Robert Lucas has argued that the welfare costs of the business cycle are extremely small, relative to the benefits of supply-side measures that improve trend growth. Lucas measured the costs of the business cycle by comparing the utility of a representative agent given the historical level of consumption volatility with the same agent’s utility in a situation in which consumption always equaled its mean value. Utility is higher with no business cycle, because of risk aversion. The parameters of the utility function—most crucially, relative risk aversion (RRA)— are thus involved in estimating business-cycle costs. The RRA has been estimated in a number of ways, for example, by using data on insurance purchases and through surveys that ask people about hypothetical gambles.

This paper will challenge Lucas’s approach by calling into question whether the widely varying estimates of RRA really measure a single, stable entity and suggesting that risk aversion has different ethical implications in different contexts. In particular, risk that people voluntarily take on is arguably more acceptable than risks imposed by society or by an employer. Policymakers make decisions about risk borne by others, a situation that calls for different sorts of reasoning than individual decisions about risk. Furthermore, using some ideas from Amartya Sen, the paper will argue that since people systematically make mistakes when they make decisions about things like insurance purchases or gambling, data on these choices do not always “reveal” how much insurance or gambling truly maximizes welfare—or how costly the cycle is.

Whereas at earlier times governments took primary responsibility for managing price risk on behalf of coffee farmers, today private risk management arrangements are rising up to fill the voids left by agricultural liberalization. This process, termed “risk privatization,” has gone hand in hand with a growing advocacy of market-based risk management arrangements, like derivatives markets. Derivatives markets, however, are not equally accessible to all coffee sector participants. Small farmers, in particular, are having difficulty managing price risk with derivatives, suggesting that risk privatization is having uneven effects in terms of economic security and welfare. Considering the ineffectiveness of other private strategies in managing price risk, the inaccessibility of derivatives markets to small farmers portends growing inequalities—among farmers of different size and wealth, and along the coffee commodity chain. The vulnerability of small coffee farmers to price risk, due to the poverty of private strategies, may well be undermining efforts at poverty alleviation, rural development and the reduction of national and global economic inequalities.

It is said that economics value individual and economic freedom and from that many hastily conclude that mainstream economics value human rights. The purpose of this paper is to show that on the contrary mainstream economics is fundamentally contradictory with many human rights especially Economic, Social and Cultural Rights. The main reason for this is that mainstream economics and human rights have trouble in communicating, the latter speaking the rights language and the former the needs language. Within the needs language, capability to pay is the key question whereas within the rights language, entitlement is. If in the first case exclusion and inequality are acceptable in the second case the only acceptable situation is the one characterized by inclusion and equality. In other words goods and services can be unequally distributed, rights cannot. For this reason one cannot count on the market alone to ensure economic, social and cultural rights. Therefore, considering the introduction of different logics into the economic equation as unbearable interferences with economic logic, mainstream economics stands against human rights. In order to give a better illustration of this contradiction the particular conflicts between economics and the right to work, the right to water and the right to social security will be presented. The main conclusion of this paper is that in order to favour human rights economics should either suffer a paradigmatic revolution or accept to play a just supporting role in the process of global development.

Endogenous Money / Monetary Reform

A2: Friday, 9:00-10:30

Though the theory of Endogenous Supply of Money lends itself to various different interpretations its central proposition is a simple one: non-financial business sector’s need for credit is seen as the driving force behind the process of money creation in the economy. However, the economic role of commercial banks and depository institutions have changed significantly in the era of financial liberalization since the early 1980s, at least in the US. Not only has the importance of traditional bank lending decreased in the overall credit creation process in the economy, but also the relative importance of commercial and industrial loans in banks’ overall asset structure have experienced a steady decline. Thus, the emergence of new financial intermediaries and instruments that have transformed the process of credit creation, along with the growing importance of the credit needs of households in financing non-GDP transactions, need to be incorporated into the theory of endogenous money. The objective of this paper is to examine the way in which the theory might need to be recast if not revised in order to do so.

This paper aims at exploring the endogenous money hypothesis as this is implied by the Post Keynesian tradition. Turkey serves as the platform on which the undertaken empirical analysis is conducted. The inconclusive cointegration results obtained reflect the turbulent economic environment that Turkey has experienced over the last decades. The causal dimension however, appears to be in line with the Post Keynesian hypothesis.

Evaluating Stephen Zarlenga’s Interpretation of the Marxist and Keynesian View of Money

The mainstream view of money has been subject to critiques from heterodox economists from the post-Keynesian and Marxist traditions yet, the monetary reform movement has been critical of political economists from all traditions for failing to identify the private issue of money as the central problem. This paper reviews some key elements of the mainstream view, and their critics, and evaluates the claims of the monetary reformers. Stephen Zarlenga, for instance, in his historical study of the political economy of money suggests that the (unnecessary) acceptance of the private creation of money precludes the possibility of a state-sanctioned ‘money of account. This notion of state-money, derived from Aristotle, is seen as indispensable for effective monetary reform. The paper then concludes that these ideas have been unfair towards Marx, Smith and Keynes yet serve to illuminate an interesting and important arena for future research.

Whither Development?

A3: Friday, 9:00-10:30

This paper traces the history and current state of international economic development through its institutions and attempts to reassess these institutions and their processes in a heterodox manner. There are many stereotypes and clichés to the foreign assistance industry: that it ‘takes from the poor in rich countries and gives to the rich in poor countries;’ that it provides laboratories for economists and other social scientists to apply theories abroad that they would never attempt at home (the most obvious examples of these are population control programs and the privatization of pension funds); and that development creates “brain drain” from indigenous institutions to the very institutions of development itself. Although a brief summary of the major research programs in development is given, the paper does not attempt to falsify or confirm any of these or other, some perhaps positive, some perhaps normative, research areas and their corresponding policy recommendations. The purpose of the paper is to question the very nature of development itself through an historical and philosophical re-examination of its institutional constructs. The Hegelian dialectical method of analysis is applied to the institutions of economic development and is used to ask, “what next and why?”

This paper develops a taxonomy of reflexive development practice, suggesting an examination of external values and norms; an assessment of the importance of local context; a recognition that policies can worsen the problems that they try to solve; and the idea that theory and policy should be revised as circumstances change. The taxonomy is developed as a way of addressing the difficulties encountered by the modernist Washington Consensus on the one hand and postmodernism on the other. The discussion draws on the work of the sociologist Pierre Bourdieu, who tries to move the debate further using the concept of reflexivity, combining the objectivism of the outsider with the attention to context of the locally-embedded researcher.

This paper argues that cultural capital exhibits the characteristics of capital goods. It is suggested that investing/disinvesting in cultural capital will have an impact on socioeconomic well-being. However, it is contended that a careful analysis of the nature of that impact must precede policy implementation. Indeed, on the one hand policies aimed at preserving cultural capital can lead to the perpetuation of the status quo and thus to socioeconomic stagnation; on the other hand sudden changes in cultural capital can create cultural lags that may hinder the development process. Overall, this paper seeks to establish a better understanding of the nature of cultural capital and of its usefulness to economic analysis.

Gendered Political Economies

A4: Friday, 9:00-10:30

A commonly asked question is: why do battered women stay with or return to their abusers. This essay seeks to answer that question. It especially focuses on the role of domestic violence shelters and other services that a woman might use to support her. Following Tiefenthaler and Farmer (1996), this paper explores the idea that a battered woman uses a domestic violence service in order to signal to her partner that she has reached her violence threshold. If a man believes that she has reached her threshold, he will decrease the amount and/or severity of the violence. Farmer and Tiefenthaler demonstrated that women who have the ability to signal to their partners can be made better off and while they point to other research to support their theory, no paper has been written that directly tests the theory. The purpose of this paper is to do just that. Using a unique data source that asks women in areas of Chicago known for high level of violence (The Chicago Women’s Health Study, 1995-1998), this paper will test what happens to battered women, in terms of incidence of violence, who have reached out for the support of different types of services.

The paper examines the continuing struggle of women in four rural communities in southwestern Guatemala, a major theater of Guatemala’s thirty-six year civil war. Lack of access to land is understood as one of the principal causes of the conflict and was therefore a key focus of negotiations between the government and the insurgents as well as between the government and refugees. Of the four communities of the present study two are communities of former refugees who were dispersed throughout Chiapas, Mexico during the war, one is a community of former combatants of the insurgent Unidad Revolucionaria Nacional Guatemalteca and the fourth is a community of campesinos/as of the same region, many of whom were displaced during or after the conflict. All received access to credit and land via two distinct land programs, both consequences of the peace process. Part one examines the overall failure of the peace process in addressing the root causes of the insurgency. The second part illuminates the role of women as they participate in new forms of struggle for social and economic change, while seeking to maintain aspects of their traditional indigenous ways of life. The paper explores women’s participation in community and household decision-making and productive activities. I look at the successes and failures of ‘women’s’ development projects and market-assisted land reform, and women’s perceptions of their progress with respect to access to resources and political power. Welfare outcomes are also measured and compared to other communities in the region.

There is a sizeable literature on social security reforms addressing relative advantages of defined benefit and defined contribution schemes. Gender has been an important analytical category in these analyses, which recognized that due to the gender division of labor, including unpaid family work and informal paid work, women are more likely to be excluded from social protection and have fewer benefits. For Turkey, on the other hand, there is no enough literature addressing the gender dimension of the social security system in general. We believe that since Turkey introduced private pension scheme as a part of ongoing social security reform, it is important to address the gender gap in this system to pioneer future studies. In this sense, this paper contributes the literature by examining the gender gap in defined contribution schemes in the Turkish social security system. We show the gender gap between men and women in Turkish private pension schemes in a projection.

Our results show that women are disadvantaged from the outset, receiving a lower wage than men, and therefore contributing less to their private pension scheme than men, on the whole. This discrimination is worsened when we account for the fact that women work fewer full-time years than men. When the pension is annualized, the yearly pension for women, adjusted based on the different longevities of men and women, is between about half and two-thirds that of men.

Economic Policy: Means, Ends, and Politics

A5: Friday, 9:00-10:30

The attitude towards public policy held by most neoclassical economists is that it should be limited and focus primarily on market failures which are in the realm of microeconomics. This attitude about public policy over the decades have led economists to focus more on theory, or explaining how the economy works, and less on policy issues, or how to improve the lives of ordinary citizens. In the process of focusing on theory, the main purpose of economics has been lost we believe —formulating public policies to improve the well-being of the ordinary people in a nation -- A primary message of Keynes.

This paper analyzes the adoption of Participatory Budgeting, referred as PB, starting in the late 1980s, and its rapid expansion in the late 1990s. PB is an institutional innovation in which citizens and civil society organizations participate on the elaboration of the municipal fiscal policy. It is mostly implemented in large and well-off municipalities governed by a left of center party, in particular, the Workers Party. There is also some indication that PB is more likely to be adopted by cities where there is a well-established history of civil society organization. Another important result is that leftist parties implement the PB and the right-of-center parties maintain it when they win the election. Probably it happens due to the high political cost to end the process. The political will of the new administrations is crucial for the continuity of the experience because citizens will not engage in a process whose decisions are not carried out. The paper contrasts the movement towards federalism and decentralization in spending decisions that PB demonstrates, with the increasing centralization of revenues at the federal government level, and the restrictions imposed by the Fiscal Responsibility Law. It is argued fiscal federalism would provide a more coherent framework for fiscal policy, and would allow eliminating some of the distortions of the current Brazilian arrangements.

Stripping the Political Bias in Light of Recent Experience and the Contributions of Keynes and Others

To label as leftist authors who defend capital controls is a misconception. Such labeling uses the Borsa economicist criterion, which reduces the dichotomy between Right and Left to a distinction between economic liberalism and interventionism. Yet, under the Borsa criterion, those authors cannot be called left-wing. The interventionism underlying the defense of capital controls, as pioneered by Keynes and developed by Tobin, Stiglitz and Rodrik, is not the product of ideological conviction favoring the indiscriminate interference of the State in the economy. To call capital controls a practice typical of left-wing governments is also a misinterpretation. Among the countries using severe kinds of capital controls after the 1990’s – Chile, China, India, Malaysia and Thailand – only the Chinese may be called leftist. The other countries’ political panorama is more complex than may suppose those who believe in a simple and direct relationship between capital controls and the political thought of governments practicing them. The discussion should be stripped of its political bias: capital controls are not inherent to the ideology of their defenders and to the political leanings of the governments that adopt them.

Pluralism and Economic Education

A6: Friday, 9:00-10:30

Economists make a clear distinction between the idea of positive economics, defined as the study of what is, and normative economics, what should be. Students are taught that economic analysis is positive analysis and that it provides factual information for people to use when making normative decisions. The fallacy of this approach is that it ignores the reality of how economics is taught and, more importantly, the bias that exists in the foundational assumptions embedded in economic models. In this paper, I examine the pedagogical implications of one of the significant challenges to neoclassical economics: the fallacy of objectivity in economics. Challenging the reliance on objectivity allows for a deeper understanding of the assumptions embedded in traditional economic theory. By opening up even the fundamental assumptions for examination we can teach students to develop their critical thinking skills beyond the existing paradigm. Thomas Kuhn argued that academia is designed to teach the student to think critically but within the existing paradigm, an inherent contradiction. Only by teaching a new generation of students to challenge the existing paradigm can we hope to create a more inclusive economics in the future. In addition, by explicitly challenging assumptions that may not represent the experiences of the increasingly diverse college students, this approach helps creates a more inclusive classroom. The paper concludes with some practical suggestions on incorporating this approach into actual teaching strategies for a macroeconomics class.

This paper outlines an approach to teaching courses on economic pluralism that is relevant to both pluralist and non-pluralist degree programs. The approach has the capacity to deliver greater benefits to students, economies and societies than orthodox courses. Pluralism creates an exciting intellectual environment that merits dissemination through teaching as well as research. Properly educated graduates should know something about the current state of their discipline as a whole, which implies exposure to at least a reasonable sample of the alternative contemporary schools of thought now available. By their nature, well-designed pluralist courses are intellectually stimulating to students, but they can be made even more stimulating and beneficial by incorporating additional activities that fit naturally with pluralist pedagogy. These activities fall under the two headings of instructive fun and skills formation, and include debates, games, presentations, and competitions. The approach is illustrated using a course entitled ‘Contending Perspectives in Contemporary Economics’ taught in an Australian university.

Business organizations have long called for graduates with desired skill sets. It deserves noting, however, that most of these skills provide benefits of equal magnitude to non-business interests and society generally. Aside from discipline-specific knowledge, the sought-for skills include awareness of holistic standpoints, appreciation of different viewpoints, abstract thinking, creativity, innovation, communication skills, interpersonal skills, independent thinking, teamwork and leadership. The paper argues that because of certain natural advantages possessed by pluralism, well-designed pluralist courses are in a far better position than orthodox courses to contribute to these important elements of human capital formation.

Academic freedom is a hallmark of U.S. higher education. As defined by the U.S. Supreme Court and the American Association of University Professors, academic freedom refers to the shared right of faculty and students to practice “free inquiry and free speech within the academic community,” including “the freedom to teach and learn” and “an environment conducive to the civil exchange of ideas.” These venerable phrases define academic freedom as a mix of negative and positive freedoms: freedom from improper coercion or indoctrination as well as the freedom to exercise critical thought and independent judgment in reaching one’s own conclusions as a scholar or student.

This paper re-examines the goals and practices of undergraduate economic education from the standpoint of academic freedom. I argue that standard economics courses and curricula undermine students’ academic freedom by presenting economic thinking as a singular dogma and by failing to provide adequate means and opportunities for students to compare, assess, and synthesize different ways of “thinking like an economist.” Drawing from learning theory and from recent studies by economic educators, I hypothesize a causal link between students’ academic freedom and the numbers and types of students who choose to major in economics, as well as the levels and types of learning they achieve within the major. I also suggest modest steps whereby departments and individual faculty can enhance students’ academic freedom by foregrounding the intellectual choices – arising from complexities, uncertainties, and value judgments – the inevitably shape economic analysis and policy.

Graduate education in economics involves faculty, students, curriculum, materials, methods, research and motives. At present time, all these elements seem to be constrained, each in its own way, by a sort of inflexible orthodoxy that dictates a special view in faculty hiring and promotions, student performance, curriculum development, textbook choice, research funding and publication, teaching and research methods, and incentive provision. On the other hand, a number of students and faculty in US, France, and in other countries are becoming more intensely critical of this type of a view and aspire to see it modified in a spirit that is more in line with a sort of pluralism that would be more supportive of diverse perspectives and methods. In sympathy with these, this paper is intended to show that the prevailing view seriously undermines educational quality in economics and that disciplined pluralism can offer to come to the rescue. Disciplined pluralism in economic education will evolve when revisions are made in economic curriculum, teaching materials and methods, faculty hiring and promotions and incentive provision and funding to open up new spaces for multiplicity of criteria and approaches. Furthermore, it will be argued, that disciplined pluralism in economic education would improve the quality of education by allowing more diversity in economic standards, materials, methods and incentive provisions.

Heterodox Institutionalisms

B1: Friday, 11:00-12:30

Subjectivism, Social Structure, and the Possibility of Socio-Economic Order:

This paper addresses the challenge of attempting to advance a strong and consistently subjectivist view of economic agency without at the same time undermining the possibility of providing a coherent account of social institutions and socio-economic order. The argument is presented as a case study and development of the ideas of Ludwig Lachmann, a prominent and self-confessed ‘radical subjectivist’ member of the modern Austrian School, who was both aware of the challenge and sought to address it. Two significant tensions are revealed in Lachmann’s account, and it is shown how, drawing on recent contributions to realist social theory, these tensions may be resolved.

Literature on the commons has come a long way from Hardin’s alarmist predictions of an inevitable tragedy. It presently relies on notions of community, social institutions and collective action to solve local and even global environmental problems. New institutional economics has especially played a significant role in the development of thought with respect to the commons, emphasizing the role of property rights, and other formal and informal institutions. These institutions, i.e., norms and rules, are expected to govern access to natural resources and the environment, and hence result in efficient outcomes. However, in the Marxian framework, norms and rules may be viewed as institutions consistent with the interests of the dominant classes. In other words, social institutions may reflect an allocation of natural wealth favoring the dominant classes or those in control of the state. Analysis of environmental issues in the Marxian tradition has been sparse, but recently there has been a growing interest in the issue. This paper reviews and critically analyzes the New Institutional and Marxian schools of thought, and discusses their contributions to the study of environmental sustainability and distributional issues. It discusses the case of commonly managed forests in India to demonstrate that unequal social relations are not only detrimental to environmental outcomes but also to the well-being of the subjugated classes. The paper therefore, argues for a shift away from the current (almost) exclusive emphasis on efficiency and conservation outcomes toward a political ecology that accounts for ecological distributional conflicts.

A defining characteristic of most heterodox traditions is an analytic focus on conglomerations of individuals, whether in the form of class, cultures, or other aggregates. Economic trends and events are explained as consequences of group interaction. This is in marked contrast to those who work in the deductivist neoclassical tradition, where the individual is taken as both the starting point and the necessary final point of explanation if analysis is to have the “microfoundations” necessary, it is argued, for economics to be “scientific.”

In this paper I will explore the meaning of two overlapping developments for inductivist and empirical heterodox analysis of aggregate economic behavior. The first of these developments is the effort of Douglass North in Understanding the Process of Economic Change (2005) and Avner Greif in Institutions and the Path to the Modern Economy (2006) to ground institutional (and cultural) analysis in some combination of experimental economics and game theory. The second development is that manifested in Amartya Sen’s Identity and Violence and in Eric Jones’ Cultures Merging. In both of these works by eminent economists, “culture” is important but the choice of cultural traits and institutional patterns is given pride of place in the current kaleidoscopically changing world of global markets and information. Both of these developments represent important challenges to heterodox economists. In this paper I will evaluate those challenges, compare them to like developments in other areas of social science, and suggest some areas of common ground that hold promise for further exploration.

