Uncertainty and the Value of Capital: Marginal Efficiency and the ‘Conventional Projection’

Keynes provided not one but two formulae for calculating the relationship between the Present and the Future. On the one hand we have the well-known Marginal Efficiency of Capital (MEC), where the value of the present stock equals the discounted sum of future earnings, but on the other we have the Conventional Projection (CP) where the expected earnings in the future reflect the productivity of present facilities. The MEC is likely to reflect the views of fund managers, the CP the views of corporate managers. These two sets of judgments of the future may coincide or diverge. Either way they determine the value of the present capital in terms of claims to it—and this determination may be stable or unstable, but in any case will be volatile in the sense that the underlying uncertainty can lead to rapid shifts. By contrast, the Classical Equations will give us the value of present capital in terms of its replacement or real cost. This is reliable, being based on the real side of the economy. The ratio of this to the uncertain and volatile MEC/CP financial calculation is analogous to Tobin's Q, and will play a role in determining investment decisions, but it chiefly gives us insight into how volatile those must be.     

From Hero to Zero? The Role of the Euro in the Current Crisis: Theory and some Empirical Evidence

A simple theoretical model of monetary unification and data from 11 euro members are used to investigate the common currency’s role in the macroeconomic performance of these countries. Euro membership has been typically accompanied by lower (or steady) inflation, but also by higher business-cycle volatility. In addition, synchronization of cyclical output was substantially affected by the common currency only in Greece (where it declined considerably) and Finland and Ireland (where it increased). Consistent with the theoretical predictions, the empirical evidence shows a strong negative relationship between cyclical synchronizations and volatilities, which however is not much stronger under the euro than it was during the Maastricht period.     

Britain’s Industrial Evolution: The Structuring Role of Economic Theory

We trace the coevolution of industrial organization and the ideas and policies that have influenced Britain’s industrial development from Alfred Marshall’s pioneering work on the English industrial districts to the present. Then, we examine four contemporary districts — in footwear, motorsport, sparkling wine, and cyber security — that are internationally competitive, despite decades of ill-informed policy choices, if not neglect. We also investigate the case of British elite sport as a high-performance industrial cluster with potentially transferrable institutional arrangements, particularly with regard to the nature and role of the strategic lead body and the state, as well as relationships within the system. We conclude that Marshall’s methodological and theoretical approach to understanding industrial organization — and his belief that industrial districts would coexist with other forms of industrial organization (rather than be superseded by them) — helps to explain the dynamism of contemporary British industrial districts, with important implications for Britain’s industrial revitalization.     

Emil Lederer’s Theory of Economic Fluctuations and the Role of Financial Institutions

Abstract

Emil Lederer was characterized as the “leading academic socialist of Germany in the 1920’s” by Joseph Schumpeter and was a highly respected economist of his time. However, most aspects of his work remain totally unexplored. This paper focuses on Emil Lederer’s theory of economic fluctuations defending the thesis that certain aspects of Lederer’s conceptualization of economic fluctuations underwent considerable modifications when his 1925 article Konjunktur und Krisen is compared with his 1938 book Technical Progress and Unemployment, a shift unacknowledged so far in the literature. In his first attempt to tackle the issue, in Konjunktur und Krisen (1925), Lederer had constructed an explanation consistent with the so-called “disproportionality theory” introduced by Tugan-Baranowsky (codified as “early Lederer”). However, Lederer’s conception of the business cycle during the 1930s and especially in his major work Technical Progress and Unemployment underwent considerable modifications. Lederer’s (1938 Lederer, E. 1938. Technical Progress and Unemployment, Geneva: King and Son.  [Google Scholar]) analysis is, apparently, very ‘Schumpeterian’ (codified as “late Lederer”). In this version of his theory, the cycle is explained by supply-side factors, and more specifically by technical change. Additionally, Lederer’s view on the role of financial institutions (credit and banks) with regards to business cycles is analysed. Lederer avoided attributing a causative role to monetary factors. The interrelation between ‘real’ factors and financial institutions constitutes an essential element in his analysis of the business cycle.     

