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The Development of Macroeconomics and the Revolution in Finance
1 The Development of Macroeconomics and the Revolution in Finance Perry Mehrling August 26, 2005 Every graduate student learns a story about where modern macroeconomics came from, if only as context for the reading list he is supposed to master as part of his PhD coursework. Usually the story is about disciplinary progress, the slow building of the modern edifice one paper at a time by dedicated scientists not much older than the student himself. It is a story about the internal development of the field, a story intended to help the student make sense of the current disciplinary landscape and to prepare him for a life of writing and receiving referee reports. Exemplary stories of this type include Blanchard (2000) and Woodford (1999). So, for example, a typical story of the development of macroeconomics revolves around a series of academic papers: in the 1960s Muth, Phelps, and Friedman planted the seed from which Robert Lucas and others developed new classical macroeconomics in the 1970s, from which Ed Prescott and others developed real business cycle theory in the 1980s, from which Michael Woodford and others in the 1990s produced the modern new neoclassical synthesis.1 As a pedagogical device, this kind of story has its use, but as history of ideas it leaves a lot to be desired. In fact, as I shall argue, neoKeynesian macroeconomics circa 1965 was destabilized not by the various internal theoretical problems that standard pedagogy emphasizes, but rather by fundamental changes in the institutional structure of the world 1 Muth (1961), Phelps (1968), Friedman (1968); Lucas (1975, 1976, 1977); Kydland and Prescott (1982), Long and Plosser (1983); Woodford (2003). -
Fundamentals of Money and Banking.Pptx
Fundamentals of Money and Banking Alfredo Schclarek Curutchet National University of Córdoba, Argentina National Scientific and Technical Research Council (CONICET), Argentina www.cbaeconomia.com The 24th NSE International Development Forum INSE, PKU August 9, 2018 1 Plan for presentation 1. Motivation 2. Visions of money 3. Money view 1. Hierarchy of monetary system 2. Fluctuation of monetary system 3. Liquidity and (in)stability of monetary system 4. Credit, money and investment 2 Motivation Recent international financial crisis (2007/2009) shows: Understand financial and banking system for macroeconomic analysis Mainstream theories (Neoclassical and NewKeynesian) not useful for: understanding, predicting and giving policy advise Not sufficient to incorporate credit frictions and banking sector in standard DSGE models Main problem: underlying theory of money 3 Visions of money Metalist: Jevons, Menger, von Mises, Kiyotaki, Wright, neo- classical and neo-keynesian Cartalist: Knapp, Mireaux, Goodhart, and post-Keynesian Money view: Perry Mehrling (Columbia University and Institute for New Economic Thinking) 4 Metalist Origin: Private sector (minimize transactions costs involved in barter and advantageous characteristics of the precious metals as a medium of exchange e.g., durability, divisibility, portability, etc.) Value of money: backing (gold, metals) Loss in value: reduction of gold and metals, relative to quantity money Quantity of money: exogenous, given by availability of gold and dollars Role of banks: only intermediaries -
Econometrics As a Pluralistic Scientific Tool for Economic Planning: on Lawrence R
Econometrics as a Pluralistic Scientific Tool for Economic Planning: On Lawrence R. Klein’s Econometrics Erich Pinzón-Fuchs To cite this version: Erich Pinzón-Fuchs. Econometrics as a Pluralistic Scientific Tool for Economic Planning: On Lawrence R. Klein’s Econometrics. 2016. halshs-01364809 HAL Id: halshs-01364809 https://halshs.archives-ouvertes.fr/halshs-01364809 Preprint submitted on 12 Sep 2016 HAL is a multi-disciplinary open access L’archive ouverte pluridisciplinaire HAL, est archive for the deposit and dissemination of sci- destinée au dépôt et à la diffusion de documents entific research documents, whether they are pub- scientifiques de niveau recherche, publiés ou non, lished or not. The documents may come from émanant des établissements d’enseignement et de teaching and research institutions in France or recherche français ou étrangers, des laboratoires abroad, or from public or private research centers. publics ou privés. Documents de Travail du Centre d’Economie de la Sorbonne Econometrics as a Pluralistic Scientific Tool for Economic Planning: On Lawrence R. Klein’s Econometrics Erich PINZÓN FUCHS 2014.80 Maison des Sciences Économiques, 106-112 boulevard de L'Hôpital, 75647 Paris Cedex 13 http://centredeconomiesorbonne.univ-paris1.fr/ ISSN : 1955-611X Econometrics as a Pluralistic Scientific Tool for Economic Planning: On Lawrence R. Klein’s Econometrics Erich Pinzón Fuchs† October 2014 Abstract Lawrence R. Klein (1920-2013) played a major role in the construction and in the further dissemination of econometrics from the 1940s. Considered as one of the main developers and practitioners of macroeconometrics, Klein’s influence is reflected in his application of econometric modelling “to the analysis of economic fluctuations and economic policies” for which he was awarded the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel in 1980. -
