News & EventsNewsletterSeptember 2014 Newsletter
PERI In Focus
In this Issue:
Green Growth: A U.S. Program for Controlling Climate Change and Expanding Job Opportunities
New Book in the Tradition of Jane D'Arista
Q&A with Jane D'Arista
A $15 Living Wage in Sonoma County
James Heintz Appointed to Andrew Glyn Professorship
Additional PERI Research 
Commentary from PERI Researchers
Green Growth: A U.S. Program for Controlling Climate Change and Expanding Job Opportunities
PERI and the Center for American Progress (CAP) have jointly published a book-length study that develops a comprehensive unified program to dramatically reduce carbon dioxide emissions while expanding job opportunities. The authors of the study include lead author PERI Co-Director Robert Pollin, Associate Director James Heintz, and Assistant Research Professor Heidi Garrett-Peltier, along with CAP Senior Fellow Bracken Hendricks. As Prof. Pollin explains, “Our work shows that the fundamental imperative of climate stabilization is not an outlandish fantasy but is truly within reach. By investing about $200 billion annually on energy efficiency and clean renewable energy for the next 20 years—meaning 1.2 percent of current U.S. gross domestic product—we can cut overall U.S. energy consumption by 30 percent relative to today, as well as expand by 400 percent the production of solar, wind, and other clean renewable sources. These clean energy investments will drop U.S. CO2 emissions by 40 percent while also generating 2.7 net new jobs. The opportunity is right before us and needs to be seized.”
>> Summary of GREEN GROWTH
The summary of Green Growth presents the study’s main findings (what’s needed to stabilize climate change) and energy and economic policy recommendations (how to achieve those aims).

>> GREEN GROWTH: The 400 page study in full

>> Comments and quotes from scholars, lawmakers, activists and business leaders in support of the study’s findings
>> Boston Review forum based on Green Growth, featuring Robert Pollin’s article, “Build the Green Economy”
Comments by PERI Green Growth co-authors: 
“The conventional wisdom is that we can either protect the environment and stop climate change or we can create jobs and grow the economy – but we can’t do both. This study shows why this is not the case. By investing in clean energy technologies, the U.S. economy can boost employment, become more energy efficient and stave off the potentially devastating effects of greenhouse gas emissions. The report shows how saving the planet requires bold, new—yet eminently feasible—policy directions.”
--James Heintz, Andrew Glyn Professor of Economics and Associate Director of PERI
“Green Growth presents a practical program for investing in clean energy to control climate change. While much research has shown that the environment-versus-economy is a false dichotomy, this study explicitly details how private investments and public policy together can control rising emissions while creating jobs. Starting from emissions targets widely agreed upon by climate scientists, Green Growth analyzes the possibilities for energy efficiency, renewable energy, and to what extent we must continue to rely on fossil fuels, and presents a 20-year investment program that is affordable and achievable.”
-- Heidi Garrett-Peltier, Assistant Research Professor at PERI
New Book In the Tradition of Jane D’Arista
Banking, Monetary Policy and the Political Economy of Financial Regulation: Essays in the Tradition of Jane D’Arista is a new book edited by PERI Co-Director Gerald Epstein, Tom Schlesinger and Matías Vernengo. Most of the essays in the volume were first presented at a May 2008 conference at PERI held in honor of Jane D’Arista, the heterodox economist. Those at the conference were acutely aware that the world was at an economic conjuncture of historic magnitude, and that D’Arista had for years been identifying, analyzing and warning against many of the forces that had led to that moment.

Writing in the tradition of D’Arista's extensive work, contributors to this volume both examine the causes of the crisis as well as advance new policy perspectives on financial markets and macroeconomics that are capable of enhancing well-being for the vast majority of people rather than only the "fortunate few" that currently control the financial system. Topics addressed include monetary policy, financial markets, financial history, liquidity, institutions and global finance.

As Gerald Epstein writes in this blog post, “How can we understand what has happened [to financial regulation]? Little to none of this would be apparent to those sifting through the entrails to find efficient markets and rational expectations lurking in the financial markets, but they become painfully obvious if one applies the institutional, historical and theoretical methods employed by Jane D’Arista.”

Tom Schlesinger writes in the introduction, “Perhaps the clearest way to view Jane is as a tough-minded empiricist who has produced critical, original insights into the functioning of the financial system and economy – and done so with the uncompromising goal of improving human welfare.”  

Jane D’Arista says of the book, “The authors have produced the kind of thinking that the heterodox community does so well—which is to say it’s not just critically and historically oriented, but in most cases takes a prescriptive policy approach, as well.”

