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Limits of Policy Intervention in a World of Neoliberal Mechanism Designs: Paradoxes of the Global Crisis

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  • Gary A. Dymski

    () (Department of Economics, University of California, USA)

Abstract

The 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.

Suggested Citation

  • Gary A. Dymski, 2011. "Limits of Policy Intervention in a World of Neoliberal Mechanism Designs: Paradoxes of the Global Crisis," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 58(3), pages 285-308, September.
  • Handle: RePEc:voj:journl:v:58:y:2011:i:3:p:285-308
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    References listed on IDEAS

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    1. Roger B. Myerson, 2008. "Perspectives on Mechanism Design in Economic Theory," American Economic Review, American Economic Association, vol. 98(3), pages 586-603, June.
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    9. Gary Dymski, 2011. "The International Debt Crisis," Chapters,in: The Handbook of Globalisation, Second Edition, chapter 6 Edward Elgar Publishing.
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    Cited by:

    1. Phillip Anthony O’Hara, 2014. "Political Economy of Love: Nurturance Gap, Disembedded Economy and Freedom Constraints within Neoliberal Capitalism," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 61(2), pages 161-192, March.
    2. Howard Stein, 2012. "The Neoliberal Policy Paradigm and the Great Recession," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 59(4), pages 421-440, September.
    3. Pascal Petit, 2013. "France and Germany Nuclear Energy Policies Revisited: A Veblenian Appraisal," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 60(5), pages 687-698, September.
    4. Gary A. Dymski, 2014. "The neoclassical sink and the heterodox spiral: political divides and lines of communication in economics," Review of Keynesian Economics, Edward Elgar Publishing, vol. 2(1), pages 1-19, January.
    5. João Sousa Andrade & António Portugal Duarte, 2014. "Output-gaps in the PIIGS Economies: An Ingredient of a Greek Tragedy," GEMF Working Papers 2014-06, GEMF, Faculty of Economics, University of Coimbra.

    More about this item

    Keywords

    Neoliberal mechanism design; Policy activism; Keynesian- Monetarist controversy; Globalization; Capital mobility; Hyman Minsky; Bradford De Long;

    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 - - - Historical; 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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