November 19, 2008 Letter
November 19, 2008 The Honorable Henry Reid The Honorable Nancy Pelosi Senate Majority Leader Speaker of the House Washington, DC 20510 Washington, DC 20515 The Honorable Mitch McConnell The Honorable John Boehner Senate Minority Leader House Minority Leader Washington, DC 20510 Washington, DC 20515 Dear Sen. Reid, Sen. McConnell, Speaker Pelosi, and Rep. Boehner: We, the undersigned economists, urge Congress to pass a new stimulus package as quickly as possible. The need to deal with financial turmoil has directed attention away from the "real" economy. But the latest data clearly show that the economy is entering a serious recession, initiated by the collapse of homebuilding and intensified by the paralysis of credit markets. Without a fast an effective response by government, the economy could continue to spiral downward, leading to a large increase in unemployment and a sharp decline in GDP. The potential severity of the downturn suggests that a boost to demand on the order of 2.0-3.0 percent of GDP ($300-$400 billion) would be appropriate, with the goal being to get this money spent quickly. The list of targets includes: a) aid to state and local governments that are being forced to make emergency cutbacks as revenues fall; b) extending unemployment insurance and increasing other benefits targeted toward low and moderate income households who are likely to spend quickly; c) moving forward infrastructure projects that have already been planned and scheduled; and d) providing tax credits and other support for "green" projects that can be done quickly, such as retrofitting homes and businesses for increased energy efficiency. -
Patinkin, the Cowles Commission, and the Theory of Unemployment and Aggregate Supply
Patinkin, the Cowles Commission, and the Theory of Unemployment and Aggregate Supply Mauro Boianovsky Universidade de Brasilia “For a long period before the writing of the first edition [of Money, Interest and Prices] I had been puzzled by the apparent contradiction between the intuitive feeling, on one hand, that there was a connection between a firm’s product-output and its labor-input, and the traditional demand curve for labor, on the other hand, that did not depend explicitly on output and whose sole independent variable was the real wage rate.” (Patinkin, 1989, p. xvi) 1. Introduction This paper offers an account of Don Patinkin’s long time quest for an explanation of the connection between a firm’s demand function for labour and its output. The task faced by Patinkin was how to make sense of an aggregate demand constraint and unemployment phenomena under the assumption that each firm is perfectly competitive (that is, it has a perfectly elastic demand for its output) and, therefore, can sell all it wants to sell at the current market price. The solution he eventually put forward in chapter XIII of his 1956 classic Money, Interest and Prices (henceforth MIP) was based on the notion that the influence of the representative firm’s output on its labour input is reflected in the form of the labour demand function, which features a kink at the employment level corresponding to aggregate demand. The view that unemployment is explained by the involuntary departure of firms from their commodity supply and labour demand curves became the hallmark of Patinkin’s contribution to the development of disequilibrium macroeconomics. -
The Vision of Hyman P. Minsky
Journal of Economic Behavior & Organization Vol. 39 (1999) 129–158 The vision of Hyman P. Minsky Perry Mehrling ∗ Barnard College, 3009 Broadway, New York NY 10027, USA Received 3 March 1998; received in revised form 20 July 1998; accepted 22 July 1998 Abstract ©1999 Elsevier Science B.V. All rights reserved. JEL classification: B3; E5 Keywords: Financial fragility; Financial instability; Speculation; Lender of last resort; Refinance On the mezzanine of Littauer, Schumpeter instructed about the primacy of vision: in particular that we — the young who engaged him in conversation — should develop our vision, we should have a view that in a sense is prescientific of what the game is about, about the way the beast functions, about the way the various parts of economics and social science are related and, yes, about our own maps of Utopia. Once we have a vision, then our control of theory, our command of institutional detail, and our knowledge of history are to be marshaled to support the vision...Schumpeter’s methodology of vision and theory, with theory a servant of vision, may seem cynical, but, in truth, it is honest. It is a way of systematizing thought so that dialogue could take place. The division between vision and technique leads to a recognition that we are marshaling evidence when we do theory, when we analyze data, and when we read history. Schumpeter’s methodology undercuts much of the pretentious nonsense about economics as a science and elevates the importance of discourse, of dialogue, and of just plain good talk for a serious study of society. -
Report September 2000 10/6/03 11:31 AM
