Politicians Who Want Us to Live Beyond Our Means — Peter Cooper

Politicians often tell us that we should live within our means. Quite right. Unfortunately, many of them do not appear to understand what this actually entails when it comes to fiscal policy. So far as most economists are concerned, the events of the last decade have thoroughly discredited advocates of austerity. Yet, it remains quite common to hear politicians from across the political spectrum calling for reductions in fiscal deficits or even fiscal surpluses. There appears to be little awareness that, in most countries, a call for a fiscal surplus is, literally, a call for the society to live beyond its means.... 

Excellent  summary. Save it and pass it on.

heteconomist
Politicians Who Want Us to Live Beyond Our Means
Peter Cooper

Bill Mitchell — Progressive political leadership is absent but required

One of the themes that has emerged in the discussions of the British Labour Party Fiscal Credibility Rule (which should be renamed the Fiscal Incredulous Rule) is when is the right time for a political party to show leadership and start educating the public on new ideas. The Modern Monetary Theory (MMT) project has been, in part, about educating people even if our ideas have been strongly resisted by the mainstream. The mainstream (New Keynesian) paradigm in economics is degenerative (meaning it has little empirical validation) and eventually it will fade into historical obscurity. For many of us that cannot come quickly enough.

The defenders of the Rule argue that progressive politicians have to tread carefully or else the amorphous financial markets will turn on them and destroy their initiatives. The problem is that by kowtowing to the City or Wall Street, the progressive political forces become captured and redundant. Witness the electoral demise of social democratic parties over the last several decades.

The conditions are ripe (see below) for a courageous head-on attack on these financial market elites and educate the public so that they allow elected governments to legislate for all rather than serving the interests of the elites, which has become the norm over the last several decades. The problem is that progressive political forces are also taking advice from mainstream economists who use the tools of neoliberalism. The upshot is that progressive political leadership is absent but desperately required....

Bill Mitchell – billy blog
Progressive political leadership is absent but requiredBill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

Simon Johnson — Saving Capitalism from Economics 101

All across the United States, students are settling into college – and coming to grips with “Econ 101.” This introductory course is typically taught with a broadly reassuring message: if markets are allowed to work, good outcomes – such as productivity growth, increasing wages, and generally shared prosperity – will surely follow.

Unfortunately, as my co-author James Kwak points out in his recent book, Economism: Bad Economics and the Rise of Inequality, Econ 101 is so far from being the whole story that it could actually be considered misleading – at least as a guide to sensible policymaking. Markets can be good, but they are also profoundly susceptible to abusive practices, including by prominent private-sector people. This is not a theoretical concern; it is central to our current policy debates, including important new US legislation that has just been put forward....

Fitting post on Labor Day (US holiday celebrating working people). Worth reading in full. Unfortunately it is about saving capitalism from its excesses rather than overhauling it.

Why is capitalism in need of an overhaul. The term, "capitalism," explains it.

"Capitalism" is a socio-economic system that favors capital (property ownership) over the other factors of production, land (environment) and labor (those that work for a living). This "market-based" system is institutionally based, and as such politically based.

Classical liberalism was about reducing government intervention in the economy. Neoliberalism is about government capture through politics in order to favor the interests of capital.

Politics is influenced by a simplistic understanding of conventional economics, which has been called "economism" to distinguish it from economics. Econ 101 is more about promoting economism more than teaching economics in terms of models that are substantiated by events.

Project Syndicate
Saving Capitalism from Economics 101

Simon Johnson |  professor at MIT Sloan, former chief economist of the IMF, senior fellow at the Peterson Institute for International Economics, and co-founder of the blog, The Baseline Scenario

Bill Mitchell — A twitter storm of lies …

This is my short Wednesday offering, which will be quite short considering the last two days have been (necessary) epics. My three-part series created somewhat of a social media storm, which means people are interested in the topic and I think that is healthy. Democracy is strengthened if people educate themselves and contest propositions that are abroad in the debate. But, as I noted yesterday, social media storms have a way of getting out of control and out of the realm of being complementary to a more considered educative process and interaction. What the recent Twitter storm has demonstrated is that key people are just willing to make spurious accusations (aka lies) without having taken the time to consider the depth of the literature that is available on any topic. That is not helpful to democracy. It undermines it. Anyway, in this short blog post, I consider some of the responses to my three-part series. As a footnote, I have now retitled the three-part series “MMT is just plain good economics” rather than using the quotation from the British Shadow Chancellor’s advisor who said that “MMT is just plain bad old economics”. Framing. I took the points of several commentators on this blog seriously in this regard. Thanks. 

