A little while back, Pavlina Tcherneva appeared with Bloomberg’s Joe Weisenthal to talk about the potential infrastructure policy of president-elect Donald Trump. She noted that, contrary to initial assumptions, the upcoming administration may not end up pushing public-debt-financed infrastructure spending, and that if the program simply amounts to tax incentives and public-private partnerships, it won’t be nearly as effective. But Tcherneva added another important dimension to this debate. (You can watch the interview here):
Tcherneva’s point is that infrastructure investment should be determined primarily by the state of dilapidation or obsolescence of our roads, bridges, etc., and not so much by the moment we occupy in the business cycle.
There are some who would argue that the time for a large fiscal stimulus has passed, with unemployment at 4.6 percent and growth continuing apace. There’s a good argument to be made that we’re not at “full employment” even at this moment, and that there’s no need to back off on stimulus (though there’s still the question as to whether the Federal Reserve would attempt to depress economic activity by raising interest rates in response to any substantial fiscal expansion — and, additionally, whether the Fed would succeed in those circumstances). But the point is, where you stand on this debate regarding the business cycle and the meaning of full employment shouldn’t be the driving factor behind infrastructure policy — we shouldn’t necessarily pursue or avoid infrastructure repairs and improvements for those reasons.
Moreover, if you’re looking for a job creation program, which Tcherneva would argue ought to be the point of “stimulus,” there are more effective options. In particular, she advocates a job guarantee that would provide paid employment at a minimally decent wage to all who are willing and able to work. Among other reasons, Tcherneva notes that such a program, which automatically expands during economic downturns and contracts in better times, is more effective as a countercyclical stabilizer, as compared to spending on infrastructure projects (read the tweet-storm version of the argument here).
And given that infrastructure seems to have become the go-to spending-side stimulus policy, we might also want to think about the distributive implications. continue reading…
A workshop organized by the Levy Economics Institute of Bard College with the generous support of The William and Flora Hewlett Foundation
The goal of this workshop is to advance the current framework that integrates gender and unpaid work into macroeconomic analysis and enables the development of gender-aware and equitable economic policies. We are interested in contributions that address the gender implications of macroeconomic processes and policies and examine mechanisms that link gender inequalities to macroeconomic outcomes. These may include but are not limited to:
Incorporation of the realm of unpaid productive activities into economy-wide models (e.g., SAM, CGE).
Analysis of the links that connect economic structure (e.g., sectoral composition of economy, degree of openness) and growth regimes (e.g., wage-led versus investment-led growth) with women and men’s economic outcomes and gender inequalities.
Assessment of the channels through which macroeconomic policies influence women’s and men’s economic outcomes and gender inequalities. These include fiscal policies and monetary policies related to interest rates, exchange rates, and financial markets.
Evaluation of the mechanisms whereby gender inequalities influence macroeconomic outcomes, such as aggregate output and employment and their sectoral composition, inflation, budget deficits, and current account balance.
Aspects of interconnections between unequal international economic relations (trade and finance) and gender inequalities.
The types of gender inequalities to be modeled may potentially encompass inequalities in care and unpaid work, labor force participation, employment composition (by sector and/or type of employment, such as formal or informal), education, and access to and utilization of social and financial services.
We invite theoretical contributions that utilize existing and novel macroeconomic modeling approaches as well as empirical studies, in particular those focusing on the dimensions of gender inequalities relevant to the countries of Sub-Saharan Africa and other low-income economies. We are also interested in papers that provide a comprehensive picture of the state of the art, identify gaps, and indicate directions for future research.
Accommodation and travel-related expenses will be covered by the workshop organizers. Please submit your abstract using the form found here.
If you have any questions, please contact Ajit Zacharias at [email protected].
Important dates:
500-word abstract due January 25, 2017
Acceptance notifications e-mailed March 1, 2017
Final paper due July 31, 2017
In a presentation here at the Levy Institute, Emilios Avgouleas argued that financial regulatory changes since the crisis have become so complex they represent a source of financial instability, and that new liquidity and capital requirements have contributed to the problem of “short-termism” in finance.
Avgouleas proposed regulatory simplification and a reorientation that would create greater relative incentives for funding long-term investment projects (e.g., infrastructure), including a lower regulatory and tax burden on long-term instruments. Empowering issuers of long-term instruments like project bonds with intellectual property rights could, he suggested, help control the quality of these financial products by preventing “slicing and dicing” in derivatives markets, on pain of losing prescribed privileges.
You can watch the presentation below: “The Financial Regulation Conundrum: Why We Should Discriminate in Favor of Long-Term Finance”
If you’re a grad student or just starting out your career and want to learn more about the work of Hyman Minsky and Wynne Godley, and wouldn’t mind doing so in a turn-of-the-century manor on the banks of the Hudson, you’re in luck.
The Levy Institute’s annual Minsky Summer Seminar is now accepting applications for the June 2017 session:
The Levy Economics Institute is pleased to announce that it will hold the eighth Minsky Summer Seminar June 10–16, 2017. 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 an introduction to Wynne Godley’s stock-flow consistent modeling methods via 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 well-known economists working in the tradition of Minsky.
