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Tag: economics

Irrational Expectations


by Geoff Mann (Viewpoint, April 2020, PDF)

However much upheaval the global COVID-19 pandemic has generated, a great deal more is coming. The economic disaster is already the object of frantic analysis, much of which tells us we can expect a bottom that matches or exceeds the Great Depression of the 1930s, at least as measured by conventional economic indicators like GDP, unemployment, and bankruptcies. This narrative provides the backbeat to the competing attempts to organize our attention during the passage through present and future trials.

While we are endlessly reminded that “we are all in this together”—a blatant act of false solidarity—many have also pointed out that we were never “all in this together” before the pandemic, we are not now, and it is quite possible we will emerge from this even less together than we were. At least in terms of wealth and income inequality, the prospects do not look good. The relatively well-off will weather the lockdown more comfortably and without the threat of eviction, debt default, and hunger, and they will return to better-paid and stable work more quickly.

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The Case Against a Basic Income


A universal basic income would shore up the market. We need ideas that shrink it.

In her campaign memoir What Happened, Hillary Clinton wrote that the idea of a universal basic income (UBI) for all Americans “fascinated” her. Reflecting on her wholly uninspiring campaign, she explained that she wanted to include it in her platform but “couldn’t make the numbers work,” so she dropped the idea.

She had planned to call it “Alaska for America,” referring to the Alaska Permanent Fund. Established in 1982, that program gives each of the state’s citizens an annual dividend from oil revenues. The idea gained popularity in the mid-sixties, and Nixon almost implemented it nationwide. American researchers conducted large-scale experiments in New Jersey, and a Canadian study took place in Winnipeg during the mid-seventies. At the time, the proposal produced heated debates in continental Europe and North America, but the decades that followed led to a slow but steady decline in support. The conservative preference for the “workfare” and “activation” policies that characterized welfare reform in the nineties — led by a different Clinton — turned basic income into a utopian fantasy.

But as interest in UBI from one of the planet’s most powerful political figures attests, the last ten years have given new life to the idea. Indeed, it’s now on the agenda of many movements and governments. For Philippe Van Parijs and Yannick Vanderborght, two of UBI’s leading proponents, “the conjunction of growing inequality, a new wave of automation, and a more acute awareness of the ecological limits to growth has made it the object of unprecedented interest throughout the world.”

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Capitalism and ecology: from the decline of capital to the decline of the world – Paul Mattick


‘Kapitalismus und Okologie’ (1976) by Paul Mattick, translated by Paul Mattick Jr. This article looks at ecological crisis, the Club of Rome’s ‘The Limits to Growth’, and the work of East German philosopher Wolfgang Harich.

The historical character of nature follows from the Second Law of thermodynamics, discovered more than a hundred years ago by Carnot and Clausius, spelling an increase in entropy ending in heat death. Our earthly life depends on the continuous supply of energy from solar radiation, which decreases with increasing entropy, however slowly. The period of time involved is indefinite from the human point of view, too gigantic to be taken into practical consideration. Nevertheless, the entropy law has a continuous, direct influence on the earth and therefore on the fate of humankind. Apart from the sun, the mineral wealth of the earth provides for the satisfaction of human energy needs. Its exploitation, however, hastens the transformation of “free” into “bound” energy, that is, energy no longer available for human use and degrading towards heat death. In other words, the available energy sources can only be utilized once. With their exhaustion human life would come to an end, and indeed very long before the cooling of the sun, as all the natural riches of the earth contain no more energy than two days’ sunlight.

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The Rate of Return on Everything, 1870-2015


This paper answers fundamental questions that have preoccupied modern economic thought since the 18th century. What is the aggregate real rate of return in the economy? Is it higher than the growth rate of the economy and, if so, by how much? Is there a tendency for returns to fall in the long-run? Which particular assets have the highest long-run returns? We answer these questions on the basis of a new and comprehensive dataset for all major asset classes, including—for the first time—total returns to the largest, but oft ignored, component of household wealth, housing. The annual data on total returns for equity, housing, bonds, and bills cover 16 advanced economies from 1870 to 2015, and our new evidence reveals many new insights and puzzles.


by Òscar JordàKatharina KnollDmitry KuvshinovMoritz SchularickAlan M. Taylor

NBER Working Paper No. 24112 / Issued in December 2017

The economics of Luther or Munzer?


by Michael Roberts (TheNextRecession)

Last week leading leftist economists in the UK held a seminar on the state of mainstream economics, as taught in the universities.  They kicked this off by nailing a poster with 33 theses critiquing mainstream economics to the door of the London School of Economics.  This publicity gesture attempted to remind us that it was the 500th anniversary of when Martin Luther nailed his 95 theses to the Castle Church, Wittenberg and provoked the beginning of the Protestant reformation against the ‘one true religion’ of Catholicism.

The economists were purporting to tell us that mainstream economics was like Catholicism and must be protested against as Luther did back in 1517.  As they put it, “Economics is broken.  From climate change to inequality, mainstream (neoclassical) economics has not provided the solutions to the problems we face and yet it is still dominant in government, academia and other economic institutions. It is time for a new economics.”

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Climate Change: What is to be Done?

Marx, Capital and the Madness of Economic Reason

Marx, Capital and the Madness of Economic Reason
London School of Economics and Political Science (LSE)
18 September 2017

Description from LSE:
Leading Marxist scholar David Harvey discusses the profound insights and enormous power Marx’s analysis continues to offer 150 years after the first volume of Capital was published. His latest book is Marx, Capital and the Madness of Economic Reason.

David Harvey (@profdavidharvey) is Distinguished Professor of Anthropology at the City University of New York Graduate School and an Honorary Graduate of LSE. His course on Marx’s Capital, developed with students over thirty years, has been downloaded by people from all over the world.

