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on Heterodox Microeconomics |
|
Issue of 2022‒08‒08
nineteen papers chosen by Carlo D’Ippoliti Università degli Studi di Roma “La Sapienza” |
| By: | Takeshi Kato |
| Abstract: | What are the fundamental differences between an Islamic economy and capitalism? The Islamic economy is characterized by the prohibition of Riba (interest) and the enforcement of Mudaraba (joint venture) and Waqf (donation). We propose new econophysics models of wealth exchange and redistribution to quantitatively compare these characteristics with the differences in capitalism, and evaluate wealth distribution and disparities by simulation. Specifically, we propose a loan interest model representing finance capitalism and Riba, a joint venture model representing shareholder capitalism and Mudaraba with respect to exchange, and a transfer model representing inheritance tax and Waqf with respect to redistribution. As exchanges are repeated from an initial uniform distribution of wealth, the distribution of wealth approaches a power-law distribution more quickly in the loan than in the joint, and the Gini index, which represents disparity, rapidly increases. The joint has a slower increase in the Gini index, but eventually the wealth distribution in both models becomes a delta distribution, and the Gini index gradually approaches 1. Next, when both models are combined with the transfer model to redistribute wealth every given period, the loan has a larger Gini index than the joint, but both models converge to a value with a Gini index less than 1. These results quantitatively reveal that in the Islamic economy, disparities are restrained by their characteristics. These correspond to the three economic modes Polanyi presented: reciprocity, redistribution, and exchange. The insights encourage an economy that embraces the morals of mutual aid as described in Mauss's theory of gifts, Kropotkin's theory of mutual aid, Graeber's theory of debt, Sarthou-Lajus's repayment to third parties, and Karatani's mode of exchange D, and provide guidelines for the next alternative to capitalism. |
| Date: | 2022–06 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2206.05443&r= |
| By: | Jacopo Di Domenico (Department of Economics and Social Sciences, Università Politecnica delle Marche, Ancona); Alberto Russo (Department of Management, Università Politecnica delle Marche, Ancona, Italy and Department of Economics, Universitat Jaume I, Castellón, Spain) |
| Abstract: | In this study, we propose the exploration of the characteristics of the Sraffian- Supermultiplier model where technological change and autonomous demand, coming from the public sector, determine the macroeconomic dynamics. The growth rate of the economy is determined by the productivity growth path that frees up labor to be employed in the production of alternative goods, and the public sector that, if not willing to accept high unemployment, has to increase its expenditure and generate the necessary demand for achieving spread (macroeconomic) growth. Because of the dependency of technological change on the sales level (due to the possibilities this offers in terms of labor division) at the macro and meso dimension, in contrast to the majority of the Supermultiplier models, the long-run growth rate of our artificial economy is also affected by the income distribution (both functional and personal) which affects the level of the total demand and shapes its composition across sectors. For the purpose of our research, we develop a multi-sectoral macroeconomic Agent based - Stock Flow consistent model (AB-SFC). The model is grounded on a theoretical framework representing a monetary economy of production (e.g. Graziani, Lavoie) where the principle of effective demand determines the level of output, while innovation is characterized by a typical Schumpeterian process of creation and destruction. The functional income distribution is determined as in classical theory and results from the struggle between capitalists and workers. The markup fixed by companies over normal unit-cost of production determines the normal rate of profit. Money is endogenous and is injected into the system when banks grant loans to companies to finance investments or wages anticipation and Government expenditure is financed by issuing public bonds. We study the impact the yearly performances have on the long-run path of the economy. After showing that the process innovation represents a necessary but not sufficient element for economic growth (and also a possible source of economic instability) which requires a public state with a hands-on approach (that increases its debt every time an increase in productivity occurs and stabilizes the economy) to achieve macroeconomic growth, we study how different productivity gain appropriations (and therefore different distribution configuration) affect the future trend of productivity (and therefore the long-run growth rate of the economy) through changes in the level of aggregate volumes and their allocation between sectors. |
| Keywords: | growth, productivity, distribution, instability, public debt, agent-based model, stock-flow consistency |