The Transatlantic Trade and Investment Partnership and the Role of Computable General Equilibrium Modelling: An Exercise in ‘Managing Fictional Expectations’

Negotiations between the world's two largest trading partners, the European Union (EU) and the USA, on a Transatlantic Trade and Investment Partnership (TTIP) have been ongoing since July 2013. Anticipating the controversy the agreement has sparked, EU trade policy-makers in the European Commission have put considerable effort into discursively framing the agreement on their terms. Drawing on computable general equilibrium (CGE) models of the agreement's likely impact, the central claim has been that the TTIP promises to deliver much-needed ‘growth and jobs’ without stretching the public purse at a time of austerity. Our main argument in this article, drawing on the insights of the economic sociologist Jens Beckert, is that these CGE models – and the figures they have produced – represent an important exercise in ‘managing of fictional expectations’. The models make overly optimistic predictions about the ability of the EU and the USA to eliminate regulatory barriers to trade – which are unlikely to be realised in the face of considerable political opposition – and also downplay the potential deregulatory impact of an agreement. Rather than act as a reliable guide to future outcomes, we thus show that these models serve the pro-liberalisation agenda of the European Commission and other advocates of the TTIP.     

Economic ‘Clusters’ in East Germany: Evidence on the Location and Characteristics of Spatially Concentrated Industries

This article presents the results of an empirical study on spatially concentrated industries (SCI) with ‘cluster’ qualities in the eastern part of Germany which have emerged so far in the process of transformation. The findings reveal that SCI in East Germany which show ‘cluster’ qualities, i.e. SCI being supported by network activities and by innovative competences, are relatively rare, and they are strongly concentrated in agglomerated spaces. As the regional policy scheme which up to now has followed the ‘watering can principle’ has brought, so far, only poor results in terms of East–West convergence, a renewed policy with a special focus on agglomerated spaces (with more favourable conditions for economic growth) and with a stronger orientation on support for networking and innovative competences will probably be more effective in stimulating economic growth in East Germany.     

The ‘Value’ of Europe: The Political Economy of Culture in the European Community

During the 1970s and 1980s the “cultural sector” became one of the primary motors for wealth creation in the European Community. At the European and national scales, a group of actors helped transform Europe's vast array of practices and services (tourism, heritage, books, audio-visual products, etc.) into “cultural industries” and pushed the EC to develop a common cultural policy to support these industries. Documenting these changes at the European scale, I argue that the perceived impact of cultural policy for particular national economic competitiveness was also significant. Italian MEPs and members of Italy's national government were especially important, as they fought to protect the country's historical heritage and promote tourism. France pushed the strongest and I show how that country's efforts were primarily intended to protect its audio-visual and publishing industries from the EC internal market's liberalisation policies, which were vocally supported by Britain because they would have served that county's national economic interests.     

Who's in the Forbes Global 2000? The Role of Home Market,Multinational Firms and Economic Development

We investigate the determinants of the share of very large enterprises that a country has at the industry‐level at the industry‐level, using data from the Forbes Global 2000 across 48 countries and 16 industries in the period of 2004–2010. We find significant and positive evidence for three effects affecting such share: the home market effect (HME), multinational firm effect (MFE) and economic development effect (EDE). A further industry‐specific analysis of the HME suggests that the industry‐level degree of increasing returns to scale may only partly explain the effects being positive without them being different across industries.     

Sequencing and the Adding-up Property in Contingent Valuation of Endangered Species: Are Contingent Non-Use Values Economic Values?

This paper presents tests of the theoretical validity of the contingent valuation (CV) method. The validity of CV is especially a concern when involving environmental goods with a predominant non-use value. One test of theoretical validity is the adding-up property that implies that a specific good should be equally valued irrespectively of it is being valued directly or built-up sequentially. In this CV study four independent sub-samples stated willingness to pay for the same composite good, or package, using different sequences. One sub-sample valued the composite good directly, while two sub-samples faced built-up sequences valuing first subsets of this composite good. A fourth sub-sample valued the composite good from a dividing-out approach, facing first the valuation of a larger multi-package. Theoretically expected sequencing effects were observed; the subset goods obtained higher values earlier in a sequence, and the dividing-out approach decreased the stated value for the composite good. Most importantly, these CV data did pass the tests of the adding-up property.     

Deficits and Divided Governments: The Case of the German ‘Bundesrat’

The hypothesis of divided government is applied to the development of deficits in Germany. Since the party system is relatively stable, divided governments emerge not from coalitional governments, but rather from the bicameral structure of the country. Different majorities in the two chambers promote deficits, especially in the case of central government deficits. The results suggest that under different majorities in the two chambers deficits are more than 0.5%-Point higher. Further, it is indicated, that only ideological polarization, but not unstable majorities per se induces higher deficits.

