Dags att ompröva Riksbankens och penningpolitikens mål

12 Nov, 2014 at 14:09 | Posted in Economics | Comments Off on Dags att ompröva Riksbankens och penningpolitikens mål

Med anledning av den pågående kontroversen mellan två prominenta ekonom-Lars — Jonung och Svensson — kan det kanske också vara intressant med ett annat perspektiv på penningpolitiken som en tredje ekonom-Lars — Syll — fört fram …

De senaste två decennierna har Sverige, oavsett regering, haft högre arbetslöshet än vad som var fallet under de tre decennierna dessförinnan. Detta sammanfaller i tid med när penningpolitiken lades om till ensidig inflationsbekämpning. Det är dags att förutsättningslöst pröva denna politik.

Situationen på 1990-­talet var till stor del ett resultat av den finanskris och ekonomiska turbulens som inledde decenniet. Men det får betraktas som anmärkningsvärt att arbetslösheten därefter enligt de vanliga definitionerna och mätmetoderna aldrig sjunkit under fyra procent, möjligen med undantag för enstaka mycket korta tidsperioder.

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I dag har Riksbanken som huvudsakligt mål att stabilisera inflationstakten kring två procent. Denna politik bygger i grund och botten på föreställningen att expansiv finans-­ och penningpolitik inte kan påverka arbetslösheten på lång sikt, och att valet av inflationstakt därför inte har någon stor betydelse för arbetslösheten. Denna politik växte fram i en speciell tidsperiod, präglad av kraftig inflation och i kölvattnet av tidigare misslyckade försök att stävja denna. En växande mängd forskning utifrån olika perspektiv tyder dock på att denna politik måste förändras om Sverige ska lyckas pressa ned arbetslösheten …

Enligt standardmodellerna kan penningpolitiken inte sänka arbetslösheten på lång sikt. Förutsättningen för denna slutsats är ett antagande om att investeringstakten inte påverkar arbetslösheten annat än tillfälligt.

Samtidigt finns det empirisk forskning som tyder på motsatsen – att investeringstakten har stor betydelse för arbetslösheten på såväl kort som lång sikt. Flera studier har bland annat presenterats av ekonomerna Robert Rowthorn och Engelbert Stockhammer, båda verksamma i Storbritannien. Ökad investeringstakt tenderar enligt dessa studier att öka efterfrågan på arbetskraft samtidigt som inflationstakten påverkas av fler faktorer än endast arbetslösheten. Investeringstakten kan i sin tur påverkas av riksbankens räntesättning. Resultaten tyder därför på att både investeringstakten och penningpolitiken kan påverka den långsiktiga jämviktsarbetslösheten …

Det är viktigt att förstå att det inte finns en konsensus inom nationalekonomin rörande hur penningpolitiken bör utformas. Det finns i dag en växande medvetenhet om att de teorier som nuvarande penningpolitik bygger på har brister. Samtidigt har penningpolitikens betydelse för arbetslösheten till stor del lyst med sin frånvaro i Sverige de senaste decennierna.

Det är därför hög tid att föra upp dessa frågor på den politiska dagordningen. Regeringen bör snarast tillsätta en utredning som förutsättningslöst prövar frågan utifrån forskningsläget och de senaste decenniernas erfarenheter.

Paul Krugman vs. Paul Krugman

12 Nov, 2014 at 11:15 | Posted in Economics | 4 Comments

What we’re seeing isn’t the rise of a fairly broad class of knowledge workers. Instead, we’re seeing the rise of a narrow oligarchy: income and wealth are becoming increasingly concentrated in the hands of a small, privileged elite.

Paul Krugman The Conscience of a Liberal (2011)

The factor market most of us know best is the labor market, in which workers are paid for their time. Besides labor, we can think of households as owning and selling the other factors of production to firms. For example, when a corporation pays dividends to its stockholders, who are members of households, it is in effect paying them for the use of the machines and buildings that ultimately belong to those investors. In this case, the transactions are occurring in the capital market, the market in which capital is bought and sold. As we’ll examine in detail later, factor markets ultimately determine an economy’s income distribution, how the total income created in an economy is allocated between less skilled workers, highly skilled workers, and the owners of capital and land [emphasis added].

Paul Krugman Essentials of Economics (2014)

gadget-freak_logo (Kopie)Looks a little schizophrenic, doesn’t it? Who are we to believe? Krugman the blogger or Krugman the textbook gadget modeler? Well, as you know, yours truly is not the least impressed by Krugman’s gadget interpretation of economics, so I go for the first altenative. The rising inequality we have seen for the last 30 years in both the US and elsewhere in Western societies has very little to do with neoclassical gadgets such as aggregate production functions and marginal productivity theory.

