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ECONOMICS
FOR SUSTAINABLE PROSPERITY
STEVEN HAIL
Binzagr Institute for Sustainable Prosperity
Series Editors
Mathew Forstater
Department of Economics
University of Missouri Kansas City
Kansas City, MO, USA
Fadhel Kaboub
Denison University
Granville, OH, USA
Michael J. Murray
Bemidji State University
Bemidji, MN, USA
“Sustainable prosperity” is a holistic notion encompassing the physical,
mental, environmental, financial, educational, and civic wellbeing of all
individuals, families, neighborhoods, and regions throughout the world.
In this sense, sustainable prosperity requires the development of a mul-
tifaceted public policy framework addressing the root causes of global,
national, and regional socioeconomic challenges. It must guarantee all
individuals a decent quality of life with dignity and the opportunity to
be a member of an inclusive, participatory, and just society. Sustainable
prosperity means that every decision we make, individually or collec-
tively, must take into account its direct and indirect effects on people, on
the planet, and on the economy.
Crafting solutions to the complex challenges that confront us in the
twenty-first century requires an interdisciplinary approach at the inter-
section of economics, ecology, and ethics. The Binzagr Institute for
Sustainable Prosperity book series seeks proposals from a broad range of
fields that encompass and further this philosophy. We welcome authored
works or edited manuscripts that investigate socioeconomic inequality
based on class, race, ethnicity, and/or gender, and that promote policies
to further sustainable prosperity among marginalized groups. We espe-
cially encourage proposals that build on the Job Guarantee approach to
full employment, financial sovereignty (functional finance), renewable
energy, sustainable agriculture, environmental policies, local community
development, local capacity building, social ecology, social venture part-
nerships, and social entrepreneurship.
Economics for
Sustainable Prosperity
Steven Hail
University of Adelaide
Aldgate, SA, Australia
v
vi Preface
Bibliography 271
Index 283
vii
List of Figures
ix
x List of Figures
xi
CHAPTER 1
debate between Friedman’s monetarists and James Tobin and his fellow
Keynesians, which it seemed the monetarists had won. I was thoroughly
taken in by the notion that macroeconomics had progressed to be a gen-
uine science; that my job was to learn to use the tools of this science;
that no serious alternative existed; and that Keynes, and anyone who had
ever worked with him, was out of date. Keynes had been dead for more
than thirty years, and economics had moved on. In the apparently trium-
phant words of the economist David Laidler (1981, 7), ‘we are all mon-
etarists now’.1
Like many of my generation, and of the next, I had been sold a pup.
Macroeconomics had not moved forwards, and the whole discipline of
economics was not progressing. It was regressing. It was already in a
muddle, and sadly since then, the muddle has only got worse. I did not
learn what I had expected to learn, in my naivety. I learned an econom
ics which normally serves powerful vested interests, albeit often
without economists being aware this was the case. It is an economics
resting on a set of assumptions which, though demonstrably invalid,
were convenient both for the development of particular types of math-
ematical m odels, and as a justification for the neoliberal transformation
which followed, not only in the USA and the UK, but across most of the
world.
I was never exposed to the work of Post-Keynesians, like Michal Kalecki,
Joan Robinson, Nicholas Kaldor, Abba Lerner, Hyman Minsky, Paul
Davidson or Wynne Godley. I never did understand Keynes, or at least
not until many years later. We did not so much as mention the ecologi-
cal limits to growth, as discussed in the Club of Rome report (Meadows
et al. 1972). There was nothing from the then newly emerging literature of
behavioural economics. We certainly did not discuss Karl Marx. This is not
to say that there were no electives available, where Marx might at least have
got a look in. However, by the time you had taken your macro, micro and
econometrics subjects, in my masters degree, there was no room for more
than one elective. I chose development economics and swallowed even
more neoclassical dogma as a result. By then, I had been so badly misled,
that I would have objected to anything else.
It took me many years, before I understood that I had been misled.
I began to develop an interest in behavioural economics, after the 1987
stock market crash, which undermined my faith in the previously all-
conquering efficient markets view of financial markets. Over time, during
1 INTRODUCTION—SEARCHING FOR A NEW ECONOMICS 3
a career spent training accountants and bankers, I met the odd banker
who suggested to me that the orthodox description of monetary policy
could not possibly be correct, and gradually the significance of this began
to sink in. Financial crises seemed to be happening more and more fre-
quently. Inequality kept rising in many countries, and trickle-down eco-
nomics began to seem absurd.
Then, in 2002, I started teaching at the University of Adelaide, which
at the time, in Colin Rogers, had a head of school who was a prominent
Post-Keynesian. I barely knew such economists existed. I read some of
Colin’s work (for example, Rogers 1989), which led me on to that of
Geoffrey Harcourt (Harcourt 2001, for a good start), the most famous
economist ever to work at the University, and to what was for the first
time a correct understanding of Keynes. Forgive me for the religious
reference, but I felt like a born-again economist. This was what I had
wanted to know in 1981, and had lacked both the maturity to discover
for myself, and the encouragement to do so from those who had been my
educators.
