Mainstream Economic Thinking Research Articles

Whitlam's Economic (Inter)Nationalism

By his own admission, Australian Prime Minister Gough Whitlam was not much of an economist, a disclosure that has fuelled criticisms of his government's performance during the economic crises of the 1970s. By contrast, Whitlam was a self‐declared internationalist who promoted the domestic and global possibilities of the international system. Of course, twentieth‐century economics and internationalism were mutual rather than dichotomous. Accordingly, Whitlam's internationalism provides a vantage point to re‐evaluate his economics. This article focusses on how one strand of Whitlam's internationalism — his Third World sympathies and alignments — informed his government's resource policy, as designed by Minister for Minerals and Energy, Rex Connor. Rather than seeking to redeem Whitlam's economic credentials via this internationalism, however, I argue Whitlam's appeal to Third Worldism sought to infuse an anti‐economics — or, more precisely, a critique of mainstream economic thinking — into Australian resources policy. The legacies of this critique have been enduring. Whitlam and Connor's attempts to establish export controls, foreign investment regulations, and state‐owned enterprise galvanised a fierce backlash from miners and libertarian economists. This backlash has helped shape the neoliberal framing of Australian mining and energy policy over the past 40 years. At the same time, with climate change and energy transitions again illuminating the politics of natural resources, Whitlam's Third World critique remains salient.

An Empirical Investigation on the Determinants of International Migration

Abstract Are differences in per capita income between countries really the main cause of migratory flows? Mainstream economic thinking would give an affirmative answer. In the light of the heterodox literature, in this article, the authors critically evaluate this view and then they conduct an empirical test (applying panel and dynamic panel models) on data relating to the stocks of migrants on 232 countries from 1990 to 2019, trying to explain migration trends based on social-political, cultural, demographic and economic variables (obtained by integrating 4 official datasets). The results reveal a non-unique influence of differences in per capita income on migratory flows: up to a certain threshold (around $27,000) migration appears to be directly related to per capita GDP of migrants’ country of origin. Furthermore, the pre-existing stock of migrants in the country of destination takes on an important role, in line with the findings of the literature on migratory chains. These empirical findings could contribute to improve migration policies.

Social entrepreneurship and the nature of the impact achieved

Society's most pressing needs all over the world have raised concerns which are comprehensive, deep and quick. The development of any nation depends on its social and economic strength as well as the contributions of its citizens. Their contribution now has an important place, but is only relatively recently that this contribution has been recognized by writers outside mainstream economic thinking. As attention has become more focused on the importance of entrepreneurship for economic security and the creation of employment opportunities, greater attention has been directed at the social enterprise sector. Thus, the new innovative culture has additionally spread to the social area. Progressively higher expectations are being set on social entrepreneurship in ameliorating social issues facing the world at large. Social entrepreneurship is a concept that covers the individual motivation and leadership behind the pursuit of social objectives. This can be best represented as the activity of pursuing social objectives through entrepreneurship. Accordingly, social business ventures can include a somewhat expansive scope of associations and organizations which acquire assets to implement social objectives. Therefore, the main purpose of this paper is to examine the impact of social entrepreneurship in addressing social issues facing the world. It will explain the importance of social entrepreneurship, its concepts, social issues as well as impacts of social entrepreneurship. Additionally, Nigeria was cited in most cases as an example of such an impact. Keywords: Social entrepreneurship, social economy, sectors, social enterprise.

Pension arrangements and economic thinking: unreal assumptions and false predictions in the case of Argentina

In accordance with mainstream economic thinking, the World Bank advised Latin American countries to reform and fully or partially privatize their pension systems. Argentina was one of the countries to follow these recommendations, which it did without first checking whether the arguments were valid or whether the theoretical assumptions were fulfilled. On the basis of publicly available statistical information and a historical review of the Argentine pension system, we conclude that most of the arguments put forward by the World Bank were refutable at the time of the reform, which did not solve the problems it set out to address. For this reason, decision-makers should heed the economic history of each country before following the recommendations of international organizations.

