# Volume VII Issue 1

Autumn 2013

### 1. Growth theory after Keynes, part I: the unfortunate suppression of the Harrod-Domar model

After Harrod and Domar independently developed a dynamic Keynesian circular flow model to illustrate the instability of a growing economy, mainstream economists quickly reduced their model to a supply side-only growth model, which they subsequently rejected as too simplistic and replaced with Solow's neoclassical growth model. The rejection process of first diminishing the model and then replaced it with a neoclassical alternative was similar to how the full Keynesian macroeconomic paradigm was diminished into IS-LM analysis and then replaced by a simplistic neoclassical framework that largely ignored the demand side of the economy. Furthermore, subsequent work by mainstream economists has resulted in a logically inconsistent framework for analyzing economic growth; the popular endogenous growth models, which use Schumpeter's concept of profit-driven creative destruction to explain the technological change that Solow left as exogenous, are not logically compatible with the Solow model.
Section: Articles

### 2. Fairness through regulation? Reflections on a cosmopolitan approach to global finance

In the aftermath of the last financial crisis a strong message prevails that 'something' has to be changed in the manner global finance is governed. What exactly this 'something' entails and what could constitute the 'common ground' of anticipated change is more difficult to determine. Many envisage future improvements of global financial governance by evoking deliberative democracy, political equality and cosmopolitanism. As financial regulation is the main instrument through which global finance is shaped and governed nowadays, these principles should then be transmitted to regulatory arrangements. This paper focuses on a new conceptual approach to regulatory and governance issues in global finance, by employing the philosophical idea of cosmopolitanism. It argues that although as a concept, cosmopolitanism cannot mitigate all the flaws attributed to contemporary finance, its development and extension to international financial regulation that is promulgated by institutions of the global financial system, would represent a worthwhile endeavour in making global finance more accountable and just in the eyes of many.
Section: Articles

### 3. On the problem of scale: Spinozistic sovereignty as the logical foundation of constitutional economics

This paper argues that sovereignty, as envisaged by Spinoza, is the logical foundation of constitutional economics. Constitutional constructs such as sovereignty weave an evolutionary dialectic between different organizational scales (the local, national, and global). This dialectic continues to wreak havoc at the local scale, and can be interrupted only through explicit constitutional constraints on the size of jurisdictions. The paper argues for more emphasis on constitutional orders in the spirit of Spinoza’s understanding of sovereignty. This entails preference for federal polities in which sovereignty is shared between different cities rather states where once capital cities dominate.
Section: Articles

### 4. The ethics of New Development Economics: is the Experimental Approach to Development Economics morally wrong?

The 2000s have witnessed the arrival and growing popularity of randomized controlled experiments (RCTs) in Development Economics. Whilst this new way of conducting research on development has unfolded important insights, the ethical challenge it provokes has not yet been systematically examined. The present article aims at filling this gap by providing the first ad hoc discussion of the moral issues that accompany the use of RCTs in Development Economics. Claiming that this new research agenda needs its own, specific set of ethical guidelines, we expose the six ethical problems that these experiments potentially provoke and that should therefore be carefully assessed by ethics committees before an RCT is launched and by scholarly journals before its results are published.
Section: Articles

### 5. Research note on an experimental approach to the intrinsic motivations of corruption

Even though most of the causes of corruption are easily identifiable at the macro level, there is considerable disagreement when it comes to the intrinsic motivations leading people to engage in this activity. The present paper tries to shed light on the aspect concerning the correlation between corruption and individual performance. This is useful for understanding the dynamics of common events like medical students attempting to bribe their way towards becoming a doctor, or companies bribing public officials to obtain licenses to build public highways, buildings, or provide electricity and water. However, corruption's secretive nature makes it difficult to obtain trustworthy qualitative data on this subject. Hence, the study addresses the issue in the lab, through an experiment based on a bribery game. The results show that there is a significant correlation between performance and propensity to engage in a corrupt activity, opening the way for an improvement in the allocation of resources to reduce this negative phenomenon.
Section: Articles

### 6. Review of Resilient Liberalism in Europe’s Political Economy, edited by Vivien A. Schmidt and Mark Thatcher, New York, Cambridge University Press, 2013, 469 pp., $32.99, ISBN 9781107613973 Section: Book reviews ### 7. Review of The Elgar Companion to Recent Economic Methodology, edited by John B. Davis and D. Wade Hands, Cheltenham, UK; Northampton, MA, USA, Edward Elgar, 2011, hb, 542 pp., ISBN 9781848447547 Section: Book reviews ### 8. Review of Mark Blyth, Austerity. The History of a Dangerous Idea, New York: Oxford University Press, 2013, 304 pp., hb,$16.95, ISBN 9780199828302

Section: Book reviews