Conclusion

Susan K. Schroeder

Chapter 7 in Public Credit Rating Agencies, 2015, pp 161-171 from Palgrave Macmillan

Abstract: Abstract In seeking to promote the public interest of economic and financial stability, we find that the approach one takes is integrally related to the vision that one holds about the role of investment and the inherent stability of a (capitalist) market economy. The information contained in the opinions of the rating industry facilitate private and public investment. Investment is a mechanism through which capital is redirected to more profitable uses. On this, orthodox and heterodox economists agree. However, they hold polar views when it comes to investment’s influence on the economy. Orthodox or mainstream economists view capital mobility, which is effected through investment activities, as being key to promoting balance through the allocation of resources between industries, to their best uses. That state or path may change with changes in technology, preferences, and resource availability, but it is characterized as balance. Here, the removal of impediments to efficiencies—which supposedly impede balance and the maximization of social welfare—is an objective of government policy. As per mainstream economics, the ideal state of an economy is characterized by a uniform rate of profit. The ideal state is demonstrated with the help of a general equilibrium framework and the neoclassical conception of (perfect) competition. As such, it is not the profit rate that channels leakages (savings) back in to the economy as injections (investments)—that role is given to the interest rate.

Keywords: Cash Flow; Rating Agency; Credit Risk; Industrial Policy; Credit Default Swap (search for similar items in EconPapers)
Date: 2015
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DOI: 10.1057/9781137359117_7

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