John Hassler och Klas Eklund — etablissemangsekonomer med dimljuset på

21 mars, 2019 kl. 09:59 | Publicerat i Economics | Kommentarer inaktiverade för John Hassler och Klas Eklund — etablissemangsekonomer med dimljuset på

Det är svårt att hitta en mer missbrukad ekonomisk klyscha än just ”strukturreformer”. För att citera en diskussion i Financial Times; ”Strukturreformer är en tom amatörekonomisk fras, ofta med vaga referenser till avregleringar och skatte- och budgetnedskärningar”.

itzhak_126513125Ordet dyker ständigt upp när något lands ekonomi anses ha kört fast på en för låg tillväxtkurva … Så också när man i början av augusti läste Dagens Industris intervju med en rad kända svenska nationalekonomer, som professor John Hassler, tidigare ordförande i Finanspolitiska rådet, Klas Eklund, senior ekonom på Mannheimer och Swartling … Samtliga oroar sig, med rätta, för ett kommande politiskt dödläge med den stora kil som Sverigedemokraterna har dunkat in i den svenska politiska vävnaden, men sedan kommer det, en därmed sammankopplad oförmåga att genomföra strukturreformer.

John Hassler uttalande slår på dimljuset; ”Jag är ganska bekymrad. Vi har en historiskt låg underliggande tillväxt i BNP per capita och det kommer att cementeras om man inte genomför ett antal strukturreformer”

Men när ordet ska fyllas med innehåll tilltar dimman, förutom just vaga referenser till ytterligare avregleringar av arbetsmarknaden och skattesänkningar, värnskatten ska bort, och att det höga svenska skattetrycket behöver sänkas. Det senare dock utan att göra avkall på det heliga ”överskottsmålet”.

Per Lindvall

The real public debt problem

21 mars, 2019 kl. 09:17 | Publicerat i Economics | 1 kommentar

The claim that our public debt is excessive has been used as a major justification for austerity – cuts in spending. That massive debt, we are told, 1) must be repaid, 2) threatens our country with bankruptcy, and 3) is a burden on future generations. All these are wrong. Let me explain why …

austerity-george-osborne-desktopBritain’s national currency is managed by our central bank, the Bank of England, owned by the citizens of the United Kingdom (that is, our elected government). As a result, the British government can never default on its bonds. Our government can replace maturing public bonds with new ones. Should private buyers, households and businesses, refuse to purchase the new bonds at the interest rate set by the British government, our government can sell them to the Bank of England …

The debt is nothing more than pieces of paper that the government promises to buy back on a specific date. These pieces of paper can be bought back with new pieces of paper (new bonds) with later buy-back dates. If the private owners of the debt paper do not want the new bonds (new debt paper), our government can sell those new bonds to the Bank of England for cash and use the cash to pay the bond holders.

John Weeks

Today there seems to be a rather widespread consensus of public debt being acceptable as long as it doesn’t increase too much and too fast. If the public debt-GDP ratio becomes higher than X % the likelihood of debt crisis and/or lower growth increases.

But in discussing within which margins public debt is feasible, the focus, however, is solely on the upper limit of indebtedness, and very few ask the question if maybe there is also a problem if public debt becomes too low.

darling-let-s-get-deeply-into-debtThe government’s ability to conduct an ‘optimal’ public debt policy may be negatively affected if public debt becomes too small. To guarantee a well-functioning secondary market in bonds it is essential that the government has access to a functioning market. If turnover and liquidity in the secondary market become too small, increased volatility and uncertainty will, in the long run, lead to an increase in borrowing costs. Ultimately there’s even a risk that market makers would disappear, leaving bond market trading to be operated solely through brokered deals. As a kind of precautionary measure against this eventuality, it may be argued — especially in times of financial turmoil and crises — that it is necessary to increase government borrowing and debt to ensure — in a longer run — good borrowing preparedness and a sustained (government) bond market.

The question if public debt is good and that we may actually have too little of it is one of our time’s biggest questions. Giving the wrong answer to it will be costly.

