nep-pke New Economics Papers
on Post Keynesian Economics
Issue of 2008‒01‒26
eight papers chosen by
Karl Petrick
University of the West Indies

  1. Catechism versus pluralism: the heterodox response to the national undergraduate curriculum proposed by the UK Quality Assurance Authority By Freeman, Alan
  2. Explaining national inequality: the relevance of Marx and the irrelevance of equilibrium By Freeman, Alan
  3. Polanyi in Brussels: European institutions and the embedding of markets in society By James Caporaso; Sidney Tarrow
  4. Pro-Growth Alternatives for Monetary and Financial Policies in Sub-Saharan Africa By Robert Pollin; Gerald Epstein; James Heintz
  5. Division of Labor, Economic Specialization and the Evolution of Social Stratification By J. Henrich; R. Boyd
  6. An Invasive Metaphor: the Concept of Centre of Gravity in Economics By Freeman, Alan
  7. Towards an historically relevant economics of the firm By Michael Dietrich; Jackie Krafft
  8. The modernity of backwardness By Freeman, Alan

  1. By: Freeman, Alan
    Abstract: Paper presented to the 2007 conference of the International Confederation for Pluralism in Economics (ICAPE), June 1-3, Salt Lake City, Utah. This paper was authored by myself following consultations, and submitted collectively by the Association for Heterodox Economics, as a result of a consultation request issued by the QAA (Quality Assurance Authority) for responses to the ‘benchmark’ statement for the subject of economics. The benchmark statement seeks to define what will in future be considered the prescriptive standard for economics undergraduate teaching in the UK and in UK-certified institutions abroad. The QAA is responsible for the maintenance of academic standards in the UK and although a non-governmental body, plays a strong role in transmitting government requirements to the higher education sector. The benchmark thus represents the first attempt in UK history to regulate what is considered ‘good’ teaching in economics. It is a highly neoclassical and orthodox document and, it is argued in the AHE response, entirely lacking in a pluralist perspective. It represents an important landmark in that it sets out the consensus, among orthodox academics, of what the ‘mainstream’ consists of and how it should be taught. The paper presented at this session represents the consensus, highly critical, response of UK heterodox economists and social scientists to the QAA benchmark statement. It also contains a comparison between the economics benchmark and that proposed by other social sciences, which suggests that economics stands in an isolated position in its attempt to define its field of enquiry by means of a strict prescriptive orthodoxy.
    Keywords: Economics Teaching; Pluralism; Heterodox Economics; Economics Teaching, Pluralism, Heterodox Economics
    JEL: A22 A13 A12 B4 B5 A14 A11
    Date: 2007–06–02
  2. By: Freeman, Alan
    Abstract: This paper was originally presented at the ‘Marxism and Political Economy’ conference called by the International Socialist Journal on Saturday 29th September 2007. A revised version was presented to the Historical Materialism conference on 13th November 2007. It enquires why, although national economic equality is one of the most persistent features of the history of capitalism, economics as yet lacks a coherent economic explanation of it. It also enquires why Marxism has failed to develop such an explanation, and concludes that in both cases the inadequacies of existing theory arise from the constraints of the general equilibrium paradigm. In the second case, however, this paradigm is wrongly attributed to Marx. The paper argues that Marx’s own, original theory of value, contains the basis for an economic mechanism of divergence in the formation of market value as the average of many producers of differing productivities. The persistence of productivity differentials – excluded by the general equilibrium paradigm – is maintained by a positive feedback mechanism. It yields a surplus (above average) profit to the high productivity producers, who become geographically concentrated within a definite and very stable block of nation-states at an early point in the history of capitalism. From then on, this extra profit could be invested in maintaining a permanent productivity lead. This is an entirely temporal effect and cannot be predicted or reproduced if it is pre-supposed that productivity differentials are ignorable.
    Keywords: Inequality; Development; Value Theory; Temporalism; World Systems Theory; Dependency Theory; Globalization; TSSI; General Equilibrium
    JEL: O1 O10 O30 B4 O33 B2 B00
    Date: 2007–09
  3. By: James Caporaso; Sidney Tarrow
    Keywords: European Court of Justice; free movement; institutions; labour contract; political economy; regulations; Single Market
    Date: 2008–01–15
  4. By: Robert Pollin (Univ. of Massachusetts); Gerald Epstein (Univ. of Massachusetts); James Heintz (Univ. of Massachusetts)
    Keywords: Pro-Growth Alternatives for Monetary and Financial Policies in Sub-Saharan Africa
    Date: 2008–01
  5. By: J. Henrich; R. Boyd
    Abstract: This paper presents a simple mathematical model that shows how economic inequality between social groups can arise and be maintained even when the only adaptive learning processes driving cultural evolution increases individual’s economic gains. The key assumption is that human populations are structured into groups, and that cultural learning is more likely to occur within groups than between groups. Then, if groups are sufficiently isolated and there are potential gains from specialization and exchange, stable stratification can sometimes result. This model predicts that stratification is favored, ceteris paribus, by (1) greater surplus production, (2) more equitable divisions of the surplus among specialists, (3) greater cultural isolation among subpopulations within a society, and (4) more weight given to economic success by cultural learners. We also analyze how competition among societies, both egalitarian societies and those with differing degrees of stratification, influences the long-run evolution of the institutional forms that support social stratification. In our discussion, we illustrate the model using two ethnographic cases, explore the relationships between our model and other existing approaches to social stratification within anthropology, and compare our model to the emergence of heritable divisions of labor in other species.
    Keywords: Length 43 pages
    Date: 2007–12
  6. By: Freeman, Alan
    Abstract: This paper undertakes a critical examination of the concept of 'centre of gravity' as adapted by economics from classical mechanics, relating it to the idea of 'long-run' profits, prices and quantities, as presented in the work of the post-Sraffians.(1) It will also address the origin of this concept of 'long-run' in Marshall's distinction between long-run and short-run determinations of economic magnitudes. It shows that economists have generally conceived of centre of gravity as a theoretical magnitude which is not observed, but around which observed magnitudes oscillate either randomly or in some deterministic manner; this much is generally agreed. This idea has, however, been interpreted in two distinct ways in the history of economic thought: (1) as an attractor dynamically determined at each point in time by path-dependent historical processes which have led the economy to be in its present state. (2) as a hypothetical static equilibrium state of the economy determined independent of history by its current exogenous parameters (utility, technical capacity, etc) It demonstrates that these two ideas are necessarily distinct and that both must be taken into account in any pluralistic research programme. Mathematically the attractor of a variable is not in general equal to its hypothetical static equilibrium, except in highly restricted circumstances such as the absence of technical change. Moreover, again outside of exceptional circumstances, the divergence between the predictions of observed magnitudes given by the two approaches increases over time, so that it cannot even be accepted that one converges on the other. Error will therefore result if it is assumed a priori that (1) is identical to (2). The fact that the two conceptions lead to different predictions does not decide that either one is correct. This should be determined empirically and therefore, an agreed empirical test should be established by the community of social scientists or, better still, society. The paper will argue that, empirically, the 'test variable' against which both conceptions should be checked is the time average of the variables in question. This is not a distinct concept of 'centre of gravity' but an empirical observable. In a pluralistic programme, the predictions of both conceptions should be evaluated against this proposed test variable. The second part of the paper examines the common basis for the critical stance taken by both Keynes and Marx to the second conception, which is rooted in a common attitude to the relation between substance and accident, and a correspondingly similar conception of uncertainty. It will relate this to the work of Quetelet and the development of the statistical method in sociology which, it will argue, is rooted in an ontologically distinct conception of social magnitudes to that found in economics, closer to the concept which Keynes and Marx shared. It argues that the post-Sraffian conception of long-run is based on a fallacious identification of these two distinct concepts, rendering the post-Sraffian approach equally incompatible with Keynes's and Marx's theories. It argues that the post-Sraffian conception of centre of gravity is 'intrinsically antipluralistic' in that it depends absolutely on the conflation of two concepts which are in fact necessarily distinct, leading to the suppression of the non-equilibrium concept as an alternative to the scientific procedure of testing the predictions of both concepts against an observable.
    JEL: B5 B51 B14 B4 B31 B12
    Date: 2006–07
  7. By: Michael Dietrich (Université de Sheffield - University of Sheffield); Jackie Krafft (GREDEG - Groupe de recherche en Droit Economie Gestion - Université de Nice Sophia-Antipolis)
    Abstract: The basic sub-text or conjecture of this paper is that an adequate economics of the firm should be historically relevant. The terms “adequate” and “relevant” imply, in the current context, that theoretical frameworks allow explanation of historical developments rather than a rationalisation of these developments. Two possible implications follow from this conjecture. First, given the complexity of historical reality a single theoretical approach to the firm may be inadequate as a general framework to understand actual events. It follows, therefore, that a historically relevant economics of the firm may imply theoretical pluralism. The possible nature of this pluralism is explored in this paper. Secondly, and following on from the first point, if the importance of theoretical pluralism is accepted, different frameworks or approaches to the firm may be relevant in different historical circumstances. Among other things, pluralism might therefore imply a requirement for empirically driven theory. In our context empirically driven suggests that historical reality is an important motivator for the economics of the firm rather than being something that is interpreted as an end product.
    Date: 2008–01–21
  8. By: Freeman, Alan
    Abstract: This paper revisits one of the classic debates on world capitalist development – the ‘transition to capitalism’ debate framed in Robert Brenner’s classic critique of World Systems and Dependency Theory. It was originally presented to the July 2007 conference of the International Confederation for Pluralism in Economics (ICAPE) and in a slightly modified form, to the September 2007 conference of the UK Political Studies Association. The paper argues that the 1970s discussion was founded on an deeply flawed understanding of the mechanisms by which modern capitalist production relations produce what is termed ‘backwardness’. Economics has failed to develop an adequate explanation for the most persistent phenomenon of the modern world – the polarisation of the world’s national economies, grouped within two great and remarkably geographically stable blocs. The reason, I argue in this paper, is the general equilibrium paradigm which predicts that modern capitalist production, left to its own devices, must necessarily even out national differences in productivity, wages, and profits over time. However the reverse happens, and development theory is deprived of an adequate explanation for national differentiation in terms of the ordinary mechanisms of the capitalist market. This loss is compounded by parallel failure within Marxist value theory. The paper locates the origin of this failure within the systematic replacement of this theory by an equilibrium re-interpretation of it, converting it into a variant of the very orthodoxy to which it was supposed to offer an alternative. The paper assesses the skewed character which results, in contemporary accounts (both within and outside economics) of development, dependency, inequality and imperialism. These are driven to assign inappropriate weight to ‘political and ‘cultural’ mechanisms or to classify the economic circumstances of the poor nations as in some sense exceptional or abnormal for capitalism. The idea that underdevelopment – ‘backwardness’ – is a failure to catch up or an absence of modernity, has thus become the conceptual framework for discussing the national difference produced by modernity. This is particularly clear in the evidently symbiotic and mutually conditioned development of slavery in the USA and the Industrial Revolution (with Cotton at its centre) in the UK. Antebellum slavery, once the economic mechanisms are clarified, can be understood not as a backward survival from a precapitalist era, but a product of modern capitalism itself. This principle is a general one. ‘Backwardness’, I argue, is a disguised outcome of the most modern of all economic processes – the constant technical revolutions that characterise industrial capitalism.
    Keywords: Inequality; Development; Value Theory; Temporalism; World Systems Theory; Dependency Theory; Globalization; TSSI; General Equilibrium
    JEL: O1 O10 O30 B4 O33 B2 B00
    Date: 2007–09

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