Post-Keynesian

Here is John Stuart Mill stating a principle that sounds noble, and then immediately making a strange caveat. "The object of this Essay is to assert one very simple principle, as entitled to govern absolutely the dealings of society with the individual in the way of compulsion and control, whether the means used be physical force in the form of legal penalties, or the moral coercion of public opinion. That principle is, that the sole end for which mankind are warranted, individually or...

In a previous post I undertook a very simple analysis to show that factor investing during inflation helps investors to stop from simply treading water – at least, if history is any guide. An interlocutor asked if I’d looked into quality factors and I said that I would get around to it. In fact, there is something very interesting in the quality factor analysis – something that highlights an aspect of inflation that is not properly appreciated by most economists and investors....

This blog, over years, presents a welter of fluke cases. I created many of the numerical examples to illustrate the reswitching of techniques, capital reversing, or some such so-called 'perversity'. Fluke cases can be combined. For example, a fluke switch point at a rate of profits of zero can also be a fluke switch point at which three wage curves intersect. Or two switch points on the wage frontier can both be fluke switch points at which four wage curves, not necessarily the same,...

In Mark Twain's novels, Huckleberry Finn is just a kid in what you might think is the most despised group in society. His mother ran away, and his father, who rarely is home to look after him, is the town drunk. Huck does not go to school, dresses in rags, and often sleeps outside in some barrel down by the waterfront. But Huck is quite conscious that some hard-working adults are looked down on worse than him by respectable people. 'That's all right. Now, where you going to sleep?' 'In...

Recently I have been looking at whether inflation might be in the pipeline. The jury is still out on that, but caution would be wise given the current situation. That leads to a rather obvious question: what should investors do during an inflation? First off, if we are to be naive stock investors, how much does inflation impact stock market returns? We can see the impact in the following chart. But this chart simply does not capture the pain investors feel during proper...

I appeared on the Bullhouse podcast again to discuss some of the recent work I have done on inflation. I also talk about how the impact of COVID19 and the policy responses to it risk resulting in major labour shortages and a return to a 1970s-style inflationary regime. Podcast: Inflation and Labour Shortages

The Four Circuits of Capital Marx describes three circuits of capital in the opening chapters of Volume 2 of Capital. But when I draw a diagram, as above, a fourth circuit seems to be missing. So I have added the circuit of advanced capital. The circuit of advanced capital begins with commodities, consisting of means of production and labor power, in the hands of or under the direction of capitalists. They have purchased these commodities with monetary advances. The capitalists, at this...

In our last post we saw that private sector indices for used car prices and for rent prices were highly predictive of future changes in the corresponding CPI component indices. The next logical step is obvious: we should use this information to build an aggregate CPI index that factors in this forward-looking information to get a prediction of inflation over the next six months. In all honesty, I was a little reticent to do this. Not to put too fine a point on it, but it is a...

Back in early August, my old colleague James Montier and I released a White Paper on inflation. In it we argued that our baseline scenario was that we would see transitory inflation caused by the extreme supply shocks caused by the lockdowns. We drew an analogy to the end of rationing in Britain after WWII, where we saw temporary price increases in the markets for rationed goods. Further, we argued that any sustained inflation would require a wage-price spiral. That is, in order...

Figure 1: Convergence to a Pattern of Switch Points over the Axis for the Rate of Profits1.0 Introduction This post illustrates how to find fluke switch points. As usual, I proceed by example, in this case, as taken from my paper in Structural Change and Economic Dynamics. 2.0 Technoplogy In this example of a capitalist economy, two commodities, iron and corn, are produced. One process is known for producing iron. In the iron industry, workers use inputs of iron and corn to produce an...