Implications For Economic Theory Research Articles

Questions to the structure and culture of the new paradigm of management of new public management

This paper aims to critically analyze the structure and the new culture of public administration paradigm named as the new administration or public management of public organizations. The main challenge is to try to explain why the dysfunctional management practices in the structure and the new culture of public organizations that are copied from focusing on administrative processes management practices of private organizations model. In doing so, it has been reviewed the literature in general from the perspective of neo-institutionalism on this subject and by using the method of critical analysis of organizations. More than dysfunctions, in this work the main challenges and worries to the implementation of the paradigm of management or governance are identified. Despite the theoretical -methodological nuances of the new institutional economy and its implications for economic theory, it is inadequate to describe only subtly strategies of the private management. This paper presents an original approach to the critical analysis of new public management. The revision of the paradigm of new public management is carried out essentially in the methodological steps needed to question and identify the action of the state in the administration of organizations and public agencies, by applying the specific management practices, based on the theoretical and methodological framework of the new institutionalism critical criteria.

Motivation, Incentives and Performance: An Interdisciplinary Review

This review aims to extend the application of economic knowledge to evidence supplied by other research areas on the relationships between incentives, motivation and performance. Six areas of investigation have been selected based on their potential contribution in addressing three issues relevant to economics. The first issue concerns the distinction between intrinsic and prosocial motivation; the second is the relationship between motivation and performance; the third relates to the existence of perverse effects of incentives on motivation, which can take the form of undermining or crowding-out effects. The results are discussed in terms of their implications for economic theory, showing that different mechanisms are at work under intrinsic or prosocial motivation, implying the need for different instruments to promote behaviors and associated performance. In terms of crowding-out effects, there is little evidence to support a perverse effect when incentives are offered before or during performance, whereas the psychological literature provides consolidated validation for the undermining effect. Economics can gain insights from other disciplines by employing their investigative tools and theoretical developments. A feature of particular interest for economics is gamification, that is, the use of game design elements (design of video games and similar games) in non-game contexts.

Bitcoin and Complexity Theory: Some Methodological Implications

This paper investigates the foundations of Bitcoin, the controversial digital and stateless currency launched in 2009. After explaining why Bitcoin is a complex object of study, the latter electronic currency is analyzed through the lenses of complexity theory. In this sense, by breaking away from the holy trinity of the mainstream, namely rationality, equilibrium and self-interest, the Bitcoin phenomenon casts light on the emergence of non-intuitive macroeconomic results derived from numerous micro-interactions involving groundbreaking technology. Further, the paper discusses how established knowledge fields, such as monetary policy and banking regulation have been shaken by Bitcoin. The methodological implications for economic theory are then singled out. Finally, we conclude.

Social Interdependencies in Consumption: An Early Economic Debate on Social Distinction, Emulation, and Fashion

This article analyzes an early and relatively little known debate on the role of social interdependencies in consumption and their implications for economic theory. The debate began in the pages of the Economic Journal when, in 1892, Alfred Marshall's student Henry Cunynghame addressed the consequences that an increase in the supply of goods might have for individual utility when this includes external effects such as a desire for display and distinction. Such interdependencies in consumption were also taken very seriously by A. C. Pigou who, in successive articles in the same journal (1903, 1910, 1913), explored in great detail the impact of third-party consumption on an individual's utility function and, potentially, on social welfare. In fact, in such cases, the derivation of the market demand curve, and even the very notion of consumer surplus, seemed to become problematic. Both Marshall and F. Y. Edgeworth remained skeptical toward the theoretical treatment of externalities in consumption, offering reasons of both practical and analytical relevance. In the same period in the Economic Journal, Caroline Foley (1893) analyzed the phenomenon of social interrelations among consumers in a more evolutionary perspective, emphasizing in addition more general possibilities in interdependencies, including change and innovation. What is of interest in this debate is that it was the first attempt in the history of economic analysis to examine the analytical consequences that considerations of social interdependencies in consumption may have for economic theory. These related to the drawing of the market demand curve, the measurement of consumer surplus, and the more general issue of how to deal with time and change in economic models. These considerations, however, proved difficult to be addressed with the then available economic tools and this, in turn, led to their being simply shelved. We conclude by noting that the participants in this debate cast the problem of social interrelations in consumption almost exclusively in terms of positional rivalry and emulation. This overshadowed the creative dimension and positive externalities that can arise through such interrelations. Foley's more historical perspective has the merit of highlighting precisely this dimension.

