Real-World Economics Today:The New Complexity,Co-ordination and Policy

More realistic economics has to start out from the most basic socio-economic phenomena and processes, i.e. dilemma-prone interdependencies and strong uncertainty among agents that have become ubiquitous phenomena in the world today. In the reality of the “new” economy these are represented by functional and spatial fragmentation of value-added chains, global de-regulation and disembedding of the most powerful economic agents, on one hand, and increasing complexity and high integration of goods and services and net-based tele-IC-technologies on the other hand. All these rather new phenomena entail ubiquitous actual or potential co-ordination failure, either in the form of conventional “market failure”, with a complete mutual blockage of action, or of “wrong” co-ordination, or technological “lock-in”. Both forms are indicative of an insufficient capacity of the co-ordinated action required. In contrast, capability of sustainable innovative action in a broad sense requires new forms of co-ordination beyond “market” and “hierarchy”. Economics thus has to be defined more than ever as a science of effective co-ordination and the generation of innovative and sustainable collective action capacity. The global corporate economy has developed individualist arrangements to cope with that new co-ordination problem, such as local clusters and hub&spoke networks, which all have severe shortcomings. Against this background, the paper develops a setting with ubiquitous direct interdependencies, net-externalities, “strategic” strong uncertainty and ubiquitous (latent) social-dilemma problems. It discusses the possibility of an ideal decentralized and spontaneous co-ordination through emergent institutionalized collective action, specifically of “well-governed” network co-operation. In conclusion, it is argued that only a hybrid system of networks together with a new public policy role, supporting collective learning and emergent institutional co-ordination, i.e. an “interactive” and “institutional” policy approach, is capable of solving the co-ordination problems of the “new” economy.     

An Alternative Post-Keynesian Framework for Understanding Capital Flows to Emerging Markets

This article contributes to the establishment of a framework for the analysis of international capital flows, with a specific focus on emerging markets. It is based on a “monetary” analysis of the economy, as well as on the works of Hyman Minsky and Jan Toporowski in particular. The key aspects of such an approach are the following. First, in a monetary economy, capital flows need to be understood as “flows of funds” that pertain to the realm of financial choices, as opposed to the traditional understanding of capital flows as based on “real” variables, such as saving and investment. A consequence of this is the need to focus on gross flows rather than capital flows. Second, liquidity preference considerations also apply at the international level, particularly in relation to the liquidity of emerging-market currencies that, in turn, depends on context-specific “Keynesian fundamentals.” Third, the rise of institutional investors is the key historical development in the financial system, shaping the current reality of cross-border capital flows, including to emerging markets. I argue that institutional investors’ liabilities, in light of the theories of Minsky and Toporowski, are one of the most important variables in determining these investors’ portfolio choices. I synthesize these elements by defining capital flows to emerging markets as the demand for emerging-market assets by institutional investors. I propose a framework to categorize the various channels that guide this demand.     

Social Economics and Evolutionary Institutionalism Today

This paper discusses theoretical and methodological elements that constitute social economics. It also considers those elements for evolutionary (Veblenian) institutional economics. It investigates how these “heterodoxies” may further converge. Such convergence would probably not trigger a complete unification, but lead to a broadly defined common research program and a strategy for joint “heterodox” survival, in face of the ranking game of the neoclassical “mainstream” and of the dominant powers supporting it as the discipline providing ideological legitimization. A common denominator of “heterodoxies” in terms of real-world orientation, direct interdependency and interaction of agents (social decision situations), appropriate complexity, and the treatment of values is drafted. Theoretical concepts discussed include complex and open systems, individual agency, institutions, embeddedness, networks, social reform, and process orientation. Formal methodological developments considered are complex modeling, game theory, or computer simulations. We arrive at a more formal common basis, which we term socio-economics. We also consider the relations of evolution and institutions, the institutional dichotomy, and the theory of institutional change. The monism of the “market” of the “mainstream” turns out to dissolve into the institutional diversity of real-world network forms, which helps explaining real-world forms of markets, hierarchies, or spatial clusters. Focuses of “heterodox” convergence will have to be the related “microfoundations” and “macrofoundations” projects, integrating an interdisciplinary “naturalistic” approach to genetic-cultural co-evolution of cooperation, and social reform. While modern socio-economics makes “heterodoxies” leading in economic research, their future still appears open between ideological cleansing and extinction through the mainstream, and proactive paradigmatic pluralism.     

