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Wednesday, April 27, 2016

Primer: Core Versus Headline CPI

Chart: U.S. Headline Versus Core Inflation (

The distinction between headline and core inflation is commonly made in market and economic commentary. This primer briefly introduces these concepts, and why they are used.

Sunday, April 24, 2016

Anwar Shaikh On Micro And Macro Economics

As I noted in my discussion of Anwar Shaikh's new book Capitalism: Competition, Conflict, Crises, one of the most interesting parts of the work was his discussion of how microeconomic behaviour is reflected in aggregate performance. There are fundamental constraints upon individual behaviour that result in the same aggregate patterns at the macro level. Using the currently popular buzzword, macro behaviour is emergent,  and cannot be predicted from individual behaviour with reference to the aggregate system. In my view, this is useful for macro analysts, as it means we do not waste our time obsessing about the lessons of microeconomics. For mainstream ("neoclassical") economics, this line of thinking is disastrous, as it means that entire "microfoundations project" has all the usefulness of a foundation made of sand.

Wednesday, April 20, 2016

Capitalism - By Anwar Shaikh

Capitalism: Competition, Conflict, Crises is a comprehensive overview of economics published by the noted heterodox economist Anwar Shaikh. This article is technically not a review, rather a "what I am reading now" article. I have read enough of it to describe the audience for the book, but I cannot hope to summarise the contents of the work, which is just over 1000 pages.

Saturday, April 16, 2016

Olivier Blanchard Joins The "Japan Is Doomed!" Crowd

Olivier Blanchard (ex-Chief Economist of the IMF) has been quoted arguing that the Japanese face serious macro risks; in reality, probably the biggest economic risk Japan faces is listening to New Keynesian economists. Ambrose Evans-Pritchard, of the Telegraph, summarised Blanchard's comments at a meeting at Lake Como as "Olivier Blanchard eyes ugly 'end game' for Japan on debt spiral." Although the article only provides a few quotes, the logic is quite weak.

Wednesday, April 13, 2016

Equilibrium And Steady State In SFC Models

The usage of the term "equilibrium" has become almost meaningless in economics, but this does not stop it from widespread use. It is associated with the economist Walras in classical and neo-classical ("mainstream") economics. Equilibrium has the political undertone that the economy has reached an optimal state, and everyone gets their "just desserts." Post-Keynesians tend to be allergic to the term, probably because of that political slant. If we ignore the politics, the classical notion of equilibrium can be related to the one-period solution of a stock-flow consistent (SFC) model. Meanwhile, SFC models introduce the notion of a "steady state,"  which could be thought of as a "long-term equilibrium." However, since SFC models allow for involuntary unemployment, these equilibria notions do not imply any form of "just desserts."

Sunday, April 10, 2016

Primer: Money And Debt In SFC Models

How money and debt are described in simple economic models colours economists' interpretation of real world monetary systems. My feeling is that money is somewhat superfluous in these models, but it is necessary to understand why that is the case. This article explains how money and government debt (Treasury bills) operate in the second simplest Stock-Flow Consistent (SFC) model in the textbook Monetary Economics by Godley and Lavoie -- model PC (Portfolio Choice; found in chapter 4).

Wednesday, April 6, 2016

What Is Monetary Policy?

One of the more arcane arguments that has resurfaced in recent years is the distinction between monetary and fiscal policy. This is in reference to various unorthodox policy prescriptions that have recently arisen -- helicopter drops, QE, etc. Eric Lonergan has written a fairly concise breakdown of the distinction - "The distinction between monetary and fiscal policy."  I have not had much time to think about his article -- too many charts to prepare -- but I do know whether my preferred definition is covered by his distinction.