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Forthcoming Events

IoI Forum
IoI Economy Forum
Venue: London
Date: Ongoing

The IoI Economy Forum meets regularly to discuss political economy across both the developed and emerging economies.


If you would like to join the forum, or would like further information, please contact Angus Kennedy at economyforum@instituteofideas.com.

Upcoming forums

Quantitative Easing: will it ever stop? Wednesday 30 April 2014

The next meeting of the Economy Forum will be at 7pm Wednesday 30 April 2014. Please email if you would like to attend.

Please note there will be a small charge of £5 to cover the room booking.

The next meeting of the Economy Forum will examine the success and failure of the ongoing programmes of quantitative easing on both sides of the Atlantic.

Phil Mullan will introduce the discussion.

Questions to consider
1.  Why have central banks come to such prominence in recent years as economic policy makers?
2.  What were the intended goals of Quantitative Easing?
3.  How successful has QE been?
4.  Were the fears about its negative effects overstated?
5.  Is the tapering of US quantitative easing the beginning of the end of easy monetary policy?
6.  What was behind the ‘forward guidance’ initiatives? Is it reasonable to assess ‘forward guidance’ as having failed?

READINGS

William White, ‘Ultra Easy Monetary Policy and the Law of Unintended Consequences’, Federal Reserve Bank of Dallas, Working Paper No. 126, August 2012

Spencer Dale, ‘Limits of monetary policy’, Speech given by Bank of England Chief Economist, Trinity College, Dublin 8 September 2012

Glenn Stevens, Governor of the Reserve Bank of Australia, ‘Challenges for central banking’, Speech in Bangkok, 12 December 2012.

Athanasios Orphanides, ‘Is monetary policy overburdened?’, BIS Working Papers No 435, December 2013

Jon Hilsenrath, ‘New View Into Fed’s Response to Crisis: From Concern to Hope to Urgent Action, a Peek Inside the Central Bank During 2008’, Wall Street Journal, updated 21 February 2014

Andrew Filardo and Boris Hofmann, ‘Forward guidance at the zero lower bound’, BIS Quarterly Review, March 2014


Past forums

Adam Smith: The Wealth of Nations Thursday 27 February 2014

Daniel Ben-Ami, author, Ferraris for All, introduced a discussion of Adam Smith's The Wealth of Nations.

This session will focus on Adam Smith’s own account of his political economy rather than subsequent attempts to claim his mantle. Participants should if at all possible read the allocated sections of The Wealth of Nations (TWON). A future forum will examine Smith’s Theory of Moral Sentiments.

QUESTIONS TO CONSIDER

  1. What were the main economic and intellectual influences on the development of Adam Smith’s political economy?
  2. How does the idea of the division of labour fit into TWON?
  3. How central is the theory of value to Adam Smith’s thought?
  4. How does Smith conceive of the relationship between individual self-interest and public prosperity?
  5. To what extent is it possible to glean elements of Adam Smith moral philosophy from his writing in TWON?

READINGS

Several other short pieces are also useful as background:

Austrian Economics Tuesday 10 December 2013

Writer and libertarian Christian Michel introduced a discussion on Austrian Economics.

Listen to the recording here

The Austrian School has been an undercurrent in the economics field after the 1930s, first eclipsed by Keynesianism, then enjoying a brief revival of interest following Friedrich Hayek's Nobel Prize in 1974, and shadowed again by the Chicago School and Milton Friedman's Monetarism, and the Washington Consensus and new neo-liberalism (all theories the Austrians firmly opposed). The present revival is a consequence of the financial crisis. The Austrians correctly predicted it (and for the right reasons, unlike others). The crisis seems an empirical demonstration of what the Austrians' literature have been describing all along.

