H. Chorney, City of Dreams, Chapter 1 (Introduction)

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Harold Chorney: City of Dreams, Chapter 2.

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Poli 610 AA 2020 Prof. H.Chorney take home test Dec.2 2020

Due back Friday December11 ,2020

Part one: write a paragraph or two on Five of the following: 30 %.5×6 %

  1. 1. Says law 2. Classical laissez-faire 3. Michal Kalecki. 4 the multiplier 5.Keynes and Bloomsbury 6. monetary policy and low unemployment 7.financial derivatives 8.Hayek and Keynes 9.John Kenneth Galbraith 10. Robert Bryce and Canadian economic policy 11.marginal propensity to consume 12. Milton Friedman 13. Economic Consequences of the Peace 14. G.E.Moore and Keynes 15. Hyman Minsky and uncertainty 16. The Great Depression 17. Q.E. and the bond market and interest rates 18. Brexit and Keynesian economic policy.

Part two :write an essay on two of the following topics=a separate essay per topic.2×35 =70

  1. 1. The essence of Keynes‘s General Theory (use equations or diagrams where appropriate)
  2. 2. Discuss the tenets of monetarism and assess how well or poorly the theory holds up after the crisis of 2008-09 and the current covid crisis
  3. 3.Discuss the Keynesian welfare state and how it reflects Keynes‘s values.

4. Discuss the origins of the IMF and the World Bank and the fate of bancor .

5. Compare Marx to Keynes.

6. Discuss the deficit and debt controversy and the impact of covid 19 on the debate.

7. Discuss Keynesian policy in the context of globalization.

8. Discuss Reagan and Thatcher and the rise of Neo-conservative economics.

9. Discuss the financial markets , speculation and derivatives and their impact.

10, Inequality and contemporary capitalism.

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Larry Summers is correct about the needed stimulus and accurate about making it clear that in terms of the low interest rate that the Fed and other national western central banks have posted there is no reason to worry about the deficit or debt and its impact upon the exchange rate of the US dollar nor inflation.

Former American treasury secretary and former Harvard University PresidentLarry Summers has reached some very progressive conclusions about American stimulus and how to finance it. He appeared this Sunday on MSNBC‘s Fareed Zakaria and clearly and forcefully explained what economists like myself have been explaining for decades that there is nothing to fear about allowing the central bank to finance a large chunk of the debt through the purchase of Treasury bills and medium and longer term debt in order to finance a series of recovery stimulus packages at historically low interest rates. He also produced a detailed accounting of the size of damage that the COVID 19 pandemic has inflicted on the United States over the past 9 months. He argues that the total is over 16 trillion US dollars which is likely to be an understatement of the damage which Americans who have caught the virus will suffer because of lasting negative health effects associated with the virus. Currently after 9 months of the pandemic the ratio of debt to the GDP has risen from 106.7 % of the GDP in 2019 to over 135.6 % of the GDP in 2020. This is a shocking rise but the pandemic is the one of the greatest shocks since the Crash of 1929 and the Great Depression which followed it.

Good for Larry Summers to appreciate accurately the situation and prescribe the appropriate policy option. There is nothing to fear in the debt, inflation or exchange rate data and much work to be done .

https://concordia-ca.zoom.us/j/87946062611

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Deficit and debt worries exaggerated by parliamentary budget officer

Once again we can see private sector and some public sector economists over estimating or historically exaggerating the risk factor in the large debts growing out of the covid-19 crisis. The Government very wisely and the Bank of Canada with their use of quantitative easing have together managed the crisis very prudently.

Contrary to the conventional wisdom derived from a bygone era the debt to GDP ratio is nowhere near historical maximums. For example the current net debt to GDP ratio is about 40 % . During the second world war the ratio rose to over 100% .During the Great Depression of the 1930s it peaked at close to 70 %. Canada and its currency survived and the country‘s economy thrived after the war under a post war Keynesian policy. It will again so long as we don’t foolishly implement austerity or budget balancing reductions. Also remember that in calculating net debt the Government typically under-estimates the value of public sector assets.

There is no sign of inflation as oil prices have slumped and there are still disinflationary tendencies. Hence the government‘s fiscal policy and the Bank of Canada‘s monetary policy are appropriate.

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Poli 204 course outline fall 2020

Poli 204 2 BB/ 2020 Concordia university
Introduction to Canadian Politics
Professor Harold Chorney 
Course outline including essay topics list (under construction please ignore the numbers along the left margin they are a computer glitch of formatting clash between word and word press)

Thursday 17:45-20:15 

Office hours t.b.a.

The study of Canadian politics is a complex field which draws upon a number of traditions in Canadian political science including institutionalism, political behaviour, political theory, international politics, political economy, history, judicial and constitutional history and economic history. In a broad survey course lasting a single term we can only touch upon a number of key aspects of the field. 

In my view some knowledge of the key economic and political history of Canada and its initial colonial relationship to Great Britain and France and its relationship to the great republic to the south , the United States, is essential in making sense of Canadian politics and its political history. So too is a recognition of the indigenous peoples of Canada and their mistreatment and acts of genocide against them by the powers of the day from the past.

