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At dinner yesterday Niall Ferguson made the argument that China (or the East) were perhaps no longer looking to how Western countries had built their social institutions and formed their empires, and were instead now doing their own thing as the Western approach was shown to be flawed

“Taking advantage of the opportunity offered by the structural adjustments of the global economy…”The decisions on the four modernisations taken at the Third Plenum represented a radical change in Chinese domesticdevelopment strategy.

Political meritocracy is the idea that a political system is designed with the aim of selecting political leaders with above average ability to make morally informed political judgments. That is, political meritocracy has two key components: (1) the political leaders have above average ability and virtue and (2) the selection mechanism is designed to choose such leaders.

At the heart of economics is a theory of action. It reflects views about how human beings make economic decisions and leads to an analysis of aggregate consequences.

A core puzzle in Önancial economics is the inability of standard risk-premium models to account for excess returns in currency and other asset markets.

Neoclassical economics has abolished the role of psychology in decision making by assuming that all individuals are rational optimizers with rational expectations about future events.

The global financial crisis led to the rediscovery of ‘fundamental uncertainty’. Incorporating uncertainty into the analysis of financial markets alters our understanding of how these markets operate and expose the two-faced role of law in finance.

There is much anecdotal evidence in the popular media, backed up by survey research, that participants in currency markets pay close attention to fundamental economic variables in forming their forecasts of future exchange rates.

For macroeconomists, an individual is rational if she uses her understanding of the way the economy works in making decisions that do not conflict with her objectives.

The present-value model of stock prices is a workhorse in financial economics. The model relates today’s price of a stock (or a basket of stocks) to the market’s forecasts of next-period’s price and dividend, appropriately discounted.

In this paper, we examine one of the core puzzles in International Macroeconomics, the so-called “forward-discount anomaly.”

A core premise of contemporary economic models is that researchers can adequately specify in probabilistic terms how individuals alter the way they make decisions and how the processes underpinning market outcomes unfold over time.

The first part of this text comes back on the standard economic viewpoint on expectational coordination, a viewpoint that the recent events have challenged.

State and market are often depicted as distinct, even antagonistic. Markets appear as natural products of spontaneous ordering; states as leviathans that if left untamed will distort, if not destroy markets’ natural state.

Uncertainty is an unavoidable feature of economic life, although we may cope with it sometimes by ignoring it. Institutions, conventions and behaviour are all conditioned by uncertainty, and they in turn condition uncertainty in a reflexive manner.

The reason why the Euro zone crisis has dragged on for so long is that Europe’s leaders have focused too much on short-term measures to patch up the emergency of the moment, rather than formulating a comprehensive plan.

After the announcement of Mario Draghi, the ECB president, to do “whatever it takes” to preserve the integrity of the European Monetary Union (EMU) in July 2012 and the establishment of the Outright Monetary Transactions (OMT) program in September 2012, the crisis of EMU is far from being resolved.

Mercantilism, Accumulation of Foreign Exchange Reserves, and RMB Internationalization

Regulation and supervision of banks and financial markets are now upgraded in the euro area. Surveillance of macroeconomic performance of all EU countries is also intensified.

In the first ten chapters of our book, The Bankers’ New Clothes: What’s Wrong with Banking and What to Do about It, we discuss banking and the economics of funding as it applies to banks.

Europe can choose its musical accompaniment. In Berlin, 50 Cent’s All Things Fall Apart has just had its premiere. Or go back to Giuseppe Verdi, born two hundred years ago.

Internationalization of the renminbi is a stated goal of the Chinese government, its brief flirtation with Special Drawing Rights and an Asian Currency Unit notwithstanding. Chinese officials understand that a dollar-centric international monetary and financial system is a mixedblessing.

Imperfect knowledge economics, or IKE to their friends, is popular with all the popular kids. George Soros, Bill Janeway and Anatole Kaletsky were in attendance as Roman Frydman and Michael Goldberg - or more properly, their students - showed the latest work in progress.

Japan is going to double its money supply, according to today’s front page of the Financial Times (5 April 2013), and a salient question might be what we should compare that to. It sounds like a lot, but is it?

Having lunch next to Edward Fullbrook he told me the story of how the post-autistic economic review got its start, leading to what we today know as the World Economic Association and all the great work coming from this community.

Some personal touches to hospitality at the INET conference, although I feel for the people who have been holding that sign all day.

In his opening remarks, Robert Johnson said that this “is not the institute of anything goes” with INET now getting to a point where it needs to stop criticising the mainstream and should instead “create a new vision.”

The Institute for New Economic Thinking held its annual plenary conference in Hong Kong from April 4-7, 2013 at the InterContinental Hotel in Kowloon. The event discussed Asia’s emergence in the global economy and other core issues.

Healthy innovation economies are the main driver of prosperity in the 21st century. But the three players that have traditionally sponsored basic research and invention in those economies are no longer willing or able to perform that role.

The developed economies of Europe, North America, and Japan are facing tremendous challenges related to indebtedness and stagnation. How will the developing economies of Asia respond to this challenge as they reorient their growth strategies to meet the rising aspirations oftheir people?

The Foundations of Economic Prosperity: The Lessons of Innovation Process and History

In “The Ambivalence of Scarcity” which is my contribution to L’Enfer des choses. René Girard et la logique de l’économie, written by Jean-Pierre Dupuy and originally published in French in 1978, I attempt to apply mimetic theory to modern economics and to economicphenomena, and also to explain why economic issues and economics as a discipline occupy such an important place in the modern world.

My remarks today will be focused primarily on features of the developed world’s financial system which led to the crisis of 2008 and to the Great Recession that followed, from which we are only slowly and painfully emerging.

In his recent lecture at the Cass Business School, Lord Turner noted that even mentioning the possibility of overt monetary financing was akin to breaking a taboo.

A striking feature of the neoclassical economic theory which has been dominant in Western universities in recent years is that it has had so little to say about innovation and innovation policy which is useful for policy-makers.

It would be nonsensical to blame economists for not foreseeing the crisis; even less for causing it. It was obvious there would be a crisis. It was impossible to foresee how it would start and evolve, and at what moment these events would occur.

The problem of value has always occupied a central place in economic thought and debate.

What is the purpose of economics?

The INET conference in Hong Kong is serious business.

We study the lags with which new technologies are adopted across countries, and their long-run penetration rates once they are adopted.

Shadowy banking is safety-net arbitrage. It employs substitutes for products and activities performed within the traditional banking sector.

All of a sudden, tiny Cyprus is making headlines. How could such a small country, with an economy approximately the size of the State of Maranhao, create such big problems?

Further system reforms will enable China to overcome middle-income trap and push forward social progress

What happens when there’s no leader in the global economy?

There is a certain rich irony attached to the sight of corrupt Russian oligarchs now posing as liberal champions of the rule of law as they find themselves sucked into the maelstrom of Cyprus’s ongoing financial crisis.

Why Nature Physics has released an issue focusing on physicists and economists considering the state-of-the-art in the application of network science to finance?

This paper considers a puzzle in growth theory from a Keynesian perspective.

Why all of the fuss about a nonexistent emergency?

An innovative new paper by INET grantee Suresh Naidu

There has been an important movement towards making available on the web a host of open courses.

The relatively new field of inequality studies is gaining increasing momentum as economic disparity grows throughout the world, in advanced countries as well as less developed ones—especially in the United States.

Michael Goldberg was awarded last week the Todd H. Crockett Professor of Economics at the Peter T. Paul College of Business and Economics at the University of New Hampshire.

That’s the question that Adair Turner, Chair of the UK Financial Services Authority, was addressing in his lecture to Cass Business School this week.

Turner’s speech at the UK Financial Services Authority

ft. INET’s Perry Mehrling

The notion of “field” is so pervasive that economists hardly pay conscious attention to it.

Although the objectivity-Grail Quest has ended with total success decades ago (so economists say), the question of the possibility and consequences of economists’ values smuggling into their daily practice still periodically surfaces, and crises make good times for such debates.

Piero Sraffa’s classic work Production of Commodities by Means of Commodities has been variously interpreted as a special case of modern neoclassical general equilibrium or a foundation stone for the revival of the classical tradition of Smith and Ricardo.

What is the purpose of markets?

The Institute for New Economic Thinking (INET) and the World Economic Forum today announced plans for closer collaboration to foster new approaches to economic thinking.

