Limits of policy intervention in a world of neoliberal mechanism designs: Paradoxes of the global crisis
Open Access
- 1 January 2011
- journal article
- Published by National Library of Serbia in Panoeconomicus
- Vol. 58 (3), 285-308
- https://doi.org/10.2298/pan1103285d
Abstract
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
This publication has 4 references indexed in Scilit:
- The Sonnenschein-Mantel-Debreu Results after Thirty YearsHistory of Political Economy, 2006
- Hedge Funds and the Technology BubbleThe Journal of Finance, 2004
- Credit CyclesJournal of Political Economy, 1997
- The Limits of ArbitrageThe Journal of Finance, 1997