 The ongoing debate about the place of Québec in Canada can also only be properly understood in the light of Canadian history and the history of the French fact in the founding of the country. Much has changed in Canada over its history. New France in the 18th century had a European origin  population of about 70,000.The indigenous people numbered by some historical estimates as high as 1 million  were recorded in the 1871 census as being close to 200,000. In 1867 the population of Canada was 3.46 million people excluding the first nations’ population.  In 1913 the population was 7.63 million . In 1941 Canada had a population of about 11.5 million people. Its population today according to Statistics Canada is close to 38 million. Quebec‘s population is 8.2 million. Whereas in the 1940s and fifties the major groups were those of British or French background and people from other ethnicities constituted less than twenty percent of the population this third group has grown substantially in importance. The first nations’ and indigenous population is now estimated to be over 1.674 million or 4.9% of the total population.

Canada can no longer be understood as a British country or a former French colony. This in strong contrast to the Canada of the early 1950s when both the Union Jack and the Red Ensign flew on the flagpole of my elementary school in Winnipeg and we were considered British subjects. Rather Canadian nationality has come into its own based as it is on a wide range of ethnicities , founding peoples and nations and immigrants from all over the world. We will likely be a nation of more than 40 million in the not too distant future and have in much of the country a strong pan-Canadian national sensibility. Yet at the same time, Québec maintains its identity as the very successful product of more than 4 centuries of French dominant presence in North America. This French presence and identity is also strong in several other regions of the country notably New Brunswick, Ontario and Manitoba. The partly bilingual character of Canada and the tension over Québec’s place in Canada are creative if difficult elements of the Canadian nation making process.
On October 19th, 2015 Canadians went to the polls to elect a new Parliament. This election was a very closely hard fought election with three major parties each according to the poll of polls having had a good chance initially to elect the largest number of members and form a minority government. In the end it produced a majority Trudeau led Liberal government.

There was a subsequent election in October of 2019 in which the Trudeau Liberals lost their majority but were able to form a minority government with support from the NDP and Green party and sometimes the Bloc Québécois. In the 2019 election the Liberals won 157 seats with 31.1 % of the vote; the Conservatives 121 seats with 34.4% of the vote; the New Democrats 24 seats with 15.9% of the vote; Bloc Québécois 32 seats with 7.7% of the vote; the Greens 3 seats with 6.5 % of the vote;  Judy Wilson-Rabould  Independent 1; others 0 seats with 0.4% of the vote. There are 338 seats and 170 seats are needed for a majority. Seats won are not proportional to vote share and the uneven results reflect the partly undemocratic nature of the first past the post electoral sstem which cries out for reform.

We will discuss the election and the current election in detail, including the leading policy issues, the nature of the voting system, the differences between the parties, Canadian electoral history and the issue of getting younger Canadians to vote in much larger numbers. The election of a majority government under the leadership of Justin Trudeau, a son of a former Prime Minister, Pierre Elliot Trudeau and a coalition of liberals, liberal progressives, environmentalists and liberal social democrats stands in sharp contrast to the recent electoral experience in the USA. 

Our complex but close trade relationship with the USA under the new Trump Republican administration has  strongly affected Canada and its democracy as anti free trade sentiments work their way through Congress, the White House and the halls of public opinion. We will face serious economic challenges if the protectionist anti- NAFTA nationalist sentiments apparently held  by the Congress toward the new agreement are not moderated. . We also face a potentially very dangerous situation should there not be a peaceful diplomatic resolution of the dispute over North Korea acquiring nuclear weapons and the means of delivering them to North American targets.the decision of President Trump to weaken Americn ties to NATO is also an important development.

Text:Eric Mintz, Livianna Tossutti and Christopher Dunn, Canada’s Politics:DemocracyDiversity and Good Government. Pearson , 2017 or preferably the new 2021 edition co-authored by Tossutti, Mintz, Brock and Barrie also published by Pearson Available through the text bookstore or by ordering from Pearson or Amazon directly.

Evaluation: An essay due in the last Thursday in October, October 29th, on a topic chosen from a list of possible topics included in the list below. 50 %. A final take home exam 50 %.

Additional reading: I draw upon several other works in Canadian history and Canadian politics . These include Alvin Finkel and Margaret Conrad’s two volume History of the Canadian Peoples vol.1Beginning to 1867 (1993) vol.2 3rd ed. 1867 to the present; C.B.Macpherson, The Political Theory of Possessive Individualism:Hobbes to Locke;Stanley Ryerson,French Canada; Unequal Union; Craig Brown, the illustrated history of Canada,2002; Donald Creighton,The Road to Confederation:The Emergence of Canada; D.Creighton the Story of CanadaHarold Innis, Essays in Canadian Economic History, Rand Dyck& Christopher Cochrane, Canadian Politics Critical Approaches;Stephen Brooks, Canadian Democracy, Oxford U Press, 2012. Michael Hart,A Trading Nation:Canadian Trade Policy from Confederation to Globalization, 2002. Mel Watkins and W. Easterbrook, Approaches to Canadian Economic History, 1969.Bob Rae,Whats’s Happened to Politics. Simon&Schuster, 2015; Richard Pound, Canadian Facts and Dates,Fitzhenry and Whiteside, 2005.

