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11 posts from January 2016

01/29/2016

Grabel, "Post-Crisis Experiments in Development Finance Architectures: A Hirschmanian Perspective on ‘Productive Incoherence’"

ROSEThe Asian and especially the global crisis of 2008 have catalyzed decentralization of the developing world’s financial governance architecture. I understand this state of affairs via the concept of “productive incoherence” which is apparent in a denser, multilayered development financial architecture that is emerging as a consequence of heterogeneous practical adjustments to changing circumstances rather than as the embodiment of a coherent doctrine. Drawing on Albert Hirschman, I argue that the absence of an encompassing theoretical blueprint for a new economic system—i.e. a new “ism” to replace neoliberalism—is in fact a vitally important virtue. If we cannot live without a new “ism,” I propose “Hirschmanian Possibilism” as a new doctrine—one that rejects an overarching theoretical framework from which to deduce the singly appropriate institutional structure of the economy. Hirschmanian Possibilism asserts instead the value of productive incoherence as a framework for pursuing democratic, ethically viable development institutions.

Ilene Grabel, "Post-Crisis Experiments in Development Finance Architectures: A Hirschmanian Perspective on ‘Productive Incoherence’", Review of Social Economy, 73/4 (2015), pp. 388-414.  

(This article is part of the special issue of Review of Social Economy on "Ethics, Global Finance, and the Great Recession," on which more here.)

01/28/2016

Arestis, Charles, and Fontana, "Power, Intergroup Conflicts and Social Stratification in the United States: What Has the Global Crisis Taught us?"

ROSEDrawing on early sociological analyses of how power and intergroup conflicts can affect the development of modern economies, this paper investigates how the recent Global Crisis (GC) has affected the stratification of the US society. The paper argues that the consumerist society has reinforced the historical stratification of social identities with white men in high-paid, high-social status managerial and financial occupations at the top, and black women in low-paid, low-status service occupations at the bottom. This paper calls for a deconstruction of the neoliberal individual into a unique combination of identities in a stratified capitalist society in order to reveal how social stratification has evolved during the GC. The paper finally concludes on the importance of heterogeneous identities in reflecting the diversity of societal and economic interests in order to address the issues of financial stability and sustainability at the corporate and societal levels.

Philip Arestis, Aurelie Charles, and Giuseppe Fontana, "Power, Intergroup Conflicts and Social Stratification in the United States: What Has the Global Crisis Taught Us?", Review of Social Economy, 73/4 (2015), pp. 370-387.  

FREE ACCESS as of 1-25-16

(This article is part of the special issue of Review of Social Economy on "Ethics, Global Finance, and the Great Recession," on which more here.)

01/27/2016

Bansak and Starr, "Distributional Costs of Housing-Price Bubbles: Who Pays the Price when Bubbles Deflate?"

ROSEIn considering whether asset-price bubbles should be offset through policy, an important issue is who pays the price when the bubble bursts. A bust that reduces the wealth of well-off households only may have small welfare costs, but costs may be sizable if broad swaths of households are affected. This paper uses micro data on millions of households from the US American Community Survey to examine how the bursting of the 1998–2006 housing bubble affected households’ employment, homeownership, home values, and housing costs. To separate dynamics of the housing bust from those of the aggregate downturn, we differentiate between metropolitan areas that did and did not experience bubbles. We find that, for most measures, deteriorations in well-being were more severe in bubble metros than elsewhere, and for several measures, differential effects on less-educated households were also more severe. This underscores the importance of leaning against broad-based housing bubbles via appropriate policies, as burdens of adjustment fall differentially on people not well prepared to bear them.

Cynthia Bansak and Martha A. Starr, "Distributional Costs of Housing-Price Bubbles: Who Pays the Price when Bubbles Deflate?", Review of Social Economy, 73/4 (2015), pp. 341-369.

(This article is part of the special issue of Review of Social Economy on "Ethics, Global Finance, and the Great Recession," on which more here.)

