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This paper analyzes the developmental trade-offs involved in multilateral versus regional-bilateral strategies of integration into the international economy. I contrast the regulations that guide policy in the areas of trade, investment, and intellectual property in the World Trade Organization (WTO) and in regional-bilateral agreements between the US and developing countries. Both strategies of integration feature similar trade-offs, in that developing countries gain increased market access and opportunities for specialization in exchange for diminished space for use of industrial policy instruments to create new productive capacities. However, the trade-offs are intensified in the case of regional-bilateral agreements: countries receive more market access, but in exchange make significantly deeper concessions regarding the management of inward investment and intellectual policy. I argue that countries whose integration into the international economy is guided by their obligations as members of the WTO still have opportunities to implement industrial strategies that are designed to alter comparative advantages and achieve upward mobility in the international economic order, but the obligations under the regional-bilateral strategy greatly circumscribe these options. The paper thus points to the need for new terms of reference in the debate over ‘policy space’ in the international political economy. In analyzing contemporary development strategies, the most useful contrast is not between the alternatives that countries have under the WTO and the alternatives that countries had in the past under the WTO's predecessors, but between a constraining multilateral environment and even more constraining regional and bilateral environments that condition increased market access on the sacrifice of the very tools that countries have historically used to capture the developmental benefits of integration into the international economy. [ABSTRACT FROM AUTHOR]

Defense and commercial trade offsets (also known as countertrade or industrial participation) are valued in the tens of billions of dollars each year andoften accompany the export of advanced technological goods. An offset is any type of non-monetary compensation that a procuring government requires an exporting firm to provide as a condition of the sale and generally commits the exporting firm to spend a certain percentage of the value of the sale in the procuring country. This paper examines 1) how procuring governments use offsets to achieve their goals, and 2) the economic and national security implications of offsets. [ABSTRACT FROM AUTHOR]

Curiously and in spite of its name, very few business cycle theories actually treat it as a cycle. Mainstream economists, for example, model all macroeconomic fluctuations as a function of exogenous forces. In their view, the economy remains at full employment indefinitely unless impacted by some external event. Post Keynesian economists disagree strongly with this characterization, arguing instead that business-cycle fluctuations are endogenously generated. The goal of this paper is to compare the explanatory power of four business cycle models - three mainstream and one Post Keynesian - for the U.S. economy since 1971. While the test employed is a simple one, the results are very clear: no model's performance comes even close to that of the one based on Keynes's seventy-year old analysis. [ABSTRACT FROM AUTHOR]

Practical monetary policy concerns and recent theoretical developments have revived interest in the concept of a "natural" equilibrium real interest rate. The natural real interest rate is potentially an important concept for monetary policy makers and some researchers have suggested that the concept of a "real interest rate gap" can be used to evaluate the stance of monetary policy or even set policy. Obtaining an estimate for the equilibrium real interest rate, however, is not straightforward, and the existence of alternative approaches to this task generates uncertainty about those estimates. In this paper, we discuss some conceptual, policy, and modeling issues pertaining to the U.S. equilibrium interest rate. Such issues include the distinction between "natural" and "neutral" real interest rates, the determination of the natural real interest rate in an open economy context, the different ways that productivity may affect the natural equilibrium real interest rate, and the sensitivity of theoretical measures of the natural equilibrium real interest rates to various parameterizations. [ABSTRACT FROM AUTHOR]

How do crises shape policy possibilities? While some scholars cast crises as material shocks, this paper offers a Post Keynesian or constructivist theory of crises as events that agents interpret. It contrasts opposing Galbraithian and classical interpretations of the 1962 steel crisis and the 2000-2001 California energy crisis. Whereas Galbraithian interpretations of the former stressed abuses of market power and legitimated wage-price guideposts, classical interpretations of the latter stressed regulatory excesses and delayed the imposition of price caps. This paper concludes that the absence of wage-price guidelines compelled the post-1970s use of austerity to limit inflation, explaining reduced U.S. growth. [ABSTRACT FROM AUTHOR]

