Seminar at BI Norwegian Business School 2017: Video 5 “Conceptualizing Capitalism: Legal Institutionalism” (Prof. Geoffrey M. Hodgson) now online

The fifth presentation at our seminar at BI Norwegian Business School (Oslo) is online: Prof. Geoffrey M. Hodgson, founder of Legal Institutionalism, the World Interdisciplinary Network for Institutional Research WINIR and author of the book “Conceptualizing Capitalism”, gives an introduction to the legal institutionalist perspective.

After clarifying the nature of law (vs. custom) and arguing that law cannot be pushed into the “superstructure” as an epiphenomenon, he provides two powerful examples demonstrating the constitutive role of law for capitalism:  property rights, and the theory of the firm.  By conflating property rights with mere possession, the field of “economics of property rights” entirely abstracts from the legal institutions necessary to guarantee and enforce property rights: a state guaranteeing and enforcing private (property and contract) law, including a system of civil courts.  Viewing the firm the way lawyers routinely do – as a fictitious legal person – solves a number of problems in the theory of the firm literature in a straightforward way and demonstrates the integrating power of a legal institutionalist perspective.

Click here to view (opens in new tab):

 

Seminar at BI Norwegian Business School 2017: Video 4, “Stützels General Theory of Business Cycles Part II” by Prof. Johannes Schmidt now online

The fourth presentation at our seminar at BI Norwegian Business School is online:  Johannes Schmidt presents, for the first time in english, Part II of Stützel’s theory of business cycles.

Stützel’s simple general approach solves a number of recurring controversies in monetary economics – especially that of a coherent integration of the “real” and “monetary” or “nominal” spheres – and provides a general theory within which existing business cycle theories – both “monetary” and “nonmonetary” – can be integrated as special cases.

It is based on nothing more than standard business and national double entry accounting categories – plus one original concept (“Lockstep” of inflows/outflows of net financial assets and/or means of payment), which is the core concept of Schmidt’s talk.

With the lockstep concept, Stützel demonstrates in a simple way why in models that implicitly presuppose lockstep – such as the Walrasian general equilibrium model or today’s “real business cycle” models – money naturally cannot “matter” (Hahn’s Problem), whereas in Keynesian and post keynesian monetary production models, this is partially remedied as explicitly intended by Keynes, but still lacks the necessary precision and clarity.  This precision, however, can be taken simply from empirical (business and national) accounting practice:  the distinction between means of payment and net financial assets.   Stützel imported this precision into ex ante macro theory as the “bipartite division of the theory of money”, added the lockstep concept and showed (already in 1953) that existing theories can be seen as describing special cases within that general framework.  Johannes Schmidt applies this to today’s macroeconomic theories of business cycles.

View Schmidt’s Presentation here (the 3 previous presentations introduce the standard legal & accounting concepts and the first part of Stützel’s Theory needed to understand Schmidt’s talk):

Seminar at BI Norwegian Business School 2017, Video 3 now Online: Stützel’s General Theory of Business Cycles

Stützel’s goal was to render superflous the controversy between Keynesians and Anti-Keynesians by demonstrating precisely for which special cases each group is correct and for which special cases each group overgeneralizes.  Thomas Weiss’ presentation shows the first part of how he accomplished that.

To view the video, click on the image.  Read a short summary below.

Summary: Ex post, aggregate increases of net financial assets (positive balances of trade) and aggregate decreases of net financial assets (negative balances of trade) are always equal by accounting identity. PLANNED aggregate expenditures (decreases of net financial assets) and PLANNED aggregate revenues (increases of net financial assets), however, are not necessarily equal since legal persons plan independently from one another on the basis of subjective, uncertain future expectations.  Aggregate plans to increase net financial assets (to achieve positive balances of trade) will eventually lead to buyer’s markets; aggregate plans to decrease net financial assets will eventually lead to seller’s markets.

On buyer’s markets, planned expenditures will determine which revenues can be realized – in this special situation, Keynesian demand economics holds true.  Thus, on existing buyer’s markets, if aggregate plans change from planned increases of net financial assets to planned decreases of net financial assets because the state announces plans to decrease its net financial assets, output and employment will increase.  On seller’s markets, however, planned revenues will determine which expenditures can be realized.  This is where Keynesian demand stimulus policy breaks down, and government austerity is needed to boost output & employment. Stagflation during the 1970s may be a historical example for such a special situation.

