An alternative to Marshall: Economic history and applied economics at the early LSE

Conclusion The LSE in its early years did not produce a “school of economics” in the sense that Marshall's Cambridge constituted a “school.” English historical economics was too diffuse, too lacking in strong leadership, too untheoretical, and too committed to economic history as a discipline to create such a “school.” The special contribution of the LSE in the pre-war period was certainly not in theory, since one of the chief reasons for it being an alternative to Marshall's school of orthodoxy was that it paid relatively little attention to economic theory during this period. Rather, its alternative economics was its central conception that the economist'sraison d'etre was to solve pressing contemporary problems for which orthodox theory seemed to offer little guidance. Thus its teachers and curriculum, assembled by Hewins and the Webbs, emphasized applied subjects and economic history.     

Czechoslovakia and comecon

Summary The article follows official statements and theoretical discussions in Czechoslovakia in order to explain the role of foreign trade in Czechoslovak economic reforms. After an outline of the historical background, stressing the dependence of Czechoslovak economy and of her industrial structure on external relations, the position of Czechoslovakia is assessed during Khrushchev's attempts to integrate the East European countries. The main attention, however, is paid to the period after December 1966 when top Czechoslovak organs took the decision to start profound economic reforms in the field of foreign trade—as the first East European country and without consulting other COMECON members. The most important instrument, the so-called “inner price adjustment”, has been employed since January 1st, 1967, i.e. one year before Hungary has introduced it, too. It interconnects the domestic wholesale prices with the foreign trade prices in such a way as to make the difference part of the financial results of the enterprises instead of former budgetary financing. Within the framework of other measures this device would make it ultimately possible to reach convertibility of the Czechoslovak crown. During the first half of 1968 theoretical efforts were aimed at foreign trade liberalization and such a policy was partly executed. Finally, two theories of “socialist integration” are sketched which have emerged in Eastern Europe on both official and theoretical levels since august 1968 as a consequence of the above-mentioned Czechoslovak developments. The author is a research fellow at the Netherlands School of Economics in Rotterdam.     

Economic forces,structural discrimination and black family instability

The social and economic gains achieved by black families during the 1960s were severely eroded during the seventies and eighties. Unemployment, poverty, single-parent families, out-of-wedlock births, and adolescent pregnancies soared to alarming levels. According to the thesis of the declining significance of race, this crisis is mainly concentrated among the black “underclass” and it is broad societal trends, not racism, that is mainly responsible for their increased deprivation. We contend that this thesis fails to assess the role of institutionalized racism as it is manifested in “unintended” or “structural” discrimination, i.e., the disproportionate adverse effects of economic trends and policies on the functioning of low-income and middle-income black families. Moreover, we argue that social forces or policies that have racially disparate adverse effects are “discriminatory” by result, whether intended or not. The major economic trends that affected black families adversely during the seventies and eighties were: back-to-back recessions, double-digit inflation, and industrial and population shifts. The key economic policies that undermined black family stability have been: anti-inflation fiscal and monetary policies, trade policies, plant closings, social welfare, block grants, and federal per capita formulas for allocating funds to states and local areas that have not been corrected for the census undercount.     

Comments on R. Cooper, M. Bordo and H. James: Exchange rate arrangements and disarrangements: prospects for a world currency

This note evaluates the prospects for a world currency, using as a departure point the papers by Bordo and James (2006) and Cooper (2006). The note argues that a world currency is unlikely in the foreseeable future and probably undesirable. Although more evidence is needed, there seem to be no strong forces towards the creation of new monetary unions among the countries with major currencies or between those countries and the periphery. Based on recent experience, the note also argues that one of the main benefits to establish a world currency, the elimination of exchange rate uncertainty, is likely less important than commonly believed. No matter how rigid a currency arrangement is, initiatives to dissolve it tend to appear as bad times arise. Still, the present equilibrium of no world currency leaves unresolved many difficult issues related to the functioning of the domestic and international monetary systems. Sergio L. Schmukler has prepared this note as a comment to the papers “Proposal for an OECD Currency” by Richard N. Cooper and “One World Money, Then and Now” by Michael Bordo and Harold James, presented at the conference “Regional and International Currency Arrangements,” February 24 and 25, 2006, Vienna, Austria, organized by the Bank of Greece and the Oesterreichische Nationalbank (Central Bank of Austria). I thank conference participants for useful comments. I am also grateful to Jose Azar and Francisco Ceballos for excellent research assistance. The views expressed in this paper are entirely those of the author and do not necessarily represent the opinion of the World Bank.     