The talk will briefly show the original historical contribution of the Austrian School (the 'subjective theory of value', which completely refuted Marx's 'labour theory'). It will move on to show how other analyses, the non neutrality of money (against J B Say), the 'problem of knowledge', and the psychological dimension of time preference cause an unavoidable misallocation of assets in regimes of fractional reserve banking – besides the ethical problem of the practice. This misallocation of financial assets creates, in addition, serious income inequality, illustrating the 'Cantillon effect'.

The whole Austrian 'business cycle theory' (of 'boom and bust') explains more phenomena taking place in the decade before the 2007 crisis and since than rival Classical, Keynesian and Monetarist theories. Probably the weakness of the Austrian model for policy-making is that it prescribes, "don't start from here". We should, indeed, prevent booms if we want to avoid busts, but what to do when you are in the hole?

READINGS

The topic has generated so much literature in the last 140 years that it's impossible to make a non arbitrary selection. So with all those limitations, this is Christian Michel's:

The foundational text is Carl Menger's Principles of Economics, Vienna, 1871, but like all bibles, people use the comments, extract quotes, but never read the original (that goes for Marx's Capital, of course). The other canonical book is Ludwig von Mises's daunting Human Action, 1949. Same remark as above. Both authors, and the ones in between, studied in Vienna, hence the label 'Austrian School'.

For baby steps into the subject, I suggest the following readings:

Dr Eamonn Butler, Austrian Economics, a Primer, a 100-page easy read, published in booklet form by the Adam Smith Institute, and downloadable free in pdf format.

A long-time classic is Faustino Ballvé's Essential of Economics, a brief survey of principles and policies, first published in Mexico, 1956, republished many times, and translated into several languages. A free, English-language version exists as an e-book.

Another good place to start, if one has time for a 200-page book, is Economics in One Lesson, 1962, again a favourite of Austrians, many times republished, also available free online.

The economics of the Austrian School (more like Marxism, and unlike Keynesianism and Monetarism) are part of a whole epistemology. Probably the best approach is to be found in Hans-Hermann Hoppe's Economic Science and the Austrian Method, 90 (dense) pages, available in paper form from the very active Ludwig von Mises Institute, and in a free download.

Of course, the Austrian School itself and all the above authors, as well as the works mentioned are the subjects of Wikipedia entries and innumerable posts on blogs and forums.

The Entrepreneurial State Tuesday 1 October 2013

Professor James Woudhuysen introduced a discussion on Mariana Mazzucato's book.

Despite her Democratic Party desire to uphold the state against Milton Friedman, free-market ideologues and the Republican right, MM may nevertheless have performed a service. Through her research, she suggests that the US state, and in the first place the Defense Advanced Research Projects Agency (DARPA) and the National Institutes of Health, has often been the background force that explains the success of Great Men in innovation such as Steve Jobs. She attacks venture capitalists for their short-term horizons and contends that the private sector leaches benefits from the state. Refreshingly, she reproaches pharmaceutical companies for their share buybacks, their cuts in R&D, and their fondness for resorting to ‘open’ innovation at the expense of developing it themselves. She is rightly skeptical about today’s patents, George Osborne’s 10 per cent corporation tax on patents, and tax credits. She is also right to point up the significance of ‘animal spirits’ to innovation – of morale, talent, excitement and direction.

However, MM also argues that DARPA has brought tremendous advances; that its successes have been emulated by the Small Business Innovation Research (SBIR) programme initiated by Ronald Reagan in 1983; that the National Nanotechnology Initiative of George Bush in 2003 could bring about the next General Purpose Technology (GPT); that the collapse of the US solar firm Solyndra was because of impatient venture capitalists rather than a misguided state, and that many large companies, including Apple, fail to pay their taxes. Perhaps her most notable conjecture is that all parts of the iPhone owe their development to the state. Where is she right, and where is she wrong?

