (Guest blogger)Rising housing costs and stagnating real wages are the primary causes of worsening housing affordability in Utah. The dismal wage growth is the result of a larger nationwide upward redistribution of wealth and income, which can be attributed to the following: a failure to adhere to full employment objectives; fiscal austerity; and various labor market policies and business practices allowing the higher social strata of a professional class to capture ever larger shares of economic growth. This is the result of institutional transformations that have exposed workers to the vulnerability of higher turnover, resulting in higher averages of unemployment, particularly worsened by the COVID-19 pandemic induced recession. For instance, from 2009 to 2016 real income

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Tom Palley on What’s wrong with Modern Money Theory

October 22, 2020

In the new issue of the Review of Keynesian Economics. From the abstract:The essential claim of Modern Money Theory (MMT) is sovereign currency issuing governments, with flexible exchange rates and without foreign currency debt, are financially unconstrained. This paper analyses the macroeconomic arguments behind that claim and shows they are suspect. MMT underestimates the economic costs and exaggerates the capabilities of deficit-financed fiscal policy. Those analytic shortcomings render it poor economics. However, MMT’s claim that sovereign governments are financially unconstrained is proving a popular political polemic. That is because current distressed economic conditions have generated political resistance to fiscal austerity, and MMT fits the moment by countering the neoliberal

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Production of Commodities at 60

September 25, 2020

Video of the conference, without the long part before it starts that was on the Review of Keynesian Economics Facebook page.[embedded content]
At any rate,the three presentations by professors Serrano, Palumbo and Nell.

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Reflections after a Post Keynesian Workshop

August 25, 2020

Jessica Finnamore (Guest blogger)Heterodox economics refers to any school of thought which is not accepted by the economic mainstream, or neoclassical economics. Post-Keynesian economics is a heterodox school of thought which believes (amongst other things) in high levels of government intervention, fundamental uncertainty, and that the economy is demand-driven rather than supply-constrained (as neoclassical economics says). Keynes himself was concerned with creating theories which were realistic and was even willing to reject theories he had previously supported if empirical evidence disproved them.Some Post-Keynesian ideas have been adopted into the mainstream; following the 2008 financial crisis, the mainstream had little to no explanation for what had caused the housing market crash

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Reflections after a Post Keynesian Workshop

August 23, 2020

Nicole L. Kormann da Silva (Guest Blogger)I am from Brazil and I did my bachelor’s degree at Universidade Federal de Santa Catarina. I would say the course there can be relatively multidisciplinary and open to alternative approaches, but macroeconomics was mainly restricted to conventional textbooks and it was only during other classes like Political Economics and Economic Development of Brazil that some insights came across my mind: it was possible – and in fact there was already a structured body of work on it – to perceive economics from another starting point.For me heterodox economics is a pluralist umbrella under which, among other schools, you find Post-Keynesian economics – PKE. I would say heterodox economics give us the possibility to rethink economics in a more realist term and

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