Tom Palley on Trumponomics

By Tom Palley, A key element of Trump’s political success has been his masquerade of being pro-worker, which includes posturing as anti-globalization. However, his true economic interest is the exact opposite. That creates conflict between Trump’s political and economic interests. Understanding the calculus of that conflict is critical for understanding and predicting Trump’s economic policy, […]

via Tom Palley on Trumponomics: Neocon Neoliberalism Camouflaged with Anti-Globalization Circus — Radical Political Economy

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Michael Hudson on Junk Economics

More below from Michael Hudson‘s J is for Junk Economics, the major part of which is a dictionary of ideas from economics, political economy and beyond which aims to be ‘a guide to reality in an age of deception’. Hudson draws on an eclectic mix of sources to argue his case; among them, the classical political economy of Smith and Ricardo, the institutionalism of Veblen, post-Keynesianism and the little-known American School of Political Economy. He remains an independent, iconoclastic and provocative thinker and his work deserves a wide audience. Continue reading

Can we avoid another financial crisis? Steve Keen’s latest book

Professor Steve Keen is an economist working in the post-Keynesian tradition at Kingston University here in the UK. He is well-known as a critic of mainstream economics (see his excellent and wide-ranging book Debunking Economics) and its failure to predict or satisfactorily explain the Great Financial Crisis (GFC) and recession, which he did some years before it occurred. His latest book is Can we avoid another financial crisis?a 130-page polemic aimed at the intelligent layman.

Keen’s central thesis is that mainstream economics failed because it ignores the role of private debt creation by the financial system, known in the jargon as ‘endogenous money’. This grew unsustainably in many countries in the decades prior to the crisis and drove a boom in the real economy and, even moreso, in asset prices (stock markets and housing). Credit expansion in economies such as the US and UK started growing consistently more rapidly than GDP in the 1980s, following the deregulation of the financial sector. Although it was subject to cycles, the trend in private debt as a share of GDP was upward. When its growth slowed or even went into reverse, the result was a severe recession and the aftermath is still with us both economically and politically. Continue reading

200 Years of Ricardian Trade Theory: How Is This Still A Thing?

A critique of Ricardo’s theory of international trade from the Developing Economics blog

Developing Economics

maxresdefault.jpegOn Saturday, April 19th 1817, David Ricardo published The Principles of Political Economy and Taxation, where he laid out the idea of comparative advantage, which since has become the foundation of neoclassical, ‘mainstream’ international trade theory. 200 years – and lots of theoretical and empirical criticism later – it’s appropriate to ask, how is this still a thing?[1]

This week we saw lots of praise of Ricardo, by the likes of The Economist, CNN, Forbes and Vox. Mainstream economists today tend to see the rejection of free trade implicit in Trump and Brexit as populist nonsense by people who don’t understand the complicated theory of comparative advantage (“Ricardo’s Difficult Idea”, as Paul Krugman once called it in his explanation of why non-economists seem to not understand comparative advantage). However, there are fundamental problems with the assumptions embedded in Ricardo’s theory and there’s little…

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The Trump effect: is this time different?

LevyInstituteAn interesting recent paper here from the Levy Economics Institute of Bard College on the prospects for the US economy in the coming years. The authors use their model, which was developed with the late post-Keynesian economist Wynne Godley (one of the few to have predicted the Great Recession), to take stock of the current situation and to discuss alternative future scenarios.

Nikiforos and Zezza argue that the US economy has performed relatively poorly since the Great Recession, and growth outcomes continue to disappoint. Although headline unemployment is relatively low, there remains substantial labour underutilization in the form of ‘marginally attached workers’ and involuntary part-time workers, which when added to the headline rate is known as the U6 measure. The latter is nearly double the headline rate, and helps to explain the continued weakness in wage growth.

The US economy faces three headwinds which continue to constrain growth: income inequality, fiscal conservatism, and the weak performance of net exports (exports minus imports). Continue reading

The rise and fall of the American middle class

William Lazonick, professor at University of Massachusetts Lowell, explains how rationalization, marketization, and globalization characterize the U.S. economy during the past 50 years, and how the behavior of companies and fate of American workers have changed during this process.

via Bill Lazonick on The Rise and Fall of the American Middle Class — Radical Political Economy