Released: Abolish Money (From Economics)!

Click cover for list of online sellers.

My latest report - Abolish Money (From Economics)! - has been released in ebook format. (The paperback edition will be published within a few weeks.) The ebook is available at the same online booksellers as my previous books.

• Amazon.com
• Other retailers.

Book Summary:

We live in a monetary economy, so it is not surprising that money plays an important role within economic theory. The argument of this book is that this role has become too important, and has warped our ability to think about the economy. The important psychological role of money within society has been transferred to monetary aggregates, and they are given far more significance than they deserve. Economists have wasted considerable time discussing reforms to the monetary system, such as Quantitative Easing, Positive Money, and Helicopter Money. We need to instead focus our attention on non-monetary reforms.

This book consists of 22 essays that discuss the role of money within economic theory, and the controversies raised by debates about the role of money. The tone is informal, as the theoretical debates are translated into plain language.

Upcoming Projects

I just wanted to give a quick update on my projects that are underway (upcoming book, SFC models development). These projects are keeping me busy, and so I will probably not have regular posts for at least a few days.

Postscript To Misunderestimating MMT

Gerard MacDonell has a follow up article to his earlier critique of MMT (my previous article was my response to his critique). I just want to expand on a couple of points, and respond to his response...

Misunderestimating MMT

My ex-colleague Gerard MacDonell wrote an article "The trouble with MMT" (Modern Monetary Theory). He offers a wide number of criticisms, however I believe that his substantive ones are unconvincing. I will note from the beginning that I cannot say that his arguments are wrong, they represent one side in a long debate in economics. Instead, I believe that we need to properly understand the debate, and that the MMT wing of post-Keynesian economics offers a lot of insight to that debate.

[Update: Gerard has a followup article here; I will respond to a couple of points in an upcoming short post.]

Trade And Growth

This article is a brief discussion of the relationship between growth and trade deficits in the United States. The previous two decades saw a marked deterioration in the U.S. trade balance, as depicted in the chart above. As a result, trade acted as a counter-cyclical brake on growth. One interesting property of the current cycle is that the trade deficit has been relatively stable when compared to that experience.

Central Banks In SFC Models

Central banks are often a feature of economic models, including stock-flow consistent (SFC) models. The role of the central bank is to supply money, which pays no interest, while the Treasury (fiscal arm of the central government) supplies interest-bearing instruments (typically Treasury bills). However, this level of detail is largely irrelevant to the model outcome; private sector money and treasury bill holdings are determined by the policy rate of interest (which equals the interest rate on Treasury bills), and the central bank operations are forced to conform to the desired portfolio holdings.

ZLB, R.I.P.

Even if one is not a fan of President-elect Trump, one must be impressed how he managed to shift expectations to end secular stagnation. With the Zero Lower Bound (ZLB) now dead as a door-nail, it is going to be difficult for mainstream economists to make it look like Dynamic Stochastic General Equilibrium (DSGE) models have something useful to tell us about the real world.

This article first discusses some of the academic theoretical issues around the ZLB, and then jumps to the latest economic squabbling based on Paul Krugman's recent comments.

The Determination Financial Asset Holdings In SFC Models

This article discusses how I systematically generate the systems of equations that determines financial asset holdings within the Python sfc_models framework for Stock-Flow Consistent (SFC) models. It should be noted that despite the generality of the title, I am only discussing how I attacked the problem (the results of my technique is consistent with the literature that I have studied). The existing literature relies on the derivation of system equations by hand, and so the modelling techniques used by others are less constrained than the algorithmic equation generation I use.

Primer: Inflation Versus Rising Prices

One source of complexity in economic discussion is the ambiguity of the term "inflation." The usual definition is that this is the rate of growth of a price index of consumer goods (such as the CPI). However, economists quite often distinguish sustained rises in the price index versus one-time shocks. Unfortunately, it is difficult to determine whether a rise in prices is going to be sustained. For this reason, it is useful to avoid discussing generic inflation, and use more precise terminology.