Its puzzled me why 'financialisation' is a wishy-washy topic that has been relegated to heterodox economic schools but its obvious because 'financialisation' is not a purely economic process, but a political one as well.
Its because mainstream economists are intrinsically allergic to studying the political implications of their economic theories.
https://x.com/ThePoliEcon/status/1980487837305975047
Sad. Because modern economics has all the analytic tools to explain the deleterious effects on political economy of 'financialisation'.
The starting point is understand the economic incentives of finance.
They make money from flow of financial transactions hence the incentive to collateralise as much of the real economy as the political system allows it.
They make money from flow of financial transactions hence the incentive to collateralise as much of the real economy as the political system allows it.
https://x.com/ThePoliEcon/status/1875361551613620364
The other axiom is that capital is not neutral. Merchants will leverage their financial and real capital to shape political processes in their favour.
That's literally what 'public choice' field in economic studies.
That's literally what 'public choice' field in economic studies.
As far as I'm aware 'public choice' has nothing to say about financialisation. Funny why that is.
The iron law of finance is, financial capital will flow to parts of real economy that has the most leverage to extract rent.
So sectors that are natural monopolies, high switching costs, network effects, government granted monopolies or demand inelastic.
So sectors that are natural monopolies, high switching costs, network effects, government granted monopolies or demand inelastic.
Example of ‘demand inelasticity’ is housing, healthcare and education.
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