nep-hme New Economics Papers
on Heterodox Microeconomics
Issue of 2022‒09‒05
sixteen papers chosen by
Carlo D’Ippoliti
Università degli Studi di Roma “La Sapienza”

  1. A complexity view on the future of work. Meta-modelling exploration of the multi-sector K+S agent based model. By Giovanni Dosi; Marcelo C. Pereira; Andrea Roventini; Maria Enrica Virgillito
  2. The economics of class. A dual approach. By Fernando Esteve Mora; Rafael Muñoz De Bustillo Llorente
  3. Good Co-ops, Bad Co-ops : Financing Cooperatives in Asymmetric Information By Cadot, Julien; Féral, Arnaud
  4. Input-Output Tables and Some Theory of Defective Matrices By Mohit Arora; Deepankar Basu
  5. A Kaleckian growth model of secular stagnation with induced innovation By Stamegna, Marco
  6. Wage inequality and induced innovation in a classical-Marxian growth model By Stamegna, Marco
  7. Potterian Economics By Daniel Levy; Avichai Snir
  8. Related Variety and Regional Development By Harald Bathelt; Michael Storper
  9. Subprime empire: on the in-betweenness of finance By Schuster, Caroline; Kar, Sohini
  10. Recurrence measures and transitions in stock market dynamics By Krishnadas M.; K. P. Harikrishnan; G. Ambika
  11. Las relaciones entre modelos económicos y tipos de capitalismo: la experiencia de Centroamérica By Segovia, Alexander
  12. The UN Food Systems Summit 2021: Lessons of the Gender and Finance Levers By Diaz-Bonilla, Eugenio; McNamara, Brian; Njuki, Jemimah; Swinnen, Johan; Vos, Rob
  13. Long-run patterns in the discovery of the adjacent possible By Josef Taalbi
  14. Domestic Linkages and the Transmission of Commodity Price Shocks By Damian Romero
  15. Social learning about climate change risk By Xu, Yilan; Box-Couillard, Sebastien
  16. Choice That’s Rational By Chatterjee, Sidharta

  1. By: Giovanni Dosi; Marcelo C. Pereira; Andrea Roventini; Maria Enrica Virgillito
    Abstract: When complexity meets economics, complexity economics turns out to be something more than simple interactions across individuals/entities, it turns into what has been labelled the bicycle postulate made of two components, coordination and change. Granted the ''Complex evolving system approach'', we provide an example of the effectiveness of the complexity view in economics applied to the context of the current debate on the future of work drawing upon the agent-based ''Schumpeter meeting Keynes'' multi-sector model (Dosi et al., 2022) and the meta-modelling approach developed in Dosi et al. (2018). The complexity approach proves to be an alternative, useful lens to address the technical change vs employment relationship modulated by demand patterns, income distribution, structural change and labour market organizations. It allows to enlarge the scope of investigation beyond production functions of tasks, relative prices of capital vs labour, inputs substitutability, comparative advantages of workers in their skill levels, the latter elements upon which the dominant neoclassical approach on the employment-technology nexus is rooted.
    Keywords: Complexity; Meta-modelling; Future of work.
    Date: 2022–08–16
  2. By: Fernando Esteve Mora (UAM); Rafael Muñoz De Bustillo Llorente
    Abstract: The aim of this paper is to present a novel proposal to define social classes from the economic perspective. This paper draws on a previous working paper (Muñoz de Bustillo and Esteve, 2022) that discusses the demise of the concept of social classes in economic analysis derived from the triumph of Neoclassical Theory, its substitution in recent times by the definition of social classes based on ad-hoc aggregation of deciles of people in the income distribution, and the convenience to explore new ways of defining social classes from an economic perspective. The proposal presented in this paper regarding social classes is based on two different elements. The first one is the participation or exclusion of a given person from the economic surplus. The second one is its position, both in terms of income and consumption, in relation to the necessary consumption, C*, and average income, Y. These concepts allow defining three different social classes: Low, Middle and High, that can be further divided in subclasses up to a total of seven. A second, and less developed part of the paper reviews the role of economic power in explaining the allocation of different people in the above-mentioned social classes.
    Keywords: Social classes, Classical political economy, Surplus approach
    Date: 2022–08
  3. By: Cadot, Julien; Féral, Arnaud
    Keywords: Agribusiness, Agricultural Finance, Institutional and Behavioral Economics
    Date: 2022–08
  4. By: Mohit Arora; Deepankar Basu
    Abstract: Recent developments in the theory of production networks offer interesting applications and revival of input-output analysis. Some recent papers have studied the propagation of a temporary, negative shock through an input-output network. Such analyses of shock propagation relies on eigendecomposition of relevant input-output matrices. It is well known that only diagonalizable matrices can be eigendecomposed; those that are not diagonalizable, are known as defective matrices. In this paper, we provide necessary and sufficient conditions for diagonalizability of any square matrix using its rank and eigenvalues. To apply our results, we offer examples of input-output tables from India in the 1950s that were not diagonalizable and were hence, defective.
    Date: 2022–07
  5. By: Stamegna, Marco
    Abstract: The present paper works out a demand-led growth model of a labour-constrained economy with an endogenous direction of technical change. It draws on the Kaleckian-Steindlian tradition to examine the short-run relation between income distribution, capacity utilization, and capital accumulation; on Goodwin-type growth cycle models to investigate the dynamic interaction between labour market and distributive conflict; on the induced innovation literature to link labour productivity growth to income distribution. The model defines a two-dimensional system of differential equations in the wage share and the employment rate at full capacity to investigate the properties of the long-run equilibrium. In a Kaleckian fashion, an endogenous rate of capacity utilization allows effective demand and income distribution to affect the long-run equilibrium. We find that: i) an exogenous increase in workers’ bargaining power raises the long-run labour share, capital accumulation, labour productivity growth, and real wage growth, regardless of the short-run demand and growth regime of the economy; ii) a positive institutional shock to the labour share may cause the long-run employment rate to fall even in a wage-led demand regime; conversely, iii) positive technology shocks reduce the long-run rate of growth of the economy in a wage-led growth regime; thus, strengthening labour market regulation emerges as an unambiguously better strategy to raise the long-run labour share, capital accumulation, and labour productivity growth.
    Keywords: Functional income distribution; effective demand; growth regimes; endogenous technical change
    JEL: E12 E24 E25 O40
    Date: 2022–07–12
  6. By: Stamegna, Marco
    Abstract: The present paper works out a classical-Marxian growth model with an endogenous direction of technical change and a heterogeneous labour force, made up of high-skilled and low-skilled workers. It draws on the Kaleckian mark-up pricing to link wage inequality to the relative unit labour cost at a firm level; on growth cycle models à la Goodwin to formalize the dynamic interaction between labour market and distributive shares of income; on the induced innovation literature to link the bias of technical change to the firm’s choice of the optimal combination of factor-augmenting technologies. We assume that economic growth is constrained by the growth rate of the high-skilled effective labour supply, whereas the low-skilled labour supply is perfectly elastic. Thus, we develop a three-dimensional system of differential equations for the output-capital ratio, the relative unit labour cost and the employment rate of the high-skilled workers, and investigate the stability and the main properties of the steady-state equilibrium. We find that, in contrast to the neoclassical literature on skill-biased technical change, the institutional framework governing the conflict over income distribution is the ultimate determinant of both wage inequality and the direction of technical change. A decline in low-skilled workers’ bargaining strength or a rise in product market concentration lead to both an increase in wage inequality and a bias of technical change favouring high-skilled over low-skilled labour productivity growth. As opposed to the Goodwin model with induced technical change and homogeneous labour force, labour market institutions thus affect steady-state income distribution, capital accumulation and labour productivity growth, and no necessary trade-off arises between labour market regulation and employment. Finally, if the steady-state value of wage inequality exceeds a critical value, an exogenous increase in the mark-up or in the high-skilled workers’ bargaining power allow both capitalists and high-skilled workers to increase their income shares at the expense of the low-skilled workers.
    Keywords: Wage inequality; growth; distribution; endogenous technical change
    JEL: D33 E11 E24 O33
    Date: 2022–07–16
  7. By: Daniel Levy; Avichai Snir
    Abstract: Recent studies in psychology and neuroscience offer systematic evidence that fictional works exert a surprisingly strong influence on readers and have the power to shape their opinions and worldviews. Building on these findings, we study what we term Potterian economics, the economic ideas, insights, and structure, found in Harry Potter books, to assess how the books might affect economic literacy. A conservative estimate suggests that more than 7.3 percent of the world population has read the Harry Potter books, and millions more have seen their movie adaptations. These extraordinary figures underscore the importance of the messages the books convey. We explore the Potterian economic model and compare it to professional economic models to assess the consistency of the Potterian economic principles with the existing economic models. We find that some of the principles of Potterian economics are consistent with economists models. Many other principles, however, are distorted and contain numerous inaccuracies, contradicting professional economists views and insights. We conclude that Potterian economics can teach us about the formation and dissemination of folk economics, the intuitive notions of naive individuals who see market transactions as a zero-sum game, who care about distribution but fail to understand incentives and efficiency, and who think of prices as allocating wealth but not resources or their efficient use.
    Date: 2022–08
  8. By: Harald Bathelt; Michael Storper
    Abstract: Evolutionary approaches have contributed substantially to the growing knowledge body about regional development processes and their underlying mechanisms. They have advanced our understanding particularly by going beyond case study methods, using empirical, mostly regression- based statistical analyses. One key concept that underlies evolutionary economic geography (EEG) is that of “related variety†. In EEG studies, regional industry structure is represented through its level of related variety, which in turn is found to be positively associated with favorable types of regional economic development. In this paper, we raise questions regarding the internal logic of the concept, its spatial expressions, measurement specifics, empirical regularities and biases, and the short- and long- term effects of related variety on regional development. Based on this examination, we make suggestions for future research.
    Keywords: Economic geographies of places; evolutionary economic geography (EEG); regional development; regional specialization; related variety
    JEL: L23 R11
    Date: 2022–08
  9. By: Schuster, Caroline; Kar, Sohini
    Abstract: In the decade since the 2008 global financial crisis, much of the debate has been over whom to blame: reckless speculative finance or irresponsible (often low-income) borrowers. This essay takes up this set of moral arguments about what the poor can and should be able to afford by examining subprime logics at a global scale: subprime empire. Predatory lending in heartland America and development-oriented microcredit in places such as India and Paraguay appear not just to be geographically disparate but also to have different moral valences. After closer inspection, however, we argue that subprime lending and microfinance are two sides of the same coin. Our analysis of microfinance allows us to understand what is happening in the “in-between” as capital flows between financial investors and poor borrowers. By comparing financialization in India and Paraguay, we document and theorize the making of subprime empires that rely on actors within marginal financial sites to stabilize the evaluative frameworks and social interdependencies that make profits flow. We argue that the forms of financial capture and conversion in the “financial in-between” reproduce imperial dynamics by naturalizing the limited expectations of economic subjects of the global south and erasing the violence inherent in these forms of economic redistribution that maintain those expectations as such.
    JEL: F3 G3 N0
    Date: 2021–08–01
  10. By: Krishnadas M.; K. P. Harikrishnan; G. Ambika
    Abstract: The financial markets are understood as complex dynamical systems whose dynamics is analysed mostly using nonstationary and brief data sets that usually come from stock markets. For such data sets, a reliable method of analysis is based on recurrence plots and recurrence networks, constructed from the data sets over the period of study. In this study, we do a comprehensive analysis of the complexity of the underlying dynamics of 26 markets around the globe using recurrence based measures. We also examine trends in the nature of transitions as revealed from these measures by the sliding window analysis along the time series during the global financial crisis of 2008 and compare that with changes during the most recent pandemic related lock down. We show that the measures derived from recurrence patterns can be used to capture the nature of transitions in stock market dynamics. Our study reveals that the changes around 2008 indicate stochasticity driven transition, which is different from the transition during the pandemic.
    Date: 2022–08
  11. By: Segovia, Alexander
    Abstract: En este trabajo se analizan los vínculos que existen entre los modelos económicos y las modalidades de capitalismo vigentes en Centroamérica desde la segunda mitad del siglo XX hasta el presente; se identifican los actores y los factores que históricamente han incidido en la configuración de los tipos de capitalismo en la región y se presentan recomendaciones para la formulación de modelos económicos transformadores, eficientes, incluyentes y sostenibles.
    Date: 2022–07–22
  12. By: Diaz-Bonilla, Eugenio; McNamara, Brian; Njuki, Jemimah; Swinnen, Johan; Vos, Rob
    Keywords: Agricultural and Food Policy
    Date: 2022–08–02
  13. By: Josef Taalbi
    Abstract: This study analyses long-run patterns of new product introductions in Sweden, 1908-2016. A theoretical framework is formulated that links notions of exploration and exploitation to the notion of innovation as a search process of recombination across knowledge types to discover the set of the adjacent possible innovations. The framework makes predictions about the rate of diversification of product portfolios, the rate of innovation, and the distribution of innovations across organizations. The results suggest on the one hand that the rate of innovation is approximately linear rather than super-linear. This explains advantages of incumbent firms, but excludes the emergence of "winner takes all" distributions. The results also suggest that the rate of development of new types of products follows "Heaps' law", where the share of new product types within organizations declines over time. Instead, old firms become increasingly focused on a core set of products and knowledge, as they age. Together these results suggest that declining product diversity might be one explanation why large firms have seen their overall innovation rates decline.
    Date: 2022–08
  14. By: Damian Romero
    Abstract: This paper studies the role of input-output (IO) linkages in the transmission of commodity price fluctuations. Empirically, the positive correlation between commodity prices and GDP decreases in the degree of IO linkages. In a model of a commodity-exporting economy where international markets set the commodity price, IO linkages reduce the demand for inputs by the commodity sector, dampening the level of income of the country after a positive commodity price shock. In a calibrated version of the model, the elasticity of GDP to commodity prices would be at least 7% higher if the commodity sector had been 10% less connected.
    Date: 2022–01
  15. By: Xu, Yilan; Box-Couillard, Sebastien
    Keywords: Environmental Economics and Policy, Institutional and Behavioral Economics, Consumer/Household Economics
    Date: 2022–08
  16. By: Chatterjee, Sidharta
    Abstract: In this paper, I discuss about the axiomatic basis of rational choice theory—the theory that is behind making rational choice and decisions. To make rational choices, we would require thinking rationally and understanding the reason and logic behind what makes a choice rational, and how we need to choose rationally. Decisions are made under various circumstances, i.e., under risk, and often under compulsion. In social choice theory, decisions are made by different types of decision making entities, i.e., committees, groups, individuals and collective judgments by various types of organizations, etc. This paper highlights these issues and addresses the fundamental tenets of making rational choices by examining and following the previous workings of experts on this field. As such, it introduces a novel concept and the idea of Social Choice Rationality in choosing what’s rational.
    Keywords: Choice, decision making, rational choice, social choice theory, Social Choice Rationality, Social welfare, welfare actions
    JEL: I3 Z1
    Date: 2022–07–25

This nep-hme issue is ©2022 by Carlo D’Ippoliti. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.