Ha Joon Chang — 13 Facts You Didn't Know About Economics

1. Economics was originally called 'political economy'

2. The Nobel Prize in Economics is not a real Nobel Prize

3. There is no single economic theory that can explain Singapore's economy

4. Britain and the US invented protectionism, not free trade

5. Free trade first spread mostly through un-free means

6. It was arch-conservative Otto von Bismarck who introduced the first welfare state in the world

7. Capitalism did best between the 1950s and the 1970s, an era of high regulation and high taxes

8. The internet was invented by the US government, not Silicon Valley

9. Before tax and welfare spending, Germany and Belgium are more unequal than the US

11. The 'lazy' Greeks are the hardest working people in the rich world after South Koreans

12. Switzerland and Singapore are not living off banking and tourism alone

13. Most poor people don't live in poor countries

The World Post

13 Facts You Didn't Know About Economics
Ha Joon Chang | Professor of Economics, Cambridge University

Simon Wren-Lewis — Bank says money multiplier is wrong - should we be shocked?

Simon Wren-Lewis explains why the textbooks are wrong (as the Bank of England article points out) and how economists already knew this, but textbooks have their own momentum, or something like that.

Teaching economics is really that screwed up? They actually pay people to do this?

Of course, its not just this, as Steve Keen's Debunking Economics points out.

Mainly Macro
Bank says money multiplier is wrong - should we be shocked?
Simon Wren-Lewis | Professor of Economics, Oxford University

Neil Wilson — Complaint to the BBC over terrible video about government spending

Peter Martin kindly drew attention to an appallingly bad piece by Hugh Pym that has been published on the BBC Online website.

Once again it perpetuates the myth about the government drawing on a mysterious pile of financial resources that are out there somewhere in the world (in this case a pile of red sweets). Both Peter and Alex Little have complained to the BBC and got the usual dismissive response.

But it got their attention. So now it's my turn, and here's what I wrote:

3spoken
Complaint to the BBC over terrible video about government spending
Neil Wilson

Neil adds: "The BBC, being quintessentially British, makes it very easy to complain. If you can see the video then please complain about it, and ask that it be withdrawn."

Ben Stein Throws Cold Water on Fox Panel Fearmongering Over National Debt (via http://crooksandliars.com)

Ben Stein Throws Cold Water on National Debt Fearmongering (via http://crooksandliars.com)

By Heather January 26, 2014 8:07 pm Fox's Ben Stein went off script this Saturday and dared to criticize the amount of money we spend on our military. I'm no fan of Fox regular and former Nixon speechwriter Ben Stein, but every once in a while, he goes…

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Gavin Kennedy — Adam Smith's Self Interest is Not Served by Selfishness

Gavin Kennedy explodes another Smith myth.

George Stigler’s 1976 opening admonition that economics is founded on the “granite of self-interest” needs to be modified by the inclusion of the words “the granite of mediated self-interest”! Smith might then have saved the Chicago ‘boys’ from embarrassment in Chile if they had read Smith properly and not been enthused by Stigler’s enthusiasms for a half-understood idea that wasn’t Smith’s anyway.

"Mediated" means by serving the interests of others, you know, like customers and associates.

See also Alexis de Tocqueville on the principle of self-interest rightly understood.

 

Adam Smith's Lost Legacy
Adam Smith's Self Interest is Not Served by Selfishness
Gavin Kennedy | Emeritus Professor, Heriot-Watt University

Think Left — Why do politicians tell us Debt/Deficit myths which they must know to be untrue?

The New Economic Perspectives’ video clip on the Government budget, Deficits and Debt presented below (produced for educational purposes), debunks the myths that politicians tell their populations to justify ‘austerity’. In the case of the clip, it starts with 3 full minutes of American politicians misinforming the electorate. An identical montage aimed at the UK electorate could undoubtably just feature George Osborne’s utterances from his forthcoming Autumn statement scheduled for this Thursday (5th December 2013).

However, the reality is that all economists know that the deficit and debt mythologies are not true and ’have long known that the idea of balancing budgets over the cycle is a bit like a fairy story we tell to frighten the kids’.

Nice post. Nice intro to MMT.  Good work, JK.

Think Left

Why do politicians tell us Debt/Deficit myths which they must know to be untrue?

(h/t Andy Blatchford on FB)

Bill Mitchell — How to discuss Modern Monetary Theory

Important post by Bill today.

I have been travelling a lot today (nearly 6 hours starting early) and so haven’t much time for blog writing. I am working on a paper at present on the use of metaphors in economics and how Modern Monetary Theory (MMT) might usefully frame its offering to overcome some of the obvious prejudices that prevent, what are basic concepts, penetrating the public psyche. Here are some notes on that theme. The blog is just a rough sketch and will be refined over the coming weeks. There is a section at the end that encourages reader feedback – lets see what you think.

Bill Mitchell – billy blog

How to discuss Modern Monetary Theory

William F. (Bill) Mitchell |Professor of Economics at Charles Darwin University, Professor of Economics at the University of Newcastle, and inaugural director of CofFEE

Warren Mosler & Thomas E. Nugent — Debtor Nation, Without The Rhetoric

Oldie but goodie from Warren. Hat tip to Charles Haydn on FaceBook.

National Review Online — FEBRUARY 24, 2004

Debtor Nation, Without The Rhetoric 
When it comes to trade deficits, choose fact over myth. 

By Warren Mosler & Thomas E. Nugent

Yves Smith — Why the “Maximizing Shareholder Value” Theory of Corporate Governance is Bogus

Yves debunks the myth of the obligation of corporate management to maximize shareholder value. Legally, "equity is residual" and sits at the bottom of the scale of corporate obligation.

This myth lies at foundation of short-term managerialism aka managing to the quarterly report that is distorting incentives. As Yves points out, it was dreamed up by an economist with no legal expertise and no deep expertise in management science other than theoretical.

It doesn't hold water legally, and management gurus like Peter F. Drucker have denounced it as short sighted, designed to enrich corporate top management based on performance bonuses, equity compensation, and equity prices at the expense of developing long-term strategy.

Naked Capitalism
Why the “Maximizing Shareholder Value” Theory of Corporate Governance is Bogus
Yves Smith

Dan Kervick — Market Myths and the Real Drivers of American Progress

Dan does the numbers to show that market fundamentalism is a hoax and the real driver of US prosperity has been cooperation among all factors and led by government.

Rugged Egalitarianism
Market Myths and the Real Drivers of American Progress
Dan Kervick
(crossposted at New Economic Perspectives)

Robert Atkinson And Michael Lind — Econ 101 is killing America

 As we can see from the current dismal state of economic affairs, economies are incredibly complex systems, and policymakers who are forced to act in the face of this uncertainty and complexity want guidance. And over the last half century, neoclassical economists have not only been more than happy to offer it, but largely been able to marginalize any other disciplines or approaches, giving them a virtual monopoly on economic policy advice.

But there are two big problems with this. First, despite economists’ calming assurances, we still know little about how economies actually work and the effect of policies. If we did, then economists should have sounded the alarm bells to head off the financial collapse and Great Recession. But even more problematic, even though most economists know better, they present to the public, the media and politicians a simplified, vulgar version of neoclassical economics — what can be called Econ 101 — that leads policymakers astray. Economists fear that if they really expose policymakers to all the contradictions, uncertainties and complications of “Advanced Econ,” the latter will go off track — embracing protectionism, heavy-handed “industrial policy” or even socialism. In fact, the myths of Econ 101 already lead policymakers dangerously off track, with tragic results for the economy and everyday Americans.

Myth 1: Economics is a science..... 

Myth 2: The goal of economic policy is maximizing efficiency.... 

Myth 3: The economy is a market..... 

Myth 4: Prices reflect value..... 

Myth 5: All profitable activities are good for the economy.... 

Myth 6: Monopolies and oligopolies are always bad because they distort prices.... 

Myth 7: Low wages are good for the economy.... 

Myth 8: “Industrial policy” is bad.... 

