Abstract
The 2007/2008 global crisis has put into agenda a basic debate in the field of public finance in what concerns state intervention. The crisis shows the narrowness and inadequacy of current mainstream and neoclassical approaches related to subjects such as the specific forms of state intervention during the crisis as well as its origins and causes. None of these approaches perceive state intervention as an economic and social reality of the discipline of public finance. Although they provide some insightful discussions on the financial crisis, they remain essentially descriptive. New developments after the global crisis revealed spectacular alternative views by reinterpreting the forms of state intervention in economic theory as well as its applications in specific countries. In these views the state and its policies are determined and transformed socially, politically and historically. In this respect, we need to know more about the dynamics of the capitalist system, its economic institutions and the patterns of production relations in every conjuncture of economic history as well as the functioning of financial systems. This paper argues that the field of public finance is socially determined as any other scientific practice. Following the recent discussions in theory and its applications, this paper treats state intervention as both a symptom and a cause of critical changes in economy and society.
Highlights
“..So economics limp along with one foot in untested hypotheses and the other in untestable slogans
The discipline of public finance, which constitutes the specific area of economics concerning the economic effectiveness of the state, has been conceived as a field limited to market intervention in the neoclassical theory
Post-Keynesian approaches concerning the market intervention of the state through public finance instruments and market regulation have not been reflected in practices, they have not gone beyond creating weak discussions except crises and instability periods
Summary
“..So economics limp along with one foot in untested hypotheses and the other in untestable slogans. Since the global crisis, discussions that can be followed up from the economic literature as well as from academic publications are questioning how the discipline of Economics could provide a better set of tools for explaining the economic reality. Is it possible to enhance the restraining set of concepts and theories related to the facts defined with the formal models that are being criticized? Post-Keynesian approaches concerning the market intervention of the state through public finance instruments and market regulation have not been reflected in practices, they have not gone beyond creating weak discussions except crises and instability periods. There was a consensus reached by a large academia in bringing back financial regulations with macro and micro regulation instruments during the post-crisis period, reforms have been concluded with moderate revisions and the financial sector continued growing after the crisis [14,15]
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