Social Structures of Accumulation Revisited

B2: Friday, 11:00-12:30

Financialization and Capital Accumulation in the Non-Financial Corporate Sector:

Recent research has explored the growing ‘financialization’ process in the U.S. and other advanced economies. The term is a catch-all phrase used to denote important changes in the structure of non-financial corporations’ balance sheets, including the growth of income from financial subsidiaries and investment as well as growth in the transfer of earnings to financial markets in the forms of interest payments, dividend payments and stock buybacks. This paper seeks to empirically explore the relationship between financialization in the U.S economy and real investment at the firm level. Using data from a sample of non-financial corporations from 1973 to 2003, I find a negative relationship between real investment and financialization. First, increased financial investment and increased financial profit opportunities may have crowded out real investment by changing the incentives of firm managers and directing funds away from real investment. Second, increased payments to the financial markets may have impeded real investment by decreasing available internal funds, shortening the planning horizons of the firm management, and increasing uncertainty. These two channels can help explain the negative relationship I find between investment and financialization.

A Detailed Empirical Look at the Effects of Two Major Changes in U.S. Banking Laws

Many people working in a general Institutionalist framework (see for example, the series of works by Lazonick and O’Sullivan), or more specifically an SSA (Social Structure of Accumulation) framework (see for example, the series of works by Kotz), argue that rise to dominance of neoliberalism has included as one of its main aspects radical changes in the functioning of finance compared to its functioning prior to neoliberalism. This work is a very narrowly focused case study intended to investigate that claim empirically. Specifically, it looks at the United States, the birthplace and still main champion in the world of neoliberalism. It considers two major legal changes, in the 1980s and 1990s, to the banking structure which had been in place since the 1930s. The question addressed is: what changes can we see empirically in flows and behavior of finance associated with these institutional changes that the advocates of neoliberalism felt were so important, and what did those changes mean for finance capital and capitalism in general in the United States?

The key insight of the social structure of accumulation theory is that capitalism requires a relatively durable set of integrated institutions, or institutional structure, to operate smoothly, but over long periods of time such an institutional structure decays and collapses, to be replaced eventually by a new one. Such an institutional structure is called a “social structure of accumulation (SSA).” During its lifetime an SSA facilitates the circuit of capital and the production and appropriation of surplus value, as the early SSA literature noted. The SSA theory also asserted that SSAs are directed at promoting rapid capital accumulation. This was linked to the idea that this theory can explain long swings in capital accumulation. Indeed, the role of institutions in promoting rapid accumulation became a defining feature of the SSA theory.

This paper argues that the development of SSAs in capitalism is not directed at promoting rapid capital accumulation. Each successive institutional structure of capitalism facilitates the circuit of capital and the production and appropriation of surplus value. However, such institutional structures do not necessarily promote a high rate of accumulation compared to some “normal” rate. This revision of the SSA theory resolves a problem that has stood in the way of applying it to contemporary neoliberalism. Neoliberal institutions have been predominant in the global capitalist system since around 1980, but they have not promoted rapid capital accumulation. This revised concept of an SSA resolves the fruitless debate over whether neoliberalism can be considered an SSA.

Economic Ethnographies

B3: Friday, 11:00-12:30

With the advance of the Great Capitalist Restoration in the post World War II era, it is useful to examine the exercise of agency within the context of neoliberalism. The persistent intensification of the market setting required by the neoliberal project in turn requires institutions and mental models that are not only complementary, but also interactively reinforcing. Since an individual’s agency is the product of her mental models, it therefore stands to reason that agency within the setting of the neoliberal Great Capitalist Restoration must bear certain ethnographic markers necessary to sustain the system. This paper seeks to examine the development, the character, and the exercise of agency within the context of the neoliberal Great Capitalist Restoration.

Using transdisciplinary social theory, we reinterpret the social position and agency of some people working in rural India. We transcend the classic polarity between choice-oriented economic theory and constraint-focused Marxist theory by focusing on strategies of agents in the rural laboring ‘field.’ An appropriate theory of strategies of rural laboring draws upon the sociology of the habitus (Pierre Bourdieu), the role of deliberation in working out household strategies (drawing upon Jurgen Habermas and Naila Kabeer), issues of status and power (Bev Skeggs and Bourdieu), and the sense of capability that arises from an agent’s locatedness. We portray workers’ agency as conditioned both by their prior habits and by social norms, but also as subject to important strategic decisions. We explore how workers try to enhance their bargaining power. We also examine the emotional and imaginative aspects of strategies which bridge different fields or ‘spheres’ (Elizabeth Anderson) of activity. The data we use includes interviews in Telugu language and two surveys, dated 1994 and 2006. We interpret the dataset firstly on a case-wise basis and secondly theme-wise. In the interpretation of these data we notice both first-order and second-order motives for working in particular ways. A first-order strategy is an orientation toward future decisions and actions. A second-order motive is a moral engagement in which the agent reflects upon their strategies in different fields, thus influencing their first-order choice of practices. The transdisciplinary theory offered here incorporates a clear set of ontological assumptions. By conducting an empirical enquiry, a more substantive theory was generated for the local area in Andhra Pradesh, India.

This essay describes the transformation of Maine loggers’ labor practices and the labor process during the post-World War II era. We describe the complex microeconomic underpinnings of a system that emerged after World War II, and show how a multidimensional crisis in this system developed during the 1960s and 1970s. This crisis had, on the one hand, a variety of economic and natural sources; at the same time, the emergence of an unlikely labor movement among woodcutters deepened the crisis and accelerated a transformation of the woodcutting system. The core of this essay is an analysis of this movement and the struggle it precipitated.

The fallout of this struggle was a watershed period in which partial unionization and a restriction of labor supply dovetailed with an accelerated mechanization drive by paper companies. During the 1970s and 1980s, paper companies adopted “high road” employment practices – improving pay and benefits dramatically, and, most notably, investing heavily in mechanized equipment that dramatically improved the safety and comfort of workers. This momentary embrace of the high road was unprecedented, and was a direct result of the multiple dimensions of the crisis in the postwar system. We describe how paper companies then deliberately created the conditions that allowed them to return to the most favorable (for them) low road labor practices of the previous system, but under new conditions that eliminated many of the problems of that system. The paper companies’ ability to construct a favorable new regime was premised on the failure of the loggers’ labor movement to persist beyond the 1970s.

Teaching Economics with System Dynamics

B4: Friday, 11:00-12:30

A Simulation Model and Interactive Learning Environment for Undergraduate Macroeconomics

This paper describes a system dynamics-based macroeconomics course that uses feedback loop diagrams and computer simulation to teach dynamics to undergraduates. The primary teaching strategy is to enable students to visualize how the major reinforcing loop in an economy is regulated over time by key counteracting loops involving prices, wages, interest rates, and exchange rates. Students use simple word-and-arrow diagrams to show ceteris paribus causal relationships between two variables, and each two-variable link is then added to other links to form feedback loop diagrams in a guided process of constructing a dynamic model of the US economy. The set of feedback loop diagrams corresponds to an underlying stock-and-flow computer simulation model and interactive learning environment called MacroLab, which students “test drive” under various structural and parameter assumptions and compare with standard textbook theories of macroeconomic structure and behavior. The paper also summarizes research suggesting that, when compared to graphical comparative statics, feedback loops are preferred by students and are more effective in conveying a sense of dynamics.

One of the main dividing lines between neoclassical and heterodox economists is the model of money, with the former treating money as exogenous and a commodity, while the latter treat it as endogenous and a non-commodity. However, neoclassicals have mathematical models of their analysis of money, whereas heterodox economists do not. In this paper I present a basic model of endogenous money, together with a “double-entry book-keeping” mode of developing dynamic disequilibrium models, which can be understood and applied without needing advanced mathematical training.

The purpose of this paper is to describe a graduate course in macroeconomic dynamics that is presented from a system dynamics perspective. The course presents a collection of well-known economic models, from Adam Smith to the present day Post Keynesian and institutional economists, translated into a system dynamics format. These models include written (non-mathematical) models, static models, difference equation models, and differential equation models. Whenever possible, the notation and nomenclature of the models has been kept the same so that the student can clearly see the evolution of the ideas of some of the great economic thinkers from the last three centuries. The course concludes with an overview of a Post Keynesian-Institutionalist-System Dynamics “core” model, which is an example of how a “proper” system dynamics macroeconomics model (i.e., one that follows the original system dynamics paradigm) is created from scratch.

Socially Embedded Markets and Human Flourishing

B5: Friday, 11:00-12:30

The Welfare State in Light of the Athenian Economy: Karl Polanyi’s Work in Perspective

Karl Polanyi was one of the most influential social scientists of the 20th century. One of his main concerns was the relationship between the markets and the society as a whole; to discuss it, he introduced the concept of “embeddedness,” fundamental for his study of the causes and consequences of the Industrial Revolution. Another important part of his legacy is the study of the economic history of what he called “ancient societies,” especially of Classical Greece. Polanyi used these studies to compare the ancient societies with his own times, in an effort to understand them all.

This paper aims to relate Polanyi’s work on the Athenian society with his studies about the modern times, showing that it is possible to make a clear analogy between the Athenian state and economy with the Modern Welfare State. First, we present the most important points of Polanyi’s study of the early Athenian economy; mainly, we focus on the coexistence of a kind of state planning and a market. Second, we show how this relates to the whole Polanyian legacy, with its emphasis in the comparison of different societies and times. Third, we characterize briefly the contemporary Welfare State, as to make an analogy between these two forms of economic organization. We conclude by underlining the relevance of this analogy suggested by Polanyi to understand the societies of our days.

James E. Sawyer (Seattle University and L’Université du Littoral Côte d’Opale, Dunkerque)

Across two centuries, the preeminent metacultural frame of doctrinal capitalism has asserted that the pursuit of self-interested action articulates universally with the attainment of the common good when executed through the institutions of private property and minimally regulated markets. For pre-industrial or classical societies, the central problem within this frame pertained (and continues to pertain) to wealth creation, and for industrial or neoclassical societies, the central problem pertained (and continues to pertain) to the explanation of cost or value. However, the pursuit of self-interested action may not align uniformly with the attainment of the common good in wealthy, post-industrial societies. This is because the very nature of the common good is likely to be heterogeneously perceived and therefore unlikely of universal discovery through market transactions. Thus, the pursuit of self-interested action may deliver little more than public “bads” and little or no public “goods.” To overcome this deficiency, it may be necessary to discover the common good “relatively,” through political institutions rather than through market transactions. With the common good thus specified, it becomes possible to specify the (relative) nature of what capital is, and also what it is not. Capital facilitates the attainment of the common good, by definition. Rent-seeking behaviors, on the other hand, do not. Thus, these may be curtailed through the imposition of government-administered taxes and also through the regulation of nonproductive, rent-seeking activities.

The pursuit of freedom has taken many forms over time, most inspired by the belief that greater liberty fosters a richer and more fulfilling human experience. But conceptions of liberty are as diverse as the many societies that claim to seek it. As a result, theorists have stressed varying components of freedom and offered a correspondingly broad array of prescriptions for maximizing human wellbeing. Until recently, the merits of these competing schools have been immeasurable. However, the advent of self-reported life satisfaction surveys coupled with quantitative measures of human freedom such as the Heritage Foundation/Wall Street Journal Economic Freedom Index and the United Nation’s Human Development Index provide an opportunity to identify those elements of liberty that are overemphasized and those that are underemphasized by scoring the strength of their relationship with national tallies of life satisfaction. By tracking the empirical connections between life satisfaction and liberty (defined both positively and negatively), I will show that a holistic approach committed to advancing the totality of human choices ultimately encourages the greatest contentment across nations.

Alternatives to Capitalist Development

B6: Friday, 11:00-12:30

For more than thirty years, Oromo nationalists have been engaged in a struggle to liberate Oromia, the largest conquered nation within the Ethiopian Empire, from a succession of minority dominated governments and create a multinational democratic state in the Horn of Africa. As the liberation movement matures, one of the crucial tasks is the formulation of an agricultural/economic policy that will meet the needs of a nation in which nearly 80 percent of the population is engaged in subsistence agricultural production.

This paper examines the current agricultural conditions in Oromia: coffee prices that have fallen since the early 1980s, the lack of infrastructure, state ownership of the land, a rapidly increasing population and decreasing farm plot size, and crop yields that are well below world averages. The neo-liberal solution to these circumstances includes the privatization of land ownership, the development of an export-oriented agriculture to supply fruits, flowers, and vegetables for the European market, the importation of foodstuffs to reduce the level of malnutrition, and the elimination of tariffs. Ignored in these recommendations are the economic characteristics of crop production—the low price elasticity of both supply and demand and the fixity of resources—as well as Oromo traditions which are based on a respect for the essential interconnectedness of creation and the maintenance of a balance between community ownership of land and individual responsibility. This paper identifies agricultural/economic policy elements that are consistent with Oromo traditions and values simultaneously taking into account the economic characteristics of crop production.

Significant aspects of U.S. capitalism and society have been and are shaped by U.S. agriculture and its related industries. The so-called “industrial agriculture complex” has become the focus of intense debate over the past few decades. Its proponents hail it as the most “efficient” system of food production in the world, and press for its worldwide export and adoption as one of the keys to eradicating poverty, hunger, and underdevelopment. Critics decry the unintended and negative impacts of this system of “factory” farming on the health of humans, animals, the environment, and rural communities.

Given the importance usually attributed to technological transformation in producing both the successes and failures of U.S. agriculture, the inability of the neoclassical theoretical apparatus to adequately address questions regarding the sources, trajectory, and dissemination of technological change is striking. The aim of this paper is to address this lacuna by developing a Marxian class analysis of technological change in U.S. agricultural enterprises. As such, the analysis focuses on the complex, contradictory, and historically contingent relationship between the organization of surplus and technological development in farm and farm-related enterprises. Consequently, this paper seeks to recast the successes and failures of U.S. agriculture in terms of class structures and exploitation, thereby generating a unique platform from which to evaluate the consequences of industrial agriculture, as well as to shift the terrain of policy debate.

In the 1970s and 1980s the issue of the “articulation of modes of production” in a developing economy elicited a large and active literature from Marxian development theorists. Central to this literature was the question of whether the development of the capitalist sector of an economy necessarily and inevitably usurped non-capitalist sectors of the economy and pushed them to extinction. This question was typically tied up in theories of imperialism and, hence, has important implications for that issue as well. This discussion came to an end not because the parties involved came to a satisfactory resolution, but rather because they drew-out their respective positions to their theoretical conclusion without finding a satisfactory resolution. This paper offers new thinking on this issue. In it I present a two-sector model (capitalist and non-capitalist) of a developing economy in order to establish the conditions under which two different class structures will grow, stagnate, or decline when they enter into exchange relations with one another. I find that there is no a priori reason why the capitalist sector of a developing economy should necessarily thrive at the expense of the non-capitalist sector, and instead find that which sector thrives and develops must be explained with reference to issues other than purely economic ones. The model I present is heavily influenced by Oscar Lange’s path-breaking dynamic multi-sector models, which have yet to receive the attention they deserve, and one of the motivations of this paper is to bring attention to overlooked aspect of Lange’s work.

Pluralist Pedagogies

B7: Friday, 11:00-12:30

This presentation is more of a demonstration than a talk. As a principles of economics professor, the purpose of my class is to create educated voters. As such, I organize both my large lecture and small lecture classes around a set of 11 “Voting” Issues. On the first day of class, I have students “vote” along Radical, Liberal, and Conservative continuums (with very little information, I tell them to just guess, as so many voters in real life do.) After developing the components of the theories which relate to the individual topic, I then revisit each issue with a slide show I have written of the three perspectives on the issue in question, including political cartoons, clips, text, graphs, etc. I then have students re-vote on the issues, and compare their educated position to their initial position. By the end of the semester, each student is exposed to three perspectives on 11 issues, and, I believe, is encouraged to become a much more educated participant of our society. This demonstration will include the Voting Issues Sheet, as well as an actual example of one of the issues as presented in class.

The premise is: The products of the (microeconomic) textbooks industry look increasingly stale. While the layout of textbooks is getting ever more fanciful, bright, and colorful, the ancillary material provided for both student and teacher is mouth watering or repellent (depending on one’s view), their contents is becoming ever more predictable. Increasing McDonaldization does not seem to leave much room for product differentiation.

If progress in economics is primarily construed as tool-driven, aiming at predictive power, applying the basic tools to an ever expanding range of problems, it is not at all surprising that the textbooks should converge on a common set of “problems” hardly whetting the students’ appetite for more. If progress in economics is understood, however, as idea-driven, meant to provide illumination of, and insight into, real-world processes, the standard textbook leaves much to be desired. Taking up the late Peter Bauer’s indictment of economics, one is reminded of an inversion of the familiar story of the emperor’s new clothes: there are new clothes, and at times they are even haute couture, but all too often there is no emperor within. Contemporary economics as reflected in the textbooks, Bauer’s rant goes on, is afflicted both by ignorance of its own past and neglect of the time dimension of cultural and social phenomena. Among remedies to rectify the situation I propose a two-pronged strategy: (i) turning to unjustly neglected contributions of the recent and not so recent past (as partly revived in various heterodox traditions) and (ii) taking inspiration from other academic fields such as history, anthropology, and evolutionary biology.

Zoologist, psychologists, educators, and most everybody else know that playing games is at the heart of learning. The IT revolution has sprouted a large gaming industry predicted to soon overtake all other media in sheer economic size. Much of their product has limited educational merit but it is increasingly possible to harness the market-driven multi-million dollar technology developed for these commercial titles to specific pedagogical goals and thus generate beneficial educational externalities. The gaming industry has developed sophisticated simulations to drive the economic environment underlying their games because the user’s satisfaction depends on the ability of the simulation to provide a realistic experience. Of particular interest to ICAPE members would be that using such games enhances students’ appreciation of economic pluralism precisely because it is needed to analyze world history and its game-world simulacra effectively. Students are thus motivated to explore heterodox ideas in order to understand & thus succeed in the gaming simulation in which they are immersed. Furthermore, using games allows a high degree of experiential/active learning with little sacrifice of content, a challenge many pedagogically aware principles instructors face.

Using simulations to explain economies is proving highly effective in research, and could be just as effective for teaching with the added benefit of enhancing the link between the frontiers of economic knowledge and undergraduate economic education. This link has been at the heart of our ongoing curricular reform at the economics department & this paper reports on how games are being incorporated & tested as part of our: Economics in Historical Perspective.

The purpose of this paper is to present an overview of my book, A Handbook for Pluralist Economics Education. The book will offer suggestions for pluralist pedagogical approaches, syllabi and exercises to stimulate critical thinking about today’s economy. Specifically, the objectives of this book are (1) to increase the pedagogical influence of pluralist economics and reduce the hegemony of neoclassical economics; (2) to increase critical thinking in economics; (3) to increase student interest in economics and economic literacy; (4) to obtain feedback from others interested in a pluralist approach; and finally to use this book as a springboard for a series of pluralist undergraduate texts under the publishing aegis of the University of Michigan. The book is fifty percent complete and (hopefully) will be finished by the Conference.

Roundtable:

Pluralism in Undergraduate Economics:

What Can We Learn From Established Programs?

C1: Friday, 1:30-3:00

Pluralism and Ontology

C2: Friday, 1:30-3:00

A Response to Christian Arnsperger and Yanis Varoufakis’s ‘What is Neoclassical Economics?’

This paper attempts to assess the arguments made by Christian Arnsperger and Yanis Varoufakis in their paper “What is Neoclassical Economics?” The authors contend that critics of neoclassical economics are off the mark if they rely on the 1950s rendition of the theory. Developments in Neoclassical theory allow neoclassicists to dodge criticisms. Arnsperger and Varoufakis propose a meta-axiomatic description of neoclassical economics to solve this problem. Arnsperger and Varoufakis’s approach to the description of neoclassical economics is promising. On the one hand, by identifying the meta-axioms, one has a clearer target for criticism. On the other hand, this approach also enforces the notion that neoclassical economics is reducible to its axiomatic parts: as argued by Tjalling Koopmans, the problems encountered by Neoclassical economics are simply technical problems which, with the addition of newer and better tools (or corrected axioms), will be solved.

Moving from what is promising in the Arnsperger and Varoufakis’s approach, this paper contends that ontological questions are of fundamental importance because all of the axioms identified by Arnsperger and Varoufakis are underwritten by the tenets of ontological atomism. It is the contention of this paper that, in addition to reasons given by Arnsperger and Varoufakis, the employment of this ontology is detrimental to both economic theory and a pluralist approach to economics. The debate should not simply take place over neoclassical axioms but should include discussion over the various ontologies employed by various approaches to economics.