  Course Topics:

  1. Introduction and overview. Coping with the pandemic.  The last Canadian federal election, issues , polls and media spin.The electoral system and the need for reform.The recent American election and its impact upon Canada.The economics of full employment and the impact of globalization and growing inequality.
  2. Geography and Economic history: the role of the staple in French Canada and British North America.Readings and sources: Mintz et al, Canada’s Politics, pp.1-51, pp.91-120; Finkel & Conrad, History of the Canadian Peoplesvol.1 & 2; pp.1-208 in vol.2, pp. tba; Michael Hart, A Trading Nation:Canadian Trade Policy from Colonization to Globalizationch.1,2&3. Stanley Ryerson, Unequal Union:Confederation and the Roots of the Conflict in the Canadas 1815-1873; Stephen Clarkson, Does North America exist? Governing the continent after NAFTA and 9/11.Mel Watkins, A Staple Theory of Economic Growth, D.Drache,Harold Innis and Canadian Capitalist Development, and Claire Pentland, The Development of a Capitalistic Labour Market in Canadaall in G.Laxer ed, Perspectives on Canadian Economic Development,Oxford U. Press, 1991. J.Bhagwati ,Protectionism; Arghi Emmanuel, Unequal Exchange:A study of the Imperialism of Trade.
  3. Indigenous peoples in pre European Canada. Indigenous Rights and Governance. The Riel rebellions Manitoba and Québec.
  4. The conquest and its legacy.Québec nationalism in twentieth and twenty-first century Canada.
  5. Democracy and the Liberal democratic state.The 1837 rebellions and the chartists. The roots of confederation and the Canadian constitution. Canadian political culture. Gender politics. Identity politics.
  6. The clash between labour and capital in the nineteenth and twentieth centuries and its impact upon Canadian politics and the political party system.
  7. The Canadian economy, the business cycle, free trade , globalization, unemployment, inequality and regional disparities.
  8. Canada as an urban nation. The growth of diversity. Canada’s treatment of its minorities. Québec nationalism and Canadian federalism.
  9. Canadian political culture and our place in global politics. The other North America.
  10. Political parties, interest groups and social movements. Democratic reform.
  11. The constitution and the Charter of Rights. The Federal system and the economics of federalism.
  12. The institutions of government: Parliament and the power of the Prime Minister.
  13. The judiciary and the courts.
  14. Summary and Review.

Essay Topics for the TermAssignmentDue the last Thursday in October i.e. October 29th.  Write an essay of between 9-10 pages on one of the following topics. The essay must include a bibliography of sources consulted. Sources should include scholarly books, articles from academic journals and where appropriate the quality press, for example The Globe and Mail,TheNew York Times, Le Devoir, Toronto Star, The Wall Street Journal. Use a manual of style and proper citation and include a reference to it in your bibliography.

 Essay Topics:
1.”The Quebec Charter of Values and the bill 21 on religious symbols  was rooted in the Quebec nationalist opposition to Canadian federalism and the nationalists’ rejection of multiculturalism.” Discuss critically explaining the roots of the debate over values in Quebec, the goal of a secular society in the light of Quebec history and your assessment of the claim that this Charter was simply a legitimate expression of the need to protect Quebec’s culture.

  1. How can C.B. Macpherson’s notion of possessive individualism be used to construct a theory of Canadian politics? Explain his theory and explore Canada’s class cleavages and political economy in your essay.
  2. Foreign ownership and control of the Canadian economy is still an issue of considerable importance in Canada’s political economy. Explain why and discuss how it has been integrated into our politics in the past and its current status.
  3. Does Canada’s voting system of first-past-the-post need to be reformed? What alternative systems are there? How would they work? Why would they be better and how could they be implemented?
  4. Discuss the power of the Prime Minister and his/her office. What checks if any need          to be placed on it?  What countervailing powers and influences are available in Canadian democracy?
  5. What ought to be Canada’s role in global affairs? Are we a peacemaker or a powder monkey ?
  6. Discuss the relationship of Canada to the U.S. Given the close economic integration that the free trade pact has promoted explore what challenges this poses to our sovereignty,  environment , public health and independence. If the new trade agreement were to fail what ought our trade strategy be.
  7. Analyze the problem of unemployment. What role has government economic policy played in this problem? What is the role of the Bank of Canada and the Department of Finance in managing this problem? Explain the competing approaches of Keynesianism versus monetarism with respect to this problem.
  8. Discuss Canadian economic history from the point of view of staple development ?Does staple theory still have explanatory power in the twenty first century?
  9. Discuss the struggle for responsible democratic government in Canada and its roots in the 1837 rebellions, the Riel rebellion, the struggle of the suffragettes for women’s voting rights and the struggle of the indigenous people for their rights and reconciliation after the cultural genocide practiced against them.     
  10. What role have trade unions played in Canada’s political and economic development ? How have they enhanced democracy? What is their role in an increasingly globalized world economy?
  11. Discuss the evolution of indigenous rights and governance in Canada.
  12. Discuss the recent Canadian election. In the end what do you believe determined the outcome: policy differences, the image of the party leader; regional differences; ideology; economic circumstances or media manipulation? What can polling tell us about this? Does the election show us the need for reforming the electoral system?
  13. Discuss Canada and free trade in the context of globalization. How can we break free from excessive dependence on an uncertain American market? What differences has the new Trump administration made to the Canada U.S. relationship and how should Canada respond?
  14. Discuss gender issues in Canadian politics.
  15. Discuss the importance of environmental issues and climate change in Canadian politics.
  16. Discuss the housing crisis in Canada. What policies are necessary to deal with it?
  17. Discuss the problem of poverty and excessive inequality in Canada. Would  a guaranteed or basic income policy be helpful . How would it work.

                                                                              END

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Poli 610 course outline fall 2020

Macro economic policy after Keynes and covid

Professor Harold Chorney

Harold.chorney@concordia.ca

Concordia university, Montreal

This course introduces students to the relevance and work of John Maynard Keynes to the solution of macroeconomic policy problems in the age of covid. Covid -19 has wreaked havoc on the global economy . It has tragically killed over 844 thousand people world wide and has produced 25.1 million cases. Canada has suffered 9120 deaths and the US 186 thousand deaths.

