Social justice and economic performance: beyond the trade-offs?

workersThe subtitle of this blog refers to two of its key concerns when it comes to the application of our ‘dismal science’: economic progress and social justice. The third is individual liberty. It was John Maynard Keynes who in 1926 coined these three as part of the “political problem of mankind” (although he referred to efficiency rather than progress), and noted how difficult they are to reconcile.

A fourth, modern, concern might be sustainability, though this can be incorporated into them in the sense that without them, the economy and society cannot be sustained in the long run. This would include environmental concerns. Theories of sustainable development look at the interaction between the economy, society and environment and try to forge a path in which, being dependent on each other, they are balanced and, literally, sustainable and sustained!

A broad conception of economic progress would necessarily see it as sustainable. If, for example, a particular pattern of economic growth destroys the nature on which it depends, then it will be undermined. At the same time, modern economic growth, which is still part of what most economists consider to be ‘progress’, is a process of transformation, not least of nature, and of society. The task is to ensure that progress can be sustained and this may require that we adopt richer measures of development. For me this needs to include social justice and well-being.

This post explores some themes relevant to the achievement of social justice and economic progress in both developed and developing economies. Some economists consider there to be a trade-off between the two, but plenty of progressive thinkers reject this pessimistic outlook. Indeed they are, together, probably two of the essential ingredients of political stability and a sustainable democracy. Continue reading

Joan Robinson on the nature of economics and the uniqueness of humanity

Joan Robinson (1973)

Joan Robinson was Professor of Economics at Cambridge. She was a leading figure in what became the post-Keynesian school, having been one of the group of academics surrounding Keynes as he developed the ideas which led to his General Theory in the 1930s.

She was highly productive and covered a broad range of subjects during her life, from the economics of imperfect competition to the theory of economic growth, as well as popular books on economic philosophy and the nature of society. She was well-known for being fierce in debate and for her tireless efforts at critiquing neoclassical theory.

The following is a brief extract from an interview with Diego Pizano conducted in 1977 and included in his Conversations with Great Economists (p.90):

“Keynes was certainly aware that an economic approach to history was only one, yet dispensable, element in the study of society. Economics is a discipline constructed on the basis of elements of many sciences – geography, biology and psychology – and it interacts with a whole range of subjects from the history of culture to politics, law and religion. Keynes had a very good background in most of these disciplines but it is probably true that he was not sufficiently aware of the connections that certainly exist between the economic and the biological process.

…I would like to say that it is crucial to understand the biological basis of human behavior to shed light on the problem of the origin of society. Man was once defined as a tool-making animal, but now it has been discovered that chimpanzees construct tools designed for particular uses. Neither tools, nor manners characterize man: language does. The invention of a procedure that enabled man to convey information about things not present and to speculate about things not known was the great step. Language made social life much richer and complex and this obviously implies that the economic life of man is much more complicated than that of any other species.”

Can the history of economics inspire a pluralistic approach to economics? — Developing Economics

Pluralistic Economics and Its History, edited by Ajit Sinha of Thapar School of Liberal Arts & Sciences, Patiala (India) and Alex M. Thomas of Azim Premji University, Bengaluru (India), contains seventeen essays. This review seeks to engage with some of the principal themes that animate the essays in this volume.

via Can the history of economics inspire a pluralistic approach to economics? — Developing Economics

Keynesian economics – back from the dead?

Here is an interesting recent lecture given by Robert Rowthorn on the “main developments in macroeconomics since the anti-Keynesian counter-revolution 40 years ago.” It can be downloaded for free. Alternatively the video of the lecture can be viewed here.

Rowthorn is Emeritus Professor of Economics at Cambridge University. Back in the 70s and 80s he was very much a Marxist, but has since moved away from that commitment and written on a wide range of topics, from Kaleckian growth and distribution theory to deindustrialisation in the advanced economies and the economics of the family.

For those who are interested in development economics, he supervised the PhD of another prominent Cambridge economist, Ha-Joon Chang, who has written a number of popular books alongside his academic work.

This is the rest of the abstract of Rowthorn’s paper:

It covers both mainstream and heterodox economics. Amongst the topics discussed are: New Keynesian economics, Modern Monetary Theory, expansionary fiscal contraction, unconventional monetary policy, the Phillips curve, hysteresis, and heterodox theories of growth and distribution. The conclusion is that Keynesian economics is alive and well, and that there has been a degree of convergence between heterodox and mainstream economics.

All of these topics are relevant to today’s economic problems, and Rowthorn argues that “many leading economists in the USA and the UK have Keynesian sympathies”.

Thanks to The Case For Concerted Action blog for drawing my attention to this lecture.

Prospects and Challenges for the US economy

Here is the latest Strategic Analysis paper from the Levy Economics Institute of Bard College on the prospects and challenges for the US economy over the next few years. The Levy Institute is officially nonpartisan, but much of its output is in the post-Keynesian tradition, and influenced by luminaries such as Hyman Minsky and Wynne Godley.

Minsky and Godley were instrumental in highlighting the interdependence of the real and financial sectors of the capitalist economy and the role of the latter in contributing to its periodic instability.

The post-Keynesian or ‘left Keynesian’ tradition is a broad church, but is generally critical of capitalism while suggesting policies which attempt to mitigate its defects, in particular the presence of unemployment, inequality and instability. It emphasises the importance of aggregate demand and macroeconomic categories and relationships.

The Levy Institute publishes a short Strategic Analysis on the US economy like this one every year. It is accessible while being based on a stock-flow consistent macroeconomic model that Godley spent the final years of his life helping to build.

The paper highlights the risks to the US over the next few years of an overvalued stock market, overstretched and fragile corporate sector balance sheets, an overvalued dollar, a slowing global economy and the US administration’s erratic trade policy. It is well worth a read.

Geoff Harcourt on Keynesian theory

In this enlightening video, Professor Geoff Harcourt, who was a distinguished pupil and colleague of Joan Robinson at Cambridge University, discusses a range of issues in Keynesian and post-Keynesian economics.

He covers the need for pluralism in economics; his definition of post-Keynesianism; the work of some of its key protagonists; uncertainty and its impact on business and the economy; the capital theory debates; and finally his vision for analysing a modern capitalist economy, and his most enduring intellectual influences.

Modern Monetary Theory and disguised unemployment

Thomas Palley, a post-Keynesian economist, here provides a critique of recent policy proposals by US Democratic politicians employing some ideas from Modern Monetary Theory. They variously want to fund programmes such as universal healthcare and a ‘Green New Deal’, financed to a large degree by increased government borrowing.

MMT, as a set of ideas, is an offshoot of post-Keynesianism, but is perhaps more straightforward to grasp when it comes to budget deficits and its opposition to austerity; hence its current popular appeal. Continue reading

Latest prospects for the US economy: can redistribution help sustain growth?

Here is a link to the latest Strategic Analysis on the US economy from the Levy Economics Institute. They publish a short report like this every year around this time, and discuss the performance of and prospects for the US, as well as considering how things could be improved with a change in policy.

The Levy Institute is officially non-partisan, but tends to publish in the spirit of post-Keynesian thinking. The late Hyman Minksy and Wynne Godley spent the latter part of their lives working there and Godley helped build their macroeconomic model of the US economy.

This year, the 14-page report is titled Can Redistribution Help Build a More Stable Economy? In short, the authors examine what they see as the four key constraints on the US economy and which account for the historically lengthy but weak recovery: (1) weak net export demand; (2) fiscal conservatism; (3) increasing income inequality; and (4) financial fragility. These four constraints help to explain the weak performance, as well as some of the political developments of recent years. Continue reading

Wages and technological progress – a walk on the demand-side

What is the link, if any, between wages and technological progress in a capitalist economy? An article in this week’s The Economist magazine sheds some light on the issue. In particular, it considers the apparently lesser-studied effect that wages might have on productivity growth.

The reverse relationship, that productivity growth allows growth in wages, is studied more often. This has certain implications for economic policy. Boosting the supply-side determinants of innovation, such as education, and research and development, become important.

But what of the demand-side? The article mentioned above describes how some economic historians are engaged in a debate over the “high-wage hypothesis” put forward by Robert Allen, which he suggests helped drive industrialisation in Britain. Continue reading