[Front Matter and Table of Contents]: The front matter includes the title page, copyright information, and a description of the Trade Policy Research Centre. It also provides a detailed Table of Contents for the volume, outlining essays on international economic order, the monetary system, exchange-rate policies, and industrial development. [List of Tables and Biographical Notes]: This section contains a list of tables featured in the essays and comprehensive biographical notes for the contributors. The contributors are prominent economists and policy advisers from various international institutions and universities, specializing in international trade, finance, and development. [Preface]: Written by Hugh Corbet, the Preface explains the origins of the volume as a tribute to Herbert Giersch. It discusses the role of the Trade Policy Research Centre in international economic policy and provides an overview of the volume's structure, which addresses the disarray in the world economy following the collapse of the Bretton Woods system. [Herbert Giersch: Scholar, Policy Adviser and Public Figure]: Fritz Machlup provides a detailed biographical and professional tribute to Herbert Giersch. The essay covers Giersch's early life in Silesia, his academic career at Münster, Saarbrücken, and Kiel, and his influential role as a 'wise man' on the German Council of Economic Experts. Machlup highlights Giersch's advocacy for flexible exchange rates and monetary stability, often in opposition to government policy, and his leadership in the 'Saarbrücken School' of economics. [Notes, References, and Abbreviations]: This segment contains the endnotes and references for Fritz Machlup's introductory essay on Herbert Giersch, followed by a list of common abbreviations used throughout the volume, such as GATT, IMF, and OPEC. [Coordination or Competition among National Macro-economic Policies?]: Roland Vaubel examines the economic case for international coordination of national stabilization policies under flexible exchange rates. He critiques the shift from the Bretton Woods system to explicit negotiations and 'summitry,' arguing that decentralization is generally more efficient. The essay systematically evaluates arguments for coordination based on assignment theory, international externalities, and game theory. Vaubel concludes that most international spillovers are pecuniary rather than technological, meaning they do not constitute market failure. He advocates for 'currency competition' and the pre-announcement of policies as a means of providing the public good of knowledge, suggesting that competition acts as a discovery procedure superior to the cartels formed by government collusion. [Strong and Weak Elements in the Concept of European Integration]: Jan Tumlir analyzes the crisis of European integration through the lens of the theory of economic order and federalism. He distinguishes between a 'strong conception' of integration—focused on the common market, private property rights, and the rule of law—and a 'weak' or 'romantic' conception based on discretionary policy harmonization and centralizing federalism. Tumlir argues that the attempt to coordinate substantive policies without a common political process leads to sub-optimal outcomes like the Common Agricultural Policy (CAP) and industrial protectionism. He suggests that the crisis can be overcome by reasserting the integrity of Community law and the principle of undistorted competition, rather than through further bureaucratic centralization. [The Logic of the International Monetary Non-system]: W. M. Corden analyzes the current international monetary 'non-system' as a form of international laissez-faire. He argues that while it appears chaotic and unplanned, it possesses an internal logic rooted in decentralized decision-making by governments and private actors. Corden identifies two primary motivations for government intervention: short-term 'smoothing' and 'exchange-rate protection' (leaning against the wind). He explains how world equilibrium is established through interest-rate responsiveness and the historical role of U.S. 'benign neglect'. Finally, he applies welfare economics to argue that this market-based system is likely more efficient and flexible than centralized alternatives, provided information flows are improved. [Key Currencies and Financial Centres]: Charles Kindleberger explores the hierarchical organization of the international monetary system, focusing on the role of key currencies and financial centers. He discusses the historical transition of financial dominance from centers like Amsterdam to London and eventually New York. Kindleberger argues that financial centers benefit from significant economies of scale and perform critical functions, most importantly acting as a 'lender of last resort' during crises. He expresses concern over the current decline of the dollar's dominance, suggesting that a system with no clear leader or a contested duumvirate (e.g., Dollar vs. Deutsche Mark) is inherently unstable and prone to prolonged depressions. [Gold and the Uneasy Case for Responsibly Managed Fiat Money]: William Fellner examines the feasibility and desirability of returning to a gold standard in a modern inflationary environment. He presents three main propositions: first, that a return to gold is currently impractical for restoring stability; second, that the absence of a gold anchor makes non-inflationary policy harder to achieve; and third, that the debate should remain open for the long term. Fellner provides a detailed historical analysis of the 'real price' of gold, arguing that recent price volatility is driven by output irresponsiveness and portfolio-mix incentives rather than just inflationary psychology. He concludes that while gold cannot currently solve the 'irrationality' of managed fiat money, future technological shifts or discoveries could change this outlook. [Interest Payments on Commercial Bank Reserves to Curb Euro-money Markets]: Herbert Grubel analyzes the growth of Euro-currency markets and proposes a policy of paying interest on domestic commercial bank reserves to curb their expansion. He argues that Euro-banking's growth is primarily