The impact of black mayors on the black community: The case of New Orleans’ ernest morial

Conclusion Dutch Morial is deeply respected by the New Orleans black community. According to a poll conducted in April 1983 by Rose-Stekler Associates, 80% of the black respondents gave Morial “excellent” or “good” job ratings, compared to only 11% who found him doing a “fair” or “poor” job. Despite very limited resourses, the Morial mayoralty has facilitated the entrance of the black middle class into the governmental process, providing access to city contracts and administrative positions. On the other hand, the black underclass has received meager rewards in the form of employment or a reduction in police brutality. Hopefully, economic development, in the long-run, will create jobs and provide additional city revenue to fund services for the poor. But for now, the primary impact of a black mayor on the black community of New Orleans has been symbolic kinds of benefits. Yet the potential positive benefits of a black mayor serving as a role model for black youth, as well as the value of civil rights rhetoric in fostering hopefulness and a more self-reliant black community, should not be underestimated. The characterization of the status of the civil rights movement in 1983 offered by C. T. Vivian, head of the Anti-Klan Network, well applies to New Orleans black community today: “Everything has changed and nothing has changed. The statistics are still terrible. But the atmosphere is totally different.”⁴⁹     

Crisis in the Russian mortgage market through the lens of financial accelerator theory

This paper analyzes the influence of the economic crisis on the Russian mortgage market from the position of the financial accelerator theory. It shows that the level of financial stability of banks and borrowers on the eve of the crisis was determining the dynamics of their development and solvency during the crisis. The “flight to quality” effect, which is inextricably connected to the financial accelerator mechanism, showed that the largest domestic banks and credit organizations that were controlled by nonresident companies and mainly specialized in mortgages were in the most advantageous position in the mortgage market. In regions, this effect manifested itself through a reduction in mortgage lending for borrowers registered in other regions and an increase in the number of credit provided by Moscow banks.     

Implications of revenue sharing for black political and economic goals

Conclusions Thus far urban development has been subject to the “regulation” of forces generated by the market economy. Such planning as has existed has been overwhelmed by the dynamics of market forces, perverted priorities, political fragmentation and economic differentiation. The joint goals of removing the “crisis” elements of urban growth and of expanding black political potential have provided the framework in which we have analyzed revenue sharing. We have analyzed the specific Nixon and Mills proposals as well as the general idea of revenue sharing, and compared revenue sharing proposals to present Federal aid to state and local governments.     

Resource allocation: A hayekian paradigm for maritime conglomerates

Conclusion This article provides a new synthesis between the strategic management literature and Austrian capital theory. The resource allocation process plays out in the context of differing subunit preferences, potentially resulting in tension and periodic conflict that may lead to dysfunctional relationships over time. Absent clearly understood and effective operational rules, the potential for heightened dysfunctional internal relationships will lead a conglomerate organization to have a diminished resource base for achieving its future strategic goals. This article presents a set of resource-allocation rules based on the Hayekian theory of production. By developing an effective resource-allocation paradigm based on economic theory, the organization can gain market share resulting in increased profitability and continued success in the marketplace. The Hayekian triangle offers firms an objective measure reflecting environmental shifts by tracking interest-rate changes that affect consumer and production demand. Organizations can gain “first-mover advantages” essential to provide the competitive advantage vis-à-vis their rivals while maintaining harmonious relationships among subunits. Entrepreneurial innovation can also be exercised by “second movers” who imitate the “first movers,” perhaps taking advantage of lessons learned. This kind of innovative imitation may well provide the greatest scope for entrepreneurial activity. The authors remain responsible for any errors or omissions.     

