Wrong is still wrong and should be disregarded

It is a public holiday in Australia today and I am not working a full day. But I have been collecting some items from the past five or so years which I am weaving into the text book that Randy Wray and I hope to have out in the coming year. When academics or others comment on public affairs it is clear that our commentary is to a certain extent time-dependent. The language we use, the topics we focus on and the conclusions we draw. So some things that are written sound quaint when we go back to them after some years. I hoard information and occasionally I access my databases to see who said what in some year and compare it to what might have happened in the interim and then what the same person might be saying in retrospect. It is an interesting exercise and when applied to my own profession reveals some amazingly nonsensical predictions or assessments. The global crisis has provided a major event to test many of the assessments made prior to the crisis. The most surprising thing is that the same sort of assessments made prior to the crisis that were demonstrated to be entirely false are still being made and still influencing policy design. But the most robust assessments have withstood the crisis and remain relevant today. I include the developments in Modern Monetary Theory (MMT) in this latter category. Mainstream macroeconomics was largely wrong before the crisis and is wrong now (for the same reasons) and should be disregarded.

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Saturday quiz – December 24, 2011 – answers and discussion

Here are the answers with discussion for yesterday’s special Santa-edition of the quiz. The information provided should help you work out why you missed a question or three! If you haven’t already done the Quiz from yesterday then have a go at it before you read the answers. I hope this helps you develop an understanding of Modern Monetary Theory (MMT) and its application to macroeconomic thinking. Comments as usual welcome, especially if I have made an error.

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Mainstream macroeconomics textbooks do not impart knowledge

I have spent most of today working on a Chapter for the upcoming macroeconomics textbook that I am writing with Randy Wray (UMKC). It is a difficult task getting the balance between the content and the pedagogy more or less correct. One has to be interesting but not simplify to the point of distraction. Moreover one has to seek to impart knowledge. Which then takes one down the epistemological path as to what constitutes knowledge. How much simplification is too much? How much abstract modelling is feasible? Questions like that. But an overriding objective is to ensure that students who are using the book receive an education which means they should expand their critical faculties based on an expansion of knowledge. One of the worst aspects of my profession is that the vast majority of textbooks that students are forced to learn from do not advance these objectives. Whatever else one might conclude about their presentation etc, they mostly can be reduced to being considered as propaganda instruments. Most of them tell outright lies about the way the monetary system operates. The current crisis and the unusual policy interventions (particularly those employed by the central banks) have brought these lies into stark relief. We can conclude that mainstream macroeconomics textbooks do not impart knowledge they are dogma.

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Saturday Quiz – December 17, 2011 – answers and discussion

Here are the answers with discussion for yesterday’s quiz. The information provided should help you work out why you missed a question or three! If you haven’t already done the Quiz from yesterday then have a go at it before you read the answers. I hope this helps you develop an understanding of Modern Monetary Theory (MMT) and its application to macroeconomic thinking. Comments as usual welcome, especially if I have made an error.

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Saturday Quiz – December 10, 2011 – answers and discussion

Here are the answers with discussion for yesterday’s quiz. The information provided should help you work out why you missed a question or three! If you haven’t already done the Quiz from yesterday then have a go at it before you read the answers. I hope this helps you develop an understanding of Modern Monetary Theory (MMT) and its application to macroeconomic thinking. Comments as usual welcome, especially if I have made an error.

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Saturday Quiz – December 3, 2011 – answers and discussion

Here are the answers with discussion for yesterday’s quiz. The information provided should help you work out why you missed a question or three! If you haven’t already done the Quiz from yesterday then have a go at it before you read the answers. I hope this helps you develop an understanding of Modern Monetary Theory (MMT) and its application to macroeconomic thinking. Comments as usual welcome, especially if I have made an error.