Report September 2000 10/6/03 11:31 AM Report September 2000 Volume 10, Number 3 Conference on Saving, Intergenerational transfers, and the distribution of wealth As part of its research program into the causes of and solutions to income inequality, the Levy Institute held a conference from June 7 to 9 on the distribution of wealth. The conference was organized by Senior Scholar Edward N. Wolff. Brief notes on the participants' remarks are given here. CONTENTS Conference Saving, Intergenerational Transfers, and the Distribution of Wealth Workshop on Earnings Inequality Editorial Monetarism is Finally Dead, RIP New Working Papers Trends in Direct Measures of Job Skill Requirements Kaleckian Models of Growth in a Stock-Flow Monetary Framework: A Neo- Kaldorian Model "It" Happened, But Not Again: A Minskian Analysis of Japan's Lost Decade Family Structure, Race, and Wealth Ownership: A Longitudinal Exploration of Wealth Accumulation Processes Can European Banks Survive a Unified Currency in a Nationally Segmented Capital Market? Household Savings in Germany An Examination of the Changes in the Distribution of Wealth from 1989 to 1998: Evidence from the Survey of Consumer Finances Discontinuities in the Distribution of Great Wealth: Sectoral Forces Old and New file://localhost/Volumes/wwwroot/docs/report/rptsep00.html Page 1 of 25 Report September 2000 10/6/03 11:31 AM Profits: The Views of Jerome Levy and Michal Kalecki New Policy Notes Welfare College Students: Measuring the Impact of Welfare Reform Health Care Finance in Need of Rethinking Can the Expansion Be Sustained? A Minskian View Drowning in Debt Levy Institute News Lecture Steve Keen: Toward a General Model of Debt Deflation New Staff Event Publications and Presentations Publications and Presentations by Levy Institute Scholars The Jerome Levy Economics Institute of Bard College, founded in 1986, is a nonprofit, nonpartisan, independently funded research organization devoted to public service. -
Don Patinkin's Ph.D. Dissertation As the Prehistory of Disequilibrium
View metadata, citation and similar papers at core.ac.uk brought to you by CORE provided by Archive Ouverte a LUniversite Lyon 2 Don Patinkin's Ph.D. dissertation as the prehistory of disequilibrium theories Goulven Rubin To cite this version: Goulven Rubin. Don Patinkin's Ph.D. dissertation as the prehistory of disequilibrium theories. 2010. <halshs-00636821> HAL Id: halshs-00636821 https://halshs.archives-ouvertes.fr/halshs-00636821 Submitted on 28 Oct 2011 HAL is a multi-disciplinary open access L'archive ouverte pluridisciplinaire HAL, est archive for the deposit and dissemination of sci- destin´eeau d´ep^otet `ala diffusion de documents entific research documents, whether they are pub- scientifiques de niveau recherche, publi´esou non, lished or not. The documents may come from ´emanant des ´etablissements d'enseignement et de teaching and research institutions in France or recherche fran¸caisou ´etrangers,des laboratoires abroad, or from public or private research centers. publics ou priv´es. Don Patinkin’s Ph.D. dissertation as the prehistory of disequilibrium theories Goulven Rubin ♦♦♦ Revised for HOPE, july 2010. This work is the outgrowth of ideas first presented in a doctoral dissertation submitted to the University of Chicago in 1947 and then further developed in a series of articles published in various journals and anthologies through the years 1948 to 1954. (1956: vii) The opening sentence of Money, Interest, and Prices , has attracted the attention of most scholars who wrote about Don Patinkin’s works in recent years. As shown by Boianovsky (2006), Merhling (2002) or Rubin (2002a), reading Patinkin’s doctoral dissertation shed new light on his major work. -
Paul Samuelson's Ways to Macroeconomic Dynamics
A Service of Leibniz-Informationszentrum econstor Wirtschaft Leibniz Information Centre Make Your Publications Visible. zbw for Economics Boianovsky, Mauro Working Paper Paul Samuelson's ways to macroeconomic dynamics CHOPE Working Paper, No. 2019-08 Provided in Cooperation with: Center for the History of Political Economy at Duke University Suggested Citation: Boianovsky, Mauro (2019) : Paul Samuelson's ways to macroeconomic dynamics, CHOPE Working Paper, No. 2019-08, Duke University, Center for the History of Political Economy (CHOPE), Durham, NC This Version is available at: http://hdl.handle.net/10419/196831 Standard-Nutzungsbedingungen: Terms of use: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Documents in EconStor may be saved and copied for your Zwecken und zum Privatgebrauch gespeichert und kopiert werden. personal and scholarly purposes. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle You are not to copy documents for public or commercial Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich purposes, to exhibit the documents publicly, to make them machen, vertreiben oder anderweitig nutzen. publicly available on the internet, or to distribute or otherwise use the documents in public. Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, If the documents have been made available under an Open gelten abweichend von diesen Nutzungsbedingungen die in der dort Content Licence (especially Creative Commons Licences), you genannten Lizenz gewährten Nutzungsrechte. may exercise further usage rights as specified in the indicated licence. www.econstor.eu Paul Samuelson’s Ways to Macroeconomic Dynamics by Mauro Boianovsky CHOPE Working Paper No. 2019-08 May 2019 Electronic copy available at: https://ssrn.com/abstract=3386201 1 Paul Samuelson’s ways to macroeconomic dynamics Mauro Boianovsky (Universidade de Brasilia) [email protected] First preliminary draft. -
