There’s a webinar for the Review Of Political Economy where Ashwani Saith discusses his new book on Cambridge economics, hosted by Louis-Philippe Rochon and with discussion from Francis Cripps, Marc Lavoie and Maria Cristina Marcuzzo.
The event was held on Feb 2, 2023.
[The title is the link to the video on YouTube]
There was a conference on the 10th death anniversary of Wynne Godley last year. If you haven’t seen it, the video recordings/presentation/remarks are in that link.
Now, there’s a special issue by the JPKE about the conference with papers as in the cover:
Happy reading!
Yesterday, March 13th had a special event, a virtual conference in honour of the great Wynne Godley.
If you hadn’t joined it, you can still view the recordings which have now been made available, thanks to Gennaro Zezza, who organised the event.
Here’s another poster, prior to the event. You can find the picture here.
Picture credit: Levy Institute on Twitter.
All videos now seem available. Check again with the conference page for the presentation or write-ups.
I came across the Cambridge Political Economy Society digital archive today. It has scans of papers which aren’t available elsewhere.
There’s an interesting article, Causes Of Growth And Recession In World Trade, there, by Francis Cripps, in which he describes the Cambridge Keynesian idea of achieving balanced trade, because nations face a balance-of-payments constraint:
The main conclusion of the analysis presented below is that demand creation by means of fiscal and monetary action at the national level is very unlikely to be able to procure a recovery from world recession, because it does not offer a solution to the structural problem of imbalances in trade. On the other hand, demand creation at the international level, designed to boost countries’ import capacity in a manner analogous to a national budgetary stimulus of domestic spending, could in principle ensure a steady world reflation. But the political obstacles to an international programme of income creation are immense, partly because this would implicitly or explicitly involve massive transfers of income from surplus countries to deficit countries.
The alternative to a programme of income creation and redistribution would be an effective mechanism for the adjustment of trade shares, making it possible for individual countries to balance their payments at a high level of domestic activity. Exchange rate changes have hitherto been accorded this role, but experience during the past decade of large exchange rate adjustments has shown that they are quite inadequate for this purpose. The exchange rate mechanism therefore needs to be reinforced, or replaced, by some other system of trade discrimination. Import restrictions, already widely used by developing countries to regulate their trade balances, are at present more or less prohibited for Western industrial countries. Many of these could achieve a recovery of their own economies if they were allowed to introduce import controls. But such action on the part of industrialised countries would not help developing countries. Indeed to sustain growth of output and employment in every country, trade controls would have to be operated on a multilateral basis with positive discrimination in favour of the weakest. Given the desperate plight of some very poor countries, the case for positive discrimination in their favour is now becoming urgent.
…
The analysis developed below treats world trade as a demand-determined system in which the level of demand is governed by balance-of-payments constraints facing individual countries and the way these interact. …
A recent UNCTAD/GDAE working paper. Abstract:
This paper proposes to revisit the debate on trade and investment agreements (TIAs), development and inequality, looking at the role of Global Value Chains (GVCs) and transnational corporations (TNCs). It first presents stylized facts about trade and investment (agreements), declining global economic growth and rising inequality under the latest round of globalization. It then provides a long-run perspective on the mixed blessings of external opening, summarizing some key contributions of the mainstream literature, which are converging with long-standing research findings of more heterodox economists, and the eroding consensus today. Based on this stock-taking, it takes a fresh critical look at the TIAs-GVCs-TNCs nexus and their impact. Using data on value-added in trade and new firm-level data from the consolidated financial statements of the top 2000 TNCs going back to 1995, it examines whether the fragmentation of production along GVCs led to positive structural change or rather stimulated unsustainable trends in extractive and FIRE sectors. It then turns to the role of TNC-driven GVCs as a vehicle for economic concentration. Finally, it presents evidence linking TIAs and their correlates to rising inequality. Key findings include the fact that the ratio of top 2000 TNCs profits over revenues increased by 58 percent between 1995 and 2015. Moreover, the rise in top 2000 TNCs profits accounts for 69 percent of the 2.5 percentage points decline in the global labour income share between 1995 and 2015, with the correlation coefficient between annual changes in both variables as high as 0.82. The paper concludes by calling for a less ideological policy debate on TIAs, which acknowledges the mixed blessings of external financial and trade opening, especially their negative distributional impact and destabilizing macro-financial feedback effects, which both call for policy intervention. As an alternative to short-sighted protectionism, it further discusses possible options for anticipating undesirable effects arising from TIAs (e.g. rising carbon emissions, economic instability, inequality, etc.) and addressing those in TIAs themselves.