a response to the 'implicit tax' of zero-interest reserve requirements in domestic markets. By paying interest on these reserves, central banks could eliminate the competitive advantage of offshore markets, reduce 'trade diversion' inefficiencies, and improve domestic monetary control. Grubel addresses the fiscal costs of this proposal, arguing that the net loss to government revenue is manageable and would be partially offset by increased corporate taxes and the return of financial business to domestic jurisdictions. [Conclusion: Euro-currency Banking and Domestic Reserve Policy]: The concluding section of the essay on Euro-currency banking summarizes the harmful effects of non-uniform taxation, specifically trade diversion. It argues that paying interest on domestic required bank deposits is the most efficient solution to eliminate these costs without requiring complex international agreements. [Notes and References (Essay on Euro-currency Banking)]: Comprehensive references and explanatory notes for the preceding essay on Euro-currency banking, citing works by Einzig, Grubel, Tobin, and various central bank reports. [Autonomous and Induced Items in the Balance of Payments]: Fritz Machlup provides a verbal restatement of conflicting theories regarding the 'forces' that determine the balance of international payments. He distinguishes between accounting identities (truisms) and causal relationships, critiquing the confusion between the two. The essay examines five rival approaches to determining which international transactions are autonomous versus induced, covering the current account, capital movements, and monetary reserves. Machlup also explores the differences between flow equilibrium and stock adjustment models, particularly under different exchange rate regimes (fixed, managed, and freely flexible). [The Monetary Approach to the Balance of Payments and Stock Demand for Money]: This segment concludes a discussion on the gold standard and provides bibliographic references for the monetary approach to the balance of payments. It further explores the 'stock demand for money,' contrasting Marshall's focus on commodity prices with Keynes's focus on security prices (liquidity preference), and explains how hoarding is represented by shifts in demand curves. [Exchange-rate Intervention: Arbitrage and Market Efficiency]: Robert Z. Aliber examines the transition from Bretton Woods to floating exchange rates and the subsequent increase in official intervention. He argues that intervention is justified by deviations from 'goods market efficiency' and purchasing power parity, rather than just money market efficiency. The essay details the mechanics of intervention, including the role of sterilization and interest rate differentials, and advocates for forward market intervention over spot market intervention due to its operational and economic advantages. Aliber concludes that intervention is effective in dampening disruptive real exchange rate movements caused by short-term financial market disturbances. [Notes and References: Exchange-rate Intervention]: Bibliographic notes and references for Robert Z. Aliber's essay on exchange-rate intervention, citing works by Friedman, Nurkse, Wallich, and others regarding floating rates and market behavior. [Disillusionment in the Conduct of Exchange-rate Policies]: Olaf Sievert discusses the widespread dissatisfaction with flexible exchange rates, noting that they have been more volatile than proponents like Giersch and Sohmen originally anticipated. He critiques the failure of the purchasing power parity hypothesis to provide stable medium-term expectations and explores how real exchange rate movements create conflicts between domestic goals like price stability and employment. Sievert argues that central banks, including the Bundesbank, have lost autonomy as they are forced to react to exchange-rate-driven shocks. He concludes by suggesting that the only alternative to 'muddling through' is a rigorous global policy of price level stabilization (zero inflation) to see if it reduces exchange rate volatility. [Part IV: General Economic Policies - 10 Economic Malaise and a Positive Programme for a Benevolent and Enlightened Dictator]: Gottfried Haberler analyzes the economic malaise of the 1970s and 1980s, characterized by stagflation and declining productivity. He proposes a hypothetical 'benevolent and enlightened dictator' model to explore ideal economic policies without political constraints. The program emphasizes strict monetary growth targets, fiscal restraint to reduce deficits and tax burdens, and the restoration of market competition by curbing the power of labor unions and monopolies. Haberler critiques monetarist and rational expectations models that ignore institutional rigidities, arguing that involuntary unemployment is a real consequence of wage stickiness. He concludes that external shocks like oil price rises and perceived 'secular stagnation' are best addressed by fostering a flexible, competitive private sector through deregulation and reduced government intervention. [Conclusion: Inflation, Growth, and the North-South Dialogue]: The concluding section of the essay argues that inflation is the root of modern economic malaise and is inextricably linked to growth and employment. It critiques the Brandt Commission's alarmist view of the North-South income gap, asserting that global tensions are primarily East-West rather than North-South. The author suggests that the best way for industrial nations to aid the 'South' is by stabilizing their own economies and liberalizing trade to provide markets for exports. [Notes and References (Haberler Essay)]: Comprehensive endnotes and references for the preceding essay, citing works by Giersch, Schumpeter, Lange, and the Brandt Commission. Topics include the economic theory of socialism, index clauses against inflation, and critiques of the New International Economic Order. [The Supply-side Approach to Macro-economic Policy: the West German Experience]: Gerhard Fels analyzes the shift from Keynesian demand management to supply-oriented policies in major industrial nations, with a specific focus on West Germany's experience since 