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on Heterodox Microeconomics |
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Issue of 2024‒08‒12
eleven papers chosen by Carlo D’Ippoliti, Università degli Studi di Roma “La Sapienza” |
| By: | Alexandre Truc (Université Côte d'Azur, CNRS, GREDEG, France); Muriel Dal Pont Legrand (Université Côte d'Azur, CNRS, GREDEG, France) |
| Abstract: | In the present paper, we investigate the diffusion of agent-based models (ABMs) in economics using a quantitative approach to better understand how the introduction of this tool in economics influenced the structure of the field as well as research programs in recent years. Our analysis shows that the proliferation of ABMs has resulted in the emergence of diverse research subfields rather than one unified research program. Most notably, we highlight how interdisciplinarity plays a pivotal role in understanding the diversity of ways in which agent-based models are integrated into economics. While in some cases ABMs are used by economists as an imported tool to address disciplinary-oriented questions in dedicated subfields journals, in other cases ABMs are a vehicle for more interdisciplinary transfers and interactions (e.g., interdisciplinary co-authorship) that are more challenging to the traditional frontiers of economics. |
| Keywords: | Agent-Based, Interdisciplinarity, Social Network Analysis |
| JEL: | B2 B21 B4 D9 |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:gre:wpaper:2024-19 |
| By: | Domenico Delli Gatti; Tommaso Ferraresi; Filippo Gusella; Lilit Popoyan; Giorgio Ricchiuti; Andrea Roventini |
| Abstract: | We present a multi-country, multi-sector agent-based model that extends Dosi et al. (2019) and incorporates the exchange market and its interaction with the real economy. The exchange rate is influenced not only by trade flows but also by the heterogeneous demand for foreign currencies from financial traders. In this respect, the dual nature of the exchange rate is highlighted, acting both as a transmission channel of endogenous shocks and as a source of shocks. Indeed, differing beliefs bring about real-financial non-linear patterns with feedback mechanisms. Simulations show that the introduction of speculative sentiment behaviour reflects important stylised facts of bilateral exchange rate series. Furthermore, the findings indicate that trend-following behaviour substantially increases financial turbulence and contributes to real economic fluctuations. Finally, we highlight the power and limitations of the central bank as an actor in the exchange rate market, showing that while the central bank's interventions can effectively curb boom-bust cycles, their outcomes differ substantially. |
| Keywords: | agent-based model, exchange rate dynamics, endogenous cycles, heterogeneous traders, central bank interventions. |
| JEL: | E3 F41 O4 O41 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:frz:wpaper:wp2024_10.rdf |
| By: | Daniyal Khan (Department of Economics, Mushtaq Ahmad Gurmani School of Humanities and Social Sciences, Lahore University of Management Sciences, Pakistan) |
| Abstract: | This paper interprets Pakistan’s monetary system through the lens of a Post Keynesian endogenous money model and argues that the 2022 amendment to the State Bank of Pakistan Act, 1956 has embedded the position of the State Bank of Pakistan (SBP) as an unusually and necessarily accommodationist central bank. On the one hand, this has practical implications. The inability of the Pakistani government to borrow from the SBP has robbed it of a key money creation mechanism and flooded the banking sector with sovereign risk. On the other hand, the replacement of the private sector by the government as the dominant source of credit demand presents an interesting theoretical case in which public credit demand becomes the source of endogenous money creation. |
| Keywords: | Money supply, central banking, financial fragility, State Bank of Pakistan, endogenous money |
| JEL: | E42 E51 E58 B52 |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:new:wpaper:2411 |
| By: | E.R.L. Sanna; M. Meleddu |
| Abstract: | This paper aims to provide a comprehensive review of the literature on environmental conflicts within protected areas and identify key foundational theories to effectively study conflict phenomena. Through the lens of ecological economics, environmental conflicts are viewed as injustices rooted in the distribution of resource rights and power dynamics. Based upon the review, the paper proposes a novel theoretical framework that integrates principles from environmental justice and ecological economics to better outline the three dimensions of conflict - substance, process and relation. The framework conceptualises conflicts as social–ecological systems in which the configuration of social relations and entitlements over ecosystem services plays a pivotal role in understanding governance challenges related to resource management in protected areas. The paper also proposes a set of indicators to measure the theoretical domains. In line with the social–ecological systems approach, it underscores the importance of utilising social–ecological network analysis techniques to effectively calculate these indicators. Overall, the paper deliver a comprehensive toolkit for practitioners and policymakers in addressing the intricate dynamics of conflicts over natural resource management, especially within protected areas. |
| Keywords: | Property rights;ecosystem services;Social–Ecological Network;Environmental justice;Protected areas conflicts |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:cns:cnscwp:202413 |
| By: | Humphries, Jane |
| Abstract: | This paper argues that in all societies there is considerable agreement about what goods and services are needed to provide a decent living, and that this standard can be measured by the expense involved in maintaining people of good standing. Maintenance costs include two components of living costs that are neglected in conventional approaches. First, in contrast to the usual focus on a fixed basket of commodities, maintenance costs capture changes in the composition and quality of the goods required for a respectable lifestyle. Second, unlike the conventional accounting they include the costs of the household services required to turn the basket commodities into livings. Ignored in the conventional methodology, the inclusion of these costs represents a core innovation. More than 4600 observations, drawn mainly from primary sources, trace levels and trends in maintenance costs for Britain, 1270-1860. These can be compared with established cost of living indicators to offer a complementary perspective on real consumption that accommodates aspirational goods and the input of household labour. The struggle to support families at respectable standards emerges as driving industriousness and motivating prudence among a class that played a major role in economic development. |
| Keywords: | cost-of-living; consumption; welfare; respectability; domestic labour; Wiley deal |
| JEL: | N00 N33 B54 |
| Date: | 2024–06–11 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:122856 |
| By: | Jose Barrales-Ruiz (Center of Economics for Sustainable Development (CEDES), Faculty of Economics and Government, Universidad San Sebastian, Chile); Codrina Rada (Department of Economics, University of Utah, USA); Rudiger von Arnim (Department of Economics, University of Utah, USA) |
| Abstract: | This paper provides a set of baseline empirical results on Goodwin cycles for the US post-war macroeconomy. Our sample consists of Hamilton-filtered series for nonfarm business sector output and labor share as well as the employment rate. Vector autoregressions (VARs) yield strong evidence for the Goodwin mechanism, i.e. profit-led activity and profit-squeeze distribution, in two (output or employment rate cycle vs. labor share cycle) and three (output, employment rate and labor share cycles) dimensions. We focus solely on the cycle rather than underlying trends, discuss how theory and empirical methods relate, and investigate whether and how the Goodwin mechanism has changed over time. To do so, we estimate split samples with standard recursive VARs for the 'golden age' (GA) and 'neoliberal era' (NE), as well as time-varying parameter VARs. Results indicate (i) overall a persistence of the Goodwin mechanism over the entire post-war period; but (ii) generally less pronounced cyclicality during NE than GA, and (iii) a weakening of the profit squeeze vis-`a-vis the employment rate over time as well as, on balance, a weakening of the profit led regime of both activity variables. |
| Keywords: | Neo-Goodwinian empirics, cyclical growth |
| JEL: | E12 E25 E32 J50 |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:new:wpaper:2410 |
| By: | Gustavo Pereira Serra (Department of Economics, Sao Paulo State University (UNESP), Brazil) |
| Abstract: | This paper analyzes the economic effects of student loans in a segmented educational market. The motivation here draws upon some studies that verify differences in labor income returns and repayment difficulties depending on the characteristics of the institution attended by the student. I put forward a neo-Kaleckian model that considers three types of households: rentiers (RH), lower-skilled workers (LSW), and higher-skilled workers (HSW). Moreover, a cost-minimizing representative firm combines physical capital and labor in effective units in the production process, which also features some labor skill substitution, thus generating a bargaining process between the different worker groups and firms that determines the wage gap. The main result is that, for a debt-financed human capital investment, the conditions that drive long-term economic growth do not necessarily align with those that reduce the wage gap and household debt. In fact, in some cases, widening the wage gap may be a necessary condition for boosting economic activity and human capital accumulation. However, this investment might not reduce the wage gap and could raise concerns about household debt. |
| Keywords: | Household debt, student loans, capacity utilization, human capital |
| JEL: | E12 E22 E24 |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:new:wpaper:2412 |
| By: | Yannis Dafermos (Department of Economics, SOAS University of London) |
| Abstract: | The European Central Bank (ECB) has recently incorporated climate considerations into its operations. In this paper, I assess whether the ECB’s approach is consistent with the challenges of the climate crisis era. I first identify three transformative implications of the climate crisis for central banking. These are that central banks (i) are becoming less able to control inflation via monetary policy tools, (ii) can no longer ignore their responsibility to support decarbonisation, and (iii) cannot rely on traditional risk exposure approaches to prevent financial instability that stems from physical risks. I then analyse to what extent these implications are reflected in the ECB climate actions and plans, showing that there is a very significant gap between the ECB’s 'tinkering around the edges' approach and the central banking challenges posed by the climate crisis. Using post-Keynesian, critical macro-finance and political economy perspectives, I develop the theoretical underpinnings of a climate-aligned central banking paradigm and analyse the implications of this paradigm for the ECB policy toolbox and mandate. I also identify the ideological and political economy factors that prevent the ECB from undergoing a climate paradigm shift. |
| Keywords: | European Central Bank; monetary policy; financial stability; inflation; climate crisis |
| JEL: | E58 Q54 |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:soa:wpaper:264 |
| By: | Sanjit Dhami (University of Leicester); Paolo Zeppini (Université Côte d'Azur, CNRS, GREDEG, France) |
| Abstract: | We consider firms' choices between a clean technology that benefits, and a dirty technology, that harms, the environment. Green firms are more suited to the clean, and brown firms are more suited to the dirty technology. We use a model derived from complexity theory that takes account of true uncertainty and increasing returns to technology adoption. We examine theoretically, the properties of the long-run equilibrium, and provide simulated time paths of technology adoption, using plausible dynamics. The long-run outcome is an 'emergent property' of the system, and is unpredictable despite there being no external technological or preference shocks. We describe the role of taxes and subsidies in facilitating adoption of the clean technology; the conflict between optimal Pigouvian taxes and adoption of clean technologies; the optimal temporal profile of subsidies; and the desirability of an international fund to provide technology assistance to poorer countries. |
| Keywords: | Technology choice, climate change, complexity, lock-in e ects, increasing returns, green subsidies, public policy, Pigouvian taxes, stochastic dynamics |
| JEL: | B2 B21 B4 D9 |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:gre:wpaper:2024-20 |
| By: | Giovanni Dosi; Federico Riccio; Maria Enrica Virgillito |
| Abstract: | This work assesses the double harm of Global Value Chain (GVC) integration. Firstly, we take a within-country structural change perspective and investigate how the internal structure of country production, and thus the ensuing emission profile, evolves across development phases. Assessing the structural change-emissions nexus is necessary to understand how to reconcile growth and sustainable development. Secondly, we look at the cross-country dimension, embracing how the changing geography of production affects the environment. We find evidence that the relocation of production toward developing countries via GVCs has negatively impacted worldwide emissions and document that GVCs are progressively becoming a carrier of industrial and ecological downgrading for developing countries. |
| Keywords: | Structural Change, CO2 Emissions, Global Value Chains |
| Date: | 2024–07–09 |
| URL: | https://d.repec.org/n?u=RePEc:ssa:lemwps:2024/17 |
| By: | Will Hicks |
| Abstract: | We discuss the role of information entropy on the behaviour of random processes, and how this might take effect in the dynamics of financial market prices. We then go on to show how the Open Quantum Systems approach can be used as a more flexible alternative to classical methods in terms of modelling the entropy gain of a random process. We start by describing an open quantum system that can be used to model the state of a financial market. We then go on to show how to represent an essentially classical diffusion in this framework. Finally, we show how by relaxing certain assumptions, one can generate interesting and essentially non-classical results, which are highlighted through numerical simulations. |
| Date: | 2024–06 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2406.20027 |