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Saturday Quiz – November 19, 2011 – answers and discussion

Here are the answers with discussion for yesterday’s quiz. The information provided should help you work out why you missed a question or three! If you haven’t already done the Quiz from yesterday then have a go at it before you read the answers. I hope this helps you develop an understanding of Modern Monetary Theory (MMT) and its application to macroeconomic thinking. Comments as usual welcome, especially if I have made an error.

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The ECB is a major reason the Euro crisis is deepening

I notice that a speech made yesterday (November 8, 2011) in Berlin – Managing macroprudential and monetary policy – a challenge for central banks – by the President of the Deutsche Bundesbank, Jens Weidmann has excited the conservatives and revved them back into hyperinflationary mode. The problem is that the content that excited them the most is the familiar mainstream textbook obsession with budget deficits and inflation (through the even more obsessed German-lens). That means it is buttressed with misinformation about how monetary operations that accompany deficits actually work. It tells me that the European Central Bank which is the only institution in Europe that has the capacity to end the crisis is in fact a major reason the crisis is deepening.

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It is a disagreement about facts not ideology

In the wake of the decision by students at Harvard University to boycott an introductory economics lecture conducted by textbook writer Greg Mankiw, I thought this New York Times article (November 5, 2011) – Wanted: Worldly Philosophers – was interesting. It provides a much more reasoned assessment of what the issues might be than the response presented in the Harvard Crimson (the student daily) – Stay in School (November 3, 2011). The latter was signed “The Crimson Staff” and a link took us to an outlined photo of a “male” and the filename was entitled – noface_131x131.jpg. So no-one was even game to own up to the viewpoint. The male photo also suggests some inherent bias. I agree with the Crimson – walkouts should not be about ideology. But they are justified if a lecturer is offering material that is patently false and attempting to hold it out as the way the economy operates. That is why I would encourage students to walk out of mainstream macroeconomics lectures right around the globe. It is a disagreement about facts not ideology.

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Saturday Quiz – October 15, 2011 – answers and discussion

Here are the answers with discussion for yesterday’s quiz. The information provided should help you work out why you missed a question or three! If you haven’t already done the Quiz from yesterday then have a go at it before you read the answers. I hope this helps you develop an understanding of Modern Monetary Theory (MMT) and its application to macroeconomic thinking. Comments as usual welcome, especially if I have made an error.

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Imagine that NSW was Ireland

Imagine that the state I live in NSW was for want of a better association Ireland. Imagine Victoria was Greece (a good association because Melbourne is the second largest Greek-speaking city in the world). Imagine Queensland was Spain (both enjoy considerable sun). Imagine South Australia was Portugal (both regions have world-renowned wine making industries). Imagine Tasmania is Italy (both are southern regions in the respective hemispheres). Western Australia can stay as WA although it will not be long before we can add another association (Belgium, France, Estonia?). Anyway, let’s imagine that NSW was Ireland for a moment.

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Saturday Quiz – October 8, 2011 – answers and discussion

Here are the answers with discussion for yesterday’s quiz. The information provided should help you work out why you missed a question or three! If you haven’t already done the Quiz from yesterday then have a go at it before you read the answers. I hope this helps you develop an understanding of Modern Monetary Theory (MMT) and its application to macroeconomic thinking. Comments as usual welcome, especially if I have made an error.

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Accelerating inflation has to be out there somewhere … in the dark or somewhere

Today I was trawling through old issues of the now-defunct The Public Interest quarterly today and unfortunately stumbled on a recent issue of its successor National Affairs (Number 9, Fall 2011 edition) which carried an article – Inflation and Debt – written by Chicago economist John H. Cochrane – a known free market/anti-government commentator. It was one of those articles where the analytical framework was taken from some textbook rather than being ground in the realities of the monetary system and all the evidence pointed away from the major conjecture but the conjecture was still asserted as an inevitability. The title reflects the sort of wan, desperate need to find inflation despite vast volumes of excess capacity and zero wage pressures. Accelerating inflation has to be out there somewhere … in the dark or somewhere.

