The Economic Institutions of Capitalism
AbstractThe 2008 crash has left all the established economic doctrines - equilibrium models, real business cycles, disequilibria models - in disarray. Part of the problem is due to Smith’s "veil of ignorance": individuals unknowingly pursue society’s interest and, as a result, have no clue as to the macroeconomic effects of their actions: witness the Keynes and Leontief multipliers, the concept of value added, fiat money, Engel’s law and technical progress, to name but a few of the macrofoundations of microeconomics. A good viewpoint to take bearings anew lies in comparing the post-Great Depression institutions with those emerging from Thatcher and Reagan’s economic policies: deregulation, exogenous vs. endoge- nous money, shadow banking vs. Volcker’s Rule. Very simply, the banks, whose lending determined deposits after Roosevelt, and were a public service became private enterprises whose deposits determine lending. These underlay the great moderation preceding 2006, and the subsequent crash.
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Bibliographic InfoArticle provided by Associazione Rossi Doria in its journal QA.
Volume (Year): (2012)
Issue (Month): 4 (December)
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Macro foundations of microeconomics; Smith’s veil of ignorance; Fiat money; Endogenous money; Leverage;
Find related papers by JEL classification:
- E00 - Macroeconomics and Monetary Economics - - General - - - General
- E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General
- B12 - Schools of Economic Thought and Methodology - - History of Economic Thought through 1925 - - - Classical (includes Adam Smith)
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