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on Post Keynesian Economics |
| By: | Peter Howells (UWE, Bristol) |
| Abstract: | In little more than twenty years, it has become widely accepted that the optimal design of monetary policy should include provision for a central bank that is independent of government influence. This is a remarkably short period of time for any idea in economics to become so widely-accepted. But there are problems. In this paper we show that there are many confusions and even some contradictions associated with central bank independence. To begin with, it is not entirely clear what it is exactly that central banks need to be independent of. Furthermore, there is confusion over the mechanisms whereby independence is supposed to deliver its benefits. The literature which is commonly said to provide the rationale for independence is often misunderstood and the evidence that independence does in fact enhance policy outcomes is extremely weak. |
| Keywords: | independent central banks |
| JEL: | E52 E58 |
| Date: | 2009–06 |
| URL: | http://d.repec.org/n?u=RePEc:uwe:wpaper:0908&r=pke |
| By: | Jan Kregel |
| Abstract: | The Federal Reserve's response to the current financial crisis has been praised because it introduced a zero interest rate policy more rapidly than the Bank of Japan (during the Japanese crisis of the 1990s) and embraced massive "quantitative easing." However, despite vast capital injections, the banking system is not lending in support of the private sector. Senior Scholar Jan Kregel compares the current situation with the Great Depression, and finds an absence of New Deal measures and institutions in the current rescue packages. The lessons of the Great Depression suggest that any successful policy requires fundamental structural reform, an understanding of how the financial system failed, and the introduction of a new financial structure (in a short space of time) that is designed to correct these failures. The current crisis could have been avoided if increased household consumption had been financed through wage increases, says Kregel, and if financial institutions had used their earnings to augment bank capital rather than bonuses. |
| Date: | 2009–04 |
| URL: | http://d.repec.org/n?u=RePEc:lev:levppb:ppb_100&r=pke |
| By: | Martin Shubik |
| Abstract: | A simple consideration of history tells us that each new piece of legislation contains loopholes that benefit a new class of entrepreneurs; some of these loopholes are small, but others are such that one could drive a bullion-laden truck through them. In this new Policy Note, Martin Shubik suggests creating a “war gaming group” to stress-test all major new legislation, with a first prize of $1 million to be awarded to the competing lawyer or team of lawyers who finds the most egregious loophole—a small amount relative to the potential savings. |
| Date: | 2009–04 |
| URL: | http://d.repec.org/n?u=RePEc:lev:levypn:09-6&r=pke |
| By: | Jan Toporowski |
| Abstract: | The capital adequacy requirements for banks, enshrined in international banking regulations, are based on a fallacy of composition--namely, the notion that an individual firm can choose the structure of its financial liabilities without affecting the financial liabilities of other firms. In practice, says author Jan Toporowski, capital adequacy regulations for banks are a way of forcing nonfinancial companies into debt. "Enforced indebtedness" then reduces the quality of credit in the economy. In an international context, the present system of capital adequacy regulation reinforces this indebtedness. Proposals for "dynamic provisioning" to increase capital requirements during an economic boom would simply accelerate the boom's collapse. Contingent commitments to lend to governments in the event of private-sector lending withdrawals, alongside lending to foreign private-sector borrowers, are a much more viable alternative. |
| Date: | 2009–05 |
| URL: | http://d.repec.org/n?u=RePEc:lev:levypn:09-7&r=pke |
| By: | Rania Antonopoulos |
| Abstract: | Widespread economic recessions and protracted financial crises have been documented as setting back gender equality and other development goals in the past. In the midst of the current global crisis--often referred to as "the Great Recession"--there is grave concern that progress made in poverty reduction and women's equality will be reversed. Indeed, for many developing countries it is particularly worrisome that, through no fault of their own, the global economic downturn has exacerbated effects from other crises manifest in food insecurity, poverty, and increasing inequality. This paper explores both well-known and less discussed paths of transmission through which crises affect women's world of work and overall wellbeing. As demand for textile and agricultural exports decline, along with tourism, job losses are expected to rise in these female-intensive industries. In addition, the gendered nature of the world of work suggests that women will see an increase in their share among informal and vulnerable workers worldwide, and will also supply more of their labor under unpaid conditions. The latter is particularly important in the context of developing countries, where many production activities take place outside the strict boundaries of the market. The paper also makes this point: examined through the prism of gender equality, the ability of the state to implement countercyclical policies matters greatly. If policy responses at the national and international levels end up aggravating inequities, gender equality processes face many more barriers, especially among the poor. |
| Date: | 2009–05 |
| URL: | http://d.repec.org/n?u=RePEc:lev:wrkpap:wp_562&r=pke |
| By: | L. Randall Wray |
