Showing papers in "Cambridge Journal of Economics in 2005"
TL;DR: The applicability of complex systems theory in economics is evaluated and compared with standard approaches to economic theorising based upon constrained optimisation as mentioned in this paper, and it is argued that much of heterodox thought, particularly in neo-Schumpeterian and neo-Austrian evolutionary economics, can be placed within a complex systems perspective upon the economy.
Abstract: The applicability of complex systems theory in economics is evaluated and compared with standard approaches to economic theorising based upon constrained optimisation A complex system is defined in the economic context and differentiated from complex systems in physio-chemical and biological settings It is explained why it is necessary to approach economic analysis from a network, rather than a production and utility function perspective, when we are dealing with complex systems It is argued that much of heterodox thought, particularly in neo-Schumpeterian and neo-Austrian evolutionary economics, can be placed within a complex systems perspective upon the economy The challenge is to replace prevailing 'simplistic' theories, based in constrained optimisation, with 'simple' theories, derived from network representations in which value is created through the establishment of new connections between elements
315 citations
TL;DR: The authors discusses the major tenets of ecological economics, including value pluralism, methodological pluralism and multi-criteria policy assessment, and argues that these new theoretical and empirical findings are largely ignored in applied work and policy applications in environmental economics.
Abstract: This paper discusses the major tenets of ecological economics—including value pluralism, methodological pluralism and multi-criteria policy assessment. Ecological economics offers viable alternatives to the theoretical foundations and policy recommendations of neoclassical welfare economics. A revolution in neoclassical economics is currently taking place, and the core assumptions of welfare economics are being replaced with more realistic models of consumer and firm behaviour. This paper argues that these new theoretical and empirical findings are largely ignored in applied work and policy applications in environmental economics. As the only heterodox school of economics focusing on the human economy both as a social system and as one imbedded in the biophysical universe, and thus both holistic and scientifically based, ecological economics is poised to play a leading role in recasting the scope and method of economic science.
232 citations
TL;DR: In this paper, the authors contribute to further theoretical development of the concept of "organisational routine", and to elaborate the research agenda on organisational routines, which contribute to clarifying the concept and enabling its application in empirical research in the social sciences.
Abstract: The concept of an 'organisational routine' is central to the evolutionary theory of the firm. However, the concept itself is still unclear. There is not much consensus in the literature regarding its dimensions, its characteristics and its functions. Despite increasing use of the concept, not much conceptual progress has been made in recent years, as remarked by several of the leading writers on the topic. The objective of this paper is to contribute to further theoretical development of the concept of 'organisational routine', and to elaborate the research agenda on organisational routines. Both of these measures contribute to clarifying the concept and enabling its application in empirical research in the social sciences, thereby unlocking its potential for understanding organisations and organisational change. Several problems for conceptual progress are identified. Implications for the conceptualisation of 'organisational routines', and for the research agenda on organisational routines are drawn.
128 citations
TL;DR: In this article, the authors trace important shifts and cluster evolution in the healthcare industry and examine the implications of the rise of science-based clusters for economic geography and related policies, with a special focus on biosciences and their rise of biologics more generally at the expense of fine chemistry in drug development.
Abstract: This paper seeks to trace important shifts and cluster evolution in the healthcare industry. Its key aim is to examine the implications of the rise of science-based clusters for economic geography and related policies. A special focus is biosciences and the rise of 'biologics' more generally at the expense of fine chemistry in drug development. The old agglomerations of pharmacy are no longer leaders in knowledge exploration, as universities, research laboratories and medical schools take over research, they are beginning to lose prominence to dedicated biotechnology firms (DBFs) in knowledge examination, and retain their most important involvement as financiers and marketers of DBF exploitation knowledge. This has profound geographical as well as industry organisation equilibrium effects. Over-concentration of the bioscientific knowledge value chain has given rise to the new spatial policy practice of developing regional science strategies. Aspects of these are commented upon.
110 citations
TL;DR: In this paper, the authors argue that mathematical economics is unreasonably ineffective, because the mathematical assumptions are economically unwarranted; ineffective because mathematical formalizations imply non-constructive and uncomputable structures.
