MMT

“Look for the Helpers” – Fred Rogers Has Something to Say to Laypersons and Students

Published by Anonymous (not verified) on Sat, 12/08/2017 - 7:49am in

Tags 

MMT

Most of us know Fred as Mr. Rogers from the children’s television program “Mr. Roger’s Neighborhood”. Now, you might find it strange or even a bit juvenile of myself to invoke Mr. Rogers as an opportunity to teach interested laypersons and students of MMT. But rest assured, in my view, it is neither strange nor[...]

The post “Look for the Helpers” – Fred Rogers Has Something to Say to Laypersons and Students appeared first on Ellis Winningham.

Non-Technical Review of the "10,000 Year Explosion".

Published by Anonymous (not verified) on Tue, 25/07/2017 - 5:56pm in

[A]
Nope. I didn't write it. I'm neither a qualified nor an impartial judge for Gregory Cochran and Henry Harpending's 2009 "The 10,000 Year Explosion".

That out of the way, I'll tell you what I did. I did something better: I searched the net for reviews to outsource the task. This is what I found.

Like most books, "The 10,000 Year Explosion" has had multiple reviews, some more technical, some less so, some favourable, others no so much, from the broader public and scholars.

Then I found this really thought-provoking gem. I consider it so for several reasons. Its author is one Emil O. W. Kirkegaard (unrelated to that Kierkegaard): he sounds like a normally intelligent and reasonably educated layman with a self-professed interest in science. Given that scholarly reviews commend the book for its non-technical language, appropriate to undergraduates, Kirkegaard's judgement suggests how the book could be received by its public.

Just as importantly, Kirkegaard is highly enthusiastic and his review leaves no room for doubt on that. I'll quote only the opening paragraph (do read the whole thing). Without further ado (emphasis mine):

"Review of The 10000 Year Explosion (Gregory Cochran and Henry Harpending)

"November 7, 2012 by Emil O. W. Kirkegaard

"This is a nontechnical overall introduction to how human evolution has happened. it mentions a lot of stuff i didnt know. i wud have liked more references. the book is openly race realist, and i was waiting for it to mention that the reason Africa is so backwards is that africans are so dumb, but it was only hinted at. instead, the authors focused the last chapter on a higher than average group, the jews. this is probably a smart move. once it has been acknowledged that the asians and jews are smarter than whites, one cannot shrug off other racial differences as being due to white racism, white supremacy, biased IQ tests, and so on."

How much of that is only a reflection of a non-professional reviewer's previous biases? Co-author Henry Harpending's profile at the Southern Poverty Law Center suggests Kirkegaard did not distort the book's basic message much, if at all.

----------
Social democracy has always been little more than a conclusion in search of an argument. That is not peculiar to social democracy. With social democrats, however, this became an art form.

That pre-ordained conclusion is twofold: (1) capitalism must be saved come what may, and (2) they are capitalism's saviours.

To uphold that conclusion is costly. New challenges pop up every day. In an emergency, any argument supporting The Conclusion will have to do. That explains social democrats' attraction to Keynes and to the less mainstream versions of his ideas. That also explains their often hard to disguise adoption of extreme right-wing ideas: ready-made arguments galore.

Fear not, a long and boring argument is not in this post. There is, I think, a more efficient argument. A picture is worth a thousand words:

(source)
In this particular case, however, the label "post Keynesian" involves not only a shady social democratic blogger posing as an academic while endorsing kooky thinkers with kooky ideas and links to doubtful groups, but real academics with a professional reputation to maintain who might think those endorsements aren't such a good idea. Like Caesar's wife, public intellectuals must be not only chaste, but beyond suspicion.

You see the problem there, don't you?

----------
Tyler Cowen reviews "The 10,000 Year Explosion" (January 22, 2009).

Steven Pinker's guarded but otherwise sympathetic comment on their earlier (and to Pinker evidently flattering) 2005 paper "Natural History of Ashkenazi Intelligence", also reported in their book. It's interesting to observe Pinker attempting to remain impartial and detached. To his credit, he did try. Did he succeed? You be the judge.

Image Credits:
[A] "The BADGER explosion on April 18, 1953, as part of Operation Upshot-Knothole, at the Nevada Test Site". Author: National Nuclear Security Administration / Nevada Site Office. Source: Wikimedia. Work in the public domain.

