The Weekend Quiz – April 30-May 1, 2022 – answers and discussion

Here are the answers with discussion for this Weekend’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 year Australian progressives abandoned the national commitment to full employment

At present, the unemployment rate in Australia is 4.2 per cent and falling. If the rate of new immigrants remains low for a while as our external borders open, then it is likely the unemployment rate will fall into the 3 per cent range soon. What people are learning is that the claims made by mainstream economists that full employment was anything between 5 and 8 per cent (at various times to suit their arguments) was a lie. It just suited their ideological agenda and flawed theoretical framework to maintain that narrative. Of course, underemployment is still very high, which means that even if the unemployment rate falls further, we are still a way from being at full employment. But with prices accelerating at present, we are seeing calls for government to pursue an austerity fiscal approach, which would prevent the unemployment rate falling further. We have been here before. Today, I document a major turning point in Australian politics, when the Labor government became the first to abandon the national government’s commitment to full employment, a policy approach that had defined the post Second World War period of prosperity. So … back to 1974 we go.

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Bottom up reform in the EMU requires the abandonment of the Treaties

Regular readers will know that I have written a lot about the topic of European integration. My 2015 book – Eurozone Dystopia: Groupthink and Denial on a Grand Scale (published May 2015) – was a detailed study of the evolution of the Economic and Monetary Union (EMU) from the origins of the ‘European Project’, as peace came in the late 1940s. I have argued that the creation of the EMU, after several failed attempts in the 1960s and 1970s, was only possible because of the emergence of Monetarism in the academy and its related socio-political manifestations which we call, generally, neoliberalism or market liberalism. If France had not succumbed to the neoliberal myths and believed it could dominate the currency union with a ‘franc fort’ then its traditional rivalry with Germany would have continued to prevent the adoption of the common currency. What I have been arguing since the ECB introduced the Securities Market Program (in May 2010) is that despite the success by the EMU architects (Delors and his gang) in embedding neoliberal principles into the legal structure of the European Union and its institutions the reality has overtaken them and a dysfunctional dystopia is only maintained by the ECB and other institutions defying the ‘rules’ established. We are now starting to see other researchers take up that angle, which is progress.

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The Weekend Quiz – December 25-26, 2021 – answers and discussion

Here are the answers with discussion for this Weekend’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 Weekend Quiz – November 27-28, 2021 – answers and discussion

Here are the answers with discussion for this Weekend’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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Poverty is about lack of opportunity not individual characteristics

When I was a postgraduate student at Monash University in Melbourne, I had many debates with a senior academic who would become a co-author early in my academic career, about the relative importance of choice and constraint. In the standard mainstream choice-theoretic framework, people are conceived as maximising satisfaction through the choices they make subject to the opportunity set they face (the constraints). This simplistic version of human decision-making dominates mainstream economics and leads to nonsensical conclusions such that unemployment is a voluntary state where people are choosing leisure (a good) over work (bad) to maximise their well-being because the income coming from work (a good) is not sufficient on an hourly basis to offset the disutility that work engenders. That sort of thinking permeates the discipline. My former colleague kept saying that people make choices and you cannot deny that. The discussions were in relation to poverty incidence. My position was that it is trivial to say people make choices. We do, every day, but to understand complex phenomena such as poverty, it is better to focus on the constraints. That focus is likely to be more revealing. A person can be making choices but if their opportunity set is very narrow and any choice dooms that person to poverty then it doesn’t make much sense to dwell on the ‘free’ choice angle. Structuralists also agree with my emphasis here. Earlier this year (February 8, 2021), some academics associated with MIT in the US published a working paper – Why do people stay poor – and its results are revealing.

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The Weekend Quiz – November 20-21, 2021 – answers and discussion

Here are the answers with discussion for this Weekend’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 Weekend Quiz – November 6-7, 2021 – answers and discussion

Here are the answers with discussion for this Weekend’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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(Modern) Marx and MMT – Part 2

This is Part 2 of my analysis of the way that fundamental ideas in Modern Monetary Theory (MMT) are totally consistent with a reasonable interpretation of Marx’s work. The motivation to clarify these issues came after I spoke at an event last weekend in the UK and shared a panel with a critic who claimed that Marx’s work established that MMT is wrong to assume that unemployment is a monetary phenomenon (insufficient spending) and that government spending can do anything about it. The claim was based on a view that Marx thought that capitalist firms have some unique logic that if they decide not to produce no amount of sales orders will induce them to expand production even if they have massive excess capacity (‘machines lying idle’) and a huge pool of idle labour to draw upon. No reasonable reading of Marx’s work would lead to that conclusion. In this part, we will consider what Marx thought about crisis and some later developments of his reproduction schemes, which make it clear that effective demand drives capitalist output, which conditions their employment decisions.

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The dying embers of New Keynesian reasoning

Lawrence Summers is a New Keynesian economist. That means something. While there are nuances that exist between members of that school of thought, mostly to do with policy sensitivities and speeds of adjustment, the New Keynesian paradigm has demonstrated clearly that it is incapable of capturing the macroeconomic dynamics in any consistent manner, despite it being the dominant approach in the profession. So, it is no wonder when Summers provides opinions the underlying logic he demonstrates is similarly flawed. Unfortunately, he keeps getting important platforms to express these opinions, which continues to blight the public policy debate. He was at it again when he started lecturing the US Federal Reserve Bank on the conduct of its asset-purchasing program.