1975. He contrasts the German approach—which emphasizes wage moderation and structural adjustment—with the American Reaganomics model. The text details the role of the German Council of Economic Experts and Herbert Giersch's 'Rentabilitätspolitik' in fostering an environment for private investment and innovation. Fels also explores how supply policy interacts with energy crises, public deficits, and exchange rate dynamics, arguing that supply-side measures helped Germany recover by improving investment profitability without triggering inflation. [Notes and References (Fels Essay)]: Citations for Gerhard Fels' essay, referencing the annual reports of the German Council of Economic Experts (Sachverständigenrat) and Herbert Giersch's work on growth policy. [Welfare Economics, Public Finance and Selective Aid Policies]: Alan Peacock examines the failures inherent in government interventions designed to correct 'market failure.' He argues that selective aid policies often suffer from 'collective failure' due to the strategic behavior of firms and the utility-maximizing motives of bureaucrats. Using models of bureaucracy from Niskanen and others, Peacock explains how information asymmetry leads to cost inflation and X-inefficiency. The essay provides a detailed case study of the British Concorde project as a prime example of resource misallocation driven by political and bureaucratic interests rather than economic viability. He concludes that Paretian welfare analysis often ignores the institutional constraints and interest group pressures that distort policy outcomes. [Notes and References (Peacock Essay)]: References for Alan Peacock's essay on welfare economics and selective aid, citing key figures in public choice theory and regulation, including Stigler, Buchanan, and Niskanen, as well as specific studies on British industrial subsidies and the Concorde project. [Industrial Prospects and Policies in the Developed Countries: Introduction and Trade Patterns]: Bela Balassa examines the growth of manufactured imports from developing countries and its impact on developed economies. He argues against the claim that these imports have harmed developed-country industries, noting that increased export earnings in developing nations led to a significant export surplus for developed nations. The section analyzes trade data from 1963-1978 and attributes slow industrial growth in developed countries to oil price shocks and domestic policy factors rather than import competition. [Protectionist Actions and Trade Projections (1978-1990)]: This section analyzes the rise and subsequent easing of protectionist measures in developed countries following the 1974-75 recession. It discusses the Tokyo Round, the Multi-fibre Arrangement (MFA), and shifts in government industrial aids in France, Britain, and Japan. Balassa provides projections for manufactured trade through 1990, suggesting that despite import growth, developed countries will maintain an increasing export surplus and benefit from specialization in high-technology industries. [Intra-Industry Trade: Horizontal and Vertical Specialization]: Balassa explores intra-industry specialization between developed and developing countries, distinguishing between horizontal (product differentiation) and vertical (parts and components) trade. Using the US textile and clothing industry as a case study, he demonstrates that productivity growth has a much larger impact on employment than trade flows. He argues that developed nations benefit by upgrading to higher value-added products while importing simpler goods, a process that facilitates industrial adjustment. [Empirical Evidence and Comparative Analysis of Intra-Industry Specialization]: This segment provides empirical data on the extent of intra-industry specialization across the US, West Germany, the UK, and Japan between 1969 and 1979. It cites studies by Finger, Kreinin, and Wolter showing increased trade similarity between developed and newly industrializing countries (NICs). The data highlights that the UK and Germany have the highest levels of intra-industry trade due to European Community integration, while Japan lags behind due to historical protectionism. [Conclusions and Policy Implications for Trade Adjustment]: The concluding section argues that intra-industry trade minimizes adjustment costs because firms can reorganize production internally. Balassa uses the economic transition of New England from textiles to high-technology as evidence of successful labor transferability. He recommends transforming the Multi-fibre Arrangement (MFA) into an adjustment tool and establishing an international safeguards code to manage sudden import surges while ensuring temporary and transparent protectionist measures. [Notes and References (Continued)]: Continuation of bibliographic notes and references citing works by Herbert Giersch, Bela Balassa, and World Bank publications regarding industrialization and trade policies in the 1970s. [Appendix: Formulas for Intra-Industry Specialisation]: An appendix detailing the mathematical evolution of intra-industry specialization measurements. It discusses the original unweighted average ratios and subsequent adjustments for trade imbalance proposed by Grubel, Lloyd, and Aquino, concluding with the specific formula used in the current essay. [Re-appraisal of Foreign Trade Strategies for Industrial Development]: Juergen B. Donges evaluates the effectiveness of foreign trade strategies in less developed countries (LDCs). He contrasts the failures of protectionist import-substitution policies—which led to slow growth, low labor absorption, and balance-of-payments constraints—with the success of outward-looking, export-oriented strategies. The essay argues that adhering to the principle of comparative advantage is essential for sustained industrialization and efficient resource allocation, even in a changing international environment characterized by new protectionism in developed nations. [Notes on Import Substitution and Export Performance]: This segment provides detailed notes and references regarding the economic performance of developing and semi-industrialized countries. It discusses the limitations of