The rate of unemployment due to the public health lockdowns has risen from under 4 % in the U.S in February of 2020 to close to 15% in April. Since April it has dropped month by month so that in June it had fallen to 11.1 % and in July to 10.2%.In August it fell to 8.4%. It may fall below 8 % and even 7 % by November. In Canada the rate rose to a peak of 13.7% in May from 5.6% in February It then fell to 12.3 % in June and to 10.9% in July.It fell further in August to 10.2% (sources U.S. Bureau of Labour Statistics; Canada, Statistics Canada Labour force Survey)

This course is an intensive examination of macro-economic policy-making and macro-economic theory in the light of recent and earlier global developments, including covid 19;, the crisis of 2008 and 2009 and fraud in global financial markets, the sub prime mortgage market crisis, the accompanying collapse in asset backed commercial paper and the Keynesian backed recovery now the longest recession free recovery in post war history, the original fear of the possibility of a double dip recession and the recrudescence of monetarism, deficit hysteria and laissez-faire in certain conservative circles.

It examines in close detail the problems of inflation,deflation,disinflation, public finance, unemployment, recession,depression, stagflation and economic growth and the financial markets in the light of the work of John Maynard Keynes and his interpreters, co-creators and supporters like Michal Kalecki , Joan Robinson, R.F.Kahn, J.K.Galbraith, Abba Lerner, Hyman Minsky, Robert Eisner, Paul Davidson on the one hand and Friedrich Von Hayek,Lionel Robbins, Milton Friedman, Harry Johnson, David Laidler, Robert Lucas, Gregory Mankiw and their followers on the other hand, as well as the neo-classical synthesis that draws from both schools.

In addition, we shall examine certain aspects of the contemporary political economy and explore the bursting bubble in high technology in 2000 and the 2007-09 collapse of the financial markets, as well as the current turbulence over the periodic collapse in world oil and commodity prices; aspects of globalization and their impact upon growth theory as well as,the election battles  of Barack Obama and Hillary Clinton’s and Bernie Sanders’ campaign for election against a Republican party that originally rejected Keynesian policy but now under Trump partly embraces some aspects of it; the surprise victory of the economic nationalist Donald Trump and his anti regulation populist politics; the Canadian success of Justin Trudeau running on a moderate Keynesian platform and the challenges he faces in winning a second but minority mandate;the  credit crisis, the revenge of the bond markets in Europe and the ECB and Greece and shifting attitudes in public opinion and policy towards Keynesian intervention and planning and away from strict laissez-faire.

From 2008 a modest New Deal style Keynesian Intervention was  introduced by the Obama administration including substantial investment in infrastructure and reregulation of the banking, financial, energy and transportation sectors. This had stabilized the slump that followed the financial crash . Growth resumed although it was not initially robust but up until the covid- 19 crisis it was prolonged so that the recovery was the longest in US post war history.

It is now replaced by the harsh consequences of the covid lockdown. A strong recovery from that may be threatened by global turbulence in trade relations, including a trade war with China initiated by President Trump and policy error. Nevertheless there is considerable evidence that Keynes is back and that his theories once brought up to date by innovations like quantitative easing or temporarily monetizing some of the debt (an innovation that I first proposed in detail in a number of scholarly articles and monographs in the early 1980s and nineties, but whose roots lie in the work of John Maynard Keynes and his circle in the early 1930s (see  my papers on Keynes and the origins of quantitative easing and on the 75th anniversary of the General Theory posted  on this site in June 2011)  These innovations are clearly sound and are very effective in fighting recessions and reversing slumps. The dogma of the past twenty-five years that unregulated markets work best and are always rational is now partly eclipsed by both events and public opinion. The previous Canadian political party obsessive consensus on balanced budgets and fiscal prudence is now clearly anachronistic in the light of events in the global economy.

The course includes an intensive examination of the economic, political and social thought of Keynes, the relationship between Keynes and Bloomsbury, the way in which his ideas were received, interpreted and applied and the revolution and then counterrevolution in thinking which his work provoked. The clash between Keynesianism and Milton Friedman’s monetarism is explored in detail. An attempt is made to present the rudiments of an alternative theory of macro-economic performance that is more consistent with contemporary reality and incorporates insights from both schools. Presentation is through lectures and seminars. Extensive reading is expected of all students.

The severe recessions of the early 1980s and 1990s and the growing fear of disinflation becoming deflation in the first decades of the 21st century and the current shocks to global financial markets and national economies serve as the contemporary backdrop for the course. The controversies over the public sector debt and deficit,the use of surpluses, the neglect of infrastructure, full employment and the role of the state in modern capitalist society are thoroughly explored.

Texts and Basic readings and films. (All students should view the film The big short and several of the other documentary style films made about the crash. A good guide to them is available on Moyers and Company:Six films on the financial crisis Jan.27, 2012.

John Maynard Keynes, The General Theory of Employment, Interest

and Money *

Hassan Bougrine and Mario Seccareccia  eds. Introducing macroeconomic analysis, Edmund Montgomery publications ltd. Toronto *

Robert Reich, Saving Capitalism for the Many Not the Few*

Richard Parker, John Kenneth Galbraith: his life, his economics , his politics. recommended reading selected chapters.