The present contribution aims at supporting the thesis that the very existence of pluralism in economic thinking is more than doubtful, because state-of-the-art theories, whether they be “orthodox” or “heterodox,” share a common axiomatic base. All acknowledge that capital creates investment. None integrates the duration and irreversibility of processes. All admit that a general rise in prices coincides, whether exogenously or endogenously, with the quantity of money. Finally, all allow that productivity gains, due to human will, may accrue on the global scale of the economic chain, even to the point of envisioning the “end of labor.” But no theory has ever demonstrated that these converging axioms provide an isomorphism of reality.

Returning both to Keynes’ demonstration of the determination order between saving and investment, and to Marx’s period of production, this paper establishes that investment precedes increase in capital; additionally, it measures and integrates process duration as an explanatory variable. Through a long-term statistical series on a G7 scale, we can see that general price level changes with no respect to monetary issues. A long-term statistical series addressing the USA will prove that resultant productivity does not show any meaningful trend. The paper concludes by saying that the set of axioms common to existing theories constitutes an inverted model of reality and that the related pluralism (that is in fact more social and political than economic) is therefore only justified by the gnawing lack of a scientific approach to studying economy because of the general denial of a negative reality.

This paper discusses the differences between neoclassical and evolutionary-complexity-computational views of individuals and their interaction in terms of their different underlying accounts of space. The two contrasting accounts of the individual are termed the atomistic view and the relational views. The paper begins by distinguishing the field and non-field concepts of space, and argues that the latter understanding of space implies a relational conception of the individual, and that the standard atomistic individual conception employs a Euclidian understanding of space. I characterize the individual in the relational conception as a complex individual. The paper then introduces the evolutionary-complexity-computational approach to individuals known as agent-based modeling, and critically evaluates one interpretation of this approach developed by Potts. The paper then uses an identity analysis to further explain complex individuals, distinguishing between individual identity and personal identity, tying the former concept to how individuals are changed by social interaction and the latter concept to their being self-organizing, reflexive agents. This overall view of individuals is applied to Mirowski’s ‘markomata’ computational view of markets, and it is argued that together they provide an understanding of markets and individuals as interlinked and everywhere complex and diverse. The paper closes with brief comments about social economic policy towards individuals on this understanding.

Orthodox Tools, Unorthodox Outcomes

C3: Friday, 1:30-3:00

Scott Gassler (Vesalius College, Vrije Universiteit Brussel, and Brussels School of International Studies)

One does not have to abandon the neoclassical model in order to critique the globalization process or recommend an alternative. The model itself provides more than enough justification for an alternative view of globalization. I construct a taxonomy based on Gassler’s notion of political and social economics. The framework presented here helps illustrate how both neoclassical and other approaches can contribute to our understanding of the complexities of the international political economy. First I review the argument for free trade in the form of the first fundamental theorem of welfare economics, stressing the underlying assumptions. Second, using the same framework I construct the neoclassical argument against free trade and show that it is much stronger than the argument in favor. I do this by simply describing the cases of market failure which are not difficult to find at the global level. Third, I argue that heterodox economics can help to construct an alternative view of globalization that is better both positively and normatively. And the neoclassical theory does not stand in its way.

Benjamin Mitra-Kahn (City University, London and New School for Social Research)

Computable General Equilibrium (CGE) Models are one of the most utilized tools for development planning and policy analysis. However its history remains unexplored, while its method and equations is the domain of ‘insiders.’ Tracing its history, it will be shown that the model rhetorically changed from the study of “deviations from uniformity in the growth process,” to a model “grounded in Walrasian Equilibrium Theory, with no theoretical innovation.

The historical review will show that CGE models are not based on General Equilibrium Micro, but rather on Keynesian Macro. Secondly, it will be proven logically that Walras has no role in CGE models, by illustrating that Walras’ general equilibrium is not equivalent or carried through to neoclassical general equilibrium. Further, neo-Walrasian equilibrium is mathematically proven to be non-computable, contrary to the computable CGE model. Finally, this paper identifies the (relatively) few key variables in CGE models. Explaining how national accounting and behavioral equations means the investigator must consciously impose causality on any CGE model, and then the choice of exogenous variables defines any results. Ultimately, the CGE model is a static, fixed output coefficient model, where all causal structures are one-way, contrary to the modern belief that CGE models are capable of deterministic dynamic analysis along the lines of general equilibrium analysis. Further, once the key CGE variables are identified, it is possible to apply a multiplicity of theoretical approaches within the model, opening the door for heterodox critique and dialogue within the macro policy language of the orthodoxy.

Economists have followed Hume in making reason, in practical affairs, “a slave to the passions.” Kant and Hegel, though in different ways, have rejected a narrowly instrumental conception of reason, insisting that reason can be practical, meaning that reason can motivate us independently of our desires, that it can govern our desires, authorizing some for example, and not others. Practical reason, for both, was deeply connected to autonomy: in exercising our practical reason, in acting on categorical (do x) not just hypothetical (do x if you want y) imperatives, we exercise our freedom. The notion of freedom that complements the economists’ conception of reason, by contrast, is the compatibilist conception of being able to do as one wants, of being uncoerced. This is quite consistent with determinism: our preferences clearly are caused. In the paper, I try to build bridges between these two views by attending to the phenomenon of indeterminacy in game theory. Purely instrumental reasoners engaged in strategic interaction in a game with multiple equilibria, when their rationality is common knowledge, have no idea what to do - and since the outcome is in fact unpredictable, we are in this situation free in a (weak, admittedly) incompatibilist sense. Achieving their instrumental goals will now require that they do something that starts to look like moving into the normative space of reasons -- to wit, come to some agreement, establish a way of playing and hold one another to account for failures to conform to the agreed way of playing.

Economic Development and Well-Being

C4: Friday, 1:30-3:00

The question of what determines happiness or well-being is finding a place in recent economic research. Although Sen popularized the idea that material goods are only a means and not an end to well-being, this idea extends at least as far back as Aristotle. In addition, many have argued that people evaluate their own well-being relative to others. Marx (1847) may have been the first to articulate this idea by suggesting that a small house is acceptable when surrounded by others, but “…let there arise next to the little house a palace, and the little house shrinks to a hut.” If relative income or achievements matter, the case for economic growth may be less compelling, particularly in circumstances where growth is only loosely correlated with other measures of development or well-being. In addition when relative standing matters, there are negative externalities to the highest earners, which may have implications for the desirability of some redistributive tax policies. This study investigates the influence of a household’s relative position on their reported subjective well-being (SWB). Using data from South Africa, we model household SWB using both absolute and relative measures of deprivation and proxies of Sen’s functionings. Our preliminary results show that relative achievements –in income levels, public goods access and other components – are very important in the determination of SWB.

Using the Kuznets’ inverted-U-shaped association as a structural constraint, we model the social tradeoff between changing inequality and changing income. If observed outcomes for recent decades are taken as constrained political-economic optima, this model identifies the parameters of a social welfare function. Our cross-country regression results tentatively suggest that the world is becoming an anti-egalitarian place.

Growth, Development, and Quality of Life: Mainstream and Heterodox Approaches

Local economic growth and development are major concerns for many policy makers but receive less attention from the economic profession, which focuses on macroeconomic growth issues or the economic development of non-industrialized nations. State and local policy surrounding economic growth and development is therefore informed heavily, at least in the United States, by the conventional wisdom as relayed by local economic development associations. These are funded by local businesses, real estate promoters and land developers. We believe a more comprehensive approach to economic growth and development needs to be considered where sustainable development and quality of life play an important role. The assumption that more growth automatically means higher quality of life is being questioned around the world, especially in industrialized countries along with equating economic growth with economic development. Economic development, in our view, means a broad based increase in the standard of living and is not equivalent to undifferentiated growth in output and income. Yet the terms are often used interchangeably by economists and by policymakers.

This paper develops an economic analysis of both the sources of local growth and development and its consequences for quality of life and the standard of living. It draws on heterodox as well as mainstream economic perspectives. We stress the need for a better understanding of how economic theories (mainstream and heterodox) and empirical economic research can contribute to the public policy debates in state and local government with broader concepts of economic growth and development that incorporate quality of life and sustainable development issues.

World Political Economy

C5: Friday, 1:30-3:00

This paper assesses three classic debates: the Brenner-Wallerstein debate on the transition to feudalism of 1974, the debate on dependency theory in that exchange, and the early 20^th Century debate on the origins of the European Empires of the late 19^th Century. The paper notes that the same question recurs in all three debates, namely, why do things which each age calls ‘backward’ coincide with, and indeed outstrip in extent, the things it calls ‘modern’? What was responsible for the slave trade? Why is poverty not history? What leads supposedly liberal nations to construct despotic empires? Why is every war more barbaric than the last? Where did the Holocaust come from? Such events call into question such basic enlightenment ideas as progress and modernity. One answer – without which ‘underdevelopment’ loses any real meaning – is that backwardness is a survival, arising from the absence or late arrival of modernity. Another idea is that backwardness is a product or feature of modernity, something it brings in its wake or indeed, constructs in order to survive.

I will address this by the economic mechanisms inherent to capitalism which ‘produce’ backwardness as an outcome of growth and innovation – ignored by both sides in the 1970s debate. I will argue that both sides neglected the impact of classical imperialism in shaping the modern world. The question which then arises is: which bears the greater responsibility for backwardness – the inherent tendencies of capitalism or its institutional and political framework?

The essential nature of pluralism in economics, its scholastic and practical attractiveness, and even unavoidability, loom large if we consider the wide variability of real life economic scenarios. Each of the latter, ranging from the class struggles of the first half of the 20th century to the prosperity of the postwar consumer society and to the current surge of outsourcing/privatization with the resulting loss of manufacturing jobs in the developed world, seems quite unique, and demanded a special approach, from the New Deal to the Keynesianism to the neo-liberal “tough love.” Today, as the old recipes stopped working altogether this led to a widespread rethinking of the known economic theories and the current pluralistic bloom.

In this article we argue that, inasmuch incompatible the pluralistic approaches may appear at the first sight, taken together, they present a broad picture, much bigger than a sum of its parts. We show that the changes within a given era, despite their seeming arbitrariness, are in no ways chaotic. They present consecutive stages within a lifecycle of domesticating a large geoclimatic zone, the economic center of its time. We show that the known historic eras unfolded in their unique territories, forming their power/social institutes (feeding chains) in a sequence of steps aimed at maximizing the use of their zone-specific resources. Each new zone, increasingly more difficult for domestication than its predecessor, was opened by a leap up the energy consumption ladder. Historically, this caused a steep growth of population feeding off a given territory, well before the related technological revolution and the rise of a zone-specific economy, centered about its main inelastic resource, such as oil today or coal in the 19th century. From this viewpoint, historic events could be seen as a collection of “textbook cases,” complete with tested economic recipes – history may thus provide a valuable guide of pitfalls and promises of our future. The twilight time between eras, which we are approaching today, is charged with poignant uncertainty. Historically, entry into a new zone caused huge changes and devastation, on the scale of two world wars, while also creating unseen before riches (the consumer society of the modern US). This is especially worrisome today – the old recipe of increasing the energy consumption is in need for new solutions considering the current dire threat of global warming.

The distinctive feature of last two hegemonies over the world system as conceived by Giovanni Arrighi has been their command and control of world money. UK hegemony was based on the gold standard. US imperialism has been characterized by at least two successive orders of world money – that centered on the Bretton Woods agreements which centered on the dollar’s peg to gold and the de facto dollar regime, based on the dollar’s seignorage, which succeeded it. Just as the unraveling of UK hegemony was bound up with the collapse of the gold standard regime of world money, so the unraveling of US hegemony has been tied up with a long build-up of unsustainable financial imbalances which must end – the only question being whether they will do so gradually and in a managed way or catastrophically. This article begins with two observations. First, that these two hegemonies were the only ones over an industrial capitalist world order. Second, that the productive (manufacturing) superiority of the UK and the US on which each of these systems of world money were anchored were products of exceptional circumstances: the UK was the first industrial capitalist country and the US benefited from the unprecedented destruction caused by two world wars in its competitors, as I have argued recently.

These observations have implications for the future of the world system and the order of its money which this article will explore. In particular, we can legitimately doubt whether the continuation of the world capitalist system can be seen in terms of the succession of another hegemon: without some exceptional occurrence, it seems unlikely that any power will achieve the sort of productive superiority which the UK and the US enjoyed in their time. If that is the case, two important questions remain, one theoretical and one practical: what does this say for world systems theory for which the idea of successive hegemons is so central? And how might the future of the world financial order be thought of?

The Social Constitution of Market Processes

C6: Friday, 1:30-3:00

The Social Construction of Market Value and its Application to Labor Markets

Surprisingly little attention has been given in economics to a social constructionist perspective despite the extensive attention it has received in other social sciences. A general social constructionist approach to economic market value will be outlined here. The implications of such an approach and the challenges it presents to traditional economics are discussed. A distinction is made between a superficial view of a social construction (such as the rules and customs of an exchange) and a deeper view of social constructions as shaping our reality at a subtle and pervasive level. While critical realism and some other perspectives argue against a pure social constructionist view of reality, the argument here is not for “pure” but rather for “deep” social constructionism.

The focus here is also firmly on the application of a social constructionist perspective to economic markets and its real implications for market decisions and transactions rather than “theorizing about theorizing.” In particular, labor market value is used as an example of applying a social constructionist perspective. How are managerial decisions made regarding how many employees to hire, which candidates to hire, and at what pay rate? How do laborers make their decision to accept or reject these offers? How does this differ from a neoclassical labor supply curves in approach and conclusion? What are the policy implications of a social constructionist approach in this area?

This paper evaluates some of the economic theories developed by Keynes in the light of recent research in behavioral and experimental economics. We found that many of the ideas set forth by Keynes in his economic works, especially in The General Theory, have a defensible behavioral foundation and fit broadly the actual behavior of economic agents in the real world. As a consequence, we argue that any economic theory claiming to follow Keynes’s thought can benefit from this interaction, especially for issues related to judgment under uncertainty.

If most of what people do is a function of habit, an admissible explanation of human behavior is not possible without a theory of habit selection. Habits are established as a resulted of repeated behaviors. Institutions, by prescribing or reinforcing some behaviors and proscribing others, shape the structure of habits and give them a social character. The emergence of a social habit structure amenable to the issue of IOUs to finance all types of consumption expenditure is a significant development. This paper seeks to make sense of pervasive changes in household spending and saving routines by the application of the institutional theory of habit selection. Consumerism—a habitude wherein the pursuit and maintenance of class status is a primary driver of spending—is a cultural adjustment to the cash flow requirements of modern business enterprise. As privileges of all kinds are restricted by class, worldly success (partly) depends on the assimilation of consumption routines (in dress, food and alcohol, travel and leisure pursuits, and so on) that signal class affiliation. Borrowing to acquire non-necessities or goods of superior quality is interpreted as a strategy for inclusion in vital social networks.

Distributive Justice

C7: Friday, 1:30-3:00

What precisely is the proper role of theories of distributive justice in thinking about economic inequalities that arise from structures and exercises of social power? This paper considers several of the most important such distributive justice theories, including those of Rawls, Nozick, Dworkin and Sen. Power is essentially the capacity of some individuals to non-reciprocally affect major aspects of others’ behavior by altering constraints effective upon them or information available to them in ways to which they would not, in ideal circumstances, give their consent. Structures and exercises of power lead to “redistributions” of income and wealth from those subject to it to those in power positions. Conversely, inequality undergirds and strengthens positions of power. The most important such inequalities are those comprehended in the systems of class, race, sex and international domination.

Distributive justice theories provide important insights into the question of what is an acceptable economic inequality. In spirit, each of the theories considered here condemns inequalities due to power, and several of them do so quite explicitly. Yet that is not the primary aim of these theories -- they simply are not mainly concerned with power but with defining justice or fairness in cases that do not involve power. Power in the sense defined here, on the other hand, is unjust and immoral in itself, and inequalities that arise from or undergird power are wrong because of that, not because they would be considered undesirable in “power free” situations. To that extent, theories of distributive justice are not of much help in thinking about social power.

The definitions of concepts like capital, labor, human capital, productive factors, and production factors are dubious and, require revaluation and elaboration. Accordingly, widely used analyses of economic relations are also dubious and, require re-examination and new explanation. Widely accepted and used definitions in the textbooks and among scholars are of Neoclassical heritage, which seem to present “a playground for academic economics” rather than a realistic approach assisting to better understanding of “actual” economic facts and relations. Therefore, regarding the present global economic (dis-)order, there seems to be a need for new as well as more realistic approaches from alternative angles with “new” definitions of “old” concepts, if and when necessary. The aims of this work are partly to reconsider and when necessary, to redefine, the conventional” key concepts such as labor, capital, interest, rent, and accordingly analyze the distribution of functional income. Thus, the questions to be analyzed in the following sections are:

§ Is the term production factor identical with the term productive factor? What is the difference between them?

§ Which factors “earn” a share of the income generated? And which factors receive an “unearned” share?

§ Which forces influence the functional distribution and redistribution of income among labor and capital; the ability to generate value or the ownership rights?

Binary Economics offers a conception of economics foundationally distinct from the economic theories presently employed by government, private enterprise, charitable institutions, and individuals to formulate and evaluate economic policy. Foundationally distinct from classical, neoclassical, Keynesian, post-Keynesian, monetarist, and socialist economics, binary economics specifically offers a unique explanation for the persistence of poverty and unutilized productive capacity. Binary economics holds that (1) labor and capital are “equally fundamental,” “independent” or “binary” factors of production, (2) technology makes capital much more productive than labor, (3) growth is most fundamentally the result of the increasing “productiveness” of capital and the distribution of its ownership, rather than increasing labor productivity, and (4) the more broadly capital is acquired with the earnings of capital the faster the economy will grow. Therefore, binary economists conclude that universal, individual participation in the right to acquire capital with the earnings of capital (“the binary property right”) is a necessary condition for sustainable growth, distributive justice, and a true democracy. Binary economics reveals a voluntary market-based strategy for producing much greater and more broadly shared abundance without redistribution. As an approach to economic policy, binary offers poor and working people a practical means to acquire capital with the earning of capital and other advantages not offered by left-wing, right-wing and centrist approaches. Based on objective standards of (1) reasonable, workable assumptions, (2) internal consistency, and (3) plausible descriptions, predictions and prescriptions, binary economics should be taught wherever mainstream approaches are taught.

Logics and Fallacies of Competition

C8: Friday, 1:30-3:00

The model of perfect competition plays a key role in neoclassical pedagogy, and explains much of the zealotry with which neoclassical economists champion their model of competitive capitalism. In Debunking Economics, I pointed out that an essential assumption of this model, the “horizontal demand curve for the individual firm,” is a mathematical fallacy. This part of the book, more than any other, inflamed neoclassical ire. Responding to neoclassical critiques led to at least six different ways of disproving the Marshallian model, and two new critiques of the Cournot-Nash game theoretic model of perfect competition. This paper will present each of these critiques, from the simplest to the most intricate; the former can be used in introductory heterodox courses, while the latter would be suitable for advanced students.

A hallmark of neoclassical ideology is that hyper-rational self-interested behavior is nonetheless compatible with the maximization of community welfare. The model of perfect competition plays an essential role in this, since only when the conditions of perfect competition apply is the neoclassical measure of social welfare maximized: in conditions other than those at which marginal cost equals price in all markets, there is a deadweight loss of welfare. This is the classic “invisible hand” of Smith--ignoring for the moment the incompatibility of Smith’s analysis with neoclassicism. My analysis establishes that this claim of the compatibility of hyper-rational self-interest and social welfare is false: the invisible hand does not exist.

