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.

On the problem of scale: Spinozistic sovereignty as the logical foundation of constitutional economics

Author(s): Benjamen F. Gussen / Language(s): English Issue: 1/2013

This paper argues that sovereignty, as envisaged by Spinoza, is the logical foundation of constitutional economics. Constitutional constructs such as sovereignty weave an evolutionary dialectic between different organizational scales (the local, national, and global). This dialectic continues to wreak havoc at the local scale, and can be interrupted only through explicit constitutional constraints on the size of jurisdictions. The paper argues for more emphasis on constitutional orders in the spirit of Spinoza’s understanding of sovereignty. This entails preference for federal polities in which sovereignty is shared between different cities rather states where once capital cities dominate.

The ethics of New Development Economics: is the Experimental Approach to Development Economics morally wrong?

Author(s): Baele Stéphane J. / Language(s): English Issue: 1/2013

The 2000s have witnessed the arrival and growing popularity of randomized controlled experiments (RCTs) in Development Economics. Whilst this new way of conducting research on development has unfolded important insights, the ethical challenge it provokes has not yet been systematically examined. The present article aims at filling this gap by providing the first ad hoc discussion of the moral issues that accompany the use of RCTs in Development Economics. Claiming that this new research agenda needs its own, specific set of ethical guidelines, we expose the six ethical problems that these experiments potentially provoke and that should therefore be carefully assessed by ethics committees before an RCT is launched and by scholarly journals before its results are published.

Research note on an experimental approach to the intrinsic motivations of corruption

Author(s): Valeria Burdea / Language(s): English Issue: 1/2013

Even though most of the causes of corruption are easily identifiable at the macro level, there is considerable disagreement when it comes to the intrinsic motivations leading people to engage in this activity. The present paper tries to shed light on the aspect concerning the correlation between corruption and individual performance. This is useful for understanding the dynamics of common events like medical students attempting to bribe their way towards becoming a doctor, or companies bribing public officials to obtain licenses to build public highways, buildings, or provide electricity and water. However, corruption’s secretive nature makes it difficult to obtain trustworthy qualitative data on this subject. Hence, the study addresses the issue in the lab, through an experiment based on a bribery game. The results show that there is a significant correlation between performance and propensity to engage in a corrupt activity, opening the way for an improvement in the allocation of resources to reduce this negative phenomenon.

Review of Resilient Liberalism in Europe’s Political Economy, edited by Vivien A. Schmidt and Mark Thatcher, New York, Cambridge University Press, 2013, 469 pp., $32.99, ISBN 9781107613973

Author(s): Pheiffer Chantel F. / Language(s): English Issue: 1/2013

Review of The Elgar Companion to Recent Economic Methodology, edited by John B. Davis and D. Wade Hands, Cheltenham, UK; Northampton, MA, USA, Edward Elgar, 2011, hb, 542 pp., ISBN 9781848447547

Author(s): Lucia Ovidia Vreja / Language(s): English Issue: 1/2013

Review of Mark Blyth, Austerity. The History of a Dangerous Idea, New York: Oxford University Press, 2013, 304 pp., hb, $16.95, ISBN 9780199828302

Author(s): Juan Camilo Blanco / Language(s): English Issue: 1/2013

Money and value: a synthesis of the state theory of money and original institutional economics

Author(s): Georgios Papadopoulos / Language(s): English Issue: 2/2013

The paper proposes a synthesis of original institutional economics and in particular of the work of John R. Commons with the state theory of money, constructing a theoretical framework for the analysis of economic value in relation to money. The argument developed resists the naturalistic, individualistic, neoclassical analysis of value, proposing an account based on antagonism and negotiation framed by social institutions and more specifically by the institution of money. Money plays an active role in the process of the constitution of the system of prices, creating possibilities of mediation in the conflicts around the distribution of social production and contributing towards the establishment of ‘reasonable value’ in economic transactions.

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