“Buy-back” in international trade: A rationale

Conclusion When a technology proprietor cannot exploit his advantage by means of ownership of a production facility abroad, a sales contract with “buy-back provisions” may, in fact, be a trade-enhancing resolution to a situation of information-asymmetry between buyer and seller. The important implication is that not all forms of countertrade can be summarily dismissed as inefficient. Just as foreign direct investment can be seen to be a response to environmental or market imperfections, “buy-back” may be a way to deal with institutional or regulatory obstacles such as the prohibition of foreign ownership.     

Child care and female employment in urban nigeria

Several factors influence female employment in most societies. They include family economic pressures, employability, earning potential, labor market environment and family composition. Several studies have been done on the influence of all factors but the last, family composition, that is, whether the mother has a baby-sitter. If the answer is a “yes,” then the probability that she will engage in an economic activity increases. This article addresses the question of the role of the child-care on female employment. The results show that the influence of child-care on female employment in Lagos depends on the nature of such help.     

SBA regional loan distribution to minorities

Summary We have shown in this paper a great disparity in the lending activities of a number of Small Business Administration regional offices. There were considerable differences between these regions on their rates of increase and then decline of loans and loan dollars issued over the 1968-1976 period and on their loans and loan dollars per unit population, small businesses, and small business employees. This was found to be the case both for minorities and for the population at large. This, however, is especially disturbing in the context of minority lending activity since SBA lending was the chief vehicle of the federal government’s minority economic development efforts from 1968 to 1976. The economic well-being of a great many minorities with ties to the small business sector was to a large measure affected unequally by the differential SBA lending rates between regions. In fact, insofar as the measures we have selected can be related to “need,” the policy seems to have been counterproductive, having concentrated lending activity precisely in the regions where minority small business in terms of population, employment, and numbers of establishments was strongest and by implication the “need” was least!     

Foreign direct investment, agglomerations, and demonstration effects: An empirical investigation

Previous studies have shown that the localisation of firms can be an important factor in attracting new foreign direct investment into a host country. The authors distinguish between “efficiency agglomerations” which arise as firms increase their efficiency by locating close to each other, and “demonstration effects” whereby existing firms send signals to new investors as to the reliability and attractiveness of the host country. They try to disentangle these two effects by examining the location of US firms in Ireland. They find that both sources of agglomerations have been important determinants of US firm entry into Ireland. JEL no. F23     

Total capital and economic growth

In contrast to the official estimates of gross private domestic investment and associated capital stocks prepared by the Bureau of Economic Analysis (BEA), the author presents estimates of total investment and capital, human and nonhuman, tangible and nontangible, by all sectors of the U.S. economy. Total investment is 3.1 times the BEA estimate in 1929, rising to 4.1 times in 1990. It accounts for almost half of adjusted GDP in the latter year. As hypothesized, real total capital stocks rise at about the same 2.9 percent average annual rate as real gross domestic product 1929–90, 0.1 percentage points more in the total economy and 0.2 points less in the predominant business sector. Increases in nontangible capital (mainly education, training, health, and research and development—“R&D”-) largely explain the growth in total tangible factor (capital) productivity in the whole economy. Nontangible, human capital has grown relatively faster in the business sector than in the entire economy, helping to explain its more rapid productivity advance. The author recommends that when BEA shifts to the U.N. standard system of accounts, it include nontangible and human tangible investments and capital in “satellite” accounts, as well as tangible investments for all sectors in the core accounts. This will greatly facilitate the analysis of economic growth. Presidential Address at the Thirty-Sixth Atlantic Economic Society Conference, October 7–10, 1993, Philadelphia, Pennsylvania.     

Oil revenues for public investment in Africa: targeting urban or rural areas?

This paper investigates the effects of oil-financed public investment on economic growth and poverty reduction using a dynamic multi-sectoral general equilibrium model featuring inter-temporal productivity spillovers. The paper shows that the relationship between resource-rent flows and real exchange rates, output growth, and poverty is less straightforward than simple models of the “resource curse” suggest. Taking Ghana as a stylized agriculture-based economy with poverty most pronounced in a region with home based agricultural production, a policy mix of smoothing the real exchange rate shock and an allocation of infrastructure spending in rural areas seems to be the most promising public investment strategy to enhance growth and reduce poverty.     

Controversies on market failure in rewarding inventors

Conclusions A definite answer to the question of whether inventors are over-compensated cannot be attained within a model of an “ideal” market economy. Our analysis, however, yields informations about the conditions which determine an inventor's reward: When constant returns to scale are prevailing in the economy (models 2, 4), we can expect that compensations for inventions are effiecient or too small. Under decreasing returns (model 5), an inventor’s reward may be either too large or too small. But overcompensation — when it occurs — can never be larger than the sum of all producers’ surpulses (model 1). Thus, profits from inventions may be large, but not excessive.     

Labor market racial discrimination against black women

Conclusion The data we have reviewed describe black women as having achieved parity with white women and indicate that this conclusion is not seriously affected after controlling for the direct and indirect effects of differences in time worked. However, the economic position of black women is not uniform throughout the economy. Black women have advanced primarily in public sector jobs and these advances have been made primarily by the youngest cohorts. Progress in the private sector has been much slower. Claims that a “new labor market” exists for black women ought to be carefully qualified, for their progress is impressive primarily when they are compared to white women—another disadvantaged group. Both groups of women are falling farther behind men in terms of relative earnings.16 Furthermore, it may be quite erroneous to interpret small differences in earnings between black and white women as evidence that black women do not suffer racial discrimination, as the following example illustrates.     

Specific Factors and International Monetary Policy Coordination

The consequences of intersectoral factor immobility for optimal monetary policy are examined in a “New Open Economy Macroeconomics” framework. When labor cannot be reallocated between tradable and nontradable goods production, this rigidity generates a welfare loss, which increases as the sectors become more different. When prices are predetermined, the model becomes a monetary “specific factor” model. Intersectoral factor immobility complicates the optimal monetary policy problem by creating a tradeoff between stabilizing tradable and nontradable sector labor. When labor is mobile between sectors, policy coordination can significantly reduce labor volatility. When it is not mobile, coordination results in less volatility in tradable sector labor, but increased nontradable sector labor volatility.     

The origin,birth, and adolescence of the review of black political economy and the black economic research center

The Review of Black Political Economy (RBPE) and the Black Economic Research Center (BERC) arose from the atmosphere of the late sixties, when black nationalism was at its apex and vigorous efforts were under way to give meaning to the concepts of “black economic development” and “black capitalism.” They were created as vehicles to assist black economists and economic activists to analyze and disseminate relevant data on black economic affairs and to explore and facilitate new approaches to black economic problems.RBPE offered black economists a place where they could publish their work and share it with their colleagues. The flavor ofRBPE has changed somewhat over its twenty-three year life, becoming less polemical and more scholarly.     

Principles of a Pan-African economic ideology

Summary In this paper, an attempt has been made to integrate the politics of Pan-Africanism with its economic ideology. The basis and need for such an ideology has been explored. It has been argued here that the roots of underdevelopment in the Black World lie in the historical evolution of the world market economy; that continued participation in monopoly capitalism serves to reinforce the international inequality; and that the localization of economic activity by multinational firms within the Black World countries deepens internal inequality by suffocating the internal markets and impoverishing the indigenous class. It is argued further that the Absorption hypothesis, seeking wage employment in the “modern” sector for the army of unemployed being generated under international monopoly capitalism, is an hypothesis of the impossibility. The “modern” sector cannot expand fast enough nor adapt its techniques of production to absorb the unemployed.     

Hub-and-Spokes Free Trade Agreements in the Presence of Technology Spillovers: An Application to the Western Hemisphere

Using a comparative-static general equilibrium model in the context of the Western Hemisphere, this paper compares the economic effects of a “hub-and-spokes” type of bilateral trade configuration (with Chile being the hub) with those of a more comprehensive regional FTA (namely, the FTAA). The model is augmented to account for the possibility of technology spillovers and its effective assimilation among participating economies. In particular, absorptive capacity, governance factor, proximity and socio-institutional congruence conjointly determine an economy’s capacity to capture the technology that is transmitted from the developed spoke United States to other regions. JEL no. D58, F13, O33