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After pausing last spring due to the pandemic, the Minsky Conference is back. Join us next week, May 5-6. It would be an understatement to say this has been an eventful year in world economies and financial markets. It is also a period in which we are seeing some signs of change in economic thought and policymaking. The conference has always been an important occasion for contact between heterodox and more mainstream economics; this year, that could be a particularly interesting dynamic to watch. The full program is below. Register here for the online event.   Wednesday, May 5, 2021 9:15–9:30 a.m. Welcome and Introduction Dimitri Papadimitriou, President, Levy Institute 9:30–10:30 a.m. Speaker Charles Evans, President and CEO, Federal Reserve Bank of Chicago MODERATOR: Binyamin Appelbaum, Editorial Board Member, New York Times 10:30 a.m.–12:00 p.m. Session 1. PROSPECTS FOR REFORMING THE FINANCIAL SYSTEM MODERATOR: Robert Huebscher, Advisor Perspectives SPEAKERS: Charles Goodhart, Emeritus Professor of Banking and Finance, London School of Economics Paolo Savona, Chairman, CONSOB Jan Kregel, Director of Research, Levy Institute 12:00–1:00 p.m. Speaker Robert Barbera, Director, J.H.U. Center for Financial Economics; Economics Department Fellow, The Johns Hopkins University 1:00–2:30 p.m. Session 2. WHAT’S AHEAD FOR THE US ECONOMY MODERATOR: Michael Stephens, Levy Institute SPEAKERS: Lakshman Achuthan, Cofounder, Economic Cycle Research Institute Michalis Nikiforos, Research Scholar, Levy Institute; Professor University of Geneva Frank Veneroso, President, Veneroso Associates, LLC 2:30–4:00 p.m. Session 3. ECONOMIC POLICY FOR THE NEW… Read More

Senior Scholar Rania Antonopoulos recently participated in a webinar for the European Trade Union Institute, during which she discussed the rationale behind and experience with the implementation of the “Kinofelis” direct job creation program—a limited job guarantee for Greece. Watch her presentation below (accompanying slides are here). The Levy Institute’s previous Strategic Analysis for Greece found that supplementing EU Recovery Funds with a more expansive job guarantee program (employing up to 300,000 people by 2022Q1) would help lift the Greek economy closer to its pre-pandemic growth trend. [youtube https://www.youtube.com/watch?v=RBhzK2M-hWU&w=504&h=284#t=15m2s]

In a February 18th front page article in the business section of the New York Times, Eduardo Porter surveys the potential for a job guarantee program. After starting with the caveat issued by Republican politicians—why trust your life choices to bureaucrats?—the piece goes on to present opinions of various experts on employment programs. It is noteworthy that even among the specialists, not one has ever been involved in actual fieldwork or research in the various experiments with job guarantee programs. In an era in which we are asked to respond to facts, none of those consulted on the implementation of job programs has ever provided statistical analysis of results, nor studied the communities where the programs were actually successful in achieving their stated goals—which in general are much wider than the suggestions that the programs have not contributed significantly to lessen economic recessions, or that they are too expensive and that they might produce “useless make-work.” Indeed, there are no references to the many existing experiments. Consider Argentina, where there is ample evidence that the Head of Households Program (HHP) played an important role in alleviating the recession and actually had a significant impact on the recovery of the economy after the 2001-2 economic, political, and social collapse. In situ fieldwork based on participant interviews conducted in urban irregular settlements… Read More

It seems the IMF aviary has turned on the hawks and embraced the deficit owls. Has the IMF joined the policy shift to MMT? Yes, in part, but it appears to be a viral form of MMT: according to Vitor Gaspar, the IMF’s head of fiscal policy, “Nations’ first priority should be vaccination, while the reduction of public debt is now far down the list of urgent actions… the main role of fiscal policy in the immediate future should be to be stimulative, to help restore economic growth, reduce unemployment and beat Covid-19.” This is a big shift in IMF policy advice on post-crisis response, Chris Giles notes: “After the financial crisis a decade ago the fund recommended that countries should reduce their debt levels.” But the pervasive pandemic is not the real reason for the change in feathered preferences: “Mr Gaspar said the IMF’s change of heart towards a relaxed approach to high levels of public debt stemmed from central banks’ reduction in interest rates. The drop in market funding costs means that, although advanced economies’ public debt has doubled as a share of GDP from 60 per cent to 120 per cent over the past 30 years, interest payments have halved from 4 per cent of GDP to 2 per cent.” Or perhaps the IMF is following Keynes’s… Read More

