Krugman’s Karma Forces Him to Feel the Bern and Attack the Kochs for “Buying Politicians”

By William K. Black
June 4, 2016     Bloomington, MN

When last we read Paul Krugman he was repeatedly demanding that Bernie Sanders cease criticizing Hillary Clinton for a lifetime addiction of taking tens of millions of dollars in political contributions and hundreds of thousands of dollars in speakers’ fees from Goldman Sachs and other business interests.  (I am an economic adviser to Bernie.)  While Professor Krugman consistently stressed that the data show that business campaign contributions do rig the system, Hillary Surrogate Krugman suddenly professed that business political campaign contributions and speaker fees have no corrupting effect on politicians.

Economists should be honest for all the usual reasons, but economists who wish to affect policy have an additional reason to embrace intellectual honesty.  Karma means that an intellectually dishonest economist is likely to be promptly confronted by the desirability of telling the truth in order to prevent disastrous policy on precisely the subject he or she just lied about.

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GOP Trumphemisms: “Completely Unacceptable” Means the Opposite

By William K. Black

Trump’s bigotry de jour was quadrupling down on his claim that the judge hearing the fraud lawsuit against the Trumphemistically-named “Trump U” (which was not a university and involved solely Trump’s wallet rather than his “leadership”) was biased against Trump because the judge, while born here, was of Mexican descent.  Trump’s free-floating bigotry is, of course, simply the norm, so the story here is the reaction of GOP leaders who have made public their support for making an open bigot our President.

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Money and Banking Part 17: History of Monetary Systems

By Eric Tymoigne

This is the last post of this series. Many more topics need to be covered to make a full Money and Banking course, but the series should help those of us who are dissatisfied with the current Money & Banking textbooks (I don’t use any).

Here is what is coming up in the near future: I will edit all the posts for typos (most of them hopefully) and to account for comments I received. Devin Smith kindly agreed to post the changes without changing any of the links. Formatting the text from a Word doc to a webpage is actually tedious work so many thanks to Devin. An M&B menu will be created at the top of the NEP homepage that will direct readers to links for each post. I will also make a fancy-looking pdf with all the posts, a table of content, etc. It will be more textbook-like and may be more appealing for some readers.

In the long term, there is a textbook coming. When? Difficult to say. I plan to write most of the first draft of the text next spring while on sabbatical. Then, several rounds of testing (and rewriting) must be done to include feedbacks from students. A test bank and exercises must be created and tested too. So there is some work to do.

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Money and Banking Part 16: FAQs about Monetary Systems

By Eric Tymoigne

The following answers a few question in order to illustrate the previous post and to develop certain points.

Q1: Can a commodity be a monetary instrument? Or, does money grow on trees?

Let us tackle the idea that “gold is money”. Clearly, a gold ingot is not a monetary instrument. There is no issuer, no denomination, no term to maturity or any other financial characteristics. A gold ingot is just a commodity, a real asset not a financial asset. On the other hand, gold coins have been monetary instruments and are still issued at times (Figure 1).

Figure 1. Gold (ingots) vs. Gold Coin (2009 $50 American Buffalo Gold Coin)

Figure 1. Gold (ingots) vs. Gold Coin (2009 $50 American Buffalo Gold Coin)

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Money and Banking Part 15: Monetary Systems

By Eric Tymoigne

Throughout this series, posts have used balance sheets extensively to get an understanding of the monetary operations of developed economies, but nothing has been said about what a monetary instrument is. It is time to spend some time on the nature of monetary instruments and the inner workings of monetary systems. A monetary system is composed of two core elements:

  • A unit of account that provides a common method of measurement: the euro (€), the pound sterling (₤), the yen (¥), the dollar ($), etc.
  • Monetary instruments: specific financial instruments denominated in the unit of account and issued by the government and the private sector.

This post first explains what financial instruments are and how monetary instruments fit within the existing range of instruments. It then delves into what determines the nominal and real value of monetary instruments and into what makes them accepted.

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Cochrane Proposes “Restoring the Rule of Law” by Letting CEOs Defraud with Impunity

By William K. Black
May 16, 2016     Bloomington, MN

John Cochrane is a theoclassical economist.  I struggle to explain to readers how radical theoclassical economics has become.  The more their anti-regulatory policies prove disastrous the more extreme their policies become.  Cochrane wrote a column recently in the Wall Street Journal that exemplifies this pattern.  We are just emerging from the worst financial crisis since the Great Depression.  The three “de’s” (deregulation, desupervision, and de facto decriminalization) caused the three most destructive epidemics of financial control fraud in history.  Much of this was driven by the perverse financial incentives that CEOs crafted to rig the system and produce an intensely criminogenic environment.

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Mankiw’s Mythical Ten Commandments of Theoclassical Economics

By William K. Black
May 16, 2016     Bloomington, MN

This is the second column in a series on the N. Gregory Mankiw’s myths and dogmas that he spreads in his economic textbooks.  The first column exposed the two (contradictory) meta-myths that begin his preface.  This column de-mythologizes Mankiw’s unprincipled “principles” of economics – the ten commandments of theoclassical economics’ priestly caste.  Some of these principles, correctly hedged, could be unobjectionable, but in each case Mankiw dogmatically insists on pushing them to such extremes that they become Mankiw myths.

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The Unprincipled and Mythical Mankiw Principles of Economics

By William K. Black
May 15, 2016     Bloomington, MN

In this first installment I discuss the unacknowledged contradiction that lies at the core of the two meta-myths in the preface to N. Gregory Mankiw’s textbooks.  Mankiw is among the leading providers of introductory economics textbooks.  In his preface to these volumes he preaches his first meta-myth in his first substantive sentence about economics.

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Stop Calling Deals That Help CEOs Pillage with Impunity “Free Trade”

By William K. Black
May 14, 2016     Bloomington, MN

This is the second column in my series on the “Mankiw’s myths and Mankiw morality.”  In the first column I showed that N. Gregory Mankiw’s own unprincipled principles of economics predicted that the financial system would be rigged by and for the financial CEOs.  In his New York Times column Mankiw purported to be writing to dispel myths, but actually did the opposite, asserting that the financial system could not be rigged.  I explained in the first column how Mankiw famously decreed that it would be “irrational” (rather than ethical) for a CEO not to “loot” a firm that he controlled.  I term this view that being ethical is irrational for a CEO “Mankiw morality.”  Under Mankiw morality, financial CEOs would have the incentive and the ability to rig the system and would do so repeatedly.

My second column responds to some of Mankiw’s myths about the “trade deals.”  I again apply Mankiw morality and theory to refute Mankiw’s myths about “trade deals” being good for America.  Mankiw morality predicts that CEOs, whenever they can personally get away with it, will rig the system to create a “sure thing” allowing the CEO to become wealthy through fraud and other abuses.  The CEOs see regulators and prosecutors as the paramount risks to their ability to get away with rigging the system.  They look for every opportunity to discredit and render ineffective regulation, to make it difficult to prosecute elite white-collar criminals, and to ensure that agency heads and attorney generals will be appointed who are unwilling to effectively regulate and prosecute corporate elites.

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A Global Marshall Plan for Joblessness?

By Pavlina Tcherneva
(Crossposted from INet)

Global unemployment is expected to surpass 200 million people for the first time on record by the end of 2017, according a recent ILO study, and limitations of official statistics suggest that the problem is much larger . As conventional measures increasingly fail to produce tight labor markets and jobless recoveries become the norm, economists grapple with this new reality by calling it secular stagnation and by adjusting upwards the rates of unemployment deemed ‘natural’ — but the human, social and economic costs of this growing problem are rarely considered in economic modeling.

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