Beyond the traditional monetary circuit

Published by Anonymous (not verified) on Wed, 19/07/2017 - 3:46am in

Tags 

MMT

Slow posting will continue the rest of the Summer. Here a paper by Sergio Cesaratto that might be of interest. From the abstract:

The paper is a contribution to a long-run theory of effective demand with elements from monetary circuit theory, Modern Monetary Theory and endogenous finance analysis. Some shortcomings of the still influential neo-Kaleckian growth model and monetary circuit theory are underlined, and the Sraffian supermultiplier is indicated as the most promising heterodox approach to growth and instability in capitalism. The Sraffian supermultiplier allows full consideration of the autonomous components of aggregate demand as the ultimate sources of growth and instability in modern capitalism. Following Steindl, capital gains are included among these components. Autonomous demand and investment are typically fed by endogenous finance. The paper articulates the relation between autonomous demand and investment on one hand, and endogenous finance on the other, in the light of Keynes’s distinction between initial and final finance.

Read rest here.

A Memo From MMT’s Legal Department

Published by Anonymous (not verified) on Sat, 15/07/2017 - 9:10pm in

A Memo From MMT’s Legal Department

By Rohan Grey and Raúl Carrillo Orthodox economists are often inclined to think of law as an external force that ‘intervenes’ to regulate otherwise naturally occurring economic phenomena. In contrast, Modern Monetary Theory and its antecedent intellectual traditions have long … Continue reading →

A Memo From MMT’s Legal Department


'Straya: Basically, she's rooted mate

Published by Matthew Davidson on Thu, 06/07/2017 - 10:58am in

Charts! Nobody asked for them, but I have them anyway! Over the last few years the Bank for International Settlements have been publishing a fab set of statistics that are not usually brought to bear in the tea leaf reading of mainstream economists. This is a shame, as they are exactly the sort of statistics which would indicate the risk of imminent financial crisis. Last month the BIS updated the data to the end of (calendar year) 2016. Here's an illustration (courtesy of LibreOffice) of where Australia is, relative to some comparable and/or interesting countries (click to embiggen):

As the BIS explains, the Debt Service Ratio (DSR):

"reflects the share of income used to service debt and has been found to provide important information about financial-real interactions. For one, the DSR is a reliable early warning indicator for systemic banking crises. Furthermore, a high DSR has a strong negative impact on consumption and investment."

So as a measure of Australia's ability to pay at least the interest on our private sector debts, if not pay down the principal, you might think this is not a bad result. We clearly substantially delevered after the GFC, thanks in large part to the Rudd stimulus pouring public money into the private sector, then levered up a bit since, but we've ended up between Canada and Sweden, which is a pretty congenial neighbourhood. But this is total private sector debt; what happens when we take business out of the equation and just look at households (and non-profit institutions serving households - NPISHs)?

Woah! Suddenly we're in a league of our own. Canada's flatlined here since the GFC, meaning the subsequent increase in their total private debt burden has largely come from investment in business capital. In such a case, provided this investment is directed at increasing productive capacity, and is accompanied by public sector spending to proportionally increase demand, this is sustainable debt. Australia has been doing the opposite.

Here's another way of looking at the coming Australian debt crisis, private sector credit to GDP:

This ratio will rise whether the level of debt rises, GDP falls, or both, so it's another good indicator of unsustainable debt levels. The current total level (in blue) of over 200% is at about the ratio Japan was at when its real estate bubble burst in the early 1990s. Breaking this down again into household and corporate sectors, we see that over the mid-1990s Australia switched the majority of its private sector borrowing from business investment to sustaining households. What happened in the mid-90s? Data here from the OECD:

 

From the mid-1990s to 2007 Australia experienced the celebrated run of Howard/Costello government fiscal (or "budget") surpluses. We all know, or should know, thanks to Godley's sectoral balances framework, what happens when the public sector runs a surplus: the private sector must run a corresponding deficit, equal to the last penny. There is nowhere else, net of private sector bank credit creation (which zeroes out because every financial asset created in the private sector has a corresponding private sector liability), for money to come from. When the government taxes more than it spends, it is withdrawing money from the private sector. Mainstream economics calls this "sustainable", and "sound finance", meaning of course it is nothing of the sort.

How did the private sector, and the household sector in particular, continue to spend from that point onward, behaving as though losing money (not to mention public infrastructure and services) down the fiscal plughole was not merely benign but quite wonderful? It chose to Nimble it and move on, going on a massive credit binge. The banks were happy to provide all the credit demanded, because the bulk of the lending was ulitimately secured by residential real estate prices, and these were clearly going to keep rising without limit (thank heavens, because if they were to fall like they did in the US in 2007…).

