Kalecki on the Political Aspects of Full Employment — David Andolfatto

Kalecki creeps into the mainstream. First it was Minsky and now Kalecki. Can Marx be far behind?

I have always had pleasant interactions with David Andolfatto and he has been open to argument about MMT. He is a careful thinker and wants to be convinced, which is, of course, a good trait.

While I think Kalecki's political reasons for the chronic lack of full employment in capital and the recurrent economic downturns that are quite convincing, David Andolfatto is skeptical, since as Kalecki admits that profits would be higher with a flatter employment curve. 

This is where I think Marx comes it. According to Marx, capitalist expropriation of surplus value is the driver of capitalism as an economic system based on private ownership of the means of production.

If that is the case, I think there is a good case to made for it, then the question becomes what role does unemployment play in this?

Kalecki alludes to it, without citing in Marx's theory. Marxian analysis is based on social embeddness in contrast to individual agents acting in their own interest independently of other influences. Societies are structured on the basis of class, and according to Kalecki's analysis, the ownership class, under capitalism the capitalists, just as under feudalism the feudal lord, is more interested in maintaining the class structure than individual gain. They exhibit solidarity in this, in contrast to the lack of solidarity among workers. And it is in employers' interests to maintain class cohesion at the top while preventing it from arising or fracturing it at the bottom. Spartacus is their worst fear. 

MacroMania
Kalecki on the Political Aspects of Full Employment
David Andolfatto | Vice President, Federal Reserve Bank of St. Louis

Kalecki, Minsky, and “Old Keynesianism” Vs. “New Keynesianism” on the Effect of Monetary Policy — Tracy Mott

A version of what Lawrence Summers and Anna Stansbury (2019) recently pointed to as “original” Keynesianism can be found in the work of Michał Kalecki and Hyman Minsky, Their work offers analysis of the determination of investment spending and effective demand which avoids the deficiencies found in the New Keynesian economics in which Summers and Stansbury find shortcomings. In the paragraphs below, I describe how their insights and those of other economists sharing their approach provide an answer to the questions with which Summers and Stansbury are grappling, and more....

Larry Summers awakens from his "dogmatic slumbers" (ht Emmanuel Kant on reading himself after reading David Hume).

Well, better late than never, but unfortunately not soon enough to avoid doing extensive damage.

Also, it doesn't seem that Professor Summers has gotten around to attribution yet. Or does he not even know of this previous work?

INET

Kalecki, Minsky, and “Old Keynesianism” Vs. “New Keynesianism” on the Effect of Monetary Policy

Tracy Mott, Professor of Ecnomics (retired), University of Denver

Antony P. Mueller — The Neo-Marxist Roots of Modern Monetary Theory

The post is interesting from the POV of history of economics. Antony P. Mueller points out how MMT owes more to Kalecki than to Keynes. His criticism of MMT goes astray in assuming the conventional economic view of debt-financed fiscal deficits crowding out private sector productive investment. MMT shows how this assumption is erroneous in that the net spending after taxes injects the exact amount of bond issuance in offset. It's the spending that funds Treasury security issuance. 

In central bank auctions of  government bonds the primary dealers act as the designated market makers, and their purchases drain the reserve add that was created by deficit spending from bank reserve balances at the Fed into security accounts at the Fed, much the same as deposit accounts in banks are drained into CD's. The total amount of the reserve add is used to settle the auction, draining the mnetary base of the reserves in injected by the deficit spending. All that changes is the maturity. MZM (money of zero maturity) becomes money of non-zero maturity.

There is no crowding out of private investment. The assumption that bond sales are funded by a stock of loanable funds for which government competes with the private sector is wrong. That is not the why the existing system works.

Nevertheless, the post is still a worthwhile read from the POV of history of economics, although one should not assume that the summary of Keyes, Kalecki and their use by MMT economics is entirely correct, for example, whether Kalecki held a labor theory of value is controversial.

