Microeconomics

Reinterpreting Bagehot’s mature work as the origin of the key currency tradition

Possible repercussions of economic crisis on the stability of democracies that already show significant signs of fragility

The principal threat to economic stability currently is the overhang of debt, both private and public.

Antitrust expert Hal Singer shows how big businesses in certain industries are taking advantage of inflation worries to jack up prices far beyond their cost increases, all the while raking in robber-baron profits.

Re-evaluating the “equality-efficiency” trade-off

What counts as work and what doesn’t?

How antitrust law is ill-equipped to address tech mergers

The Chicago School has long used bankrupt assumptions to strangle antitrust policy

The Chicago School has long used bankrupt assumptions to strangle antitrust policy.

Chaired by Nobel laureates Joseph Stiglitz and Michael Spence, INET has assembled a global team of leaders and scholars calling for new thinking & new rules for the world economy

“We don’t look after each other at all,” says Jeffrey Sachs on America today

The social and medical sciences depend on randomised control trials – though they face more assumptions and biases than commonly thought.

In the face of  laissez-faire capitalism at home and resurgent nationalism across the globe, INET offers an innovative look at the causes of—and solutions for—the problems that ail a fissuring world economy.

Distinguished Scholars Including Larry Summers and Adair Turner Present Evidence of the Trend and Policy Solutions

The World Economic Roundtable seeks to help the business, investment, and policy communities understand ongoing changes in the world economy and to promote a discussion of ideas that can advance the goal of a widely shared global prosperity.

The Implications of Xi’s Belt and Road Initiative for China and the World Economy

The 2008 financial crisis was a shock to faith in entirely free financial markets. But the neoliberal assumptions underlying the previously dominant “Washington Consensus” continue to inform much Western commentary on China’s economy.

As globalization proceeds rapidly, manufacturing industry in most of developed countries declined steadily. 

The Death of the Seventy-year American Empire  

As dual economies transform countries, how does world politics adjust?

Unpacking the Effect of Trade on Workers and Voters 

This paper discusses what we have learned about the debt build-up in advanced societies over the past century. It shows that the extraordinary growth of aggregate debt in the past century was driven by the private sector.

A better set of approaches for the 21st century.

Is Comparative Advantage the Ideology of the Comparatively Advantaged? 

The Electoral Consequences of Rising Trade Exposure

What Do Citations Actually Measure in Economics and How Should Economic Journals and Department Review Committees Use This Data? 

INET gathered hundreds of new economic thinkers in Edinburgh to discuss the past, present, and future of the economics profession.

The Festival for New Economic Thinking is a collaborative initiative of several organizations, and aims to bring together those who seek to improve how economics is taught, studied and practiced. 

“Blindly” Engaging in Global Supply Chains Can Erode Developing Nations’ Economic Power

The Young Scholars Initiative and its working groups will be hosting meetings and discussions in and around the 2017 Trento Festival of Economics. 

A discussion featuring Kenneth Smith, Head of the Trade and NAFTA Office of the Ministry of the Economy of Mexico, and Jay Pelosky, Principal of Pelosky Global Strategies.

Globalization has fallen into disrepute; the myth of the prosperity and happiness-generating  free market has been dispelled. A visionary concept that provides guidance and direction is required now.

A discussion with Kaushik Basu, Professor of Economics and the C. Marks Professor of International Studies at Cornell University and former Senior Vice President and Chief Economist of the World Bank. 

In his 2017 presidential address to the National Economic Association, Professor Darrick Hamilton warned that treating economics as a morally neutral ‘science’, and the discipline’s limited attention to structural barriers and overemphasis individual agency, has resulted in bad economics, and bad policy particularly as it relates to racial disparity.

A transition from the conventional policy of “redistributing income” to “redistributing membership”, could promote economic integration across communities and intergenerational mobility.

A trade war would undoubtedly hurt both sides. But there is reason to believe that the US has more to lose. If nothing else, the Chinese seem to know precisely which weapons they have available to them. China could stop purchasing US aircraft, impose an embargo.

A reference guide to all Institute for New Economic Thinking (INET) community presentations at the Eastern Economic Association’s (EEA) 2017 annual meeting

Institute scholar Arjun Jayadev argues that while TPP is dead, its damaging legacy on intellectual property rights is likely to shape future bilateral trade agreements

A discussion on Brexit with Iain Begg, Professorial Research Fellow at the European Institute, London School of Economics.

A discussion on China’s economic management at the beginning of the Trump era featuring Leland R. Miller, Co-founder and CEO of the China Beige Book.