To apply, send a letter of application and current curriculum vitae to Kathleen Mullaly at the Levy Institute ([email protected]). Admission to the Summer Seminar includes room and board on the Bard College campus. A registration fee of $250 is required upon acceptance.
Due to space constraints, the Seminar will be limited to 30 participants. Applications will be reviewed on a rolling basis beginning in January 2017.
The 2017 Summer Seminar program will be organized by Jan Kregel, Dimitri B. Papadimitriou, and L. Randall Wray.
Below the fold is a copy of the 2016 program, to give a sense of the sort of topics and speakers featured at the Seminar (note the guest speakers do change from one year to the next): continue reading…
Fiscal Consolidation, Budget Deficits and the Macro Economy, by Research Associate Lekha Chakraborty, deals with debates about the macroeconomic effects of budget deficits in the context of examining fiscal policy in India over the period 1980/81–2012/13.
From the Introduction:
In India, efforts were … made to contain the fiscal deficit by both the central and state governments. The Fiscal Responsibility and Budget Management (FRBM) Act was enacted by the Government of India in 2000 with the aim to … reduce the fiscal deficit to three per cent of GDP by 2008-09. All the states in India also have introduced FRBM legislation. The rationale behind the reduction in fiscal deficits emanated from the theoretical paradigms of macroeconomics which argued that excessive fiscal deficits often trigger inflationary pressures in the economy, increase the rate of interest and crowd out private capital formation, create balance of payments crises and in turn debt spiraling. However, considerable ambiguity exists about the link between fiscal deficit and macroeconomic activity.
Designed as a terminal degree with a professional focus, the Levy Economics Institute Master of Science in Economic Theory and Policy offers students an alternative to mainstream graduate programs in economics and finance. This innovative two-year program combines a rigorous course of study with exceptional opportunity to participate in advanced economics research, with direct access to the Institute’s global network of researchers.
Application deadlines are November 15 for Early Decision and January 15 for Regular Decision. Scholarships are available. Visit bard.edu/levyms for more information. Click here to apply.
Learn about the Levy M.S. by joining one of our online information sessions hosted by Institute scholars:
Wednesday, October 5, 3:00 p.m. EDT, with Research Scholar Michalis Nikiforos Tuesday, October 11, 11:00 a.m. EDT, with Ajit Zacharias, Senior Scholar and Distribution of Income and Wealth Program Director Tuesday, October 18, 10:00 a.m. EDT, with Senior Scholar and Bard College Professor of Economics L. Randall Wray
The program application fee will be waived for all prospective students who attend. Click here for details.
This last part of the series (see Part I, II, and III here, here, and here) will focus on the Brazilian response to the crisis.
1. What Should Brazil Do?
The current Brazilian crisis fits with Minsky’s theory of instability (see here, here, and here). The traditional response to a Minsky crisis involves government deficits to allow the non-government sector to net save. That is, if the private sector desire to net save increases, then fiscal deficits increase to allow it to accumulate net financial assets. The sharp increase in budget deficits in 2015 comes as no surprise. Rezende (2015a) simulated
a scenario in which we have rising government deficits to offset current account deficits, to allow the domestic private sector balance to generate financial surpluses. In this case, in the presence of current account deficits equal to 4% of GDP, to allow the private sector to net save 2% of GDP, it would require government deficits equal to 6% of GDP. If the private sector is going to save 5% of GDP (equal to the 2002-2007 average pre-crisis) and a current account deficit equal to 4% of GDP then we must have an overall government budget in deficit equal to 9% of GDP. Given the current state of affairs, government deficits of this magnitude might be politically unfeasible right now. (Rezende 2015a)
In 2015, Brazil’s budget deficit increased from 2% of GDP in 2008 to 10.38% of GDP in 2015. Though government deficits support incomes (cash flow and portfolio effects) and stabilizes profits, the bad composition of the government budget, that is, virtually the entire deficit is due to interest payments, did little to sustain employment. Brazil’s primary budget balance swung from a surplus of 3% of GDP over a decade to a deficit. As this happened, credit rating agencies’ decision to downgrade Brazil’s sovereign debt to junk status put Ms. Rousseff under growing pressure to cut public spending. In this regard, with the implementation of austerity policies in 2015 automatic stabilizers were switched off, that is, the real growth (deflated by IPCA) of expenses by the central government sharply declined (figure 1) aggravating the recession. continue reading…
This part of the series (see Parts I and II, here and here) will focus on macroeconomic and microeconomic aspects of financial fragility and the provision of liquidity. Minsky’s framework not only sheds light on how to detect unsustainable financial practices, but the position adopted in this paper is that the current Brazilian crisis does fit with Minsky’s instability theory. This is a Minsky crisis in which during economic expansions market participants show greater tolerance for risk and forget the lessons of past crises so economic units gradually move from safe financial positions to riskier positions and declining cushions of safety. continue reading…
Jim Vrettos, a sociologist at John Jay College and host of “The Radical Imagination”, interviewed the Levy Institute’s Randy Wray on how the discipline of economics has gone astray. Wray’s story begins in the late 1960s, with what he describes as a reaction against “New Deal economics.”
The interview ends with a discussion of the ongoing US presidential election.
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