nep-pke New Economics Papers
on Post Keynesian Economics
Issue of 2014‒09‒29
four papers chosen by
Karl Petrick
Western New England University

  1. Being a consultant "expert" in a developing country: the legacy and lessons of Albert Hirschman By P. G. Ardeni
  2. Import of Institutions and Economic Value Transformation: The Interactions among the Economic Agents in Georgia By Nino Papachashvili; Lela Jamagidze
  3. "Public Preferences for Redistributive Policies in Israel" By Yuval Elmelech
  4. "The ECB and the Single European Financial Market: A Proposal to Repair Half of a Flawed Design" By Mario Tonveronachi

  1. By: P. G. Ardeni
    Abstract: After more than half a century, the reflections of Albert O. Hirschman on development assistance, the role of consultant "experts" in providing policy advice and the "visiting economist's syndrome" are still very current. In as much as Hirschman argued against all-encompassing policy frameworks, overall development plans and universal models, "one-size-fits-all" models abstracting from the local, historical, geographic and institutional conditions have remained the prevailing modus operandi of international development agencies and governments in development assistance. In spite of Paul Krugman's criticism of Hirschman's lack of a mathematically-consistent approach in favor of an ad hoc pragmatism, Hirschman's avoidance of assuming a toy model to deal with practical issues and the specificities of development problems in different countries – while still using rigorous and detailed analysis– appears to be a promising attitude of enormous relevance even today. If the rejection of large-scale models of the hey days of development theory was due to the neoliberal policy wave that led to the "Washington consensus" – more market and less State –, development assistance has remained firmly entrenched in the principles of balanced growth, all-encompassing liberalizing policy reforms and diffused marketization with an increasingly limited role for the State. Development assistance approaches have maintained a standard list of prescriptions, policy-reform recipes for all sectors, social, institutional and even political objectives, under the justification that "everything depends on everything". In this paper, I briefly review the evidence regarding the active pursuit of a paradigm that, sidelining Hirschman's unorthodox approach, has confirmed that we have "forgotten nothing and learned nothing", as Hirschman once said. While Hirschmanian concepts like "linkages" and "leading sectors" and some of his famous parables – like the "tunnel effect" on inequality – have left an enduring mark on economists' perspectives, his "unbalanced-growth" has been dismissed on ineffectual grounds, while his "empirical lantern" has been derided and abandoned. The lessons of Hirschman's consultant experience in the tropics have left a legacy that goes beyond his prescriptions: it is a philosophy, a conception of the world, a guiding sets of principles that survives time. From that wilderness where Hirschman led his followers, it is only by re-igniting that lantern that we can wisely contribute to the "development" of others as savvy and informed "experts".
    JEL: B2 B3 O2
    Date: 2014–09
  2. By: Nino Papachashvili (Ivane Javahkishvili Tbilisi State University); Lela Jamagidze (Ivane Javahkishvili Tbilisi State University)
    Abstract: The present work discusses the decisions of economic agents and the interactions among them in Georgia‟s transformation economy from new institutional point of view. European integration is an irreversible economic orientation of Georgia, which influences both formal and informal institution formation. The authors argue that the analysis of the economic value formation aspects of the ongoing process of Europeanization is important for the understanding of the stage by stage outcomes of this process. The Association Agreement between Georgia and the EU represents Georgia‟s Europeanization action plan. The Agreement stresses that European values represent the cornerstone of economic integration and political association. The implementation of the Association Agreement will bring concrete benefits in terms of increased opportunities for small and medium sized businesses, access to the European education, strengthened rule of law, etc. The authors argue that the success of modernization depend on the one hand, institution imports and on the work of these institutions on the other. The foundation of their effective work will be those value constructs that the society holds. The success of institution implementation depends on pace of the increase in the number of people, who use them. The faster the realization of the need and benefits of the observation of certain “rules of the game”, the faster they will be institutionalized. Institutional adaptation gives the economic agents broader opportunities for their economic activities and they adopt new strategies of behavior related to the changes of the institutional framework. Adaptability to the imported institutions depends on the economic values of the economic agents and the benefits of the implementation of the new institutions. The present study incorporates economic values in the analysis of the economic agent interactions against the background of Europeanization. The authors offer a theoretical approach to pose the problem and evaluate the behavior of economic agents in the context of importing European institutions and values in Georgia. The nature of the interactions among the economic agents significantly defines the smooth functioning of the economic system. The authors emphasize that study of the economic agent behavior (state and businesses) in institution import and economic value transformation context will enable to identify the challenges of the adaptation process.
    Keywords: import of instituions; transition economy
    Date: 2014–09
  3. By: Yuval Elmelech
    Abstract: This paper contributes to the literature on inequality and welfare policy by studying public support for redistributive policies in Israel, a society with an extreme level of socioeconomic inequality. Drawing on the relevant literature and taking into consideration the distinct demographic makeup of contemporary Israeli society, the study aims to describe public support for opportunity-enhancing and outcome-based redistributive policies and to explore the extent to which individual economic and demographic characteristics are associated with policy preferences. Analysis of data from a unique topical module of the 2008 Israel Social Survey reveals that support for opportunity-based programs is strong overall, but that the Israeli public is deeply divided along ethnic lines, religious affiliation, and immigration status. While results from multinomial regression analyses provide support for the self-interest theory, the findings also underscore the significance of various demographic and social indicators as determinants of policy preferences. These findings are discussed in light of the current debates on the sources of, and possible remedies for, the growing social and economic polarization within Israeli society.
    Keywords: Israel; Public Opinion; Redistributive Policies; Social Policy Preferences
    JEL: D63 H59
    Date: 2014–09
  4. By: Mario Tonveronachi
    Abstract: The flaws of the Maastrict Treaty are a frequent object of commentary but, as yet, Europe remains unable—or, perhaps more accurately, unwilling—to address these flaws. The European project will remain unfinished and the ability of the European Central Bank to implement effective monetary policies will continue to be hobbled. As Mario Tonveronachi observes in this public policy brief, Europe has a currency union, but this does not mean that Europe has achieved a single financial market, an essential element for a functioning union. He reminds us that a single European market requires pricing in relation to common risk-free assets rather than in relation to a collection of individual idiosyncratic sovereign rates. And financial operators must have access to the same risk-free assets for trading and liquidity operations. The euro provides neither of these functions, and thus, while there has been a measure of convergence, a single financial market, and the financial integration it represents, remains unachieved.
    Date: 2014–09

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