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on Post Keynesian Economics |
| By: | James K. Galbraith |
| Abstract: | What in monetarism, and what in the "new monetary consensus," led to a correct or even remotely relevant anticipation of the extraordinary financial crisis that broke over the housing sector, the banking system, and the world economy in August 2007 and that has continued to preoccupy central bankers ever since? Absolutely nothing, says Senior Scholar James K. Galbraith. In this new Policy Note, Galbraith reevaluates monetary policy in light of the collateral damages inflicted by the subprime mortgage crisis. He provides a critique of monetarism--what Milton Friedman famously defined as the proposition that "inflation is everywhere and always a monetary phenomenon"--and of the "new monetary consensus" on which Federal Reserve Chairman Ben Bernanke's ostensible doctrine of inflation targeting rests. Given the current economic crisis, Galbraith says, the Fed would do well to embrace the intellectual victory of John Maynard Keynes, John Kenneth Galbraith, and Hyman P. Minsky--and act accordingly. |
| Date: | 2008–05 |
| URL: | http://d.repec.org/n?u=RePEc:lev:levypn:08-1&r=pke |
| By: | Hyman P. Minsky; L. Randall Wray |
| Abstract: | "At the annual banking structure and competition conference of the Federal Reserve Bank of Chicago in May 1987, the buzzword heard in the corridors and used by many of the speakers was 'that which can be securitized, will be securitized.'" So notes Hyman Minsky in a prescient memo on the nature, and the implications, of securitization, written 20 years before an explosion in the securitization of home mortgages helped create the current financial crisis. This memo, which served as the basis for a lecture in Minsky's monetary theory class at Washington University, has not been widely circulated. It is published here in its entirety, with a preface and an afterword by Senior Scholar L. Randall Wray that places Minsky's work in context. |
| Date: | 2008–06 |
| URL: | http://d.repec.org/n?u=RePEc:lev:levypn:08-2&r=pke |
| By: | Pavlina R. Tcherneva |
| Abstract: | The monetarist counterrevolution and the stagflation period of the 1970s were among the theoretical and practical developments that led to the rejection of fiscal policy as a useful tool for macroeconomic stabilization and full employment determination. Recent mainstream contributions, however, have begun to reassess fiscal policy and have called for its restitution in certain cases. The goal of this paper is to delimit the role of and place for fiscal policy in the New Economic Consensus (NEC) and to compare it to that of Post-Keynesian theory, the latter arguably the most faithful approach to the original Keynesian message. The paper proposes that, while a consensus may exist on many macroeconomic issues within the mainstream, fiscal policy is not one of them. The designation of fiscal policy within the NEC is explored and contrasted with the Post-Keynesian calls for fiscal policy via Abba Lerner's "functional finance" approach. The paper distinguishes between two approaches to functional finance--one that aims to boost aggregate demand and close the GDP gap, and one that secures full employment via direct job creation. It is argued that the mainstream has severed the Keynesian link between fiscal policy and full employment--a link that the Post-Keynesian approach promises to restore. |
| Date: | 2008–07 |
| URL: | http://d.repec.org/n?u=RePEc:lev:wrkpap:wp_539&r=pke |
| By: | Antonio Carlos Macedo e Silva; Claudio H. Dos Santos |
| Abstract: | This paper argues that institutionally rich stock-flow consistent models—that is, models in which economic agents are identified with the main social categories/institutional sectors of actual capitalist economies, the short period behavior of these agents is thoroughly described, and the "period by period" balance sheet dynamics implied by the latter is consistently modeled—are (1) perfectly compatible with John Maynard Keynes's theoretical views, (2) the ideal tool for rigorous post-Keynesian analyses of the medium run, and (3) therefore crucial to the consolidation of the broad post-Keynesian research program. |
| Date: | 2008–07 |
| URL: | http://d.repec.org/n?u=RePEc:lev:wrkpap:wp_537&r=pke |
| By: | Dimitri B. Papadimitriou; Greg Hannsgen; Gennaro Zezza |
| Abstract: | This paper considers a plan proposed by Warren Buffett, in which importers would be required to obtain certificates proportional to the amount of non-oil goods (and possibly also services) they brought into the country. These certificates would be granted to firms that exported goods. Exporting firms could then sell certificates to importing firms on an organized market. In this paper, starting from a relatively neutral projection of all major variables for the U.S. economy, we estimate that the plan would raise the price of imports by approximately 9 percent, quickly reducing the current account deficit to about 2 percent of GDP. We discuss several problems that might arise with the implementation of the Buffett plan, including possible instability in the price of certificates and retaliation by U.S. trade partners. We also consider an alternative version of the Buffett plan, in which certificates would be sold at a government auction, rather than granted to exporters. The revenues from certificate sales would then be used to finance a reduction in FICA payroll taxes. We report the results of simulations of the alternative plan’s effects on macroeconomic balances and GDP growth. Notably, the alternative plan would lessen the severity of the growth recession expected in our base projection. |
| Date: | 2008–07 |
| URL: | http://d.repec.org/n?u=RePEc:lev:wrkpap:wp_538&r=pke |
| By: | Filipe J. Sousa (Departamento de Gestão e Economia (DGE), Universidade da Madeira (UMa)); Luís M. de Castro (Faculdade de Economia do Porto (FEP)) |
