A central question in corporate finance literature relates to the choice between debt and equity. The debate on capital structure choice has been fueled by the publication of the article of Modigliani and Miller (1958). These pioneers of finance beg the question of the pertinence of capital structure. They demonstrated that in efficient, perfect, and integrated capital market, firms draws no gains from opportunistically switching between debt and equity.
Therefore, firms can not reduce the overall capital cost by adopting one financial structure instead of another. Subsequently, the static trade-off theory suggests that there is an optimal capital structure determined by the tax structure, costs of financial distress, and agency problems. A deviation from this target level of debt pushes firms to adopt an adjustment process toward this optimum.
Since the 1980s many authors have worked on macroeconomic models incorporating ideas from Michal Kalecki, Nicholas Kaldor, Richard Goodwin, Hyman Minsky, and Charles Kindleberger. The premises are widely known. Relevant questions are whether the models provide insight into how economies behave in terms of cyclical growth, and how macroeconomic performance is affected by institutional and policy changes. Events leading up to the 2007-2009 crisis provide a natural tests and illustrations of the models. Summaries appear in Palma (2009) and Taylor (2010). This paper provides background for much of the verbal discussion in the latter reference. The presentation focuses on simple, partial models designed to highlight different aspects of macroeconomic adjustment and growth.
As the centennial celebration of the American Association of Museums (AAM) approaches in the next six months, it is appropriate to examine the challenges and opportunities in the century ahead. The growing deleterious effects of human impact on the earth assure that living in a sustainable fashion will be (and already is) of paramount concern. The varied definitions and applications of sustainability range from land and water use to driving patterns. For our purposes, sustainability can be defined as meeting the needs of the current generation without compromising the needs of future generations. With a sense of relevancy to the public at the core of their work, museums are in a unique position to address and model sustainability.