The political and economic crisis in Europe is often viewed as an indirect consequence of the global financial and economic breakdowns caused by the U.S. "subprime" crisis. European governments themselves tend to underestimate Europe's responsibility for the crisis and seem to prefer to manage the symptoms of the crisis rather than pursue a real recovery from it. This paper argues that the enforced policies are far from achieving an appropriate economic solution for the Eurozone. Moreover, it suggests that, although the European domestic debt situation is very close to the American one, their most recent evolutions and their main causes differ. If the growth of the American debt can partly be explained by macroeconomics imbalances, the causes of the growth of the European domestic debt must be found in a change in the behavior of financial sector agents. The conclusion advocates for a more radical European policy to solve the debt bubble. [ABSTRACT FROM AUTHOR]

An important tenet of a burgeoning ‘law and finance’ literature is that stock market development is contingent upon corporate law offering ample protection to shareholders. This paper addresses this claim, using as its departure point developments occurring in the United States between 1930 and 1970. It shows that, contrary to what the law and finance literature would predict, during this period and throughout the twentieth century generally the US lacked corporate law that provided extensive protection to shareholders. It also points out that while federal securities legislation introduced in the mid-1930s bolstered investor protection, this reform effort did not energise the stock market in the manner implied by law and finance analysis. [ABSTRACT FROM PUBLISHER]

A number of recent articles have used different financial market instruments to measure near term expectations of the federal funds rate and the high-frequency changes in these instruments around Federal Open Market Committee announcements to measure monetary policy shocks. This article evaluates the empirical success of a variety of financial market instruments in predicting the future path of monetary policy. All of the instruments we consider provide forecasts that are clearly superior to those of standard time series models at all of the horizons considered. Among financial market instruments, we find that federal funds futures dominate all the other securities in forecasting monetary policy at horizons out to six months. For longer horizons, the predictive power of many of the instruments we consider is very similar. In addition, we present evidence that monetary policy shocks computed using the current-month federal funds futures contract are influenced by changes in the timing of policy actions that do not influence the expected course of policy beyond a horizon of about six weeks. We propose an alternative shock measure that captures changes in market expectations of policy over slightly longer horizons. [ABSTRACT FROM AUTHOR]

Under George W. Bush, the United States has chosen to revolutionize world affairs by abandoning successful forms of hegemonic governance, based on the institutionalization of collective economic and security regimes, in favor of militarism, or the pursuit of global domination through force. Starting from a critique of structuralist approaches, this paper examines the ideational transformation of the American right and situates it within the context of the US's emergence in 1991 as a unipolar strategic actor and as the core state in the newly globalized capitalist political economy. While these synchronous transformations considerably augmented America's autonomy, giving the US the opportunity to reconfigure the world system to its advantage, one must distinguish between the current imperial expansionism of the revived and expanded US national security state and earlier forms of US hegemonic rule. The aim: to account for a fundamental shift of the way in which the US has governed the capitalist world system since 1945. [ABSTRACT FROM AUTHOR]

In response to the recent spate of financial crises in East Asia (1997-98), the IMF has established a core set of international standards to regulate market behaviour in the global South. These standards are embodied in 11 modules that comprise the IMF's Reports on the Observance of Standards and Codes (ROSCs). Both content and form of the ROSCs warrant further consideration. That said, the main objective of this paper is to explain how and why one particular ROSC, namely corporate governance, has become standardised. And, more importantly, to address the question of whose interests are served. In doing so the essay suggests that, despite the claim that the international standard of corporate governance embodies 'universal principles', the definition advanced in the ROSes intentionally draws on the Anglo-American variant. This imposed standardisation of corporate governance serves two overlapping goals. First, it seeks to stabilise the international financial system by ensuring that emerging markets adhere to the principles of a neoliberal open market economy. Second, by placing a greater emphasis on 'shareholder value' than other types of corporate governance, it protects the interests of institutional investors based in market-centric systems such as that of the USA. [ABSTRACT FROM AUTHOR]

