nep-hme New Economics Papers
on Heterodox Microeconomics
Issue of 2019‒06‒24
twenty-one papers chosen by
Carlo D’Ippoliti
Università degli Studi di Roma “La Sapienza”

  1. Capital, technical progress and international trade By Rahim, Sikander
  2. Inequality and Stagnation by Policy Design By Thomas I. Palley
  3. The Rise of Populist Movements in Europe: A Response to European Ordoliberalism? By David Cayla
  4. Economic Theory ten years after the crisis: Just tweaking around the edges? and/or A bit of repair at the seams? By Vassilis Droucopoulos
  5. The Collaborative Innovation Bloc: A Reply to our Commentators By Elert, Niklas; Henrekson, Magnus
  6. The rise of part-time work: A German-French comparison By Marotzke, Petra
  7. Structual change in times of increasing openness By Claudius Gräbner; Philipp Heimberger; Jakob Kapeller; Bernhard Schütz
  8. (In)visibility, care and cultural barriers: the size and shape of women’s work in India By Deshpande, Ashwini; Kabeer, Naila
  9. An agent-based model for designing a financial market that works well By Takanobu Mizuta
  10. Keynes's Investment Theory as a Micro-foundation for his Grandchildren By Sergio Nisticò
  11. Income, Familialism and Women’s Economic Independence By Kaitlin Alper
  12. Fair Producer Prices By Bronkhorst, Ruud
  13. Long-Run Environmental Accounting in the U.S. Economy. By Nicholas Z. Muller
  14. The Fair Reward Problem: The Illusion of Success and How to Solve It By Didier Sornette; Spencer Wheatley; Peter Cauwels
  15. The Relationship Between Theology and Economics: The Role of The Jansenism Movement By Maxime Menuet
  16. Topology and Formation of Production Input Interlinkages: Evidence from Japanese microdata By Yoshiyuki ARATA; Philipp MUNDT
  17. Global Value Chains and Domestic Innovation By ITO Keiko; IKEUCHI Kenta; Chiara CRISCUOLO; Jonathan TIMMIS; Antonin BERGEAUD
  18. Female science advisors and the STEM gender gap By Mouganie, Pierre; Canaan, Serena
  19. Measuring Markups from Revenue and Total Cost: An Application to Japanese Plant-Product Matched Data By NISHIOKA Shuichiro; TANAKA Mari
  20. An emigrant economist in the tropics: Nicholas Georgescu-Roegen on brazilian inflation and development By André Roncaglia de Carvalho; Carlos Eduardo Suprinyak
  21. What's Wrong With Modern Money Theory (MMT): A Critical Primer By Thomas I. Palley

  1. By: Rahim, Sikander
    Abstract: (Abstract) CAPITAL, TECHNICAL PROGRESS AND INTERNATIONAL TRADE Much has been written about the objection originally formulated by Piero Sraffa to the use of production functions and aggregate capital and of the disputes that ensued, but there seems to be no systematic explanation in one place of why this objection is crucial to the foundations of economic theory and why the various attempts to escape it fail. This paper is an attempt provide one. First, it presents the reasoning of the objection and shows how the arguments against it are either fallacious or too restricted to be useful. Second, it shows how technical progress and international trade give two more reasons for the same objection, which, though logically independent, only became apparent because of the first. From these it follows that neither technical progress nor international trade can be plausibly described or explained if capital goods are not treated as heterogeneous goods manufactured with the use of capital goods. This leads to a more realistic depiction of technical progress as the outcome of the R&D of competing firms. (For brevity, government activities are left out.) The implications for international trade are described briefly. This paper is not a survey; it is confined to the minimum needed to establish its contentions. Its discussion of the disputes has mostly been said before, but it covers some gaps that seem to have been overlooked. It adds to the discussion in that the disputes did not take up the implications of technical progress and international trade.
