Martin Hellwig, the panel chair and director of the Max Planck Institute for Research on Collective Goods, started the discussion by highlighting that a debate over the effectiveness of fiscal stimulus policies in the US had been matched by one over austerity policies in Europe that involved doing the exact opposite.
Essentially, this represented the current fiat system versus the energy-guzzling Bitcoin. At this point, we were very excited about the direction of our research and about the contribution that it could make to the fields of economics and information science. Unfortunately, our research hit an insurmountable obstacle when we tried to model proof-of-stake: During my own reflection on the differences between proof-of-work and proof-of-stake, I came to the conclusion that these systems resemble our transition from a gold standard to a fiat standard.
Like gold, Bitcoin uses electricity and capital equipment to mine new coins. On the other hand, proof-of-stake allows the users with the largest holdings to create coins out of thin air. In a proof-of-stake system, the probability of receiving a reward is equal to the fraction of coins held by the user divided by the total number of coins in circulation.
Following this logic, proof-of-stake would appear to be superior to proof-of-work because economic theory argues that the fiat system is superior to the gold standard due to deflationary spirals caused by hoarding. Note, however, that my late uncle, the American economist Larry Sechrest, argued in his book, Free Banking: Theory, History, and a Laissez-Faire Model that the problems associated with the gold standard actually stemmed from regulation and not from the scarcity of gold.
To date, my reflections have not helped us find a suitable set-up for the lab experiment: The only problem that I could find was quite philosophical in nature and too complicated to be easily modelled in a lab.
The twentieth-century Austrian logician, Kurt Gödel, argued that no system can prove its own correctness from within itself. In a proof-of-work system, anyone can join the system and immediately determine the correct history of transactions in the blockchain because the correct chain is the longest chain by default. In comparison, proof-of-stake has not developed a method for ensuring that every computer in the network comes to the same conclusion on the correct history of transactions from within the system.
Instead, proof-of-stake relies on an external third party or host of third parties to establish agreement on the history of transactions. Although the introduction of counterparties may not be a problem in every case, the original goal of the blockchain technology was to create consensus without intermediaries.
In the end, we could not find a suitable way to model proof-of-stake in a lab with humans. In our own analysis of this problem, we realised that there was a fundamental problem with the premise of our study: Although we have encountered this major setback in our study, we have learned a tremendous amount about blockchain technology and about our own strengths and weaknesses as researchers.
Instead of giving up, we are going in a new direction with our blockchain research. After all, the journey for pioneers is never paved. The economics profession took a big hit in the wake of the global financial crisis. Why did macroeconomists with their fancy models not see it coming? Should governments inject money into the economy to boost demand or cut spending to reduce record public deficits?
These questions and many more were up for debate at a panel of three Nobel Laureates and a young economist at the 6 th Lindau Meeting on Economic Sciences on Friday 25 August. The participants considered the new conditions for monetary policy — cutting interest rates and rescuing banks — and fiscal policy — changing taxes and spending public money.
They also asked why, before the crisis, policy-makers seemed to have paid insufficient attention to financial markets in their models. Panel discussion during the 6th Lindau Meeting on Economic Sciences.
Martin Hellwig, the panel chair and director of the Max Planck Institute for Research on Collective Goods, started the discussion by highlighting that a debate over the effectiveness of fiscal stimulus policies in the US had been matched by one over austerity policies in Europe that involved doing the exact opposite. Peter Diamond, co-recipient of the Nobel Prize in , said that the decision by the US government to pursue an active fiscal policy, which lessened the depth of the recession, helped to explain the gap between growth rates in North America and Europe since the crisis.
The failure to follow up reflected a lack of appreciation by politicians and the general public of the value of suitable stimulus policies. He cited financial crises that saw countries experiencing contrasting outcomes at the same time: While the financial crisis was localised in North America and the euro area, there was a short recession and quick recovery in Japan, Taiwan and South Korea and no recession in Scandinavia and Australia.
Christopher Sims, co-recipient of the Nobel Prize in , agreed that responsible fiscal policies were always required. Friday was the last day in Lindau but not the last day of the meeting. Here are our highlights from Friday:. The myth of the independent central bank: Vote splitting as main problem of many presidential election systems… Finale of the lectures at LiNoEcon by Eric Maskin lindaunobel pic. Simply brilliant econometrics, simply brilliant James Heckman.
Young researchers reexamining the relationship between leisure and productivity at lindaunobel LiNoEcon pic. We will keep you updated on the 6th Lindau Meeting on Economic Sciences with our daily recaps. The daily recaps will feature blog posts, photos and videos from the mediatheque. Ökonomen leben in einer ideologischen Phantasiewelt. Sie betrachten die Menschen als eine Ansammlung von verlässlich rational handelnden, auf Nutzenmaximierung ausgerichteten, berechnenden Maschinen.
Deshalb lassen sich ihre Verhaltensweisen bei ihren Interaktionen in den freien Märkten zuverlässig mit Hilfe einer Handvoll Gleichungen modellieren, die im Wesentlichen auf die Jahre alten Erkenntnisse von Adam Smith oder anderen klassischen Ökonomen zurückgehen.
Aber einige Tage auf der 6. Daniel McFadden während seines Vortrags auf der 6. Lindauer Tagung der Wirtschaftwissenschaften. Peter Diamond vom MIT, einer der Laureaten des Jahres , gab sich keinen Illusionen hin, dass Menschen immer Entscheidungen treffen, die in ihrem eigenen langfristigen Interesse sind und führte dazu die Versäumnisse in der privaten Altersvorsorge an.
Diamond beschäftigte sich in seinem Vortrag damit, was wir aus internationalen Erfahrungen für die Ausgestaltung staatlicher und privater Pensionssysteme lernen können.
Seine Beispiele reichten von der Entstaatlichung des öffentlichen Rentensystems in Chile bis hin zu kostengünstigen und effizienten Mitteln der Altersversorgung, die rund drei Millionen US-Staatsbediensteten zur Verfügung stehen.
Simple Wirtschaftsmodelle, so die Argumentation von Diamond, sind eine schlechte Grundlage für politische Richtungsentscheidungen. Von ihm durchgeführte Modellierungen zeigten, dass unter bestimmten Umständen bessere Ergebnisse erzielt werden können, wenn man den Menschen keine Entscheidungsmöglichkeiten lässt, sondern einfach vorgibt, was zu tun ist. Sir James Mirrlees im Gespräch mit Nachwuchsökonomen während der 6. Robert Aumann von der Hebräischen Universität Jerusalem, der im Jahr mit dem Nobelpreis ausgezeichnet wurde, verpasste dem vereinfachenden Konzept von Menschen als nutzenmaximierenden Maschinen aus einem ganz anderen Blickwinkel einen Seitenhieb.
Genauso, wie wir wohl in der Regel nicht deswegen Sex haben, weil wir den Fortbestand der Menschheit sichern wollen, sondern einfach, weil es sich gut anfühlt. Wenn wir solche unmittelbaren Beweggründe übersehen, könnten wir missverstehen, was menschlichen Verhaltensweisen zugrunde liegt — und somit Ökonomie selbst falsch verstehen. The rise of China has been one of the most important events to hit the world economy in recent decades.
Rapid economic growth has had enormous implications within China, lifting millions of Chinese citizens out of poverty. According to research by David Autor, David Dorn and Gordon Hanson , manufacturing employment has declined much more quickly in parts of the United States that produce goods imported from China.
These findings of negative impacts of Chinese competition for manufacturing workers have been corroborated by studies of European countries.
This had an especially big impact on developing countries, whose swiftly rising exports to China became dominated by raw materials such as crops, ores and oil. Exports from low- and middle-income countries to China grew twelvefold from to , compared with a twofold rise in their exports to everywhere else, so that China became an increasingly important trade partner for the developing world.