01/26/2016

DeMartino, "Harming Irreparably: On Neoliberalism, Kaldor-Hicks, and the Paretian Guarantee"

ROSEThe global neoliberal project, which entailed inter alia financial liberalization that accelerated financialization of the world economy, was advocated by leading Austrian, Chicago School neoclassical, and New Keynesian economists, despite awareness that the project would harm many members of society even as it benefitted others. To the extent that they were efficacious in their advocacy, economists contributed to the imposition of serious harm. Often the harm befell the most vulnerable members of society. At least some of the harm was avoidable. This paper examines critically the Kaldor-Hicks compensation test, a primary criterion used in defense of the neoliberal project. The paper finds that the best existing defense of Kaldor-Hicks is Paretian rather than Benthamian in nature: it focuses on the long-run rather than on each individual policy innovation, and claims that all agents benefit by a series of Kaldor-Hicks consistent innovations even if some are harmed in each individual instance. The paper finds that the Paretian case is deficient on grounds other than those commonly invoked against Kaldor-Hicks. The critique focuses on the neoclassical consequentialist welfarism that grounds the Paretian case, and the related presumption that all harms are reparable and, indeed, compensable.

George F. DeMartino, "Harming Irreparably: On Neoliberalism, Kaldor-Hicks, and the Paretian Guarantee," Review of Social Economy, 73/4 (2015), pp. 315-340.

(This article is part of the special issue of Review of Social Economy on "Ethics, Global Finance, and the Great Recession," on which more here.)

01/25/2016

Special issue of Review of Social Economy on "Ethics, Global Finance, and the Great Recession"

ROSEThe December 2015 issue of Review of Social Economy is a special issue on the theme "Ethics, Global Finance, and the Great Recession," edited by Philip Arestis, Aurelie Charles, and Giuseppe Fontana. (All three co-editors are actively involved with the ASE: Fontana is the current president, Charles is an international director, and Arestis is a trustee.)

From the editors' introduction:

The global events of 2007–2008 have brought financialisation, namely the increasing role of financial motives in the operation of modern economies and societies, to the attention of millions of people, who are now questioning the neoclassical foundations of economic theory and practice. However, many fundamental questions are still unanswered. Will the actors, institutions, and policies of financial markets that led to the financial crisis and the related Global Crisis be tamed once and for all with new regulations? Would this require a paradigm change in the economics discipline and policy-making away from neoclassical models and assumptions? Furthermore, what is the proper function of financial institutions in the achievement of a fair society? What role should ethics play in shaping the behaviour of these institutions? Could the financial sector be restructured to enhance social and economic goals such that if a financial crisis occurs, as in 2007, its negative effects will not fall disproportionally on the most vulnerable parts of the society? These are complex and challenging questions. The papers in this special issue are an attempt to start answering these fundamental questions, and provide hints for policy-making to address future crises and their impact on the society at large.

The articles in this special issue are:

George F. DeMartino, "Harming Irreparably: On Neoliberalism, Kaldor-Hicks, and the Paretian Guarantee"

Cynthia Bansak & Martha A. Starr, "Distributional Costs of Housing-Price Bubbles: Who Pays the Price when Bubbles Deflate?"

Philip Arestis, Aurelie Charles & Giuseppe Fontana, "Power, Intergroup Conflicts and Social Stratification in the United States: What Has the Global Crisis Taught Us?"   FREE ACCESS (as of 1-25-16)

Ilene Grabel, "Post-Crisis Experiments in Development Finance Architectures: A Hirschmanian Perspective on ‘Productive Incoherence’"

01/22/2016

Jones and Kalmi, "Membership and Performance in Finnish Financial Cooperatives: A New View of Cooperatives?"

ROSEMany economists adopt a critical stance on cooperatives. One example is the claim that larger membership in cooperative banks is detrimental to performance. We re-examine this earlier finding by drawing from a richer and broader conceptual framework than used previously and conclude that in recent years, the relationship between membership and performance may be positive. In our empirical analysis, we use new data for Finnish cooperative banks and, compared to earlier work, develop an alternative measure for membership and employ improved estimation methods. A positive relationship between membership and performance in financial cooperatives is consistently found. We discuss our findings in light of an emerging body of theoretical and empirical work on cooperatives, especially for financial cooperatives, and argue that a new view of cooperatives is warranted.

