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Working Paper No. 563
May 13, 2009
Whither New Consensus Macroeconomics?
AbstractIn the face of the dramatic economic events of recent months and the inability of academics and policymakers to prevent them, the New Consensus Macroeconomics (NCM) model has been the subject of several criticisms. This paper considers one of the main criticisms lodged against the NCM model, namely, the absence of any essential role for […]
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Policy Notes No. 6
May 11, 2009
The “Unintended Consequences” Game
AbstractA simple consideration of history tells us that each new piece of legislation contains loopholes that benefit a new class of entrepreneurs; some of these loopholes are small, but others are such that one could drive a bullion-laden truck through them. In this new Policy Note, Martin Shubik suggests creating a “war gaming group” to […]
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Working Paper No. 562
May 08, 2009
The Current Economic and Financial Crisis
AbstractWidespread economic recessions and protracted financial crises have been documented as setting back gender equality and other development goals in the past. In the midst of the current global crisis—often referred to as “the Great Recession”—there is grave concern that progress made in poverty reduction and women’s equality will be reversed. Indeed, for many developing […]
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Working Paper No. 561
May 06, 2009
The Return of the State: The New Investment Paradigm
AbstractTo save America—indeed, the global economy as a whole—the private/public sector balance has to shift, and the neoliberal economic model on which the country has been based for the past 25 years has to be modified. In this new working paper, Marshall Auerback details why the role of the state needs to be reemphasized. The […]
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Policy Notes No. 5
April 09, 2009
A Proposal for a Federal Employment Reserve Authority
AbstractThere is already considerable talk about the possible need for a massive public works program in response to the deepening recession and rising unemployment; however, an ad hoc emergency approach is going to waste billions of dollars by mismatching skills and needs. In this new Policy Note, Martin Shubik of Yale University outlines a proposal […]
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Strategic Analysis
April 09, 2009
Recent Rise in Federal Government and Federal Reserve Liabilities: Antidote to a Speculative Hangover
AbstractFederal government and Federal Reserve (Fed) liabilities rose sharply in 2008. Who holds these new liabilities, and what effects will they have on the economy? Some economists and politicians warn of impending inflation. In this new Strategic Analysis, the Levy Institute’s Macro-Modeling Team focuses on one positive effect—a badly needed improvement of private sector balance […]
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Research Project Report
April 09, 2009
New Estimates of Economic Inequality in America, 1959—2004
AbstractIn this latest LIMEW report, the authors present new evidence on the pattern of economic inequality in the United States that indicates higher inequality in 2004 than in 1959. According to the LIMEW, there was a surge in inequality between 1989 and 2000 that reflects the large increase in income from wealth for the top […]
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Public Policy Brief No. 100
April 08, 2009
It’s That “Vision” Thing: Why the Bailouts Aren’t Working, and Why a New Financial System Is Needed
AbstractThe Federal Reserve’s response to the current financial crisis has been praised because it introduced a zero interest rate policy more rapidly than the Bank of Japan (during the Japanese crisis of the 1990s) and embraced massive “quantitative easing.” However, despite vast capital injections, the banking system is not lending in support of the private […]
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Policy Notes No. 4
April 08, 2009
A Crisis in Coordination and Competence
AbstractThe ad hoc emergency approach to the current economic crisis has a great chance of wasting billions of dollars by mismatching skills and needs. According to Martin Shubik of Yale University, the current deepening recession needs a “quick fix” solution now, but a longer-fix solution must be put into place along with it. There is […]
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Working Paper No. 560
April 06, 2009
The Social and Economic Importance of Full Employment
AbstractUnemployment was singled out by John Maynard Keynes as one of the principle faults of capitalism; the other is excessive inequality. Obviously, there is some link between these two faults: since most people living in capitalist economies must work for wages as a major source of their incomes, the inability to obtain a job means […]
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Strategic Analysis
April 02, 2009
A “People First” Strategy: Credit Cannot Flow When There Are No Creditworthy Borrowers or Profitable Projects
AbstractIn 1930, John Maynard Keynes wrote: “The world has been slow to realise that we are living this year in the shadow of one of the greatest economic catastrophes of modern history.” The same holds true today: we are in the shadow of a global catastrophe, and we need to come to grips with the […]
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Working Paper No. 559
April 02, 2009
Labor-market Performance in the OECD
AbstractIn this paper we assess the evolution of labor-market performance in the Organisation for Economic Co-operation and Development (OECD) over the last decade. We provide a survey of the literature dealing with labor-market performance in the OECD, finding that, while this literature tends to conclude that institutions are a key part of the story, the […]
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Working Paper No. 558
April 01, 2009
Managing the Impact of Volatility in International Capital Markets in an Uncertain World
AbstractInternational financial flows are the propagation mechanism for transmitting financial instability across borders; they are also the source of unsustainable external debt. Managing volatility thus requires institutions that promote domestic financial stability, ensure that domestic instability is contained, and guarantee that international institutions and rules of the game are not themselves a cause of volatility. […]
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Policy Notes No. 3
March 27, 2009
An Assessment of the Credit Crisis Solutions
AbstractAll of the various schemes that have been put forward to resolve the current credit crisis follow either the “business as usual” or the “good bank” model. The “business as usual” model takes different forms—insurance or guarantee of the assets or liabilities of the financial institutions, creation of a “bad bank” to buy toxic assets, […]
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Policy Notes No. 2
March 25, 2009
What Role for Central Banks in View of the Current Crisis?
