Growth theory after Keynes, part I: the unfortunate suppression of the Harrod-Domar model

Author(s): Hendrik Van den Berg / Language(s): English Issue: 1/2013

After Harrod and Domar independently developed a dynamic Keynesian circular flow model to illustrate the instability of a growing economy, mainstream economists quickly reduced their model to a supply side-only growth model, which they subsequently rejected as too simplistic and replaced with Solow’s neoclassical growth model. The rejection process of first diminishing the model and then replaced it with a neoclassical alternative was similar to how the full Keynesian macroeconomic paradigm was diminished into IS-LM analysis and then replaced by a simplistic neoclassical framework that largely ignored the demand side of the economy. Furthermore, subsequent work by mainstream economists has resulted in a logically inconsistent framework for analyzing economic growth; the popular endogenous growth models, which use Schumpeter’s concept of profit-driven creative destruction to explain the technological change that Solow left as exogenous, are not logically compatible with the Solow model.

Fairness through regulation? Reflections on a cosmopolitan approach to global finance

Author(s): Marin Beroš,Marta Božina Beroš / Language(s): English Issue: 1/2013

In the aftermath of the last financial crisis a strong message prevails that ‘something’ has to be changed in the manner global finance is governed. What exactly this ‘something’ entails and what could constitute the ‘common ground’ of anticipated change is more difficult to determine. Many envisage future improvements of global financial governance by evoking deliberative democracy, political equality and cosmopolitanism. As financial regulation is the main instrument through which global finance is shaped and governed nowadays, these principles should then be transmitted to regulatory arrangements. This paper focuses on a new conceptual approach to regulatory and governance issues in global finance, by employing the philosophical idea of cosmopolitanism. It argues that although as a concept, cosmopolitanism cannot mitigate all the flaws attributed to contemporary finance, its development and extension to international financial regulation that is promulgated by institutions of the global financial system, would represent a worthwhile endeavour in making global finance more accountable and just in the eyes of many.

A theory of planning horizons (2): the foundation for an ethical economics

Author(s): Frederic B. Jennings Jr. / Language(s): English Issue: 1/2012

The concept of planning horizons serves as a measure of many unsettled aspects of economic analysis. First and foremost, the notion is ordinal: we speak of ‘horizon effects’ as directional shifts in planning horizons without tallying ‘wits’ or calibrating horizonal axes of change. Second, the derivation of horizon effects is inductive; we simply assert their inherence in the range of factors subsumed within the imagined projections behind all choice. The planning horizon is set wherever surprise supplants expectation; the horizon occurs at the outer range of accurate anticipation, to which we lack clear epistemological access. Planning horizons – horizon effects – suggest a new foundation for an ethical economics of conscience, social maturation and growth. The idea of planning horizons invites a distinction of foresight from myopia in economic constructions. But time horizons are only one aspect of our planning horizons: to see ahead in time we must embrace all relevant causal effects. Foresight depends on knowledge of how reality actually works, which is a matter more of degree than ‘truth’; the planning horizon offers an index of our ‘rational bounds.’ Our range of anticipation is also related to our internalization of social and ecological externalities in our decisions, so to the scope of our ethical conscience and to our sense of human community. Indeed, the organizational health and integrity of our society is horizonal in this sense. The aim of this paper is to explore and develop the concept of planning horizons in its intellectual origins and economic concerns. Its philosophic conceptual roots, methodological underpinnings, psychological insights and economic implications are outlined to show why an economics of planning horizons offers an ethical economics of interdependent dynamic complex systems. With standard doctrines seen as a special case in a larger horizonal frame, social theory embraces an ethical economics with dissimilar institutional implications favoring cooperation.

The Hegelian dialectics of global imbalances

Author(s): Célestin Monga / Language(s): English Issue: 1/2012

Traditional narratives of external imbalances have focused on the analysis of national accounts, trade flows, and financial flows. They have generated two opposing views of the current situation of the world economy: on one side, a prudent, if not pessimistic view considers large imbalances as evidence of problems with the international monetary and financial system, and symptoms of domestic distortions (mainly in the United States and China). On the other side, a relaxed, if not optimistic view suggests that global imbalances are not anomalies but simply the predictable outcome of a world with increasingly globalized financial flows in search of the right mix of risks and returns. This paper offers a critical analysis of these competing explanations of the United States-China imbalances and suggests a way of reconciling them. The paper uses Hegel’s parable of the development of self-consciousness to explain the dynamics between the two countries. Hegel may not have been a great philosopher of history but his study of lordship and bondage provides a good framework for analyzing the dialectics of recognition and acknowledgement that currently characterizes the macroeconomic relationships between the United States and China.