The Global Financial Crisis put a dent in the demand for credit, but as subsequent government fiscal policy has tightened, under the rubric of "budget repair", it is rising again. We are already in a state of debt deflation: Australia's household debt service ratio (as above), at between 15 and 20 percent of household income for over a decade, has dampened domestic demand, leading to rising unemployment and underemployment, leading to more easy credit as a quick fix for income shortfalls ("debtfare"). More of what income remains is redirected to debt servicing rather than consumption, and so we spiral downwards, our incomes purchasing less and less with each turn. [I will post more about some of the social and microeconomic consequences in (over-)due course.]

The Australian government needs to spend much, much more - and quickly. Modern Monetary Theory, drawing on an understanding of the nature of money that goes back a century, shows us that government spending (contrary to conventional wisdom) is not revenue-constrained; a currency-issuing government can always buy anything available for sale in the currency it issues. There is nothing about our collective "budget" that needs repairing before we can do so. The same data from the OECD shows that most currency-issuing governments with advanced industrial economies run fiscal deficits almost all the time:

In fact, under all but exceptional conditions, government fiscal surpluses (i.e. private sector fiscal deficits) are a recipe for recession or depression. The greater the surplus, the greater the subsequent government spending required to lift the private sector out of crisis, as can be seen above in the wild swings in neoliberal governments' fiscal position from the mid-90s on. The fiscal balance over any given period is nothing more than a measurement of the flow of public investment into the private sector. What guarantees meaningful sustainability is a government's effective use of functional finance to manage the real (as opposed to financial) economy in pursuit of public policy objectives. Refusing to mobilise idle resources (including, crucially, labour) for needed public goods and services is not "sound finance"; it is the very definition of economic mismanagement, as was once widely recognised:

"It is true that war-time full employment has been accompanied by efforts and sacrifices and a curtailment of individual liberties which only the supreme emergency of war could justify; but it has shown up the wastes of unemployment in pre-war years, and it has taught us valuable lessons which we can apply to the problems of peace-time, when full employment must be achieved in ways consistent with a free society.

"In peace-time the responsibility of Commonwealth and State Governments is to provide the general framework of a full employment economy, within which the operations of individuals and businesses can be carried on.

"Improved nutrition, rural amenities and social services, more houses, factories and other capital equipment and higher standards of living generally are objectives on which we can all agree. Governments can promote the achievement of these objectives to the limit set by available resources.

"The policy outlined in this paper is that governments should accept the responsibility for stimulating spending on goods and services to the extent necessary to sustain full employment. To prevent the waste of resources which results from [un]employment is the first and greatest step to higher living standards."

Australian Government, 1945, White Paper on Full Employment

We chose to forget all this from the 1980s onward. We can choose to remember it at any time.

Capitalism 2.0? Yeah, Right.

Published by Anonymous (not verified) on Wed, 31/05/2017 - 7:19pm in

As national anthems go, "Advance Australia Fair" isn't in the same league as, say, "La Marsellaise" or "The Star-Spangled Banner". It's not so much that people hate it, but that I don't know anyone who really likes it. That's why every now and again someone wants it changed.

The big debate starts. There are three parties: (1) It's not broken, don't fix it. (2) C'mon! Let's adopt a new anthem (me, I like "Waltzing Matilda" better); (3) Let's be realistic. We may not like it, but let's keep it anyway. To keep everybody happy, let's change its lyrics.

People argue and argue, until they tire and forget all about it.

That reminds me of Daniel Little's post "Capitalism 2.0?" (June 17, 2016). 

----------
Until 2008 the consensus among the good and wise was that capitalism wasn't broken. Since the collapse of the housing bubble, however, it's been impossible to say that in public.

Little didn't try. Instead, he offers a list of nine issues, which I summarise in two broad categories: inequality (income, wealth, opportunity, power, and influence), and several structural inabilities. (He doesn't mention economic instability or under/unemployment, but that may be just a simple oversight).

To address those problems, particularly income inequality, Little proposes some institutional changes to our current political economy, such that a revised capitalism is better at satisfying the demands of justice and human well-being. He doesn't much like this capitalism, so let's change the lyrics, but not the tune: Capitalism 2.0.

One of Little's proposals is the Speenhamland system, sorry universal basic income. How would it be funded? Presumably, thus: "All of these ideas about a more just capitalism require resources; and those resources can only come from public finance, or taxation".

In one single stroke one's expectations were downgraded, from Capitalism 2.0 to 19th century Capitalism beta release. (See here, here; and here and here)

----------
The problem with Little's UBI proposal is that he is a philosopher of social sciences: if he can't imagine drawbacks, then there aren't drawbacks. Capitalists will accept the UBI and won't take undue advantage of it because. He, in other words, assumes away class conflict: it's an "outmoded" Marxist notion, as outmoded as "Waltzing Matilda".