Basil Moore passed away yesterday. 💐
Post-Keynesian economics greatly influenced Post-Keynesian monetary theory. Although his work was present in Cambridge Keynesians work, such as Joan Robinson, Nicholas Kaldor, Wynne Godley and Francis Cripps, they didn’t influence the thinking on monetary matters as much as Moore did with his great book Horizontalists And Verticalists — The Macroeconomics Of Credit Money.
He does recognise Kaldor’s work in that book:
The obvious lesson to be learned from the experience with the General Theory in the past fifty years is that .. revolutionizing the way the world thinks about economic problems” is an enormously difficult task. In spite of the mountains of Keynesian exegesis that has been produced, Nicholas Kaldor was the sole English-speaking economist of the first rank to have endorsed what is here termed the Horizontalist position (1970, 1981, 1982, 1983, 1985a, b). This book represents my attempt to enlist the support of other scholars in what has at times seemed a quixotic crusade by a member of the lunatic fringe against the prevailing orthodoxy.
I regret not having met him. My only interaction was to ask him via email, where I can buy his book Horizontalists And Verticalists because it cost $450 on Amazon at the time! He didn’t know but replied recommending his book Shaking the Invisible Hand: Complexity, Endogenous Money and Exogenous Interest Rates. But later I managed to get the book. He also said that
It was my attempt to introduce endogenous money into the Macro literature, but no one has heard of it since the mainstream never reviewed it. (They gave H&V to Phil Kagan, a leading Monetarist, who didn’t much like it, but at least it was reviewed.
Noechartalists will be surprised to know that Moore also endorsed Chartalism in his 1988 book:
[page 8] Soft or fiat money refers to unbacked paper or token coins. It maintains its value because it is legally tenderable (by fiat) in settlement of debts and taxes.
…
[page 18] Currency (fiat money) is the physical embodiment of the n,onetary unit of account (numeraire) defined by the sovereign government. It is a sure and perfectly liquid store of value in units of account. It is legal tender for the payment of taxes and for the discharge of private debt obligations enforceable in courts of law. In consequence it is generally accepted as a means of payment.
…
[page 294] Money of any kind allows the breaking of the barter quid pro quo that is imposed by lack of trust and for which money is not a substitute. Even though intrinsically worthless, money is acceptable to me provided that it is also acceptable to you and to everyone else. Trust in money now comes from government guarantee of its acceptability as legal tender. “Today all civilized money is beyond the possibility of dispute, chartalist” (JMK, 5, p. 4).
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[page 372] Fiat money represents a bridge between the world of commodity money and credit money. In its liquidity characteristics it is virtually identical to commodity money, except that it is chartalist.
There were many places I disagreed with Moore. I don’t think he was a fan of the use of expansionary fiscal policy. I don’t know why he claimed that the Keynesian multiplier doesn’t exist. But as Geoff Harcourt says in the foreword to the book Complexity, Endogenous Money and Macroeconomic Theory — Essays in Honour Of Basil J. Moore:
But, important as these contributions have been, Basil has influenced many other topics, sometimes by his innovative thinking, sometimes by being the irritant that has led other oysters to create pearls of their own. Especially is this true of his highly individual approach to the true meaning of the Keynes–Kahn–Meade multiplier concept and also to the validity of Keynes’s concept of effective demand as presented in The General Theory. Basil has made us think anew about our understanding of the natures of saving and investment, their relationship to each other, to the concept of an under-employment rest state, and also of the relationship of the macroeconomic income and expenditure accounts, balance sheets and funds statements to the behavioral relationships originally developed by Keynes and his followers. To sometimes disagree with Basil’s arguments is not at all to detract from the great stimulus he has provided for fundamental rethinks of basic, central, core concepts and relationships.