FURTHER QUESTIONS TO CONSIDER

  1. Clearly, the state has long been the breast at which private firms have sucked. But does that make its investments 'directed', courageous, early, capital-intensive, entrepreneurial, risk-taking, unbureaucratic and effective? If not, what would we propose?
  2. Like the polemical targets of Big Potatoes, MM dismisses the ‘linear’ model of innovation, and is anxious to say that innovation isn’t about R&D. Why does she feel the need to do this, and what is her alternative account?
  3. MM argues that the state has been bad at doing PR around its excellent role in innovation. How true is this?
  4. MM’s book is marred by her cavalier use of a number of familiar categories in modern political economy – categories which she fails to explain or justify. Which are the most prominent in her analysis? Why would we want to contest them?
  5. MM has kind words for Japan’s Ministry of International Trade and Industry (MITI) in the 1970s and 1980s. She argues that Italy’s problem is not too much state spending, but rather inadequate attention to education, human capital and R&D. She adds that Canada, Australia and New Zealand have higher debt, but stable growth. Finally she upholds Brazil, China and South Korea as examples of state-backed ‘green growth’. How do we assess the claims MM makes for these different countries?
  6. MM acknowledges her debt to John Maynard Keynes, Karl Polanyi, Joseph Schumpeter, Christopher Freeman, Marcia Angell, Robert Solow, Richard Nelson, Bill Lazonick and Carlotta Perez. How valuable are these sources for an understanding of innovation?

READINGS

The truth about neoliberalism. Thursday 27 June 2013

Daniel Ben-Ami, author, Ferraris for All, introduced a discussion on neoliberalism.

Listen to the recording here:

Is there a powerful neoliberal current intent on pursuing austerity in western societies? Many self-identified liberals and leftists insist this is the case. The first step in tackling this question is to probe more deeply into the meaning of “neoliberalism”. Too often it is assumed to refer simply to an ideological commitment to the free market. This discussion will probe the topic more deeply.

QUESTIONS TO CONSIDER

  1. What are the main components of the neoliberal worldview?
  2. To what extent is neoliberalism a break from earlier forms of liberalism?
  3. What is the significance of the German /Austrian strand of neoliberalism?
  4. How has the influence of neoliberalism changed since the 1970s?

READINGS

A new industrial revolution? Tuesday 7 May 2013

Peter Marsh, economist; former manufacturing editor, Financial Times, author, The New Industrial Revolution: Consumers: Globalization and the End of Mass Production, introduced a discussion on the themes of his book.

READINGS

The limits and dangers of muddling through: Tuesday 5 March 2013

Phil Mullan, economist; author, The Imaginary Time Bomb, introduced the discussion.

In the January 2013 issue of Foreign Affairs Fareed Zakaria wrote in an article titled 'Can America be fixed?': "With only a few exceptions, the advanced industrial democracies have spent the last few decades managing or ignoring their problems rather than tackling them head-on". Nowhere is this more true than in the sphere of economics.

The economic problems that hit the western economies in the 1970s have never been fixed. Instead an extraordinary confluence of circumstances since the late 1980s meant that these problems could be papered over with temporary palliatives at home, and a greater reliance on wealth created elsewhere, especially in emerging Asia. This Long Slump has been disguised for extensive periods by the greater ease these palliatives gave in maintaining the appearance of expanding prosperity. This was a false prosperity built mainly on state-driven policies, not least the unprecedented expansion of debt. Ultimately these state-led methods for coping with the moribund condition have proved unsustainable, evidenced by the post-2008 return to stagnation conditions. Today's 'contained depression', evidenced by the sluggish recoveries everywhere in the west, is a consequence primarily, not of the financial crisis itself, but of those four decades of low investment in production and of lacklustre innovation, and of the political failure to address these deficiencies.

