Institutions, regulatory regimes and policy

George Kararach ()

Chapter 20 in Liberating Economics From Ideologies and Dystopia, 2025, pp 275-285 from Edward Elgar Publishing

Abstract: Social, economic and political power dynamics play a role in shaping economic outcomes. Simultaneously, the policy approaches that emphasised market regulation are wanting. We start from a premise that institutions are critical for a modern economy and are anchored on its historical, social and cultural processes shaping the economic growth trajectory. In this regard, an efficient and consistent macroeconomic policy based on the neoliberal canon is not always a guarantee of an optimal path with full employment and long-run equilibrium. We show that: (a) economic growth is a process too complex to be expressed through a formalisation restricted to a cast of a few variables that can be measured; (b) in this process, what matters is the mutual causality relations, or circular causation as per Gunnar Myrdal's formulation, where the role of the firms, the individual decisions and the institutions are fundamental; (c) historical and cultural mediations are also important; and (d) optimality and steady-state will hardly be reached in the long run due to the uncertainty and instability of the system. Regulatory policy becomes critical in setting the boundaries of behaviours in the economy beyond those linked to the market mechanism.

Keywords: Institutions; Regulatory regimes; Modern capitalism; Regulatory policy; Circular causation; Political dynamics (search for similar items in EconPapers)
Date: 2025
ISBN: 9781035316175
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