The Sino-US agreement regarding China's accession to the World Trade Organization (WTO) in late 1999 came as a surprise to many observers. How and why did the Chinese reach the agreement in view of the impasses in the negotiation that occurred earlier in the year? These impasses included the collapse of the WTO talks during Zhu's visit to the USA in April, the NATO bombing of the Chinese embassy in Belgrade in May, and the deadlock between the Chinese and US negotiators in November. Drawing on published sources as well as experts' insights, this paper examines the Chinese leadership's decision-making process and its reasons for concluding the agreement. It suggests that the exclusive decision-making circle of top Chinese leaders circumvented the opposition to the agreement and facilitated the negotiations. These leaders, especially Jiang and Zhu, favoured an agreement because they believed WTO membership could improve China's international relations, trade conditions, the outcomes of reform at home, and China's leverage over Taiwan. The closed decision making on the WTO also left the Chinese leaders with a challenging task: educating officials and the population about the WTO rules and possible impacts while ensuring that they abide by the rules. [ABSTRACT FROM AUTHOR]

The article offers a look on the goals, plans, and priorities in Soviet Union and U.S. competition in terms of economy. Analysts and some published articles drew an opposing views and lines of thought on the Soviet economy. It is the purpose of this article to attempt to distinguish fact from fancy insofar as available knowledge of the Soviet economy will permit. It also aimed to shed some light on the query about the long-range industrial growth prospects for the Soviet Union and the United States. In addition, it tries to evaluate how fast is Soviet industry catching up with American industry.

Discussions of capitalism in agriculture as of 1983, suggest that the classical Marxist texts are outmoded. These critics, however, offer little in the way of empirical support for their claims. When data on the development of the U.S. agriculture are examined, they confirm the classical theorists. The development of the U.S. agriculture has been characterized by an increase in scale, in capital investment and in the importance of wage labor. This paper also argues that the development of agriculture in the U.S. confirms V. I. Lenin's early work. But if Lenin's description is comprehensive, his explanations are not. He emphasized the importance of market forces to the exclusion of all else. He did not anticipate the enormous role of the state in orchestrating the advance of the U.S. agricultural capitalism. Indeed, a growing body of literature supports the idea that state intervention propelled the development of capitalism in the U.S. agriculture. This essay updates Lenin's discussion of U.S. agriculture and speculates on the role of the state in its transformation. What is less clear is whether European agriculture diverged from classical expectations. A comparative study of farm structure and state policy might go a long way towards revising and elaborating classical theory.

Over the past few decades, financial markets became increasingly deregulated and household debt expanded, sometimes rapidly. It is thus possible that greater deregulation led to improved credit access and lower cost of credit for typically underserved groups, such as minorities and low-income families, relative to their counterparts. Credit access is measured here by loan denials, discouraged applications. The cost of credit is measured by debt payments relative to debt. Differences in credit access and the cost of credit should have diminished over time, particularly after 2000, after large-scale deregulation had taken place. Differences by demographic groups over time are tested using multivariate tests based on data from the Federal Reserve's Survey Consumer Finances from 1989 to 2004. While some minority groups found increasing credit access after 2000, credit became increasingly more expensive relative to whites due to a less advantageous composition of debt or higher interest rate differentials. Importantly, growing differences in debt composition and interest rates contradict the expectation of credit market equalization after deregulation. [ABSTRACT FROM AUTHOR]

Typically, the standard of living is measured by incomes and wealth. But this political scientist believes a core benefit of a middle class is economic security. He says that what is truly harming the middle-class way of life is rising insecurity that government and corporations no longer ameliorate. [ABSTRACT FROM AUTHOR]

Contrary to the writings of many political analysts, there are many fronts on which to battle the United States. Iran has considered opening another front by leading an assault on the U.S. dollar. Will it succeed? Our writer thinks it will not, partly because, as of now, the dollar's sources of strength are considerable. But he realizes that the dollar could come under more serious pressure in coming years. [ABSTRACT FROM AUTHOR]