The core philosophy of this Japanese defensive art used by the weak against the stronger Samurai is to mobilize the opponent’s greater force to your own advantage. Many have criticized the run-up in the quotation of the GameStop shares as a violation of market principles or regulations. Far from it, it simply represents the fact that day traders may be dumb money, but they have understood how to apply jiu-jitsu. If the intent was simply to profit from trading the stock, no retail trader could ever compete with the institutions. To attempt to directly manipulate the price of the stock through outright purchase or sale would be impossible. The strategy that was used was simply to recognize, as Softbank had done earlier in the year, the nature of market hedging. There is a myth that hedging can eliminate risk. This almost never happens, unless there is a perfect match between risk of gain and risk of loss. In all other cases, hedging requires compensation to transfer the risk—to those more able to bear the risk, as Greenspan would say. After the 2008 financial crisis, we learned that ability had nothing to do with it; it was who was willing to bear the loss, and most were not able and required the government to bail them out. So in the run-up… Read More

by Lekha Chakraborty and Amandeep Kaur[1] The macroeconomic uncertainty during the Covid-19 pandemic is hard to measure. Economists and policymakers use the “output gap” variable to capture “slack.” It is a deviation between potential output and actual output, which is a standard representation of a “cycle.” The potential output is an unobserved variable. There is an increasing concern about the way we measure potential output—decomposing the output into trends and cycles. This is because the business cycle is not always a “cycle.” Sometimes, the “cycle is the trend.”[2] When macroeconomic crises and recessions tend to “permanently” push down the level of a country’s GDP, it is inappropriate to assume that output will bounce back to previous levels. The notion of the output gap is ill-conceived and ill-measured. Scholars have highlighted the significance of “hysteresis” (the dependence of economic path on history) in analyzing the output dynamics in crisis.[3] Against the backdrop of the Covid-19 pandemic crisis, there is a renewed interest in hysteresis and business cycles. The state of the economy and the level of GDP are history dependent (hysteresis). The concept of hysteresis has urgent relevance for designing apt fiscal and monetary policies to tackle low demand during recessions.

November 3rd, 2019, I delivered remarks on the closing panel of The New School/UMASS Amherst Graduate workshop held in New York City. The panel theme was “Broadening the boundaries of political economy”. I have since graduated and successfully gone through the job market. I hope my remarks from last year can serve as encouragement for fellow female, black, African-American, Latinx, and ethnic minority economic students, as well as all students in the field who have ever felt discriminated against. I also hope that it can help my colleagues understand the importance of fighting against misogyny and racism in the field.   “Broadening the boundaries of political economy” Remarks by Luiza Nassif-Pires: “A couple of weeks ago, when Mark [Setterfield] sent the e-mail announcing the theme of the closing panel this year “Broadening the boundaries of Political Economy” I had this unstoppable urge to participate and say something about diversity. I really had to take a step back last night (the second time my watch said it was 1 am) to analyze: What on earth was I thinking when I decided to add one more commitment to my crazy ‘thesis writing while working four jobs and going on the job market’ schedule? What is this urge to say something about diversity that kept me working late on a Saturday night? To… Read More

[The following is an interview by Paula Quental of Lygia Sabbag Fares, one of my coauthors for this post on how home quarantine has impacted domestic violence. The interview originally appeared in Portuguese and is posted here with permission.]   Labor market deregulation is bad for all workers and even more perverse for women, says economist. According to Lygia Sabbag Fares, a specialist in Labor Economics and Gender Studies, labor reform is a way for the powerful to transfer the burden of productive costs to workers. According to Dr. Fares, there is no indication that a more egalitarian division of domestic chores between men and women, a supposed “gain” from the pandemic, will be sustainable in the future. by Paula Quental The discourse in defense of work flexibility—including working hours with a bank of hours, part-time, work on weekends, and relay shifts, among other measures—usually touts the advantages for workers, especially for those (in general, women) who need to reconcile hours worked with domestic duties. This argument has gained momentum during the COVID-19 pandemic, considering the spread of the home office and a supposedly more equal division of domestic tasks between men and women. According to the economist Lygia Sabbag Fares—professor at the Escola Superior de Administração e Gestão Strong, certified by the Getúlio Vargas Foundation (FGV), PhD in Economic… Read More

