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In the last 24 hours, two big news stories regarding the economic impact of the Covid-19 pandemic have broken. The first is news that the Senate has passed a $2 trillion stimulus package that legislators claim is intended to alleviate the economic damage caused by the responses to the unfolding pandemic: closures of schools and businesses as well as the social isolation of much of the population. The second–a reported 3 million new unemployment claims in the last week alone–is a direct result of the aforementioned responses, as businesses close, events and travel plans are canceled and those who can remain isolated in their homes wondering which will run its course first: the supply of binge-able content on Netflix or the pandemic.

Pavlina Tcherneva recently participated in a hearing before a parliamentary group (La France insoumise) of France’s National Assembly on the subject of the Green New Deal and the job guarantee (the intro is in French; Tcherneva’s testimony is in English): [iframe width=”485″ height=”274″ src=”https://www.youtube.com/embed/csyE46OeS8Q” frameborder=”0″ allow=”accelerometer; autoplay; encrypted-media; gyroscope; picture-in-picture” allowfullscreen></iframe]

In this rare video from 1987 (there is very little surviving footage of Minsky discussing his work), Hyman Minsky summarizes his theory of the financial fragility at the heart of modern capitalist economies: [iframe width=”486″ height=”364″ src=”https://www.youtube.com/embed/9mHBrixVarU” frameborder=”0″ allow=”accelerometer; autoplay; encrypted-media; gyroscope; picture-in-picture” allowfullscreen></iframe] This was part of an event in Bogotá, Colombia (which is discussed in this working paper by Iván D. Velasquez).

The Hyman P. Minsky Summer Seminar Levy Economics Institute of Bard College Blithewood Annandale-on-Hudson, N.Y. June 7–13, 2020 The Levy Economics Institute of Bard College is pleased to announce the 11th Minsky Summer Seminar will be held from June 7–13, 2020. The Seminar will provide a rigorous discussion of both the theoretical and applied aspects of Minsky’s economics, with an examination of meaningful prescriptive policies relevant to the current economic and financial outlook. It will also provide special sessions introducing the theory and applications of Wynne Godley’s stock-flow consistent modeling methods, supported by hands-on workshops. The Summer Seminar will be of particular interest to graduate students, recent graduates, and those at the beginning of their academic or professional careers. The teaching staff will include international economists working in the theory and policy tradition of Hyman Minsky and Wynne Godley. Applications may be made to Kathleen Mullaly at the Levy Institute ([email protected]), and should include a letter of application and current curriculum vitae. Admission to the Summer Seminar will include provision of room and board on the Bard College campus. The registration fee for the Seminar will be $375. Due to limited space availability, the Seminar will be limited to 30 participants; applications will be reviewed on a rolling basis starting in January 2019.

Bloomberg Businessweek‘s Cristina Lindblad and Peter Coy sat down with L. Randall Wray for an in-depth interview on Modern Monetary Theory: [iframe src=”https://www.bloomberg.com/multimedia/api/embed/iframe?id=081295ee-e45c-4dae-a380-2989a5ad4c23″ allowscriptaccess=”always” frameborder=”0″></iframe]

We are grieved to announce that Nina Shapiro, Professor of Economics Emeritus at St. Peter’s College, passed away on March 6. Nina was one of the first Levy Institute Visiting Scholars and a major contributor to the field of post-Keynesian economics. She passed away last week at the age of 71 from complications due to cancer. Nina was best known for her work on the post-Keynesian theory of the firm and innovation, as well as the history of economic thought and macroeconomic theory. Her work was rooted in the tradition of Marx, Keynes, Kalecki, and Steindl. She was a deeply creative thinker who connected Marxian and Marshallian ideas on competition with the macroeconomics of Keynes and Steindl. An essay published at the start of her career—“The Revolutionary Character of Post Keynesian Economics” (Journal of Economic Issues, 1977)—made an enduring case for the rejection of scarcity as the basis for economic analysis. She was a founding member of the Editorial Board of The Journal of Post-Keynesian Economics and at the time of her death was at work on a book on the theory of the firm. Trained in the nascent political economy doctoral program of The New School for Social Research with Edward Nell, Robert Heilbroner, David Gordon, and Anwar Shaikh, she was a part of the Rutgers University Livingston College… Read More

The New Keynesian monetary mainstream has brought out the big guns. Paul Krugman, Kenneth Rogoff, and Larry Summers have come out to shoot down the rising star known as “MMT,” which stands for Modern Monetary Theory. For a while, it was academically convenient to withhold paying any public attention that could foster competition in the field. Like other non-mainstream ideas in economics, MMT was simply ignored by our star mainstream economists, who are always ready and keen to lend their wisdom and advice for public action. Now that MMT has reached the public debate through arousing interest among powerful public voices, fostering political debate about available policy options, protecting the mainstream monopoly of opinion has prompted them to take aim at MMT. The key issues in the battle of ideas between Paul Krugman (New Keynesian monetary mainstream of the IS/LM variety) and Stephanie Kelton (MMT) are out there for everyone to see (see Krugman, Feb. 12th; Kelton, Feb. 21st; Krugman, Feb. 25th; and Kelton, Mar. 4th). It is noteworthy that the two do not seem to be all too far apart regarding their preferred policy agenda. At its core, the controversy really concerns monetary theory – including the question of what kind of money and monetary economy any relevant monetary theory should theorize about. Regarding this particular battle, I will… Read More