Comparison Of Patterns Of Convergence Among “Emerging Markets” Of Central Europe, Eastern Europe And Central Asia

Based on analysis of economic growth indicators for 1989-2014, this article distinguishes the “emerging markets” of Central and Eastern Europe (with Russia included), from the other economies that fall in the broad ‘emerging markets’ category. Following the post–1989 reforms, the countries of the region share many of the same typical institutional features as other “emerging economies”, but not necessarily the associated economic outcomes. What characterizes “emerging economies” is that they grow fast enough to systematically close the distance dividing them from the advanced economies, creating convergence. Departing from this pattern, Central and Eastern Europe (and Russia) have so far fallen short in terms of the growth rates, and the region as a whole has not made much progress in catching up. By more than doubling its national product Poland is the only notable exception in the region, although Slovenia may fit in the same category. At the other extreme, some of the economies actually lost two decades in terms of reducing the gaps, and some even fell further behind (e.g., Serbia, Ukraine). These findings have potentially serious implications for economic theory in general and for the presumption that globalization processes act as a unifying developmental force.

Forecasting Equity Returns: An Analysis of Macro vs. Micro Earnings and an Introduction of a Composite Valuation Model

Analyses of P/E10 and Market Value/GDP (MV/GDP) market valuation ratios reveal P/E10’s reliance on misconceptions of the differences between micro and macro earnings. Kalecki’s profit function is used to identify and avoid these problems, contest P/E10’s theoretical support, reveal MV/GDP as the metric providing better theoretical and statistical support, introduce the concept of “macro-earnings negativity”, and provide other important implications for economic theory. Based on the MV/GDP metric, we develop a multi-variable forecasting model utilizing both new and prior-researched variables, the most effective of which is a demographic measure. The resulting composite model is much more accurate than popular benchmark metrics, and, relative to popular benchmarks, forecasts considerably lower returns for the coming decade.

Hyman Minsky’s Financial Instability Hypothesis and the Accounting Structure of Economy

Hyman Minsky’s view of the accounting structure of economy is essentially based upon ownership of wealth, cash flows and financial instruments as entitlements to both. Further accounting notions are introduced here that improve on Minsky’s financial analysis. From the accounting viewpoint, revenues and expenses, assets and liabilities are organized through economic entities that frame and shape cash transfers through an accruals basis of accounting. Including these ongoing entities and their accruals upgrades Minsky’s frame of analysis from both heuristic and theoretical viewpoints. Current international and US accounting standards and practices provide examples concerning leases, repos, special purpose entities, goodwill, depreciation and liquidation values, and mark-to-market valuation of corporate liabilities. Notably, banking and government agencies can then be understood as dynamic holistic connections that layer upon ownership of wealth and entitlements to it, generating a credit-debt economy that fundamentally differs from a “capitalist” economy. Among others, Schumpeter and Keynes originate this collective dynamic understanding of bank borrowing and government borrowing, respectively. Both borrowings can be and have been employed to generate investment, production and consumption that could not have been generated without them. Some implications for economic theory and analysis of financial stability, banking and money are developed.

A Missing Chapter of Monopoly Capital: Introduction to Baran and Sweezy’s “Some Theoretical Implications”

Monopoly Capital: An Essay on the American Economic and Social Order by Paul A. Baran and Paul M. Sweezy, published in 1966, is one of the foundational works in the development of Marxian political economy in the United States and indeed the world, and is today recognized as a classic, having generated more than four-and-a-half decades of research and debate. The completion of the book, however, was deeply affected by Baran’s death, on March 26, 1964, two years before the final manuscript was prepared. Although all of the chapters were drafted in at least rough form and had been discussed a number of times the authors had not mutually worked out to their complete satisfaction certain crucial problems. Consequently, two chapters were left out of the final work.… What happened to these two missing chapters—“Some Implications for Economic Theory” and presumably “On the Quality of Monopoly Capitalist Society—II”—remained for many years a mystery. This article can also be found at the Monthly Review website, where most recent articles are published in full.Click here to purchase a PDF version of this article at the Monthly Review website.

