Abstract
Starting with the distinction between the theory of the necessity of crisis with respect to the idea of crisis as a mere possibility, the author addresses the meaning of crisis in orthodox and most heterodox approaches. Beyond the differences in economic analysis, this chapter argues that these theories have one element in common: the crisis would be the product of certain failures, and therefore it is avoidable. If the crisis is merely a possibility, there can be a capitalism without crisis. Behind this conception, a number of theoretical foundations must be explicit, since they are normally hidden or not properly analyzed. Within this critical approach, the author focuses around the role of economic policy, income distribution and financial capital for the theory of crisis.
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Notes
- 1.
It is true that neoclassical economics is supply-side insofar as it considers that in the short term the output is determined by the use of the capital stock and labor. But inasmuch as it rests on consumption demand, preferences and subjective utility, it has a demand-biased analytical dimension.
- 2.
It is possible to verify that in economics’ textbooks of neoclassical authors there is no chapter dedicated to the crisis. The few comments are to be found within brief references to cycles or economic fluctuations. Even so, not satisfied with this conceptual degradation of the term “crisis”, Mankiw and Scarth (2001: 252) point out that “economic fluctuations present a recurring problem for economists and policy-makers”, as recessions are frequent.
- 3.
Thus Borio (2012) defines the financial cycle as the self-reinforcing interactions between perceptions of value and risk, attitudes toward risk, and financing constraints, which translate into booms followed by busts.
- 4.
The problem is that if Keynes had taken profit obtained in the past or now, in the present, then he would have had to explain investment from savings. By extension, the idea of a fall in the marginal efficiency of capital is elaborated with the same elements of orthodox analysis. The absence of a complete break with the theoretical foundations of neoclassical economics that prevent reaching the crisis from the very structure of the economic system and the logic of capital can be seen in this issue. Only to the extent that expectations suffer from uncertainty makes possible to introduce a source of instability into the theoretical system.
- 5.
In an eclecticism including elements of Keynes, monetarists and the Real Business Cycle models as well, this perspective results evidently orthodox along the terms here exposed. Thus, Knoop (2004: 98) explains that “New Keynesian researchers have attempted to develop new and widely varied models in which market failure is generated by individuals engaging in optimizing behavior (not just through assumed, or ad hoc, behavioral assumptions)”. Note that Keynesian traces lie in market failures and price inflexibility.
- 6.
For example, Minsky (1986: 155) points out that “within the neoclassical theory, fluctuations, disequilibrium, and financial trauma can only occur because of shocks or changes imposed from outside the system. Thus, a great deal of what happens in history is explained as the result of institutional failures in unique historical circumstances.”
- 7.
- 8.
It can be claimed that it is related to the conceptions of the crisis focused on the expansion of unproductive activities, such as finance, commerce and certain non-market services (F. Moseley); the increase in circulation time (M. Lebowitz) or the tax burden of the State in the 1970s crisis (J. O’Connor and E.O. Wright). On these controversies, I refer to Mateo (2007).
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Mateo Tomé, J.P. (2019). Conventional Economics and the Theories of the Possibility of Crisis. In: The Theory of Crisis and the Great Recession in Spain . Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-030-27084-1_4
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