Mises Wire
The Neo-Marxist Roots of Modern Monetary Theory

Antony P. Mueller

Ramanan — Michal Kalecki On The Effect Of Wages On Employment

Kalecki quote.

The Case for Concerted Action
Michal Kalecki On The Effect Of Wages On Employment
V. Ramanan

See also

@Brankomilan leads us to this (french) pieceabout Austria. It states that the Austrian government enacted a new law which authorizes working days of 12 hours and working weeks of 60 hours.
A). This is a clear case of retrogression. It’s good to read what, in 1921, the International Labor Office stated in its first annual report….

Real-World Economics Review Blog
Productivity in the Eurozone (and why it matters)

Merijn Knibbe

Lars P. Syll — Kalecki and Keynes on the loanable funds fallacy

Banks are not intermediaries between savers and borrowers, and finance is not allocating existing savings to future investment.

The opposite is true. Bank credit is self-funding; in credit extension, loans (assets) create deposits (liabilities). In finance as allocation of capital, investment creates saving.

Lars P. Syll’s Blog
Kalecki and Keynes on the loanable funds fallacy
Lars P. Syll | Professor, Malmo University

Lars P. Syll — Kalecki on wage-led growth

Kalecki refutes Say's law, which says essentially that money is a "hot potato" and people spend or invest all of it immediately without intertemporal saving. That is to say against a strict interpretation of Say's law, choice is not anything like immediate in a modern monetary economy, and saving negatively affects consumption of consumer goods and productive investment in capital goods thereby reducing effective demand below full employment. Since private debt is a feature of a modern monetary production economic and financial system, and nominal debt does not readjust without legal restructuring, economic contraction results in non-performing loans and ultimately defaults.

"Money" is not neutral, as Say's law assumes. Wages and prices do not adjust immediately to changes in economic conditions. Adjustment can take a long time, during which further changes occur that are not conducive to adjustment in the direction of general equilibrium at optimal capacity and full employment as efficient use of resources. Of this interregnum between states, Keynes said that in the end we are all dead; instead of waiting for the market to do its magic, the intelligent way forward is to address the causes.

Say's law in its strict formulation applies only to a particular economic model that is not very representational of a modern money production economy, especially one that relies extensively on the use of credit. While this model may be useful in illustrating the operations of supply and demand in a"free market," such ideal conditions don't exist in the world owing to a variety of factors, social, political, and economic.

The classical liberal solution was to refashion the world to be closer to the ideal system, but that attempt proved itself a fool's errand socially and politically. The neoliberal solution that replaced the classical approach has been to modify the initial approach by using the power of the state domestically and in imposing international agreements in order to favor capital while mouthing the sentiments about free markets, free trade, and free capital flows. The state favoring capital and international agreements favoring capital are kept in the background as the hidden agenda while the agenda that is presented publicly is "freedom."

Lars P. Syll’s Blog
Kalecki on wage-led growth
Lars P. Syll | Professor, Malmo University

Ramanan — Effective Demand And The Labour Market

Noah Smith asks, “Why the 101 model doesn’t work for labor markets”.|

He realizes the answer but attributes it to Nick Hanauer.…

So Smith indeed concedes that the profession missed it out. But the attribution is incorrect. All this was figured out by Michal Kalecki in the 1930s....

The Case for Concerted Action
Effective Demand And The Labour Market
V. Ramanan

See also

Information Transfer Economics
It's a production input. No, it's a market good. Relax, it's both.
Jason Smith

Econospeak
Noah Smith: "Why the 101 model doesn't work for labor markets"

Sandwichman

Chris Dillow — Keynes' flaws

Michael Roberts reminds us of something important – that Keynesian economics has severe shortcomings. I agree.

For me, the problem with Keynes was what he didn’t say. He was largely silent about three related issues: class, power and profits, or least he dismissed them lightly:

the problem of want and poverty and the economic struggle between classes and nations, is nothing but a frightful muddle, a transitory and an unnecessary muddle. (Preface to Essays in Persuasion)

It’s no accident that it should have been so easy to find a Keynesian-neoclassical synthesis, as both schools of thought ignored these matters.