import-substitution policies in Southern Europe and Turkey, while contrasting them with the export-oriented successes of South Korea and Taiwan. The text addresses the debate over whether authoritarian regimes are necessary for such economic transitions and notes the shift toward market forces in China. It also provides extensive bibliographic references for manufactured export performance and the impact of trade policies on domestic equity. [Industrialization Policies and Foreign Direct Investment]: A collection of notes focusing on the role of Foreign Direct Investment (DFI) and international trade negotiations in development. It examines how export-oriented DFI can integrate with local economies rather than remaining enclaves, while warning against excessive concessions. The segment also reviews the impact of external shocks like the oil crisis on non-OPEC developing countries, the results of the Tokyo Round of GATT, and the 'fallacy of composition' argument regarding comparative advantage. It concludes with a critique of infant-industry incentives and the risks of government-steered industrial development. [Impact of the Energy Crisis on the Third World and the Prospects for Adjustment]: Lutz Hoffmann analyzes the energy situation in developing countries, distinguishing between commercial and non-commercial energy sources (like fuel wood and agricultural waste). He argues that while developing countries use a small share of global energy, their demand is growing rapidly due to industrialization and urbanization. The essay highlights the severe ecological consequences of non-commercial energy use, such as deforestation, and the economic strain placed on oil-importing LDCs by rising fuel prices and debt service ratios. [Determinants of Energy Demand and Sectoral Intensities]: This section examines the technical determinants of energy demand, comparing sectoral energy intensities between industrial and developing nations. Hoffmann finds that industrial energy intensity is surprisingly similar across both groups. He explores how development strategies—specifically the choice between capital-intensive import substitution and labour-intensive export orientation—dictate a country's energy trajectory. The text argues that while industrialization inevitably increases energy demand, the specific path taken (and the resulting income distribution) can significantly alter the total energy bill. [Price Response, Technological Change and Energy Supply Flexibility]: Hoffmann discusses the flexibility of energy demand and supply in the Third World. He notes that energy demand in LDCs is more price-elastic than often assumed due to the potential for substituting commercial energy back to non-commercial sources. The segment provides a detailed breakdown of the massive financing requirements (estimated at $560 billion for 1980-1990) needed to expand energy capacity. It evaluates the roles of the World Bank, OPEC, and private banks in financing these projects, while warning that even successful investment will likely see oil import bills continue to rise as a percentage of export revenue. [Notes and References for Energy Crisis Essay]: Bibliographic references and explanatory notes for Lutz Hoffmann's essay on the energy crisis in the Third World. Includes citations for World Bank working papers, energy conference reports, and academic studies on energy-capital complementarity and regional energy consumption patterns. [Part VI: Economic, Social and Political Thought - The Perception of Man and Justice and the Conception of Political Institutions]: Karl Brunner examines the intellectual conflict in Western democracies regarding the role of government, tracing it to two fundamental strands: the perception of man and the conception of justice. He contrasts the 'Scottish' model (REMM: Resourceful, Evaluating, Maximizing Man) with the 'French' sociological model of man as a conformist role-player. Brunner further distinguishes between 'end-state' (outcome-based) and 'process' conceptions of justice, arguing that end-state views necessitate an expansive, coercive state that ignores the inherent incentives and 'fundamental ambivalence' of political structures. He critiques the institutionalization of moral standards and the shift toward normative 'human rights' as erosions of descriptive property rights, ultimately arguing that the REMM model and processual justice better explain the failures of government regulation and the importance of a minimal state. [Conclusion: The Future of Western Democracies and Political Structure]: The concluding section of the essay argues that the prevailing sociological perception of man and end-state views of justice lead inevitably toward a socialist society. It advocates for a 'Scottish Model' of man and a process-oriented perception of justice, suggesting that a minimal, decentralized political structure is the only environment where genuine moral decisions and individual conscience can flourish without the interference of state police powers. [Notes and References]: A comprehensive list of citations and references supporting the preceding essay, including mentions of works by Hayek, Nozick, and various economic seminars. [Schumpeter and Hayek: On Some Similarities in Their Thought]: Erich Streissler explores the intellectual relationship between Joseph Schumpeter and Friedrich von Hayek within the context of the Austrian School. He argues that despite perceived differences, both thinkers share roots in the Austrian tradition, particularly regarding the real effects of credit, the role of the entrepreneur, and the dual nature of the price system as both informative and potentially misleading. The essay also discusses the influence of Marxist economic analysis on the early Austrian school's theories of capital and money. [Notes and References (Streissler Essay)]: Bibliographic references for Erich Streissler's essay, citing key works by Marx, Wieser, Böhm-Bawerk, Mises, and Hayek, as well as modern economic journals. [Index]: A detailed alphabetical index for the entire volume 'Reflections on a troubled world economy', covering topics from agricultural modernization to zero-sum games in balance of payments.
