Limits of Policy Intervention in a World of Neoliberal Mechanism Designs: Paradoxes of the Global Crisis
AbstractThe current global context poses several paradoxes: the recovery from the 2009 recession was not a recovery; investment, normally driven by profit rates, is lagging and not leading economic activity; the crisis is global but debate involves sub-global levels; and public safety-nets, which have helped to stabilize national income, are being cut. These paradoxes can be traced, in part, to the impact of the “truce” that followed the Keynesian-Monetarist controversy on economists’ ideas about policy activism. This implicit “truce” has removed activist macro policy from discussion, and shifted attention toward institutions as mechanisms for solving game-theoretic coordination problems. Policy activism then centers on how the “agents” (nations) can achieve optimal use of their available resources (or optimal access to resources) at the global level; and this involves creating and fine-tuning compacts – neoliberal mechanism designs – that can capture rents and attract globally mobile capital. This approach leads economists to see the key problem in the current global crisis as fixing broken neoliberal mechanisms. However, a global economy dominated by mechanisms that feed on aggregate demand without generating it faces the prospect of stagnation or collapse.
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Bibliographic InfoArticle provided by Savez ekonomista Vojvodine, Novi Sad, Serbia in its journal Panoeconomicus.
Volume (Year): 58 (2011)
Issue (Month): 3 (September)
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Web page: http://www.panoeconomicus.rs/
Neoliberal mechanism design; Policy activism; Keynesian- Monetarist controversy; Globalization; Capital mobility; Hyman Minsky; Bradford De Long;
Find related papers by JEL classification:
- B22 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Macroeconomics
- B52 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - Institutional; Evolutionary
- C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General
- D62 - Microeconomics - - Welfare Economics - - - Externalities
- E02 - Macroeconomics and Monetary Economics - - General - - - Institutions and the Macroeconomy
- F53 - International Economics - - International Relations, National Security, and International Political Economy - - - International Agreements and Observance; International Organizations
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