Are your student advisees looking for an opportunity to advance their career goals with a graduate degree? The Levy Economics Institute Master of Science in Economic Theory and Policy can help them prepare themselves for responsible positions in government, business, education and research.

The M.S. in Economic Theory and Policy degree is designed to meet the preprofessional needs of undergraduates in economics and related fields. The terminal nature of the M.S. degree provides a strong signal that the graduate is pursuing career-stage posts and not simply transitional employment. All students participate in a graduate research assistantship at the Levy Economics Institute of Bard College—an economic policy think tank with more than 25 years of public policy research experience.

With the “deadline season” for graduate school applications approaching, please advise your students to consider our program. Click here to find out more. Application deadline: March 30, 2013

Sincerely,

Office of the Director
Master of Science in Economic Theory and Policy
Levy Economics Institute of Bard College
845-758-7776
[email protected]

A conference organized by the Levy Economics Institute of Bard College with support from the Ford Foundation.

April 17–19, 2013

Ford Foundation
320 East 43 Street, New York City

In 2008–09, the world experienced its worst financial and economic crisis since the Great Depression. Global employment and output collapsed, and an estimated 84 million people fell into extreme poverty. Given the fragility and uneven progress of the economic recovery, social conditions are expected to improve only slowly. Meanwhile, austerity measures in response to high government debt in some of the advanced economies are making the recovery even more uncertain.

It’s time to put global finance back in its proper place as a tool to achieving sustainable development. This means substantial downsizing, careful reregulation, universal social protections, and an active, permanent employment-creation program. Therefore, the 2013 Minsky Conference will address both financial reform and poverty in the context of Minsky’s work on financial instability and his proposal for a public job guarantee. Panels will focus on the design of a new, more robust, and stable financial architecture; fiscal austerity and the sustainability of the US economic recovery; central bank independence and financial reform; the larger implications of the eurozone debt crisis for the global economic system; improving governance of the social safety net; the institutional shape of the future financial system; strategies for promoting poverty eradication and an inclusive economy; sustainable development and market transformation; time poverty and the gender pay gap; and policy and regulatory challenges for emerging-market economies.

To register, visit the conference website.

A list of conference participants is below the fold. continue reading…

Registration is now open for the Levy Institute’s fourth Hyman P. Minsky Summer Seminar, to be held on the Bard College campus in June 2013. The annual Summer Seminar provides a rigorous discussion of both the theoretical and the applied aspects of Minsky’s economics, and is geared toward recent graduates, graduate students, and those at the beginning of their academic or professional careers. Application deadline: March 31, 2013. Apply early, as space is limited. See here for more information.

Last week, a short walk from the Brandenburg Gate, the Levy Institute held its most recent Hyman P. Minsky Conference on Financial Instability.  The two day conference in Berlin featured a mix of central bankers, academics, politicians, and financial practitioners and dealt with issues related to the eurozone debt crisis, the Federal Reserve, signs of instability in China, Dodd-Frank and financial reform, the payments system (including the threat of cyber attacks and the potential destabilizing effect of the development of alternative payments technologies), indexes of financial fragility, and a host of other intriguing topics.

On the first day, Vítor Constâncio, Vice President of the European Central Bank, delivered a morning speech that highlighted the poverty of the dominant economic thinking underlying the flawed institutional design of the European Monetary Union, with its centralized monetary policy and decentralized fiscal and financial stability policy.

“In the pre-EMU economic modelling world,” said Constâncio, “there was no need to counter financial imbalances and financial instability as the financial sector did not play a crucial role from a macroeconomic perspective.  Similarly, under the assumption of self-equilibrating markets, there was no need to monitor macroeconomic imbalances and disequilibria on the labour, product or financial markets.  With an assumed stable private sector, apart from exogenous shocks, the only source of instability acknowledged were governments and their fiscal profligacy.”  In running through the flaws in these theoretical assumptions, Constâncio noted Minsk’s remark in Stabilizing an Unstable Economy that “… for an economic theory to be relevant, what happens in the world must be a possible event in the theory.”

Against that background, Constâncio traced a path for reform of the eurozone structure. He also included a discussion of the reasoning behind the European Central Bank’s policy on Outright Monetary Transactions (OMT)—the ECB’s bond purchasing program, designed to bring down rising interest rates on peripheral government debt—and said after the speech that he expects Spain to apply for the program.  He portrayed OMT as a way of getting peripheral nations out of “a vicious circle of rising interest rates, falling growth and deteriorating public finances.”  (In other words, as a way of getting out of what Greg Hannsgen and Dimitri Papadimitriou have dubbed a “fiscal trap.”  OMT, Hannsgen and Papadimitriou observe, partially moves the EMU away from its effectively “metallist” currency setup.)

