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on Heterodox Microeconomics |
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Issue of 2026–07–27
fourteen papers chosen by Carlo D’Ippoliti, Università degli Studi di Roma “La Sapienza” |
| By: | Corrado Di Guilmi; Takashi Kamihigashi |
| Abstract: | The paper proposes a computational approach for including forward-looking intertemporally optimizing agents in agent-based models. Optimization is implemented considering, on the one hand that revision of economic behavior does not occur continuously over time but only when individual circumstances suggest or impose it, and, on the other hand, that, given the inherent uncertainty and complexity of the economic system, the planning horizon is finite. We propose a macroeconomic model with a large population of household agents. Each period a random sample of them resets their propensities to consume and invest by maximizing their intertemporal utility. They then stick to these optimally set quantities until they are again selected for optimization. The study is a primer in considering the joint effect of heterogeneous agents' interaction and forward-looking behavior, and provides novel insights into the mechanism of transmission of individual choices to the macroeconomy. The heavy computational tasks are managed through the development of new programming tools. The coexistence of interaction and forward-looking behavior generates interesting coordination dynamics. The results suggest that even a tiny fraction of optimizing agents over the whole population has a significant effect of aggregate output, but this effect is nonlinear and conditional on the length of the planning horizon. |
| Keywords: | intertemporal optimization, computational agent-based model, forward-looking behavior |
| JEL: | C63 E21 E70 |
| Date: | 2026–07 |
| URL: | https://d.repec.org/n?u=RePEc:een:camaaa:2026-53 |
| By: | Marianna Epicoco |
| Abstract: | This paper analyzes the relationship between climate change, technological change and affluence. Our expected contribution is to provide a deeper conceptualization of technological change, while taking into account ecological limits, justice and democratic concerns. To this end, we analyze and try to combine evolutionary theories of long-run economic development and limits-to-growth theories, i.e., post-growth and degrowth. We suggest that technological change, even if directed by government policies in the “right directions”, is unlikely to rapidly reduce global emissions. Hence, a significant reduction in global affluence is as necessary as a faster low-carbon transition in order to limit climate change, stay within ecological limits and achieve a more just transition. We also suggest that the lowcarbon transition can be conceptualized as an ecological technological revolution, which can originate a new phase of economic development through major qualitative changes of socio-economic systems in dominant technologies, sectors, firms, institutions and societal values. Finally, we propose that a cap on affluence can be conceptualized as a technology cap, which can accelerate and shape a lowcarbon transition by activating two processes. The first is an endogenous process of co-evolution or cumulative causation between minimalist demand and investment in ecological technologies. The second is a process of debate and democratic definition of an ecological technological paradigm, which can enable socio-institutional actors to act as exogenous unlocking factors. Both these processes, and the forces that shape them, should enable the qualitative evolution of socio-economic systems towards ecology, without necessarily produce their quantitative growth. |
| Keywords: | Climate change; Technological revolutions; Affluence; Long-run economic development; Ecological technological revolution; Technology cap. |
| JEL: | Q50 O33 O11 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ulp:sbbeta:2026-24 |
| By: | Heise, Arne |
| Abstract: | Following Lawrence Klein's designation of a 'Keynesian Revolution', the impact of John Maynard Keynes's The General Theory of Employment, Interest and Money has remained contested. While early interpretations viewed it as a refinement of neoclassical equilibrium theory, later accounts increasingly characterized it as revolutionary break. Drawing on a meta- synthesis of journal articles explicitly addressing the Keynesian Revolution, this paper shows that such claims are typically justified intuitively rather than on explicit philosophy-of-science grounds, even after Thomas S. Kuhn's Structure of Scientific Revolutions. Where analytical criteria are applied, conclusions hinge on whether Keynes's theory transforms the ontological and epistemological foundations of economics or merely modifies them. The findings suggest that most interpretations reflect intra-paradigmatic variation rather than a genuine scientific revolution suggesting 'a revolution that never was'. |
| Keywords: | Keynesian Revolution, Thomas S. Kuhn, Say's Theorem, Walras's Law |
| JEL: | A11 B20 B31 E12 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:cessdp:341982 |
| By: | Zhang, Zuhang |
| Abstract: | Production theory records feasible input-output quantities. This paper develops a generative representation beneath that record. A commodity is defined as a structured functional object, and production is represented by directed generative structures that transform parts, operations, and knowledge into modules and final commodities. The paper defines generative length, minimal generative complexity, organizational gain, socially normal recipes, and execution labels. It proves that the standard production set is a projection of generative production space, that this projection loses dynamic information about future productive possibilities, and that recipe-space productivity improvements admit an exact mechanism decomposition. |
