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How economists understand (or not) the relationship between the real and financial economy

Hermele, Kenneth LU (2015) In Fessud Working Paper Series 82.
Abstract
Economists' attempts to understand the relationship between the real and the financial eocnomy, and the impact of the latter on the former, go back to the origins of economics but they have gained renewed strength with the financial crisis of 2008 and the resulting economic crisis. The relationship real-finance is variously portrayed as being non-important, mutually beneficial, or destructive, real economic activities losing out to pure speculation and wasteful consumption patterns. The various economics traditions' takes concerning the pro- and cons of the rise of finance capital is discussed, and summarized in a table. In the process, classical and neo-classical, as well as Marxist, Neo-Schumpeterian and Ecological perspectives are... (More)
Economists' attempts to understand the relationship between the real and the financial eocnomy, and the impact of the latter on the former, go back to the origins of economics but they have gained renewed strength with the financial crisis of 2008 and the resulting economic crisis. The relationship real-finance is variously portrayed as being non-important, mutually beneficial, or destructive, real economic activities losing out to pure speculation and wasteful consumption patterns. The various economics traditions' takes concerning the pro- and cons of the rise of finance capital is discussed, and summarized in a table. In the process, classical and neo-classical, as well as Marxist, Neo-Schumpeterian and Ecological perspectives are discussed (and summarized in the Appendix). Three levels of the economy are investigated: the financial, the real (where production of goods and services take place) and the real-real, where the physical pre-conditions for the other two are located.

The conclusion is that the various sectors cannot be understood in isolation from each other, and that some of the recipes for a resumption of a healthy balance between finance and the real economy forget to anchor this vision in a clear understanding of the limits to growth suplied by Ecological Economics. (Less)
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author
organization
publishing date
type
Book/Report
publication status
published
subject
keywords
Real economy, real-real economy, fictitious capital, productive capital, neutrality of money, veil of money, financial euphoria.
in
Fessud Working Paper Series
volume
82
pages
43 pages
publisher
Fessud, University of Leeds
ISSN
2052-8035
language
English
LU publication?
yes
id
3def7cb8-ab2c-45e8-be04-6d245f56ac84 (old id 5147125)
date added to LUP
2015-03-04 11:18:27
date last changed
2016-04-15 22:27:05
@techreport{3def7cb8-ab2c-45e8-be04-6d245f56ac84,
  abstract     = {Economists' attempts to understand the relationship between the real and the financial eocnomy, and the impact of the latter on the former, go back to the origins of economics but they have gained renewed strength with the financial crisis of 2008 and the resulting economic crisis. The relationship real-finance is variously portrayed as being non-important, mutually beneficial, or destructive, real economic activities losing out to pure speculation and wasteful consumption patterns. The various economics traditions' takes concerning the pro- and cons of the rise of finance capital is discussed, and summarized in a table. In the process, classical and neo-classical, as well as Marxist, Neo-Schumpeterian and Ecological perspectives are discussed (and summarized in the Appendix). Three levels of the economy are investigated: the financial, the real (where production of goods and services take place) and the real-real, where the physical pre-conditions for the other two are located.<br/><br>
The conclusion is that the various sectors cannot be understood in isolation from each other, and that some of the recipes for a resumption of a healthy balance between finance and the real economy forget to anchor this vision in a clear understanding of the limits to growth suplied by Ecological Economics.},
  author       = {Hermele, Kenneth},
  institution  = {Fessud, University of Leeds},
  issn         = {2052-8035},
  keyword      = {Real economy,real-real economy,fictitious capital,productive capital,neutrality of money,veil of money,financial euphoria.},
  language     = {eng},
  pages        = {43},
  series       = {Fessud Working Paper Series},
  title        = {How economists understand (or not) the relationship between the real and financial economy},
  volume       = {82},
  year         = {2015},
}