Yanis Varoufakis

What is neoclassical economics? The three axioms responsible for its theoretical oeuvre, practical irrelevance and, thus, discursive power

This paper offers a precise definition of neoclassical economics based on three axioms which lie at the latters foundations. This definition is all inclusive in that it applies as much to the neoclassical economic models of the late 19th century as it does to todays more flexible and inclusive models. The paper argues that these axioms, simultaneously, (a) provide the foundation for neoclassicisms discursive success within the social sciences and (b) are the deep cause of its theoretical failure. Moreover, (a) and (b) reinforce one another as neoclassicisms discursive power (which is largely due to the hidden nature of its three foundational axioms) makes it even less likely that it will con-duct an open, pluralist debate on its theoretical foundations (i.e. the three axioms which underpin it).

MODERN AND POSTMODERN CHALLENGES TO GAME THEORY

Equilibrium game theory borrows from neoclassical economics its rationality concept which it immediately puts to work in order to produce the basic results it needs for building an elaborate narrative of social interaction. This paper focuses on some recent objections to game theorys use of rationality assumptions in general, and of backward induction and subgame perfection in particular, and interprets them in the light of the postmodern critique of the grand meta-narratives which social theorists often rely on for social explanation. The paper presents a defence of game theory which seeks to accommodate the postmodern critique. However, it goes on to show that such a defence is illegitimate and claims that the problem lies with the faulty conceptualisation of the main concept on which game theory rests: that of Reason. Having established the nature of the problem, it considers three alternative interpretations (Humean, postmodern and Hegelian) of why the problem resists logical solutions and of its significance for social theory.

Discrete and smooth switching regressions for Australian labour productivity growth

One of the potential hazards in empirical wok is structural instability. In the simple case where the change from one reime to another is instananeous the analyst can resort to switching regressions after idetifying the offending break. However, what if the transition is gradual, rather than discrete, and takes time to complete? This paper offers a suitable modification of the switching regression model and illustrates how this more general technique can handle smooth transitions when estimating the growth of Australian labour productivity.

A real target model of wage inflation with variable union power: the UK experience 1962–1984

This paper offers a reassessment of the hypothesis that nominal wage determination involves Union real wage targets whose attainment depends on the bargaining process. The conventional model is augmented by the introduction of employer targets as well as nonlinear specification for relative power. Empirical evidence suggests that our estimates of Union power can partially explain share price fluctuations.

Game Theory, Oligopoly and Bargaining

Game theory is currently having as much impact on certain topics in microeconomics as rational expectations has had on macroeconomics.1 Yet whilst the modern undergraduate typically has a reasonable grasp of rational expectations macroeconomics, his or her understanding of game theory is likely to be both rudimentary and, even worse, faulty. Most microeconomic texts have a section on the ‘prisoners’ dilemma’ to highlight the problem of establishing cooperation; and somewhere else there will be an exposition of Cournot duopoly which suggests it could only apply to shortsighted firms which cannot predict a rival’s reactions; and that is about it. It is one of the purposes of this chapter to point out the richness of the prisoners’ dilemma game and another to correct the misperceptions surrounding Cournot. But our hope is that we can take the reader much further. Game theory provides a unifying framework with which to analyse properly any question involving the interaction of rational agents. This includes topics as apparently diverse as oligopoly, externality, public goods, tariff-setting, bequests by parents to their children, wage-bargaining, Mrs Thatcher’s macroeconomics, and much more besides. Clearly, there is insufficient space to treat each of these adequately here.

A modest proposal for Europe: a two-part plan for overcoming the eurozone’s crisis, redesigning its crumbling architecture, and reinvigorating the European Project

During 2010, each and every response by the Eurozone to the galloping sovereign debt crisis has been consistently underwhelming. Monthly European Union Summit pronouncements, which during the first half of 2010 were met with initial goodwill by the markets and commentators, quickly proved the harbinger of further deepening of the crisis. By the end of 2010, the markets did not even wait for the European Unions leaders to conclude their monthly meetings before signalling another jump in yields and a further deterioration of the continents financial outlook. Eventually, it became clear to everyone that the European approach (of extending expensive loans to fiscally stricken sovereigns on condition of savage austerity) was deeply flawed. This article outlines the basis of a policy mix that would end the crisis without any substantial institutional changes. It is in this particular sense that this proposal is both practical and modest.

Where the customers are always wrong: some thoughts on the societal impact of a non-pluralist economic education

Economics, like any other scientific pursuit, ought to be educational. However, two observations cast doubt on whether it is. First, we find that students of economics seem to become less civilised the more they surrender to their disciplines ways. Secondly, contemporary economics, as practised in the best departments, has lost its capacity to value the features which are essential to the good society. This, the paper claims, is a motivated failure that constitutes a powder keg buried deep in the foundations of complex liberal societies. To defuse it, and retrieve from economics insights useful to a good society, economics desperately needs (and deserves) a hefty dose of critical pluralism.

Labour productivity growth trends in OECD countries: selection of subperiods

Extends the approach of an earlier article which studies the underlying trend rate of growth of labour productivity in the post‐war UK economy. Analyses productivity growth trends in the member countries of the OECD. Also explores some implications for the productivity slow‐down debate. Begins by providing a brief summary of the estimation method used, then reports and discusses the empirical findings. Goes on to develop the analysis further in the context of a number of member countries.