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on Heterodox Microeconomics |
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Issue of 2026–07–20
fourteen papers chosen by Carlo D’Ippoliti, Università degli Studi di Roma “La Sapienza” |
| By: | Simon Fløj Thomsen |
| Abstract: | This paper reviews the development of Ecological Stock-Flow-Consistent Input-Output models as an emerging alternative to mainstream climate-economy modelling frameworks. In light of the limitations of neoclassical approaches, which rely on restrictive behavioral and equilibrium assumptions, Ecological Stock-Flow-Consistent Input-Output models offer a coherent framework to analyze climate policies by jointly representing financial dynamics, the real economy, and ecological pressures within a stock-flow-consistent dynamic setting. After introducing the Stock-Flow-Consistent and input-output traditions separately, the paper explains how these approaches can be integrated and discusses the implications of disaggregating the production sector into interdependent industries. The existing Ecological Stock-Flow-Consistent Input-Output literature is then surveyed, with particular attention to the treatment of financial linkages, inter-industry relations, environmental extensions, and the calibration strategy. An important finding is that, while the models become more complex in both the production, financial and ecological interactions, most of the models remain theoretical or calibrated, with weak empirical foundation. The paper therefore evaluates the potential of Ecological Stock-Flow-Consistent Input-Output models as tools for climate policy analysis and argues for a shift of focus towards fully empirical implementations. Finally, it identifies key methodological and data-related challenges that must be addressed for Ecological Stock-Flow-Consistent Input-Output models to become robust and reliable components of the climate policy toolkit. |
| Keywords: | Empirical Stock-Flow-Consistent models, Environmentally Extended Input-Output modelling, Ecological macroeconomics |
| JEL: | E12 E17 F41 L16 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:imk:fmmpap:123-2026 |
| By: | Leiashvily, Paata |
| Abstract: | This paper argues that the medium-term Juglar business cycle is an intrinsic property of an operationally closed economic system rather than a response to external shocks. The oscillation is treated as an emergent property of a network of economic actions rather than an aggregate of individual agents: this distinguishes the approach from agent-based modeling and brings it close to the rule-based evolutionary ontology of micro–meso–macro. It is shown that, through positive and negative feedback, the recursive organization of economic processes necessarily generates endogenous oscillations typical of complex nonlinear systems. During a crisis the structural disproportions that accumulated in the upswing are eliminated. The paper examines the competitive self-regulation mechanism in its pure form, as a necessary precondition for understanding how the economy functions under real-world conditions of monopolization, financialization, and so on. The cycle is shown to move along a trajectory between two turning points — “producers are unwilling to produce more” and “consumers are unwilling to consume less.” The gradual upswing and the sharp crash are explained structurally: breaking an economic link requires only one party’s decision, whereas restoring it demands coordination among all parties. A forward model is presented that reproduces this dynamics without any external driver, and two crisis circuits are identified — commodity and financial. The paper concludes that anti-crisis policy based on supporting aggregate demand is ineffective: the crisis is merely postponed, while structural distortions persist, accumulate, and eventually lead to a deeper crisis. |
| Keywords: | endogenous business cycle; Juglar cycle; operational closure; recursive organization; dynamic symmetry; default cascade; forward model; limits of self-regulation; emergence from actions; evolutionary ontology (micro–meso–macro); agent-based modeling. |
| JEL: | C69 D59 E32 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:129569 |
| By: | Drakopoulos, Stavros A.; Katselidis, Ioannis |
| Abstract: | This work discusses the role of psychology in the Post War II non-mainstream economics tradition, focusing on George Katona, Harvey Leibenstein and Tibor Scitovsky. Although those three authors were largely ignored by orthodox economists, they exercised a considerable influence on heterodox schools and helped to establish the foundations of behavioural economics and of the economics of happiness. Katona started a research programme at the Survey Research Center of the University of Michigan, which was openly based on the economic psychology of the attitudes and motives underlying market behaviour. Initially, he focused on the psychological aspects of business behaviour in order to explore the motives and attitudes of businessmen. Subsequently, Katona’s studies were centred on the psychological aspects of consumption, suggesting the use of interview surveys to obtain both financial and attitudinal data of consumers. Leibenstein is considered to be one of the first economists to explore issues pertaining to what is called today behavioural economics. Anticipating modern or new behavioural economics, Leibenstein incorporated the psychological dimensions of economic behaviour into his microeconomic approach long before the emergence of behavioral economics as a distinct discipline. Scitovsky was among the first economists to detect a new-found interest in the determinants of well-being and in its underlying processes in psychological research, and to show how economics could be enriched by applying the new psychological insights. All three were clearly against the purging of psychology from twentieth century economic theory, arguing that incorporating concepts and findings from psychology into economics was methodologically legitimate and theoretically fruitful. The paper will also discuss their critical attitude towards the standard model of economic rationality and the mainstream methodological framework. Further, it will investigate key common points of these authors, including their emphasis on the role of interdependent preferences. |
| Keywords: | History of Heterodox Economics; Relation between Economics and Psychology; History of Old Behavioral Economics; History of Happiness Economics |
| JEL: | A12 B2 B3 B4 B50 |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:129729 |
| By: | Daniele Maria Di Nosse; Fabrizio Lillo |
| Abstract: | Automated Market Makers based on concentrated liquidity, such as Uniswap v3, significantly improve capital efficiency but expose Liquidity Providers (LPs) to adverse selection costs, formalized as Loss-Versus-Rebalancing (LVR). While theoretical literature quantifies these costs, the interplay between realistic blockchain microstructure and endogenous pricing mechanisms remains under-explored. This paper develops a granular Agent-Based Model of a Uniswap v3 pool interacting with a stochastic reference market governed by Heston volatility dynamics. The framework incorporates discrete block propagation, mempool latency, and a heterogeneous population of agents, including latency-sensitive arbitrageurs, smart routers, Maximal Extractable Value searchers, and active LPs benchmarked against a frictionless rebalancing strategy. We propose and evaluate dynamic fee schedules driven by volatility and order-flow toxicity proxies intended to compensate LPs for adverse-selection losses. Our simulations investigate the conditions under which LPs can achieve positive hedged Profit and Loss (fees minus LVR). The analysis suggests that dynamic fee adjustments can improve hedged LP profitability mainly by increasing fee income in states associated with stale-price risk. Depending on the configuration, these rules may also affect realized LVR, but the current aggregate results support compensation for LVR more directly than a reduction of LVR itself. |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2606.23070 |
| By: | YOSHIHARA, Naoki; VENEZIANI, Roberto |
| Abstract: | We analyse a general, dynamic neoclassical production economy. We show that any sequence of competitive equilibrium prices converges to a vector of production prices. Thus, far from being a special case, classical prices of production are the attractor of neoclassical equilibrium prices. Indeed, and this is a second insight, prices of production turn out to be the (unique) supporting price vector of the turnpike capital accumulation path. Finally, our results have some implications for theories of exploitation and class, and distributive justice more generally. |
| Keywords: | Neoclassical Production Economies, Prices of Production, Intertemporal Walrasian Equilibrium Prices, Euler Equation |
| JEL: | B51 C61 C62 D46 D51 |
| Date: | 2026–07 |
| URL: | https://d.repec.org/n?u=RePEc:hit:hituec:780 |
| By: | Claudius Gräbner-Radkowitsch (Department of Plural Economics, Europe University Flensburg, Germany; Institute for Comprehensive Analysis of the Economy, Johannes Kepler University Linz, Austria; Socio-Ecological Transformation Lab, Johannes Kepler University Linz, Austria) |