Further, for Little income inequality is an accident, not a necessary consequence of deliberate stabilisation policies. But, don't worry, I won't argue otherwise based on "invalid" Marxism; after all, there are non-Marxist economists who can do it for me:

"When the Fed perceives inflation as being too great a problem, it raises interest rates to limit employment growth. If it raises interest rates far enough, then it can actually cause the economy to start losing jobs, thereby raising the unemployment rate. A higher unemployment rate puts downward pressure on wages. If wages start to drop, then there is less inflationary pressure in the economy and the Fed has accomplished its goal, although it comes at the cost of higher unemployment and lower wages.

"This is not the whole story. The Fed's interest rate hikes do not affect all workers evenly.

"When the Fed raises interest rates to slow the economy and increase unemployment, the people who disproportionately lose their jobs are the more disadvantaged groups in society, specifically workers with less education and racial and ethnic minorities. Firms do not lay off their CEOs and top managers when business slows, they lay off assembly line workers, custodians, sales clerks and other workers viewed as disposable. This means workers without college degrees are far more likely to end up unemployed when the Fed raises rates than workers with college or advanced degrees. Hispanic and African American workers can also expect to take a hit when the Fed cracks down." Dean Baker, "The Conservative Nanny State" (Kindle Locations 149-159).

Announcing the First International Conference on Modern Monetary Theory 

Published by Anonymous (not verified) on Sat, 20/05/2017 - 8:02am in

Announcing the First International Conference on Modern Monetary Theory 

Economics for a New Progressive Era University of Missouri-Kansas City September 21–24, 2017 Conference site: mmtconference.org With Support From Robert Skidelsky and Morton Sosland UMKC Economics Club Journal of Post Keynesian Economics Featured Speakers Include Warren Mosler, Robert Skidelsky, Jamie Galbraith, … Continue reading →

Announcing the First International Conference on Modern Monetary Theory 


Taxes and Turmoil in Lebanese Politics

Published by Anonymous (not verified) on Mon, 20/03/2017 - 2:54am in

A series of protests have begun to rock Lebanon as of mid-March 2017. Protesters are taking to the streets to denounce the Lebanese government’s plan to introduce or increase 22 new taxes on citizens, most notably increasing the VAT tax from 10-11%, as well as various other taxes on food, drink, public notary services, and other categories that stand to impact daily purchases in the country. These measures will further reduce spending power of average Lebanese citizens during a time period when poverty has already risen by 66%(!) in the past 6 years, when around 30% of the population lives below the poverty line, when 9% of the Lebanese population lives on less than $1 per day, and when Syrian refugees continue to pour into Lebanon by the millions, further exacerbating Lebanese economic woes. Furthermore, Lebanon is the 3rd most unequal country on this planet in terms of wealth inequality, and this inequality implies that these new tax measures will primarily impact those who are already struggling to survive, let alone maintain a decent standard of living. In fact, these newly proposed taxes will be what economists call a “regressive tax,” since they will consume a bigger portion of the poor’s income compared to the rich.

Illustration: Heske van Doornen

The biggest complaint, rightfully so, of the protesters is that Lebanese politicians, with their entrenched system of confessionalism and nepotism, have stolen from public funds to aggrandize their own wealth, and have left the average Lebanese citizen struggling to survive off of the crumbs tossed to them. This rampant corruption, culture of excess, and paralysis of state oversight has contributed to a debt-to-GDP ratio of 140%, one of the highest in the world. Despite such mounting debt, the Lebanese government has little show for it in terms of providing services to the public.

For example, the Lebanese government cuts off electricity for several hours a day throughout the country— sometimes as much as 40-50% of the day, and claims that there are simply no public funds available to provide electricity for a full 24 hours. This is where the new tax proposal comes in; the government maintains that their hands are simply tied, and that these painful measures are needed to make a dent in paying off the public debt. However, when we examine the issue of public debt from the perspective of Modern Money Theory (MMT), we find that this idea is based on ignorance of how taxes and spending work at the public level.

MMT asserts that any sovereign government is capable of printing its own money into existence to pay for anything that it wishes to, from public healthcare to defense to infrastructure, or any other government-funded project. Because the government can create money out of nothing by simply printing it, or electronically transferring it to bank accounts, this by definition removes the necessity to collect taxes as a form of revenue to pay for things. The Lebanese government, for example, could have enough money to pay for electricity 24 hours a day if it simply created money to pay for it by electronically transferring the sum to the bank accounts to pay electricity companies. All of this can be done without ensuring that there is an equal amount of taxes flowing into the government, because the government does not use these taxes to pay for things. It pays for things by creating money out of nothing.

