But Joe’s latest public contribution—“The Great Malaise Continues” on Project Syndicate—simply echoes the mainstream on a crucial point that explains why the US economy is at stall speed, which the mainstream simply doesn’t get.
I’ve attended two conferences in two days where both the power and the impotence of the European Central Bank (EBC) have been on vivid display.
Its political power is considerable, both in form and in substance. At both seminars, the ECB speaker—ECB Board member Peter Praet at the first, and ECB President Mario Draghi at the second—spoke first, and then left. In form, the ECB has no need to defend its policies because it is unimpeachable in its execution of them. In substance, it does not even considering engaging with its subjects—I use the word deliberately—in open and robust discussion.
The position of the economy in the environment is a shared blindspot in economics: no existing school handles the topic well, and yet this is the key issue we need to understand. I explain the Laws of Thermodynamics–as well as I could in an introductory class without using mathematics–and provide some links to important topics that students wouldn’t normally hear about in an economics degree.
This lecture covers the Post Keynesian school of thought in economics, focusing mainly on its modern emphasis upon endogenous money, sectoral balances, and Minsky’s Financial Instability Hypothesis. I also show how to do non-equilibrium modeling (using my Open Source modeling program Minsky of course).
Paul Krugman’s latest column—“Check Out Our Low, Low (Natural) Rates” (which he didn’t flag as “Wonkish”, even though it is so in spades—noted that the “natural real rate of interest” was falling, and that this justified the low interest rate set by the Federal Reserve.
Actually they’ve done no such thing. But they do effectively assume that it’s unnecessary all the time.
This transcendental truth became apparent to me in the reactions I have had from mainstream economists to a lecture I gave to my Kingston students this month (which is posted on my YouTube channel and blog).
This lecture introduce the Austrian school of thought, which is closely related to the Neoclassical mainstream–in that it shares its utilitarian theory of value, accepts basic supply and demand analysis, and sees capitalism as generally tending towards equilibrium. But it is also highly critical of the mainstream for the absurd assumptions about individual knowledge that it is willing to make to preserve its equilibrium-oriented mathematical approach. It sees capitalism’s strengths as how it encourages innovation, which is an equilibrium-disturbing process, and regards money as being both integral to capitalism and the primary source of economic cycles.
This talk covers all “the usual suspects” for me–the Neoclassical obsession with equilibrium, financial instability, the Loanable Funds myth and the reality of Endogenous Money, and the foolishness of governments trying to run a surplus as if they are households, when the better analogy is that they are banks and should run deficits to create part of the money supply the non-bank private sector needs.
Becoming an Economist is the introductory course on economics for undergraduates at Kingston University. This is the second of 11 lectures in the subject; I’ll post the others as I write them over the next few months. This lecture discusses why the Mainstream approach, starting from the fundamental question Walras posed “Can a system of free markets reach a set of prices that ensures that supply equals demand in all markets?”
The answer was “No”, but that didn’t stop the “Equilibrium Fetish Juggernaut” that Walras unleashed.
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