Myth 9: The best tax code is one that doesn’t pick winners.... 

Myth 10: Trade is always win-win....

Salon
Econ 101 is killing America

Robert Atkinson And Michael Lind 

Unlearning Economics — The Many Straw Men Surrounding Marx

Debunking some of the persistent myths about Marx and Marxism.

Every school of thought likes to claim that the other schools of thought misunderstand or misinterpret them, and hence that their criticisms miss the mark by attacking a 'straw man'. Sadly, it is often true that this is the case, and I am guilty of misinterpreting my opponents on many occasions. However, in my opinion, there is little contest for the most frequently misrepresented figure around: it has to be Karl Marx.

For many, Marxist theories should be laid to rest. His labour theory of value is often referred to as "discredited", superseded by the subjective theory of value, while historical materialism and its lofty ideals about changing human nature are held to be equally fallacious. His purported views on colonialism (and their Leninist children), while not entirely wrong, are held to be incomplete as they fail to include non-capitalist instances of these phenomena. Finally, his historical ideas about the 'inevitable' overthrow of class war and victory of socialism are seen as naive and deterministic, and, to a degree, ethnocentric.

However, as I will show, such crude caricatures have been around for over a century, and were often repudiated by Marx (and his collaborator, Friedrich Engels) themselves. In actuality, Marx's theories are generally coherent and illuminating, even if you disagree with them.

Peiria
The Many Straw Men Surrounding Marx
Unlearning Economics

Robert E. Prasch — The “Lessons” that Wall Street, Treasury, and the White House Need You to Believe Five Years After the Collapse of Lehman Brothers

1. No One Saw It Coming.

2. The Crisis was Almost Exclusively About Liquidity.

3. TARP was the Only “Responsible” Choice in 2008

New Economics Perspectives
The “Lessons” that Wall Street, Treasury, and the White House Need You to Believe Five Years After the Collapse of Lehman Brothers
Robert E. Prasch | Professor of Economics, Middlebury College

Ramanan — Jackson Hole Symposium Starts With The Money Multiplier

Robert Hallfrom Stanford University in the first talk titled The Natural Rate of Interest, Financial Crises and the Zero Lower Bound:

… Every economic principles book describes how, when banks collectively hold excess reserves, the banks expand the economy by lending them out. The process stops only when the demand for deposits rises to the point that the excess reserves become required reserves and banks are in equilibrium. That process remains at the heart of our explanation of the primary channel of expansionary monetary policy …

The Case for Concerted Action
Jackson Hole Symposium Starts With The Money Multiplier
Ramanan

Really.

John Carney — An outdated monetary policy model stirs fears of Fed policy

John Carney debunks the myths about reserves, money supply, bank lending, and inflation. Will will the people who need to hear it, like Rick Santelli and the Zero Hedgies, read it?

CNBC NetNet

An outdated monetary policy model stirs fears of Fed policy
John Carney | Senior Editor

Tschäff Reisberg — Best of Frank Newman's Freedom from National Debt

Some short excepts.

This Episode of Life
Best of Frank Newman's Freedom from National Debt
Tschäff Reisberg

Frank N. Newman, CEO of major banks in the U.S. and China, and former Deputy Secretary of the U.S. Treasury, is the author of Six Myths that Hold Back America: And What America Can Learn from the Growth of China's Economy and Freedom from National Debt.

Asad Zaman — Three Goals for Pedagogical Change

First Obstacle: Normative Positive Distinction

Second Obstacle: A-historical Methodology 

Third Obstacle: Free Markets generate best possible economic outcomes 

Summary: As discussed, there is a huge amount of work necessary to reform the economics curriculum to make it people friendly, instead of capital friendly. Three necessary initial steps have been outlined above. There are many other ways of proceeding, and the purpose of this blog is to initiate a discussion on how to make pedagogical changes for improved economic outcomes.

WEA Pedagogy Blog
Three Goals for Pedagogical Change
Asad Zaman

The assumptions, including methodological, make the neoliberal approach to economics as the basis of the market state propaganda for capital as the dominant factor with all other factors serving its efficiency, which only a market free of regulation can provide according to the myth.