The fourth presentation by Prof. Johannes Schmidt, Karlsruhe (coming soon) will present the second part of Stützel’s Theory of business cycles, introducing the concept of lockstep of revenues and expenditures (increases and decreases of net financial assets) and receipts and payments (increases or decreases of the stock of means of payment).   Lockstep means inflows and outflows equal each other for a period so there is no change in stocks of net financial assets or means of payment (or both). While this is always true for the economy as a whole, for partial groups inflows and outflows will often deviate from each other, lockstep being the exception. Lockstep or deviation effects can happen independently of each other on the level of net financial assets and means of payment, yielding 4 possible combinations. Schmidt shows that current macroeconomic theories each describe one of those 4 special cases.  Thus, they are not really theoretical alternatives, but can be integrated as special cases into Stützel’s General Theory.

This General Theory is based on standard, precise empirical business and national accounting categories, one original concept (lockstep of inflows and outflows of means of payment and net financial assets), and a few realistic behavioral assumptions taken from everyday business practice.

Seminar at BI Norwegian Business School 2017: Second Video now Online

Watch it by clicking on the image:

Nicolas clarifies the historically specific legal nature of assets & liabilities, using legal anthropology to distinguish reciprocity based mutual obligations of exchanging favours and gifts within a “Gemeinschaft” from money-denominated, state enforceable legal obligations within a civil society (“Bürgerliche Gesellschaft”).  He then introduces a foundational concepts of double entry bookkeeping:  the balancing items net worth (equity) – this is what Luca Pacioli originally termed “il cavedale”, i.e., capital  and probably the origin of the term – and net financial assets.   The concept of net financial assets (a balancing item which, for a nation as a whole, is usually called international investment position) forms the core concept of Stützel’s mechanics of balances based ex ante theory of business cycles.  It is the core concept allowing for a coherent integration of the real and monetary spheres in macro models.

Nicolas then develops this up to sectoral accounting for a closed economy, clarifying that capitalism is a zero sum game on the level of net financial assets – but not on the level of net worth (profits&losses).   The next two videos – Presentations by Thomas Weiss and Prof. Johannes Schmidt – will present an introduction to Stützel’s theory of business cycles.  Stay tuned, these will be published soon.

For a summary of contents of video and the complete seminar, click here.

ANEP Seminar at BI Norwegian Business School, Nov. 01-03, 2017: Papers for Download

Information on the seminar, including the programme, can be found here.  Some short introductory presentations of our approach can be found on our youtube channel.  Anyone interested in taking a more detailed look at our approach of constructing a realistic, non-universalist paradigm for analyzing capitalism by reconnecting accounting to the historically specific foundations in roman law it is empirically based upon, and then contrasting this with informal, traditional social relations in stateless contexts, can download some further material below.  Our own papers are marked by showing the author in bold print, but are augmented by papers detailing the most fundamental building blocks of our conceptual framework: Law, Legal Institutionalism, Mechanics of Balances, and Legal/Economic Anthropology. All links will open in a new tab.

 

  • Business Cycles
    • Stützel 1952, Preis, Wert und Macht. Analytische Theorie des Verhältnisses der Wirtschaft zum Staat
    • Stützel 1953, Paradoxa der Geld- und Konkurrenzwirtschaft
    • Grass/Stützel 1983, Volkswirtschaftslehre
    • Weiss 2017, Conceptualizing Credit & Money: Law, Balance Sheets and and the Inherent Instability within the Core Institutions of Open Societies

 

New Blog on Stützel’s Mechanics of Balances

On top of Legal Institutionalism, Micro-Macro Accounting and Stützel’s Mechanics of Balances are the second fundamental building block of our approach, as outlined in Thomas Weiss’ presentations at the 2016 YSI Plenary in Budapest (view here) and 2017 WINIR  Conference, “Institutions and Open Societies” (view here).

