The Monetarist fantasy is over — Robert Skidelsky

Quite a good piece that pushes the MMT view without naming it.

Progressive Economy Forum
The Monetarist fantasy is over
Robert Skidelsky | Crossbench peer and Emeritus Professor of Political Economy at Warwick University

The debt delusion — Michael Roberts [book review]

Michael Roberts reviews and critiques The Debt Delusion by John Weeks.

Michael Roberts Blog — blogging from a marxist economist
The debt delusion
Michael Roberts

Keynes Goes Global: Anticipating the Global Slowdown — Yaroslav Lissovolik

Overall, a fiscal stimulus coordinated across countries appears to be increasingly expedient as the intensity of the trade stand-off among the leading trading powers is showing further signs of escalation. Rather than an ad hoc response from a number of countries a decade ago a more comprehensive, rules-based and coordinated arrangement could be advanced in a way that renders this anti-crisis mechanism a systemic part of an effective use of the Global Financial Safety Net (GFSN). Indeed, in order to magnify the synchronicity effects of the fiscal spending at the country level, other layers of the Global Financial Safety Net could be employed, namely the stimulus coming from the regional and global development banks/institutions as well as Regional Financing Arrangements (RFAs)....

Keyword— "coordinated."

The dilemma is that national sovereignty is needed for democracy, but this generally acts against a coorodinated international response. There is no supervening international mechanism as yet.

Valdai Analytics
Keynes Goes Global: Anticipating the Global Slowdown

Yaroslav Lissovolik

The Great Paradox: Liberalism Destroys the Market Economy —Heiner Flassbeck

Another paradox of liberalism arising from equation of economic liberalism with capitalism and of economic liberalism as equatable with political liberalism as representative democracy. The rise of interest in social democracy now no accident of history but rather a logical progression of the historical dialectic?

Flassbeck Economics
The Great Paradox: Liberalism Destroys the Market Economy

Heiner Flassbeck

Brad DeLong — This is, I think, both right and wrong. China has an... interesting property-rights system—your property is secure not ...

Beginning to figure out how China works and why Western expectations have been consistently wrong about China' stability and resilience. The post addresses much more than property rights.

More evidence that the Chinese leadership groks the basics of MMT?

Grasping Reality
This is, I think, both right and wrong. China has an... interesting property-rights system—your property is secure not ...
Brad DeLong | Professor of Economics, UCAL Berkeley

Michael Roberts — China’s ‘Keynesian’ policies

China’s policy in the Great Recession was not just ‘fiscal stimulus’ in the Keynesian sense, but outright government or state investment in the economy. It actually was ‘socialised investment’. Investment is the key here –as I have argued in many posts – not consumption or any form of spending by government.…

As John Ross said on his blog at the time, “China is evidently the mirror image of the US …If the Great Recession in the US was caused by a precipitate fall in fixed investment, China’s avoidance of recession, and its rapid economic growth, was driven by the rise in fixed investment. Given this contrast, the reason for the difference in performance between the US and Chinese economies during the financial crisis is evident.”...

I would argue that "Keynesianism" is not Keynes of the General Theory, the full tile of which is the The General Theory of Employment, Investment, and Money. Investment drives production, which produces not only goods but also employment, and investment in capital goods occurs owing to the flow of funding to firm investment in capital goods, both as fixed capital — plant and technology, and also human capital owing to augmented "labor power" as knowledge and skill though investment in training.

Regardless of economic system, real (firm) investment, in contrast to financial investment in saving vehicles, leads to real growth (a flow) and "real savings" (stocks of capital goods and quality of labor).

Keynes realized this and so-called paleo-Keyensianism was about public investment in addition to temporary stimulus to address economic contraction. Public investment is not only in infrastructure, R&D, and other economic factors that directly relate to firms, but also welfare investment that indirectly do so, in particular education and health services. Public investment need not be limited to addressing economic and financial crises, and should not be in a modern monetary production economies, where growth must keep pace with population growth and increased productivity is desirable.

The notion that Keynes was chiefly focus on welfare and stimulus is simplistic. He understood the primacy of investment in the production-distribution-consumption cycle and addressed it specifically, as shown in the title of his major work.

