Officially Despised Yet Tolerated: Open-air Markets and Entrepreneurship in Post-socialist Countries

This article examines the entrepreneurial activity at open-air markets (OAMs) in post-socialist countries. Based on interviews and observations of 65 traders at the largest OAM in the Baltics, we address the following questions: (a) To what extent can these traders be considered productive entrepreneurs? and (b) What unique functions do OAMs fulfil in the post-socialist environment? Our analysis indicates that, based on our working definition of entrepreneurship in transition countries, we consider these traders to be entrepreneurs. In addition, we identify a number of important social, political and economic roles that OAM traders fulfil in the transition environment.     

The Role of Natural Resources in Economic Development

Economists now recognize that, along with physical and human capital, environmental resources should be viewed as important economic assets, which can be called natural capital. Three recent debates have emerged over the role of natural capital in economic development. First, as many ecological services are unique, does the environment have an “essential” role in sustaining human welfare, and if so, are special “compensation rules” required to ensure that future welfare is not worsened by natural capital depletion today? Second, the environmental Kuznets curve (EKC) hypothesis has fostered empirical estimations of an “inverted U” shaped relationship between a variety of indicators of environmental pollution or resource depletion and the level of per capita income. Does the existence of such EKC relationships suggest that environmental degradation will eventually decline with growth? Finally, recent economic theories and empirical evidence have questioned whether lower income economies that are endowed with abundant natural resources develop more rapidly than economies that are relatively resource poor. Is it possible that resource abundant economies are not reinvesting the rents generated from natural resource exploitation into productive assets, or that resource booms actually divert economic resources from more productive and innovative sectors?     

A Critique of Kirzner's Finders-Keepers Defense of Profit

This paper criticizes Kirzner's use of the finders-keepers ethic to justify entrepreneurial profit. It does so by pursuing two lines of argumentation. First, Kirzner's defense of the justice of entrepreneurial profit is based upon treating the wage-for-labor-time exchange as legitimate. There are good reasons for doubting the justice of the wage-labor exchange. The paper argues that the profits earned by a capitalist firm employing wage-labor can not be considered to be just if we accept the juridical principle of imputation. The juridical principle of imputation asserts that people should be held legally responsible for the actions and results of the actions for which they are factually responsible. If we consider hired human beings always to be responsible agents, as is true in David Ellerman's (1992) rendition of the labor theory of property, Kirzner's defense of entrepreneurial profit generated in a capitalist enterprise is weakened. Second, the paper criticizes Kirzner's thesis that in a market economy everyone has, in principle, an equal opportunity to be an entrepreneur directing a productive enterprise or to be an entrepreneur engaging in speculation. Kirzner reaches this conclusion because he believes that credit markets in a free economy do not systematically discriminate amongst types of borrowers. This conclusion has been called into question by credit rationing models demonstrating that asset-poor individuals can be systematically denied access to loans. The credit rationing literature erodes the underpinnings of Kirzner's application of the finders-keepers ethic to the evaluation of entrepreneurial profit earned through speculation or productive creativity because it implies that all individuals do not in principle have an equal opportunity to be an entrepreneur.     

Exogenous shocks,dynamic correlations,and portfolio risk management for the Asian emerging and other global developed and emerging stock markets

ABSTRACT

This study examines the potential influence of exogenous shocks on time-varying correlations and portfolio strategies between the Asian emerging and other global stock markets including developed and other emerging markets. Using the ARMA-cDCC-FIEGARCH model with and without exogenous shocks, our results highlight the usefulness of including other global stock assets in the traditional portfolio for Asian emerging market investors. However, investors have limited opportunities to diversify their assets during the global financial crisis. Moreover, the shocks from the U.S. stock market have a greater influence on global stock markets compared to that from U.S. economic policy. Fortunately, the model with exogenous shocks improves its accuracy, which plays the same role of controlling structural breaks in the model. More importantly, incorporating exogenous shocks in our model also provides better value-at-risk performance results and hedging effectiveness. These results have several important implications for investors, researchers, and policymakers.     

