Ha-Joon Chang and Mariana Mazzucato: Rethinking the State

What is the role of the state in the economy?

Technocrats preaching the “free market” see the state as merely a tool to correct market failures. But should the state play a more active role in shaping the economy and promoting smart and inclusive growth? Read more

Katharina Pistor: The Legal Theory of Finance

Bad theories can have very real consequences.

The most recent example was the 2008 financial crisis, which showed that inadequate theories about the financial system can help create a systemic collapse.

But did economists learn their lesson? Read more

China's central government is paying for the AMCs

Interbank crunch, GDP slowdown, worsened rebalancing, mysterious government debt … after so much frustrating news I finally found something inspiring: the Asset Management Companies (AMCs) are paying their bond principals! Read more

IEA 2014 World Congress Calls for Submissions

The International Economic Assocation has sent out a call for submissions for its 17th World Congress. The event will take take place on June 6-10, 2014, and is supported by the Centre for International Governance Innovation (CIGI) and the Institute for New Economic Thinking. The text of the call for submissions is quoted below. You can also download it as a PDF at the bottom of the page.  Read more

A much-maligned engine of innovation - Martin Wolf reviews Mariana Mazzucato's "brilliant" new book

Don't miss the review of Institute for New Economic Thinking grantee Mariana Mazzucato's new book, The Entrepreneurial State, in today's Financial Times. Read more

We Don't Have To Accept High Unemployment - We Can Fix It Today

Persistent high unemployment has produced a crisis for virtually all Americans. Many have suggested that this may be “the new normal” and that there is little we can do about it. But they’re wrong.

We can resolve the crisis in unemployment by adopting a federal job guarantee (JG) for all citizens via a government Job Guarantee Program. Read more

Detroit, and the Bankruptcy of America’s Social Contract

One way to view Detroit’s bankruptcy — the largest bankruptcy of any American city — is as a failure of political negotiations over how financial sacrifices should be divided among the city’s creditors, city workers, and municipal retirees — requiring a court to decide instead. It could also be seen as the inevitable culmination of decades of union agreements offering unaffordable pension and health benefits to city workers. 

But there’s a more basic story here, and it’s being replicated across America: Americans are segregating by income more than ever before.  Read more

How Big Finance Crushes Innovation and Holds Back Our Economy

By Lynn Stuart Parramore

Author's note: This post is based on papers presented and remarks made during a conference panel I moderated featuring William Lazonick of U Mass-Lowell, Jan Kregel of the Levy Institute and Damon Silvers of the AFL-CIO.

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Understanding Bank Liquidity

The shortage of liquidity in the interbank market in China has sparked off a fear of “monetary famine.” This seems rather odd when the national savings rate is 50 per cent of GDP and even though growth is slowing, it is still one of the fastest growth rates in the world.

We have to go back to the 1959 Radcliffe Committee on the Working of the Monetary System in the UK for the controversial view at that time that it was the liquidity of the system that determined spending behavior, rather than the interest rate. The Radcliffe Committee also held the view that the central bank can influence the state of liquidity. Read more

Why is China auditing local government debt again?

Here is what the FT says: 

China will conduct an urgent audit of all government debt, underlining concerns over rising financial risks in the world's second-biggest economy.

The National Audit Office said in a one-line statement on Sunday that it had been instructed by the state council, China's cabinet, to come up with a tally of how much money is owed by all levels of government from villages up to central authorities.

So why do we ask the question in the title? Read more