Paul Samuelson is well-known to have been a compulsive citer and for having a particular Whig program for the history of economics

Economists and historians of economics have related differently over time, and the past of the discipline has then served for varied purposes.

On January 24 2013, the Workers’ Rights Student Coalition at Columbia Law School will host an INET-sponsored evening with top political leadership from SYRIZA, Greece’s dominant opposition party and anticipated next government, to discuss the challenges facing Greece and the euro zone and SYRIZA’s plans for reform.

INET is pleased to announce that Roman Frydman, Chair of INET’s Program on Imperfect Knowledge Economics, has published a book with Edmund Phelps, 2006 Nobel laureate and Director of the Center on Capitalism and Society at Columbia University, Rethinking Expectations: The Way Forward for Macroeconomics (Princeton University Press).

One of the fundamental ideas of modern economics — that people have rational expectations, an unbiased, statistically correct view of the future — is, in reality, a simple hypothesis.

Eric Beinhocker and Tony Dolphin argue that lasting reform to the financial sector will not be achieved without tackling the price rigging and anti-competitive behaviour that is rife in the industry.

The History of Economics Society (HES) held four sessions at the Allied Social Science Associations (ASSA) 2013 meeting, in San Diego, Jan. 4-6: “Keynes and the International Monetary System” (co-organized by Robert Dimand and Rebeca Gomez Betancourt), “Writing MIT’s History” (organized by E. Roy Weintraub and having our blog fellow Yann Giraud presenting), “Looking for Best Practices in Economic Journalism: Past and Present” (organized by our blog fellow Tiago Mata), and “Real Business Cycle after Three Decades: Past, Present and Future” (a panel discussion co-organized by Warren L. Young and Sumru Altug).

INET has chosen the label “openness” to describe New Economic Thinking - “open” for other disciplines, for other methods, for other questions, for other interpretations, etc. It’s easy to hurrah.

Five years into the Great Recession, discussion and political fights continue about the right approach to international banking supervision. How to avert the next financial crisis or at the very least lessen its damage?

The Azim Premji University-Institute for Economic Thinking Advanced Graduate Workshop in Poverty, Development and Globalization is interested in identifying the complex global interactions that influence poverty and development as well as the development strategies that have proven successful in promoting equitable growth, promoting capabilities, and reducing poverty.

Financial fragility does not fall from the sky. That’s why treating risk as if it comes from exogenous shocks can’t capture the reality of financial markets.

This research project continues the work of the University of Texas Inequality Project, developing new data and research in several technical areas.

This research project extends proven techniques in statistical learning theory so that they cover the kind of models and data of most interest to macroeconomic forecasting.

This research project develops a software program for economic simulation that makes it easy to develop dynamic, monetary models of the macro-economy.

This research project analyzes the determinants of wage share, taking account of country-specific institutional aspects, in order to contribute to the theory of distribution, combining insights from political economy, institutional economics, and industrial relations.

This research project considers and casts doubts on the stationarity properties of macroeconomic data that are key to New Classical models with implications for the understanding of long-term economic growth, shorter term business cycles, stabilization policy, and industrial and development policy.

This research project explores the relationship between environmental regulation, innovation, and competitiveness through a meta-analysis, which extracts key implications for economic thinking and future research, and unique datasets on patented “environmental” inventions.

This research project aims to better understand the impact of various forms of central bank communication by blending techniques from psychology and political science.

This research project compiles and annotates the archival legacy of the Bellagio Group’s founders Fritz Machlup, Robert Triffin, and William Fellner as they sought to reform the international financial system between 1963 and 1974.

This research project argues that economics currently lacks the capability to assess when mathematical modeling, on its own, is a sufficient means for understanding a given set of social phenomena.

This research project collects data that measures maternal knowledge about the impacts of investments on child development and estimates the role such knowledge plays in the determination of economic and social inequality.

This research project examines the political and ideological implications of different ways of framing the relationship between humanity, nature, and the world of goods.

This research project provides the mathematics for a second marginal revolution enabling the natural modeling of heterogeneous agents with unstable beliefs, fully dynamic preferences, and allowances for an increased level of self-inconsistency.

This research project creates a computational model of the current financial crisis to discover the essential elements needed to reproduce the crisis, while investigating alternative policies that may have reduced its intensity and strategies for recovery.