Financialization, Structural Power, and the Global Financial Crisis for Europe’s Core and Periphery

In the aftermath of the Global Financial Crisis (GFC), European governments intervened to support domestic financial systems; several years later, peripheral European economies were at greater risk of having domestic financial crises transform into fiscal crises. While mainstream economic thinking predicts financial markets will punish risky bank behavior with higher interest rates and punitive resolution measures, in fact, banks in core European economies, which engaged in riskier activity in the subprime mortgage market, faced preferential treatment in the aftermath of the GFC. This article argues that financialization, the increased structural economic power of financial institutions, increased the structural power of core members of the Eurozone to direct supranational policies after the GFC. It supports these claims with financial data from balance sheets for a sample of EU economies, as well as institutional analysis of the financial aspects of European integration, and the financial, monetary, and fiscal responses that followed the onset of the GFC. While banks in the Eurozone core were more likely to have engaged in risky behavior, they were more likely to receive liquidity assistance from monetary authorities like the Federal Reserve due to their activity in the US. As Eurozone governments consider how to respond to crises, such as the Covid-19 pandemic going forward, policies that more equitably support governments rescuing domestic financial actors should be considered in tandem with broader financial regulations of structurally important economic institutions.

The Climate Change Challenge: A Review of the Barriers and Solutions to Deliver a Paris Solution

Global greenhouse gas (GHG) emissions have continued to grow persistently since 1750. The United Nations Framework Convention on Climate Change (UNFCCC) entered into force in 1994 to stabilize GHG emissions. Since then, the increasingly harmful impacts of global climate change and repeated scientific warnings about future risks have not been enough to change the emissions trend and enforce policy actions. This paper synthesizes the climate change challenges and the insofar insufficient mitigation responses via an integrated literature review. The fossil industry, mainstream economic thinking, national rather than international interests, and political strive for short-term interests present key barriers to climate mitigation. A continuation of such trends is reflected in the Dice model, leading to a 3.5 °C temperature increase by 2100. Despite receiving the Nobel Prize for integrating climate change into long-run macroeconomic analysis via the Dice model, increases in global mean temperatures overshooting the 1.5 °C to 2 °C Paris targets imply an intensified disruption in the human–climate system. Past and present policy delays and climate disruption pave the way for solar radiation management (SRM) geoengineering solutions with largely unknown and potentially dangerous side effects. This paper argues against SRM geoengineering and evaluates critical mitigation solutions leading to a decrease in global temperatures without overshooting the Paris targets. The essential drivers and barriers are discussed through a unified approach to tipping points in the human–climate system. The scientific literature presents many economically and technologically viable solutions and the policy and measures required to implement them. The present paper identifies the main barriers to integrating them in a globally cooperative way, presenting an efficient, long-term, and ethical policy approach to climate change.

Growth is Good for the Poor? Not Necessarily

ABSTRACT In mainstream economic thinking, it is common to find a simplistic relationship between economic growth and poverty reduction. Two decades ago, a paper titled “Growth is Good for the Poor” purported to have established a strict one-to-one relationship between economic growth at the national level and growth of income among the poor. In this note we explain the methodological, modelling, and analytical shortcomings of the exercise. Using simulations based on random numbers we show that the data did not support the arguments and that, consequently, the policy conclusions were not warranted by the analysis. The lessons are important in the current context when addressing growing poverty in the wake of the COVID-19 pandemic.

Commentary on " Selecting futures: The role of conviction, narratives, ambivalence, and constructive doubt" by Fenton‐O'Creevy and Tuckett (2021)

Commentary on <i>"</i> Selecting futures: The role of conviction, narratives, ambivalence, and constructive doubt" by Fenton‐O'Creevy and Tuckett (2021)

Constructing Viking Link: How the Infopower of Cost-benefit Analysis as a Calculative Device Reinforces the Energopower of Transmission Infrastructure

This paper sheds light on the performativity of economics in the decision-making process behind Viking Link, a Danish-British interconnector under construction. It shows how energopower, that is, the political power inherent to energy infrastructures, is reinforced through the workings of cost-benefit analysis as prescribed by the Danish Ministry of Finance. In doing so, the paper offers a novel approach to the performativity of calculative devices, highlighting the role of infopower, a Foucauldian neologism denoting the power inherent to information structures. Calculative devices are understood as information infrastructures that exert power through the work of data formatting. The cost-benefit analysis, as such a calculative device, limits the potential valuations of Viking Link and hence restricts decision-making. This has impactful consequences, as the infopower of mainstream economic thinking makes it possible to disregard relevant aspects of Viking Link, like its (lacking) contribution to decarbonization and alternatives to interconnectors as ways of integrating fluctuating renewable energy.