The prominence of the debate over ‘reswitching’ has obscured the importance of Piero Sraffa’s profound contribution to economics. It’s time to revisit and build on that body of work

Beneath the heated political rhetoric over U.S.-China economic ties lies an increasingly complex reality

Milwaukee-born short-seller Jim Chanos, founder and managing partner of New York-based Kynikos Associates, teaches University of Wisconsin and Yale business students about corporate fraud. During his life and career, he has witnessed seismic shifts in economic thinking and the relationship between labor and capital. Chanos shares his thoughts on the world emerging from the election of Donald Trump and the tumultuous political events of 2016. 

The big question in Asian countries right now is what lesson to take from Donald Trump’s victory in the United States’ presidential election, and from the United Kingdom’s Brexit referendum, in which British voters opted to leave the European Union. Unfortunately, the focus is not where it should be: geopolitical change.

Flows of goods and services, people and capital have overwhelmed the ability of political processes to accommodate them

What we’re reading: Some analysts expect dramatic changes and a short-term boost to the US economy, others predict continuity — and see Trump’s election reflecting a sea change in the global order

By suppressing important questions in favor of being cheerleaders for globalization, economists failed to influence the public conversation

The TPP is dead, as is the assumption that future free-trade agreements can be negotiated by experts alone

A conversation with Isaac Stone Fish, Senior Fellow at the Asia Society’s Center for U.S. – China Relations and Asia Editor at Foreign Policy Magazine.

Economists offer widely different explanations for the decline in trade between nations, in a debate that remains unresolved but is increasingly urgent

Economists honored for their work on contract theory, which has important implications for issues such as executive compensation that have been a focus of Institute research

This course aims to introduce graduate students to the “standard” basic methods and topics of microeconomics as taught at the Ph.D. level, while providing a very different teaching approach than is prevalent in introductory doctoral-level microeconomics courses. Typically, much effort is focused on mastering a large technical apparatus consisting of axioms, theorems, propositions, and corresponding proofs, often leaving students longing for an informed and critical understanding of the deeper significance of the methods and results.

The National Institute of Public Finance and Policy (NIPFP) in collaboration with the Institute of New Economic Thinking (INET) are organizing India’s first “Law Economic Policy Conference (LPEC 2016)”. The aim is to bring together economic, legal and policy thinkers together to consider policy issues in a holistic manner.

An exclusive conversation with Richard Batley, Head of Macroeconomics at Lombard Street Research.

We are happy to announce that we are offering a second run of the online course which aims to introduce graduate students and interested persons generally to the basic methods and topics of standard microeconomics as taught at the Ph.D. level — with a bit of ‘attitude’!

Prof. Sanjeev Goyal explains his general theory of network formation based on individual incentives, and their economic implications

Does general equilibrium theory sufficiently enhance our understanding of the economic process to make the entire exercise worthwhile, if we consider that other forms of thinking may have been ‘crowded out’ as a result of its being the ‘dominant discourse’? What, in the end, have we really learned from it?

How economists turned to the study of collective decision-making after World War II, faced many impossibilities, and lost interest after solving them

One thing is now certain about the upcoming presidential election in the United States: the next president will not be a committed free trader.

The Advanced Graduate Workshop in Development, led by Nobel Laureate Joseph Stiglitz is interested in identifying the complex interactions that influence well-being, development and growth.

Mass protests challenging the government to focus on job-creation rather than on market liberalization and trade deals may carry a cautionary message to Western policy makers, too.

Capitalism will destroy itself, the former Greek finance minister warns, if economic calculation excludes human needs and ignores democratic verdicts

The Haas Institute for a Fair and Inclusive Society’s report analyzes the Trans-Pacific Partnership and examines the widespread global implications in the event of its passage.

Join us for a reception at the ASSA conference in San Francisco

There is a deeper story to be told about the inclusion of the Renminbi.

How much does the standard theory of externalities and public goods really say?

By integrating the history of industrial development in Britain and the United States with the ideas of leading economic thinkers, this essay demonstrates the absurdity of perfect competition as the ideal of economic efficiency.

A new online course challenges typical teaching approaches.

Do we need to rethink the teaching of economics?

Hot on the heels of the BIS, now comes the IMF Global Financial Stability report, “Corporate Leverage in Emerging Markets–A Concern?”. Yes, a concern, and just in time for the annual meeting in Peru next week.

A student of microeconomics learns that any competitive equilibrium leads to a Pareto efficient outcome (First Fundamental Theorem of Welfare Economics). What do we mean by the efficiency or inefficiency of markets?

A student of microeconomics learns that any desirable efficient market allocation can be sustained by a competitive equilibrium (the Second Theorem of Welfare Economics), given appropriate lump-sum wealth redistributions. This is typically understood as a means to correct unfair market outcomes. What are the real world implications of the second theorem? How well does it address distributional concerns?