Bill Mitchell – billy blog
A twitter storm of lies …
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

Bill Mitchell — We can do something about neoliberalism

It is Wednesday, so just a (relatively) short blog post today. I am using the time today to further scope out the material and logic for my next book with Thomas Fazi, which we hope to publish sometime in 2019. I will provide more details on that project soon but it is intended to be the followup to our current book – Reclaiming the State: A Progressive Vision of Sovereignty for a Post-Neoliberal World (Pluto Books, 2017). So, today, a bit of that sort of flavour. In 1977, the Young European Federalists, which has long campaigned for European integration, released its Manifesto, which coined the term “democratic deficit”. While they intended it to be a concept to advance their pan-European intentions, the idea resonates strongly in the current climate and can be used to support a return to grass roots democracy aimed at reclaiming the nation state from the neoliberals and the progressive pretenders who have become infested with neoliberal ideas. In the last week, we have seen two notable events. First, the entrenchment of the colonial status of Greece under the watchful eye and collaboration of so-called ‘socialists’. Second, the magnificent success in today’s New York Democratic Primary election by a truly progressive candidate. These events are diametrically opposed. The former tells you what is wrong with traditional progressive political parties. The latter tells us that we can do something about it.

Bill Mitchell – billy blog
We can do something about neoliberalism
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

WCEG — Should-Read: Robert Skidelsky: The Advanced Economies’ Lost Decade

The eminent Robert Skidelsky identifies three groups of economists who gave what ex post was clearly bad advice, and bad advice that mattered about fiscal policy, from 2009 on: Alberto Alesina and company with their “expansionary austerity” doctrines, Ken Rogoff and company with their “short-term-pain-for-long-run-gain” doctrines, and Ricardo Haussman and company with the “no choice but austerity” doctrines. All three groups, however, had reasons for their arguments and were thinking hard—albeit, in my view, not as hard and as deeply as they ought to have and had a responsibility to do—and genuinely believed what they were putting forward. There were also three groups of economists giving bad advice who either did not believe what they were saying or had done no thinking at all: Robert Lucas and company with his “nothing to apply a multiplier to” ideological and unfounded claims that fiscal policy could never be effective; John Taylor, Marvin Goodfriend, and company with their Bernanke’s monetary expansion will produce currency debasement and inflation but will not boost employment; and a whole host of professional Republicans who ought to have been backing up Bernanke’s plans for further monetary stimulus and his call for an end to fiscal austerity headwinds, but were instead very quiet, as Elmer Fudd would say, in part at least not to annoy political masters in the Republican Party. I think the economics profession could have played a useful role in helping to manage the recovery if those three groups unmentioned by Skidelsky had not been present....

WCEG — The Equitablog
Should-Read: Robert Skidelsky: The Advanced Economies’ Lost Decade
Brad DeLong

June Sekera — Denial of the public non-market system, and the consequences

Public non-market production makes up a quarter to a half or more of all economic activity among advanced democratic nation-states. Yet the public economy’s ability to function on behalf of the populace as a whole is seriously imperiled in many western democracies, and particularly jeopardized in the United States. The surging influence of mainstream economics has been a prime factor in the degradation of the public domain over the last several decades – a phenomenon that James Galbraith (2008) has called “the collapse of the public governing capacity.”

Market advocates, exploiting neoclassical economic theory, have foisted market axioms and precepts onto government, intent on transforming public goods production in imitation of an idealized and idolized market model.

The ravaging of government in the interests of ideology and private profit has proceeded largely unhampered because we have no adequate theory to explain the nature and dynamics of the non-market public economy, no intellectual infrastructure to explain how its purposes and processes differ crucially from those of the market, and no effective explanatory model that shows why such differences matter substantially for democratic governance and the well-being of the populace....

The post is short and to the point.

However, I think the last sentence may be an exaggeration.

MMT does address this issue in terms of public purpose, and it is not original in doing so. John Kenneth Galbraith's career as public policy economists was all about addressing this and at one time he was listened to, and he played a policy making role in government, too. Many Post Keynesians also focused on this.

The problems are, first, the assumptions both substantive and procedural (methodological) of conventional economists, and secondly, the dominance of this approach in academic economics and also policy making circles.

Real-World Economics Review Blog
Denial of the public non-market system, and the consequences

Excerpted from June Sekera, “Missing from the mainstream: the biophysical basis of production and the public economy”, real-world economics review, issue no. 81, 30 September 2017, pp. 27-41, 

Bill Mitchell — Prime Minister Corbyn should have no fears from global capital markets

Bill addresses many issues in this post that MMT economists don't ordinarily focus on like capital markets, capital flows, capital flight, capital controls, and exchange rate depreciation. Since most progressives don't understand the background and dynamics they generally get sucked into commonly deployed neoliberal traps. Bill shows how they don't need to.