Did Hayek have a monetary theory of business cycles?

Joseph Schumpeter, a careful reader of Hayek, categorized Hayek’s theory of economic cycles as non-monetary. Almost every other source, including Hayek himself, categorized the theory as monetary. The issue turns on the concept of causality being used. The question of what causality concept to apply to complex phenomena has substantive implications for economic theory. A simple concept of causality, appropriate to the study of some physical phenomena, will mislead when applied to complex phenomena. We provide examples of errors in analysis that follow from the wrong choice of a causal paradigm.

Freedom to Choose and Choice X-inefficiencies: Human and Consumer Rights, and Positive and Normative Implications of Choice Behavior

It is important to model choice behavior in a manner that captures the reality that choices made by individuals are often not utility maximizing or satisficing from the perspective of the person doing the choosing. If an individual's choice behavior is not welfare maximizing, as it is always assumed to be in the traditional economics narrative, then the revealed preferences of individuals need not be a metric for the good life. Rather, choice behavior might instead reflect the preferences of others, misleading or incomplete information, or poor education. A key point made in this paper is that only in an environment where individuals are free to choose and have effective voice, irrespective of income, gender, ethnicity, or religion, can choice behavior be a metric for the good life. It is possible for rational agents who are characterized by optimal or true preferences to be unable to realize or manifest these preferences for social or institutional reasons. This has important implications for economic theory as well as for public policy,

Rationality and the language of decision making

PurposeThe purpose is to show the importance of language in economic activity and encourage economists to pay more attention to language than hitherto.Design/methodology/approachThe paper examines John Searle's work and consider its implications for economic theory. It discusses Searle's “background” and its role in the explanation of intentional phenomena. It analyses the implications of the background for the notion of rule‐following and illustrates the role the background plays in decision making by examining conversation‐analytical studies of decisions involving responses to invitations.FindingsSearle offers a novel interpretation of rules which contrasts to that found in economic theory. The decisions I examine manifest a “preference structure” independent of the preferences of individuals. These can be called “background preferences”. Personal and background preference rankings can conflict with each other. This leads to a possible interpretation of the phenomenon “weakness of will”. The paper concludes with remarks on why language is a neglected phenomenon in economic theory.Originality/valueSearle's work is slowly coming to the attention of a few economists. However, most contributions to the debate so far are at a very general level and do not tackle concrete issues of economic theory. By looking empirically at decision making, this paper shows the relevance of Searle to an issue at the heart of economic theory.

Consumption Takes Time: Implications for Economic Theory

Consumption Takes Time: Implications for Economic Theory

Veblen’s “Instinct of Workmanship,” Its Cognitive Foundations, and Some Implications for Economic Theory

(2005). Veblen’s “Instinct of Workmanship,” Its Cognitive Foundations, and Some Implications for Economic Theory. Journal of Economic Issues: Vol. 39, No. 1, pp. 1-20.

Behavioral economics: implications for economic theory and policy

The concerns of behavioral economics are considered in the context of the decentralized, private ownership market economy. Modes of adaptive economizing behavior are outlined and their implications for augmenting the classical paradigm outlined. The role of viability mechanisms that indirectly and adaptively coordinate producers and consumers out of equilibrium is emphasized. The destabilizing nature of the creative intelligence and adaptive economizing transforms the world. The example of internal combustion, its effect on agriculture and transportation and the corollary use of resources provides a timely example.