Speaking truth to power

21 mars, 2019 kl. 08:39 | Publicerat i Politics & Society | 1 kommentar

A ”millionaire​ funded by billionaires” is not “part of the solution” but rather “part of the problem, actually”. No beating around the bush there. Great!

ZEIT: Hat Carlson nach dem Interview noch einmal den Kontakt zu Ihnen gesucht?

Bregman: Ja. Wollen Sie seine Antwort sehen? (er zieht sein Telefon hervor und liest aus seiner E-mail vor) ”Mir hat gefallen, was Sie in Davos gesagt haben, und ich hatte grosse Hoffnungen für unser Interview. Aber Sie haben sich als dümmer, dogmatischer und weniger eindrucksvoller erwiesen als erwartet. Im Übrigen sind Sie ein Arschloch.”

Die Zeit

Alan Krueger (1960 – 2019)

20 mars, 2019 kl. 22:49 | Publicerat i Economics | 7 kommentarer

jp-imgresI’ve subsequently stayed away from the minimum wage literature for a number of reasons. First, it cost me a lot of friends. People that I had known for many years, for instance, some of the ones I met at my first job at the University of Chicago, became very angry or disappointed. They thought that in publishing our work we were being traitors to the cause of economics as a whole.

David Card

Economist-former-Obama-adviser-Alan-Krueger-dead-at-58Back in 1992, New Jersey raised the minimum wage by 18 per cent while its neighbour state, Pennsylvania, left its minimum wage unchanged. Unemployment in New Jersey should — according to mainstream economics textbooks — have increased relative to Pennsylvania. However, when economists David Card and Alan Krueger gathered information on fast food restaurants in the two states, it turned out that unemployment had actually decreased in New Jersey relative to that in Pennsylvania. Counter to mainstream demand theory we had an anomalous case of a backward-sloping supply curve.

Lo and behold!

But of course — when facts and theory don’t agree, it’s the facts that have to be wrong …

The inverse relationship between quantity demanded and price is the core proposition in economic science, which embodies the pre-supposition that human choice behavior is sufficiently rational to allow predictions to be made. Just as no physicist would claim that “water runs uphill,” no self-respecting economist would claim that increases in the minimum wage increase employment. Such a claim, if seriously advanced, becomes equivalent to a denial that there is even minimal scientific content in economics, and that, in consequence, economists can do nothing but write as advocates for ideological interests. Fortunately, only a handful of economists are willing to throw over the teaching of two centuries; we have not yet become a bevy of camp-following whores.

James M. Buchanan in Wall Street Journal (April 25, 1996)

Alan Krueger was an economist who — contrary to people like Buchanan — had the courage to question received opinion when facts falsified the theory. RIP.

Public debt — a macroeconomic necessity

19 mars, 2019 kl. 21:40 | Publicerat i Economics | 3 kommentarer

The problem stems from the fact that the affluent, which include successful entrepreneurs and capital owners, save relatively more than average or poor households … For this to work out, additional​ demand would have to be created …

dirk2The implication of this is that there’s a macroeconomic requirement to run public deficits, founded on a demand gap that arises from households and firms wanting to set aside savings in the form​ of money … This demand gap cannot be closed but by an increase in government spending and hence debt.

Private debt could close it only temporarily​ since it cannot rise forever. Household debt to GDP ratios have risen substantially in many countries over the last decades, but people will not accept​​ mortgage payments in the range of 50-100 per cent of their​ disposable income …

A permanent public deficit is not a pathological symptom, but a macroeconomic necessity in order for private households to be in a position to save money.

Dirk Ehnts

MMT — the Wicksell-Le Bourva connection

19 mars, 2019 kl. 20:53 | Publicerat i Economics | 3 kommentarer

MMT Comparing the limited work of Wicksell, Le Bourva, and MMT, we find that they share many similarities. Obviously, the institutions and issues being discussed have changed during the decades these scholars were writing, yet all three views agree on some fundamental issues. The methodology is quite similar, with a strong focus on balance sheets opposed to theoretical models based on assumptions that are necessary for the mathematics to work. There is also a strong consensus that monetary theory is positive, not normative. Further relevant areas of agreement are found with respect to: the idea of Chartalism when it comes to the origin and value of money; the endogeneity of money regarding bank creation of deposits; the role of the money market in the economy and the missing link to inflation; the monetary circuit and the link from debt to income; and the effects of deficit spending.