This omission, however, has had several baleful effects....

Stumbling and Mumbling
Keynes' flaws
Chris Dillow | Investors Chronicle

Peter Cooper — The Monetary Circuit & Compatibility of Marx, Kalecki and Keynesian Macro

There appears to be a considerable degree of compatibility between Marx and various Kalecki- and Keynes-influenced approaches to macroeconomics. Compatibility, of course, does not imply that all these theoretical approaches stand or fall together. It simply suggests, to the extent that the compatibility exists, that it is possible to see them all as fitting within an overarching, open analytical framework. In this post, the compatibility is considered in relation to the private-sector monetary circuit of a capitalist economy.
The compatibility flows partly from the following three similarities in analytical approach….

heteconomist
The Monetary Circuit & Compatibility of Marx, Kalecki and Keynesian Macro
Peter Cooper

Mark Blyth — Global Trumpism

Why Trump’s Victory Was 30 Years in the Making and Why It Won’t Stop Here

Goodhart's law. That would be Charles Goodhart.

The era of neoliberalism is over. The era of neonationalism has just begun.

Needless to say, must-read.

Foreign Affairs
Global Trumpism

Mark Blyth | Professor of Political Economy at Brown University

Brad DeLong — Must-Read: Michael Kalecki (1943): Political Aspects of Full Employment:

Kudos to Brad for using his bully pulpit to promote Kalecki.

Grasping Reality
Must-Read: Michael Kalecki (1943): Political Aspects of Full Employment:
Brad DeLong | Professor of Economics, UCAL Berkeley

Ramanan — Joan Robinson on Kalecki and Keynes continued

Joan Robinson on Kalecki and Keynes continued.

The Case for Concerted Action
Kalecki And Keynes, Part 2

V. Ramanan

Ramanan — Kalecki And Keynes

Joan Robinson quote.

The Case for Concerted Action
Kalecki And Keynes
V. Ramanan

Chris Dillow — Why not full employment?

All this raises a thought. Could it be that the main obstacle to full employment policies is not so much one of technical economics so much as ideology and politics?

Ya think?

Stumbling and Mumbling
Why not full employment?
Chris Dillow | Investors Chronicle

Jan Toporowski — Kalecki's Fable

You may have seen this already but it is worth rereading. If you haven't seen it, you will like it. Plus, it is short.

Naked Keynesianism
Kalecki's Fable
Jan Toporowski
Posted by Matias Vernengo | Associate Professor of Economics, Bucknell University

Diane Coyle — Capitalism and the law

Short review of The Great Leveler: Capitalism and Competition in the Court of Law by Brett Christophers. 

I greatly admired his previous book, Banking Across Boundaries, and this new one has the same compelling combination of analysis and historical detail. The theme this time is capitalism as a constant balance between competitive markets and market power, these two forces applied by laws and their enforcement. Anti-trust laws are enacted or enforced with greater rigour when monopoly power gets out of hand. Intellectual property laws are strengthened after periods of cut-throat competition. In contrast to those – often Marxist – writers who have seen a single direction of travel toward ever-greater monopoly power, Christophers argues here that there is a cycle. He cites Kalecki, but also Marx’s dialectics: “Monopoly produces competition, competition produces monopoly,” Christophers quotes Marx as writing in a letter of 1846.…

Christophers ends with Lenin’s prediction that the future is capitalist monopoly on the international stage, monopoly imperialism. I have more confidence in self-correcting mechanisms. We will see.

The Enlightened Economist
Capitalism and the law
Diane Coyle | freelance economist and a former advisor to the UK Treasury. She is a member of the UK Competition Commission and is acting Chairman of the BBC Trust, the governing body of the British Broadcasting Corporation

V. Ramanan — Kalecki And Keynes On Wages

Some good quotes.

