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The latest news, debates, proposals and developments on new economic thinking at a glance.
Because of the Russian war of aggression against Ukraine, the USA and the European Union have decided on far-reaching sanctions against Russia. After the Biden administration imposed an import ban on Russian oil, the possibility of an embargo on Russian energy is also increasingly being discussed in Germany. So far, the German government has rejected this step out of concern for supply security – but economic distortions are also cited as a reason for rejection.
What would be the macroeconomic consequences of an import ban on Russian energy for Germany? This question is addressed by a whole team of renowned German economists in a policy brief – among them Moritz Schularick, Benjamin Moll, Rüdiger Bachmann and Karen Pittel. According to the study, the consequences would be severe but manageable. GDP is estimated to fall between 0.2% and 3%, depending on how quickly gas consumption can be reduced or substituted. Poor households would be affected more by rising gas prices but differences are small so that fiscal policy could compensate them by targeted transfers. The authors suggest that policymakers create short-term incentives to improve energy efficiency and substitute with renewables.
The full report is available here.
What if Putin’s war regime turns to MMT? Or to wartime Keynesianism? – Blogpost
Adam Tooze, 03.03.2022
Sanctions are the chosen weapon of the West against Putin’s aggression. Rather than starting small we have gone immediately to an attack on the central bank. The question now, is how severe do we expect the impact of sanctions to be. How rapidly will they act? How will they impact Russian society and how might they change its politics? Will we see Russia abandon its Wall Street Consensus macrofinancial regime – fiscal austerity, floating exchange rate, domestic bond finance – that it deployed to accumulate a foreign reserves war chest?
Schuldenregeln der Eurozone sollen erst 2024 wieder voll gelten – Article
Spiegel Online, 02.03.2022
Expensive sanctions and economic aid, plus plans for extensive rearmament: the war in Ukraine is leading to rising national debt. The EU Commission is now reacting to this.
Will Russia’s War Spur Trade Diversification? – Article
Michael Spence, Project Syndicate, 01.03.2022
In today’s turbulent world, economic security depends on countries’ ability to depend on their trading partners. This raises serious short-term challenges, particularly for the European Union, which is in the unenviable position of being heavily dependent on Russian energy imports.
Understanding the social state – Article
Emmanuel Saez, IMF Blog, 01.03.2022
Its growth is a puzzle for modern economics but has deep evolutionary roots. The scope and size of government in economic life are at the center of the public policy debate. The most striking evolution has been the enormous growth of government in advanced economies over the 20th century (the size of the government, measured by the proportion of tax revenue to national income). What are governments doing with so much tax revenue that they did not do before?
In light of the 100 billion special fund for the Bundeswehr, the discussion about the debt brake has gained momentum once again. The debate on whether the debt rule written into the Basic Law in 2009 is an expression of sound budgetary policy or more akin to a straitjacket is as old as the rule itself. Recently, critical voices have become louder in view of the massive investment required for the climate-neutral transition and demographic change. And what does the German population say about this?
A recent study by the Centre for European Economic Research (ZEW) in Mannheim looks at public opinion on the debt brake. Based on a representative survey, the authors conclude that approval of the fiscal rule has declined. While 69 percent still approved of the debt brake in 2014, only 59 percent did so in 2021. In addition, around 20 percent were sceptical about it and a good 60 percent were in favour of a return to a balanced budget at a later date.
The study and more information can be found here.
Three new survey studies take up the topic of social justice. All three are based on the European Social Survey, a cross-sectional survey for comparative analyses in Europe with the most recent survey in 2018/2019.
According to the survey, a large majority of working Europeans feel that the distribution of income and wealth is unfair. Nevertheless, only eight percent of all respondents in Europe feel they belong to a disadvantaged group. This proportion has risen, however, as women have become more sensitive to discrimination. Just under a third have doubts about equal opportunities in the labor market.
More information is available here (in German).
Herr Feld, bringen Sie die schwarze Null zurück ins Finanzministerium? – Interview (Paywall)
Lisa Nienhaus and Mark Schieritz, Zeit Online, 16.02.2022
Der neue Berater von Christian Lindner will, dass die Koalition spart und schmutzige Energie teurer wird.
Die junge Generation zweifelt an der Marktwirtschaft – Artikel (Paywall)
Florian Diekmann, Spiegel Online, 15.02.2022
Wohlstand für alle? Für die Mehrheit der 16- bis 29-Jährigen in Deutschland erfüllt die soziale Marktwirtschaft dieses Versprechen nicht. Der SPIEGEL-Umfrage zufolge wankt auch die Unterstützung für den Kapitalismus.
Der Digitalausschuss hat plötzlich etwas zu sagen – und darf in Zukunft Gesetze federführend beraten – Artikel
Daniel Delhaes, Handelsblatt, 15.02.2022
In den vergangenen vier Jahren belächelt, hat der Digitalausschuss in dieser Legislaturperiode viel Macht. Die 34 Abgeordneten wollen diese nun nutzen.
Supporting carbon taxes: The role of fairness – Studie (Paywall)
Stephan Sommer, Linus Mattauch, Michael Pahle, Ecological Economics, Vol. 195, May 2022
While the economic case for carbon pricing is compelling, public support for it remains low. Using a stated-choice experiment with a sample of 6000 German household heads, we examine how their fairness preferences influence support for carbon taxes under different revenue uses. We find that respondents who prefer green spending are more likely to support a carbon tax, but the support diminishes considerably for higher tax rates – in contrast to respondents who support social cushioning. Our findings have implications for advancing carbon pricing, as its support can be increased substantially when designed according to citizens’ fairness preferences.
Larry Fink’s Capitalist Shell Game – Artikel
Mariana Mazzucato, Prokect Syndicate, 11.02.2022
The chairman and CEO of the world’s largest asset manager has once again made waves by exhorting his fellow corporate leaders to embrace “stakeholder capitalism.” Unfortunately, their understanding of that concept is far too limited and stops well short of the radical reforms needed to transform capitalism in the interests of people and the planet.
Why inflation and the cost-of-living crisis won’t take us back to the 1970s – Artikel
Adam Tooze, The New Statesman, 07.02.2022
Surging energy prices force us to confront the suffering caused by inflation and our uncertain future. But a new wage-price spiral is still unlikely.
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.