Brad DeLong is quite complimentary in his discussion of the heterodox papers presented in the joint Union for Radical Political Economics/American Economic Association session, “Causes of the Great Recession and the Prospects for Recovery,” at the most recent economics meetings in San Francisco.
He then concludes:
What is disappointing to me is the extent to which both the mainstream and URPE are in the same box. They see the same world. They develop very similar analytical perspectives. They evaluate and phrase them differently, true. But there is no magic key in URPE to the lock of the riddle of history that the mainstream has overlooked. And—if you include Hobsonians within the URPE ekumene—there is no magic key in the mainstream that URPE has overlooked.
There’s certainly something wrong with heterodox economics these days if a leading mainstream economist such as DeLong, whose views on the current economic crises are by his own admission closely aligned with those of Larry Summers, finds that both the mainstream and URPE views “are in the same box.”
It’s a case, it seems to me, of damning with fervent praise.
Here, for the record, is the lineup of the session in which DeLong participated:
Stagnation and Institutional Structures
Abstract: The recovery from the financial crisis and Great Recession of 2008-09 has been sluggish in the United States, and more so in a number of other developed economies. This has given rise to a literature about possible secular stagnation (Eichengreen 2015; Gordon 2014a, 2014b; Krugman 2014; Summers 2013, 2014). This paper argues that the cause of the sluggish recovery in the U.S. is the transformation of the prevailing “free-market,” or “neoliberal,” institutional structure from a structure that had promoted capital accumulation for some 25 years into an obstacle to further normal expansion following the crisis of 2008-09. The paper cites historical evidence of previous periods in which stagnation gave way to normal long-run expansion only after a new institutional structure had emerged. Drawing on the “social structure of accumulation” theory of accumulation and crisis, the paper argues that the observed pattern of crisis, stagnation, institutional restructuring, and long-lasting normal growth is not an accident but is rooted in the central role in the promotion of normal capital accumulation that is played by a coherent, mutually reinforcing set of economic and political institutions which, however, cannot play that role indefinitely.
Recessions, Depressions, and the Rate of Profit
Abstract: Recessions are common; depressions are rare. This paper argues that there is a distinction between economic recessions and depressions and this distinction helps to explain why economic recovery can be weaker and take longer. The paper will argue that the ultimate cause of recessions and depressions is a decline in profitability in the business sector of an economy. The Keynesians (supporters of fiscal expansion) and Austerians (supporters of fiscal contraction) deny the role of profitability in recessions and depressions. So their prescriptions for recovery do not work. The paper will offer empirical evidence from the US economy to support this thesis. But not every depression is the same: each has its own characteristics. The distinctive feature of the current depression is the role of excessive credit or debt. Evidence will be presented to argue that the Federal Reserve quantitative easing programme had little positive effect on US real GDP or investment growth and merely fuelled a new stock and bond market boom.
Understanding the Great Recession: Keynesian and Post-Keynesian Insights
Abstract: Basing themselves on the actual experience of the 1930s, a fundamental insight offered by Keynes, Kalecki and subsequent advocates of what became Post-Keynesian economics is that, when responding to a major crisis, the economic system is not self-adjusting. In a modern monetary capitalist economy, private sector stabilizing forces do exist; but, at best, they can be considered very weak, while the destabilizing elements tend to dominate. This underlying asymmetry would suggest that, in the absence of public sector policies to counteract such instabilities, the inexorable outcome of a deep crisis is long-term stagnation. In contrast to other heterodox economists, especially from the Marxian tradition, Post-Keynesians believe that it is possible even within a capitalist economy to counteract effectively these destabilizing tendencies through appropriate macroeconomic policy actions of the state, as it happened to some extent during the post-World War II “Golden Age”. The object of the paper will be to explore both theoretically and empirically the properties of these destabilizing factors so as to shed some light on the nature of the present crisis. A significant insight offered by Keynes in the General Theory and explored by some Post-Keynesians historically has to do with the importance of the fundamental interaction between the rentier and non-rentier sectors of the modern capitalist economy, which can both trigger the crisis and abort the recovery. In particular, once a financial crisis occurs, which usually results from the destabilizing actions of the rentier sector, macroeconomic policy often works in such a way as to maintain the economy in a state of high long-term unemployment. Such a scenario of long-term stagnation, characteristic of the 1930s, is being played out again today and we shall explore possible long-term measures to pull economies out of what has clearly become a macroeconomic austerity trap.