Index

Accumulation and crisis, theory of see Bank of England, 119, 133, 135, 142 Crisis theory Banking Review, 111 Agent choice Banks generally, 27 bonus-driven incentive system, use of see consciousness of ignorance, 46, 47 Bonus-driven incentive system macrotheory, relationship to, 39–49 capital requirements see Capital path dependency, 26, 42–44, 161, requirements 282, 312 deregulation of, 30–31 residual hypothesis, 45 excessive leverage, 32 subjectivist and objectivist approaches failures, number of, 113–114 to, 40–41 hiring practices, 156 Aglietta, Michel, 279 large banks, growth of, 113–116 Aglietta and Breton study, 279 Baran, Paul, 10, 204 AIG, 131, 136, 141 Baran and Sweezy study, 10, 204, 236 Am I a Liberal?, 310, 315 Basle Committee, 121 Amromin, G., 27 Basle Rules, 132, 135 Amromin and Sharpe study, 27 Bear Stearns Animal spirits, 50, 53, 54 generally, 119, 120, 136 Annuities, 123 compensation practices of, 153 Armey, Dick, 364 Beaver, W., 20 Arrighi, Giovanni, 279 Bebchuk, Cohen and Spamann study, Arrighi and Silver study, 279 153 Asian Development Bank, 392 Bebchuk, Lucian, 153 Asymmetric information Becker, J., 146 generally, 14, 33, 253 Becker and Morgenson study, 146 New Keynesian theory, in, 175–189 Behaviorists, 14–15 passim Berle, Adolf, 206 Athenaeum, 308 Berle and Means study, 206 Austerity policies Bernstein, J., 262 generally, 1–3, 10, 263, 269, 274 Black, Fischer, 24 European resistance to, 383 Blankfein, L., 139 public employees as target, 377 Blinder, Allan, 59 South Korea, in see South Korean Block, F., 63 crisis Bloomberg, 124 U.S. deficit crisis and see Deficit crisis Boeing, 372 Bolton, Anthony, 137 Bach, G.L., 330 Bond market, 124, 284 Bank for International Settlements, 30, 138 Bonus-driven incentive system Bank of America generally, 2–3, 120, 131–132, generally, 119, 142, 163 151–152 compensation practices of, 153 boom-bust cycles, role in, 160–162

413

James Crotty - 9781784719029 Downloaded from Elgar Online at 09/27/2021 10:11:32AM via free access 414 Capitalism, Macroeconomics and Reality

cumulative total return analysis of Bretton Woods system, 1, 62, 260, 272, bank stocks, 155 348 destructive competition, effect of, 164 Britain’s Industrial Future, 320–322 effect of diminishing profits, 153 Brittan, S., 389 excess supply of rainmakers, effect Brown-Collier, E., 308 of, 156, 165–168 Buffett, Warren, 159 Great Financial Crisis, role in, Bureau of Labor Statistics, 380, 398 151–152 Burger, Albert, 335 growth in popularity of, 156–158 Bush, George H. W., 364, 368 growth of bonuses as diminishing Bush, George W., 364, 365, 366, profits, 153–154 368–372 inability to restrain, 162–165 Business Week, 115, 209, 267, 293 large investment banks specifically, Busts see Booms and busts in, 153–155 mutual fund investors, effect of, 163 Camdessus, Michel, 407–408 oligopoly pricing power, effect of, Camerer, C., 14 160, 162 Camerer and Lowenstein study, 14 primacy of bonuses, 153–155 Can Lloyd George Do It?, 325 rents, rainmaker premiums as, Canada, 375–376 156–158 Capital, 73–99 passim short-term horizons of investors as Capital asset pricing model factor, 164 assumptions used to construct, 24–25 Wall Street firms, 153–154 econometric testing of, 21–22 Booms and busts Keynes-Minsky versus, 24–29 generally, 21, 24–32, 56, 96–98, 129, “market portfolio,” 21 130–133, 137–138, 138–165 “no arbitrage” assumption, 23 passim, 140, 182–193, 396–403 unrealistic assumptions used to conflict between capital and labor as create, 17 leading to, 331 Capital deepening, 221–225, 233, endogenous boom-bust cycles, 229–230 235–238 expansion, role of credit in, 94–96 Capital requirements inflation as factor, 187–188, 343–345, banks, for, 30–31, 121, 132, 134–143 352–353 collateralized debt obligations, for, Keynes-Minsky-Marx theory, in, 134 161–162 Value at Risk, 30–31, 121–122, South Korean crisis and, 396–397, 138–139 400–405 Capital widening, 221–223, 232, speculative inflation during, 187–188 235–236, 238 telecom bust, 297 Carvalho, Fernando, 45, 48, 61 Borenzstein, E., 389 Case-Shiller index, 143 Borenzstein and Lee study, 389 Center on Budget and Policy Priorities, Bosworth, Barry, 208, 210 369, 379 Bosworth and Collins study, 400 Chandler, Alfred, 251, 273 Bowles, Gordon and Weisskopf study, 260 Chang, H.-J., 389 Bowles, S., 259 Chang, Park and Yoo study, 391 Bowring, J., 251 Chicago Fed, 117 Boyer, Robert, 279 China, 262 Brazil, 301, 344 Citigroup Brenner, Robert, 259, 277 generally, 117, 119, 135, 137, 140, 146 Breton, Regis, 279 compensation practices of, 153

James Crotty - 9781784719029 Downloaded from Elgar Online at 09/27/2021 10:11:32AM via free access Index 415

Claessens, S., 403 Keynes-Minsky-Marx theory, in, 8 Clark, John Maurice, 250, 251, 252 nonfinancial corporations, neoliberal Clarke, S., 236, 237 globalization’s effect on, Class conflict theory of macropolicy 276–277, 289 generally, 329, 352–353 Coercive competition, 264–265, 275 balance of payments as factor, Cohen, Alma, 153 346–352 Coherence, micro- and macro-foundations concept of cycle, role of, 334–341 of, 39–40, 60–64 cyclical behavior of factor shares, Collateralized debt obligations, 33–34, 335–341 118–125, 132–137 exclusive reliance on monetary and Collier, B., 308 fiscal policy, end of, 351–352 Collins, C., 400 foreign exchange system, role of, Commons, John R., 315 348–349 Competition full employment as goal, 332–333, generally see Competition in financial 335–338, 342–343 markets goals of state as factor, 329–334 coercive competition, 264–265, 275 gold, role of, 348–349 cooperation, relation between harmony-conflict dialectic, 330 competition and, 256 inflation, role of, 343–345, 352–353 corespective competition see international and political affairs as Corespective competition factor, 346–352 destructive competition, 164, 247– Keynesian position distinguished, 332 251, 254–256, 264–267, labor problems, 338–340 274–279, 282, 289, 292–297 maximization of profits as primary dialectical process, as, 226 goal, 330 fraternal and fratricidal modes of New Economic Policy, 347–352 competition, 222–223, 227, pluralism, 331 230, 233 political-social and economic factors Keynes’ view distinguished, 342–343 anarchic competition, 316–320 productivity, cyclical movements in, atomistic competition, rejection 338–340 of, 316–320 profits/wages ratio, 335–338 disequilibrium competitive racial income differentials, 341 processes, 310–312, 318 stable reserve army, 342–343 regulated competition, 317 technological forces, 338–339 perfect competition, Neoclassical unemployment, 342–343, 353 model of, 249 US dollar, role of, 348–349, 352 Competition in financial markets wage and price controls, 340, generally, 109–112 344–345, 351–353 bidding clubs, 115 wage struggle, 343–345, 352–353 bond market, 124 wars and, 347–348, 353 brokerage services, profitability of, 114 Clinton, Bill, 364, 366, 368, 379 collusive behavior, 115–116 Clower, R., 42 consolidation in sector, 113–114 Coddington, A., 39 corespective competition see Coerced investment Corespective competition generally, 266 derivatives, 117–126 investment theory, in reformulation fee structures, 114–115 of, 220–221, 223–224, financial deepening, 113 226–227, 230, 234–235 Group of Ten survey, 114

James Crotty - 9781784719029 Downloaded from Elgar Online at 09/27/2021 10:11:32AM via free access 416 Capitalism, Macroeconomics and Reality

hedge funds see Hedge funds natural oligopolies, in, 250–253, herd behavior, 124, 286, 312 255–256 high growth industry, financial firms nonfinancial corporations, among, as, 112–113 274–275, 280, 281 high returns, pressure to achieve, Corporate raiders, 284–285 123–124 Corporate tax rate, 372, 374 higher risk leading to higher profits, Countrywide, 140 116–124 Credit default swaps see Derivatives initial public offerings, 114–115, 120 Credit derivatives see Derivatives institutional investor incentives as Credit rating agencies, 132 increasing risk taking, 122 Crisis theory large banks, growth of, 113–116 generally, 7, 72–73, 100–102 low interest rates due to Central abstract forms of crisis, 75, 77–90 Banks’ intervention, 116 barter, 78 mergers and acquisitions, 114–115, capitalist crises, generally, 82–83, 120, 267 90–91 noninterest income, 117–122 circulation, generally, 73–76 OTC products, 124 contract-credit system, 91–92, 96–100 paradox of high profit rates and contract economy, 83–90 intense competition, 109–112, credit-accumulation nexus, 92 126 credit system, development of, 91–92 rate of expansion of financial firms, depth and duration of downturn, 112–113 factors in, 100 Conditional macroeconomic coherence, disequilibrium aspects of simple 39–40, 60–64 commodity production, 80–81 Conditional stability expansion, role of credit in, 94–96 generally, 39–40, 48–49, 53–54, 57, 59 falling rate of profit and oversensitive expectation and confidence formation contract credit system as trigger, as contributing to 49–60, 49–60 98–100, 101–102 institutional foundation of, 60–64 fragility or over-sensitivity of system, uncertainty and, 39–40, 49–64 84–104 passim Confidence “functions” of money, 77 expectation and confidence formation gross rate of profit defined, 94 see Expectation and confidence hoard, money as, 80, 85 formation interest rate as eroding net profit rate, neoclassical agents and, 49–50 97 optimism distinguished, 46 laws of motion of capitalism, 90–91 risk distinguished, 46 money as means of circulation, 78–83 variable, as, 27–29 money as means of payment, 83–90 Conflation, 8, 197–198, 201–203, money as measure of value, 81–82 205–206, 210–212 net rate of profit defined, 94 Congressional Budget Office, 368, 369, non-capitalist commodity exchange, 372, 375, 378 forms of, 78 Contractual rigidity, 63 potential crises in contract economy, Core industries, 247–268, 275–276 87–89 Corespective competition rate of profit as key variable, 92–93, generally, 250–259, 264–265, 267 94–98 financial markets, in, 115–116 reproduction process of capitalism, investment theory, in reformulation 80, 81, 84, 91 of, 230, 232–233 simple commodity production and

