nep-pke New Economics Papers
on Post Keynesian Economics
Issue of 2006‒04‒29
five papers chosen by
Karl Petrick
Leeds Metropolitan University

  1. Chapter 17 of Keynes' General Theory: The Mystery Unveiled By Franco Donzelli
  2. The Political Economy of Financial Fragility By Erik Feijen; Enrico Perotti
  3. Path Dependence and Regional Economic Evolution By Ron Martin; Peter Sunley
  4. "Markets, Democracy and Economic Justice in the Age of Postmodernism: Fictions, "Factions", or Frictions" By Haider A. Khan
  5. Cultural Diversity in People’s Attitudes and Perceptions By Diana Petkova

  1. By: Franco Donzelli (Universita' degli Studi di Milano)
    Abstract: In Chapter 17 of the General Theory (henceforth GT) Keynes tries to generalize the standard GT model, which can be found expounded in the preceding sixteen Chapters of his well-known book, by developing an "extended" model of portfolio choice and capital-asset pricing based on a newly devised notion of "own rate of interest". Yet Keynes' attempt can hardly be regarded as successful: in fact, soon after the publication of the GT, Keynes himself apparently gives up defending the peculiar traits of his "extended" model, while most early Keynesians show perplexity or even positive hostility towards the theoretical contents of Chapter 17 of the GT. In this paper we shall unveil the many mysteries still surrounding the conception, interpretation, meaning, and possible uses of the conceptual apparatus and theoretical system put forward by Keynes in Chapter 17 of his book. After clarifying Keynes' motivations and purposes in writing that Chapter, we shall compare its central analytical concept, the "own rate of interest", with a few concepts of "commodity" rates of interest that are explicitly cited, or implicitly hinted at, by Keynes as possible sources of inspiration for his theory: namely, we shall examine two alternative notions of real rate of interest, respectively called the "loan-in-kind" and the "payment-in-advance" rate of interest; then, after analyzing Sraffa's notion of "futures" rate of interest, we shall conclude our review of the relevant literature by discussing Fisher's notion of "expected" rate of interest. Finally, after formally restating Keynes' "extended" model, as informally expounded in Chapter 17 of the GT, we shall trace back the failure of Keynes' attempts at generalizing his theory in that Chapter to his poor value theory, which, being rooted in Marshall's partial equilibrium analysis, proves desperately inadequate to tackle the truly general equilibrium problem posed in Chapter 17.
    Keywords: Keynes, money, interest rates, asset pricing, general equilibrium and disequilibrium,
    Date: 2006–02–24
  2. By: Erik Feijen; Enrico Perotti
    Abstract: While financial liberalization has in general favorable effects, reforms in countries with poor regulation is often followed by financial crises. We explain this variation as the outcome of lobbying interests capturing the reform process. Even after liberalization, market investors must rely on enforcement of investor protection, which may be structured so as to block funding for new entrants, or limit their access to refinance after a shock. This forces inefficient default and exit by more leveraged entrepreneurs, protecting more established producers. As a result, lobbying may deliberately worsen financial fragility. After large external shocks, borrowers from the political elite in very corrupt countries may successfully lobby for weak enforcement, and retain control of collateral. We provide evidence that industry exit rates and profit margins after banking crises are higher in the most corrupt countries.
    Date: 2006–03
  3. By: Ron Martin; Peter Sunley
    Abstract: In recent years, economic geographers have seized on the concepts of ‘path dependence’ and ‘lock-in’ as key ingredients in constructing an evolutionary approach to their subject. However, they have tended in to invoke these notions without a proper examination of the ongoing discussion and debate devoted to them within evolutionary economics and elsewhere. Our aim in this paper, therefore, is, first, to highlight some of the unresolved issues surround these concepts, and, second, to explore their usefulness for understanding the regional economic evolution. We argue that in many important aspects, path dependence and lock-in are place-dependent processes, and as such require geographical explanation. At the same time, there has been little discussion of regional path creation: te assumption has been that new technological-economic paths emerge at random or spontaneously across space, an assumption that we find too simplistic. This leads on to the key question as to why some regional economies become locked into development paths that lose dynamism, whilst other regional economies seem able to avoid this danger and in effect are able ‘reinvent’ themselves through successive new paths or phases of development. We conclude that whilst path dependence is an important feature of the economic landscape, the concept requires further elaboration if it is to function as a core concept in an evolutionary economic geography.
    Keywords: path dependence, evolutionary economic geography, regional economic evolution, lock-in
    Date: 2006–03
  4. By: Haider A. Khan (GIGS, University of Denver)
    Abstract: This paper starts with an initial gesture accepting the validity of many of the criticisms of modernity by some leading postmodern thinkers.From this initial position, it then evalutess the postmodernist positions themselves with regards to democracy and justice by paying careful attention to the arguments of these leading postmodernists Following this procedure, Lyotard's characterization of the discourse on morality and justice as phrase-regimes can be shown to lead to an ethical impasse. His appeal to the Kantian sublime, in this context, would seem to be a category mistake. The aesthetic category of sublime does not fit the requirements of moral judgments even in Kantian terms. Epistemologically, the postmodern dilemma arises from a correct critique of metaphysics and transcendentalism. However, the critique is partial and negative. It is partial in the sense that it does not take the challenge of Kant to develop normativity seriously enough to explore alternatives as Hegel did. It, therefore, pursues entirely the negative critical path leading to thoroughgoing skepticism and nihilism.Derrida's belated attempts to rescue philosophy from a linguistic nihilism may succeed. But it still falls far short of offering a positive account of normativity.This paper offere as an alternative to natural law and transcendental norms an approach based on Hegel's explorations in dialectics. Following this alternative offers a way of exploring democracy and economic justice. A concrete set of institutions consistent with the development of self-determination can be seen as necessary for the idea of economic justice to have meaning. In the spheres of production, distribution, exchange, law and contracts among others, the development of appropriate economic and political institutions allowing this inter-subjective idea of freedom to unfold becomes the thematic development of economic justice.At the microlevel, by carefully considering poststructuralist psychoanalytical theory of Lacan and others a dynamically oriented approach to the question of the subject becomes possible. Pre-Freudian thinkers such as Hegel or Marx did not see the formation of the individual in all its deeply problematic aspects.A continuum of subjectivity ending with the fully liberated individual offers various possible levels of moral agency. In an economically and socially unjust setting radical analytic and social interventions will be necessary for these possibilities to materialize.
    Date: 2006–04
  5. By: Diana Petkova (Sofia University ‘St. Kliment Ohridski’)
    Abstract: This paper shares the approach of social constructivism, and maintains that diversity should be examined not ‘par excellence’, as an entity in itself, but as reflected in people’s minds and expressed in their attitudes and perceptions. On the basis of an empirical Bulgarian-Finnish intercultural research the paper states that diversity is not essential, given and unproblematic. Rather, it undergoes constant evolution. What is considered now ‘different’ can in future be seen as more or less ‘similar’. The informants characterized people with a religious, ethnic or racial background, other than theirs, as ‘distant’ and ‘different’, while people belonging to groups with the same origin were designated as ‘similar’ and ‘close’. This means that cultural diversity can also be translated into a social-psychological distance. Thus diversity is context-bound and cultural groups are always seen and appraised from the perspective of one’s own particular cultural paradigm.
    Keywords: Diversity, ‘Self’, ‘Other’, Attitudes, Perceptions
    JEL: Z
    Date: 2006–04

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