Although economic insecurity has always existed, the process of the powerful shifting precarity to others began with the English enclosure movement and has persisted since that time. As Karl Polanyi notes, an important factor is the speed at which fundamental changes occur, which affects the ability of communities to adapt to them. To illustrate this point, I compare the case of modern enclosures in South Africa with that of premodern England.
One of the most troubling developments in recent years has been widening income inequality in the United States and elsewhere. We argue Post Keynesian Institutionalism (PKI) provides insight into the causes of increasing income inequality and our contribution is threefold. First, we compare PKI to the "financialization" literature, noting key similarities and differences. Second, we examine changes in financial structure and income inequality for a sample of developed nations, showing that financialization has increased in nearly all the countries sampled and that this increase has generally been accompanied by a rise in income inequality. Third, we demonstrate that the development of modern financial structures does not preclude an expansive welfare state and egalitarian public policies. Our finding is congruent with Hyman Minsky's conception of PKI, which stressed both that "economic systems are not natural systems" and that capitalism comes in as many varieties as Heinz has of pickles.
Late in his career, Hyman P. Minsky - a major contributor to Post-Keynesian Institutional economics - described the process of capitalist development by combining the ideas of Joseph A. Schumpeter and John Maynard Keynes to emphasize the role played by financial innovations in supporting entrepreneurial activity and technological change. This chapter extends that literature by focusing on how conditions in the real and financial sectors influence the management and distribution of risk. Drawing primarily from John Kenneth Galbraith's The New Industrial State, we provide a case study of how the distribution of risk in the United States serves as an important factor in the transition from one stage of capitalism to another.
Although the fundamental trilemma of open-economy macroeconomics has been a popular framework for analyzing the effects of various policy combinations, it ignores how policy regimes change. Drawing from Post-Keynesian Institutionalist theory, this article considers this process in democracies as a type of technological change in which progress may be limited by insufficient knowledge and actions by vested interests. A case study of interwar France shows that these barriers often delay or weaken stabilization programs, which increase both political and economic uncertainty that further lowers aggregate demand and inhibits the attainment of macroeconomic equilibria. Although we should not generalize these observations, they suggest that understanding and addressing cultural and institutional factors may be necessary for successful countercyclical policymaking.
Many observers expected a stronger countermovement against neoliberalism following the Great Recession. This article argues that such a protective response failed to materialize because the financialization process has aligned the preferences of labor and rentier classes. The result has been weaker support in democracies for expansionary monetary and fiscal policies during the early stages of recessions, which further lowers aggregate spending by increasing uncertainty. Thus, reversing the culture of financialization may be a necessary condition for preventing and responding to financial crises.
Critics of Pope Francis's Evangelii gaudium argue that recent economic growth and reductions in inequality are evidence that his notion of the "economy of exclusion" is misguided. However, Francis alludes to another type of exclusion-increased uncertainty generated by technological change that affects citizens even in developed nations. Drawing from Post-Keynesian institutionalist theory, this article argues that this condition is common in capitalism, and that grassroots reforms are needed to ensure shared prosperity.
By the end of the nineteenth century, leaders of many industrializing countries became increasingly concerned about social stability as radical insurgencies arose to replace laissez-faire instituti...
Post-Keynesian institutionalist economists like Wallace Peterson and John Kenneth Galbraith recognized that the impact of uncertainty on economic wellbeing depends in part on the degree of control people have over the sources and consequences of it. Given the inability of government and other large institutions to reduce uncertainty or to provide citizens with the ability to manage it, mediating structures are considered as an alternative means of promoting economic security. The article concludes by describing and evaluating several of these alternatives.
This chapter argues that when executives use their power to negotiate guaranteed contracts for themselves while placing their employees' wages, health care and pensions at risk, they are violating standard norms of distributive justice. The growth in the average pay of US chief executive officers has been spectacular over the last twenty years. Of all fringe benefits, health insurance has generated the most debate recently because of its spiraling costs and a decline in the number of people covered. As conservative columnist David Brooks contends, political initiatives to defeat tax breaks for the wealthy and to combat inequality will be successful only if they can demonstrate that people achieved their success by competing unfairly. Most neoclassical economists believe that the labor market sets appropriate compensation levels. Institutionalism, which focuses on the social dynamics governing employment relations, provides a better approach to ethical analysis than concentrating on outcomes.
Although economists may disagree about the underlying causes of the recent Great Recession, a common theme is how impulsiveness, avarice, and corruption first destabilized the global financial syst...
Recent studies find that business school students would benefit from a further integration of traditional disciplines with the liberal arts. This paper outlines a suggested approach for accomplishing this in a finance capstone course, and reports the results from student assessments. The findings suggest that coursework aimed at developing critical thinking and communications ability can be designed in ways that complement standard business programmes.
Adam Smith is well known for his description of how actions taken to further one's self-interest may benefit society. However, Smith emphasized that forbearance, which is the exercise of self-restraint while pursuing personal gain, is a necessary condition for the "invisible hand" to promote the common good. Using the recent subprime mortgage crisis as a case study, I argue that because forbearance is unlikely to result from personal choice or regulatory efforts, grassroots efforts by users of financial services are needed to ensure just outcomes in real estate lending.
The Revenue Act of 1932 surpassed any previous American peacetime tax increase. To many economists a tax increase is an inappropriate response to depression. Notwithstanding, the tax reduced fears about financial instability by temporarily resolving uncertainty about the federal budget.
Most economists agree that the effect of foreclosures on the housing market in the United States has been an important reason for recent macroeconomic stagnation. This paper considers the federal government's poor performance in helping homeowners renegotiate their mortgages to be a collective action failure in its role as a lender of last resort. The reasons for this failure have important implications for Minsky's model of financial crisis since both lenders of last resort and federal government actions are important factors in preventing economic collapses.
Despite unprecedented lender-of-last-resort efforts by the Federal Reserve and the Treasury Department, the U.S. economy continues to be plagued by high levels of unemployment and foreclosures. Although several proposals to address these problems have been developed, their reactive nature limits their potential effectiveness. This paper describes how combining an employer-of-last-resort program with Treasury-financed mortgage mitigation initiatives could enhance economic stabilization.
