The Power of the Market

desmondmcneill1 Comment

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“The ‘market’ is a bad master, but can be a good servant.”
– S. Chakravarty (1993: 420)

In the world today, more and more interpersonal interactions are replaced by market transactions. The market system is both an economic and a cultural phenomenon, yet we seem to be hardly aware of the values that are bound up in it. This phenomenon is manifest at many levels: from the family, through the neighbourhood and the enterprise, to the nation and the globe. If there is such a thing as global ethics, I suggest, then they are – like it or not – the ethics of the market. My purpose here is to elaborate this claim, and to assess its implications. I shall distinguish between the market as a theoretical construct in economics, and the market as a social institution.

My main hypothesis can be briefly stated as follows: the most convincing ethical argument currently being made in favour of the market is its neutrality. Whether the market is in fact neutral may be disputed. But if one accepts this claim, it implies that the market is amoral, rather than immoral, and there remain, I suggest, two objections to allowing the market ethic to prevail. The first is that this is an abrogation of moral responsibility. It implies delegating decisions of major social and material significance to powers which are beyond our control, and whose outcome is uncertain. Second, the neutrality of the market comes at a cost in social and human terms; social relations between persons are replaced by contractual relations between economic agents.Read More »

Poor Behavior, Good Behavioral Policies? Double Standards for the North and South

Svenja Flechtner2 Comments

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Behavioral approaches to development economics and policy have gained momentum in recent years. A growing number of papers studying behavior of people in poor countries have been published in top journals, accompanied by the rise of randomized controlled trials (RCTs). In 2015, the World Development Report was dedicated to behavioral and cognitive research and policy. Papers studying how to nudge farmers to use fertilizers or increase savings have become classics in the field. Lots of hope has been placed into social experiments and behavioral policies to fight global poverty.

Behavioral policies are of course not reserved for policy-making in poor countries. In fact, nudges became famous with a US-American savings plan. Many behavioral instruments have been discussed and tested in and for rich countries. But there has been an important difference as compared to the debates in development economics: when debating behavioral policies in rich countries, scholars have also devoted lots of time to consider normative and ethical concerns. For example, following Thaler and Sunstein’s exposition of Libertarian Paternalism (see also here), a debate unfolded on whether nudges could be anti-libertarian (here, here, here, or here). Implications of the use of nudges as a new form of government policy have been analyzed, for example, from a Foucauldian perspective, or with a focus on institutional change. Books have been written about ethical concerns. The debate has reached a great level of differentiation, e.g. when authors argue that so-called social nudges (these are nudges that seek to stimulate voluntary cooperation in social dilemma situations) may be justified for different reasons than those targeting individual welfare. Overall, the debate has become really sophisticated, and the autonomy, welfare, and dignity of citizens in rich countries as well as consequences of the use of behavioral policies for these countries’ modes of government have received lots of careful scrutiny (recently again here).Read More »

The long run evolution of the rich in India 1937-2012

Rishabh Kumar3 Comments

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Inequality in India may be returning to levels last seen during British Rule. To understand this, it is necessary to put India’s elite at the center of macro-history.

One of the central questions in political economy is how wealth evolves, particularly at the top. In Europe and the USA, we now accept that progression of wealth inequality followed a “U” shape or what has been called the “Inverted Kuznets Curve.” Briefly put, on the eve of World War I, the richest few percentiles dominated Western society with their massive wealth holdings. Fast forward to a decade after World War II and we see that their wealth declined substantially, but then started rising again in the late 1970s. Much has been written on this since (and due to) the publication of Piketty’s (2014) Capital in the 21st Century. My new and revised paper (Kumar, 2017b) puts the rich at the center of India’s economic history over the last eight decades. The main question I want to ask is the following: Is the state of contemporary wealth concentration in India a continuation or a break from its history?Read More »

