Peter Radford — Nailed to Its Perch

Economics, in its majority form, is simply dumb and wrongheaded. It is a dangerous technology based on a severely anti-social premiss. It seeks to contort the world to match itself rather than to describe the world as it is....

The project of the economic liberalism that dominates the economics profession is to model an idealized world based on highly restrictive assumptions based on ideology, chiefly methodological individualism that assumes ontological individualism, and then recommend policy that attempts to conform the real world to the model.

The Radford Free Press
Nailed to Its Perch
Peter Radford

Capitalism in the Time of Trump? — Lynn Parramore interviews Mariana Mazzucato

Mariana Mazzucato, Professor of the Economics of Innovation at the Science Policy Research Unit of the University of Sussex and author of The Entrepreneurial State: debunking public vs. private sector myths, has made a passionate case for the government’s active role in the economy —sending the old laissez faire notion that markets can run themselves into the dustbin where it belongs. In a new book co-edited with Michael Jacobs, Rethinking Capitalism: Economics and Policy for Sustainable and Inclusive Growth, she offers a bold new vision for contemporary capitalism that works for the people and the planet. What chance does this vision have in the age of Trump and Brexit? Mazzucato shares her view.

INET
Capitalism in the Time of Trump?
Lynn Parramore interviews Mariana Mazzucato, Professor of Economics, University of Sussex

Tom Hickey — Some Reflections on Economics and Public Policy.

Here are some thoughts that occurred to me while reading a post somewhere on economics and public policy.

It's really quite laughable how so many economists presume that all problems are economic problems at bottom and so they can be professionally diagnosed by economists and treatment successfully prescribed.

Get over yourselves. You are making yourselves look ridiculous in assuming that you have some special talent for designing public policy that will solve societies' social and political problems, which generally go way beyond economic issues alone. Yes, I am talking about things like education and poverty, which are sociological and psychological as well as economic. Even development is not simply a matter of getting the economics right as though one shoe fits all.

Get some humility and do some reading beyond your field. Otherwise, you're just moralizing. Why do you think you have expertise in that?

Social engineering requires a broadly scientific approach involving input from many disciplines. The end-in-view is effectiveness. To summarize Peter F. Drucker on the effective executive, "Efficiency is doing things right, and effectiveness is doing the right things." Finding out what works is a matter for research and testing. The issues are broad and no single discipline can resolve issues of this magnitude and depth. Economists have role to play in this, of course, but it is complementary role.

In addition, the real issue in a liberal society and among liberal societies is reconciling the trifecta of social, political and economic liberalism instead of assuming that economic liberalism resolves all social and political challenges through imposing economic liberalism alone or even chiefly. 

Right, I know, "Rothbard." Utopia. Never going to happen. Get a grip.

In the first place, it's beyond complicated, as in complex adaptive systems and emergence. Secondly, its not even possible to impose economic liberalism thoroughly owing to asymmetries, especially those involving power that tip the playing field, as evidenced in growing inequality approaching feudal proportions, not to mention path dependence owing to imperialism and colonialism that continue to disadvantage many countries and peoples, especially indigenous people.

Beverly Mann — Why Do So Many Wealthy Democrats Think The Only Money That Matters To The Hoi Polloi Is The Money They Must Pay To The Government?

Sanders got it right last night. This is the Republican mantra. And it’s no longer selling so well.

Angry Bear
Why Do So Many Wealthy Democrats Think The Only Money That Matters To The Hoi Polloi Is The Money They Must Pay To The Government?
Beverly Mann

Andrea Terzi — Mario Monti defends the austerity fortress

I have known Mario Monti since the time he was my professor of Monetary Economics in the late 70s. An excellent teacher, he opened his course by teaching financial accounting and balance sheets, explaining that every financial asset has a corresponding liability and demonstrating the importance of net sectors’ financial positions.

Today, Mario Monti chairs the EU “high-level group on own resources”, working on a reform of the EU budget. In an interview by Federico Fubini (Corriere della Sera, 18 October 2015), he discusses the current state of public finances in the EU and shares his concerns that the tight fiscal policy enforced in highly indebted EU countries is now being relaxed prematurely.

I do believe Monti has a point when he claims that the recent EU concessions on budget rules have initiated a tendency toward flexibility, risking a possible loss of credibility for EU rules. He may also have a point when he argues that the Italian government’s tight fiscal policy in 2011-13 (under Monti’s premiership) may have contributed, politically, to convincing Germany to accept Draghi’s “whatever it takes” move that saved (so far) the euro.

But Mario’s view of public debt is, I’m afraid, outdated.

In the cited interview, Monti criticizes Italian Prime Minister Renzi for being too relaxed on fiscal rules. I won’t discuss here if Renzi’s projected budget indeed deviates, and, if so, how much, from EU rules. This is not the point here. My point is Monti’s approach to public debt and his concerns about fiscal flexibility.

I too am concerned about flexibility, but, I suspect, for a different reason. I fear that easing fiscal rules through a non-transparent process may raise more political discontent among EU partners. A sounder political approach would be fiscal expansion coming from a shared EU governance decision. And yet, as long as the latter is not yet happening, what’s wrong, economically, with the EU permitting larger deficits than the rules allow?

On the contrary, Monti is alarmed with flexibility for precisely an economic reason. He views public debt as a gift to today’s voters, funded by future voters’ money. And I suspect he would use this same argument if a larger fiscal deficit were the result of a shared EU decision. Monti’s concern is not only about single euro members attempting to get away from rules; it is about making any exception to those rules, at any level of government.

This is where I believe Monti is wrong, and I will show why by building on the concepts that he taught me long ago.…

Sectoral balances follow.

