The responsibilities of heterodoxy. Arjun Jayadev and I have an ongoing project of interviewing dissenting economists who we think deserve wider recognition. Our first interview was with Axel Leijonhufvud; the second, just now up at the INET site, is with our old professor Jim Crotty. Jim’s ECO 710 was for us, as for hundreds of UMass grad students over the past 30 years, the starting point for systematically thinking about the economy as a whole. (You could think of him as sort of the Earth-II version of Rudi Dornbusch.) You can read more of my thoughts about him at the link.
Here’s an interesting clip that didn’t make it into the INET version:
The radicalism — and coherence — of Keynes larger political-economic program is a topic I’d like to return to in the future, as is the importance of an organic relationship to some broader social movement or political project. For heterodox economists, I think even more than for other academics, it’s impossible to even do good scholarship if your relationship to your object of study is only as a scholar. Science, as Max Weber says, “presupposes that what is yielded by scientific work is important in the sense that it is ‘worth being known.’ … This presupposition cannot be proved by scientific means.”
The problem with heterodoxy. The post here about the non-existence of mainstream economics is now up at Evonomics, in a somewhat improved form. While we’re on that topic, I will let loose with a peeve. Joan Robinson is like a god to me — in an anthropological sense she might even literally be a divinity for my tribe. But I hate that often-quoted line that the only reason to study economics is “to avoid being fooled by economists.” It reinforces the worst habit of heterodox people: putting negative critique above positive efforts to understand the world.
Articles to read. Three recent articles that really deserve posts of their own:
Thomas Palley on negative interest rates (he’s against them).
Jerry Epstein on the costs of big finance.
Cédric Durand and Maxime Gueuder on the weakening link between profits and corporate investment. I’ve been planning to write something on exactly this; clearly it will have to respond to this paper.
Interest rates and trade imbalances. Izabella Kaminska has a very interesting post up at FT Alphaville. (Does she write any other kind?) This one brings out two important points. First, to the extent that low interest rates mainly lead to bringing forward future spending — this is probably especially true in housing — they are good tools for dealing with temporary downturns but not for secular shortfalls. (Kaminska doesn’t say so, but this is one reason the “natural rate” concept is misleading.) Second, the macroeconomic significance of trade imbalances depends on what happens to the corresponding financial flows — and this isn’t automatic. Continuous British surpluses in the gold standard era were compatible with steady growth of the world economy because they financed investment — in railroads especially — in the peripheral countries, using British capital goods. The general lesson is:
If countries want to carry international surpluses indefinitely the suggestion here is they need also to reinvest those “savings” into capacity expanding investments abroad.
Also in FT Alphaville, here’s a nice post by Matthew Klein on a question that should be obvious, but is seldom asked: If large current account deficits are dangerous, then what exactly is the purpose of allowing free flows of portfolio investment across borders? From the point of view of the receiving country, the only benefit of portfolio inflows is that it lets them finance current account deficits. If that’s not desirable, why allow them? Klein doesn’t give the clear negative answer that I would, but it’s the right question to be asking.
Evicted. At Dissent, my Roosevelt colleague Mike Konczal has an excellent review of two new books on eviction and foreclosure. It’s an important topic, and Evicted looks like an important book. I had some debates about it on twitter that clarified a question that doesn’t quite come out in the review itself. Are housing costs so high for more people because of market and regulatory failures that allow landlords to exploit poor tenants? Or is the cost of providing adequate housing simply greater than poor families can pay? The first points toward tenants organizing and better regulation of rental housing, the latter toward direct or indirect subsidies or direct public provision of housing.
Also from Mike, a review of two recent books about the appropriate role of the state.
Rising health costs in Europe. Via Adam Gaffney, here’s an interesting article on rising household payments for heatlh care in Europe, even in countries that are notionally single payer. Adam’s summary:
It supports the hypothesis—put forward by many—that there has been a *partial* retreat from universal health care in Europe (especially if we define universal health care as free care at point of use for all). The main findings are as follows:
-The odds of having any out-of-pocket expenditures on health care in the previous 12 months (among 11 European nations) were 2.6 fold higher in 2013 than in 2006-2007;
-Overall out of pocket payments for health care increased 43.6% (inflation adjusted) between 2006-2007 and 2013;
-The proportion of individuals with catastrophic health care expenditures rose, particularly in Spain and Italy, which have been particularly hard-struck by austerity.
My take: We need to stop thinking about universal health care as an end goal or terminus: its actually a work in progress, and neoliberal health policy ideology has already done a number on it in Europe.
The poor stay poor. My old UMass comrade Mike Carr has a new article on income mobility, coauthored with Emily Wiemers. There’s a nice writeup of it in The Atlantic.
The right vs the rentiers? I was interested to learn that one of Theresa May’s declared priorities as Prime Minister is reforming corporate governance, including requiring worker representatives on boards. I have no idea if anything will come of it, but it’s interesting to see ideas that would be well to the left of the mainstream here adopted at least rhetorically by a conservative government in the UK. Was also interesting, in the coverage, to see some acknowledgement of the importance of cogovernance and works councils in Germany. Obviously export surpluses should not be taken as the measure of economic success in any broader sense, but it’s still worth pointing out that Europe’s biggest exporter is one of its least liberal economies.
Also in Theresa May news, doesn’t it seem like if Article 50 can’t be invoked without Scotland’s ok, that means Brexit isn’t happening? Which I think was the safe bet all along. Because if what scares you is that the “burghers of middle England” can “with a single vote destroy trillions of dollars of value,” then you can probably relax. The trillions will win the next round.