Ellerman's Labor Theory of Property and the Injustice of Capitalist Exploitation

The traditional Marxian arguments for the injustice of capitalist exploitation generally focus on the ownership patterns of productive property. Exploitation is thus viewed either as the result of illegitimate private ownership or as the result of the unequal distribution of productive assets. This paper seeks to contribute a different perspective on the injustice of exploitation. It argues that exploitation violates principles of appropriative and contractual justice, rather than distributive justice. To make this case, the paper shows how Ellerman's labor theory of property might be combined with Resnick and Wolff's Marxian theory of exploitation and enriched by Nussbaum's interpretation of Aristotelian moral theory to challenge the justice of the wage-for-labor-time exchange, without making reference to the existence or distribution of private property.     

DETERMINANTS OF WOMEN'S MICROENTERPRISE SUCCESS IN AHMEDABAD,INDIA: EMPOWERMENT AND ECONOMICS

Abstract

Microenterprise success is often evaluated solely in terms of economic outcomes. These evaluations do not recognize how opportunities for success may differ across groups and contexts, and disregard the importance of power and control as factors in success. This article investigates the determinants of a two-dimensional concept of microenterprise success for women in Ahmedabad, India, by analyzing data from a 1998 study of home-based garment producers. Growing economic success for these garment producers decreased empowerment outcomes, which suggests that evaluating both economic and empowerment outcomes and their interactions is important to understanding the process of achieving success. Improving the economic outcomes of women's enterprises via better training and access to markets, credit, and capital equipment does not necessarily facilitate women's empowerment. Microenterprise scholars and practitioners must focus on improving women's status within their homes, so they may contribute to and benefit from the decisions made about how to use their resources.     

DEFENDING THE INDEFENSIBLE? CULTURE'S ROLE IN THE PRODUCTIVE/UNPRODUCTIVE DICHOTOMY

Abstract

The purpose of this article is to reveal the justifications for different production boundaries historically. It finds that the boundaries were and are predicated on an untenable productive/unproductive dichotomy that was justified on select and shifting cultural norms. Furthermore, the production boundary informed other categories like labor, capital, income, and wealth. Hence, this article exposes the degree to which economic categories were and are unstable, fragile, contested, and culturally embedded constructs. It then explores feminist-inspired production boundaries based on third-person criterion and finds that these boundaries are likewise culturally contingent. However, these new production boundaries merely do what economics has always attempted to do, which is to theorize production under different cultural circumstances. This article reaffirms the mutually constitutive role of culture and economic categories.     

Using Field Experiments to Change the Template of How We Teach Economics

In this article, the author explains why field experiments can improve what we teach and how we teach economics. Economists no longer operate as passive observers of economic phenomena. Instead, they participate actively in the research process by collecting data from field experiments to investigate the economics of everyday life. This change can be shown to students by presenting them with evidence from field experiments. Field experiments related to factor markets, behavioral economics, and discrimination are presented to explain how this approach works across different economic content. The three questions that are highlighted are the following: (1) Why do women get paid less than men in labor markets? (2) How can we use behavioral economics to motivate teachers? (3) What seven words can end third-degree price discrimination?     

Stock and credit market expansion and economic development in emerging markets: further evidence utilizing cointegration analysis

This paper empirically investigates the relationship between equity and credit market development and economic growth, in a sample of five very important ‘emerging’ markets. In particular, employing a multivariate time-series methodology to test for long-run trends and causality between variables that proxy for stock market development, credit market development and economic development. The results seem to suggest that equity markets have a role to play only in relatively liberalized economies, like Chile and Mexico. In financially repressed economies, like India, the equity market does not affect real sector growth. Furthermore, the banking crises in the 1980s and 1990s in Chile and Mexico resulted in a negative relation between economic growth and the credit market. In South Korea, equity and credit markets both affect economic growth, but not vice versa. In countries where the nature of the stock market has been speculative, like Taiwan, a negative relationship is detected between equity market development and economic development.     

Current Account Imbalances or Too Much Bank Debt as the Main Driver of Gross Capital Inflows? Spain During the Great Financial Crisis

Abstract:

In contrast to the widespread view which posits that large current account deficits and net international debt were at the epicenter of the crisis in the Euro Zone, with diverging competitiveness playing a central role, this article points to the huge volume of bank credit that banks refinanced in international markets.

With a focus on the Spanish economy, we ground our view in an analysis linking gross—not net—capital flows, bank credit, and gross external debt, which provides more adequate information about a country’s international financing patterns and its external exposure.

The main conclusion of this article is that the principle driver of gross external debt in Spain was bank credit, with accumulated current account deficits accounting for less than 50 percent of gross external debt. Other consequences in keeping with this view are: the measures of economic policy required to sort out current account imbalances—particularly wage devaluation to improve competitiveness—may do more harm than good and they do not prevent the problem of too much bank credit from occurring again, and the residence of debt holders in the Euro Zone crisis is relevant for the understanding of the crisis as the result of a power imbalance     

Social networks near and far: The role of bonding and bridging social capital for assets of the rural poor

With formal insurance and credit markets either absent or inaccessible to rural agents in most poor rural economies, social networks play a highly important role in mitigating the risks that agricultural households face. These kinds of informal insurance schemes are presumed to be most effective in the face of idiosyncratic risk. However, social mechanisms also exist in developing countries that may reduce locally correlated risk such as the adverse economic effects of climatic conditions that affect multiple residents in a village. This paper analyzes the role of localized (bonding) and of spatially dispersed (bridging) social capital in mitigating the impact of idiosyncratic and of locally correlated shocks on farm households’ livestock endowments. Using dynamic panel generalized method of moments (GMM) system estimation with seven‐period panel dataset of over 400 households, we find that bonding social capital is able to protect households’ livestock assets against idiosyncratic shocks, but bridging social capital does not play a role in mitigating the impact of correlated shocks. The results hold up to multiple robustness checks. A test of different hypotheses about the nature of these assets’ trajectories rejects the asset poverty trap hypothesis, and instead finds that livestock asset dynamics are characterized by a single stable equilibrium.     

Aging, Asset Markets, and Asset Returns: A View From Europe to Asia

The extent of the demographic changes is dramatic especially in some Asian and European countries. This paper investigates the effect of aging on global asset markets and asset returns, focusing on markets for productive capital, and especially on interactions between European and Asian economic development. Aging has complex effects on the markets for real capital. If elderly people save less than younger people, interest rates will increase. At the same time, however, the younger generation becomes smaller, which reduces the demand for new investment. The equilibrium effect is thus uncertain. Our multicountry computational equilibrium model delivers a subtle picture: there will be some decline in the return from productive capital, but it is relatively small. We find noticeable interaction effects between labor market and pension reforms in Europe on the one hand, and the demographic and economic developments in Asia, especially India and China, on the other hand.     

Incomplete Markets, Transitory Shocks, and Welfare

Although equilibrium allocations in models with incomplete markets are generally not Pareto-efficient, it is often argued that quantitative welfare losses from missing assets are small when time horizons are long and shocks are transitory. In this paper we use a computational analysis to show that even in the simplest infinite horizon model without aggregate uncertainty welfare losses can be substantial. Furthermore we show that in this model welfare losses from incomplete markets do not necessarily disappear when one considers calibrations of the model in which agents become very patient. We argue that when the economic model is calibrated to higher frequency data, the period persistence of negative income shocks must increase as well. In this case the welfare loss of incomplete markets remains constant even as agents' rate of time preference tends to one. Journal of Economic Literature Classification Numbers: D52, D58, D60.     

Austrian economics and the analysis of labor markets

Theory and policy relating to labor markets is dominated by the mainstream labor market model, although a less well-known, socioeconomic version can also be identified. The mainstream model is methodologically flawed and forced, thereby, to relegate any (serious) investigation of labor market institutions and/or social structures to the margins of its analysis. The socioeconomic account is not so much methodologically flawed, as methodologically ambivalent. While this ambivalence does not actually prevent the investigation of institutions and/or social structures, it does promote ambiguity whenever we inquire into the precise nature of the interaction between them and labor markets. Insights from Austrian economics, when used in collaboration with critical realist methodology, can play a part in augmenting the socioeconomic account, generating a totally new approach to the analysis of labor markets.

Wage Discrimination in India's Informal Labor Markets: Exploring the Impact of Caste and Gender

Although there has been considerable interest in wage discrimination in India, available studies have largely dealt with formal rather than informal markets that are of little relevance for the poorest people. Focusing on India's informal labor markets leads to three findings of interest. First, gender wage discrimination is larger in informal than in formal labor markets, resulting in losses that are larger than receipts from one of the country's most important safety‐net programs. Second, economic growth will not make gender discrimination in wage labor markets disappear. Finally, contrary to what is found for gender, the hypothesis of no significant wage discrimination based on caste cannot be rejected.     

Rawls's influence and counter-influence on Sen: Post-welfarism and impartiality

Abstract

This article aims to clarify Sen's paradoxical relationship to Rawls's work in the face of some misconceptions. It is argued, first, that the dialogue between the authors did not start with Sen's 1980 article “Equality of What?”: Rather, this article represents the beginning of a transformation in Sen's position towards Rawls. Second, Sen's approach to justice is not a mere extension of Rawls's theory of justice as fairness: The departure relies less on a different metric of justice than on a divergent conception of impartiality, one which undermines the foundation of Rawls's theory of justice.     

The Financial Stability Board and Switzerland’s WiR-Credit Mechanism

Abstract:

The incentives banks face, such as the Basel Capital Accords, motivate them to favor lending with collateralized assets, rather than lending to Small-Medium Enterprises (SMEs), with associated profound economic consequences for society. Since the 1970s there has not been any direct oversight of whether or not credit contributes to GDP. We need a macroeconomic policy tool that can discriminate among different categories of credit extended to curb speculation in existing assets (non-GDP) and promote new business investment (GDP).

Government money creation and private credit growth are often presumed the only two ways to enhance nominal demand, yet the Swiss Economic Circle (Wirtschaftsring-Genossenschaft or WIR) is a Swiss Bank whose creation of purchasing power for SMEs has counter-cyclically stabilized the Swiss economy for over 80 years. The Financial Stability Board (FSB) should create localized credit-creation architectures utilizing a Swiss-WIR type currency to funnel credit that reflects systemic and macroeconomic risks that individually will never be rational for banks left to themselves.     

Economic policy uncertainty in the US and China and their impact on the global markets

The recent US-China trade conflict has caused substantial uncertainty in the global markets. What is the rationale of this conflict? Is the rising of Chinese economy imposing a realistic threat to the US-led post-war international system? Using economic policy uncertainty in each of these two key global economic players as a measure of policy stance, this paper builds a time series model following Diebold and Yilmaz (2014) to estimate the influence of both the US and China on several key international markets, namely, stock, credit, energy and commodity markets. We find that, although China has become more influential, the US's dominant position still holds in all the markets. The results suggest that concerns regarding China's competition with the US in shaping the global world order are more likely to be driven by political factors rather than economic motives.     

Foreign Direct Investment,Sectoral Effects and Economic Growth in Africa

Abstract

Many small, frontier equity markets in regions such as Africa and Eastern Europe have opened in recent years. As in other larger emerging markets, important issues for investors are the extent of financial integration with exchanges in other countries and, if some reasonable degree of integration is found, whether such markets still provide diversification opportunities. Here, we will examine a frequently used metric of integration by testing for the existence of common trends, or cointegration, in these frontier markets. While common stochastic trends are found, results show that coefficients on cointegrating vectors are at times negative, and reaction to deviations from the long-run trend are often slow, thus indicating that frontier markets are a good source of diversification opportunities despite a degree of integration.     

Raced Markets: An Introduction

ABSTRACT

The central consensus among the scholars and activists who came together for the first Raced Markets Workshop in December 2015 was that ‘race’ may have begun as fiction, an invention of Europeans in the service of colonisation, however, the fiction of race became material over time, reproduced in relation to the manifold raced markets of the global political economy. Since that original workshop, and against a consolidated neoliberal capitalist context, the political rise of fascistic movements has intensified across the globe. Our collective provocation here is that this current conjuncture cannot be explained with reference to the exceptional intrusion of racism, nor the epiphenomenal status of race in relation to political economy. Instead we attend to how race functions in structural and agential ways, integrally reproducing raced markets and social conditions. Our Introduction opens this conversation for New Political Economy readers, positioning neoliberalism and the current conjuncture as the present political economic moment to be understood through a raced market frame of analysis. Our hope is that this special issue will be read as a timely intervention, referencing a long tradition of (often marginalised) thought which attends to race as productive and material, rather than confined to the ideological realm.