The text of Constancio’s speech can be read here.

Audio of all the conference presentations and sessions can be found here.

An upcoming Levy Institute conference:

From November 26 to 27, the Levy Economics Institute of Bard College will gather top policymakers, economists, and analysts at the Hyman P. Minsky Conference on Financial Instability to gain a better understanding of the causes of financial instability and its implications for the global economy. The conference will address the challenge to global growth affected by the eurozone debt crisis; the impact of the credit crunch on economic and financial markets; the larger implications of government deficits and the debt crisis for U.S., European, and Asian economic policy; and central bank independence and financial reform.  Organized by the Levy Economics Institute and ECLA of Bard with support from the Ford Foundation, The German Marshall Fund of the United States, and Deutsche Bank AG, the conference will take place Monday and Tuesday, November 26 to 27, in Frederick Hall, 4th fl., Deutsche Bank AG, Unter den Linden 13–15, Berlin.

A full schedule and list of participants can be found here.

An announcement from the Levy Institute:

Starting in fall 2013, the Levy Economics Institute will begin offering the Master of Science in Economic Theory and Policy, a two-year degree program designed to meet the preprofessional needs of undergraduates in economics and finance. Headed by Senior Scholar and Program Director Jan Kregel, this innovative program draws on the expertise of Institute scholars and select Bard College faculty, and emphasizes empirical and policy analysis through specialization in one of four key research areas: macroeconomic theory, policy, and modeling; monetary policy and financial structure; distribution of income, wealth, and well-being, including gender equality and time poverty; and employment and labor markets.

The Levy Economics Institute Master of Science in Economic Theory and Policy degree program offers students a marketable set of skills and a strong understanding of economic and policy models at both the macro and micro levels, with direct application to a broad range of career paths. Thanks to the close links between our research agenda and the program’s core curriculum, students experience graduate education as a practicum, and all students participate in a graduate research assistantship at the Institute. There is also a 3+2 dual-degree option for undergraduates that leads to both a BA and the MS in five years.

For more information, visit www.bard.edu/levyms.

I returned to the Levy Institute yesterday after the International Post Keynesian Conference in beautiful Kansas City. I will mention some of the news from the conference, for readers who are interested in the kinds of events that Levy Institute scholars attend.

At such conferences, ideas are taken very seriously, and many interesting debates were simmering at this one.  Theories and models abounded. Many of them went right to the heart of the causes of the financial crisis.

Speaking of interesting, students were among those attending and helped to organize the conference. Some were selling official conference t-shirts as well as used books in the vendors’ area. I haven’t had a chance to try my shirt on, having returned home only Sunday night on a delayed flight.

Many of the giants in the field were there.  A surprise event in honor of the Institute’s Jan Kregel took place last Thursday night, the first night of the conference.  Kregel recently joined Paul Davidson as an editor of the Journal of Post Keynesian Economics. A new Post Keynesian economic policy forum is online, and many from the Institute are editors. This new paperback from Eckhard Hein and Englebert Stockhammer, also on display at the conference, explains some of the ideas and history of this school of economists, including their conferences. Post Keynesian and Keynesian economics have of course been resurgent in recent years, and the topic of Hyman Minsky (whose archive is here) in particular frequently came up in the presentations and discussions among the economists.

An enjoyable keynote speech by noted author Robert Skidelsky came after the conference was officially adjourned. Skidelsky argued in favor of an “underconsumptionist” interpretation of the current world economic situation. In other words, a tilt in income distribution reduces spending by the masses. He noted that Keynes himself deployed such an argument in his later work, though his 1936 General Theory of Employment, Interest and Money emphasized that volatile investment, driven by changing expectations, largely accounted for fluctuations in total output and employment.  The speech also mentioned the views of Depression-era Fed Chair Marriner Eccles, which were featured in this recent post by Thorvald Grung Moe, another conference participant.  Skidelsky also discussed his new book, How Much Is Enough? (Amazon link), which is coauthored by Edward Skidelsky.