Read more:
>> The Table of Contents
>> The Introduction by Tom Schlesinger, “Jane D’Arista: an appreciation”
To purchase:
>> Banking, Monetary Policy and the Political Economy of Financial Regulation: Essays in the Tradition of Jane D’Arista in print, available for purchase here
>> Banking, Monetary Policy and the Political Economy of Financial Regulation: Essays in the Tradition of Jane D’Arista available as an e-book:
>>On Google play
A Q&A with Jane D’Arista
Economist Jane D’Arista “is one of the last great institutionalists,” writes Tom Schlesinger in his introduction to Banking, Monetary Policy and the Political Economy of Financial Regulation: Essays in the Tradition of Jane D’Arista. She is the author of a history of the Federal Reserve’s first two decades of policy-making and an analysis of the financial system in The Evolution of U.S. Finance. She served on the Banking Committee, held a senior position with the Congressional Budget Office, and was the chief finance economist for the House Energy and Commerce Committee’s Subcommittee on Telecommunications, Consumer Protection and Finance. D’Arista later co-founded the LL.M. Program in International Banking and Financial Law at Boston University, and has taught at other institutions, including New School University, The University of Utah, and the University of Massachusetts Amherst.
Schlesinger writes that several themes distinguish Jane’s work: “her insistence on the primacy of the financial system’s economic function, her perception that reckless market developments were undermining the sustainability of the U.S. and global financial systems (and with them the fate of the real economy), and her conviction that bold policy reforms were required to avert crisis, restore stability and systematically enhance equity.”
PERI In Focus recently spoke with Jane D’Arista.
You are credited with being one of the few economists to have predicted the Great Recession of 2008. In retrospect, do you feel some measure of satisfaction knowing you were right?
It’s complicated, but no, I’m not glad I was right. My reaction is more one of, “Isn’t it sad that nobody listened to those of us who predicted it, and put a stop to it?”  Of course, there is a certain satisfaction in knowing that you weren’t making a mistake, that you were seeing things clearly, and that the methodologies you were using were the correct methodologies. We didn’t want it to happen. But it just became so clear it would.
Do you have any theories about why there was such reluctance to heed your and others’ warnings? Do you see that as having changed?
We were dealing in doom and gloom at a time when nobody wanted to hear any of it. As James Galbraith reminds us in his chapter (“From Milton Friedman to Jane D’Arista: The Financial Crisis and the Dilemma Facing the Central Banks,”), Fed chair Bernanke was optimistic right up until the end. That’s the story everyone wanted to hear at the time; that’s what we were up against.
Also, the heterodox community was shy. We had been marginalized by mainstream economists and the press before 2008. The press never called us before; now they do. I think the book comes out at an ideal time, to capture that kind of momentum that we have seen created for heterodox economics over these last ten years.
The authors have produced the kind of thinking that the heterodox community does so well—which is to say it’s not just critically and historically oriented, but in most cases takes a prescriptive policy approach, as well.