The front matter includes the title page, copyright information, and a description of the Trade Policy Research Centre. It also provides a detailed Table of Contents for the volume, outlining essays on international economic order, the monetary system, exchange-rate policies, and industrial development.
Read full textThis section contains a list of tables featured in the essays and comprehensive biographical notes for the contributors. The contributors are prominent economists and policy advisers from various international institutions and universities, specializing in international trade, finance, and development.
Read full textWritten by Hugh Corbet, the Preface explains the origins of the volume as a tribute to Herbert Giersch. It discusses the role of the Trade Policy Research Centre in international economic policy and provides an overview of the volume's structure, which addresses the disarray in the world economy following the collapse of the Bretton Woods system.
Read full textFritz Machlup provides a detailed biographical and professional tribute to Herbert Giersch. The essay covers Giersch's early life in Silesia, his academic career at Münster, Saarbrücken, and Kiel, and his influential role as a 'wise man' on the German Council of Economic Experts. Machlup highlights Giersch's advocacy for flexible exchange rates and monetary stability, often in opposition to government policy, and his leadership in the 'Saarbrücken School' of economics.
Read full textThis segment contains the endnotes and references for Fritz Machlup's introductory essay on Herbert Giersch, followed by a list of common abbreviations used throughout the volume, such as GATT, IMF, and OPEC.
Read full textRoland Vaubel examines the economic case for international coordination of national stabilization policies under flexible exchange rates. He critiques the shift from the Bretton Woods system to explicit negotiations and 'summitry,' arguing that decentralization is generally more efficient. The essay systematically evaluates arguments for coordination based on assignment theory, international externalities, and game theory. Vaubel concludes that most international spillovers are pecuniary rather than technological, meaning they do not constitute market failure. He advocates for 'currency competition' and the pre-announcement of policies as a means of providing the public good of knowledge, suggesting that competition acts as a discovery procedure superior to the cartels formed by government collusion.
Read full textJan Tumlir analyzes the crisis of European integration through the lens of the theory of economic order and federalism. He distinguishes between a 'strong conception' of integration—focused on the common market, private property rights, and the rule of law—and a 'weak' or 'romantic' conception based on discretionary policy harmonization and centralizing federalism. Tumlir argues that the attempt to coordinate substantive policies without a common political process leads to sub-optimal outcomes like the Common Agricultural Policy (CAP) and industrial protectionism. He suggests that the crisis can be overcome by reasserting the integrity of Community law and the principle of undistorted competition, rather than through further bureaucratic centralization.
Read full textW. M. Corden analyzes the current international monetary 'non-system' as a form of international laissez-faire. He argues that while it appears chaotic and unplanned, it possesses an internal logic rooted in decentralized decision-making by governments and private actors. Corden identifies two primary motivations for government intervention: short-term 'smoothing' and 'exchange-rate protection' (leaning against the wind). He explains how world equilibrium is established through interest-rate responsiveness and the historical role of U.S. 'benign neglect'. Finally, he applies welfare economics to argue that this market-based system is likely more efficient and flexible than centralized alternatives, provided information flows are improved.
Read full textCharles Kindleberger explores the hierarchical organization of the international monetary system, focusing on the role of key currencies and financial centers. He discusses the historical transition of financial dominance from centers like Amsterdam to London and eventually New York. Kindleberger argues that financial centers benefit from significant economies of scale and perform critical functions, most importantly acting as a 'lender of last resort' during crises. He expresses concern over the current decline of the dollar's dominance, suggesting that a system with no clear leader or a contested duumvirate (e.g., Dollar vs. Deutsche Mark) is inherently unstable and prone to prolonged depressions.
