Quick & New -
the New Economy Ticker
The latest news, debates, proposals and developments on new economic thinking at a glance.
In an opinion piece, former German Interior Minister (1978-1982) Gerhart Baum (FDP) calls for liberals to overcome their distrust of state intervention. He argues for an updated understanding of freedom that includes responsibility.
Baum hopes for a revival of “social liberalism” which defined the FDP’s programmatic orientation in the 1970s. With the traffic light coalition, he says, the right time has come for a liberal reorientation. Because: “Social, ecological and liberal, that’s a good mix.”
The author cites two areas of application in particular in which a paradigm shift is necessary. First, environmental protection, which the Free Democrats had long neglected as a freedom-restricting growth killer. Second, the social dimension. The focus of liberal politics should be on people and their self-realisation – linked with social responsibility and the pursuit of social justice.
The full Handelsblatt article is (behind a paywall) available here.
In a recently published study, Jens van ‘t Klooster describes the fiscal and monetary policy of the European Union since 2008. He observes a genuine paradigm shift taking place amongst central bankers and EU technocrats setting financial and fiscal rules. The new economic paradigm could be labeled Technocratic Keynesianism, where policy makers are informed by Minskian-Keynesian ideas to constrain the power of capital.
These policies are pushed through strategic ambiguity: new policies of monetary financing and credit guidance have a justification in terms of previously hegemonic market liberal ideas. Continuity is suggested and legislative involvement is minimised. Hence, similar to the European integration process this paradigm shift also seems to work through the back door.
The full article is available open access here.
Lorem ipsum dolor sit amet, consetetur sadipscing elitr, sed diam nonumy eirmod tempor invidunt ut labore et dolore magna aliquyam erat, sed diam voluptua. At vero eos et accusam et justo duo dolores et ea rebum. Stet clita kasd gubergren, no sea takimata sanctus est Lorem ipsum dolor sit amet. Lorem ipsum dolor sit amet, consetetur sadipscing elitr, sed diam nonumy eirmod tempor invidunt ut labore et dolore magna aliquyam erat, sed diam voluptua. At vero eos et accusam et justo duo dolores et ea rebum. Stet clita kasd gubergren, no sea takimata sanctus est Lorem ipsum dolor sit amet. Lorem ipsum dolor sit amet, consetetur sadipscing elitr, sed diam nonumy eirmod tempor invidunt ut labore et dolore magna aliquyam erat, sed diam voluptua. At vero eos et accusam et justo duo dolores et ea rebum. Stet clita kasd gubergren, no sea takimata sanctus est Lorem ipsum dolor sit amet.
Duis autem vel eum iriure dolor in hendrerit in vulputate velit esse molestie consequat, vel illum dolore eu feugiat nulla facilisis at vero eros et accumsan et iusto odio dignissim qui blandit praesent luptatum zzril delenit augue duis dolore te feugait nulla facilisi. Lorem ipsum dolor sit amet, consectetuer adipiscing elit, sed diam nonummy nibh euismod tincidunt ut laoreet dolore magna aliquam erat volutpat.
Ut wisi enim ad minim veniam, quis nostrud exerci tation ullamcorper suscipit lobortis nisl ut aliquip ex ea commodo consequat. Duis autem vel eum iriure dolor in hendrerit in vulputate velit esse molestie consequat, vel illum dolore eu feugiat nulla facilisis at vero eros et accumsan et iusto odio dignissim qui blandit praesent luptatum zzril delenit augue duis dolore te feugait nulla facilisi.
Nam liber tempor cum soluta nobis eleifend option congue nihil imperdiet doming id quod mazim placerat facer possim assum. Lorem ipsum dolor sit amet, consectetuer adipiscing elit, sed diam nonummy nibh euismod tincidunt ut laoreet dolore magna aliquam erat volutpat. Ut wisi enim ad minim veniam, quis nostrud exerci tation ullamcorper suscipit lobortis nisl ut aliquip ex ea commodo consequat.
Duis autem vel eum iriure dolor in hendrerit in vulputate velit esse molestie consequat, vel illum dolore eu feugiat nulla facilisis.
At vero eos et accusam et justo duo dolores et ea rebum. Stet clita kasd gubergren, no sea takimata sanctus est Lorem ipsum dolor sit amet. Lorem ipsum dolor sit amet, consetetur sadipscing elitr, sed diam nonumy eirmod tempor invidunt ut labore et dolore magna aliquyam erat, sed diam voluptua. At vero eos et accusam et justo duo dolores et ea rebum. Stet clita kasd gubergren, no sea takimata sanctus est Lorem ipsum dolor sit amet. Lorem ipsum dolor sit amet, consetetur sadipscing elitr, At accusam aliquyam diam diam dolore dolores duo eirmod eos erat, et nonumy sed tempor et et invidunt justo labore Stet clita ea et gubergren, kasd magna no rebum. sanctus sea sed takimata ut vero voluptua. est Lorem ipsum dolor sit amet. Lorem ipsum dolor sit amet, consetetur
In a recently published article, the Financial Times picked up on some of the ideas how to finance necessary public investments while also complying with the debt brake, which were developed with the cooperation of the Forum and also have found their way into the coalition agreement. The article says that “the new coalition has a smorgasbord of plans to raise funds without violating the constitutional ceiling on new borrowing.”
Explicit reference is made to the proposals of Krebs, Graichen and Steitz (2021) and by Dezernat Zukunft (2021).
Hardly any study is as famous in the context of government debt and growth as the study by Kenneth Rogoff and Carmen Reinhart Growth in a Time of Debt published in 2010. The authors found that high debt levels above 90% of GDP hinder economic growth. The study developed its political clout especially in the euro crisis, where it repeatedly served as an argument for austerity advocates.
In the academic debate, however, the study quickly came under criticism. Doctoral student Thomas Herndon was able to show that the analysis was biased by Excel errors. So does this mean there is no connection between debt and growth?
In a meta-analysis based on 50 economic articles, Philipp Heimberger examines the current state of research on that question. He comes to the conclusion that the unweighted average does indeed show a negative correlation between debt and growth. However, this disappears as soon as one controls for publication bias. The existence of a magic debt level above which growth is inhibited is also rejected.
The whole study is available here.
A shorter version is available as an 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.