Addressing effective demand is key in addressing demand-leakage to saving is central for Keynes. Effective demand is important since without it, investment will fall. Moreover, when private investment slows, public investment needs to pick up the slack. Investment, both public and private, are key to economic performance and social wellbeing, which is the intended meaning of "welfare," rather than transfer payments as "welfare" has come to be interpreted.

China appears to understand this and increases the rate of public investment in addition to providing stimulus for welfare to address crises. This did not happen in the Western capitalist countries in the follow-up to the crisis and they suffered for it as a result.

While Michael Roberts is out of paradigm with MMT, he makes some points worth considering from the Marxian perspective, too.

Michael Roberts Blog
China’s ‘Keynesian’ policies
Michael Roberts

See also

Kaldor, the famous Hungarian economist of Cambridge University, claimed in 1978 that countries with the most dynamic economic growth tended to record the fastest growth in labor costs as well. The renown “Kaldor-paradox” may be confusing for policymakers influenced by the neoclassical mainstream. It tells us that keeping costs low may not lead to competitive advantages and faster economic growth. So let’s resurrect the Kaldorian ideas and see whether the relationship has changed at all (hint: it has not)....

Wages as dynamic investment.

Could the Kaldor-paradox imply that most of the examined countries are wage-led (or demand-led) economies?…

Economic Questions ± formerly The Minskys
There is no such thing as low-wage competitiveness
Daniel Olah, economics editor, writer and PhD student, and Viktor Varpalotaiis, Deputy Head of Macroeconomic Policy Department at Ministry for National Economy, Hungary

Chris Dillow — Job Guarantee: Marxist or Keynesian?

Must-read.

What we have there, then, are two different conceptions of a JG. On the one hand, it might be a policy which helps capitalism function better (Keynes). But on the other, it might be a form of transitional demand – a policy which whilst fulfilling human needs is one that cannot actually be sustainably adopted by capitalism and is instead a stepping stone towards socialism (Marx).

I’m honestly not sure which it is.

I would not put it in terms of capitalism and socialism but rather forms of capitalism and socialism and their interaction.

A JG is incompatible with capitalism as private control of the means of production, that is, both classical liberalism as laissez-faire and neoliberalism as government policy favoring capital (and rent-seeking), unless the JG is transformed into workfare (as CD observes).

On the other hand, a JG is compatible with social democracy as a modification of capitalism (Keynes), democratic socialism as as form of combined public and private control that eliminates economic rents, and socialism as public control of the means of production. A JG is irrelevant in the case of pure communism, where all able to worker contribute their work and its output to the society and are compensated according to needs.

Capitalism should not be confused with markets. Markets are compatible with socialism that is not purely communistic, where "from each according to one's abilities and to each according to one's needs" is the foundational socio-economic principle (Marx and Engels).

The trend was from classical liberalism, to social democracy, to neoliberalism. The next stage in the dialectic is to be determined. China is proposing socialism with Chinese characteristics and recommending socialism with the local characteristics to the rest of the world in a new multipolar world order that replaces current Western liberal hegemony.

There are essentially five major forms of political organization on the table, excepting traditionalism, which I discuss separately. Starting from the right side of the political spectrum and moving left:

• Fascism. Or corporate statism. See Giovanni Gentile and Benito Mussolini, The Doctrine of Fascism. 
• Capitalism as neoliberalism (Hayek) and classical liberalism (Rothbard) and ordoliberalism (Freiburg School). 
• Mixed Economy (Keynes, European social democracy, and ordoliberalism). 
• Socialism (See Wikipedia, Types of Socialism)
• Communism (Marx & Engles, Lenin, Trotsky, Mao, Xi)

This is not a linear progression, since fascism and communism meet in state control under the supposedly temporary dictatorship of the proletariat that never progressed beyond dictatorship.

While Traditionalism is generally not considered as a major influence on political theory now, it is coming to the fore again:

• Islamic law and its concept of social justice is spreading 
• Catholic social teaching is being revived by Pope Francis
• Traditional Russian Byzantine (Orthodox) culture is being promoted under Vladimir Putin
• Traditional Chinese culture, especially Confucianism, is being rehabilitated after Mao by Xi Jinping
• PROUT or Progressive Utilization Theory is based on Indian Vedic tradition. 