The defining characteristic of this long period of economic crisis is that the western elites have been able to turn muddling along into their modus operandi. The unusual economic and political circumstances since the 1980s – an end to social contestation at home and to Cold War abroad, globalisation, and the emergence of financialisation and other forms of greater state economic intervention - has opened up that 'muddle through' path for western elites of all political complexions. Not only do such measures not fix things properly, but they are at a great cost to our collective future. They get in the way of the long overdue economic renewal, by producing a state of corporate and personal dependency that inculcates against revitalisation. The sustained political evasion of the west’s profound economic challenges has itself become the number one barrier preventing a return to economic growth and genuine prosperity. In this way a political, subjective failure, and the continuation of 'muddle through' ways, prevents the thoroughgoing restructuring and revamp of the objective economic and technological conditions necessary to get us out of this Long Slump.

QUESTIONS TO CONSIDER

  1. Is it fair to say we've had 'productive decay' since the 1970s? Surely people living in the west are much better off than they were 40 years ago.
  2. What's wrong with 'muddling through'? It seems to have sustained rising prosperity for much of the time since the 1980s; today's problems are bound to pass at some point.
  3. How can one expect a state that has made a virtue of 'muddling through' to changes its approach and initiate a renaissance in innovation and production? As the physicist Andre Geim implies, isn't this a somewhat utopian hope ('Be afraid, be very afraid, of the world's tech crisis', Financial Times, 6 February 2013)?

READINGS

How broken are the western economies?
Quantitative Easing: a current example of muddling through: what are the consequences?

The state of industrial policy: Wednesday 5 December 2012

Rob Lyons, deputy editor, spiked, introduced a discussion on state industrial policy.

A recent government-commissioned report, by former Conservative deputy leader Michael Heseltine, has criticised the coalition for not having a strategy for growth. Heseltine argues for greater government intervention, particularly at local level, to revive ailing parts of both the economy and the country. Last year, the think tank Demos published a report by an Italian-American economist, Mariana Mazzucato, which argued that the 'entrepreneurial state' has always played a part in innovation, research and development and should do so even more.

On the other hand, free-marketeers would argue that a bloated state that draws off a large proportion of society's wealth will inevitably misallocate those resources and be a barrier to innovation and new ideas. Far better to simply let the market get on with it rather than have the state attempt to 'pick winners' based on political interests or current fashions. The high-profile failure of the US solar-power company Solyndra, which had been heavily supported by the federal government, is a case in point. There is also plenty of evidence that privatisation, the private-finance initiative and other state contracts have propped up large areas of economic activity in recent years in the absence of vigorous economic growth.

Some things that are necessary for the smooth operation of capitalism as a whole - like basic research, the provision of infrastructure, the creation of an educated workforce, and so on - may never be profitable for any individual company. Is there a role for the state that supports wealth creation without making the mistakes of state intervention in the past?

Some questions to consider in advance:

READINGS

The Giants of Asia: Tuesday 25 September 2012

Professor James Woudhuysen introduced a discussion on his Battle of Ideas session, the Giants of Asia.

With their huge populations and buoyant growth rates, China and India are two of the economic and technological powerhouses of the 21st century. And though many seem to forget it after the Lost Decade, Japan is the third largest economy in the world, the second largest developed economy and the world’s largest creditor nation. Nevertheless, all three countries have giant problems, too. Will the giants of Asia stumble in the face of the US rebound? And when might Asian production finally and decisively shift to low-cost Indonesia, Bangladesh and Vietnam?

Specifically, in this meeting, we want to look at the following questions about Japan:

BOOKS

ARTICLES

The moral limits of markets: Thursday 30 August 2012

Economics writer Daniel Ben-Ami will introduce a discussion on Michael Sandel’s What Money Can't Buy: the moral limits of markets. Sandel argues there is an urgent need for a public debate about how far market values, rather than just the market economy, should be allowed to go. In his view excessive marketisation leads to social corrosion and extreme inequality.

Questions to consider:

  1. What is the true extent of marketisation in America and Britain? Consider not just the economy but the social impact of market encroachment.
  2. At what point do market values become excessive?
  3. To what extent does marketisation corrode social bonds and a sense of a common identity?
  4. How do market values relate to the inequality debate?

