Wren-Lewis trying to cope with ideology

18 Aug, 2019 at 20:07 | Posted in Economics | 4 Comments

Simon Wren-Lewis has also commented on the study by Mohsen Javdani and Ha-Joon Chang — on economics and ideology — that I wrote about earlier today. Says Wren-Lewis:

scI also, from my own experience, want to suggest that in their formal discourse (seminars, refereeing etc) academic economists normally pretend that this ideological bias does not exist. I cannot recall anyone in any seminar saying something like ‘you only assume that because of your ideology/politics’. This has one huge advantage. It means that academic analysis is judged (on the surface at least) on its merits, and not on the basis of the ideology of those involved.

The danger of doing the opposite should be obvious. Your view on the theoretical and empirical validity of an academic paper or study may become dependent on the ideology or politics of the author or the political implications of the results rather than its scientific merits. Having said that, there are many people who argue that economics is just a form of politics and economists should stop pretending otherwise. I disagree. Economics can only be called a science because it embraces the scientific method. The moment evidence is routinely ignored by academics because it does not help some political project economics stops being the science it undoubtedly is.

Quite frankly I have to admit to being at a loss here. Of course, you never hear anyone at our seminars telling the lecturer that the assumptions on which his models are built are only made for ideological reasons. But that does not necessarily mean — wether on the surface or not — that “academic analysis is judged on its merits”. What it means is that we have a catechism that no one dares to question. And that catechism has become hegemonic for particular reasons, one of which may very well be of an ideological nature. When the neoclassical theory was developed in the late 19th century one of the reasons was that some economists — e.g. Böhm-Bawerk –thought that the Ricardian (labour value) tradition had become too radical and could be used as a dangerous weapon in the class struggle. Marginalism was explicitly seen as a way to counter that.

Wren-Lewis seems to think that ‘the facts are bound to win in the end.’

It is difficult to see why.

Take the rational expectations assumption. Rational expectations in the mainstream economists’ world imply that relevant distributions have to be time-independent. This amounts to assuming that an economy is like a closed system with known stochastic probability distributions for all different events. In reality, it is straining one’s beliefs to try to represent economies as outcomes of stochastic processes. An existing economy is a single realization tout court, and hardly conceivable as one realization out of an ensemble of economy-worlds since an economy can hardly be conceived as being completely replicated over time. It is — to say the least — very difficult to see any similarity between these modelling assumptions and the expectations of real persons. In the world of the rational expectations hypothesis, we are never disappointed in any other way than as when we lose at the roulette wheels. But real life is not an urn or a roulette wheel. And that’s also the reason why allowing for cases where agents make ‘predictable errors’ in DSGE models doesn’t take us any closer to a relevant and realist depiction of actual economic decisions and behaviours.

‘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 in any way decisive empirical evidence has been presented.

So, given this lack of empirical evidence, why do mainstream economists still stick to using this kind of theories and models building on blatantly ridiculous assumptions? Well, one reason, I would argue, is of an ideological nature. Those models and the assumptions they build on standardly have a neoliberal or market-friendly bias. I guess that is also one of the — ideological — reasons those models and theories are so dear to many Chicago economists and ‘New Keynesian’ macroeconomists …

We need more redistribution

18 Aug, 2019 at 19:11 | Posted in Economics | 1 Comment

Income inequality as measured by the Gini coefficient rose by about 36% in the 1980s under Thatcher, but the real story is the share of income that goes to people at the very top:

According to Greg Mankiw … in the United States the 1%’s share of total income, excluding capital gains, rose from about 8 percent in 1973 to 17 percent in 2010. Between 2010 and 2015 it’s risen from 17% to 22%!!

inequalityIt’s incredibly concentrated even among the super-rich. The top 0.01%’s share of national income – this is just 16,000 people in a country of 330 million – rose from 0.5% in 1973 to 3.3% in 2010 to 5% in 2015. Their share of income quadrupled in just 35 years …

Just giving people money is fine if you don’t mind them playing video games all day – but many people themselves would tell you that they don’t have the willpower to go back to school or find new work, even if they could do so in theory.