Fabian Lindner is now hosting a new blog in english on Stützel’s Mechanics of Balances.  You are invited to explore it here.  More detailed overviews in english on the basic concepts of this fundamental building block of our approach can be found here and here.

ANEP Economics Seminar at BI Norwegian Business School, Nov. 01-03, 2017

We will be giving a 3-day seminar “Introduction to New European Political Economics and Legal Institutionalism” at BI Norwegian Business School in Oslo, Norway.

It will take place from November 1-3, 2017 and feature guest speakers Geoff Hodgson (University of Hertfortshire) and Johannes Schmidt.  Geoff Hodgson is the co-developer of Legal Institutionalism, author of the book “Conceptualizing Capitalism” and co-founder of WINIR, the World Interdisciplinary Network for Institutional Research.  Johannes Schmidt is a Professor at the Hochschule Karlsruhe Technik und Wirtschaft and, together with Fabian Lindner, a pioneer in communicating Wolfgang Stützel’s work on mechanics of balances to the English speaking community.

A full description and programme can be found at BI Norwegian Business School’s website by clicking here.  Papers for download can be accessed here (links open in new tabs).

We welcome and invite anyone interested in getting an introductory overview of the current state of our work and discussing with us personally!

 

 

ANEP team at WINIR 2017 “Institutions and Open Societies”

At this week’s WINIR conference on Institutions and Open Societies at Utrecht University, Nicolas Hofer, Wolfgang Theil and Thomas Weiss will present some more material we developed over the past year.

Nicolas will summarize some difficulties in building open societies that are are rooted in the contradictory basic legal structure of open societies:  the private/public law dialectic.  Public law is based upon centralizing power and sovereignty, private law on its opposite, fundamentally decentralizing power, decisionmaking and sovereignty.  Yet, private law presupposes public law and cannot exist without it.  Republican constitutions mediate this conflict but in times of crisis have often been replaced by authoritharian forms of government: forms of government have been changing back and forth between more centralized and more decentralized forms.  Such cycles were well known to many republican thinkers of classical antiquity, among them Aristoteles, Cicero, Machiavelli, Vico and Kant, as Anacyclosis.

State building itself has to deal with an even more fundamental conflict, as Francis Fukuyama points out in his recent 2 volume global comparative history of state formation: the conflict between kinship-based “informal” relations and the impersonal legal order of a modern state, which are in no less of a tension than public and private law.

Wolfgangs presentation will develop a legal institutionalist concept of money and show how from that perspective, two controversies in monetary theory can be solved in a fairly uncontroversial way:  that between metallists and nominalists, and that between Randall Wray’s Modern Monetary Theory and Perry Mehrling’s Money View whether the state’s liabilities are often at the top of the hierarchy of means of payment because the state is a quasi-absolutist entity (Wray), or rather because the state “does business” with all its citizens (Mehrling).

Thomas’ Presentation will sketch basic elements of Stützel’s balance mechanics-based theory of business cycles, thereby moving from Levels 1 and 2 of our framework to laying out some basic concepts for levels 3 (intentional actors and their plans & expectations) and 5 (long cycles) of our model building project:

Presentations & Papers will be available soon. For now, you can check Wolfgang’s academia page for papers, and our youtube channel for previous presentations.

Intro to New European Political Economics – new youtube playlists

Adding to our own presentations, we created playlists on the most important core pillars of our approach to a new Paradigm (“New European Political Economics”):  Legal Anthropology, Legal Institutionalism, Mechanics of Balances, comparative historical analysis of long cycles of development of the state, western civilization and modern capitalism.

To get a flavor of what we do, check them out by clicking here.

Thanks for reading/watching – enjoy!

YSI Plenary Budapest 2016

Germany’s finance minister Wolfgang Schäuble and the former finance minister of Greece, Yanis Varoufakis, seemed to have never really understood each others views and positions. We are convinced one important reason for this is the lack of a shared paradigm that would be powerful enough to integrate both – seemingly entirely opposite – positions on economic policy in the Eurozone that Schäuble and Varoufakis each represent.

In the pursuit of the creation of such a new paradigm with integrative power, Continue reading “YSI Plenary Budapest 2016”