Planning and Urban Growth: An Anglo-American Comparison

Understanding the complexity of institutional change is a necessary step in gaining deeper knowledge of economic performance over time, and it is one of the main challenges in the research agenda of institutionalism. Institutional change can be studied using a variety of theoretical approaches. We study some of the main approaches to institutional change in original economic institutionalism and new institutional economics. First, after comparing the approaches of Émile Durkheim and Thorstein Veblen, we focus on the contributions of the instrumental value theory and other original institutional traditions in the study of institutional change. Second, new institutional economics improved on the weak points of rational choice institutionalism regarding institutional change and incorporated the “institutions-as-rules” approach (Douglass North) and the “institutions-as-equilibria” approach (Avner Greif, Masahiko Aoki). We analyze both approaches to institutional change. Furthermore, we present an updated nonintegral overview of approaches to institutional change, show several interconnections between original and new institutionalisms, and conclude that the dialogue between the different theories of institutional change is relevant and beneficial.     

新经济地理学中的制度转向与区域发展

近年来,伴随着资本主义社会经济转型和全球化,资本主义进入了制度重建的新阶段,社会科学日益重视“制度”因素的作用。经济地理学强调制度、文化对区域发展的影响,提出了经济地理学的“制度转向”。文章深入分析西方学者提出的制度转向、制度厚度概念及与区域发展关系的基础上,进行理论评析,并简要探讨对中国区域发展的启示。     

State capitalism and the rent-seeking conjecture

The notion that state capitalism (an economic system “in which the state functions as the leading economic actor and uses markets primarily for political gain”) is a new form of capitalism emerging in the global arena has been recently advanced by several authors. This paper explores the problem of the nature of this system in the light of these claims to novelty. What are its main features as described by these authors? Is state capitalism distinctive from other forms of capitalism or other types of economic systems? Are we really witnessing the emergence of a new type of economic system? To address such questions the paper starts by trying to place the model of state capitalism within the traditional comparative economic systems framework. The inconclusive result leads to a different approach in which the concept of rent-seeking society is used to underlie the structural similarities between mercantilism, real life socialism and state capitalism. The article argues that the conjecture that what has been labeled “state capitalism” is yet another form of rent-seeking system is both robust and worth further investigating.     

Institutional Matrices Theory,or X- and Y-Theory: A Response to F. Gregory Hayden

This article draws attention to issues about the institutional matrices theory (IMT) as perceived by and raised in the article by F. Gregory Hayden. To clarify the “controversial” points, I structure my response narrative along two lines. First, I present the prehistory of IMT, or X- and Y- theory, including earlier work by scientists related to the concept of institutional matrix. I connect the development of the actual IMT with the period of “perestroika” and the associated market experiments and reforms in Russia and Eastern European countries. One could see that the effects of market reforms in Russia were different in comparison with other countries in economic transition. I show that the institutional approach was accepted as more relevant to understanding the unexpected results in Russian society. I present IMT as a development of the ideas of Karl Polanyi and Douglas North to answer the challenges of explaining the real social and economic processes in Russia, as well as its wider application to a broader range of economic and social situations in different countries. Second, I then present the main IMT theses, giving special attention to the issues as perceived and raised by Hayden. In conclusion, I suggest the possibility of a joint project that combines IMT consideration and the social fabric matrix (SFM) concept of F. Gregory Hayden.     

Chinese Capitalism and the Maritime Silk Road: A World-Systems Perspective

As China tries to catch up from a semi-peripheral status in the hierarchy of a capitalist world-system, three decades of fast economic growth have recently shown serious signs of capital glut, overproduction and decreasing returns to capital, indicating the beginning of a phase of contraction and stagnation in the long-cycles of capitalist accumulation. The combination of “capital logic” and “territorial logic” in Giovanni Arrighi’s framework gives both the Chinese state and Chinese capital strong incentives and pressure to actively engage in a “spatial fix” by reconfiguring its geographic vision in order to further capital accumulation and expansion on a larger spatial dimension, culminating in the “One Belt, One Road” Initiative, including the Maritime Silk Road Initiative (MSRI). The official promotion of the MSRI hopes to revitalise the historical precedents of the “Silk Road” so that the modern-day hyper-connectivity across Asia, Africa and Europe will facilitate the formation of a China-led reorganised world economy, operating under open and equal participation, possibly leading to common development for all countries involved. However, the nature and impact of such a grandiose initiative, especially its core mission of “connectivity”, is still highly contingent on the hybrid nature of Chinese capitalism in the world-system and how China engages capitalism at the global scale.     

