Steve Fazzari & Barry Cynamon: What Happened to the "Feel Good" Economy?

One of the conundrums in regard to the recent US midterm elections is the apparent disconnect between the improvement in the unemployment rate—which has dropped below 6 percent—and the fact that so many Americans continue to feel so disillusioned about the economy.  In reality, this election was not about the unemployment rate per se or what any economist says about how the economy is doing. Rather, it was about how Americans feel the economy is doing. The fact is that most Americans do not believe the economy is doing better. Specifically, they do not think their personal economy has yet recovered.

From Reflexivity to the Wu-Tang Clan

Mathematics as a Common Language

A recurrent criticism made about the economics profession is that it has become overly mathematicised, to the extent of allowing “elegant” models crowd out reality. So the advocacy of mathematics as a common language for the economics profession undoubtedly fills many with horror. Read more

Inequality Hurts Economic Growth, for All of Us

It’s official, at least according to the OECD.

Rising inequality is estimated to have knocked more than 10 percentage points off growth in Mexico, New Zealand, Sweden, Finland and Norway over the past two decades. In Italy, the United Kingdom and the United States, the cumulative growth rate would have been six to nine percentage points higher had income disparities not widened. On the other hand, greater equality helped increase GDP per capita in Spain, France and Ireland prior to the crisis. Read more

William Lazonick: How Superstar Companies Like Apple Are Killing America’s High-Tech Future

Featured: Huffington Post | AlterNet | Naked Capitalism | TheAirNet | Techreformer

Few would argue that America’s fortunes rise and fall on its ability to generate technological innovations — to put bold ideas to work and then bring them to market. William Lazonick, professor of economics at the University of Massachusetts Lowell, and Matt Hopkins, research associate at the Academic-Industry Research Network, have investigated how the technology knowledge base gets created, what has gone wrong in America’s approach to innovation, and why the truth about who invests in the process is poorly understood. In the interview that follows, Lazonick shares findings from two recent papers that are part of the Institute for New Economic Thinking’s project on the “Political Economy of Distribution.” He explains why successful companies like Apple need to make fundamental changes to the way they allocate resources and stop throwing away America’s most valuable asset for future innovation — you. Read more

Peter Temin: Lessons from the Great Depression

George Santayana once wrote that those who could not remember the past were condemned to repeat it.  And looking at today’s policy makers at work seeking to combat the huge challenge of unemployment in the aftermath of the Great Financial Crisis of 2008, it appears that there is a lot of collective amnesia evident amongst this crowd.  

A History of the JEL Codes : the Making of the "Microeconomics" and "Macroeconomics" Categories [Part 3]

During the 1930s, members of the Econometric Society such as Tinbergen or Fleming, increasingly came to use a slightly transformed version of a pair of words coined by Ragnar Frisch around 1933: “macrodynamics” and “microdynamics.” Yet, it was only in 1990 that Microeconomics and Macroeconomics were established as independent JEL categories.

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Paul Martin: Taking A Stand On Financial Regulation

Canada has long received credit for its economic turnaround under the stewardship of Paul Martin, the country’s former prime minister and finance minister.  
In general, Martin has received justifiable plaudits but often for the wrong thing. Canada’s “fiscal austerity expansion,” which was praised by deficit hawks around the world, only succeeded because the country had, and still has, a free-floating exchange rate. As a result, the Canadian dollar dropped sharply in the mid-1990s, facilitating a huge turnaround in the country’s trade account and thereby offsetting the fiscal austerity embraced by the government at that time.

Steven Fazzari & Barry Cynamon: Why is the U.S. Economy Underperforming? Rising Inequality is the Key.

Featured: Huffington Post | Salon | AlterNet | Mike Norman Economics

Steven M. Fazzari and Barry Z. Cynamon, researchers long interested in consumer behavior, wrote an op-ed for the St. Louis Post Dispatch in October, 2007 in which they predicted that an end to the relentless trend of rising household debt and a subsequent crash in household spending could lead to a surprisingly deep U.S. recession. Soon after, their prediction came true in the aftermath of the global financial crisis.

Fazzari and Cynamon’s current work, which examines how high and rising inequality is holding back the American economy, is part of the Institute for New Economic Thinking’s project on the “Political Economy of Distribution.” In two papers, “Inequality, the Great Recession, and Slow Recovery” and “Household Income, Demand, and Saving: Deriving Macro Data with Micro Data Concepts,” they explore how the massive debt which led to the Great Recession, the spending collapse that followed, and the stagnation that persists are all linked to income inequality. In the following interview, they discuss how their findings challenge conventional economic views. (Click here for an extended version of the interview). Read more

Japan Repeats QE Mistake in Latest Recession

The Japanese economy is officially back in a recession again. 

The response by Japan’s central bankers has been to implement more quantitative easing even though wherever this strategy has been tried throughout the world it has failed to spur aggregate demand (although it has helped foment stock market speculation).  The only good thing about the recession is that it has spurred Prime Minister Abe to step away from another ruinous increase in the consumption tax, the principle cause for today’s slowdown. Read more