Beyond Dualism Between Determinism and Voluntarism in Dynamic Economics or Essay on the "Paradox of History-Creating Decision"
The paper contains attempt to go beyond dualism between determinism and voluntarism in dynamic economics. On one hand, economic dynamics is not predetermined by tastes, endowments and technologies (as Neoclassical Economics teaches). On the other hand, economic dynamics is not a consequence of absolutely subjective and spontaneous affairs of individuals (as Austrian Economics teaches). In order to solve the problem author applies Post Keynesian approach to the analysis of economic dynamics and emphasizes such conceptions as the principle of “creative” decision and the principle of shifting equilibrium. He formulates and explores the “paradox of history-creating decision”. This paradox is the fact that “uncausedness” and “creativity” of one decision means inevitably “causedness” and “emptiness” of another one. All human decisions cannot be autonomous “creative”. The different decisions are characterized by the different degrees of “originativeness” and “creativeness”. The paper formulates criteria which influence on it.
The paper tries to give Post Keynesian explanation of the most important problems of the Post-Soviet Russian Capitalism. The main idea is that institutions of this type of capitalism reduce uncertainty ineffectively. The main cause of it is a failure of the state as the effective enforcer of the contracts. In turn, higher uncertainty leads to chronic underinvestment, deindustrialization, technological degradation and tendency to sink into the underdevelopment trap. The accompanying phenomenon is the underdeveloped monetary system. All these factors contribute to the significant economic backwardness of the modern Russian economy.
The main idea of the paper is that the persistence of the current global crisis can be explained by phenomenon of investor myopia. When agents exclude from the consideration values of future variables after some “threshold” time point they may refuse from investing in durable productive assets. So, investor myopia – as an extreme form of short-termism – inhibits long-run economic development and can prolong crisis.
The underlying causes of investor myopia have institutional and cultural nature and exert influence on the human behavior with time lags.
On the one hand, investor myopia is a reaction on the higher uncertainty due to ineffective institutions leading to a lack of enforcement or lack of punishment for opportunistic behavior. These aspects are very serious problem in some post-socialist countries like Russia or Ukraine. On the other hand, investor myopia is a reflection of values of economic culture emphasizing the importance of maximizing short-term financial gains and/or current consumption. It means that in the developed countries investor myopia can be a product of both evolution of money manager capitalism (including financialization) and dynamics of mass consumption society. Therefore prolonged crises are, perhaps, the inherent features of the modern capitalistic societies characterized by the dominance of financial markets (where institutional investors rule the roost) and values of consumptive society.
The paper contains attempt to develop investor myopia theory of economic growth. Investor myopia takes place when agents do not take long-term outcomes of their activity into account. This phenomenon, can, of course, lead to underinvestment. The outcome is negative rates of economic growth. Such negative growth, as it known, had hit Russia, Ukraine and some other transitional economies in the 1990s. Investor myopia can be treated as the long-run phenomenon which is concerned with serious defects of institutional environment. The main practical conclusion is that the State is responsible for overcoming of investor myopia. This phenomenon can be considered as the key to many fundamental economic problems of developing and post-transitional economies.
The paper examines the structure, governance, and balance sheets of state-controlled banks in Russia, which accounted for over 55 percent of the total assets in the country's banking system in early 2012. The author offers a credible estimate of the size of the country's state banking sector by including banks that are indirectly owned by public organizations. Contrary to some predictions based on the theoretical literature on economic transition, he explains the relatively high profitability and efficiency of Russian state-controlled banks by pointing to their competitive position in such functions as acquisition and disposal of assets on behalf of the government. Also suggested in the paper is a different way of looking at market concentration in Russia (by consolidating the market shares of core state-controlled banks), which produces a picture of a more concentrated market than officially reported. Lastly, one of the author's interesting conclusions is that China provides a better benchmark than the formerly centrally planned economies of Central and Eastern Europe by which to assess the viability of state ownership of banks in Russia and to evaluate the country's banking sector.
The paper examines the principles for the supervision of financial conglomerates proposed by BCBS in the consultative document published in December 2011. Moreover, the article proposes a number of suggestions worked out by the authors within the HSE research team.