Mainstream macroeconomics distorts our understanding of economic reality

11 Nov, 2014 at 12:05 | Posted in Economics | 3 Comments

For a good many years, Tony Lawson has been urging economists to pay attention to their ontological presuppositions. Economists have not paid much attention, perhaps because few of us know what “ontology” means. This branch of philosophy stresses the need to “grasp the nature of the reality” that is the object of study – and to adapt one’s methods of inquiry to it.

5112X+PoJkLEconomics, it might be argued, has gotten this backwards. We have imposed our pre-conceived methods on economic reality in such manner as to distort our understanding of it. We start from optimal choice and fashion an image of reality to fit it. We transmit this distorted picture of what the world is like to our students by insisting that they learn to perceive the subject matter trough the lenses of our method.

The central message of Lawson’s critique of modern economics is that an economy is an “open system” but economists insist on dealing with it as if it were “closed.” Controlled experiments in the natural sciences create closure and in so doing make possible the unambiguous association of “cause” and “effects”. Macroeconomists, in particular, never have the privilege of dealing with systems that are closed in this controlled experiment sense.

Our mathematical representations of both individual and system behaviour require the assumption of closure for the models to have determinate solutions. Lawson, consequently, is critical of mathematical economics and, more generally, of the role of deductivism in our field. Even those of us untutored in ontology may reflect that it is not necessarily a reasonable ambition to try to deduce the properties of very large complex systems from a small set of axioms. Our axioms are, after all, a good deal shakier than Euclid’s.

The impetus to “closure” in modern macroeconomics stems from the commitment to
optimising behaviour as the “microfoundations” of the enterprise. Models of “optimal choice” render agents as automatons lacking “free will” and thus deprived of choice in any genuine sense. Macrosystems composed of such automatons exclude the possibility of solutions that could be “disequilibria” in any meaningful sense. Whatever happens, they are always in equilibrium.

Axel Leijonhufvud

Modern economics has become increasingly irrelevant to the understanding of the real world. In his seminal book Economics and Reality (1997) Tony Lawson traced this irrelevance to the failure of economists to match their deductive-axiomatic methods with their subject.

It is — sad to say — as relevant today as it was seventeen years ago.

It is still a fact that within mainstream economics internal validity is everything and external validity nothing. Why anyone should be interested in that kind of theories and models is beyond my imagination. As long as mainstream economists do not come up with any export-licenses for their theories and models to the real world in which we live, they really should not be surprised if people say that this is not science, but autism!

Studying mathematics and logics is interesting and fun. It sharpens the mind. In pure mathematics and logics we do not have to worry about external validity. But economics is not pure mathematics or logics. It’s about society. The real world. Forgetting that, economics is really in dire straits.

Economics and Reality was a great inspiration to me seventeen years ago. It still is.

Understanding capitalism

10 Nov, 2014 at 09:28 | Posted in Economics | 2 Comments

Frank Roosevelt, a member of the Sarah Lawrence economics faculty since 1977, likens his field to the elephant a group of blind scholars famously tried to describe. Each felt a different part of the animal, and so described a different beast.

“There is no objective truth in economics,” says Roosevelt. “Nobody understands the whole picture. Everybody gets a piece of it.”

81ZvfCDvPoLIn February, Oxford University Press published the third edition of the introductory economics textbook Understanding Capitalism: Competition, Command, and Change, Roosevelt’s six-and-a-half-year project of rewriting and revision. It’s an untraditional book. Roosevelt is an untraditional economist.

“I’m not like ninety-nine percent of economists in the world—I’m in the one percent that is self-styled ‘radical,’” he says. “‘Alternative’ is a more sanitized word.”

Each year, about a million college students take introductory economics courses; their textbooks are selected from among some two dozen on the market. But this apparent magnitude of choices, Roosevelt says, belies the sameness in their explanation of economics. “Class,” for example, is not an independent entry in the index of the most popular traditional textbook. “In our book,” says Roosevelt, “class is not only in the index, but it has more references to it than almost any other word.

”There are power groups, power interests, and much of the world is made up of power relationships. Class is about power relations. We think introductory courses should educate people about the economic system in which we live. This concept is central to this book, and that’s what makes it different.”

