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on Heterodox Microeconomics |
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Issue of 2026–03–02
fourteen 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: | Inspired by feminist macroeconomics, this paper shows how a Marx-Keynes-Schumpeter (MKS) macrodynamic system can be augmented by simple models of the care economy. To this end, an MKS model of steady-state growth and distribution is extended to include: first, a model of unpaid domestic care-giving within the household; and second, a model of household acquisition of marketed care services. It is shown that the care economy affects basic macroeconomic outcomes, such as labour productivity, aggregate demand formation, and the steady-state growth rate. The chief conclusion is that the care economy should be the subject of more routine attention in macroeconomic theory. |
| Keywords: | Care economy, human capacities, wage-led growth, profit-led growth, natural rate of growth |
| JEL: | B54 E11 E12 J16 J24 O33 O41 |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:new:wpaper:2603 |
| By: | Paolo Pellizzari (Ca’ Foscari University of Venice); Francesca Parpinel (Ca’ Foscari University of Venice) |
| Abstract: | We describe an Agent-Based Model of a Ponzi scheme following the Madoff's case. Agents have an initial propensity to invest in the scam, as the wealth is perceived to grow, whereas it is not invested in any way, and is dissipated by the fraudster. We emphasize that the widening gap between the perceived wealth and the true total money in the hands of the impostor is the key feature of such schemes. If trust evaporates due to the absorption of bad news on the economy, the propensity gradually reverses and an increasing number of agents withdraw their capital (and made up profits). We examine the time needed to reveal the scam and reach a bankruptcy, as a function of the amount of news that hits the market. We also investigate how a special agent named Markopolos (inspired to a real personage) affects the time to bankruptcy, due to his ability to abruptly "convince" to dis-invest the agents he run across. The Markopolos effect appears to be statistically significant, but is quite weak with respect to the outcome generated by a flow of news and the ensuing widespread loss of trust and redemptions. |
| Keywords: | Agent-Based Model, Ponzi Schemes, NetLogo |
| JEL: | C63 K42 G11 D83 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ven:wpaper:2026:04 |
| By: | Dan Adler |
| Abstract: | Complex change is often described as "evolutionary" in economics, policy, and technology, yet most system dynamics models remain constrained to fixed state spaces and equilibrium-seeking behavior. This paper argues that evolutionary dynamics should be treated as a core system-thinking problem rather than as a biological metaphor. We introduce Stability-Driven Assembly (SDA) as a minimal, non-equilibrium framework in which stochastic interactions combined with differential persistence generate endogenous selection without genes, replication, or predefined fitness functions. In SDA, longer-lived patterns accumulate in the population, biasing future interactions and creating feedback between population composition and system dynamics. This feedback yields fitness-proportional sampling as an emergent property, realizing a natural genetic algorithm driven solely by stability. Using SDA, we demonstrate why equilibrium-constrained models, even when simulated numerically, cannot exhibit open-ended evolution: evolutionary systems require population-dependent, non-stationary dynamics in which structure and dynamics co-evolve. We conclude by discussing implications for system dynamics, economics, and policy modeling, and outline how agent-based and AI-enabled approaches may support evolutionary models capable of sustained novelty and structural emergence. |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2602.15957 |
| By: | Kitamura, Kazuhito |
| Abstract: | This paper deepens the "Equilibrium Theory Endogenizing Imbalances" based on asset dynamics, as presented in the previous study (Kitamura, 2025), by incorporating concepts from thermodynamics and statistical mechanics. The objective is to bridge to a qualitative theory of development, encompassing issues such as the sustainability of economic growth and the creation of innovation. While the previous work proposed a model where imbalances are perpetuated through asset preference and capital diffusion, this study extends the framework into a model where "effective asset potential"—defined as the asset level divided by the rate of return on assets—acts as the driving force behind capital flows. It demonstrates a mechanism in which the capital efficiency of each nation significantly determines its economic trajectory. Consequently, this paper reveals that individual economies exist under a tension between "subjective equilibrium" aimed at utility maximization, and the "pressure of entropy increase" inherent in asset dynamics. Through observations using multilateral data, the global economy has polarized into "self-organizing economies" that concentrate and accumulate capital, and "diffusive economies" that primarily disperse and dissipate capital. This paper presents a novel perspective that views the global economy as a "dissipative structure" maintained through the interdependence of these distinct phases. Based on this analysis, the paper argues that for an economic system to remain sustainable, it is essential to maintain the gradient of asset potential within the system properly by eliminating "stagnation" through innovation and redistribution policies. Ultimately, this paper proposes that what economics terms "equilibrium" is equivalent to "thermal death" in physics; therefore, the goal of economics should be the avoidance rather than the realization of such a state, making the perspective of "entropy management". |
