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from Blair Fix Did you hear the joke about the economists who tested their theory by defining it to be true? Oh, I forgot. It’s not a joke. It’s standard practice among mainstream economists. They propose that productivity explains income. And then they ‘test’ this idea by defining productivity in terms of income. In this post, I’m going to show you this circular logic. Then I’ll show you what productivity differences look like when productivity is measure objectively. They’re far too...

from Anne Mayhew I count myself as one of those friendly critics who applaud several of the major MMT contributions to our understanding of the modern American economy. Among these contributions are the emphasis put on the endogeneity of money; the importance of using of a flow-of-funds approach in analysis of the macroeconomy; detailed descriptions of how the FED (Federal Reserve System) actually operates, details usually missing from texts. And from these three emphases the central...

from Lars Syll One of the limitations with economics is the restricted possibility to perform experiments, forcing it to mainly rely on observational studies for knowledge of real-world economies. But still — the idea of performing laboratory experiments holds a firm grip of our wish to discover (causal) relationships between economic ‘variables.’ If we only could isolate and manipulate variables in controlled environments, we would probably find ourselves in a situation where we with...

from Geoff Davies The point of a theory or model is to provide a useful guide to understanding the world. People like Paul Krugman are fond of claiming simple equilibrium models provide a useful first cut or first approximation to understanding. Others put their faith in more elaborate equilibrium models. But do equilibrium models, simple or elaborate, offer any useful guidance to actual economies, or are they perhaps radically misleading? Is this a useful guide to this? Or this? The...

from Dean Baker Presidential candidate Joe Biden is considering to propose a financial transactions tax as part of his campaign for the Democratic nomination, according to a recent report from The Washington Post. This is big news for those of us who have long advocated such a tax. Sen. Bernie Sanders has taken the lead on this issue among presidential candidates, including a financial transactions tax — also known as an FTT — as part of his plan for making college tuition free. Several...

from L. Randall Wray MMT provides an analysis of fiscal and monetary policy that is applicable to national governments with sovereign currencies. We argue that there are four essential requirements that qualify a national currency as sovereign in the sense in which we use the term: the National government chooses a money of account in which the currency is denominated; the National government imposes obligations (taxes, fees, fines, tribute, tithes) denominated in the chosen money of...

from Lars Syll At least since the time of Keynes’s famous critique of Tinbergen’s econometric methods, those of us in the social science community who have been impolite enough to dare to question the preferred methods and models applied in quantitative research in general and economics more specifically, are as a rule met with disapproval. Although people seem to get very agitated and upset by the critique — just read the commentaries on this blog if you don’t believe me — defenders of...

In an impressive overview of the state of Canadian Political Economy, a new book Change and Continuity ed. by Mark P. Thomas et.al. includes two important articles on the continuing relevance of the staple thesis. On the one hand, Jim Stanford’s “Staples Dependence Renewed and Betrayed: Canada’s Twenty-First Century Boom and Best” does just as its title tells because of the reversion to dependence on petroleum as a staple export since 2000 and the deindustrializing effect on the national...

In an impressive overview of the state of Canadian Political Economy, a new book Change and Continuity ed. by Mark P. Thomas et.al. includes two important articles on the continuing relevance of the staple thesis. On the one hand, Jim Stanford’s “Staples Dependence Renewed and Betrayed: Canada’s Twenty-First Century Boom and Best” does just as its title tells because of the reversion to dependence on petroleum as a staple export since 2000 and the deindustrializing effect...