The End of ‘Central Europe’? The Rise of the Radical Right and the Contestation of Identities in Slovakia and the Visegrad Four

ABSTRACT

The article analyses the effects of the migration crisis and the parallel rise of right wing parties on national and regional identities in Slovakia and the broader subregion of the Visegrad Four. It argues that the recent right wing political discourse around migration has been reshaping the meaning of ‘Central Europe’ as a normative project and an identity shared by the V4 countries. The post-Cold War narrative of Central Europe was a story of ‘returning to the West’, which in practice meant that normative conformity with the West was a precondition of membership in key Western institution. The situation has changed visibly after the migrant crisis, as the V4 political elites have now been constructing new identities, in partial juxtaposition with Western European liberalism. These new identities favour a culturalist, conservative interpretation of the nation and reject humanitarian universalism, epitomized by the European Union’s decision to welcome the refugees. This arguably devaluates the previous notion of ‘Central Europe’ as a region that seeks to identify itself firmly with the West. Slovakia is chosen as a case study because of the recent success of the radical right in the 2016 parliamentary elections. The article concludes that although the situation of being structurally locked into the EU does not allow the V4 countries to openly challenge its main principles, the V4 political elites pursue a counter-hegemonic strategy, subverting and resignifying some of its key political notions. One should, therefore, speak not of an end of ‘Central Europe’ but rather of its evolution into a new, hybrid stage, where normative conformity and identification with the West will only be partial. The article makes use of Laclau and Mouffe’s theory of discourse and related concepts as well as insights from constructivist geopolitics literature to track articulatory practices of the regional establishments. The study relies on evidence from recent political campaigning in Slovakia as well as official Visegrad Group documents from 2015 to 2016.     

The ‘West’ against the ‘Rest’: Geopolitics after the end of the cold war

With the end of the Cold War, it seemed that we had reached the ‘end of geopolitics’. Since the mid‐1990s, however, the term ‘geopolitics’ has experienced a revival, and even regional groupings which have so far abstained from any kind of power politics, such as the European Union, have started to claim geopolitical interests for themselves. But it is not clear what constitutes this kind of power politics in the 1990s and what drives ‘the West’ to pursue geopolitics, directed against what Huntington has labelled so plainly and provocatively the ‘Rest’. The article addresses this question by analysing Western capital's need for access to markets in the South and the EU's and US’ growing dependence on oil imports. The article will argue that a Western geostrategy based on Huntington's civilisational model would be counterproductive in the long run, manoeuvring the Western states into a situation where these geopolitical goals would have to be enforced by military means instead of being pursued through a strategy of political and economic support.     

The New ‘Passive Revolution’ of the Green Economy and Growth Discourse: Maintaining the ‘Sustainable Development’ of Neoliberal Capitalism

This paper analyses the rapidly emerging discourse of a green economy based on green growth. It highlights inherent conflicts and contradictions of this discourse such as the myth of decoupling growth from the environment, pollution generations and resource consumption. Using key theoretical constructs of both Gramsci and Polanyi, the paper argues that the green economy/growth discourse can be seen as a Gramscian ‘passive revolution’ whereby the dominant sustainable development discourse, subsumed by capitalist hegemony, is protected in the context of global environmental, economic and development crises. The ‘neoliberalising of nature’, or in other words, the privatisation, marketisation and commodification of nature, akin to Polanyi's fictitious commodities, continues and intensifies with green economy/growth strategies. Greening the economy and associated strategies of green growth divert attention from the social and political dimensions of sustainability and issues of social and international justice. In this way, the inexorable march or ‘sustainable development’ of neoliberal capitalism is maintained. This paper goes on to argue that contesting the claims of green economy/growth discourse through political struggles by civil society against the neoliberalisation of nature is a sign of a slowly emerging counter-hegemonic ‘double movement’ which challenges capitalist hegemony and the commodification of society–nature relations.     

Securing Japan in the ‘West’: The US-Japan Alliance and Identity Politics in the Asian Century

Why has the military dimension of the US-Japan relationship remained the central point of reference for Japanese foreign relations, despite the demise of the Soviet Union? Why has Japan, deepening economic interdependence notwithstanding, remained politically distant from East Asia? Based on analysis of statements by Japanese and US political elites and academics regarding the US-Japan alliance, this article argues that the rise of China, coterminous with the rise of ‘Asia’, challenges the notion of the ‘West’ as, according to standards of industrial modernity, a superior social and political order. These moving ideational boundaries question Japan’s position as the most advanced Asian nation and member of the (Western) international society of states. Therefore, the US-Japan alliance has since the mid-1990s become increasingly important for securing Japan in the ‘West’ and the ‘West’s boundaries in East Asia.     