Abstract: In this paper I attempt to show that mathematical economics is unreasonably ineffective. Unreasonable, because the mathematical assumptions are economically unwarranted; ineffective because the mathematical formalizations imply non-constructive and uncomputable structures. A reasonable and effective mathematization of economics entails Diophantine formalisms. These come with natural undecidabilities and uncomputabilites. In the face of this, I conjecture that an economics for the future will be freer to explore experimental methodologies underpinned by alternative mathematical structures. The whole discussion is framed within the context of the celebrated Wignerian theme: The Unreasonable Effectiveness of Mathematics in the Natural Sciences.
90 citations
TL;DR: In this paper, the authors focus on an alternative perspective on inflation to that of the non-accelerating inflation rate of unemployment (NAIRU) and show that there are no automatic forces leading to a level of aggregate demand consistent with constant inflation.
Abstract: This paper focuses on an alternative perspective on inflation to that of the non-accelerating inflation rate of unemployment (NAIRU). It indicates that there are no automatic forces leading to a level of aggregate demand consistent with constant inflation. Inflationary pressures arise from conflict over income shares, and from cost elements, with the price of raw materials, especially oil, being the most important. There are supply-side factors impinging on the inflationary process, which arise from the level of productive capacity (relative to aggregate demand). The supply-side constraints are viewed as arising from capacity constraints, rather than from the operation of the labour market. Copyright 2005, Oxford University Press.
89 citations
TL;DR: This article pointed out that the continuing neglect of Marxists both of the co-operative movement and of the passages from Marx (and Engels) that present a system of producer cooperatives as a new production mode can be traced back to the late emergence of an economic theory of producer-cooperatives.
Abstract: This paper has a dual aim: first, to draw attention to a number of passages inwhich Marx explicitly extolled the cooperative movement and thereby confutethe wrong but widely held assumption that Marx was inimical to the marketand rejected cooperation as a production mode even for the transition period;second, to argue that the continuing neglect of Marxists both of the co-operative movement and of the passages from Marx (and Engels) that presenta system of producer cooperatives as a new production mode can be tracedback in part to the late emergence of an economic theory of producercooperatives.Key words: Marx, Marxism, Socialism and cooperative movementJEL classifications: B13, D23, D74
87 citations
TL;DR: The authors investigates the environment that saw the birth of the Cambridge Journal of Economics (CJE) at Cambridge (UK), in 1977, and the relationship that linked it to the direct pupils of Keynes.
Abstract: There have been strong ties between the Cambridge Journal of Economics (CJE) and the Cambridge School of Keynesian Economics, from the very beginning. In this paper, the author investigates the environment that saw the birth of the CJE at Cambridge (UK), in 1977, and the relationship that linked it to the direct pupils of Keynes. A critical question is explicitly examined: why didn't the 'Keynesian revolution' succeed in becoming a permanent winning paradigm? Some behavioural mistakes of the members of the Keynesian School may explain this lack of success, but only to a certain extent. In any case, there were and there still are remedies too. But what we are inheriting is a unique set of analytical building blocks (the paper lists eight of them) that makes this School of economics a viable (and in some directions definitely superior) alternative to mainstream economics. Admittedly, there is some important work still to be done. The paper highlights the need for a two-stage approach, addressing pure theory and extensive institutional analysis. It is argued that a combination of the two would strengthen the coherence of the theoretical foundations, and at the same time would provide a fruitful extension of economic analysis to empirical, institutional and economic dynamics investigations. Copyright 2005, Oxford University Press.
80 citations
TL;DR: In this article, the authors study whether companies located in regional agglomerations grow faster than isolated ones, and whether companies spun-off from universities have a better performance than start-ups.
Abstract: The paper maintains that biotechnology regions develop as complex systems: they start with star scientists in research universities, generating knowledge spillovers, then move progressively towards regional technology markets. In the process they attract venture capital (or modify the behaviour of existing venture capital firms with the addition of biotechnology portfolios). The routines of universities are also modified with the addition of intellectual property and technology transfer offices intervening as sellers in the newly created knowledge markets. The paper also considers whether companies located in regional agglomerations grow faster than isolated ones, and whether companies spun-off from universities have a better performance than start-ups. The study is based on about 90 Canadian-based publicly quoted biotechnology companies.
79 citations
TL;DR: Theories of growth and international trade are reviewed critically from the perspective of understanding persistent inter-country and inter-regional income inequality as discussed by the authors, and contrasts are drawn between structuralist and neoclassical approaches to explaining the income gap between rich and poor nations.