| Abstract: | Socio-ecological transformations present regions with the challenge of moving away from established trajectories towards uncertain alternatives. This paper argues that the original institutional economics (OIE) tradition provides powerful yet underused tools for understanding these processes. It demonstrates that classical concepts such as the institutionalist conception of habits and institutions, ceremonial encapsulation, and path dependence remain analytically valuable, despite having been developed under different socio-historical conditions. Building on this foundation, the paper extends the concept of relatedness beyond its established technological meaning to encompass cognitive and institutional dimensions. This extended concept helps explain not only why existing trajectories persist but also which pathways actors are positioned to pursue, thereby clarifying the feasibility of transformation. These arguments are illustrated through the case study of the Lusatian coal region in Germany, drawing on semi-structured interviews with regional stakeholders. The analysis demonstrates how cognitive and institutional relatedness collectively shape the accessible space of transformation. |
| Date: | 2026–07 |
| URL: | https://d.repec.org/n?u=RePEc:set:wpaper:7 |
| By: | Yeva Nersisyan; L. Randall Wray |
| Abstract: | This paper examines the rise of the plutonomy--an economy dominated by the new plutocrats--and compares it with the Gilded Age of the 1920s. We show how John Kenneth Galbraith’s analysis in his classic, The Great Crash, offers insights into our current predicament. The financing used by the investment trusts that pumped up the stock market then looks eerily similar to the circular finance used by today's tech firms that dominate the equity market today. The assets held by those trusts were the stocks and debts of other trusts--just as our tech firms owe and own each other today. That ensures that when liquidation of positions begins, a Fisher-type debt deflation dynamic will take hold. Furthermore, just as the economy of the late 1920s relied on the spending of the rich, today's record level of inequality means that the economy must rely excessively on the investment spending of the Magnificent Seven and consumption spending of the millionaires, billionaires, and trillionaires minted by the boom of their share prices. Galbraith explained how FDR’s New Deal reconstructed the economy so that its growth relied on mass consumption supported by greater income equality, by reigning-in finance, and by creating a bigger role for government. We warn that government is ill-prepared to deal with the coming financial crisis and we offer alternatives to the strategy adopted to deal with the Global Financial Crisis. |
| Keywords: | The Great Crash; Plutonomy; Artificial Intelligence; Magnificent Seven; financial crisis; Minsky; Money Manager Capitalism |
| JEL: | B15 B25 B26 B52 E12 E32 E44 E62 |
| Date: | 2026–07 |
| URL: | https://d.repec.org/n?u=RePEc:lev:wrkpap:wp_1122 |
| By: | Mark Setterfield (Department of Economics, New School for Social Research, USA); Christopher R. Herdelin (Department of Economics and Finance, Saint Peter's University, USA) |
| Abstract: | In this paper, we present an alternative to the conventional view regarding the Goodwin pattern. We demonstrate that the Goodwin pattern emerges from a three-dimensional system of real, monetary, and distributional dynamics where the monetary linkage includes a central bank incorporating an asymmetric reaction function. The asymmetric reaction function is the result of a central bank that is inflation averse resulting in a deflationary bias. Therefore, the central bank sets interest rates in response to variations in the wage share and real activity, however, there is no influence of distribution on real activity. In our model, the central bank reaction function reflects implicit inflation targeting in real activity × wage share space responding to goods market and labour market pressure. In other words, the central bank finds itself in a conflicting claims environment, changing interest rates when either output or the wage share deviate from their target values. Our results show that the introduction of the central bank reaction function with a deflationary bias produces the cyclical behavior associated with the Goodwin pattern, but more importantly, it also demonstrates a weakening of the profit squeeze mechanism and a secular decline in the wage share. |
| Keywords: | Goodwin pattern, central bank, reaction function, cyclical growth |
| JEL: | E11 E12 E32 E37 E43 E58 |
| Date: | 2026–07 |
| URL: | https://d.repec.org/n?u=RePEc:new:wpaper:2608 |
| By: | Thomas Palley |
| Abstract: | This essay is about the polycrisis, whereby the global order is afflicted by simultaneous crises impacting economics, politics, societal relations, geopolitics, and nature. The essay uses the metaphor of “bad apples” versus “bad barrel” to explain the argument. The “bad apples” explanation views the polycrisis as a series of idiosyncratic crises, and it leaves the free market ideal intact and absolves capitalism. The “bad barrel” explanation sees the polycrisis as being systemically produced, and it contests the free market ideal and identifies capitalism as the driving cause. The Neoliberal era (1980 – present) has surfaced the polycrisis, and the crisis openly revives Luxemburg’s question of “socialism or barbarism?” There is much to be done if society is to avoid a repeat of barbarism. That includes persuasively explaining capitalism’s flaws, articulating the future of socialism, and breaking the chokehold on politics that blocks surfacing these issues. The Chinese proverb is “A journey of a thousand miles begins with a single step.” That is true, but we should also seek to ensure the first step is in the right direction. Acknowledging the polycrisis and recognizing it is a product of capitalism’s “bad barrel” does both. |
| Keywords: | polycrisis, capitalism, noeliberal, socialism |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:imk:fmmpap:125-2026 |
| By: | Igor Lugo; Martha G. Alatriste-Contreras |
| Abstract: | The coordination of prices in economics is one of the most complex phenomena. In particular, the classical and neoclassical approaches related to the economic theory provide some insights into such a complex coordination based on different formulations. However, these formulations have not been successful for explaining simple mechanisms to understand and predict a set of prices that theoretically clears all markets. Consequently, elementary cellular automata can contribute to clarify such a coordination problem by using simple computational rules to describe the theoretical bases of the classical and neoclassical economics. Therefore, we propose to use this type of cellular automata for explaining different escenarios of price coordination in which simple rules of price interactions generate stable and unstable patterns of coordination. We used an explorative data analysis based on the Shannon entropy for computing the uncertainty related to such generated patterns of coordination, and a Monte Carlo simulation approximation based on a Spearman correlation for evaluating the statistical significance of such price coordination. Findings suggested that the classical economics provides a consistent approach for understanding the coordination of prices because it emphasizes human interactions based on logical choices related to an objective data. On the other hand, the neoclassical approach does not propose any type of mechanism for describing the price coordination. The neoclassical individual is just a spectator and receiver of the unpredictable and supposed event of price coordination. As a result, by modeling the economic theory based on computational concepts, we reveal facts and believes behind the classical and neoclassical economics. |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2607.00050 |
| By: | Wilp, Susanne Bleier |
| Abstract: | This paper develops a theoretical synthesis of the future of sex work in the Global South and argues for an inverted learning gradient. Where an earlier companion paper showed that in the Global North the future of sex work is decided in labour law and in digital and financial infrastructure that the state would have to provide, this paper shows that in the Global South the protective infrastructure exists where sex workers have built it themselves - as peer organisation, cooperative banking, and community health networks, often before and without the state. Drawing on peer-reviewed research and movement scholarship - including Mgbako's fieldwork on African sex worker activism, the literature on the Sonagachi project and the Durbar collective in India, research on the Latin American network RedTraSex, and Agustin's analysis of the 'rescue industry' - the paper makes three claims. First, the degree of self-organisation, not the legal framework, is the strongest predictor of protective capacity in the South. Second, the same extraterritorial US power that regulates the North through platform law operates in the South through funding and visa policy, exemplified by the PEPFAR anti-prostitution pledge, the 2012 visa denials that forced an alternative AIDS conference to Kolkata, and the 2025 dismantling of PEPFAR itself - which strikes hardest at precisely those structures that had made themselves dependent on it. Third, the learning gradient between North and South runs in both directions: the South can learn institutional permanence from the North, the North can learn self-built infrastructure and peer efficiency from the South. South Africa's ongoing decriminalisation process serves as the Southern counterpart to the Belgian experiment. Related work https://doi.org/10.31235/osf.io/uc57b_v1 |
| Date: | 2026–06–15 |
| URL: | https://d.repec.org/n?u=RePEc:osf:socarx:tysjx_v1 |
| By: | Kevin Leportier (CREM - Centre de recherche en économie et management - UNICAEN - Université de Caen Normandie - NU - Normandie Université - UR - Université de Rennes - CNRS - Centre National de la Recherche Scientifique, INSPÉ Normandie Caen - Institut national supérieur du professorat et de l'éducation - Normandie Caen - UNICAEN - Université de Caen Normandie - NU - Normandie Université) |
| Abstract: | This paper examines whether the algorithmic institutions developed within market design are compatible with the Hayekian conception of liberty as the absence of coercion. While market design is often presented as a continuation of Hayekian insights regarding dispersed knowledge and decentralized coordination, this paper argues that Hayekian liberty depends on more than decentralized choice. It also requires a stable institutional environment within which individuals can form coherent plans and learn from experience. Algorithmic institutions tend to weaken this stability, thereby undermining Hayekian liberty. |
| Keywords: | Hayek, Algorithmic institutions, Coercion, Liberty, Freedom, Market design, Mechanism design |
| Date: | 2026–05–26 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-05676848 |
| By: | Moran Koren |
| Abstract: | Empirical economists often start their projects with a toolbox. Shared packages, replication archives, and circulated guides shorten the time between and idea and a rough initial draft. Theorists, on the other-hand, largely start from a blank page. By 2026, large language models can a produce and check nontrivial mathematics. The can also hallucinate and write wrong claims very convincingly. The current bottleneck on machine-assisted theory is no longer production but trust: a model will claim to prove a false theorem as readily as a true one. Building on recent attempts in mathematics, I present 3 methods for doing economic theory with a language model. These methods differ on how the work is verified: a single disciplined pass, an adversarial prover-verifier pair (Claude Opus~4.8 proposing, OpenAI Codex refuting), and a structured multi-agent project with a reviewer gate (inspired by the Google co-mathematician architecture). I demonstrate these protocols on one open worked example: designing a Groves/Pigouvian incentive mechanism for the Gans--Kominers eigengrade model of grade inflation. None of the three runs produced a strict direct-revelation VCG/Clarke mechanism (as requested, perhaps due to the non-existence of such mechanism). Three phenomena recur. First, convergent discovery: two runs derive the same effective-resistance externality kernel on opposite margins. Second, adversarial verification is load-bearing: the pair caught three of its own false claims and the gate rejected a sub-goal. Third, polish is not rigor: the most finished-looking output was the least verified. The methodological takeaway is that external verification, not model capability, is the design variable. |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2606.22337 |
| By: | Snower, Dennis |
| Abstract: | Whereas labor markets are traditionally viewed as machine-like environments – where agents, coordinated by price signals, solve constrained optimization problems or adhere to established heuristics – this paper views labor markets as human ecosystems, containing living things, namely, the human beings who participate in these markets. Living things adapt to their environment and evolve across their domains of life. Consequently, activities in labor markets cannot be understood independently of their social and political foundations. Labor markets are embedded in social, economic, political and environmental systems, and their adaptiveness to their social and natural environments. In this context, the insider-outsider theory may be generalized by reconceptualizing insiders and outsiders in terms of their relative adaptive advantages and the structural barriers to adaptation. The functions and misfunctions of adaptively embedded labor markets can be specified in terms of the adaptiveness as systems or the adaptiveness of the components of these systems. The insider-outsider theory indicates why there is no “invisible hand†whereby agents that are individually adaptive will lead to a labor market that is systemically adaptive at the labor-market or economy-wide levels. The ecosystemic approach also involves a reconceptualization of agents operating in labor markets, implying a new theories of the firm and workers. The first- and second-best policy implications are briefly surveyed. |
| JEL: | J41 J63 J64 D23 B52 D70 O43 |
| Date: | 2026–01 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:21067 |