Our March/April Issue Is Out!

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We sent our March/April 2016 issue to e-subscribers last week, and the print copies are now arriving in print subscribers’ mailboxes!  (Not a subscriber? We hope you’ll consider subscribing today–just click here.)  We’ve already posted three articles from the issue to the D&S website: Why Higher Ed Can’t Wait, by Biola Jeje and Belinda Rodriguez; John Miller’s take on Clinton and Sanders’ financial reform proposals; and (just posted today) David Bacon’s No Country for Old People.  Here is the issue’s note from the editors:

Bill of Indictment

How has contemporary capitalism failed, in the United States and around the world?

It has failed on sustainability. For decades now, there has been no sensible way to deny the looming catastrophe of climate change. Yet, only now are we taking the first steps to abandon “business as usual” and avert the worst.

It has failed on stability. The boom-and-bust cycle of capitalist economies has been adrenalized by the deregulation of finance. As Nina Eichacker shows in her study of Iceland’s financial collapse (p. 21), no country has the institutional capacity to cope with the instability inherent in a deregulated and “supercharged” financial system.

It has failed on security. Even wealthy countries fail to guarantee the basics in life—like housing, medical care, or education. As Gerald Friedman explains (p. 32), millions in the United States are still without access to health care, and millions more lack adequate coverage—even though universal care could be achieved at lesser cost than under the current system.

It has failed on dignity. In many countries, the young today face a bleak and uncertain future. Describing the disaster of unemployment in Greece today (p. 17), Evita Nolka quotes a young adult obviously tormented by “being deprived of the opportunity to work during the most productive years of your life.”
Just as the particulars of the indictment are clear, so are many of the possible responses. Friedman explains how a single-payer health insurance system could reduce waste and achieve universal coverage. Biola Jeje and Belinda Rodriguez describe the burgeoning movement, of which they are a part, for free higher education in the United States today (p. 5). David Bacon advocates a human-rights approach to economic security in old age (p. 26). John Miller describes proposals to rein in the financial system (p. 9). James Boyce shows that serious action on climate change would benefit the majority of people today, both in terms of health and wealth (p. 12).

If anything, though, the readiness of solutions to our most pressing problems only casts the current system in a more negative light. Nolka’s example of a shuttered Greek textile factory—its unemployed workers meticulous in caring for the machines—serves as a case in point. It would take so little to restart production and get them back to work, but the factory remains closed and they remain unemployed. The solutions are all around us, yet those in positions of power can’t put them into practice.

Or won’t.

The Latest Links on Friedman/Sanders, Romers, etc.

Gerald Friedman, Naked Capitalism, Gerald Friedman Responds to the Romers on the Sanders Plan: Different Models, Different Politics. Differences between my evaluation of the impact of the Sanders economic program from that of the Romers reflect different views of the economy, the difference between a static model where national income and employment are largely fixed and a dynamic one where these are shaped by effective demand and are, therefore, susceptible to change in response to economic policy. There are no errors in arithmetic.* [There’s a footnote contradicting the Wolfers NYT hit piece alleging accusing Friedman of “bad math, or logic”.] It is a fundamental difference in vision that divides our approaches; the same distinction that divided John Maynard Keynes from those he labelled the Classicals in his General Theory of Employment, Interest, and Money.”

James Sherman, at his blog The Body Politick, Uncovering the Bad Math and Logic (and the Bias) at the New York Times. A nice takedown of the Romers and of Wolfers. Follow-up to a previous post, Bernie Sanders, Social Democracy, and Economic Growth – Part I.

Robert Waldman, at Angry Bear blog, New Keynesian Orthdoxy and HysteresisWaldman seems to be agreeing with Friedman (against the Romers) that temporary stimulus can have permanent effects; he is also criticizing the Romers for appealing to the standard model to criticize Friedman, when they themselves don’t agree with the standard model. “There is a standard model in which demand stimulus has only a temporary effect on output and certainly no long term effect on the rate of growth of output. The model does not fit the data. In the academic discussion, macro economists note this and discuss alternative models. But if an outsiders (the Sanders campaign) or other than top status academics say something inconsistent with the standard model, economists say they are wrong and appeal to the standard model. This can make the orthodoxy invulnerable to data. It can be noted that it is rejected by data and alternatives discussed when confronting the problematic data, but this discussion isn’t shared with non-economists.” This was the “Weekend Reading” at Brad DeLong’s blog. (Does this mean DeLong is backing away from his earlier harsh remarks about Friedman’s analysis (in this blog post, in which he manages to praise Friedman before criticizing him, as a vehicle for mentioning that he got two summa readings on his senior thesis, one from Friedman)? Will he admit that he’s doing so, vs. siding with Krugman and the Gang of Four, as he said in his original post?)

