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Michael Hudson’s new book The Bubble and Beyond has just been released and can be purchased here . Speech given at the Veblen, Capitalism and Possibilities for a Rational Economic Order Conference , Istanbul, Turkey, June 6th, 2012 Simon Patten recalled in 1912 that his generation of American economists – most of whom studied in Germany in the 1870s – were taught that John Stuart Mill’s 1848 Principles of Political Economy was the high-water mark of classical thought. However, Mill’s reformist philosophy turned out to be “not a goal but a half-way house” toward the Progressive Era’s reforms. Mill was “a thinker becoming a socialist without seeing what the change really meant,” Patten concluded.
I've been doing some reading and it seems that the source of our present economic woes can be narrowed down to one or more of the following explanations: Explanation School of Thought Workers overpaid neoclassical Jobless don't want work chicago school Falling rate of profit orthodox marxist Falling real wage share marxian Government choking business right-libertarian Rent seeking classical Excessive growth ecological Liquidity trap orthodox keynesian Demand deficiency post keynesian Net saving desire > NFA MMT Ineffective regulation institutionalist Wrong target (NGDP) market monetarism Wrong target (FP) MMR Hyperinflation austrian Imperialism trotskyist Moral malaise religious right Socialists in government gun lobby Government's run out of money official government position Support for these competing theoretical explanations appears to vary across segments of the community. As best as I can tell …
The Second Bill of Rights was a list of rights proposed by Franklin D. Roosevelt during his State of the Union Address on January 11, 1944. [ 1 ] In his address Roosevelt suggested that the nation had come to recognize, and should now implement, a second " bill of rights ". Roosevelt's argument was that the "political rights" guaranteed by the constitution and the Bill of Rights had "proved inadequate to assure us equality in the pursuit of happiness ."
What’s more, his father, John Kenneth Galbraith, was the most famous economist of his generation: a Harvard professor, best-selling author and confidante of the Kennedy family. Jamie has embraced a role as protector and promoter of the elder’s legacy. But if Galbraith stood out on the panel, it was because of his offbeat message. Most viewed the budget surplus as opportune: a chance to pay down the national debt, cut taxes, shore up entitlements or pursue new spending programs.
Mitchell’s laws: The more budgets are cut and taxes inceased, the weaker an economy becomes. To survive long term, a monetarily non-sovereign government must have a positive balance of payments. Austerity = poverty and leads to civil disorder.
Otherwise Good WaPo Article on Modern Monetary Theory Marred by Undeserved Praise of Roosevelt InstituteIn the “wonders never cease” category, the Washington Post, which is normally firmly in the camp of orthodox economic thinking and budget hawkery, ran a very well researched and complementary article by Dylan Matthews on Modern Monetary Theory. This may be a sign of MMT moving out of being regarded in policy circles as fringe (some might say lunatic fringe) to a useful part of an economist’s toolkit. Matthews tries to be scrupulous in giving credit where credit is due, in both how much effort it has taken for the idea to obtain some legitimacy and who its major proponents are.
It was obvious to me way back before I had ever heard of MMT that governments should probably never run a budget surplus—or should do so only in dire emergencies. When the government runs a surplus, that means it is taking more money out of the economy than it is spending back into the economy. It is making us poorer. Anyone who worries about wasteful government spending should be all the more concerned about government surpluses. When corporations accumulate too much cash, investors rightly worry that management will lose discipline and engage in wasteful acquisitions or expansions.
Over the last week, an important approach to economics that has spent years on the sidelines went mainstream: Modern Monetary Theory. This is good news for anyone who wants to see the neoliberal paradigm challenged, and a positive sign to heterodox economists who have difficulty getting a hearing in a field still gripped by outmoded models. The theory, which provides unusual perspectives on issues including currency, debt, and government spending, kicked off in the mid-90s and has since grown into a movement. Its roster of proponents includes James K. Galbraith; Australian economist Bill Mitchel; Randall Wray and Stephanie Kelton of the University of Missouri-Kansas City ; Rob Parenteau; Pavlina Tcherneva; Scott Fullwilier; Warren Mosler; and blogger Marshall Auerback.
Economic Maverick: MMT in the House! "Rouge" school of economics gets mainstream press in the Wash Post!After a long hiatus I had to come back and post about this much deserved attention recently given by a mainstream US media organ, The Washington Post, to heterodox economics - specifically the Post Keynesian and MMT (Modern Monetary Theory) schools! This is potentially a big moment and could signal an opening for launching "rogue", "maverick" and "non mainstream" heterodox thinking into the "mainstream"! Pasted below is a great chart from the article outlining the “family trees” of the Post-Keynesian, the “mainstream” Keynesian and Neo-Classical schools. The fact that MMT even received this kind of attention in the mainstream media is itself now becoming a story. FT Alphavile had a few great posts here and the major Post Keynesian blogs from the Univ.
In a newspaper that relies on the same old crew of reliably wrong experts for the vast majority of its economic reporting, it's good to see this piece by Dylan Matthews on Modern Monetary Theory (MMT). I've had many people ask me my assessment of MMT. I consider many of the leading proponents of MMT to be friends and generally find myself on the same side of political debates. However, I have to confess to being a bit unclear as to what exactly separates MMT from the good old Keynesian economics I learned in my youth. My reading of Keynes is that economies will often be constrained by demand, absent intervention from the government. That means that expansionary fiscal and/or monetary policy will often be in order to keep an economy running near full employment.
Dan Kervick posted the following as a comment at CEPR in response to Dean Baker's recent post on MMT , in which Baker recommends using monetary policy and increasing exports along with fiscal policy to address lagging demand. Dan also posted this as a comment here. I am promoting it to a post.
Since there were many thoughtful comments on my earlier post, it seemed worth saying a bit more by way of response. As I noted at the onset, I did not see a difference between MMT and the Keynes that I first studied more than 30 years ago. I guess I still don’t see the difference.
Dean says that MMT economists advocate focusing on the first channel and “disparage” using the other two, while not recognizing the fourth at all. Dean goes on to discuss his views compared to what he thinks is the MMT position on the “four” channels beginning with the monetary channel. Like MMT Says: Monetary Policy Would Be Ineffective He replies to criticisms saying that the monetary policy channel would be ineffective in creating recovery by saying that he was only claiming that the Fed can do more than it has so far done, and not that monetary policy could produce full employment.
This is the second installment of a critical review of Dean Baker's second reaction to the debate kicked off by the WaPo's piece on Modern Monetary Theory , written by Dylan Matthews. The first installment discussed Dean's views on using the monetary channel to boost aggregate demand, and began criticism on his views on devaluing the currency and increasing exports. This post continues that critique, and later takes up his views on work sharing. Expanding US Exports at the Expense of Decreasing Real Wealth?
I don't think Dean is directly addressing MMT proposals in this area. MMT doesn't advocate wasteful spending, or digging holes for the sake of the activity, or spending money on projects and programs that will waste real resources or people's lives. There is a risk that any spending, private or public, will be wasteful or involve an excess of real costs over real benefits. But that's no excuse for avoiding private sector spending, so why should it be one for avoiding public sector spending when that's called for? The events of the last ten years show that both Federal spending on Wars, and private spending on financial adventures can be disastrous, but it was wasteful investments on fantasy sand castles that crashed much of the world economy; not deficit spending in the United States intended to achieve public purpose. In fact, that kind of spending has been starved for the past 35 years at least.
Ballinger & Full Reserve Banking (FRB)
Brad Delong and MMT