James Crotty - 9781784719029 Downloaded from Elgar Online at 09/27/2021 10:11:32AM via free access Index 417

capitalist production, relation 113, 129, 130, 138, 143–147, 151, between, 74–90, 90–93 275, 362–366 unity of circulation and production, Derivatives 94–100 generally, 32–34, 114, 131, 132–138, velocity of money, 80–81 140–143 Crony capitalism, 297, 395, 404 high profits resulting from, 117–126 Crotty, James, 27, 130, 139, 145, 155, notional value of all contracts (2005), 162, 164, 185, 197, 246, 252, 259, 112–113 261, 264, 266, 275, 276 proposed regulation of, 146 Crotty and Dymski study, 389 DeYoung, R., 117 Crotty and Epstein study, 145 DeYoung and Rice study, 117 Crotty and Goldstein study, 228, 229, Dhareshwar, A., 400 277, 285 Di Napoli, T., 131 Crotty and Lee study, 389, 406 Dinallo, Eric, 136 Cuomo, Andrew, 153 Disequilibrium competitive processes, 310–312, 318 Daimler-Chrysler, 267 simple commodity production, in, Darwin, Charles, 310, 311–312 80–81 Das, S., 141 unemployment as disequilibrium Das Kapital, 73–99 passim phenomenon, 180 Davidson, P., 42, 44, 45, 53, 61, 176 Does Unemployment Need a Drastic Deficit crisis Remedy?, 308 causes of, 357–365, 368–370, Donaldson, G., 59 376–377 Donaldson and Lorsch study, 59 congressional attack on New Deal, Drexel, Burnham and Lambert, 284 378–379 Duhem, Pierre, 18 debt ceiling crisis, 380–381 Duhem-Quine thesis, 18 debt-to-GDP ratio, 358, 363, 368–371 Dumenil, Gerard, 277, 279 economic and political background, Dumenil and Levy study, 277, 279 357–365 Duncan, M., 264 increased inequality, 365–367 Dymski, Gary, 389 media reporting on, 382 Obama acceptance of budget cuts, East Asian growth model, 2, 259, 263, 379–380 273, 274, 301, 387, 388, 393–394, overview, 357–359, 381–383 397–398, 400 prospective deficits, causes of, Economic dynamics, theory of, 5–6 369–370 Efficient market hypothesis real family income, 366–367 generally, 3, 13–16, 39–49 recommended response to, 362–363, econometrics tests of, 20–21 370–374 liquidity as always available under, right-wing economic policies as 133 causing, 359–365 relevant information set, 16 slower growth, 365–367 Eisenhower, Dwight, 346, 347, 349 Social Security and health care as Endogenous change, 4, 5, 50 factors, 365–367, 374–376 Engels, Friedrich, 97 state and local responses, 376–377 English economy in 1920s, Keynes’ view tax rates and revenue, 370–374 of see Industrial and macro policy Degree of monopoly, 203 in 1920s, Keynes’ view of Delay, Tom, 364 Enron, 294–295 Deregulation, 3–4, 13–16, 23–24, 29–35, Epstein, G., 145

James Crotty - 9781784719029 Downloaded from Elgar Online at 09/27/2021 10:11:32AM via free access 418 Capitalism, Macroeconomics and Reality

Ergodic stochastic economic models, Fischer, Stanley, 387, 394, 407 42–43, 175, 176–177 Fisher, S., 210 European Central Bank, 121 Fisher and Merton study, 210 European Economic Community, 351 Fitch Ratings, 124, 136 Evolution, theory of, 310, 311–312 Fitzgibbons, A., 53 Exogenous shocks, 5, 43, 57, 177, 178, 179 Forbes Magazine, 287 Expectation and confidence formation Ford Motor Co., 247, 267 generally, 27, 49, 161, 180, 181–182, Foreign exchange system, 260, 348–349 198 Fortune Magazine, 135 conditional stability, contribution to, Fragility 49–60 crisis theory, fragility or over- conventional process of, 52–60 sensitivity of system in, endogeneity of, 57, 182 84–104 passim historically contingent, as, 58–59 Minsky’s financial fragility thesis, 63, institutionally specific, as, 58 143, 162, 182, 189, 219, 230 Keynes-Minsky theory, 27, 57, 161 France, 349 social and interactive, as, 57–58 French, K., 21 speculative excess as factor, 183–184 Friedman, Milton, 40 generally, 3, 5, 7, 311, 344 Fama, Eugene, 15–16, 20–21, 205 positivism of see Positivism Fama and French study, 21 Froud, J., 115, 279, 294 Fazzari, Steve, 43, 175–189 Froud and Williams study, 115 FDIC, 124 Fukuyama, Francis, 14 Federal Reserve, 298 Fuld, Richard, 159 Feldstein, Martin, 393 Felix, David, 279, 283 Galbraith, John Kenneth, 258 Ferguson, N., 142 Geithner, Timothy, 122, 126, 140, 143, Fidelity International, 137 146, 147 Financial Services Authority, 138 General Electric, 247 Financial theories of instability General Motors, 267 generally, 196–197 German Central Bank, 141 irreversibility of investment, 207–208 Germany, 259, 260, 352 Keynesian models of conflation, Gingrich, Newt, 364 198–201 Glass-Steagall Act, 111 marginal efficiency of capital, 198–201 Global Crossing, 295 Minsky’s theory of instability see Global financial crisis Minsky, Hyman 2007 see Great Financial Crisis Q theory, 201–202 Great Depression see Great Depression semi-autonomy of owners and Global neoliberalism managers generally see Neoliberal globalization generally, 205–210 austerity policies see Austerity empirical evidence in support of, policies 210–212 nonfinancial corporations, effect on Financial Times, 32, 114, 115, 118, 119, see Nonfinancial corporations, 121, 134, 135, 137, 138, 140, 142, neoliberal globalization’s effect on 144, 162, 167, 267, 395 paradox of neoliberalism see Paradox Financialization of nonfinancial firms, 2, of neoliberalism 109, 297–300 Glyn, Andrew, 277 Findley, M., 14, 22 Goldin, C., 156, 158, 165 Findley and Williams study, 14, 22 Goldin and Katz study, 156, 158, 165

