Technologies in transition,policies in transition: foresight in the risk society

The emergence of formal Foresight programmes in science policy across Europe is examined in terms of government's response to the changes in, and especially the uncertainties of, contemporary innovation. The paper explores this through deploying Beck's notion of the “risk society”, asking how far Foresight can be construed as the management of new technologies by the transition towards the “negotiation state”. It shows how, through a discussion of the social management of new health technologies, a tension arises between the priorities and regimes of the new “negotiation” and those of the former “provident” (or welfare) state. The emergence of new technologies will be shaped by the institutional assumptions and processes operating within the different policy regimes.     

Around the world with Irving Fisher

This paper aims to show why Irving Fisher's own data on interest rates and inflation in New York, London, Paris, Berlin, Calcutta, and Tokyo during 1825–1927 suggested to him that nominal interest rates adjusted neither quickly nor fully to changes in inflation, not even in the long run. In Fisher's data, interest rates evolve less rapidly than inflation and change less than inflation over time. Even so, the “Fisher effect” is commonly defined as a point-for-point effect of inflation on nominal interest rates rather than what Fisher actually found: a persistent negative effect of increased inflation on real interest rates.     

Money demand and the role of monetary indicators in forecasting euro area inflation

This paper examines the stability of money demand and the forecasting performances of a broad monetary aggregate (M3), excess liquidity and excess inflation in predicting euro area inflation. The out-of sample forecasting performances are compared to a widely used alternative, the spread of interest rates. The results indicate that the evolution of M3 is still in line with money demand, even when observations from the economic and financial crisis are included. Both excess measures and the spread are useful for predicting inflation.     

Lineages of Embeddedness: On the Antecedents and Successors of a Polanyian Concept

Since the 1980s, much debate has revolved around Karl Polanyi's concept of the “dis/embedded economy,” generating some light and not a little heat. This paper looks at three reasons that account for part of the “heat.” It begins by tracing the sources upon which Polanyi drew. They include Karl Marx, Ferdinand Tönnies, and Max Weber, along with anthropology of the inter‐war period, and German and American Institutionalist economics. After exploring the differing ways in which these varying currents conceptualize the relationship between economy and society, I explore the different interpretations of what Polanyi means by embeddedness, and the different purposes to which contemporary economic sociologists have put the term. For some, he is held up as the originator of a line of sociological analysis that treats “the economy” as a subsystem “embedded in” a social system. In this reading the emphasis is upon the moral underpinnings of market behavior, in contrast to the naturalism of Ricardo, Malthus and their heirs. For others, his “disembedding” thesis contains a more radical tale: of the market economy coming to dominate “society,” bringing forth a sorcerer's apprentice world of untrammeled market forces that, although human creations, lie beyond conscious human control.     

China's soft landing: Too good to be true?

Chinese inflation reached a peak of almost 30% in late 1994 but has since fallen back to below 10%. Growth has eased in response to weakening demand but the slowdown has been very modest, with growth of around 10% recorded to last year. In this article, Hong Bai and Andrew Sentance critically examine this apparent "soft landing" and suggest that the reduction in inflation may be more apparent than real.     

Is the Economy Overheating?

In the last year total output has risen 4 per cent and manufacturing is up 6 per cent. Unemployment has fallen by 400,000. The current account, which was in surplus in the first half of the year, has moved back into deficit. Does this mean that the economy is “over- heating”? In the context of our forecast we examine this issue; we consider how rapidly supply can increase and how fast demand is increasing. We conclude that the growth of output in the last year was initially driven by supply and that, more recently, domestic demand has been growing very rapidly. The emergence of a current account deficit is evidence of excess domestic demand but from now on we expect demand to grow less rapidly. With non-oil supply expanding at a rate in excess of 3 per cent, we forecast steady output growth and little change in either inflation or the current account. In our judgement, the economy, though hot, is not overheating.     

