nep-pke New Economics Papers
on Post Keynesian Economics
Issue of 2008‒10‒07
nine papers chosen by
Karl Petrick
University of the West Indies

  1. A Social Innovation or a Product of Its Time? The Rehn-Meidner Model’s Relation to Contemporary Economics and the Stockholm School By Erixon, Lennart
  2. When Consumption Generates Social Capital: Creating Room for Manoeuvre for Pro-Poor Policies By Leonardo Becchetti; Melania Michetti
  3. Social Contracts, Civil Conflicts and International Peacemaking By Mansoob Murshed
  4. Entrepreneurship, Economic Growth and Policy in Emerging Economies By Thurik, A.R.
  5. Stages of the Ongoing Global Financial Crisis: Is There a Wandering Asset Bubble? By Lucjan T. Orlowski
  6. Social status in economic theory: a review By Tom Truyts
  7. Reversal of Opinion: The Implications of the Work of Acemoglu and Robinson for Marxist Thought By Howard Petith
  8. How can a psychologist inform economics? The strange case of Sidney Siegel By Alessandro Innocenti
  9. Risk Management and the Costs of the Banking Crisis By Patrick Honohan

  1. By: Erixon, Lennart (Dept. of Economics, Stockholm University)
    Abstract: A wage and economic policy programme for full employment, price stability, growth and equity was developed by two Swedish trade-union economists in the early post-war period. A restrictive macroeconomic policy, a wages policy of solidarity and an active labour market policy are the cornerstones of the Rehn-Meidner model. The model was influenced by Hans Singer’s analysis of the fallacies of incomes policy under full employment conditions. However it is difficult to find equivalences in contemporary economics to the model’s composition of means and goals, functional relationships or to its emphasis on the role of actual profits in wage formation.
    Keywords: Rehn-Meidner model; Swedish model; Stockholm school of economics; labour market policy; wages policy of solidarity
    JEL: B22 B29 E24 E62 E64 J31 J51
    Date: 2008–09–16
  2. By: Leonardo Becchetti (University of Tor Vergata); Melania Michetti (Fondazione ENI Enrico Mattei and Università Cattolica del Sacro Cuore - Milano)
    Abstract: Economic interactions are often accused of being neutral, or even of generating adverse effects, not only on the social fabric but also on a factor (social capital) which is regarded as the foundation of both socio-economic activity and prosperity. In this paper we document how a particular form of economic interaction (affiliation of marginalised producers to a first level association and to the fair trade import channel) has indeed positive effects on a specific type of social capital. Our findings on a sample of Kenyan farmers show that years of affiliation to Fair Trade significantly affect the participation in elections and the trust placed in trade unions, political parties and the government, net of the impact of other controls and after accounting for the selection bias effect. This implies that consumers buying fair trade products contribute to reinforce both social cohesion and the institutions in countries in which these variables are fundamental in creating room for manoeuvre for pro-poor (equity plus growth) policies.
    Keywords: Fair trade, social capital, impact study
    JEL: O19 O22 D64
    Date: 2008
  3. By: Mansoob Murshed (Institute of Social Studies)
    Abstract: The regularity with which peace deals break down and civil wars resume is well established. This briefing looks at the factors that drive violent conflicts, and the factors that may undermine peace deals, including those brokered and supported by international third parties. For peace to last, agreements must be viable, credible and enforceable, and the commitment of donors must not be in doubt. For these conditions to be in place, conflict resolution must be in donors' interests.
    Keywords: Civil war, Social Contract, Aid for Peace
    JEL: C78 D72 D74 D83
    Date: 2008
  4. By: Thurik, A.R. (Erasmus Research Institute of Management (ERIM), RSM Erasmus University)
    Abstract: Entrepreneurship has emerged as an important element in the organization of economies. This emergence did not occur simultaneously in all developed countries. Differences in growth rates are often attributed to differences in the speed with which countries embrace entrepreneurial energy. This led to the political mandate to promote entrepreneurship. Hence, a clear and organized view is needed of what the determinants and consequences of entrepreneurship are. The present contribution tries to provide this view with a particular view on emerging economies. Entrepreneurship, its drivers and its consequences can be best understood using the model of the Entrepreneurial Economy which explains the functioning of the modern economy. This model differs from that of the earlier Managed Economy. Policies in emerging economies should aim at combining the two models.