Athol Fitzgibbons, Keynes Vision * (several copies will be circulated among students )

Joseph Stiglitz, Freefall:Free Markets and the Sinking of theGlobal Economy *, N.Y. : W.W.Norton, 2010

Peter Clarke, Keynes:the Rise, Fall, and Return of the 20th Century’s Most Influential Economist,  *strongly recommended 

Richard Davenport Hines, Universal Man:the Seven Lives of John Maynard Keynes
Paul Krugman, End This Depression Now.
 N.Y.Berlin&London:Bloomsbury Press, 2009.  *

Ben Bernanke,The Courage to Act:A Memoir of a Crisis and its Aftermath

Frank Stilwell, Political Economy: The Contest of Economic Ideas(highly recommended for students with limited economics background)

David Wessel, In Fed We Trust        

Trust: Ben Bernanke’s War on the Great Panic, How the Federal Reserve Became the Fourth Branch of Government, New York:Random House, Crown Business, 2009.

Thomas Kuhn, The Structure of Scientific Revolutions (recommended )

Harold Chorney, The deficit papers *(available through me)

Haroldchorneypoliticaleconomist blog available on the internet

Scott Patterson, The Quants:How a New Breed of Math Whizzesconquered Wall street and Nearly destroyed It

Kevin Phillips, Bad

Money: Reckless Finance, Failed politics, and the Global Crisis of American Capitalism (Viking, 2008)

The Rotman School ofManagement, The Finance Crisis and Rescue:what went wrong?why? what lessons can be learned? U of Toronto Press, 2008

John Maynard Keynes, Essays in Persuasion (Reserve)

The Economic Consequences of the Peace

Treatise of Money, Vol 1 & vol 2(Reserve)

Henry M. Paulson, Jr.On the brink: Inside the Race to Stop the

Collapse of the Global Financial System, N.Y. Grand central publishing, Hachette, 2010

Charles Kindleberger, Manias,Panics and Crashes:A History of Financial Crises,London:Macmillan,1978

Scott Patterson, The Quants:How a New Breed of Math Whizzes Conquered Wall Street and Nearly Destroyed It, New York Crown business,2010.

Michael Lewis, The Big Short: Inside the Doomsday Machine, N.Y. :Norton, 2010.

Justin Fox, The myth of the rational market,A history of risk, reward and delusion on Wall  Street,N.Y. Harper, 2011.

Simon Johnson and James Kwak, 13 bankers: The Wall Street Takeover and the Next Financial Meltdown, New York :Vintage, 2011.

Gordon Brown, Beyond the crash:Overcoming the First Crisisof Globalization, N.Y.,London, Toronto &Sidney, Free Press

The General Theory and After: A Supplement Vol.29 ( R )

Robert Skidelsky, John Maynard Keynes, Vols 1 & 2 &3 (R )

 Robert Skidelsky, Keynes The Return of the Master *

Donald Moggridge,John Maynard Keynes: An Economist’s Biography (R )

Zachary Carter, The Price of Peace:Money,Democracy, and the life of John Maynard Keynes NY:Random House, 2020

Richard Davenport-Hines, Universal Man:The Seven lives of John Maynard Keynes, London UK: William Collins, 2015

Harold Chorney, Revisiting Deficit Hysteria in Labour/Le Travail Fall 2004 No.54, pp.245-258. * (available on internet) *

Harold Chorney, The Deficit and Debt Management: An Alternative to Monetarism * (Reserve)

Harold Chorney, After the Crash:Rediscovering Keynes and the Origins of Quantitative Easing paper presented to the Eastern Economics Association, New York,Feb. 27, 2011. (posted on this site June 3, 2011) *

Harold Chorney, John Maynard Keynes and the General Theory after 75 Years:Preface to a Presentation to the Canadian Economics Association Special Panel on” Reconsidering Keynes in a Time of Crisis” * (posted on this site June 3, 2011)

A.Fitzgibbons, Keynes’ Vision * (Reserve)

Brian Snowdon & Howard Vane eds. A Macroeconomics Reader (Reserve)

Timothy Lewis, In the long run We Are All Dead: The Canadian Turn to Fiscal Restraint 

Joseph Stiglitz, Making Globalization Work (Reserve)

Joseph Stiglitz, Globalization and its Discontents(Reserve)

Joseph Stiglitz, The Roaring Nineties(Reserve)

William D. Cohan, Money and Power:How Goldman Sachs Came to Rule the World

Dean Baker, Gerald Epstein and Robert Pollin, Globalization and Progressive Economic Policy (Reserve)

Doug Henwood, Wall Street (Reserve)

L.Randall Wray, Understanding Modern Money:The Key to Full Employment and Price Stability (Reserve)

James Macdonald, A free nation Deep in Debt (Reserve)

J.C.Gilbert, Keynes’s Impact on Monetary Economics

  Harry G.Johnson, Macroeconomic theory and monetary policy,

Chicago: Aldine publishing, 1972.

Axel Leijonhufvud,On Keynesian Economics and the Economics of

Keynes,London: Oxford University press, 1968.
Gilles Dostaler, Keynes et ses combats, Paris:Albin Michel, 2005. (Also available in a new English language edition)
G.Boismenu &G.Dostaler, eds. La Theorie générale et le keyésianisme, Montreal:ACFAS, 1987.