From Creative Destruction To Destructive Creation

The article underlines that uncontrolled and wasteful debt is the main culprit for a economic system that not only makes inequality in the world methodically more extreme, but also systematically misdirects economic resources. Mainstream economic thinking is plainly wrong in circumstances of extreme debt and it is only used as a veil for the wealthy to become wealthier at the expense of the economic agents of a country. Austerity policies that are usually prescribed as the solution in highly indebted countries only serve the interests of the bond holders and those who seek to gain from the misfortune of the country that finds itself sinking in debt.

Innovative ways of thinking concerning economic governance after the global financial crisis

The global financial crisis highlighted the limitations of the mainstream economic thinking. The post-crisis reflection has not resulted yet in any new paradigm, however, several new, still separate, innovative approaches appeared in the field of public finances and economic governance. The aim of the paper is to provide a structured presentation of these new innovative approaches, which can serve as a potential basis of a new way of thinking about economic and financial governance and the innovation of public finances. The paper reviews the relevant international literature published after the global financial crisis and, as a result, presents the innovations, especially in respect of the role of the state, the renewal of central banking, the reassessment of the stability and geopolitical aspects of economic policy, the relevance of confidence and cooperation in public policy, the increasing role of the public sector concerning the sustainability of economic development and the renaissance of institutional economics. Based on these new approaches, the paper concludes that the smart, inclusive and sustainable, innovation-led growth requires the rethinking of the role, the functions, the objectives and the instruments of public policy and economic governance.

Queer Fire: Ecology, Combustion and Pyrosexual Desire

We set out by noting the preference for circular flows in ecological thought, and the related abhorrence of inefficiency and waste that Western ecology shares with mainstream economic thinking. This has often been manifest in a shared disdain both for uncontained, free-burning fire and for ‘unmanaged’ sexual desire. The paper constructs a ‘pyrosexual’ counter-narrative that explores the mutually constitutive and generative implication of sex and fire. Bringing together the solar ecology of Georges Bataille, feminist and queer thinking about sexuality and reproduction, and a range of ways of theorising biological life and fire, we explore how fire mediates between organismic desire and the energetic dynamics of the earth and solar system. The first section takes a genealogical approach to fire and sex that traces their entanglement from the initial ‘assembling’ of fire through to the emergence of a fire-handling creature. The second section looks at how fire has been contained and intensified by human actors, and the role that heat-driven transformations of inorganic matter have played in the incitement and channeling of desire in urban spaces. The third section addresses the development of industrial ‘heat engines’ and the implications for desire and reproduction of tapping vast reservoirs of subterranean solar energy. We round off by beginning to consider what alternative possibilities might lie in the renegotiation of sex and fire on a planet undergoing rapid change.

Long-term vs short-term perspectives: adaptation, stability and the roles of the constitutional courts in the management of the Eurozone crisis in Germany and Italy

ABSTRACTThe article sheds light on the different approaches used by Germany and Italy in adopting and implementing the instruments created to tackle the Eurozone crisis, with special reference to the European Stability Mechanism, the Fiscal Compact, and the monetary policy instruments adopted by the European Central Bank (ECB). The responses of the two countries are argued to derive from the influence of mainstream economic thinking – Germany promotes a culture of stability and a longer term perspective while Italy favours liquidity and short-term solutions – on the case law of the constitutional courts of the two countries. The German Court has insisted on the principle of constitutional identity and budgetary autonomy of the Bundestag to resist the expansionary monetary policy of the ECB and the growing competences of the EU. In addition, it has recognised the primacy of the principle of long-term stability as a constitutional principle. The Italian Court, on the other hand, has managed to balance the imperative of debt reduction with the need to avoid damaging the welfare state. Case law shows that both Courts have played an increasingly political role.

