|
on Post Keynesian Economics |
| By: | Charles Goodhart |
| Abstract: | In this paper I shall take the causes, developments and economic consequences of the financial dislocations of the last six months as given and generally understood, having already written extensively on this subject, in a more academic vein in the Journal of International Economics and Economic Policy and in a more popular format in the February, 2008, issue of Prospect. Instead I want to turn to the regulatory implications, and official responses, of this continuing event. Being British, this inevitably focuses primarily on issues pertaining to the UK. |
| Date: | 2008–04 |
| URL: | http://d.repec.org/n?u=RePEc:fmg:fmgsps:sp177&r=pke |
| By: | Charles Goodhart |
| Abstract: | My first-ever essay into quasi-independent research involved an attempt to understand, explain and even possibly extend G.L.S. Shackle’s model of decision-making under uncertainty. Undergraduates at Cambridge who had done well in Part 1 of the Economics Tripos were encouraged to participate in a joint student/Faculty seminar, called – as I recall – the Monday Club, and each Monday evening of term one of the undergraduates, chosen by drawing lots, was expected to present a paper. Anyhow when I drew my turn, I constructed a three dimensional graph, out of green plasticine, of Shackle’s focus gain and focus loss, potential surprise, and all that. I recollect that the marks for technical merit were higher than those for artistic ability. The approximate date of that presentation was November 1958. |
| Date: | 2008–04 |
| URL: | http://d.repec.org/n?u=RePEc:fmg:fmgsps:sp178&r=pke |
| By: | Charles Goodhart |
| Abstract: | The relative liquidity of financial assets is significantly influenced by the Central Bank’s willingness to buy such assets, or to accept them as collateral, in the course of providing additional cash to banks. Those assets which the Central Bank will deal in for such purposes become more liquid, and more marketable, than those that the Central Bank will not. When the banking system as a whole is short of cash, it has no other recourse than to go to the Central Bank for assistance. The Central Bank has to provide this, since otherwise interest rates will rise very sharply, given the banks’ inelastic demand for cash reserves. A Central Bank’s choice, in practice, is the price (interest rate) at which it will supply the requisite cash, not the volume of high-powered cash reserves to supply. Normally a Central Bank will supply just enough cash to hold very short-term (e.g. overnight) rates close to the policy rate, chosen generally on broad macro-economic grounds, e.g. to maintain medium-term price stability. |
| Date: | 2008–04 |
| URL: | http://d.repec.org/n?u=RePEc:fmg:fmgsps:sp179&r=pke |
| By: | Rodrik, Dani |
| Abstract: | The focus of policy reform in developing countries has moved from getting prices right to getting institutions right, and accordingly countries are increasingly being advised to move towards "best-practice" institutions. This paper argues that appropriate institutions for developing countries are instead "second-best" institutions - those that take into account context-specific market and government failures that cannot be removed in short order. Such institutions will often diverge greatly from best practice. The argument is illustrated using examples from four areas: contract enforcement, entrepreneurship, trade openness, and macroeconomic stability. |
| Keywords: | economic development; governance |
| JEL: | O1 |
| Date: | 2008–03 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:6764&r=pke |
| By: | Ingrid Robeyns |
| Abstract: | This paper presents an analysis and an assessment of Amartya Sen’s capability approach. In the first part, it gives a detailed explanation of the capability approach. It analyses the core concepts and tries to clarify confusions in the literature by looking at different interpretations and usages. In the second part of the paper the major critiques on the capability approach are scrutinised. It is argued that some of those critiques are based on mistaken interpretations, while others follow from a too narrow reading. At the same time it is recognised that theoretical and empirical applications of the capability approach nevertheless remain to address a number of difficulties. The paper also includes an annotated survey of the existing empirical applications. Ultimately, both the assessment of the critiques as well as the survey of applications provide support for Sen’s claim to see the capability approach as a framework of thought, which can address diverse problems and can be applied in quite different ways. |
| Date: | 2008–03 |
| URL: | http://d.repec.org/n?u=RePEc:ete:ceswps:ces0030&r=pke |
| By: | Grüner, Hans Peter |
| Abstract: | In most industrialized economies, financial wealth is distributed far more unequally than income. According to Wolff (2007) more than half of the American households possess almost no productive capital while realizing about 20 percent of national income. This mismatch poses a problem for the efficient aggregation of consumer needs on capital markets. Individuals use information about their own preferences as consumers to identify profitable investments. Under certain conditions, this behaviour efficiently matches future demand with productive capacity, thus replacing future markets for consumer goods. However, when wealth is distributed too unequally, capacity cannot match consumer needs. I present some first experimental evidence in favour of consumption driven investment behaviour based on real portfolio choices and self-reported preferences about consumer goods. |
| Keywords: | capital markets; Consumption driven investment; information aggregation; wealth distribution |
| JEL: | C91 G11 G14 O16 |
| Date: | 2008–03 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:6750&r=pke |