Other Key Works:

Hyman Minsky, John Maynard Keynes (N.Y.:McGraw Hill, 2008);                        Stabilizing an Unstable Economy(N.Y.:McGraw Hill, 2008);   Can it Happen again:Essays on Instability and Finance (Armonk, N.Y.: M.E.Sharpe, 1982);  R.Dimand, The Origins of the Keynesian Revolution;  Charles Hessian, John Maynard Keynes: A Personal Biography of the Man Who Revolutionized Capitalism and the Way We Live;  Roy Harrod,John Maynard Keynes;  A. Hansen, A Guide to Keynes;  Fausto Vicarelli, Keynes:The Instability of Capitalism;  Paul Davidson,Post Keynesian Macroeconomic Theory;  R.Allen & G.Rosenbluth,False Promises: The Failure Of Conservative Economics;  Lars Osberg & Pierre Fortin, Unnecessary Debts;  D.Drache & R.Boyer,States Against Markets: The Limits of Globalization;  Thomas Palley; Plenty of Nothing: The Downsizing of the American Dream and the Case for Structural Keynesianism;  Adrian Ham, Treasury Rules: Recurrent Themes in British Economic Policy;  James Rock, ed. Debt and the Twin Deficits Debate;  Warren Young,Interpreting Mr. Keynes: The IS LM Enigma;  Peter Clarke, The Keynesian Revolution in the Making;  A. Carabelli, On Keynes’ Method;   J.A.Trevithick, Involuntary Unemploment:Macroeconomics From a Keynesian Perspective;  A.Asimakopulos, Keynes’ General Theory and Accumulation;  Victoria Chick, Macroeconomics after Keynes;  David Colander & Dewey Daane eds. The Art of Monetary Policy  Maurice Lamontagne, Business Cycles in Canada;  Frank Hahn, Money and Inflation;  William Greer, Ethics and Uncertainty:The Economics of John Maynard Keynes and Frank H. Knight;  Lydia & Maynard eds. Polly Hill&Richard Keynes;  Jan Marsh, Bloomsbury Women: Distinct Figures in Life and Art;  Quentin Bell, Virginia Woolf:A Biography;  Frances Spalding, Vanessa Bell;  Leon Edel ,Bloomsbury;  G.E.Moore, Principia Ethica ; Armand Van Dormael,Bretton Woods:Birth of a Monetary system;  Allan Meltzer, A History of the Federal Reserve ; Milton Friedman & Anna Schwartz,A Monetary History of the United States;  Milton Friedman,Capitalism and Freedom;  Lanny Ebenstein, Milton Friedman . Milton and Rose Friedman, Two Lucky People; James Tobin, Full Employment and Growth:Further Keynesian Essays on Policy.

Key Internet sites:  http://www.Statistics Canada; OECD; Eurostat; U.S. Bureau of Labour Statistics;Statistics Canada;The Federal Reserve,European Union;D.Henwood’s Site; New York TimesThe Financial Times.The Hayek list. The post-Keynesian list; The Wall Street Journal; haroldchorneyeconomist. a list of posts to read will be provided shortly. you can start with After the Crash:Rediscovering Keynes and the origins of quantitative easing, haroldchorneyeconomist, June 3, 2011.

Evaluation: Students will be expected to make a virtual zoom presentation to the seminar, , complete a major paper and write a take home test.They will also be expected to be regular , informed and active zoom members of the seminar. To be informed obliges one to do significant reading and attend the seminar regularly.  Presentation and participation – 20 % ;Essay – 40 %; Test – 40   % .

Topics Outline:

  1. Introduction and Overview.Why study the work of Keynes ? Keynes in the age of covid-19.Contemporary economic orthodoxy. New technology and the business cycle. Globalization. The return of intervention and planning post 9/11, the New Orleans and covid-19 effect.The crash and  financial crisis,the recovery its origins and prospects.the covid-19 pandemic Financial derivatives, the collapse of Wall Street and TARP.Canadian versus American; conditions. Stimulus and deficit finance and deficit hysteria. The Republicans rediscover Hayek and Ayn Rand.
  2. The macro-economic problem; The role of markets; laissez-faire and rational markets versus   economic regulation;Paul Volker’s critique of the new regulatory framework; the world of classical economics.The monetarist counter-revolution.The economics of full employment. Galbraith’s notions of countervailing power, the technostructure, corporate planning and the new industrial state.  The post modern age and the political economy of globalization and its impact upon policy making.An outline of an alternative model of market behaviour.OPEC and the theory of cartels.
  3. Say’s law and the question of unemployment; the question of wage rigidity.The labour market clearing model. Wage flexibility, the natural rate of unemployment and inflation, the problem of aggregate demand.Aggregate supply.
  4. Keynes before the General Theory:1. Keynes the quantity theorist;the Marshallian roots of Keynes. Keynes and Bloomsbury; The Economic Consequences of the Peace;
  5. Keynes before the General Theory: 2 Keynes and G.E.Moore, The Tract and The Treatise; The Essay on Probability, The Economic Consequences of Mr.Churchill,   his liberal vision. Uncertainty.
  6. The Fundamental Equations. the Treatise on money and the problem of inflation and unemployment. The death of inflation and the return of deflation? Cartels and futures markets and inflation.
  7. The Great Depression, Keynes and the General Theory; Michal Kalecki .Uncertainty and the investment process; the role of speculation. the asset backed commercial paper crisis and the work of Hyman Minsky. The Canadian American reception of Keynes. The New Deal.
  8. The General Theory: towards a synthesis; Keynes versus

Hayek and the classics. Keynes and Shaw and Marx. The origins of quantitative easing. the Treasury view and bond market revenge.

  1. Neo-classical economics

and the bastardization of Keynes. Samuelson,Meade, Harrod, Timlin, Hicks and the IS -LM. The neo-classical synthesis and its vulnerabilities in the age of stagflation.