Read full textWilliam Fellner examines the feasibility and desirability of returning to a gold standard in a modern inflationary environment. He presents three main propositions: first, that a return to gold is currently impractical for restoring stability; second, that the absence of a gold anchor makes non-inflationary policy harder to achieve; and third, that the debate should remain open for the long term. Fellner provides a detailed historical analysis of the 'real price' of gold, arguing that recent price volatility is driven by output irresponsiveness and portfolio-mix incentives rather than just inflationary psychology. He concludes that while gold cannot currently solve the 'irrationality' of managed fiat money, future technological shifts or discoveries could change this outlook.
Read full textHerbert Grubel analyzes the growth of Euro-currency markets and proposes a policy of paying interest on domestic commercial bank reserves to curb their expansion. He argues that Euro-banking's growth is primarily a response to the 'implicit tax' of zero-interest reserve requirements in domestic markets. By paying interest on these reserves, central banks could eliminate the competitive advantage of offshore markets, reduce 'trade diversion' inefficiencies, and improve domestic monetary control. Grubel addresses the fiscal costs of this proposal, arguing that the net loss to government revenue is manageable and would be partially offset by increased corporate taxes and the return of financial business to domestic jurisdictions.
Read full textThe concluding section of the essay on Euro-currency banking summarizes the harmful effects of non-uniform taxation, specifically trade diversion. It argues that paying interest on domestic required bank deposits is the most efficient solution to eliminate these costs without requiring complex international agreements.
Read full textComprehensive references and explanatory notes for the preceding essay on Euro-currency banking, citing works by Einzig, Grubel, Tobin, and various central bank reports.
Read full textFritz Machlup provides a verbal restatement of conflicting theories regarding the 'forces' that determine the balance of international payments. He distinguishes between accounting identities (truisms) and causal relationships, critiquing the confusion between the two. The essay examines five rival approaches to determining which international transactions are autonomous versus induced, covering the current account, capital movements, and monetary reserves. Machlup also explores the differences between flow equilibrium and stock adjustment models, particularly under different exchange rate regimes (fixed, managed, and freely flexible).
Read full textThis segment concludes a discussion on the gold standard and provides bibliographic references for the monetary approach to the balance of payments. It further explores the 'stock demand for money,' contrasting Marshall's focus on commodity prices with Keynes's focus on security prices (liquidity preference), and explains how hoarding is represented by shifts in demand curves.
Read full textRobert Z. Aliber examines the transition from Bretton Woods to floating exchange rates and the subsequent increase in official intervention. He argues that intervention is justified by deviations from 'goods market efficiency' and purchasing power parity, rather than just money market efficiency. The essay details the mechanics of intervention, including the role of sterilization and interest rate differentials, and advocates for forward market intervention over spot market intervention due to its operational and economic advantages. Aliber concludes that intervention is effective in dampening disruptive real exchange rate movements caused by short-term financial market disturbances.
Read full textBibliographic notes and references for Robert Z. Aliber's essay on exchange-rate intervention, citing works by Friedman, Nurkse, Wallich, and others regarding floating rates and market behavior.
Read full textOlaf Sievert discusses the widespread dissatisfaction with flexible exchange rates, noting that they have been more volatile than proponents like Giersch and Sohmen originally anticipated. He critiques the failure of the purchasing power parity hypothesis to provide stable medium-term expectations and explores how real exchange rate movements create conflicts between domestic goals like price stability and employment. Sievert argues that central banks, including the Bundesbank, have lost autonomy as they are forced to react to exchange-rate-driven shocks. He concludes by suggesting that the only alternative to 'muddling through' is a rigorous global policy of price level stabilization (zero inflation) to see if it reduces exchange rate volatility.
Read full textGottfried Haberler analyzes the economic malaise of the 1970s and 1980s, characterized by stagflation and declining productivity. He proposes a hypothetical 'benevolent and enlightened dictator' model to explore ideal economic policies without political constraints. The program emphasizes strict monetary growth targets, fiscal restraint to reduce deficits and tax burdens, and the restoration of market competition by curbing the power of labor unions and monopolies. Haberler critiques monetarist and rational expectations models that ignore institutional rigidities, arguing that involuntary unemployment is a real consequence of wage stickiness. He concludes that external shocks like oil price rises and perceived 'secular stagnation' are best addressed by fostering a flexible, competitive private sector through deregulation and reduced government intervention.