Bill Mitchell – billy blog
Prime Minister Corbyn should have no fears from global capital markets
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

Bill Mitchell — Employment as a human right

As I indicated earlier this week, I will progressively add notes to the body of work that will become the manuscript for my next book (with long-time co-author Joan Muysken) on the – Future of Work. As I write bits and pieces, I will post them here for comments and feedback. The book will be published sometime in 2018. At present, I am working on the philosophical considerations that we will deploy to underpin the more prescriptive elements (policy proposals) that we will produce....

Bill Mitchell – billy blog
Employment as a human right
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

James Kwak — The Importance of Fairness: A New Economic Vision for the Democratic Party

A lot has been written recently about the direction of the Democratic Party. This is what I think.…

The Democratic Party was once the party of working people. So why is it increasingly becoming the party of well-educated, socially tolerant, cosmopolitan city-dwellers? Because, in an age of stagnant median incomes and a disintegrating social safety net, Democrats have no economic message for the many people who are struggling to make ends meet, to pay for college, to stay in a home, or to save for retirement.

This impotence is the product of sweeping changes in the intellectual and political landscape of the United States.

Good diagnosis and prescription.

One of the central themes of my book is that economism [market state] is an ideological worldview: a lens through which we see the world, which affects the way we interpret reality and serves the interests of certain groups. Logically, it can only be overthrown by another worldview. And so the book ends this way:

“Millions if not billions of people today hunger to live in a world that is more fair, more forgiving, and more humane than the one that we were born into. Creating a new vision of society worthy of that collective yearning—one that goes beyond the false promises of economism—is the first step toward building a better future for our children. That is the story that remains to be written.”

What the Democratic Party needs is an economic message that: addresses the real problems that many Americans face on a daily basis (instead of callously insisting that “America is already great”); and resonates with their very real frustrations and anxieties. Both politically and as policy, the idea that the rising tide of economic efficiency and growth would lift all boats has failed. It is time for something new.

Baseline Scenario
The Importance of Fairness: A New Economic Vision for the Democratic Party
James Kwak | Associate Professor of Law at the University of Connecticut School of Law

David Ruccio — Populism and mainstream economics

...we read the spectacular claim that today’s populists—these “new, outsider political forces”—are wrong because they “claim to have a monopoly on truth.”...

But the idea that populists are somehow the only ones who claim to have a monopoly on truth is an extraordinary diagnosis of the problem.

Think of the legions of mainstream economists who have lined up over the years to claim a monopoly on the truth concerning a wide variety of policies, from restricting minimum wages and approving NAFTA to deregulating finance and voting no on Brexit. They are the ones who have aligned themselves with the interests of economic and political elites and who, in the name of expertise, have attempted to trump democratic, public discussion of important economic issues.…

If mainstream economists finally relinquished that claim—and, as a result, spent more time both learning the languages of other traditions within the discipline of economics and listening to the grievances and desires of those who have been sacrificed at the altar of the status quo—perhaps then they’d have something useful to contribute to the larger debate about where the world is headed right now.

Occasional Links & Commentary
Populism and mainstream economics
David F. Ruccio | Professor of Economics, University of Notre Dame

Lars P. Syll — Why governments should run deficits

Lynn Parramore interviews Mario Seccareccia (MMT).

Lars P. Syll’s Blog
Why governments should run deficits
Lars P. Syll | Professor, Malmo University

Dani Rodrik — Is Global Equality the Enemy of National Equality?

The question in the title is perhaps the most important question we confront, and will continue to confront in the years ahead. I discuss my take in this paper.

More on nationalism versus internationalism.

Dani Rodrik's Weblog
Is Global Equality the Enemy of National Equality?

Dani Rodrik | Ford Foundation Professor of International Political Economy at the John F. Kennedy School of Government at Harvard University

David Henderson — Ominous Inaugural Addresses

If Donald Trump understood trade and immigration, that would not be ominous at all. Because if he made every decision on trade and immigration "to benefit American workers and American families," he would decide to move in the direction of lower tariffs and import restrictions and fewer restrictions on immigration. Remember that "American workers and American families" includes pretty much all Americans, including those who gain from buying cheap imports (which, by the way, is all of us) and those who gain from hiring cheaper labor. The fact of gains from trade and immigration is not controversial in the economics literature. What makes this statement ominous is that Trump doesn't understand trade.

What's ominous is that economists like this don't understand ordinary families problems and the effects on politics in a representative democracy. This election was unusual in that the establishment of neither party was able to prevail precisely because they were not paying attention to this. This is the reason for Brexit, too, and it is also the reason for the disintegration of the Eurozone and the rise of the right in Europe.