So making the choice between Keynes and Marx may be somewhat simplistic and fall into the logical fallacy of the false dilemma, arguing in terms of black or white when there are many shades of grey.

In my view, the MMT JG is step away from neoliberalism in the direction of social democracy and a mixed economy. But it has further implications if implemented with other aspects of MMT socio-economic policy based on SFC modeling and functional finance, where makes room for a much more active use of fiscal space while providing a rationale for understanding the potential of it. So while a JG is "Keynesian," there is more to than that, as Chris Dillow senses. But it is not necessarily "Marxist" either.

Stumbling and Mumbling
Job Guarantee: Marxist or Keynesian?
Chris Dillow | Investors Chronicle

Dirk Ehnts — A Post-Keynesian comment on “Marx’s “Capital”‘ (6th ed.) [by (Ben Fine and Alfredo Saad-Filho]

This debunks the idea by the authors (Ben Fine and Alfredo Saad-Filho) that “underlying Keynesianism is the idea that there is a natural or equilibrium full-employment interest rate”.

Keynes quotes proving the point.

econoblog 101
A Post-Keynesian comment on “Marx’s “Capital”‘ (6th ed.)
Dirk Ehnts | Lecturer at Bard College Berlin

Brad DeLong — John Maynard Keynes: Essays In Biography

Brad rates this as a should-read. For anyone interested in Keynesianism, Post Keynesianism and MMT, the history of economics, or economic theory, it is a must-read.

Conventional economists have apparently concluded that they don't need to read it if they even thought about, which most probably haven't, being under the spell of the "normal paradigm" in spite of its poor results empirically.

Washington Center for Equitable Growth
John Maynard Keynes: Essays In Biography

Brad DeLong

Here is a link to download Keynes's Essays in Biography (1933) as a PDF.

Another must-read from Brad.

 I think the very smart Jeffrey Friedman gets this… not quite right. The case for the empirical benefits of capitalism is very strong—but only if one is willing to remove libertarian blinders and focus on eliminating the market failures (in distributions, in aggregate demand, in externalities, in information, etc.) that keep the function the market maximizes from being a good proxy for societal well-being. And once one has the market properly supported and disciplined, the philosophical discussion can commence: Jeffrey Friedman: What’s Wrong with Libertarianism: “Libertarian arguments about the empirical benefits of capitalism are, as yet, inadequate…

From the Marxian and Institutionalist points of view,  economic liberalism, of which contemporary Libertarianism is a variant, provides the philosophical framework for bourgeois capitalism. Its fundamental weakness is prioritizing economic liberalism over social and political liberalism, which gives rise to many paradoxes of liberalism that result in illiberality such as have been pointed out many time here at MNE.

Brad also provides another keeper Keynes quote.

Here is an excerpt:

But, above all, individualism, if it can be purged of its defects and its abuses, is the best safeguard of personal liberty in the sense that, compared with any other system, it greatly widens the field for the exercise of personal choice.

Individualism as the pursuit of self-interest does not lead to the greatest good for the greatest number the spontaneous emergence of natural order, unless "natural order" is conceived as the outcome of social Darwinism. This result is so grossly unfair that overtime it becomes unstable politically.

Keynes is saying here that individualism only works as a guiding principle of liberalism if collective consciousness is sufficiently high, which is manifested in a society's culture and institutions. The fact that civil and criminal law are needed goes to show that collective consciousness alone is not that high presently. In addition, the level of social and political dysfunctionality in liberal countries shows that the culture and institutions of the society are insufficient to bridle narrow self-interest to the degree necessary to generate a harmonious society and balanced social, political and economic conditions.

This is a design problem.

Jeffrey Friedman: What’s Wrong with Libertarianism

More from BDL:

Three Books for 2017: Economics for the Common Good, Janesville, Economism

Weekend Reading: Richard Thaler: Behavioral Economics

Brad DeLong — The New Socialism of Fools

Good read. BDL argues that globalization is not the problem it is taken to be. The solution is not more nationalism and less globalization but rather full employment economic policy that addresses social welfare and economic distributional issues simultaneously. 