AbstractCentral banks have an aversion to bailing out speculators when asset bubbles burst, but ultimately, as custodians of the financial system, they have to do exactly that. Their actions are justified by the goal of protecting the economy from the bursting of bubbles; while their intention may be different, the result is the same: speculators, […]
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Working Paper No. 557
March 19, 2009
Background Considerations to a Regulation of the US Financial System
AbstractUnited States financial regulation has traditionally made functional and institutional regulation roughly equivalent. However, the gradual shift away from Glass-Steagall and the introduction of the Financial Modernization Act (FMA) generated a disorderly mix of functions and products across institutions, creating regulatory gaps that contributed to the recent crisis. An analysis of this history suggests that […]
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Public Policy Brief No. 99
March 09, 2009
The Return of Big Government: Policy Advice for President Obama
AbstractIn the current global financial crisis, economists and policymakers have reembraced Big Government as a means of preventing the reoccurrence of a debt-deflation depression. The danger, however, is that policy may not downsize finance and replace money manager capitalism. According to Senior Scholar L. Randall Wray, we need a permanently larger fiscal presence, with more […]
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Public Policy Brief No. 98
February 19, 2009
The Case Against Intergenerational Accounting: The Accounting Campaign Against Social Security and Medicare
AbstractThe Federal Accounting Standards Advisory Board (FASAB) has proposed subjecting the entire federal budget to “intergenerational accounting”—which purports to calculate the debt burden our generation will leave for future generations—and is soliciting comments on the recommendations of its two “exposure drafts.” The authors of this brief find that intergenerational accounting is a deeply flawed and […]
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Research Project Report
February 19, 2009
What Are the Long-Term Trends in Intergroup Economic Disparities?
AbstractOver the last half century, government policy has had an important hand in alleviating disparities among population subgroups in the United States; for example, special tax treatment for families with children has meant an improvement in the well-being of single mothers, and Medicare and Social Security have been the driving force in improving well-being among […]
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Research Project Report
February 03, 2009
Postwar Trends in Economic Well-Being in the United States,1959–2004
AbstractThe Levy Institute Measure of Economic Well-Being (LIMEW) is a more comprehensive measure than either gross money income or extended income because it includes estimates of public consumption and household production, as well as the long-run benefits from the ownership of wealth. As a result, it provides a picture of economic well-being in the United […]
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Working Paper No. 556
January 29, 2009
Long-Term Trends in the Levy Institute Measure of Economic Well-Being (LIMEW), United States, 1959–2004
AbstractThe motivation to construct the LIMEW in lieu of relying on the official measures of well-being is to provide a more comprehensive measure of economic inequality that will also show the disparities among key demographic groups. The authors of this new working paper show that the LIMEW provides a perspective on disparities among population subgroups […]
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Public Policy Brief No. 97
January 29, 2009
After the Bust
Abstract“Change” was the buzzword of the Obama campaign, in response to a political agenda precipitated by financial turmoil and a global economic crisis. According to Research Associate Thomas Palley, the neoliberal economic policy paradigm underlying that agenda must itself change if there is to be a successful policy response to the crisis. Mainstream economic theory […]
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Working Paper No. 555
January 27, 2009
Financial Stability: The Significance and Distinctiveness of Islamic Banking in Malaysia
AbstractThis paper explores the significance of Islamic banking in Malaysia for stability in the country’s economy as a whole. Neither conventional theory nor Islamic economics puts forward a systematic explanation of financial intermediation; consequently, neither is capable of identifying destabilizing elements in the system. Instead, a flow-of-funds approach similar to Minsky’s own is applied to […]
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Working Paper No. 554
January 26, 2009
Macroeconomic Imbalances in the United States and Their Impact on the International Financial System
AbstractThe argument put forward in this paper is twofold. First, the financial crisis of 2007–08 was made global by the current account deficit in the United States; and second, there is global dependence on the United States trade deficit as a means of maintaining liquidity in financial markets. The outflow of dollars from the United […]
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