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1. Efficiency, Finance, and Varieties of Industrial Policy: Guiding Resources, Learning, and Technology for Sustained Growth

Author:
Akbar Norman and Joseph E. Stiglitz
Publication Date:
11-2016
Content Type:
Book
Institution:
Columbia University Press
Abstract:
Industrial policy, once relegated to resource allocation, technological improvements, and the modernization of industries, should be treated as a serious component of sustainability and developmental economics. A rich set of complimentary institutions, shared behavioral norms, and public policies have sustained economic growth from Britain's industrial revolution onwards. This volume revisits the role of industrial policy in the success of these strategies and what it can offer developed and developing economies today. Featuring essays from experts invested in the expansion of industrial policies, topics discussed include the most effective use of industrial policies in learning economies, development finance, and promoting investment in regional and global contexts. Also included are in-depth case studies of Japan and India's experience with industrial policy in the banking and private sector. One essay revisits the theoretical and conceptual foundations of industrial policy from a structural economics perspective and another describes the models, packages, and transformation cycles that constitute a variety of approaches to implementation. The collection concludes with industrial strategies for facilitating quality growth, realizing more sustainable manufacturing development, and encouraging countries to industrialize around their natural resources.
Topic:
Economics, Industrial Policy, Natural Resources, and Finance
Political Geography:
Global Focus
Publication Identifier:
9780231542777
Publication Identifier Type:
ISBN

2. Pseudo-wealth Fluctuations and Aggregate Demand Effects

Author:
Martin Guzman and Joseph E. Stiglitz
Publication Date:
04-2015
Content Type:
Working Paper
Institution:
Institute for New Economic Thinking (INET)
Abstract:
This paper presents a theory of pseudo-wealth in a model that displays aggregate demand externalities. With heterogeneous beliefs and a market for exploiting those differences in beliefs, pseudo-wealth will be created–i.e. the sum of expected wealth of all the individuals will be larger than what it is feasible for the society. Under some conditions, those perceptions will lead to larger levels of consumption of (tradable and non-tradable) goods, leisure, and borrowing than in a world with common beliefs. If those differences in beliefs disappear, pseudo-wealth will disappear, leading to adjustments in behavior that amplify the initial decrease in expected wealth. That is, we provide a simple general equilibrium model in which the destruction of pseudo-wealth amplifies the effects of the initial disturbance, leading to large decreases in economic activity. Importantly, this downturn is not associated with any change in the state variables that describe the economy. More generally, the paper shows that completing markets (in this case by creating a market for bets) may imply lower output both in the present and in the future, raising unsettling questions on criteria for welfare analysis.
Topic:
Markets, Inequality, Finance, Macroeconomics, Welfare, and Wealth
Political Geography:
Global Focus