Tag Archives: Palley

On of the issues between more mainstream Keynesians and their more heterodox counterparts is whether frictions are central for Keynesian results or not. Since the Neoclassical Synthesis the conventional view is that some rigidity or friction was behind the problems of unemployment, be that the liquidity trap (the Keynesian case with the flat LM, since Hicks 1937), the rigidity of wages (since Modigliani 1944), or some other coordination problem (mostly in the New Keynesian literature).In...

By Thomas I. Palley (Guest Blogger)The last decade has witnessed a significant revival of belief in the efficacy of fiscal policy and mainstream economics is now reverting to the standard positions of mid-1970s Keynesianism. On the coattails of that revival, increased attention is being given to the doctrine of Modern Money Theory (MMT) which makes exaggerated claims about the economic costs and capability of money-financed fiscal policy. MMT proponents are now asserting society can enjoy a...

By Thomas I. Palley (guest blogger)Recently, there has been a burst of interest in modern money theory (MMT). The essential claim of MMT is sovereign currency issuing governments do not need taxes or bonds to finance government spending and are financially unconstrained. MMT rests on a triad of arguments concerning: (i) the macroeconomics of money financed budget deficits, (ii) the employer of last resort or job guarantee program, and (iii) the history of money. This primer analyzes that...

By Thomas Palley (guest blogger)This paper argues the mainstream economics profession is threatened by theories of the financial crisis and ensuing stagnation that attribute those events to the policies recommended and justified by the profession. Such theories are existentially threatening to the dominant point of view. Consequently, mainstream economists resist engaging them as doing so would legitimize those theories. That resistance has contributed to blocking the politics and policies...

Financialization is a fuzzy concept. There are many definitions, and none is clear cut, at least to characterize the changes of the last 40 years or so, which is the period most authors associate with financialization. I'm not suggesting it's not a useful concept though.* In some sense, financialization refers to the last phase in the capitalist system (even if there are ways in which one might argue that capitalism was always financialized). At any rate, going to the point I wanted...

By Thomas Palley (guest blogger)Brazil is falling under an evil political spell. The leading candidate in the presidential election is Jair Bolsonaro, an extreme right-wing politician. It is as if voters are sleepwalking their way to destruction of Brazilian democracy. Under the spell’s influence, they have become blind to the truth about Brazilian politics and blind to their better nature. Read rest here.

Thomas Palley (guest blogger)Some progressive economists are now arguing for the idea of a Job Guarantee Program (JGP), and their advocacy has begun to gain political traction. For instance, in the US, Bernie Sanders and some other leading Democrats have recently signaled a willingness to embrace the idea. In a recent research paper I have examined the macroeconomics of such a program. Whereas a JGP would deliver real macroeconomic benefits, it also raises some significant troubling...

By Thomas PalleyA journalist sent me some questions about MMT. My answers are below. 1. What are the major flaws you see within Modern Monetary Theory? (A.) I like to say that MMT is a mix of “old” and “new” ideas. The old ideas are well known among Keynesian economists and are correct, but the new ideas are either misleading or wrong.The essential old idea, which everybody knows, is government has the power to issue money. We used to talk of “printing” money. In today’s electronic world we...

By Thomas I. PalleyDonald Trump’s first one hundred days have revealed his inclination for unilateralism in international relations. That inclination reflects his opportunistic and bullying disposition, and it also fits well with his anti-globalization pose.Trump’s unilateralism has also spawned a dangerous waltz with Washington’s neocon establishment. The opportunistic Trump looks to gain establishment support, while the neocon establishment looks to the opportunist-in-chief to implement...

By Thomas Palley A key element of Trump’s political success has been his masquerade of being pro-worker, which includes posturing as anti-globalization. However, his true economic interest is the exact opposite. That creates conflict between Trump’s political and economic interests. Understanding the calculus of that conflict is critical for understanding and predicting Trump’s economic policy, especially his international economic policyAs part of maintaining his pro-worker masquerade,...