Forecast Summary

There is one overriding question which this issue of Economic Outlook seeks to address: to what extent will the tight monetary policy now in place produce a slowdown in consumer spending and take the savings ratio back up from last year's record lows? The answer, provided by the forecast, is that the savings ratio will rebound this year and our Macroeconomic Viewpoint argues that this will be sufficient, in combination with a rising budget surplus, to effect a reduction in inflation and the current account deficit over the medium term. But it does not achieve the government's target, set out in the MTFS, of a balanced budget - the public sector remains in chronic surplus. This objective requires national savings to be privatized and, in a special Microeconomic Viewpoint, we put the case for tax incentives to boost personal saving and enable the budget surplus to be reduced in a way which does not add to demand.     

The London Business School Gower Publishing

The 1989/90 payround is under way against the background of the highest rate of inflation in nearly seven years, the lowest rate of unemployment since December 1980 and a spate of industrial disputes which feature pay as a central theme. Reflecting this, pay settlements are moving higher and whole economy earnings are rising at an underlying rate of 9.25per cent, compared with only 7.5 per cent in early 1987. The obvious danger, with the labour market remaining tight, is that earnings will accelerate further, possibly into double figures. If this were to coincide with slower output growth, unit labour cost inflation would increase sharply, either threatening the government's inflation objectives or, as in 1980–81, resulting in a squeeze on profits - a hard landing. In our June forecast, we ruled out this possibility - at least as the central case - but at the same time we warned that "the main economic danger lies in this area: if wage bargainers are successful in bidding up wages to compensate for higher retail price inflation, the battle to reduce inflation could be even more protracted than our forecast suggests and output prospects too would be that much weaker". In this Forecast Release we return to this theme.     

The London Business School with Gower Publishing

With the benefit of hindsight, we can see that the course of the world economy in 1988 was a product not so much of the stock market crash of October 1987 but of the reaction to the crash. Monetary policy and to a lesser extent fiscal policy were eased and consumer spending responded to cuts in interest rates and rising real incomes. With the world recovery in its sixth year, capacity pressures began to emerge and investment also boomed, helped by a lower cost of capital. As a result of this strong private sector demand, OECD output increased 4 per cent in 1988 as a whole and industrial production and world trade rose even more rapidly. Against the background of buoyant demand and output, inflationary fears have resurfaced. Since the spring monetary authorities in most countries have been tightening policy, raising interest rates by early 1989 above the levels which helped bring about the stock market crash. Their aim is to effect a slowdown in demand before a significant upward movement in inflation and inflationary expectations takes hold. In our judgement the present policy stance will achieve its aim of a "soft landing" for the world economy. The pick-up in world inflation is contained below 5 per cent and by the second half of this year inflation eases, paving the way for a relaxation of monetary policy. Output growth slows from 4 per cent to 3 percent in 1989 and 2 per cent in 1990, picking up again as interest rates are lowered in 1991–2.     

AN ECONOMIC POLICY HYPOTHESIS OF METROPOLITAN GROWTH CYCLES: A Reflection on the Recent Rejuvenation of Tokyo*

Rejecting the simplistic life-cycle hypothesis of cities put forth by Klassen and Paelinck, this paper advances a new hypothesis for the cyclical movements of urban growth that have taken place on a world-wide scale. The recent rejuvenation of major industrialized cities is largely attributed to the shift in the government's economic policies toward a smaller government, supported by the existence of economies of scale in large cities. The paper closely examines Tokyo's recent rejuvenation and shows how the government's conservative economic policies of the 1980's helped reverse the declining trend of the previous decade.     