How did you develop your thinking about financial systems?
I began my career working for a Texas Congressman, Wright Patman, a grand old man who chaired the House Committee on Banking and Currency. He was interested in labor and housing, and taking lessons from the Depression. He was the ideal mentor, as were many of his staff. The first thing he asked me to do was a study of the Reconstruction Finance Corporation of the 1930s. While we didn’t always win, it was exciting to work with a powerful member of Congress, getting these views across.
I was also influenced by serving on the Banking Committee when globalization really took off. I watched as finance moved abroad in the 1970s, and started operating outside the regulatory framework. Watching that unfold influenced my thinking. And now we have a blind market system. For instance: There is no information about asset-backed securities markets. You don’t know how many assets were traded, by whom, or for how much.
The heterodox community is more historically and policy oriented than mainstream economists tend to be. And this has been a theme of mine as a teacher. Financial thinking in the 1930s, for instance, was enriched by the many different ideas and approaches one could pull off the shelf—practical solutions to the problems as they were occurring. John Maynard Keynes and his ideas, of course, but there were a number of other economists who were very specific about what was needed. Unfortunately, we didn’t have the benefit of that approach this time around.
What role did teaching play in the course of your career?
Teaching held a very important place. I loved it. I enjoyed introducing a stronger historical, institutional and policy-oriented bias to students.Many of them were receptive and were influenced by that way of thinking.
For me, teaching was also a way of developing my thoughts, and getting feedback right away. When you write an article, people might read it and put it aside, and you never hear what they really think. But you do hear from the students. That is a very good way to keep your thinking in line and relevant. You can’t go off too many deep ends, because you are trying to be consistent and deliver a clear message.
What are your thoughts about financial policy and the Fed today?
It is frustrating to see the Fed's approach to monetary policy so complacent. The Fed does not seem to be interested in analyzing how effectively it operates, making use of all the tools available or designing new tools that might better move policy initiatives through the financial system now in place. What can monetary policy do to help the real economy? What the Fed has been doing with the quantitative easing regime has not been that helpful. We haven’t gotten the change in the real sector we need. We can see that low interest rates may feed speculation rather than spur lending.
On the other hand, Yellen’s emphasis on employment and wages is credible. That in itself is a very important message, and she has the respect of the Fed board and of the markets. There is reason to be delighted with her. She’s moving the system away from its emphasis on inflation. She is putting greater emphasis on what happens in the real economy, and what happens to real people in the real economy, rather than what happens to markets. Stability is important, but she knows there are even more important things to emphasize.
You’re retired now, but it seems you’ve found a second career as a poet.
I am retired, but my commitment, my passion for economics, for the issues I've always been following, is still there.
But yes, poetry is now the day job. I’d promised myself that, at some point, poetry would be my main preoccupation. I have published a book (The Overgrown Copse, Antrim House), and now writing poetry is how I begin the day.
A $15.00 Living Wage in Sonoma County
Sonoma County, California will consider adopting a living wage ordinance that mandates $15 an hour for workers employed by the County, County contractors, and businesses receiving economic development subsidies. This detailed analysis of the proposal by PERI Assistant Research Professor Jeannette Wicks-Lim finds that the costs transmitted to the County from covered businesses will equal less than 0.03 percent of its $1.4 billion annual budget. Raises for 3,800 home care workers who provide essential daily care for low-income elderly and disabled adults add the largest cost increase to the County. Still, including all covered groups, the costs of the measure to the County will equal less than one percent of its total budget. 
>> Read "An Assessment of the Fiscal Impact of the Proposed Sonoma County Living Wage Ordinance"
James Heintz Appointed to Andrew Glyn Professorship
PERI and the University of Massachusetts Department of Economics is pleased to announce the appointment of James Heintz, Associate Director at PERI, to the Andrew Glyn Professorship. The professorship, funded by an anonymous donor and a matching fund established by the Provost's Office, honors Andrew Glyn, a rigorous, path-breaking, socially committed and renowned economist who was a faculty member at Oxford University for nearly 40 years until his death in 2007. The position is housed jointly in the Department of Economics and PERI. Léonce Ndikumana, Professor of Economics and Director of the African Development Policy Program at PERI, was the inaugural Andrew Glyn Professor, from 2011 until 2014.
“James Heintz is widely recognized as one of the leading progressive economists in the world today,” says Robert Pollin, Co-Director of PERI and Distinguished Professor of Economics. “His work combines creativity and rigor along with a deep and unmistakable commitment to social and economic justice. For 13 years now, he has been a major contributor to all that we do at PERI.”
James’ research interests are wide-ranging, yet he has also developed unique levels of expertise in critical areas that are generally neglected by U.S. economists. These include macroeconomic theory and policy as they relate specifically to sub-Saharan Africa; informal labor markets; the integration of gender issues into macroeconomics; and the economics of human rights.   
"It is an honor to be named the Andrew Glyn Professor of Economics,” says Heintz. “Andrew Glyn was an amazing person -- dedicated to using economic analysis in the battle to make the world fairer and more just. I firmly believe this is what economics should do, and hope that my work will reflect the spirit of Andrew's achievements."
Additional Recent PERI Research

PERI Working Paper: Deepankar Basu and Debarshi Das
Social Hierarchies and Public Distribution of Food in Rural India
This paper develops a simple model that shows that consumption of Publicly Distributed System (PDS) food grains is significantly different between rich and poor households in states where PDS functions relatively well; in places where the PDS is non-functional, the difference is not significant. Using household-level data, the authors find evidence which suggests that one way to make the PDS functional is to make it more accessible to poor and underprivileged households.
PERI Working Paper: Noah Enelow
Farm Labor Networks, Cooperatives and Fair Trade: An Empirical Analysis of Peruvian Coffee Growers
Agricultural marketing cooperatives are potentially important tools for rural development. However, many cooperatives experience significant outside sales to private intermediaries. This study analyzes the problem of outside sales in a coffee cooperative in northern Peru, and finds that the labor practices of cooperative members exert significant influence on their level of outside sales.
PERI Working Paper: Léonce Ndikumana
Implications of Monetary Policy for Credit and Investment in Sub-Saharan African Countries
This paper investigates the implications of monetary policy for domestic investment through its effects on bank lending to the private sector and interest rates in sub-Saharan African countries. The study argues the pursuit of inflation control through contractionary monetary policy carries high costs in terms of reduced investment and ultimately slower economic growth. 
PERI Working Paper: Léonce Ndikumana
International Tax Cooperation and Implications of Globalization
While globalization has been characterized by substantial increase in trade in goods, the most rapid expansion has been in the cross-border financial flows. Recent developments in globalization raise important issues regarding taxation policy and economic development. 
PERI Working Paper: Gerald Epstein
The Contested Terrain Approach to the Political Economy of Central Banking
The contested terrain approach to the analysis of central banking – which borrows the term from Richard Edwards’ book on the fight over corporate labour processes – suggests that central bank behaviour, like that of other important institutions of capitalist governance, can usefully be analyzed as a struggle among key classes (and class-fractions) over economic policy.

