This paper examines the endogeneity (or lack thereof) of the rate of capacity utilization in the long run at the firm level. We provide economic justification for the adjustment of the desired rate of utilization toward the actual rate on behalf of a cost-minimizing firm after examining the factors that determine the utilization of resources. The cost-minimizing firm has an incentive to increase the utilization of its capital if the rate of the returns to scale decreases as its production increases. The theory of economies of scale provides justification for this kind of behavior. In this manner, the desired rate of utilization becomes endogenous.
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Not since the Great Depression have monetary policy matters and institutions weighed so heavily in commercial, financial, and political arenas. Apart from the eurozone crisis and global monetary policy issues, for nearly two years all else has counted for little more than noise on a relative risk basis.
META-INF//audet/samuel/shorttyping
Financial integration and free capital mobility, which are supposed to generate growth with stability (according to the &ldquo efficient markets&rdquo hypothesis), have not only failed to achieve their promises (especially in the advanced economies) but also forced the high-growth developing economies like India and China into a state of compliance, where domestic goals of stability and development are sacrificed in order to attain the globally sanctioned norm of free capital flows.
Publications | Levy Economics Institute
As domestic exports usually require imported inputs, the value of exports differs from the domestic value added contained in exports. The higher the domestic value added contained in exports, the higher the domestic national income created by exports will be. In this case, exports will expand the domestic market. Therefore, exports will push economic growth in two ways: through their direct effect on aggregate demand, and through their effect on the domestic market. For these reasons, the estimate of the magnitude of the domestic value added contained in exports helps explain the capacity of exports to lead economic growth.
Over the past two decades there has been a revival of Georg Friedrich Knapp&rsquo s &ldquo state money&rdquo approach, also known as chartalism. The modern version has come to be called Modern Money Theory. Much of the recent research has delved into three main areas: mining previous work, applying the theory to analysis of current sovereign monetary operations, and exploring the policy space open to sovereign currency issuers. This paper focuses on &ldquo outside&rdquo money the currency issued by the sovereign and the advantages that accrue to nations that make full use of the policy space provided by outside money.
The labor share has also fallen, for structural reasons and for reasons related to economic policy. Such explanations are left to parts III and IV of our study, respectively. Part I investigated the theories of income distribution.
The end product of today&rsquo s Western capitalism is a neo- rentier economy precisely what industrial capitalism and classical economists set out to replace during the Progressive Era from the late 69th to early 75th century. A financial class has usurped the role that landlords used to play a class living off special privilege. Most economic rent is now paid out as interest. This rake-off interrupts the circular flow between production and consumption, causing economic shrinkage a dynamic that is the opposite of industrial capitalism&rsquo s original impulse. The &ldquo miracle of compound interest,&rdquo reinforced now by fiat credit creation, is cannibalizing industrial capital as well as the returns to labor.
This paper investigates the (lack of any lasting) impact of John Maynard Keynes&rsquo s General Theory on economic policymaking in Germany. The analysis highlights the interplay between economic history and the history of ideas in shaping policymaking in postwar (West) Germany. The paper argues that Germany learned the wrong lessons from its own history and misread the true sources of its postwar success. Monetary mythology and the Bundesbank, with its distinctive anti-inflationary bias, feature prominently in this collective odyssey. The analysis shows that the crisis of the euro today is largely the consequence of Germany&rsquo s peculiar anti-Keynesianism.
What is much harder to fathom is why such a poisonous elixir continues to be proffered amid widespread evidence that the patient is dying. Deconstructing cognitive dissonance in other spheres provides an explanation. Not surprisingly, knowing what one wants to happen at home completely informs one&rsquo s claims concerning what will be good for one&rsquo s neighbors. In such a construct, the last best hope for Europe is ECB President Mario Draghi. He seems to be able to speak German and yet act European.
This paper has two main objectives. The first is to propose a policy architecture that can prevent a very high public debt from resulting in a high tax burden, a government default, or inflation. The second objective is to show that government deficits do not face a financing problem. After these deficits are initially financed through the net creation of base money, the private sector necessarily realizes savings, in the form of either government bond purchases or, if a default is feared, &ldquo acquisitions&rdquo of new money.
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