Since economics is supposed to be the study of the exchange of value and (hopefully) the increase in prosperity and well-being among human beings, it will be a central thread of future discussion on this site. The general perspective I’ll be taking is that:
- the currently dominant approach to macroeconomics, often called “neoclassical,” is not a very effective approach to understanding the economy and influencing it positively via public policy;
- the modern finance sector has too much economic and political power and a largely pathological culture, which makes it a chronically destructive yet very powerful influence on our economy, political process and society as a whole;
- the organizational structure, governing systems, incentives, regulation and legal treatment of corporations is biased in favor of maximizing shareholder returns and executive compensation, at the expense of the welfare of other stakeholders, including non-executive employees, local communities and the environment.
That’s the bad news.
The good news is that there are a growing number of economic perspectives that individually and (especially) collectively offer a much more solid foundation for economic analysis, policymaking and “economic growth that works for everyone.” A key part of what I hope to do on this site is to not only discuss these various perspectives, but also to highlight potential synergies among them, and to consider policies and private and/or public initiatives with potential to leverage these synergies to maximize their potential benefits.
There’s a lot of ground to cover in this area. To get started, this post will introduce a few of the organizations, websites, and economic perspectives that are helping to build a foundation for reforming our economic system and the analytical approaches used to understand and influence it.
To get things started, here’s an 8 minute video entitled “Financial Instability,” which was produced by the Institute for New Economic Thinking (INET). One of the key critiques contained in the video is that the field of economics needs to incorporate insights from other disciplines, including psychology, sociology, anthropology, political science and history. Another is that the finance sector has become too powerful and pathological as a political and economic force, and is poorly understood by political leaders and mainstream economists (which makes it all the more difficult to effectively restrain its excessive power).
According to its website, INET “was created to broaden and accelerate the development of new economic thinking that can lead to solutions for the great challenges of the 21st century.” As part of this effort, it recently held a conference in Berlin entitled “Paradigm Lost: Rethinking Economics and Politics.” Information on the conference, including papers and video presentations can be found here.
As its name suggests, a website called “New Economic Perspectives” (NEP) also focuses on reform of the economy and economics as a field of study. More so than INET, it focuses on pretty specific areas of research, analysis and advocacy, including:
1. An emerging school of economics called Modern Monetary Theory (MMT), which provides an alternative to the dominant neoclassical framework for understanding the federal deficit and modern monetary systems. Based on this framework, MMT advocates economic policies that include a federal “job guarantee” for anyone involuntarily unemployed. Given the deep and prolonged unemployment we’ve faced since the financial crisis in 2008, its claim that a federal job guarantee can be provided without causing deficit-related problems makes MMT at the very least a thought-provoking school of economics. Since it’s already provoked some thinking on my part, I’ll be revisiting it in future posts. For those eager to learn more, I’d recommend starting to read through the multi-part MMT Primer on the NEP website. The Primer includes a number of posts specific to the job guarantee (#42-49), the first few of which can be found here, here and here.
2. The need for much stronger regulation of the financial sector, including criminal prosecution. Probably the strongest NEP advocate of such policies is University of Missouri Professor Bill Black, who worked as a financial regulator during the S&L crisis, is an expert on white collar crime, and has written a book entitled “The Best Way to Rob a Bank is to Own One.” Black is not only extremely well informed about the extent of fraud, corruption and “regulatory capture” in the finance sector, but he is also bluntly eloquent in speaking about it, and the ready availability of remedies, if political leaders and regulators choose to employ them. In that spirit, he testified before a congressional committee in the wake of the 2008 financial crisis, which you can watch in the 8 minute video below. And, if you’d like to see him unleash his eloquent and well-informed outrage even more than he did in his congressional testimony you can check out a 16 minute video of Professor Black speaking at an OccupyLA teach-in in late 2011.
The third and last organization I’ll introduce in this post is the New Economics Institute. According to its website, NEI’s purpose is to “develop, research, and lead, in a US context, the implementation of systemic solutions to a series of systemic problems that now face humanity. These include:
- The sustainability, climate and dwindling resources crisis.
