nep-pke New Economics Papers
on Post Keynesian Economics
Issue of 2005‒11‒12
eleven papers chosen by
Karl Petrick
Leeds Metropolitan University

  1. "A Simplified Stock-Flow Consistent Post-Keynesian Growth Model" By Claudio H. Dos Santos; Gennaro Zezza
  2. "Macroeconomics of Speculation" By Korkut A. ErtŸrk
  3. "The Case for an Environmentally Sustainable Jobs Program" By Mathew Forstater
  4. "Manufacturing a Crisis: the Neocon Attack on Social Security" By L. Randall Wray
  5. "Imbalances Looking for a Policy" By Wynne Godley
  6. "Some Unpleasant American Arithmetic" By Wynne Godley
  7. "Social Security's 70th Anniversary: Surviving 20 Years of Reform" By L. Randall Wray
  8. "The United States and Her Creditors: Can the Symbiosis Last?" By Wynne Godley; Dimitri B. Papadimitriou; Claudio H. Dos Santos; Gennaro Zezza
  9. "Refocusing the ECB on Output Stabilization and Growth through Inflation Targeting?" By Joerg Bibow
  10. Bridging Structure and Agency: Processes of Institutional Change By Dolfsma, W.; Verburg, R.
  11. Discussion of 'BEHAVIORAL ECONOMICS' By Ariel Rubinstein

  1. By: Claudio H. Dos Santos; Gennaro Zezza
    Abstract: Despite being arguably the most rigorous form of structuralist/post-Keynesian macroeconomics, stock-flow consistent models are quite often complex and difficult to deal with. This paper presents a model that, despite retaining the methodological advantages of the stock-flow consistent method, is intuitive enough to be taught at an undergraduate level. Moreover, the model can easily be made more complex to shed light on a wealth of specific issues.
    Date: 2005–04
  2. By: Korkut A. ErtŸrk
    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 Òcould do no harm as bubbles on a steady stream of enterprise.Ó Clearly, times have since changed. KeynesÕs old warning that the situation ÒÉ is serious when enterprise becomes the bubble on a whirlpool of speculationÓ has begun to ring true again. To deepen our understanding of financial fragility under present-day conditions, the paper builds on KeynesÕs 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 KeynesÕs better known analysis in the GT, which, it is argued, does not lend itself as readily to analyzing asset price misalignments.
    Date: 2005–06
  3. By: Mathew Forstater
    Abstract: The job numbers in the United States and around the globe continue to look bleak. Not only are the absolute numbers dismal, but also job growth has dragged on with no hope for a substantial change in prospects. This situation supports the view that we are facing a long-term problem that requires critical and creative problem-solving responses. Since unemployment is the major cause of poverty, many of our most pressing social problems are directly or indirectly related to joblessness. I argue that not only the quantity but also the quality of jobs is at issue.
    Date: 2005–01
  4. By: L. Randall Wray
    Abstract: For seven decades, the far right has never veered from its avowed mission to gut AmericaÕs most comprehensive, successful, and popular safety net: Social Security.While it had won a few small battles (most notably, the Greenspan CommissionÕs huge 1983 payroll tax hikes and two-year increase in the normal retirement age), its efforts never gained much political traction before 2000. Ironically, the Clinton administration provided some much-needed support to the conservative think tanksÕ preposterous claim that Social Security faces financial Armageddon. And candidate Al GoreÕs only significant campaign issue involved maintaining "lockboxes" to protect the trust fund by dedicating a portion of projected 15-year budget surpluses to the program.
    Date: 2005–02
  5. By: Wynne Godley
    Abstract: The latest batch of numbers from the United States makes for a disturbing read. The growth rate of GDP has been adequate, but the current account deficit was 6.3 percent of GDP in the fourth quarter of 2004, and the terrible trade figures for January and February promise an even bigger deficit in the first quarter of 2005 (BEA 2005). Let no one suppose that this deterioration is a temporary effect that will automatically turn around soon.
    Date: 2005–04
  6. By: Wynne Godley
    Abstract: Is it sufficiently realized how intractable those U.S. imbalances -- and how dangerous their potential consequences at home and abroadÑhave now become?
    Date: 2005–06
  7. By: L. Randall Wray
    Abstract: Social Security turned 70 on August 14, although no national celebration marked the occasion. Rather, our top policymakers in Washington continue to suggest that the system is "unsustainable." While our nation's most successful social program, and among its longest lived, has allowed generations of Americans to live with dignity in retirement, many think it is time to retire Social Security itself. They claim it is necessary to shift more responsibility to individuals and to scale back the promises made to the coming waves of retiring baby boomers.
    Date: 2005–09
  8. By: Wynne Godley; Dimitri B. Papadimitriou; Claudio H. Dos Santos; Gennaro Zezza
    Abstract: The main arguments in this paper can be simply stated: 1) If output in the US grows fast enough to keep unemployment constant between now and 2010 and if there is no further depreciation in the dollar, the deficit in the balance of trade is likely to get worse, perhaps reaching 7.5 per cent by the end of the decade. 2) If the trade deficit does not improve, let alone if it gets worse, there will be a large further deterioration in the US's net foreign asset position so that, with interest rates rising, net income payments from abroad will at last turn negative and the deficit in the current account as a whole could reach at least 8.5 per cent of GDP. . . .
    Date: 2005–09
  9. By: Joerg Bibow
    Abstract: Challenging the conventional wisdom that structural problems are to blame for the euro areaÕs protracted domestic demand stagnation, this paper sets out to shed some fresh light on the role of the ECB in the ongoing EMU crisis. Contrary to the widely held interpretation of the ECB as an inflation targeterÑand a rather soft one, too -- it is argued that the key characteristic of the ECB is the pronounced asymmetry in its policy approach and mindset. Curiously, this asymmetry has not only given rise to an antigrowth bias, but to upward price pressures and distortions as well. There is a link between stagnation and inflation persistence that owes to the ECBÕs failure to internalize the euro areaÕs fiscal regime. This raises the question as to whether inflation targeting would have led to better results, or could do so in future.
    Date: 2005–07
  10. By: Dolfsma, W.; Verburg, R. (Erasmus Research Institute of Management (ERIM), RSM Erasmus University)
    Abstract: The tension between (social) order and change, or, alternatively formulated, between structure and agency, has a long history in the social sciences (e.g. Verburg 1991). The discussion has substantial philosophical overtones. In this article we recount the history of the discussion. We both acknowledge the more recent admonition that the agent may have been given short shrift in previous eras (Davis 2003), but at the same time argue that one should not negate the reality of social structure or institutions (Hodgson 1999, 2004). In this article we argue, however, that these recent contributions, from the fields of economics, sociology, political science and management, do not provide a much needed account of how the tension between structure and agency may be resolved conceptually. Accounts seem to emphasize either structure or agency, and fail to capture their interrelationships. We submit that that the process of institutionalization does resolve the tension conceptually, focusing on the role of the agent in reproducing institutional setting, but also in instigating institutional change. We provide a theoretical account of the conditions under which institutions change, and the likely direction of such change. In doing so we emphasize the relation between socio-cultural values subscribed to in a society or community and institutional settings and practices (Dolfsma 2004). As institutions should be conceptualized to have both structural as well as ?cultural? aspects (Neale 1987), in many but not all cases irrevocably related, agents can re-interpret or re-define a given institutional structure in the light of a differing perspective, giving rise to tensions felt and possilbly setting in motion a process of institutional change.
    Keywords: Structure;Agency;Institutions;Institutional change;Process;Tensions;
    Date: 2005–11–01
  11. By: Ariel Rubinstein
    Date: 2005–11–04

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