There’s a big role for government to direct investment towards these places, using the money we’ve taken from the winners from globalisation, either to support private industry or just set up our own industries to employ people the private sector won’t …

The super-rich are eating a bigger and bigger slice of the pie, for no good reason, and there are lots of things we could use that money for to make ordinary people’s lives better.

Sam Bowman

Mainstream economics textbooks usually refer to the interrelationship between technological development and education as the main causal force behind increased inequality. If the educational system (supply) develops at the same pace as technology (demand), there should be no increase, ceteris paribus, in the ratio between high-income (highly educated) groups and low-income (low education) groups. In the race between technology and education, the proliferation of skilled-biased technological change has, however, allegedly increased the premium for the highly educated group.

Another prominent explanation is that globalization – in accordance with Ricardo’s theory of comparative advantage and the Wicksell-Heckscher-Ohlin-Stolper-Samuelson factor price theory – has benefited capital in the advanced countries and labour in the developing countries. The problem with these theories are that they explicitly assume full employment and international immobility of the factors of production. Globalization means more than anything else that capital and labour have to a large extent become mobile over country borders. These mainstream trade theories are really not applicable in the world of today, and they are certainly not able to explain the international trade pattern that has developed during the last decades. Although it seems as though capital in the developed countries has benefited from globalization, it is difficult to detect a similar positive effect on workers in the developing countries.

There are, however, also some other quite obvious problems with these kinds of inequality explanations. The World Top Incomes Database shows that the increase in incomes has been concentrated especially in the top 1%. If education was the main reason behind the increasing income gap, one would expect a much broader group of people in the upper echelons of the distribution taking part of this increase. It is dubious, to say the least, to try to explain, for example, the high wages in the finance sector with a marginal productivity argument. High-end wages seem to be more a result of pure luck or membership of the same ‘club’ as those who decide on the wages and bonuses, than of ‘marginal productivity.’

Mainstream economics, with its technologically determined marginal productivity theory, seems to be difficult to reconcile with reality. Although card-carrying neoclassical apologetics like Greg Mankiw want to recall John Bates Clark’s (1899) argument that marginal productivity results in an ethically just distribution, that is not something – even if it were true – we could confirm empirically, since it is impossible realiter to separate out what is the marginal contribution of any factor of production. The hypothetical ceteris paribus addition of only one factor in a production process is often heard of in textbooks, but never seen in reality.

When reading mainstream economists like Mankiw who argue for the ‘just desert’ of the 0.1 %, one gets a strong feeling that they are ultimately trying to argue that a market economy is some kind of moral free zone where, if left undisturbed, people get what they ‘deserve.’ To most social scientists that probably smacks more of being an evasive action trying to explain away a very disturbing structural ‘regime shift’ that has taken place in our societies. A shift that has very little to do with ‘stochastic returns to education.’ Those were in place also 30 or 40 years ago. At that time they meant that perhaps a top corporate manager earned 10–20 times more than ‘ordinary’ people earned. Today it means that they earn 100–200 times more than ‘ordinary’ people earn. A question of education? Hardly. It is probably more a question of greed and a lost sense of a common project of building a sustainable society.

Since the race between technology and education does not seem to explain the new growing income gap – and even if technological change has become more and more capital augmenting, it is also quite clear that not only the wages of low-skilled workers have fallen, but also the overall wage share – mainstream economists increasingly refer to ‘meritocratic extremism,’ ‘winners-take-all markets’ and ‘super star-theories’ for explanation. But this is also highly questionable.

Fans may want to pay extra to watch top-ranked athletes or movie stars performing on television and film, but corporate managers are hardly the stuff that people’s dreams are made of – and they seldom appear on television and in the movie theaters.

Everyone may prefer to employ the best corporate manager there is, but a corporate manager, unlike a movie star, can only provide his services to a limited number of customers. From the perspective of ‘super-star theories,’ a good corporate manager should only earn marginally better than an average corporate manager. The average earnings of corporate managers of the 50 biggest Swedish companies today, is equivalent to the wages of 46 blue-collar workers.

It is difficult to see the takeoff of the top executives as anything else but a reward for being a member of the same illustrious club. That they should be equivalent to indispensable and fair productive contributions – marginal products – is straining credulity too far. That so many corporate managers and top executives make fantastic earnings today, is strong evidence the theory is patently wrong and basically functions as a legitimizing device of indefensible and growing inequalities.

