nep-pke New Economics Papers
on Post Keynesian Economics
Issue of 2008‒02‒02
nine papers chosen by
Karl Petrick
University of the West Indies

  1. Rhetorical Dualism and the Orthodox/Heterdox Distinction in Economics By Andrew Mearman
  2. Resurrecting Keynes to Revamp the International Monetary System By Pietro ALESSANDRINI; Michele FRATIANNI
  3. Dynamic trading and asset prices: Keynes vs. Hayek By Cespa, Giovanni; Vives, Xavier
  4. Flexible Rules cum Constrained Discretion: A New Consensus in Monetary Policy By Philip Arestis; Alexander Mihailov
  5. Political Economy Origins of Financial Markets in Europe and Asia By Svetlana Andrianova; Panicos Demetriades; Chenggang Xu
  6. Simultaneous Valuation vs. the Exploitation Theory of Profit: A summing up By Freeman, Alan; Kliman, Andrew
  7. Peace, War and International Security: Economic Theories By J Paul Dunne; Fanny Coulomb
  8. Awards - A View from Psychological Economics By Bruno S. Frey; Susanne Neckermann
  9. Replicating Marx: a Reply to Mohun By Kliman, Andrew; Freeman, Alan

  1. By: Andrew Mearman (School of Economics, University of the West of England, Bristol)
    Abstract: This paper attempts to combine elements of the approaches of two influential economists, Sheila Dow and Deirdre McCloskey and expands on previous work (2005) on Dow’s concept of dualism. A concept of rhetorical dualism is developed: dualism (defined variously) engaged in for a rhetorical purpose. It is argued by way of example case studies that rhetorical dualism is a significant feature of economics and that several influential authors have engaged in it. Further rhetorical dualism is shown to be prevalent in the current orthodox/heterodox distinction, and in the arguments of heterodox economists; but also that this distinction and type of distinction are unhelpful.
    Keywords: Rhetoric; dualism; heterodox economics
    JEL: B41
    Date: 2008–01
  2. By: Pietro ALESSANDRINI (Universita' Politecnica delle Marche, Dipartimento di Economia); Michele FRATIANNI (Indiana University, Graduate School of Business Bloomington)
    Abstract: There is a broad consensus that the current, large US current-account deficits financed with foreign capital inflows at low interest rates cannot continue forever; there is much less consensus on when the system is likely to end and how badly it will end. The paper resurrects the basic principles of the plan Keynes wrote for the Bretton Woods Conference to propose an alternative to the current international monetary system. We argue for the creation of a supranational bank money that would coexist along side national currencies and for the establishment of a new international clearing union. The new international money would be created against domestic earning assets of the Fed and the ECB. In addition to recording credit and debit entries of the supranational bank money, the new agency would determine the size of quotas, the size and time length of overdrafts, and the coordination of monetary policies. The substitution of supranational bank money for dollars would harden the external constraint of the United States and resolve the n-1 redundancy problem.
    Keywords: Keynes Plan, exchange rates, external imbalances, international monetary system, key currency, supranational bank money
    JEL: E42 E52 F33 F36
    Date: 2008–01
  3. By: Cespa, Giovanni (Queen Mary University of London); Vives, Xavier (IESE Business School)
    Abstract: We investigate the dynamic of prices, information and expectations in a competitive, noisy, dynamic asset pricing equilibrium model. We look at the bias of prices as estimators of fundamental value in relation to traders' average expectations and note that prices are more (less) biased than average expectations if and only if traders over- (under-) rely on public information with respect to optimal statistical weights. We find that prices are biased in relation to average expectations whenever traders speculate on short-run price movements. In a market with long traders, over-reliance on public information obtains if noise trader increments are correlated enough and/or there is low enough residual uncertainty in the payoff. This defines a "Keynesian" region; the complementary region is "Hayekian" in that prices are less biased than average expectations in the estimation of fundamental value. The standard case of no residual uncertainty and noise trading following a random walk is on the frontier of the two regions. With short-term traders there typically are two equilibria, with the stable (unstable) one displaying over (under-) reliance on public information.
    Keywords: Price bias; long and short-term trading; multiple equilibria; average expectations; higher order beliefs; over-reliance on public information;
    JEL: G10 G12 G14
    Date: 2007–11–09
  4. By: Philip Arestis (Department of Land Economy, University of Cambridge); Alexander Mihailov (Department of Economics, University of Reading)
    Abstract: This paper demonstrates that recent influential contributions to monetary policy imply an emerging consensus whereby neither rigid rules nor complete discretion are found optimal. Instead, middle-ground monetary regimes based on rules (operative under ‘normal’ circumstances) to anchor inflation expectations over the long run, but designed with enough flexibility to mitigate the short-run effect of shocks (with communicated discretion in ‘exceptional’ circumstances temporarily overriding these rules), are gaining support in theoretical models and policy formulation and implementation. The opposition of ‘rules versus discretion’ has, thus, reappeared as the synthesis of ‘rules cum discretion’, in essence as inflation-forecast targeting.