Some minor differences occur when it comes to the question of why banks do not expand unlimited credit if they can. While Wicksell believes that the interbank-market debt of banks expanding their loan books relatively faster than other banks should stop further bank loan creation, Le Bourva agrees with Kalecki and sees rising risk as the major factor. In Wray (2012), it is creditworthiness and access to reserves at low costs that limit the extension of loans.

Dirk Ehnts & Nicolas Barberoux


19 mars, 2019 kl. 19:09 | Publicerat i Varia | Kommentarer inaktiverade för Darker


Psalm 50

19 mars, 2019 kl. 18:48 | Publicerat i Varia | Kommentarer inaktiverade för Psalm 50


L’Italia può permettersi un vicepremier che racconta delle balle del genere?

19 mars, 2019 kl. 17:05 | Publicerat i Politics & Society | Kommentarer inaktiverade för L’Italia può permettersi un vicepremier che racconta delle balle del genere?


How to teach economics if you have a dissenting perspective

19 mars, 2019 kl. 12:22 | Publicerat i Economics | 6 kommentarer

teaching-economics-6-638Issue #1: How do you teach the introductory economics courses if you have a dissenting perspective? Mankiw lays out three alternatives, teaching the mainstream and suppressing your own views, teaching minority or fringe views (i.e. your own), or not teaching introductory econ at all. He says the second option is “pedagogical malpractice” … I opted for an approach neither of them consider, to present mainstream economics in the third person: this is what that particular group thinks. Allow for a critical distancing, which is not the same as critique. I didn’t write “this stuff is garbage”, but “here are the assumptions that conventional economists make that distinguish their approach from others.” Whenever possible, I point out where other disciplines differ, and while I encourage students to judge for themselves, I don’t pressure them into adopting any one point of view. This is called critical thinking, and it barely exists in the world of economics textbooks, which proselytize shamelessly.

Issue #2: What should be the role of supply and demand theory and, in particular, the welfare interpretation of it? Mankiw feels welfare economics gets short shrift in the typical intro econ course and text … I am mostly on Mankiw’s side here, but from a critical perspective. I agree entirely that welfarism underlies virtually all applied econ work outside macroeconomics, and it’s important for students to understand what it means. We just saw a “Nobel” prize awarded to an economist, Bill Nordhaus, whose primary claim to fame is an application of the welfare framework to climate change. Nearly every economist working on climate issues adopts the same approach. It would not be an exaggeration, however, to say that the vast majority of climate scientists regard their work as nuts. Clearly there is a pressing need to present the underpinnings of welfare economics to as wide an audience as possible, so they can understand these disputes.

Peter Dorman

MMT and the real issue of money and debt

18 mars, 2019 kl. 18:17 | Publicerat i Economics | 3 kommentarer

Austerity policies throw millions of people out of work … The lower level of output caused by austerity means there are fewer goods and services available to distribute. Society becomes objectively poorer in material production terms. How can that be helpful? …

Some readers may object: what if there just isn’t enough money to buy people? If there’s just no money, it’s no good going ever further into debt.

Wrong. Money is not actually a limited resource. Money is a scorekeeping tool, nothing more. Governments and central banks can no more run out of money than the scorekeeper of a basketball game can run out of scoring-points …


Unless debts are denominated in a foreign currency, a government and the banking system it ultimately controls cannot ‘run out of money’ …

The real issue is the distribution of money and debt — not its inherent availability or quantity.

