Crises and Economic Theory: The Relevance of the History of Economic Thought
Chair: Maria Cristina Marcuzzo
Crises, in the past, have prompted the economics profession to question the dominant (macroeconomic and monetary) theory. As is well known, the Great Depression led to the emergence of Keynesian theory, while Stagflation in the Seventies gave rise to the monetarist counter-revolution and to the New Classical Economics. The apparent consensus embodied in mainstream DSGE models in the times of the Great Moderation seems now under severe pressure. The proposed session critically analyses the (heretofore) dominant paradigm in macroeconomics, in the light of what has happened during and after the financial crisis of 2008. It then speculates about the effects that the crisis can have on economic theory. Will the economic collapse and its durable consequences favor a rethinking of mainstream macroeconomic theory? Will the history of economic thought play any role in this? Is it reasonable to expect a return of great economists from the past?
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“Traditional Economic Theories and New Approaches to the Recent Economic and Financial Crisis”
Talamo, Giuseppina and Sabatino, Michele (Università di Enna, KORE)
The purpose of this paper is to concisely survey the literature on the recent crisis with a focus on the impact of the quantitative Easing (QE) and Junker Plan (JP) policies in the European scenario. We will also consider national policies all within the various constraints imposed by EU rules. What we want to emphasize is first, that despite the QE policy, the JP and all national policies, what emerges is the absence of coordination and integration between monetary and fiscal policies. Thus, considering that the current crisis for its severity and its ample effects, is similar to past crises in many dimensions, we will compare the two great recessions in term of impact of policies. In the European scenario, the adoption of austerity policies have aggravated the economic situation of many EU countries depressing aggregate demand and launching a vicious circle of austerity-depression-deficit-austerity. This has prompted the need to review the main economic paradigms, to find new tools and, again, to brush theories considered outdated, focused mainly on the face of aggregate demand and fiscal and monetary policies. This paper aims to analyze, in this regard, the effectiveness of some of these expansionary policies focusing on monetary policy, with particular reference to those called ‘unconventional’ which were recently conducted by the ECB following the intensification of the Eurozone crisis.
“Income Inequality, Public Debt and Social Cohesion: A Post Keynesian Approach”
Forges Davanzati, Guglielmo (Università del Salento)
This paper aims at discussing the links existing between the increasing income inequality on the global scale and the processes of financialization, with particular reference to the increase of public debt. This issue will be dealt with in the theoretical framework of the so-called radical Institutionalism, emphasising the ethical dimension of economic behaviour. It will be argued that i) the increase of income inequality in most OECD countries is a major cause of the explosion of public debt, involving a redistribution of income at the benefit of rentiers; ii) the economic policies devoted to reducing public debt, via the reduction of public spending, increase income inequality and face a trade-off beteween the necessity to create the conditions for capitalist reproduction and the need to preserve social cohesion.
“History of Economic Thought as Analytic Tool: Why Historiography of Ideas Is More than Watching Old Movies”
Bögenhold, Dieter (Alpen-Adria Universität Klagenfurt)
Especially when an economic crisis occurs, as it was in the last big crisis in 2008, contemporaries tend to question certainties of belief systems including academic systems of knowledge. Paradigms evolve to become a subject of inquiry. One of those new topics is a claim to increasingly acknowledge history of economic thought (HET) as an important, although neglected, domain of economic inquiry. During the last decades, HET has mostly been abolished or has disappeared in many contemporary teaching curricula in economics. An – unforecasted – crisis teaches us the lesson that our academic understanding may be incomplete. However, can we learn anything by reading in HET? The answer is that HET makes current debate less sterile because it embeds the matter into a flux of changing paradigms. Many brilliant argumentations exist hinting to the fact that HET has to be interpreted as a permanent over-writing process of academic failures by which we can learn about directions of new knowledge. The paper will primarily argue with Joseph A. Schumpeter who dealt in detail with the question why and how to deal with historiography as a tool of doing appropriate economics in his substantial introduction to the History of Economic Analysis (1954)
“Political Realism and Models of the State. Antonio de Viti de Marco and the Origins of Public Choice”
Giuranno, Michele, and Mosca, Manuela
It is well known that one of the features of Public Choice, political realism, in Italy is embedded in a time-honored tradition going back to Machiavelli, and perpetuated by G. Mosca and Pareto in their political and sociological writings. The scientific spirit, which in their era led to the foundation of various social disciplines, fostered the application of economic analysis to the political sphere. In this context the initiator of the pure theory of public finance, Antonio de Viti de Marco (1858-1943), formulated an economic model of the state, consisting of two types of constitutional extremes: the absolute state, and the democratic state. In this work, we ask how this model may be reconciled to G. Mosca and Pareto’s theory of the ruling class, which De Viti de Marco agreed with. Finally, we analyze the validity of this theoretical construction for the interpretation of collusion, rent seeking and “clientelism”, i.e. the redistribution of extracted rent, which takes place in the form of discretionary allocation of public jobs, public contracts and other corporative favours. Collusion is the use of the democratic institutions, by the ruling classes, in order to gain monopoly power. While collusion is the base for rent creation, rent extraction is not the final goal of politicians; rather, it is a means to magnify electoral consent. What emerges provides reasons to reflect upon for further developments in Public Choice.
Conference Programme at: http://www.siecon.org/online/en/convegni/2017-58-rsa/programma/