As a student in the 60’s, Roosevelt was involved in the Civil Rights and anti-war movements, and co-founded a group called the Union for Radical Political Economics. The first edition of Understanding Capitalism (1985) was written by two friends from the Union’s early days, Samuel Bowles and Richard Edwards. Roosevelt began using it right away, giving it equal course time with more traditional textbooks and introducing, he concedes, “a lot of cognitive dissonance” into his classes.

J.B.

Fall of the Berlin Wall

8 Nov, 2014 at 20:51 | Posted in Politics & Society | Comments Off on Fall of the Berlin Wall

Common non-sense on inequality

7 Nov, 2014 at 16:37 | Posted in Economics | 1 Comment

 

To think that the exploding income and wealth inequality that we see around us today can be explained by marginal productivity theory is — to put it gently — an obvious sign of someone having bad luck when trying to think.

Lars, Lars och Lars om bostadsbubblan

7 Nov, 2014 at 11:13 | Posted in Economics, Politics & Society | 8 Comments

Tydligen behöver man heta Lars här i världen. Professor Lars P Syll. Eller professor Lars Jonung, som nu intervjuas hos Schibsted/SvD. Och säger allt som behöver sägas och även sagts här på bloggen så många gånger.

Bostadsbubblan“Alla finansiella kriser sedan 800 år tillbaka har föregåtts av en längre period med kraftig kredittillväxt i kombination med låga räntor. Det är precis vad vi har sett i Sverige de senaste 15 åren. Vi bygger upp förutsättningarna för en framtida finansiell kris. Vi vet att den kommer, vi vet bara inte när.”

Professor Jonung klarar som alla borde av att se skillnaden på KPI-inflation och tillgångsprisinflation, där den senare är direkt ohälsosam och leder till bubblor och kommande kris.

“Det går inte att uppnå inflationsmålet om vi inte har finansiell stabilitet. Vi har idag inflation i Sverige, men inte konsumentprisinflation, som Riksbanken vill ha, utan tillgångsprisinflation, som Riksbanken inte vill ha.”

Tvärt om är inte en måttlig KPI-deflation något problem. Tvärt om skapar den välstånd och reala inkomstökningar. Det finns ingen som klagar på att TV-apparater, mobiltelefoni etc blir billigare. Utom Riksbanken, som försöker bekämpa teknikutveckling genom att sänka räntan …

Slutsatsen är att man ska läsa och lyssna på människor som heter Lars. Så länge de inte heter Lars E O Svensson, förstås.

Cornucopia

Added November 10: Lars E O Svenssons svar på Jonungs kritik.

Economists — not mathematics — solve economic problems

6 Nov, 2014 at 17:20 | Posted in Economics | 3 Comments

A common mistake amongst Ph.D. students is to place too much weight on the ability of mathematics to solve an economic problem.  They take a model off the shelf and add a new twist. A model that began as an elegant piece of machinery designed to illustrate a particular economic issue, goes through five or six amendments from one paper to the next. By the time it reaches the n’th iteration it looks like a dog designed by committee.

amathMathematics doesn’t solve economic problems. Economists solve economic problems. My advice: never formalize a problem with mathematics until you have already figured out the probable answer. Then write a model that formalizes your intuition and beat the mathematics into submission. That last part is where the fun begins because the language of mathematics forces you to make your intuition clear. Sometimes it turns out to be right. Sometimes you will realize your initial guess was mistaken. Always, it is a learning process.

Roger Farmer

Good advice — coming from a professor of economics and fellow of the Econometric Society and research associate of the NBER — well worth following.

Åtstramningspolitik vid vägs ände

6 Nov, 2014 at 12:07 | Posted in Economics, Politics & Society | Comments Off on Åtstramningspolitik vid vägs ände

austerity22Kent Werne intervjuade igår Mark Blyth och yours truly apropå Europas — och Sveriges — problem att få fart på ekonomin och riskerna med att ensidigt förlita sig på en förlegad penning-politik. Resultatet kan du läsa i Dagens ETC.

Still dead after all these years — general equilibrium theory

6 Nov, 2014 at 10:47 | Posted in Economics | 4 Comments

General equilibrium is fundamental to economics on a more normative level as well. A story about Adam Smith, the invisible hand, and the merits of markets pervades introductory textbooks, classroom teaching, and contemporary political discourse. The intellectual foundation of this story rests on general equilibrium, not on the latest mathematical excursions. If the foundation of everyone’s favourite economics story is now known to be unsound — and according to some, uninteresting as well — then the profession owes the world a bit of an explanation.

Frank Ackerman

Almost a century and a half after Léon Walras founded general equilibrium theory, economists still have not been able to show that markets lead economies to equilibria.