No one ought to doubt that the idea that capitalism is an expression of impartial market forces of supply and demand, bears but little resemblance to actual reality. Wealth and income distribution, both individual and functional, in a market society is to an overwhelmingly high degree influenced by institutionalized political and economic norms and power relations, things that have relatively little to do with marginal productivity in complete and profit-maximizing competitive market models – not to mention how extremely difficult, if not outright impossible it is to empirically disentangle and measure different individuals’ contributions in the typical team work production that characterize modern societies; or, especially when it comes to ‘capital,’ what it is supposed to mean and how to measure it. Remunerations do not necessarily correspond to any marginal product of different factors of production – or to ‘compensating differentials’ due to non-monetary characteristics of different jobs, natural ability, effort or chance.

Put simply – highly paid workers and corporate managers are not always highly productive workers and corporate managers, and less highly paid workers and corporate managers are not always less productive. History has over and over again disconfirmed the close connection between productivity and remuneration postulated in mainstream income distribution theory.

Neoclassical marginal productivity theory is obviously a collapsed theory from both a historical and a theoretical point of view, as shown already by Sraffa in the 1920s, and in the Cambridge capital controversy in the 1960s and 1970s.

When a theory is impossible to reconcile with facts there is only one thing to do — scrap it. And start redistributing!

Economics and ideology

18 Aug, 2019 at 09:47 | Posted in Economics | 5 Comments

Mainstream (neoclassical) economics has always put a strong emphasis on the positivist conception of the discipline, characterizing economists and their views as objective, unbiased, and non-ideological …

Ronald_Reagan_televised_address_from_the_Oval_Office,_outlining_plan_for_Tax_Reduction_Legislation_July_1981Acknowledging that ideology resides quite comfortably in our economics departments would have huge intellectual implications, both theoretical and practical. In spite (or because?) of that, the matter has never been directly subjected to empirical scrutiny.

In a recent study, we do just that. Using a well-known experimental “deception” technique embedded in an online survey that involves just over 2400 economists from 19 countries, we fictitiously attribute the source of 15 quotations to famous economists of different leanings. In other words, all participants received identical statements to agree or disagree with, but source attribution was randomly changed without the participants’ knowledge. The experiment provides clear evidence that ideological bias strongly influences the ideas and judgements of economists. More specifically, we find that changing source attributions from mainstream to less-/non-mainstream figures significantly reduces the respondents’ reported agreement with statements. Interestingly, this contradicts the image economists have of themselves, with 82% of participants reporting that in evaluating a statement one should only pay attention to its content and not to the views of its author …

Economics education, through which economic discourses are disseminated to students and future economists, is one of these important channels. It affects the way students process information, identify problems, and approach these problems in their research. Not surprisingly, this training may also affect the policies they favor and the ideologies they adhere to. In fact, there already exists strong evidence that, compared to various other disciplines, students in economics stand out in terms of views associated with greed, corruption, selfishness, and willingness to free-ride …

We find evidence of a strong ideological bias among economists … For example, when a statement criticizing “symbolic pseudo-mathematical methods of formalizing a system of economic analysis” is attributed to its real source, John Maynard Keynes, instead of its fictitious source, Kenneth Arrow, the agreement level among economists drops by 11.6%. Similarly, when a statement criticizing intellectual monopoly (i.e. patent, copyright) is attributed to Richard Wolff, the American Marxian economist at the University of Massachusetts, Amherst, instead of its real source, David Levine, professor of economics at the Washington University in St. Louis, the agreement level drops by 6.6%.

Mohsen Javdani & Ha-Joon Chang

7ti40Mainstream economists — in many ways separated from the ​life of ordinary people — are with their ‘the model is the message’ thinking particularly inclined to confuse the things of logic with the logic of things. They have a tendency to get enthralled by their theories and models​ and forget that behind the figures and abstractions there is a real world with real people. Real people that have to pay dearly for fundamentally flawed ideological doctrines and recommendations.