Abstract: Theories of growth and international trade are reviewed critically from the perspective of understanding persistent inter-country and inter-regional income inequality. Three separate literatures are considered for the insights they offer about international disparity: Classical political economy, the North-South trade models, and the 'new' growth and trade theories that incorporate increasing returns and/or product differentiation. Classical antecedents of the more recent theories are identified, and contrasts are drawn between structuralist and neoclassical approaches to explaining the income gap between rich and poor nations.
77 citations
TL;DR: In this paper, the blurring of organisational boundaries associated with 'networks' of organisations suggests the need to reconsider how work and employment are shaped by shifting inter-capital relations.
Abstract: The blurring of organisational boundaries associated with 'networks' of organisations suggests the need to reconsider how work and employment are shaped by shifting inter-capital relations. Traditional theories of the internalised employment relationship understate its inter-relationship with both the form of inter-capitalist competition and the type of inter-capitalist production relations. Also, existing theories of inter-organisational contracting do not adequately address how these are shaped by employment relations, both within and between organisations. An alternative approach provides a new perspective for considering forms of countervailing power to protect workers' interests in a capitalist system continuously shifting from integrated to non-integrated forms. Copyright 2005, Oxford University Press.
TL;DR: In this article, the role played by local knowledge spillovers (LKS) as a driver of regional innovative activity is investigated, and a typology of mechanisms through which regional agglomeration may stimulate learning and innovation at the firm level is derived.
Abstract: The paper throws new light on the debate about the role played by local knowledge spillovers (LKS) as a driver of regional innovative activity. It transcends the regional level of analysis that has been commonly adopted in the literature so far, using insights from the evolutionary theory of the firm. This makes it possible to derive a typology of mechanisms through which regional agglomeration may stimulate learning and innovation at the firm level. When this typology is brought to bear on the extant approaches in the debate, the contrasting viewpoints can be reconciled to some extent. The main conclusion is that little theoretical ground for the LKS debate remains.
TL;DR: In this paper, the authors show that the IS-MP-IA model is closely attached to the neoclassical synthesis and fails to take account of: (i) the recent empirical evidence on the short-run output-inflation trade-off, the recent work and evidence on interdependence of aggregate demand and supply, the limits of monetary policy and the consequences for demand-management policy of (i), (ii) and (iii).
Abstract: Romer has proposed an alternative macroeconomic framework, i.e., the IS-MP-IA model. Its proponents claim that it constitutes a ‘modern’ view of macroeconomics. We show that the new framework is closely attached to the neoclassical synthesis and, in addition, fails to take account of: (i) the recent empirical evidence on the short-run output-inflation trade-off, (ii) the recent work and evidence on the interdependence of aggregate demand and supply, (iii) the limits of monetary policy and (iv) the consequences for demand-management policy of (i), (ii) and (iii). Once all these aspects are incorporated, we have that short-run stabilization policy is non-neutral in the long run, loanable funds theory becomes irrelevant and aggregate demand becomes the crucial exogenous variable in the short run and, perhaps, also in the long run.
TL;DR: This paper explored four different possible forms of relationship between economics and psychology, which have different connotations in terms of the relative status of the two disciplines and focused on the future for one of these, psychological economics.
Abstract: This paper begins by exploring four different possible forms of relationship between economics and psychology, which have different connotations in terms of the relative status of the two disciplines. It then focuses on the future for one of these, psychological economics. After setting out the hardcore axioms and positive and negative heuristics of a research programme in psychological economics, it explores institutional and psychological barriers to the success of such a research programme in the context of both research and teaching.
TL;DR: In this article, a study was conducted to observe the development process and key success factors in three community enterprises adopting a Buddhist economic approach to development, which were established by weavers, farmers and housewives from three communities in the south of Thailand.
