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Promoting Household Wellbeing: Markets or Public Policies?

Paper Session

Sunday, Jan. 6, 2019 8:00 AM - 10:00 AM

Hilton Atlanta, Crystal F
Hosted By: Association for Evolutionary Economics
  • Chair: Sherry Davis Kasper, Maryville College

Financially Unstable Households

Robert H. Scott, III
,
Monmouth University
Steven Pressman
,
Colorado State University

Abstract

One of Minsky’s most important contributions is the Financial Instability Hypothesis (FIH), which explains why capitalist economies experience periods of optimism (booms) and pessimism (bust). At the beginning of a cycle, businesses take on more debt, but they are conservative and the principal is easily paid from profits (a hedge position). As optimism grows, so does risk-taking and businesses take on more debt. At some point they can only afford to pay interest on that debt (speculative position). In the most extreme case, businesses take on so much debt that they can neither pay the principal nor make interest payments, which threatens bankruptcy (Ponzi position). This paper applies Minsky’s FIH to households. Minsky wrote about financial instability (e.g., 1975, 1986) before US households had taken on large levels of debt. Minsky focused on businesses since they were the debt drivers. Today household debt is at record levels in the US and many households struggle to make ends meet because of this. Excessive mortgage debt by households is generally recognized as a major factor leading to the Great Recession. So it makes sense to understand how financially unstable US households are and what this means for the economy. We begin the paper by arguing that Minsky’s categories should be applied to households; then we operationalize them using the Fed’s Survey of Consumer Finances and the PSID. This enables us to measure changes in household financial instability from 1989 to 2016 using Minsky’s framework and also draw some conclusions.

EU Youth Employment Policies Targeting the Social Economy: Assessing Their Capacity to Advance Decent Work and Social Solidarity

Asimina Christoforou
,
Athens University of Economics and Business

Abstract

Youth unemployment has dramatically increased in the European Union (EU), especially after the crises, creating a world of heightened uncertainty and instability. The EU has introduced a number of policy initiatives to eradicate the problem. Recently, it has turned to the so-called social economy. The social economy dates back to the Industrial Revolution and identifies with organisations, such as associations, cooperatives and social enterprises, which provide goods and services by combining economic and social goals in order to counter the inefficiencies and injustices of the market and to promote cooperation, equality and development. The aim of this article is to assess the capacity of EU’s youth employment policies to provide decent work and social solidarity via the social economy. The article draws from legal documentation and statistical data regarding youth employment and the European social economy; and supranational and national policy measures and programmes. It argues that despite attempts to reinstate social objectives in public policy and labour markets in the EU, prospects to advance work and solidarity may be hindered by the dominance of market values of competition, efficiency and growth. It suggests that the EU should revise its economic and social model by socially ‘re-embedding’ the economy in accordance to Polanyi’s conception of the double movement. It explains how public policy and labour markets could be re-defined within the context of the social economy in order to combine different forms of social integration, namely the market (exchange), the state (redistribution) and the civil society (reciprocity).

The Tenuous Grasp: Possession and Loss in the Marketplace

William Redmond
,
Indiana State University

Abstract

Generally speaking markets serve as provisioning technologies, facilitating the supply of goods and services to consumers. However markets can also serve as de-provisioning mechanisms, taking things away from people. Examples include evictions, foreclosures, and repossessions of vehicles.
Like the forward movement of goods and services, the “reverse” flow involves market and legal institutions to accomplish the tasks involved. Reverse flows employ specialist employees and specialist suppliers who are not typically involved in forward-moving markets, and are not often known to the consumers at the time of purchase.
The affected consumers are overwhelmingly lower income and minority (with the notable exception of the substantial number of mortgage foreclosures during the recent housing bubble). Power relations in these markets favor sellers, who are familiar with the legal details of the exchange and means of enforcement, over buyers who are not. In the main this is a social class issue in which lower class individuals are predominantly affected, with middle and upper-classes much less so. Put another way, this is another economic arena in which inequality plays a large role in the outcomes. Consumers involved in evictions or repossessions generally enter into the exchanges in good faith but are differentially affected by reversals of fortune which result in adverse financial circumstances. Those with the tenuous grasp truly live in a condition of uncertainty.

A True Focus on the Family: Social Policies to Help Family Care

Timothy A. Wunder
,
University of Texas-Arlington

Abstract

Polanyi postulated that individuals join within societies to protect themselves from the vagaries of the material world. When markets strip people of protections individuals will spontaneously respond attempting to provide protections for themselves. Modern developed economies have a material abundance beyond the imagination of people living two centuries ago, yet for many the guaranteed ability to access that material abundance is more tenuous then ever. In the US individual debt has driven economic growth for decades so while most possesses material things, few actually own them. A job loss or an illness can strip the family of all assets faster than a drought could destroy the livelihood of a 19th century farmer. As a reaction to this many young adults are choosing to delay or forego having children and people wanting to take care of parents at life’s end cannot do so. This essay will explore how a universal child stipend and family elder care stipend would help to strengthen families. The ability of individuals to call upon family aid is one of the ultimate protective institutions and social policy must give families the financial tools to once again perform these roles. In this era of hyper-individualism society has abandoned the family and public policy must now create room if families are to have the economic space to exist.

Entrepreneurship and Human Development in an Uncertain World

Tonia Warnecke
,
Rollins College

Abstract

In the aftermath of the Great Recession, and growing uncertainty in the political and socioeconomic landscape of many countries, the idea of entrepreneurship as a strategy for personal financial security is experiencing increased popularity. This paper will discuss the controversial relationship between entrepreneurship, economic growth and human development in the developing world, focusing on necessity vs. opportunity entrepreneurship and informal vs. formal sector entrepreneurship. Examination of varied institutional scholarship on entrepreneurship (e.g. Schloss 1968; McDaniel 2005; Nega and Schneider 2014; Dolfsma and de Lanoy 2016; Champeyrache 2018) yields insight regarding the conditions which impact entrepreneurship’s ability to produce meaningful change for individuals, households, communities, and the broader economy. This paper also considers whether these conditions have changed in recent decades, and discusses the way that entrepreneurship fits into the institutional infrastructure for social welfare provision, noting the challenges of promoting entrepreneurship-based solutions in the absence of a strong social safety net. Examples from China and India will be used for context.
Discussant(s)
Richard V. Adkisson
,
New Mexico State University
JEL Classifications
  • D1 - Household Behavior and Family Economics
  • B5 - Current Heterodox Approaches