Panoeconomicus 2011 Volume 58, Issue 3, Pages: 285-308
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Limits of policy intervention in a world of neoliberal mechanism designs: Paradoxes of the global crisis
Dymski Gary A.
The current global context poses several paradoxes: the recovery from the
2009 recession was not a recovery; investment, normally driven by profit
rates, is lagging and not leading economic activity; the crisis is global but
debate involves sub-global levels; and public safety-nets, which have helped
to stabilize national income, are being cut. These paradoxes can be traced,
in part, to the impact of the “truce” that followed the Keynesian-Monetarist
controversy on economists’ ideas about policy activism. This implicit “truce”
has removed activist macro policy from discussion, and shifted attention
toward institutions as mechanisms for solving game-theoretic coordination
problems. Policy activism then centers on how the “agents” (nations) can
achieve optimal use of their available resources (or optimal access to
resources) at the global level; and this involves creating and fine-tuning
compacts - neoliberal mechanism designs - that can capture rents and attract
globally mobile capital. This approach leads economists to see the key
problem in the current global crisis as fixing broken neoliberal mechanisms.
However, a global economy dominated by mechanisms that feed on aggregate
demand without generating it faces the prospect of stagnation or collapse.
Keywords: neoliberal mechanism design, policy activism, Keynesian-Monetarist controversy, globalization, Capital mobility, Hyman Minsky, Bradford De Long
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