We consider nonparametric identification and estimation of pricing kernels, or equivalently of marginal utility functions up to scale, in consumption based asset pricing Euler equations. Ours is the first paper to prove nonparametric identification of Euler equations under low level conditions (without imposing functional restrictions or just assuming completeness).

Have economists fallen in love with an idealized vision of an economy in which rational individuals interact in perfect markets? To what extent is standard microeconomics responsible for this state of affairs?

The Institute for New Economic Thinking has awarded $2 million in grants to fund 21 different projects as part of the latest round of its research grant program.

The financial crisis of 2008 was unforeseen to a significant extent. One reason is that the dominant academic theories influencing political decision makers ignore recent advances and instead rely largely on models and decision science dating back to the Second World War.

The Eurozone crisis has been wrongly interpreted as either a crisis of fiscal profligacy or of deteriorating unit-labour cost competitiveness (caused by rigid labour markets), or a combination of both.

A survey on behalf of the Sueddeutsche Zeitung indicates that German economists are much more American in their thinking than is presumed – with a rising trend.

Exploiting three earthquakes in Italy as quasi-experiments, we analyse the response of homeowners’ consumption to transfers targeted to finance housing repair and reconstruction. To the extent that funds are made available up-front, these transfers are akin to loans, mainly affecting the liquidity of households’ wealth

There is a renewed interest in the size of labour supply elasticities and the discrepancy between micro and macro estimates. Recent contributions have stressed the distinction between changes in labour supply at the extensive and the intensive margin. In this paper, we stress the importance of individual heterogeneity and aggregation problems.

The adoption and diffusion of inputs in the production network is at the heart of technological progress. What determines which inputs are initially considered and eventually adopted by innovators? We examine the evolution of input linkages from a network perspective, starting from a stylized model of network formation.

This paper presents an experiment investigating the effect of social identity on hiring decisions. The question is whether people discriminate between own and other group candidate

The Institute for New Economic Thinking responds to an evident need for innovative approaches to understanding economic and financial processes.

John Muth proposed the Rational Expectations Hypothesis (REH) to represent how the market (an aggregate of its participants) understands and forecasts outcomes. REH imposes internal consistency between the market’s forecasts and “the relevant economic theory” (Muth 1961, p. 316).

Among the areas left largely unscathed by the 2008 financial crisis and subsequent never-­‐ending recession, the teaching of economics ranks high.

Pushing this strand of research brings a certain feeling of trepidation. It comes from recognizing that by openly elaborating on how to catch or deter a criminal, you thereby confer an undue advantage on the criminal through forewarning.

Over the past decades African economies have exhibited two stunning paradoxes: growth acceleration coexisting with stubbornly high poverty rates; increasing capital flight along with widening development financing gaps. There has been no attempt to link the two in the literature.

The largely unexpected arrival of the global economic crisis and the largely unpredicted slowness of the recovery from the Great Recession should be precipitating an intellectual crisis across economics and policy making. We require additional theories and additional methods to detect how an economy is evolving and to provide the basis for policy intervention (Haldane, 2014).

The central concepts of Keynes’ macroeconomic theories concerning the behavior of labor markets, aggregate demand, and asset pricing can be formulated as special cases of a general social interaction model.

Caring Economics is about a new way of thinking about human prosperity. In mainstream economics, prosperity is a matter of consumption, income and wealth. By contrast, Caring Economics conceives of prosperity in terms of deeper sources of durable human wellbeing.

The Institute for New Economic Thinking held its sixth Annual Conference from April 8 to April 11, 2015, in collaboration with the Organization for Economic Cooperation and Development (OECD) in Paris.

Do large firm dynamics drive the business cycle? We answer this question by developing a quantitative theory of aggregate fluctuations caused by firm-level disturbances alone. We show that a standard heterogeneous firm dynamics setup already contains in it a theory of the business cycle, without appealing to aggregate shocks.

This chapter surveys experimental research on networks in economics.

The interaction between social structure and markets remains a central theme in the social sciences. In some instances, markets can build on and enhance social networks’ economic role; in other contexts, markets appear to be in direct competition with social networks. The impact of markets on inequality and welfare is also varying: while markets can sometimes offer valuable outside options to marginalised individuals, in other situations only well connected and better off individuals can benefit from them.

Individuals derive benefits from their connections, but these may, at the same time, transmit external threats. Individuals therefore invest in security to protect themselves. However, the incentives to invest in security depend on their network exposures. We study the problem of designing a network that provides the right individual incentives.