Dirk Ehnts

DSGE models — worse than useless

18 mars, 2019 kl. 17:41 | Publicerat i Economics | 2 kommentarer

 dirkAmong other conceptual absurdities, such as the assumption that economic actors consist of identical omniscient ‘rational agents’ all of whom have perfect information about prices and quantities everywhere in the global economy, DSGE models generally incorporate the erroneous ‘veil of barter’ notion and ignore the functioning of real monetary systems …

DSGE models represent the distilled essence of the past three decades of dominant macroeconomic theory. Yet they are, to put it bluntly, nonsense, There is only one representative agent — no meaningful discussion of debt can take place in such a theoretical frame. These models are worse than useless — they are misleading.

Dirk Ehnts is, of course, absolutely right. DSGE models are worse than useless — and still,​ mainstream economists seem to be überimpressed by the ‘rigour’ brought to macroeconomics by New-Classical-New-Keynesian DSGE models and its rational expectations and microfoundations!

It is difficult to see why.

‘Rigorous’ and ‘precise’ DSGE models cannot be considered anything else than unsubstantiated conjectures as long as they aren’t supported by evidence from outside the theory or model. To my knowledge,​ no decisive empirical evidence has been presented.


Proving things ‘rigorously’ in DSGE models is at most a starting-point for doing an interesting and relevant economic analysis. Forgetting to supply export warrants to the real world makes the analysis an empty exercise in formalism without real scientific value.

Mainstream economists think there is a gain from the DSGE style of modelling in its capacity to offer the one and only structure around which to organise discussions. To me, that sounds more like a religious theoretical-methodological dogma, where one paradigm rules in divine hegemony. That’s not progress. That’s the death of economics as a science.

California dreaming (personal)

18 mars, 2019 kl. 16:57 | Publicerat i Varia | Kommentarer inaktiverade för California dreaming (personal)


Yes, indeed, looking out through my library windows into​ The Magistrate’s Park, the sky is grey, rain keeps falling, and Spring seems to be far, far, away. Although it’s almost forty years now since I was a research student at the ​University of California, on a day like this, I sure wish I was back in Berkeley Marina, Tilden Park, Telegraph Avenue, Yosemite, Joshua Tree …

La femme qui est dans mon lit

18 mars, 2019 kl. 16:20 | Publicerat i Varia | Kommentarer inaktiverade för La femme qui est dans mon lit


Cette chanson a été un produit de la collaboration entre Serge Reggiani et Georges Moustaki. Les vers du commencement sont d’un poème de Charles Baudelaire.

Hyman Minsky and the IS-LM obfuscation

17 mars, 2019 kl. 11:18 | Publicerat i Economics | 39 kommentarer

As young research stipendiate in the U.S. yours truly had the great pleasure and privilege of having Hyman Minsky as a teacher. He was a great inspiration at the time. He still is.

The concepts which it is usual to ignore or deemphasize in interpreting Keynes — the cyclical perspective, the relations between investment and finance, and uncertainty, are the keys to an understanding of the full significance of his contribution …

miThe glib assumption made by Professor Hicks in his exposition of Keynes’s contribution that there is a simple, negatively sloped function, reflecting the productivity of increments to the stock of capital, that relates investment to the interest rate is a caricature of Keynes’s theory of investment … which relates the pace of investment not only to prospective yields but also to ongoing financial behavior …

The conclusion to our argument is that the missing step in the standard Keynesian theory was the explicit consideration of capitalist finance within a cyclical and speculative context. Once capitalist​ finance is introduced and the development of cash flows … during the various states of the economy is explicitly examined, then the full power of the revolutionary insights and the alternative frame of analysis that Keynes developed becomes evident …

The greatness of The General Theory was that Keynes visualized [the imperfections of the monetary-financial system] as systematic rather than accidental or perhaps incidental attributes of capitalism … Only a theory that was explicitly cyclical and overtly financial was capable of being useful …

If we are to believe Minsky — and I certainly think we should — then when people like Paul Krugman and other ‘New Keynesian’ critics of MMT and Post-Keynesian economics think of themselves as  defending ”the whole enterprise of Keynes/Hicks macroeconomic theory,” they are simply wrong since there is no such thing as a Keynes-Hicks macroeconomic theory!