| JEL: | C63 H63 O33 O41 |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:jau:wpaper:2022/12&r= |
| By: | Hanappi, Hardy |
| Abstract: | The current dynamics of the global political economy are depressing: A multidimensional climate crisis is taking on speed; new pandemic waves with unknown lethal consequences are building up; National capitalism – bent to become a new form of fascism – raises its head and the return to military conflict solution makes a 3rd World War possible. But despite these gloomy perspectives it remains true that mankind so far has mastered all difficulties as soon as it became aware of them. Our species in principle has all means – physically and intellectually – to let a new Atlantis rise. And the guidelines how to overcome the above mentioned three crises, are delivering the blueprint of the organizational design of such a new Atlantis. This paper explores this exciting hypothesis. The first goal to reach clearly is to avoid a 3rd World War, which means to defeat the fascist movements in the world. As the 20th century showed, fascism developed out of nationalism, which in turn was nourished by a nationwide controlled class rule, a form of military (and police) governed capitalist exploitation. This currently so successful form of capitalism (China, Russia, USA) is defined as ‘National Capitalism’. It corresponds to what I called disintegrating capitalism in (Hanappi, 2019a). Being victorious, to have overcome national capitalism, means to have been able to establish a global democratic government. To get there the progressive opposition to National Capitalism has to develop theory, strategy and practice. As described in (Hanappi, 2020) a certain degree of division of progressive labor activities – the emergence of a global class of organic intellectuals (1) – will be needed. Only with global governance the other two crises, the climate crisis and the future global health crises, can be overcome. Since they are already here and help to make the impasse of capitalism, of national capitalism, become very visible to every human individual, we already can find ways of global coordination to prevent them. In doing so, success is possible and can yield into the necessary optimism, an attitude which is necessary for the emotional basis of any progressive, humanistic movement. A man-made Atlantis can rise - not beyond an ocean but here on earth. We just have to unite our intellectual forces and to continue the century-old struggle for emancipatory social evolution (2). (1) In explaining Gramsci’s concept of the organic intellectual Perry Anderson writes: ‘Gramsci argued that intellectuals are absolutely necessary for the proletariat, both in historical periods when it is a class in-itself and in those when it is a class for-itself. Without intellectuals the proletariat could neither come to power, nor consolidate or develop its power after winning it.’ (Anderson, 2016, Kindle-Positions 1971-1982). (2) Thomas Morus wrote his ‘Utopia’ in 1516. |
| Keywords: | Global Political Economy, Crisis Management, Utopia |
| JEL: | B52 P00 |
| Date: | 2022–06–27 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:113578&r= |
| By: | Malcolm Rutherford (Department of Economics, University of Victoria) |
| Abstract: | Previous discussions concerning the relationship between John Dewey’s pragmatic instrumentalism and institutional economics have focused on Clarence Ayres and on issues of valuation. This paper gives attention to the actual conduct of economic investigations by institutionalists such as Wesley Mitchell, Walton Hamilton, and John R. Commons. It is argued that many aspects of Dewey’s instrumentalism are clearly displayed in the problem centered, investigational, and experimental methods employed by institutionalists, and in their commitment to problem solving and social control. The association of institutionalist methods with Dewey’s instrumentalism implies that many of the standard criticisms of institutionalist methods are misplaced. These criticisms, that institutionalism lacked proper theoretical perspective and produced work that was overly descriptive, have been made predominantly from a logical positivist methodological perspective, and ignore Dewey’s notions of science that informed the institutionalist approach. Appraising institutionalist successes and failures from the point of view of the methodology they actually adopted provides a much more nuanced criticism, one based on the strengths and weaknesses of the underlying instrumentalist methods they employed. In particular, some serious difficulties with the application of Dewey’s experimentalism to social science are located. |
| Keywords: | Institutionalism, Instrumentalism, John Dewey, Wesley Mitchell, Walton Hamilton, J. R. Commons |
| Date: | 2022–07–12 |
| URL: | http://d.repec.org/n?u=RePEc:vic:vicddp:2008&r= |
| By: | Alicia Lefrançois (CRIISEA - Centre de Recherche sur les Institutions, l'Industrie et les Systèmes Économiques d'Amiens - UR UPJV 3908 - UPJV - Université de Picardie Jules Verne); Sophie Changeur (CRIISEA - Centre de Recherche sur les Institutions, l'Industrie et les Systèmes Économiques d'Amiens - UR UPJV 3908 - UPJV - Université de Picardie Jules Verne) |