| Abstract: | The markets-as-networks theorists contend, at least tacitly, the significance of business relationships for the focal firm – that is, business relationships contribute somewhat to the focal firm’s survival and growth. We do not deny the existence of significant business relationships but sustain, in contrast to the consensus within the Markets-as-Networks Theory, that relationship significance should not be a self-evident assumption. Significance cannot be a taken-for-granted property of each and every one of the focal firm’s business relationships. We adopt explicitly a critical realist position in this conceptual paper and claim that the relationship significance is an event of the business world, whose causes remain yet largely unidentified. Where the powers and liabilities of business relationships (i.e., their functions and dysfunctions) are put to work, inevitably under certain contingencies (namely the surrounding networks and markets), effects result for the focal firm (often benefits in excess of sacrifices, i.e., relationship value) and as a result the relationship significance is likely to be brought about. In addition, the relationship significance can result from the dual influence that business relationships have on a great part of the structure and powers and liabilities of the focal firm, i.e., its nature and scope respectively. |
| Keywords: | Markets-as-Networks Theory, relationship significance, business relationships, focal firm, resources, competences, activities |
| JEL: | M31 |
| Date: | 2008–07 |
| URL: | http://d.repec.org/n?u=RePEc:por:fepwps:282&r=pke |
| By: | David Colander; Casey Rothschild |
| Abstract: | The macro economy is complex; everyone knows that. Complex systems are difficult to analyze and manage; everyone knows that too. The best approach to teaching and describing the complex macro economy is something we know much less well. Currently, in teaching macro to both graduate and undergraduate students, we don’t stress just how complex the economy really is. The argument in this paper is that we should emphasize that complexity to frame the macro question.1 Having done that, we can get on with what we do, and much of the structure of both the graduate and undergraduate macro can be taught as it currently is. But instead of seeing the approaches at the two levels as substitutes for one another, complexity helps to frame as what they really are: complementary approaches to addressing a challenging set of questions. |
| Date: | 2008–01 |
| URL: | http://d.repec.org/n?u=RePEc:mdl:mdlpap:0801&r=pke |
| By: | Lekha S. Chakraborty |
| Abstract: | This paper presents new evidence on the links between public-infrastructure provisioning and time allocation related to the water sector in India. An analysis of time-use data reveals that worsening public infrastructure affects market work, with evident gender differentials. The results also suggest that access to public infrastructure can lead to substitution effects in time allocation between unpaid work and market work. The broad conclusion of the paper is that public-investment policy can redress intrahousehold inequalities, in terms of labor-supply decisions, by supporting initiatives that reduce the allocation of time in nonmarket work. |
| Date: | 2008–07 |
| URL: | http://d.repec.org/n?u=RePEc:lev:wrkpap:wp_536&r=pke |
| By: | David Colander |
| Date: | 2008–04 |
| URL: | http://d.repec.org/n?u=RePEc:mdl:mdlpap:0804&r=pke |
| By: | Belton, Willie (Georgia Tech); Uwaifo Oyelere, Ruth (Georgia Tech) |
| Abstract: | It has been well documented in the literature that ethnicity matters significantly in the determination of savings. In particular, African-American savings lag far behind savings for other ethnic groups. Similarly, the literature also provides evidence of the long-lived nature of institutions and the link between institutions and culture. In this paper, we provide an explanation for the savings gap that still exists between African-Americans and White Americans even after accounting for appropriate factors that can lead to savings differentials. We initially provide evidence that the savings gap exists and persist after including several control variables in a regression analysis. We then provide evidence that the persistent gap can not be attributed solely to racial discrimination but can be explained by the response of culture to institutional scaffolding erected many years earlier. Using a novel within race decomposition we provide evidence that past institutions transmitted through culture can help to explain this persistent saving disparity. |
| Keywords: | savings gap, institutions, race, culture |
| JEL: | D14 D31 J15 J11 J71 |
| Date: | 2008–06 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp3545&r=pke |
| By: | Christian Ghiglino; Sanjeev Goyal |
| Abstract: | We consider a world in which individuals have private endowments and trade in markets, while their utility is sensitive to the consumption of their neighbors. Our interest is in understanding how social structure of comparisons, taken together with the familiar fundamentals of the economy – endowments, technology and preferences – shapes equilibrium prices, allocations and welfare. We find that equilibrium prices and allocations depend on average individual centrality in the social network. As we add links to a social network, the centralities rise and this pushes up prices of the socially sensitive good. Newly linked agents demand more of the socially sensitive good, while the reverse happens with regard to the standard good. We derive a formula to compute the critical link, i.e., the new link which maximizes price increase. We then turn to a model with heterogenous endowments, and find that inequality in network centrality and in wealth inequality reinforce each other. Thus a transfer of resources from less to more central agents raises prices of the socially sensitive good and alters allocations and utilities of all agents. We show by example that poor individuals lose utility while rich individuals gain utility as society moves from segregation to integration. |
| Date: | 2008–06–30 |
| URL: | http://d.repec.org/n?u=RePEc:esx:essedp:655&r=pke |