Hammers, Nails and New Constructions – Orthodoxy or Pluralism: An Institutional View

Frederic B. Jennings, Jr. (Center for Ecological, Economic, and Ethical Education)

The guiding premise of this paper is that a ruling orthodoxy in academics is pathological, symptomatic of an institutional failure rising from models unfit to their realms of use. Substitution assumptions supporting rivalry do not apply in any complementary setting, which calls for cooperation instead. Pluralism ought to be normal; that this is not the case suggests some problems in need of attention. Choices are based on imagined projections, where costs stay invisible, limned theoretically yet unobserved. ‘If all one has is a hammer, everything looks like a nail.’ Substitution assumptions say our relations entail a conflict of interest to be resolved through rivalrous systems. A network model where rival and common needs are entwined opens a choice: competition or cooperation, which is more efficient? The notion of planning horizons shows how longer horizons enhance common over conflicting needs. Planning horizons serve as an ordinal index of bounded rationality, extended by complementary learning. If so, the efficiency case for cooperation is strengthened by inter-horizonal complementarity in a contagious spread of horizon effects. Applications are also explored, to show the failure of competition in complementary settings: in ecology, where integration is needed, not decentralization; in education, where rigid doctrine discourages learning and novel ideas; in information networks, which invert the normal linkage of value to scarcity; and in a myopic culture rising out of competitive frames. Scientific control leads to rigid dogma in academics at the expense of vision; science should be open as an axiomatic condition. Pluralism helps to prevent theories unfit to their realms of use. We need to lay down our hammers and nails and try some new constructions.

Most who fear rapid climate change, unchecked population growth, and the widening gap between rich and poor—people as well as nations—want public policy to oppose these and other unsustainable trends. Instead, due in large part to the stranglehold which orthodox, mainstream, neoclassical economic thought exerts on the global policy process—an unseemly amount of which is driven by events within the DC beltway—they are forced to stand idly by as public policy aids and abets such trends.

I submit that a renewed focus on the methods and findings of science, specifically those of the emerging science of competition, can help to break the offending stranglehold. A lot was learned about competition during the twentieth century, and much of the new knowledge either calls into question, or directly contradicts, essential teachings of mainstream economic theory. Like my forthcoming book Competition: The Birth of a New Science (Hill & Wang, July 2007), my talk will focus on the weak points in neoclassical economic theory, some of which are newly exposed by the emerging science of competition, and propose various ways of exploiting them. Much remains to be done, both in the science itself, and in the dissemination of its results.

The tendency for at least some capitalist economies to grow is one of their most characteristic properties, as Marx realized. However, the source of growth is not well understood, even within heterodox perspectives. The question can be addressed by historical studies of the origins of capitalism, including comparative ones, or by examining recent/current capitalist systems, especially the most dynamic firms or sectors, and conversely the situations where growth does not occur.

A satisfactory account requires more than just description/correlation; it needs to explain the essential features that dynamic systems possess that differentiate them from mere trade (markets). Thus, Pomeranz emphasizes eighteenth-century England’s escape from resource constraints, but his explanation does not hold for other capitalisms. A sufficiently general theory is likely to be institutional, in terms of incentive structures. Reviewing the diverse range of dynamic firms shows that the marxist view, that dynamism depends on wage labor, is found to be too restrictive both for eighteenth-century England and for many present-day firms. However, together with the management literature on supply chains (Porter; Cox), a satisfactory account covering e.g. the putting-out system and present-day supermarkets is possible. This makes sense conceptually: employment of labor and dominance over a supply chain both enable “the firm” to make radical changes in type/quantity of labor and capital equipment, and in location etc. This is necessary for success in the struggle for competitive dominance. But not sufficient: firms may fail to expand as they lack objective conditions for profitable investment, as an Angolan example illustrates.

Plenary Session I

Pluralism and Economic Inquiry

P1: Friday, 3:30-5:30

This paper examines change in the research frontier in economics, and asks whether the current competition between new research programs may be supplanted by a new single dominant approach in the future. The paper discusses whether economics tends to be dominated by a single approach or reflect a pluralism of approaches, and argues for the former. It argues that orthodoxy usually emerges from heterodoxy, and interprets the division between orthodoxy and heterodoxy in terms of a core-periphery distinction. Regarding recent economics, the paper maps out two different types of combinations of new research programs: synchronic and diachronic. It treats the new research programs as a new kind of heterodoxy, and asks how a new orthodoxy might arise out of this new heterodoxy and traditional heterodoxy. It discusses this question by advancing two scenarios regarding how the two different types of combinations in the new research programs might consolidate along the lines of three shared commitments in traditional heterodoxy to form a new orthodoxy in economics.

Economics is a discipline with contested scientific inquiry; and the two protagonists are mainstream or neoclassical economics and heterodox economics. Ignoring the debate over whether mainstream and neoclassical are more or less the same, the immediate question that arises is whether such a contest exists. That is, for contested inquiry to exist, the protagonists must offer incommensurable theoretical explanations of the economic activities that comprise the provisioning process. This question is dealt with in the first section of the paper. In the second section of the paper the issue of pluralism between the two protagonists is dealt with. In particular a brief historical overview of the intolerance of the mainstream towards heterodox economics is delineated followed by a critical evaluation of the consequences of the intolerance. The third and final section of the paper deals with pluralism and integration within heterodox economics.

In seeking to promote a more open economics, heterodox economists face some of the same demons we see among the mainstream. The tendency to affiliate with similarly situated people and the preference to talk with those who share our perspectives afflicts not just the orthodox. Heterodox associations typically organize conferences and panels with member participants, who by virtue of their affiliation, are inherently screened to fit within the conception of the association. Ditto for society journals, which typically expect some acknowledgment of the core ideas around which the association builds its identity.

Supportive intellectual communities can nourish ideas and scholars; the ability to talk with those who share key ideas can refine and give resilience to our ideas. Yet in seeking the strength such support gives, heterodox groups must also carefully examine their own practices and members. Who is missing and why? How can those who are not yet participants in key economic debates be enabled to speak and be heard? How can we better empower those whose ideas we cannot yet fathom and may not agree with? How can we negotiate between wanting our own ideas to be heard and our professed desire to empower those whose lives are not yet adequately represented in economic debates?

Pluralism, Realism, and Heterodoxy

D1: Saturday, 8:30-10:00

Heterodox economists have come under suspicion of what Giere (2006) termed ‘strategic pluralism’ (Van Bouwel 2004, Sent 2003, 2006). Stealthily, they might actually be what Garnett (2006) called ‘paradigm warriors.’ The goal of this contribution is not so much to judge the accused, but rather to assess the accusations. They seem to lean heavily on the claim that an advocate of pluralism should be a pluralist himself. Though this assertion sounds like a truism, I will argue against it. I maintain that pluralism is a desideratum at the aggregate level, but inappropriate at the individual level. More specifically, this contribution clarifies the notion of pluralism by introducing an often neglected but crucial distinction between different levels at which pluralism can be situated. Within this framework, I argue why paradigm warriors and strategic pluralists need not undermine pluralism but can indeed strengthen it.

This paper extends my own development of Sheila Dow’s work on dualism as a tendency in thought. Dualism involves the creation of artificial distinctions between categories or objects, often via the polarization of those things. Dualism can occur for reasons of necessary abstraction. However, this paper argues that dualism often derives from rhetorical concerns. For example, dualism is used to create the impression of division necessary for a contribution to appear novel or transcendent. The paper therefore in some way synthesizes the literatures of McCloskey and Dow. Rhetorical dualism has significant negative effects. For example, it leads to ‘wrong turns’ in debates. Further, rhetorical dualism can militate against pluralism by dividing debates into camps from which it is difficult to deviate, thereby preventing the development of pluralism. This paper argues that such rhetorical dualism is commonplace in economics. As an example, the paper builds on recent work by Davis, Garnett and Sent, amongst others, to argue that the orthodox/heterodox distinction is another crucial example of rhetorical dualism. It identifies different ways in which orthodox and heterodox are contrasted. Further, the paper argues that a move towards a language of pluralism may be more helpful.

In my Reorienting Economics (Lawson, 2003, Routledge) and elsewhere (e.g. Lawson 2006) I defend a specific ontological conception and use it to interpret the nature of both the mainstream and heterodox traditions in economics. Various commentators suggest that my position in all this is insufficiently pluralist. In this short essay, I hope to convince otherwise. Specifically I will seek to allay any concern that I defend a conception in which heterodoxy is somehow discouraged from engaging others, is necessarily oriented to replacing the mainstream with an undesirably monolithic paradigm, and/or is encouraging of isolationism. For I am indeed convinced that a pluralistic orientation is desirable, not least because it seems essential both to human flourishing in general and to knowledge advance in particular. But I also believe that such an orientation is quite consistent with the position I defend.

Mixed Economies vs. Market Fundamentalism

D2: Saturday, 8:30-10:00

When Hayek’s Road to Serfdom first appeared in 1944 it was the subject of much controversy and that controversy still remains today. Hayek on various occasions has claimed that the central message of RTS has been distorted and misunderstood. He has described his analysis as a “warning” to countries that have pursued socialist policies. If they do not mend their ways those countries that have given up some economic freedoms in pursuit of socialism “inevitably” will lose their political freedoms as they travel down the road to serfdom. Yet, scholars as diverse as Lionel Robbins, George Stigler, and Paul Samuelson held a divergent assessment of Hayek’s work, pointing to the actual record of mixed economies they deny his claims that reductions of economic freedoms inevitably lead to a loss of political freedoms. Scholars sympathetic to Hayek’s message have recently claimed that Robbins et al have misunderstood Hayek. In particular they point to a letter Hayek wrote to Samuelson complaining about the latter’s alleged role in shaping the public perception of RTS. We use the vantage point of this dispute between Samuelson and Hayek as a way to gain entrée into the debate over RTS. The Hayek-Samuelson letters provide a way in which to solve what Hayek meant by the use of the word “inevitable” which plays a central role in the message of RTS. We conclude by arguing that of the various possible interpretations Hayek’s argument fails on a number of grounds and that those who argue “The Road to Serfdom was meant to be a warning, not an historical prediction,” are debating with straw men.

When the end of 20th century is considered together with the “triumph” of neo-liberal economics ideology which can be mentioned with the “end of the history” thesis, it witnessed a dominant, exclusive and absolute veracious hegemony of a system of economic thought. Market fetishism, which came into the picture with pre-assumption of state being inactive together with allocation of economic structuring only to private sector disregarded the characteristic of the state being entrepreneur as well as meant that state’s regulatory notion would imply intervention in the market and therefore denoted that it should be removed. At the same time, the neo-liberal point of view which has also criticized the increased role of the public sector in the economy in the period 1950-1980, suggested that the state should withdraw from the economy both in developed and developing countries and should reduce its control over the economy in 1980s. However, when South Korean experience is considered, it is noticed that South Korea has adopted a pluralist economy approach when industrialization policies pursued and the role given to the state in the economy are observed. In this direction, this development strategy of South Korea which has reached to the level of developed countries besides the existence of countries that not in the development process with simple neo-liberal hypothesis sets a very important example for the claim stating that a single economic paradigm could not be enough in development process.

The apparent contradiction between Austrian economics and the institutionalists has been put into perspective with the addition of an Austrian wing within the New Institutional Economics. We notice a complementary relationship, in two ways, between Austrian school, based on the role of individuals and the market, and the NIE, based on the role of institutions on economic behavior and on the creation of efficient labor markets. On one hand, the idea of continuous improvement in business management, the idea of Kirznerian incrementalism in front of Schumpeter´s radical innovations, is now developed in a complex and interrelated production system where contributions from every agent to the final output are necessaries and difficult to quantify. In the environment of the work organization inside the firm, we think that labor institutions such as union actions, collective bargaining and labor laws can perform an informational-cognitive function that encourage “alertness” or Kirznerian entrepreneurship. We question whether labor institutions develop per se a constraining function over the agent’s free decision-making, which demands deregulatory labor policies. On the other hand, we recognize that bounded rationality and uncertainty determine some models of incomplete labor contract and transaction costs that can produce problems of equity and efficiency. As the ideology in Douglas North, my hypothesis is that labor institutions let overcome differences between what has been done and what has been perceived; they can resolve the conflict of the distribution of benefits; they can reduce transaction costs and contribute to create productive organizations which are more efficient in the global economy.

Trade, Development, and Public Health: Feminist Perspectives

D3: Saturday, 8:30-10:00

Globalization of manufacturing production has brought about a new international division of labor that involved the growth of manufacturing sectors in the global South and service sectors in the global North. These developments had profound implications for the gendered division of labor in these economies where women’s share in employment increased. This “feminization of labor” has motivated a “win–win” argument regarding the effects on women of global economic restructuring. However, a closer scrutiny of these trends from a feminist perspective revealed that women in the South have been weak–winners at best, as employment opportunities for them came in low–wage categories, and in the North, low-wage women in production occupations experienced disproportionate job losses. Since the early–1990s, globalization has broadened to include services and the mainstream “win–win” argument regarding its impact on women is back. Our paper contributes to the growing feminist literature on the gendered outcomes of services trade. Using data from the 2000 Decennial Census of Population Public Use Micro Sample files, we identify the US service occupations potentially affected by trade and offshoring and investigate the impact on gender wage and employment differentials of employment in these occupations. We find that, between 1990 and 2000, in male–dominated occupations, female share in employment increased but the gender wage gap widened possibly indicating the substitution of men by women in attempt to lower labor cost in the face of intensified international competition. In female–dominated occupations, women’s share in employment decreased possibly indicating substitution of women in these occupations by their counterparts in economies of the South.

While neoclassical and liberal paradigms have been frequently used as guides for development projects, alternative feminist based viewpoints stressing the value and importance of issues such as gender equality, reproductive rights, household labor, and child rearing are becoming more important frameworks to use in development studies. Stemming from this, the possibility arises of creating a more complex understanding of how recently implemented structural adjustment policies in the developing world are truly affecting each country’s population. This paper attempts to synthesize empirical findings of the effects structural adjustment policies have had in the past two decades through a feminist perspective, thereby including additional, and previously ignored factors, such as the effects on unpaid labor, healthcare, resource control, and education. Through this analysis, the feminist perspective can be seen as both a valid and imperative alternative to understanding development during the current period of globalization.

Neo-classical economists struggle to understand the impact of HIV/AIDS, with macro-economic models seemingly unable to capture the way in which the pandemic will affect economic life. The predicted impacts of HIV/AIDS on sub-Saharan Africa vary widely and are sometimes counter-intuitive results, with high-prevalence rate countries sometimes expected to experience increases in per capita income. As a result, there has been a range of work within the mainstream approach to refine existing methodologies. However, this paper will argue that a key problem is the failure of macro-models to encompass the economic impact of a high rate of illness and death among women – and that a gendered approach to modeling is needed. Women are disproportionately impacted by HIV/AIDS and consequently this paper argues that approaches from feminist economics can illustrate the failures of standard macro-economic modeling.

The paper shows that women’s reproductive activities remain excluded from models of the national economy, while women’s productive work is often poorly understood. The importance of the exclusion of women’s productive and reproductive activities is partly illustrated by the significantly large impacts generated by models that focus on the relationship between HIV/AIDS and poor educational outcomes for children. However, the impacts on children’s education are complex, and oversight for education forms only part of the caring responsibilities of women. Higher illness and death of adult women is likely to have a wider range of serious economic impacts – and this is illustrated by the results of micro-level surveys. The paper ends by drawing a series of conclusions for methodology.

Transformative Trends in the Global Economy

D4: Saturday, 8:30-10:00

Over the last two decades or more the Latin American and Caribbean economies adopted neo-liberal economic policies with limited or negative industrial and socio-economic gains. The problem is underscored by a relative decline in global competitiveness and the consequent deindustrialization of LAC. An expansion of labor migration has occurred in tandem with the instability in the LAC economy. These trends speak to the new geo-economics of development and call for an alternative perspective on development options for the LAC region. Migration and the growth of a diasporic economy have emerged to be the most important strategic economic resource for the LAC region in the late twentieth and early twenty-first century. Remittances, in particular, makes a substantial contribution to poverty reduction and a more favorable balance of payments position in the region when compared with traditional forms of external capital such as aid, debt financing and FDI. However, the unanswered question is whether the benefits of migration such as remittances, diasporic exports and the vent of surplus population can redress the loss of economically active workers (i.e. brain drain), the social investment foregone and the new health and security risks?

The goal of this paper is to examine the emigration and development nexus in relation to shifts in the techno-economic paradigm and global economic restructuring. The paper concludes by asking whether migration and diasporization can do for the LAC region what it did for some “now” developed economies?

The last decade has witnessed a substantial increase in intra-regional as well as inter-regional economic and political cooperation among the countries of the South. In this paper, I explore whether the increase in South-South interaction holds the promise of an alternative economic model, is best thought of as unity in the face of Northern hegemony, or is too heterogeneous to be captured by one title. Focusing on static gains from trade, mainstream trade theory (and empirics) has traditionally ignored South-South trade or criticized it as ‘protectionism by another name.’ More recently, organizations such as the WTO have been advocating South-South liberalization as a stepping-stone towards multilateral liberalization. After examining the origins and trajectory of modern South-South relations, recent trade agreements and patterns of trade and investment, the paper has two mains conclusions. I propose that South-South regional integration is more likely to be mutually beneficial among countries with similar levels of development. Second, while South-South cooperation is not a panacea for the problems facing developing countries today, it nevertheless creates a political and economic space for alternatives.

China

was the world’s leading economy over much of the past two millenniums. The rise of the capitalist world-economy (with European supremacy) coincided with the long-term decline of China. China’s incorporation into the world system led to a series of changes that fundamentally transformed the Chinese society and contributed to China’s unique experience of revolutionary socialism.

There has been much talk about the recent economic rise of China which is widely expected to lead to a new China-led global economy. However, China’s economic expansion is more likely to intensify the global capital-labor conflicts, geopolitical conflicts, as well as environmental crisis. Could the rise of China coincide with the decline of the capitalist world-economy? The resolution of these conflicts would require a creative rethinking of the 20th century socialist experience including China’s own experience.

Ecological Economics

D5: Saturday, 8:30-10:00

Wealth, Well-Being, and Values: The Contribution of Heterodox Economics to a (Real)

This paper starts with a short overview of the main (linked) themes of ecological economics which nourish some discussion on its characteristics and on the direction it should be develop: (i) the nature of the value for humans of ecological resources; (ii) the understanding and the modeling of the consumer behavior and more largely of the human actor; (iii) the design of macro-indicators that might be used as alternatives to GDP and that might cut short the growth/sustainable development debate. Its purpose is to provide some theoretical landmarks coming from heterodox economics which, firstly, reinforce the claims for the emergence of new ways of thinking about these themes and, secondly, allow the delimitation of a coherent framework in which a real transdiscplinary dialogue could bloom. It is argued that key insights can be drawn from Marxian and Keynesian schemes of thought, but also from some ones of their actualities (contemporary approaches of well-being; Post-Keynesian economics) at both micro and macro-level. Those insights relate to: (i) the nature of the value of ecological resources and its conflict relationships with the capitalist’s law of (economic) ‘Value’; (ii) the scope of individual and societal wealth in connection with the human actor and its motivations (values); (iii) the ontological approach of environmental problems.

Recent insights regarding resource limitations and environmental degradation, together with the findings of comprehensive indicators of economic welfare, suggest that exponential economic growth may no longer be the appropriate goal for macroeconomic policy. Despite unprecedented technological change and R&D investment, resource use rates continue to rise to unsustainable levels. This situation creates a policy dilemma that leaves us with the undesirable options of either attempting to maintain economic growth at the risk of irreparable long-term damage to ecological capacity, or creating an economic crisis in the short term. Because of its naturalistic ontology and narrow epistemological perspective, neoclassical economics is unable to effectively recognize and address this policy dilemma. In this paper, a heterodox monetary approach is adopted, drawing on economic history, post- Keynesian, institutionalist, chartalist, and circuitist theory, to determine the relationship between the current institutional arrangements surrounding money and the environmental impacts of the economy. Money will be explored as an accounting device of credit/debt relationships that has different characteristics and properties that have become naturalized and institutionalized over time. The current institutional arrangements surrounding money are found to be causal relations that create systemic patterns of economic activity that are damaging to the environment. Money is therefore seen as an ‘environmental relation.’

