There was an Bloomberg Op Ed today (November 22, 2011) – Protesters Ignore American Love of Entrepreneurs – by Harvard economist Edward Glaeser. It is an attack on the OWS movement and an appeal to how great American entrepreneurship is. The ideas resonate with some recent work I have been doing on the impacts of national income redistribution under neo-liberalism on aggregate demand and the role of the financial sector. The link is that entrepreneurship in the US is not what it was and it is an illusion to think that the past two decades or so bears much similarity to the heyday of US entrepreneurship, whatever your view of the latter is. The entrepreneurs are disappearing in American and being replaced by rapacious wealth shufflers who add nothing to productive capacity or general prosperity.

I did an interview in August with the Harvard International Review (published by Harvard University). It was finally published yesterday (October 16, 2011) – Debt, Deficits, and Modern Monetary Theory. I consider the principles that are outlined in that interview to provide a sound organising framework for progressive movements aiming to make changes to the current failed systems. I think Modern Monetary Theory (MMT) does provide insights to the general population that are not only obscured by the mainstream media but which if they are broadly understand will empower the 99% to demand governments redefine their roles with respect to the non-government sector. Part of that re-negotiation has to be to reduce unemployment and redistribute national income more equally. We will also be better placed to have a sensible discussion about the human footprint on the planet. The three goals – full employment, reduced inequality and environmental harmony – should be central to the current civic protests (such as OWS). But we also have understand that government has to be involved in the pursuit and maintenance of those goals. The problem is not government but the politicians we elect and the coalition between them and the corporate elites. An understanding of MMT can energise the progressive fight back.

Sometimes, not often, I read some economic analysis that is sound. In the constant barrage of mainstream economics telling us that budget deficits are causing the crisis to linger; that interest rates are about to rise sharply because there is too much public debt; that inflation is about to go hyper because bank reserves have risen; that taxes will soon sky-rocket to pay back the debt; and all the rest of the lies that students are forced by lecturers around the world to rote learn, to find a well-reasoned piece of analysis is very refreshing. My attack dog propensities subside and I am able to think about what is being written – seeing where I agree and disagree and even learn some things. Such was my experience this morning when I read a new Report from the US-based The Way Forward Moving From the Post-Bubble, Post-Bust Economy to Renewed Growth and Competitiveness. It will not be a case of common sense prevailing because the forces against this type of clear thinking are many and powerful. But it is evidence that views that are not incompatible with Modern Monetary Theory (MMT) are being developed and thrown into the public debate. In this case, the authors also have some public profile. The ideas in this Report would provide a Way Forward.

I have been following the Occupy Wall Street developments with interest because ultimately I consider the only reasonable way entrenched elites become unseated is if there is mass action by citizens. I do not think military coups are a very sound way to lay the groundwork for grassroots democracy. I also like the idea of a “leaderless resistance movement with people of many colors, genders and political persuasions” although politics doesn’t take long to creep in and steer movements like these in particular ways. In the last day or so I have become aware that there is some notion among the “occupiers” that the evil they are opposing is fiat currency rather than corporate power particularly that of the financial monoliths. While power does lie in the monetary system the only way of ensuring that this power is democratised is if the currency-issuing entity is freely elected and accountable to us. That is a necessary but not sufficient condition for the advancement of economic development. My input to the OWS movement is by understanding Modern Monetary Theory (MMT) we can appreciate how governments are necessary for the development process and that we have to concentrate on making the fiat currency system work for us and prevent it from being hi-jacked by the so-called 1 per cent.

George Osborne, Britain’s vandalising exchequer gave his Conservative Party Conference speech yesterday in Manchester. The Transcript is courtesy of the New Statesman. Like everyone I scanned the speech for signs that the British Government was prepared to suspend its ideological arrogance for the sake of the economy, which the people had entrusted them to revive. No such luck. Instead the nation was presented with a self-satisfied denial of the basic problem that is sending the British economy into reverse gear after showing some signs of recovery about the time the national government changed hands. The problem for Britain is that the Government has outlined the wrong problem and proposed the wrong solution.

On Monday, September 26, 2011 the British Shadow Chancellor gave a speech (his first major speech in that role) to the Labour Party Conference in Liverpool. The Full Transcript of the Speech is courtesy of the New Statesman. Balls ended his speech by saying “There is a better way” and I agree – the current macroeconomic policy settings in the UK are destructive and will be regretted. The problem is that Balls’ path to prosperity is not that better way which means the British people are in the same boat as a lot of electorates – caught between the devil and the deep blue sea. Playing Ball is not a better way.

The news today is not good and you might want to go to the end and get the music segment rolling before coming back to the start to read the rest. The newly appointment of Alan Krueger to the Chair of the US President’s Council of Economic Advisors (CEA) has been widely applauded. Somehow the press think that he might actually change the course of policy and provide for a resurgence of employment. If you examine his early academic work you realise he has a concern for low-pay workers that many mainstream economists eschew. But he hasn’t published anything substantial in macroeconomics or banking. His recent macroeconomics commentary is not encouraging. My conclusion is that the new ew CEA head falls well short of the (macro) mark.

Everywhere I look I find examples of politicians and leading lights making macroeconomic statements without understanding macroeconomics. Given that these statements have policy implications that impact on real people making such erroneous statements – no matter how well-intentioned one is – is a dangerous thing that we should avoid. Imagine if I suddenly started to make claims about the strength of bridges such that they would fall down if my advice was taken. There would be a law against that. One notable economist apparently thinks that macroeconomics is not “regular economics” – but rather some far-fetched misplaced set of ideas that would be better forgotten. My view is different. A correctly specified macroeconomics provides a safeguard against falling into logical traps – such as the fallacy of composition. The so-called “regular economics” is a fantasy world where the angels on the pinheads are assumed away into one representative angel who knows all and never makes a mistake (on average). If you want to understand how mass unemployment arises and how it is solved then the mainstream version of “regular economics” will leave you in the dark.

I know it is fashionable these days, particularly on the left to claim that class is dead – that its not about class any more – that left-right is dead – etc. But there was an interesting Bloomberg article (August 29, 2011) – Give Karl Marx a Chance to Save the World Economy – by one George Magnus, who is listed as a senior economic adviser at UBS Investment Bank. Confused? Why would a banker invoke the thoughts of the long-dead and usually vilified (by bankers) philosopher? For me it is always a normal part of thinking to go back to Marx because his dissection of capitalism – the sources of profits and the importance of seeing beyond the superficial exchange relations and thus understanding class relations embedded in production – has not, in my view, been bettered. And now a banker is suggesting that need to read Karl Marx.

Paul Krugman (August 20, 2011) was bemoaning the loss of intellectual values in the current debate when he referred to this Wall Street Journal article (August 19, 2011) – Why Americans Hate Economics. On face value I concluded that the WSJ had stumbled onto something – that the mainstream economics profession was not worth its salt. I was wrong though. The WSJ author was making a case that we should return to the economics that dominated the world prior to the Great Depression. The problem is that it is this way of thinking that represents the dominant paradigm today. It is the paradigm which has caused all the problems. It is this mainstream paradigm that people hate. The WSJ author is very confused. But then Paul Krugman’s response is hardly meritorious. So this is why the World hates economics – by which we mean mainstream New Keynesian macroeconomics.

There has been a lot of “opinion” expressed over the last few days about the causes of the British riots. If I had a meter to assess the ideological biases given breath in the press over this issue to date it would be swinging out there in the right-wing of opinion – “cultural problem”, “lawless lazy youth fed by the welfare state”, “criminality”, “intolerable monsters” all words I have read or heard in the media recently. Anyway who has my view is labelled a “left-wing cynic” who want to “makes excuses for thugs”. Opinion is after all just that so it is always of benefit to temper it with research evidence. Anyway, the short conclusion – supported by the research evidence – is that I blame the British government for the riots.

I am travelling today and so have to steal time to write this blog between other commitments. Later this week I am presenting a paper at a workshop on stock-flow consistent macroeconomics and I was thinking over the weekend just gone what I would do with the time I have for the presentation (1 hour). I started putting together a database of IMF forecasts out to 2016 for various nations and simulating the implications for the sectoral balances. Then I thought I would discuss the internal inconsistencies of those forecasts from a stock-flow perspective and the implications of those inconsistencies. I will write a blog later in the week on that once I have finalised the presentation. But the preliminary thinking led to today’s blog. In policy you have to wish for the possible.