    Keywords: optimal monetary policy, flexible rules, constrained discretion, central bank independence, inflation targeting
    JEL: E52 E58 E61
    Date: 2007–10
  5. By: Svetlana Andrianova; Panicos Demetriades; Chenggang Xu
    Abstract: This paper contributes to the finance-growth literature by examining the political economy origins of some of the most successful financial markets in Europe and Asia. It provides historical evidence from London, Amsterdam and Hong Kong that highlights the essential role played by the government sector in kick-starting financial development. We show that the emergence of financial systems did not occur through laissez-faire approaches and that secure property rights alone were not sufficient for financial development. In the cases of London and Amsterdam, governments created large trade monopolies which were responsible for all the major financial innovations of the time. In the case of Hong Kong, where the financial developmentmodel was bank-based, large banking monopolies with close links to the state were created. We argue that the three examples are not special cases and the role of government in the early stages of financial development has been widespread world-wide.
    Date: 2008–01
  6. By: Freeman, Alan; Kliman, Andrew
    Abstract: Prepublication version of ‘Simultaneous Valuation vs. the Exploitation Theory of Profit: A summing up’, forthcoming in Capital and Class #94, Spring 2008 This paper examines the claims made by Simon Mohun and Roberto Veneziani in their Capital and Class #92 article entitled ‘The incoherence of the TSSI: a reply to Kliman and Freeman’. We show that they have effectively conceded that simultaneist interpretations of Marx’s theory contradict his conclusion that exploitation (workers’ surplus labor) is the exclusive source of profit in capitalism. We demonstrate the errors of logic in their claim that the TSS interpretation is incoherent. The debate thus confirms that the TSS interpretation – contrary to simultaneist interpretations – reproduce all Marx’s principal disputed conclusions and therefore constitutes a superior interpretation of his theory of value.
    Keywords: Value; Price; Money; Labour; Marx; MELT; Okishio; TSSI; temporalism; rate of profit.
    JEL: B5 B51 B14 B4 B31 B12
    Date: 2008–01
  7. By: J Paul Dunne (School of Economics, University of the West of England, Bristol); Fanny Coulomb (University Pierre Mendes, Grenoble.)
    Abstract: This paper considers the economic theories that are relevant for the study of peace war and international security . It presents different levels of generality, starting with the big questions of international security, which are usually the domain of international relations, before moving to general economic theoretical perspectives and then focusing on some specific developments in economics and security. More specifically it reviews the economics of security, distinguishing neoclassical theories, Keynesian and institutional, Marxist, and monopoly capital, before discussing the issues involved in the debate between the schools of thought. The economics of conflict is then considered, starting with the approach economists have taken –mainly neoclassical, before considering more general political economy perspectives.
    Keywords: Economics; Peace; war; security;
    JEL: H56 B20
    Date: 2008–01
  8. By: Bruno S. Frey; Susanne Neckermann
    Abstract: Awards in the form of orders, decorations, prizes, and titles are ubiquitous in monarchies and republics, private organizations, not-for-profit, and profit-oriented firms. This paper argues that awards present a unique combination of different stimuli and that they are distinct and unlike other monetary and non-monetary rewards. Despite their relevance in all areas of life awards have not received much scientific attention. We propose to study awards and present results on a vignette experiment that quantifies and isolates the effects of different award characteristics such as the publicity associated with winning an award. Further, employing a unique data set, we demonstrate that there are substantial differences in the intensity of usage of awards across countries.
    Keywords: Awards; compensation; incentives; principal-agent; honors and distinctions
    JEL: C93 J33 M52
    Date: 2008–01
  9. By: Kliman, Andrew; Freeman, Alan
    Abstract: This is a prepublication version of ‘Replicating Marx: a reply to Mohun’, Capital and Class No. 88, Spring 2006, pp 117-123. ISSN 0309 8168 Kliman (2001) showed that “simultaneist” interpretations – those which hold that Marx valued inputs and outputs simultaneously – contradict his exploitation theory of profit, while the temporal single-system interpretation (TSSI) conforms to it. Mohun, S. 2003. “On the TSSI and the Exploitation Theory of Profit,” Capital and Class 81, Autumn 2003, pp85-102. calls these demonstrations into question. This note defends them.
    Keywords: Value; Price; Money; Labour; Marx; MELT; Okishio; TSSI; temporalism; rate of profit.
    JEL: B5 B51 B14 B4 B31 B12
    Date: 2006–04

This nep-pke issue is ©2008 by Karl Petrick. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.