This paper weighs possible medium-term responsible policy choices to the extraordinary expansion of government spending in response to the COVID-19 outbreak. The paper is divided into two parts. In part 1 of the paper, we look at conventional debt sustainability and question whether conventional rules created during a period of high interest rates and high inflation remain relevant. Current and future conditions support a case for government debt/GDP to remain elevated compared to history, conditional upon limited state interference in the economy to allow appropriate allocation of capital and resources. In part 2, we consider the historical experience of the United Kingdom. History shows the country had several examples of rapid, large-scale expansion of government debt relative to the size of the economy. On each occasion, the elevated level of debt-to-GDP was later reduced by a combination of relatively benign factors, including commitment to low inflation and sound monetary system. This supported the financial probity of the UK government and allowed it to continue to borrow unimpeded.

The part played by unemployment in the rise to power of Hitler weighed on the minds of leaders in Western democracies. There was a determination to create a world in which large-scale unemployment was abnormal and at worst only a temporary phenomenon. The war had shown that this was possible in a community united to pursue a common goal and the aim was to create such a community in a world free from the horrors of war, by creating communities in which the welfare of every person was important. Australia was remarkably successful in achieving this for 30 years. Its success depended on governments responding to any sustained increase in unemployment by undertaking large increases in public sector expenditure supported by accommodating monetary policy and tax cuts if desirable. In bad times as well as good, there was a determination to ensure that both the incomes and prices paid for necessities by the less well-off did not force anyone to live in poverty. The biggest obstacle to achieving this today is the growth of neoliberalism with its emphasis on ‘freedom’ or giving individuals the ability to act as they please with minimal constraints and an ideological commitment to small government.

This extended Review Article assesses the changing role of the corporation in history, using the 2018 book by Oxford scholar Colin Mayer entitled ‘Prosperity’ as a basis for the analysis. This is a traditional review article centred around the Mayer book, but as we end we take our argument, albeit tentatively, to other related issues, beyond the Mayer argument. The corporation may be viewed in a positive sense as a creator of wealth and ‘prosperity’ for society in general, or as in a negative sense as generating ‘prosperity’ only for the few, shareholders and executives at the expense of the many, including workers, customers and future generations. Colin Mayer’s book visits both sides of this ‘prosperity’ equation and the title of the book derives from this recognition. Our argument is that even within the limits of contemporary neo-liberal global capitalism, corporations could be a force for more sustainable and balanced economic growth, as well as for social and environmental good. This requires a clarification of its ‘purpose’ as well as changes in the composition of its decision-making structures and revised mandates of its boards and sub-committees such as its remuneration committees that often have been given the power alone to determine executive pay. But we argue (albeit only suggestively) in the final section that the nature and variety of capitalism itself may have to be addressed alongside firm level changes for the long-term good and sustainability of a more equal society. Mayer shows that since its birth in Roman times, as an agency for promoting public works and the public good, the corporation has taken on many different roles, with varying purpose. Only in the last 50 years has the Milton Friedman doctrine, that companies should have only one role, of maximizing shareholder wealth, become the dominant explanation for the purpose of the corporation. We are not confident that corporations will voluntarily move in these progressive directions, especially given the continuing stranglehold of neo-liberal globalization. A push for broader social and economic change from below through struggle may be essential.

We analyse the money-financed fiscal stimulus implemented in Venice during the famine and plague of 1629–31, which was equivalent to a ‘net-worth helicopter money’ strategy – a monetary expansion generating losses to the issuer. We argue that the strategy aimed at reconciling the need to subsidize inhabitants suffering from containment policies with the desire to prevent an increase in long-term government debt, but it generated much monetary instability and had to be quickly reversed. This episode highlights the redistributive implications of the design of macroeconomic policies and the role of political economy factors in determining such designs.

Both the physical and transition-related impacts of climate change pose substantial macroeconomic risks. Yet, markets still lack credible estimates of how climate change will affect debt sustainability, sovereign creditworthiness and the public finances of major economies. We present a taxonomy for tracing the physical and transition impacts of climate change through to impacts on sovereign risk. We then apply the taxonomy to the UK’s potential transition to net zero. Meeting internationally agreed climate targets will require an unprecedented structural transformation of the global economy over the next two or three decades. The changing landscape of risks warrants new risk management and hedging strategies to contain climate risk and minimise the impact of asset stranding and asset devaluation. Yet, conditional on action being taken early, the opportunities from managing a net zero transition would substantially outweigh the costs.

The essay examines Spain’s colonial legacy in the long-run development of Spanish America. It surveys the fiscal and constitutional outcomes of independence and assesses the relative burden imposed by colonialism. Constitutional asymmetries between revenue collecting and spending agents constrained de facto governments’ power to tax. Inherent disparities embedded in the colonial fiscal system worsened with vaguely defined representation for subjects and territories and vexed their aggregation into a modern representative polity. Governments with limited fiscal capacity failed to deliver public goods and to distribute the costs and benefits of independence equitably. Growing indirect taxes, debt and money creation allowed them to transfer the fiscal burden to other constituents or future generations. Taxpayers became aware of the asymmetry between private contributions and public goods and hence favoured a low but regressive taxation. Comparisons with trajectories in the metropolis and the United States are offered to qualify this legacy.

Recent advances in historical national accounting have allowed for global comparisons of GDP per capita across space and time. Critics have argued that GDP per capita fails to capture adequately the multi-dimensional nature of welfare, and have developed alternative measures such as the human development index. Whilst recognising that these wider indicators provide an appropriate way of assessing levels of welfare, we argue that GDP per capita remains a more appropriate measure for assessing development potential, focussing on production possibilities and the sustainability of consumption. Twentieth-century Africa and pre-industrial Europe are used to show how such data can guide reciprocal comparisons to provide insights into the process of development on both continents.

This article outlines some of the intellectual lessons learnt by central bankers during the financial crisis. The key question is whether a broader range of policy options than simple inflation targeting has to be considered in order to limit instability. Interactions with overseas pools of savings, government debt markets and financial risk have all conspired to complicate significantly the task of monetary policymaking. These developments do not mean that the target for inflation has to be modified or dropped but that setting policy will be a more complex task and require more explanation than it has in the recent past.

We examine the international propagation of the financial crisis of 2008, and compare it with that of the crisis of 1931. Both crises featured a flight to liquidity and safety. We argue that the collateral squeeze in the United States, which became intense after the failure of Lehman Brothers, was an important propagator in 2008; in 1931 the acceptances granted by London banks to central European borrowers propagated the crisis to the UK. In both crises, central banks' reserve management actions contributed to the liquidity crisis. And in both crises, the behaviour of creditors towards debtors, and the valuation of assets by creditors, were very important. However, there was a key difference between the two crises in the range and nature of assets that were regarded as liquid and safe: central banks in 2008, with no gold standard constraint, could liquefy illiquid assets on a much greater scale.

We identify similarities and differences in the scale and nature of the banking crises in 2008-9 and the Great Depression, and analyse differences in the policy response to the two crises in light of the prevailing international monetary systems. We find that the scale of the banking crisis, as measured by falls in international short-term indebtedness and total bank deposits, was smaller in 2008-9 than in 1931. However, central bank liquidity provision was larger in the flexible exchange rate environment of 2008-9 than in 1931, when it had been constrained in many countries by the gold standard.

Eye fixation–related potential (EFRP) measures electrical brain activity in response to eye fixations. The aim of the current study was to investigate whether the EFRPs vary during consecutive eye fixations while subjects were performing an object identification task. Eye fixations evoked P1 and N1 components at the occipital and parietal recording sites. The latency of P1 component increased during consecutive fixations. The amplitude of P1 increased and the amplitude of N1 decreased during consecutive fixations. The results indicate that EFRPs are modulated during consecutive fixations, suggesting that the current technique may provide a useful tool to study temporal dynamics of visual perception and processes underlying object identification.

This paper evaluates the probability density forecasts reflected in the Bank of England's real GDP growth fan charts. Evaluation is carried out using tests that allow for data dependence and using two GDP growth estimates. Results suggest there are problems with the shorter horizon forecasts, but conclusions about the performance of longer-term forecasts depend to some extent on the GDP estimates used in the assessment.

The life and work of Miguel de Cervantes coincide with the first cycle of globalization. One of the main engines of the world economy was the silver trade between the Americas and the Asian markets. The new world economy was developing at the same time as the «military revolution» in Eurasia. The Spanish, Ottoman, Safavid, Mughal and Russian empires and other political entities used the new military «hardware» and «software» to expand their borders and to maintain their position employing the larger part of their financial resources. These new economic and political realities propelled ecological exchanges that would irrevocably change the history of the world. That was the time of Don Quixote.

The ability of left-hemisphere stroke patients (n = 8) and healthy control subjects (n = 8) to process sounds preattentively and attentively was studied by recording auditory event-related potentials (ERPs) and behavioral responses. For the right-ear stimulation, the mismatch negativity (MMN) was significantly smaller in the patients than control subjects over both hemispheres. For the left-ear stimuli, the MMN was significantly smaller in the patient group than in the control group over the left hemisphere, whereas no group differences were obtained over the right hemisphere. In addition, the N1 amplitude was reduced bilaterally for the right-ear stimulation (with the reduction being larger over the left hemisphere), whereas no significant effects on the N1 amplitude were found for the left-ear stimulation. Behaviorally, the patients detected significantly fewer deviant tones than did the control subjects irrespective of the stimulated ear. The present results thus suggest that the long-latency ERPs can be used to probe such auditory processing deficits that are difficult to define with behavioral measures. Especially by recording MMN to monaural stimuli, the discrimination accuracy can be separately determined for the left and right temporal lobes.

Many previous studies have demonstrated that the visual N1 component is larger for attended-location stimuli than for unattended-location stimuli. This difference is observed typically only for tasks involving a discrimination of the attended-location stimuli, suggesting that the N1 wave reflects a discrimination process that is applied to the attended location. The present study tested this hypothesis by examining the N1 component elicited by attended stimuli under conditions that either required or did not require the subject to perform a discrimination. Specifically, the N1 elicited by foveal stimuli during choice-reaction time (RT) tasks was compared with the N1 elicited by identical stimuli during simple-RT tasks. In three experiments, a larger posterior N1 was observed in choice-RT tasks than in simple-RT tasks, even when several potential confounds were eliminated (e.g., arousal and motor preparation). This N1 discrimination effect was observed even when no motor response was required and was present for both color- and form-based discriminations. Moreover, this discrimination effect was equally large for easy and difficult discriminations, arguing against a simple resource-based explanation of the present results. Instead, the results of this study are consistent with the hypothesis that the visual N1 component reflects the operation of a discrimination process within the focus of attention.

The P3 amplitude is augmented by decrements in target-probability, increments in the number of nontargets preceding the target, and extensions of the interstimulus interval (ISI). Each of these changes prolongs the target-to-target interval (TTI) and, consequently, results attributed to these factors might, at least partially, be accounted for by the TTI. Recent research also indicates that the P3s elicited by targets in one-, two-, and three-stimuli tasks (in which the TTI remains invariant) are similar. However, the TTI has not been examined systematically in previous research. The present study had subjects listen to a randomized ISI (0.5, 1, 2, or 4 s) version of the auditory oddball task in which targets occurred after one, two, three, four, or five nontargets. Event-related potentials were analyzed based on ISI, sequential structure, and TTI. The study examined sequence and ISI effects independent of TTI effects and demonstrated that extensions of ISI affected N1 but not P3 amplitude, extensions of TTI enhanced P3 amplitude independent of sequential structure, and sequential structure failed to influence P3 amplitude when TTI was controlled.

Attentional modulations of event-related brain potentials (ERPs) were measured when subjects were cued to attend to a visual quadrant or to a ring-shaped region of visual space to detect infrequently presented targets within the attended region. Spatial attention directed to quadrants was reflected in modulations of sensory-evoked P1 and N1 components at lateral posterior sites and enhanced negativities (Nds) at midline electrodes that started around 150 ms poststimulus. When attention was directed to ring-shaped regions, no modulations of P1 and N1 amplitudes were found, and Nd effects observed at midline electrodes were delayed by about 50 ms. These findings indicate that behavioral effects observed both when attention is directed to contiguous regions and to general areas of visual space may be caused by different underlying processes. Intraperceptual “sensory gating” mechanisms operating in a way suggested by the notion of an attentional “zoom-lens” may be responsible for the selection of single regions, quadrants, or hemifields. When relevant regions are more complex, spatial selectivity will affect primarily postperceptual processes.