Thursday, December 15, 2022

What Is The Bielefeld School Of Economics?

 This is about a paper I have just written for a special issue to appear in a journal I used to edit about the late economist, Peter Flaschal. Who most of you are probably thinking, although maybe not all of you? He was a heterodox macroeconomist located for his entire career at Bielefeld University in Germany.  He coauthored a lot with a group of economists who either were on the faculty there, at least for some time, or visited there frequently. Some of the other members of this group are the also now late Carl Chiarella of the University of Technology in Sydney, Australia, Willi Semmler of the New School in New York, Peter Skott of U-Mass Amherst, Toichiro Asada of Chuo University in Tokyo, Reiner Franke of Bremen University in Germany. They have tended to work on fairly mathematical nonlinear dynamics models that can show both growth and endogenous cycles, including complex ones such as chaotic, so, unsurprisingly, up my alley. 

Their most important influence was models of this sort by the late Richard Goodwin, who had a Marx-influenced predator-orey model of class struggle syclical fluations. Their early models were labeled as Kynes-Wicksell-Goodwin (KWG) models, But then they picked up invnentory adjustment models from Metzler, leading them to label their models Keynes-Metzler (KMG) models.  Around 2009 Flaschel in particular, sort of following Goodwin on this, put more emphasis on both Marx and Schumpeter, relabeling their models as Keynes-Marx-Schumpeter (KMS) models. Their models differ both from the New Keynesian models that assume rational expectations and dominate much of academic macroeconomics nnd are paid attention to by central bankers, and also Post Keynesian models, that tend to be less mathematical, although both have also been influenced by Kalecki and Kaldor. Partly because they have had trouble publishing in to journals and have never created any of their own like the Post Keynesians have, they have done a lot of book writing, with Flaschel an author of coauthor on 17, not counting even more he edited or coedited, mostly with people named above.

Flaschel and several of them also advocating somewhat leftish policies for government intervention in economies to stabilize the endogenous fluctuations their models show to be prevalent, with these largely driven by real effects involving wage-price dynamics and inventory adjustments rather than financieal fluctuations, although they have well-developed financial sectors in their models, and some of them have done a lot of financial modeling, notably the late Chiarella, who wss a coeditor of the Journal of Economic Dynamics and Control for a while. 

Anyway, the policy angle that Flaschel especially came to advocate, along with Proano and Asada has been flexicurity, an approach inspired by policy in Denmark. It combines having a flexible labor market on both sides, free hirigin and firing with strong labor organizing, and a strong social safety net with government serving as an "employer of first resort." They have also advocated educational reforms to enhance all this as well as the use of pension funds for financing real capital investment, again with an idea to help smooth out business cycles. This approach has many supporters in the EU, where Flashel's writings on this have gotten some attention, although critics have called them "naive."

Anyway, I gave them this label of "Bielefeld School" in a Foreword I wrote for one of their books in 2995, Foundations for a Disequilibrium Theory of the Business Cycle: Qualitative Analysis and Quantittative Assessment, by Chiarella, Flaschel, and Franke our of Cambridge University Press. The label has not caught on much, and they have not gotten as much attention as I think they deserve. My paper compares them in more detail to Post Keynesians, who are perhaps more combative about their heterodox relations with mainstream economics and only barely aware of these people, who sometimes put them down for their sometimes lack of mathematical rigor. I suggest that their common admiration for Kalecki and Kaldor and Goodwin whose models can generate complex dynamics is a possible opening for them to communicate and support each other, especially given that they are generally in the same neck of the ideological and policy woods, with the modern monetary theorists full emploiyment ideas looking somewhat like those of this flexicurity approach that does not get talke about in the US.

Barkley Rosser

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