The Case for Concerted Action
Kalecki And Keynes On Wages
V. Ramanan

Ed Walker — Capitalism Versus The Social Commons

For a long time, and particularly since WWII, societies around the world have managed substantial parts of their productive activity in non-capitalist zones. In the UK, for example, health care is provided by the National Health Service. It operates in a market society, but it is not part of the process of capital accumulation. The education system is an example in the US. We can think of these non-capitalist enclaves as a social commons. We all share in them, and we all have a stake in seeing to it that they operate at a high level.

With the turn towards neoliberalism in the past 35 years, the rich have tried to colonize these non-capitalist sectors. Currently UK capitalists and the Tories are intent on privatizing the NHS for their personal gain. They look at the way the US medical/drug system works for the benefit of the rich and they want that for themselves. In the US, we have already turned over big chunks of the prison system to these people, with predictable results. The big push in the US is the effort to take over the education system for personal profit. In a larger perspective, the capitalists and their economists tell us constantly that European welfare states are impossibly expensive and must be privatized. Why? Why is this such a big deal?

It might be easy to put this down to greed, or to the Great Man theory of economic progress, or creative destruction. But perhaps there is something in the nature of capitalism that can explain this better. Two books published in the wake of WWII examine a broad sweep of economic history to try to understand how that war happened. Karl Polanyi’s The Great Transformation sees the war as the end of the experiment with unrestrained free market capitalism, and offers the hope of a more socialist future. Hannah Arendt’s The Origins of Totalitarianism offers a dark view of human nature and of the capitalist system, and is much less hopeful…

Arendt has a strong Marxian flavor. Polanyi sees the value of the increase in productivity brought on by the industrial revolution, but believes strongly in the Enlightenment view that humans can control and direct society to prevent the damage that unrestrained capitalism can bring, damage he describes in detail. Far from celebrating capitalism, both Arendt and Polanyi argue that unrestrained capitalism and free market ideology were significant factors in the rise of fascism…

"Privatize everything that can be monetized."

Naked Capitalism
Capitalism Versus The Social Commons
Ed Walker

Matias Vernengo — Misconceptions about Heterodox Economics in general and Sraffian in particular

Short lesson in history of economics.

Naked Keynesianism
Misconceptions about Heterodox Economics in general and Sraffian in particular
Matias Vernengo | Associate Professor of Economics, Bucknell University

Bill Mitchell — The roots of MMT do not lie in Keynes

I am currently working on an introductory chapter to a collection I have prepared for my publisher (Edward Elgar) which describes the evolution of Modern Monetary Theory (MMT). The task might appear to be straightforward but in fact is rather vexed. There is considerable dispute as to where the roots lie. A specific debate is the importance of the work of John Maynard Keynes. Many Post Keynesians, almost by definition, believe that Keynes was a central figure in the development of what we now call Post Keynesian economics, although that ‘school of thought’ evades precise identification and is certainly anything but homogenous. There are MMT proponents, who while sympathetic which much of Post Keynesian theory, disagree on key propositions – specifically relating to debt and deficits (as an example). But then they also point to Keynes’ work as seminal in the development of MMT. My own view is that many of the important insights in Keynes were already sketched out in some detail in Marx. Further, the work of the Polish economist Michał Kalecki was much deeper in insight than the work of his contemporary, Keynes. But for me the real sticking point against Keynes was his view that fiscal deficits should be balanced over the business cycle and that would allow governments to pay back debt incurred in the deficit years. That view has crippled progressive thought ever since and is antithetical to MMT. The debate also has resonance with the current leadership struggle within the British Labour Party about fiscal deficits and the claims by the ‘socialist’ candidate, Jeremy Corbyn that he will “balance the budget” when unemployment is low so as to avoid inflation. This view derives from the adoption by progressives of Keynes’ views, whether they know that or not. It is a mistaken view and retards progressive policy development.…

Bill Mitchell – billy blog
The roots of MMT do not lie in Keynes
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia