A reconstructive critique of IPE and GPE from a critical scientific realist perspective: An alternative Keynesian-Kaleckian approach

This paper offers, first, a critique of the relative lack of economic theory in ‘British’ Global Political Economy and then use of neoclassical rational choice theory in American mainstream IPE from the perspective of critical scientific realism. Keynesian economic theories provide perhaps the most obvious alternative. Keynes’ General Theory has been followed by many, forming also the basis of Minsky’s long ignored but now, after the 2008-9 crisis, all of a sudden famous explorations on the mechanisms of financial markets. While a major leap forward, we argue that these theories are historically and conceptually limited. Keynes’ critique of neoclassical economic theory and his alternative theories of particularly the effective demand and of money and credit can be strengthened by following also a neo-Kaleckian approach which avoids some of the inconsistencies of neo-Keynesianism. We indicate where further conceptual work is required and provide several illustrations from the neo-Kaleckian and neo-Keynesian theory to suggest a partial agenda of further scientific work including the explanation of unnecessary and undesired global fluctuations, tendencies and crises and possible collective responses to them. We also suggest the possibility of going beyond Keynes and Kalecki in terms of a general field theory of global political economy that can accommodate the deep normative and institutional underpinnings of the historically evolving planetary political economy

Sluggish information diffusion and monetary policy shocks

The sticky-information model appeared in order to offer a more empirically consistent view on the effects of monetary policy than the one provided by the benchmark sticky prices setup. Such inattentiveness framework was built on the assumption that current decisions are mainly based on past expectations about the current state of the economy. In this note, we propose an explanation for information stickiness that goes beyond the simple idea of infrequent updating of expectations. The suggestive new feature is that contemporaneous decisions will depend on a process of information diffusion that is triggered by the relation between two rational players: the profit maximizing media industry and the private agents, who seek information in order to update prices

Evaluating Flexibility in Small Firm Financing

The choice of financing source is particularly difficult for a small firm due to the high uncertainty about future liquidity requirements. We show that the techniques of continuous time arbitrage and stochastic control theory may be used not only to value such firms but also to determine the optimal financing policies. In particular, we investigate the choice between liquid, but more expensive, forms of financing and restrictive, but cheaper, sources of capital. In addition to developing an optimal financing policy for a typical firm, we estimate the value of flexibility in a financing arrangement. This, in turn, provides a rational explanation for the otherwise surprisingly high levels of flexible financing used by small firms. Beyond small firm management, our findings have important implications for financial institutions and regulators

Reason in action: a realist account

This thesis argues against the Humean theory of practical reasons, criticising its foundations in philosophical and moral psychology. It develops a realist account of value-based reasons, underpinned by a distinctive cognitivist moral psychology, and a non-causalist account of the rational explanation of action. Contemporary Humeans reject Hume’s own theory of thought, but this leaves the Humean theory of practical reasons without justification for a conception of desire as non-cognitive and not open to fundamental rational evaluation. Two possible strategies for filling this justificatory gap are (i) an appeal to grammatical considerations about the attribution of desires and their content, or (ii) an appeal to distinctions in respect of direction of fit. I argue that neither is successful. Kant’s moral psychology provides the key to an alternative account, but is unsatisfactory due to its acceptance of a theory of thought which is relevantly similar to Hume’s, and of non-compulsory rationalist presuppositions. Separated from these aspects, Kant’s insights open a path to developing a conception of desire as essentially rationally evaluable. I argue that, in addition to such a conception, we should accept an account of rational attitudes as constitutively normative. On the basis of these two views, I argue that desire is a kind of evaluative belief. An independently plausible account of reasons takes them to be evaluative facts, and this neatly connects to the normative philosophical psychology. I consider the implications of such a view for the rational explanation of action, arguing that while causal theories of action and action-explanation are unacceptable, the normative philosophical psychology allows the development of non-causal alternatives to them. The non-causal account of action and action-explanation leaves space for an explanatory role for reasons themselves, beyond that provided by merely psychological explanation, as well as an explanatory role for an agent’s character and emotions

(WP 2017-04) Behavioral Economics and the Positive-Normative Distinction: Sunstein’s \u3cem\u3eChoosing Not to Choose\u3c/em\u3e and Behavioral Economics Imperialism

This paper examines behavioral economics’ use of the positive-normative distinction in its critique of standard rational choice theory as normative, and argues that it departs from Robbins’ understanding of that distinction in ways that suggest behavioral economists themselves do not observe that distinction. One implication of this is that behavioral economists generally do not recognize Putnam’s fact-value ‘entanglement thesis’ while a second implication is that the charge that rational choice theory is descriptively inadequate paradoxically appears to mean that it does not employ the implicit value basis and normative vision that behavioral economics recommends, thus actually violating Robbins’ distinction. This latter argument is developed through an examination of Sunstein’s Choosing Not to Choose which uses nudge policy in the form of default rules to advance a different conception of freedom than standard choice theory employs. The paper goes on to argue that behavioral economics imperialism, particularly in the form of behavioral development economics imperialism, is more about promoting its implicit value basis and normative vision over that promoted by standard rational choice theory than about advancing an alternative conception of economics for social science. A final section comments on economics’ status and relation to the other social sciences

The politics of health sector reform in Eastern Europe: the actor-centered institutionalist framework for analysis

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