|
on Post Keynesian Economics |
| By: | Korkut Erturk (University of Utah) |
| Abstract: | Despite his emphasis on the speculative character of investment decisions, Minsky paid little attention to asset price speculation per se, ignoring asset price bubbles and their macroeconomic effects. That is perhaps because his views were formed during the era of financial regulation, when speculation “could do no harm as bubbles on a steady stream of enterprise.” Clearly, times have since changed. Keynes’s old warning that the situation “… is serious when enterprise becomes the bubble on a whirlpool of speculation” has begun to ring true again. To deepen our understanding of financial fragility under present-day conditions, the paper builds on Keynes’s insights in his General Theory on the stock exchange by going back to his Treatise, where asset price expectations and speculation play an integral part in his analysis of the business cycle. More specifically, it develops the macroeconomic implications of some of his arguments that have mainly been eclipsed by his GT. These can be summarized in three related propositions: (1) asset price expectations systematically exhibit self-sustained biases in one direction or another over the business cycle; (2) once an asset price bubble emerges no automatic mechanism exists to check the deviation of prices from their true values; and, (3) mean reversion in asset prices over time plays itself out through a rise in inactive money balances in the banking system, which Keynes called the bear position, as more and more people begin to think that asset prices have reached levels that are unreasonable. This early picture of how financial variables interact with output determination over the business cycle is contrasted with Keynes’s better known analysis in the GT, which, it is argued, does not lend itself as readily to analyzing asset price misalignments. |
| Keywords: | asset prices, speculation, business cycle, keynesian theory |
| JEL: | E |
| Date: | 2005–06–16 |
| URL: | http://d.repec.org/n?u=RePEc:wpa:wuwpma:0506010&r=pke |
| By: | Neva Goodwin and Julie A. Nelson |
| Abstract: | It can be difficult to incorporate ecological and feminist concerns into introductory courses based on neoclassical analysis. We have faced these issues head-on as we have worked on writing introductory economics textbooks, Microeconomics in Context (Goodwin, Nelson, Ackerman and Weisskopf, 2005) and Macroeconomics in Context (in progress). In this essay, we will describe how we have modified the introductory curriculum to encompass these perspectives. |
| URL: | http://d.repec.org/n?u=RePEc:dae:daepap:05-05&r=pke |
| By: | M. Keith Chen (School of Management, Yale University); Venkat Lakshminarayanan; Laurie Santos |
| Abstract: | Behavioral economics has demonstrated systematic decision-making biases in both lab and field data. But are these biases learned or innate? We investigate this question using experiments on a novel set of subjects — capuchin monkeys. By introducing a fiat currency and trade to a capuchin colony, we are able to recover their preferences over a wide range of goods and risky choices. We show that standard price theory does a remarkably good job of describing capuchin purchasing behavior; capuchin monkeys react rationally to both price and wealth shocks. However, when capuchins are faced with more complex choices including risky gambles, they display many of the hallmark biases of human behavior, including reference-dependent choices and loss-aversion. Given that capuchins demonstrate little to no social learning and lack experience with abstract gambles, these results suggest that certain biases such as loss-aversion are an innate function of how our brains code experiences, rather than learned behavior or the result of misapplied heuristics. |
| Keywords: | Prospect theory, Loss aversion, Reference dependence, Evolution, Neuroeconomics, Capuchin monkeys, Monkey business |
| JEL: | C91 C99 D12 D46 D80 D81 |
| Date: | 2005–06 |
| URL: | http://d.repec.org/n?u=RePEc:cwl:cwldpp:1524&r=pke |
| By: | Avner Ben-Ner; Brian McCall; Massoud Stephane; Hua Wang |
| Abstract: | The asumption that behavior is independent of the identity of those who participate in an economic interaction is fundamental to economists’ understanding of how markets operate, how firms work internally, how nations trade with each other, and much else. In this paper, we show that the distinction between Self and Other, ‘us’ and ‘them,’ or in-group and out-group, affects significantly economic and social behavior. In a series of experiments with approximately 200 Midwestern students as our subjects, we found that they favor those who are similar to them on any of a wide range of categories of identity over those who are not like them. Whereas family and kinship are the most powerful source of identity in our sample, all 13 potential sources of identity in our experiments affect behavior. We explored individuals’ willingness to give money to imaginary people, using a dictator game setup with hypothetical money. Our experiments with hypothetical money generate essentially identical data to our experiments with actual money. We also investigated individuals’ willingness to share an office with, commute with, and work on a critical project critical to their advancement with individuals who are similar to themselves (Self) along a particular identity dimension than with individuals who are dissimilar (Other). In addition to family, our data point to other important sources of identity such as political views, religion, sports-team loyalty, and music preferences, followed by television-viewing habits, dress type preferences, birth order, body type, socio-economic status and gender, albeit statistically significant, sources of differentiation between Self and Other. The importance of the source of identity varies with the type of behavior under consideration. |
| URL: | http://d.repec.org/n?u=RePEc:hrr:papers:0805&r=pke |
| By: | Niki Papadopoulou |
| Abstract: | This paper investigates the micro mechanisms by which monetary policy affects and is transmitted through the U.S economy, by developing a unified, dynamic, stochastic, general equilibrium model that nests two classes of models. The first sticky prices and the second limited participation. Limited participation is incorporated by assuming that households’ are faced with quadratic portfolio adjustment costs. Monetary policy is characterized by a generalized Taylor rule with interest rate smoothing. The model is calibrated and investigates whether the unified model performs better in replicating empirical stylized facts, than the models that have only sticky price or limited participation. The unified model replicates the second moments of the data better than the other two types of models. It also improves on the ability of the sticky price model to deliver the hump-shaped response of output and inflation. Moreover, it also delivers on the ability of the limited participation model to replicate the fall in profits and wages, after a contractionary monetary policy. |
| JEL: | E31 E32 E44 E52 |
| URL: | http://d.repec.org/n?u=RePEc:gla:glaewp:2004_3&r=pke |