James Crotty - 9781784719029 Downloaded from Elgar Online at 09/27/2021 10:11:32AM via free access Index 419

Goldman Sachs, 115, 120, 131, 136, 138, Board of National Investment, role of, 146, 163 321–322 Goldstein, Jonathan, 228 coal, crisis in, 318 Goodhart, Charles, 133–134, 142 cooperative labor-management-state Gordon, D., 260 decision-making, 323 Great Depression corporatist, as, 308 generally, 3, 13, 244, 359 cotton industry, 318–320 New Deal response to, 359–361 Council on Industry, 324–325 Great Financial Crisis disequilibrium competitive processes, generally, 1–3, 34–35, 151 310–312, 318 banks, role of, 30–32 evolution and laissez-faire, 310–312 bonuses, role of, 151–152, 168 passim debt, role of, 31–32 industrial policy, 322–325 New Financial Architecture, role of initial statement and defense of see New Financial Architecture macro-policy position, 308–316 non-transparent securities, role of, irreversibility of real capital 32–34 accumulation, 318–319 Great Recession see Great Financial labor, control over, 317–318 Crisis microeconomic theory, 308, 310 Greenspan, Alan, 141, 144, 288, 388, Ministry of Industry, role of, 323–325 393, 394 National Industrial Council, 324–325 Greenspan Commission, 375 nationalization, 315 public corporation, importance of, Hahm, J., 389 313–316 Hahm and Mishkin study, 389 public investment as cornerstone of Haldane, Andrew, 3, 136, 139 policy, 321–325 Hanks, George, 111 radical nature of, 325–326 Harrison, B., 264 reasons for high growth rate (1870- Harrod, Roy, 320 1914), 307–308 Health care costs, 374–376 regulated competition, 317 Hedge funds, 114–115, 118–124, 123, scientific method as applicable to 127, 130–146 passim economics, 311 Henwood, 279 socialization of investment, 308, Herd behavior, 124, 286, 312 320–322 Hollister, Robinson, 341 three economic orders, 315–316 Hollister and Palmer study, 341 unemployment, remedy for, 308–310 Household debt, 31 visionary essays, 308–316 Howell, D., 264 Inequality of income and wealth Howell, Duncan and Harrison study, generally, 2, 5, 10, 257–259, 262, 264 301, 358–363, 365–366, 370–374, 382–383 IBM, 247 South Korea, in, 391 India, 262 Inflation Industrial and macro policy in 1920s, generally, 260–262, 343–350, Keynes’ view of 352–356, 361–362 generally, 307–308, 325 booms, as factor in, 187–188, anarchic competition, 316–320 343–345, 352–353 atomistic competition, rejection of, Informational efficiency see Efficient 316–320 market hypothesis bankruptcy and debt, 319–320 Inherently unstable financial markets, 3, 6

James Crotty - 9781784719029 Downloaded from Elgar Online at 09/27/2021 10:11:32AM via free access 420 Capitalism, Macroeconomics and Reality

Instability independent behavioral investment generally, 5–8, 34 equation, 224–225 inherently unstable financial markets, investment in 1980s, analysis of, 3, 6 237–238 Minsky’s theory of see Minsky, Hyman irreversibility of investment, 223, 228 monocausal theories of, 197, 203 realization problems, 220, 224 New Keynesian theory regime shifts, 233–237 investment instability, theory of, strategy, role of, 230–235 175–189, 200–201 unknowability, 228 New Keynesian theory and, 175–180, Irrationality 183, 186–187 generally, 14, 16, 27, 41, 54, 332 uncertainty distinguished, 59 agent irrationality, 41 Institute for International Finance, 392 radical irrationality of Keynesian Institutionalization of decision-making, investor, 54 62 Irreversibility of investment Insurance companies, 123 generally, 207–208, 248 International Monetary Fund investment theory, reformulation of, generally, 135, 145, 244, 263, 269, 223, 228 272, 274, 284 New Keynesian theory, 186 South Korea, policy toward see South Post Keynesian theory, 186 Korean crisis Itoh, M., 236, 237 Investment theory, reformulation of generally, 219–220 Japan, 259, 260, 263, 265, 344, 352, 353 “Accumulate, Accumulate” Jensen, M.C., 206 generally, 219–220, 236 Jensen and Meckling study, 206 conditional, as, 220–224 Johnson, Lyndon, 346, 347 investment in 1980s, analysis of, Johnson, Simon, 165 237–238 Johnson and Kwak study, 165 simplistic, as, 226–227 Journal of Economic Perspectives, 58 anarchic regime, 230, 233–235, 236 JPMorgan Chase, 117, 119, 137 approach to expectations, 228 Jung, Kim Dae, 406 bankruptcy, 228 Junk bonds, 124, 284 capital deepening, 221–225, 233, Justice Department, 115 235–238 capital widening, 221–223, 232, Kalecki, Michal 235–236, 238 generally, 4, 54, 203, 204, 342, 343 coerced investment, 220–221, 223–224, full employment and profits, view of, 226–227, 230, 234–235 332–334 competition as dialectical process, 226 Keynesianism and, 332–334 corespective regime, 230, 232–233 monopoly pricing theory, 333 enterprise decision making, theory of, The Political Aspects of Full 236 Employment, 329 financial fragility theory, 230 Kaplan, S., 165 financial markets, effect of theory of, Kaplan and Rauh study, 165 224–225 Katz, L., 156, 158, 165 fraternal and fratricidal modes of Kennedy, John, 346, 347 competition, 222–223, 227, Keynes, J.M. 230, 233 generally, 4, 6, 13, 19–20, 27, 63, growth-safety tradeoff investment 116, 129, 299 model, 228–230, 232 corporatist, as see Industrial and macro

James Crotty - 9781784719029 Downloaded from Elgar Online at 09/27/2021 10:11:32AM via free access Index 421

policy in 1920s, Keynes’ view of Say’s Law, view of, 245–246 Keynes-Minsky-Marx theory see spontaneous optimism, 50 Keynes-Minsky-Marx theory uncertainty see Uncertainty Keynes-Minsky theory see Keynes- unknowability of future see Minsky theory Unknowability of future Keynesian theory see Keynesian Kissinger, Henry, 394 theory Klamer, A., 178 Keynes-Minsky-Marx theory Korean Development Institute, 398 boom-bust cycles, 161–162 Kregal, J., 61, 308 coerced investment, 8 Krippner, Greta, 279, 299 growth-safety tradeoff investment Krueger, A., 389, 403 model, 228–230, 232–233 Krueger and Yoo study, 389, 403 inherently unstable financial markets, Krugman, Paul, 147, 297, 368, 381, 398 as to, 3 Kuznets, Simon, 333 long-run balance of prices, 24 Kwak, James, 165 Keynes-Minsky theory generally, 15, 19 “Laws of motion” of capitalism, 4, assumptions in, 25–26, 34 73–74, 78, 90–91, 94, 96, 280 capital asset pricing model vs., 24–29 Lawson, Tony, 19, 41, 57 disappointed expectations, 57 Lazonick, William, 251, 281, 282 expectation and confidence formation, Lazonick and O’Sullivan studies, 281, 27, 57, 161 282 growth-safety tradeoff investment Lee, J.W., 389 model, 228–230, 232–233 Lee, Kangkook, 389, 391 market ebullience, 28–29 Lehman Brothers Keynesian theory generally, 120, 136 agent choice, 39–49 compensation practices of, 153 animal spirits, 50, 53, 54 Leijonhufvud, A., 42 confidence, 27–29, 46–47, 161 Levy, Dominique, 277, 279 credit rationing, 187 Lewis, Michael, 159 equilibrium, 43–44, 180 Liar’s Poker, 159 financial theory of instability see Liberal Industrial Committee, 318 Financial theories of instability Liberal Industrial Inquiry, 316, 320, 324 full-employment balanced growth, Life insurance policies, 123 335–338 Lloyd George, David, 316, 318, 320, 322 industrial and macro policy in 1920s, Long Term Capital Management, 138 Keynes’ view of see Industrial Lorsch, J., 59 and macro policy in 1920s, Lowenstein, G., 14 Keynes’ view of Lucas, R., 39, 41 inherently unstable financial markets, as to, 3 Maddison, Angus, 273 Kalecki and, 332–334 Malkiel, Burton, 22, 23–24 macro policy management, 245 Mankiw, N.G., 178 major policy proposals, 10 Market ebullience, 27–29 New Keynesianism see New Marx, Karl Keynesian theory generally, 4, 5, 6, 7, 61, 63, 267 owner-manager conflict see Owner- Capital, 73–99 passim manager conflict class conflict theory of macropolicy post Keynesian theory see Post based on see Class conflict Keynesian theory theory of macropolicy

James Crotty - 9781784719029 Downloaded from Elgar Online at 09/27/2021 10:11:32AM via free access 422 Capitalism, Macroeconomics and Reality

competition and cooperation, relation Nabisco, 284–285 between, 256 Nadiri, M.I., 400 crisis theory see Crisis theory Nadiri and Son study, 400 investment theory, reformulation of NAFTA, 364 see Investment theory, Natural oligopolies reformulation of generally, 9, 264, 266–267 monopoly defined, 256 corespective competition in, 250–253, Say’s Law, view of, 245–246 255–256 McCloskey, D., 178 re-oligopolization, 266–268 MCI, 296 Nehru, V., 400 Means, Gardiner, 206 Nehru and Dhareshwar study, 400 Meckling, W., 206 Neoclassicism Medicaid, 357–360, 368, 370, 374, 376, conflation of owners and managers, 378, 380, 382 205–206 Medicare, 357–360, 368, 370, 374, 376, general equilibrium models, 202, 245 378, 380, 382 investment theory, 201 Mergers and acquisitions, 114–115, 120, micro theory, 247 267 New Keynesianism distinguished, Merrill Lynch, 131, 134–135 175–178, 181, 185, 189 Merton, R., 210 perfect competition, model of, 249, Milken, Michael, 284 253 Minsky, Hyman perfect distribution, assumption of, generally, 4, 7, 8, 13, 129, 341 247 financial instability, theory of, 54, theory of choice under uncertainty, 203–205, 219, 230 176 fragility theory see Fragility Neoliberal globalization market ebullience, 28–29 generally, 267–269 Marxian accumulation theory and, austerity policies see Austerity policies 219–228 barriers to entry, 166–167, 251, 253, Q theory, variant of, 205 255–256, 269 Minton, B., 119 chronic excess capacity, 264–267 Minton, Stulz and Williamson study, 119 coerced investment, 266 Mishel, Bernstein and Schmitt study, 262 coercive competition, 264–265, 275 Mishel, L., 262 core industries, 247–268 Mishkin, F.S., 389 corespective competition see Moggridge, D., 320 Corespective competition Monetarism, 3 debate over, generally, 244–246 Money and forward contracts, 61 deregulation see Deregulation Monopoly Capital, 236 destructive competition, 247–251, Monopoly capitalism, theory of, 10, 236 254–256, 264–267 Moody’s, 132 fixed costs, 249–251 Morgan “Money Trust,” 109 freedom of exit, 248–250, 255, 258 Morgan Stanley, 115, 146, 159, 163 global aggregate demand growth, Morgenson, G., 146 261–263 Morin, Francois, 279 long-term planning, 258–259, 273, Morrison, A., 166 282–283 Morrison and Wilhelm study, 166 micro theory, 245–250 Mortgage-backed securities, 32–34, natural oligopolies see Natural 118–119, 131, 132–135, 137 oligopolies Muth, John, 41, 43 nonfinancial corporations, effect on see

James Crotty - 9781784719029 Downloaded from Elgar Online at 09/27/2021 10:11:32AM via free access Index 423

Nonfinancial corporations, neo risk management, false claims as to, liberal globalization’s effect on 134–137 oil prices and, 260–261 Special Investment Vehicles, use of, perfect factor substitutability in 137 production, 249–250 system-wide leverage, facilitation of, promises of, 244–246 142–143 slow growth resulting from, 261–266 Value at Risk, use of, 138–139 South Korean crisis see South Korean weak theoretical foundation, 130 crisis New Keynesian theory structural contradictions of, 257–261 generally, 4, 8, 10, 189 symbiotic relations between state and agent expectations, assumptions market, destruction of, 257–261 about, 177–178 virtuous circle of prosperity, 246, asymmetric information, assumption 259–261, 275 of, 175–189 passim New Deal, 358–381 passim bankruptcy, 186–187 New Economic Policy, 347–352 credit, sufficiency and insufficiency New Financial Architecture of, 183–184 generally, 129–130, 143–147 credit rationing, 187–188 capital requirements, 137–140 debt-equity ratios, 186 complex and opaque financial diversification, 185 products, 132–134, 140–142 ergodic, stochastic models, 175, definition, 129–130 176–177 illiquid financial products, 132–134 fundamental uncertainty, 175–189 incentives increasing risk, 130–132, government economic policy, view 138–139 of, 188–189 increased systemic risk, 140–142 insolvency, 186–187 key structural flaws instability capital requirements, 137–140 generally, 175–180, 183, 186–187 complex and opaque financial insurance, 185 products, 132–134, 140–142 investment theory, 175–189 illiquid financial products, irreversibility of investment, 186 132–134 key Keynesian theories as incentives increasing risk, incompatible with, 179–184 130–132, 138–139 Keynesian investment theory increased systemic risk, 140–142 distinguished, 175–189 off-balance sheet assets, 137–140 link between finance and investment, risk assessment, flaws as to, 185–186 138–139 Post Keynesian theory distinguished, risk management, false claims as 175–176, 179, 184–190 to, 134–137 systemic risk, 185 Special Investment Vehicles, use wedge between finance and of, 137 investment, 185–186 system-wide leverage, facilitation New York State Comptroller’s Office, 154 of, 142–143 New York Times, 131, 136, 143, 288, Value at Risk, use of, 138–139 381, 407 weak theoretical foundation, 130 Nixon, Richard, 342, 343, 347, 351, 361 off-balance sheet assets, 137–140 Nonergodic, stochastic processes, 185 “originate-and-distribute” model, Nonfinancial corporations, neoliberal failure of, 135 globalization’s effect on risk assessment, flaws as to, 138–139 generally, 272–274, 301

James Crotty - 9781784719029 Downloaded from Elgar Online at 09/27/2021 10:11:32AM via free access 424 Capitalism, Macroeconomics and Reality

accounting fraud, 294–297 slowdown in global aggregate agency theory, development of, 285 demand, 273–279, 281, 283–284 buybacks, 291–292 speculative bubble of 2000-2002, cash flow taken by financial agents, 294–297 289–293 stock options as pay component, changes in corporations’ objectives 287–289 and constraints, 274 stockholders and stock prices, changing financial markets, effect of, 286–289, 294–297 279–293 Norris, Floyd, 161 chronic excess capacity, 275 coerced investment, 276–277, 289 Obama, Barack, 144, 146, 365, 369, 372, coercive competition, 264–265, 275 373, 382 core industries, 275–276 Office of Financial Stability, 3 corespective competition, 274–275, Okun, Arthur, 346 280, 281 Oligopolies see Natural oligopolies debt, increase in, 278–279, 289–293 OPEC, 260 deregulation, 275 Optimal financial markets, theory of destructive competition, 274–279, generally, 15–16 282, 289, 292–297 debt as not dangerous, 31–32 dividend payments as percent of cash “event studies,” 22 flow, 291 leverage as not dangerous, 31–32 executive compensation, 287–289 testing of, 22, 23 financial or portfolio conception of Optimal security pricing, 15–16 corporations, effect of, 284–285 Orange County, 141 financialization of nonfinancial Originate-and-distribute model, 134–135, corporations, 2, 109, 297–300 142 GDP growth rates, 273 Oster, S., 249, 251 gross portfolio income, growth of, O’Sullivan, Mary, 251, 281, 282 299–300 OTC products, 124 IMF and World Bank imposition of Owner-manager conflict policies, 284 generally, 196–197 neoliberal paradox defined, 273–274 conflation of owners and managers, net real fixed investment, 277, 278, 197, 198–206 289 Keynesian models of conflation, organizational integration, 281–282 198–206 other miscellaneous financial assets, Minsky’s theory of instability, 54, growth of, 298–300 203–205 profit rates, 277–278, 294–297 Q theory, 201–202 real interest rates, 280, 283 semi-autonomy of owners and managers rentier capitalism, rise of, 279–280 generally, 205–210 rising public debt, 283–284 empirical evidence in support of, Schumpeter-Chandler managerial 210–212 firms, 280–283 Oyer, Paul, 156, 165 shareholder value movement, 286–289 Palmer, John, 341 shift to “impatient” financial markets, Paradox of neoliberalism 273, 282, 293 generally, 272–301 short-term survival strategies, neoliberal paradox defined, 273–274 adoption of, 273, 275, 281, political unpopularity of policies, 282–283, 285, 286, 293–297 407–408

James Crotty - 9781784719029 Downloaded from Elgar Online at 09/27/2021 10:11:32AM via free access Index 425

South Korean crisis, as reflected in, Prince, Charles, 135, 164 407–408 Public employees as austerity target, 377 Park, H.-J., 391 Partnoy, Frank, 139 Q theory, 197, 199, 201–202, 205, Paulson, Henry, 136, 142 208–210 Pension funds, 123 Quarterly Journal of Economics, 20, 44, Perelman, Michael, 251 52 “Perfect calm,” 30, 116, 124, 126 Quine, Willard, 18 Perfect financial markets see Efficient market hypothesis Rabin, Matthew, 14 Phelps, Edmund, 341 Rainmakers Philippon, T., 156–158, 165 apprenticeship process, 166–167 Philippon and Reshef study, 156–158, bonuses for see Bonus-driven 165 incentive system Phillips curve study, 342, 343 character traits of, 158–160 Phillips-Fein, Kim, 360, 365 defined, 151 Pigou, Arthur C., 180 excess supply of, 156, 165–168 Piketty, Thomas, 288 false value created by, 162 Piketty and Saez study, 288 Rajan, Raghuram, 118, 122 Piron, Robert, 58 Ramey, V., 247 Plender, John, 126 Ramey and Shapiro study, 247 Political Economy Research Institute, 3 “Rational expectations” Pollard, Sidney, 313, 314 generally, 3, 19, 27, 39–49, 161, 163 Pomerleano, Michael, 404 ergodic stochastic processes, 42–43 Porter, M., 251 Rauh, J., 165 Positivism Re-oligopolization, 266–268 generally, 5, 7, 15–20, 34–35 Reagan, Ronald, 363–364, 366, 368, 370, capital asset pricing model vs. 378, 380 Keynes-Minsky, 24–29 Rentier capitalism, 262, 279–280 econometrics, use of, 18 Reshef, A., 156–158, 165 empirical tests used to defend, 20–24 Rice, T., 117 realism of assumptions as irrelevant Richardson, M., 135–136 in evaluating, 15–20, 34–35 Richardson and Roubini study, 135–136 unrealistic assumptions and Great Risk Financial Crisis; illustrative degree of confidence distinguished, 46 examples, 30–34 higher risk leading to higher profits, Post Keynesian theory 116–124 credit rationing, 187–188 institutional investor incentives as fundamental uncertainty in, 185 increasing risk taking, 122 government economic policy, view New Financial Architecture and see of, 188–189 New Financial Architecture investment theory, 175–189 systemic risk, 138, 140, 179, 185 irreversibility of investment, 186 Value at Risk, 30–31, 121–122, New Keynesianism distinguished, 138–139 175–176, 179, 184–190 Robinson, Joan, 54, 59 nonergodic, stochastic processes in, Rodrik, Dani, 34–35, 389 185 Rogoff, Kenneth, 390 price rationing, 187–188 Romer, David, 178 speculative inflation during booms, Roosevelt, Franklin Delano, 358–360 187–188 passim

James Crotty - 9781784719029 Downloaded from Elgar Online at 09/27/2021 10:11:32AM via free access 426 Capitalism, Macroeconomics and Reality

