nep-pke New Economics Papers
on Post Keynesian Economics
Issue of 2005‒06‒05
six papers chosen by
Karl Petrick
Leeds Metropolitan University

  1. Evolutionary Theory and Economic Policy with Reference to Sustainability By John M. Gowdy
  2. Cumulative Causation and Evolutionary Micro-Founded Technical Change : A Growth Model with Integrated Economies By Patrick Llerena; André Lorentz
  3. The Implosion of the Brussels Economic Consensus. By George Irvin
  4. Network Capital and Social Trust: Pre-Conditions for ‘Good’ Diversity? By Sandra Wallman
  5. On Growth and Development. By Enrico Colombatto
  6. Environmental Innovations: Institutional Impacts on Co-operations for Sustainable Development By Helmut Karl; Antje Möller; Ximena Matus; Edgar Grande; Robert Kaiser

  1. By: John M. Gowdy (Department of Economics, Rensselaer Polytechnic Institute, Troy NY 12180-3590, USA)
    Abstract: The policy recommendations of most economists are driven by a view of economic reality embodied in Walrasian general equilibrium theory. Ironically, the Walrasian system has been all but abandoned by leading economic theorists. It has been demonstrated to be theoretically untenable, its basic assumptions about human decision making have been empirically falsified, and it consistently makes poor predictions of economic behavior. The current revolution in welfare economics offers opportunities on two related fronts for an evolutionary perspective on human behavior to reshape economic theory and policy. The first opportunity is to incorporate empirically-based information about human behavior to the study of human wants and their formation. This includes information about the evolution of the genetic component of decision making as well as the cultural dimensions of behavior. Expanding the role of economic analysis beyond stylized market behavior to focus on well-being (real utility) has far-reaching consequences for microeconomic policy. Secondly, abandoning the Walrasian model also means rethinking the microfoundations approach to the economic analysis of sustainability. This opens the door for economists to engage with the growing body of research on the evolution of whole societies. One link between the evolution of human behavior and the evolution of human societies is the psychological phenomenon of considering sunk costs. Understanding and overcoming the sunk cost fallacy may be the key to creating a sustainable society.
    Date: 2005–05
  2. By: Patrick Llerena; André Lorentz
    Abstract: We propose to develop in this paper an alternative approach to the New Growth Theory to analyse growth rate divergence among integrated economies. The model presented here considers economic growth as a disequilibrium process. It introduces in a cumulative causation framework, micro-founded process of technical change taking into account elements rooted in evolutionary and Neo-Austrian literature. We then attempt to open the ‘Kaldor-Verdoorn law black-box’ using a micro-level modelling of industrial dynamics. We use this framework to study the nature and sources of growth rate divergence, focusing on the effect of some macro-economic parameters (income elasticities) and of some technological parameters (technological opportunities and absorptive capacities). If the results remain broadly in Kaldorian lines, this framework allows for more subtle considerations of growth rate divergence.
    Date: 2004
  3. By: George Irvin
    Abstract: Underlying the current political crisis of EU is a decade of cumulative malaise produced by low growth, high unemployment and welfare cuts. The poor economic record of the core Eurozone states is attributable neither to supply-side sclerosis nor top-heavy welfare, but rather to the ECB’s obsession with inflation and the fiscal strait-jacket imposed by the Stability and Growth Pact (SGP), referred to here as ‘Brussels Consensus’ economics. The paper critically examines the SGP rules, argues that the 2005 SGP compromise reached at Luxembourg has not addressed the fundamental problem of Europe’s asymmetric economic institutions, and proposes radical remedies.
    Keywords: Eurozone growth; unemployment; Maastricht; EIB; SGP rules; EU fiscal and monetary policy; neo-liberal Brussels consensus.
    Date: 2005–05
  4. By: Sandra Wallman (University College London)
    Abstract: This paper unpicks the assumption that because social networks underpin social capital, they directly create it – more of one inevitably making more of the other. If it were that simple, the sheer quantity of networks criss-crossing a defined urban space would be a proxy measure for the local stock of social capital. Of course the interrelationships are more complex. Two kinds of complication stand out. The first is specific: networks have both quantitative and qualitative dimensions, but the two elements have no necessary bearing on each other. The shape and extent of a network says nothing about the content of the links between its nodes. Certainly the line we draw between any two of them indicates contact and potential connection, but what kind of contact, how often, how trusting, in what circumstances, to what end…? Reliable answers to these questions need more than surface maps or bird’s eye accounts of who goes where, who speaks to whom. The second complication is a general, not to say universal, difficulty. We are stuck with the fact that sociological concepts - networks, social capital and trust included - are ‘only’ abstractions. They are ways of thinking about the apparent chaos of people behaving all over the place – here, to make it worse, in multi-cultural urban environments - but none of them is visible to be measured, weighed or quantified. This does not make the concepts ‘untrue’, and it should not stop them being useful. My hope is that we can find a nuanced perspective which will at least make the complications intelligible. At best, a multi-layered model will account for diversity in the nature of trust; and for variations in the way social capital is hoarded or distributed within and across ethnic boundaries. It would be contribution enough if we were able to specify the conditions which cause social capital, as Puttnam formulates it, to be exclusionary or inclusionary in its effect.
    Keywords: Network capital, Social trust, ‘Good’ diversity
    Date: 2005–05
  5. By: Enrico Colombatto
    Abstract: Contrary to the mainstream view, the paper offers a subjectivist approach to growth and an institutional view of development. In particular, the term development regards the prevailing rules of the game and their effects on the key variables for economic activity to take off: property rights and entrepreneurship. And growth is deemed to be the result of favourable institutional environments where chances are exploited and individuals succeed in improving their living conditions. From a methodological standpoint it is then argued that the common attempts to measure growth provide at best crude evaluations of the efforts to acquire purchasing power, but hardly measure well-being. From a normative perspective, the role of growth-enhancing government intervention is thus questioned. Doubts are also raised with respect to the recent and increasing literature on institutional design, which seems to ignore much of the lessons taught by the institutional schools - both old and new. And which tends to describe the past, rather than providing explanations that might help us understand the future.
    Date: 2005–04
  6. By: Helmut Karl (Ruhr-University Bochum); Antje Möller (Ruhr-University Bochum); Ximena Matus (Ruhr-University Bochum); Edgar Grande (Technical University of Munich); Robert Kaiser (Technical University of Munich)
    Abstract: A suitable strategy for achieving sustainable development is to foster environmental innovations. Environmental innovations, however, suffer from so-called "double externalities", because apart from innovation spillovers they also improve the quality of public environmental goods, which can be used without cost by free riders. Those innovation spillovers can be avoided through co-operation. Furthermore co-operations can be considered as advantageous because environmental innovations often depend on interaction in research and development, production, selling and disposal. This paper analyzes as to what extent institutional factors impact co-operative arrangements of innovative organizations in the development of new environmental technologies. It applies a multi-dimensional institutional analysis focusing not only on institutional arrangements which exist among organizations but also on opportunities and constraints provided by the institutional environment in which these organizations are embedded. Expanding the existing research we will conclude what kind of policy measure may support the success within networks of environmental oriented innovators.
    Keywords: Environmental innovation, Co-operation, Sustainability, Institutional analysis, Policy measures
    JEL: L14 O31 Q55 Q58
    Date: 2005–04

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