Derek Jones & Panu Kalmi, "Membership and Performance in Finnish Financial Cooperatives: A New View of Cooperatives?", Review of Social Economy, 73/3 (2015), pp. 283-309.

01/21/2016

Potts and Hartley, "How the Social Economy Produces Innovation"

ROSESocial economics has long been concerned with the effects on human societies of market-coordinated processes of economic innovation. But the social economy also causes invention and innovation, an aspect that has received less attention. This article reviews three new approaches to the study of the growth of knowledge in economic systems as driven expressly by sociocultural mechanisms and dynamics. The first are so-called “social network markets” and “novelty bundling markets”. The second extends from “knowledge commons” to “innovation commons”. The third is a sociocultural semiotic process of group dynamics. These models represent different ways the social economy generates newness and produces innovation.

Jason Potts & John Hartley, "How the Social Economy Produces Innovation," Review of Social Economy, 73/3 (2015), pp. 263-282.

01/20/2016

Pietrykowski, "Participatory Economic Research: Benefits and Challenges of Incorporating Participatory Research into Social Economics"

ROSEParticipatory action research (PAR) and community-based participatory research (CBPR) involve traditional subjects of research in the co-creation of research design, data collection, and analysis. PAR has been used in the fields of public health, education, and geography. A case study of a local economy CBPR project will be discussed. The increasing use of field and behavioral experiments in economics together with recent critiques of the ethical commitments of economic policy raises important questions about the role of expert knowledge, indigenous knowledge, and the relationships of power and privilege involved in mainstream academic research. The applicability of the PAR method for economics will be investigated in light of the epistemological and ethical commitments of social economics.

Bruce Pietrykowski, "Participatory Economic Research: Benefits and Challenges of Incorporating Participatory Research into Social Economics," Review of Social Economy, 73/3 (2015), pp. 242-262.

01/19/2016

White, "Judgment: Balancing Principle and Policy" (2014 ASE Presidential Address)

ROSEJudgment is an element of decision-making that is of critical importance to both ethics and economics but remains underappreciated in both. In this paper, I describe one conception of moral judgment, drawn from the moral philosophy of Immanuel Kant and the legal philosophy of Ronald Dworkin, in which an agent weighs and balances the various moral duties and principles relevant to a choice situation in a way that maintains the integrity of her moral character. After explaining the foundations and uses of judgment in ethics, I discuss its importance to two areas of economic modeling, individual choice and policy-making, both of which can be enhanced by incorporating judgment alongside more basic ethical motivations and concerns.

Mark D. White, "Judgment: Balancing Principle and Policy," Review of Social Economy, 73/3 (2015), pp. 223-241.

(The video of the presidential address can be found here.)

01/15/2016

Read for free: Fontana and Sawyer, "Towards Post-Keynesian Ecological Macroeconomics"

ASE president Giuseppe Fontana and Malcolm Sawyer (both of the University of Leeds) have a new paper in Ecological Economics titled "Towards Post-Keynesian Ecological Macroeconomics" that is available to read for free:

The paper starts with a brief criticism of macroeconomic analyses of different schools of thought for their focus on economic growth and maximisation of output. This applies to the traditional Keynesian approach, which has focused on the achievement of sufficient aggregate demand to underpin full employment and full capacity utilisation, down-playing aggregate supply constraints. This also applies to the neoclassical approach, including the current New Consensus Macroeconomics approach, which asserts the dominant role of aggregate supply in the long run, and where growth is set by the so-called ‘natural rate of growth’, with no concerns over environmental and ecological issues. The paper then proposes a different approach to macroeconomic analysis. It explicitly acknowledges that economic growth is a double-edged sword. Growth can help to alleviate persistent levels of high unemployment, but it can also lead to potentially catastrophic environmental problems. Building on the Monetary Circuit theory and the Demand-led growth theory, the paper offers an analysis of the interconnections and interdependence of the economic, biophysical and social worlds and by doing it hopes to provide the building blocks for the establishment of post-Keynesian ecological macroeconomics.

Read the entire paper here.