John Weeks on the Economics of the 1%

Below is a useful excerpt from the book launch of Professor John Weeks‘ Economics of the 1%. It came out in 2014, and I can wholeheartedly recommend it. The book is aimed at the intelligent general reader, and contains plenty of ‘debunking’ of myths in economics from a left perspective, as well as the author’s ideas for economic reform.

Weeks has written other more technical books for those who are interested, most recently Capital, Exploitation and Economic Crisis and The Irreconcilable Inconsistencies of Neoclassical Macroeconomics. The first is Weeks’ constructive take on Marx’s theory of capitalism and crisis, while the second is a thorough critique of neoclassical macroeconomics, as the title suggests.


J is for Junk Economics – Michael Hudson on the Real News Network

This year I have been regularly posting excerpts from Michael Hudson’s new book J is for Junk Economics. Below is Part One of his interview with The Real News Network, in which he discusses his reasons for writing this iconoclastic ‘dictionary’ of economic thought. In his words, it is a guide to how the economy really works and seeks to overturn a misleading orthodoxy propagated by the media and many academics, not least economists!

The US does not have the highest living standard in the world (Ha-Joon Chang’s Thing 10)

23-things-they-don-t-tell-you-about-capitalismAnother telling extract from Ha-Joon Chang’s 23 Things They Don’t Tell You About Capitalism (p.102-3, 111):

“The average US citizen does have greater command over goods and services than his counterpart in any other country in the world except Luxembourg. However, given the country’s high inequality, this average is less accurate in representing how people live than the averages for other countries with a more equal income distribution. Higher inequality is also behind the poorer health indicators and worse crime statistics of the US. Moreover, the same dollar buys more things in the US than in most other rich countries mainly because it has cheaper services than in other comparable countries, thanks to higher immigration and poorer employment conditions. Furthermore, Americans work considerably longer than Europeans. Per hour worked, their command over goods and services is smaller than that of several European countries. While we can debate which is a better lifestyle – more material goods with less leisure time (as in the US) or fewer material goods with more leisure time (as in Europe) – this suggests that the US does not have an unambiguously higher living standard than comparable countries.

…There is no simple way to compare living standards across countries…by focusing just on how many goods and services our income can buy, we miss out a lot of other things that constitute elements of the ‘good life’, such as the amount of quality leisure time, job security, freedom from crime, access to healthcare, social welfare provisions, and so on. While different individuals and countries will definitely have different views on how to weigh these indicators against each other and against income figures, non-income dimensions should not be ignored, if we are to build societies where people genuinely ‘live well’.”

Trumponomics Part 1: Causes of the phenomenon

TrumponomicsAs promised, here is a review of some of the ideas covered in the fairly weighty tome Trumponomics – Causes and Consequences, recently published by the World Economics Association.

The book consists of 30 chapters, each one written by a different author. They are wide-ranging, but all come from a left perspective on economics and politics.

I am not going to review it chapter by chapter, but thought I would discuss some of the main ideas. As there is plenty to get through, I have divided it into three posts to be published this week: part 1 – causes, part 2 – consequences, and part 3 – alternatives.

Part 1 – Causes

A number of the chapters discuss the reasons for the electoral success of Donald Trump. The book is written by economists, so inevitably many of them have an economic basis. However, since their sympathies are with left wing heterodox thinking, much of it could be classed as political economy, which often incorporates political, historical and sociological ideas to an interdisciplinary analysis.

Broadly speaking, the rise of Trump can be explained by patterns of socio-economic change in recent decades which have left many behind; by the perception that particular elites, including the Democrats, have become disconnected from the concerns of ordinary people and have been captured by Wall Street and the ideology of neoliberalism; and by a campaign whose rhetoric successfully appealed to raw emotion rather than to rationality alone. Continue reading

Instability: poverty and low skill push Britain to Brexit — via INCOMESCO blog

A report on the causes of BREXIT has been published. According to this report, Brexit was the reason of ‘Poverty, Low Skills and Lack of Opportunities’. The research was accomplished by Goodwin, M, and Heath, O (2016) for the JRF Organisation. ‘This report provides unprecedented insight into the dynamics of the 2016 vote to leave […]

via Instability: Poverty and low skill push Britain to Brexit — INCOMESCO

Trickle-down versus trickle-up economics

From the blog of Michael Pettis (the link to the full post is highlighted):

Does cutting taxes on the wealthy lead to greater growth?

“Policies that increase income inequality can in some cases lead to higher savings, higher investment, and greater long-term growth. But, in other cases, such policies either reduce growth and increase unemployment or force up the debt burden. What determines which of these outcomes takes place is whether or not savings are scarce and have constrained investment.”

To give you a better idea of the argument, here is his conclusion. Pettis’ post may debunk the shibboleths of both left and right, while providing scope for reconciliation:

“Trickle-down economics does indeed work, as does its opposite, trickle-up economics, depending on underlying conditions that are not hard to specify. The key is the relationship between desired investment and actual investment. When the former exceeds the latter, policies that increase income inequality will generally cause savings to rise and expenditures to shift from consumption to investment; this leads to higher future growth that will eventually more than compensate ordinary and poor households for the increase in income inequality.

When desired investment is broadly in line with actual investment, however, there is no trickle-down effect. Policies that increase income inequality must permanently lower growth in the long run, although, in the short run, lower growth can be postponed by an increase in the debt burden.

In advanced economies, like those of the United States and Europe, there is no savings constraint on desired investment, so income inequality can only result in higher debt or higher unemployment and slower growth. It is only in developing countries that income inequality may boost growth, although in countries that have pursued the Gerschenkron model of forcing up domestic savings, like China has, actual investment can substantially exceed desired investment. This makes the reduction of income inequality or the channeling of wealth from the state to ordinary and poor households an urgent matter.”

Are CEOs paid to excess?

A short but lively debate between right and left on executive pay. The Adam Smith Institute’s Sam Bowman and Professor Mariana Mazzucato of UCL argue over whether it has become excessive relative to the pay of the rest of the workforce.

The Adam Smith Institute is proudly neoliberal (formerly libertarian), while Mazzucato believes strongly in state industrial and technology policy, as well as in the benefits of ‘stakeholder capitalism‘ as opposed to shareholder capitalism.

The stakeholder approach aims to balance the interests of different groups affected by the operations of firms, from CEOs to trade unions and customers, via particular forms of corporate governance. The aim of such a framework is to achieve both greater efficiency and a more equitable society.