Modeling Financial Instability

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This paper will be pub­lished in a forth­com­ing book on the cri­sis edited by Malliaris, Shaw and She­frin. In what fol­lows, I derive a cor­rected for­mula for the role of the change in debt in aggre­gate demand, which is that ex-post aggre­gate demand equals ex-ante income plus the cir­cu­la­tion of new debt, where the lat­ter term is the veloc­ity of money times the ex-post cre­ation of new debt.

Economists are almost always wrong about economics, despite what they may think

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That ver­bose title is almost the reverse of a quin­tes­sen­tially arro­gant state­ment of eco­nomic supremacy pub­lished in the UK’s Daily Tele­graph - on the edi­to­r­ial page of the busi­ness sec­tion — by Andrew Lil­ico. Enti­tled “Econ­o­mists are nearly always right about things, despite what you may think in the print edi­tion, its con­tent and tone encap­su­lated every­thing about eco­nomic the­ory, and econ­o­mists’ blind belief in it, that led me to write Debunk­ing Eco­nom­ics over a decade ago.

Bye Bye Bernanke (I)

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On Jan­u­ary 31, we will bid good­bye to chair­man Ben Bernanke and say hello to chair­man Janet Yellen. Most com­men­tary has focused on what Yellen’s ascen­dancy might mean for the Fed­eral Reserve and the US econ­omy, but today I’d like to con­sider how Bernanke’s legacy might he be regarded in future years — say, 70 years after the cri­sis we’re in now.

Some sample Minsky models

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To sup­port SourceForge’s Project of the Month fea­tur­ing Min­sky, here are some sam­ple Min­sky mod­els. To down­load them, right click and choose “save as”–otherwise they will open in a sep­a­rate browser win­dow as XML files.

I’ve also made a playlist of 8 short videos show­ing some of the fea­tures of Min­sky. Those videos are also linked at the bot­tom of this post.

Augusto Graziani’s legacy retains its currency

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I was going to write a ret­ro­spec­tive on Ben Bernanke this week, since his tenure as Fed­eral Reserve chair­man ends soon, and it’s time to look back on his period in office – as he him­self did on his pre­de­ces­sors dur­ing the Great Depres­sion. But a far more impor­tant depar­ture occurred last week: the Ital­ian econ­o­mist Pro­fes­sor Augusto Graziani died at the age of 80.

Secular stagnation III –minus the irony

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I’m sorry, I couldn’t help it: when Larry Sum­mers first made his sec­u­lar stag­na­tion speech at the IMF, and the Amer­i­can eco­nom­ics tribe her­alded it as if it were the great­est (and lat­est) thing since sliced bread, my irony gene went into overload—and that showed in my first post on the topic. The argu­ment that the West has been suf­fer­ing from sec­u­lar stag­na­tion, and that only a series of finan­cial bub­bles have kept the illu­sion of pros­per­ity going, has been part of non-orthodox eco­nom­ics for over three decades.