Last week I visited the students who have started the Post Crash Economics Society at Manchester University, and took part in a debate on the topic of “Should (and could) economics have predicted the economic crisis?” with Peter Backus. The society will release a video of the talk at some point, but in the meantime here is my presentation.
Eight years ago, in December 2005, I began warning of an impending economic crisis that would commence when the rate of growth of private debt started to fall. My warnings hit a popular chord: journalists throughout the world picked it up and publicised my views – as well as similar arguments from Nouriel Roubini, Dean Baker, Ann Pettifor, Michael Hudson, Wynne Godley, and a few others.
In the introduction to last week’s post on my blog I appended the statement “Health warning: contains substantial portions of irony. May exceed your daily allowance”. Judging from the comments onBusiness Spectator, that was indeed the case for some readers. So I’ve eschewed irony in this week’s post.
Guest post by Geoff Davies*
Readers of this blog will have encountered the idea that near-equilibrium neoclassical economic theory is irrelevant to dynamic, far-from-equilibrium, real modern economies, and that the body of theory built around the neoclassical assumptions is full of inconsistencies. You will also be familiar with the idea that money and debt play central, dynamic roles in modern economies.
I was invited to give a speech on that topic to the Second Meeting of Ministers of Finance of the CELAC in Quito, Ecuador today (November 29 2013). In it I outlined Keynes’s Bancor proposal from Bretton Woods, explained why White’s plan was adopted instead, supported the proposal by Zhou Xiaochuan, the Governor of the Central Bank of China, to institute Keynes’s scheme, and proposed that Latin America could try a regional version of the same via the Bank of the South.
Recently Krugman has been defending textbook economics, arguing that if policy makers had simply followed their advice, the crisis would have been far less severe.
It is deeply unfair to blame textbook economics either for the crisis or for the poor response to the crisis. (Krugman, The Trouble with Economics is Economists)
The “Mun” iteration of Minsky, the Open Source system dynamics program with special features to handle monetary modeling, is now available at SourceForge:
The Minsky Home Page at SourceForge
The Finance News Network’s Lelde Smits interviewed me just before I left Australia last week: Link to the Interview.
I’ll also be giving a number of talks in Europe in the next few weeks. Follow the links below for more details:
Thursday December 5th, 5pm the Oxford PPE Society
Larry Summers’ speech at the IMF has provoked a flurry of responses from New Keynesian economists that imply that Summers has located the “Holy Grail of Macroeconomics” – and that it was a poisoned chalice.
“Secular stagnation”, Summers suggested, was the real explanation for the continuing slump, and it had been with us for long before this crisis began. Its visibility was obscured by the subprime bubble, but once that burst, it was evident.
Compare the following two statements, and see if you can guess who the speakers are, when they made these speeches, and what they announced in them: