Short post by Tom on the Sinophobia that has become more common in the US with the rise of the trade wars and the pandemic. He says: "Much of the United States (especially Washington, DC) is in the grip of a contagious lethal anti-China fever which is spreading fast. Even people I usually admire and respect have become infected. Reason and facts have lost all capacity to inoculate."Read rest here.

[embedded content] End of Bretton Woods with Barry Eichengreen, myself and Lilia Costabile, organized by L-P. Rochon and the Review of Political Economy.

50 years ago this Sunday. A debate with Barry Eichengreen on that today at 1pm NY time, and you can register here.
[embedded content]My paper can be read here.

New working paper at the Political Economy Research Institute (PERI). From the abstract:The paper analyzes the relation between premature deindustrialization in Latin America with what is termed premature financialization. Premature financialization is defined as a turn to finance, organized as an industrial concern, which is a vehicle for accumulation before the process of industrialization has reached maturity. This contrasts with developed countries where financialization occurs after an advanced stage of economic and social development is reached, and where the growth of the financial sector, beyond a certain threshold, can be detrimental to economic activity. The paper examines the consequences of premature financialization for investment, growth, and financial stability.Read full

Collapse, ma non troppo!New IDEAS Working Paper on the alternative views of the collapse of Bretton Woods. From the abstract:Contrary to conventional views which suggest that the collapse of Bretton Woods represented the beginning of the end of the global hegemonic position of the dollar, the collapse of the system liberated American policy from convertibility to gold, and imposed a global fiat system still dominated by the floating dollar. The end of Bretton Woods and the set of regulations that imposed capital controls were part of the agenda of many powerful groups within the US, and led to the creation of a more dollarized world. The challenge to the dollar might arise, eventually, from the decline in the United States’power to determine the pricing of key commodities in global

New versus Classical DevelopmentalismNew paper by Tom Palley, titled “The Economics of New Developmentalism: A Critical Assessment” which has been published in Investigacion Economica. Palley argues that "the issues raised will be a key element in the 2022 Brazilian presidential election that will likely pit Ciro Gomes versus Lula in the first round. Gomes aligns with New Developmentalism. Lula inclines to Classical Developmentalism. Of course, economic analysis is just part of the development problematic. It must be reconciled and integrated with the political reality of Latin America’s unethical economic elite, its corrupted political class, and the omnipresent threat of US intervention against change that challenges the economic status quo."

Each era gets its own version of Keynes. The post-war era got the sanitized biography by his disciple and friend Roy Harrod. It emphasized the somewhat late Victorian values of what he called the presuppositions of Harvey Road, Keynes’ birth place at Cambridge, representing the ethical principles that he received from his parents. Not only it avoided any discussion of Keynes’ sexuality, that was verboten at that time, and not just because Keynes’ mother was still alive, but also it was well suited to the moderate Neoclassical Synthesis version of Keynesianism that came dominate American academia and the profession with its emphasis on wage rigidities and imperfections. Lord Robert Skidelsky famously argued that Harrod’s biography was “an exercise in covering up and planting false trails”

Classical political economics was in part a discourse for the rising bourgeoisie, and as such most of its members – that accepted some version of the labor theory of value and that distribution was conflictive – were for laissez-faire policies. That was certainly the case of the Physiocrats, and of Adam Smith and David Ricardo, the two most accomplished of the British political economists.However, the classical analytical scheme did not assume full employment of labor or that the economic system was self-adjusted. Competition meant that market prices fluctuated around the natural prices, but those did not imply efficient allocation of resources. The notion that markets are self-adjusting with a tendency to full employment is a development of the last quarter of the nineteenth-century, and

ROPE will be hosting a special Zoom Webinar, hosted by Lilia Costabile. The webinar is on August 13, 2021, at 1 pm, NY time (Bretton Wood collapsed on August 15, 1971) . To register, please use the following link.

The Review of Keynesian Economics (ROKE) Clarivate impact factor has gone up again. The five year one is a bit higher at 1.397. For a critical discussion of the role of impact factors and journal rankings see this old post from when ROKE was just 3 years old and was ranked for the first time. Next year it will be the 10th anniversary of the journal.