PERI Working Paper: Léonce Ndikumana
Savings, Capital Flight, and African Development
Historically, countries that have achieved and sustained high growth rates over long periods are those that were able to maintain high domestic saving rates, enabling strong and sustained domestic investment. In the case of African countries, domestic saving has remained low, leading to high investment-saving gaps and increased dependence on external capital. A key reason is the inadequate performance in domestic saving mobilization in the public sector and in the private sector. But an important factor that has been overlooked is the leakage of resources through capital flight. This paper analyses the linkages between capital flight and domestic saving in the case of African countries. 
PERI Working Paper: Simon Sturn
From Internal Imbalances to Global Imbalance: A survey on the Causes of China's Export-Led Growth
There is a broad consensus that China’s export- and investment-led growth model is unsustainable and therefore needs to become more balanced. In the public debate, Chinese exchange rate interventions are mostly made (solely) responsible for this. But it is unclear whether and how much the Renminbi is undervalued, and if an exchange rate appreciation helps to reduce China’s current account surplus significantly. This survey reviews the international literature on China’s export-oriented growth model. 

PERI Working Paper: Thomas I. Palley
Monetary Policy After Quantitative Easing: The Case for Asset Based Reserve Requirements
This paper critiques the Federal Reserve’s quantitative easing (QE) exit strategy which aims to deactivate excess liquidity via higher interest rates on reserves. That is equivalent to giving banks a tax cut at the public’s expense. It also risks domestic and international financial market turmoil. The paper proposes an alternative exit strategy based on ABRR which avoids the adverse fiscal and financial market impacts of higher interest rates. ABRR also increase the number of monetary policy instruments which can permanently improve policy. This is especially beneficial for euro zone countries. Furthermore, ABRR yield fiscal benefits via increased seignorage and can shrink a financial sector that is too large.

PERI Working Paper: Thomas I. Palley
Aggregate Demand, Endogenous Money, and Debt: A Keynesian Critique of Keen and an Alternative Framework
This paper presents a Keynesian critique of Steve Keen’s treatment of the endogenous money – credit – aggregate demand (AD) nexus. It argues his analytic intuition is correct but is developed in the wrong direction.
PERI Working Paper: Sara Hsu, Jianjun Li, Ying Xue
Shadow Banking and Systemic Risk in China
In this paper, the authors discuss elements of systemic risk and the Chinese shadow banking sector, and analyze systemic risk in the Chinese shadow banking systems using a Markov model. Based on their Markov analysis, the authors find that some systemic risk is presented by trust companies and that banks absorb most of this risk in the financial system. 
PERI Working Paper: Simon Sturn and Gerald Epstein
Finance and Growth: The Neglected Role of the Business Cycle
A canonical cross-country/time-series literature argues that finance, measured as private credit, fuels growth. This literature aims to sweep out business cycles by averaging the data over five years. The authors show that growth and credit are positively correlated with output gap measures for five year averaged data. Studies not adequately controlling for this pro-cyclicality overstate the long-run impact of finance. 
PERI Working Paper: Iren Levina
A Puzzling Rise in Financial Profits and the Role of Capital Gain-Like Revenues
The paper provides an explanation for the puzzling decoupling between the rate of growth of financial profits and GDP in the 2000s. Drawing on the insights from Keynes, Minsky, and Hilferding, the paper identifies a peculiar type of profit – capital gain-like revenues that take the form of profits from underwriting, mergers and acquisitions, securitization, and trade in financial assets. These capital gain-like revenues come from the redistribution of monetary assets and lack a counterpart in current GDP. They can be thought of as wealth transfers. 
Commentary from PERI Researchers 

Gerald Epstein on Janet Yellen's focus on job growth

Gerald Epstein on what Stanley Fischer's "disappointment" in the financial recovery ignores

James Boyce, New York Times opinion piece: "The Carbon Dividend"

James Boyce on how the new carbon dividend bill will reward citizens and cap pollution

Robert Pollin: What it will take to switch to a green economy

Gerald Epstein on the slow roll-out of Dodd-Frank as a boon to banks

Jeannette Wicks-Lim on the benefit to retailers of raising their wage floors

Robert Pollin on how austerity policies keep the recovery weak

Robert Pollin on municipal bonds: How the Fed could bail out the basic economy

Robert Pollin and Dean Baker on the economy's weak recovery

Does a higher minimum wage lead to job losses? Robert Pollin debates

Robert Pollin on the federal deficit reaching its historic average
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