Busting the Bankers’ Club
Econ4’s Jerry Epstein talks about his new book on “finance for the rest of us”:
How to fight toxic inequality
Econ4’s Jim Boyce interviewed on Truthout:
In the upper tier of the economic spectrum, wealth generates income, and income in turn generates more wealth. The rich make money even when they sleep. Their economic advantages are compounded by their political influence over the government. At the opposite end of the economic spectrum, the poor make money only when they work. Even then, they often don’t make much. Unless some kind of countervailing force is present, inequality tends to widen over time — an accumulation of advantages and disadvantages.
If the economy were a self-contained perpetual-motion machine, economics would be a dismal science indeed. But it is not…
Read more here.
A new spirit of questioning
Continuing its remarkable run of pieces pulling the comfortable rug out from under mainstream economics, Finance & Development has now published a think-piece by Nobel laureate Angus Deaton. Excerpts:
Like many others, I have recently found myself changing my mind, a discomfiting process for someone who has been a practicing economist for more than half a century….
- Power: Our emphasis on the virtues of free, competitive markets and exogenous technical change can distract us from the importance of power in setting prices and wages, in choosing the direction of technical change, and in influencing politics to change the rules of the game. Without an analysis of power, it is hard to understand inequality or much else in modern capitalism.
- Philosophy and ethics: In contrast to economists from Adam Smith and Karl Marx through John Maynard Keynes, Friedrich Hayek, and even Milton Friedman, we have largely stopped thinking about ethics and about what constitutes human well-being. We are technocrats who focus on efficiency. We get little training about the ends of economics, on the meaning of well-being—welfare economics has long since vanished from the curriculum—or on what philosophers say about equality. When pressed, we usually fall back on an income-based utilitarianism. We often equate well-being with money or consumption, missing much of what matters to people….
Read more here.
Economics’ original sin: the exclusion of power
Jayati Ghosh deconstructs the multiple failings of mainstream economics – again, remarkably, in the IMF’s Finance & Development:
Much of what is presented as received economic wisdom about how economies work and the implications of policies is at best misleading and at worst simply wrong. For decades now, a significant and powerful lobby within the discipline has peddled half-truths and even falsehoods on many critical issues—for example, how financial markets work and whether they can be “efficient” without regulation; the macroeconomic and distributive implications of fiscal policies; the impact of labor market and wage deregulation on employment and unemployment; how patterns of international trade and investment affect livelihoods and the possibility of economic diversification; how private investment responds to policy incentives such as tax breaks and subsidies and to fiscal deficits; how multinational investment and global value chains affect producers and consumers; the ecological damage wrought by patterns of production and consumption; whether tighter intellectual property rights are really necessary to promote invention and innovation; and so on.
Why does this happen? The original sin could be the exclusion of the concept of power from the discourse, which effectively reinforces existing power structures and imbalances. Underlying conditions are swept aside or covered up, such as the greater power of capital compared with workers; unsustainable exploitation of nature; differential treatment of workers through social labor market segmentation; the private abuse of market power and rent-seeking behavior; the use of political power to push private economic interests within and between nations; and the distributive impacts of fiscal and monetary policies. The deep and continuing concerns with GDP as a measure of progress are ignored; despite its many conceptual and methodological flaws, it remains the basic indicator, just because it’s there.
Read her piece here.
Beyond cookie-cutter economics
Dani Rodrik writes – believe it or not, this is in the IMF’s monthly Finance & Development – in a biting critique of free-market orthodoxy:
Economists who want to be relevant and useful must offer concrete solutions to the central problems of our time: speeding the climate transition, creating inclusive economies, promoting economic development in poorer nations. But they must avoid cookie-cutter Econ 101 solutions. Their discipline offers much more than rules of thumb. Economics can help only if it expands our collective imagination instead of reining it in.
Read his piece here.
Hard times in a ‘good’ economy – 2
The political fallout could be huge:
Nevada has the worst unemployment rate in the country, gas and grocery prices are still among the nation’s highest, and the cost of housing here has soared. President Biden’s policies are squarely to blame, Republicans argue, and former President Donald J. Trump will fix it if voters return him to the White House.
Nevada’s unemployment rate has been cut in half since Mr. Biden took office, gas prices have dropped by nearly $2 a gallon since mid-2022, and more than 200,000 jobs have already been created as the state is receiving $3.3 billion in infrastructure investments. Democrats here say that the economy is finally on the upswing after Mr. Trump and the coronavirus pandemic drove it into the ground, and that re-electing Mr. Biden is critical to keeping it that way.
Which of these disparate economic pictures resonates most strongly with voters could make a difference come November in the critical battleground state.
Read more here.
Hard times in a ‘good’ economy – 1
The first in a series of posts on why, despite the fact that the U.S. economy is doing well by the usual measures of GDP growth and employment, the reality looks very different to many Americans:
On paper, Mr. Arias presents as an example of an improving economy. He is earning more than during the worst of the pandemic. He has health insurance, and is taking medication for his diabetes.
But he is earning less than half what he did before the unraveling began.
“It’s still hard,” he said. “You go to the store and buy $100 worth of groceries and there’s nothing in the car.”
Read more here.
The hacking of US foreign policy
Jeff Sachs writes:
American foreign policy is not at all about the interests of the American people. It is about the interests of the Washington insiders, as they chase campaign contributions and lucrative jobs for themselves, staff, and family members. In short, US foreign policy has been hacked by big money.
As a result, the American people are losing big. The failed wars since 2000 have cost them around $5 trillion in direct outlays, or around $40,000 per household. Another $2 trillion or so will be spent in the coming decades on veterans’ care. Beyond the costs directly incurred by Americans, we should also recognize the horrendously high costs suffered abroad, in millions of lives lost and trillions of dollars of destruction to property and nature in the war zones.
Read his opinion piece here.
Should we teach neoclassical economics?
Reflecting on this question, Louis-Philippe Rochon and Sergio Rossi quote Keynes:
“The master-economist must possess a rare combination of gifts… He must be mathematician, historian, statesman, philosopher — in some degree. He must understand symbols and speak in words. He must contemplate the particular, in terms of the general, and touch abstract and concrete in the same flight of thought. He must study the present in the light of the past for the purposes of the future. No part of man’s nature or his institutions must be entirely outside his regard. He must be purposeful and disinterested in a simultaneous mood, as aloof and incorruptible as an artist, yet sometimes as near to earth as a politician.”
Read more here.