Measuring Change of Capitalist Varieties: Reflections on Method,Illustrations from the BRICs

How to indicate institutional diversity and gradual change in capitalist political economies? What is the appropriate typological method, how could a suitable typology look? In the Weberian tradition, this article pleads for a method that rigorously distinguishes ideal types from empirical cases. Ideal types (like liberal capitalism) idealise reality by emphasising certain aspects, cases (like Brazilian capitalism) are hybrids more or less approximating the types. Contrasting static classifications that do not allow for gradual change, the latter has to be understood as the movement of cases in the field between the types. Using the state–economy and capital–labour relationships as criteria the article proposes a typology consisting of liberal, statist, corporatist, meso-communitarian and patrimonial types. Liberalism, statism and particularly patrimonialism are relevant for emerging economies. In the second half, the article illustrates its methodological recommendation by indicatively mapping institutional change from 1998 to 2008 in political economies that recently gained importance: the BRICs (Brazil, Russia, India, China), Turkey and a few Eastern European ones. It turns out that most of them liberalised but that this change was rather modest in the BRICs, while it was more significant in Eastern Europe. Yet statism and patrimonialism appear still to be strong.     

制度距离、相邻效应与双边贸易--基于“一带一路”国家空间面板模型的实证分析

制度在双边贸易中具有举足轻重的作用。文章首次将相邻效应引入传统的制度与贸易关系的分析框架,运用空间面板模型深入考察了制度距离、相邻效应对中国与“一带一路”国家双边贸易的影响。结果表明,中国与“一带一路”沿线国家之间在文化、法律、宏观经济制度以及微观经济制度方面的差异显著抑制了双边进出口贸易的发展,并且这种抑制作用在长期更为显著。进一步引入相邻效应的分析表明,中国与“一带一路”沿线国家之间的双边贸易受到中国与沿线国家邻国之间贸易的制约,即相邻效应表现为竞争关系,并且无论是针对进口贸易还是出口贸易而言,中国与沿线国家之间的制度距离均强化了相邻效应的“竞争”作用,但上述作用在不同地区具有显著差异。因此,在推进“一带一路”战略时,中国需要考虑制定相关的配套政策来平衡中国与“一带一路”国家,特别是与这些两两相邻国家之间的双边贸易利益,以促进中国与各国双边贸易关系的良性发展。     

Economics,Power, and Regulation of Multinational Corporations

Contingent — rather than secure — provisioning is the core of the institutions of capitalism. This differential access to means of life is a method of prodding labor force participation, considered “coercion” by “old” institutional economists and “freedom” by neoliberal thinkers. Status differentials, which are based on pay hierarchies and branded consumer goods, help reinforce the individual competition for differential rewards. Reform would require reconstituting the labor market, as well as financial institutions, and restructuring the rationales for income distribution.     

Transition as a process of large-scale institutional change

After several years of transition experience the theory is very poorly developed except in regard to macroeconomtc stabilization. Another key dimension of transition is institutional change to provide the organizational infrastructure for a market economy. Such issues are analysed here through a series of models focusing on: uncertainty of outcomes, complementarities and interactions between reforms, and political constraints. The choice between “big bang” and more gradualist strategies is studied under various conditions and the paper also examines specific incentive and allocative aspects of the transition from socialism to capitalism.     

The Nature and Avoidance of the ＂Middle Income Trap＂

The ＂middle income trap＂ is a significant theoretical and practical issue closely related to the economic and social transition and sustainable development of a country. This paper explores the essence of the ＂middle income trap＂ and ways to avoid it. It reveals that the inner nature of the ＂middle income trap＂ lies in the institutional transition dilemma, which results essentially from a lack of reasonable and clear definitions of governance boundaries between government and market as well as government and society. This lack of boundaries causes coexistent and interrelated government inefficiency, market distortion/failure and social anomie, leading to a stagnant transition from a factor-driven to an efficiency-driven and further innovation-driven economy. Moreover, this paper proposes that the proper way to avoid the ＂trap＂ can be found in the reconstruction of the state governance mode, that is, to transition from a development-oriented and omnipotent government to a public service-oriented and limited government, from factor-driven to efficiency-driven and further innovation-driven development, and from a traditional society to a modem civil society through defining reasonable and clear boundaries between government and market as well as government and society. Thus, reconstruction can establish a state public governance mode featuring the interactive role of government, market and society, and achieve the modernization of state governance systems and capacity.     

Unemployment and Technical Innovation; A Study of Long Waves and Economic Development

The purpose of this paper is to provide further thoughts for promoting the government after reviewing the competing insights of the right-wing public choice school economists and the left-wing institutionalists in the VeblenCommons tradition. This paper points out that big government and big business have indeed become complements to some extent. That is, they are symbiotic and one certainly cannot criticize (or try to remove) big government without checking big business at the same time, and vice versa. To counteract the power of corporate hegemony and to break the control of governments by privileged interests, this paper suggests that it is desirable to initiate institutional change in society toward the movement of more local government planning in promoting the local community. Such a society is not only practically consistent with the progress of sustainable development (under the “think globally, act locally” guideline) but also conceptually compatible with John Stuart Mill’s high-minded mental culture and John Maynard Keynes’S forward-looking vision of economic bliss.     

