A Marxian take on the financial crisis

I came across this blog post today. I skimmed it and thought it looked rather interesting in light of our class discussion last week. In particular, pay close attention to what the writer says is the importance in Marxian analysis of the word, “crisis.” Recall O’Connor’s use of the word in his article. What is being conveyed is the idea of a complete breakdown in confidence. In a capitalist economy, confidence is key (you don’t have to read Marx to believe that). Therefore, if there is a lack of confidence or declining confidence then things can go south pretty fast. That’s what happened according to the Marxian viewpoint. The conclusion is pretty scary if you believe the writer: We’ve come to the point where we are not trying to save either the poor or the rich, but the system itself! As you read this, think about how a Neo-classical of Keynesian might respond. Do you think they would predict a complete and total collapse of the entire system as readily? How would they challenge the Marxian perspective on the data?

Short essay question

Conservatives and liberals offer different views regarding the role of government in the current financial crisis. Conservatives contend that government involvement in the economy has contributed to deficit spending, over-regulation and high taxes; while liberals contend that deregulation or lack of government intervention is the leading cause of the current fiscal crisis. Given the difference between the two camps, defining/understanding government’s role in the economy is an important step in finding a solution to the current crisis.

Read the articles by Gordon and Blinder and watch the interview with Martin Feldstein and Joseph Stiglitz on Charlie Rose. What can you infer about what the writers and the interviewees think about government’s role? How do Stiglitz’ and Feldstein’s attitudes toward Obama’s fiscal stimulus plan reflect their conception of the proper role of government in the economy? Where would you classify each one in terms of the three paradigms discussed in class?

Good weekend

A little later today, Joshua will be uploading the question for the short essay assignment. I am looking for a paper that is between 700-1,000 words in length, double-spaced, and APA format. The due date is February 11. You can hand it in before class by emailing it to me or you can give it to me in class.

I came across this interesting article on income inequality. The article basically documents the redistribution that has been occurring since the 1970s, which has seen income flow increasingly to wealthy Americans. The authors note that “Excluding capital gains, the richest one percent claimed 17.4 percent of all pre-tax income in 2005, more than double what that figure was in the 1970s. (It bottomed out at 7.8 percent in 1973.) This is the greatest concentration of income since 1936, when the richest one percent received 17.6 percent of total income.”

The article, which is found on inequality.org (a project of Demos and the Institute for Policy Studies) is chock full of graphs and tables that underscore the massive transfer of wealth from middle-income and lower Americans to the well-to-do. There is also an excellent section at the end that takes the reader to the original sources for the data.

We will be discussing income inequity in some detail in a couple of weeks. This article will serve as a good backdrop for that discussion. One thing to keep in mind as you are thinking about income inequality is “How much of this transfer of wealth is a result of public policy?” “If much of the redistribution is the consequence of public policy, how much of it was supported by the voting public?

Origins of the economic crisis

Source: Jeff Frankel's Weblog Dec 5, 2008

Who killed the economy

Now you play the game that is keeping economists up late at night. Trying to figure out who is most at blame for killing the economy. Just click on this link to vote on who is the most blameworthy. Will it be Greenspan or Bush? Maybe it will be something like Hedge Funds and China instead of someone.

This is a Test Post

Testing 1, 2, can you read me?

There is class tonight

Despite the snow and ice, the powers-that-be have mandated that learning will go on! Take a look at the discussion questions from yesterday’s and the first post.

Charlie Rose – A conversation about Obama’s economic stimulus package

Martin Feldstein and Joseph Stiglitz discuss Obama’s stimulus package on Jan 27, 2009

more about "Charlie Rose – A conversation about …", posted with vodpod

Some discussion points for tomorrow’s class

In addition, the questions from last week’s first blog post, please come to class tomorrow prepared to discuss the following:

1) Which of Musgrave and Musgrave’s three fiscal functions of government is the most controversial and why?

2) What is Musgrave and Musgrave assuming about society’s current distribution of income?

Accurate Pie Chart

More useful links

The first one is called “How to Gut a Book” and is written with history students in mind bu the advice is still pertinent. You should come to every class prepared to talk about the author’s main thesis of every article or book we read in class.

The second one is called “Visualizing Economics.” If you’re like me you probably prefer a well-done graphic to page after page of complex formulae. This website provides a wealth of economic data in attractive graphical presentations.

Interesting blog post

This is an interesting blog post that uses a graph to show that over the long run, economic growth swamps short term fluctuations in the economy. The graph also tells the story mentioned in class that only the massive spending prompted by the world war pulled us out of the Great Depression. The overriding message of the post seems to be that historical trends indicate that we will pull ourselves out of this current mess; the fear that has captured the public is probably natural but that in the end long term growth will prevail.

Another great site for visualizing data is FlowingData. This example shows some interesting ways to visualize consumer spending.

Another good piece is this one in Forbes which provides a fair overview of the history of economic stimulus packages.

Checking Periodically

Thanks Chris and Kevin for your comments. And yes, Kevin, I agree that more referees are needed. Please everyone join in the discussion and don’t be shy.

I want to urge everyone to check in periodically–a couple times a week is probably about right–because I’ll update this space on a regular basis.

This column caught my attention in today’s NY Times. Tell me what you think. Do you detect any bias?

Greetings

Welcome students. The readings for next week are Friedman and O’Connor in the Peretz book. Think about how each author approaches the question of the government’s role in the economy. In some ways, both authors view the government as a threat but for different reasons…why?

How would you classify each author based on the categories discussed in class 2 weeks ago (interventionist, nonintervensionist, Marxian)? Why? How would each one view the type of fiscal stimulus package being considered by the Obama administration?

Useful Links
Milton Friedman’s Wikipedia entry
James O’Connor’s Wikipedia entry
Amazon.com’s review of O’Connor’s Fiscal Crisis of the State.
Milton Friedman on Charlie Rose

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