    Keywords: Capital theory, technical progress, R&D, international trade
    JEL: B51 F10 F11 O31 O32 O34
    Date: 2018–12–21
  2. By: Thomas I. Palley
    Abstract: This paper argues the mainstream economics profession is threatened by theories of the financial crisis and ensuing stagnation that attribute those events to the policies recommended and justified by the profession. Such theories are existentially threatening to the dominant point of view. Consequently, mainstream economists resist engaging them as doing so would legitimize those theories. That resistance has contributed to blocking the politics and policies needed to address stagnation, thereby contributing to a political vacuum which is being filled by odious forces. Those ugly political consequences are unintended, but they are still there and show the dangerous consequences of the death of pluralism in economics. The critique of mainstream economists is not about "values" or lack of "change": it is about academic practice that suppresses ideas which are existentially threatening.
    Keywords: Income inequality, stagnation, neoliberalism, Keynesianism, pluralism
    JEL: A0 A11 B50 E00 E12
    Date: 2019
  3. By: David Cayla (GRANEM - Groupe de Recherche Angevin en Economie et Management - UA - Université d'Angers - AGROCAMPUS OUEST - Institut National de l'Horticulture et du Paysage)
    Abstract: This article aims to explain the contemporary emergence of populism in the European Union. According to Polanyi's double movement framework, the emergence of these political forces can be understood as the result of protective responses from societies weakened by difficult market adjustments. Since the Single Act treaty (1986), the European economy took a path that intended to create a supranational self-adjusting markets economy based on the ordoliberal philosophy. However, by detaching the economic sphere from the reach of politics, the European Single Market has injured some important social institutions. The rise and the diversity of populisms in the European Union can therefore be explained by an attempt to preserve some national institutions that were diversely impacted by the market forces.
    Abstract: Cet article vise à expliquer l'émergence récente du populisme dans l'Union européenne. Dans le cadre du double mouvement de Polanyi, l'émergence de ces forces politiques peut être interprétée comme le résultat des réponses protectrices de sociétés affaiblies par de difficiles ajustements de marché. Depuis l'Acte unique (1986), l'économie européenne s'est engagée sur la voie d'une économie de marché supranationale autorégulatrice fondée sur la philosophie ordolibérale. Cependant, en détachant la sphère économique de la sphère politique, le marché unique européen a endommagé certaines institutions sociales de premier plan. La montée et la diversité des populismes dans l'Union européenne s'expliquent donc par une tentative de préserver certaines institutions nationales qui ont été affectées par les forces du marché.
    Keywords: European Single Market,institutional economics,Ordoliberalism,populism,marché unique européen,institutionalisme,ordolibéralisme,Polanyi,populisme
    Date: 2019–06–01
  4. By: Vassilis Droucopoulos (Emeritus Professor of the Department of Economics of the University of Athens.)
    Abstract: It is my intention to address, primarily within the scope of mainstream macroeconomic theory, three of the questions making up the main theme of the conference, namely: How a very problematic theory continues to survive and dominate both the policy and the academic scene. What are the processes in the economy and the society that sustain its dominance? What is the condition of the economic Orthodoxy (particularly under its current form of the New Macroeconomic Consensus, that is the hybrid of mild neoliberalism with conservative New Keynesianism)? A good many orthodox economists hold the view that there is no necessity for a paradigm shift. On the contrary, a mere evolution towards a more pluralistic discipline would suffice. Hence the title of my talk.
    Keywords: Economic Pluralism, Macroeconomic Theory
    JEL: A20 B40 B50
    Date: 2018–12
  5. By: Elert, Niklas (Research Institute of Industrial Economics (IFN)); Henrekson, Magnus (Research Institute of Industrial Economics (IFN))
    Abstract: We are grateful for the comments to our article, and for the opportunity to respond to them. In our original contribution, we argued that the application of the EOE perspective could help make Austrian economics more concrete, relevant and persuasive, especially regarding policy prescriptions. At the heart of this perspective is the idea that entrepreneurship, when construed as the act of building an innovative firm, is an inherently collaborative activity. The comments have strengthened our conviction that the EOE perspective is of value for Austrian economics and been of great help in furthering our thinking on the matter. The comments have also helped us see how the perspective fits in with the broader tradition of Austrian economics.​
    Keywords: Austrian economics; Entrepreneurship; Innovation; Institutions; Schumpeterian entrepreneurship; Spontaneous order
    JEL: B53 D20 G32 L23 L26 O33
    Date: 2019–06–10
  6. By: Marotzke, Petra
    Abstract: I study possible determinants of part-time employment among women in France and Germany using microdata of the Labour Force Survey. Voluntary part-time work is substantially more widespread among women in Germany than it is in France. Estimation results show that while the presence of children and marital status are related to the choice to work part time in both countries, their impact is substantially greater in Germany. Controlling for several factors, the probability of working part time in Germany exceeds that in France among married women and among women with children, while there is hardly any difference among single women and women without children living in the same household. Further results suggest that, besides financial incentives, social norms and cultural legacy play a role in choosing to work part time.
    Keywords: Part Time,Female Labour Supply
    JEL: J16 J22
    Date: 2019
  7. By: Claudius Gräbner; Philipp Heimberger; Jakob Kapeller; Bernhard Schütz
    Abstract: This paper analyzes the dynamics of structural polarization and macroeconomic divergence in the context of European integration, where the latter is understood primarily as an increase in economic and financial openness. In the process of estimating the dynamic effects of such an openness shock on 26 EU countries, we develop a taxonomy of European economies that consists of core, periphery and catching-up countries, as well as financial hubs. We show that these four country groups have responded in a distinct way to the openness shock imposed by European integration and argue that the latter should be seen as an evolutionary process that has given rise to different path-dependent developmental trajectories. These trajectories relate to the sectoral development of European economies and the evolution of their technological capabilities. We propose a set of interrelated policy measures to counteract structural polarization and to promote macroeconomic convergence in Europe.
    Keywords: Europe, path dependency, European integration, economic openness, competitiveness
    Date: 2018
  8. By: Deshpande, Ashwini; Kabeer, Naila
    Abstract: Based on primary data from a large household survey in seven districts in West Bengal in India, this paper analyses the reasons underlying low labor force participation of women. In particular, we try to disentangle the intertwined strands of choice, constraints posed by domestic work and care responsibilities, and the predominant understanding of cultural norms as factors explaining the low labor force participation as measured by involvement in paid work. We document the fuzziness of the boundary between domestic work and unpaid (and therefore invisible) economic work that leads to mis-measurement of women’s work and suggest methods to improve measurement. We find that being primarily responsible for domestic chores lower the probability of “working”, after accounting for all the conventional factors. We also document how, for women, being out of paid work is not synonymous with care or domestic work, as they are involved in expenditure saving activities. We also find that religion and visible markers such as veiling are not significant determinants of the probability of working. Our data shows substantial unmet demand for work. Given that women are primarily responsible for domestic chores, we also document that women express a demand for work that would be compatible with household chores.
    Keywords: women; gender; labor force participation; India
    JEL: J16 J21 J40 B54
    Date: 2019–05
  9. By: Takanobu Mizuta
    Abstract: Designing a financial market that works well is very important for developing and maintaining an advanced economy, but is not easy because changing detailed rules, even ones that seem trivial, sometimes causes unexpected large impacts and side effects. A computer simulation using an agent-based model can directly treat and clearly explain such complex systems where micro processes and macro phenomena interact. Many effective agent-based models investigating human behavior have already been developed. Recently, an artificial market model, which is an agent-based model for a financial market, has started to contribute to discussions on rules and regulations of actual financial markets. I introduce an artificial market model to design financial markets that work well and describe a previous study investigating tick size reduction. I hope that more artificial market models will contribute to designing financial markets that work well to further develop and maintain advanced economies.
