Articles

Articles and analyses from the INET community on the key economic questions of our time.

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Solomonic Judgment vs. Sophists, Economists and Calculators [1] [2]

Dec 12, 2013

Given the choice, would you accept to live in a society where happiness and prosperity is guaranteed for all on the condition that one single person be kept permanently unhappy? Is the well-being of thousands of people “worth” the sacrifice and suffering of a single innocent child? Such is the dilemma to which the inhabitants of the utopian city of Omelas are confronted in Ursula Le Guin’s philosophical short-story “The Ones Who Walk Away from Omelas”. In her parable, most people are ultimately able to come to terms with the atrocity. The few citizens who cannot end up walking away from the city — nobody knows where they go and they are never heard from again.

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Our Hansen Moment

Dec 5, 2013

The main goal of the macroeconomist is to understand the sources behind business cycles and the behavior of financial markets in the modern economy.

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[PART 2] U.S. Current Account Deficits and German Surpluses: The Role of Income Distribution in Global Imbalances

Nov 6, 2013

In our two papers, we analyze how changes in personal and functional (wages versus profits) income distribution interact to produce different macroeconomic outcomes in different countries. On the basis of a stock-flow consistent model calibrated for the United States, Germany, and China, simulations suggest that a substantial part of the increase in household debt and the decrease in the current account in the United States since the early 1980s can be explained by the interplay of rising (top-end) household income inequality and certain institutions (e.g. easy access to credit, privately financed education and health care systems).

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Economic Policy Must Address Excessive Private Sector Leverage

Nov 6, 2013

Adair Lord Turner, former Chairman of Great Britain’s Financial Services Authority and current Senior Fellow at the Institute for New Economic Thinking, will argue in a keynote address to the Federal Reserve Bank of Chicago on Thursday that central banks must be equipped in future to address the dangers of excessive private sector leverage, using both pre-emptive interest rate policy and macro-prudential policy tools.

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We Can Do Better

Oct 24, 2013

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Trust and Finance

Oct 24, 2013

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Sovereigns versus banks: Crises, causes and consequences

Oct 18, 2013

In the aftermath of the global financial crisis, few would dispute the risks of excessive borrowing. But which debts should one worry about – public or private? This column presents new research on the interplay of public and private debts since 1870 in 17 advanced economies. History demonstrates that excessive private-sector borrowing plays a greater role than fiscal profligacy in generating financial instability. However, when the credit boom collapses, the government’s capacity to alleviate the downturn is limited by the prevailing level of public debt.

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Reinhart and Rogoff Respond to Criticism

Oct 16, 2013

Advisory Board members Carmen Reinhart and Kenneth Rogoff today issued a response to recent criticism of their paper “Growth in a Time of Debt.”