| Abstract: | Through the study of its representations, uses and adoption (or rejection) process, this exploratory study aims to understand a consumption practice considered to be transgressive. More precisely, this work investigates a consumption practice that transgresses gender norms, i.e. the consumption of makeup by French hetero-masculinities. Both the topic and the field haven't been much investigated in marketing. Rooted in the Consumer Culture Theory, this study will be carried out using a multiplatforms unobtrusive observation, semi-structured interviews with heterosexual men who don't consume makeup and life narratives with heterosexual male makeup-consumers. Paillé's 1994 Grounded Theory analysis adapted from Glaser and Strauss (1967) will be used for data analysis in order to triangulate the results. This work is expected to bring theoretical, managerial and societal contributions to marketing, especially the concept of transgression applied to a consumption practice and how to use it in marketing. |
| Abstract: | Cette étude exploratoire vise à la compréhension d'une pratique de consommation qualifiée de transgressive par l'étude de ses représentations et usages ainsi que de son processus d'adoption (ou de rejet). Plus précisément, ce travail explore une pratique transgressive des normes de genre, la consommation de maquillage des hétéro-masculinités dans un contexte français, thème et terrain encore peu investigués en marketing. Ancrée dans la Consumer Culture Theory, cette étude s'appuie sur une observation nonparticipante multi-plateformes, des entretiens semi-directifs auprès d'hommes hétérosexuels non-consommateurs et des récits de vie auprès d'hommes hétérosexuels consommateurs de maquillage. La théorisation ancrée de Paillé (1994) adaptée de Glaser et Strauss (1967) sera utilisée pour analyser les données afin d'opérer une triangulation des résultats. Il est attendu que ce travail apporte des contributions tant théoriques que managériales et sociétales pour le marketing, notamment le concept de transgression appliqué à une pratique de consommation et la façon de le mobiliser en marketing. |
| Keywords: | transgression,consumption practice,hetero-masculinities,gender,consumer culture theory |
| Date: | 2021–05–19 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-03643694&r= |
| By: | Wolfgang Bretschneider (CiviS\Econ – Economic Analysis of Civil Security); Andreas Freytag (Friedrich Schiller University Jena, University of Stellenbosch, CESifo-Research Network, STIAS Stellenbosch); Johannes P. Rieckmann (Brandenburg Institute for Society and Security (BIGS), Potsdam); Tim H. Stuchtey (Brandenburg Institute for Society and Security (BIGS), Potsdam) |
| Abstract: | The issue of internal security has become increasingly complex over the past decades. As there is an increasing overlap between private and public provision of security, the question of how to allocate responsibility for security between the public sphere (state) and the pri- vate sphere has become important. The literature suggests that this question cannot be an- swered based on a simple private vs. public binarity. Concepts that can provide both clarity and sufficient complexity are much needed. This article offers an institutional economics concept based on the difference between provision and production, and discusses selection criteria for public vs. private provision, and production of protection services at three differ- ent stages: punishment as deterrence; patrol services; and self-defence. What stands out is that a unique characteristic of the economic good ‘protection service’ is of particular rele- vance for the level of provision as well as of production: the potential repressivity. |
| Keywords: | protection, privatisation of security, homeland security, civil security, economics of security, public good, publicly provided good, security industry |
| JEL: | H41 H42 K42 L33 L51 |
| Date: | 2022–07–19 |
| URL: | http://d.repec.org/n?u=RePEc:jrp:jrpwrp:2022-009&r= |
| By: | Padellini, Mauro |
| Abstract: | Some examples are given showing how surplus production (and consequently its pursuit) can make reproduction more difficult, compared to the simpler case of subsistence production. |
| Keywords: | reproduction; surplus |
| JEL: | E11 |
| Date: | 2022–06–13 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:113374&r= |
| By: | Faye, Amy |
| Abstract: | The sustainability of agricultural production systems is of growing concern. Agro-ecology has received considerable interest as an alternative to conventional farming. Clarity of both concepts is a precondition for any assessments. Large-scale adoption of agro-ecology could yield profound changes in rural Africa and on economic development of African countries due to the interlinkages between agriculture and the other sectors of an economy. Therefore, its promotion should be cautiously investigated and guided not only by its environmental effects but also by its ability to contribute to food systems sustainability, the development of rural economies, and economies as a whole. Consequently, the analysis of agro-ecology should be connected to the objectives of agricultural transformation as part of a process of structural transformation. Based on a meta-narrative review approach using multiple references from selected online reference databases, the concepts of agricultural transformation and agro-ecology are assessed, and a conceptual framework to guide future empirical analyzes of the role of agro-ecology on agricultural transformation as part of a process of structural transformation is proposed. |