There is nothing in the post-General Theory writings of Keynes that suggests him considering Hicks’s IS-LM anywhere near a faithful rendering of his thoughts. In Keynes’s canonical statement of the essence of his theory in the 1937 QJE-article there is nothing to even suggest that Keynes would have thought the existence of a Keynes-Hicks-IS-LM-theory anything but pure nonsense. So, of course,​ there can’t be any ”vindication for the whole enterprise of Keynes/Hicks macroeconomic theory” — simply because ”Keynes/Hicks” never existed.

To be fair to Hicks, we  shouldn’t forget that he returned to his IS-LM analysis in an article in 1980 — in Journal of Post Keynesian Economics — and self-critically wrote:

sir_john_hicksThe only way in which IS-LM analysis usefully survives — as anything more than a classroom gadget, to be superseded, later on, by something better — is in application to a particular kind of causal analysis, where the use of equilibrium methods, even a drastic use of equilibrium methods, is not inappropriate. I have deliberately interpreted the equilibrium concept, to be used in such analysis, in a very stringent manner (some would say a pedantic manner) not because I want to tell the applied economist, who uses such methods, that he is in fact committing himself to anything which must appear to him to be so ridiculous …

When one turns to questions of policy, looking toward the future instead of the past, the use of equilibrium methods is still more suspect … It may be hoped that, after the change in policy, the economy will somehow, at some time in the future, settle into what may be regarded, in the same sense, as a new equilibrium; but there must necessarily be a stage before that equilibrium is reached …

We now know that it is not enough to think of the rate of interest as the single link between the financial and industrial sectors of the economy; for that really implies that a borrower can borrow as much as he likes at the rate of interest charged, no attention being paid to the security offered. As soon as one attends to questions of security, and to the financial intermediation that arises out of them, it becomes apparent that the dichotomy between the two curves of the IS-LM diagram must not be pressed too hard.

In his 1937 paper Hicks actually elaborates four different models (where Hicks uses I to denote Total Income and Ix to denote Investment):

1) “Classical”: M = kI   Ix = C(i)   Ix = S(i,I)

2) Keynes’ “special” theory: M = L(i)   Ix = C(i)    I = S(I)

3) Keynes’ “general” theory: M = L(I, i)   Ix = C(i)   I = S(I)

4) The “generalized general” theory: M = L(I, i)   Ix =C(I, i)  Ix = S(I, i)

It is obvious from the way Krugman and other ‘New Keynesians’ — what a gross misnomer — draw their IS-LM curves that they are thinking in terms of model number 4 — and that is not even by Hicks considered a Keynes-model! It is basically a loanable funds model, that belongs in the neoclassical camp and which you find reproduced in most mainstream textbooks.

Hicksian IS-LM? Maybe. Keynes? No way!

MMT — modern monetary realism

16 mars, 2019 kl. 11:39 | Publicerat i Economics | 40 kommentarer

MMT is not, as its opponents seem to think, primarily a set of policy ideas. Rather, it is essentially a description of how a modern credit economy actually works – how money is created and destroyed, by governments and by banks, and how financial markets function. Nor is MMT new: it is based on the work of John Maynard Keynes, whose Treatise on Money pointed out back in 1930 that “modern States” have functioned this way for thousands of years.

Abrahamian-Long-ver-imgFrom this description, certain straightforward facts flow. Governments create money by spending and extinguish it via taxation. It follows, therefore, that a large country, borrowing in its own currency, cannot be forced into default. That is why the US is not Greece, and cannot become Venezuela or Zimbabwe.

Does this mean that “deficits don’t matter”? I know of no MMT adherent who has made such a claim. MMT acknowledges that policy can be too expansionary and push past resource constraints, causing inflation and exchange-rate depreciation – which may or may not be desirable. (Hyperinflation, on the other hand, is a bogeyman, which some MMT critics deploy as a scare tactic.)

But the issue with budget deficits isn’t interest rates, which remain under government control. Nor is it the possible crowding out of private investment, which assumes that the pool of finance is fixed. The issue is real resources. Here, MMT’s proposed job guarantee would keep real resource use exactly at the level required for full employment – not less, but also not more.

