Naked Keynesianism

From the Federal Reserve Board press release: "The Committee currently expects that, with gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace and labor market indicators will continue to strengthen. However, global economic and financial developments continue to pose risks. Inflation is expected to remain low in the near term, in part because of earlier declines in energy prices, but to rise to 2 percent over the medium term as the...

Last weekend, as a result of Brad DeLong's post on free trade, we had a brief Twitter exchange. He had suggested that the Heckscher-Ohlin (HO) model* implies gains from trade associated to comparative advantage. He went further and suggested, after I implied that the Methuen Treaty between England and Portugal had not been favorable to the latter, that Portugal had indeed benefited greatly from free trade.It is important to note, before we get to Portugal, that the HO model, which is a...

Decent Vultures A short note in Spanish for Página/12 on the new direction of the Macri's government, with the emphasis on free trade and financial deregulation. Will try to post something longer in English later this week.

By Sunanda Sen* (Guest Blogger)Success achieved by the Indian economy , as highlighted in the recent budget of the central government rests on four pillars which include current GDP growth rate at 7.6%, drop in inflation ( as measured by the CPI index) around 6%, a record stock of official reserve at $350bn and most importantly, a reduced fiscal deficit at 3.5% of current GDP.Looking beyond the official figures to convey the positive note, one comes across reservations; first that the GDP...

Tom's new post titled 'Self-Protectionist Moment: Paul Krugman Protects Himself and the Establishment' criticizes Krugman's role as an establishment economist and defender of free trade. He says: Paul Krugman has a new op-ed ('A Protectionist Moment?') in which he tries to walk away from his own contribution as an elite trade economist to the damage done by globalization, while also lending his political support to Hillary Clinton and the neoliberal globalization wing of the Democratic...

Wall Street Journal notes the obvious, given the US presidential campaign. Here some old entries that explain the theoretical problems with "free trade." Some are more theoretical (first three) and others more in tune with the issues related to Free Trade Agreements (FTAs) and Bilateral Investment Agreements (BITs).On 'free' and managed trade (Ricardian model)More on "free" trade (HOS model)Free trade again (on the role of absolute rather than comparative advantage)On free trade and...

Last month Keynes' General Theory was 80. Today Adam Smith's Wealth of Nations turns 240 (h/t Paulo Gala)! Below the often misunderstood quote on the notorious invisible hand. He says: "As every individual, therefore, endeavours as much as he can both to employ his capital in the support of domestic industry, and so to direct that industry that its produce may be of the greatest value; every individual necessarily labours to render the annual revenue of the society as great as he can. He...

I read recently this paper (subscription required) by Sandy Darity and Arden Kreeger in HOPE. in the paper they show how the 1970s efforts to attract more African-American PhD students were eventually abandoned, since faculty deemed the project a failure. They argue that the: "factor that shaped the MIT faculty’s conclusion that the experiment had failed was their impression that black graduate students—particularly when they entered the program in sufficiently large numbers to form a Black...

From Papadimitriou, Nikiforos, and Zezza's new Levy Strategic Analysis: "over the last 25 years policymakers in Washington have become increasingly fiscally conservative. The current recovery is the only one in the postwar period during which government expenditure has decreased in real terms. Fiscal austerity, together with weak foreign demand, has put the entire burden of supporting aggregate demand on the private sector spending in excess of its income and borrowing. This has led to a...

I'll post a longer discussion later, but I wanted to provide a short update on the situation in Argentina. Everything indicates, as I had noted before, that the government of Macri wanted to accelerate inflation, with depreciation and an increase in the electricity bill.Macri rehired the technician (Graciela Bevacqua) that had been fired by Cristina Kirchner, and that led to the (mostly true) critique that inflation was higher than the official measure indicated.  More importantly, for a...