    Date: 2019–06
  10. By: Sergio Nisticò (University of Cassino and Lazio Meridionale)
    Abstract: In contrast with the ‘missing micro-foundations’ argument against Keynes’s macroeconomics, the paper argues that it is the present state of microeconomics that needs more solid ‘Keynesian foundations’. It is in particular Keynes’s understanding of investors’ behaviour that can be fruitfully extended to consumption theory, in a context in which consumers are considered as entrepreneurs, buying goods and services to engage in time-consuming activities. The paper emphasizes that the outcome in terms of enjoyment is particularly uncertain for those innovative and path-breaking activities, which Keynes discussed in his 1930 prophetic essay about us, the grandchildren of his contemporaries. Moreover, the Keynes-inspired microeconomics suggested in the paper provides an explanation of why Keynes’s prophecy about his grandchildren possibly expanding leisure did not materialize yet. The paper finally points at the need for appropriate economic policies supporting consumers’ propensity to enforce innovative forms of time use.
    JEL: B41 D11 D81
    Date: 2019–06
  11. By: Kaitlin Alper
    Abstract: This paper explores the dynamics of women’s economic independence at the individual household level and its relationship to country-level income distributions. I posit a negative relationship between income and women’s economic independence. Using detailed household-level data from the Luxembourg Income Study (LIS) across thirteen advanced capitalist democracies, I show that women at upper ends of the income distribution consistently have less within-household economic independence than do their counterparts at the bottom of the distribution. I then show that this negative relationship is sensitive to political characteristics at the country level. In countries whose policies support a male breadwinner model, women’s economic independence is lower across the board than in other types of countries; in gender egalitarian countries, it is higher. Family policies do not, however, have a significant impact on the income stratification of women’s economic independence. These results suggest that social policy characteristics and labor market dynamics have important implications for gender equity both within and between households.
    Date: 2019–06
  12. By: Bronkhorst, Ruud
    Abstract: In order to ensure that peasants as well receive just remuneration for their work as described in the Universal Declaration of Human Rights, a paradigm change in thinking about producer prices is needed: from market prices to ‘fair’ prices. After an overview of how economists have dealt with the concept fair, this paper continues with a methodology, the ‘Living Income / Fair Price’ approach, that describes how to calculate producer prices that are not only based on production costs, but on the concepts ‘living wages’ and ‘living income’ as well. These prices are called ‘fair prices’. These fair prices can be calculated for each agricultural product separately, based on the assumption of full employment on the specific crop.
    Keywords: Agricultural and Food Policy, Demand and Price Analysis
    Date: 2019–04–15
  13. By: Nicholas Z. Muller
    Abstract: This paper estimates an augmented measure of national output inclusive of environmental pollution damage in the United States economy over a 60-year period. The paper reports two primary findings. First, air pollution intensity declined precipitously from the 1950s to the modern era. Air pollution damage comprised roughly 30 percent of output in the post WWII economy, declining to under 10 percent in 2016. Second, accounting for pollution damage significantly affects growth rates. Prior to the passage of the Clean Air Act in 1970, GDP outpaced Environmentally-Adjusted Value Added (EVA), defined as GDP less air pollution damage. Following passage of the Act, EVA grew more rapidly than GDP. Macroeconomic and environmental policies, as well as the business cycle, appreciably affect damages and EVA growth.
    JEL: O44 Q51 Q53 Q56 Q58
    Date: 2019–05
  14. By: Didier Sornette (ETH Zürich - Department of Management, Technology, and Economics (D-MTEC); Swiss Finance Institute); Spencer Wheatley (ETH Zurich); Peter Cauwels (ETH Zurich; Director Quaerens CommV)
    Abstract: Humanity has been fascinated by the pursuit of fortune since time immemorial, and many successful outcomes benefit from strokes of luck. But success is subject to complexity, uncertainty, and change – and at times becoming increasingly unequally distributed. This leads to tension and confusion over to what extent people actually get what they deserve (i.e., fairness/meritocracy). Moreover, in many fields, humans are over-confident and pervasively confuse luck for skill (I win, it’s skill; I lose, it’s bad luck). In some fields, there is too much risk-taking; in others, not enough. Where success derives in large part from luck – and especially where bailouts skew the incentives (heads, I win; tails, you lose) – it follows that luck is rewarded too much. This incentivizes a culture of gambling, while downplaying the importance of productive effort. And, short term success is often rewarded, irrespective, and potentially at the detriment, of the long-term system fitness. However, much success is truly meritocratic, and the problem is to discern and reward based on merit. We call this the fair reward problem. To address this, we propose three different measures to assess merit: (i) raw outcome; (ii) risk-adjusted outcome, and (iii) prospective. We emphasize the need, in many cases, for the deductive prospective approach, which considers the potential of a system to adapt and mutate in novel futures. This is formalized within an evolutionary system, comprised of five processes, inter alia handling the exploration-exploitation trade-off. Several human endeavors – including finance, politics, and science – are analyzed through these lenses, and concrete solutions are proposed to support a prosperous and meritocratic society.
    Keywords: success, reward, luck, merit, measurement, scenario analysis, Darwinian, evolutionary learning, equality
    JEL: A13 C12 C18 D39 D63 D8 G10 H30
    Date: 2019–04
  15. By: Maxime Menuet (CERDI - Centre d'Études et de Recherches sur le Développement International - UdA - Université d'Auvergne - Clermont-Ferrand I - CNRS - Centre National de la Recherche Scientifique)
    Abstract: This article reassesses the links between the origins of the political economy and the Christian theology during the seventeenth and eighteenth centuries. I focus on the Jansenism movement-the most powerful Christian protest current in the pre-Revolution period. I reveal that the influence of this movement on economic ideas can be roughly divided into three issues. During the pre-Unigenitus (1713) period (first jansenism), (i) the original vision of labor that contrasts with the Protestant's approach and the Catholic doctrine, and (ii) the idea that self-interest can produce a social optimum were major contributions of the jansenism on economic debates. During the post-Unigenitus period (second jansenism), (iii) the confrontation between two parties-the "liberal" vs the "resistant" jansenism currents-on the interest-bearing loans issue led to the development of new economic arguments for or against the credit, while making reference to the Holy Writings.
    Keywords: Jansenism,theology,social optimum,labor,interest-bearing loans
    Date: 2019–06–12
  16. By: Yoshiyuki ARATA; Philipp MUNDT
    Abstract: Recent studies have emphasized the role of production input interlinkages in explaining a wide range of economic phenomena. In the vast majority of these studies, however, the input-output architecture is fixed and exogenously given, and hence relatively little is known about the evolution of the production network and the underlying mechanisms shaping its dynamics. Here we seek to fill this gap in the extant literature by studying the evolution of production input interlinkages on the most granular level of economic activity, building on a diverse set of more than 80,000 companies sampled across nearly all industries of the Japanese economy. We find that several network properties with a pronounced impact on shock propagation and the emergence of aggregate fluctuations are remarkably stable over time and invariant under the local link formation mechanism. To estimate the mechanism inducing this stability, we employ a stochastic actor-oriented model that resolves the problem of interdependent observations inherent to networked environments. This model approaches the dynamics of the production network from the perspective of individual firms whose myopic decisions to change their suppliers take into account the effect of direct connections and link externalities. Building on this approach, we find that topological features of the network such as network distance and the current number of relationships are a main driver of network dynamics in subsequent periods, and are quantitatively more important than productivity differentials.
    Date: 2019–04
  17. By: ITO Keiko; IKEUCHI Kenta; Chiara CRISCUOLO; Jonathan TIMMIS; Antonin BERGEAUD
    Abstract: This paper explores how changes in both position and participation in Global Value Chain networks affect firm innovation. The analysis combines matched patent-firm data for Japan with measures of GVC network centrality and GVC participation utilizing the OECD Inter-Country Input-Output Tables for the period 1995 to 2011. We find that Japan's position in the GVCs has shifted from being at the core of Asian value chains towards the periphery relative to other countries in the network, i.e. becoming less "central". We use China's WTO accession as an instrumental variable for changes in Japanese centrality. Our analysis shows that increases in forward centrality – as a key supplier - tends to be positively associated with increasing firm patent applications. Firms in key hubs within GVCs, more specifically as key suppliers, appear to benefit from knowledge spillovers from various customers and downstream markets.
    Date: 2019–04
  18. By: Mouganie, Pierre; Canaan, Serena
    Abstract: In an effort to reduce the gender gap in the fields of science, technology, engineering and mathematics (STEM), policymakers often propose providing women with close mentoring by female scientists. This is based on the idea that female scientists might act as role models and counteract negative gender stereotypes that are pervasive in science fields. However, as of yet, there is still no clear evidence on the role of mentor or advisor gender in reducing the STEM gender gap. We use rich administrative data from a private 4-year college to provide some of the first causal evidence on the impact of advisor gender on women's STEM degree attainment. We exploit a unique setting where students are randomly assigned to academic advisors--who are also faculty members--in their freshman year of college. A college advisor's main role is to provide students with one-on-one personalized mentoring regarding course and major selection. Students declare a major at the end of their freshman year, after having had the opportunity to repeatedly interact with their advisors. We find that being matched to a female rather than a male science advisor substantially narrows the gender gaps in STEM enrollment and graduation, with the strongest effects occurring among students who are highly skilled in math. In contrast, the gender of an advisor from a non-science department has no impact on students' major choice. Our results suggest that providing close mentoring or advising by female scientists can play an important role in promoting women's participation and persistence in STEM fields.
    Keywords: STEM, Gender Gap, Advising
    JEL: I20 I24
    Date: 2019–05–27
  19. By: NISHIOKA Shuichiro; TANAKA Mari
    Abstract: The evolution of product markups has important implications for macroeconomic dynamics. However, thus far, the trends and distributions of product markups have been very different, depending on how they are estimated. This paper uses plant-product matched data from Japan, and theoretically and empirically compares two alternative measures of product markups. One measure is De Loecker and Warzynski's (2012) state-of-the-art production approach that estimates production function parameters and computes markups from the output elasticities of an input divided by that input's revenue share. An alternative measure, which has been much less frequently applied empirically to micro data, is Diewert and Fox's (2008) approach that derived markups from the revenues divided by the total costs. Markups derived from the latter approach are consistent with the theoretical predictions: The markups increase as their market power increases and as their marginal costs decline.
    Date: 2019–03
  20. By: André Roncaglia de Carvalho (Unifesp); Carlos Eduardo Suprinyak (Cedeplar-UFMG)
    Abstract: After his escape from communist Romania in the late 1940s, Nicholas Georgescu-Roegen used to describe himself as an “emigrant from a developing country”. Through his professional engagements with Vanderbilt University, he also came to visit many other parts of the developing world. One of his missions brought him multiple times to Brazil between the mid-1960s and mid-1970s, an experience which led him to write an article on the complicated dynamics between inflation and economic growth in developing countries – first published in Portuguese in 1968, then in English in 1970. In this paper, we will set Georgescu-Roegen’s contribution against the background of the lively debates on inflation taking place in Brazil at the time, stressing how his analysis departed from other approaches. Relatedly, we will show how he anticipated aspects of later controversies regarding the perverse distributive effects of inflation. Finally, we will explore some of the reasons why Georgescu-Roegen’s arguments had only limited influence over other scholars then working on inflation, despite his prestige and very strong connections with the Brazilian community of economists.
    Keywords: inflation, income distribution, development economics, structuralism, monetarism, Vanderbilt University
    Date: 2019–06
  21. By: Thomas I. Palley
    Abstract: Recently, there has been a burst of interest in modern money theory (MMT). The essential claim of MMT is sovereign currency issuing governments do not need taxes or bonds to finance government spending and are financially unconstrained. MMT rests on a triad of arguments concerning: (i) the macroeconomics of money financed budget deficits, (ii) the employer of last resort or job guarantee program, and (iii) the history of money. This primer analyzes that triad and shows each element involves suspect economic arguments. That leads MMT to underestimate the economic costs and exaggerate the capabilities of money financed fiscal policy. MMT's analytic shortcomings render it poor economics. However, its simplistic printing press economics is proving a popular political polemic, countering the equally simplistic and wrong-headed household economics of neoliberal austerity polemic.
    Keywords: Modern money theory (MMT), budget deficits, job guarantee program
    JEL: E00 E12 E40 E58 E60
    Date: 2019

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