Notes/New Paradigm in Macroeconomics/Introduction
Notes for introduction to "New Paradigm on Macroeconomics" by Richard Werner
- Download here: File:Richard A. Werner (auth.) - New Paradigm in Macroeconomics Solving the Riddle of Japanese Macroeconomic Performance-Palgrave Macmillan UK (2005).pdf
- Also see Werner on Decentralization
Page 3- People not aware they’re studying a single branch of economics.
Page 7- Japan economy had a clever institutional design / cartel
Page 9- Interest rate reductions, stimulus packages exhausted
Page 11- Small & medium enterprises have imperfect access to capital markets (move away from efficient market equilibrium economics)
- Comparative advantage by David Ricardo
- Poor countries focus on low value-added goods
- Prices of low value goods declining in the market
- Buy finished goods whose relative prices go up, from richer countries
- Then IMF comes in, further privatization
- Neoclassical economics doesn’t take into effect happiness of one onto another
- “it is autistic” – western positivism taken to extreme
- Monopoly pursuit of profit, detriment to all, to democracy
- Pefect information is a false assumption
- Neoclassical deductive, not empirical
- We need to be inductive
- Invalid axioms like individuals care just about maximizing material benefit.
- Fictional world of unrealistic models
Page 19- Neoclassical approach dominant, overshadows other branches that do look at reality: applied economics, economic history, political economy and regional economic studies.
- Free markets and free trade → optimum wlefare
- government intervention → inefficient distortion of economy
- but only iff:
- everyone had perfect information about everything (and
- zero transaction costs
- constant returns to scale
- complete markets
- perfect competition … )
- People make money from information assymmetries
- That’s where greatest profit to be made **
- Motivation, incentive and social hierarchy play a big role in economy.
- Institutions, hierarchies and ranking are important.
- Institutional design & credit creation
- Limited liability of directors
- Skews incentives that borrowing is encouraged
- Driving force of capitalism
- Market of money & credit: demand likely to outstrip supply
- Investigation: supply of money and credit, and its implication
- Inductive research into the development and operation of the banking system is necessary.
- Banks are truly special.