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Complexity and economic laws

from Maria Alejandra Madi

In the 1960s, Hayek argued that: “in the field of complex phenomena, the term” law “, as well as the concepts of cause and effect, are not applicable”. Regarding “The Theory of Complex Phenomena”, Hayek warned that in the case of complex phenomena, the scientist must give priority to the development of theoretical assumptions, instead of privileging empirical tests. The economist perceives the market system as a complex system in which the coordination process of decentralized individual plans takes place.

According to his approach, cognition and evolution are social phenomena intertwined in a historical process. read more

Next WEA webinar: TRADE WARS AFTER CORONAVIRUS

TRADE WARS AFTER CORONAVIRUS
Economic, political and theoretical implications
A webinar from the WEA

Friday May 28, 2021.   5pm-7pm,  London Time.   

LINK:  meet.google.com/nxr-ucuj-agf    

1. WELCOME. Maria Alejandra Madi, Chair WEA Conference Programme

2. PRESENTATIONS

America’s Trade Deficits: Blame U.S. Policies – Starting with Tax Laws
Kenneth E. Austin
University of Maryland

The interplays of US, China and their intellectual monopolies

Cecilia Rikap and Ariel Slipak
Cecilia Rikap: Consejo Nacional de Investigaciones Científicas y Técnicas (CONICET) and CEPED, IRD/Université de Pari; Ariel Slipak: Universidad de Buenos Aires and Universidad Nacional de Moreno, Argentina.

The War on Trade and its Theoretical Implications Oscar Ugarteche
Leader of the WEA Conference TRADE WARS AFTER CORONAVIRUS
Instituto de Investigaciones Económicas UNAM  

The papers can be accessed at https://tradewars2020.weaconferences.net/papers/    

3. Q&A  

4. FINAL CONSIDERATIONS

Vaccines and underdevelopment as dependency

from Maria Alejandra Madi

The current vaccination scenario calls for a reflection on the conceptualization of underdevelopment as a process of dependency. Nowadays, to understand the big picture of the production and trade of vaccines, for instance, it is necessary to consider the analysis of the dynamics of the world-wide capitalist system.

Indeed, the access to vaccines has put in question the modernization process in Latin America. Regarding the global South, the Brazilian Celso Furtado was undoubtedly an intellectual who aimed to achieve economic transformation social change. Strong influence on him had the interpretation of the Argentinian Raúl Prebish, particularly the center-periphery approach to the understanding of the Latin American underdevelopment based on a deep critique to the competitive advantages approach to growth in the international economy. As a matter of fact, Furtados´s main contribution turned out to be known as the “structural and historical approach” to underdevelopment.

In his view, throughout the 20th century, the modernization presented further land, wealth and income concentration in Latin America.  Indeed, it was a false modernization process as it did benefit only a minority and reinforced the structural heterogeneityread more

Wicked problems in economic policy

from Maria Alejandra Madi

While the study of wicked problems is not new, there is a need to develop a broader understanding of its scope in policies under the paradigm of complexity. The origin of the term “wicked Problem” goes back to Rittel and Webber’s (1973) questioning of the validity of technical-scientific approaches in social policy and urban planning. In the face of complexity and uncertainty, these problems require iterative approaches, with the consideration of multiple causes and stakeholders.

More than four decades later, however, there are strong arguments for the development of new topics generated, such as problem framing, policy design, policy capacity and the contexts of policy implementation. According to the OECD, wicked problems are dynamic and persistent in nature. They feature multiple interactions with other social issues and involving many actors. For example, climate change, migration, poverty, unemployment, social exclusion and development are all wicked problems.

According to the report Tackling Wicked Problems (Australian Public Service Commission, 2007), policy makers should consider: read more

Economics education in a post-pandemic world

from Maria Alejandra Madi

Ten years after the 2008 global financial crisis, the commodification of health, the spread of fiscal austerity programmes, deep social marginalization and climate change challenges revealed that health issues are “vital matters” that economists should address. Moreover, the outcomes of the coronavirus crisis call for a reflection on the contemporary threatens related to individual freedom, control on individuals and insecurity in social interrelations.

Indeed, it has long seemed to me the need to call for reflection and action upon what is ethical in our behavior in the world and the role of ethics in economics education.

In a recent piece titled “How Should Colleges Prepare for a Post-Pandemic World”, published in The Chronicle of Higher Education (https://www.chronicle.com/article/How-Should-Colleges-Prepare/248507), Brian Rosemberg wrote: If one were to invent a crisis uniquely and diabolically designed to undermine the foundations of traditional colleges and universities, it might look very much like the current global pandemic read more

Structural flaws and COVID-19

from Maria Alejandra Madi

The fundamental structural flaws in the global economy have not been addressed after the 2008 global crisis.  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 concentration of income, wealth and power. By negatively influencing labour and working conditions, it became increasingly difficult for effective demand to reach the level of full employment. In response to this situation, credit policies fostered consumers to expand their spending through increasing debt. While public spending on social and infrastructural objectives was severely restricted, it expanded in other areas, sustaining the income and the demand of powerful groups.   Considering this background, in the last two years, serious concern arises that a new global economic crisis of unprecedented magnitude could still happen.

At the beginning of 2020, the outbreak of COVID 19 in Europe and Latin America put in question the dynamics of neoliberal capitalism and its global governance. Moreover, the global health crisis will certainly have negative implications for economic growth and democratic institutions since its evolution is deeply affecting social cohesion and political stability. When taking into account the trade-off between the so called efficient strategies for re-opening the economies and the recommendations on social distancing, the former ones might be only possible in societies that tolerate more inequalities. read more

WEA online conference: Trade Wars after Coronavirus

from Maria Alejandra Madi

The  United States declared an economic war on China in early 2018. Economic warfare is a unilateral action that questions the existence of multilateralism and places the question of what regime we are about to enter after the weakening of the existing multilateral trade agencies. US trade policy opens the door for new relationships between emerging market economies and international financial institutions on issues of liberalisation but mostly it ends a period started in the 1980’s of unregulated international trade and opens a new one. The solution to the structural economic problems of the US, similar to those of Britain in the 1960’s is not tariffs and trade restrictions. The trade war is above all a war that will be won by one side at some point.

The recent outbreak of coronavirus has just added more uncertainties to the global trade war scenario

The next WEA on line conference Trade Wars after Coronavirus  calls for a deep reflection to matters related that includes, among other questions:

  • Will free trade be still strongly promoted through international financial institutions (IFI) policies?
  • Can any multilateral agency now take retaliation against any country that goes against the spirit of existing free trade agreements?
  • If the profit squeeze in the US comes at the same time as US technological leadership is at stake, how much at stake is it?
  • Can China actually replace the US as the economic leader in the world? If not, what does prevent it? If so, what is required? How can the US prevent this from happening?
  • Does the winner of the trade war keep the hegemony as its prize? Or, are we in a new situation of shared/partial hegemonies?
  • What are the lessons learnt from the US trade war against Japan?
  • What is the difference between this trade war and the Japanese one of the 1980’s?
  • What are the consequences of the trade wars after coronavirus to the world economy and the future of neoliberalism?
  • No more globalisation as we know it?

WEA on line Conference website

Conference Leader

Oscar Ugarteche, Instituto de Investigaciones Económicas, UNAM

Contact

Oscar   Ugarteche      ougarteche@gmail.com

and Maria Alejandra Madi      maria.madi2014@gmail.com

Key dates

Closing date for submissions

28th June, 2020

Discussion Forum opens

5th October, 2020

Discussion Forum closes

5th December, 2020

A policy-makers toolkit for state-backed digital currencies: do we need this?

from Maria Alejandra Madi

Since the 2008 global financial crisis, the financial regulation scenario faces new drivers and challenges.  Bank transactions by internet and mobile banking have sharply increased. In this digital environment, new technologies – such as advanced analytics, big data, in addition to the use of robotics, artificial intelligence, new forms of encryption and biometrics – have been enabling changes in the provision of financial products and services. The current wave of financial innovations is being increasingly oriented to more friendly digital channels through apps in the context of mobile banking strategies that privilege the development of open banking and further interactions with social media

Indeed, the increasing digitalization of financial transactions is also related to changes in the banks’ competitive environment, where the intense growth of the start-ups called fintechs, especially since 2010, has revealed a new articulation between finance and technology. Such fintechs are companies organized as digital platforms with business models focused on costumer relationship in the areas of payment systems, insurance, financial consultancy and management, besides virtual coins. Among other initiatives, we can highlight the crypto fintech products, such as a consumer app for the Bakkt, the Bitcoin futures contracts exchange run by the Intercontinental Exchange.  read more

What works? Policy design without theory is useless

September 23, 2019 4 comments

from Maria Alejandra Madi

Against a rationalist top down approach to policy making, the evidence-informed policy and practice has rapidly evolved in the last two decades.

In this line of research, a new book What Works Now? Evidence-informed Policy and Practice has been edited by Annette Boaz, Huw Davies, Alec Fraser and Sandra Nutley.  It offers not only a synthesis of the role of evidence in policy making but also an analysis of its use in recent economic models and practices in the UK, Australia, New Zealand, Scandinavia, Canada and the United States. In addition to the diversity of policy and practice settings where evidence is sought and gets applied, the book considers policy examples related to healthcare, social care, criminal justice, education, environment and international development.. At the core of the argument regarding the actual relevance of ‘know-about’, ‘know-what works’, ‘know-how’, ‘know-who’ and ‘know-why’ is the belief that evidence matters.

Considering this policy scenario, the relevant question at stake is  what are the implications of the new policy design practices that mainly rely on the belief that evidence matters?  read more . . .

GOING DIGITAL. The next WEA Conference

from Maria Alejandra Madi                  

GOING DIGITAL conference site

The advent of digital economy creates new challenges for businesses, workers, and policymakers. Moreover, business prospects for artificial intelligence and machine learning are evolving quickly. These technologies have transforming implications for all industries, businesses of all sizes, and societies. The digitalization of economic activities calls for a deep reflection on the forces that will shape the future of the global economy.

The objective of this conference, led by Prof. Maria Alejandra Madi and Dr. Malgorzata Dereniowska, is to discuss recent contributions to the understanding of digital economy and its consequences for business trends and labour challenges. The conference also focuses on bridging the gap between different economic theoretical approaches and the practical applications of artificial intelligence and machine learning.

The Conference calls for a focused reflection on the benefits and risks of the high-tech revolution is an important element of shaping sustainable business and just labor. Related topics include law, ethics, safety, and governance.

Topics include (but are not limited to): read more

On NAIRU and NAIBER

from Maria Alejandra Madi

Throughout the last decades, the nominal interest rate became the dominant monetary policy instrument. Looking backward, the early 1980s proved to be a transition period in terms of monetary policy. After the monetarist experiences of Thatcher and Reagan, there was a pragmatic shift from the supply of the monetary base to the interest rate as monetary policy instrument. The recognition that the control of the monetary base could not only impose extreme volatility to the interest rate but also deeply affect the whole economy challenged, in fact, the previously stable empirical relationship between money supply, demand for money, prices, and income supported by Milton Friedman.

At the theoretical level, the so-called “New Consensus in Macroeconomics” favoured the short-term interest rate as the policy instrument in conjunction with inflation targeting. The new-Keynesian so-called “Taylor rule” has increasingly turned out to be adopted by central banks to manage the interest rate as the policy instrument. In this policy approach, the central bank, mainly through open market operations, sets the short-term interest rate in order to adjust its level in response to changes in inflation and output. In a framework of capital account openness, however, the autonomy of monetary policy, aimed to stabilize prices, subordinates the fiscal budget.

After the global financial crisis, academic economists and policy makers have actively participated in the debate on monetary policy.  read more . . .

The neoliberal governance of the self: a clarification

from Maria Alejandra Madi

My last post on Behavioural Economics arose some interesting questions about the rationality of the neoliberal governance of the self and its relation to the current research about psychology and cognitive theories. (https://rwer.wordpress.com/2019/03/20/beyond-behavioral-economics-the-self-governance-of-nudging/#comment-150149)

The neoliberal governance of self-care (or neoliberal governance of the self) relies on Dual Process Cognitive Theories (DPTs), especially the one elaborated by Daniel Kahneman. According to him, the distinction between Econs and Humans rejects the concept of homo oeconomicus of the neoclassical theory.  The human brain functions in ways that refer to a distinction between two kinds of thinking: automatic  and reflective (rational), and Kahneman called these ways of thinking System 1 and System 2, respectively. His Dual Process Cognitive Theory tries to explain why human beings actually systematically deviate from rational decisions.   read more

Beyond behavioral economics: the self-governance of nudging

from Maria Alejandra Madi

Looking back, after the Second World War, new theoretical and applied work in economics fostered empirical techniques that included structural estimation, the development of input-output methods and linear programming. Among the theoretical advances, the Keynesian revolution, the mathematical modeling of the business cycle, game theory, dynamic modeling, new models of consumer behavior and general equilibrium analysis can be highlighted.

What is significant about these changes is that, as theoretical and empirical work became more formal and mathematical, the conceptions of economic theory and of its relationship to various types of applied work changed. “Measurement without theory”, as Rutledge Vining explained, means that empirical work was needed in order to discover the appropriate theory. The ensuing debates were dominated by this view, that also included Milton Friedman’s contribution that turned out to be one of the most widely read methodological essays in economics.

By the 1970s, mainstream economics was centered on mathematical modeling of maximizing agents and econometric models were widely spread in applied work. Consequenlty, economics was becoming more methodologically homogeneous despite the protests from heterodox economists. In this setting, new theories for specific fields in economics were developed. As Backhouse and Cherrier claimed, there has been a process of unification and fragmentation in economics.  read more

Karl Polanyi and social justice

February 22, 2019 35 comments

from Maria Alejandra Madi

In the introductory note to the book Trade and Market, Polanyi invites the readers to re-examine the notion of the “economy” since many people think that the only way of organizing the livelihoods of men is the market economy. In his own words:

‘What is to be done, though, when it appears that some economies have operated on altogether different principles, showing a widespread use of money, and far-flung trading activities, yet no evidence of markets or gain made on buying or selling? It is then that we must re-examine our notions of the economy.’ (Polanyi et al, 1957: xvii).

In order to develop an alternative notion of the “economy”, Polanyi proposed a new theoretical approach to explain the place and role of human beings in social and economic systems. He addressed that men value those material goods that serve the end to promote protection and social standing. As a result, in his approach, social matters  turn out to be anthropological ones and the role of history is highly relevant. As  Polanyi wrote:

“But a purposeful use of the past may help us to meet our present over concern with economic matters and to achieve a level of human integration, that comprises the economy, without being absorbed in it” (Polanyi et al., 1957: xviii). 

Indeed, while considering different historical references, Polanyi provided a guide to examine the non-market economies and claimed that empirical observations reveal economic life in archaic and primitive economies to be entirely different from that assumed by formal economic analysis (Polanyi et al, 1975: 243-44). Against the methodological approach to economics based on assumptions, premisses and deductive reasoning, Polanyi proposed the method of economic anthropology that depends upon principles of economic behavior that are induced from empirical observation.  read more

Pension funds and the search for alternative assets

January 11, 2019 6 comments

from Maria Alejandra Madi

A decade after the 2008 global crisis, some key trends can be highlighted: a) There has been a shift to defined contribution (DC) pension plans, b) The increasing role of alternative assets, such as private equity, among pension assets.

Many governments in OCDE countries have been committed to structural reforms in labour markets and pension plans. As a result, the current era of austerity has deep impacts on the diversification of types of pension plans. According to a 2018 OCDE  report, in a mandatory pension plan, a) employers setup a plan for their employees, b) employees contribute to a state funded pension scheme or c) employees contribute a private pension fund of their choice.  In a quasi-mandatory, employers need to setup a pension plan as a result of labour agreements. In some OCDE countries, there are automatic enrolment programs at the national level where employees have the option to opt out of the plan under certain conditions.

In this setting, a recent PwC report warned that government-incentivized or government-mandated retirement plans turns out to privilege the use of defined contribution (DC) pension plans -such as the United States.  read more

Climate change: threats and challenges

from Maria Alejandra Madi

Global warming and global CO2 emissions are interconnected. In 2018, heatwaves were observed in Europe, Asia, North America and northern Africa, while the extent of Arctic sea ice has been continuously dropping. According to the World Meteorological Organization (WMO), the last four years (2015-2018) have been the warmest years on record. In particular, between January and October 2018, global average temperature increased 0.98 degrees Celsius above the levels of 1850-1900. If this trend continues, temperatures may rise by 3-5 degrees Celsius by 2100.

Global CO2 emissions have also been increasing in the last years. China and the US together account for more than 40% of the global total CO2 emissions, according to 2017 data from the European Commission’s Joint Research Centre and the PBL Netherlands Environmental Assessment Agency. After the withdrawal from the Paris climate change agreement, the US’s environmental policy shifted to a pro-fossil fuels agenda on behalf of the need to overcome the disadvantage of American businesses and workers. Trump called climate change a “very, very expensive form of tax”. Fossil fuel lobbies in Saudi Arabia, Russia and Canada are powerful forces against government climate policies.  read more

The neoliberal policies of resilience

from  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).   Read more…

Complexity in economics

September 6, 2018 20 comments

from Maria Alejandra Madi

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.  read more

On global capitalism and the survival of democracy

from Maria Alejandra Madi

In the new millennium, the proliferation of financial assets, with  unstable economic growth, has given way to widespread 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.    read more

Dialogos: economics education and pedagogy. An interview with Peter Söderbaum

from Maria Alejandra Madi

Malgorzata Dereniowska: Welcome to “Dialogos: Economics Education and Pedagogy,” Peter! In this interview we will focus on the questions of institutional change in economics education system, economic pedagogy and social responsibility of universities.

Could you tell me something about your background and your professional experience as a teacher of economics?

Peter Söderbaum: As a student at Uppsala University I became interested in political science, economics and business management (or business economics). My first teaching experiences were at Uppsala University and the department of economics (course in international economics) but I later moved to the department of business management where I was teaching marketing courses and also took my PhD on Positional Analysis. Later I moved back to economics now at the Swedish University of Agricultural Sciences, Uppsala, to become associate professor and lecturer in environmental and natural resource economics. 1995-2005 I was responsible for ecological economics Bachelor and Master programs at Mälardalen University in Västerås.

At an early stage Uppsala University organized an interdisciplinary course in environmental science and I became the person responsible for the environmental economics part of the course. I am referring to the 1970s and this was a time when the borders between disciplines became less respected and interdisciplinary work and courses increasingly encouraged. If I as a lecturer in marketing can learn something about consumer behavior from social psychology – why should I refrain from such learning opportunities? read more

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