| Keywords: | production theory; generative production structures; production recipes; modularity; technological change; productive possibilities; automation |
| JEL: | B41 C63 D24 L23 O14 O30 O33 |
| Date: | 2026–07–09 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:129956 |
| By: | Eva Ivan-Haintz (CCIIF - Research Center for the History of Philosophical Ideas, Faculty of Philosophy, University of Bucharest, Romania) |
| Abstract: | This review of Handbook of Teaching Philosophy to Economists focuses on the relationship between philosophy and economics, with particular attention to the pedagogical challenges of teaching philosophy to economists, understood as essential for cultivating critical thinking and intellectual autonomy. |
| Keywords: | economic methodology, philosophy, economics students, critical thinking, pedagogy, philosophy of economics |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-05501532 |
| By: | Andreas Lichtenberger (The Vienna Institute for International Economic Studies, wiiw); Oliver Reiter (The Vienna Institute for International Economic Studies, wiiw); Bernhard Schütz (The Vienna Institute for International Economic Studies, wiiw) |
| Abstract: | We develop an agent-based stock-flow consistent macroeconomic model with multiple industries and supply chains to analyse the propagation of sectoral shocks. The model features five industries with heterogeneous firms producing final goods, intermediate inputs, and capital goods. Key innovations are the distinction between homogeneous intermediate goods (produced on stock) and tailor-made capital goods (ordered in advance), reflecting differences in production processes and the usage of the Almost Ideal Demand System (AIDS) for modelling household consumption behaviour. Calibrated to Austrian data using Eurostat sources and neural posterior estimation, the model is used to analyse the economy’s response to a sector-specific supply shock, illustrated through the example of a flooding event affecting the primary sector. Our results demonstrate that inventory levels critically determine economic resilience a 100-year flood has limited impact regardless of the industry setup, but under a 1, 000-year flood, low inventory ratios trigger a vicious circle in which supply shortages cascade across industries, preventing reconstruction and causing a prolonged GDP contraction. High inventory buffers, by contrast, enable rapid recovery. Hence, the structural decomposition into industries becomes decisive when inventories are low, revealing that interdependencies matter most during supply-constrained crises. These findings highlight the importance of explicitly modelling industry interdependencies and inventory dynamics for understanding shock propagation. |
| Keywords: | agent-based model, supply chains, input-output analysis, inventories, shock propagation, climate change |
| JEL: | C63 D57 E17 E37 Q54 |
| Date: | 2026–07 |
| URL: | https://d.repec.org/n?u=RePEc:wii:wpaper:277 |
| By: | Jean-Philippe Bouchaud |
| Abstract: | Financial and economic history is strewn with bubbles and crashes, booms and busts, crises and upheavals of all sorts. Understanding the origin of these events is arguably one of the most important problems in economic theory: are economies intrinsically unstable, and can one ``stabilize unstable economies''? In this review I argue, from a physicist's vantage point, that the concept of equilibrium -- so central to mainstream economic thinking -- is likely to be the exception rather than the rule in large, complex, interacting systems. Drawing on a series of stylized ``toy'' models, I show how excess volatility, endogenous crises and crashes, inflation swells and persistent inequalities can all emerge naturally from genuinely out-of-equilibrium dynamics, without invoking large exogenous shocks. Three generic mechanisms recur throughout: trapping in a multiplicity of history-dependent equilibria; the impossibility of dynamically reaching equilibrium, leading to oscillations and chaos; and the spontaneous evolution towards fragile, marginally stable states -- the self-organized criticality paradigm. I stress that these are phenomenological scenarios rather than calibrated theories: there is, at this stage, no ``smoking gun''. But the burden of proof, I contend, should be on the equilibrium camp. |
| Date: | 2026–07 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2607.09620 |
| By: | phelps, robert |
| Abstract: | We present a minimal (‘toy’) model of an economy as a simple set of equations modelling confidence, consumption, price, investment and debt. Behaviour in the model is grounded in simple heuristics that use available recent information and ‘animal spirits’ instead of complex intertemporal optimization. It is shown that such a model can endogenously generate business cycles where booms are driven by high spirits and credit, while recessions are driven by saving to reduce accumulated debt. We discuss the potential of this minimal model as the basis of a more elaborate core economic model exhibiting cycles and non equilibrium dynamic behaviour |
| Keywords: | macroeconomics economics business cycle debt toy model confidance animal spirits Keynes |
| JEL: | A1 E10 E12 |
| Date: | 2024–09–01 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:126453 |
| By: | Javidanrad, Farzad (University of Warwick) |
| Abstract: | Why can aggregate profit be persistently realised in monetary production economies despite the apparent insufficiency of the initial money supply? Existing explanations have attributed this problem to a variety of institutional mechanisms, including bank credit, capitalist expenditure, government deficits, financial innovation, and foreign trade. This paper argues that these explanations identify different manifestations of a deeper structural phenomenon without explaining its underlying cause. Building on the Credit-Debt Reproduction Mechanism (CDRM), the paper demonstrates that, in debt based monetary production economies, the endogenous reproduction of financial claims systematically exceeds the reproduction of the means of monetary settlement. Consequently, the realisation of aggregate profit in monetary form requires a recurrent source of exogenous purchasing power. The argument is developed in three stages. First, a historical analysis shows that debt remissions, usury restrictions, monetary debasement, and successive monetary innovations can be interpreted as institutional responses to a recurring shortage of circulating liquidity. Second, a formal mathematical model establishes the necessary relationship between profit realisation, debt accumulation, and monetary scarcity. Third, a stock-flow consistent model and dynamic simulations demonstrate that, in the absence of sufficient public-sector monetary injections, the monetary gap expands cumulatively, whereas appropriate fiscal recycling of purchasing power stabilises the system. The paper concludes that the recurrent need for monetary accommodation is not a market imperfection but an endogenous property of debt-based monetary production, offering a unified theoretical explanation for a wide range of historical and contemporary monetary phenomena JEL codes: N1, E4, E5, B5, C6 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:wrk:warwec:1623 |
| By: | Michael Cauvel; Y.K. Kim |
| Abstract: | We examine the potential linkages between two empirically-observed patterns in aggregate macroeconomic data. The cyclical relationship between economic activity and the labor share—referred to as the Goodwin pattern—has been well documented by a number of papers in the literature (Barrales-Ruiz et al., 2021). On the other hand, some recent studies have uncovered evidence of a cyclical relationship between economic activity and household credit, suggesting that household debt is a critical driver of macroeconomic cycles (Mian et al., 2017). We study these two cyclical processes in combination with one another. We illustrate the empirical plausibility of a pseudo- Goodwin cycle in which fluctuations in household indebtedness create the appearance of a Goodwin cycle, even in the absence of any causal effects between demand and distribution. Therefore, we argue that it is necessary to consider debt, demand, and distribution as essential elements in an interrelated system. Our analysis of such a three-dimensional system using both U.S. data and a panel of 30 advanced economies suggests that debt is a more important driver of economic activity over the business cycle than income distribution. |
| Keywords: | Goodwin cycle, household debt, income distribution, business cycles |
| JEL: | E12 E25 E32 |
| Date: | 2026–07 |
| URL: | https://d.repec.org/n?u=RePEc:pke:wpaper:pkwp2617 |
| By: | Amir Rashid |
| Abstract: | Green growth through circular economy is the dominant institutional response to ecological breakdown. Yet its insufficiency is structural: material flow arithmetic prevents loop closing at scale in a growing economy, thermodynamic constraints make completely closed loops physically infeasible, and circular material flows account for only 1.4% of global GDP while CE-principled service activities generate around two thirds of GDP without arresting ecological overshoot. The binding constraint lies not in production organisation but in the monetary architecture that structurally compels throughput expansion regardless of how production is organised. Six independent scholarly traditions, from ecological economics and post-Keynesian monetary theory to the historical critique of usury, have converged on interest as the central structural problem in any economy that does not require perpetual growth. Yet no existing proposal has specified a technically coherent mechanism to replace the monetary control function that interest currently performs, a gap unfilled across nine decades of sovereign money proposals. This article introduces the Principal Return Rate (PRR) as that mechanism. The PRR replaces interest not as a cost of credit but as a rate of return instrument: sovereign money, anchored to productive demand, is returned to central bank reserves at rates determined by the PRR. Inflation is controlled through central bank PRR adjustment, analogous to interest rate policy but acting on return velocity rather than borrowing cost, without the cost-push channel that interest itself generates. The PRR system closes the functional design gap open for nine decades. The article also introduces the hypothesis that positive time preference is partially endogenous to the interest-bearing system, generated by the inflation interest produces, making its conventional justification partially circular. |
| Date: | 2026–07 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2607.03214 |
| By: | Mazzocchetti, Andrea; Monasterolo, Irene; Vismara, Andrea |
| Abstract: | We analyse how banks’ climate sentiments affect credit risk adjustments and lending conditions for high- and low- carbon investments and the implications for firms’ investments and the decarbonization of the economy. We model climate sentiments as banks forming expectations about firms’ performance in the low-carbon transition scenarios of the Network for Greening the Financial System, based on firms’ energy technology alignment and on perceived policy credibility. We distinguish between high climate sentiments, i.e. banks’ strong confidence in the success of climate policies and the future performance of low-carbon firms, and low sentiments. To anaylse these dynamics we tailor and extend EIRIN, a macro-financial Stock-Flow Consistent model of an open economy, and widely used by financial supervisors. EIRIN is populated by a limited number of heterogeneous agents and sectors, with the real and financial side of the economy treated in an integrated way. Calibrating EIRIN on the Austrian economy, we find that high banks’ climate sentiments can reinforce the impact of climate policies, resulting in a 4.5% reduction in the GHG emissions to GDP ratio and in a 0.6% increase in GDP growth, compared to the Net Zero scenario without climate sentiments. Conversely, low climate sentiments can counteract climate policy impacts, leading to an 8.5% increase in GHG emissions to GDP ratio. Furthermore, credit constraints on low-carbon investments can further hinder the low-carbon transition, increasing the GHG emissions to GDP ratio by 15%. Our findings highlight the importance for policy makers to deliver clear and credible messages about the low-carbon transition to the banking sector, in order to align expectations and investment decisions. |
| Keywords: | Banks; Climate finance; Climate policy |
| JEL: | B59 C69 G20 Q50 |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:20520 |
| By: | Vorchik, Andrey |
| Abstract: | This article is devoted to the phenomenon of intrinsic motivation, to understand which two models are proposed. We study how positive/negative intrinsic motivation to work (experienced utility) affects worker's individual labour supply (model I) and the amount of effort they exert (model II). In model I, we use intrinsic motivation to explain the positive/negative slope and possible bending of the individual labor supply curve. Both models I and II show that positive intrinsic motivation to work (job satisfaction) removes the tradeoff between worker's happiness and efficiency. Thus, from an evolutionary point of view, the very possibility of being intrinsically motivated for any kind of activity can be considered as an adaptation that gives its owner an evolutionary advantage. Provided that probabilities of achieving internal and external goals of the person are positively correlated, higher intrinsic motivation is also contributing to the achievement of the external goal of survival in the environment. However, as follows from model II, in order to persist in the long term, intrinsic motivation must not only be positive, but also high enough so that it is not crwoded out by extrinsic motivation in the course of cultural selection. The paper explains the mechanisms behind crowding out and the reverse process of crowding in, as well as describes methods of regulating these processes. The negative effects of crowding out on the efficiency labour markets and the economy as a whole are discussed, as well as practical implications for the education system. |
| Keywords: | rationalization theory by Max Weber, extrinsic and intrinsic motivation, experienced utility theory by Daniel Kahneman, Bernoulli utility function, emotions, cultural selection, self-fulfilling prophecy |
| JEL: | B52 D03 D61 J20 M52 |
| Date: | 2026–03–26 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:128463 |
| By: | Mazzocchetti, Andrea; Monasterolo, Irene; Dunz, Nepo; Hrast Essenfelder, Arthur |
| Abstract: | Acute physical risks are becoming more frequent and severe, with future scenarios projecting further intensification. Such events can cause significant and potentially persistent economic losses, and can strain public finances due to increasing disaster response and recovery costs. However, so far, macroeconomic models have struggled to capture the impacts of climate physical risks in the economy and public finance in a consistent way. In particular, key shock transmission channels and extreme weather events are often neglected, leading to a partial assessment of disaster losses and of the recovery needs. This information, in turn, is crucial to assess the climate insurance protection gap and to design adequate and financially sound public policy response. To address this gap, we tailor and extend EIRIN, a Stock-Flow Consistent macrofinancial model of an open economy, calibrated at the country level. EIRIN is composed of a limited number of heterogeneous agents and sectors of the real economy, financial sector and market, with the real and financial side of the economy treated in an integrated way. Agents are represented as a network of interconnected balance sheet items calibrated on real data, and are characterised by bounded rationality. This approach enables us to analyse the conditions for economic disruptions to emerge and become persistent, considering climate tail risk scenario, and the role of fiscal and credit constraints as amplification mechanisms. We calibrate EIRIN on Italy, a country that is highly exposed to natural disasters, has significant fiscal vulnerabilities and high public debt. We find that extreme weather events leading to 15% of firms' capital stock loss, coupled with subsequent financial constraints on lending, can trigger large and persistent adverse effects on GDP growth and public debt levels. Negative shocks are amplified in absence of country's adaptation strategies and tailored financial policies. |
| JEL: | B59 E12 Q54 |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:20359 |