Sack the Economists?

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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.

The International Financial Order

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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.

Trust economic textbooks? Not on your life!

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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)

End this Depression Never?

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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.