- The equality crisis, here and around the world, in income, assets, access, and democracy.
- The financial risk crisis, with a system that is neither efficient nor resilient.
- The well-being crisis, in which rising income is not translating into rising happiness.
Since its origins more than 30 years ago as the E. F. Schumacher Society, NEI has focused on “new ways of organizing and understanding the economy which puts people and planet first.”
In a recent article introducing a multi-part series entitled “New Economic Visions” published by AlterNet, Gar Alperovitz, an NEI director discussed The Rise of the New Economy Movement. Alperovitz is also co-founder of The Democracy Collaborative and Professor of Political Economy at the University of Maryland.
Here’s how he begins his introduction to the New Economic Visions series:
Just beneath the surface of traditional media attention, something vital has been gathering force and is about to explode into public consciousness. The “New Economy Movement” is a far-ranging coming together of organizations, projects, activists, theorists and ordinary citizens committed to rebuilding the American political-economic system from the ground up.
The broad goal is democratized ownership of the economy for the “99 percent” in an ecologically sustainable and participatory community-building fashion. The name of the game is practical work in the here and now—and a hands-on process that is also informed by big picture theory and in-depth knowledge.
Thousands of real world projects — from solar-powered businesses to worker-owned cooperatives and state-owned banks — are underway across the country. Many are self-consciously understood as attempts to develop working prototypes in state and local “laboratories of democracy” that may be applied at regional and national scale when the right political moment occurs.
The New Economic Visions series also includes articles focused on:
- new models for corporate ownership and control, and for creating a “generative” economy
- models for local community wealth-building
- alternative models for banking, including publicly-owned, cooperatively-owned, local and community-oriented banks
Another piece in the New Economic Visions series endorses Alperovitz’s “evolutionary reconstruction” theory as “a better alternative to either reform or revolution.”
Visionaries from Gandhi to Buckminster Fuller have agreed with him. This model focuses our change energy on building new parallel institutions that will, in time, supplant the old ones. Don’t fight the existing system, this strategy argues. Instead, just sidestep it entirely and create a new one. As the old system collapses under its own decay, yours will gradually fill in the gaps until it becomes the new dominant paradigm.
Alperovitz ends his introduction to the New Economic Visions series on a sobering yet hopeful note.
[D]riving the movement’s steady build up, day by day, year by year, is the growing economic and social pain millions of Americans now experience in their own lives—and a sense that something fundamental is wrong. The New Economy Movement speaks to this reality, and just possibly, despite all the obstacles—as with the civil rights, feminist, environmental and so many other earlier historic movements—it, too, will overcome.
Implicit in Alperovitz’s closing comment is the notion that necessity is the mother of both invention and evolution, which is something I’m inclined to agree with.
Though my future posts will spend some time considering the intensification of the “necessity” we now face as a species, the focus of this blog will generally be on the innovation and evolution being birthed by that necessity.
Like chilbirth itself, there may be considerable pain in the course of this birthing. But I’m confident that, as with childbirth, there will also be great joy and appreciation for the magical and most deeply fulfilling elements of being human (together) on this planet.
For material on MMT, also take a look at mmtwiki.org
Excellent material! I am the co-authour with John Lucas, an Oxford political and mathematical philosopher, of Ethical Economics published by Macmillans and St Martins Press in 1996 which investigates the rationality of economic decision making. It has been suggested that we produce a second version of the book following the recent financial crisis which will make a strong case pace Sen for seeing economics as a moral as well as a mathematical predictive science, in reaffirming the philosophical principles of Ethical Economics, such as cooperation, facilitation, money as encapsulated choice and the non-privatative nature of business enterprises, We also want to revisit the question of “value” in economic and financial activity and propose this as a fundamental paradigm for creating, controlling and rewarding the creation of wealth. So there is much in common I believe with what you are saying about new perspectives with which I find myself in total agreement. Best regards, Michael Griffiths, Florence , Italy..