TESTING TIMES FOR CENTRAL BANKS – IS THERE ROOM FOR AUSTRIAN IDEAS AT THE TOP TABLE?

Central banks are facing an unprecedented test in the wake of the credit crisis. We briefly outline prevailing theoretical frameworks and argue that central bankers effectively have a choice between three separate frameworks: Vienna, Cambridge and Chicago. Despite Austrian economics being the least acknowledged we survey increasing exposure in mainstream media, suggesting a role for a more explicit use. We provide implications for policy‐makers and claim that Austrian ideas have a place at the top table of policy debate.     

CAPITALISM,SOCIALISM AND CALCULATION

The merits and demerits of what we call ‘capitalism’ have been a source of much attention since Adam Smith wrote his seminal treatise on the salutary effects of free commerce and before. We consider the criticisms of the capitalist system as stated most prominently by Karl Marx, and we evaluate Marx's proposed solution to the evils of capitalism – specifically, socialism. We also explore the contributions of Ludwig von Mises and Friedrich Hayek to the debate about whether Marx's proposed alternative was really an alternative. Mises and Hayek provide powerful critiques of Marx's socialist vision by addressing the problem of economic calculation and the inability of central authorities to acquire knowledge diffused and distributed across an entire society. We question whether Marx offered a solution and then consider more recent attacks on capitalism and its alleged destruction of cultural capital. The theoretical contributions of Mises and Hayek are supported by recent empirical contributions suggesting that liberal political economy is robust.     

ECONOMIC RECESSIONS,BANKING REFORM AND THE FUTURE OF CAPITALISM1

In the 2010 London School of Economics and Political Science Hayek Memorial Lecture, the author argues that flaws in the design of the monetary and financial system were responsible for the global financial crisis and the subsequent recession. The crash reflected the unsustainable nature of the bubble induced by artificial credit expansion created by fractional‐reserve banking under the direction of central banks. Such boom–bust cycles will continue until radical reforms are implemented, including a 100% reserve requirement for demand deposits.     

The political uncertainty and stock market behavior in emerging democracy: the case of Taiwan

This paper examines the congressional effect between the pre- and post-democratization on the stock market by the asymmetric Generalized Autoregressive Conditional Heterosce desticity (GARCH) model in the period 1984–2004. The results found that the congressional effect is negative effect on stock returns but volatility is not significant. However, the democratic effect on stock returns is negative and increased of volatility. Moreover, the congressional effect on stock market returns following democratization significantly exceeds that before democratization, but have no significant effect for the volatility in the same circumstances. These results provide evidences consistent with the contention of liberalization (Hayek, Am. Econ. Rev. 35, 519–530, Individualism and Economic order, The university of Chicago press, Chicago, London, 1945, 1948; Popper, The open society and its Enemies, Princeton university, NJ, 1950).     

Money,markets, meltdown: the 21st‐century crisis of labour

Analyses of the global crisis that erupted in 2007 in bank failures, liquidity shortages and business bankruptcies have obscured the connections between the real and monetary economies. Money market fetishism dominates. In the past, theories of economic crisis assigned a key causal role to labour's growing strength. In Britain, the focus of debate was trades unions' allegedly unregulated power at workplace level, but labour's presence and influence in state, business and workplace institutions has since receded. This article attempts to re‐insert labour into the contemporary analysis of the crisis and highlights the shifting relations between states, capital and labour in the age of austerity.     

Austrian Challenge to Orthodoxy

The demise of Keynesianism leaves a void in economic thinking that is being filled not only by the Chicago monetarists but also by the lesser known 'Austrian school' of market liberalism, of which F. A. Hayek (right) is the leading living exponent. Norman Barry of the (private) University of Buckingham shows how it supplies new and radical solutions to unsolved problems of economic policy.     

Gaining from disorder: Making the case for antifragility in purchasing and supply chain management

The purchasing and supply chain management (P&SCM) discipline assumes that supply chains are fragile systems, hence taking a “negative” approach toward disorder. Building on Taleb’s concept of antifragility—the ability to gain from disorder rather than avoiding it—, we challenge this traditional assumption. The COVID-19 pandemic has revealed that some companies were indeed able to gain from disorder, whereas some of those that focused too much on robustness and resilience lost ground. Building robust and resilient supply chains may no longer be enough to thrive in today’s highly volatile business world. This article sparks a new debate by introducing antifragility to the P&SCM literature and provides new directions for future research.     