Rotheim, R., 50 South Korean crisis Roubini, Nouriel, 133, 135–136 alleged collapse of economy, 387, Rubin, Robert, 146, 393 395–405 Russia, 262 austerity policies, imposition of, 263, Ryan, Paul, 379 389–395 capital accumulation rates, 398–399 Saez, Emmanuel, 288 capital productivity as factor, 397–400 Salomon Brothers, 159, 165 causes of, 283, 388–391, 395, 404 Sarel, M., 400 chaebol, role of, 388, 391, 392, 396, Say’s Law, 6, 8, 63, 77, 79, 245–246 403, 406 Schmitt, J, 262 crony capitalism as cause of, 404 Schumpeter, Joseph cross-country profitability generally, 4, 6, 273, 274 comparisons, 403–404 corespective competition see debt to foreign banks, increase in, 392 Corespective competition domestic profit time series, 401–403 creative destruction, 390 economic conditions during mid- natural oligopolies, theory of, 9 1990s, 387–388, 395–405 neoliberal micro theory compared, exports, increase in, 396–397 247, 250–255 “extreme conditionality,” 387, 390, SEC, 142, 295 392 Securities Industry and Financial GDP growth, 398 Markets Association, 33, 132, investment boom as irrational, 163 396–397 Serial acquirers, 294–295 liberalization policies as cause of, Shackle, G.L.S., 40, 44, 45, 48, 49, 51, 389, 392, 406 53, 56, 176 liquidity crisis, as, 387, 389, 390, 395 Shapiro, M., 247 neoliberal paradox as reflected in, Shareholder domination, 8, 207 407–408 Shareholder-value movement, 2–3 output-to-capital ratio, analysis of, Sharpe, S., 27 397–398 Sharpe, William, 17 overview of, 387–388, 406–408 Sherman, Howard, 333–334, 338 political effect of, 406–408 Shiller, Robert, 19, 59 post-crisis evaluation report, 390–391 Silver, Beverly, 279 profitability data during boom, Singh, A., 389 400–405 Skidelsky, Robert, 315, 320 response to, 387–395 Smith, Y., 30 “structural reforms,” 390, 392, Smith study, 30 393–394, 407–408 Social Security, 62, 357–361, 368, total factor productivity, measurement 374–379, 382 of, 398–400 Social structures of accumulation theory, Spamann, Holger, 153 260 Special Investment Vehicles, 130, 137 Solow, Robert, 19, 144–145 Static models, 5, 24, 178–180, 182–183 Son, W., 400 Steindl, J., 204, 216, 333 Sonnenfeld, Jeffrey, 295 Steinherr, A., 121 Sorenson, Theodore, 346 Stiglitz, Joseph, 14, 159, 374, 389 Sorkin, Andrew Ross, 159 Stiroh, Kevin, 117 South Korea “Structural reforms” generally, 265 generally, 1, 3 crisis in see South Korean crisis South Korean crisis, in, 392–393

James Crotty - 9781784719029 Downloaded from Elgar Online at 09/27/2021 10:11:32AM via free access Index 427

Stulz, R., 119 Unemployment Subprime mortgages, 118–119, 129, 135, class conflict theory of macropolicy, 137, 141 in, 342–343, 353 Summers, Lawrence, 21, 146, 393, 395, disequilibrium phenomenon, as, 180 407 Does Unemployment Need a Drastic Sweezy, Paul, 10, 204 Remedy?, 308 Sylos-Labini, P., 251 rate of, 260, 309, 326, 361, 362, 363, 380 Taiwan, 265 remedy according to Keynes, Tax cuts, 3, 10, 277, 347, 351, 357–359, 308–310 362–365, 368–382 Union Bank of Switzerland, 135 Telecom bust, 297 Unions Tett, Gillian, 134, 135, 137, 139, 140 generally, 262, 358–364 passim, 362, The Economic Consequences of the 377, 381 Peace, 307 attempts to control, 352–353 The Economist, 120, 123, 145, 155, 288, strikes, 339–340 296 wage struggle, 343–345 The End of Laissez-Faire, 310 Unknowability of future, 5, 7, 16, 20, The Financial Times, 126, 296 26–27, 44, 61, 198, 199, 228, 248 The General Theory, 20, 50, 54, 57–58, 59, Useem, Peter, 279, 286 180–181, 184, 197, 198, 325, 332 The Means to Prosperity, 325 Value at Risk, 30–31, 121–122, The Nation, 308 138–139 The Political Aspects of Full van Ark, B., 398 Employment, 329 Variato, Anna Marie, 175–189 The Treatise on Money, 187 Veneroso, F., 389 Theories of Surplus Value, 77, 82 Versailles Treaty, 307 Timmer, M., 398 Vickers, D., 44, 45, 176 Timmer and van Ark study, 398 Viniar, David, 138 Tobin, James Volcker, Paul, 1, 111, 115, 126, 130 generally, 8 Q theory, 197, 199, 201–202, 205, Wade, R., 389 208–210 Wade and Veneroso study, 389 Tract on Monetary Reform, 319 Wage and price controls, 340, 344–345, Tranquility, periods of, 54–55 351–353 Treasury Department, 284, 370 Wages, Price and Profit, 345 Trichet, Jean-Claude, 121 Wall Street Journal, 123, 131, 140, 154, Troubled Asset Relief Program, 144, 146 159, 164, 165, 250, 276, 339, 388, Tyco, 295 393, 408 Wall Street Watch, 142, 145 Uncertainty Walrasian theory, 42–43, 50, 51, 81, 189, generally, 5, 27, 30, 44–45, 248 190, 244 conditional stability and, 39–40, Weber, A., 141 49–64 Weiss, L., 391 credit rationing, as explanation for, Weisskopf, F., 260 187–188 Wells, H.G., 320 fundamental uncertainty in New Wessel, David, 297 Keynesian theory, 175–189, 248 Wilhelm, W., 166 instability distinguished, 59 Williams, E., 14, 22 psychological effects, 50–52, 181 Williams, K., 115

James Crotty - 9781784719029 Downloaded from Elgar Online at 09/27/2021 10:11:32AM via free access 428 Capitalism, Macroeconomics and Reality

Williamson, R., 119 WTO, 263, 269 Wolf, Martin, 140, 144 World Bank, 244, 263, 269, 272, 274, Xerox, 296 284 World War I, 307 Yoo, C.G., 391 WorldCom, 294–295, 296 Yoo, J.H., 389, 403

James Crotty - 9781784719029 Downloaded from Elgar Online at 09/27/2021 10:11:32AM via free access