| Keywords: | Asset Dynamics; Economic Entropy; Effective Asset Potential; Coefficient of Capital Satiation; Dissipative Structure |
| JEL: | A10 C50 E00 F00 O10 R10 |
| Date: | 2026–02–01 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:127971 |
| By: | boughabi, houssam |
| Abstract: | This paper investigates the interplay between distributive conflict, wage dynamics, and persistent unemployment within a Kaleckian framework, emphasizing the long-memory properties of wages. We develop a stochastic model in which wages adjust adaptively to cumulative historical discrepancies between prices and wages, reflecting backward-looking expectations, institutional rigidities, and distributive conflict. Applying this framework to Germany over the period 1990–2024, we provide empirical evidence that persistent price–wage divergences generate long-lasting effects on real wages and aggregate demand. Within a Kaleckian perspective in which investment and employment are demand-driven, these wage dynamics contribute to the persistence of unemployment by weakening consumption and effective demand over time. Our findings highlight that long-memory wage adjustment amplifies the macroeconomic consequences of distributive conflict and inflation, underscoring the importance of historical wage inertia in shaping employment outcomes. The results offer new insights into the structural origins of persistent unemployment in advanced economies. |
| Keywords: | Kaleckian economics, wage–price dynamics, long-memory, distributive conflict, persistent unemployment |
| JEL: | C22 E12 E24 E32 J30 |
| Date: | 2026–01–17 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:127752 |
| By: | boughabi, houssam |
| Abstract: | This paper develops and empirically evaluates a Kaleckian model of distributive conflict in which mark-up pricing generates a divergence between wages and prices, eroding workers’ real purchasing power and inducing debt-financed consumption. In contrast to neoclassical frameworks, prices are administratively set by firms under imperfect competition, while workers adjust to distributive losses through borrowing and the accumulation of bank deposits. The model for- malizes workers’ consumption behavior as a real, dynamic process, highlighting a martingale-like condition in which households smooth real consumption over time despite inflationary pressures arising from rising mark-ups. Using household-level panel data, the paper tests this martingale property by estimating a fixed-effects regression of real consumption on its lagged value and lagged financial resources. The results provide evidence that real consumption exhibits strong persistence, consistent with consumption smoothing, while debt plays a compensatory role in sustaining demand under declining wage shares, the analysis also shows that this mechanism is inherently unstable, as rising indebtedness eventu- ally leads to deleveraging, contraction in effective demand, and downward pressure on prices. The findings contribute to the Post-Keynesian literature by linking distributive conflict, household debt, offering new empirical insights into the dynamics of consumption and macroeconomic instability. |
| Keywords: | Kaleckian pricing; Distributive conflict; Debt-financed consumption; Consumption smoothing; Financial fragility. |
| JEL: | D33 E12 E25 E31 E44 |
| Date: | 2026–02–06 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:127985 |
| By: | Galanis, Giorgos; Ricchiuti, Giorgio; Tippet, Ben |
| Abstract: | Responses to climate change differ between countries yet the impact of these differences on the evolution of global climate action has not been analysed to date. This paper addresses two related questions: (i) what is the role of the variation of preferences in the global political economy of climate action; and (ii) what are the necessary conditions for sustained high levels of global action? The authors develop a model to assess countries’ choices at different times to either take action to reduce emissions or not. They find that countries’ choices are influenced by their current level of emissions, total participation in climate action, and other idiosyncratic factors. The heterogeneity between countries is caused by income inequality, differing vulnerability to climate damage, and other political economy factors. The model’s key result is that sustained high levels of global action are achieved only if there is a low degree of heterogeneity in countries’ preferences for action and a strong peer pressure effect to act. |
| Keywords: | climate action; heterogeneous agents; evolutionary dynamics; integrated assessment; global action; political economy |
| JEL: | C62 F50 Q54 Q58 |
| Date: | 2025–12–11 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:137104 |
| By: | Tom Youngman; Tim Lennox; M. Lopes Alves; Pirta Palola; Brendon Tankwa; Emma Bailey; Emilien Ravigne; Thijs Ter Horst; Benjamin Wagenvoort; Harry Lightfoot Brown; Jose Moran; Doyne Farmer |
