Rethinking economics is a dramatically urgent necessity in light of the damages caused by the 2008 global financial crisis, resulting from the dominance of mainstream economics. Economic policies implemented since the early 1980s in many countries have induced lower economic growth, higher rates of involuntary unemployment and more income and wealth inequalities than in the previous three decades. A decade after the beginning of this crisis, policy is still unable to provide all citizens with greater economic comforts. This volume contributes to rethinking economics by providing readers at all levels with thoughtful contributions on a range of topics.
The standard neoclassical method for building macroeconomics upon a microeconomic foundation has proven unable to anticipate and account for actual issues, especially the financial and economic crisis that burst in 2008. In this chapter we show that it would be appropriate to return to the method once used by classical writers, who considered the economy as a whole and referred to institutions and production conditions as the cornerstone of economic activity. This was also Keynes’s method, in developing the concept of a monetary economy of production. We show that a renewed analysis of the economy as a whole would open up a range of new perspectives on macroeconomics.
Ever since its emergence, the State has always had an economic function in society. Under capitalism, the ideology of laissez-faire or neoliberalism makes full use of all the powers of the modern State to deregulate markets, privatize public corporations and assert hegemony of the individual/corporate property rights with the aim of expanding wealth for the dominant class. This chapter proposes alternative ways for the State to manage the economic affairs in society for the benefit of all social classes.
The global financial crisis that burst in 2008 seriously undermined economics from an epistemological, methodological as well as philosophical perspective. In this respect, the way we think and approach economics must be reconsidered afresh. In this chapter we will show, contrary to the normal evolution of mainstream economics, that there is an interest and even an urgency of opening economics to other disciplines. This is the case in particular with sociology, but also history, anthropology and political science. As we argue, pluralism allows for greater knowledge, which can only serve to reinforce the scientificity of economics.
Uncertainty inescapably affects all economic decisions and actions. Core neoclassical theory does not, and cannot, treat uncertainty seriously, because its constrained maximization requires the reduction of all uncertainties to different forms of perfect knowledge. Other economic schools do take uncertainty seriously, however, giving it independent, determining roles rather than eliminating it by assumptions. The treatment of uncertainty in four schools is discussed – the deficient neoclassical approach, followed by the better approaches of post-Keynesian, Austrian and institutionalist economics, all of which link economic theorizing to key features of reality, so embracing uncertainty instead of ignoring or trivializing it.
Jean- Luc Bailly
Our monetary economies of production are not based upon relative exchanges described by the standard theory. Money is neither a commodity nor a positive asset; it cannot be exchanged against physical goods and services. It follows that payments do not consist of mutual transfers of commodities. In fact, each producer working for the needs for the community produces wealth for himself. Further, transactions on any markets are absolute exchanges. One of the consequences of this is that market prices do not measure wealth; rather, they are coefficients of redistribution of products.
Jean- François Ponsot
This chapter shows that money is more than a purely economic instrument and has consequences for the whole of society. It identifies three perspectives that better reflect the complexity of money: a macroeconomic perspective, based on the post-Keynesian endogeneity of money; an institutionalist perspective identifying money as a social link; a political-economy perspective treating money as an instrument of power and conflicts. Highlighting this three-dimensional nature of money allows us to understand the proliferation of monetary innovations and contestations in the recent past (local currencies, crypto-currencies and so on) that have emerged to challenge the established monetary order and try to reappropriate money.
As Keynes pointed out, economic decisions and activity under uncertainty do not tend automatically to full capacity utilization. Firms in general cannot but adapt their output to expected demand. This chapter invites us to rethink economic growth as the result of the factors that make the firms more or less optimistic regarding future aggregate demand. This is because expected demand is the driving force of output, time after time, and commands innovation and capital accumulation that, in the long run, allow for higher output in spite of the demographic constraint.
Omar F. Hamouda
How can policy interventions achieve their desired goal of alleviating income disparities? Is there an established, universal economic criterion that guides what determines or how to judge “fair” distribution? The economic structure of the twenty-first century is characterized by a production pattern in which capital is slowly eclipsing labour in the creation of added value, rendering a great deal of human participation redundant. In this environment, orthodox economics has little to contribute to the question of who should get what portion of the national dividend, and income redistribution is problematic. Insight from Keynes can help in rethinking the theory of income distribution.
Fiscal policy is the object of numerous theoretical controversies, notably during the two most recent crises: the 2009 great recession and the 2011–12 euro-area crisis. In such framework, we propose to rethink the use of fiscal policy through three elements. First, theoretical principles developed by Keynes and post-Keynesian authors must be put forward to focus fiscal policy on economic growth. Second, globalization offers new opportunities to use this instrument. Finally, fiscal indicators, such as the structural primary budget balance or the net public debt, must be taken into account to offer a fiscal space necessary to apply our proposals.