Notes/New Paradigm in Macroeconomics/Introduction

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Notes for introduction to "New Paradigm on Macroeconomics" by Richard Werner

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)

Page 13-

  • 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

Page 15-

  • Neoclassical economics doesn’t take into effect happiness of one onto another
  • “it is autistic” – western positivism taken to extreme

Page 16-

  • Monopoly pursuit of profit, detriment to all, to democracy
  • Pefect information is a false assumption

Page 17-

  • Neoclassical deductive, not empirical
  • We need to be inductive

Page 18-

  • 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 … )

Page 25-

  • People make money from information assymmetries
  • That’s where greatest profit to be made **

Page 26-

  • Motivation, incentive and social hierarchy play a big role in economy.
  • Institutions, hierarchies and ranking are important.
  • Institutional design & credit creation

Page 27-

  • Limited liability of directors
  • Skews incentives that borrowing is encouraged
  • Driving force of capitalism
  • Market of money & credit: demand likely to outstrip supply
  • Supply-determined
  • 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.