Abstract: This study was undertaken to observe the development process and key success factors in three community enterprises adopting a Buddhist economic approach to development. The enterprises were established by weavers, farmers and housewives from three communities in the south of Thailand. Data were obtained through in-depth interviews and observation with representatives of the groups and their supporters as they participated in community activities. Buddhist economics differs significantly from neoclassical economics in its recognition of ethic and moral issues. In addition to the objective of production or consumption to optimise profit or utility value, Buddhist economics also recognises that many non-financial factors which contribute to an individual's quality of life are important. The key success factor in the community enterprises which were studied was the process of 'good thinking', or the constructive use of wisdom among leaders and group members through the processes of 'right understanding' and 'right thought'. Economically efficient activities were developed through the use of an external factor--a 'good friend', comparable with social capital--and an internal factor--the employment of analytical thinking by members, comparable to the use of human capital. Neither factor can be created from physical capital but is derived from the process of learning and reviewing. Copyright 2005, Oxford University Press.
TL;DR: This article analyzed early reactions put forward by Cambridge economists David Champernowne and Joan Robinson to J. M. Keynes's treatment of the labour market in The General Theory, and introduced the concepts of monetary employment and critical levels of employment.
Abstract: This essay analyses early reactions put forward by Cambridge economists David Champernowne and Joan Robinson to J. M. Keynes's treatment of the labour market in The General Theory. Champernowne's and Robinson's critical reactions represented attempts to fill the gap of the determinants of changes in money-wages, which they both identified as a weak spot in the argument of the book. They rejected, albeit for different reasons, Keynes's notion of the point of full employment as an upper limit defined by the equality between the real wage rate and the marginal disutility of employment. Instead of Keynes's taxonomy of types of unemployment, Champernowne and Robinson introduced, respectively, the concepts of 'monetary employment' and 'monetary unemployment', and of 'critical levels' of employment. Copyright 2005, Oxford University Press.
TL;DR: In this paper, the authors introduce the notion of indeterminate goods, a new category of goods which can be compared with the classical framework of experience, search and credence goods.
Abstract: The purpose of this paper is to introduce a new category of goods, 'indeterminate goods', which will be compared with the classical framework of experience, search and credence goods (Nelson, 1970; Darby and Karni, 1973). This concept sheds new light on the nature and status of quality uncertainty through the following hypothesis: uncertainty about the product's quality can be shared by all agents of the market, and this uncertainty can be non-neutral and disrupt the market. We identify three types of shared uncertainty about the product's characteristics and the corresponding problems that can arise: shared uncertainty due to the emergence of a product (Hirschman, 1974), shared uncertainty concerning the past of a product (basing ourselves on the art market), and finally shared uncertainty regarding the future impacts of a product, through empirical data on product safety.
TL;DR: In this article, a large sample of publicly quoted UK firms is analysed within a model that explores the profit maximisation and managerial utility enhancement motives for giving. But the authors draw a distinction between the decision to participate in giving and the determination of the amount of corporate contributions, and find that among givers, the rate of giving is related positively to R&D intensity and rate of directors' remuneration, and corporate profitability and negatively to firm indebtedness.
Abstract: The charitable giving of a large sample of publicly quoted UK firms is analysed within a model that explores the profit maximisation and managerial utility enhancement motives for giving. The empirical method draws a distinction between the decision to participate in giving and the determination of the amount of corporate contributions. Firm size and advertising intensity are found to be positively associated with the probability of participation in giving. Stricter corporate governance and the rate of directors’ remuneration are negatively related to the probability of participation. Among givers, the rate of giving is related positively to R&D intensity, the rate of directors’ remuneration, and corporate profitability and negatively to firm indebtedness.
TL;DR: The authors argue that technological changes in analytic and computing methods are opening up new avenues of study, and the "low-hanging fruit" from previous approaches and methods have already been picked.
Abstract: Thispaper arguesthat,currently,significant changeistakingplaceineconomics because (1) technological changes in analytic and computing methods are opening up new avenues of study, and (2) the ‘low hanging fruit’ from previous approaches and methods have already been picked. It offers a vision of the future of economics that sees economists focusing less on the study of infinitely bright agents operating in information rich environments and more on the study of reasonably bright individuals operating in information-poor environments. Agent-based models and computer analysis of data will increase in importance, and deductive analytics will decrease in importance.
TL;DR: The emergence of technology systems is the result of interdependen t dynamics of generation and diffusion of complementary bits of localised technological knowledge as mentioned in this paper, which is the crucial element assessing the collective conditions under which technological knowledge is accumulated and diffused.