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Saturday Quiz – September 10, 2011 – answers and discussion

Here are the answers with discussion for yesterday’s quiz. The information provided should help you work out why you missed a question or three! If you haven’t already done the Quiz from yesterday then have a go at it before you read the answers. I hope this helps you develop an understanding of Modern Monetary Theory (MMT) and its application to macroeconomic thinking. Comments as usual welcome, especially if I have made an error.

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It is easy to create jobs

The US President delivered his long-awaited speech outlining the proposed American Jobs Act today to a packed Congress. The room was full of self-serving, anti-intellectuals masquerading as the representatives of the people of America. Eventually, this sham will be clear to all and the “American people” will “demand action”. If they don’t then the neo-liberal domination of policy which has led to the crisis and the extended malaise will continue to impoverish them. Bold action was needed from the President at least to demonstrate leadership so that the democratic forces could start to pressure the T-pots. Unfortunately, the President doesn’t seem to understand that it is easy to create jobs. A government just has have the will to do so.

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When you’ve got friends like this … Part 6

Today I continue my theme “When you’ve got friends like this” which focuses on how limiting the so-called progressive policy input has become in the modern debate about deficits and public debt. Today is a continuation of that theme. The earlier blogs – When you’ve got friends like this – Part 0 – Part 1 – Part 2 – Part 3 – Part 4 and Part 5 – serve as background. The theme indicates that what goes for progressive argument these days is really a softer edged neo-liberalism. The main thing I find problematic about these “progressive agendas” is that they are based on faulty understandings of the way the monetary system operates and the opportunities that a sovereign government has to advance well-being. Progressives today seem to be falling for the myth that the financial markets are now the de facto governments of our nations and what they want they should get. It becomes a self-reinforcing perspective and will only deepen the malaise facing the world.

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Saturday Quiz – August 27, 2011 – answers and discussion

Here are the answers with discussion for yesterday’s quiz. The information provided should help you work out why you missed a question or three! If you haven’t already done the Quiz from yesterday then have a go at it before you read the answers. I hope this helps you develop an understanding of Modern Monetary Theory (MMT) and its application to macroeconomic thinking. Comments as usual welcome, especially if I have made an error.

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Saturday Quiz – August 20, 2011 – answers and discussion

Here are the answers with discussion for yesterday’s quiz. The information provided should help you work out why you missed a question or three! If you haven’t already done the Quiz from yesterday then have a go at it before you read the answers. I hope this helps you develop an understanding of Modern Monetary Theory (MMT) and its application to macroeconomic thinking. Comments as usual welcome, especially if I have made an error.

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Painstaking, dot-point summary – bond issuance doesn’t lower inflation risk

I will finish this week with a painstaking, dot-point summary of some key elements of Modern Monetary Theory (MMT) to show clearly why bond-issuance which might accompany a budget deficit doesn’t lower the inflation risk of the deficit spending – not now, not tomorrow, nor at some mythical “long-run” point in time. All the inflation risk is on the spending (aggregate demand) side. The monetary arrangements that might or might not accompany the spending decisions of government do not add or subtract from the inflation risk. Mainstream theory thinks they do. That theory is demonstrably false. I will also cover several related myths that seem to have cropped up over the last week – both in the international media and among the comments made on this blog. It seems that we need some baby steps. So with my fire-suit (always) on I hope you all enjoy it. Some of the critics might like to read this news item before they start.

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Paul, its time to update your textbook

Textbooks get out of date and need revision in the light of recent data or events. Some textbooks are exposed as being just plain wrong and should be re-written completely. Obviously authors in the latter category are reluctant to admit that their textbook is not an adequate description of the way – for example, the economy works – and so they not only resist updating their offering but they also defend it against all the evidence. Anyway, after reading Paul Krugman’s most recent attempt to come to grips with Modern Monetary Theory (MMT) I concluded that it was way past the date that he should be rewriting his macroeconomics textbook. Otherwise he is misleading the students who are forced to use it in their studies. So Paul, its time to update your textbook.

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