A model of aggregate wage and price setting is developed that nests competing hypotheses concerning the role of worker' aspirations and bargaining power in the wage bargain. It is shown that although aspirations and bargaining power always affect inflation in the short run, there is disagreement as to whether or not they influence macroeconomic performance in the long run. Empirical results suggest that a model in which aspirations and bargaining power affect the long-run rate of unemployment best fits the data and most accurately forecasts the rate of inflation. The implications of this result for the potential future performance of the U.S. economy and for macroeconomic policy are explored. [ABSTRACT FROM AUTHOR]

The article examines the burden of reconciling low unemployment with low inflation, an issue that has plagued political economists in the United States since the late 1960s. The Organization for Economic Cooperation and Development (OECD) has reported that the average annual rates for both inflation and unemployment rose from the 1960s to 1979, but since then unemployment has continued rising due to political policy in the workplace. The article discusses how institutionalized worker insecurity has played a role in lowering inflation constraint in the United States.

The article focuses on the report of the American Institute of Physics submitted to the Manpower Office of the National Security Resources Board proposing recommendations for mobilization. Henry L. Barton, director of the American Institute of Physics, suggested that appropriate regulations be mandated to expand the scope of Selective Service to include Scientific and Technological Service as well as Military Service. The report also includes a proposal to create a National Board of Scientific and Technological Personnel to insure proper utilization of resources.

The article discusses the Marshall Plan for European recovery and the foreign policy of the U.S. The author reflects that the foreign policy of the U.S. has shifted from negotiating with the U.S.S.R. for peace to implementing economic assistance programs to Europe, or the so-called Marshall Plan. He suggests on using aid as a political weapon to be able to reach agreement with the Soviet Union through the exchange of goods between eastern and western Europe. He opines that for the Marshall Plan to be effective, European countries must initiate self-help plans and mutual assistance among these countries.

The substantial increase in economic inequality in favor of the upper income group in the United States and many other developed and developing nations during the past 30 years has become a major concern in public policy. Modifications of the standard measures of inequality, the Lorenz curve and Gini index, are proposed that better reflect the decline in the share of income received by the poor and middle portions of the income distribution relative to the upper end. A second pair of curves based on the fractions of either the middle or lower portion of the income curve that has the same share as the topu% and the areas between them and the line of equality are introduced. The proposed curves and related measures indicate that a noticeably greater change in the U.S. income distribution occurred during the 1967–2013 time period than are observed in the Lorenz curve and Gini index. The maximum difference between the proposed curves for the income and wealth data in the United Kingdom's 2010–2012 survey are greater than that of the Lorenz curve. [ABSTRACT FROM PUBLISHER]

This article analyzes the economic policies of U.S. President Ronald Reagan. Despite a budget and trade deficit which provided the opportunities to invest for a more productive future the total social investments have fallen. The author of this article suggests that while the new economic orthodoxy had promised a miracle, it delivered a debacle. The supply-siders were promised lower taxes without government deficits and without cuts in needed government services. They delivered tax cuts and wound up with government deficits despite taking to the domestic social programs. The monetarist ended up presiding over the recession they had created-the most severe in the postwar era. The new orthodoxy succeeded in strengthening the hand of business on all fronts of labor, consumers, government, but it failed to induce business to invest. The financial speculation spree of wild proportions was present instead of an economic boom. With lower taxes leaving corporations with much needed liquid cash investments were made only in paper bonds with lower interest rates.

Since the 1970s, corporate governance in the United States has become increasingly beholden to Wall Street. This trend is so prominent that the resulting formation is increasingly known as money manager capitalism. This article explores some of the reasons behind this change, and its implications for the American economy. [ABSTRACT FROM AUTHOR]

The article presents an analysis on the factors that caused the 2008 global financial crisis in the U.S. It discusses various explanations of the crisis and the solutions offered by economists from the four schools of thought which include Neoclassicals, Keynesians, Institutionalists and Marxists. It also provides useful insight and view from the different schools of thought regarding the government's response to address the problem and the economic imbalances of the nation. Furthermore, it explores the Marxists' concept on the systemic causes of the crisis and its suggestion on the need for the government to initiate investigations and interventions.

The works of Adam Smith are habitually oversimplified. But in this piece, the author takes a deeper journey into the meaning of Smith to draw interesting lessons about the current economic crisis and future reforms. [ABSTRACT FROM AUTHOR]

Despite the oft-heard claims that current generations are stealing from future generations by running fiscal deficits, this author holds that both theory and evidence suggest that this is either not true or not knowable. Intergenerational justice is not an appropriate way to analyze fiscal issues. Now, in particular, such an analysis is misleading and damaging. Spending by the government helps to improve the economy, which encourages businesses to invest in future productivity, which is the only way to make future generations wealthier than their parents. This virtuous cycle is even stronger if the government's spending is itself used to invest in future productivity. [ABSTRACT FROM AUTHOR]

In mid-June 2008, an international group of economists met in Paris to discuss the gravity of the current economic crisis and what the United States should do about it. The meeting was convened by Economists for Peace and Security and the Initiative for Rethinking the Economy. The author presided over the off-the-record discussions, summarized here on his own responsibility. In the process, he provides one of the most comprehensive and compelling assessments of where the United States and the world now stand, and what can be done to ameliorate the situation. [ABSTRACT FROM AUTHOR]

What should the new U.S. economic policies be? Challenge often devotes its pieces to discussion of demand and public investment. In this piece, however, we offer another view. The author argues in favor of creating surpluses through a progressive income tax or even wealth tax—perhaps even prefunding social security. Would this policy lead to contraction of capital investment? He believes that looser monetary policy can compensate adequately for the diminished demand. [ABSTRACT FROM AUTHOR]

For over 30 years, American congresses and presidencies have consistently worked to reduce federal budget deficits. These efforts at deficit reduction/surplus generation did indeed contribute in many instances to lower federal budget deficits and even created surpluses. An apparent problem with deficit reduction/surplus generation is that every time government deficits are reduced, private-sector wealth also falls. Thus, growing levels of American household and business indebtedness are closely associated with the policy of reducing federal deficits. One way of alleviating the problem of growing household indebtedness is to reverse the policy aim of reducing federal budget deficits. [ABSTRACT FROM AUTHOR]

This article examines the consequences of the political 'incompleteness' of the monetary union for the democratic accountability of its external monetary policy, comparing the euro area to the United States. In most countries, exchange-rate policymaking is substantially delegated to the finance ministry and central bank; oversight by other domestic actors is relatively weak. While this is true of the United States, the role of the Congress provides the possibility for 'democratic override' when policy diverges substantially from the preferences of a broad set of private sector interests. Europe's monetary union, by contrast, lacks such a mechanism; no institution can provide an effective check on the policies pursued by the core actors, the ECB and Eurogroup. A comparison of the postures of the United States and euro area toward Chinese exchange rate policy suggests that these institutional differences affect policy outcomes. [ABSTRACT FROM AUTHOR]

The author suggests that policy makers hesitate to determine whether full employment in the modern world is possible despite the positive effects of increased spending and tax cuts. Deficit spending in the U.S. during the administration of President George W. Bush alleviated some of the impact of cyclical downturns. She focuses on the nature of full employment and deficit spending in relation to government as the employer of last resort. Since unemployment is rampant in developed and developing countries, she suggests that full employment policies must be considered.

The authors suggest that full employment policies are outdated. They discuss the idea of involuntary unemployment, a primary concept of Keynesian macroeconomic theory. John Maynard Keynes felt that aggregate demand could settle at levels insufficient to motivate companies to offer sufficient numbers of jobs to employ all people who would be wiling to work. They focus on the special circumstances that enabled the adoption of Keynesian policies until the 1960s and the conditions that led to their demise in the 1970s.

According to liberal arguments for American hegemony a dangerous world needs American power. How does the liberal view hold up against the reality test of how political aims are interpreted and implemented by security professionals? I argue that many security operations are embedded in strategies of political brinkmanship. The second part explores whether American economic policies too can be viewed as brinkmanship. This concerns the ramifications of 'free market' policies for the United States at a time when exports become imports, the trade deficit deepens, income inequality widens and external deficits rise to unsustainable levels. In closing I reflect on the rationality of political and economic brinkmanship. [ABSTRACT FROM AUTHOR]

The article discusses Mexico's vast petroleum and energy supplies and the difficult process of policy changes in the sector. Negotiations leading to the North American Free Trade Agreement (NAFTA) called for Mexico to tap into its energy supply and join the Organization for Economic Cooperation and Development (OECD). While Mexico has become one of the largest suppliers of crude oil to the United States, the country has faced political confinement which rejects privatization of resources. Mexico is also troubled by public spending dependance on oil reserves, making it hard for Petroleos Mexicanos (PEMEX) to increase investment quantities.

