nep-hme New Economics Papers
on Heterodox Microeconomics
Issue of 2020‒01‒13
eighteen papers chosen by
Carlo D’Ippoliti
Università degli Studi di Roma “La Sapienza”

  1. Schumpeter vs. Minsky on the Evolution of Capitalism and Entrepreneurship By Sau, Lino
  2. Die New Austrians als Pseudo-Heterodoxe? By Quaas, Friedrun
  3. How the rich are different: Hierarchical power as the basis of income size and class By Fix, Blair
  4. How the Rich Are Different: Hierarchical Power as the Basis of Income Size and Class By Fix, Blair
  5. Bankers as Immoral? The Parallels between Aquinas’s Views on Usury and Marxian Views of Banking and Credit By Lambert, Thomas
  6. Resistance as Sacrifice: Towards an Ascetic Antiracism By al-Gharbi, Musa
  7. The green transition: public policy, finance and the role of the State By Francesco Lamperti; Mariana Mazzucato; Andrea Roventini; Gregor Semieniuk
  8. Multilevel Simulation of Demography and Food Production in Ancient Agrarian Societies: A Case Study from Roman North Africa By Gauthier, Nicolas
  9. Weal: the universal core of human well-being By Folk, György
  10. The Islamic Shariah Principles for Investment in Stock Market By Alam, Md. Mahmudul; Akbar, Chowdhury Shahed; Shahriar, Shawon Muhammad; Monzur-E-Elahi, Mohammad
  11. L'énergie et les fonctions de production agrégées : perspectives historique et méthodologique By Quentin Couix
  12. Post-Keynesian Controversy About Uncertainty: Methodological Perspective, Part I By Luká? Augustin Máslo
  13. Randomization and Social Policy Evaluation Revisited By James J. Heckman
  14. The assault of finance’s ‘present futures’ on the rest of time By Walter, Timo; Wansleben, Leon
  15. Why is inequality so unequal across the world? Part 1. The diversity of inequality in disposable income: multiplicity of fundamentals, or complex interactions between political settlements and market failures? By Palma, J. G.
  16. The Migration State in the Global South: Nationalizing, Developmental, and Neoliberal Models of Migration Management By Adamson, Fiona; Tsourapas, Gerasimos
  17. Labor Institutions and Development Under Globalization By Servaas Storm; Jeronim Capaldo
  18. On pledging one's trustworthiness through gifts: an experimental inquiry By Giuseppe Danese; Luigi Mittone

  1. By: Sau, Lino (University of Turin)
    Abstract: Joseph Schumpeter and Hyman Minsky have devoloped, during their lives, both a theory of the business cycles and a theory of capitalist development. Minsky was influenced by Schumpeter during the period he spent at Harvard University in 1942 and he thought that Schumpeter vision of the capitalist process required an integration of financial markets and investment behaviour: roughtly speaking, Minsky’s financial keynesianism was what Schumpeter needed to complete his own theory of the devoloping of a capitalist economy. Minsky explored an even broader historical framework during the last decade of his life: the theory of capitalist development along the idea that there are many types of capitalism. As pointed out by Whalen (2001) to analyse each stage of capitalist development following Minsky’s perspective, one should ask what is the distinctive activity being financed, what is the pivotal source of financing, and what is the balance of economic power between those in business and in banking/finance activity. Capitalist development is shaped by the institutional structure, but this structure is always evolving in response to profit-seeking activity. The financial system takes on special importance in this theory not only because finance exerts a strong influence on business activity but also because this system is particularly prone to innovation. In this paper, I shall focus particularly on this analysis trying to up-date his taxonomy, taking into account the process of global financialisation, and comparing it with Schumpeter’s previous scrutinity on the evolution of capitalism.
    Date: 2019–11
  2. By: Quaas, Friedrun
    Abstract: In recent years, the Austrian School of Economics (NASE) has decisively expanded its ideological sphere of influence with the help of neoliberal think tanks. At the same time it explicitly cultivates the image of a scientifically heterodox actor far away from the economic mainstream. In this way, it has succeeded in arousing the interest of representatives of the plural economy, which the Austrian School has since adopted as part of its heterodox canon. But how coherent is this image of the NASE as an opponent of orthodoxy? The article examines this question from a historical-theoretical perspective and analyses the mainstream contribution of the various generations of the Austrian School.
    Keywords: Austrian School of Economics, Neoclassical Mainstream, Heterodoxy
    JEL: B13 B25 B53
    Date: 2019–12–01
  3. By: Fix, Blair
    Abstract: This paper investigates a new approach to understanding personal and functional income distribution. I propose that hierarchical power - the command of subordinates in a hierarchy - is what distinguishes the rich from the poor and capitalists from workers. Specifically, I hypothesize that individual income increases with hierarchical power, as does the share of individual income earned from capitalist sources. I test this idea using evidence from US CEOs, as well as a numerical model that extrapolates the CEO data. The results indicate that income tends to increase with hierarchical power, as does the capitalist composition of income. This suggests that hierarchical power may be a determinant of both personal and functional income.
    Keywords: hierarchy,power,functional income distribution,personal income distribution,inequality,capital as power,class
    JEL: D31 D33 B5
    Date: 2019
  4. By: Fix, Blair (York University)
    Abstract: This paper investigates a new approach to understanding personal and functional income distribution. I propose that hierarchical power --- the command of subordinates in a hierarchy --- is what distinguishes the rich from the poor and capitalists from workers. Specifically, I hypothesize that individual income increases with hierarchical power, as does the share of individual income earned from capitalist sources. I test this idea using evidence from US CEOs, as well as a numerical model that extrapolates the CEO data. The results indicate that income tends to increase with hierarchical power, as does the capitalist composition of income. This suggests that hierarchical power may be a determinant of both personal and functional income.
    Date: 2019–04–11
  5. By: Lambert, Thomas
    Abstract: Throughout history, the performance, practices and ethics of bankers and banking in general have received mixed reviews in both popular and scholarly writings. Early writings by philosophers, clerics, and scribes played a crucial role in the perceptions of banking and banking occupations. Thomas Aquinas’s thoughts and writings were greatly influenced by the Romans’ and Aristotle’s opinions on usury and the charging of interest, and Aquinas was in a position to have his opinions implemented in policy and practice. Marx noted how banking and credit were used to expand the production and sales of a capitalistic economy beyond certain limits, although his focus was mostly on credit extended to businesses. At the same time, he wrote about how the credit system could lead to economic crises as well as to the concentration and centralization of capital. While lending is motivated by profit, and while households are not coerced into borrowing money, the justice of a system which exploits workers and at the same time encourages them to borrow money in order to maintain a certain standard of living can be viewed as unfair and immoral. The value of goods, according to Aquinas and Marx, should mostly reflect the value of labor embodied in them, and for that reason, labor should be compensated fully for its work. For these reasons, Aquinas and Marxian economists offer somewhat similar views on both the labor theory of value as well as on the morality of certain banking practices. If credit and the banking system also bring about crisis and the greater concentration and centralization of capital, then the morality of these outcomes also needs to be examined.
    Keywords: banking, exploitation, usury, Aquinas, Marx
    JEL: B11 B51 N20
    Date: 2019–12–20
  6. By: al-Gharbi, Musa (Columbia University)
    Abstract: Often described as an outcome, inequality is better understood as a social process -- a function of how institutions are structured and reproduced, and the ways people act and interact within them across time. Racialized inequality persists because it is enacted moment to moment, context to context -- and it can be ended should those who currently perpetuate it commit themselves to playing a different role instead. This essay makes three core contributions: first, it highlights a disturbing parity between the people who are most rhetorically committed to ending racialized inequality and those who are most responsible for its persistence. Next, it explores the origin of this paradox – how it is that ostensibly antiracist intentions are transmuted into ‘benevolently racist’ actions. Finally, it presents an alternative approach to mitigating racialized inequality, one which more effectively challenges the self-oriented and extractive logics undergirding systemic racism: rather than expropriating blame to others, or else adopting introspective and psychologized approaches to fundamentally social problems, those sincerely committed to antiracism can take concrete steps in the real world – actions which require no legislation or coercion of naysayers, just a willingness to personally make sacrifices for the sake of racial justice.
    Date: 2019–06–13
  7. By: Francesco Lamperti; Mariana Mazzucato; Andrea Roventini; Gregor Semieniuk
    Abstract: While investments into renewable energy technologies are growing almost everywhere, the chances to meet ambitious emission and climate targets, as those envisaged in the Paris Agreement, are scant. To speed up the transition, policy makers need to design and implement a policy mix that could affect not just the quantity of green finance, but its quality as well. In this paper, we argue that a mission-oriented approach to the transition from an economy with high, to one with low greenhouse gas emissions, coupled with the state taking on the role of an entrepreneurial state, could provide an effective win-win strategy to address climate change concerns (embodied in emissions reduction and adaptation boosting) and build the basis for the next phase of growth and technological progress. In practice, this amounts to (i) abandoning the view that cost-internalization of environmental externalities would suffice to induce an effective transition (ii) developing a multi-level and cross-sectoral governance of the transition, with a clear direction in terms of the technological trajectory to favour, and (iii) designing a policy mix encompassing: fiscal instruments, targets and standards; public-private co-funding schemes; financial regulation; and disclosure practices. Social scientists should support such ambitious policy-design processes through adequate model development, where a combination of policies, and a directive role of the state, can be accommodated and examined in detail.