Competitive markets, collective action, and the Big Box Retailer problem

Author(s): Brent D. Beal / Language(s): English Issue: 1/2012

I use a stylized scenario—the Big Box Retailer Problem—to demonstrate that the presence of behavioural interdependence in economic markets may result in deficient outcomes that are both stable and supported by ongoing participant behaviour. I present a theoretical discussion of social dilemmas and use the Big Box Retailer Problem to illustrate that these characteristics—stability and ongoing support—cannot be reliably employed as indicators of outcome efficiency. Equally important is the conclusion that upfront costs and the ongoing necessity of monitoring and encouraging contributory behaviour are not reliable indicators of the relative inefficiency of outcomes associated with collective action. Questions are raised regarding the ethical responsibilities of business educators and the implications of social dilemmas for corporate social responsibility research.

Observing productivity: what it might mean to be productive when viewed through the lens of Complexity Theory

Author(s): Manfred Füllsack / Language(s): English Issue: 1/2012

The paper tries to explore options and preconditions for a theoretically thoroughly grounded conception of productivity that is able to account for its observer-dependency and thereby meets the needs of a dynamic and highly differentiated modern society. It does so in respect to insights from Cybernetics and Complexity theory, thereby taking up charges about the contradiction of economic productivity and the Second Law of Thermodynamics. In respect to epistemological consequences of contemporary levels of productivity, a seemingly paradoxical constraint is put forward: the constraint that productivity is conditioned on being observed as such, with the observer in its turn being conditioned on productivity. The assumption is that this paradoxical constitution helps to keep productivity adaptive to the changes it itself incites in economy.

Between a rock and a hard place: second thoughts on Laibman’s Deep History and the theory of punctuated equilibrium with regard to intellectual evolution

Author(s): Altug Yalcintas / Language(s): English Issue: 1/2012

In this article I reconsider Laibman’s Deep History (2007) in the light of Niles Eldredge and Stephan Jay Gould’s theory of punctuated equilibrium. I argue that the theory of punctuated equilibrium explains (1) why conceptions of inevitability and directionality in intellectual evolution may not be as useful as Laibman thinks they are in the context of social evolution and (2) why stasis (that is, intellectual path dependence) in intellectual evolution does not allow different pathways of thought to converge.

Review of Vito Tanzi, Government versus Markets – The Changing Economic Role of the State, New York, Cambridge University Press, 2011, 376pp, Hardback, ISBN 978-1-107-09653-0

Author(s): Xavier Landes / Language(s): English Issue: 1/2012

Review of Paul Turpin, The Moral Rhetoric of Political Economy: Justice and Modern Economic Thought, Routledge, London & New York, 2011, pp. 163

Author(s): Sergiu Bălan / Language(s): English Issue: 1/2012

A theory of planning horizons (1): market design in a post-neoclassical world

Author(s): Frederic B. Jennings Jr. / Language(s): English Issue: 2/2012

The neoclassical case supporting competitive frames and market solutions has failed to promote stable world-wide economic development. Other approaches in economics incorporate social culture, increasing returns, market power, ecological limits and complementarity, yielding broader applications for development theory. In this paper a theory of planning horizons is introduced to raise some meaningful questions about the traditional view with respect to its substitution, decreasing returns and independence assumptions. Suppositions of complementarity, increasing returns and interdependence suggest that competition is inefficient by upholding a myopic culture resistant to learning. Growth – though long believed to rise from markets and competitive values – may not derive from these sources. Instead, as civilizations advance, shifting from material wants to higher-order intangible output, they evolve from market tradeoffs (substitution and scarcity) into realms of common need (complementarity and abundance). The policy implications of horizonal theory are explored, with respect to regulatory aims and economic concerns. Such an approach emphasizes strict constraints against entry barriers, ecological harm, market power abuse and ethical lapses. Social cohesion – not competition – is sought as a means to extend horizons and thereby increase efficiency, equity and ecological health. The overriding importance of horizon effects for regulatory assessment dominates other orthodox standards in economics and law. Reframing economics along horizonal lines suggests some meaningful insight on the proper design of economic systems.

