In light of the recent crisis in 2008-09 the essay researches into the relationship between ethics and economics by investigating into the history of economic thought. The goal of the essay is to challenge separationist views of economics and society by demonstrating that classical economists did not regard economics as value free system that excluded guide-lines of ethical behavior.
As far as it concerned the development of economics as own branch of thought, none of the Authors who will be quoted in this essay - from Thomas Aquinas in the 13th century to John Locke, Bernard Mandeville, Jeremy Bentham and Adam Smith in the 17th and 18th centuries - explicitly denied the existence of a given set of social, moral (and very often religious) values as precondition for the functioning of the economy. Their belief in the necessity of moral values may help to understand why scholars like Smith and Bentham could have faith in the stability of the liberal systems they promoted. Since both scholars had witnessed a number of crises in the 18th century such as the "South Sea Bubble" in England (1720), the "Mississippi Bubble" in France (1720), the "Wissel-ruiterji-Crisis" in the Netherlands (1763-1773) and the "Canal Mania" again in England (1772-1797) , their conclusions concerning the self-organizational power of markets could well have been different.
The fact that in light of these crisis former scholars did not reject but rather promoted liberal economic concepts demonstrates their trust in the social abilities of men. This essay argues that this trust was not solely based on economic but also on ethical dimensions of individual behavior.
Joseph Schumpeter's works serve as reference point for virtually all contemporary accounts of capitalism as engine for economic growth. However, when calling upon Schumpeter the majority of authors refer solely to his notions on entrepreneurship and creative destruction whereas his observations on the role of credit in processes of economic development are very often left aside.
Hence, the present paper aims to recapitulate Schumpeter's theories on credit and development. In light of the current economic downturn since 2007/2008 the main focus shall rest on Schumpeter's observations concerning the instability of economic growth financed on credit. The paper will thus test in how far Schumpeter's credit theories serve as guide for the analysis of recent economic events. By returning to the beginnings of dynamic interpretations of capitalism, the author wants to lay bare some fundamental dynamics of credit and growth that may provide insight into the basic economic mechanisms behind the recent crisis.
In order to achieve these goals the paper will proceed as follows: In a first part, the paper will revisit Schumpeter's theories on creative destruction, credit, and economic development, and thus lay the basis for the analysis in the subsequent chapters. In a second part the paper will analytically test Schumpeter's theories on credit and development by adjusting a model of credit rationing and peer review as it has been developed by Joseph Stiglitz. In a third part, the paper will test the assertions of the two preceding chapters in form of empirical observations thus referring to the Gramm-Leach-Bliley-Act and the process of asset securitization as phenomena that have boosted the issuance of credit thus having instabilized the whole economy. The paper concludes by referring to potential remedies. Along with Schumpeter who underlines normative elements within processes of credit financing the paper concludes that regulators alone cannot revoke and ensure stability. Rather, it is also up to the management of financial intermediaries to regain trust into the system by displaying prudent and responsible behavior.
Die vorliegende Arbeit analysiert international gebräuchliche Konzepte der Messung von Arbeitslosigkeit und deren Aussagekraft. Im Mittelpunkt der Betrachtungen steht der Vergleich der in der Bundesrepublik Deutschland verwendeten Konzepte zur Messung von Arbeitslosigkeit in Form der offiziellen Arbeitslosen- bzw. Erwerbslosenquoten mit den vom US-amerikanischen Bureau of Labor Statistics (BLS), der International Labor Organisation (ILO) und dem Statistischen Amtes der Europäischen Gemeinschaft (Eurostat) angewandten Methoden der Arbeitsmarktanalyse. Ziel der Untersuchung ist, die unterschiedliche Aussagefähigkeit der jeweiligen Messkonzepte herauszuarbeiten. Unter Beachtung existierender Verbesserungsvorschläge werden auf der Basis der gewonnenen Ergebnisse abschlieflend eigene konzeptionelle Empfehlungen zur Messung von Arbeitslosigkeit vorgestellt.
The paper explores incentives created by the German Bank Restructuring Act for investors holding assets in systemically important banks (SIBs)..
Its purpose is to examine consequences that follow for risk choices of SIBs, as well as for Germany's financial system..
Applying the analytical model of Stigliz (1990) the study reinforces the view that regulators can induce SIBs to forego.
risks by curbing promises of systemic support. Adverse consequences result from the fact that the.
Bank Restructuring Act is affecting dierent groups of SIB-investors heterogeneously. This leads to macroeffects that bear potentials to offset risk reductions achieved on the micro level.
Large-scale and unusual events, especially when they bring unwanted consequences, provide an opportunity to ask basic questions." The finan-cial meltdown of 2007-2009 and its consequences surely fit this description hence delivering an occasion to scrutinize economic and financial struc-tures. Together with researchers from the University of St Gallen, the Swiss initiative "Schweizer Dialog" responded to this opportunity in December 2009 by initializing a dialogue between citizens and experts from business, politics, and academia on the social and economic consequences of the 2007- crisis. In this context, University of St Gallen economist HANS CHRISTOPH BINSWANGER has pointed at the excessive creation of money and credit in the years before the financial meltdown of 2007-2009 as fun-damental problem that had destabilized the financial system. Identifying the need of tighter regulations on money and credit, PROFESSOR BINSWANGER referred to IRVING FISHER'S famous scheme of "100% Money" as remedy that would help to stabilize financial markets in the future.
The objective of this essay is to use PROFESSOR BINSWANGER'S proposal as starting point for a discussion on the scope of financial reform. The essay bases its observations on FISHER'S 100 percent scheme as hypothetical blueprint for a radical and thorough renewing of financial infrastructures. Rather than debating the economic and financial impacts of tighter controls on monetary growth and its aggregates, it focuses on the institutional and - since the current volume of the "Schriften der Assistierenden der Universität St. Gallen" addresses the interdependencies of Switzerland and Europe as key topic - geographic boundaries of regulatory reform.
The remainder of this essay is structured as follows: Chapter II discusses Irving Fisher's 100 Percent Proposal focusing on its basic mechanics as well as its historic contexts. Chapter III reviews the institutional and geographic boundaries of regulatory debates taking recent trends and events such as the evolution of shadow banking, or Swiss bailout experiences into account. Chapter IV concludes.
I refer to Ms. Sharon Footerman letter ("Mann's advice to leaders at Davos," January 28 2009) in which Ms. Footerman suggests that your newspaper should give more conspicuous credit to Thomas Mann in light of the fact that your guide to the current summit in Davos has been titled "The Magic Mountain". I will try to follow her advice by adding other works of Mann to the discourse, especially Mann's Nobel-prize winning novel The Buddenbrooks that portrays the downfall of a wealthy mercantile family of Lübeck over four generations. The term "Buddenbrooks phenomenon" made its appearance in the study of economic history at the World Congress on Economic History held in Budapest in 1982 where Theo Barker from the London School of Economics devoted a workshop to it. Since then, the term has invoked many different interpretations. In his seminal work "Trust: The Social Virtues and the Creation of Prosperity" (1995) Francis Fukuyama refers to the Buddenbrook phenomenon in order to describe the limitations of inter-generational growth of family enterprise due to the principle of equal inheritance among the members of succeeding generations. Other scholars simply refer to the "Buddenbrooks phenomenon" in order to signify the human factor in economic processes. Whatever interpretation seems to be the best, there is another work of Thomas Mann that is probably more appropriate as literary guide on recent economic events such as the alleged fraud by US broker Bernard Maddoff, i.e. Mann's short novel "Confessions of Felix Krull. Confidence Man
Der Vortrag skizziert unterschiedliche Positionen zum Zusammenhang von Ökonomie und Religion. Besondere Beachtung finden ökonomische und historische Studien, sowie die Ansätze von Frank H Knight und Clarence Ayres
Thank you very much for Mr Hoenig's thought provoking comments on the need of financial sector reform (Why the sign must say: no UBS in the US, Financial Times, June 17, 2011). While I share Mr. Hoenig's fear about the relative advantages and disadvantages in the global financial system, I do not share his conclusion that it is in the interest of the US to exclude foreign banks for the following four reasons:
First, shutting out international competitors will ceteris paribus limit the numbers of banks active in the US. Resting US financial markets on fewer shoulders will increase the systemic relevance of US banks, which will in the long run increase not decrease systemic risks.
Second, UBS had to be bailed out in 2008 mainly due to the bank's high exposure to US subprime markets. The fact that the Swiss government rescued UBS by setting up a stability fund of $40 means that Switzerland has been importing risks from US financial markets, not exporting risks to the US. Excluding foreign banks from US financial markets will prevent this kind of global risk sharing and therefore increase the liabilities of US tax payers.
Third, shielding the US banking sector from foreign competition until the introduction of new rules, makes reforms less likely since US banks will be incentivized to lobby against any legal change so as to not lose government protection.
Fourth, the implementation of protectionist policies implies dangers that other countries might retaliate by closing their financial markets to US banks. Shutting accesses to foreign capital markets is clearly not in the interest of an economy that is a net borrower of funds, like the US.
In light of these considerations, integrative approaches such as a global regime for large banks as currently discussed by international regulators, seem to be more promising than policies that favor protectionist separatism.
