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Heterodox economics: Marginal revolutionaries.

Economists...

Steve Marglin on Heterodox Economics. Modern Political Economics: Making Sense of the Post-2008 World. An interview with Naked Capitalism’s Phil Pilkington on our book ‘Modern Political Economics’ – Part A. Naked Capitalism just published a long interview that I gave to Phil Pilkington on the themes of Modern Political Economics: Making sense of the post-2008 world; the book jointly authored by myself, Joseph Halevi and Nicholas Theocarakis.

An interview with Naked Capitalism’s Phil Pilkington on our book ‘Modern Political Economics’ – Part A

Here is the interview’s first part: Interview conducted by Philip Pilkington. Philip Pilkington: Without getting into too much technical detail what is it that you refer to in your book Modern Political Economics: Making Sense of the Post-2008 World the ‘inherent error’ in all economic theories and models? Yanis Varoufakis: The essence of the economists’ inherent error is that they erred into thinking it is possible to tell a credible story about how values and prices are formed in complex (multi-sector) economies that grow through time. Struggled to produce such a narrative. PP: One consequence of this is that you believe a meaningful theory of value cannot be established, right? YV: All model builders have a natural tendency to ‘close’ their models.

DSGE modelling

Are macroeconomic methods politically biased? In a recent post, Steve Williamson writes: The tools of modern macroeconomics are no more the tools of right-wingers than of left-wingers.

Are macroeconomic methods politically biased?

These are not Republican tools, Libertarian tools, Democratic tools, or whatever. These are the tools of Economic Science[.] The Economics Anti-Textbook: Jim Stanford reviews The Economics Anti-Textbook. More on Schools of Thought. The main task of this post is to try and answer the following question: why do schools of thought seem to fragment mainstream macroeconomics but not microeconomics?

More on Schools of Thought

However before tackling that issue, I need to clear some ground raised by some interesting comments on my earlier posts on this issue. One point I did not make clear enough in my earlier discussion is a distinction between mainstream and heterodox economics. The Return of Schools of Thought Macro. When I first studied macro, it was all about ‘schools of thought’.

The Return of Schools of Thought Macro

Keynesians, Monetarists, New Classicals, and probably many more I cannot remember. Macroeconomists tended to take sides. Antagonists often talked across each other, and anyone not already on one side just got totally confused. I recall reading one textbook on international macro where each chapter represented an alternative ‘view’, with no clear idea of how each view or school was related to another.

One thing that was pretty clear, however, was that most schools of thought could be identified with a particular ideological position. Econ Department - Contact Info for Stephen Marglin. When Economic Journalists Get Out of Their Depth. By Philip Pilkington, a journalist and writer living in Dublin, Ireland Working as a journalist and as an opinion writer each have their charms.

When Economic Journalists Get Out of Their Depth

Journalists have the pleasure of discovery and revelation: uncovering new facts, talking to people, sometimes acting as a catalyst to move events forward. Keynesianism vs. Monetarism. Michal Kalecki. Published by EH.NET (December 2011) Julio G.

Michal Kalecki

L? 1,000,000 economists can be wrong: the free trade fallacies. EmailShare 12EmailShare Not only did the global financial crisis catch the vast majority of economists completely unawares, they instead expected tranquil and even buoyant times just as the biggest economic crisis since the Great Depression began.

1,000,000 economists can be wrong: the free trade fallacies

My favourite such observation is from the OECD's Economic Outlook for June 2007—in which the Chief Economist suggested that, "the current economic situation is in many ways better than what we have experienced in years . . . Our central forecast remains indeed quite benign. " Keen questions economics of free trade - macrobusiness.com.au. In his trademark way, Steve Keen recently upset the apple cart of the economic mainstream by questioning the assumptions economists make to explain the benefits of free trade between nations.

Keen questions economics of free trade - macrobusiness.com.au

Free trade is yet another example of an economic principle that is sound at an individual level, but cannot be simply translated to a macro level. Keen used the situation of England and Portugal reducing trade barriers for wine and cloth as his example. But there is an obvious fallacy to this neat and plausible argument: To effect specialisation, England has to shift labour and capital from wine to cloth (and Portugal has to do the opposite). Strange bedfellows. The Great Ricardian Equivalence Throwdown! Y'all know I cannot resist wading into a good macro throwdown. First, a summary of the action!! This week's econ-blogosphere mayhem started when Paul Krugman wrote a post about the idea of Ricardian Equivalence (the idea that the timing of taxes doesn't matter), and why it doesn't imply that fiscal stimulus can't work.

As an example of someone who does think that Ricardian Equivalence makes stimulus a non-starter, Krugman cited some remarks by uber-macroeconomist Robert Lucas:

Economists

The Destruction of Economic Facts. During the second half of the 19th century, the world's biggest economies endured a series of brutal recessions.

The Destruction of Economic Facts

At the time, most forms of reliable economic knowledge were organized within feudal, patrimonial, and tribal relationships. If you wanted to know who owned land or owed a debt, it was a fact recorded locally—and most likely shielded from outsiders. At the same time, the world was expanding. Travel between cities and countries became more common and global trade increased. The result was a huge rift between the old, fragmented social order and the needs of a rising, globalizing market economy. To prevent the breakdown of industrial and commercial progress, hundreds of creative reformers concluded that the world needed a shared set of facts. A Misnomer for Their Sound Economics. Animal Spirits - How Human Psychology Drives The Economy, and Why It Matters for Global Capitalism, by George A. Akerlof and Robert J. Shiller, was published earlier this year by Princeton University Press, Princeton and Oxford, 2009. It is a timely book, as it addresses the questions of why most economists failed to foresee the current global crisis, to provide explanations for its occurrence and to suggest effective remedies to counteract it.

But above all it is a refreshingly original, formidable set of economic propositions, corrosive and at the same time constructive, with pointed and valuable policy implications. Bob Solow’s book-cover endorsement - “… a sorely needed corrective” - is an understatement. Akerlof and Shiller claim that “Keynes appreciated that most economic activity results from rational economic motivations - but also that much economic activity is governed by animal spirits” (p. ix) . “1. Irrationality and non-economic motives. The Big Interview with Robert Shiller. Paul Samuelson’s Secret. The last two volumes of Paul Samuelson’s collected papers appeared this month, edited by Janice Murray, his assistant for twenty years.

Paul Samuelson’s Secret

As far as I can tell, the only mention of Commodities Corp. to be found anywhere in the seven volumes appears in the final one, in the last serious piece he ever wrote, which appeared originally in Volume 1 of Annual Review of Financial Economics, two years ago, at a time when PAS knew full well he was slipping out the door. (He died in December 2009.) “I skip here my long years as activist charter investor and Board of Directors member for Commodities Corporation of Princeton,” he writes in “An Enjoyable Life Puzzling over Modern Finance Theory.” “Space does not allow me to go into that intricate story.” Somewhere, in the letters, perhaps, or in interviews with various colleagues that were taped and tucked away, further details of a great case study may be waiting for a scholar. . xxx Not that Samuelson himself took the finding literally. New Keynesian Economics. New Keynesian economics is the school of thought in modern macroeconomics that evolved from the ideas of John Maynard Keynes.

Keynes wrote The General Theory of Employment, Interest, and Money in the 1930s, and his influence among academics and policymakers increased through the 1960s. In the 1970s, however, new classical economists such as Robert Lucas, Thomas J. Sargent, and Robert Barro called into question many of the precepts of the Keynesian revolution. The label “new Keynesian” describes those economists who, in the 1980s, responded to this new classical critique with adjustments to the original Keynesian tenets. The primary disagreement between new classical and new Keynesian economists is over how quickly wages and prices adjust. A long tradition in macroeconomics (including both Keynesian and monetarist perspectives) emphasizes that monetary policy affects employment and production in the short run because prices respond sluggishly to changes in the money supply. N. New Classical Macroeconomics. After Keynesian Macroeconomics The new classical macroeconomics is a school of economic thought that originated in the early 1970s in the work of economists centered at the Universities of Chicago and Minnesota—particularly, Robert Lucas (recipient of the Nobel Prize in 1995), Thomas Sargent, Neil Wallace, and Edward Prescott (corecipient of the Nobel Prize in 2004).

The name draws on John Maynard Keynes’s evocative contrast between his own macroeconomics and that of his intellectual forebears. Keynes had knowingly stretched a point by lumping his contemporaries, a. c. pigou and Alfred Marshall, in with the older classical political economists, such as David Ricardo, and calling them all “classical.” According to Keynes, the classics saw the price system in a free economy as efficiently guiding the mutual adjustment of supply and demand in all markets, including the labor market. Keynesian Economics. Keynesian economics is a theory of total spending in the economy (called aggregate demand) and its effects on output and inflation. Although the term has been used (and abused) to describe many things over the years, six principal tenets seem central to Keynesianism. Neoclassical Economics.

MMT.