Vol. 24 No. 1 (2004): Jan-Mar / 2004

Vol. 24 No. 1 (2004)

Jan-Mar / 2004
Published January 1, 2004


On open systems
Victoria Chick
Brazilian Journal of Political Economy

To many, economics is seen as increasingly divorced from reality. I shall argue that one of the causes of this divorce is the attachment to closed-system theorising, and advocate instead the method of open systems with partial and temporary closures. Definitions of closed and open systems are examined. It is evident that there are many different criteria which may define open systems. Theorists differ in their emphasis on one or other criterion. There are also different dimensions of openness: openness to non-economic factors; the openness of economic theories themselves; the interplay of micro- and macro-economics; and the treatment of time. These are explored, using Keynes’s General Theory as a case study of an open system.

JEL Classification: A10; B31; B40; B50; E12.

Elements for a political economy of the reforms in Lula Government
Edmar Lisboa Bacha
Brazilian Journal of Political Economy

“Elements for a Political Economy of the Reforms in Lula Government”. Under the hypothesis that structural reforms are positive for the economy, it is argued that, in a government of the 'right', there exists stable political economy equilibrium: some reforms are made and the economy has a median performance. In a government of the 'left', such median equilibrium is unstable. A situation of double equilibria is characterized: the government either succeeds fully or it fails miserably. The conclusion is that the success of Lula's government will depend on the result of a race between the of his popularity, on one hand, and the improvement of the economy, on the other.

JEL Classification: E61; E65; O11; O54.

Monetary policy independence and floating exchange rates: what does the brazilian evidence tell us?
Carlos Eduardo Soares Gonçalves
Brazilian Journal of Political Economy

Some authors have advocated that shifting from fixed exchange rates to floating regimes has not delivered better economic outcomes to developing countries. As the argument goes, pervasive fear of floating in these economies has prevented s in real interest rates and, more importantly, has been a hindrance in the way towards more monetary policy autonomy. This paper presents evidence suggesting this may not be the case for Brazil. More precisely, there are signs that fear of floating was less acute here (presumably due to low exchange rate pass-through) than elsewhere, and also that policymakers are now targeting monetary policy principally to domestic objectives.

JEL Classification: E5; E58.

Escaping the debt constraint on growth: a suggested monetary policy for Brazil
Thomas I. Palley
Brazilian Journal of Political Economy

Existing interest rates imply explosive debt dynamics for Brazil. It also faces rising inflation from earlier currency depreciations, which could trigger future depreciation. These conditions impose a policy contradiction. Brazil needs lower interest rates for debt sustainability, but tight monetary policy to avoid exchange rate depreciation and inflation. The paper develops a strategy to escape this contradiction. Policy must bolster investor confidence to lower external interest rates, lower domestic interest rates to reduce debt service burdens, and implement domestic credit creation controls to control inflation.

JEL Classification: E40; E44; F30; F40.

Politics and fiscal reforms in recent Brazil
Maria Rita Loureiro, Fernando Luiz Abrucio
Brazilian Journal of Political Economy

“Politics and Fiscal Reforms in Recent Brazil”. This study focuses on the economic and political framework in which fiscal changes take place in Brazil in the past two decades, in the general context of the State reform. Emphasis is given to the Cardoso government’s reforms which are examined not only from a macroeconomic perspective but also from the viewpoint of democratic accountability. Without disregarding the role of critical conjunctures, the article also stresses the incremental nature of these reforms and indicates that successful ones take place gradually and that each step taken has influence on the path ahead.

JEL Classification: E6; E61.

Selected efficiency: a neo-Schumpeterian evolutionary perspective on normative economic issues
Mario Luiz Possas
Brazilian Journal of Political Economy

“Selected Efficiency: A Neo-Schumpeterian Evolutionary Perspective on Normative Economic Issues”. This paper intends to address an almost completely disregarded field in Neo-Schumpeterian Evolutionary economics: that of normative theory and competition policy issues. The amount of both modeling and appreciative theorizing that has been produced under this approach is already impressive, but it lacks a corresponding effort on normative implications of the theory. After discussing the limitations of the static Pareto-efficiency tools for competition analysis and policy, especially in antitrust, some scarce contributions towards dynamic efficiency and related concepts are briefly reviewed. Finally, an alternative dynamic efficiency concept labeled “ive efficiency”, focusing on the efficiency of the market as a ive environment (apud Nelson & Winter), is introduced and the basic lines of a possible analytical framework for its application are suggested.

JEL Classification: D60; O33.

Information economics, electronic networks and regulation: elements of analysis
Alain Herscovici
Brazilian Journal of Political Economy

“Information Economics, electronic networks and regulation: elements of analyze.” This paper aims at analyzing the different components of the so-called new economy. The first part, essentially theoretical, deals with the various conceptions on both the nature and role of information in the working of markets. The second part shows the microeconomic characteristics of electronic networks, evaluating its competitive properties. In the third part, after having outlined the current accumulation regime, the relationship between networks development and the implementation of a new mode of regulation are discussed. As regards this matter, alternative interpretations of Solow paradox are offered.

JEL Classification: D82; L86; O38.

Currency union in Mercosul
Helder Ferreira de Mendonça, Anabel da Silva
Brazilian Journal of Political Economy

“Currency Union in Mercosul”. Nowadays, influenced by the European experience, several Brazilian economists have given special attention to the possibility of a currency union among the countries of Mercosul. This paper makes a brief analysis of the main theoretical aspects that represent the basis for the proposition of a currency area. Besides this, the paper shows two distinct views in the national literature concerning the hypothesis of the creation of a currency area for the Mercosul. The main conclusion of this article is that the proposal mentioned above is not feasible, because the costs of macroeconomic coordination are too high.

JEL Classification: E42; F33.

Towards a pro-poor development strategy for middle-income countries: a comment on Bresser-Pereira and Nakano
Alfredo Saad Filho
Brazilian Journal of Political Economy

This paper draws upon Bresser-Pereira and Nakano (2003), in order to outline a pro-poor growth strategy for middle-income countries. This strategy avoids the pitfalls of the neoliberal model implemented in several countries in the aftermath of the 1982 international debt crisis, and is conducive to income distribution and sustainable growth simultaneously.

JEL Classification: I3; H5; Z18.

Economy and institutions in Kubitschek government
Newton Paulo Bueno, José Heleno Faro
Brazilian Journal of Political Economy

This paper seeks to incorporate one of the most recent theoretical progresses in institutional economics to the analysis of the institutional evolution of Brazil during the period 1956/1961: an endogenous rational choice model for institutional dynamics. The Kubitschek period was chosen because it was a moment of our recent history where it was tried to implement significant institutional changes in our political, economical and social institutions seeking to accelerate the rhythm of the industrialization process. The institutions implanted however did not present the self-reinforcement property nor in the weak sense, nor in the strong sense (terms defined in the paper), being for this subject to be undermined by endogenous processes. This institutional arrangement therefore, that was initially capable to sustain itself in conditions of fast industrialization with relative stability of prices, was progressively weakened, becoming self - enforceable only in conditions of economic stagnation and accelerated inflation. It is argued finally that the analysis outlined above can be useful to understand a little better the general nature of the processes of institutional change.

JEL Classification: N16; N46.