Suggested readings

After reading the book it is particularly worth watching and listening to Sandel’s broadcast performances as these illustrate his broader views and underpin his influence as a celebrity academic.

Short pieces by other authors on this topic include:

The military-industrial complex today: Thursday 14 June 2012

Professor James Woudhuysen will introduce the discussion.

In terms of industrial policy, it can be argued that the UK – and even more, the US – have long had one: it's called the state's procurement of weapons that have a fair amount of R&D put into them. Most recently, Obama's State of the Union address (January 2012) said that the US Department of Defense, the world’s largest consumer of energy, would make one of the largest commitments to clean energy in history – with the US Navy purchasing enough capacity to power 250,000 homes a year.

Clearly the role of military procurement has changed over the years; right now, for instance, the new US cybersecurity agency cannot find all the computer specialists it wants. Since Eisenhower's influential and liberal 1961 farewell address, which coined the phrase 'military-industrial complex', US defence spending totals and percentages, as well as US forces/weapons postures, have likewise been through their ups and downs, declining as a percentage of GDP during the Cold War and reviving even before 9-11, and certainly since. Over the years, too, nuclear weapons, always a relatively cheap option, have become a smaller and smaller element in US defence spending.

Economic and political attitudes to the MIC have also changed. Historically the left always attacked the MIC for its pork-barrel subversion of democracy, its expense, its waste, its baroque product innovations, its arms exports, its debatable 'spin-off', and its direct interest in starting wars. On the other hand, from Baran and Sweezy in the 1950s through to the British SWP, military budgets have long been seen as an essential Keynesian support for capitalism, mopping up the capitalist 'surplus' generated elsewhere. More recently, however, the US has seen (and again the UK is not far behind) a convergence between militarists worried about energy security, and Greens keen on military innovations spinning off into renewable energy.

Cuts in UK defence are sharp. At the same time UK defence secretary Philip Hammond has just added his voice to traditional US demands that Germany do more in defence. Meanwhile cuts in US defence are a mirage, and there is a very rapid increase in defence spending in China and India.

What role would we assign to expenditure on armed services and weapons today? Are arms really so different from other kinds of products? Why have attempts to restructure the MIC, and reap a peace dividend, proved so difficult? What do we make of the growing US deployment of private armed services in places like Iraq? What can we foresee about the future course of defence spending, in the UK, the US and Asia?

Suggested readings

For MIC buffs:

For MIC super buffs:

When all the fruit is gone: Tuesday 17 April 2012

Phil Mullan introduced a discussion on the recent book The Great Stagnation: How America Ate All the Low-Hanging Fruit of Modern History, Got Sick, and Will (Eventually) Feel Better

Cowen attributes America's economic troubles to a combination of technological exhaustion by around the 1960s, and of Americans' failure to see that this technological plateau had been reached and to adjust accordingly since.

Questions to consider:

Suggested readings

Not essential for the discussion but if you are interested in the technology-productivity theme historically:

Equality and Efficiency: the big trade-off, Tuesday 28 February 2012

Angus Kennedyintroduced a discussion on the classic text Equality and Efficiency: the big tradeoff by Arthur M. Okun. As many call today for increased taxes to pay for social entitlements and to restrain the alleged greedy excesses of bankers and the City, for the state to deliver social justice and fairness, it is worth considering the arguments that attempts to increase equality in society can not only be economically wasteful and inefficient but also even that they come at the expense of freedom and at the risk of creating a culture of dependency and passivity.

“High tax rates,” wrote Okun, “are followed by attempts of ingenious men to beat them as surely as snow is followed by little boys on sleds.” Is it true that there is a necessary tradeoff between equality and efficiency? That attempts to regulate the economy such as Basel III are doomed to failure? Would lower tax rates benefit us all or just the well-off? In what sense can we be considered to be equal, if any, so long as inequalities in wealth distribution remain?