Complexity and the culture of economics: a sociological and inter-disciplinary analysis

Author(s): Hendrik Van den Berg / Language(s): English Issue: 2/2012

This paper offers a sociological explanation for why the field of economics has so severely restricted the scope of its analysis to the point where it failed to foresee the financial crises, economic recessions, and other large shifts in economic activity that have characterized the global economy in recent decades. This paper’s analysis of the culture of economics draws heavily on the work of Pierre Bourdieu, the French sociologist who developed a useful framework with which to analyze the culture of an intellectual field like economics. Specifically, the paper describes how the neo-liberal doxa supports the restrictive neoclassical (marginalist) modeling approach that is a central element of the habitus of mainstream economics. Bourdieu’s concept of symbolic violence shows how the orthodox economics culture perpetuates itself even in the face of the complete failure of the culture’s favored neoclassical and rational expectations models to anticipate recent macroeconomic crises. The paper concludes with some thoughts on how this understanding of the culture of economics can enable economists to free themselves from the oppressive culture of mainstream economics.

The economist as shaman: revisioning our role for a sustainable, provisioning economy(

Author(s): Molly Scott Cato / Language(s): English Issue: 2/2012

In view of the problems heterodox economists have faced in predicting, explaining and finding solutions to the financial and ecological crises facing humanity, the paper takes a wide-angle view of the question of what the role of an economist might be in a sustainable society. I argue that the role of an economist is one of an intermediary between people and the resources they need for survival, a role that in less rationalist societies might have been performed by a priest or shaman. I propose three central responsibilities for an economist in a sustainable society: supporting a process of re-embedding the economy in the environment; negotiating a respectful—even reverential—relationship between humans and non-human species; ensuring a means of acquiring resources that minimises the entropic impact of the human community.

Behavioural Procedural Models – a multipurpose mechanistic account

Author(s): Gustavo Marques,Leonardo Ivarola / Language(s): English Issue: 2/2012

In this paper we outline an epistemological defence of what we call Behavioural Procedural Models (BPMs), which represent the processes of individual decisions that lead to relevant economic patterns as psychologically (rather than rationally) driven. Their general structure, and the way in which they may be incorporated to a multipurpose view of models, where the representational and interventionist goals are combined, is shown. It is argued that BPMs may provide “mechanistic-based explanations” in the sense defended by Hedström and Ylikoski (2010), which involve invariant regularities in Woodward’s sense. Such mechanisms provide a causal sort of explanation of anomalous economic patterns, which allow for extra market intervention and manipulability in order to correct and improve some key individual decisions. This capability sets the basis for the so called libertarian paternalism (Sunstein and Thaler 2003).

Review of Amitava Krishna Dutt and Benjamin Radcliff (eds.), Happiness, Economics and Politics. Towards a Multi-Disciplinary Approach, Edward Elgar Publishing, 2009, 362 pp.

Author(s): Elena E. Nicolae / Language(s): English Issue: 2/2012

Review of Abhijit Banerjee and Esther Duflo, Poor Economics: A Radical Rethinking of the Way to Fight Global Poverty, Public Affairs, 2012, 303 pp.

Author(s): Hannah Cockrell / Language(s): English Issue: 2/2012

Review of Joseph Stiglitz, Freefall: America, Free Markets, and the Sinking of the World Economy, W. W. Norton & Company, 2010, 361 pp.

Author(s): Kathryn Cohen / Language(s): English Issue: 2/2012

Review of Niall Ferguson, Civilization: The West and the Rest, Allen Lane, Penguin Books, London, 2011, pp. 385

Author(s): Andrei Josan / Language(s): English Issue: 2/2012

Review of Branko Milanovic, The Haves and the Have-Nots: A Brief and Idiosyncratic History of Global Inequality, Basic Books, 2011, 258 pp.

Author(s): Elizabeth Karin / Language(s): English Issue: 2/2012

Review of David Roodman, Due Diligence: An Impertinent Inquiry into Microfinance, Center for Global Development, 2012, 365 pp.

Author(s): Annie Sholar / Language(s): English Issue: 2/2012

Review of Jose Huerta de Soto, The Austrian School. Market Order and Entrepreneurial Creativity, Edward Elgar Publishing, 2011, 129 pp.

Author(s): Irina Ion / Language(s): English Issue: 2/2012