As for myself, I presented my most recent Levy Institute working paper and two example computable documents based on the model. The documents, which allow one to experiment with the model, along with links to the paper, appear in this May post.*  A somewhat skeptical Marc Lavoie, Fred Lee, and Sunanda Sen asked questions during the Q and A. After the session, Davidson was kind enough to bring up a few important issues that did not figure in my paper and presentation, including the key role of household credit, which has, however, been an important part of some previous work by me and other macroeconomists at the Institute (like this 2007 brief on the potential for a mortgage crisis, which I coauthored with Dimitri Papadimitriou and Gennaro Zezza).

*Note: The post is now slightly revised.- G.H., October 3.

The Levy Economics Institute of Bard College will hold its fourth annual Hyman P. Minsky Summer Seminar in June 2013.  The Summer Seminar provides a rigorous discussion of both the theoretical and the applied aspects of Minsky’s economics, with an examination of meaningful prescriptive policies relevant to the current economic and financial crisis.  It is of particular interest to graduate students, recent graduates, and those at the beginning of their academic or professional career.

The 2013 Seminar program will be organized by Jan Kregel, Dimitri B. Papadimitriou, and L. Randall Wray, and the teaching staff will include well-known economists concentrating on and expanding Minsky’s work.

Registration information can be found here.

From the announcement of a new joint research project by Mariana Mazzucato and the Levy Institute’s Randall Wray (“Financing Innovation: an Application of a Keynes-Schumpeter-Minsky Synthesis”):

The purpose of this project is to integrate two research paradigms that have strong policy relevance in understanding the degree to which financial markets can be reformed in order to nurture value creation and ‘capital development’, rather than value extraction, and destruction.  The first one might be called the Keynes-Minsky vision that puts effective demand front and center of economic analysis, and the second is the Schumpeter-Minsky vision that places innovation at the center of competition theory, rather than relegated to the periphery of imperfect competition. The project will bring the two visions together to provide rigorous analysis of competition in the financial sphere and how it interacts with competition in the industrial sphere. The new framework will help us better understand the difference between creative destruction and destructive creation, and its applicability to new periods of economic growth such as that which will hopefully result from the green technology revolution.

Below is the abstract of a presentation to be delivered by Frank Veneroso on Monday April 30th (1:30pm) at the Levy Institute:

Most orthodox explanations of what we call asset bubbles and financial crises attribute them to exogenous shocks to the economy.  For example, a Fed monetary policy error supposedly caused the Great Depression with its three great banking crises, and a Greenspan monetary policy excess led to the asset bubbles and eventual financial crisis of the last two decades.

For Hyman Minsky financial fragility and eventual financial crisis was endogenous to capitalist economies.  Minsky saw this process occurring over two time frames.  First, over the course of a single business cycle, fading memories of the cash flow shortfalls of the most recent recession led to more positive profit expectations, greater fixed investment, a higher reliance on debt finance, and an overall condition of greater financial fragility.  In addition to this “financial instability” hypothesis appropriate to a single business cycle, Minsky also saw an endogenous process of ever greater financial fragility from business cycle to business cycle throughout the post war period.  This endogenous process resulted from ever greater bailouts by Big Government and the Big Central Bank in the recurrent post war recessions that threatened financial crisis and debt deflation.  In effect, an interplay between private risk taking and public sector bailouts resulted in mounting moral hazard across business cycles which distorted risk perceptions to an ever greater degree.  This led to ever increasing private indebtedness and consequent financial fragility.

Hyman Minsky largely limited his focus on these two endogenous processes that fostered rising financial fragility to the world of banks and their corporate borrowers.  In his later writings on money manager capitalism, he transferred this thinking to the realm of markets in traded securities.  His principal focus was the market for traded debt securities.   He discussed stock markets and exchange markets only tangentially and commodity markets not at all.

Over the last twenty years we have seen the emergence of extreme financial fragility and subsequent financial crisis.  Traded asset markets have been paramount.  Stock markets and commodity markets have  played critical roles. How does Hyman Minsky’s thinking about the endogeneity of financial instability within economic cycles and across successive economic cycles help explain the rise of speculation and bubbles in traded asset markets like those for stocks and commodities over the last two decades?

One can start with Minsky’s writings on money manager capitalism and fold into them complimentary contributions from many other notable economic theorists to flesh out a Minsky-like theory of an endogenous process of speculation and asset bubble propagation in such traded asset markets.  This broadens the scope of Minsky’s seminal thinking on the financial instability process and helps explain the entire serial bubble era of the last two decades as well as all the facets of the Great Crisis of 2008-2009 which followed.