| Abstract: | In June 2026, the UK government will set its carbon budget for the period 2038 to 2042, the seventh such carbon budget (CB7) since the Climate Change Act became law in 2008. For the first time, this carbon budget will be accompanied by a macroeconomic assessment of its impact on growth, employment, inflation and inequality. Researchers from the Institute of New Economic Thinking (INET) Oxford are working in partnership with the Department for Energy Security and Net Zero to deliver this assessment using our data-driven macroeconomic agent-based model (ABM). This extended abstract presents the work in progress towards this pioneering policymaking using our data-driven macroeconomic ABM. We are conducting our work in three work packages. By the time of the workshop, we hope to be able to present preliminary findings from the first two work packages. In WP1, we adapt an existing macro-ABM prototype and build a UK macroeconomic baseline. The main task for this is initialising the model with suitable UK household microdata. We present the options considered and the approach settled upon. In WP2, we conduct preliminary modelling that represents UK decarbonisation as an external shock to financial flows and technical coefficients. In order to present results in time to influence the June 2026 policy decision, this second work package exogenously forces the ABM to follow the CB7 green investment and associated technological change projections provided by the Climate Change Committee. Finally, we will implement more sophisticated social and technological learning packages in WP3, building our own projections of likely decarbonisation pathways that may diverge from UK government plans. For the workshop, we will present the progress of WP1 and WP2. |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2602.15607 |
| By: | Fabio Petri |
| Abstract: | This paper attempts a pedagogical explanation of what the debates in capital theory around Sraffa’s results are about, and why they have profound implications for the theory of income distribution. First it is pointed out that the classical or surplus approach does not suffer from the inconsistencies it was accused of. Then the difference is stressed between traditional neoclassical theory which attempted the determination of long-period general equilibria, and the neo-Walrasian versions. A simple model illustrates the need for a given endowment of value capital for the determination of long-period equilibria; the impossibility of specifying this endowment is pointed out; the abandonment of that treatment of capital in the neo-Walrasian versions is shown to render those versions incapable of indicating the behaviour of actual economies Jel Classification: B21 B51 D50 |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:usi:wpaper:939 |
| 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: | Investment has been low in the last decades (both by firms and by government). This does not only hold for fixed capital including R&D, but also for investment in climate, housing, infrastructure and education. Productivity has been low too and should be stimulated, as is elaborated in the Draghi report. A problem is that firms invest a considerable part of their savings in financial assets abroad. Moreover, assets held by banks and pension funds are mainly invested in mortgages and financial assets abroad. In this paper we analyse scenarios were banks, pension funds, and firms redirect part of their financial investments to investment in fixed capital and government investment. Next to demand effects this output growth is induced by productivity growth, in which productive government investment also plays a role. Finally, inflationary tendencies are controlled by wage and price policies. 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 trade balance surplus; (5) a Central Bank owning a large stock of Dutch government bonds; (6) a government with modest negative savings and a moderate debt; and (7) a centralised system of wage negotiations. In the paper we use an open economy post-Keynesian stock-flow consistent model with a welldeveloped 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. Finally, productivity growth is affected by both private and government investment in a variant of Verdoorn’s Law. 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 the positive effects of redirecting investment to stimulate the economy. We also find a rebound effect if these redirected investments are discontinued. |
| Keywords: | Financialisation, investment, stock-flow consistent modelling, productivity |
| JEL: | E12 E37 E44 E64 O16 O23 O40 |
| Date: | 2026–02–24 |
| URL: | https://d.repec.org/n?u=RePEc:unm:unumer:2026003 |
| By: | Perkins, Richard; Taeger, Matthias |
| Abstract: | Green finance has demonstrated remarkable resilience despite ongoing challenges. We address this puzzle by arguing that this resilience rests on a promissory legitimacy – credibility derived from future-oriented promises rather than present achievements. To advance this argument, we develop the concept of a promissory machine which produces green finance through the ordering logics of promises, themselves primarily directed at financial audiences. The machine further works to uphold the credibility of these promises through cycles of credibility work. A corollary is that green finance is constantly evolving, diversifying, and growing in complexity in ways that ultimately obscure the veracity of promissory claims. We contribute to debates on future temporalities by suggesting that the promises of green finance extend the present rather than creating possibilities for transforming it. |
| Keywords: | green finance; promissory legitimacy; machine; temporalities; greenwashing |
| JEL: | F3 G3 R14 J01 |
| Date: | 2025–02 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:137061 |
| By: | Robert Stehrer (The Vienna Institute for International Economic Studies, wiiw) |
| Abstract: | Global value chains (GVCs) are intricate international networks in which the production and distribution of goods and services across multiple economies and industries is coordinated. Their complexity introduces strategic dependencies when economies or industries rely heavily on a limited number of foreign suppliers. Such dependencies can also create additional vulnerabilities, particularly at choke points (i.e. key links or nodes in the chain) whose disruption – whether due to political instability and geopolitical tensions, natural disasters, pandemics or policy shocks and trade restrictions – can halt production. This study builds on previous research by examining two factors (i) size dependencies arising when an importing economy-industry pair relies largely on the inputs of a partner economies, and (ii) choke dependencies, where imports from one economy pass through another, creating potential choke points. Choke dependency is particularly concerning, as disruptions in the choke economy can impact not only its direct exports but also the flow of goods from other suppliers. Using the multi-country input-output tables (MC IOTs), this study introduces two indicators to assess dependencies (i) ‘size dependency’, based on the share of an economy-industry’s foreign output sourced from a specific partner, and (2) ‘choke dependency’, based on the pass-through frequency (ptf) indicator, which reveals how often inputs from third economies are routed through a particular partner. An economy-industry pair is considered dependent if it meets thresholds for size dependency, choke dependency or both. This comprehensive approach aims to offer a deeper understanding of systemic vulnerabilities in global trade networks. |
| Keywords: | Global value chains, choke points, dependencies, vulnerabilities, GVC metrics |
| JEL: | C67 F14 F15 |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:wii:rpaper:rr:480 |
| By: | Sackey, Lawrence; Nortah-Ocansey, Derick A.; Mensah, Daniel |
| Abstract: | Over the past decades, Islamic banking has emerged as a viable alternative to conventional banking, gaining recognition in both Muslim-majority and non-Muslim countries. continues to face persistent challenges including liquidity pressures, rising non-performing loans, fiscal instability and regulatory concerns that constrain credit expansion, weaken investor confidence and impede sectoral growth. These systemic weaknesses have prompted policymakers and financial institutions to consider Islamic finance as a complementary model to strengthen the country's financial architecture. This study therefore explores the potential adoption of Islamic banking in Ghana and identifies its opportunities, challenges and relevant policy considerations. A systematic literature review was undertaken using a content analysis approach. Out of seventy-five (75) initial publications, thirty (30) were selected based on methodological rigor and thematic relevance. Findings indicate that Islamic banking could enhance financial inclusion, provide alternative financing mechanisms, support economic growth, attract foreign direct investment, promote infrastructure development and contribute to a more diversified financial market. However, barriers such as limited public awareness, regulatory gaps, misconceptions about Islamic financial principles, competition from conventional banks and inadequate professional expertise may hinder its successful adoption. The study also recommends that, if implemented, Islamic banking should be strategically aligned with Ghana's macroeconomic and fiscal objectives. Specifically, it should be leveraged to finance large-scale infrastructure projects including roads, industrial facilities, agricultural ventures, housing and other capital-intensive initiatives, thereby complementing fiscal policy and supporting long term national development. |
| Keywords: | Islamic banking, Financial inclusion, Economic growth, Regulatory challenges, Sukuk, Alternative financing |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:gabwps:336971 |
| By: | Krafft, Caroline |
| Abstract: | Despite rising educational attainment, women's employment rates have declined in Egypt, falling to just 15% as of 2023. This chapter explores the determinants of declining female employment rates in Egypt. The research considers demand side factors, including potential discrimination and the changing structure of the economy, as well as supply side factors, such as gender norms, domestic responsibilities, and education mismatch. Analyses illustrate trends in women's employment and review the rich literature on drivers of women's employment in Egypt. A particular focus is how the policy environment shapes both supply and demand for women's labor. While women have become increasingly educated, restrictive gender norms and disproportionate care responsibilities limit what types of employment they can accept. Those types of jobs have become decreasingly available since structural reform curtailed public sector hiring. The private sector has not created sufficient "women-friendly" employment. Policy and programmatic interventions that try to increase women's employment will have to either create woman-friendly jobs or shift gender norms that restrict women's employment. |
| Keywords: | Employment, gender, Egypt |
| JEL: | J21 J22 J23 J16 B54 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:glodps:1719 |