This year’s Minsky conference will be a one-day affair, featuring keynote speakers that include St. Louis Fed President James Bullard, former PIMCO chief economist Paul McCulley (now Senior Fellow at Cornell Law), and First Vice President of the Minneapolis Fed, Ron Feldman. The Levy Institute’s Jan Kregel will be discussing reform of the eurozone system; Michalis Nikiforos will be presenting the upcoming strategic analysis for the US economy (using the Institute’s stock-flow model); and L. Randall Wray will be presenting on “Paying for a Green New Deal.” Financial Stability, Economic Policy, and Economic Nationalism A conference organized by the Levy Economics Institute of Bard College Levy Economics Institute of Bard College Blithewood Annandale-on-Hudson, New York 12504 April 17, 2019 Registration for the conference is now open. The preliminary program is attached below the fold. Further details are available here.

Public interest in Modern Monetary Theory (MMT) is undergoing a new growth spurt, and progressive politicians are playing a key role in the current phase. Rep. Ocasio-Cortez recently referenced the heterodox framework to push back against the assumption that her ambitious policy proposals must, as a matter of financial necessity, be made budget-neutral (an assumption, as Brendan Greeley of the Financial Times pointed out, that is informatively selective:  “When Washington wants something … it appropriates. And so arguments about balancing budgets aren’t actually about constraints. They’re about priorities. Important programs get appropriations, full stop. Unimportant programs need to be paid for with taxes.”) The growing interest in the MMT view of fiscal constraints does seem to be part of a broader softening of attitudes toward public debt and deficits in our policy discourse. Ken Rogoff, for example, managed to write the following in The Times yesterday:  “To be frank, it has never been remotely obvious to me why the UK should be worrying about reducing its debt–GDP burden, given modest growth, high inequality and the steady (and largely unexpected) decline in global real interest rates.” This time is, indeed, different. L. Randall Wray recently presented in Berlin at an event marking the release of the German translation of his book Understanding Modern Money. The presentation (in English) may be seen below, including… Read More

A federal judge has ruled that the Trump administration’s attempt to add a citizenship question to the next (2020) decennial census is illegal. The administration has already begun the process of appealing the ruling. One way to understand the broader context behind this proposed change is to see it as part of ongoing attempts to influence the outcome of the democratic process (efforts which include gerrymandering, voter registration purges, and so on). In this case, the addition of the citizenship question would lower response rates (that is, lead to an undercount of the population) in areas with higher proportions of immigrants — documented and undocumented. These lower response rates, in turn, could affect the apportionment of congressional seats — that is, reduce the number of seats representing those areas of the country (the undercount would also reduce the level of federal funding directed to such areas). And as the one-pager below by Senior Scholar Joel Perlmann makes clear, the ostensible justification for this change — to obtain citizenship data in order to enforce the Voting Rights Act — is weak, when weighed against the aforementioned “side effects.”  As Perlmann points out, there are ways to obtain this data that do not undermine the integrity of the full census count. Unfortunately, the latter is most likely the entire point of this… Read More

(These remarks will be delivered today at the UBS European Conference in London.) Q: These questions about deficits are usually cast as problems to be solved. You come from a different way of framing the issue, often referred to as MMT, which—at the risk of oversimplifying—says that we worry far too much about debt issuance. Can you help us understand where fears may be misplaced? Wray: First let me say that I think the twin deficits argument is based on flawed logic. It runs something like this: the government decides to spend too much, causing a budget deficit that competes with private borrowers, driving interest rates up. That appreciates the currency and causes a trade deficit. The budget and trade deficits are unsustainable as both the private sector and the government sector rely on the supply of dollars lent by foreigners. At some point the Chinese and others will demand payment and/or sell out of dollars causing US rates to rise and the dollar to crash. While that’s a simplified summary, I think it captures the main arguments. Here’s the way I see it: Overnight rates are set by the central bank; deficits raise them only if the central bank reacts to deficits by raising them. Budget deficits result in net credits to bank reserves and hence put downward (not… Read More

Mainstream neoclassical economics is hooked on the idea of individual worker-savers as prime movers in capitalist market economies. As workers, individuals choose how much to work, determining the economy’s output; as savers, they determine how much of that output takes the shape of the economy’s capital investment. With banks as conduits channeling saving flows into investment, firms churn inputs into outputs that match worker-savers’ tastes. In this way, the neoclassical world gets shaped by what rational intertemporal utility-maximizing worker-savers wish it to be. In its most fanciful version – erected on supposedly sound micro foundations and known as “real business cycle theory” (RBC) – the neoclassical fantasy world of intertemporally optimizing worker-savers is subject to exogenous shocks to tastes and technology. Random technology shocks may be either positive or negative, and as Edward Prescott—acclaimed RBC founding father, together with Fynn Kydland—famously explained, negative technology shocks arise whenever there is a traffic jam on some bridge (see Romer 2016). That’s truly creative: Imagine a couple of dancers receiving the Nobel prize in medicine for wildly hopping around a coconut tree while peeing on a rotten banana and screaming voodoo until they are blue in the face. Unlikely to happen in medicine, you might say, but in economics voodoo routines and hallucinations of this kind can still earn you a pseudo-Nobel prize… Read More