The problem is not globalization as much as neoliberal globalization, where the gains go to the top of the town. This results in distributional issues that affect social welfare and create a political reaction.

Now if he would just jump on the MMT bandwagon about effecting a full employment policy using enlightened fiscal policy.

Project Syndicate
The New Socialism of Fools

Brad DeLong | Professor of Economics, UCAL Berkeley

Bill Mitchell — There is nothing much that Milton Friedman got right!

“If we want to ensure more people are well-employed, central banks alone will certainly not suffice” is a quote I am happy to republish because I consider it to be 100 per cent accurate. The only problem is that the way I think about that statement and construct its implications is totally at odds with the intent of its author, who claimed it was “an important lesson of Friedman’s speech”, which “remains valid”. The quote appeared in a recent Bloomberg article (July 17, 2017) – What Milton Friedman Got Right, and Wrong, 50 Years Ago – written by journalist Ferdinando Giugliano. It celebrates the Presidential Speech that Friedman gave to the American Economic Association on December 29, 1967 at their annual conference in Washington D.C. In terms of the contest of paradigms, the speech is considered to be the starting point proper of the Monetarist era, even though it took at least another 5 or 6 years (with the onset of the OPEC oil crises) for the gospel espoused by Friedman to really gain ground. The problem is that Friedman was selling snake oil that became the popular litany of the faithful because it suited those who wanted to degrade the role of government in maintaining full employment. It was in step with the push by capital to derail the Post War social democratic consensus that had seen real wages growing in proportion with productivity, reduced income inequality, jobs for all who wanted to work and a strong sense of collective solidarity emerge in most advanced nations. This consensus was the anathema of the elites who saw it as squeezing their share of national income and giving too much power to workers to negotiate better terms and conditions in their work places. Friedman provided the smokescreen for hacking into that consensus and so began the neo-liberal era. We are still enduring its destructive consequences.

Friedman’s speech was subsequently published in the American Economic Review as ‘The Role of Monetary Policy’ in the 1968 volume 58(1) (pages 1-17). 

The Bloomberg article goes along with the view that Friedman’s speech represented a “paradigm shift” in economics....

Bill Mitchell – billy blog
There is nothing much that Milton Friedman got right!
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

Michael Roberts — Keynes, civilisation and the long run

Criticism of Keynes, Keynesianism and some Post Keynesians from a Marxian perspective.

Michael Roberts
Keynes, civilisation and the long run

Michael Roberts

Matthew Rozsa — He’s a Keynesian now: Donald Trump tells New York Times he wants to “prime the pump”

“We’re also going to prime the pump,” President Trump told Robert Draper of The New York Times Magazine. “You know what I mean by ‘prime the pump’? In order to get this [the economy] going, and going big league, and having the jobs coming in and the taxes that will be cut very substantially and the regulations that’ll be going, we’re going to have to prime the pump to some extent. In other words: Spend money to make a lot more money in the future. And that’ll happen.”

Pulling a Nixon.

Salon
He’s a Keynesian now: Donald Trump tells New York Times he wants to “prime the pump”

Matthew Rozsa

Walden Bello — Keynesianism and the Great Recession

Not MMT, but interesting.

Triple Crisis
Keynesianism and the Great Recession

An Interview with Walden Bello, professor of sociology and public administration at the University of the Philippines Diliman and executive director of Focus on the Global South

Yanis Varoufakis — Trump: The Next Keynesian President? Don’t Bank On It

While it is impossible to predict the economic consequences of Mr Trump’s tenure, given his strategic preference for vagueness over policy detail, one thing is clear: any mention of Trump as a Keynesian president, just as in the case of Ronald Reagan, confuses “Keynesian” for “irresponsible” and generates expectations unlikely to be fulfilled.
Deficit spending can take one of three forms: tax cuts, spending increases or a combination of the two. Republicans, from Ronald Reagan to George W. Bush, and now clearly Donald Trump, favor large-scale tax cuts while concentrating additional spending on defense procurement.