Caveat emptor: the Graduation Approach, electronic payments and the potential pitfalls of financial inclusion

plbds2 Comments

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By Paulo L dos Santos and Ingrid Harvold Kvangraven

The Graduation Approach to poverty reduction is inextricably bound up with programmes promoting financial inclusion. Proponents for the approach see it guiding a series of interventions that encourage poor households to ‘graduate’ into ‘mainstream development programmes’ which are centred on the provision of credit and other financial services (BRAC 2014). Indeed, the approach has been presented as a way to address the needs of those “too poor for microfinance services” (UNHCR 2014). The presumption is that the development and poverty reduction needs of ‘graduates’ will be well served by financial inclusion initiatives.Read More »

Towards a Critical Pluralist Research Agenda in Development Economics: Some Bricks from Berlin to Build Upon

Svenja Flechtner1 Comment

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By Svenja Flechtner, Jakob Hafele & Theresa Neef

Much has been said about what’s going wrong in development economics – on this blog (for example by Adel Daoud, Ingrid H. Kvangraven, or Jacob Assa) and elsewhere (for example by Angus Deaton, Dani Rodrik, and Benjamin Selwyn), as well as in newspapers. Much has been written, too, about alternative perspectives and approaches to economic development thinking (this recent compilation by Reinert, Ghosh and Kattel gives an overview of many of them). But is it possible to build a coherent pluralist and critical framework out of these approaches? If so, what could a critical and pluralist research agenda for development economics look like?Read More »

The Financialization Response to Economic Disequilibria: European and Latin American Experiences

Carolina AlvesLeave a comment

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Book review of N. Levy-Orlik & E Ortiz (2016), The Financialization Response to Economic Disequilibria: European and Latin American Experiences, Edward Elgar Publishing: Cheltenham UK

Levy and Ortiz’s The Financialization Response to Economic Disequilibria is a timely book. It critiques mainstream economic theory and its limitations in explaining how economic conditions change or the transition from one state of equilibrium to another. Its analyses rely on Keynes, Kalecki, Kaldor, Minsky, Prebish, Furtado, and Marxists such as Luxemburg, Marini and Lapavitsas. Macroeconomic teachers interested in a heterodox approach may benefit from Levy and Ortiz’s book as complementary material with experiences showing the dysfunctionality of the global economy from the specific prism of financial disequilibria.

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Toward an Economic Theory of Imperialism?

mohamedobaidyLeave a comment

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“Our role is to widen the field of discussion, not to set limits in accord with the prevailing authority.” Edward Said, Orientalism (1978)

This blog post aims to introduce Patnaik’s theory of imperialism – as developed in The Value of Money (2009) – and its relation to economic theory. According to Patnaik a cogent economic theory that seeks to understand the laws of capitalism necessarily stems from a coherent theory of money due to the central place money plays in a capitalist mode of production. Hence, the purpose of his scientific endeavor is to examine the underlying social arrangement behind the determination of the value of money. Consequently, the conceptual framework Patnaik establishes starts with the following question: what does determine the value of money?

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Premature Deindustrialization and the Defeminization of Labor

jpellg3 Comments

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In two previous posts on this blog, I’ve discussed the issue of premature deindustrialization and some of its possible consequences. In a recent paper, I, along with co-author Bret Anderson of Southern Oregon University, explored the potential consequences of premature deindustrialization further by examining the possible connections between premature deindustrialization and the defeminization of industrial employment. Premature deindustrialization is a situation in which the shares of manufacturing value added and employment begin to shrink at per-capita income levels much lower than those of the early industrializers, along with manufacturing employment peaking at lower levels. The scarce manufacturing jobs that do remain, however, are likely to be relatively high paying jobs that countries and workers compete for. In our work, we assessed whether premature deindustrialization is a feminizing or defeminizing force in industrial employment. By examining 62 countries from 1990 to 2013, we find that premature deindustrialization is likely to amplify the male bias of industrial upgrading.Read More »