This chapter aims to show the ineffectiveness and the theoretical limits of the dominant approach to social policies by reiterating the historical necessity of social security, designed to satisfy the production system in terms of efficiency and effectiveness while allowing the needs of the population to be met. This chapter will also explain the theoretical relevance of social security, established by many studies within the Keynesian tradition and largely supported by empirical research that has shown its crucial role in economic and social development of capitalist societies. This chapter concludes by indicating how this role can be maintained in the future.
Ever since its emergence, the State has always had an economic function in society. Under capitalism, the ideology of laissez-faire or neoliberalism makes full use of all the powers of the modern State to deregulate markets, privatize public corporations and assert hegemony of the individual/corporate property rights with the aim of expanding wealth for the dominant class. This chapter proposes alternative ways for the State to manage the economic affairs in society for the benefit of all social classes.
Robert H. Scott
This chapter discusses how ecological economics contains the perspective needed to align the interests of the economy with the limitations of the natural environment. This approach differs from the anthropocentric neoclassical environmental economics that adheres to traditional microeconomic analysis for thinking about natural resources, pollution and measuring economic progress. Our biosphere is under immense strain: a growing world population, climate change, water pollution and many other current and impending environmental challenges. Achieving a steady-state economy can alleviate some of the pressures living on a finite planet put on the biosphere while promoting economic security and advancement.
The standard neoclassical method for building macroeconomics upon a microeconomic foundation has proven unable to anticipate and account for actual issues, especially the financial and economic crisis that burst in 2008. In this chapter we show that it would be appropriate to return to the method once used by classical writers, who considered the economy as a whole and referred to institutions and production conditions as the cornerstone of economic activity. This was also Keynes’s method, in developing the concept of a monetary economy of production. We show that a renewed analysis of the economy as a whole would open up a range of new perspectives on macroeconomics.
The origin of the 2008 financial crisis can be found in the architecture of domestic payment systems, which are also used for international settlements despite the purely accounting nature of bank money. This chapter will discuss the essential principles of the necessary reform of the current international payment system, which must ensure the emission of a purely scriptural money reserved for national central banks, for the final payment of all transactions involving two separate currency areas. Here we explain that only a supranational currency will guarantee national and international financial stability.
Within the context of crises, a number of questions have arisen with respect to the role of banks. There has been a wide-ranging discussion over reforms that have proven rather limited in their analysis. Heterodox economists, however, have shown to be more astute as to the specific problems confronting our economies, and have proposed innovative solutions. Indeed, the theory of endogenous money shows an enlightened and indestructible link between banks and economic activity that is particularly important for proposing needed reforms to the banking system.
Uncertainty inescapably affects all economic decisions and actions. Core neoclassical theory does not, and cannot, treat uncertainty seriously, because its constrained maximization requires the reduction of all uncertainties to different forms of perfect knowledge. Other economic schools do take uncertainty seriously, however, giving it independent, determining roles rather than eliminating it by assumptions. The treatment of uncertainty in four schools is discussed – the deficient neoclassical approach, followed by the better approaches of post-Keynesian, Austrian and institutionalist economics, all of which link economic theorizing to key features of reality, so embracing uncertainty instead of ignoring or trivializing it.
Jonathan F. Cogliano and Xiao Jiang
This chapter introduces agent-based modeling (ABM) as a research tool that possesses advantages for heterodox research programs. We introduce the approach in four steps. First, we discuss the uniqueness of ABMs, which lies primarily in the flexibility to incorporate vastly heterogeneous agents and to address models with high degrees of freedom. Second, we argue that the flexibility of ABMs makes them an appropriate tool for the questions raised by classical and (post-)Keynesian economists. To demonstrate this point we briefly sketch two ABMs, one which constructs an environment that captures the classical-Marxian processes of gravitation, thereby opening new pathways in value theory, and the other is a nuanced analysis of Keynesian effective demand problems and the existence of chaotic cycles in a capitalist economy. The chapter then revisits the flexibility of ABMs in order to discuss their capability of incorporating dimensions from across the broad variety of heterodox research programs.
Field research for economists usually involves the administration of a survey instrument designed to yield quantitative data that can be used to test the predictions of an a priori theoretical model. In this chapter, I argue that qualitative methods can be valuable to the heterodox economist in generating hypotheses about economic phenomena, developing survey instruments and interpreting quantitative data. More importantly, the use of open-ended questions, unstructured interviews, and focus groups permit researchers to understand how and why certain decisions are made, from the perspective of the decision-makers themselves, while shedding light on the social and institutional context within which these decisions are made. I discuss my own experiences with using a mix of qualitative and quantitative methods to understand the role of gendered social norms of household provisioning in shaping the impact of remittances from migrant women on education expenditures of rural households in the Northern Region of Ghana.
This chapter provides an introductory account of the core elements of a generic critical realist social ontology for economics. The focus on social ontology in critical realism puts forward a position based on causal powers inhering in entities (such as structures and agents), complex interactions between causal powers in terms of arising events, and a consequent account of systems as ‘open’. According to its proponents, this social ontology is implicit within heterodox economic positions but is antithetical to mainstream economics. This is because mainstream economics pursues theorizations and applications that reduce to closed systems and typically assume and/or explore event regularities, often based on uses of mathematical models that are expressed in a deductive form. Critical realism’s great strength is that it provides a more plausibly realistic account of the economy as an intrinsic aspect of society; in so doing it ‘under-labours’ for heterodox approaches. However, in so far as it only under-labours, critical realism can also be developed in a variety of ways based on different issues for methods and methodology.