Energy access and use restructuring has been underway for over two decades in much of the Western world under the guidance of economists and policy makers guided by the principles and theories provided by these economists. So called energy markets are seen everywhere today – in oil, natural gas, electricity, at all levels from the just being born EU “liberalized” energy market, to worldwide “futures” markets, to the small customer purchasing electricity in Austin, Texas. Still, however, no one involved in these great changes and certainly not those observing the changes from the sidelines has clearly described what these markets are, how they came to be what they are, or has even partially described construction of a process for assessing the results of these markets and what ought to be the future form and function of these markets. This paper explores this situation in three respects. First, I briefly examine construction of the United States (US) versions of electricity and natural gas markets, including both the human and nonhuman actors playing roles in that construction. Second, and similarly, I examine construction of the assessment of the results of the US electricity and natural gas markets, looking once again at both human and nonhuman actors. Finally, I examine construction by human and nonhuman actors of the future of the US electricity and natural gas markets.

The standard neoclassical model of the depletion of nonrenewable resources offers a picture of optimal and efficient depletion paths. According to the model, if markets are functioning perfectly, market prices will increase over time as conditions of absolute scarcity become progressively more acute. The policy prescription of such an approach is obvious. Nothing needs to be done, since the gradual increase in the price of the nonrenewable resource (like oil) will itself provide for a smooth transition into a renewable substitute. Many economists have acknowledged the possibility of market failure in such an analysis. For example, imperfect information (i.e., not knowing future demand and supply) will lead to inefficient market allocations and pricing over time. Nonetheless it is important to consider that prices may not reflect scarcity, not because of market failure, but rather because of success in the market. This analysis takes Veblen’s distinction between business and industry and applies it to the oil industry to demonstrate that market prices are unlikely to signal absolute scarcity in a timely way. That is to say absolute scarcity may be ignored by the ‘vested interests’ for business purposes. Thus from a policy perspective it is essential for government policy to be proactive in facilitating the transition of the economy toward greater thermodynamic efficiency.

Marxian Economics

D6: Saturday, 8:30-10:00

The monetary expression of labor-time serves to link money and labor-time as related but distinct measures of commodity values. This paper examines the effects of changes in aggregate demand on the monetary expression of labor-time in a commodity money economy and explores the implications of this analysis for the case of non-commodity money. This research is intended to provide a basis for integrating monetary analysis into a Marxian theory of cycles and crises by showing how changes in demand in the short run may affect prices and profitability, in part, via changes in the monetary expression of labor-time.

Proponents of the temporal single-system interpretation (TSSI) have disproved the alleged proofs of internal inconsistency in Marx’s value theory. Roberto Veneziani’s 2004 essay, “The Temporal Single-System Interpretation of Marx’s Economics: A critical evaluation” Metroeconomica 55: 1, pp. 96-114), is part of an effort by critics to avoid conceding the validity of these refutations. This paper is a response to his essay. I will argue that Veneziani’s paper is a model of truthiness. He gives the impression of having uncovered fatal errors in the TSSI refutations, yet acknowledges in passing that the TSSI deduces Marx’s disputed conclusions from his premises. This would not be possible if Marx’s arguments were internally inconsistent. Hence, Veneziani tacitly concedes that the alleged proofs of inconsistency have been disproved. He also gives the impression of refuting TSSI demonstrations that simultaneist interpretations imply that there can be surplus labor without profit. However, he actually concedes––grudgingly and fleetingly––the validity of these demonstrations. The paper will also show that Veneziani’s other main claims, however truthy, are false. In particular, I shall respond to his critique of TSSI demonstrations that labor-saving technological change can lower the rate of profit. Veneziani seems to prove that these demonstrations hold true only in extremely implausible circumstances, but none of his arguments holds water. The paper will also criticize the use of truthiness as a scholarly norm, particularly as practiced by Veneziani and other critics of Marx and the TSSI.

Labor, in Marxian accounts, often appears as the universal ontological ground of social life—the founding moment of social being/Reality. Everything comes into being or is transformed into a new reality through labor; it is the substance and creator of Being/Existence. It is construed as the essential and distinctive, if not the only, quality of being human: defined as purposeful productive activity through which objects provided by nature are shaped in accordance with a conscious plan for the satisfaction of needs/desires, labor distinguishes human beings from animals, or nature in general, giving them their unique character. These accounts, finding textual evidence not only in Marx’s early, “humanist,” texts, but also in his “mature” writings, end up fetishizing labor in a manner not so much different than Hegelian speculative philosophy he persistently criticized. Moving beyond naïve renditions that merely equate it with the “reification” of social relations and “false consciousness,” I contend fetishism involves a speculative inversion: conceiving a quality that arises as an effect of a network of relations as the inherent, natural and essential characteristic of an element of this network (Žižek 1989). Despite occasional slips, Marx carefully avoids this fetishistic inversion by situating labor within the context of a particular society. This implies neither quality—creator of use-values or the producer of values—should be read as labor’s innate or essential attribute; rather, labor acquires these characteristics within Marx’s discourse as he analyzes class relations that prevail in a capitalist society.

Accounting for Economic Growth

D7: Saturday, 8:30-10:00

The South African government has set for itself an objective of halving poverty and unemployment by 2014. The rate of growth needed to achieve its socio-economic and developmental objectives has been predicted to be around 5 percent on average between 2004 and 2014. This paper assesses the contribution of foreign direct investment (FDI) to South Africa’s economic development through its impact on economic growth for the period 1985-2005.The importance of FDI hinges on the fact that it provides capital needed for investment, creates employment, comes with managerial skills and technology and therefore accelerates the pace of growth and development (Asiedu, 2001:2). The long term relationship between foreign direct investment and economic growth is examined by running an Ordinary Least Squares (OLS) and a two-staged least squares regression on an augmented Solow production function, using secondary data within a growth accounting framework. The results show that there is a positive and significant relationship between changes in FDI inflows and the growth in GDP. Lessons are drawn from other emerging economies like china, India and Brazil to suggest the kind of policy initiatives that could get the South African economy benefit from FDI to attain its objective of 5% to 6% growth by 2014 and its set economic development objectives of employment creation and poverty reduction.

The goal of this paper is to examine whether there are more comprehensive measures of unemployment rates than the government’s official measurement. For this aim, this paper traced (1) historical developments of international standards concerning the measurement of (un-)employment rates proposed by the ILO, and (2) a series of alternative measurements proposed by the U.S BLS. The research result based on empirical data for Korea since 1990s shows that a series of alternative unemployment measurements and labor underutilization frameworks are superior to the single official unemployment rate in analyzing actual labor market conditions; the official unemployment rate alone misleads a wide range of visible and invisible unemployment and the existence of the ‘time-related,’ ‘income-related’ underemployed workers.

State Investment in Agricultural Productivity as an Alternative Engine of Growth:

According to Kaldor’s Laws of Economic Development, industry is the main engine of economic growth. My main question is, for less developed regions of the world, can mass state investments for developmentalist projects be an alternative way for development. Southeast Anatolia is one of the least developed regions of Turkey. The state enacted a mass development project in this region at late 80s, aiming providing electricity and water for irrigation for agricultural production via construction of many dams and power plants. How this project has effected economic development of the region? In this study, Southeast Anatolian Region and the province in that region which benefited from the project firstly, Sanliurfa, will be examined. GDP per capita of the province and whole region between 1987 and 2001 will be compared to GDP per capita of East Anatolian Region and its provinces, where we can hardly see the effect of the project. Beside GDP per capita, some other socio-economic variables will be examined.

This paper explores shortcomings associated with employing a marginalist method for explaining economic and social reality. Our thesis is that a poor and blinded choice of economic method can indeed lead to blatant explanatory failures. In this paper we probe into the economic method based on marginalism found in selected contributions of Robert Barro and Xavier Sala-i-Martin, what stands at the core of their ‘convergence hypothesis.’ We then consider explanatory failures that arise in their implementation of marginalism in predicting the time line for per capita income convergence between the eastern and western regions of the Federal Republic of Germany.

Economics in the Human Conversation

D8: Saturday, 8:30-10:00

Because of evolutionary origin as ‘a warm-blooded, primitively cerebrating vertebrate,’ man cannot have ‘divined’ the eventual evolution of his uniquely human ‘deliberative capability’ and its consequences. What has developed consequently – ‘evolved’ – is that man has learned how to ‘facilitate’ his existence -with what we call ‘technological advances,’ before discovering the consequences of such ‘facilitation out of ignorance’ – that, in particular, he would some day, and inevitably, come to regret how he had lessened the duration and worsened the very nature of his existence on earth through war, waste and the corruption of ‘pre-sapiens natural dynamics’: overpopulation, pollution, global warming and loss of biodiversity – human existence, ‘the quality of life.’

Economics has evolved out of fundamentally natural mechanisms of human diasporation and eventual trade. For the greater part of history, these mechanisms were more or less satisfactory in the sense that it was not intellectually yet possible to foresee problematic consequences arising from underlying physiological dynamics. Economics and economic theory, in this respect, have evolved as less concerned with consequences than with ‘abstract market properties’ and ‘economic growth.’ Critically missing there then is any reference to man’s expressly physiological nature –and to that aforementioned ‘deliberative capability’ in particular - the inevitability, in other words, of his increasingly deliberated and ‘scientifically meliorated’ influence on what is a closed-earth system in favor of life-form best longevity. There is a ‘mantra’ to this, and it is: least population of least resource/environment corruption.

This paper/brief introduces this Conference, the Academy, and the world to the new General Theory that completes the task commenced by John Maynard Keynes and the paradigmist agenda. MEESA is an acronym for the Mammonization of Economics and the Epistemological Subjugation of the Academy. It symbolizes a new analytical methodology central to which are the indispensable conceptions of mammonism, the jurisprudence of usury, and the recognition of money as a medium of power — a medium of allocation, appropriation, and control — rather than a medium of exchange. MEESA exposes the epistemological subjugation of the Academy under philosophical mammonism and the conceptual incarceration of the Exchange Paradigm of Money.

In the context of Robert Garnett Jr.’s essay, “Whither Heterodoxy?,” this brief introduces the Forensic Scholastic Method that brings courtroom analytical skills and evidentiary insights to the Academy and acts as a transitional step toward the Parapometrics® methodology — the science of power — that encompasses the developments of organic and mammonic jurisprudence and epistemology, and enables the formulation of geomammonics to supplant the anachronism of geopolitics. It shows how the transition from the exchange to the power paradigm of monetary understanding renders economic reality conceptually accessible and paradigmatically soluble, and shows how these developments have resolved the crisis of economics and the mythologies of neoclassicism. It introduces the Academy to the Keynesian conception of pluralism that recognizes that when pluralism and paradigmism are correctly conceived they are symbiotically rather than adversarially related, and it suggests that ICAPE and heterodoxy formally embrace this reality.

The paper will deal with inputs from various fields of the social sciences which will deal with research involving professional psychologists, sociologists in terms of economic theory and its assumptions; and in terms of specific theories in their own fields relating to our economic theories and assumptions in terms of analysis and policy. The paper will also deal with specific parts of economic analysis outside the major areas of orthodox analysis such as behavioral economics, experimental economics, socio-economics, institutional/evolutionary economics, post Keynesian economics, et al.

After the above, an integration will be made into a more pluralistic, interdisciplinary approach to economics in terms of analysis/policy. In order to keep the paper from going into all different directions at once, the paper will then assume for the sake of analysis that the socio-economic system is at a “crisis” at which time the various analysis discussed above become relevant. Thus, what economic analysis discussed above becomes relevant; and what sociological and psychological analysis become relevant such as, for example, sociological “spread effects”? Thus, it is the belief herein that Economics is at the assumed point of “crisis” and calls for a more pluralistic, interdisciplinary analysis including areas of study both within economics and form outside fields such a sociology and psychology to better understand the total realities of the economic situation in terms of analysis and policy.

Rethinking the Economics of the Environment:

Why a Heterodox Approach Matters

E1: Saturday, 10:30-12:00

There has been a discernible shift in the discourse amongst policy makers as relates to the environment. What was the mainstream economic view of environmental problems as driven by market failure, with its corollary recommendations for correcting market failures through policy intervention, is rapidly giving way to an ultra-conservative, ideologically driven approach to environmental problems known Free Market Environmentalism. Free Market Environmentalism views privatization- the removal of natural resources and the environment from the public realm - as the solution to environmental problems and views government policy as the cause of environmental problems, not the corrective. For heterodox economists who have long argued the limitations of mainstream environmental economic analysis, the growing influence of Free Market Environmentalism is particularly troubling. Rather than focusing energies on shifting the discourse on environmental policy in progressive directions, many heterodox economists have had to retreat to defend what has long been established - market failure as the origin for environmental problems. Debunking free market environmentalism, therefore, is critical to developing a new progressive economics of the environment.

Managing Scientific Uncertainty and Ethical Controversy in Climate Analysis:

Catastrophic Impacts, Distributive Justice, and Risk Aversion in the Stern Review

The importance of scientific uncertainty and ethical judgments in the economic analysis of climate change policy is widely recognized, and a variety of methods have been used by economists to address the underlying issues. In particular, the widely publicized Stern Review of the economics of climate change attempted to base its recommendations on a sophisticated treatment of uncertainty, equity and risk. However, I suggest that in practice the methods Stern used are not adequately robust to justify the policy conclusions he draws, particularly his conclusion that it is not economically warranted to seek to stabilize global temperature below a 2ºC increase above pre-industrial. I show further how equally reasonable assumptions, in the same basic framework, would lead to very different conclusions, and suggest ways in which the key controversies might be addressed through a combination of familiar and novel approaches.

Frank Ackerman (Global Development and Environment Institute and Center for the Applied Study of Economics and the Environment)

Climate change poses the ultimate challenge for public policy; formulation of adequate responses will require new approaches to economic theory. Three critical features of the climate problem call for new theoretical departures: the unsustainability of the status quo; the importance of multi-century causal relationships; and the impossibility of precise calculation of expected harms.

The unsustainability of the status quo is difficult to comprehend within a framework that assumes the optimality of market equilibrium. In a world with a changing climate, we are not close to a desirable equilibrium; and incremental movement toward free market equilibrium is not necessarily helpful. Multi-century causal relationships raise the well-known paradoxes of discounting: conventional approaches suggest that the far future doesn’t matter, and that almost nothing should be done to provide a sustainable world for our descendants. Common sense and non-economic discourse require a better answer; if it involves discounting, the discount rate must not only decline over time, but must also start at a relatively low rate. The impossibility of precise calculation of harms challenges the conventional understanding of externalities. Harms caused by climate change are not separable into individual externalities, due to joint causation; nor are they predictable in detail, due to increasing variance of weather outcomes and chaotic dynamics; nor are they monetizable, since the way of life and natural existence that are at stake are literally priceless. Solutions require a reinvigorated approach to public goods and the public sector, expanding a conversation about collective values that has lately been confined to military and security questions; recognition of the path-dependent nature of development, and strategic choice of preferable paths; and adoption of a precautionary approach to protection of human life and nature.

Markets and Community

E2: Saturday, 10:30-12:00

Austrian economics and Marxian economics should be irreconcilably at odds. The Austrians have put forth the strongest arguments against socialism, pointing to the calculation, knowledge and incentive problems that a socialist state would have to overcome. And, the Marxists have consistently highlighted the inevitable, negative side effects of an unrestrained, chaotic market; alienation and exploitation chief among them. Surprisingly, Sciabarra, Burczak and others have discovered a number of similarities between Austrian and Marxian economic analyses. Both schools, for instance, share a dialectic approach to social inquiry and emphasize that context matters.

By focusing on the work of F.A. Hayek and Henri Lefebvre this paper will explore additional similarities between the two camps. Both have stressed that the market is a social space (in the language of Lefebvre) or a spontaneous order (in the language of Hayek) that is produced by the interactions of individuals competing and cooperating with each other and is also the site of those interactions. Both have also paid little attention to the extra-catallactic relationships that can develop in markets. Conversations that express more than bid-ask, conversations that aren’t just bartering and negotiations, conversations between market participants that are concerned with more than making a deal do occur in markets. Indeed, a number of meaningful social relationships are buttressed by markets and would not exist if markets did not exist. Interestingly, its Lefebvre’s spatial theory rather than Hayek’s spontaneous order approach that most readily accommodates a discussion of this additional benefit of markets (beyond efficiency and coordination).

There is an increasing debate about the nature and significance of pluralism within economic analysis. The pluralism debate is currently centered on a variety of dimensions, i.e. pluralism of methods, theoretical pluralism, ontological pluralism, etc. The aim of this paper is to relocate the debate regarding pluralism in the context of discussing the apparent incompatibility of gifts and markets. We commence with a focus upon the development of markets through a consideration of the linear market development model advanced by the likes of Hicks and Polanyi. This accepted position within economic analysis argues that markets are the natural evolutionary successor of gift-based economies. By looking at markets as institutions, it is possible to connect our thinking about them with other institutions which are observed in contemporary economies, such as gift. Thus, we argue in this paper against the conventional position within economics that markets and gifts are incompatible, and that gift and gift-giving can only exist outside the market system. Although the nature of gift has changed over time, the presence of altruism and other residues of gift giving within transition economies are advanced as evidence of the possible coexistence of markets and gift within the same economic system. A linear model of development which emphasizes an organic process of replacement of a gift economy with a market system will be challenged.

For many Marxists, and leftist critics in general, market activity is fundamentally inculpated with capitalism and as such, social movements predicated upon market activity are written off as utopian. I disagree on two counts. First, I reject the conflation of market activity with capitalism and argue what market activity means really depends upon the context within which it takes place. Many different types of market activity are possible, some with social impacts we may embrace or conversely, deplore. Secondly, I see LETS (Local Exchange Trading Systems) and local currency movements actively promoting practical, and by their widespread and growing popularity, compelling, ‘anticapitalist’ economies predicated on communal solidarity and need fulfillment in the present day. This paper explores the ethical and practical dimensions of LETS and Local Currency movements.

Finance Capital and Economic Growth

E3: Saturday, 10:30-12:00

Financial Anarchy, Capital Flow Volatility, and Fixed Investment in Developing Countries:

The revival of international capital flows together with domestic economic reform programs along the “Washington Consensus” during the 1990s led to a strong shift of mood among economists regarding the long-term outlook of the so-called Emerging Markets. Nevertheless, after more than a decade of financial liberalization experience some serious questions remain over the capacity of capital flows in achieving the initial policy projections. In addition to unmet expectations, there is a growing debate over the direct role of such flows in generating consecutive financial crises during the course of 1990s and early 2000s. On the other hand, apart from a few empirical studies at the macroeconomic level, there is a lack of analysis of the effects of capital flow volatility on domestic investment performance of developing countries. What we suggest is that financial liberalization not only failed to realize its initial policy objectives such as capital market deepening but also created a volatile macroeconomic environment. As a result, increasing volatility of capital flows has become a major destabilizing force for investment growth in developing countries. Using bi-annual micro-level panel data for Argentina, Mexico and Turkey, we analyze the impacts of volatility of short-term capital inflows on real investment behavior under financial liberalization. In all three cases, the empirical results employing a Generalized Method of Moments estimator by Arellano and Bover (1995)’s orthogonal deviations transformation suggest that increasing volatility of short-term capital flows have a both economically and statistically significant negative effect on new fixed investment spending of real sector firms.

The paper gives an overview of the dynamic interaction of industrial and financial circulation, focusing specifically on the macroeconomic effects of asset market speculation in the context of the latter. Much of the emphasis in this discussion is on some of Keynes’ arguments in his Treatise which had been eclipsed by his much better known GT. The formulation of his ‘liquidity preference’ argument into a theory of the interest rate in this later work and the sharp exchanges with some of his critics on the loanable funds theory made it harder to appreciate the degree of continuity in his thought with the tradition of monetary analysis that emanates from Wicksell, of which the Treatise was a part. As he (and his followers) became embroiled in debates with mainstream economists in the aftermath of the GT, many of his insights in the Treatise were lost or abandoned because they no longer fit easily in the truncated theoretical structure he adopted in his latter work. For later economists, this has made it harder to appreciate, let alone pursue, Keynes’ early insights. This paper errs, if at all, on the other side as it highlights these early insights at the expense of Keynes’ formulation of his views in the GT.

Rohit (Political Economy Research Institute, University of Massachusetts, Amherst, and

This paper is an attempt to analyze some stylized facts in the last two and a half decades for the US economy. Along with an increase in the profit share as well as wealth concentration in post-1973 period, there has been a dramatic increase in the average consumption as a proportion of the GDP. Simultaneously, there has been financial deregulation resulting in an unprecedented level of freedom and advantage to the rentiers. All this was happening while the growth rate of the economy declined compared to the golden age period. We argue that there is a link between these seemingly disjoint processes viz. growth, concentration and financialization of capital, which could be studied in a Kaleckian-Keynesian framework. The process of concentration and financialization have had two opposite effects, though not necessarily equal in their impact, on the economy; on the one hand, it gave a boost to consumption through the wealth effect and on the other it led to under-investment. We study both these processes theoretically by building a growth model where both these processes play key roles and then we attempt to substantiate our theoretical claims by statistical and econometric analysis.

