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The latest news, debates, proposals and developments on new economic thinking at a glance.
How can the shortage of skilled workers be contained? In a recent interview with Makronom, IZA Director Simon Jäger talks about the extent of the shortage and possible countermeasures. Why the market, which should significantly increase wages when supply is tight, does not always regulate everything?
I think that the findings from modern labour market research on the market power of companies in the labour market play a crucial role in understanding. The labour market is not a perfectly competitive market and frictions are not the exception but the rule. The complaint about labour shortages is also evidence of wages being paid below labour productivity in some sectors.
To counter the problem, better immigration offers, for example, are an important pillar. The IZA proposes linking immigration to collective bargaining and expects a double dividend from this: An increase in labour migration together with an additional incentive for productive, growing companies to enter into collective bargaining agreements.
Read the whole interview (in German) here.
The Global Minimum Corporate Tax Needs More Work – Article
Jo Stiglitz & Tommaso Faccio, Project Syndicate, 19.06.2023
Two years after a “historic” deal to establish a new global corporate-tax regime, the consensus is eroding, and developing countries are taking matters into their own hands. Their efforts are perfectly understandable, given that the agreement’s main provisions may have done more harm than good.
“We have a lot to lose in Germany” – Article (German)
Michael Brächer, 22.06.2023, Der Spiegel
Many Germans fear social decline, and the AfD is stronger than ever. Economist Andreas Peichl says whether the pessimism is justified. Or are we simply bad at dealing with change?
Finding the money to fix the world requires a rethink on tax, says Jayati Ghosh – Article
Jayati Ghosh, The Economist, 13.06.2023
The co-chair of an independent tax commission on why the focus should be on squeezing more from big business and billionaires.
America is telling a very different story about trade – Article
Rana Foroohar, Financial Times, 18.06.2023
A paradigm shift is under way — even if the details are still catching up with the narrative.
A wealth tax could help poorer countries tackle climate crisis, economists say – Article
Fiona Harvey, The Guardian, 19.06.2023
Taxing world’s wealthiest people could help poorer countries shift economies to low-carbon and recover from climate damage.
Le Maire calls for room for investment – Article (German)
Carsten Volkery, Handelsblatt, 16.06.2023
Ahead of the meeting of EU finance ministers, Bruno Le Maire distances himself from Christian Lindner. However, the states agree not to increase the EU budget.
Fiscal policy is about to change beyond recognition – Article
Martin Sandbu, Financial Times, 15.06.2023
We must prepare — institutionally and politically — for the permanently higher state investments new times require.
Our Debt to Future Generations – Article
Jo Stiglitz, Project Syndicate, 14.06.23
No one argues that policymakers should not think about future generations. But, rather than focusing narrowly on financial debt, we should consider what kind of world we are bequeathing to our descendants, and what current policies and fiscal commitments will better serve their interests.
The inefficiency of growth in poverty reduction – Article (German)
Arthur Zito Guerriero, Makronom, 12.06.23
Global poverty has fallen sharply since the turn of the millennium – but this required high growth rates and brought with it great environmental burdens. And only a minimal share of the newly generated economic output actually benefited the poor, while it was mainly the rich income groups that profited.
Higher tax rate only for millionaires – With this idea the Union wants to rule again – Article (German)
Karsten Seibel, die Welt, 10.06.23
The CDU wants to relieve the burden on people with incomes of up to a little more than one million euros. Current calculations by the Taxpayers’ Association serve as a blueprint. Now only potential coalition partners have to agree.
National Sovereignty’s Silver Lining – Article
Dani Rodrik, Project Syndicate, 09.06.23
Despite the dire predictions that have accompanied the decline of global governance, less international cooperation does not necessarily mean disaster. In fact, national governments can prioritize domestic prosperity and social cohesion over multilateralism without harming the global economy.
The economy and banks need nature to survive – Blogpost
Frank Elderson, ECB, 08.06.23
Humanity needs nature to survive, and so do the economy and banks. The more species become extinct, the less diverse are the ecosystems on which we rely. This presents a growing financial risk that cannot be ignored, warns Frank Elderson, member of the Executive Board of the ECB and Vice-Chair of the Supervisory Board of the ECB.
Markups, Profit Shares, and Cost-Push-Profit-Led Inflation – Article
Michalis Nikiforos & Simon Grothe, INET, 06.06.23
To what extent is profit-led inflation compatible with what we know about the price-setting behavior of firms and income distribution?
Gender Pay Gap – From the Role – Article (German)
Helena Ott, ze.tt, 08.06.23
After the birth of a child, many women are stuck in mini-jobs and thus remain dependent on their partners. And the state? It does a lot to keep it that way.
16 Reasons For Fast Action – Tipping Points And Their Significance For Climate Policy – Article (German)
Vera Huwe, Levi Henze, Janek Steitz, Dezernat Zukunft, 07.06.23
A new background paper deals with tipping elements in the Earth system and the associated mechanisms and risks. Climate science research on tipping elements has recently made great advances in knowledge that have far-reaching implications for climate policy, but have gone largely unnoticed by the general public.