Suggested readings

Less cash? More inequality? The reality of changes in UK living standards, Wednesday 21 September 2011

Daniel Ben-Ami introduced a discussion on trends in living standards in Britain. There is much talk about growing poverty, rising inequality and the impact of public spending cuts on the British population. This discussion will seek to identify real material changes in living standards. It will attempt to work out developments in relation to poverty, inequality and austerity in recent years. It will also consider the pitfalls of different approaches to measuring such shifts. In the aftermath of the English riots and against a background of ongoing austerity, it is important to establish to what degree Britons are really feeling the pinch.

Questions to consider

Suggested readings

Is the dollar dead?, Wednesday 3 August 2011

Phil Mullan introduced a discussion on the fate of the dollar. During most of the twentieth century the US and the dollar have reigned supreme in the world. The dominance of the dollar as the leading international currency has both expressed US hegemony and also more recently helped to sustain it. As each year passes economic power is shifting more and more away from the US, and from the west in general, to China and the rest of the emerging economies. How much longer can the US expect to maintain its own currency as world money?

Questions to consider

Suggested readings

Inflation: is the problem getting bigger?, Wednesday 1 June 2011

Professor James Woudhuysen introduced a discussion on inflation, commodity price ups and downs, and what may lie ahead.

Questions to consider

Suggested readings

Behavioural Economics, Thursday 5 May 2011

Timandra Harkness introducd a discussion on behavioural economics.

Questions to consider

Suggested readings

Articles

Global Imbalances, Thursday 24 March 2011

Ben Hunt, author of The Timid Corporation: Why Business is Terrified of Taking Risk, introduced a discussion on global imbalances.

Questions to consider

Suggested readings

For reference

The New Economics, Thursday 10 February 2011

Daniel Ben-Ami introduced the discussion.

Background

The 2008-9 economic and financial crisis was a tremendous shock to the discipline of economics. Economists were mortified by their failure to predict events. Within a short time it became widely accepted that many core elements of the discipline were sadly lacking.

Common themes in the discussion of economics included the need to make it more moral, historical and understanding of human psychology. This meant it should be correspondingly less focused on profits, mathematical models and the idea of rationality.

Typically the case for the new economics, also sometimes referred to as the “Keynesian resurgence”, was put in counter-position to a supposed free market orthodoxy. Supporters of new economics saw themselves as pragmatic proponents of state intervention rather than doctrinaire advocates of the free market.

Perhaps the best known institution promoting new economics was the Institute for New Economic Thinking. Since its foundation in October 2009 the organisation has gained the support of many of the world’s top economists and economic policymakers.

Existing think tanks which took up the theme included Demos and the IPPR. This was in addition to organisations that pre-existed the crisis such as the New Economics Foundation and the New Economics Institute - although the latter changed its name from the EF Schumacher Society in 2009.

Questions to consider

Suggested readings:

Where in the world is the economy going? Wednesday 15 December 2010

The discussion – an end of the year review – was on the state of the world economy post G20, with introductions by Rob Killick and Mina Blauel on the situation in the developing and in the developed world: global imbalances between slow growth and rapid development; currency wars; trade deals; protectionism; etc.

Read Rob Killick's edited introduction.

Suggested readings:

Sunday 10 October 2010

Alex Hochuli will introduce a discussion on Anatole Kaletsky’s latest book Capitalism 4.0

Suggested readings:

Sunday 5 September 2010

Professor James Woudhuysen introduced a discussion on 'Does Britain need an industrial policy?'

Some questions to consider:

And some suggested readings:

Sunday 25 July 2010

Daniel Ben-Ami introduced a discussion on his new book Ferraris for All: In Defence of Economic Progress

Some questions to consider:

Sunday 20 June 2010

Yimeng Liu introduced a discussion on the realities of income distribution in China in the context of its rapid economic growth.

Yimeng kindly submitted this paper, Income Disparity in China, as a briefing document.

Further suggested readings: