30th Annual Levy Institute Conference, Thursday, May 4 (virtual)
James Keenan
James E Keenan
> https://www.levyinstitute.org/news/30th-annual-levy-economics-institute-conference
>
> "The /*30th Annual Levy Economics Institute Conference*/ is a one-day,
> fiscal/monetary policy, inflation, unemployment and job creation, and
> the US macroeconomic outlook."
>
> Papadimitriou, all of whom spoke at the Levy Institute Summer Seminar
> last June.
>
https://www.levyinstitute.org/conferences/conference2023/
The conference will have 4 90-minute sessions, so it's a bit less of a
cognitive load than previous (f.k.a. Minsky) conferences at Levy.
James Keenan
This year's Levy Conference was a one-day, all-Zoom affair. Post-pandemic I'm all Zoomed-out, so I only paid close attention to one of the four 90-minute segments, that being the one on inflation.
James K Galbraith
The first presentation in that segment -- and the wittiest presentation of the day -- was by University of Texas prof James K Galbraith. You can get a good taste of what he said by reading his February 2023 INET working paper, "The Quasi-Inflation of 2021-2022: A Case of Bad Analysis and Worse Response". (It's also in the Journal of Keynesian Economics, but that's paywalled.) Galbraith distinguishes between two types of inflation:
'Pure' inflation: a textbook concept, rarely encountered in the real world, which entails an undifferentiated devaluation of the monetary unit with respect to all newly-produced goods and services.
'Everyday' inflation: the propagation of a price shock(s) from one sector or commodity through the price structure. This type always affects the distribution of income and may or may not be sustained.
What we've experienced in the last two years is the latter. Galbraith noted that to make monetary policy (as the Federal Reserve does) by focusing on an index measuring year-over-year price changes means policy is inherently backward-looking. With respect to the public discourse around inflation this has the disadvantage of giving Larry Summers, Jason Furman and Ken Rogoff eleven extra Op-Ed opportunities for each shock.
Galbraith heaped scorn on Phillips Curve/Natural Rate/NAIRU thinking about inflation. He noted that he had published an article calling for junking the Phillips curve in a 1997 article in the Journal of Economic Perspectives, while it took mainstream economist Olivier Blanchard until 2018 to publish an article in the same journal wondering whether it was time to go beyond the Phillips curve. Galbraith quipped that he raised two daughters to voting age in the time that it took Blanchard to realize the problems in the Phillips curve.
Isabella Weber
U. Mass Amherst professor Isabella Weber presented on "Inflation in Times of Overlapping Emergencies: Systemically Significant Prices, Profits and Conflict." This appears to have been largely based on a February 2023 working paper she wrote with Evan Wasner, "Sellers’ Inflation, Profits, and Conflict: Why Can Large Firms Hike Prices in an Emergency?" (which I have not yet had time to work through). Weber is strongly influenced by the input-output modeling of the economy by mid-twentieth century economist Wassily Leontief.
Weber argues that inflation is largely a phenomenon of changes in relative prices originating in shocks in key sectors of the economy which then propagate outwards. Hence, like Galbraith, she argues that inflation has immediate redistributive implications. Firms raise prices only if they expect other firms to do the same. Sector-wide cost increases function as a coordinating mechanism. If demand outstrips existing capacity by a wide margin, firms temporarily gain monopoly power to raise prices and boost profit margins. Otherwise, to increase profit margins firms have to lower costs. If price shocks become systemic, it is not feasible to react to them with rate hikes and macro tightening each time a shock hits a systemically significant sector. She calls for economic policy disaster preparedness and wonders that if certain sectors are so important, then maybe they shouldn't be privately run.
Yeva Nersisyan and Randy Wray
Nersisyan and Wray then presented a talk called (not surprisingly), "An MMT Perspective on Current Inflation." (See their Levy Institute "one-pager", "The Causes of Pandemic Inflation. They characterize recent inflation as mostly a supply-side problem. "Fifty years of neoliberalism" suppressed aggregate demand and domestic corporate investment. The piper was paid with the supply-chain disruptions of production. Federal Reserve management of the economy continues to be based on "triple unobservables": inflation expectations, real rates, natural rates. Policy reduced to psy-ops. Nersisyan and Wray feel that the U.S. still has large under-utilization of productive capacity, even given low domestic investment. Wages are not driving inflation, they're playing catch-up. They note that the Federal Reserve forecasts Americans to be 3% poorer at end of 2023 compared to what was projected pre-pandemic.Wray's final comment: The Fed is now biggest financial destabilizer we have.
If any other reader caught part of this conference, please feel free to add summaries of such part.
carlan
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