我国经济转轨期软预算约束与通货膨胀分析

本文采用我国1989～2009年经济转轨时期的数据,对联立方程模型参数进行了重新估计,估计结果显示预算软约束依然是通货膨胀产生的原因之一,但是转轨时期软预算约束正逐步向硬约束转变,这个转变对社会消费尤其是居民消费产生很大影响。然后对2009年以来的通货膨胀问题与软预算约束以及结构扭曲之间的关系进行了研究,研究发现这一轮的物价上涨与经济结构严重失衡有密切的关系,并且预算软约束的存在使财政赤字和国债负担扩大,给经济运行带来了隐患和风险。     

The paradox of rising wage growth and falling inflation

• ? Strong labour markets and rising wages in advanced economies stand in sharp contrast to recent declines in economists’ inflation forecasts and market expectations. In our view, though, these developments are not necessarily contradictory. Even if wage growth edges higher, we think demand factors will limit any pick‐up in prices. Instead, we expect firms’ margins will be squeezed.
• ? Although the labour share has risen more sharply than we had expected over the past couple of years, we are sceptical that this will translate into substantially stronger underlying inflation. Not only has the rise been small, it has been employment rather than wages that has surprised to the upside. The strength of employment is probably more about firms’ production preferences than workers’ capitalising on a stronger negotiating position.
• ? True, wages adjusted for productivity now look high by historical standards. But neither theory or empirical evidence suggests that this must inevitably lead to stronger CPI inflation in the short‐term. Our forecast for flat wage growth in 2019 and the absence of strong cost pressures elsewhere are also a comfort.
• ? Inflation tends to be more responsive to demand indicators – and the recent GDP growth soft patch suggests any further pick‐up in underlying inflation pressures will be limited (see Chart below).
• ? More generally, we think that the consensus view on inflation for the key advanced economies is high. Market‐based inflation expectations are typically lower than our own, which may reflect the perception that inflation risks are skewed to the downside. Positive economic surprises could lead downside risks to narrow, but ageing expansions and secular stagnation worries suggest this is unlikely, limiting any future pick‐up in bond yields.

     

Can Good Apples Be Mixed with Bad Economics? A Mengerian Critique of the Alchian and Allen Theorem

Abstract . The Alchian and Allen Theorem has been a popular staple of many economics classes since Armen Alchian and William Allen first introduced it in their well‐known text University Economics. The Theorem says that the addition of the same fixed cost to two similar goods will result in an increase of demand for the higher‐priced, “higher‐quality” good relative to the lower‐quality item. Response to the Theorem ranges from an informal comment that it is a “parlor trick” to it being called the “Third Law of Demand.” We review some of the literature, and use Carl Menger's economic analysis to challenge the Theorem's validity. Based on Menger's analysis, we conclude that the Theorem is not, in fact, a theorem because it is does not describe a general case, but instead only applies in some cases, thereby becoming, at best, a special case of Menger's more general analysis. Further, we find evidence that Alchian and Allen themselves unwittingly contradict their own argument elsewhere in one of their texts.     

Offshoring and reshoring: U.S. insights and research challenges

The phenomenon of reshoring to the U.S. has received wide attention ever since it became a political platform for U.S. politicians during the last presidential election. The economic downturn, a heightened emphasis on sustainability, and increasing customer expectations for flexibility and improved cost performance drove firms to re-consider the appropriate “shoring” decision. The intent of this research note is to add a U.S.-centric perspective to the “shoring” debate.     

Towards estimating the demand for money in China

The demand for money in China is estimated separately for the periods before and after the economic reform. Besides the traditional transactions demand variable, the expected rate of inflation (as a measure of the opportunity cost of holding money) and the monetization process are also incorporated into the demand function. The preliminary results show that the demand for money in China has changed in response to the institutional changes during the economic reform. Adding the monetization and inflation expectation variables into the money demand function has enhanced significantly its explanatory power.     

Does Austerity Work? Theory and Evidence

• A number of factors underpin the Coalition's fiscal strategy, the most important being the use of rules (for the structural current deficit and net debt) and the creation of a new “institution”, the OBR, to monitor it. According to the Chancellor, this combination would ensure the government's “credibility and avoid elevated sovereign default premia and foster sustainable recovery.” 1
• It is already clear that the limited degree of independence for the OBR is a major shortcoming but there is another, more serious, problem in the Treasury's belief that the deficit ratio can be reduced by making spending cuts as clear failures by the government to achieve its fiscal targets on the deficit have shown. Such a failure is consistent with the results of research over the last decade which gives strong support to the view that fiscal multipliers are much larger than unity.
• The length of the downturn, the repeated large failures to hit deficit reduction targets and now the source and nature of the recovery show that his plan is failing. The former was predictable from the evidence just noted. In turn, the recovery relies on the surge in consumer demand following the easing of credit conditions for house purchase and points to a switch to a “Plan B”. It also demonstrates that the Chancellor could have brought about recovery very much earlier had he stimulated demand on taking office not reducing it with his self‐imposed austerity measures. He could even have stimulated demand to a much more constructive long‐term effect by increasing public investment.