Damon Runyon’s law

17 Aug, 2019 at 16:54 | Posted in Economics | Leave a comment

To get right down to it, I suspect that the attempt to construct economics as an axiomatically based hard science is doomed to fail. There are many partially overlapping reasons for believing this …

soloA modern economy is a very complicated system. Since we cannot conduct controlled on its smaller parts, or even observe them in isolation, the classical hard- science devices for discriminating between competing hypotheses are closed to us. The main alternative device is the statistical analysis of historical time-series. But then another difficulty arises. The competing hypotheses are themselves complex and subtle. We know before we start that all of them, or at least many of them, are capable of fitting the data in a gross sort of way. Then, in order to make more refined distinctions, we need long time-series observed under stationary conditions.

Unfortunately, however, economics is a social science. It is subject to Damon Runyon’s Law that nothing between human beings is more than three to one. To express the point more formally, much of what we observe cannot be treated as the realization of a stationary stochastic process without straining credulity. Moreover, all narrowly economic activity is embedded in a web of social institutions, customs, beliefs, and attitudes. Concrete outcomes are indubitably affected by these background factors, some of which change slowly and gradually, others erratically. As soon as time-series get long enough to offer hope of discriminating among complex hypotheses, the likelihood that they remain stationary dwindles away, and the noise level gets correspondingly high. Under these circumstances, a little cleverness and persistence can get you almost any result you want. I think that is why so few econometricians have ever been forced by the facts to abandon a firmly held belief …

Robert Solow

Axel Leijonhufvud

15 Aug, 2019 at 23:26 | Posted in Economics | 7 Comments


Trying to delineate the difference between ‘New Keynesianism’ and ‘Post Keynesianism’ — during an interview a couple of years ago — yours truly was confronted by the odd and confused view that Axel Leijonhufvud was a ‘New Keynesian.’ I wasn’t totally surprised — I had run into that misapprehension before — but still, it’s strange how wrong people sometimes get things.

The  last time I met Axel, we were both invited keynote speakers at the conference “Keynes 125 Years – What Have We Learned?” in Copenhagen. Axel’s speech was later published as Keynes and the crisis and contains the following thought provoking passages:

For many years now, the main alternative to Real Business Cycle Theory has been a somewhat loose cluster of models given the label of New Keynesian theory. New Keynesians adhere on the whole to the same DSGE modeling technology as RBC macroeconomists but differ in the extent to which they emphasise inflexibilities of prices or other contract terms as sources of shortterm adjustment problems in the economy. The “New Keynesian” label refers back to the “rigid wages” brand of Keynesian theory of 40 or 50 years ago. Except for this stress on inflexibilities this brand of contemporary macroeconomic theory has basically nothing Keynesian about it.

51BMduFh0cL._SX373_BO1,204,203,200_The obvious objection to this kind of return to an earlier way of thinking about macroeconomic problems is that the major problems that have had to be confronted in the last twenty or so years have originated in the financial markets – and prices in those markets are anything but “inflexible”. But there is also a general theoretical problem that has been festering for decades with very little in the way of attempts to tackle it. Economists talk freely about “inflexible” or “rigid” prices all the time, despite the fact that we do not have a shred of theory that could provide criteria for judging whether a particular price is more or less flexible than appropriate to the proper functioning of the larger system. More than seventy years ago, Keynes already knew that a high degree of downward price flexibility in a recession could entirely wreck the financial system and make the situation infinitely worse. But the point of his argument has never come fully to inform the way economists think about price inflexibilities …

I began by arguing that there are three things we should learn from Keynes … The third was to ask whether events provedthat existing theory needed to be revised. On that issue, I conclude that dynamic stochastic general equilibrium theory has shown itself an intellectually bankrupt enterprise. But this does not mean that we should revert to the old Keynesian theory that preceded it (or adopt the New Keynesian theory that has tried to compete with it). What we need to learn from Keynes, instead, are these three lessons about how to view our responsibilities and how to approach our subject.

Axel Leijonhufvud a ‘New Keynesian’? Forget it!

Statistics and mathematics — not very helpful for understanding economies

15 Aug, 2019 at 09:53 | Posted in Economics | 1 Comment

Statistical science is not really very helpful for understanding or forecasting complex evolving self-healing organic ambiguous social systems – economies, in other words.

leamer1 zoomedA statistician may have done the programming, but when you press a button on a computer keyboard and ask the computer to find some good patterns, better get clear a sad fact: computers do not think. They do exactly what the programmer told them to do and nothing more. They look for the patterns that we tell them to look for, those and nothing more. When we turn to the computer for advice, we are only talking to ourselves …

Mathematical analysis works great to decide which horse wins, if we are completely confident which horses are in the race, but it breaks down when we are not sure. In experimental settings, the set of alternative models can often be well agreed on, but with nonexperimental economics data, the set of models is subject to enormous disagreements. You disagree with your model made yesterday, and I disagree with your model today. Mathematics does not help much resolve our internal intellectual disagreements.

Ed Leamer

Indeed. As social researchers we should never equate science with mathematics and statistical calculation. All science entail human judgement, and using mathematical and statistical models don’t relieve us of that necessity. They are no substitutes for doing real science. .

amathMathematics is one valuable tool among other valuable tools for understanding and explaining things in economics.

What is, however, totally wrong, are the utterly simplistic beliefs that

• “math is the only valid tool”

• “math is always and everywhere self-evidently applicable”

• “math is all that really counts”

• “if it’s not in math, it’s not really economics”

And in case you think this critique is some odd outcome of heterodox idiosyncrasy, well, maybe you should think twice …

einstein

Low interest rates and leveraged loans — a dangerous combination

14 Aug, 2019 at 00:11 | Posted in Economics | Leave a comment

lowintA la longue, l’environnement de taux d’intérêt très bas a fini par désorienter les investisseurs et les professionnels des marchés financiers. Puisque placer de l’argent dans des fonds obligataires ne rapporte quasiment rien et que de nombreux titres s’échangent désormais sur des niveaux de taux de rendement négatifs, les hedge funds, mais aussi de grandes compagnies d’assurances et des fonds de pension se sont mis en quête d’actifs plus risqués …

Problème : le niveau de rendement des actifs risqués a lui aussi fondu, laissant l’investisseur sans points de repère. « Nous sommes dans une zone dangereuse. Entre 2005 et 2007, la prime de risque avait également disparu. Dans un tel contexte, le danger est qu’une panique se déclenche, et que tous les investisseurs cherchent à vendre », prévient David Benamou.

Aux Etats-Unis, la ruée sur les leveraged loans, des « prêts à effet de levier » accordés à des entreprises déjà très endettées, témoigne de cet appétit pour les actifs aux rendements plus élevés « …

Même si les banques semblent aujourd’hui moins directement exposées à ces prêts à risque qu’elles ne l’étaient aux subprimes en 2007-2008, « le marché des leveraged loans aux Etats-Unis pourrait jouer un rôle amplificateur lors de chocs macroéconomiques ou financiers touchant les Etats-Unis », concluent les économistes sur « Bloc-notes éco ».

Tant que l’économie américaine tient, le risque reste contenu. Un scénario catastrophe n’est toutefois pas à exclure.

Véronique Chocron / Le Monde

No reality, please. We’re economists!

13 Aug, 2019 at 17:59 | Posted in Economics | 1 Comment

Mathematics, especially through the work of David Hilbert, became increasingly viewed as a discipline properly concerned with providing a pool of frameworks for possible realities. No longer was mathematics seen as the language of (non-social) nature, abstracted from the study of the latter. Rather, it was conceived as a practice concerned with formulating systems comprising sets of axioms and their deductive consequences, with these systems in effect taking on a life of their own. The task of finding applications was henceforth regarded as being of secondary importance at best, and not of immediate concern.

ffullbrookThis emergence of the axiomatic method removed at a stroke various hitherto insurmountable constraints facing those who would mathematise the discipline of economics. Researchers involved with mathematical projects in economics could, for the time being at least, postpone the day of interpreting their preferred axioms and assumptions. There was no longer any need to seek the blessing of mathematicians and physicists or of other economists who might insist that the relevance of metaphors and analogies be established at the outset. In particular it was no longer regarded as necessary, or even relevant, to economic model construction to consider the nature of social reality, at least for the time being …

The result was that in due course deductivism in economics, through morphing into mathematical deductivism on the back of developments within the discipline of mathematics, came to acquire a new lease of life, with practitioners (once more) potentially oblivious to any inconsistency between the ontological presuppositions of adopting a mathematical modelling emphasis and the nature of social reality. The consequent rise of mathematical deductivism has culminated in the situation we find today.

Tony Lawson

I think the ‘confidence’ mainstream economists have in their own theories and models, basically is a question of methodology. When applying deductivist thinking to economics, economists usually set up “as if” models based on a set of tight axiomatic assumptions from which consistent and precise inferences are made. The snag is that if the models are to be relevant, we also have to argue that their precision and rigour still holds when they are applied to real-world situations. They often don’t. When addressing real economies, the idealizations necessary for the deductivist machinery to work, simply don’t hold.

keynes-right-and-wrong

The world as we know it​ has limited scope for certainty and perfect knowledge. Its intrinsic and almost unlimited complexity and the interrelatedness of its organic parts prevent the possibility of treating it as constituted by ‘atoms’ with discretely distinct and stable causal relations. Our knowledge accordingly has to be of a rather fallible kind.

To search for precision and rigour in such a world is self-defeating, at least if precision and rigour are supposed to assure external validity. The only way to defend such an endeavour is to take a blind eye to ontology and restrict oneself to prove things in closed model-worlds. Why we should care about these and not ask questions of relevance is hard to see. We have to at least justify our disregard for the gap between the nature of the real world and our theories and models of it.

Deductivist closed-system theories, as all the varieties of the Walrasian general equilibrium kind, could perhaps adequately represent an economy showing closed-system characteristics. But since the economy clearly has more in common with an open-system ontology we ought to look out for other theories — theories who are rigorous and precise in the meaning that they can be deployed for enabling us to detect important causal mechanisms, capacities and tendencies pertaining to deep layers of the real world.

Rigour, coherence and consistency have to be defined relative to the entities for which they are supposed to apply. Too often they have been restricted to questions internal to the theory or model. But clearly,​ the nodal point has to concern external questions, such as how our theories and models relate to real-world structures and relations. Applicability rather than internal validity ought to be the arbiter of taste.

Die ‘Schwarze Null’ ist eine falsche Ideologie

12 Aug, 2019 at 13:04 | Posted in Economics | Leave a comment

 

Joan Robinson on why it is so import to study economics

10 Aug, 2019 at 13:26 | Posted in Economics | 2 Comments

robinson The purpose of studying economics is not to acquire a set of ready-made answers to economic questions, but to learn how to avoid being deceived by economists.

Die ‘Schwarze Null’ wackelt

10 Aug, 2019 at 09:45 | Posted in Economics | 1 Comment

 

Yes indeed — the government’s penny pinching is insane.

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.

The 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.

No matter how much confidence you have in the policies pursued by authorities nowadays, it cannot turn bad austerity policies into good job creating policies. Austerity measures and overzealous and simple-minded fixation on monetary measures and inflation ​are not what it takes to get our limping economies out of their present-day limbo. austerity22They simply do not get us out of the ‘magneto trouble’ — and neither does budget deficit discussions where economists and politicians seem to think that cutting government budgets would help us out of recessions and slumps. In a situation where monetary policies have​ become more and more decrepit, the solution is not fiscal austerity, but fiscal expansion!

We are not going to get out of the present economic doldrums as long as we continue to be obsessed with the insane idea that austerity is the universal medicine. When an economy is already hanging on the ropes, you can’t just cut government spendings. Cutting government expenditures reduces aggregate demand. Lower aggregate demand means lower tax revenues. Lower tax revenues mean​ increased deficits — and calls for even more austerity. And so on, and so on …

Joan Robinson — de Keynes à Marx

9 Aug, 2019 at 14:00 | Posted in Economics | Leave a comment

Cadette de vingt ans de Keynes, qui était déjà un personnage célèbre, elle ne craignait pas de le critiquer, parfois avec virulence, comme en fait foi leur correspondance. Elle faisait partie de ceux que Keynes respectait et dont il acceptait les critiques. Dans un article paru dans le premier numéro d’Economie appliquée, en 1949, elle explique que l’expression ” théorie générale ” désigne une oeuvre collective, élaborée à Cambridge depuis le début des années 30 par plusieurs personnes.

robinsonAvec les années, Joan Robinson considérait que le contenu révolutionnaire du message de Keynes s’était affadi, que la révolution keynésienne avait avorté … Avec les années, Joan Robinson considérait que le contenu révolutionnaire du message de Keynes s’était affadi, que la révolution keynésienne avait avorté. Elle qualifiait de ” keynésiens bâtards ” les auteurs de la synthèse entre keynésianisme et théorie néoclassique, qui s’est imposée comme paradigme dominant dans l’après-guerre. Prônant un keynésianisme radical, tant sur le plan politique que théorique, Joan Robinson s’est imposée comme leader d’un courant de pensée qu’on qualifie maintenant de post-keynésien. Dans une Lettre ouverte d’une keynésienne à un marxiste, publiée en 1953, elle se décrit comme une keynésienne de gauche, ajoutant que c’est une catégorie qui comprend très peu de membres …

Contrairement aux économistes néoclassiques, Marx s’est intéressé, selon elle, aux vrais problèmes de l’économie : croissance, crises et chômage. Il a découvert que ces problèmes n’étaient pas des accidents de parcours, mais des dysfonctionnements reliés à la nature même du capitalisme. Joan Robinson nous a dit qu’elle considérait la distinction entre forces productives et rapports de production comme la plus importante découverte de Marx. Bien sûr, elle s’est attirée avec ce livre et d’autres articles sur Marx les foudres des marxistes orthodoxes, ce qui ne l’a jamais empêchée de dormir.

Gilles Dostaler / Alternatives Economiques

L’équilibre général depuis Sonnenschein-Mantel-Debreu

8 Aug, 2019 at 15:10 | Posted in Economics | 4 Comments

La question est de savoir si, partant toujours d’une situation qui n’est pas un équilibre, la variation des prix amène à un équilibre … Les théoriciens de l’équilibre général ont fait apparaître, dans les années 1970, les difficultés rencontrées dans la formalisation du processus supposé mener à un équilibre et ont abouti à un résultat négatif : il n’est pas possible d’affirmer, même dans le modèle de concurrence parfaite, que le processus est stable, c’est-à-dire qu’il conduit effectivement à l’équilibre …

pignolLes théoriciens de l’équilibre général ont donc formulé la question de la stabilité dans les termes suivants : peut-on élaborer des hypothèses sur les agents dont on puisse déduire des propriétés sur les fonctions de demande nette agrégée qui garantiraient la stabilité de l’équilibre ? La réponse est négative. Le théorème établi par Hugo Sonnenschein en 1973, et généralisé par Rolf Mantel et Gérard Debreu, montre qu’on ne peut établir aucune propriété des demandes nettes agrégées qui assure la stabilité de l’équilibre. Les hypothèses sur les fonctions de demande nette agrégée nécessaires à la stabilité (par exemple, l’hypothèse de substituabilité brute) ne sont pas fondées microéconomiquement. On peut certes énoncer des conditions qui assurent la stabilité, mais elles sont arbitraires : on ne peut les déduire de l’axiomatique des comportements individuels.

La conclusion est que l’on n’a aucune idée de la manière dont un mécanisme de prix concurrentiel peut mener à l’équilibre. La théorie de l’équilibre général ne fournit aucun résultat appuyant l’idée selon laquelle un système de libre concurrence, dans lequel les prix sont flexibles et varient selon la loi de l’offre et de la demande, converge vers l’équilibre. Même en acceptant toutes les hypothèses, la théorie de l’équilibre général n’a pas démontré la capacité du système des prix à coordonner efficacement les décisions des agents économiques.

Claire Pignol / Alternatives Economiques

I can’t but agree with Pignol here. You could, of course, as Brad DeLong has asserted, consider modern mainstream economics to be in fine shape “as long as it is understood as the ideological and substantive legitimating doctrine of the political theory of possessive individualism” and if you manage to put a blind eye to all the caveats to its general equilibrium models — markets must be in equilibrium and competitive, the goods traded must be excludable and non-rival, etc, etc. The list of caveats soon becomes impressively large — and not very much value is left of modern mainstream economics if you ask me.

Still — a century and a half after Léon Walras founded neoclassical general equilibrium theory — modern mainstream economics hasn’t been able to show that markets move economies to equilibria.

We do know that — under very restrictive assumptions — equilibria do exist, are unique and Pareto-efficient. One, however,​ has to ask oneself — what good does that do?

It’s strange that mainstream macroeconomists still stick to a general equilibrium paradigm more than forty years after the Sonnenschein-Mantel-Debreu theorem — devastatingly showed that it is​ an absolute non-starter for building realist and relevant macroeconomics.

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 negligible. 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.

Stability​ that can only be proved by assuming Santa Claus conditions is of no avail. 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.

Susan Strange et Hyman Minsky sur le système financier capitaliste

8 Aug, 2019 at 14:23 | Posted in Economics | 5 Comments

Après la crise des subprime, les analyses théoriques de l’Américain Hyman Minsky (1919-1996) démontrant l’instabilité intrinsèque de la finance ont connu un regain d’intérêt. A l’inverse, les travaux de la Britannique Susan Strange (1923-1998), tout aussi prescients et beaucoup plus abordables, n’ont pas connu la même fortune … Pourtant, sa description de la finance comme un casino est devenue un lieu commun. Et ses deux ouvrages sur le sujet, publiés en 1986 et 1998 font preuve d’une profondeur d’analyse dont les économistes feraient bien de s’inspirer.

Strange-Susan-2« Le système financier capitaliste se rapproche rapidement de rien de moins qu’un vaste casino », écrit Strange dès 1986. Les joueurs ont le choix des paris : l’évolution des taux de change, des taux d’intérêt, des actions, etc. Mais ce sont les grands banquiers qui tiennent la maison et qui, à la fin, empochent les mises.

Problème, ce casino est très instable et à la différence d’« un casino ordinaire dans lequel vous pouvez décider d’aller ou pas, dans celui de la haute finance, nous sommes tous des joueurs quotidiens involontaires ». Quand la crise financière frappe et que l’économie s’effondre, chacun peut perdre son emploi, même s’il n’a pas demandé à jouer.

La conclusion est claire : « Au lieu de nous offrir une protection contre les incertitudes de la vie, la finance est devenue elle-même une source d’incertitude. » Elle est devenue hypertrophiée par rapport à l’économie réelle et c’est le résultat d’un développement spé­culatif, écrit-elle dès 1986.

Susan Strange critique depuis longtemps les économistes, en particulier leur refus de penser cette instabilité financière. Mais elle a bien repéré qu’Hyman Minsky était à part, étant l’un des rares à réfléchir au sujet, même si elle souligne qu’en raisonnant en économie fermée, il se prive d’analyser les phénomènes de contagion à un niveau international.

Christian Chavagneux / Alternatives Economiques

Les dangers d’une guerre des monnaies

7 Aug, 2019 at 14:19 | Posted in Economics | Leave a comment

tupp Pour le moment, l’escalade est surtout verbale, mais elle présage le pire. En laissant – un peu – filer le yuan, lundi 5 août, Pékin a déclenché l’ire de Washington, qui a aussitôt formellement accusé la Chine de manipuler sa monnaie. Un tel reproche risque de « perturber gravement l’ordre financier international et de provoquer le chaos sur les marchés financiers », a répliqué la Chine, dès le lendemain. Les tensions commerciales s’enveniment encore et semblent en passe de se doubler d’une guerre des monnaies, au risque d’ébranler une économie mondiale déjà fragilisée …

Les deux pays trouveront peut-être un terrain d’entente. Mais l’escalade des derniers jours permet d’en douter. Au-delà des Tweet accusateurs de M. Trump et des communiqués offusqués de Pékin, l’attitude des deux parties laisse craindre qu’aucune n’a véritablement l’intention de trouver un accord à court terme. Déjà en campagne pour la présidentielle de 2020, M. Trump parie qu’une ligne dure vis-à-vis du géant asiatique lui permettra de gagner des points. Au sein de l’administration américaine, certains sont convaincus que l’entourage du leader chinois, Xi Jinping, attend que le milliardaire quitte le pouvoir pour négocier un accord plus favorable.

Le Monde

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