Alexander Reed Kelly — Three Economic Myths Busted

As a share of national income, federal spending peaked during the Reagan administration; spending has increased only half as fast under President Obama as under President Bush; and declining revenues, not rising spending, accounts for the swelling federal deficit overseen by the Bush and Obama administrations.

Those three points, provided by University of Massachusetts-Amherst economics professor Gerald Friedman, run in direct contradiction to stories heard from conservatives and the economic fear mongers who speak to them from media and Congress. Namely, that Obama is a spendthrift and that spending is the cause of the government’s budget problems.

Truthdig
Three Economic Myths Busted
Alexander Reed Kelly

Stephen Reid — Mythbusters: “The private sector is more efficient than the public sector”

The myth

“The private sector is efficient and dynamic; public sector is costly and slow. The more we can get the private sector to run things the better.”

NEF — New Economics Foundation
Mythbusters: “The private sector is more efficient than the public sector”
Stephen Reid
 | Organiser, New Economy Organisers Network

Privatizing economic areas that are essentially monopolies or at best oligopolies does not increase efficiency or "save taxpayers money."

Lacking an actually competitive environment without exorbitant entry costs, the more efficient solution is more often government than private enterprise. Otherwise, monopoly rent is extracted and needless subsidies provided.

F. Marc Ruiz — Your Mind On Money: Modern Monetary Theory going mainstream?

Silly post that completely misunderstands MMT, but a nice comment by Scott Fullwiler setting the author straight.

NWI Times
Your Mind On Money: Modern Monetary Theory going mainstream?
F. Marc Ruiz
(h/t Tschäff Reisberg on FB)

Here is Scott's comment there:

stf18 - 22 hours ago

Hi Marc

A few corrections for you.

First, you write:

"The theory also stipulates that a central bank, like the Federal Reserve, can create new money to finance this spending without concern of currency devaluation (inflation) as long as the government conducts business (taxes and spending) in the currency it is creating."

This is incorrect. We have never said this can be done "without concern of currency devaluation (inflation)" and in fact we have always said these are the principle concerns, so we make the precise opposite point you attribute to us here. The point is that default and bond vigilantes are not the applicable concerns. Also, devaluation and inflation are not the same thing--the $US has depreciated 30% against the Euro since 2000 and inflation has not risen, for instance.

Second, you write:

"MT based policies will invariably lead to an economy completely awash in liquidity, whether productive or not, and excess liquidity invariably leads to financial bubbles. And bubbles scare me."

Again, MMT has never proposed leaving the economy "awash in liquidity" in this manner (I would argue here that your understanding of what liquidity is is rather deficient, but that's a different point for another day). We follow Abba Lerner here, who argued that bonds can be provided to replace reserves if it is desired that the public hold bonds rather than "money." The point, again, is that the decision of bonds vs. reserves is based on the macro consequences, not the need to "finance" govt deficits.

Third, another correction and a comment. You write:

"Policies founded in MMT also concern me because I think they tend to scare business owners and entrepreneurs operating in the real economy. Unlimited liquidity and spending may facilitate trading and speculation on Wall Street, but real business owners tend to get scared by government deficits and debt."

Again as above, MMT has never proposed either unlimited liquidity or spending. We are adamantly opposed to both. As for the comment, we would argue that "real business owners" care the most about sales (i.e., demand for their products) when making decisions about how many workers to employ and how much to invest in productive capacity. A government that uses fiscal policy to sustain spending at the macro level at or near current productive capacity should lead to less uncertainty among businesses than one that pursues, say, austerity in the face of false concerns over bond vigilantes. So, you've built a straw man here and knocked it down--MMT is completely opposed to policies that "facilitate trading and speculation on Wall Street."

Overall, I appreciate your interest in MMT and your willingness to discuss it on your blog, but your understanding of MMT at the current time is built on a number of fabrications/stereotypes rather than actual MMT literature.

Best,
Scott Fullwiler
neweconomicperspectives.org