Economic theorist and ‘entrepreneur of popularisation’: Schumpeter as Finance Minister and journalist

Abstract

Modern theory of popularisation suggests that the production and the popularisation of scientific knowledge are interlinked and interactive processes. This perspective offers new insights into Joseph A. Schumpeter's main work in public finance, The Crisis of the Tax State, and into his later endeavours as Finance Minister and journalist to popularise two central economic ideas of this work, the once-and-for-all capital levy and the reform of the tax system. We demonstrate that Schumpeter's Crisis contains popularising features and was written with a popularising intention. Furthermore, we show that in his journalistic works popularisation went hand in hand with the development of innovative economic ideas.     

ITQ’s in Chile: Measuring the Economic Benefits of Reform

In 2001 an individual (operationally transferable) quota system was introduced for all the most important industrial fisheries in Chile. This system was put in place after years of declining stocks and over investment. In this paper we describe this reform and estimate related allocative efficiency benefits for the most important industrial fishery in the country, the southern pelagic fishery. Benefits were estimated using a bioeconomic model estimated using data for the 1985–2004 period. The estimated model was then used to generate simulated scenarios of the evolution of this fishery in a 20 year horizon with and without the ITQ system in place. The benefits of the reform can then be estimated by comparing the fishery’s costs in the scenarios with and without ITQs. This approach allows benefits to be estimated using more realistic counterfactual scenarios than just comparing the fishery before and after the reform. Estimated discounted net benefits reach US $166 million in the period 2001–2020. Fleet size fell from 149 active boats in 2000 to 57 in 2004 as a direct consequence of the reform. Among the interesting features of the Chilean experience is the way the political economy of the reform was facilitated by the prior introduction of de facto individual quotas within the framework of fishery experimental activities. When the authorities closed the southern pelagic fishery because of biological problems between 1997 and 2000, they organized ‘experimental’ fishing expeditions in which participant boats were given the right to fish a certain amount of resources per expedition. This pseudo quota system allowed fishermen to experience directly the benefits of individual quotas and that was instrumental to the political agreement leading to the reform. It is important to note that the Chilean southern industrial pelagic fishery has average catches of over 1.4 million tons a year, making it one of the largest fisheries in the world to be regulated by individual quotas.     

‘The Death of the West’: Samuel Huntington,Oriana Fallaci and a New ‘Moral’ Geopolitics of Births and Bodies

This paper argues for the inclusion of biopolitical practices of mobility regulation into study of Israeli control of the Occupied Palestinian Territories (OPT). State investment in bifurcated infrastructure, checkpoints, identity documents and a permit system underlines the centrality of closure to occupation. Through closure, Israeli agents of government aim beyond sovereign control of the Israeli-Palestinian border or narrowly conceived security for Israeli subjects. Differentiating, quantifying, documenting and disciplining, closure constitutes biopolitical control of the occupied Palestinian population. Palestinian agents are tasked with minor administrative responsibilities, but only within a framework of Israeli biopolitical control. Our analysis draws on empirical material from fieldwork in the West Bank and three case studies of Palestinian life in East Jerusalem. Findings point towards an Israeli “governmentality” of Palestinian mobility informed by incomplete territorialisation of the West Bank and demographic anxiety.     

Does ‘New Regionalism Theory’ Explain the Complementary Role of Foreign Direct Investment and Trade Activity in the Central and Eastern European Region? The Case of Bulgaria

In this paper we attempt to contribute to the ongoing debate about new and old regionalism. First, we focus on the presentation of regional initiatives in the Central & East European (CEE) region and on specific motives behind Foreign Direct Investment (FDI) and trade expansion in CEE countries. Then, through empirical research and the analysis of regional initiatives we found that FDI and trade are complementary to each other, while FDI is a characteristic of new regionalism signifying deeper integration. On the other hand, geographical proximity still plays an important role in trade and investment suggesting that elements from both old and new regionalism are apparent in the CEE region. Only a small number of advanced countries participate in a few regional initiatives. However, membership in regional initiatives - if isolated - does not directly and/or simultaneously imply deep integration (new regionalism).