This paper determines that not only did Reagan face a difficult and already determine economic path set by years of mismanagement, but the systems that were implemented under his Administration were the most significant economic changes created in decades.
The study finds casual evidence of significant negative effect on short-run growth and growth relative to counter-factual forecast growth in countries with weak instututions; creating growth disappointments prior to private and public resource windfalls. This effect is termed the presource curse. For a giant oil or gas discovery, between 1988 to 2010, the study estimates an average growth disapppointment effect of 0.83 percentage points, measured as the average annual gap between forecast and actual growth over the five years following a discovery. Further, the estimated effect varies by the size of the discovery, increasing to a 1.77 percentage points gap in the case of a super giant discoveries. The estimated effect is inversely related to the quality of political institutions, and driven by countries with lower institutional quality at the time of the discovery, consistent with the similar long-run results documented in the resource curse literature. For countries with below-threshold institutional quality, the growth disappointment effect is larger, measured as 1.35 percentage points in annual terms. There is no measured growth disappointment effect for countries with strong institutions. Using the synthetic control method we confirm our findings for a selection of countries above and below the institutional quality threshold. The findings suggest that studies of the resource curse that focus only on the effects of resource exploitation or examine only long-run growth effects may overlook important short-run growth disappointments following discoveries, and the way countries respond to news shocks.
Literature on the causes and consequences of volatility is growing by the day, however. Some of the leading explanations for output volatility include the role played by macroeconomic distortions, low levels of financial sector development and weak political institutions. Popular accounts of volatility in developing countries are based around the role of terms of trade fluctuations. The story is deceptively simple. Growth in a typical developing country may be more volatile by virtue of its specialization in primary commodities. Since primary commodity prices are more volatile in global mmarkets, developing countries are more susceptible to terms of trade fluctuations - and, thereby - greater output volatility.
This paper argues that a country's geographical characteristics can be an important determinant of its trade structure. In particular, it highlights the adverse effects of remoteness for export patterns and exposure to growth shocks resulting in high levels of volatility. Focusing on structural causes of volatility, this paper concludes that there is considerable empirical support for geography-based explanations for volatility. The effect of geography on volatility surves even after controlling for other determinants of volatility traditionally considered in the literature. The analysis in this paper is based on a forthcoming article in the Journal of Development Economics (see Malik and Temple (2009); an earlier more detailed working paper version is Malik and Temple (2006)).
We test the model's predictions using a panel of US states over the period 1963-2007. Our identification strategy rests on the constitutionally entrenched differences in gubernatorial terms limits that provide plausibly exogenous cross-state variation in political time horizon, and aggregate national TFP shocks that are exogenous to invdividual states. Our more conservative estimates indicate that a one standard deviation positive TFP shock induces an increase of approximately $494 in real per capita public debt in politically myopic states. Political Myopia, Public Debt, and Economic Growth Revised Dec 17
- Kampuchea: Politics, Economics, and Society research papers examine one of the thirty six volumes that examines the practice of Marxist doctrines in different countries.
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Smith’s notion of individual-centred analysis of political economy did not go unchallenged. The German American economist Friedrich List (1789–1846) developed a more-systematic analysis of mercantilism that contrasted his national system of political economy with what he termed Smith’s “cosmopolitical” system, which treated issues as if national borders and interests did not exist. In the mid-19th century communist historian and economist Karl Marx (1818–83) proposed a class-based analysis of political economy that culminated in his massive treatise Das Kapital, the first volume of which was published in 1867.
From the 1930s Keynesianism dominated not only domestic economic policy but also the development of the post-World War II Bretton Woods international economic system, which included the creation of the International Monetary Fund (IMF) and the World Bank. Indeed, Keynesianism was practiced by countries of all political complexions, including those embracing capitalism (e.g., the United States and the United Kingdom), social democracy (e.g., Sweden), and even fascism (e.g., the Nazi Germany of Adolf Hitler). In the 1970s, however, many Western countries experienced “stagflation,” or simultaneous high unemployment and inflation, a phenomenon that contradicted Keynes’s view. The result was a revival of classical liberalism, also known as “neoliberalism,” which became the cornerstone of economic policy in the United States under President Ronald Reagan (1981–89) and in the United Kingdom under Prime Minister Margaret Thatcher (1979–90). Led by the American economist Milton Friedman and other proponents of monetarism (the view that the chief determinant of economic growth is the supply of money rather than fiscal policy), neoliberals and others argued that the state should once again limit its role in the economy by selling off national industries and promoting free trade. Supporters of this approach, which influenced the policies of international financial institutions and governments throughout the world, maintained that free markets would generate continued prosperity.
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Political economy emerged as a distinct field of study in the mid-18th century, largely as a reaction to mercantilism, when the Scottish philosophers Adam Smith (1723–90) and David Hume (1711–76) and the French economist François Quesnay (1694–1774) began to approach this study in systematic rather than piecemeal terms. They took a secular approach, refusing to explain the distribution of wealth and power in terms of God’s will and instead appealing to political, economic, technological, natural, and social factors and the complex interactions between them. Indeed, Smith’s landmark work—An Inquiry into the Nature and Causes of the Wealth of Nations (1776), which provided the first comprehensive system of political economy—conveys in its title the broad scope of early political economic analysis. Although the field itself was new, some of the ideas and approaches it drew upon were centuries old. It was influenced by the individualist orientation of the English political philosophers Thomas Hobbes (1588–1679) and John Locke (1632–1704), the Realpolitik of the Italian political theorist Niccolò Machiavelli (1469–1527), and the inductive method of scientific reasoning invented by the English philosopher Francis Bacon (1561–1626).
Comparative political economy studies interactions between the state, markets, and society, both national and international. Both empirical and normative, it employs sophisticated analytic tools and methodologies in its investigations. Rational-choice theorists, for example, analyze individual behaviour and even the policies of states in terms of maximizing benefits and minimizing costs, and public-choice theorists focus on how policy choices are shaped or constrained by incentives built into the routines of public and private organizations. Modeling techniques adapted from econometrics are often applied to many different political economic questions.