| Keywords: | Agricultural and Food Policy, International Development, Production Economics |
| Date: | 2022–04 |
| URL: | http://d.repec.org/n?u=RePEc:ags:aesc22:321227&r= |
| By: | Benjamin Patrick Evans; Mikhail Prokopenko |
| Abstract: | The efficient market hypothesis (EMH), based on rational expectations and market equilibrium, is the dominant perspective for modelling economic markets. However, the most notable critique of the EMH is the inability to model periods of out-of-equilibrium behaviour in the absence of any significant external news. When such dynamics emerge endogenously, the traditional economic frameworks provide no explanation for such behaviour and the deviation from equilibrium. This work offers an alternate perspective explaining the endogenous emergence of punctuated out-of-equilibrium dynamics based on bounded rational agents. In a concise market entrance game, we show how boundedly rational strategic reasoning can lead to endogenously emerging crises, exhibiting fat tails in "returns". We also show how other common stylised facts of economic markets, such as clustered volatility, can be explained due to agent diversity (or lack thereof) and the varying learning updates across the agents. This work explains various stylised facts and crisis emergence in economic markets, in the absence of any external news, based purely on agent interactions and bounded rational reasoning. |
| Date: | 2022–06 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2206.05568&r= |
| By: | Quisumbing, Agnes; Heckert, Jessica; Faas, Simone; Ramani, Gayathri; Raghunathan, Kalyani; Malapit, Hazel; The pro-WEAI for Market Inclusion Study Team |
| Abstract: | This background paper examines the linkages and interactions between women’s empowerment, food systems, and nutrition. It examines: How women’s empowerment and gender equality relate to a range of nutrition outcomes across various levels in six countries in Asia and Africa. The factors that are conducive to greater empowerment of women and gender equality based on a literature review and analysis of data on women’s empowerment in agricultural value chains in Bangladesh, the Philippines, Benin, and Malawi. Three case studies from rural Burkina Faso, Kenya, and Nigeria that were gender sensitive and aimed to improve nutritional status or food security. Engaging in formative research to understand the challenges women face and explicitly including gender-transformative strategies in intervention design can improve their performance. |
| Keywords: | Agricultural and Food Policy, Food Consumption/Nutrition/Food Safety, Food Security and Poverty |
| Date: | 2022–05–01 |
| URL: | http://d.repec.org/n?u=RePEc:ags:unadrs:321953&r= |
| By: | Henrekson, Magnus (Research Institute of Industrial Economics (IFN)); Wennström, Johan (Research Institute of Industrial Economics (IFN)) |
| Abstract: | This essay argues that the most crucial institution of any school system is its view of knowledge—from which virtually all other aspects of a school are derived: the content of its curricula, its pedagogical practices, and the incentives that motivate its members. To make this case, we outline the two main conflicting views of knowledge, the classical view and the postmodern social constructivist view. According to the classical view, the purpose of schooling is to give students objective knowledge and skills that they cannot acquire in any way other than through hierarchical instruction in well-defined disciplines. The social constructivist view rejects the existence of objective knowledge. This rejection translates to a preference for student-directed pedagogy, the mixing of instructional fields, and an emphasis on developing general critical thinking skills rather than on acquiring domain-specific knowledge. Using the history of education in Sweden as an example, our analysis suggests that the recent decline in educational quality in the Western democracies can be remedied by a paradigm shift in the governing view of knowledge toward the classical view. |
| Keywords: | Communal knowledge; Institutions; Postmodernism; Social constructivism; Thought style; Views of knowledge |
| JEL: | H42 H44 H75 I22 I28 L88 |
| Date: | 2022–06–22 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:iuiwop:1432&r= |
| By: | Pierre Gosselin (IF - Institut Fourier - CNRS - Centre National de la Recherche Scientifique - UGA - Université Grenoble Alpes); Aïleen Lotz (Cerca Trova); Marc Wambst (IRMA - Institut de Recherche Mathématique Avancée - CNRS - Centre National de la Recherche Scientifique - UNISTRA - Université de Strasbourg) |
| Abstract: | This paper provides a general method to directly translate a classical economic framework with a large number of agents into a field-formalism model. This type of formalism allows the analytical treatment of economic models with an arbitrary number of agents, while preserving the system's interactions and microeconomic features of the individual level. We apply this methodology to model the interactions between financial markets and the real economy, described in a classical framework of a large number of heterogeneous agents, investors and firms. Firms are spread among sectors but may shift between sectors to improve their returns. They compete by producing differentiated goods and reward their investors by paying dividends and through their stocks' valuation. Investors invest in firms and move along sectors based on firms' expected long-run returns. The field-formalism model derived from this framework allows for collective states to emerge. We show that the number of firms in each sector depends on the aggregate financial capital invested in the sector and its firms' expected long-term returns. Capital accumulation in each sector depends both on short-term returns and expected long-term returns relative to neighbouring sectors. For each sector, three patterns of accumulation emerge. In the first pattern, the dividend component of short-term returns is determinant for sectors with small number of firms and low capital. In the second pattern, both short and long-term returns in the sector drive intermediate-to-high capital. In the third pattern, higher expectations of long-term returns drive massive inputs of capital. Instability in capital accumulation may arise among and within sectors. We therefore widen our approach and study the dynamics of the collective configurations, in particular interactions between average capital and expected long-term returns, and show that overall stability crucially depends on the expectations' formation process. Expectations that are highly reactive to capital variations stabilize high capital configurations, and drive low-to-moderate capital sectors towards zero or a higher level of capital, depending on their initial capital. Inversely, low-to moderate capital configurations are stabilized by expectations moderately reactive to capital variations, and drive high capital sectors towards more moderate level of capital equilibria. Eventually, the combination of expectations both highly sensitive to exogenous conditions and highly reactive to variations in capital imply that large fluctuations of capital in the system, at the possible expense of the real economy. |
| Keywords: | Capital accumulation,Capital Allocation,Collective states,Statistical Field Theory,Real Economy,Financial Markets,Multi-Agent Model |
| Date: | 2022–05–05 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-03659624&r= |
| By: | Paskins, Matthew |
| Abstract: | In recent years explicitly utopian visions have reappeared across the political spectrum. To a surprising degree these visions have drawn on histories and science and technology. What should scholars of Science and Technology Studies (STS) and History and Philosophy of Science (HPS) make of these developments? The concept of utopia has often been treated with considerable distrust in these fields, as an indication of closed end-directed blueprints, or as an indication of fantasies of limitless technological improvement and purification of categories. Alongside this uneasiness, however, HPS and STS scholars have also projected transformative ambitions, seeking to recover from the past different ways of knowing and relating to the human and non-human world. By engaging with critiques of utopia from thinkers including Karl Popper, Otto Neurath, Bruno Latour, Isabelle Stengers and Donna Haraway, and exploring some of the utopian strands which have recurred in studies of science and technology—including the longing for integration, the association of science with planning, and the ways in which feminist scholars have envisaged alternative forms of science—we can understand the ongoing, and often unrecognised, utopian dimensions of HPS and STS. |
| Keywords: | Anthropocene; Feminist theory; Integration; Planning; Pluralism; Utopia; European Union's Horizon 2020 research and innovation programme (grant agreement number 694732- NARRATIVENSCIENCE) |
| JEL: | B10 B20 |
| Date: | 2020–06–20 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:109300&r= |
| By: | Sipiczki, Agnes |
| Abstract: | Environmental, social and governance (ESG) investing has been practised in Europe for more than two decades, during which it has moved from niche to the mainstream market. The rapid growth in the number of sustainability-related financial products and service providers over the past decade has also attracted regulators’ attention. The EU’s regulatory capacity on sustainability represents a hidden treasure that echoes the realisation that to achieve the EU’s environmental and social goals, a sharp departure from the current predominant model of capitalism and corporate governance is required. It has been argued that an increasing amount of capital is misallocated due to the inadequacy of ESG criteria and the ESG services market’s lack of transparency. The rankings produced by ESG rating agencies create a false sense of security, and investors who buy into ESG funds with dubious credibility need protection. Considering the potential implications of ESG exposures for long-term financial stability, it is in the public interest to critically evaluate ESG criteria and reporting requirements to clear a path for more meaningful and more operational corporate objectives that contribute to the green, digital and just transition. Whilst in the context of the EU sustainable finance package many regulatory measures are already underway, it is imperative that the Commission fixes the blind spots and completes the additional steps needed. |
| Date: | 2022–04 |
| URL: | http://d.repec.org/n?u=RePEc:eps:cepswp:36111&r= |
| By: | Marta Fana (European Commission - JRC); Davide Villani (European Commission - JRC) |
| Abstract: | The original assumption behind the measurement of functional income distribution was that this measure would reflect uniquely the income allocated to different social classes. However, this straightforward dichotomy is more complicated today than it was 200 years ago for different reasons, such as the diversification of sources of income, and the role of managers. This paper proposes a new estimation of factors income distribution that is based not only on the source of income but also considers class belonging. We provide an empirical estimate for Italy (1991-2016) using the Survey on Households Income and Wealth (Bank of Italy). The revised labourers share is lower than the standard wage share. Moreover, we show that the size of the labour class is growing considerably due to the expansion of wage earners while at the same time they suffer a remarkable loss of income. Despite some labourers move towards the top of the distribution, most of the growing presence of wage income in the top of the distribution is imputable to managers. |
| Keywords: | Social classes, Functional Income Distribution, Inequality. |
| Date: | 2022–06 |
| URL: | http://d.repec.org/n?u=RePEc:ipt:dclass:202205&r= |
| By: | Bruno Vétel (CEREGE - CEntre de REcherche en GEstion - EA 1722 - IAE Poitiers - Institut d'Administration des Entreprises (IAE) - Poitiers - Université de Poitiers - Université de Poitiers - ULR - La Rochelle Université) |
| Abstract: | L'image courante et caricaturale du pirate informatique est celle d'un jeune qui a l'air un peu demeuré sous son sweat à capuche, mais qui s'avère être un génie de l'informatique peu regardant des règles de droit. Quatre figures médiatiques du pirate sont présentées à la suite afin de nuancer un peu ce poncif. Elles permettront aussi de comprendre en quoi la reprise commerciale de l'illustration présentée ci-contre, qui rappelle étrangement le logo d'une marque identitaire poitevine, n'est peut être pas que le fruit d'un hasard, mais sans doute aussi le signe de l'importance d'une culture pirate diffuse et largement démocratisée. |
| Date: | 2022–01–10 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:halshs-03676856&r= |
| By: | Larsen, Harry |
| Abstract: | Work in general, and the learning curve in particular, are typically modelled with the power law, y(x) = a xb. This model provides little insight into the causes of the dynamics of the labor hours associated with work. A stochastic model with links to information is proposed. It is implemented as a Monte Carlo system, producing probability density functions, thus deriving labor cost uncertainty as intrinsic to the performance of work itself. The paper demonstrates a time domain application of the model in a factory setting with feedback interactions between work elements. |
| Keywords: | Learning curve, Slope, Negative Binomial Distribution, Task, Trial, Uncertainty |
| JEL: | D24 |
| Date: | 2022–06–10 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:113369&r= |
| By: | William Lazonick (The Academic-Industry Research Network) |
| Abstract: | "Sustainable prosperity" denotes an economy that generates stable and equitable growth for a large and growing middle class. From the 1940s into the 1970s, the United States appeared to be on a trajectory of sustainable prosperity, especially for white-male members of the U.S. labor force. Since the 1980s, however, an increasing proportion of the U.S labor force has experienced unstable employment and inequitable income, while growing numbers of the business firms upon which they rely for employment have generated anemic productivity growth. Stable and equitable growth requires innovative enterprise. The essence of innovative enterprise is investment in productive capabilities that can generate higher-quality, lower-cost goods and services than those previously available. The innovative enterprise tends to be a business firm - a unit of strategic control that, by selling products, must make profits over time to survive. In a modern society, however, business firms are not alone in making investments in the productive capabilities required to generate innovative goods and services. Household units and government agencies also make investments in productive capabilities upon which business firms rely for their own investment activities. When they work in a harmonious fashion, these three types of organizations - household units, government agencies, and business firms—constitute "the investment triad." The Biden administration's Build Back Better agenda to restore sustainable prosperity in the United States focuses on investment in productive capabilities by two of the three types of organizations in the triad: government agencies, implementing the Infrastructure Investment and Jobs Act, and household units, implementing the yet-to-be-passed American Families Act. Absent, however, is a policy agenda to encourage and enable investment in innovation by business firms. This gaping lacuna is particularly problematic because many of the largest industrial corporations in the United States place a far higher priority on distributing the contents of the corporate treasury to shareholders in the form of cash dividends and stock buybacks for the sake of higher stock yields than on investing in the productive capabilities of their workforces for the sake of innovation. Based on analyzes of the "financialization" of major U.S. business corporations, I argue that, unless Build Back Better includes an effective policy agenda to encourage and enable corporate investment in innovation, the Biden administration's program for attaining stable and equitable growth will fail. Drawing on the experience of the U.S. economy over the past seven decades, I summarize how the United States moved toward stable and equitable growth from the late 1940s through the 1970s under a "retain-and-reinvest" resource-allocation regime at major U.S. business firms. Companies retained a substantial portion of their profits to reinvest in productive capabilities, including those of career employees. In contrast, since the early 1980s, under a "downsize-and-distribute" corporate resource-allocation regime, unstable employment, inequitable income, and sagging productivity have characterized the U.S. economy. In transition from retain-and-reinvest to downsize-and-distribute, many of the largest, most powerful corporations have adopted a "dominate-and-distribute" resource-allocation regime: Based on the innovative capabilities that they have previously developed, these companies dominate market segments of their industries but prioritize shareholders in corporate resource allocation. The practice of open-market share repurchases - aka stock buybacks - at major U.S. business corporations has been central to the dominate-and-distribute and downsize-and-distribute regimes. Since the mid-1980s, stock buybacks have become the prime mode for the legalized looting of the business corporation. I call this looting process "predatory value extraction" and contend that it is the fundamental cause of the increasing concentration of income among the richest household units and the erosion of middle-class employment opportunities for most other Americans. I conclude the paper by outlining a policy framework that could stop the looting of the business corporation and put in place social institutions that support sustainable prosperity. The agenda includes a ban on stock buybacks done as open-market repurchases, radical changes in incentives for senior corporate executives, representation of workers and taxpayers as directors on corporate boards, reform of the tax system to reward innovation and penalize financialization, and, guided by the investment-triad framework, government programs to support "collective and cumulative careers" of members of the U.S. labor force. Sustained investment in human capabilities by the investment triad, including business firms, would make it possible for an ever-increasing portion of the U.S. labor force to engage in the productive careers that underpin upward socioeconomic mobility, which would be manifested by a growing, robust, and hopeful American middle class. |
| Keywords: | Investment triad, productive capabilities, corporate governance, innovative enterprise, strategic control, organizational integration, financial commitment, retain-and-reinvest, dominate-and-distribute, downsize-and-distribute, stock buybacks, stock prices, executive pay, corporate taxation, career learning, Joe Biden, Build Back Better |
| JEL: | B59 D01 D02 D04 D2 D3 G3 H00 J5 L1 L2 L5 M1 O3 O43 |
| Date: | 2022–03–30 |
| URL: | http://d.repec.org/n?u=RePEc:thk:wpaper:inetwp182&r= |
| By: | Bresser-Pereira, Luiz Carlos |
| Abstract: | O desenvolvimentismo clássico foi uma teoria econômica heterodoxa que mostrou que os países precisam de intervenção moderada do Estado na economia para se industrializar. O crescimento depende de investimentos e de uma taxa de lucro esperada satisfatória, garantida pelas tarifas de importação legitimadas pelo argumento da indústria nascente. Os países latino-americanos adotaram essa política industrial a partir da década de 1950 e tiveram altas taxas de crescimento. Mas o argumento da indústria nascente perde validade com o tempo. Na década de 1980, sob a pressão do Norte, os países latino-americanos adotaram as reformas neoliberais e estão quase estagnados desde então. O novo desenvolvimentismo surgiu nos anos 2000, fez a crítica da economia convencional, propôs uma nova estratégia de crescimento focada em uma taxa de câmbio competitiva, e legitimou o uso de tarifas de importação com o argumento da doença holandesa. |
| Date: | 2021–11–24 |
| URL: | http://d.repec.org/n?u=RePEc:fgv:eesptd:554&r= |