If the objective is to provide a flagging economy with necessary stimulus, Republican deficit spending is a most inefficient means. John Maynard Keynes, who had no love lost for the working class, and harbored a keen interest in promoting the wellbeing of aristocratic folk like himself, nonetheless objected to large-scale tax cuts for a simple, practical reason: the trickle-down effect is a myth, to put his point in Reaganite language.

The reason that “trickle down” is a myth is that the rich are most likely to save a large part of the tax relief they receive, thus blunting its stimulus potential, or use it to go skiing in Switzerland, rather than to spend it in their demand-deprived community. This is why targeted spending on the poor was the British gentleman’s recommendation: because it stimulates demand much more efficiently.

In defense of Keynes, Varoufakis points out that Keynes was a deficit dove that recommended balancing the budget over the cycle, running deficits in bad time and surpluses in good times. This where MMT economists part company with Keynes.

Yanis Varoufakis
TRUMP: THE NEXT KEYNESIAN PRESIDENT? DON’T BANK ON IT 

Newsweek, 16 NOV 2016

Lord Keynes — Trump the Keynesian causes Libertarian Heads to Explode

Is Trump a "Keynesian" with respect to pump-priming?

Social Democracy For The 21St Century: A Post Keynesian Perspective
Trump the Keynesian causes Libertarian Heads to Explode
Lord Keynes

Lars P. Syll — People who have their heads fuddled with nonsense

The Conservative belief that there is some law of nature which prevents men from being employed, that it is “rash” to employ men, and that it is financially ‘sound’ to maintain a tenth of the population in idleness for an indefinite period, is crazily improbable – the sort of thing which no man could believe who had not had his head fuddled with nonsense for years and years … Our main task, therefore, will be to confirm the reader’s instinct that what seems sensible is sensible, and what seems nonsense is nonsense.

The is the key principle of genuine Keynesian approaches to economic and political economy, including MMT.

Lars P. Syll’s Blog
People who have their heads fuddled with nonsense
Lars P. Syll | Professor, Malmo University

Matias Vernengo — Overdose of heterodoxy, failed Keynesian policies or same old balance of payments constraint

Ricardo Hausmann blames the situation in Venezuela to excessive heterodox policies. The piece is not particularly well written, but if you look for the deep cause of the crisis, according to Hausmann, then you must conclude that it is a fiscal one. The government spent too much, and got into too much debt.…

So fiscal problems, too much spending and borrowing, too much money printing, which caused inflation and the currency crisis (the black market gap between the official and parallel value of the domestic currency). As I have discussed in many posts (too many to link) and in a recent paper causality is upside down.…

Naked Keynesianism
Overdose of heterodoxy, failed Keynesian policies or same old balance of payments constraint
Matias Vernengo | Associate Professor of Economics, Bucknell University

Heiner Flassbeck — Brazil, Croatia and Greece: does one need ‘neoliberal reforms to solve a country’s economic problems’?

That consequently a neoliberal agenda will prevail in a country in which the social-democratic government suffered greatly because of global neoliberalism and at the end proved to be unsuccessful because of a neoliberal assault is absurd. The real tragedy is that absurdity has become an outstanding characteristic of our era.

flassbeck economics
Brazil, Croatia and Greece: does one need ‘neoliberal reforms to solve a country’s economic problems’?

Heiner Flassbeck

Norm Mogil — Fiscal Policy to the Rescue?

It's the multipliers, stupid.

Not all fiscal stimuli act with the same degree of potency. Chart 2 separates the type of stimulus between " investment" and "tax" measures. The governments obtain the greatest bang for the buck when undertaking infrastructure projects, both for their immediate impact on jobs and income as well as for their longer term benefits in adding to productive capacity (e.g. urban transportation systems). Next in importance are stimulus programs generated by increasing government consumption of goods and services (i.e. day-to-day expenses associated with government operations).

Tax measures, on the other hand, have not proven to be anywhere nearly as effective in promoting growth. The impact of reductions in personal or corporate tax cuts are de minimis. Since some portion of a tax cut is usually saved rather than entering the spending stream, tax multipliers are lower than government spending multipliers.

Thus, economists have long urged governments to look to stepping up their capital investment activities as the primary driver of fiscal stimulus policy.

Sober Look
Fiscal Policy to the Rescue?
Norm Mogil