    Keywords: market-shaping; mission-oriented; green finance; renewable energies; transition; entrepreneurial state.
    Date: 2019–12–30
  8. By: Gauthier, Nicolas (University of Arizona)
    Abstract: Feedbacks between population growth, food production, and the environment were central to the growth and decay of ancient agrarian societies. Population growth increases both the number of mouths a society must feed and the number of people working to feed them. The balance between these two forces depends on the population's age structure. Although age structure ultimately reflects individual fertility and mortality, it is households that make decisions about the production and consumption of food, and their decisions depend on interactions with all other households in a settlement. How do these organizational levels interact to influence population growth and regulation? Here, I present a multi-level agent-based model of demography, food production, and social interaction in agricultural societies. I use the model to simulate the interactions of individuals, households, and settlements in a food-limited environment, and investigate the resulting patterns of population growth. Using Roman North Africa as a motivating example, I illustrate how abstract properties like "carrying capacity" emerge from the concrete actions and interactions of millions of individual people. Looking forward, bottom-up simulations rooted in first principles of human behavior will be crucial for understanding the coevolution of preindustrial societies and their natural environments.
    Date: 2019–08–22
  9. By: Folk, György
    Abstract: Well-being is a formative concept of our times, one of the most widely used constructs in the social sciences, publicity, political and lifestyle discourses. Notwithstanding its commonness the term well-being remains elusive, the disagreement regarding how to properly understand and measure well-being persists. Present paper proposes an attempt to reorientate the discourse on well-being by the introduction of a tertium datur between the two extremes of ad infinitum culturally variable and individually malleable and the rigidly materialistic, biologically and by natural scarcity determined interpretations of human nature. Weal defines a singular domain in which human life is possible, sustainable and flourishing. Most other available constructs with comparable aspirations including happiness, desire theories, Quality of Life (QOL), subjective well-being (SWB), and objective lists carry Western cultural biases and lack ontological rigour. Weal is the unitary domain in which human communities balance between self-sufficiency and flourishing in a sustainable way. The descriptive approach to weal, mapping it under the guidance of discrete scientific disciplines reveals a limited set of cardinal aspects, the cardinal needs (CDN). To serve the purpose of reorientation, weal is operationalised as a domain in multidimensional space, each dimension encompassing an optimal level of availability of the fundamental satisfiers between the two extremes of drastic insufficiency and harmful excess. The cardinal needs are briefly presented as assessed fundamental by corresponding research, with some elementary references illustrating their non-infinite nature.
    Keywords: wellbeing, evolutionary anthropology, human being, human need, community, environment
    JEL: A1 A11 O1 Q5 Q56
    Date: 2019–11–05
  10. By: Alam, Md. Mahmudul (Universiti Utara Malaysia); Akbar, Chowdhury Shahed; Shahriar, Shawon Muhammad; Monzur-E-Elahi, Mohammad
    Abstract: Due to chronic financial crises experienced during last several decades repeatedly and a failure to protect investors‟ rights as a result, the world is looking for an alternative form of stock market for quite some time so that interests of all relevant stakeholders can be safeguarded. At the same time, from the perspectives of devout Muslims, the current form of stock market restricts a Muslim to make investments in the market due to unsatisfying several provisions from the Islamic law, known as shariah. This study provides the criteria under which conditions the Islamic shariah permits making investments in the stock market. Hand in hand with that primary discussion, it has been eluded briefly why the Islamic shariah principles offer a better alternative against conventional practices of the stock market.
    Date: 2019–06–14
  11. By: Quentin Couix (Centre d'Economie de la Sorbonne;
    Abstract: From a historical and methodological perspective, this paper focuses on empirical work on energy based on the aggregate production function, from the early 1970s to the late 2000s. It starts with the standard neoclassical approach, and in particular the controversy over the substitutability between capital and energy. Then it tackles the thermodynamic approach, which focuses on the explanation of the long-term growth. It shows continuity in the methodological issues raised by this work. At the theoretical level, the aggregate production function offers little conceptual insight into the physical aspects of the production process. At the empirical level, the results of estimates of energy production functions raise questions. In the neoclassical framework, the estimation is done indirectly through the cost function, so that the result is overdetermined by the marginal productivity pricing assumption. The thermodynamic approach proceeds in the opposite direction to a direct estimate, which encounters statistical problems no less important. If these difficulties relate more generally to the aggregate production function, energy issues reveal them in a very striking way
    Keywords: energy; aggregate production function; growth accounting; thermodynamics
    JEL: B23 B41 O47 Q01 Q43
    Date: 2019–11
  12. By: Luká? Augustin Máslo (University of Economics, Prague)
    Abstract: In this paper, the author summarizes key arguments in a discussion of two post-Keynesian economists, Paul Davidson and Rod O?Donnell, about the nature of uncertainty in economics. The author focuses on a controversy about necessity/unnecessity to supply a proof of ergodicity/non-ergodicity of economic processes. The author draws a conclusion that O?Donnell perceives the difference between probabilistic and non-probabilistic uncertainty as quantitative rather than qualitative in opposition to Davidson who perceives this difference as qualitative. In a controversy about necessity/unnecessity, the author sides with O?Donnell and supports O?Donnell?s argumentation by pointing to baselessness of the burden-of-proof argument, as long as both parties of the controversy have an interest in finding the truth.
    Keywords: ergodicity, uncertainty, probability
    JEL: B41 D80
    Date: 2019–10
  13. By: James J. Heckman (The University of Chicago)
    Abstract: This paper examines the case for randomized controlled trials in economics. I revisit my previous paper "Randomization and Social Policy Evaluation" and update its message. I present a brief summary of the history of randomization in economics. I identify two waves of enthusiasm for the method as "Two Awakenings" because of the near-religious zeal associated with each wave. The First Wave substantially contributed to the development of microeconometrics because of the flawed nature of the experimental evidence. The Second Wave has improved experimental designs to avoid some of the technical statistical issues identified by econometricians in the wake of the First Wave. However, the deep conceptual issues about parameters estimated, and the economic interpretation and the policy relevance of the experimental results have not been addressed in the Second Wave.
    Keywords: field experiments, randomized control trials
    JEL: C93
    Date: 2019–12
  14. By: Walter, Timo; Wansleben, Leon (London School of Economics and Political Science)
    Abstract: The title of our contribution refers to Alexander Kluge’s movie, “Der Angriff der Gegenwart auf die übrige Zeit” (“the assault of the present on the rest of time”). The question we ask is how financialized capitalism shapes and formats the politics of the future. Our central tenet is that, far from providing an engine ’imagining’ futures that substantively guide (collective) actions, finance ‘consumes’ forecasts, plans, or visions in its present coordination process. While the “oscillation” between present futures and future presents has been identified as a defining feature of modern conceptions of contingency, freedom, and choice (Luhmann; Esposito), these two temporal modalities are collapsed in contemporary financial markets in an ongoing ‘pricing in’ of various possible future states. Projected futures do not substantively shape collective paths towards them or instruct social learning, but are calculatively assimilated to improve coordination between present prices. Fatally, central banks have been at the forefront of “synchronist” (Langenohl) finance, believing that as long as numeric calibration of their own and the markets’ expectations as expressed in prices align, they have rendered capitalism governable. Under this regime, central banks really do not govern inflation, but inflation expectations as expressed in the “yield curve” and built into interest rate derivatives. We argue that financial techniques built on the efficient market hypothesis and the Black-Scholes-Merton formula, as two theoretical articulations of this modern “synchronist” (Langenohl) temporality of finance, allow central banks to ignore possible “random” fluctuations in actual inflation and concentrate on the internal calibration of present futures as the sole criterion for monetary policy success. We show that the resultant “assault” on “future presents” was an important factor in the run-up to the crisis of 2007-9. Central banks deliberately attempted to eliminate uncertainties in markets about the future course of monetary policies. For that purpose, shared fictions about the underlying logics of Western economies (real interest rates, NAIRU etc.) were rigidly built into the structures of asset prices. Moreover, since central banks and market actors aligned their expectations over real interest rates, market actors could act as if their uncertainties about future liquidity needs could be neglected, since current money market and official lending rates were supposed to already define the price of liquidity tomorrow. In the last part of the contribution, we will extend this argument to contemporary quantitative easing, to show how it reinforces the pitfalls of generating expectations of economic prosperity and stability via the contemporary financial system.
    Date: 2019–11–08
  15. By: Palma, J. G.
    Abstract: This is a two-part paper. Part 1 addresses the diversity in the distribution of disposable income across the world; and Part 2, that in market income (i.e., before taxes and transferences). There are many underlying questions to these phenomena: does the diversity of inequality in disposable incomes reflect a variety of fundamentals, or a multiplicity of power structures and choice? Is rising market inequality the product of somehow ‘exogenous’ factors (e.g., r>g), or of complex interactions between political settlements and market failures? If the latter, how do we get through the veils obscuring these interactions and distorting our vision of the often self-constructed nature of inequality? Has neoliberal globalisation broadened the scope for “distributional failures” by, for example, triggering a process of “reverse catching-up” among OECD countries, so that now highly unequal middle-income countries like those in Latin America embody the shape of things to come? If so, are we are all now converging towards features such as mobile élites creaming off the rewards of economic growth, and ‘magic realist’ politics that lack self-respect if not originality? (Should I say, ‘Welcome to the Third World’?) In Part 1 I also develop a new approach for examining and measuring inequality (distance from distributive targets). In turn, Part 2 concentrates on three issues: why there has been such a deterioration of market inequality among countries of the OECD, why this has led to a growing asymmetry between their distributions of market and of disposable incomes, and why inequality seems to move in "waves". The main conclusion is that to understand current distributive dynamics what matters is to comprehend the forces determining the share of the rich — and, in terms of growth, what they choose to do with it (and how they are allowed do it).
    Keywords: income distribution, inequality, ideology, reverse catching-up, institutional persistence, neo-liberalism, new left, poverty, Latin America, Southern Africa, US, Western and Eastern Europe, emerging Asia, Palma ratio and sectors
    JEL: D31 E11 E22 E24 E25 I32 J31 N16 N30 N36 O50 P16
    Date: 2019–12–20
  16. By: Adamson, Fiona; Tsourapas, Gerasimos (University of Birmingham)
    Abstract: How do states in the Global South manage cross-border migration? This article identifies Hollifield’s “migration state” as a useful tool for comparative analysis yet notes that in its current version the concept is limited, given its focus on economic immigration in advanced liberal democracies. We suggest a framework for extending the “migration state” concept by introducing a typology of nationalizing, developmental, and neoliberal migration management regimes. The article explains each type and provides illustrative examples drawn from a range of case studies. To conclude, it discusses the implications of this analysis for comparative migration research, including the additional light it sheds on the migration management policies of states in the Global North.
    Date: 2019–10–25
  17. By: Servaas Storm (Delft University of Technology, The Netherlands); Jeronim Capaldo (Tufts University)
    Abstract: Labor market regulation is a controversial area of public policy in both developed and developing countries. Mainstream economic analysis traditionally portrays legal interventions providing for minimum wages, unemployment insurance and (often only a modicum of) employment protection as `luxuries` developing countries cannot afford. After decades of de-regulatory advice, international financial institutions have recently come to a less extreme position. But any such concessions to labor regulation are based on concerns for social stability or for short-term support to aggregate demand, while regulation continues to be viewed as harmful to economic efficiency in the long run. In this paper we take a deeper look at the impact of labor institutions on economic development in two ways. First, we propose a macroeconomic model of a balance-of-payments constrained `small` developing country open to trade and foreign capital. This helps us clarify the importance of a dynamic view of economic efficiency, as opposed to the static view embedded in mainstream policy advice. Secondly, we discuss the political economy of labor regulation. We argue that labor institutions promote economic development through positive effects on aggregate demand, labor productivity and technology.
    Keywords: Labor regulation, labor cost, balance-of-payments constrained growth, labor income share.
    JEL: F43 F63 F66 O4 J3 J8
    Date: 2018–05
  18. By: Giuseppe Danese; Luigi Mittone
    Abstract: The anthropological literature provides many instances of tokens donated in the form of a gift to woo potential trade partners, or to strengthen ties to existing partners. We study the role of gifts, as pledges of one’s trustworthiness, through an experiment modeled on the trust game. We vary whether the trustee can send a token before the trustor decides whether to transfer money; whether one of the tokens is socially positioned; and whether the participants interact repeatedly or are randomly re-matched in each round. Participants in a fixed matching achieve comparable levels of trust and trustworthiness in the studies with and without tokens. In the studies with a token, trustors send significantly more points when the trustee has sent a token. A token is used more sparingly after it is socially positioned. We conclude that for institutional design, the time horizon of the relationship might be at least as important as the ability to make pledges.
    Keywords: Pledges, Gifts, Marcel Mauss, Trust Game, Tokens
    JEL: Z13 B52 C92
    Date: 2020

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