by Lekha Chakraborty and Harikrishnan S As the Reserve Bank of India Governor Shri Shaktikanta Das puts it upfront, these are extraordinary times, and we need to respond with “whatever it takes” to deal with the pandemic. Over the past few days, our hope for systematically “flattening the curve” by containing the COVID-19 pandemic and moving to a quick V-shaped or U-shaped recovery is waning[i]. Evidence is increasingly pointing towards the situation worsening to a dual crisis — a public health crisis and a macroeconomic crisis — like never before. The IMF projections substantiate that the drag of the pandemic on global growth could be to the extent of -3%. This is a major revision in the global growth rate over a very short period of time. The IMF highlighted that “the Great Lockdown is the worst economic disruption since Great Depression, and far worse than the global financial crisis,” and its estimates suggest that “the cumulative loss to global GDP over 2020 and 2021 from the effects of the COVID19 pandemic would be around $9 trillion, greater than the economies of Japan and Germany combined.”[ii] *(The IMF has since released its latest [June 2020] estimates, showing global growth declining 4.9 percent, for a cumulative, 2020-21 loss of $12 trillion.) How have the central banks responded to this crisis?  This… Read More

I have translated this eulogy on behalf of the Economics Institute of the Federal University of Rio de Janeiro, where I have spent many of my years of economic formation. Carlos Lessa is part of a generation of brilliant Brazilian economists that have shaped the public debate and the discipline in Brazil. This is an effort to pay homage and make more visible the work and life of scholars whose writings are hardly ever translated into English but who are extremely important to our education. This Friday June 5th at dawn, Carlos Lessa, Professor Emeritus of the Institute of Economics and former Rector of the Federal University of Rio de Janeiro (UFRJ) has passed away. This is a time of mourning for our community. Lessa was a brilliant professor and for several decades has been systematically considered by students as the best in class. As an intellectual, he was a big interpreter of Brazil and especially of Rio de Janeiro, a city that for him was the epitome of what is best and worst in our country . In addition to his many classes, he was a man of his time and a brilliant speaker, known for his very influential and extremely popular talks and speeches. His hundreds of lectures, from a world before the existence of the internet, are of immeasurable importance and impact, particularly in the most difficult years of our history, during the military dictatorship… Read More

by Ana Luíza Matos de Oliveira Brazil is a highly unequal country — so is the access to its higher education system. However, in the beginning of the 21st century (2001-2015), there was a convergence between the profile of Brazilian higher education students and the Brazilian population in terms of income, race, and region, although many inequalities still exist. Now, this process might be at risk. From 2001 to 2015, economic growth and improvements in the labor market affected families’ spending decisions. Also, the budget for higher education presented significant growth and many programs aiming at democratizing access to higher education in Brazil — such as Reuni (expansion of the federal higher education system), Prouni (offer of scholarships in private institutions), loan schemes for students, affirmative action, and student assistance — were created or broadened. Policies in partnership with the private sector were put in place and are related to a significant growth in enrollment in private institutions in this period. This led to greater social inclusion in higher education, as Graph 1 demonstrates.[1] It is also important to state that during this period there was a policy of increasing the value of the minimum wage (MW), which in 2020 is now R$ 1045 (USD 205). Graph 1 – Students in Higher Education according to per capita income – Brazil… Read More

by Harikrishnan S and Lekha Chakraborty As predictable as it can be, the Indian Prime Minister announced lockdown at 8 PM on March 24th 2020, giving the country and its 1.3 billion people all of four hours to get ready, evoking memories of the demonetisation announcement and the midnight launch of the GST! This was done by invoking the National Disaster Management Act of 2005. While many analysts lauded the communication strategy of the leader “directly” speaking to the people as political decisiveness, our contention is that it was a clear case of using a “command and control” strategy instead of co-operative federalism, which the government had been taking pains to highlight that it believed in. The manner in which we are getting out of the lockdown, with an ad hoc and arbitrary exit strategy, at a time when the number of COVID cases reported daily has seen a mountainous surge (almost every other day previous records are being broken), shows a clear lack of any sort of planning and sadly reeks of cluelessness. While the obvious intent of the lockdown policy was “to flatten the curve” and control the spread of the pandemic, almost irreversible economic disruption has resulted in many sectors and a mounting humanitarian crisis through the unprecedented exodus of migrant labour is staring at us with… Read More