  1. Stagflation, the re-emergence of monetarism, the deficit and public finance, what to do with the surplus.Keynesian policy in a federal state.
  2. Supply-side and rational expectations theory. The natural rate hypothesis. The natural rate of inflation versus the natural rate of unemployment.
  3. Post -Keynesian theory and policy;New Keynesian theory; Canadian macro-economic policy since the war.Technology and economic growth. Can we banish the cycle ?
  4. Rediscovering full employment.A look again at an alternative model to current orthodoxy.Integrating the natural rate of inflation, OPEC cartelization and interest rate policy. Capital versus current accounting in public finance. The conversion of the Bush Republicans to Keynesian technique and its impact upon policy making in the US. The Obama Democrats and the 787 billion dollar deficit financed stimulus. The Republican counter-attack and the conversion of the party back to Tea party fiscal conservatism;The Return of deficit hysteria. The Stiglitz- Krugman critique. the need for a second stimulus.The bond market.Harper’s cautious conversion to Keynesian deficits.  The road ahead.The economics of fuller employment.

Tentative presentation schedule:

HRC  Sept 8. Covid -19 and the return of high unemployment.Tarp and the crash. Keynes in the era of globalization and covi-19. The current crunch over falling oil prices and the Canadian dollar. policy responses fiscal and monetary.Deficit hysteria, income replacement and stimulus.

Sept. 15   On Wealth and income inequality and unemployment;    .Aspects of the macro-economic problem.The role of markets laissez faire and monetarism Globalization and post modernism., high tech and the dual labour market.

. Sept.22.  Say’s Law. the labour market clearing model and NAIRU and aggregate demand versus aggregate supply.

Sept.29 Keynes before the General theory. hrc

October 6.The treatise on money, the fundamental equations the problem of inflation and unemployment.Asset speculation.  Minsky..

Oct.13. Hyman Minsky and Michel Kalecki. financial markets speculation a post Keynesian approach. hrc Keynes Shaw and Marx. Latin American approaches. Keynes and Bloomsbury. Keynes vision;

Oct.20. QE Deficits and public finance.Keynes, Shaw and Marx. Keynes and Bloomsbury. Keynes’s vision continued.

October 27. further notes on deficit finance on crises and crashes. Keynesian policy in a federal state.hrc the Keynesian multiplier

Nov.3,  Post capitalism ? Keynesian macro economics in a globalized post world

 Nov 10    Euro zone crisis .Brexit, Reagan and Thatcher and rise of neoconservative economics.  World Bank, IMF and Bretton Woods. The European union and NAFTA.Trade and full employment. The world bank and IMF need for reform.

Nov.17 The EU, Brexit and Nafta and Keynesian economics. IS LM and the distortion of Keynes.

Nov.24 IS LM and its distortions. Rationl expectations and irrational results.

Dec. 1 Inequality and wealth distribution and globalization.   ,Monetarism and quantitative easing.Neo classicals and classicals versus Keynes. Impact on public policy. International development and the World Bank and the IMF. Full  and fuller employment in a post-Keynesian world.

Dec. 8 Review

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Protectionism and the rise of Donald Trump; Erin O‘Toole wins Tory leadership with the support of social conservatives, Quebec nationalists and Alberta energy sector

One of the books on my shelves of economics literature in my hallway is Protectionism by Jagdish Bhagwati who has taught at Colombia University for many years. It was published in 1989 by MIT press but most of it is still very relevant to the current world of globalization and the rise recently of protectionist arguments fuelled by the presidency of Donald Trump . Bhagwhati was an outspoken advocate of trade liberalization and a strong critic of protectionism. He also makes the case that protectionism harms the interests of the vast majority in order to protect the interests of the minority that benefit from protected domestic production even if global productivity. suffers because of truncated trade and punitive oligopoly prices because of tariffs. The rise of Donald Trump and economic nationalism is the consequence of the failure of globalists and trade liberals to take seriously the actual consequence of freer trade on the employment prospects of workers who increasingly were affected by job losses, off-shoring and income lost due to lower wages and loss of jobs. Globalization of supply chains already was recognized by Bhagwati in the 1960s. One should also cite the work of Stephen Hymer and his pathbreaking work on the rise of the multinational corporation. But the political impact was underestimated . We are now living with the consequences in this covid age. (more on this later)

The theme of economic nationalism was also one of the appeals that the newly elected leader of Canada‘s Conservative party Erin O‘Toole . O‘Toole won the leadership at a virtual convention yesterday by capturing 57 % of the vote on the third ballot. He ran a campaign that tried to build a coalition of Alberta energy provincialists, Quebec nationalists and older bleu Quebec tories, and social conservatives who are found throughout the country. The Conservatives hope to force an early election by passing a non confidence motion aimed at the recent controversy over the We charity and the failure of Justin Trudeau and Bill Morneau the Finance Minister to recuse themselves from the approval process of a proposal to allow the We charity to administer the roll out and delivery of a program to fund student jobs. The controversy turned into a debacle for the Liberals with Bill Morneau resigning and Trudeau receiving lots of criticism. I could be wrong but I would be surprised if there were an election given the covid crisis and the relative youth of this Parliament. The NDP may well support the government fearing an early election. Whether the new Tory leader would do well in a new election is very debatable. A new election so soon after the last one in the midst of a pandemic seems unwise at the very least.

