Lauren Schmitz, a SCEPA Research Assistant, presented her cutting-edge research on new growth theory and arts funding at a high-profile symposium on "The Arts, New Growth Theory, and Economic Development." 

The May 10, 2012 event, hosted by the Brookings Institution and the National Endowment for the Arts (NEA), examined new growth theory as a tool for assessing the impact of art and culture on the U.S. economy. New growth theory argues that, in advanced economies, economic growth stems less from the acquisition of additional capital and more from innovation and new ideas.

Schmitz's research was part of a panel on case studies on the arts and economic development. Her paper, Do Cultural Tax Districts Buttress Revenue Growth for Budding Arts Organizations?, questions the role government should play in financing the arts by analyzing Denver's Scientific and Cultural Facilities Districts (SCFD). Her results find that, rather than public funds 'crowding-out' private dollars, there is evidence of a 'crowding in' that increases private investment. 

The symposium featured papers commissioned by the NEA Office of Research and Analysis and Michael Rushton, the co-editor of the Journal of Cultural Economics. The presentations were moderated by experts from Brookings, the Department of Housing and Urban Development and the Department of Commerce.

Jeff Madrick, SCEPA Senior Fellow, posted a blog as part of the Roosevelt Institute's "Rediscovering Government" project that uses the $2 billion in trading losses announced by J.P. Morgan Chase as the quintessential example of why strong regulation is needed. Below is an excerpt. 

"(Jamie) Dimon, among the most cautious of executives, couldn’t control this trading animal with a life of its own, either. That’s the important conclusion. A Volcker rule to limit speculative trading for banks is necessary. They are using federally insured money to finance much of their banking operations, enabling them to leverage other facets of the company. They are using shareholder money, not their own, to take risks, yet they take enormous bonuses when all goes right. And they are implicitly using taxpayer money, because if they lose too much, they will be bailed out by the federal government. They remain too big to fail.

Serious capital requirements must be implemented against such trading, and banks must also change banker compensation procedures further. For traders, it’s a heads I win, tails you lose proposition. And so it is with the bank CEO as the firm’s overall earnings rise and are socked with a blow only every once in a while. These compensation plans have changed under pressure from the federal government to some degree. But probably not enough. The firms’ partners and employees have to be on the line for losses over time.

All this is a case study in why finance needs more government rules and regulations than most other industries. The omnipresent claim that such rules undermine liquidity in markets is almost laughable. In truth, we have a lot of liquidity when we don’t need it and little when we do—such as after the Lehman Brothers catastrophe in the fall of 2008. As regulations were eliminated and weakened after the 1970s, finance became more unstable, crises more frequent, and trillions of dollars were invested down the rat holes of speculation and fantasy, while Wall Street employees made countless millions. Yes, finance is important to economic growth, but only if government controls it properly. Otherwise it can be and has been damaging."

The Financial Times published a letter to the editor on May 14, 2012, by Sanjay Reddy, Associate Professor of Economics and SCEPA Faculty Fellow. The letter, Bias for Workers Would foster Asia Trade," puts forward an argument that "Growing inequalities within Asian economies threaten the sustainability of growth and development for reasons not mentioned, most importantly the obstacle they create to generating a pattern ofdemand that absorbs locally produced goods and services." 

Reddy not only diagnoses the problem, but puts forward a prescription: "One way to effect amore equal income dist bution and increase the roleof domestic demand in the growth process is to promote co-ordinated enhancementsin wages and labour standards across Asian countries. Such an approach would muteany adverse impact on the competitiveness of individua exporting countries and alsofoster regional trade. In the present situation, a bias in favour of workers cansimultaneously improve lives and make the aggregate pa ern of development moresustainable, in both Asia and the world."