     

Stepping-stones for integrated chain management in the firm

The Dutch government's National Environmental Policy Plans (issued in 1989 and 1993) identified Integrated Chain Management – the incorporation of sustainability considerations into supply chains and related networks – as an important means of implementing their ambitious environmental objectives in the economic sphere. However, there is a debate going on as to what kind of policy measures would support its adoption and how they can be implemented in practice. Integrated Chain Management has two main features. The first is the flows of materials which result from economic activities. The second is the institutional frameworks which shape the production and consumption processes which drive the material flows. Previous studies have examined the ecological, economic, organizational and public policy aspects of Integrated Chain Management. However, they have not clarified the business logic behind the forces that give rise to chain‒oriented action. This matters because public policy is most effective when it is compatible with existing business trends. This paper therefore examines these trends (in particular Total Quality Management, Supply Chain Management and environmental management) utilizing current literatures and four case studies of large British and Dutch companies. From this examination it generates four stepping-stones for encouraging movement towards Integrated Chain Management. In principle, the results are relevant to all economic sectors. © 1997 John Wiley & Sons, Ltd. and ERP Environment.     

Forecast Summary

The sluggish response of the current account to severe monetary tightening has put pressure on the exchange rate, which was instrumental in the decision to raise base rates to an eight-year high of 15 per cent. In so doing, the government has declared itself ready to risk recession to hold the pound - its main bulwark against rising inflation. Our forecast illustrates the risk. Compared with June, when we saw the economy avoiding a hard landing in the short term (at the cost of a protracted battle to reduce inflation over the medium term), the present forecast projects a sharp deceleration in output next year. Over the medium term output grows a disappointing 2 per centp.a., unemployment starts to rise and it is not until 1992 that retail price inflation is back below 5 per cent.     

Introduction: the Asia-Pacific HRM model revisited

This article introduces a symposium which 'revisits' the Asia-Pacific HRM model, much discussed in recent literature. It argues that, while the IR/HRM systems of the countries in the region are prima facie heterogeneous, there is both commonality and diversity. It posits the four logical cases of 'hard convergence', 'soft convergence', 'soft divergence' and 'hard divergence'. It argues that the most probable outcomes are likely to be the middle options. 'Soft convergence' may have occurred as a result of broader responses to broad economic trends such as globalization; 'soft divergence' may still be de rigueur , as the devil is always 'in the details'. Institutional and legal changes may also take place more slowly than enterprise-level or organizational ones.     

The CAPITAL in Social Capital: An Austrian Perspective

In recent decades economists started discovering the importance of the social dimension of economic interactions. Contemporary economics has borrowed several sociological concepts for its own use, among the most important being the concept of social capital. However, this transfer within disciplines did not occur without a loss—the nature of social capital in economics remains confused and obscure. The purpose of this article is to clarify it, specify the possibilities for its use, and discuss their limits. It is argued that economics once also possessed a view of human beings that was more “socialized” than the modern neoclassical Homo oeconomicus, and that this more “socialized” view still exists in the Austrian school of economics. Because this tradition of economic thought has also developed an elaborate capital theory, it can serve as an ideal source where we can look for inspiration in the current social capital debate. First, social capital is (re)defined along these lines as an individual's asset connected with recognized reciprocity (as opposed to interactions usually classified as “altruistic”). Then major critical claims about the relation between social and physical capital are answered and the connection between social capital, trust, and social norms is described.