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the New Economy Ticker
The latest news, debates, proposals and developments on new economic thinking at a glance.
Why Are Financial Markets So Complacent? – Article
Anatole Kaletsky, Project Syndicate, 01.08.2022
Markets and central banks confidently expect a comfortable new “Goldilocks” era for the global economy that will allow everyone to live happily ever after. But investors’ sanguine outlook rests on four cognitive biases.
The Covid-crisis and the socio-ecological transformation: challenges for fiscal policy – Policy Brief (German)
Sebastian Dullien, Achim Truger, Katja Rietzler, WSI Mitteilungen, August 2022
The Corona crisis and the socio-ecological transformation pose difficult challenges for German fiscal policy. On the one hand, there are massive additional public finance needs in the order of €600 billion to €800 billion over the next ten years; on the other hand, the federal government has ruled out fundamental reforms of the debt brake in the coalition agreement and does not envisage any tax increases.
The Wealth of the Germans – Article (Paywall,German)
Moritz Schularick, Charlotte Bartels & Thilo Albers, FAZ, 01.08.2022
Today, one per cent of German households own around 27 per cent of the total assets of all Germans. But what was it like in the past? About the history of wealth distribution in Germany.
The article is based on this study.
The European drama series – Article (German)
Philipp Heimberger & Lea Steiniger, der Standard, 31.07.2022
Is the ECB preventing the euro crisis from flaring up again? Whether its new bond-buying programme is suitable as an anchor of stability could soon be called into question: if countries in need do not meet the criteria for it.
More competition! – Article (German)
Carsten Hermann-Pillath, Frankfurter Rundschau, 22.07.2022
Economics denies its own mantra. Yet a self-application of the prevailing doctrine would be revolutionary: breaking down barriers to market entry for new ideas and curbing the power of academic interest groups.
A recently launched website by Martyna Linartas revolves around the issue of inequality. The aim of the site is to make the problem of inequality more visible to the public and to provide knowledge about it in order to tackle the problem and reduce inequality.
Click here to get to the webpage.
Dealing with inflation, really – Article
Jayati Ghosh, Social Europe, 25.07.2022
Jayati Ghosh bemoans the economics profession’s inability to think beyond crude analyses of inflation—and crude policies to stem it.
The debt brake becomes a security risk – Article
Thorsten Benner, Tagesspiegel, 24.07.2022
The CDU/CSU has declared the black zero a fetish; today, the traffic light government could fail because of the debt brake. That is not sensible, writes Thorsten Benner in a guest article.
The ECB turns the tables on panicky markets and policymakers – Article
Martin Sandbu, Financial Times, 24.07.2022
Investors and governments are being tested in the latest attempt to address the eurozone’s problems.
The investment drought of the past two decades is catching up with us – Article
Martin Sandbu, Financial Times, 20.07.2022
Despite 20 years of cheap credit, countries have failed to secure their future.
The regime at risk – macroprudentialism faces the test of inflation – Analysis
Adam Tooze, Substack, 16.07.2022
With the fight against inflation taking center stage, the talk now is of the risks involved in slowing an economy hard. It is a test not just of particular policies and policy-makers but of a policy regime.
A new study by the German Institute for Economic Research (DIW) examines the burden on German households across the entire basket of goods along the income distribution on the basis of the Income and Consumption Survey and SOEP.
The authors come to the conclusion that the lower the income of households, the more the price increase burdens them. Moreover, the aid packages would relieve the lowest income decile in particular, while the lower middle class would continue to be significantly affected by price increases. Should inflation continue to rise in the second half of the year, low-income households in particular would be at greater risk of poverty.
An extensive summary of the study is available here.
Globally rising prices are an expression of a shift away from a shortage of demand to a shortage of supply, a phase of supply bottlenecks and general scarcity. In a new article, Gustav Horn therefore argues for a reorientation towards supply-side policies.
Instead of (only) relying on classical monetary policy instruments of higher interest rates, which lower inflation by dampening demand, a policy focused on expanding supply could achieve this goal at lower cost. Furthermore, according to Horn, a future-proof supply policy could drive the energy and mobility transition and enable broad-based digitalisation. For this to happen, he says, globalisation must be redesigned to focus on resilience rather than solemnly on naïve trade relations. The focus is on mobilising the labour market so that more people have opportunities for good work.
Read the whole article (in German) 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.