Laura Tyson,  at Project Syndicate, Closing the Investment Gap. A commenter on Robert Waldman’s Angry Bear post links to a piece by Tyson, who is one of the “Gang of Four,” saying: “Tyson may not realize it, but she just provided a ringing endorsement of the Sanders economic plan as well as Friedman’s analysis of same.” In the paper (which the commenter quotes from), Tyson argues that a temporary fiscal stimulus can have persistent effects: “Under conditions of weak aggregate demand, stronger public investment encourages more private business investment.” Oops. She’s saying what the Romers are criticizing Friedman for saying. I guess if you say it in an article that only other economists are likely to read, and not in support of an insurgent anti-establishment campaign, it’s ok; if not, not.

Menzie Chinn, Econbrowser blog, Visualizing Textbook and Alternative Interpretations of the Friedman Analysis of the Sanders Economic Plan“Now that the dust has (kind of) settled on exactly what is and is not in Gerald Friedman’s interpretation of the Sanders economic plan, I thought it useful to contrast the textbook (at least the one I use, Olivier Blanchard/David Johnson’s) view of how a fiscal stimulus works, versus that in which a one-time spending increase yields a permanent increase in output, in a graphical format.” Nice graphs!

David Ruccio, Real-World Economics Review blog, Looking Below the Surface. “The fact is, the arrogant liberal response to Sanders and Friedman carried out in the name of ‘responsible arithmetic,’ which has created an ‘illusion of consensus,’ has been been both timid (in terms of actual policies) and shallow (in terms of what it focuses on).” There were several earlier pieces on the kerfuffle from the Real-World Economics Review blog that I’d missed (also siding with Friedman, natch): Lars Syll, Real-World Economics Review blog (2/28), Bernie Sanders and the Verdoorn Law. David Ruccio, Real-World Economics Review blog (2/28), The Debate Continues; Peter Radford, Real-World Economics Review blog (2/21), Krugman versus Sanders; and earlier from David Ruccio, at Occasional Links & Commentary on Economics, Culture and Society (2/20), Pushback.

Robert Vienneau, at his blog Thoughts on Economics, Romer and Romer Stumble. Points to three problems with what the Romers say in just one passage about labor markets and regulation. The conclusion: “Even the best mainstream economists seem incapable of writing ten pages without spouting ideological claptrap and propagating silly errors exposed more than half a century ago. Something seems terribly wrong with economics profession.”

Robert Reich, from his blog, Why the Critics of Bernienomics Are Wrong. Short and snappy. Hew as also interviewed on Democracy Now!, “We Must & Can Aim High”: Former Clinton Labor Secretary Robert Reich on Endorsing Bernie Sanders. In response to a question from host Amy Goodman about the kerfuffle, “Bernie Sanders is claiming—and Gerald Friedman, professor Gerald Friedman, an economist, backing him up, is claiming—that he could, because of his proposals, such as a single-payer plan, get economic growth up to 5.3 percent—that’s not out of the historic dimension of what’s possible; in fact, in the early 1980s, we had 5.3, almost 5.4, percent economic growth—and also get unemployment down to 3.9 percent or 3.8 percent—again, not out of historic possibility. In fact, that’s what was the approximate rate in the late 1990s.”

Gerald Friedman, interviewed on BloombergBusiness, Sanders Economics: Do the Numbers Add Up?  Jerry acquits himself well.

Ryan Cooper, The Week, Who’s Afraid of John Maynard Keynes? Nice piece on the debate about output since the Romers’ critique of Friedman came out. “Ultimately, there is only one way of resolving this question for sure: Attempt aggressively expansionist policy, and see how far we can get. No one knows for sure where the top is, or whether serious efforts to bring the millions of discouraged workers with fiscal stimulus, active labor market policies, or paid family leave would pay dividends. But they are unquestionably worth trying. Insofar as the professional center-left economist corps is creating a sense that such efforts are futile, they are doing their nation a massive disservice.”

That’s it for now.