Socialism and Human Development

E4: Saturday, 10:30-12:00

Marxism and poverty have always lived a contradictory existence, especially in the Global South. Marxist discourses on poverty are sharply distinct from other non-class focused approaches on poverty, namely the World Bank approach, the Post-developmentalist approach and the Capability approach. First, struggling to eradicate poverty is a distributional problem pertaining to the allotment of social surplus and it is also a distributional matter pertaining to the subsumed class payments since social surplus is the excess over the subsumed class payments. For example, in the latter case, a reduction in subsumed class payments (or production surplus) can make available more social surplus for poverty eradication. Second, poverty eradication is also related to the fundamental class processes since surplus originates there. Poverty eradication challenges us to seek to produce and extract surplus labor beyond the existing production surplus. That is, how much social surplus is available to be distributed remains critically determined by the concrete forms of fundamental class process, the amount of surplus they help generate and who gets the initial control over the surplus. One may seek a change in the fundamental class process in order to reshape the amount of surplus being appropriated and distributed as social surplus. Correcting the injustice of poverty is not simply a distributional question as most discourses on poverty tend to emphasize. Not only is it also a question of production but it is very much a class question as well.

Given the weakness of state and of private entrepreneurship in Africa, new kinds of institutions are being considered at the grassroots level: one of them is cooperative enterprise. Cooperatives could be classified in two different groups. A cooperative that pursues only the economic interests of its members can be defined as an ‘interest cooperative’: it is a form of ‘collective egoism.’ On the other end, ‘community cooperatives’ are built around a common bond, which creates a sense of belonging. Community cooperatives might find in Africa an enabling environment, as solidarity relations are still very important there. Community ties constitute the basic fabric of society at the extended family, village and clan level. A common cultural heritage could be the springboard for a process of economic development, although the passage from a traditional organization to a modern cooperative is not a simple one. The experience of two African countries, Mozambique and Senegal, is considered. Since the beginning of the ‘80s, many new cooperatives were created in both countries for various objectives: commercialization, collective buying of inputs and machinery, saving and credit, management of irrigation perimeters, etc. These were mostly ‘interest cooperatives,’ but there were also some cases of community cooperatives. Two of them are analysed here: the first one is the ‘Uniao geral das cooperativas agropecuarias de Maputo,’ located in the farming belt of the capital of Mozambique; the second is the ‘Amicale sportive et culturelle des agriculteurs du Wallo,’ a Union of cooperatives created in the Delta of river Senegal.

A small but growing literature (Devine, Hahnel and Albert, Cockshott and Cottrell, Laibman, Campbell) has developed concerning the feasibility of a socialist alternative to capitalism. (For the purposes of this paper that implies a non market alternative: the so-called market socialism literature is larger than the non market socialism literature, and will be only briefly alluded to in this paper in regards to its fundamental position on the topic of this work.) The focus of these works has largely been on institutions and policies that could make such an economy viable. While some of the works have touched on the other key aspect some (in particular Devine, and Hahnel and Albert), it has received much less attention – the transformation of humans in the process of moving from what is to what is being proposed. This paper will use one of the earlier (partial) institutional models of a viable non market economy to address this issue of human transformation in a transformation to a more humane socio-political-economic society.

Pluralist Post Keynesianism

E5: Saturday, 10:30-12:00

Towards an Anthropogenic Approach to Households in a Monetary Theory of Production

The paper extends Alfred Eichner’s anthropogenic approach to labor to household relations within a monetary theory of production by combining Post Keynesian, Institutionalist and gender analysis. While the anthropogenic approach acknowledges money as a necessary motive for engaging in paid employment it does not disassociate human relations from the production process. The emphasis of this approach on active human agents with multifaceted goals, including enhancement of social ties, as well as establishment of social distances, provides outlets for incorporating notions of femininity and masculinity, as well as ideological notions of hierarchy that are embraced by household members, into monetary production process. Thus, household relations are treated as important part of monetary theory of production since workers are socialized within household relations where neither money, nor gender is neutral. An anthropogenic approach to households within a monetary theory of production is a step towards a framework of capitalist provisioning that integrates monetary and gender hierarchies and offers non-conflationary micro-macro economic theorizing.

A Proposed Methodological Synthesis of Post Keynesian and Institutional Economics

The phenomenon of high performing-low socioeconomic African American students casts doubt on a simplistic causal relationship between socioeconomic status and achievement, and compels us to look for a more holistic explanation. Here we develop a System Dynamics model of the classroom Teacher/Student transaction, and estimate the effect of student Structural factors (race and class) within Teacher Cultural context (teacher expectations). The model is calibrated using data from the Early Childhood Longitudinal Study - Kindergarten sample. Simulation results find that student’s race and class, cast as Cultural variables affecting teacher expectations in interrelationship with the child’s Agential cognitive processes, can explain the Structure of African American/White differences in educational outcomes.

A Comparative Analysis between the Labor Theory of Value and the Post Keynesian Theory

The goal of this paper is to show that labor theory of value and Post Keynesian theory reach to the similar conclusion about the firm: The firm is a dynamic and complex economics’ phenomenon that evolves and grows permanently. In order to get to that objective, we first must answer the following questions: Is it possible to obtain from the labor theory of value (LTV) a microeconomics explanation of the firm supply? Can we build a microeconomics firm theory starting from LTV? If this is possible, we will be able to elaborate a comparative analysis between this new explanation and the Post Keynesian microeconomics theory. We will try to show that our answer is affirmative, and in this paper we show – in theoretical terms – that a supply theory derived from the concept labor-value, and clearly different in many aspects from the Post Keynesian framework. Yet both theories reach the same conclusion: firms are dynamic and evolve into mega corporations: multi-nationals and transnational enterprises. Both theories conclude that in the evolutionist process the market is not the heart of the capitalist economy as it is stated by the traditional micro theory. But to the Post Keynesians, that role is played by the firm, while for Marxists it is the dynamic relation between the firms and market.

Opening up the Economy, But to What Ends?

E6: Saturday, 10:30-12:00

In recent years a group of researchers at Cambridge (UK) have (re)introduced conceptions of open and closed systems into economics. In doing so they have employed these categories in ways that, in my assessment, both facilitate a significant critique of current disciplinary practices, and also point to more fruitful ways of proceeding, particularly for heterodox economics. I will defend the Cambridge position, and show that making this conception of open systems explicit might in fact help unite heterodox projects.

This study has two objectives. First, we present the distinctive way in which feminist scholars have sought to bring multidisciplinary methods and methodologies into the field of economics. Such effort immediately requires a start from the redefinition of economics as a field that explores social provisioning. Feminist economists have been studying intricate relations between factors of production: namely capital, labor, land, technology and their connection to reproduction and vice versa. In other words, linking paid and unpaid labor has been a major task. Such endeavor questions economic theory to its core, and therefore requires tools that are not traditionally used in mainstream economic discipline.

When we look at manifestations of feminist theory in other social sciences such as in sociologically, anthropology and political science, we observe the growing dominance of the ‘economistic’ approach in these fields. This development feeds into the vicious cycle particularly at the methodological level. We have to redefine economics. Second objective of this study is to raise attention to the methodological bottleneck and how it is organically connected to use of method. We need to find ways to capture socio-economic and political reality. We conclude arguing that along with the research done at the empirical or theoretical levels, there is a need to extend the field employing more research on methodological concerns and its manifestation in choice of method. Unless our approach is fed by the developments in feminist theory as its groundwork, we would only be able to alleviate rather than eradicate the limitations to accomplish our premises. We propose exploration and use of ‘interpretive approach’ in economics discipline in general and feminist economic approaches in particular.

Critical Realism has spawned two quite distinct traditions: one associated with Bhaskar himself and the other a school of Critical Realism in Economics (CRE) most closely associated with Tony Lawson’s work. Bhaskar has contended that Marxism is the exemplar of applied critical realism in the social sciences. In contrast CRE has included Marxian economics within a broader heterodox tradition and has if anything subordinated it to other approaches. There are also distinctions in each tradition’s treatment of neoclassical economics. While inadequacies within neoclassical development theory ultimately drove Bhaskar to an analysis of its philosophical deficiencies, Bhaskar himself has never elaborated an explicit critique of the mainstream. On the other hand, those within CRE have engaged much more directly with academic economics. These developments have led commentators such as Fine (2004) to identify the CRE position as the definitive application of critical realism in economics and to criticize it accordingly. It is the contention of this article that conflating the Bhaskar and CRE positions has been a decisive mistake. This article will be proceed by drawing out the tensions that Nielsen (2002) has perceptively noted, before using these to delineate the CRE project from its Bhaskarian relative and ascribing to it most of weaknesses that Fine has referred to. Finally then, this will leave us in a better position to outline an alternative critique of the neoclassical framework and to construct a viable political economic alternative particularly with reference to the Social Structure of Accumulation (SSA) framework within Marxism.

Unmeasured Contributors to Economic Growth

E7: Saturday, 10:30-12:00

Total Factor Productivity, Income Distribution, and Growth Accounting in China:

Research on technical progress as one of the key growth resources in China have been carried out in terms of the so called “growth accounting” exercises, coined by Solow (1957). Technically sophisticated as they may look, the results and interpretations are far from satisfactory. This paper aims at demonstrating that total factor productivity (TFP) for China, measured by “Solow Residual” is flawed. The equations used to calculate TFP are nothing more than an accounting identity: what they allegedly measure for technical progress has nothing to do with technological progress, but to do with the weighted average of the distributional parameters for capital and labor. It is well acknowledged, but ignored by neo-classical economists, that the good fit of econometric models can not be interpreted as evidence of the existence of a well-behaved production function, but as the mere result of a “law of algebra.”

To demonstrate these themes effectively, this paper will take two steps. The first step mathematically shows that all relations of variables for inputs, distribution and output, which are utilized to calculate index numbers for the TFP, are simply the result of a (macro) accounting identity. Second, re-examining a standard growth accounting exercise for the Chinese economy, I will show why they work, demonstrating that the derived results must be so, not because of any kind of imaginable economic law of motion, but because of the law of algebra a la Shaikh. The whole demonstration would imply a serious and immediate call for an alternative approach to technical progress and economic growth which can replace unreliable neo-classical faith.

“In modern business practice, capital is distinguished into two . . . categories of assets, tangible and intangible” (Thorstein Veblen 1919).

Economists by and large have been very reluctant to follow up on Veblen’s early insight and to explore the intangible factors that contribute to economic growth. But whenever economists have embarked on such exploration, the results have been important and illuminating. For example, in the early 1960s a great deal of economic research began to be focused on investment in standard human capital. In the 1990s, the attention of many social scientists turned to social capital. More recently, some social scientists are investigating noncognitive human capital or personal capital. No doubt still other intangible forms of capital will be recognized as contributors to economic growth. So it is important to study intangible capital in all its manifestations. After defining intangible capital, the paper first focuses on explaining how the different components of intangible capital contribute to economic growth. Second, the paper surveys the empirical literature on the intangible factors contributing to economic growth. These findings have important implications for government policy. Is there a case for government encouragement of the more intangible forms of investment? Would such encouragement be justified as a way to enhance the competitiveness of a nation’s economy?

It is the intention of this work to present an “alternative” long-run growth model based on a key concept named “qualifications of labor(-er).” We shall encounter this concept, qualifications of labor(-er), in every aspect and degree of the investigation of long-run growth analysis. To put it more properly, given the gifts of nature, the “creative mental labor” appears to be the sole and everlasting genesis of all long-run economic growth. Technological advances, which are the indispensable ingredients of all long-run growth, are, in fact, the products of “creative mental labor.” Efficient use of the technologies is also a rather essential factor.

Starting Points for Reconstructing Standard Economic Theory

E8: Saturday, 10:30-12:00

In recent years there has been an increasing interest in mainstream economics in relation to the importance of spatial aspects of economics. Models in macroeconomics and international economics, which are based on ignorance of the costs of spatial interactions, are under permanent critique. However, I try to show that the typical neoclassical treatment of space is inadequate from the spatial problems’ point of view, because it is based on an inadequate view of space, on the network of one point economies. Most parts of criticism concerning dimensionless aggregated one-point-economy are valid to the network of one-point-economies. In the adequate analysis of spatial phenomenon one has to think about regions as overlapping entities and to use zoning-system-independent continuous space view, which is built by individual locations and individual actions and movements. Beside the problems of the treatment of space, there are other methodological problems of model building as well. Firstly, the neoclassical approach is based on a restricted meaning of economics, namely on a method oriented approach to economics which limits our methods in reasoning of economics. Secondly, there are many (both epistemological and practical) problems with its modeling techniques. Thirdly, it disregards or misinterprets the former researches in the spatial aspects of economy. Fourthly, it does not deal with the institutional, social, cultural, legal factors.

The paper demonstrates some concrete problems and negative practical consequences of the two most popular research movements in neoclassical economics concerning space, namely the models of New Economic Geography and the “convergence approach” of the temporal change of spatial income differences.

Many major theoretical traditions have relied on the assumption of homogeneity. In classical economics, including Marx, homogeneous labor is a prominent example. Neoclassical theory routinely considers (for example) a set of identical firms. On the other hand, the more empirical perspectives that focus on history and institutions tend to emphasize specificity. The clearest case is on the production side. The outcome of competition between firms depends on their differences, e.g. in cost structure or innovative performance. Subsequent developments may increase these, in a positive feedback loop, resulting in further heterogeneity in the market. This is the heart of the struggle for competitive advantage, which is rendered invisible by the prevalent neoclassical approach, and not sufficiently clear in heterodox theories. Heterogeneity is almost as important in consumption. Different sections of society have highly unequal buying power, with far-reaching consequences for types of goods consumed/produced and for their distribution. In Sen’s classic description of famines, starvation depended not on aggregate food availability but rather on “entitlements” to buy or grow food. The analysis of that extreme case can readily be extended, e.g. to the property market. This has implications for use of “willingness-to-pay,” and for market solutions to problems such as climate change. Heterogeneity needs a central place in theory. Its absence leads to problems with aggregation, and thus with understanding the micro-macro relationship. It also renders an issue such as poorer people’s higher utility per dollar theoretically invisible, making it necessary to introduce it from outside as an ethical position.

Post Keynesian Microfoundations

F1: Saturday, 1:00-2:30

Reinterpreting the Microeconomic Foundations for Understanding Labor Market Outcomes

In spite of high aggregate demand, U.S. labor market changes appear to compromise existing and future job creation. Here is the conundrum: Why is relatively high aggregate demand not supporting more directly the growth of well-paying employment opportunities?

The objective of this paper is to develop a theoretical model consistent with this factual anomaly that goes beyond the usual microeconomic interpretation of labor market outcomes. The latter, as is well known, relies on a marginal productivity perspective of the demand for labor, coupled with a disutility perspective of the supply of labor effort, In rejecting that the “demand for labor” is a useful perspective, it will be argued that the role of business firms is not to demand labor, but to make employment offers in order to realize business proceeds. Business firms aspire to realize net proceeds from financial investments, by generating outputs that are realized as proceeds. It will be demonstrated that Proceeds-Employment-Offer functions are the vehicle for realizing this objective. Thus, Keynes’ aggregate demand construct retains its central importance for explaining commodity market outcomes. However, to explain labor market outcomes, which are our concern here, a Proceeds-Employment-Offer function is joined to the Actual Proceeds Function to determine the economy’s level of employment and its sectoral allocation between its price-making and price-taking sectors.

Market competition is central to any economic theory, but it is still a contested concept in Post Keynesian economics. Some claim that there is no widely-accepted theory of market competition in the Post Keynesian economic tradition. Others argue that Post Keynesians synthesize different approaches to competition. The main contention in this presentation is that Post Keynesian economics provides all necessary philosophical and analytical tools to build a very rigorous, coherent, and sophisticated theory of what I would call dynamic market competition (DMC), but it has yet to be developed. Analytical distinction made by Alfred Eichner between non-oligopolistic and oligopolistic markets on the one hand, and Walrasian, Marshallian, Chamberlinian competitive markets, on the other hand, serves as the main building blocks for DMC. Finally, Nina Shapiro’s analysis of working dynamics as well as consequences of market competition in Marshallian markets offers a dynamic link between competitive markets and oligopolistic markets. The first section clarifies the philosophical foundations of Post Keynesian economics and its methodology, the second section utilizes analytical distinctions advanced by Eichner such as Walrasian, Marshallian, and Chamberlinian markets to explain the nature of market competition in competitive markets. The third part elaborates on market competition in transitional markets, as advanced by Nina Shapiro, to establish the linkage between competitive and oligopolistic markets, before elaborating on the nature of market competition in oligopolistic markets in the fourth section. The last section evaluates the reverberations of the findings.

This paper attempts to adumbrate an informal macroeconomic model of cycles and growth synthesizing the work published by authors working within the Institutionalist and Post Keynesian traditions. This “Evolutionary Keynesian” approach to theory and policy is compared and contrasted with New Keynesian models of business cycles, monetary economics and stabilization policy, and with New Endogenous Growth theory. The New Keynesian and New Endogenous Growth theory models are portrayed as forming the basis for the “new consensus” macroeconomic models which have come to dominate the neo-liberal approach to policy over the past decade. The paper argues that the Evolutionary Keynesian approach is superior as a guide to policy making.

Author Meets Critics:

Socialism after Hayek, Theodore A. Burczak

University of Michigan Press, 2006

F2: Saturday, 1:00-2:30

Beyond Economic Man?

F3: Saturday, 1:00-2:30

While theories of social evolution are nothing new, recent developments have stimulated new interest in evolution (Hodgson, 2002) or evolutionary game theory (Gintis 2006, Beinhocker 2006) as the ontology for economics and, perhaps, as a unifying basis for a wider range of thought. Hodgson and Beinhocker adopt “Universal Darwinism,” so that for them “evolution” refers to an algorithm or formal model that involves distinct populations of at least two distinct kinds of entities, “interactors” and “replicators.” McCain (2006) recently proposed a framework of this type tied more closely to Evolutionarily Stable Strategies (ESS) models. In McCain, pure strategies are the “interactors,” while heuristic rules as conceived in artificial intelligence and bounded rationality theory are the replicators. This essay reviews the recent contributions and controversy, summarizes McCain’s proposal, and explores the potential of these ideas as unifying principles. As Gintis notes, the social sciences differ from the natural sciences in that the social sciences lack any common, coherent basis; and this should be recognized as a deficiency of the social sciences. Gintis focuses especially on economics and sociology. Accordingly, Gintis stresses the evolution of norms and values. However, Gintis regards norms and values as preferences, and adopts a modified rational-action theory. Arguing that this is a wrong step, this paper suggests that norms are best understood in terms of rules of thumb, and illustrates how this may be done with examples of a public goods game and the “ultimatum game.”

In The Taming of Chance, Ian Hacking argues that over the course of the evolution of probabilistic analysis probability as a social practice has become such a part of society that it has become integral to it. I argue that the practice of contemporary probability theory has historical roots in analysis, and that the practice of analysis has come to inform probability theory, and its concomitant knowledge scheme – as the beacon of scientific knowledge. Economics, as an exemplary form of social-scientific knowledge, serves as an important testing ground for understanding the movement of the evolution of functional analysis into probabilistic analysis, and its implication for its use in a social setting. This paper sketches the principles of functional analysis, by way of Newton and Lebesgue, and shows how a cultural practice I call ‘the modern individual’ takes roost in the ontological language it employs. This practice of ‘the modern individual,’ it will be suggested, was inherently unstable from the onset, and what was meant as a liberatory expression of modernity has digressed into a singular, homogenous structure: the subsumption of the economic agent into a social probability function. I use Debreu’s, Theory of Value, and Aumann’s, “Existence of Competitive Equilbria in Markets with a Continuum of Agents,” to help ground this assertion. This is my reading of what Hacking calls ‘the taming of chance,’ what I call the taming of the economic individual.