Read full textThe concluding section of the essay argues that inflation is the root of modern economic malaise and is inextricably linked to growth and employment. It critiques the Brandt Commission's alarmist view of the North-South income gap, asserting that global tensions are primarily East-West rather than North-South. The author suggests that the best way for industrial nations to aid the 'South' is by stabilizing their own economies and liberalizing trade to provide markets for exports.
Read full textComprehensive endnotes and references for the preceding essay, citing works by Giersch, Schumpeter, Lange, and the Brandt Commission. Topics include the economic theory of socialism, index clauses against inflation, and critiques of the New International Economic Order.
Read full textGerhard Fels analyzes the shift from Keynesian demand management to supply-oriented policies in major industrial nations, with a specific focus on West Germany's experience since 1975. He contrasts the German approach—which emphasizes wage moderation and structural adjustment—with the American Reaganomics model. The text details the role of the German Council of Economic Experts and Herbert Giersch's 'Rentabilitätspolitik' in fostering an environment for private investment and innovation. Fels also explores how supply policy interacts with energy crises, public deficits, and exchange rate dynamics, arguing that supply-side measures helped Germany recover by improving investment profitability without triggering inflation.
Read full textCitations for Gerhard Fels' essay, referencing the annual reports of the German Council of Economic Experts (Sachverständigenrat) and Herbert Giersch's work on growth policy.
Read full textAlan Peacock examines the failures inherent in government interventions designed to correct 'market failure.' He argues that selective aid policies often suffer from 'collective failure' due to the strategic behavior of firms and the utility-maximizing motives of bureaucrats. Using models of bureaucracy from Niskanen and others, Peacock explains how information asymmetry leads to cost inflation and X-inefficiency. The essay provides a detailed case study of the British Concorde project as a prime example of resource misallocation driven by political and bureaucratic interests rather than economic viability. He concludes that Paretian welfare analysis often ignores the institutional constraints and interest group pressures that distort policy outcomes.
Read full textReferences for Alan Peacock's essay on welfare economics and selective aid, citing key figures in public choice theory and regulation, including Stigler, Buchanan, and Niskanen, as well as specific studies on British industrial subsidies and the Concorde project.
Read full textBela Balassa examines the growth of manufactured imports from developing countries and its impact on developed economies. He argues against the claim that these imports have harmed developed-country industries, noting that increased export earnings in developing nations led to a significant export surplus for developed nations. The section analyzes trade data from 1963-1978 and attributes slow industrial growth in developed countries to oil price shocks and domestic policy factors rather than import competition.
Read full textThis section analyzes the rise and subsequent easing of protectionist measures in developed countries following the 1974-75 recession. It discusses the Tokyo Round, the Multi-fibre Arrangement (MFA), and shifts in government industrial aids in France, Britain, and Japan. Balassa provides projections for manufactured trade through 1990, suggesting that despite import growth, developed countries will maintain an increasing export surplus and benefit from specialization in high-technology industries.
Read full textBalassa explores intra-industry specialization between developed and developing countries, distinguishing between horizontal (product differentiation) and vertical (parts and components) trade. Using the US textile and clothing industry as a case study, he demonstrates that productivity growth has a much larger impact on employment than trade flows. He argues that developed nations benefit by upgrading to higher value-added products while importing simpler goods, a process that facilitates industrial adjustment.
Read full textThis segment provides empirical data on the extent of intra-industry specialization across the US, West Germany, the UK, and Japan between 1969 and 1979. It cites studies by Finger, Kreinin, and Wolter showing increased trade similarity between developed and newly industrializing countries (NICs). The data highlights that the UK and Germany have the highest levels of intra-industry trade due to European Community integration, while Japan lags behind due to historical protectionism.
Read full textThe concluding section argues that intra-industry trade minimizes adjustment costs because firms can reorganize production internally. Balassa uses the economic transition of New England from textiles to high-technology as evidence of successful labor transferability. He recommends transforming the Multi-fibre Arrangement (MFA) into an adjustment tool and establishing an international safeguards code to manage sudden import surges while ensuring temporary and transparent protectionist measures.
Read full textContinuation of bibliographic notes and references citing works by Herbert Giersch, Bela Balassa, and World Bank publications regarding industrialization and trade policies in the 1970s.
Read full textAn appendix detailing the mathematical evolution of intra-industry specialization measurements. It discusses the original unweighted average ratios and subsequent adjustments for trade imbalance proposed by Grubel, Lloyd, and Aquino, concluding with the specific formula used in the current essay.
Read full textJuergen B. Donges evaluates the effectiveness of foreign trade strategies in less developed countries (LDCs). He contrasts the failures of protectionist import-substitution policies—which led to slow growth, low labor absorption, and balance-of-payments constraints—with the success of outward-looking, export-oriented strategies. The essay argues that adhering to the principle of comparative advantage is essential for sustained industrialization and efficient resource allocation, even in a changing international environment characterized by new protectionism in developed nations.