With this understanding, we can then reverse the causal relationship between taxes and public spending: taxes do not fund public spending. Rather, public spending creates the money by which citizens can conduct economic activity, including paying taxes. This is not an example of the classic “chicken vs. egg” conundrum. In this case, we can definitely say which side came first, for logical reasons. Citizens would simply not be able to pay taxes unless they had the money to pay for them in the first place, which in turn must be created by the government and released into the economy through public spending.

This implies that the government’s debt and deficit, as a matter of principle, does not matter to the public sector in the same way that a debt would matter to a household or firm. Government can always print more money in order to pay for things, including interest on debts. If a household tried to create its own play money and offer it to the credit card company at the end of the month, it would be rightfully ridiculed. However, because the government’s currency is universally recognized as bestowing the holder with value, it is accepted anywhere, and for “all debts, public and private.” In effect, it is the sovereignty of the state, and the credibility of their power to meet contractual financial obligations, that gives the money its value.

So, what then is the purpose of taxes, if they are not used to fund government spending? Primarily, taxes are a way of the government asserting sovereignty over its citizens. By denominating the taxes levied on citizens in the currency that they print, the government ensures that there will always be a widespread demand for its currency that people need to obtain to pay taxes. This ability to create money out of nothing and to generate widespread demand for it is a powerful component of state sovereignty, and, as other articles attest, the modern state as we know it would not even exist today without this power.

Taxes also serve another important economic function: they limit how much money a person can spend (purchasing power). When the government is worried about inflation (rising prices throughout society) brought about by rapid economic growth, for example, increasing taxes would be one way of decreasing spending in the entire economy, thus counteracting the threat of inflation. However, what does this mean for a country like Lebanon with a sizable percentage of its population living under the poverty line, and where the problem is too little spending and economic growth, not too much?     

If Lebanese citizens have to pay increasingly higher taxes on daily necessities,  their purchasing power will shrink. As their purchasing power and consumption declines, businesses will suffer. Investment and employment rates would likely decline, and poverty would increase. This increase in poverty would translate into citizens having even less money to contribute to taxes, since they would be consuming less and would have a smaller income. In such a situation, instead of these new tax measures decreasing the government debt, it is conceivable that they would actually do the exact opposite by increasing it, due to a decline in consumption and income, which are two of the biggest sources of taxes for the Lebanese government.  

To conclude, it is time to admit the problems facing Lebanon are much more complex and fundamental than any new tax proposals would ever fix. Taxes do not create revenue for government spending, and in fact, new taxes in the country would even threaten to propel the already unacceptably high poverty line in the country even higher, as incomes and purchasing power are eroded. There is no reason to believe that the government debt even needs to be paid off in the first place, since government can never run out of money to pay for things, including debt servicing payments. Rather, the most fundamental problem in Lebanon is a political system characterized by diversionary religious sectarianism, and a culture of corruption and disdain for the masses that have allowed the Lebanese politicians to usurp public funds for personal gain, all while keeping a stranglehold on the people’s aspirations for freedom and dignity for decades.

Written by Stephanie Attar
Stephanie is part of the third group of students studying at the Levy Institute. Prior to coming to the Levy, she completed a masters degree in political science, with a concentration in political philosophy. Her research always incorporates Marxian dialectical materialism in order to analyze the interconnected nature between the state and the economy. She is also interested in the Arab world, global inequalities engendered by capitalism-imperialism, and radical solutions to advance the interests of humanity.

The post Taxes and Turmoil in Lebanese Politics appeared first on The Minskys.

MINSKY AND MODERN MONEY THEORY: Was Minsky a “forefather”?

Published by Anonymous (not verified) on Sat, 25/02/2017 - 1:03pm in

MINSKY AND MODERN MONEY THEORY: Was Minsky a “forefather”?

By L. Randall Wray A few weeks ago, a video of a lecture that Hyman Minsky gave at Westminster College on Oct 30, 1991 was made available. Although the Levy Institute has some audio of Minsky, this is the only video … Continue reading →

MINSKY AND MODERN MONEY THEORY: Was Minsky a “forefather”?


L. Randall Wray on MMT and Positive Money

Published by Anonymous (not verified) on Fri, 17/02/2017 - 5:19am in

Pages