Industrial Policy in Response to the Middle‐income Trap and the Third Wave of the Digital Revolution

AbstractThe ‘middle‐income trap’ (MIT) is ‘real enough’ for policy makers in developing countries to take it as a serious threat to prospects for achieving ‘high’ average income. Those prospects are further clouded by the major changes occurring as the digital revolution moves from connecting people to the internet to connecting the internet to everything else, across many sectors of human life (the Third Wave). Both sets of forces raise the potential advantages of pro‐active industrial policy. Yet mainstream economic thinking – and the consensus of international development organizations like the World Bank – has long tended to disapprove of it, in the spirit of ‘The best industrial policy is none at all’. In light of the middle‐income trap, the Third Wave, and other conditions in the world economy, this essay discusses some of the big issues in the design of industrial policy, on the theme of how to do it well rather than how to do it less.

“Methodomania”? On the methodological and theoretical challenges of IMP business research

Purpose Behind the simple connotation “business exchange” a complex empirical phenomenon can be observed, including using, producing and developing activities, taking place in different contexts, influenced by ideas stemming from both practice and mainstream economic thinking. The purpose of this paper is to discuss the methodological challenges of research on business exchange in general and of IMP research in particular. Furthermore, to discuss how the authors can avoid the contemporary “methodomania” trend, where the researchers’ focus is directed toward accounting for which rules were followed. Design/methodology/approach The paper is based on a methodological distinction made by Peter Galison (1997) in his investigation of the interdependence among research approach, methodology, and research object in microphysics. Studies based on: “image,” allows data in its original form, and “logic,” requires the translation of original data and therefore relies “fundamentally on statistical demonstrations.” This distinction is utilized to investigate what is specific with business exchange as a research object, and how IMP researchers have dealt with the methodological challenges it presents. Furthermore, the paper considers these different methodological approaches in relation to theory and understanding of the research object. Findings The main conclusion is the huge importance the image-based methodology has had for the development of the IMP network approach. From the very start the IMP project has been focused on the production of a large set of, in Galison’s terminology, “hard facts” about the existence, substance and importance of interaction and the relationships it is creating. This image-based methodology has been utilized in the development of a set of imaging instruments, each with an ability to picture the content and consequences of business exchange. Research limitations/implications Two methodological challenges which are specific for business research are identified. One is that “images” in terms of personal accounts on the organizing of production and use of economic resources are marbled with ideas, stemming from a mix of theories, textbooks and practice on how to do this. The second is that established theories create a “logic” in terms of the combination of “assumptions” and established “accounting principles” that produce a number of outputs interpreted as primary data and objective accounts of the characteristics of the production and use of economic resources. Practical implications IMP’s image-based methodology and the development of specific imaging instruments can increase the exactness in the pictures of the content and consequences of business interaction, and also, catch the range of its substance. Considering this circumstance could be a way to avoid “methodomania” and to breed awareness of the relationship among research object, methodology, and research approach. Social implications IMP’s image-based methodology can increase the awareness that the logic-based model of business exchange has been ascribed an advisory role in terms of how companies should act in order to survive and prosper: as sellers and buyers in relation to each other, and also in relation to others. Originality/value First, the paper underlines that image-based methodologies can be used to produce “hard facts” about the existence, substance, and importance of business interaction. Second, the paper shows how the methodology of mainstream economics tends to be “the elephant in the room,” both in approaches resting on “image” and “logic.” It addresses the importance of making the elephant visible and investigates what is happening in its shadow.