Ian Steedman: Consumption takes time – Implications for economic theory. The Graz Schumpeter Lectures Vol. 4

Ian Steedman: Consumption takes time – Implications for economic theory. The Graz Schumpeter Lectures Vol. 4

Multiple Constraints and Hicksian Complementarity: A Generalization and an Application to Portfolio Choice

Ian Steedman (Consumption Takes Time: Implications for Economic Theory, Routledge, London, 2001) has shown, among other things, that when a household chooses amounts of time to allocate to competing consumption activities subject to both a money income constraint and a time constraint, at least two consumption activities must have at least one compensated complement each. This paper generalizes Steedman's result in several directions and uses the generalized version to study compensated complementarity among state–dependent consumption levels and asset purchases in a model of portfolio choice under uncertainty.

Mixed and pure sharecropping in Nepal: empirical evidence supporting the traditional hypothesis

We analyse differences in input and output intensities across three comparative tenure regimes in Nepal, using two test methods: an F-test based on Hotelling's T2 statistic, and a test which adapts Shaban's (1987) methodology to include plot size and crop type. Our results reveal statistically significant differences in the three alternative systems of property rights assignments, which have implications for economic theory and policy relating to tenure systems.

Glogalisation and Trade: A Symposium

The world economy has become more open and integrated in recent years. Countries are more engaged in international trade and the importance of tradables relative to non-tradables in national output is rising everywhere. Capital flows more freely among countries and workers cross borders more readily than ever before. These are some of the changes people have in mind when they talk about the 'internalisation' or 'globalisation' of the world economy. While the general trend toward greater openness is widely acknowledged, there is disagreement on the extent and novelty of these developments. There is also disagreement on whether all this is on balance good or bad - for the world economy and for individual countries and their citizens. In order to explore these issues, the Lowe Institute of Political Economy and the Graduate Institute of International Studies convened a two-day workshop of experts in Claremont in late January 1997. The objective was to assess globalisation in terms of its causes, dimension, and major attributes, and to examine its implications for economic theory, economic measurement, and economic policy. The deliberations of the workshop are summarised in the following pages.

The Government Procurement Agreement: Implications of Economic Theory

This paper analyzes the provisions of the new Agreement on Government Procurement (GPA), drawing insights from trade theory and recent developments in the economics of information and law. A central conclusion is that in a world where imperfectly informed procurers purchase from imperfectly competitive firms on behalf of imperfectly informed tax-payers, it is not easy to devise rules which would be optimal in all situations. Nevertheless, the non-discriminatory provisions of the GPA seem to approximate closely the rules which would maximize global welfare. A significant benefit of the GPA is in helping to overcome national agency problems in procurement by creating mechanisms for reciprocal international monitoring supported by multilateral enforcement. There is, however, scope for improvement. First, the GPA does not equip bidders for government contracts to vault over trade restrictions, so the creation of genuine international competition for government procurement remains crucially dependent on the liberalization of trade. Secondly, weaknesses remain in the enforcement mechanism. These include the low level of compensation to a successful challenger, the absence of restrictions on settlements, and the lack of provision for challenge and review of bail-outs. The paper proposes certain improvements. (This abstract was borrowed from another version of this item.)

Nonlinear mode-interaction in the macroeconomy

A central problem for a dynamic formulation of macroeconomic theory is how to explain the occurrence of different, relatively well-defined economic modes such as the short term business cycle, the construction (or Kuznets) cycle, and the economic long wave (or Kondratiev cycle). Equally important is a description of the various phenomena that can arise through interaction between these cycles. Modern nonlinear theory suggests that different cyclical modes may be entrained through the process of mode-locking, where the periods of the interacting modes adjust to one another, so as to attain a rational ratio. This type of interaction is well documented in physical and biological systems. However, despite the importance of the problem and abundant evidence for nonlinearity in the economy, modern concepts of nonlinear mode-interaction have not yet been applied to the problem of entrainment between economic cycles. We show how mode-locking and other highly nonlinear dynamic phenomena arise in a model of the economic long wave. The behavior of the model is mapped as a function of the frequency and amplitude of an external forcing, producing both a devil's staircase and a detailed Arnol'd tongue diagram. Two different routes to chaos are identified. The Lyapunov exponents are calculated, allowing the strength of the chaos to be assessed, and the fractal nature of the basins of attraction for two simultaneously existing periodic solutions is illustrated. The paper concludes with a discussion of the implications for economic theory.