Market Liquidity and Hence Ultimately on Dealer of Last Liquidity by Quoting Two-Way Markets, but Resort
Three Principles for Market-Based Credit Regulation By PERRY MEHRLING* * Mehrling: Barnard College, Columbia University, 3009 Broadway, New York NY 10027 (e-mail: [email protected]). I. Back to Basics Thanks to Aaron Brown, Tom Michl, Daniel Neilson, and Zoltan Pozsar for helpful comments. The Bagehot Rule for handling financial Over the last three decades, a new market- crisis—“lend freely but at a high rate”—was based credit system has grown up to become Bagehot’s attempt to distill the principles of larger than the traditional bank-based credit central bank practice as that practice had system, only to mark that achievement in 2007 developed organically over the previous fifty with a financial crisis of its very own. Some years (Bagehot 1873). Today the Bagehot say the crisis was a “Minsky moment” when Rule is where everyone starts when thinking the inherent instability of credit—market- about the role of the central bank, even if most based credit as well as bank-based credit— subsequent discussion is about how to avoid was revealed for all to see. While not crisis in the first place. necessarily disagreeing with that formulation, My concern about this near-universal I prefer to emphasize that it was a “Bagehot framing of the problem is that the world moment” when the Fed was forced to put Bagehot was thinking about is, in crucial aside its inflation fine-tuning and go back to respects, not the world we are dealing with basics. In retrospect, it was the actions of the today. Bagehot was all about the 19th century Fed, more than anything else, that put a floor bill market; our new market-based credit on the crisis. -
Irving Fisher and His Compensated Dollar Plan
Irving Fisher and His Compensated Dollar Plan Don Patinkin his is a story that illustrates the interrelationship between economic his- tory and economic thought: more precisely, between monetary history T and monetary thought. So let me begin with a very brief discussion of the relevant history. In 1879, the United States returned to the gold standard from which it had departed at the time of the Civil War. This took place in a period in which “a combination of events, including a slowing of the rate of increase of the world’s stock of gold, the adoption of the gold standard by a widening circle of countries, and a rapid increase in aggregate economic output, produced a secular decline ˙.. in the world price level measured in gold˙...” (Friedman and Schwartz 1963, p. 91; for further details, see Friedman 1990, and Laidler 1991, pp. 49–50). The specific situation thus generated in the United States was de- scribed by Irving Fisher (1913c, p. 27) in the following words: “For a quarter of a century—from 1873 to 1896—the dollar increased in purchasing power and caused a prolonged depression of trade, culminating in the political upheaval which led to the free silver campaign of 1896, when the remedy proposed was worse than the disease.” This was, of course, the campaign which climaxed with William J. Bryan’s famous “cross of gold” speech in the presidential election of 1896. Fisher’s view of this campaign reflected the fact that it called for the unlimited coinage of silver at a mint price far higher than its market value, a policy that would have led to a tremendous increase in the quantity of money and the consequent generation of strong inflationary pressures. -
The Monetary and Fiscal Nexus of Neo-Chartalism: a Friendly Critique
JOURNAL OF ECONOMIC ISSUES Vol. XLVII No. 1 March 2013 DOI 10.2753/JEI0021-3624470101 The Monetary and Fiscal Nexus of Neo-Chartalism: A Friendly Critique Marc Lavoie Abstract: A number of post-Keynesian authors, called the neo-chartalists, have argued that the government does not face a budget constraint similar to that of households and that government with sovereign currencies run no risk of default, even with high debt-to-GDP ratio. This stands in contrast to countries in the eurozone, where the central bank does not normally purchase sovereign debt. While these claims now seem to be accepted by some economists, neo-chartalists have also made a number of controversial claims, including that the government spends simply by crediting a private-sector-bank account at the central bank; that the government does need to borrow to deficit-spend; and that taxes do not finance government expenditures. This paper shows that these surprising statements do have some logic, once one assumes the consolidation of the government sector and the central bank into a unique entity, the state. The paper further argues, however, that these paradoxical claims end up being counter-productive since consolidation is counter-factual. Keywords: central bank, clearing and settlement system, eurozone, neo-chartalism JEL Classification Codes: B5, E5, E63 The global financial crisis has exposed the weaknesses of mainstream economics and it has given a boost to heterodox theories, in particular, Keynesian theories. The mainstream view about the irrelevance of fiscal activism has been strongly criticized by the active use of fiscal policy in the midst of the global financial crisis.