Abstract: The emergence of technology systems is the result of interdependen t dynamics of generation and diffusion of complementary bits of localised technological knowledge. Technological communication is the crucial element assessing the collective conditions under which technological knowledge is accumulated and diffused. The case study of the emerging Emilian technological system in the plastics sector shows that the synchronic and diachronic localised interactions among industrial dynamics, institutional R&D efforts and technological interrelatedness are the determinants of the systematic production, accumulation and distribution of localised technological knowledge, in turn explaining the origin and development of the technology system itself.
TL;DR: The authors argues for an explicit engagement of political economy with values, and presents a number of criticisms of the ethical limitations of both markets and neoclassical economics, and argues that Neoclassical theory is unlikely to be able to take on board this critique because of its commitment to Homo economicus and the ideal of the market.
Abstract: This paper argues for an explicit engagement of political economy with values, and presents a number of criticisms of the ethical limitations of both markets and neoclassical economics. Neoclassical theory is unlikely to be able to take on board this critique because of its commitment to Homo economicus and the ideal of the market. But this is not the case for political economy in the tradition of post-Keynesianism, Marxism and institutionalism. The reason why political economy has not exploited this advantage to any great extent has to do with the fear of many political economists that an engagement with values necessarily diminishes the scientific status of their approach. The paper presents six theses in order to convince them that this fear is fundamentally misconceived. Copyright 2005, Oxford University Press.
TL;DR: This paper investigated the empirical basis for the belief that unemployment makes people less employable, and that the existence of a pool of long-term unemployed people is therefore in itself a barrier to full employment.
Abstract: This paper investigates the empirical basis for the belief that unemployment makes people less 'employable', and that the existence of a pool of long-term unemployed people is therefore in itself a barrier to full employment. Drawing on data for Great Britain from the 1940s to the present day, it shows that this idea has arisen through misinterpretations of the statistical evidence. The resulting policies, besides diverting resources from the demand-side pro grammes appropriate to the true situation of structural unemployment, appear to have created a problem of the kind they were intended to address, by encouraging unemployed people to move onto sickness benefits.
TL;DR: The authors examined the methodology of Shaikh and Tonak (Measuring the Wealth of Nations, 1994) underlying their calculation of estimates of productive labour in the US economy from 1964 to 2001.
Abstract: This paper examines the methodology of Shaikh and Tonak (Measuring the Wealth of Nations, 1994) underlying their calculation of estimates of productive labour in the US economy from 1964 to 2001. The focus is not on the results but on the methods that generate them. The paper finds that the compromises made by Shaikh and Tonak because of data unavailability are unreliable, and that better approximations are possible. On this latter basis, the Shaikh and Tonak methodology can be used to provide the labour and wage estimates needed for empirical investigations in the surplus-based tradition. Copyright 2005, Oxford University Press.
TL;DR: In this article, the authors focus on the evolution of the concept of freedom in the work of Amartya Sen. They trace the development of Sen's thought from the capability analysis of the late 1970s to his more recent separation of freedom into its opportunity and process aspects.
Abstract: Following a brief review of the conception of freedom as employed in economic discourse, this paper focuses on the evolution of the concept of freedom in the work of Amartya Sen. It traces the development of Sen's thought from the capability analysis of the late 1970s to his more recent separation of freedom into its opportunity and process aspects. While broadly appreciative of Sen's development of the concept of positive freedom, the paper identifies some difficulties arising from his definition of capability as a set of options as well as from his separation of the opportunity and process aspects of freedom. Aspects of the relationship between Sen's conception of freedom and that of Marx are discussed briefly in the context of Sen's recent discussion of the market as a source of freedom. Copyright 2005, Oxford University Press.
TL;DR: In this article, the authors explore the relationship between economic and scientific specialisation for 17 manufacturing sectors and find considerable support for Marx's position that scientific and production specialisation are, often, tightly linked.
Abstract: This paper brings together data from 14 OECD countries on scientific publications, patents and production specialisation to explore the relationship between economic and production specialisation for 17 manufacturing sectors. Since Marx, there has been a fundamental debate in economics about the link between science and the economic system. Marx argued that the developments in the science system are strongly influenced by changes in the economic sphere, whereas Polanyi argued that developments in science are largely independent of economic sphere. Using a panel data model and econometric estimations at the sectoral-level, the paper assesses the two positions and finds considerable support for Marx’s position, that is, that scientific and production specialisation are, often, tightly linked.
