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on Heterodox Microeconomics |
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Issue of 2025–02–17
nine papers chosen by Carlo D’Ippoliti, Università degli Studi di Roma “La Sapienza” |
| By: | Mark Setterfield (Department of Economics, New School For Social Research, USA) |
| Abstract: | Motivated by extensions to the neo-Goodwinian framework pioneered by Lance Taylor (and others), this paper investigates the two-way interaction between growth and distribution in a `Marx-Keynes-Schumpeter' (MKS) system in which the principle of effective demand, distributive conflict, and technical change are the (interacting) drivers of capitalist macrodynamics. A particular concern is with the effects of distribution on both the actual (demand-led) and natural rates of growth, and the reconciliation of these growth rates in a steady-state growth configuration consistent with a constant but indeterminate rate of employment. A baseline model is developed in which the medium-run equilibrium rate of growth is profit-led by hypothesis, but the steady-state long-term rate of growth is nevertheless wage-led. This baseline result is then shown to be generally robust to the introduction of different sources of technical change and both the demand- and supply-side effects of human capacities accumulation (whether through unpaid domestic production or expenditure on marketed services). The paper ends with suggestions for further research. These include extending the model to incorporate interactions between the economy and the environment in the manner suggested by Lance Taylor in his later work. |
| Keywords: | Wage-led growth, profit-led growth, natural rate of growth, technical change, human capacities |
| JEL: | B54 E11 E12 E24 E25 O41 O44 |
| Date: | 2025–02 |
| URL: | https://d.repec.org/n?u=RePEc:new:wpaper:2502 |
| By: | Caldarola, Bernardo (Mt Economic Research Inst on Innov/Techn, RS: GSBE other - not theme-related research); Mazzilli, Dario; Patelli, Aurelio; Sbardella, Angelica |
| Abstract: | Structural change consists of industrial diversification towards more productive, knowledge-intensive activities. However, changes in the productive structure bear in-herent links with job creation and income distribution. In this paper, by taking an economic complexity approach, we investigate the consequences of structural change defined in terms of labour shifts towards more complex industries on employment growth, wage inequality and functional distribution of income. The analysis is con-ducted for European countries using data on disaggregated industrial employment shares over the period 2010 – 2018. First, we identify patterns of industrial specialisa-tion by validating a country-industry industrial employment matrix using a bipartite weighted configuration model (BiWCM). Secondly, we introduce a country-level mea-sure of labour-weighted Economic Fitness, which can be decomposed in such a way as to isolate a component that identifies the movement of labour towards more complex industries the structural change component. Thirdly, we link structural change to i) employment growth, ii) wage inequality, and iii) the labour share of the economy. Our findings indicate that the structural change measure we propose is associated negatively with employment growth. However, it is also associated with lower income inequality: as countries move to more complex industries, they drop the least complex ones, so the (low-paid) jobs in the least complex sectors disappear. Finally, structural change predicts a higher labour ratio of the economy; however, this is likely to be due to the increase in wages rather than to job creation. |
| JEL: | E24 D63 J31 O11 O15 O52 |
| Date: | 2024–11–25 |
| URL: | https://d.repec.org/n?u=RePEc:unm:unumer:2024033 |
| By: | Giovanni Scarano |
| Abstract: | The paper discusses the possible presence and role of the concept of equilibrium in the formulations of the ‘classical economists’ and Marx, also examining the characteristics of the ‘long-period positions’ attributed to these authors. The paper argues that the ‘classical economists’ and Marx only considered all real economic phenomena as momentary results of an unstoppable historical and dynamic process, characterised by continuous conflicts and recompositions. In this context, so-called long-period positions could play a role in determining the dynamics of adjustment without ever being the point of arrival or stasis. This means that, for these authors, long-period positions could be drivers of the gravitation of economic variables, but not necessarily final resting points. It is also argued that the concern to determine the long-period positions of the prices of production did not have a central place in Marx’s analysis. |
| Keywords: | Equilibrium, Dynamics, Attractor, Long-Period Positions, Uniform Rate of Profit, Classical economists |
| JEL: | B12 B14 B51 D50 E32 |
| Date: | 2025–02 |
| URL: | https://d.repec.org/n?u=RePEc:rtr:wpaper:0285 |
| By: | Sheyan Lalmohammed |