This paper argues that there is no clear break between contemporary mainstream economics and neoclassical economics. Contemporary mainstream economics consists of an heterogeneity of approaches that include, among others, new institutional economics, new information economics, social choice theory, behavioral economics, and evolutionary game theory. These seemingly disparate approaches constitute a unified discursive formation articulated around a theoretical problematic that they share not only with one another but also with neoclassical economics: Each approach aims to specify the conditions of existence of a harmonious and contradiction-free social order (e.g., the notion of equilibrium and its normative implications) and in doing so each, explicitly or implicitly, refers back to a notion of subject as a self-identical and self-identifiable unity (e.g., rational actor). In this sense, contemporary mainstream economics is an accumulated outcome of the various responses to a number of potentially damaging theoretical criticisms as well as empirical controversies that haunted neoclassical economics throughout the twentieth century. Against those who isolate the Sonnenschein-Debreu-Mantel results of the 1970s as a unique moment in the history of neoclassical economics, it is necessary to highlight how each contemporary mainstream approach takes a shortcoming of neoclassical economics as its entry point, how each approach continues to deploy or refer to a number of neoclassical concepts (opportunity cost, scarcity, Pareto efficiency, rationality, and equilibrium), and how each approach aims to contain a problem of theoretical humanism in neoclassical economics in order to keep intact or restore its constitutive theoretical humanist presuppositions.

Inequality and Structural Change

F4: Saturday, 1:00-2:30

This paper analyzes the evolution of pay inequality in Cuba from 1990 through 2004, an era known as the “Special Period in Times of Peace.” Inequality rose during this period; even as active distribution policies softened the adverse trends in pay inequality caused by the harsh economic situation. To analyze the evolution of pay inequality we use the between-groups component of Theil’s T statistic computed from data on earnings by region and sector collected by Cuban government sources. With this method, we are able to calculate the general trend in pay inequality, as well as the contribution of each economic sector and region to this trend. These sectoral and regional trends show how industries and geographic regions performed over time. This analysis reveals a transition of the Cuban economy away from reliance on sugar and towards new growth sectors, particularly tourism, but also information technology, pharmaceuticals, and biotechnology.

The present paper proposes to analyze the relationship between inequality and macroeconomic aggregates as suggested in Galbraith & Garza Cantu (2001). In that volume, the authors find that, for the period 1947-1998 and in the United States, there exists a close correlation between unemployment and the inequality of wages in the manufacturing sector. The relationship is positive and suggests that inequality had a macroeconomic and policy dimension. Those findings are here extended in several directions. First, we devise generalized theoretical scenarios in which inequality could be related not only to unemployment, but also to other labor market variables. We derive a framework relating inequality and the structure of the labor force and underline the differences with the existing literature. Second, we introduce an updated measure of inequality and the relevant econometrics to answer the questions raised in the first part. The Theil inequality measures are extended to cover 1948-2003 and the cointegrated VAR model is briefly presented. The third part is devoted to the analysis of the results. We discuss the most significant correlations between the inequality measures and the individual labor market indicators. We find that unemployment and participation rates are leading indicators of inequality. As such our results shed light on the thirty-year long increase of inequality: there is a clear macroeconomic policy dimension to that increase, but at the same time that increase can be explained by “good” and “bad” reasons.

High unemployment has been a problem in Europe for three decades. The orthodox view points to the institutional rigidity of national labor markets in Europe as a principal cause of high unemployment, and to bring flexibility in labor markets as the cure. An alternative view argues that the problem of unemployment in Europe indicates policy failure. Both of these perspectives accept that the European wage structure is inflexible. This paper tests the rigidity of the European wage structure at the continental level. Using multivariate analysis, we analyze the variation in the movement of relative European wages from 1980 to 2005. We find that there is substantial variability in the European wage structure when viewed internationally, mainly because relative wages by nation have changed when currency valuations adjusted.

The geographical aspect of income distribution is a significant, but often overlooked, dimension of American economic evolution. Just as the incomes of individuals vary over time, so do the incomes of states and counties. The patterns of these differences can reveal the macroeconomic sources of inequality. In this paper, we use Theil’s T statistic of income inequality to note the aggregate changes in geographical income dispersion across counties from 1969 to 2004. Concentrating on the later years of this period, we isolate the counties most responsible for widening or narrowing the cross-county distribution of incomes. We find that broad, macro-level factors – the information technology boom and bust in the in the mid to late 1990’s and, perhaps, a new era of big government after 2001 – correspond to changing patterns in the geographical distribution of American incomes.

Critical Perspectives on Business Schools and Schooling

F5: Saturday, 1:00-2:30

This paper argues that undergraduate business ‘education’ represents a form of schooling whose purpose is to produce and reproduce individuals with the ‘proper’ internalized beliefs and ideology to act as technocrats and low level managers in capitalist organizations. This paper draws upon an academic year long ethnographic study of three ‘Introduction to Management’ classrooms, as well as interviews with students and faculty at an AACSB accredited business school of a large, public university. Utilizing a conceptual framework from Bourdieu’s work on education, I will examine discuss how lectures and textbooks shape a worldview of student and what these undergraduates are really learning.

This paper builds on observations from my years of being a doctoral student and teacher of management. Trained primarily in the liberal arts, the Sandinista Revolution (having spent nine years in Nicaragua) and the UC Riverside economics department, I came to the study of management in order to learn the “nuts and bolts” of accounting and finance in order to community-based finance. What I found, and what kept me in the academic field, was a discourse of social and economic organization that is both enormously influential and intellectually extremely fragile. I spent seven years being taught – and contesting – this discourse. During most of those years I was also teaching a course of “business and its environment.” The paper begins by describing the key values of management discourse and how they are promoted in business schools. I go on to explain the ways I have found to teach “through and past” these values: using primary texts and calls for critical thinking to help business students see and evaluate the assumptions underlying fundamental constructs such as the moral basis of profit and wage differentials, the meaning of work, the logic of markets, etc. The challenges – and gratification - of working in business schools and with these students are summarized.

Hegemonic Ideas in Historical Perspective

F6: Saturday, 1:00-2:30

Guinness is Good for You (and So Is Gosset): The Economic Origins of Student’s t

“Student’s” methods changed the character of economics and some other sciences after 1908, and especially after the first edition of Ronald A. Fisher’s Statistical Methods for Research Workers (1925). A century later, the scientific character of “Student”—a.k.a. William Sealy Gosset (1876-1937) himself—remains a mystery to most economists. The meaning and intent of “Student’s” t is explored with novel historical evidence. It is found that good old “Student” himself, the anonymous brewer of Guinness beer, invented and then advocated an economic approach to the logic of uncertainty. Yet in daily usage of “Student’s” t a majority of economists ignore his economic logic. Instead we follow the uneconomic logic of Fisher and Harold Hotelling, and unwittingly violate the Generalized Axioms of Revealed Preference (GARP). Increased attention to “Student’s” economic approach—partially reinvented by Wald and Savage and Zellner and some others—is here suggested.

In his lectures on “governmentality,” Michel Foucault argued that the early modern period was characterized, in the field of political philosophy, by a change in the object of political power: the control exerted over territories (i.e., physical extensions of dominion) was gradually replaced by a notion of power exerted over populations. In the present paper, we try to link this idea to the development of seventeenth-century British economic thought. In that body of literature, notions of population management of some sort are constantly present, beginning with early-seventeenth century pamphleteers like Thomas Mun and Edward Misselden and developing along the subsequent decades in a close relationship with some fundamental aspects of the economic doctrines of the period, as for example the “political arithmetic” envisaged by William Petty. The apex of such development is to be found in the extensive use made by Charles Davenant, in the last decade of the century, of the demographic statistics compiled by Gregory King. Moreover, we try to expose the connection between these demographic concerns and some key analytical concepts adopted by authors of the period, such as the distinction between “natural” and “artificial riches,” in an effort to show that those concerns were not simple subsidiaries to some military imperative of large numbers, but were instead a direct corollary to a widespread notion of labor as a creative force that would evolve into what E. A. J. Johnson has called a “foreign-paid incomes balance” doctrine – and to which we can trace back the rudimentary origins of a labor theory of value.

It has been necessary to trace some of the roots of the concepts of decision-making, such as rationality in economics, because those have been affected by many influences along the course of the history, due particularly to the development of philosophy. The critique of Sen (2002), among others, to the traditional economic theory and its narrow view of the economic agent, has been reviving the understanding of authors, like Smith in his original context, and their understanding about how decisions are made. Previous to scientific research in economics, those postulates suffered the struggle between philosophy, ethics and religion. The schisms in Occidental religion in the first millennium played a role in the way that not only religion, but science and philosophy developed later. That secularization derived alternative explanations for the concept of the self and its motivations for its actions, using mostly the Greek tradition. With this background, the study of logic was conducted as an important part of the research agenda, mainly by two sides: British Empiricism and Continental Rationalism, both known as the period of the Enlightenment. I argue that the former was responsible for the ‘ethically’ selfish and ‘empirical’ agent, while the latter for the ‘logical’ and ‘reasonable’ agent. Important philosophers, like Descartes or Hume, privileged the use of mathematical sciences to express this process more accurately. The Cartesian method is the root (and the source of “indubitable certainty”) of the developing of mathematical representations of rationality, like maximizing behavior or the internal consistency of choice. All of this will help us to explain the modern linguistic concept of rationality, which nowadays has many focuses.

This paper is an attempt at developing an analytical framework that could be helpful to understand unstable character of the capitalist society, by drawing upon the work of four important thinkers: Marx, Weber, Schumpeter, and Polanyi. It is argued that all four share a similar vision towards capitalism. Whereas Marx and Schumpeter find the source of instability in competition and capital accumulation processes, Weber and Polanyi see the basic problem as the tensions within the institutional structure of the capitalist society. Therefore, Marx (with the analyses of accumulation and fetishism), Weber (with the notion of the “iron cage”), Schumpeter (with the notion of the “creative destruction”), and Polanyi (with his idea of the “double movement”) are all indispensable in the development of the thesis that the working of capitalism undermines its own institutional structure, and thus make the reproduction of the capitalist society a contradictory process.

The paper advances three theses in regard of these thinkers: first, being various representatives of the German “expressivist” tradition, these thinkers conceive human history as displaying two antinomical tendencies at once; namely, human self expression through creative action vs. the loss of freedom due to increasing rationalization, alienation, and domination; second, capitalism should be seen as a big step forward towards more rationalization and therefore the loss of freedom, even if it creates the preconditions of the self-realization of the “species-being”; and third, they all believe that the very success of capitalism is the basic cause of its failure.

Labor Market Complexities

F7: Saturday, 1:00-2:30

Labor markets in the popular arts are unusual in that there are lottery-like payoffs with quality differences between winners and losers being arguably low or even nonexistent. Various forms of the “superstar” phenomenon have provided possible explanations for the distribution of market payoffs in the arts relative to the distribution of quality. These explanations focus on virtually costless reproduction of certain products causing very minor quality/talent differences to lead to vast differences in compensation, “consumption capital” with people benefiting from discussing a specific art product with others who have “consumed” it, and on information cascades that may have little or nothing to do with quality. All of these explanations are based on a neoclassical economic framework, and two of these three are consistent with perfectly competitive markets.

A new approach and explanation is proposed here that is arguably more realistic and more consistent with observed popular arts labor market behavior. The approach is social rather than atomistic and is both institutional and behavioral in perspective. Popular arts labor markets can be characterized as “relationship markets.” That is, success in these markets depends to a large degree on social connections, and relationships are highly valuable currency. This unusual yet pervasive characteristic of these markets has generally been ignored by economists. It is argued that this feature is closely tied to the other idiosyncrasies of popular arts markets. Both the implications of relationship-based markets and the reason relationships have evolved to become so important in the popular arts are explored.

This paper describes and analyzes the labor market experiences of Mexican immigrant workers in a city that is a relatively new destination for such workers. Based on interview data with 80 immigrant workers, both documented and undocumented, this study investigates the relative importance of various labor market “assets,” including education, class background, English language fluency, social networks, sex, indigenous origin, legal status and experience in the U.S. We also assess the degree to which labor standards are maintained for positions held by immigrant workers, and therefore how “formal” or “informal” this market is. The analysis is informed by neoclassical, institutional, Marxist and feminist economic approaches.

Orthodox thinking in economics suggests that labor unions and collective bargaining practices act as institutions of labor market rigidity leading to wage rates higher than the market clearing level and hence cause unemployment. Recent experiences of Turkey through several economic crises, however, indicate that collective bargaining has acted as an institution of wage restraint rather than rigidity. Faced with the adverse macroeconomic environment of the crisis and rising unemployment, those sectors where collective bargaining was relatively more extensive seem to have exhibited a more coordinated reaction of wage restraint than those sectors where labor union presence is absent or limited.

We apply both a quantitative and a qualitative method to explore the role of collective bargaining in wage setting with particular focus on the period 1993-2005 characterized by periodic economic crises. Using panel data from the manufacturing industry at the two-digit sector level, we conduct wage regression including a series of demand and productivity variables as well as the institutional variables of sectoral rates of collective bargaining and unionization to explore the effects of collective bargaining on wage flexibility. The econometric findings are also supported by a detailed examination of qualitative data on collective bargaining agreements in the pre- and post- crises periods. The findings indicate that collective bargaining practices play a double role in the wage determination process depending on the economic conjecture. Collective bargaining has the potential to act as a mechanism of wage restraint in times of economic contraction and crisis as labor unions become willing to compromise wages in return for stability of employment. In times of economic expansion, however, collective bargaining enables the acquisition of a larger share of value-added by enhancing the bargaining power of workers. Hence, rather than the orthodox view that defines the role of economic institutions as universally rigid, the findings of the paper underlines the need for detailed evaluation of each case specific to the social, economic and political context; and dependent on the historical set of circumstances.

Yesterday’s Radicals = Today’s Leading Edge?

G1: Saturday, 2:45-4:15

In this paper we assess Robert Solow’s critique of radical economics (1970). Solow advanced three major claims. First, Radical economics was not a paradigm in the Kuhnian sense. Second, it did not provide a framework for doing normal science. Third, radicals were uninterested in testing their own claims, whatever they may be. Solow’s conclusion was that radical economics was mere ideology parading as science. If heterodox economists had taken Solow’s indictment to heart radical political economy could well have been still born. Fortunately radicals did not listen. Solow’s indictment of radical economics is answered today in spades. To assess Solow’s claims we trace the evolution of the research program of Samuel Bowles and Herbert Gintis. We argue that Bowles’s and Gintis’s research program has played a leading role in the current revolution in economics. Evolutionary game theory combined with experimental economics as well as advances in behavioral economics provide a solid foundation for the aspirations of the left. Today these advances inform the indictment that is made against the very Walrasian economics that Solow defended. How the tables have turned.

Heterodox economists often argue that mainstream economics is anti-pluralistic, closed minded, and ideologically biased. Such criticisms of mainstream economics generally fall on deaf ears. The first part of the paper explores the question why that is the case; it suggests that it is primarily a failure to communicate, not a difference in vision or in views of the need to be pluralistic. This part of the paper explores the way the economics profession really works, and agues that the profession is best thought of as an evolving complex system in which agents focus on institutionally determined goals that often have little connection to the broader issues that heterodox economists often discuss. It argues that the mainstream economists are not trying to put heterodox economists down, because, for the most part mainstream economists hardly are aware that heterodox economists exist.

The second part of the paper considers some strategies for heterodox economists who want to change the way mainstream economics is done. It argues that any strategy to change the profession must be based on an understanding of the way the profession actually works, and that the first step in developing an effective strategy is to stop thinking of the debate as one between heterodoxy and orthodoxy. It suggests that non-mainstream research would be more effective at bringing about change if it focused less on methodology and pointing out problems with the mainstream profession, and more on doing economics, and on studying proposals for changing the current institutional structure. The final part of the paper considers some specific recommendations for heterodox research to further its pluralistic goals.

The Role of Heterodox Economics in Changing the Direction of Mainstream Economics Today

This paper argues that economics is currently undergoing a fundamental shift in its method, away from neoclassical economics and into something new. Although that something new has not been fully developed, it is beginning to take form and is centered on dynamics, recursive methods and complexity theory. The foundation of this change is coming from economists who are doing cutting edge work and influencing mainstream economics. These economists are defining and laying the theoretical groundwork for the fundamental shift that is occurring in the economics profession. Much of this work is being done by heterodox economists. The primary focus of this paper is to explain how heterodox economics is influencing the direction of mainstream economics today.

E.K. Hunt’s Contributions to Economic Pluralism

G2: Saturday, 2:45-4:15

It is natural to expect that individuals take themselves as the origin of the products of their labor. The relationship with the rest of the world and the products of their labor is expected to derive from their living practice as well. However, as beautifully pictured in K. Hunt’s words “The most fundamental evil of capitalism was not the material deprivation of workers. Rather, it was to be found in the fact that capitalism systematically prevented individuals from achieving their potential as human beings. It …thwarted the development of their biological, emotional, aesthetic, and intellectual potential.” We argue that an academician who is expected to ‘produce’ knowledge is not different from any other laborer concerning the link between himself/herself and his/her product. Accordingly, our aim here is to explore the nature of the relationship between the academician and his/her product in a capitalist world. We are going to analyze how the capitalist relations of production shape the science laborer and his/her product and become a hegemonic power over him/her.

The starting point of our analysis is Marx’s idea of alienation which basically means the conflict between things which are properly in harmony. Hence, we hypothesize a prototype academician who is ‘producing’ in economics (since the author of this article is an economist) at first and then, we will explore how the product of the individual economist becomes independent of him/her and start shaping and distorting his/her expectations. We are going to elaborate Hunt’s interpretation of the concept by means of three specific alienation paths, namely, methodological alienation, alienation to one’s own product and eventually alienation to himself/herself.

This paper is a critique of the claim that only an “anti-essentialist” Marxism can offer a link between Marxism and “radical” institutionalism. It is argued that E.K. Hunt’s interpretation of Marx is a better candidate to build such a conceptual bridge. Anti-essentialist Marxism cannot be defended from a philosophical and a social-theoretical point of view for three reasons: First, its anti-rationalism causes it to be confined only within the empirical realm for it forgets Marx’s dictum that “all science would be superfluous if appearances directly coincided with the essences.” Second, its anti-humanism, coupled with the Althusserian claim that “history has no subject,” causes it to overlook the importance of a Marxian ethics that is based on the notion of human essence and freedom. And last, but not least, it offers a deficient social theory for it cannot consider the fact that institutions are in part “expressions” of human nature, or in Polanyi’s words, they are “embodiments of human meaning and purpose.” That is to say, anti-essentialist Marxism offers a positivistic social theory that overlooks the inherent hermeneutical element in human praxis and therefore in society. Hunt’s interpretation of Marx, by contrast, offers an alternative to “anti-essentialism” without relapsing into reductionism, determinism, anti-rationalist epistemology, positivistic social theory and anti-humanism. Hunt also shows that Marxism and institutionalism share a similar conception of human nature, a similar ethical position that focuses on the realization of human potential as a normative goal, and a similar social-theoretical position focusing on institutional reproduction and change.

Utility represents the foundational assumption of neoclassical economics. A close inspection of the utility theory of value, however, exposes endemic ethical constraints, particularly when examined from a social welfare perspective. E.K. Hunt has provided one such close examination. Hunt has regularly exposed the limitations of utilitarian philosophy, repeatedly demonstrating how the subjective characteristics of utilitarianism preclude the theorist from having a social welfare mechanism for evaluating interpersonal comparisons and thus necessitating the neoclassical Pareto criterion. Similar to Hunt, Amartya Sen is also keenly aware of this conundrum. To his credit, while seeking an alternative to Pareto optimality, Sen has recognized the limits of utility and has chosen its abandonment. In turn Sen has proposed replacing the Pareto criterion with the capabilities approach. Sen’s solution, however, may be tainted. As Hunt explains, utility transcends metaphysics. A theory of value represents the necessary component of any economic theorist’s “pre-analytic vision,” with utility being central to the neoclassical framework. As such, while ethically constrained, utility cannot simply be removed from the “pre-analytic vision” without being replaced by an alternative theory of value. Sen, by abandoning utility, appears to have established a new social welfare approach absent a theory of value. As a result, Sen’s position, while commendable, may have a significant philosophically weakness.