    Keywords: entrepreneurship;policy;economic development;small firms;economic growth
    Date: 2008–09–25
  5. By: Lucjan T. Orlowski
    Abstract: This study argues that the severity of the current global financial crisis is strongly influenced by changeable allocations of the global savings. This process is named a “wandering asset bubble”. Since its original outbreak induced by the demise of the subprime mortgage market and the mortgage-backed securities in the U.S., this crisis has reverberated across other credit areas, structured financial products and global financial institutions. Four distinctive stages of the crisis are identified: the meltdown of the subprime mortgage market, spillovers into broader credit market, the liquidity crisis epitomized by the fallout of Bear Sterns with some contagion effects on other financial institutions, and the commodity price bubble. Monetary policy responses aimed at stabilizing financial markets are proposed.
    Date: 2008–09
  6. By: Tom Truyts
    Abstract: Social distinction or status is an important motivation of human behaviour. This paper provides a selective survey of recent advances in the economic analysis of the origins and consequences of social status. First, a selection of empirical research from a variety of scientific disciplines is discussed to underpin the further theoretical analysis. I then consider the origins and determinants of tastes for status, discuss the endogenous derivation of such a preferences for relative standing and assess the different formalisations these preferences. Subsequently, the consequences of preferences for status are studied for a variety of problems and settings. The last section discusses a number of implications of status concerns for normative economics and public policy.
    Date: 2008–08
  7. By: Howard Petith
    Abstract: This paper describes the implications for Marxist thought of the work of Daron Acemoglu and James Robinson. In the first two periods of this they explained how the rise of democracy brought prosperity to Europe  and why the same process had not worked in Latin America because of the possibility of coups. The implication is that mass poverty can better be alleviated by safeguarding democracy rather than moving to socialism. In the last period A and R have formalized doubts about the efficacy of democracy in this role. The implication here is that Marxists should work to find a system of government that is immune to elite dominance. Hugo Chávez is taken as an example.
    Keywords: Marx, democracy, revolution, participatory democracy
    JEL: B14 B51 D72 D74 O15 P16
    Date: 2008–08–01
  8. By: Alessandro Innocenti
    Abstract: Before Kahneman and Tversky showed how behavioural economics could bring psychology and economics into a unified framework, in the 1950s a social psychologist, Sidney Siegel, entered the realm of economics and laid the foundation of experimental economics. This paper gives an assessment of Siegel’s overall contribution and claims that Siegel was not only a pioneer of experimental economics but also of behavioural economics. Had his view on the integration of psychology and economics been more promptly received, it might have triggered a different and more successfully path to the injection of greater realism in economics. When Siegel died, his approach to integrate psychology and economics lost its main advocate. Although his legacy was paramount in the work of the Nobel Prize Vernon Smith, Siegel endorsed a quite different approach to how make interdisciplinary research effective.
    Keywords: economics, psychology, behavioural economics, bargaining theory, utility theory.
    JEL: B20 B30 C70
    Date: 2008–07
  9. By: Patrick Honohan
    Abstract: The 2007-8 banking crisis in the advanced economies has exposed deficiencies in risk management and prudential regulation approaches that rely too heavily on mechanical, albeit sophisticated, risk management models. These have aggravated private and economic losses, while perhaps protecting the taxpayer from bearing quite as high a share of the direct costs as in typical crises of the past. Policymakers and bankers need to recognize the limitations of rules-based regulation and restore a more discretionary and holistic approach to risk management.
    Date: 2008–09–29

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