A resolution to the NPV–IRR debate?

Two criteria for choosing between capital investment projects are net present value (NPV) and internal rate of return (IRR). Sometimes they provide inconsistent rankings. This inconsistency sparked a debate about which criterion is better. The debate has lasted more than 100 years.This paper describes a new approach to the debate. The time value of money equation is a polynomial, and a polynomial of order n does not have a single root. It has n roots. The result of taking into account the n solutions for IRR is a new equation for NPV that suggests a resolution to the debate.     

How does history matter? Hysteresis in Canadian trade

Should trade economists account for hysteresis when estimating gravity models, as [Eichengreen, B., & Irwin, D. A. (1998). The role of history in bilateral trade flows. In J. A. Frankel (Ed.), Regionalization of the world economy. Chicago: University of Chicago/NBER] recommend? Are the effects on trade of key variables, such as a national border, mismeasured when hysteresis is not accounted for? Using a unique panel data set on Canada's international trade over 1988–1996, and building on recent advances in fixed effects approaches to gravity estimation, we find strong evidence that history does matter in determining trade. But exporter and importer fixed effects, as opposed to lagged dependent variables, appear adequate to capture history. Omitting lagged dependent variables matters little to measured parameters like the border effect. After accounting for history we find Canada's overall border effect to be large with little evidence of diminishment in this period.     

Entrepreneurial motivation

Recent research on entrepreneurship has focused largely on macrolevel environmental forces [Aldrich, H. (2000). Organizations evolving. Beverly Hills: Sage] and the characteristics of entrepreneurial opportunities [Christiansen, C. (1997). The innovators dilemma. Cambridge: Harvard Business School Press]. Although researchers adopting this focus have rightly criticized much of the existing empirical research on the role of human motivation in entrepreneurship [Aldrich, H., & Zimmer, C. (1986). Entrepreneurship through social networks. In D. Sexton & R. Smilor (Eds.), The art and science of entrepreneurship (pp. 3–23). Cambridge, MA: Ballinger; Adm. Sci. Q. 32 (1987) 570], we believe that the development of entrepreneurship theory requires consideration of the motivations of people making entrepreneurial decisions. To provide a road map for researchers interested in this area, we discuss the major motivations that prior researchers have suggested should influence the entrepreneurial process, as well as suggest some motivations that are less commonly studied in this area. In addition to outlining the major reasons for exploring these motivations, we identify the major weaknesses that have limited the predictive power of previous research on this topic. We offer explicit solutions for future research to adopt to overcome these problems.     

LIBERTY BETWEEN THE LINES IN A STATIST AND MODERNIST AGE: UNFOLDING THE ADAM SMITH IN FRIEDRICH HAYEK

This article interprets F. A. Hayek as having been constrained by the statism and modernism of his times, and as writing in a way that obscured some of his central ideas. I suggest that between the lines we can see a focus on liberty understood hardily as others not messing with one's stuff– even though Hayek in The Constitution of Liberty defined liberty in ways that tended to obscure this hardy definition, and Hayek often used code words like ‘competition,’‘the market,’ and ‘spontaneous’ where ‘liberty’ or ‘freedom’ would have been plainer, albeit more offensive to the culture. Seeing the hardy definition of liberty between the lines in Hayek enables us to see his focus on the liberty principle and his case for a presumption of liberty. Such a reading of Hayek, I suggest, is true to Adam Smith, who expounded a central message that by and large the liberty principle holds, and that it deserves the presumption in our culture and politics.     

Flexibility and Rigidity in Crisis Management and Learning at Swedish Public Organizations

Abstract

To date the relationship between crises, organizational crisis management, and learning has been understudied. In an effort to broaden theoretical understandings of the relation between crisis and learning, this article analyses the crisis management and learning processes of two public organizations during a sequence of two failures. A framework of rigidity versus flexibility in response is utilized in the analysis. The findings are discussed in relation to their implications for the nexus between crisis and learning. The study concludes by raising four hypotheses for further research.     