Author Meets Critics:

Reclaiming Marx’s “Capital”: A Refutation of the Myth of Inconsistency

Andrew Kliman, Lexington Books, 2007

G3: Saturday, 2:45-4:15

Economic Knowledge, Reframed

G4: Saturday, 2:45-4:15

The neoclassical conception of homo economicus is becoming less satisfactory to economists as an assumption. In response, the recent “behavioral” approach to economics is trying to conceive a more realistic view of the “economic man” by crossing disciplinary boundaries, by relying on new empirical evidence from laboratory and field research and by introducing notions such as “framing effects” that stand in stark contrast to the once hegemonic expected utility theory. The implications of the ubiquity of framing are immense both for the past and the future of economics. The former view of decision-making as a mere cognitive optimization process now seems absolute, whereas future efforts to study economic behavior as also an “ideological” phenomenon are warranted. While trying to argue for the statements above, the immediate purpose of the paper is more modest. Initially, various important framing effects are listed and described. I then propose a particular categorization of such effects where cognitive, discursive (ideological) and norm-based frames are distinguished. Noting the heterogeneity and even the conflicting nature of the literature on framing, a “natural” need for a plurality of approaches in terms of method and philosophy is argued for. I also show discursive framing effects to be the least explored and perhaps the most problematic for mainstream economics.

Although it is claimed that the media are pro-business in their coverage of economic news, news stories also regularly explore the ‘dark side’ of capitalism, in which pressures of global competition result in job losses that create substantial hardships for middle-class people. This paper first reviews existing theoretical explanations for popularly-oriented representations of economic structures and processes, including those of Gramsci and Althusser. It then goes on to argue that recurrent economic representations are fruitfully viewed as cultural ‘memes’ –- ways of viewing the world that spread and thrive because of their ‘fitness value’ to outlets that propagate them, given the environment within which they operate. This framework is then used to analyze the television-news coverage of lay-offs and business closures. It is argued that the ‘dark side’ narrative commonly used to relate news stories about lay-offs and business closures enhances the fitness value of media outlets and their corporate advertisers –- where the value rests especially in framing people’s fluctuating worth in the market economy as a regrettable, but also necessary concomitant to its manifold benefits.

This paper will argue that one should consider the possibility that “written economic history” is a distinct literary genre, and asks (as does the historian Victor Wickberg) what the blurring of the boundaries between history and fiction in the past thirty years portends for history as both an artistic form and a mode of inquiry into the past. A concern with language by historians (the so-called “linguistic turn” in the study of the past that has taken place in recent years) has led to the reconsideration of history itself as not simply a factual report of past events, but as having literary meaning and structure. This essay will argue that one should examine the concern with narrative in historical writing, the use of various literary tropes, the role of plot, character and event, the genre conventions that structure historical writing, and the increasingly permeable boundary between history and the novel.

Power, Profit, and Capitalist Competition

G5: Saturday, 2:45-4:15

No one ever got rich by earning the average rate of profit; for if one person could, everyone could. Yet both orthodox and heterodox economists have focused mainly on the average rate of profit, not on how some firms earn exceptional rates of profit, or on how some individuals garner exceptional capital gains or economic rents. Ironically, business schools do pay attention to this topic – to valuation of assets and to entrepreneurs who manage to get exceptional rates of profit (or economic rent). Yet Marx’s concept of the concentration of capital appears to refer not just to concentration within an industry by the standard Herfindahl indicator, but also to concentration in the size distribution of income and wealth. Even so, Marxists have done very little analysis of how an individual becomes super-rich, even though it is here that a rich vein of political economic analysis lays waiting to be explored. Exceptions are Farjoun and Machover, who studied the distribution of profit rates around the average, and Nitzan and Bichler, who analyze what happens when large oil firms’ profit rates deviate from average profit rates. This paper offers suggestions for how research on capital gains and manipulation of asset values might proceed, including a classification of different ways in which power is used to create or enhance asset values. Examples are drawn from several sectors of the economy.

The concept of power is used in restricted ways in different traditions in economics. Neoclassical theory only recognizes market power, in situations like monopoly, which itself is assumed rather than explained. The Marxist tradition emphasizes command relations between different class positions. While this is important, it underplays the relationship between competitors which is the motivating force of capitalism, and can be analyzed as one of power, or to be more precise, of relative strength. This is not a prominent feature of the other major theoretical traditions either.

The major issues are the source and the consequences of superior strength. One source of company strength is the ability to lower costs. This is often dismissed (not only in neoclassical accounts) as unimportant because firms tend to share the same technology – but this does not guarantee an identical cost structure, as the management literature clearly recognizes, leaving space for cost-cutting – thus giving the lower-cost firm a price-setting initiative. The other main source is new products and temporary monopoly, as well recognized e.g., in the Schumpeterian tradition. The immediate result is variable mark-up, the essence of unequal strength between competitors, which can be expressed as unit profit. This can be modeled mathematically. Arithmetically it is a difference, and therefore highly sensitive to change in one of its determinants, partly explaining the volatility of capitalism. The longer-term consequence is ascendancy of some firms at the expense of others, i.e. this perspective is able to explain (rather than assume) the development of market structure.

This paper uses a large set of UK company accounts data to critique the methodology used in Glick (1985) to test for ‘gravitation’ of profit rates, on the following grounds:

§ the preferred definition of the profit rate is not appropriate to the notion of the competitive process to be tested

§ the tests are confined to manufacturing alone rather than to the economy as a whole

§ the data is at too high a level of aggregation to accord with the notion of ‘industry’ used in the work

§ no attention is paid to the shape of profit rate distributions, only to their dispersion.

The dataset is used to compute industry profit rates at four different levels of aggregation for a total of 12 different profit rate measures – four measures tested by Glick, four measures discussed in Gillman (1956), and four standard accounting ratios. We show that once aggregation effects are taken into account, only measures Gillman describes as ‘traditional Marxist’ ones avoid counter-intuitive results when gravitation is tested for in the economy as a whole, rather than in manufacturing alone.

Pluralism among and within Schools of Economic Thought

G6: Saturday, 2:45-4:15

In this paper I will compare two philosophical positions: the Millian Fallibilism and the Kuhnean notion of incommensurability, in order to show that they give raise to two different kinds of pluralism. Particularly, I assert that taking incommensurability seriously generates what might be called an autistic pluralism, while holding Millian philosophy, instead, promotes a more tolerant pluralism, more in line with the spirit of heterodox economics. Kuhn’s philosophy deserves consideration because it is the main foundation of the Babylonian mode of thought (and the so called “modified pluralism”), which influences the work of many post-Keynesian economists. They hold this mode of thinking because -unlike “Formalism,” which is taken to be the method of mainstream economics- they think it allows diversity of visions and paves the way to a new economics out of the contributions of many different economic views. I will show they are misguided: contrary to their expectations there exist an important connection between the commitment to incommensurability (taken either in its strong or some weaker version) and the kind of auto-centered research that in an early paper Kuhn labeled “convergent thinking.” A compromise with Kuhnean incommensurability thesis cannot help to reach this sort of open-minded attitude that most post-Keynesians want to instill into the different groups of economists. Mill’s pluralism, instead, is better suited to become the foundation of what might be called Post-Autistic Pluralism.

Is Convergence among Heterodox Schools Possible, Meaningful and/or Desirable?

I will revisit some of my earlier articles on feminism and institutionalism; analyze a recent article on the compatibility and desirability of convergence among new, old, and original institutional economics; and address a comment on my earlier effort “that convergence is the equivalent of erasure” by a feminist economist. All of this is directed at answering the questions in the title.

In defining the nature of academic disciplines, a conventional approach to demarcating subject boundaries is to group theoretical frameworks and approaches into categories or schools of thought, i.e. academic entities which have a certain degree of coherency in terms of their theoretical or methodological approach. By coherency we mean both homogeneity and the internal logic of a system of thought. Within the discipline of economic analysis, the existence of alternative schools of thought (e.g. neoclassical, institutional, etc.) is readily accepted despite the absence of any clear framework or criteria for defining the nature and members of each school. Whereas some schools of thought may fit the ‘coherency’ criteria, many of the economic studies that fall under the umbrella of the Austrian school are characterised by their differences as much as their similarities. The aim of this paper is to explore the defining characteristics of schools of thought, with Austrian economics chosen to illustrate some of the themes we raise. We argue it is not always possible to separate debates over pluralism between schools from controversy over pluralism within schools. The pluralism that characterizes the Austrian school leads the discussion on to explore the nature of pluralism and the levels at which plurality can be applied and analysed in relation to economics.

Economic Analysis with System Dynamics

G7: Saturday, 2:45-4:15

The growth of unsolicited commercial e-mail (also known as spam) imposes significant costs on organizations and causes considerable aggravation on the part of e-mail recipients. This paper contributes to the understanding of the spam phenomenon by drawing on the microeconomic and institutional frameworks, which are supplemented by computer modeling and simulations in the system dynamics tradition. Adapting the tragedy of the commons metaphor to e-mail, this paper identifies a causal structure that drives the direct electronic marketing industry. The recognition of players and rules which are relevant to the spam industry makes it possible to elucidate the impact of various regulatory, economic and technical solutions aimed at curbing spam. For instance, our analysis explains why filtering has failed to reduce the global production of unwanted commercial e-mail. This paper advances understanding of the commons, the economics of spam, and provides practical recommendations for policymakers.

Race, Class, and Culture-Influenced Nonlinearities in the Interpretation of Cognitive Skill Growth

Rehabilitation, Incapacitation and Deterrence. These terms are justifications given for the existence of prisons. They are seen as the mechanisms as to how prisons decrease crime. Levitt argues that mass incarceration is roughly socially optimal by examining the effect of overcrowding litigation. Levitt captures the marginal release of prisoners and shows how this increases crime rates. In this paper, I argue and econometrically demonstrate that there is a differential effect on crime rates of the marginal release of prisoners versus the marginal addition of prisoners. More generally, I discuss how incarceration can increase crime rates. First, I provide a critique of the individualistic ideology underlying the mechanisms used to justify the existence of prisons. Second, I look at the outcomes of mass incarceration on certain communities and how these outcomes create conditions which increase crime. Third, I present empirical research showing the effects of incarceration on crime.

Bounded Rationality and the Intersubjectivity of Business Investment

G8: Saturday, 2:45-4:15

The paper attempts to reconstruct Herbert Simon’s paradigm from the conventionalist point of view, which associates economic research with the insights from other social sciences, especially philosophy, psychology and sociology. The paper aims to demonstrate that Simon’s assumption of bounded rationality strongly implies the social issues of coordination that are related to shared models of reality, in particular in the structured settings like formal organizations. These models are viewed as common systems of interpretations, which shape and guide social representations. In this respect, Simon anticipated the heterodox approach developed by the French School of Economics of Conventions. According to both paradigms, the problem of coordination should not be separated from the problem of rationality and the problem of social representations. It is argued that Simon defined two types of conventions: the first one was specified as a set of customary rules in the workplace, the second one as a shared cognitive model of environment. A program for economic research which follows involves important socio-psychological and philosophical aspects and considers coordination, cognition and moral judgment as closely interdependent major questions.

Alexandra Strommer de Farias Godoi (Escola de Administração de Empresas de São Paulo)

Despite its essentiality to the economic process, the dynamics of the investment decision by firms has been neglected by mainstream microeconomics and its restrictive understanding of “rationality.” Traditional choice theory assumes that all possible alternatives of action are transparent to decision-makers at all moments, and that their consequences can be perfectly estimated and easily compared with each other. Based on the influential work of Herbert Simon and on subsequent advances of cognitive psychology, as well as on case studies in which the decision processes of eight Brazilian firms of different sizes and industries were analyzed, we propose an heterodox approach for the practical understanding of the decision processes of firms, based on the central idea of the construction of a representation of reality. This representation is subject not only to cognitive limitations related to difficulties in collecting and processing information (bounded rationality), but also to the conditioning of possibilities of action truly available to entrepreneurs to past choices, through a net of synergies and smaller decisions, the consequences of which cannot be forecasted precisely along a large scope of dimensions (bounded liberty, an original concept introduced by this work). Issues like allocating the entrepreneur’s time along multiple decisions with different degrees of complexity, relevance and urgency, or the need to establish an algorithm for the search and valuation of alternatives that are ignored a priori and whose characteristics cannot be fully acknowledged – topics that are made opaque by mainstream rationality hypothesis – resurge here, offering abundant possibilities for future economic research.

Investment is a crucial part of aggregate effective demand but it is also quite problematic to model. Nevertheless, the long term behavior of a modern economy owes much to the intensity with which firms are inclined to set up new productive capacity. That technical change, especially the strain that draws inspiration form the Schumpeterian tradition, is a powerful engine of growth is now widely recognized by economic theory. In this context, it is increasingly argued that waves of sustained investment are in fact driven by opportunities generated by technological innovations. This paper attempts to address this issue by investigating a model which places innovation waves at the root of investment demand. The first section deals with firms’ learning, searching and interaction, and with the self-organising process of knowledge diffusion that ultimately leads to technological upgrading. Search is local and takes place in a network of knowledge specific relationships. Innovation is the result of a twofold activity aimed, on the one hand, at perusing an attainable cognitive neighborhood for valuable information and, on the other, to autonomously carry out research and development. The second part of the paper investigates the allocation of human technological capabilities between these two tasks and to determine the incentive to engage in this costly expenditure. Finally, the third part explores the emergence of investment effective demand. In keeping with the Schumpeterian assertion, investment in technologically upgraded capacity while generating new effective demand and lending strength to an upswing also conjures up creative destruction.

Plenary Session II

Economics for the Common Good

P2: Saturday, 4:30-6:00

The idea that there might be an American system “beyond capitalism,” though theoretically obviously possible, is in fact extremely difficult for most people to conceive. At one level there are very real questions about how to structure an effective form of social ownership which would not violate democratic principles. An equally large obstacle to thinking seriously about an America beyond capitalism, has been an inability to develop an analysis of how, specifically, we might move from where we are to where we might one day like to be. Related to this has been a lack of concrete examples which demonstrate the feasibility of various a forms of social ownership. A striking feature of our era of history is the development of a range of new theories of how a democratic form of socialism might be organized. Just below the radar of most media attention there are also literally thousands of practical new economic efforts. These include 10,000 employee-owned firms; co-ops involving 120 million members; numerous state public investment (and ownership) efforts; increasing numbers of neighborhood and municipal forms of social ownership. Both the theories and the steadily expanding practical efforts are necessary elements in the development of a longer term political possibility. Moreover, despite temporary upswings of hope, many negative and long-standing distributional, environmental, and economic trends point towards growing national difficulties. As in the painful periods before the Progressive era and before the New Deal, developments at the state and local level may well help pave the way—and provide models for—subsequent longer term national change.

Neva Goodwin (Tufts University and Global Development and Environment Institute)

This paper assumes, but does not re-state, the scientific evidence that business-as-usual economic activities are leading to dangerous changes in the Earth’s climate. It distinguishes between the mitigation activities which can reduce the extent of expected climate change, and adaptation activities which will be needed in response to climate-related events that can not, or will not, be prevented. Mitigation activities must not only bring about rapid reduction in emissions of greenhouse gasses; they must also create social resilience, to enable people to minimize the suffering from climate-related emergencies. Social resilience requires poverty alleviation, widely available education, robust social systems for emergency health and other relief responses, and reduction in large inequalities of access to power and resources. As economies make the necessary transitions – from business-as-usual, to a focus on climate change mitigation, to adaptation – a number of systemic changes will be required. It will be necessary to create institutional and regulatory structures, as well as financial and cultural incentives, that will align the goals of corporations with the common good. This is part of the larger shift that will need to be made in the goals of the economy and of macroeconomic theory: from growth to well-being.

After three decades of defeats, the progressive economic movement is worse off at the beginning of the 21st century than it was at the beginning of the 20th century. Moreover, we often contributed to our own defeats. I will argue that participants need a better understanding of the nature of the epic struggle we are engaged in between the economics of competition and greed and the economics of equitable cooperation, and heterodox economists need to be more realistic about what we can contribute.

The Next Economics, After Modernism

H1: Sunday, 9:00-10:30

The reasons why we as scholars prefer one paradigm to another are not only scientific but also ideological. It is suggested that pluralism should be discussed at the levels of theory of science, paradigms in economics and ideological orientations. Neoclassical economics is closely connected with logical positivism as a theory of science and is close to Neo-liberalism as an ideological orientation. Specific ideas of institutional arrangements follow from these perspectives. Alternatives to the mainstream have similarly to be articulated and discussed at all three levels to open the door for an alternative set of institutional arrangements.

Exclusive reliance on economic growth in GDP-terms and on monetary profits exemplifies an ideological orientation. When faced with new challenges such as Sustainable Development and Corporate Social Responsibility, the shortcomings of the neoclassical paradigm become accentuated. Alternative ideas to those of Economic Man, profit-maximizing firms and markets in terms of supply and demand are needed. A political economics approach to an understanding of individuals and organizations as actors in markets and institutional change processes is proposed.

Lisa Morrison (Eastern Illinois University) and Eric Hake (Eastern Illinois University)

Some of the most potent criticisms of mainstream economics and its methodology have come from outside the economics profession. While much attention has been directed to the French student movement in favor of a Post-autistic economics, the Political Science revolt against the creeping imperialism of rational choice models has also had explicit results. This paper seeks to explore the connections between these two movements. Focusing on the similarities between these two movements, and expanding the intellectual debate beyond economics allows us to see the context of the modern methodological dispute. Secondly, focusing attention on the intellectual traditions threatened by neoclassical advance in other disciplines – political science, sociology, anthropology – will allow the introduction of key alternative conceptions of human behavior and social organization that have long existed outside the traditional economics discipline. In particular, our paper will argue the model of human behavior and interaction that economists are now groping toward is remarkably similar to the older literature in economic anthropology. This older literature also provides us with an explanation for the continued dominance of neoclassical economics. The recognition and utilization of post-autistic Sister movements, such as the newfound vigor of economic sociology, will hopefully allow the creation of a more humane, and less-autistic, economic science for the 21st century.

My love for economics is not I hope in question. I’ve practiced since 1964 its core disciplines, “price theory” Chicago-style (if not always with Chicago politics) and a fascination with numbers (if seldom in the bankrupt style of statistical “significance”). I’ve been a transportation economist and a quantitative economic historian, and in studying the field’s “rhetoric” I’ve usually chosen to see the world-lore in economics I admire, not in economics I’d like to bury. It makes the point that a study of word-lore in the style of the departments of English or communication is not an exercise in ripping away the mask of rhetoric to see the nasty stuff going on underneath. It makes the point that economics, like any other field of science or scholarship, is human argument all the way down.

Practicing Pluralism

H2: Sunday, 9:00-10:30

The Heterodox Response to the National Undergraduate Curriculum Proposed by the

This paper was submitted collectively by the Association for Heterodox Economics, as a result of a consultation request issued by the QAA (Quality Assurance Authority) for responses to the ‘benchmark’ statement for the subject of economics. The benchmark statement seeks to define what will in future be considered the prescriptive standard for economics undergraduate teaching in the UK and in UK-certified institutions abroad. The QAA is responsible for the maintenance of academic standards in the UK and although a non-governmental body, plays a strong role in transmitting government requirements to the higher education sector. The benchmark thus represents the first attempt in UK history to regulate what is considered ‘good’ teaching in economics. It is a highly neoclassical and orthodox document and, it is argued in the AHE response, entirely lacking in a pluralist perspective. It represents an important landmark in that it sets out the consensus, among orthodox academics, of what the ‘mainstream’ consists of and how it should be taught. The paper presented at this session represents the consensus, highly critical, response of UK heterodox economists and social scientists to the QAA benchmark statement. It also contains a comparison between the economics benchmark and that proposed by other social sciences, which suggests that economics stands in an isolated position in its attempt to define its field of enquiry by means of a strict prescriptive orthodoxy.

Beginning in the 1870s, classical political economy came under increasing criticism from adherents to the heterodox historical political economy school and the emerging neoclassical school. Moreover, the rise of interest in socialism and land nationalization by the working class and accompanying interest in Mar

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Risk, Inequality, and Human Welfare

A1: Friday, 9:00-10:30