1. Economic Policy and Economic Dynamics

2. Outline Miscellaneous on Philosophy, Methodology and Theories Miscellaneous on Philosophy, Methodology and Theories Economic Policy – Role of Interest Groups Economic Policy – Role of Interest Groups Economic Dynamics - Mainstream Theory Economic Dynamics - Mainstream Theory Complex Economic Dynamics Complex Economic Dynamics Financial Instability Hypothesis Financial Instability Hypothesis Impact of Current Economic Crisis on Economic Theory and Economic Policy Impact of Current Economic Crisis on Economic Theory and Economic Policy

3. Miscellaneous on Philosophy, Methodology and Theories Mathematics in Economics Mathematics in Economics Model Time x Real Time Model Time x Real Time Neutrality of Money Neutrality of Money Selected Assumptions of Mainstream Economic Theory Selected Assumptions of Mainstream Economic Theory Equilibrium Equilibrium Rationality – Homo Oeconomicus Rationality – Homo Oeconomicus Methodological Individualism Methodological Individualism Postkeynesianism Postkeynesianism Equilibrium Does not Exist Equilibrium Does not Exist Fundamental Uncertainty and Procedural Racionality Fundamental Uncertainty and Procedural Racionality Methodological Collectivism Methodological Collectivism

4. Economoic policy – Role of Interest Groups  Corporatism Corporatism Corporatism  Political Economy  Of Trade Liberalization  Of Common Market  EU – From Neo-Corporatism to Pluralism

5. Economic Dynamics - Mainstream Theories  General Equilibrium  Partial Equilibrium  Economic Cycles  Facts about Cycles  Theories  Samuelson´s Multiplier –Accelerator Model  Sequence of Fluctuations Caused by Shocks  AD – AS Diagram  Policy  Economic Growth  Solow Growth Model  Policy

6. Complex Economic Dynamics  Simple Dynamics Periodic Behavior Characterized by Finit Number of Periodic Values  Complex Dynamics Infinit Cycle or Chaotic Behavior Infinit Cycle or Chaotic Behavior  Mathematics: e.g. Nonlinear difference equation  5 Types of Dynamic Behavior Possible  Stable or non-stable equilibrium  Stable or non-stable cycle  Chaotic behavior  Bifurcation Points

7. Financial Instability Hypothesis  Hyman Minsky – Post-Keynesian Economist (1919 – 1997)  Capitalist market economy is inherently unstable  Basic reason for instability are investments  Instability of investments is increased by debt financing, which is typical for current capitalism  Three Types of Debt Financing  Hedge Financing: Expected financial flows cover mature liabilities all the time  Risk: in financial flows  Speculative financing: Total expected financial flows cover total liabilities, short run borrowing necessary from time to time  Risk: in financial flows and short term interest rates  Ultra – speculative financing: Based on optimistic expectations that actives created by investments increase their value in the future and it will cover liabilities  Risks in financial flows, short term interest rates and change of the behavior of financial markets  Financial Crises and Economic Crises

8. Impact of Current Economic Crisis on Economic Theory and Economic Policy  Change of the current mainstream paradigm?  Incorporation of some results of out-of mainstream theories into the mainstream?  Intervene or not?  New rules for financial system