| Abstract: | The integration of artificial intelligence (AI) into economic systems represents a transformative shift in decision-making frameworks, introducing novel dynamics between human and AI agents. This paper proposes a welfare model that incorporates both game-theoretic and behavioral dimensions to optimize interactions within human-AI ecosystems. By leveraging agent-based modeling (ABM), we simulate these interactions, accounting for trust evolution, perceived risks, and cognitive costs. The framework redefines welfare as the aggregate utility of interactions, adjusted for collaboration synergies, efficiency penalties, and equity considerations. Dynamic trust is modeled using Bayesian updating mechanisms, while synergies between agents are quantified through a collaboration index rooted in cooperative game theory. Results reveal that trust-building and skill development are pivotal to maximizing welfare, while sensitivity analyses highlight the trade-offs between AI complexity, equity, and efficiency. This research provides actionable insights for policymakers and system designers, emphasizing the importance of equitable AI adoption and fostering sustainable human-AI collaborations. |
| Date: | 2025–01 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2501.15317 |
| By: | Jan Fagerberg (Centre for Technology, Innovation and Culture (TIK), University of Oslo, Norway. Department of Food and Resource Economics, University of Copenhagen, Denmark) |
| Abstract: | The concern about the current generation’s overuse of the earth’s resources, at the expense of the well-being of future generations, is not new. Already half a century ago, there was a very vivid debate about this issue. A thorough assessment was made in 1975 by the Romanian-American scholar Nicholas Georgescu-Roegen in an article entitled “Energy and Economic Myths”, commonly acknowledged as one of the main sources of inspiration of the so-called “degrowth” literature. However, it is argued that it would be a misunderstanding to see Georgescu-Roegen as an advocate of “degrowth” (or alternatively a stationary economy) as appropriate strategies to save mankind from environmental and resource challenges. Georgescu-Roegen’s advice was not to stop economic development, or advocate for harsh sacrifices by those living today. Rather what he suggested was to overhaul the working of the global economy (and the policies associated with it) so that the world becomes a more equitable place, nature (threatened species) is better protected (to our own benefit), and the harm to future generations becomes as small as possible. A key element in making this possible, according to Georgescu-Roegen, was transitioning from a fossil-fuel driven to a solar-powered economy. It is argued that Georgescu-Roegen’s approach (and program) is indeed very relevant for contemporary discussions of how to deal with important challenges facing both the present and, not the least, future generations. |
| Date: | 2025–02 |
| URL: | https://d.repec.org/n?u=RePEc:tik:inowpp:20250210 |
| By: | Meijers, Huub (RS: GSBE MORSE, RS: GSBE other - not theme-related research, Macro, International & Labour Economics, Mt Economic Research Inst on Innov/Techn); Muysken, Joan (RS: GSBE other - not theme-related research, Macro, International & Labour Economics, RS: GSBE - MACIMIDE) |
| Abstract: | This paper argues that interest rate policy is a wrong tool to reduce inflation for two reasons. First, it ignores the causes of inflation, which started with bottlenecks in the economy, energy price shocks and some important sectors raising their profit markups. Second the financial fragility of the economy poses a serious risk, which should be solved first. We elaborate these points for the Dutch economy. This economy is characterised by several stylised facts which constitute a highly interdependent framework: (1) households with positive savings, large pension claims and a huge mortgage debt; (2) firms with large positive savings and large financial claims abroad; (3) a large financial sector with assets mainly invested in mortgages and abroad; (4) a large balance of trade surplus; (5) a Central Bank owning a large stock of Dutch government bonds; and (6) a government with modest negative savings and a moderate debt. The various interdependencies and imbalances are not sufficiently recognised in most debates on economic policy. The risks they imply for a financial crisis are also relevant for many other developed countries. In the paper we use an open economy stock-flow consistent model with a well-developed financial sector. Next to the banking sector we distinguish a pension fund which invests to a large extent abroad. Firms invest a considerable part of their retained earnings abroad in financial assets. We also introduce an inflationary process, based on conflict inflation, which allows for external inflation shocks. The model recognises the balance sheets and portfolios of financial assets of the six sectors in the model – the prices of these assets are explicitly modelled. The financial flows leading to wealth changes are analysed and both wealth effects and transmission channels for the impact of monetary policy play an important role. We estimate the model, using quarterly stock-flow consistent data for the Dutch economy. This enables us to reproduce the stylised facts presented above. From simulations with our model we show (a) why a price (and wage) policy is much more effective to reduce inflation than an interest rate policy (which mainly supresses economic growth); (b) how the vulnerability of the financial sector is aggravated by interest rate policy, and therefore can be used to blackmail central banks to reduce the interest rate. |
| JEL: | E44 B50 E60 G21 G32 O23 |
| Date: | 2024–11–19 |
| URL: | https://d.repec.org/n?u=RePEc:unm:unumer:2024030 |
| By: | Meijers, Huub (RS: GSBE MORSE, RS: GSBE other - not theme-related research, Macro, International & Labour Economics, Mt Economic Research Inst on Innov/Techn); Muysken, Joan (RS: GSBE other - not theme-related research, Macro, International & Labour Economics, RS: GSBE - MACIMIDE) |
| Abstract: | The overarching main purpose of this paper is to detail all data collection and data manipulation and choices to be made to come to a consistent dataset to estimate and calibrate an SFC model, for which we use the model as specified in Meijers and Muysken (2022) as reference. This also enables us to show more in general how data collection from national accounts in a stock-flow consistent way influences the modelling of an economy. We give examples for the composition of the wealth of households by including non-traded assets, the composition of the wealth of firms by identifying direct investments – both outward and inward, and the composition of the wealth of government by pointing out the substantial amount of assets owned by the government, which we ignore. Next to that, we identify the impact of pension funds on both decisions made by households, including forced savings, and on the entire financial sector. We show how the net foreign debt accumulates through a persistent trade balance surplus and is financed to a large extent by pension funds. Finally, we show that corrections in income and savings are required to retain the consistency of the model while staying close to the national accounts. All these observations have important consequences for modelling the savings and investment behaviour of the various sectors. |
| JEL: | E01 B50 E60 F47 G21 G32 E44 E47 |
| Date: | 2024–08–13 |
| URL: | https://d.repec.org/n?u=RePEc:unm:unumer:2024017 |
| By: | Fusillo, Fabrizio; Nenci, Silvia; Pietrobelli, Carlo (RS: UNU-MERIT); Quatraro, F. |
| Abstract: | Although evolutionary economics has extensively analyzed the evolution of industries in relation to innovation and technology lifecycles, the interplay between industry lifecycles and evolutionary patterns of knowledge networks has not been fully explored yet. This work aims to bridge this gap by analyzing the co-evolutionary patterns of knowledge and trade flows in the mining industry, using social network tools in combination with the Schumpeterian tradition of analysis. The study focuses on three Latin American countries: Brazil, Chile, and Peru, where the mining sector plays a significant role in the economy, particularly in the context of energy and digital transitions. Our findings suggest that the innovation network and the global value chain-trade network display divergent co-evolutionary patterns: while the former tends to be stable and concentrated, the latter shows increasing fragmentation and turbulence. The analysis also shows remarkable evolutionary evidence at the country level. |
| JEL: | L10 L72 O30 F14 N56 |
| Date: | 2023–10–27 |
| URL: | https://d.repec.org/n?u=RePEc:unm:unumer:2023037 |
| By: | Meijers, Huub (RS: GSBE MORSE, RS: GSBE other - not theme-related research, Macro, International & Labour Economics); Muysken, Joan (RS: GSBE other - not theme-related research, Macro, International & Labour Economics, RS: GSBE - MACIMIDE); Piccillo, Giulia (RS: GSBE UM-BIC, RS: GSBE MORSE, RS: GSBE Studio Europa Maastricht, Macro, International & Labour Economics) |
| Abstract: | Expectations are usually introduced in macroeconomic stock-flow consistent models (SFC-models from hereon) in an ad hoc way, without much motivation. Moreover, these are usually very simple forms of expectations, and certainly not some form of rational expectations. The implicit assumption is that expectations do not matter very much in these models. However, the way expectations are modelled in SFC-models is very important for two reasons. The first reason is that expectations are very important in understanding the way the economy reacts to a shock, since the stability of the economy is dependent on the nature of expectations. We show for instance that the more backward-looking expectations are, the more stable the economy tends to become. The second reason is that expectations themselves can also be a source of shocks. We show how under certain circumstances optimism or pessimism in expectations can lead to self-fulfilling prophesies. To illustrate the impact of expectations on the stability of an economy we use a simple model, based on the models in Godley & Lavoie, 2007. The model includes a financial sector and government, since we are convinced that the notion of a monetary economy is crucial to understand the impact of expectations on an economy. We also introduce a foreign sector in a very simple way to allow for a better understanding of the multiplier impact of shocks and of foreign reserves on the economy. First we analyse the stationary state solution and analyse its properties. We show that this model is only stable when either the tax rate or government debt is not too high. We also point out the self-fulfilling properties of optimism and pessimism in expectations in this model. Next to that, we show that under “perfect foresight” the model becomes less stable – more restrictions on taxes and government debt are necessary to guarantee stability of the model. However, under naïve expectations the model becomes more stable – there are less restrictions necessary to guarantee stability of the model (due to path dependency). Finally, we introduce the notion of fundamentalist expectations and show how these affect the stability of the model in an intermediate way. In order to introduce adaptive expectations, we conclude our model with some simulation results – analytical solutions cannot be found. We show how adaptive expectations also require an intermediate reaction of fiscal policy to keep the economy stable. |
| JEL: | B50 E60 F47 |
| Date: | 2023–06–23 |
| URL: | https://d.repec.org/n?u=RePEc:unm:unumer:2023024 |