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Real world economics

Critiques of orthodox economics have proliferated in recent times, but often these critiques are not translated into alternative principles for policy-making. The Centre for Policy Development's 'Real World Economics' program provides a platform for our fellows and others to explore approaches which move beyond the ‘small government vs big government' debate and provide the basis for consistent policy-making across portfolios.

Much of the thinking that informs government policy is based on outdated or oversimplified economic theory — recent applied research (for example in behavioural economics) is often not taken into account. We need to incorporate a broader, more balanced understanding of human nature into the economic principles that underpin policy development.

Predicting the crisis: Medal winning analysts

Steve Keen reviews the best theory from economic analysts who predicted the financial crisis, as far back as 1933: If they were to hand out medals for predicting the global financial crisis, the Gold Medal for having predicted the crisis must go to Irving Fisher, who in 1933 developed the "Debt Deflation Theory of Great Depressions" – a piece which remains the best description of what happens to an economy that succumbs to excessive debt in the context of low inflation. We are now reliving the horror he warned us against.


The end of neo-liberalism? Implications of the crisis

John Quiggin questions the long- term implications of the financial crisis: The implications of the current crisis seem likely to be as equally profound as those of the 1970s inflationary recession that saw the failure of Keynesian economic management. While most political discussion is premised on the assumption that this is a temporary emergency, to be followed by a return to ‘normal’ conditions as soon as possible, the changes that have already taken place make this assumption untenable.


What to do next? Policy directions after the financial crisis

James Murray explains the next phase in government policy to assist the economy after bailing out the banks and encouraging borrowing: Over the last 3 months, governments around the world have bailed out lending institutions, guaranteed deposits, and expanded the money supply. The figures are astronomical: $7.76 trillion USD as at November 24th. That equates to $24,000 USD for every person in the United States, and could pay off half of American mortgages. But what will the next stage of policy response to the global financial crisis?


The financial crisis: The conclusion of a catalogue of errors

Richard L'Estrange describes the characteristics of the economic crisis and how journalists, economists and commentators have clamoured to define them: The origins of economic downturns used to be at least somewhat comprehensible. But even a keen reader of the financial pages must have found their eyes glazing over when the conversation turned to collateralised debt obligations and asset-backed securities, alpha-seeking hedge funds and sub-prime mortgages. The two defining characteristics of this ‘crisis' have been the rapid speed at which the turmoil has manifested itself, and the unique causes that underpin it.


The financial crisis – our great opportunity

Ian Dunlop exposes the wide-ranging problem underlying the financial crisis: environmentally unsustainable economic growth. Throughout the developed world, the financial crisis has prompted calls for the restoration of economic stability and moderation to a system wracked by greed. That culture of greed, which triggered the crisis, has led to a procession of unsustainable organisations going cap in hand to the central government to secure financial ‘bail-outs’. Such a process, however, is symptomatic of a much more wide-ranging problem.


Miriam Lyons presents Oikonomia at the Queensland Economics Teachers Conference

CPD Executive Director Miriam Lyons will present 'Oikonomia: economics in the 21st century' at the Queensland Economics Teachers Conference on Saturday, March 7th 2009.


The end of Public Private Partnerships?

Centre for Policy Development fellow John Quiggin explains why, in the context of the current global financial crisis, the flow of Public Private Partnerships (PPP) projects have come to a halt, and are unlikely to be revived.


You can see a lot by just looking: Understanding human judgement in financial decision-making

In this paper CPD fellow Ian McAuley outlines the main implications of behavioural economics for financial decision-making, breaking down the myth that market participants are always rational decision-makers who act to maximise their own best interests.


The future of regulation

The Hon Lindsay Tanner MP addressed the CPD in Melbourne on Wednesday September 10. In his address, Mr Tanner described his role as Minister for Deregulation as much more than 'Dr No': "deregulation is a lot more than simply striking out poor regulation. We want to ensure that the Commonwealth develops the capability to regulate better...Achieving this will...require us to open up the regulatory reform process to include the insights of those citizens and firms who are subject to regulation."


Broadening Financial Understanding Summit

CPD fellow Ian McAuley will talk about financial decision-making at the Australian Bankers' Association summit on Broadening Financial Understanding in Sydney on July 2.


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