There was still something missing, though. The general equilibrium
approach of orthodox economics, which I will reject in Chapter 2, for
very good reasons, at least seems to hang together. It is suggestive of the
approach to economic management which the great majority of econo-
mists, politicians and pundits continue to take for granted, to this day.
Post-Keynesian economics seemed to me to lack the internal consistency
and power to ever challenge orthodox economics with much prospect of
success. To change the direction of our societies from a path of neoliber-
alism towards one of equitable and sustainable prosperity, something was
missing.
That something is modern monetary theory. I was originally intro-
duced to modern monetary theory by Philip Lawn, who is Australia’s
leading ecological economist, and a pioneer of a metric of economic
development called the Genuine Progress Indicator. Phil was a col-
league of mine at Flinders University, in the middle of the last decade,
and persuaded me to start reading Bill Mitchell’s Billyblog. William
Mitchell, from the Centre of Full Employment and Equity, in Newcastle,
New South Wales, is not only one of the principal developers of mod-
ern monetary theory, but also a candidate for the title of the world’s
best living economist. However, despite reading his blog, I remained
something of an MMT sceptic until the collapse of Lehman Brothers,
on 15 September 2008. It was that event, and the events that followed
4 S. HAIL
it, which led me to read voraciously all the modern monetary theory I
could lay my hands on, as well as books and papers by Hyman Minsky
and Paul Davidson, and by Michal Kalecki and Keynes himself.
As you can see, I am a slow learner. It took years for me to think
about and understand the main elements of an economics for sustainable
prosperity. Modern monetary theory is central to such an economics. It
is, in my opinion, a genuinely beautiful set of ideas, concepts and prin-
ciples; elegant in its simplicity; powerful in its validity; profound in its
significance; revolutionary in its implications; and for many people, trans-
formational in its impact on their thinking. For me, it lies at the centre of
a broader set of ideas, arguments and discoveries, drawn from a variety of
disciplines and perspectives, which hold out the hope that we can harness
this interconnected knowledge to deliver a future economy characterised
by sustainable prosperity. We can do much better in the future than we
have ever done in the past.
cut. I would not like you to have to go through such a long process of
transition as I have done. I hope it is accessible to all, useful to many and
I hope it doesn’t make economics seem like brain damage.
That is exactly how economics was described by the environmental
activist, David Suzuki, in a 2011 documentary movie.2 Economics, how-
ever, is obviously just the study of the economy. The economy is the set
of natural and fabricated resources, institutional arrangements, organisa-
tions and markets which are available to meet our needs and to influence
our current and future well-being. It is something which we have created
and which we can and will change, for better or for worse. Like all insti-
tutions, it evolves over time, and not necessarily in ways which are con-
ducive to genuine progress. It has evolved, and been managed, in such
a way as to push us beyond our planet’s ecological frontier, while at the
same time in many countries failing to provide the social foundations for
shared prosperity.
You could say the same thing about economics as a discipline. It has
evolved in a way which has not been conducive to the well-being of peo-
ple and the planet. To state that millions have been lifted out of extreme
poverty is not much of a defence for economic orthodoxy. Many millions
still live in want and insecurity in a struggle for survival, in a global econ-
omy with the technology to make this unnecessary. And all the while
we are using, according to the Global Footprint Network, such a high
level of ecological resources that we would need 1.7 Planet Earths for
this to be sustainable in the long term. If every individual on the planet
consumed resources at the rate of the average American or Australian,
we would need 5 Planet Earths. We have, since the 1970s, unnecessar-
ily gone well beyond our planetary boundary for resource use, partly
because orthodox economics has encouraged our leaders to concentrate
on goals which are largely irrelevant to human welfare, and to ignore
those things which really matter. Even in America and Australia, rela-
tive poverty has increased, as inequality has been allowed to rise to levels
not seen since before World War II. Many of the changes which have
happened in the USA and elsewhere over the past 30 years have been
destructive rather than progressive, and for that, the economics profes-
sion shares a great deal of the blame.
So it is understandable that a lot of people have lost faith in eco-
nomics, and might echo Suzuki’s words. Much of the economics
done over a long period has been, if not brain damage, at least a form
of brainwashing, and this is true of virtually all the work done within
6 S. HAIL
orthodox macroeconomics since about 1980. The good news is that this
brainwashing is not irreversible. If you have had too great an exposure
to it, and feel yourself to have been damaged as a result, then this book
is offered as a remedy. If you have so far avoided being damaged, then
please see the book as a form of inoculation. Once you have read it, you
will be able if you wish to read a wide variety of mainstream texts, or
to engage prominent conservative economists in debate, with no fear of
being misled. Instead, you will be amazed that they could have been so
wrong about so much that matters over such a prolonged period. You
will wonder how this is even possible.
To describe all economics as ‘brain damage’, though, is silly and
potentially self-defeating, whatever your form of activism. To quote John
Maynard Keynes, once again from the last page of The General Theory,
‘the ideas of economists and political philosophers, both when they are
right and when they are wrong, and more powerful than is commonly
understood’. Now, as much as at any time in history, it is important for as
many people as possible to engage with economic ideas, and to identify
which seem to be right and which are wrong. At the very least, we can
then, as Joan Robinson put it, ‘avoid being deceived by economists’—
by the wrong sort of economists, in any case. Because the right sort of
economics can be a force for good, and help to deliver a g enuinely sus-
tainable prosperity.