Post-Keynesian Economics has lost a giant. R.I.P., Basil Moore.
The United Nations 🇺🇳 Conference On Trade And Development (UNCTAD) publishes wonderful annual reports on trade and development. These are written by heterodox authors many times. Alex Izurieta, Francis Cripps, Jayati Ghosh are a few contributors. This year’s report is here. 200 pages!
The report has detailed discussion on robots and its impact. This is quite different from what one hears normally.
From the press release:
With the United States withdrawing from its role as global consumer of last resort, recycling surpluses is a key element in rebalancing the global economy. The report turns the spotlight on the eurozone – especially Germany – which is now running a large surplus with the rest of the world. The recent Group of 20 proposal made by Germany – a Marshall Plan for Africa – is welcome, but so far lacks the requisite financial muscle. The trillion-dollar Belt and Road Initiative of China is much bolder, even as its surplus has dropped sharply over the last two years.
The report draws lessons from 1947, when the International Monetary Fund, the World Bank, the General Agreement on Tariffs and Trade and the United Nations joined forces to rebalance the post-war global economy, and the Marshall Plan was launched. Seven decades later, an equally ambitious effort is needed to tackle the inequities of hyperglobalization to build inclusive and sustainable economies.
In response to the political slogan of yesteryear – “there is no alternative” – the report outlines a global new deal to build more inclusive and caring economies. This would combine economic recovery with regulatory reforms and redistribution policies, and do so with speed and at the requisite scale. The successes of the New Deal of the 1930s in the United States owed much to its emphasis on counterbalancing powers and giving a voice to weaker groups in society, including consumer groups, workers’ organizations, farmers and the dispossessed poor. This is no less true today.
In today’s integrated global economy, Governments will need to act together for any one country to achieve success. UNCTAD urges them to seize the opportunity offered by the Sustainable Development Goals and put in place a global new deal for the twenty-first century.
In addition, you can see the two short videos here.
There’s a new book, The Palgrave Companion To Cambridge Economics which features among other things biographies of Wynne Godley, Joan Robinson and Nicholas Kaldor and other notable Cambridge economists. Wynne Godley’s biography—Wynne Godley (1926-2010)—is by his closest collaborators – Francis Cripps and Marc Lavoie (pp. 929-953)
You can access the book on Springer, if you have subscription or preview it on Google Books.
Excerpt:
One interpretation of Godley’s theoretical work is that it is a quest for the Holy Grail of Keynesianism. Keynesians of all stripes had for a long time mentioned the need to integrate the real and the monetary sides of economics. Integration was all the talk, but for a long time, little seemed to be achieved … The main purpose of the Godley and Cripps’s 1983 book is to amalgamate the real and the financial sides, providing a theory of real output in a monetary economy …
Godley believed that Keynesian orthodoxy ‘did not properly incorporate money and other financial variables’ (ibid.: 15). Godley and Cripps and their colleagues ‘found quite early on that there was indeed something deficient in most macroeconomic models of the time’, including their own, ‘in that they tended to ignore constraints which adjustments of money and other financial assets impose on the economic system as a whole’ (ibid.: 16). Interestingly, Godley was aware of the work being carried out at about the same time by Tobin and his Yale colleagues, as well as by others such as Buiter, Christ, Ott and Ott, Turnovsky, and Blinder and Solow, who emphasized, as Godley and Cripps (ibid.: 18) did, that ‘money stocks and flows must satisfy accounting identities in individual budgets and in an economy as a whole’. Still, Godley thought that the analysis of the authors in this tradition was overly complicated, in particular because they assumed some given stock or growth rate of money, ‘leaving an endogenous rate of interest to reconcile’ this stock of money with the fiscal stance (Godley 1983: 137). Godley and Cripps (ibid.: 15) were also annoyed by several of the behavioural hypotheses found in the work of these more orthodox Keynesians, as they ‘could only give vague and complicated answers to simple questions like how money is created and what functions it fulfils’. The Cambridge authors thus wanted to start from scratch, with their own way of integrating the real and the financial sides, thus avoiding these ‘tormented replies’ (ibid.) …
Ultimately, Godley’s desire to present a definitive treatise based on consistent macroeconomic accounting gave rise, nearly 25 years later, to the Monetary Economics book (Godley and Lavoie 2007a) …
Thirlwall’s Law is counter-intuitive and comes across as shocking. It says that the growth of a nation’s economy is directly proportional to the rate of exports and inversely related to the income elasticity of imports.
The reason it comes as shocking and difficult to believe is that our planet, with all inhabitants and institutions considered resident cannot export (unless there are non-residents such as aliens), but the world still grows.
Now there are several pitfalls in this argument. First, Thirlwall’s law doesn’t fail because the expression for growth rate is indeterminate. Rate of exports is indeterminate and the income elasticity of imports is indeterminate.
So we have
growth = inderminate/indeterminate
Second, the world does not have a central government. So the world as a whole is not comparable to a closed economy with a government.
There is a way in which the world as a whole is balance-of-payments constrained. The argument is by Nicholas Kaldor. In his 1980 article Foundations And Implications Of Free Trade Theory, written in Unemployment In Western Countries – Proceedings Of A Conference Held By The International Economics Association At Bischenberg, France, Kaldor makes the argument for the world balance-of-payments constraint.
Nicholas Kaldor on free trade
In a recent article on the ‘Causes of Growth and Recession in World Trade’,1 T. F. Cripps has demonstrated that a country is not ‘balance of payments constrained’ if its full employment imports, M*, are less that its import capacity M̅ (as determined by its earning from exports). Such a country is free to choose the level of domestic demand which it considers optimal for its own circumstances,2 whereas the other countries from whom M* > M̅, must, under conditions of free trade, reduce their output and employment below the full employment level, and import only what they can afford to finance. He then shows that the sum of imports of the ‘unconstrained’ countries determine the attainable level of production and employment of the ‘constrained’ countries, and the remedy for this situation requires measures that increase the level of ‘full-employment’ imports or else reduce the export share of the ‘unconstrained countries’. The ‘rules of the game’ which would be capable of securing growth and stability in international trade, and of restoring the production of the ‘constrained’ countries to full employment levels, may require discriminatory measure of import control, of the type envisaged in the famous ‘scarce currency clause’ of the Bretton Woods agreement.
In the absence of such measures all countries may suffer a slower rate of growth and a lower level of output and employment, and not only the group of countries whose economic activity is ‘balance-of-payments constrained’. This is because the ‘surplus’ countries’ own exports will be lower with the shrinkage of world trade, and they may not offset this (or not adequately) by domestic reflationary measures so that their imports will also be lower. Provided that the import regulations introduced relate to import propensities (i.e. to the relation of imports to domestic output) and not to the absolute level of imports as such, the very fact that such measures will raise the trade, production and employment of the ‘constrained’ countries will mean that the volume of exports and domestic income of the ‘unconstrained’ countries will also be greater, despite the downward change in their share of world exports.3
Footnotes:
1Cambridge Economic Policy Review (March 1978), pp, 37-43.
2Owing to the widespread view according to which a given increase in effective demand is more ‘inflationary’ in its consequences if brought about by budgetary measure than if it is the result of additional investment or exports (irrespective of any limitations of import capacity) the inequality or potential inequality in its payments balance may cause a surplus country to regard a lower level of domestic demand as ‘optimal’ in the first case than in the second case.
3In other words, if countries whose ‘full employment’ balance of payments shows a surplus because M* < α W (where M* is the level of full employment imports, α is the share of a particular country’s exports of in world trade W) after a reduction of α to α̂ (α̂ < α) through the imposition of discriminatory measures, the country will still be better off if α̂ W* > α W where W* is the volume of world trade generated under full employment conditions.
[boldening mine]
What Kaldor is saying that because of balance of payments constraint of economies, the world as a whole has a slower growth because surplus nations do not expand domestic demand to the level needed. He is also saying that import controls raise imports rather than reduce them (this because of higher national income) and the exporters’ exports will also increase (even though their share is reducing.).
So the world as an built-in deflationary bias in the way it works.
I came across the UN Global Policy Model document with lots of equations and written by Francis Cripps and Alex Izurieta. (h/t Jo Michell). The article date is May 2014.
Just thought I should link it for readers interested.
(The post title is the link).