Revisiting the Behavioral Revolution in Economics – Article
Antara Haldar, Project Syndicate, 02.06.2023
Over the past 15 years, as behavioral sciences gained widespread recognition, economics has progressively acknowledged the significance of the biases that drive individuals and firms to behave irrationally. But the much-needed epistemic revolution has failed to materialize, owing to economists’ resistance to change.
A relief for worries about the future – Column (German)
Marcel Fratzscher, Die Zeit, 02.06.2023
The majority of Germans are in favour of an unconditional basic income, preferring a model with 1,200 euros per month. And above all out of fear of change.
Using artificial intelligence against artificial intelligence – Article (German, Paywall)
Roland Preuß, Süddeutsche Zeitung, 05.06.2023
AI is changing the everyday working lives of millions of employees. Can politics keep pace? In Hubertus Heil’s Ministry of Labour, they are trying – also with the help of new technology.
Earth past its safe limits for humans, scientists say – Article
Attracta Moorey, Financial Times, 31.05.2023
Activities have pushed 7 of 8 planetary boundaries into risk zones, research finds.
Fundamentally rethinking (learning) the economy – Blog post (German)
Lukas Bäuerle, Makronom, 01.06.2023
Many students perceive their economics education programmes as out of touch with reality. A teaching reform is overdue – and should be guided by certain principles.
Crisis of democracy – where are we still learning to get involved? – Podcast (German)
Petra Pinzler & Stefan Schmitt, Die Zeit, 31.05.2023
In cities and municipalities, there is a lack of people who get involved. How can democracy be promoted in concrete terms? We ask Elisabeth Niejahr from the Hertie Foundation.
(Not) Afraid of the Grim Reaper? – Blog post (German)
Moritz Gartiser, Makronom, 08.05.2023
A significant driver of inequality in Germany is the decline in the taxation of high wealth. An analysis of media coverage of inheritance tax now provides indications of how tax cuts are publicly commented on and legitimised.
A recent article portrays how the paradigm shift in US-economic policy is impersonated by Isabella Weber and her ideas on inflation.
This astounding turnabout reveals a transformation in how we conceptualize the global economy. If you can understand Weber’s once forbidden theories, you can understand just how dramatically Washington’s economic assumptions have changed during the past two years—and what this new thinking might mean for the country’s future… At Joe Biden’s first press conference as President, he pitched his $1.9-trillion American Rescue Plan by announcing that he wanted to “change the paradigm” in economic thought.
Read the whole article here.
OUR MAIN TOPICS
New Paradigm
NEW PARADIGM
After decades of overly naive market belief, we urgently need new answers to the great challenges of our time. More so, we need a whole new paradigm to guide us. We collect everything about the people and the community who are dealing with the question of a new paradigm and who analyze the historical and present impact of paradigms and narratives – whether in new contributions, performances, books and events.
Redefining
the role of
the state
REDEFINING
THE ROLE OF
THE STATE
For decades, there was a consensus that reducing the role of the state and cutting public debt would generate wealth. This contributed to a chronic underinvestment in education and public infrastructure. New research focuses on establishing when and how governments need to intervene to better contribute to long-term prosperity and to stabilize rather than aggravate economic fluctuations.
Remaking
finance
REMAKING
FINANCE
More than a decade after the financial crisis there still seems to be something seriously wrong with the financial system. Financial markets still tend to periodically misprice risk and contribute to boom and bust cycles. A better financial system needs to discourage short-termism and speculative activity, curtail systemic risk and distribute wealth more broadly.
Greening
prosperity
GREENING
PROSPERITY
During the high point of market orthodoxy, economists argued that the most 'efficient' way to combat climate change was to simply let markets determine the price of carbon emissions. Today, there is a growing consensus that prices need to be regulated and that a carbon price on its own might not be enough.
Reducing
inequality
REDUCING
INEQUALITY
The rising gap between rich and poor has become a threat to social cohesion in most rich countries. To reverse this trend it will be crucial to better understand the importance of different drivers of income and wealth inequality.
Innovation Lab
INNOVATION LAB
Do we need a whole new understanding of economic growth? What would be a real alternative? How viable are alternatives to GDP when it comes to measuring prosperity? These and other more fundamental challenges are what this section is about.
Globalization
for all
GLOBALIZATION
FOR ALL
After three decades of poorly managed integration, globalization is threatened by social discontent and the rise of populist forces. A new paradigm will need better ways not only to compensate the groups that have lost, but to distribute the gains more broadly from the start.
Europe
beyond markets
EUROPE
BEYOND MARKETS
The euro was planned during a period in which economic policy making was driven by a deep belief in market liberalism and the near impossibility of systemic financial crises. This belief has been brought into question since the euro crisis, which showed that panics do happen. New thinking needs to focus on developing mechanisms to protect eurozone countries from such panics and to foster economic convergence between members.
Corona Crisis
CORONA CRISIS
The current Corona crisis is probably the worst economic crisis of the post-World War 2 era. Economists are working hard on mitigating the economic effects caused by COVID-19 to prevent a second Great Depression, the break-up of the Eurozone and the end of globalisation. We collect the most important contributions.