Arin Dube (& Ethan Kaplan, Columbia University)
A Spatial Approach to Macroeconomic Inference
Many of the most important questions in contemporary macroeconomics have proven elusive and thus have yet to be answered in a convincing way. This is in part due to heavy reliance by empirical macroeconomists on time series variation of economic aggregates to find answers.
The project will be conducted through three separate research projects with a common methodological approach using spatial cross-sectional variation in addition to time series variation to identify effects. The projects will focus on: (1.) estimating fiscal multipliers, (2.) estimating the impact of anti-predatory lending laws on housing prices, default rates and foreclosures, (3.) estimating the impact of raising wages during recessions. The end product of the project will make both methodological and substantive contributions to modern macroeconomics.
Gerald Epstein & James Crotty
How Big is Too Big? What Should Finance Do and How Much Should It Be Cut Down to Size?
The financial sector has grown significantly over the last several decades and some have suggested that the sector is now too big. Yet we have no obvious theoretical framework nor clear metric to measure the social usefulness of financial activities to help us determine the desirable size of the financial sector.
Building on James Tobin’s concept of “functional efficiency,” this project will develop new micro and macro data sets to: 1) estimate the size of “functionally inefficient” financial activity and to 2) estimate the share of financial innovations that are “socially inefficient.” We will then utilize these data sets to study the impacts of financial regulations, financial taxes and other safety enhancing financial measures that affect the level of “functionally efficient” finance. Finally, we will study the impact of financial size on political capture, and then add those impacts to the study of the socially desirable size and character of the financial system.
Launched in October 2009 with a $50 million commitment from George Soros and driven by the global financial crisis, the Institute for New Economic Thinking (INET) is dedicated to empowering and supporting the next generation of economists and scholars in related fields through research grants, Task Force groups, academic partnerships, and conferences. INET embraces the professional responsibility to think beyond current paradigms. Ultimately, INET is committed to broadening and accelerating the development of innovative thinking that can lead to insights into and solutions for the great challenges of the 21st century and return economics to its core mission of guiding and protecting society.