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Author Archives: Maria Alejandra Madi

Economic conditions are constantly changing. Today, our generation is confronted with the outcomes of contemporary globalization that is a broader, complex, and multifaceted process characterized by new markets, new actors and new rules. Indeed, globalization has produced many changes in our economy, society, culture, and politics. As a result, deep pressures to conform to new standards of behavior, such as efficiency and competitive performance, have forced individuals and communities not only to rethink values and practices but also to rebalance tradition and change.

In the scenario of globalized markets, individuals and communities face many challenges to be resilient because of the changes in markets, wealth and power. Throughout the last forty years, most governments around the world supported the long-run process of neo-liberal reforms that turned out to be characterized by the financialisation of the capitalist economy. By negatively influencing labor and working conditions, it rendered increasingly difficult to reach (or even approach) the level of full employment. In this setting, changes in corporate ownership, through waves of mergers and acquisitions, created new business models where companies, while highly powerful and concentrated, turned out to be simply bundles of financial assets and liabilities to be traded (Madi, 2017).

Considering the labour markets, employability seems to be shaped by private strategies that aim cost reductions, labour flexibility and efficiency targets. Longer working hours, job destruction, turnover, outsourcing, workforce displacement and loss of rights have also been part of the spectrum of management alternatives aimed at cost reduction. Indeed, the current dynamics of labour markets favoured the vulnerability of workers, mainly young people, and precarious jobs. Therefore, job instability and fragile conditions of social protection turned out to put pressure on the redefinition of survival strategies. As a result workers turned out to redefine their skills, become informal entrepreneurs or migrate, among other examples of the current worldwide changes in their livelihoods.

In this setting, current neoliberal policies of resilience have been increasingly prevalent in current economic thinking and policies. The policy recommendations seek to foster the capacity of individuals and communities to cope with market uncertainties. BRASSET and HOLMES (2016) present a literature review on the neoliberal (and managerial) policies of resilience, characterized as a set of governance techniques aimed to manage uncertainty and achieve the adaptation of individuals and communities to global changes.  Considering the labour markets, for example, the neoliberal policies of resilience have turned out to enhance the workers´ adaptation to the “market discipline” and, therefore, there has been a re-distribution of the responsibilities for social adjustment among the state, business men, investors and workers. As a consequence, the evolution of unemployment results from the “unsuitable” or “inappropriate” behavior of workers to face a changing real-world.

As a matter of fact, in the frame of the neoliberal policies of resilience, human life turns out to be focused on the attempt to face exogenous uncertainties and risks in order to foster adaptive strategies. In short, the sole purpose of resilient individuals and communities seems to be survivability.

Indeed, in the light of current  global social and political challenges.  the spread of the  discourse of resilience calls for a critical thinking on the failures of economic thinking and economic policies.

References

BRASSET, J and HOLMES, C. (2016)  “Building Resilient Finance? Uncertainty, complexity, and resistance”, The British Journal of Politics and International Relations, 18(2): 370–388.

MADI, M.A.C. (2017) Pluralist Readings in Economics: key-concepts and policy-tools for the 21st century, Book Series: Economics: Current and Future Developments.Volume 2.  Bentham Publishers

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Traditional epistemological theories have fostered an endless debate on dichotomies characterized by forms of objectivism, on the one hand, and forms of relativism/skepticism on the other. Currently, among the deep global social and cultural challenges, the crisis in epistemology is characterized by a radical questioning of the whole matrix within which such dichotomies have been drawn.

Taking into account the evolution of Economics as a science, the need for a deep epistemological has already been pointed out by outstanding economists.  Joseph Schumpeter, for example,  rejected the kind of economic thought that mainly favours deductive methods of inquiry – based on mathematical reasoning- because this  habit  generates analytical unrealistic results that are irrelevant to solve the real-world economic problems. Also John Maynard Keynes warned that the understanding of the economic phenomena demands not only purely deductive reasoning, but also other methods of inquiry along with the  study of other fields of knowledge- such as History and Philosophy. Today, Schumpeter’s and Keynes’s criticism could be certainly addressed to those economists whose beliefs ultimately privilege the adoption of a nominalist bias because the dialogue between the economic theories and the economic reality turns out to be abandoned not only in academic research but also in the policy making process.

Considering this background, the shift to Complexity in economic thinking can contribute to substantive epistemological insights in order both to face the contemporary theoretical and methodological challenges and to reject the Cartesian theorization of knowledge under an anthropocentric foundational model of rationality, complete order and truth.  Descartes reinforced the analytical-synthetic process of reasoning. Following the deductive method of pure inquiry, human knowledge grows throughout a rigorous chain of ideas. As a consequence, new thoughts arise while the human subject applies deductive reasoning so as to create a chain of ideas that links the most simple to the most complex ones. In this attempt, true knowledge can be obtained. The Cartesian method represents an attempt to extend the mathematical method of inquiry to all of human knowledge in the form of the mathesis universalis.  Indeed, this extension is at the center of the a priori foundations of scientific knowledge in Neoclassical Economics.

Edward Fullbrook, in his  book Narrative Fixation in Economics, also highlights that the Cartesian view of human reality has deeply shaped the way Neoclassical Economics theorizes about the economic and social existence (2016, p. 45). Indeed, while emphasizing the relevance of the pure thought of a disembedded human subject, Neoclassical Economics has reinforced the relevance of the Cartesian method of inquiry that moved the so called scientific (true) knowledge out of the general flux of experience.

Indeed, the dialogue between the economic theories and the economic reality is complex and a dialogical approach should be considered in any attempt to build realistic economic theories, as Keynes warned.

The changing environment of real-world markets through time -that is irreversible- refers to a certain degree of ontological indeterminacy that should be considered in realistic economic theories.  In thruth, a shift to Complexity in economic thinking can favor the adoption of a realist standpoint that relates to

  • A non-anthropocentric approach
  • A social ontology that is rooted in actual experience
  • A new approach to rationality
  • An evolutionary approach based on the coexistence of laws and change
  • Ontological indeterminism
  • Epistemological fallibilism
  • An endogenous approach to norms and ethics

Considering the relevance of this topic in economics education, students should be aware of the consequences of different epistemological approaches. Complexity in Economics is not  just a new label, but represents a  way of rethinking economics as a science.  

 

 

In the new millennium, the proliferation of financial assets, with  unstable economic growth, has given way to widespread to precarious jobs, income gaps and weaker welfare programs. The same policies that have obliterated social services and kept labour cheap have supported the expansion of short-termism and new global business models in the context of deregulated capitalism.

Besides, the onset of the 21st century represents a new political age  overwhelmed by the violation of democratic ideals of political equality and social peace. Indeed,  democracy has been allowing for election to office but not to power (Madi, 2015). And, as a consequence, policy makers might give priority to their sponsors instead of the needs of citizens – decent work and income equality.

In truth, the current trends in  global capital accumulation and production have shaped a scenario where unemployment, job instability and fragile conditions of social protection increased (Stiglitz, 2011). First, labour-saving technologies have reduced the demand for many middle-class, blue-collar jobs. Second, globalization has created a global marketplace, confronting expensive unskilled workers with cheap unskilled workers overseas and favouring outsourcing practices. Third, social changes have also played a role in the labor market changes, such as the decline of unions. Four, political decisions are influenced by the top 1% who favor policies that increase income inequality.

All these trends do reveal issues of current power, politics and economics in a social context where democratic institutions are being threatened.

Taking into account the overall  economic, social and political evidence in Western countries, Robert Kuttner, in his recent book Can Democracy Survive Global Capitalism?  (2018, WW Norton), highlights that since the 1970s the globalization of capital has affected the very foundation of a healthy democracy. While analysing the consequences of this trend, he warns:

“If democracy cannot harness capitalism, it runs the risk of subverting itself and giving way to neo-fascist regimes that will pretend to manage the market but more often ally themselves with corporations and substitute ultra-nationalist symbols and scapegoats for reform.”

Indeed, this book calls for a deep examination of current power, politics and economics in a social context where democratic institutions are being threatened:

Do current trends of social inequality and economic instability stimulate disillusioned voters to support populism? Is the alliance of global finance and far-right parties inevitable?  Is it possible to build new conventions to make capitalism serve democracy?

Answering these questions  not only involves critical thinking on the failures of economic policies in the light of current  political challenges  but also  calls for a reflection on the alternatives to the reversal of the decline of democracy in the West.

 

 

References

Robert Kuttner, Can Democracy Survive Global Capitalism?,   WW Norton, 2018.

Lima, G. & Madi, M.A. , Capital and Justice, WEA Books, 2016.

Madi, M. A.,  “2016: Promises and Problems”, WEA Pedagogy Blog, December 29, 2015
https://weapedagogy.wordpress.com/2015/12/29/2016-promises-and-problems

Stiglitz, J.,  “Of the 1%, by the 1%, for the 1%”. Vanity Fair Magazine, April 30, 2011.
http://www.vanityfair.com/news/2011/05/top-one-percent-201105.

 

Alfred Marshall wrote in his Principles of Economics that “economic conditions are constantly changing, and each generation looks at its own problems in its own way” (1920, p. v.). Our generation is confronted with many problems including climate change, environmental damage, disruptive innovations, inequality, indebtedness, youth unemployment, besides a health care crisis. At the center of these problems, however, is the discipline of economics itself and economics education.

 

The mathematization of economics was done in the name of science, but in doing so, the mainstream of the academic community has renounced its claim to studying the actual economy. In this respect, it is worth remembering  Keynes’ critique of  the behaviour of pofessional economists at his time since his words are more valuable  than ever,

For professional economists…were apparently unmoved by the lack of correspondence between the results of their theory and the facts of observation;– a discrepancy which the ordinary man has not failed to observe, with the result of his growing unwillingness to accord to economists that measure of respect which he gives to other…scientists whose theoretical results are confirmed by observation when they are applied to the facts (Keynes, 1936, The General Theory of Employment)

Since the French students’ petition in 2001, several books have been written on how to teach pluralist economics, including John Groenewegen’s Teaching Pluralism in Economics (2007); Edward Fullbrook’s Pluralist Economics (2009); Jack Reardon’s Handbook of Pluralist Economics Education (2009),  and the WEA Conference book The economics curriculum: towards a radical reformulation (2014), among other relevant contributions.  To spread the discussion on how to implement pluralism in the classroom,  the International Journal of Pluralism and Economics Education  and the WEA Pedagogy Blog have been launched. And several global organizations- the Association of Heterodox Economics and the International Confederation of Associations for Pluralism in Economics, for example, have emphasized the need for pluralism.

 

Considering this background, the publication of  Introducing a New Economics: Pluralist, Sustainable & Progressive (Pluto Press, 2017) is welcome.

The authors  – Jack Reardon, Maria Alejandra Madi and Molly S. Catto – demand that the real world should be brought back into the classroom in order to most effectively confront current crises. Indeed, with a firm commitment to theoretical, methodological, and disciplinary pluralism, the authors challenge the institutional education hegemony head on. They believe that economics must play a central role in not only conceptualizing the problems of our generation but also in articulating solutions.

The textbook  Introducing a New Economics calls for a rejection of  the narrow curricula and the lack of intellectual diversity that characterize mainstream economics. The authors believe that economics must be re-conceptualized to focus on three elements:

  • One, economics must comport with sustainability. As they explain in the text, many definitions of sustainability exist, nevertheless, a central element uniting the disparate definitions is an ethical concern for the future.
  • Second, economics must become pluralist, which along with sustainability is another multi-faceted and complex word. Pluralism -understood as respect for different and opposing views- is necessary since there are myriad ways of conceptualizing problems and no one view has a monopoly of understanding.
  • Third, economics must concern itself with justice. Our future is uncertain which requires an economics education that is open-minded and help students to conceptualize and design a more equitable economic system that can provision for all.

 

Visit Pluto Press webiste https://www.plutobooks.com/9780745334882/introducing-a-new-economics/

Ten years ago, the collapse of the investment bank Bear Stearns marked a prelude of the 2008 global financial crisis. Founded in 1923, it became one of the world’s largest investment banks and its stock market capitalization was $20 billion in 2007. Extremely active in the hedge fund business, the funds High-Grade Structured-Credit Strategies Fund and Enhanced Leverage Fund owned $20 billion in collateralized debt obligations as of 2006. These derivatives, based on mortgage-backed securities, started losing value in September 2006 since housing prices began to fall.

In January 2008, Moody’s downgraded Bear Stearns’ mortgage-backed securities and this event put pressure on the bank’s  liquidity management. In March 2008, the Federal Reserve held its first emergency weekend meeting in 30 years and finally lent up to $30 billion to Chase to purchase Bear Stearns in order to avoid that the bankruptcy of other over-leveraged investment banks, such as Merrill Lynch and Lehman Brothers (Amadeo, 2018).

After Septmeber 2008, the financial crisis acquired a manifold character involving the socio-economic structures at worldwide level. Although the crisis was triggered in the financial sector, it marked the culmination of a long-term trend of financialisation of the economic system (Herman and Madi, 2018).

Throughout the last forty years, most governments around the world supported the long-run process of neo-liberal reforms that turned out to be characterised by the financialisation of the capitalist economy. In this historical scenario, monopoly-finance capital became increasingly dependent on bubbles that, both in credit and capital markets, proved to be globally the sources of endogenous financial fragility. This process was reinforced, in a vicious circle, by a distribution of income, wealth and power. By negatively influencing labor and working conditions, it rendered increasingly difficult for effective demand to reach (or even approach) the level of full employment. In response to this situation, banking and credit policies also supported by governments and supranational institutions were inducing consumers to expand their spending.

While public spending on social and infrastructural objectives was severely restricted, it expanded for sustaining the income and the demand of powerful groups. In this situation, corporate decision making was increasingly subordinated to speculative financial commitments. A financial conception of investment gained ground in the context where financial innovations aimed to achieve short-term profits with lower capital requirements. Managers and owners of firms privileged financial gains often based on speculative shifts of shareholder values. Changes in corporate ownership, through waves of mergers and acquisitions, created new business models where companies, while highly powerful and concentrated, turned out to be simply bundles of financial assets and liabilities to be traded. Hence, current corporate governance came to have the privilege of mobility, liquidity and short-term profits based on high levels of debt.

In the new millenium, a trend of high expansion of financial assets, while economic growth remains limited and sporadic, gave way to widespread unemployment, income gaps and less welfare. The same policies that obliterated social services and kept labor cheap favoured global enterprises and financial deepening. Besides, the onset of the new millennium represents a new age of democracy where democracy allows for election to office but not to power. These questions reflect on issues of current power, politics and economics in a social context where democratic institutions are being threatened (Madi, 2015).

Indeed, in contemporary capitalist societies, the global financial architecture favoured the expansion of financial assets, capital mobility and short-term investment decisions – increasingly subordinated to rules of portfolio risk management. In this scenario, changes in productive organisation were based on competitiveness and corporate governance criteria. Therefore, job instability and fragile conditions of social protection turned out to put pressure on the redefinition of survival strategies. As a result of the new trends in capital accumulation and production, workers turned out to redefine their skills, become informal entrepreneurs or migrate, among other examples of the current worldwide challenges to citizens. Considering this background, governments faced increasing challenges to support an ethically defensible approach to working conditions. While money is an end in itself social behaviours have mainly turned out to be guided by the profit motive. Consequently, social cohesion was reduced since groups of specific interests turned out to spread their actions and expectations in ways that are desirable to the interest group. Indeed, the outstanding conflicts between solidarity and particular interests revealed growing tensions between ethical values and individual principles in capitalist societies.

This situation poses a major challenge to economic theory and policy action. In fact, after ten years from the 2008, it is evident by now that not much changed in the “mainstream way” of addressing the economic crisis. The prevalent tendency has been to conceive the crisis as caused by an excess of imprudent speculation, with little questioning of the economic and institutional “fundaments” that paved the way to that course of events. Consequently, the policies addressing the crisis rarely went beyond short-term proposals. Indeed, the policy measures have been far from still solving the structural aspects of the crisis.

In the next decade: will a new reality of disruptive innovations in business and markets create higher levels of inequality within and among nations? Will massive investments in green technology lead the world toward a cleaner future? How can we assess the model of governance and development of China?

In short, how will we look back on 2018 a decade from now?

 

References

Amadeo, K. (2018) Bearn Stearns, Its Collapse, and Bailout. How a Bank That Survived the Depression Started the Great Recession, March 14. https://www.thebalance.com/bearn-stearns-collapse-and-bailout-3305613

Arestis, P. and Sawyer, M. (eds.) (2010) 21st Century Keynesian Economics. Annual Edition of International Papers in Political Economy. Houndmills, Basingstoke: Palgrave Macmillan.

Davidson, P. (2009) The Keynes Solution: The Path to Global Economic Prosperity. Basingstoke: Palgrave Macmillan.

Foster, W.T. and Catchings, W. (1926) The Dilemma of Thrift. Pollak Foundation for Economic Research.

Galbraith, J.K. (1958) The Affluent Society. New York: Mariner Books, second edition 1998.

Hansen, Alvin H. (1939), “Economic Progress and Declining Population Growth”, American Economic Review, 29(1): 1-15.

Harcourt, G. and Kriesler, P. (eds.) (2013) The Oxford Handbook of Post Keynesian Economics. Oxford: Oxford University Press.

Hermann, A. (2014a) “The Essays in Persuasion of John Maynard Keynes and Their Relevance for the Economic Problems of Today”. In Hölscher, J. and Klaes, M. (eds.) Keynes’s Economic Consequences of the Peace: A Reappraisal. London: Pickering and Chatto.

Hermann, A. (2015) The Systemic Nature of the Economic Crisis: The Perspectives of Heterodox Economics and Psychoanalysis. London and New York: Routledge.

Elinor Ostrom was born in the year of 1933 in California, United States. Almost tem years after getting her doctorate in Political Science (University of California), she became professor at the Indiana University Department of Political Science in 1974. Over her long academic career, her activities included extensive field experiences in underdeveloped countries and active participation in many professional associations, such as the American Political Science Association. She was awarded 12 honorary doctorates from universities around the world and three years before her death Elinor Ostrom and Oliver E. Williamson won the 2009 Nobel Prize in Economic Sciences. She was the only woman ever to win the Nobel  Prize in Economics.

Her approach to social and ecological systems highlights the complexity of natural and human systems. In her famous book, Governing the Commons: The Evolution of Institutions for Collective Action (1990), Elinor Ostrom focused on the capacity of people around the globe to create long-run resilient arrangements for protecting environmental resources. In particular, she studied how groups of people manage and preserve common-pool resources such as forests and water supplies. However, collective actions have not inevitably emerged in all groups of people. Ostrom defined common or common-pool resources as public goods with finite benefits. Therefore, common-pool resources can be potentially used beyond the limits of sustainability because of the lack of exclusion of users. This creates an incentive for increasing the rate of use of this resource above its physical or biological renewal. Besides, her research pointed out that common property is a kind of institutional arrangement that regulates ownership and responsibility.

Considering this framework, Ostrom developed a theoretical approach to the management of common-pool resources at local and global levels where polycentric systems of governance refer to build collective-actions. In this respect, she considered there is not one ideal governance regime, but a variety of regimes of governance that might include: rules of appropriation of  resources, rules of maintenance of resources, rules of monitoring and enforcement of the appropriation and obligation activities, rules for of conflict resolution,  besides the evaluation of the performance of the resource system and the strategies of participants to change previous rules. Indeed, the users of common-pool resource can work together to enhance the  sustainable governance of  their commons by collective action. Indeed, under her view, successful commons’ self-governance institutional arrangements depend on: the coherence between the resource environment and its self-government structure, the enforcement of rules through effective monitoring and sanctions, and the adoption of low-cost conflict resolution mechanisms.

According to Ostrom, adaptive governance is related to changing rules and enforcement mechanisms over time since institutional arrangements are able to cope with human and natural complex systems. As a result, citizens, governments, businessmen, and resource users  might deal with collective-action problems in diferente ways at diverse scales. When considering the relations between urban public policies and the commons, her latest works highlighted the challenges to collective-action in metropolitan areas where  citizens can less effectively articulate preferences, define problems and choice packages of urban public goods and services. Under her understading, the competition for contracts in urban goods and services might foster technological innovations and social co-production to find out new ways to face the social and environmental needs.

Indeed, Elinor Ostrom´s contribution adds to our understanding how collective actions and polycentric arrangements of governance  can influence economic outcomes, human behaviours  and institutions towards growing resilience and sustainability. In this attempt, she crossed traditional boundaries between political science and economics.

 

References.

Madi, M. A. ( 2017) Puralist Readings in Economics: key-concepts and policy tools for the 21st century. Bentham Publishers.

The WEA Online Conferences, designed by Edward Fullbrook and Grazia Ietto-Gillies, makes full use of the digital technologies in the pursuit of the commitments included in the World Economics Association Manifesto: plurality, reality and relevance, diversity, openness and ethical conduct.

The current WEA Conference Monetary Policy after the Global Crisis marks the tenth anniversary of the greatest recession after 1929-33. The aims of this conference include discussing key theoretical insights in order:

  • To provide a framework for improving monetary policy practices.
  • To review and advance knowledge on the recent financial crisis regarding the main challenges and prospects of central banking.
  • To particularly survey and discuss the use of Divisia monetary aggregates and their potential role to address central bank challenges economic vulnerabilities.

Therefore, our main goal is to establish a global forum for confronting of the opposite views about

  • the causes and consequences of the Great Crisis.
  • the current challenges to central banking.
  • the role of proper money aggregation in preventing of the future economic slowdowns.

In sum, the conference aims to survey and discuss the recent theoretical advances in monetary tools, goals and policies, along with the latest empirical research findings.  Indeed, this Conference will be one of the first which, in an extensive manner, tackles the problem of monetary aggregation after the Great crisis.

The WEA Online Conferences seek to also engage readers and commentators all around the world considering: (a) the variety of theoretical perspectives; (b) the range of human activities and issues which fall within the broad domain of economics; and (c) the study of the world’s diverse economies; (d) the increasing relevance of the adoption and use of online discussion forums.

Students, academics and professionals who are interested in  policy challenges can read the Key-note papers of Daniel L. Thornton, Rakesh Bissoondeeal and Jane Binner in addition to other interesting contributions organized in the following Conference Sessions:

  • Divisia Monetary Aggregates and Contemporary Monetary Challenges
  • Divisia Monetary Aggregates: Prospects and Future Research Potential
  • Finance and Growth: Changes and Transformation

To visit the Discussion Forum works, click  http://monetarypolicy2018.weaconferences.net/papers/. 

Please first  register  to this OPEN ACCESS Conference in order to get your e-certificate!

http://monetarypolicy2018.weaconferences.net/register/

 The Discussion Forum closes on  March 15th. During the following weeks, we cordially invite you to visit the conference’s website, where you can read and download the conference papers, leave comments, and engage in discussion.