I haven’t written about bitcoin in a long while, in part because it is somewhat irrelevant, like all notions of a future dominance of private currencies (another of Hayek’s incredible blunders; more problems with Hayek here and here). Note that nation states are fine and well, and not going anywhere, and hence national currencies will remain dominant. Only a weak state without its own currency (El Salvador is dollarized; on that see here and here) would make bitcoins legal tender. But more on that later.Even though it’s discussed in my old post, let me first explain why bitcoin makes little sense as a currency. The first thing to note about bitcoiners is that they think that the state management of the currency is prone to abuse, and that the value of money, and, hence the price level (or

[embedded content]The talk I gave for Rethinking Economics Peru (in Spanish). Go check their website and materials here or if you don’t speak Spanish there’s a lot of interesting material in the general (in many languages) Rethinking Economics here. An older post, in English, that discusses essentially the same thing.

Friedman’s adviseesZachary Carter, of Price of Peace fame (a good book that I recommend, btw), wrote an interesting piece on Milton Friedman’s legacy, which I think is, as Hyman Minsky said of Joan Robinson’s work, wrong in incisive ways. But even before we get to his main point, that the era of Friedmanomics is gone, it is worth thinking a bit about the way he approaches the history of ideas. This is clearly a moral tale for Carter, with good guys and bad guys. Gunfight at high noon. It is more about vision than analysis, in the terminology of Schumpeter.He starts, like Nancy MacLean in her Democracy in Chains — I discussed only tangentiallythe issue here — with Brown v. Board of Education, and Friedman’s, rather than Buchanan’s, insidious behavior favoring policies that allowed the

[embedded content]A shorter version at the ISET conference of my Will Lyons Lecture at Franklin & Marshall. And yes, I think Harrod and Skidelsky were right (not Crotty and O’Donnell). He was definitely an Asquith Liberal.

[embedded content]My talk at the Universidad Nacional de Colombia last Friday, in Spanish of course. Part of the argument is that Prebisch, contrary to what is often assumed, moved from an argument that emphasized the role of the external constraint in leading to underdevelopment during his United Nations years, to one that put the emphasis on the patterns of domestic consumption, and its negative impact on the surplus, following the literature on stagnation, in his last book on peripheral capitalism. I suggest that the change is problematic.

"But that one is holding the poop!"Adam Tooze, the author of the monumental Crashed (who was, incidentally,  student of Wynne Godley, one of my mentors), wrote a piece for the London Review of Books that has received a lot of praise. While it reviews Paul Krugman’s latest book, it provides an overview of the radicalization of New Keynesians, or at least some, that dominate both in academia, and in the corridors or power. The gatekeepers of knowledge and academic  and intellectual influence, with a close connection to power, so to speak. He tells us at the outset that Krugman, the economist that was a bulwark of free trade, even when the theories for which he received his Sveriges Riksbank Prize (aka the Nobel) suggested that some degree of intervention might be good, and that remained

By Thomas Palley (Guest blogger)Almost fifty years ago, the Swedish econographer Axel Leijonhufvud (1973) wrote a seminal study on the Econ tribe titled “Life among the Econ”. This study revisits the Econ and reports on their current state. Life has gotten more complicated since those bygone days. The cult of math modl-ing has spread far and wide, so that even lay Econs practice it. Fifty years ago the Econ used to say “Modl-ing is everything”. Now they say “Modl-ing is the only thing”. The math priesthood has been joined by a priesthood of economagicians. The fundamental social divide between Micro and Macro sub-tribes persists, but it has been diluted by a new doctrine of micro foundations. The Econ remain a fractious and argumentative tribe.Read paper here.

22 Apr 2021 None –27 May 2021 NoneThe Global Financial Crisis of 2008 and the COVID pandemic that erupted in 2020 have reinforced criticisms of the main, orthodox current economic theory. At the same time, they highlighted the need for and importance of alternative approaches such as Post-Keynesian Economics (PKE). The Post-Keynesian Economics Society (PKES) is an initiative that fosters research and dissemination within the framework of PKE. Furthermore, PKES is committed to working towards a strengthening and an internationalization of heterodox economics networks. The shift to online events due to the covid crisis provides an occasion for such international collaborations. We have worked with the Italian PK network and want to convene a series of webinars with Argentinean PK scholars,

[embedded content] The 4th Godley-Tobin Lecture given by Marc Lavoie, a co-author of Wynne Godley, and one of the leading Post Keynesian authors.

[embedded content]Video of the lecture by Michael Lazzara and Esteban Pérez Caldentey, part of the seminar on Memories of Neoliberalism at Bucknell University.

Part of the Eastern Economic Association Meeting, and sponsored by the Review of Keynesian Economics.

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

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

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

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

[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.

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

[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."

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

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