The late Stahl, in these 36 compelling and inspiring essays, shows why he was an uncommon economist as well as an uncommon human being. He was an unapologetic liberal who spent much of his career working in the bastion of mainstream conservatism known as the Federal Reserve. His dear friend, the late Elliot Richardson, former U. Attorney General and author of ''Reflections of a Radical Moderate,'' used to tease Sheldon that he was the ''moderate radical'' to Richardson's ''radical moderate. Yet the biggest problem with Mr Blanchard's idea is that central banks are not starting from scratch.
Erik Reinert – Developing Economics
The stabilisation of expectations has been remarkably successful—and it allowed policymakers to cut rates as fiercely as they did. But it cannot be taken for granted, especially when some rich countries' budget deficits are so vast. How could they convince investors that the change was intended to make policy more flexible, rather than to inflate away the state's debts? With their credibility undermined, the next crisis would be much harder to fight.
As an intellectual exercise, Mr Blanchard's idea is intriguing.
Della Duncan: Rethinking Economics
As a policy proposal, it is reckless. That is not true of the IMF's second piece of revisionism. A note to be published on February 19th acknowledges that controls on capital inflows can be a useful tool for countries facing a surge of foreign funds see article. For an organisation that has long focused on the distortions such controls create, the shift is significant. It is also timely. With rich-world interest rates at rock bottom, emerging economies are likely to face continuing surges of foreign capital. Until now, the IMF has sniffed in disapproval when countries have introduced controls.
Spatial scale matters, and hence we saw the development of NEG inspired models that were more specifically aimed at a specific level of geographical aggregation see Combes et al.
A Critical Perspective On Development Economics
The bottom line with respect to these subsequent theoretical developments, however, is that despite qualitatively different and arguably also more realistic results, these more recent NEG models essentially do not offer a different or more substantive analysis when it comes to the role of geography or history.
In this respect, Figure 1 also aptly summarizes the depiction of geography and history in these more recent NEG models. It is only when we come to NEG empirics that a different story emerges in the sense that the depiction of geography in terms merely of a transport cost parameter T , and the depiction of history as initial conditions determining equilibria selection, are found to be too restrictive.
Take first the NEG stance on geography. In the two-region model of Krugman a Krugman, P. Regional economics: a new economic geography perspective. The depiction of transport costs via an exponential iceberg transport cost function is itself already far from innocent Fingleton, b Fingleton, B. Towards applied geographical economics: modelling relative wage rates, incomes and prices for the regions of Great Britain. Applied Economics , — Transport costs and the new economic geography.
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Cheltenham : Edward Elgar. With many regions, analytical tractability is no longer possible because the many indirect ways that regions interact imply that the convenient symmetry of transport costs and hence of geography no longer holds. From an empirical point of view this neglect of a more realistic geography is even more problematic Brakman et al. Putting new economic geography to the test: free-ness of trade and agglomeration in the EU regions. Regional Science and Urban Economics , 36 5 : — The break point B in Figure 1 is associated with the level of transport costs where the spreading equilibrium switches from stable to unstable moving from right to left along the horizontal axis.
The sustain points S 0 and S 1 refer to the level of transport costs at which full agglomeration is no longer sustainable moving from left to right along the horizontal axis. For an introduction to multi-region NEG simulations based on real data and estimations , see Combes et al. For an application to the case of EU regions see Bosker et al.
A similar conclusion as to the limited usefulness of the basic NEG models arises with respect to the role of history. Not only is the set of possible equilibrium economic landscapes pre-given by the structure and assumptions of the model , so also is the unique path that leads that spatial distribution of economic activity from the initial situation to its corresponding stable long-run equilibrium configuration. Here, we are not concerned with the precise details of these NEG studies on the impact of historical shocks.
See Redding Redding, S.
The empirics of new economic geography. Journal of Regional Science , 50 1 : — Fowler Fowler, C. Taking geographical economics out of equilibrium: implication for theory and policy. View all notes The point we want to emphasize with respect to history is that there is an important parallel with the need to take geography more seriously within NEG.
In Figure 1 , history is reduced to a given number of multiple long-run equilibria and the pre-determined path that will guide any initial allocation of workers to its long-run equilibrium. The change is coming from an exogenous shock, and the stability equilibria and the change shock are two separate phenomena. On Krugman's model of economic geography.
Geoforum , — The empirical NEG research on the history of shocks already goes some way towards addressing these concerns. For one thing, these studies include far more institutional, case-specific and historical details than the basic NEG model as depicted by Figure 1. To take the case of the effect of allied bombing of German cities in World War II on their post-war development see Brakman et al.
Journal of Economic Geography , 4 2 : — Journal of Urban Economics , — In Section 6 we will argue that in dealing with the role of geography and history, one way forward for economic geography at large, including NEG, is to pay more attention to the actual history of economic landscapes. One reaction to the statement that the treatment of geography and history is overly simplistic in NEG models is to reject any model that argues that the role of geography and history can be usefully summed up by anything resembling Figure 1.
As we made clear in the introduction of our paper, this is the standard reaction to NEG by most proper economic geographers. We return to this line of argument in Section 4, but since we do not think that there is a single approach yet with a convincing and all-encompassing analysis of the role of geography and history, we think that internal criticism is useful as well.
Given that the confrontation of the standard NEG models with the real world makes clear that geography and history cannot be modelled merely by a transport cost parameter or a pre-given set of adjustment paths to a fixed set of multiple equilibria, respectively, the question becomes whether and how NEG will take up this challenge. Basically, two answers or strategies can be discerned from recent NEG research. The first strategy is to ignore the challenge either by sticking to the well-known two-region setting of Krugman a Krugman, P.
The second strategy is to try to expand the NEG analysis by incorporating a more substantive role for geography and history. Since analytical results are basically only available in NEG for the case of two or a very few regions, it is tempting to stick to this set-up if one wants to use solvable models to analyse the impact of policy induced shocks on the spatial equilibrium allocation of economic activity. It is inter alia for this reason that NEG models that are after the policy implications of NEG prefer the two-region model see for instance Baldwin et al.
The downside of this strategy is thus that one is still basically stuck with the depiction of geography and history as discussed in Subsection 3. Even less productive is the strategy to actually further diminish the role of geography and history.
Rethinking Economics: Reflections of an Uncommon Economist
Many recent NEG studies implicitly do so by analysing and testing NEG models for a given spatial distribution of economic activity. Key examples of this strategy are the numerous market access studies that try to assess whether regions with a good market access, that is regions that are part of or nearby to well-developed markets for final goods or intermediate inputs, pay higher wages or have a higher per capita income. Regional wage and employment responses to market potential in the EU. With the latter, a relatively large demand in a region will at last partly show up in higher wages.
The market as a factor in the localization of industry in the United States. Annals of the Association of American Geographers , — By effectively backtracking to Krugman Krugman, P.
Related Rethinking Economics: Reflections of an Uncommon Economist
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