A simple model of three economies with two currencies: the eurozone and the USA

This paper presents a Keynesian model which describes threecountries trading merchandise and financial assets with oneanother. It is initially assumed that all three countries haveindependent fiscal policies but that two of the countries sharea currency, hence the model can be used to make a preliminaryanalysis of the conduct of economic policy in ‘the eurozone’vis-à-vis the rest of the world—‘the USA’.The main conclusion will be that, if all three countries doindeed operate independent fiscal policies, the system willwork under a floating currency regime, but only so long as theEuropean central bank is prepared to modify the structure ofits assets by accumulating an ever rising proportion of billsissued by any ‘weak’ euro country.     

Wage formation in historical perspective: the French experience

Translator's note: In this article Robert Bayer introduces thenotion ‘regulation’ as a key concept in analysesof the labour market. The term refers to the balance of social,institutional and economic forces which characte rise at a particulartime the economic system as a whole or particular parts of it.I considered translating ‘regulation’ as ‘order’,‘regime’, ‘system’ or ‘formation’;but these terms are either too static or already bear inappropriateconnotations. It was therefore decided to retain the Frenchexpression in the English text.     

The Schumpeterian role of financial innovations in the New Economy's business cycle

Alan Greenspan claims that modern financial innovations, especiallyfinancial derivatives, were major contributors to a Schumpeterianprocess of ‘creative destruction’ which produceda high-growth ‘New Economy’ and opposes their regulation.A different perspective emerges when it is recognised that the‘New Economy’ followed the general contours of aSchumpeterian business cycle, and the role of modern financialinnovations is examined in that context. The authors argue thatthe primary role of financial derivatives has been in contributingto ‘reckless finance’ and speculative excesses inthe second phase of that cycle, and that Schumpeter would favoursubjecting the use of derivatives to more regulation.     

Thinking about developmental states in Africa

During much of the 1980s and 90s, a literature emerged suggestingthat ‘developmental states’ were impossible in Africa.The arguments given ranged from cultural ones about the pervasivenature of clientalism to structural ones on the dependence ofAfrican economies or the atypical levels of rent seeking inAfrican economies. This paper argues that Africa has had statesthat were ‘developmental’ in both their aspirationsand economic performance. It further argues that these experiencesneed to be examined critically for useful lessons, an exercisethat has been hindered by an excessive levelling of the Africanpolitical and economic landscapes.     

Money, cycles and capital formation: von Mises the 'Austrian' vs. Robertson the 'Dynamist'

A ‘disequilibrium’ between saving and investmentdecisions determines a maladjustment in production, the disruptionof capital, and a downturn in economic activity, according tothe ‘Austrian’ approach. By contrast, the ‘Dynamists’argue that it may lead to economic growth, as disequilibriummay well be instrumental to capital accumulation. What explainsthese different predictions in otherwise similar models? Thekey is in the interplay between the analytical features andthe ideological options underlying each of these approaches:alternative lines of thought, entirely compatible with theiranalytical models, were abandoned by some of these authors whenthey conflicted with their pre-analytical views. This paperillustrates the argument by exploring the models of two ‘fathers’,von Mises and Robertson.     

New Labour, energy policy and 'competitive markets'

By the end of New Labour's first term four central objectivesof energy policy had become established: ‘cheap’energy, the relief of fuel poverty, a major reduction of carbondioxide emissions, and energy security through maintaining awide diversity of primary fuel supplies, all to be achievedthrough ‘competition’. After surveying New Labourenergy policy documents, the paper argues that New Labour failedto appreciate (i) the extent to which, under such a laissezfaire policy regime, these objectives were mutually inconsistent;(ii) that the apparent successes of energy market liberalisationduring the preceding Conservative Governments had little todo with ‘competition’; and (iii) that the transactioncosts of injecting increasing ‘competition’ intoboth British and European energy systems are likely to exacerbatethe growing threat to energy security. The paper concludes witha brief examination of the implications of transaction costeconomics for the organisational structure of the UK energysupply industry.     

The Asian crisis and the shaping of 'proper' economies

The latter half of the 1990s saw a new international agendadevelop: the ‘strengthening of the international financialsystem’ through the globalisation of standards and codesof ‘best practice’. The author calls for criticalreflection on this normalisation of ‘free market’capitalism and its global enforcement through a comprehensivesystem of economic standardisation and surveillance. To thisend, Michel Foucault's analysis of liberalism is shown to behighly relevant.     

The economic case for international labour standards

This paper explores the economic case for international labourstandards. Granting workers rights of free association and collectivebargaining confers both static and dynamic economic efficiencies.Static efficiencies refer to one-time gains from improvementsin economic practice. Dynamic efficiencies refer to gains fromimprovements to the growth path resulting from a shift awayfrom a ‘low road’ development path to a ‘highroad’ path. These efficiencies raise wages, employmentand output in developing countries, and they can also benefitworkers in developed countries. Labour standards are an institutionalmechanism for raising the quality of growth in both developingand developed countries. In this sense, they are a ‘win–win’institution.     

'Total factor productivity vs. realism' revisited: the case of the South Korean steel industry

This paper presents key features of the development of the SouthKorean steel industry through the critical examination of anarticle by Truett and Truett. Despite their claim to exhibit‘realism’ by use of a translog cost function, theirmethodology has strong affinities with the methods of measuringtotal factor productivity growth, which have long been knownas invalid but continue to be applied not least to the experienceof East Asian countries. It will be argued that the theoreticaland empirical flaws involved with these methods invalidate theirresults and corresponding policy implications. Above all, byshowing that the assumptions for their calculation do not holdin terms of the economic conditions of the industry, the paperpoints to a different understanding of ‘realism’than that conceived by and for their study.     

Monoculture versus diversity in competition economics

Economics rightfully represents the major basis for competitionpolicy. Next to generating knowledge about competition and itswelfare effects, the currently popular ‘more-economicapproach’ is charged with a number of additional hopesand expectations. While this article highlights the benefitsof economics-based competition policy, it takes a cautious stancetowards excessive expectations, in particular regarding theidea that a monocultural, ‘unified’ competitiontheory as an exact, objective and unerring scientific approachto antitrust could make normative assessment and generalisationssuperfluous. Diversity in competition economics is advocatedin two ways. First, competition economics is empirically characterisedby a considerable pluralism of theories and policy paradigms.Second, it is demonstrated that this diversity of theories istheoretically beneficial for future scientific progress. Asno ultimate competition theory can ever be expected., the ‘more-economicapproach’ must be extended in order to embrace diversity.     

The nature and role of monetary policy when money is endogenous

This paper considers the nature and role of monetary policywhen money is modelled as credit money endogenously createdwithin the private sector. There are currently two schools ofthought that view money as endogenous: one has been labelledthe ‘new consensus’ in macroeconomics, and the otheris the Keynesian endogenous (bank) money approach. The paperfirst explores the analysis of monetary policy in the ‘newconsensus’ macroeconomic model, followed by an examinationof the effectiveness of monetary policy in that analysis. TheKeynesian view of endogenous money is discussed, and the rolefor monetary policy in a Keynesian endogenous monetary policyanalysis is considered, including discussion of the objectivesand instruments of monetary policy.     

Financial crisis in Southeast Asia: dispelling illusion the Minskyan way

This paper extends Minsky's financial instability hypothesisto the case of the open, ‘liberalised’, economy,making it possible to put forward a specifically Minskyan accountof the road to the financial crisis in Southeast Asia (1997/1998).The analysis suggests that the threats to growth and employmentemanating from the financial sector which Minsky identifiedin the closed economy setting are much intensified in open,liberalised, developing economies. Financial liberalisationis an important key factor in this process. Rival explanationsof the crisis are examined and rejected in favour of the extendedMinskyan explanation. The policy implications are derived anddiscussed.     

Preferences, reductionism and the microfoundations of Analytical Marxism

Analytical Marxism has recommended that Marxian theory shouldconform to ‘normal’ scientific methods and thatthis should involve the development of microfoundations. Thelatter has involved the adoption of rational choice theory andits corresponding assumptions regarding agents' behaviour. Thispaper seeks to question this position and highlight a numberof problems which Analytical Marxism faces, particularly inthe domain of economic theory. The different views of scienceespoused by Analytical Marxists display a tension between ‘positivist’and ‘realist’ perspectives, and the arguments forindividualist and anti-reductionist approaches to social andeconomic theory are also argued to be problematic. The approachof Analytical Marxism, it is suggested, can involve the uncriticaladoption of many of the assumptions of standard economic theoryand, as such, it is subject to a number of substantive criticisms,some of which have been elaborated from within mainstream economictheory.     

Capabilities as causal powers

The author argues that Sen's capability approach is primarilya philosophical under-labouring exercise aimed at elaboratingcertain central economic categories, and that the philosophicaland methodological underpinnings of Sen's approach are radicallydifferent from those of contemporary welfare economics and mainstreameconomic practice. Sen's notion of ‘capabilities’as the potential functionings to achieve well-being is interpretedhere as a specification of the ontological category of ‘causalpower’, presupposing an open system conception of realitythat contrasts with much of contemporary economic practice.