Wednesday, July 13, 2016

V. Ramanan — The World Needs A Kaldorian Response

Before the crisis, the economics profession believed in two orthodoxies:
  1. crude version of Monetarism, which treats the stock of money as exogenous and also claims that fiscal policy is impotent.
  2. free trade.
While policy response following the 2008 crisis have made economists realize that the first orthodoxy is wrong, they are yet to realize the orthodoxy of the second. As Joan Robinson said in her 1973 article, The Need For A Reconsideration Of The Theory Of International Trade, “there is no branch of economics in which there is a wider gap between orthodox doctrine and actual problems than in the theory of international trade”. The recent consensus of the economics profession on the debate about the UK EU referendum highlights it. Instead of the invisible hand, we need a visible hand, i.e., a coordination at the international level. The leftist response as highlighted by Dani Rodrik are welcome but still leave the problem open. So one needs both this and a world-wide fiscal expansion with balance-of-payments targets.
The Case for Concerted Action
The World Needs A Kaldorian Response
V. Ramanan

1 comment:

Neil Wilson said...

Still won't drop the balance of payment control crap I see.

All an artefact of drawing lines around countries rather than currencies.

Draw it around the currency and you automatically get the solution to 'dollarisation' thrown in for free.