City and Country: Lessons from European Economic Thought

The article concerns some European thought on the issue of city and country. We discuss the contributions of Henri von Storch, Gustav von Schmoller, Werner Sombart, Wilhelm Röpke, and Friedrich Hayek and attempt to translate these theories into practice in documenting the case of the city of Marl.     

The Chicago School Lessons from the Thirties for the Eighties

The influential Chicago School of Professors Milton Friedman, George Stigler, Ronald Coase, Gary Becker and others largely grew out of the work of Henry Simons in the 1930s. Chris Tame, Secretary of the Libertarian Alliance and a graduate in American Studies, examines the origins of Chicago economics and shows their importance for the 1980s.     

On theE-optimality of certain asymmetrical designs under mixed effects model

TheE-optimality of the following designs within the class of all proper and connected designs with givenb, k andv under mixed effects model are established.

1. A group divisible design with λ₂ = λ₁ + 1.
2. A group divisible design with λ₁ = λ₂ + 1 and group size 2.
3. A linked block design.
4. The dual of design (i)
5. The dual of design (ii).

All these designs are known to satisfy the same optimality property under fixed effects model whenk<v, while the design (i) is known to beE-optimal even whenk>v. From the results proved here, theE-optimality of designs (ii, (iii), (iv) and (v) under fixed effects model in the situation whenk >v also follows.     

The R&;D and productivity relationship of Korean listed firms

This study analyzes the relationship between R&D investment and the productivity of Korean R&D-engaged firms. An interdependent chain of equations including the propensity to invest, R&D investment and productivity are estimated in a multi-step procedure accounting for selectivity and simultaneity biases. Using Korean firm level panel data of listed firms from 1986 to 2002, we find four main empirical results. First, there is a two-way causal relationship between R&D investment and productivity for Korean listed firms. Second, Chaebol firms were associated with lower R&D growth as well as lower labor productivity growth in comparison to non-Chaebol firms. Third, there was a substantial reduction in growth rates both in R&D investment and labor productivity in 1997-1998, immediately following the Asian financial crisis. Fourth, considering the positive feedback effect from productivity growth to R&D growth, a decrease in R&D investment growth after the Asian financial crisis should have been harmful by further decreasing productivity growth.     

Building the Planning Consensus: The Plan of Chicago,Civic Boosterism,and Urban Reform in Chicago, 1893 to 1915

Since its publication in 1909, Daniel Burnham's Plan of Chicago has been criticized for its lack of attention to social issues and for the failure of subsequent reconstruction projects to live up to the ambition of the plan. These criticisms assume that the Plan of Chicago was insufficiently progressive, or they evaluate the Plan by reference to the successes and failures of subsequent decades of urban reconstruction in Chicago. This article argues that the key to understanding the Plan of Chicago is to place it in its historical context. Burnham's Plan of Chicago was an expression of the tradition of Chicago civic boosterism and earlier city‐building practices as much as it was of the nascent profession of city planning. Finally, while the Plan did neglect housing, poverty, and other social questions, it did possess a social vision based on civic inclusivity, rather than economic inclusivity. The Plan can be read as a reform document based on the assumption that physical environment shapes individual character and social relationships. It assumed the creation of a unified and harmonious physical city would produce a contented and productive citizenry. In short, the Plan of Chicago deployed a transformative vision in the service of conservative goals.     

R&D Cuts and Subsequent Reversals: Meeting or Beating Quarterly Analyst Forecasts

Abstract

Among firms that meet or beat earnings expectations, we find that cuts to R&D spending are more prevalent in Q4 relative to other interim quarters. This is consistent with the relative costs of real-activities management (accruals-based earnings management) decreasing (increasing) in Q4 due to the annual audit. More importantly, we find that the subsequent reversal of such R&D cuts is more prevalent and economically more significant following Q4 cuts relative to the reversals that follow cuts in other interim quarters. Our findings suggest that examination at the quarterly level (rather than annual level) lends new insights into the current debate regarding the prevalence of potentially value-destroying R&D cuts that managers make. Indeed, our findings suggest that some cuts may merely be temporary deferrals of R&D outlays.