Share of commodities in trade of developing countries. So for countries like Brazil, how did the benefits from the China-driven commodity boom compare to the costs of rising competition from Chinese manufactures? Our study analyses the and Brazilian censuses to check how the fortunes of workers across different regions and industries evolved during the boom in trade with China.
Share of commodities in trade of Brazil. We first confirm that during this time, there was a negative effect of Chinese import competition on employees of manufacturing firms. But our findings also suggest that growth in trade with China created winners as well as losers within Brazil.
Wages rose more quickly in parts of the country benefiting more from increasing Chinese demand, which were mainly regions producing soy or iron ore. We also find that these regions saw a rise in the share of employed workers in formal jobs. Unlike jobs in the informal economy, jobs in the formal sector come with unemployment insurance, paid medical leave and other benefits, and so this increase in formality can be seen as a rise in non-wage compensation. Our study concentrates on the short-run effects of trade with China on Brazilian workers.
We also do not consider the benefits to Brazilian consumers from access to cheaper imported goods from China. But what we do find suggests that trading raw materials for manufactures with China may not have been a raw deal for developing countries like Brazil after all.
People value fiat money because other people value it. As long as everyone agrees that fiat money has value, then it does have value: In hyperinflationary episodes, confidence in a fiat currency evaporates and people dump it in favour of assets, commodities and even other fiat currencies. Printing more of it only makes matters worse. Macroeconomic models involving fiat money are thus inherently models with multiple equilibria.
In one equilibrium, the value of money is stable: In such models, the economy can suddenly jump to an explosively inflationary equilibrium without any change in policy.
Central banks can, of course, always meet demand for their own currency, since they can create it ex nihilo. Nobel Laureate Professor Christopher Sims argues that it is fiscal policy that guarantees the value of fiat money.
Central banks thus can never be independent of government. The original concept of the Eurosystem assumes that there is a sharp distinction between monetary and fiscal policy, and that monetary policy does not give rise to fiscal transfers. We now know that all monetary policy actions have fiscal consequences: Thus, even the ECB is entwined with government. Not only are central banks not independent of government, but they are also dependent on governments running appropriate and plausible countercyclical fiscal policy.
When a central bank is actively buying assets, it can become technically insolvent if those assets fall in value. Several central banks around the world currently have negative net worth at market prices: There has been a considerable debate about whether the solvency of central banks makes any difference to their credibility as lenders of last resort or their ability to control inflation. Arguably, it does not — provided fiscal authorities can support them.
Often, the net present value of future seigniorage receipts is sufficient to cover any asset and liability mismatches at market prices. But if seigniorage is insufficient, then tax receipts will be needed to plug any gaps. In practice, this implies that the net present value of projected future primary surpluses must be sufficient to recapitalise the central bank without increasing government debt. What happens if the fiscal authority is unwilling to recapitalise its central bank?
But in the Eurozone, the central bank is not only fully independent of government, but there are also 19 governments of varying degrees of fiscal credibility. Maintaining the stability of the euro depends on the willingness of all these governments to recapitalise the ECB. To be sure, their willingness has already been tested. Had it not done so, some of those countries would undoubtedly have been forced out of the euro. Some Eurozone countries might balk at recapitalising a central bank that in their view was actively supporting governments that were breaking fiscal rules, especially as the ECB lacks the democratic legitimacy to make such decisions.
The Eurozone thus still lives in a world of multiple equilibria, even though the likelihood of a sudden switch to explosive inflationary dynamics appears remote at present. Professor Sims says it would be better if there were a democratically accountable, Eurozone-wide fiscal institution with the power to raise taxes, which could take over the buying and selling or issuing of government debt.
The US knows how you organise it. Sadly, we seem to be some distance from introducing such an institution in the Eurozone. Please send any copyright reports to: Only one flag request every ten seconds is allowed. Please try again later. Ads by Traffic Junky. Autoplay Next Video On Off. This video is part of the following collections:.
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