From Crisis to Supranational Integration
New Directions in Modern Economics series
As we have seen in the previous chapters the global economy is not the simple summation of national economies. Each national economy integrated into the world market accepts common rules – not always explicit – concerning trade, finance and money. As a consequence the power of a national government over its internal economy is greatly affected by external constraints. Even the distribution of income is no longer a simple national matter. The world financial crisis is a clear example of the broad connection between private finance, public finance and the international monetary order. The aim of this and the following chapter is to discuss international money and international finance – private and public – as interconnected problems, in order to find some guidelines to reform the present international institutions. As far as money is concerned, Davidson (1982: 241) rightly recalls: ‘Money can only be studied in an historical and institutional context.’ Indeed a historical- institutional approach seems the most appropriate; it gives us the opportunity to study the main features of money and finance as national and international institutions and their evolution since the birth of the modern nation- state. Today the institutional approach in economics is thriving and founded on solid foundations. Thorstein Veblen and John Commons can be considered ‘old’ institutional economists. The new developments, mainly based on the theory of institutional evolution and the modern methodology of social sciences, are considered ‘new’ institutional economics (Hodgson, 1998; Williamson, 2000).
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