We do know that — under very restrictive assumptions — equilibria do exist, are unique and are Pareto-efficient.

But after reading Frank Ackerman’s article — or Franklin M. Fisher’s The stability of general equilibrium – what do we know and why is it important? — one has to ask oneself — what good does that do?

As long as we cannot show, except under exceedingly special assumptions, that there are convincing reasons to suppose there are forces which lead economies to equilibria — the value of general equilibrium theory is nil. As long as we cannot really demonstrate that there are forces operating — under reasonable, relevant and at least mildly realistic conditions — at moving markets to equilibria, there cannot really be any sustainable reason for anyone to pay any interest or attention to this theory.

A stability that can only be proved by assuming “Santa Claus” conditions is of no avail. Most people do not believe in Santa Claus anymore. And for good reasons. Santa Claus is for kids, and general equilibrium economists ought to grow up, leaving their Santa Claus economics in the dustbin of history.

Continuing to model a world full of agents behaving as economists — “often wrong, but never uncertain” — and still not being able to show that the system under reasonable assumptions converges to equilibrium (or simply assume the problem away), is a gross misallocation of intellectual resources and time. As Ackerman writes:

The guaranteed optimality of market outcomes and laissez-faire policies died with general equilibrium. If economic stability rests on exogenous social and political forces, then it is surely appropriate to debate the desirable extent of intervention in the market — in part, in order to rescue the market fromits own instability.

The Invisible Hand — a brilliant idealization proved wrong by reality

6 Nov, 2014 at 09:11 | Posted in Economics | 2 Comments

The Invisible Hand is a source of clean economics in a dirty world. Great castles can be built on the Invisible Hand, but a rising tide will wash them away. This is what happened in 2008 …

autoThe many obstacles to the workings of the Invisible Hand amount to an overwhelming criticism. The Invisible Hand is an approximation, usually not applicable in the real world without significant modification …

If rightly read, Smith’s theory proposes the opposite of laissez-faire political practice, suggesting that there is a need for a visible hand of government. It describes both why markets work and why they fail … The Invisible Hand is a brilliant idealization of markets that shows how limited laissez-faire theory is in reality.

Jeff Madrick

Dumb and Dumber — the CNBC version

5 Nov, 2014 at 22:07 | Posted in Varia | 1 Comment

 

Dumb and Dumber To

5 Nov, 2014 at 09:27 | Posted in Economics | 1 Comment

2011-10-26-dumb_and_dumber-533x299

lucasbob-1Macroeconomics was born as a distinct field in the 1940s (sic!), as a part of the intellectual response to the Great Depression. The term then referred to the body of knowledge and expertise that we hoped would prevent the recurrence of that economic disaster. My thesis in this lecture is that macroeconomics in this original sense has succeeded: Its central problem of depression-prevention has been solved, for all practical purposes, and has in fact been solved for many decades.

Robert Lucas (2003)

In the past, I think you have been quoted as saying that you don’t even believe in the possibility of bubbles.

eugeneEugene Fama: I never said that. I want people to use the term in a consistent way. For example, I didn’t renew my subscription to The Economist because they use the world bubble three times on every page. Any time prices went up and down—I guess that is what they call a bubble. People have become entirely sloppy. People have jumped on the bandwagon of blaming financial markets. I can tell a story very easily in which the financial markets were a casualty of the recession, not a cause of it.

That’s your view, correct?

Fama: Yeah.

John Cassidy

And in case you think that one shouldn’t be rude about people you disagree with, let me be very clear on the issue.

respectEvery now and then I get some upset comments from people wondering why I’m not always respectful of people like Eugene Fama, Robert Lucas, Greg Mankiw and others of the same ilk. Here’s a good hint at why it might sometimes be quite appropriate to be disrespectful:

Why can’t I be serious and respectful? Well, the answer is that we’re not having a serious conversation. There are real debates in economics — for example, about how much slack remains in the economy, how effective unconventional monetary policy really is, etc.. For those debates a respectful tone is appropriate. But when people resurrect 80-year-old fallacies, then claim that they never said what they said, then come right back with the same thing, we need colorful language to convey the deep unseriousness of their position.

Paul Krugman

Friedman och den ‘naturliga’ arbetslösheten

5 Nov, 2014 at 09:15 | Posted in Economics, Politics & Society | Comments Off on Friedman och den ‘naturliga’ arbetslösheten

Som väl ingen kunnat undgå i ekonomkretsar har det varit många synpunkter på “jämviktsarbetslösheten” sedan Uppdrag Granskning sände sitt program Jobb-bluffen.