In the current parliament the Liberals who received 33.1 % of the vote have 157 seats;Jody Wilson-Raybould as an Independent 1; the Conservatives 34.4 % and 121 seats; the NDP 15.9% and 24 seats; the Bloc Québécois 7.7% and 32 seats; the Green Party 6.5% and 3 seats; other 0.4 % and 0 seats.There are 338 seats and 170 seats are needed for a majority. Seats are not proportional to the vote share because of our first past the post plurality electoral system which cries out for reform.The latest polls show virtually identical results once the margin of error is factored in with the Liberals at 35.3 %, the Conservatives at 30.7 %, the New Democrats at 17.4 %, the Bloc Quebecois at 7.3 % and the Greens at 3 seats with 7.2% others 1.8%.

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The Demand for Money and the issue of liquidity preference

The demand for money and the issue of excessive liquidity preference.

Keynes developed his notion of liquidity preference as outlined in the GT (1936) building on ideas he may have developed in part through his earlier supervision of Fredrick Lavington who had been a student of Keynes and later he was the Girdler Lecturer in Economics at Cambridge. His work The English Capital Market was first published in 1921. Lavington lectured at Cambridge from 1918 to 1927 and spent seven prior years at the Board of Trade. He died in 1927. ( See Donald Moggridge, Maynard Keynes An Economist‘s Biography, Routledge, London&NYC, 1992; F. Lavington, The English Capital Market, Methuen, London 1921.) In addition Keynes made use of his considerable insights from his work The treatise on Money published in 1930.

Keynes developed his money demand and Money supply theory in the following way starting from classical assumptions but then building in risk, uncertainty, complexity in financial markets and liquidity preference in order to show that there was a non zero demand for cash balances. This is what permits what I once called quasi hoarding of money . If that is so then it is understandable how such idle balances do not produce full employment and financial markets can be unstable. Disequilibrium is a real possibility and Say‘s law does not hold.

Keynes writes that M = M1+M2=L1(Y)+L2(r) where M is the total demand for money M1 is transactions and precautionary demand, M2 is the speculative motive demand; L1 is the liquidity function corresponding to an income Y which determines M1 and L2 is the liquidity function of the rate of interest r which determines M2 .

Keynes then states It follows that there are three matters to explore. i) the relation of changes in M to Y and r, ii) what determines the shape of L1; and iii) what determines the shape of L2 (GT p.200).All the changes in M occur as a change in money income. The new level of additional income can be the result of the Government through the Fed creating additional money buying treasuries, for example, and expanding its balances sheet. But Keynes points out that the new higher level of income will not necessarily be high enough for the requirements of M1 to absorb the whole of the increase in M; some of the money will seek an outlet in buying securities or other financial assets until r has fallen so as to bring about an increase in the size of M2 sufficient to stimulate a rise in Y to the extent that the new money is absorbed either in M2 or in M1 which corresponds to the rise in Y caused by the fall in r.Remember that bond prices always move in the opposite direction to the rate of interest.Buying bonds bids up their price and lowers the rate of interest.Selling them lowers their price and hence bids up the rate of interest.

Keynes goes on to specify that V is the velocity of money and there is no reason to assume it is a constant. Hence he writes L1 (Y) = Y V = M1 where YV is Y divided by V. The value of V will depend on the character of banking and industrial organization, on social habits, on the distribution of income and on the effective cost of holding idle cash balances. In the short period (and in my view Keynes errs here which helps the classical find their way back to the quantity of money argument) We can safely assume no material change in these factors and we can treat V as nearly enough constant ,(GT pp200-201) In the Marshallian instant period which is no more than a snapshot in time this might be true but not always so.The current Covid crisis shows how quickly things can change.

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Keynes on Marx versus his own approach

Keynes wrote very little on Marx although at one point he dismisses the labour theory of value as ‘‘out of date controverialising‘‘ and at another refers to Marx as a lesser figure than Sylvio Gessell, the German revolutionary Minister of Finance in the short lived Bavarian Soviet Republic in 1919 and former merchant and  monetary theorist. But there is an intriguing short passage in his collected works that offers an insight  as to what he thought of the great Hegelian of the nineteenth century.

Keynes compares Marx‘s notion of M-C-M‘ where M‘ exceeds M to the widespread view that the chain should read C-M-C‘.  Keynes writes as follows in a note in volume xxix, p.81, (CW Macmillan, Cambridge University Press for The Royal Economic Society, 1979.)

 

The excess of M‘ over M is the source of Marx‘s surplus value. It is a curiosity in the history of economic theory that the heretics of the past hundred years who have in one shape or another, opposed the formula M-C-M‘ to the classical formula  C-M-C‘ have tended to believe either that M‘ must always and necessarily exceed M or that M must always and necessarily exceed M‘, according as they were living in a period in which one or the other predominated in actual experience. Marx and those who believe in the necessarily exploitatory character of the capitalist system, assert the inevitable excess of M‘ ; while Hobson, or Foster and Catchings or Major Douglas who believe in its inherent tendency towards deflation and underemployment, assert the inevitable excess of M. Marx ,however, was approaching the intermediate truth when he added that the continuous excess of M‘ , would be inevitably interrupted by a series of crises, gradually increasing in intensity, or entrepreneur bankruptcy and underemployment, during which presumably, M must be in excess. My own (Keynes‘s argument) should at least …serve to effect a reconciliation between the followers of Marx and those of Major Douglas, leaving the classical economists still high and dry in their belief that M and M‘ are always equal !

This passage aside from its somewhat limited  interpretation of surplus value shows that Keynes was always keen to appeal to progressives to recruit them to the cause of establishing a revolution in economic thought in the midst of the Great Depression and that Marx had a large following among the young during times of crisis.

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