Money And The Real Economy
Mario Monti defends the austerity fortress
Andrea Terzi, Professor of Economics, Franklin College, Switzerland

Vincent Navarro — How Should Economics be Taught?

Navarro: One of the major problems we encounter in the production of economic knowledge is its excessive disciplinary approach. Actually, the academic institutions are usually divided by departments based on disciplines, one of them being economics. The reality that surrounds us, however, cannot be understood following the disciplinary approach. The understanding of our realities, including the economic ones, calls for a multidisciplinary analysis, with the understandings of the historical, political and social forces that shape and determine that reality. In order to understand the current Great Recession, for example, we have to understand how power—class power, race power, gender power, national power—is produced and reproduced through political institutions, as well as social and cultural ones. In other words, we have to comprehend how power relations shape the governance of our societies, including their economies. 

The current economics, for the most part, do not do that. They specialize in branches of the tree without understanding, or even less, questioning, the nature of the forest. Moreover, they have given great emphasis to the methods, depoliticizing the realities of the economic phenomenon. Today, modern economics is used as a way of confusing and/or ignoring the political realities that shape the economy. Currently, most of the major economic problems we face are basically political....

The absence of the study of the political and social context, determined historically, makes current economics an apologetic message for current power relations, mystifying, hiding, and/or confusing the understanding of the economic phenomena. It is not surprising, therefore, that the critical traditions within economies are completely ignored or marginalized. It is predictable that current economists did not perceive the arrival of the current recession, which is a Great Depression for millions of Europeans. Only analysts from critical traditions were able to predict it. And we did it....

The current emphasis on methods and its analysis of the economic reality without looking at the political context that determines it is a consequence of changes in the power relations in our societies. The apologetic function of current economies of the current power relations explains its lack of relevance. What we have been seeing since the 80s has been the enormous growth of income derived from capital, and the decline of income from labor. This has resulted in the drastic growth of inequalities.

But those who derive their income from capital have enormous influence on value-generating systems, including the media and universities. This is extremely clear in the US but is happening also in the European universities. Today, the influence of financial and economic institutions in the production of knowledge is enormous. They fund research, support economic journals, and shape, to a large degree, the academic culture in the area of economics. It is very similar to what happens in medicine where the pharmaceutical industry has a major influence in shaping clinical knowledge and practice.

In my over 50 years of academic life, never has the 1% (those who derive their income from capital) had as much influence in shaping the knowledge of economics....

Worth reading the whole interview.

The Greenville Post
How Should Economics be Taught?

Vincent Navarro | Professor of Public Policy, Sociology and Policy Studies at Johns Hopkins Bloomberg School of Public Health and the chair of the Public Policy program University Pompeu Fabra

This interview was conducted by students at the Barcelona Graduate School of Economics, one of the leading schools of economics in Europe.

Oleg Komlik — Why and when do governments appoint economics professionals and economics-trained politicians?

Should policymakers – politicians and high-level state officials – be experts in their fields? Does professional competence effect public policies at all? And does it prove itself? These, undoubtedly, important issues to be discussed and researched. But in order to delve into them, first one needs to understand why and when some governments appoint people with professional economic background and headed by economists, while in orther cases the picture is different? 

In “The Technical Competence of Economic Policy-Makers in Developed Democracies” Mark Hallerberg and Joachim Wehner tackled these questions. They analyzed educational and occupational background data for 1200 policy-makers (presidents/prime ministers, finance ministers, and central bankers) from EU and OECD democracies since 1973. The findings are not just interesting, they also could explain a lot about economic policymaking....

Economic Sociology and Political Economy
Why and when do governments appoint economics professionals and economics-trained politicians?
Oleg Komlik | founder and editor-in-chief of the ES/PE, Chairman of the Junior Sociologists Network at the International Sociological Association, a PhD Candidate in Economic Sociology in the Department of Sociology and Anthropology at Ben-Gurion University, and a Lecturer in the School of Behavioral Sciences at the College of Management Academic Studies

Tim Harford — The economists’ manifesto

If Britain’s top economists were in charge, what policies would they implement? Tim Harford sets the challenge 

It’s often said that economists have too much influence on policy. A critic might say that politicians are dazzled by data-driven arguments and infatuated with the free-market-fetishising practitioners of the dismal science. As a card-carrying economist, I have never been convinced that politicians are the puppets of economists. Still, the idea seemed worth exploring, so I called up some of the country’s most respected economists and presented them with this scenario: after the election, the new prime minister promises to throw his weight behind any policy you choose. What would you suggest?

My selection of economists was mainstream — no Marxists or libertarians — but arbitrary. There is no pretence of a representative survey here. But there were common threads, some of which may surprise...

The economists’ manifesto
Tim Harford

Miles Corak — “After Piketty”, 12 policy proposes to reduce inequality of outcomes

“The media storm surrounding the publication of Thomas Piketty’s remarkable Capital in the Twenty-First Century (2014) has ensured that inequality is now in the forefront of public debate. But what next?

Thus begins an essay in The British Journal of Sociology by the dean of inequality studies, A. B. Atkinson of Oxford University. This is a must read for anyone interested in public policy addressed to the growing inequality in the rich countries.

Professor Atkinson’s focus is on the United Kingdom, but his far-reaching set of policy prescriptions address many aspects of public policy (not just tax and transfer policy), and have relevance well beyond the European context.

Tony Atkinson is an economist of the highest order who has been studying and contributing to the economics of inequality since the 1960s. In this paper he offers 12 proposals that, he says, “could bring about a genuine shift in the distribution of income towards less inequality.”

Here is a link to the paper.….

Economics for public policy

“After Piketty”, 12 policy proposes to reduce inequality of outcomes
Miles Corak | Professor of Economics, Graduate School of Public and International Affairs, University of Ottawa

h/t Brad DeLong