Read full textThis segment provides detailed notes and references regarding the economic performance of developing and semi-industrialized countries. It discusses the limitations of import-substitution policies in Southern Europe and Turkey, while contrasting them with the export-oriented successes of South Korea and Taiwan. The text addresses the debate over whether authoritarian regimes are necessary for such economic transitions and notes the shift toward market forces in China. It also provides extensive bibliographic references for manufactured export performance and the impact of trade policies on domestic equity.
Read full textA collection of notes focusing on the role of Foreign Direct Investment (DFI) and international trade negotiations in development. It examines how export-oriented DFI can integrate with local economies rather than remaining enclaves, while warning against excessive concessions. The segment also reviews the impact of external shocks like the oil crisis on non-OPEC developing countries, the results of the Tokyo Round of GATT, and the 'fallacy of composition' argument regarding comparative advantage. It concludes with a critique of infant-industry incentives and the risks of government-steered industrial development.
Read full textLutz Hoffmann analyzes the energy situation in developing countries, distinguishing between commercial and non-commercial energy sources (like fuel wood and agricultural waste). He argues that while developing countries use a small share of global energy, their demand is growing rapidly due to industrialization and urbanization. The essay highlights the severe ecological consequences of non-commercial energy use, such as deforestation, and the economic strain placed on oil-importing LDCs by rising fuel prices and debt service ratios.
Read full textThis section examines the technical determinants of energy demand, comparing sectoral energy intensities between industrial and developing nations. Hoffmann finds that industrial energy intensity is surprisingly similar across both groups. He explores how development strategies—specifically the choice between capital-intensive import substitution and labour-intensive export orientation—dictate a country's energy trajectory. The text argues that while industrialization inevitably increases energy demand, the specific path taken (and the resulting income distribution) can significantly alter the total energy bill.
Read full textHoffmann discusses the flexibility of energy demand and supply in the Third World. He notes that energy demand in LDCs is more price-elastic than often assumed due to the potential for substituting commercial energy back to non-commercial sources. The segment provides a detailed breakdown of the massive financing requirements (estimated at $560 billion for 1980-1990) needed to expand energy capacity. It evaluates the roles of the World Bank, OPEC, and private banks in financing these projects, while warning that even successful investment will likely see oil import bills continue to rise as a percentage of export revenue.
Read full textBibliographic references and explanatory notes for Lutz Hoffmann's essay on the energy crisis in the Third World. Includes citations for World Bank working papers, energy conference reports, and academic studies on energy-capital complementarity and regional energy consumption patterns.
Read full textKarl Brunner examines the intellectual conflict in Western democracies regarding the role of government, tracing it to two fundamental strands: the perception of man and the conception of justice. He contrasts the 'Scottish' model (REMM: Resourceful, Evaluating, Maximizing Man) with the 'French' sociological model of man as a conformist role-player. Brunner further distinguishes between 'end-state' (outcome-based) and 'process' conceptions of justice, arguing that end-state views necessitate an expansive, coercive state that ignores the inherent incentives and 'fundamental ambivalence' of political structures. He critiques the institutionalization of moral standards and the shift toward normative 'human rights' as erosions of descriptive property rights, ultimately arguing that the REMM model and processual justice better explain the failures of government regulation and the importance of a minimal state.
Read full textThe concluding section of the essay argues that the prevailing sociological perception of man and end-state views of justice lead inevitably toward a socialist society. It advocates for a 'Scottish Model' of man and a process-oriented perception of justice, suggesting that a minimal, decentralized political structure is the only environment where genuine moral decisions and individual conscience can flourish without the interference of state police powers.
Read full textA comprehensive list of citations and references supporting the preceding essay, including mentions of works by Hayek, Nozick, and various economic seminars.
Read full textErich Streissler explores the intellectual relationship between Joseph Schumpeter and Friedrich von Hayek within the context of the Austrian School. He argues that despite perceived differences, both thinkers share roots in the Austrian tradition, particularly regarding the real effects of credit, the role of the entrepreneur, and the dual nature of the price system as both informative and potentially misleading. The essay also discusses the influence of Marxist economic analysis on the early Austrian school's theories of capital and money.
Read full textBibliographic references for Erich Streissler's essay, citing key works by Marx, Wieser, Böhm-Bawerk, Mises, and Hayek, as well as modern economic journals.
Read full textA detailed alphabetical index for the entire volume 'Reflections on a troubled world economy', covering topics from agricultural modernization to zero-sum games in balance of payments.
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