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The Weekend Quiz – August 28-29, 2021 – answers and discussion

Here are the answers with discussion for this Weekend’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 ideology that the RBA operates within needs a review not it legislative charter

There are calls for the Reserve Bank of Australia to be forced to undergo a major review of its operations, given that it has failed to achieve its own stated inflation targets for many years now. The RBA is resisting that call. The Australian Labor Party, which is in opposition at present, is trying to politicise the issue by claiming it will review the RBA once it becomes government. The problem is that the call to review the RBA is being made by those who would make the worst aspects of the central bank worse. Further, the legislative structure that defines the RBA and its charter already allows the RBA to pursue employment as a goal with equal priority to inflation. The fact that it hasn’t done that is because it adopted the NAIRU myth and used the unemployed as a tool to discipline inflation rather than a policy target to be maximised. That occurred in the 1980s and beyond as neoliberalism became dominant. The problem is not the legislative structure that the RBA operates within. The problem is that it is part of a broader ideology that has demonised discretionary use of fiscal policy and prioritised interest rate changes, which has reduced our growth rates, undermined employment, suppressed wages and more. The Labor Party has echoed that same ideology and is just being hypocritical now. That ideology is what needs a ‘review’. And urgently.

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The Weekend Quiz – August 7-8, 2021 – answers and discussion

Here are the answers with discussion for this Weekend’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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Calling the British PAC, IFS – it is time we all moved on from the debt and deficit hysteria

The BBC in Britain carried a story yesterday (July 25, 2021) – UK will be paying for Covid for decades, say MPs – that began with the assertion that “Taxpayers will bear the costs of Covid ‘for decades'”. I guess there is some truth in that statement – families will remember their loved ones that died from the virus and those who are stricken with Long COVID will probably endure the negative effects for the rest of their lives. In that sense, if they are also ‘taxpayers’ they will be ‘paying’ the ‘costs’ of the pandemic. But, of course, that is not what the BBC article was wanting its readers to absorb. The intent was to lie to British citizens that somehow their tax burdens would have to rise to offset the deficits that the British government has run dealing with the collapsing economy. I know the BBC was just reporting on a document released by the House of Commons Committee of Public Accounts – COVID 19: Cost Tracker Update (released July 25, 2021). But the role of the public broadcaster is not to act as a press releasing agency for such politicised organisations, which, given the absence of any alternative voice in the article, is exactly what it did. The demise of critical scrutiny in economics commentary by national broadcasters everywhere is a major problem and makes them indistinguishable from scandalous media organisations run by private sector owners.

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The Weekend Quiz – June 26-27, 2021 – answers and discussion

Here are the answers with discussion for this Weekend’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 Weekend Quiz – May 15-16, 2021 – answers and discussion

Here are the answers with discussion for this Weekend’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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We are undermining our futures by deliberately wasting our youth

What simple measures might we use to see whether a system is working or not? Well that depends on the objective of the system. For me, one of the worst things that can happen in a social context is a capitalist system is involuntary unemployment because work is intrinsic to our beings. From the time we crawled out of the slime we have had to transform nature in order to survive. That reality goes to the heart of human existence and gives us purpose and builds our sense of network and cooperation and giving. I know all the arguments – this is a filthy capitalist system and why would we want people to be wage slaves – I am older now. I have been a left-winger all my life. I heard these arguments decades ago. And until those revolutionary armies that are apparently hiding out in the suburbs arms themselves and appear in the streets, I am thinking of the actual societies we live in and have to make the best of. We would spend our whole life times talking about revolution while workers around the world are being made to bear the costs of the failing neoliberal system.

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The Weekend Quiz – February 27-28, 2021 – answers and discussion

Here are the answers with discussion for this Weekend’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 income-expenditure relationship in macroeconomics – graphic treatment

We have been doing a lot of work developing the MOOC at the University of Newcastle which will also mark the first – MMTed material. We will follow up the MOOC with more detailed learning options in subsequent months. Tomorrow, we will be filming some more material for the MOOC and I think you will enjoy what we have planned when the MOOC begins on March 3, 2021. As part of the planning I have been thinking of simplified frameworks for teaching rather complicated concepts and relationships. Here is an example of that sort of thinking.

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Central banks should just write off all their government debt holdings

The tensions in the public policy debate between economists is intensifying and on show in Europe, where these sort of obvious conflicts between adherence to dogma and a recognition that ‘out-the-box’ solutions are not only possible but preferred. More of these latter thought offerings are starting to appear as more people come to understand that the mainstream dogma has become more of a security blanket for reputations rather than saying anything about reality. One such proposal emerged last week in the form of a letter to the major European newspapers signed by more than 100 economists and politicians calling for the ECB to write-off its massive public debt holdings, which currently amount to around 25 per cent of total outstanding public debt. It is a good idea but some of the framing leaves a lot to be desired. At any rate, central banks everywhere should be buying up massive amounts of government debt and hitting the keyboard with zeros and writing it off. The world would be a much better place if they did that.

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