Revival of Legacy of Tooke and Gibson: Implications for Monetary Policy

Abstract The monetary policy rules used by central banks these days are based on the assumption that inflation could be reduced by increasing interest rate. On contrary, Tooke (1774-1858), the forefather of monetary economics, was of the view that the relationship between interest rate and inflation should be positive. His view was based on simple logic, ‘interest is a part of cost, and therefore, the increase in interest rate should increase inflation by increasing cost of production (Tooke, 1838)’. Tooke’s view has got support from a number of empirical evidence including Gibson (1923) who found positive correlation between two variables for UK data over a period of 200 years. On the other hand, mainstream economic thinking on which the actual monetary practices are based ignored any possibility of positive relationship between interest rate and inflation throughout the history. The existence of Tooke’s cost side effects of monetary policy is a serious concern because if these effects exist than the use of monetary policy would be counterproductive. Using the data from entire globe, I attempt to explore the nature of relationship between the interest rate and inflation. I found that the data supports the perception of Tooke and Gibson and denies that the effectiveness of monetary policy currently adapted by the correlation between interest rate and inflation is positive. The results are robust to sample size, sample period, and various definitions of interest rate and inflation.

Better Development Decision-making: Applying International Human Rights Law to Neoclassical Economics

This paper aims to demonstrate that a human rights-compliant normative approach offers solutions to some of the specific areas of concern for economic decision-making in the context of development, as well as for meeting the requirements of human rights. The authors, an international lawyer and economist respectively, draw on the doctrines that inform international human rights law in the area of socio-economic rights and by providing a careful construction that meets the didactic demands of a cross-disciplinary inquiry, reveal how the externally-generated ethical criteria of international human rights law provide welfare economics with the justice-centred guidance it lacks, moving it beyond the conventional premises of economic efficiency and aggregate social utility. The merits of this study transcend that of academic pursuit: most international organisations favour mainstream economics with development economists adopting the value judgments and allocation efficiency principles of neoclassical welfare economics. Integrating the normative demands of human rights into mainstream economic thinking and decision-making may thus offer international development and financial institutions insights that help set alternative norms and value judgments that can act as an integral complement to welfare economic analysis.

Market Reasoning as Moral Reasoning: Why Economists Should Re-engage with Political Philosophy

In my book What Money Can't Buy: The Moral Limits of Markets (2012), I try to show that market values and market reasoning increasingly reach into spheres of life previously governed by nonmarket norms. I argue that this tendency is troubling; putting a price on every human activity erodes certain moral and civic goods worth caring about. We therefore need a public debate about where markets serve the public good and where they don't belong. In this article, I would like to develop a related theme: When it comes to deciding whether this or that good should be allocated by the market or by nonmarket principles, economics is a poor guide. Deciding which social practices should be governed by market mechanisms requires a form of economic reasoning that is bound up with moral reasoning. But mainstream economic thinking currently asserts its independence from the contested terrain of moral and political philosophy. If economics is to help us decide where markets serve the public good and where they don't belong, it should relinquish the claim to be a value-neutral science and reconnect with its origins in moral and political philosophy.

Responding to the financial crisis: Need for a new economics

This viewpoint argues that the financial crisis has also highlighted the failings of mainstream economic thinking, at both micro and macro-economic levels, in providing adequate and appropriate understanding of how economies work. As a result, it cannot inform well decisions by policy-makers. In particular, mainstream economics has neglected the complexity of systemic interactions and behavioural factors underlying modern economies, as well as the systemic dependence of economies on natural resources and ecosystem services. This piece discusses four heterodox economic approaches that could contribute to the development of a new economics. By focussing on what these approaches tell us about particular problems, a more realistic and useful economics can be developed, which can address the current economic challenges in ways consistent with realising a transition to a sustainable future.

The euro — a story of misunderstanding

From the very beginning of the European Monetary Union the crucial institutions, the European Commission and the European Central Bank, led by mainstream economic thinking, were not up to their task of controlling the core of the system effectively. A huge gap in competitiveness among the member states has arisen due to German wage-dumping policy on the one hand and, on the other, wage growth in Southern Europe which is above the growth of productivity plus the inflation target of 2%. A European-wide coordination of wage policy is the only promising way to close this gap. However, as wages and competitiveness are not high on the agenda of the politicians responsible and their advisers, time to save the euro is running out.