TL;DR: Coase's political convictions changed from an early socialism to a later neo-liberalism as mentioned in this paper, which stands in apparent contrast to the theoretical consistency of his early ('The Nature of the Firm') and later ('The Problem of Social Cost') contributions to economics.
Abstract: That Coase's political convictions changed from an early socialism to a later neo-liberalism stands in apparent contrast to the theoretical consistency of his early ('The Nature of the Firm') and later ('The Problem of Social Cost') contributions to economics. Offering further evidence about his early views in particular, this paper takes a fresh look at Coase's views on competition and antitrust to show that he consistently stressed the role of what we shall call the principle of 'institutional direction', and that this principle involves an important criticism of both neo-liberal and socialist views on regulation and state intervention. Copyright 2005, Oxford University Press.
TL;DR: In this article, the authors analyzed the terms and conditions of the differentiated structure of rural credit with the advent of capitalist agriculture within the interventionist state, and found that the possibility of interlinkage between credit and all other structures is remote.
Abstract: This study, based on a primary field survey in rural West Bengal, analyses the terms and conditions of the differentiated structure of rural credit with the advent of capitalist agriculture within the interventionist state. The sample households are classified according to the economic classes of Patnaik as well as the standard acreage criterion. The possibility of interlinkage between credit and all other structures is remote. The average rate of interest is inversely related to ascending class status. There is a systematic association between rate of interest and the value of collateral on the one hand, and marketability of collateral and interest rates on the other.
TL;DR: The authors argue that globalisation can best be understood as the culminating stage of these stretching and deepening processes, and that commodity relations now embrace the entire planet and the latter in the sense that they cover not merely goods, or the capacities for producing goods, but also every other type of capacity and every other kind of outcome.
Abstract: While recognising that most pre-capitalist formations exhibited elements of commodity exchange, Marx argued that capitalism differentiates itself as a genuine commodity system by virtue of two interdependent processes having reached a critical stage of development: a 'stretching' of commodity relations to the point where production for the market displaces subsistence production as the primary form; and a 'deepening' of commodity relations such that these encompass not only goods and services but the capacities for producing them. This paper argues that globalisation can best be understood as the culminating stage of these stretching and deepening processes: the former in the sense that commodity relations now embrace the entire planet and the latter in the sense that they cover not merely goods, or the capacities for producing goods, but also every other type of capacity and every other type of outcome. Copyright 2005, Oxford University Press.
TL;DR: In this article, the authors test the consistency of these outsourcing decisions with the predictions derived from the transaction cost perceptions of a panel of economists, finding that little consistency is evident between actual outsourcing patterns and the predictions of the (Williamsonian) transactions cost model, suggesting that a competence or resource-based approach may be relevant to understanding firm outsourcing.
Abstract: Are the perceptions of professional economists on transaction costs consistent with make-or-buy decisions made within firms? The answer may have important implications for transaction cost research. Data on firms' outsourcing during the new product development process are taken from a largescale survey of UK, German and Irish manufacturing plants, and we test the consistency of these outsourcing decisions with the predictions derived from the transaction cost perceptions of a panel of economists. Little consistency is evident between actual outsourcing patterns and the predictions of the (Williamsonian) transactions cost model derived from the panel of economists. There is, however, evidence of a systematic pattern to the differences, suggesting that a competence or resource-based approach may be relevant to understanding firm outsourcing, and that firms are adopting a strategic approach to managing their external relationships. © Cambridge Political Economy Society 2005; all rights reserved.
TL;DR: The authors argue that the modern endogenous growth theorists actually misrepresent Young's concept of increasing returns and Marshall's distinction between internal and external economies, and that they need to explain what they had in mind with greater clarity, rigour and depth.
Abstract: Endogenous growth theory is now fashionable. It seeks to explain why per capita income growth in capital abundant countries is often faster than in capital poor countries and defies the operation of diminishing returns. This theory, which took off with Romer and Lucas, often makes Allyn Young's concept of increasing returns and Marshall's distinction between internal and external economies its starting point but considers their treatment of the subject as not sufficiently rigorous. The modern endogenous growth theorists then claim to explain what they had in mind with greater clarity, rigour and depth. This paper argues that this is not the case as these theorists actually misrepresent Young in important ways.