Hyun Bang Shin (@urbancommune) is Associate Professor of Geography and Urban Studies at LSE.

The LSE Department of Geography & Environment (@LSEGeography) is a center of international academic excellence in economic, urban and development geography, environmental social science and climate change.

David Harvey and Robert Brenner

Robert Brenner and David Harvey held this conversation December 1, 2016, at the CUNY Graduate Center. The event was hosted by the Center for Place, Culture and Politics.

Here is the full conference, divided into 3 parts.

Part 1:

Part 2:

Part 3:

What is wrong with free money?


by Gruppen Gegen Kapital und Nation

Proposals for a Universal Basic Income or Citizen Income and variants thereof enjoy sympathy from different camps: from conservatives like Richard Nixon1, from libertarians who consider themselves disciples of the free market2, from liberals like Martin Wolf3, from social democrats like Paul Krugman4 and from people who consider themselves Marxists5.

However, what each of these proponents actually mean and want with a Universal Basic Income is wildly divergent. Centrally, the Marxists want an end to the “compulsion to work”, liberals and libertarians rather want to provide “incentives to work”.

Yet, despite these differing and at times opposing aims, these proposals share more than just a name: they share wrong premises about the capitalist mode of production and the state which watches over it.

In the following we want to first critique these shared wrong premises about productivity, the welfare state and the budget. Then, we draw out the contradiction of some left-wing supporters who, on the one hand, insist on unity with libertarian, liberal and social democratic Universal Basic Income proposals in order to acquire a whiff of seriousness and, on the other hand, continuously deny this unity.

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Money and Totality


Michael Roberts reviews Fred Moseley’s new book, Money and Totality, Brill, 2016

One of the major trends in the world economy in the last two years has been the collapse of the price of oil in world markets. From a peak of over $100 a barrel, the price plummeted to under $30 a barrel and is still only around $40. The explanation for this fall, as provided by mainstream economics, is simple. There has been a change in the supply and demand for oil. Economists then go on to discuss which is the more important factor: supply increasing or demand falling.

But this analysis of the price of a commodity and what is it is worth at the level of supply and demand – as taught in all economics textbooks in colleges – is superficial at best. There is a joke in financial investor circles, when discussing why the stock price of a particular company has suddenly fallen: ‘Well, there were more sellers than buyers’ – true to the point of tautology.

What explains why a barrel of oil is $40 and not $1? Why do 100 paper clips cost $1 and one car costs $20,000? In other words, we need to understand what something is worth in the marketplace beyond just supply and demand; we need a theory of value. From that, we can begin to explain the workings of a capitalist economy, where everything is produced for sale. And if we can measure changes in value we can begin to understand the laws of motion of a capitalist economy – and, Marxist economics would add, its key contradictions, because Marxist economics is not so interested in the changes in the price of one commodity as in the nature and causes of the overall trends and fluctuations in an economy. That is, macroeconomics – with a purpose.

Marxist value theory is based on the view that commodities are priced in the market according to the labour time expended on them. Actually, labour time is basic for all forms of social production by human beings. As Marx wrote,

Every child knows a nation which ceased to work, I will not say for a year, but even for a few weeks, would perish. Every child knows, too, that the masses of products corresponding to the different needs required different and quantitatively determined masses of the total labour of society. That this necessity of the distribution of social labour in definite proportions cannot possibly be done away with by a particular form of social production, but can only change the mode of its appearance, is self-evident. No natural laws can be done away with.1

But Marx goes on:

What can change in historically different circumstances is only the form in which these laws assert themselves. And the form in which this proportional distribution of labour asserts itself, in the state of society where the interconnection of social labour is manifested in the private exchange of the individual products of labour, is precisely the exchange value of these products.

This is why Marxist theory of value applies to capitalism, not previous modes of social organisation.

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Capitalism and Anwar Shaikh


The most important book on capitalism this year will be Anwar Shaikh’s Capitalism – competition, conflict, crises.

As one of the world’s leading economists who draws on Marx and the classical economists (‘political economy’, if you like), Anwar Shaikh has taught at The New School for Social Research for more than 30 years,authored three books and six-dozen articles.  This is his most ambitious work.  As Shaikh says, it is an attempt to derive economic theory from the real world and then apply it to real problems.  Shaikh applies the categories and theory of classical economics to all the major economic issues, including those that are supposed to be the province of mainstream economics, like supply and demand, relative prices in goods and services, interest rates, financial asset prices and technological change.

Shaikh says that his “approach is very different from both orthodox economics and the dominant heterodox tradition.”  He rejects the neoclassical approach that starts from “Perfect firms, perfect individuals, perfect knowledge, perfectly selfish behavior, rational expectations, etc.” and then “various imperfections are introduced into the story to justify individual observed patterns” although there “cannot be a general theory of imperfections”.  Shaikh rejects that approach and instead starts with actual human behavior instead of the so-called “Economic Man”, and with the concept of ‘real competition’ rather than ‘perfect competition’. Chapters 3 and 7-8 emphasize that.  It is the classical approach as opposed to the neoclassical one.

The book is a product of 15 years work, so it has taken longer to gestate than Marx took from 1855 to 1867 to deliver Capital Volume one.  But it covers a lot.  All theory is compared to actual data in every chapter, as well as to neoclassical and Keynesian/post-Keynesian arguments. A theory of ‘real competition’ is developed and applied to explain empirical relative prices, profit margins and profit rates, interest rates, bond and stock prices, exchange rates and trade balances.  Demand and supply are both shown to depend on profitability and interact in a way that is neither Say’s Law nor Keynesian, but based on Marx’s theory of value.  A classical theory of inflation is developed and applied to various countries.  A theory of crises is developed and integrated into macrodynamics.  That’s a heap of things.

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