Why these pundits don't get is that immigration is not an economic issue as much as a political one and the embedded labor in imports is ersatz immigration.

"Build the wall" is symbolic of this. As I recall, Lou Dobbs was the first to pick up on this, although it may have been Pat Buchanan that was first. Both was mocked for it as was Donald Trump, but DJT parlayed it to victory — unless you believe the lame excuse that "Putin did it."

These establishment types are clueless about reality and can only see the world through their models based on restrictive assumptions that make them worthless in application to political economy and policy formulation.

Econlog
Ominous Inaugural Addresses

David Henderson, research fellow at Stanford University's Hoover Institution and is also associate professor of economics at the Naval Postgraduate School in Monterey, California

Bill Mitchell — A lying government pushing economy towards recession and greater inequality

It is highly surreal listening to radio/TV commentators talking about government financial affairs (fiscal balance etc). These so-called experts are paraded before the nation and the script is generally the same. The interviewer who knows virtually nothing but has the key triggers on hand (‘budget repair’, ‘ratings downgrade’, etc ad nauseum) asks the ‘well respected expert’ about the state of affairs and the answers are always the same – fictional. This charade plays out almost daily but reaches a hysterical fever pitch at the time the Government releases its annual fiscal statement (May) or its Mid-Year Economic and Fiscal Outlook (December). The Government plays along with the charade releasing what it deems to be cleverly crafted documents, shifting revenue and spending across year lines to give one impression or another of the state of affairs. None of the charade is based on any fundamental economic understanding. None of it means anything other than a demonstration of a national scam to hide the truth from the ordinary citizen who for one reason or another relies on experts to summarise technical detail into meaningful sound bites. The nation then goes about its business in this cloud of ignorance, while the elites continue to suppress wages and living standards and march of with increasing shares of national income. They know what is going on and it is in their interests to keep the rest of us from having the same information. It is the same the world over. Well, here is what is going on with a framework that allows the reader to cut through the lies …

Exposing conventional economic analysis as ideological persuasion (propaganda) aka "duping the rubes."

Bill Mitchell – billy blog
A lying government pushing economy towards recession and greater inequality
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

James Kwak — Economics 101, Economism, and Our New Gilded Age

In policy debates and public relations campaigns, however, what you are more likely to hear is that a minimum wage must increase unemployment—because that’s what the model says. This conviction that the world must behave the way it does on the blackboard is what I call economism. This style of thinking is influential because it is clear and logical, reducing complex issues to simple, pseudo-mathematical axioms. But it is not simply an innocent mistake made by inattentive undergraduates. Economism is Economics 101 transformed into an ideology—an ideology that is particularly persuasive because it poses as a neutral means of understanding the world.

Overextension of the scope of the model. The scope is determined by the assumptions, and the more restrictive the assumptions, the more limited the and the less realistic the model.

Economism is a logical fallacy used rhetorically to persuade through mathiness. It's not science but persuasion that amounts to sophistry. Intelligent economists know this. Those who don't realize it are unintelligent. So take you pick between liar and moron.

Baseline Scenario
Economics 101, Economism, and Our New Gilded Age

James Kwak | Associate Professor of Law at the University of Connecticut School of Law

Mariana Mazzucato — New Times: Mariana Mazzucato on why it's time for progressives to rethink capitalism

Some separate economic from societal problems, stating that we must address the former before we can tackle the latter. But the future for progressives lies in advancing the two together.…

The time is ripe for progressives to make their case with confidence and to rethink capitalism. Narratives about wealth creation must become more collective, as should the distribution of the rewards which result. The public realm matters to wealth creation, just as it matters to building a stronger and more just society.

New Statesman
New Times: Mariana Mazzucato on why it's time for progressives to rethink capitalism
Mariana Mazzucato | RM Phillips chair in the Economics of Innovation at SPRU in the University of Sussex

See also

Prospect
A real industrial revolution
Mariana Mazzucato

Bill Mitchell — The tide is turning but there is a long way to travel yet

I am late with this one — Bill posted it on Friday — but it is important. It corrects some mistakes in David Graeber's article at The Guardian and is a good lesson in being careful in talking about MMT. It's also about progress in closing the last mile.

Bill Mitchell – billy blog

The tide is turning but there is a long way to travel yet

Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

Noah Smith — Leading Economists Now Lean Left

The Overton window has shifted in political economics.

Bloomberg View
Leading Economists Now Lean Left
Noah Smith | Assistant Professor of Finance, Stony Brook University

Jason Smith — The political method

Isn't politics the scientific method grand?

I bet you didn't think you'd be laughing when you read an economics paper ... laughing so hard you couldn't breathe ...

Be sure to click through the links in the post.

Information Transfer Economics

The political method
Jason Smith