Jason Smith — Letter to Dirk Bezemer

It appears I have to attempt to contact Dirk Bezemer directly for people to take my claims seriously that Bezemer has misquoted and fabricated quotes in his papers claiming that some economists using "accounting" or "flow of funds" models were able to predict the global financial crisis and widespread recession. I believe this kind of controversy is best to keep in the open instead of being conducted through private email. The point of publication is in part to put academics and researchers on the record as well as hold them publicly accountable. However, I have written an email to Professor Bezemer at the only email address I have for him (listed in his unpublished paper). In the interest of open discussion, I reproduce that email below....

Information Transfer Economics
Letter to Dirk Bezemer
Jason Smith

Jason Smith — No one saw this coming: Bezemer's misleading paper

Jason Smith calls out Dirk Bezemer (who now identifies as an MMT economist).

Again the difference among 1) scientific prediction based on generating testable hypotheses from a theory, 2) forecasting probabilities of outcomes from data, and 3) foreseeing and forewarning based on contingencies.

Information Transfer Economics
No one saw this coming: Bezemer's misleading paper
Jason Smith

See also

On occasion when I mention things about econ twitter or my blog, my wife responds sarcastically with "Oh no. Are you making friends again?" with the obvious connotation (because she knows me well) that I am starting fights. I'm not sure what sets me off, but one ingredient is usually some reference to physics in the context of economics. The latest version got a response from the subject David Orrell in comments. This is actually a two-part blog post, the other having been scheduled earlier and contains much more detail about the numerous fabricated and out of context quotes in an article by Dirk Bezemer about claims to have predicted the global financial crisis or global recession.

Below, I have responded to David Orrell's comments on my post. Given how blunt I was, David was relatively nice. But this is exactly the kind of discussion I'd like to be having: What does it mean to make macro- or micro-economics more scientific? My general feeling is that what comes under the broad heading of alternative or "heterodox" approaches is strangely exactly like "mainstream" economics, just with different jargon or mathematical decorations. Neither appear to value empirical data. Neither appear to make accurate forecasts. Neither appear to reject models or give up models that so complicated relative to the data they can never be rejected.

Here is my response:

Making friends: David Orrell

The Arthurian — A response to Bezemer & Hudson's "Finance is Not the Economy"

Nominal versus real.

The New Arthurian
A response to Bezemer & Hudson's "Finance is Not the Economy"

The Arthurian

Dirk Bezemer and Michael Hudson — Finance is Not the Economy

Abstract: Conflation of real capital with finance capital is at the heart of current misunderstandings of economic crisis and recession. We ground this distinction in the classical analysis of rent and the difference between productive and unproductive credit. We then apply it to current conditions, in which household credit — especially mortgage credit — is the premier form of unproductive credit. This is supported by an institutional analysis of postwar U.S. development and a review of quantitative empirical research across many countries. Finally, we discuss contemporary consequences of the financial sector’s malformation and overdevelopment.

Michael Hudson

Finance is Not the Economy
JOURNAL OF ECONOMIC ISSUES Vol. L No. 3 September 2016
DOI 10.1080/00213624.2016.1210384
Dirk Bezemer, professor of economics at the University of Groningen, the Netherlands, and Michael Hudson, distinguished research professor of economics at the University of Missouri, Kansas City, and a professor at Peking University.

Graham Hodgson — Dirk Bezemer about Positive Money

Bezemer opposes, Hodgson responds.

Positive Money
Dirk Bezemer about Positive Money
Graham Hodgson

Lars Schall — Who saw the economic crisis coming and why?

Oh my, the debate over who saw the crisis coming spills over to Asia Times Online. Probably not much you haven't seen already.

But the story is getting legs rather than going away as the elites of the world hope it will and are doing their best to bury it, because it shows that their brand of "capitalism" (neoliberalism) isn't working and some people have shown why.

Being the journalist he is, Schall is digging in. Which is supposed to be what journalism is about, isn't it? In the US we have propagandists rather than journalists. Unfortunately, however, Schall is associated with the bonkers school of economic otherwise.

Asia Times Online
Who saw the economic crisis coming and why?
Lars Schall | German financial journalist

Here is the "rebuttal." Bank critics miss relative value by Friedrich Hansen. ROFLMAO.

Dirk Bezemer and Michael Hudson — Incorporating the Rentier Sectors into a Financial Model

ABSTRACT

Current macroeconomics ignores the roles that rent, debt and the financial sector play in shaping our economy. We discuss the Classical view on rents and policy responses to the rentier sector in the 19th century. The finance, insurance & real estate sector is today’s incarnation of the rentier sector. This paper shows how financial flows can be conceptually and statistically studied separately from (but interacting with) the real sector. We discuss finance’s interaction with government and with the international economy.

Michael Hudson
Incorporating the Rentier Sectors into a Financial Model
Dirk Bezemer and Michael Hudson
Published in the World Economic Association’s World Economic Review Vol #1
(h/t beowulf in the comments)

Michael Stephens— 2012 Money and Banking Conference

Videos of Jamie Galbraith's presentation, Randy Wray's slide presentation, and link to PDF's of the rest of the presentations

Multiplier Effect
2012 Money and Banking Conference
Michael Stephens

Yves Smith — Getting Economics to Acknowledge Rentier Finance (Michael Hudson-Dirk Bezemer)

A new paper by Michael Hudson (University of Missouri at Kansas City) and Dirk Bezemer (University of Groningen, Netherlands) makes an important contribution by looking at financial services from a Classical economics perspective. Classical economists took a decidedly dim view of what they saw as unproductive rent-seeking, with “rent” seen as the dead hand of the feudal aristocracy weighing on current production...

Naked Capitalism
Getting Economics to Acknowledge Rentier Finance
Yves Smith

Mathias Vernengo — Stock-Flow with Consistent Accounting (SFCA) models

Gennaro Zezza, student and co-author of the late Wynne Godley and currently responsible for the Levy Institute macroeconomic model, gave an interesting talk on the usefulness of Stock-Flow with Consistent Accounting (SFCA) approach to macroeconomic modeling. He refers to the models as stock-flow consistent (SFC), but I prefer to emphasize that the consistency is not just about the relation between stocks and flows, but also the fact that these models provide the full set of accounts (website for those interested in this approach here).

SFCA proved to be considerably more successful than conventional, in particular Dynamic Stochastic General Equilibrium (DSGE) models, in predicting the Great Recession (see here paper by Dirk Bezemer).

Read the rest at Naked Keynesianism
Stock-Flow with Consistent Accounting (SFCA) models
by Mathias Vernengo | Associate Professor, University of Utah
(h/t Clonal in the comments)

Must-read.

Dirk Bezemer - Growth and Crisis: The Two Faces of Credit

Dirk Bezemer - Growth and Crisis: The Two Faces of Credit

Perry Mehrling interviews Dirk Bezemer for INET (10 min)

Dirk Bezemer is MMT-friendly.

INET abstract:

At least since Joseph Schumpeter we know that credit is good for economic growth. At least since 2007 we know that too much credit foreshadows financial turmoil. Inspired by Keynes and Minsky, Dirk Bezemer pieces together a cross-country data set of credit and debt, investigating whether the two faces of credit are different for different forms of credit. And using agent-based modeling, he strives to capture the interaction between the financial and the real -- this is new economic thinking.