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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.

This research project uses spatial cross-sectional variation in addition to time series variation to estimate fiscal multipliers; the impact of anti-predatory lending laws on housing prices, default rates, and foreclosures; and the impact of raising wages during recessions.

This research project explores how the output of firms outside of the financial sector is affected by the health of the banks and other financial institutions.

This research project focuses on the effect of the technological changes that led to the British Industrial Revolution in the eighteenth century on the market for skilled workers.

This research project will examine the long-term costs of macroeconomic instability in a major metropolitan area and the direct impact of macroeconomic shocks on technological discovery.

This research project investigates the influence of economic doctrines on policy norms in recent decades through analysis of the history of the Nobel Prize in Economics.

This research project explores ways to influence policy, starting with selected UK regulators, pension funds, and asset management groups, by testing the feasibility of “emotional finance” solutions to the prevention of future financial crises.

This research project explores and documents the development of graduate economics training in the leading centers of doctoral education in the United States.

This research project uncovers the economic forces which reshaped the evolution of the imperial examination system in traditional China, using a new dataset from archival sources of ancient Chinese Books.

This research project examines the relationship between the creation of money, price formation, and income flows, assuming no restrictions to the volume of credit, while abstracting from the existence of speculative crises and the role of the public sector in the process of monetary creation.

This research project shows what economists can learn from political philosophers in thinking about economic inequality while also investigating the philosophical significance of recent empirical work on inequality, within economics and elsewhere.

What it will mean for the U. S. economy to go over the “fiscal cliff.”?

INET researchers have continued their innovative work and are finding larger platforms and eager audiences for it.

Your average economics textbook presents the neat image of a discipline with many useful conceptual paradigms for viewing the world. But it almost never gives any sense of how these ideas developed.

Economics is very theoretically comfortable with what may be termed `Keynesian’ waste.

The Risk Society

The degree to which economics is isolated from the ordinary business of life is extraordinary and unfortunate.

Doing Capitalism in the Innovative Economy

We derive generalization error bounds — bounds on the expected inaccuracy of the predictions — for traditional time series forecasting models.

The European periphery is qualitatively dierent from the core.

Ireland has experienced a series of interlocking banking, fiscal, unemployment and political crises since 2007.

You know the country is in a financial mess when even establishment figures such as Rachel Lomax are calling for revolutionary thinking

In a previous post we queried whether the theory of the consumer as developed in the first three chapters of Mas-Colell, Whinston and Green (and indeed other comparable texts) provides anything by way of content beyond what is implied by the abstract description of consumers as agents who are maximizing something. [We did not discuss chapter four, on aggregation of demand, to which we may return later]. As we noted then, a comparable point can be made about the theory of the firm.

The Institute for New Economic Thinking has openings for 2-4 Postdoctoral Fellows in New York City.

Did the industrial revolution increase the relative demand for skilled labor, or decrease it?

How do economists make their models work? By assuming that investors have rational expectations and that every market participant is alike. However, things quickly get messy once economists start to acknowledge that people are different, interact with each other, and change heuristic forecasting strategies based on recent performance.

For one more time traveling closer to home – Mainz! It’s been the annual meeting of the German Society of the History of Science (the kind of academic club one has to be nominated for membership).

For nineteenthth century figures such as Bentham and Jevons, the concept of utility was associated with satisfaction or pleasure experienced.

So, my new students’ training is essentially about understanding urban “territories” and “societies” through fieldwork. And my contribution is, supposedly, to highlight the economic dimension of all this.

When they told me I was expected to teach “Introduction à l’économie” this year, I thought, OK, this is straight. Every economist knows how to do that.

The Eurocrisis has many dimensions—bank solvency crisis, sovereign debt crisis, political unity crisis, and economic/unemployment crisis—but time after time it has been the liquidity crisis dimension driving events, and ECB response to the liquidity crisis driving institutional evolution. The reason is simple. Liquidity kills you quick.

Contemporary mainstream economics has widely “poisoned the well” from which people get their ideas about the relationship between economics and ethics.

Mathematics and the ‘Whiz Kids’

Two Nobel laureates, an election, and a shaky economy. The message? We can do a whole lot better.

What do you get when you put two of the most well known and most widely cited economists in the world, both Nobel laureates, on stage together? A healthy dose of economic reality.

China released quarterly GDP figures this week. Wen Jiabao emphasized the parts of the release that pointed toward stabilization, and one can certainly find some logic to that view.

The British Corn Returns data provided the empirical basis for the fierce debate around the introduction and repeal of the 19th century British Corn Laws. Contemporary readers, like David Ricardo and Thomas Malthus, followed them as closely as stock market prices of today. Much of 19th century political economy rested on contemporaries’ interpretations of this data.

INET co-founder George Soros has been awarded the Adam Smith Award by the National Association for Business Economics (NABE), an association of business economists.

MWG introduces the theory of consumer behavior by presenting two distinct approaches to modeling consumer behavior, the preference-based approach (based upon unobservable preferences generating a utility function) and the choice-based approach (based upon observable choice behavior), and attempting to establish connections between the two.

What makes a good model?

a lack of US growth may lead to a fall in the dollar’s popularity, and the result could be a global liquidity shortage.

In this post, I would like to explore the views of preferences and behavior outlined in MWG Ch.1, and specifically the view of rationality developed in this first chapter.