J K Galbraith

Veckans dumstrut — finansminister Magdalena Andersson

16 mars, 2019 kl. 09:07 | Publicerat i Economics | 2 kommentarer

Redan nu frågar sig ekonomer vilka motiv regeringen har för att inte satsa mer och låna mer, särskilt som räntorna ligger under nollpunkten och alla ser att Sverige behöver rejäla investeringar i allt från infrastruktur till vård och välfärd.

dumstrut1Men en intervju med affärstidningen Bloomberg har dock finansminister Magdalena Andersson sagt att hon kommer att ha en bra förklaring till att hon inte öppnat plånboken. Det blir spännande att höra den, inte minst för socialdemokratiska politiker och väljare runt om i landet.

De lär inte vara nöjda med skicket på vägarna, längden på vårdköerna eller storlekarna på förskolans barngrupper. Att socialförsäkringarna inte håller måttet, tågen står stilla, pensionerna är låga och ungdomarna inte har någonstans att bo jublar ingen över …

Frågan Magdalena Andersson till slut måste svara på är varför en socialdemokratiskt ledd regering under fem år låtit bli att göra av med pengar, trots att alla sett att behoven finns.

Daniel Swedin / Aftonbladet

Det verkar än en gång som om före detta studenter från Handelshögskolan i Stockholm har rejäla kunskapsluckor. Kanske borde man sluta lära ut monetaristiskt Chicago-nonsens från 70-talet och istället följa med i teoriutvecklingen. Lite ‘functional finance’ och MMT kanske inte skulle skada även på maktelitens lekskola …

Den ­svenska utlandsskulden är historiskt låg och statsskulden ligger snart under 30%.

Ett lands statsskuld är sällan en orsak till ekonomisk kris, utan snarare ett symtom på en kris som sannolikt blir värre om inte underskotten i de offentliga finan­serna får öka.

Med tanke på de stora utmaningar som Sverige står inför är finansministerns tal om ansvar för statsbudgeten minst sagt oansvarigt. I stället för att ”värna om statsfinanserna” borde rege­ringen se till att värna om samhällets framtid.

I am I said

15 mars, 2019 kl. 19:22 | Publicerat i Varia | Kommentarer inaktiverade för I am I said


The need for class politics

15 mars, 2019 kl. 19:13 | Publicerat i Politics & Society | 6 kommentarer

The Marxian idea of class does matter. For one thing, it is an objective fact that millions of people live lives of poverty, unfreedom and insecurity because they lack access to capital.

0*LU4hw4S7RjzIlsmgAnd for another, it does help explain the popularity of Corbynism among the so-called “middle-class”: at the last election, 35% of “ABs” voted Labour. Many people even in erstwhile good professions have no hope of owning property and face stress and domination from their managerialist overlords. The harm caused by class division extends far up the income ladder. Even quite posh people are working class – however many avocados they eat – and many of them vote accordingly.

You might argue that if so many people are working class then the definition is useless. Far from it. The fact that they are vindicates Marx’s claim that “the lower strata of the middle class sink gradually into the proletariat.” It also means that class makes for a less divisive type of politics. Whilst identity politics risks splitting us into countless hostile groups – made more bitter because they are personalized – class politics can unite most of us. And it can do so in a more humane way. Class is a matter of social structure, not of goodies against baddies. This should take personalities out of political discourse and so permit more sober analysis. I know it is an odd thing to say given the historical record, but Marxism has the potential to be a more civilized type of politics than we currently have.

Stumbling and Mumbling

Funeral Ikos

15 mars, 2019 kl. 15:49 | Publicerat i Varia | Kommentarer inaktiverade för Funeral Ikos


tavenerIf thou hast shown mercy
unto man, o man,
that same mercy
shall be shown thee there;
and if on an orphan
thou hast shown compassion,
that same shall there
deliver thee from want.
If in this life
the naked thou hast clothed,
the same shall give thee
shelter there,
and sing the psalm:

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