In his brilliant popular science book, A Short History of Nearly
Everything (2003), Bill Bryson described the reluctance of leading geol-
ogists over many years to accept, or even to take seriously, the notion
that the continents are not fixed in place, but drift and collide over time.
It took more than fifty years for plate tectonics to be accepted as valid,
despite the fact that generations of children had by then noticed that the
continents in places seem as if they would fit together like pieces in a jig-
saw, and that there was overwhelming scientific evidence of continental
drift. For half a century, plate tectonics was not something in which a
respectable geoscientist could believe. It is not only in economics that
the great majority of the supposed experts in a field can be badly wrong
about fundamental issues over a long period.
Imagine that the economic well-being of billions of people had relied
on the theory that the continents are fixed in place. The consequences
could have been disastrous. They might have included growing inequal-
ities and insecurities in many countries; long-term unemployment and
underemployment; rising household indebtedness; financial fragility; and
18 S. HAIL
10. The distinction between soft and hard economic theories is drawn from
Paul W. Glimcher’s, Foundations of Neuroeconomic Analysis (2011).
11. As in The Case for Mindless Economics (Gul and Pesendorfer 2008).
12. The statement that ‘all models are wrong’ is usually attributed to the stat-
istician George Box (1976). However, he also asked, ‘how wrong do they
have to be to not be useful?’ That is the question.
13. Colin Rogers’ so far unpublished paper, The State of Macroeconomics: A
post-mortem, written in 2017, uses this Tolkien-inspired analogy.
14. The three valid justifications for incorporating assumptions in economic
models are listed in Steve Keen’s, Debunking Economics (2001).
15. According to Samuelson’s obituary in the New York Times (Weinstein
2009).
16. Stabilising an Unstable Economy (Minsky 1986, 110).
17. He said this very late in life, in an article entitled ‘Saving Economics
from the Economists’, which appeared in the December 2012 issue of
the Harvard Business Review. He also said, in the same article, that ‘the
degree to which economics is isolated from the ordinary business of life
is extraordinary and unfortunate’. If only he had not waited until he was
over 100 years old to say such things!
18. Reuters Business News, 24 June 2010.
19. Blanchard and Leigh (2013).
20. In her testimony before Congress, on 29 November 2017.
21. Options for Reducing the Deficit: 2017–2026, Congressional Budget Office.
22. Lucas (2003, 1).
23. Blanchard (2008).
24. In a speech delivered at the meetings of the Eastern Economic
Association, Washington, DC, 20 February 2004.
25. New York Times blog of 18 June 2013.
26. The Financial Times, 3 March 2009.
27. The Financial Times, 21 July 2009.
28. Goodhart (2009).
29. Delivered by Paul Romer on 5 January 2016, as the Commons Memorial
Lecture of the Omicron Delta Epsilon Society. Forthcoming in The
American Economist.
30. Veblen was the founder of Institutional Economics; the author of The
Theory of the Leisure Class (1899); coiner of the term ‘conspicuous con-
sumption’; and author of the brilliant paper ‘Why is Economics Not an
Evolutionary Science?’ in the Quarterly Journal of Economics in 1898,
among much else. Veblen did ‘hard economics’.
31. It is obvious the Karl Marx cannot be summed up in a footnote.
However, it is in terms of his influence on monetary circuit theory, which
is related to and consistent with the modern monetary theory approach
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Kulturgeschichte der Deutschen im Mittelalter
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Language: German
Kulturgeschichte
der Deutschen
im Mittelalter
Von
1916
Verlag von Quelle & Meyer in Leipzig
Alle Rechte vorbehalten.
Altenburg
Pierersche Hofbuchdruckerei
Stephan Geibel & Co.
Inhaltsverzeichnis.
Seite
Einleitung: Kultur und Volkstum 1
Erstes Kapitel: Zusammenstoß und erste Auseinandersetzung
urdeutschen Wesens mit der Weltkultur 3
Zweites Kapitel: Erste Fortschritte deutschen Lebens im
Rahmen deutscher Eigenart unter wachsender Führung
der Herrenschicht (Ländlich-kriegerische Kultur) 21
Drittes Kapitel: Die stärkere Durchdringung deutschen Lebens
mit der antik-kirchlichen Kultur unter zunehmender
Beeinflussung durch die Romanen: Aristokratisches
Zeitalter 58
Viertes Kapitel: Ausbildung einer allgemeineren Laienkultur
volkstümlichen Charakters: Bürgerlich-demokratisches
Zeitalter 113
Einleitung.
Kultur und Volkstum.
Fußnote:
[1] Vgl. die näheren Ausführungen in meinem Aufsatz: Kultur und
Volkstum im »Archiv für Kulturgeschichte« Bd. VIII, Heft 2.
Erstes Kapitel.
Zusammenstoß und erste Auseinandersetzung
urdeutschen Wesens mit der Weltkultur.