Defenders of the WTO argue that it provides an independent arena for hearing and adjudicating trade disputes. Member countries are bound by the decisions of the WTO Dispute Settlement Body (WTO-DSB), and the perception of neutrality – that cases are ruled according to the strict and true meaning and spirit of the agreements that countries signed – is pivotal to its broader legitimacy. Using a fine-grained assessment of one trade dispute brought to the WTO, involving a complaint by Australia and New Zealand that US lamb tariffs contravened the WTO's safeguard provisions, this article questions these assumptions. It argues that the praxis of dispute settlement is over-determined by the institutionalized market preferences of the Organization. The procedural materiality of dispute settlement hinges on the narrow legalisms of wording within trade agreements, heard within an environment that is sympathetic to market liberal interpretations. With regard to safeguard provisions, and as evidenced in the case US – Lamb Meat , these institutional contexts create daunting obstacles for defendant countries to demonstrate they have not contravened WTO rules. These insights bring into relief debates on WTO dispute settlement as a system of global governance, providing support for the contention that this system should be understood as a political mechanism working systematically to advance trade liberalization. [ABSTRACT FROM AUTHOR]

This article outlines the new monetary policy consensus in the U.S. as of 2005, the assumptions underlying it, and the channels through which the U.S. Federal Reserve Board believes monetary policy works. Recent developments in mainstream economic thinking on macroeconomic and monetary phenomena have given a new impetus to the direct management of the economy. The use of monetary policy by way of manipulating the rate of interest to affect inflation is now well accepted by both academic economists and central bank practitioners. The explicit control of the money supply, which was fashionable in the 1970s and 1980s in the U.S. and elsewhere, was abandoned in favor of monetary rules that focus on interest-rate manipulation by the central bank. Several countries have adopted this new monetary policy since the early 1990s in an attempt to reduce inflation to low levels. Since then, many commentators have praised this policy framework as a superior way of conducting monetary policy. Indeed, Frederic S. Mishkin argues that countries pursuing this policy seem to have significantly reduced both the rate of inflation and inflation expectations beyond that which would likely have occurred in the absence of inflation targets.

The International Monetary Fund claims that its loan conditions are apolitically devised because loans are negotiated by the technocratic staff and away from the possibly politicized Executive Board. Previous studies have suggested IMF Executive Board politicization but have not analyzed internal IMF documentation. Recently released IMF Article IV Consultations from the IMF Archives provide the opportunity for a new methodology based on searching for slippages in staff recommendations. It was found that two lenient IMF–Egyptian agreements had considerable slippages and two strict IMF–Egyptian agreements had little evidence of slippages. It was further found that the United States intervened in both the 1987 and 1991 agreements by usurping staff recommendations and undermining negotiations to ensure that these two agreements were lenient. The United States intervened in the 1987 and 1991 negotiations to preserve the political stability of the pro-Western Egyptian regime during a particularly turbulent time. [ABSTRACT FROM AUTHOR]

Effects of defense spending on investment in the United States are examined. Findings reveal that there is a positive cointegration relation between defense spending and investment. Findings do not indicate a trade off between defense spending and investment. Nondefense government spending has a greater positive effect on investment compared to defense spending. The results suggest that the anticipated rise in defense spending during the first decade of the twenty-first century should promote investment and thereby enhance capital accumulation and economic growth. [ABSTRACT FROM AUTHOR]

It is time to take a look back at how effective the Bush economic policies have been. In one of the most comprehensive analyses of policy to date, these economists present a critical historical analysis of recent policy. They conclude that more coordinated policy could have resulted in an economy that started to recover quickly, would probably have resulted in more job growth, and would not have left America with ongoing sources of instability and high future budget deficits. [ABSTRACT FROM AUTHOR]

The article discusses the development of capitalism in Great Britain and in the U.S. Great pressure is currently being applied on developing countries by the developed world, and the international development policy establishment that it controls, to adopt a set of "good policies" and "good institutions" to foster their economic development. According to this agenda, "good policies" broadly are those that include restrictive macroeconomic policy, liberalization of international trade and investment, privatization, and deregulation. The key institutions include democracy, good bureaucracy, an independent judiciary, strongly protected private property rights and transparent and market-oriented corporate governance and financial institutions. This article has shown how the currently dominant neo-liberal argument for free trade and laissez-faire industrial policy is based on a fundamentally mistaken reading of the history of capitalism. Particularly important in this argument is the very selective and distorted reading of the economic histories of Great Britain and the U.S., whose ascents to industrial supremacy are erroneously attributed to their free trade policy and non-interventionism.

The article discusses the role of U.S. government fiscal assistance for state and local governments in alleviating recession. In times of economic weakness, behavior that is prudent for individuals can be damaging for the economy as a whole. Rising unemployment and falling consumer confidence en- courage people to pull in their belts to spend less and save more. In such times, the federal government is the only source of additional spending for the economy, but it need not undertake all such spending directly. The General Revenue Sharing program was developed to provide federal aid to both state and local governments. Aid precludes the need for state and local taxes to some extent. Aid can be provided in a form that is not biased. Political dynamics often reduce the effectiveness of targeting in grant programs, including anti-recession assistance. An effective response to recession must include aid to state and local governments. Such aid should be of sufficient magnitude to offset several percentage points of cuts in state spending or increases in taxes, given the size of the state local sector. Allocations to states or localities should be determined by a simple, transparent formula and at a minimum, the formula should take into account the effects of recession, population, and fiscal capacity. The fewer the restrictions on aid, the more quickly a proposal can become law and the money distributed and spent.

The article outlines the transformation of economic history in the U.S. At a time when economic issues matter to more people than ever before, it is interesting and not a little ironic to note that the field of economic history--how the economy got that way, as it were--is in deep trouble. The parlous state of economic history today was not foreordained. Indeed, for a time in the 1960s and 1970s, economic history was perhaps the most sizzling part of the hottest trend in history: quantification. The changing demographics of the historical profession, particularly in the United States, also served to reinforce the trend toward qualitative approaches.

Fiscal stimulus has long been de-emphasized as a policy tool in the United States. In the three decades following the publication of John Maynard Keynes's General Theory of Employment, Interest, and Money in 1936, countercyclical fiscal policy achieved a gradual ascendancy within the economics profession and in the practical realm of economic policy. By the 1960s, it was widely agreed that fiscal policy should be used to counter fluctuations in the economy. To counter a recession, taxes should be cut, cash transfer payments (such as unemployment insurance benefits) increased, and government purchases of goods and services increased. But the past three decades have witnessed the decline and fall of countercyclical fiscal policy in both theory and practice. The majority of economists have concluded that monetary policy alone should be used to stabilize the economy, and a minority have argued that the government should not use either monetary or fiscal policy for that purpose. In an article titled "It's Baaack: Japan's Slump and the Return of the Liquidity Trap," Paul Krugman asks whether monetary policy has the power to rescue a depressed economy when the interest rate is already near zero.

This article focuses on the role of welfare-state institutions for economic development. The U.S. economy is currently experiencing its longest expansionary period ever, its lowest unemployment rate since 1970, and, most important of all, employment growth that is breaking one record after another and this at a time when Europe is suffering from employment stagnation. The transatlantic employment gap coincides with substantial institutional differences. In Europe, unemployed workers receive unemployment benefits of up to 90 percent of their last earned net income for long periods in stark contrast to the situation in the U.S., where the replacement rate is 50 percent and benefit duration is six months. In the U.S., workers can be laid off at very short notice, union influence has diminished, and wage differentials are high and rising. In Europe, employment protection is strong, unions are influential, most workers are covered by collective wage agreements, and wage inequality is generally low and stable. Many economists blame the transatlantic employment gap on European welfare-state institutions, on the grounds that they conflict with the assumptions of the perfect-market model. Europe, they say, should copy the U.S. model. It should reduce the generosity of its welfare-state arrangements, deregulate its labor markets, and reduce union influence.

The American criminal justice system today focuses to an unprecedented degree on incarceration as a means to punish transgressors. As the author will see, this practice deviates substantially from practices of other Western nations, and, indeed, from Western justice tradition. Incarceration is expensive, which has led to attempts to reduce costs by relying on the discipline of the marketplace through "privatization" of prisons and, more importantly, by putting prisoners to work for private firms. These largely complementary movements are generating what might be termed a "prison-industrial complex," or a form of "penal Keynesianism." In the article, it will be argued that while penal Keynesianism does replicate some of the features of military Keynesianism, it is not likely to generate as many supply-side and demand-side benefits, and thus cannot be seen as a replacement for the old military-industrial complex. Most importantly, while military Keynesianism tended to enhance the employability of many young, lowly educated males who were able to enter military service, imprisonment does not generally do so. Indeed, even if full employment were attained within prison walls, it is not clear that this result would generate net benefits to society as a whole.

The article reports on the final Hover Commission report, which focuses on the subject of government research and development in the U.S. According to sources, the report reversed its usual plea for reduction of federal spending by recommending increased support for research activities. Moreover, the report stressed the overriding importance of basic research, in which the safety, the increase in productivity, and the advance of health in the country must come from constantly increasing knowledge through fundamental research. Thus, five overall recommendations were made, including increased support for basic research, and establishment of assistant secretaryships in research and development in the Army.

The article focuses on full-employment programs. The U.S. economy has performed well over the past several years compared to what we have come to expect in recent decades, but it is far from the best it can be. The unemployment rate of 4.2 percent is the lowest since the 1960s, but in the midst of the longest peacetime expansion in the nation's history, it is nearly double rates that were common in the 1950s. In addition to the number of unemployed, millions are underemployed and millions more are officially out of the labor force but would work if a job were available. Of those who have full-time jobs, many earn wages below the poverty line. In good economic times, people forget about business cycles but this expansion will eventually turn to recession. Poverty, joblessness, and underemployment will again increase. Although no one can say exactly when the next recession will begin, troubling signs have appeared around the world: equity and bond market volatility in the U.S. and overseas, the Asian and Russian crises, unprecedented rates of household and business indebtedness in the U.S., and an obsession with meeting government budget deficit reduction targets everywhere.

The article discusses some controversies over teaching macroeconomics in the U.S. in 1980s. There are reasons why macroeconomics is often a controversial subject. First, there is a lot at stake in macroeconomics and macroeconomic policy. The second reason is that there is a real possibility that the right theory, the right way to look at the national economy changes from decade to decade as social institutions change. A third reason for controversy in macroeconomics is that economists labor under the difficulty of not being able to do controlled experiments like other scientists.

This article examines the effects of retention performance method on macroeconomics in the U.S. Among the variables examined are class size, method of instruction, cognitive levels of learning, pre- and post-test scores, grade in the course, class, SAT scores, and selected questions on attitude that were statistically significant when students were taking the course. In the cohort without additional economics, the significant independent variables were SAT verbal score, class, and a variable defined as the extent to which the students read about contemporary economics in the newspapers. Comparing method of instruction in the large classes with that of the small classes indicated that the retention test scores were higher under traditional learning methods in the larger classes, while self-instructional methods generated higher scores in the smaller classes. The study reported shows that attitudes in large classes do not significantly influence retention performance, and that performance was similar regardless of class size.

It is probable that most teachers of economics use the publications of the Federal Reserve Banks with their students. In this article, Cohen and Marsh report on an interesting systematic attempt to compare the effectiveness of Federal Reserve BankReviews with the effectiveness of the scholarly literature upon which the Review articles were based. Readers will be interested not only in their findings, but in the research design they utilized. [ABSTRACT FROM AUTHOR]