Tyvärr har det mesta av “debatten” bestått av tämligen ovederhäftiga och magsura kommentarer från Riksbanksledamöter och andra etablissemangsekonomer.

jobbluffen

Detta förvånar föga med tanke på det tankegods dessa bär med sig i form av Friedmanska idéer om den naturliga arbetslösheten och senare nyklassiska och nykeynesianska diton om NAIRU.

Mer förvånande är väl då att de som man kanske kunde tro skulle stå för alternativen tydligen fullständigt kapitulerat för den nationalekonomiska ortodoxin.

Jag skrev om detta för några veckor sedan, men nu har glädjande nog även andra reagerat:

Varför envisas med en ”tankeram” som pekar ut arbetarrörelsens segrar som hinder? Varför streta vidare på en politisk spelplan som ger den som vill förändra ekonomin utifrån mer verklighetsförankrade och progressiva insikter en rejäl uppförsbacke? …

Idén att a) det finns en specifik lönenivå som skapar ”jämvikt” i ekonomin, b) detta extatiska tillstånd kan förnimmas genom inflationstakten, samt c) full sysselsättning definieras genom inflationstaktens stabilitet, är inget som faller sig naturligt att göra till ett politiskt hjärtebarn. Den kommer från doktrinär nationalekonomi, och har rötterna hos en av nyliberalismens fäder, Milton Friedman.

Enkelt uttryckt kan man säga att teorin pekar fram mot arbetslösheten som ett problem som uppstår när marknader hindras av verkligheten från att bete sig som i idévärlden. En ”naturlig” arbetslöshet finns alltid – Friedman använder en lik-nelse om att det alltid kan finnas någon kvarbliven skjorta på hyllan i en affär …

Som många andra nationalekonomiska trossatser står sig denna inte så stadigt i mötet med empiri. Ändå spelar den stor roll i praktisk politikutformning …

Nu har vi haft val, Anders Borg har lämnat rodret. Redan innan det hade Moderaterna tagit bort webbsidan med sin definition av full sysselsättning. Och det blir förhoppningsvis en del andra innebörder som från och med nu kopplas till begreppet ”reformarbete”. Men någon grundläggande uppgörelse med sättet att tänka kring arbetslösheten är tyvärr inte att vänta i första taget på Finansdepartementet och närliggande institutioner.

Till och med LO-ekonomerna tycks ha vänt taggarna utåt, som man kunde se när SVT:s Uppdrag Granskning – möjligen alltför förenklat – ville peka på problemen med denna konsensus, i reportaget ”Jobb-bluffen”. Det är svårt att bedöma vad jämviktsarbetslösheten egentligen är, men den fungerar som ”tankeram”, resonerar man hos LO-ekonomerna.

Vänd på saken! Varför envisas med en ”tankeram” som pekar ut arbetarrörelsens segrar som hinder? Varför streta vidare på en politisk spelplan som ger den som vill förändra ekonomin utifrån mer verklighetsförankrade och progressiva insikter en rejäl uppförsbacke? Ett brett samtal runt dessa frågor vore det svenska samhället i allmänhet och arbetarrörelsen i synnerhet väl betjänt av.

Ali Esbati

Keynes — more important than ever

4 Nov, 2014 at 13:41 | Posted in Economics | 1 Comment

Central banks have moved to stimulate spending in the face of this attempt to increase savings by lowering interest rates. They lowered them to the zero lower bound without having much effect; the fall in desired savings was too large. We are in a Keynesian liquidity trap. Central banks have tried to stimulate spending by actively increasing the money supply, raising fears of inflation in many circles. But no inflation has resulted as the cash sits idle in corporate coffers. Even at zero interest rates, business firms are reluctant to spend!

9780262028318What to do? Many pundits say we must simply endure what they call secular stagnation. This is an unhappy prediction. Much better is the Keynesian insight that this is the perfect time for fiscal policy. In the U.S. again, there are immediate needs to repair roads and bridges, rebuild the energy grid, and modernize other means of travel. Keynesian fiscal policy expansion will benefit the economy in both the short and long run.

We argue in our new book, Keynes, Useful Economics for the World Economy, that these recommendations can be seen as inferences from a simple and effective model of the short-run economy. We show how hard it was for Keynes to break away from previous theories that work well for individual people and companies—and even for the economy as a whole in the long run—to define the short run in which we all live. We also stress Keynes’ interest in the world economy, not just in isolated economies. After all, the IMF is perhaps the most enduring remnant of Keynesian thought left today.

Peter Temin & David Vines

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