Three Decades After James Street’s “The Institutionalist Theory of Economic Development”: What Does Institutional Approach to Economic Development Mean Today?

James Street’s article, “The Institutionalist Theory of Economic Development,” (1987) is a masterpiece of institutionalist research on economic development. The thirty-year anniversary of its publishing is an invitation to review what the institutional approach to economic development means today. This article, therefore, aims to present a historical survey of works published in the Journal of Economic Issues (JEI) on economic development.     

Capitalism,Territory and “Marxist Geopolitics”

This response traces the importance of ideas and politics versus economic determinism in developing a critical approach to geopolitics particularly in questioning the necessary relationship between territory and capitalism. From this perspective, and contra to “Marxist geopolitics,” spatial-political form does not follow from economic function. To argue so leads to an intellectual and political dead end.     

Theoretical Issues of Gender in the Transition from Socialist Regimes

Institutional economics is often presented by its critics as a tradition in political economy purporting a mechanistic, robot-like, view of the human agent. In this paper this portrayal of institutional economics is rejected and choice is reclaimed for institutionalism. In fact, institutional economics is not committed to an understanding of behavior as mere stimulus-response. Notwithstanding the fact that institutionalism places great emphasis on habit in human conduct, this does not mean that it excludes autonomy, volition or rationality.

The paper addresses the notion of habit within the pragmatist-institutionalist tradition with the aim of clarifying this concept, disentangling it from current misconceptions. With the intention of contributing to the development of a theory of choice in institutionalism, it then deals with deliberation and choice in the pragmatist literature, namely in John Dewey's Human Action and Conduct. Finally, the implications of deliberation thus conceived, namely in respect to collective action and institutional change, are highlighted.     

Institutionalist Theories of the Wage Bargain: Beyond Demand and Supply

I distill an integrated structure of institutionalist theories of wage determination, linked by overarching views of reality and key principles, and show that three fundamental propositions connect these into one “extended family.” I then outline ten principles that reflect the models and propositions. While very different in form than the familiar Walrasian price-auction model, this relatively succinct approach to wage determination leads to many testable hypotheses. It also explains questions, such as: Why can the minimum wage not often be raised without causing unemployment? Why has wage inequality increased within occupations and educational levels, as well as between? Why does high pay tend to be accompanied by better benefits, working conditions, and on-the-job training (rather than compensating for the lack of one of these)? The insights of many contemporary institutional economists, including Robert Prasch, are particularly important to this analysis, along with earlier work of John R. Commons, John Dunlop, Lloyd Reynolds, and Lester Thurow.     

The Evolution of the Veblenian Dichotomy: Veblen,Hamilton, Ayres,and Foster

One of the most troubling developments in recent years has been widening income inequality in the United States and elsewhere. We argue Post Keynesian Institutionalism (PKI) provides insight into the causes of increasing income inequality and our contribution is threefold. First, we compare PKI to the “financialization” literature, noting key similarities and differences. Second, we examine changes in financial structure and income inequality for a sample of developed nations, showing that financialization has increased in nearly all the countries sampled and that this increase has generally been accompanied by a rise in income inequality. Third, we demonstrate that the development of modern financial structures does not preclude an expansive welfare state and egalitarian public policies. Our finding is congruent with Hyman Minsky's conception of PKI, which stressed both that “economic systems are not natural systems” and that capitalism comes in as many varieties as Heinz has of pickles.     

Comparative Institutional Advantage and the Appropriate Development Model for Sub-Saharan Africa

The theory of comparative institutional advantage posits that certain types of firms locate production facilities in a particular location and avoid other locations due to unique institutional advantages and disadvantages. In sub-Saharan Africa, neoliberal policies, weak and corrupt states, and Transnational Corporations have created a particularly destructive variant of capitalism. African capitalism generates little in the way of economic growth, rewards mainly the TNC and the African elites, and undermines Africa’s economic future via activities that are utterly extractive in nature. African capitalism is facilitated directly by the WTO, the structural adjustment policies of the IMF and the World Bank, and the institutional structures of African economies. After outlining the problems with African capitalism as currently structured, the paper goes on to suggest an alternative to this model involving experimental, embedded, grass roots development efforts that build on domestic cultural institutions that would generate significantly more positive outcomes for the people of sub-Saharan Africa. By abandoning neoliberal policies, it might be possible to create a better economic model that would build on community-centered institutional strengths to benefit a greater proportion of the population.