| Abstract: | Unemployment was singled out by John Maynard Keynes as one of the principle faults of capitalism; the other is excessive inequality. Obviously, there is some link between these two faults: since most people living in capitalist economies must work for wages as a major source of their incomes, the inability to obtain a job means a lower income. If jobs can be provided to the unemployed, inequality and poverty will be reduced--although such policy will not directly address the problem of excessive income at the top of the distribution. Most importantly, Keynes wanted to put unemployed labor to work--not digging holes, but in socially productive ways. This would help to ensure that the additional effective demand created by government spending would not be exhausted in higher prices as it ran up against bottlenecks or other supply constraints. Further, it would help maintain public support for the government's programs by providing useful output. And it would generate respect for, and feelings of self-worth in, the workers employed in these projects (no worker would want to spend her days digging holes that serve no useful purpose). President Roosevelt's New Deal jobs programs (such as the Works Progress Administration and the Civilian Conservation Corps) are good examples of such targeted job-creating programs. These provided income and employment for workers, actually helped increase the nation's productivity, and left us with public buildings, dams, trails, and even music that we still enjoy today. As our nation (and the world) collapses into deep recession, or even depression, it is worthwhile to examine Hyman P. Minsky's comprehensive approach to resolving the unemployment problem. |
| Date: | 2009–05 |
| URL: | http://d.repec.org/n?u=RePEc:lev:wrkpap:wp_560&r=pke |
| By: | Marshall Auerback |
| Abstract: | To save America--indeed, the global economy as a whole--the private/public sector balance has to shift, and the neoliberal economic model on which the country has been based for the past 25 years has to be modified. In this new working paper, Marshall Auerback details why the role of the state needs to be reemphasized. The abandonment of a mixed economy and corresponding diminution of the role of government was hailed as the "rebirth of individualism," yet it caused rising inequality and the decline of median wages, and led to the widespread neglect of public goods vital to its citizens' welfare. Meanwhile, the country ran through the public investment it had made from the 1930s to the 1970s, with few serious challenges from policymakers or mainstream economists. The neoliberal model was also aggressively exported: the "optimal" growth strategy for all emerging economies was supposedly one that emphasized limited government, corporate governance, rule of law, and higher levels of state-owned and -influenced enterprise—in spite of significant historical evidence to the contrary. Not even the economic wreckage in Mexico, Argentina, Thailand, Indonesia, and Russia seemed sufficient to challenge, let alone overturn, the prevailing paradigm. That is, until now: in reaction to the financial crisis, many governments—led by the United States—are enacting massive economic stimulus packages and taking a central role in promoting economic growth strategies. This reemergence of state-driven capitalism constitutes a "back to the future" investment paradigm, one that is consistent with a long and successful pattern of economic development. But once we get beyond the pothole patching and school repairing, what industries can be pushed forward using public seed capital or through Sematech-like consortiums? What must be brought to the fore is the need for a new growth path for the United States, one in which the state has a significant role. There are already indications that the private sector is beginning to adapt to this new, collaborative paradigm. |
| Date: | 2009–05 |
| URL: | http://d.repec.org/n?u=RePEc:lev:wrkpap:wp_561&r=pke |
| By: | Sanjaya DeSilva; Yuval Elmelech |
| Abstract: | In recent years, as the homeownership rate in the United States reached its highest level in history, homeownership itself remained unevenly distributed, particularly along racial and ethnic lines. By using data from the 2000 Integrated Public Use Microdata Series (IPUMS) and 2006 American Community Survey (ACS) to study the trajectory into homeownership of black, Asian, white, and Latino households, this paper explores the various socioeconomic and demographic characteristics, as well as the distinct immigration experiences and spatial patterns that shape racial and ethnic inequality in homeownership. The unique (merged) dataset enables the authors to distinguish assimilation (length of residence) from immigration cohort effects, and to control for various spatial characteristics at the PUMA (Public Use Microdata Area) level. The paper employs a decomposition technique that delineates the distinct effects that composition differentials have on the visible white-minority disparity in homeownership. The findings reveal substantial differences along racial-ethnic lines, highlight the importance of immigration and spatial context in determining Asian and Mexican homeownership rates, and emphasize the unique role that family structure and unobserved factors (e.g. prejudice and discrimination) continue to play in shaping the black-white homeownership gap. |
| Date: | 2009–05 |
| URL: | http://d.repec.org/n?u=RePEc:lev:wrkpap:wp_565&r=pke |
| By: | Philip Arestis |
| Abstract: | This paper is concerned with the New Consensus Macroeconomics (NCM) in the case of an open economy. It outlines and explains briefly the main elements of and way of thinking about the macroeconomy from the standpoint of both its theoretical and its policy dimensions. There are a few problems with this particular theoretical framework. We focus here on two important aspects closely related to NCM: the absence of banks and monetary aggregates from this theoretical framework, and the way the notion of the “equilibrium real rate of interest” is utilized by the same framework. The analysis is critical of NCM from a Keynesian perspective. |
| Date: | 2009–05 |
| URL: | http://d.repec.org/n?u=RePEc:lev:wrkpap:wp_564&r=pke |
| By: | Giuseppe Fontana |
| Abstract: | In the face of the dramatic economic events of recent months and the inability of academics and policymakers to prevent them, the New Consensus Macroeconomics (NCM) model has been the subject of several criticisms. This paper considers one of the main criticisms lodged against the NCM model, namely, the absence of any essential role for the government and fiscal policy. Given the size of the public sector and the increasing role of fiscal policy in modern economies, this simplifying assumption of the NCM model is difficult to defend. This paper maintains that conventional arguments used to support this controversial assumption--including historical reasons, theoretical propositions, and practical issues--do not have solid foundations. There is, in fact, nothing inherently monetary in the stabilization policies found in the model. Thus, fiscal policy could play a role at least as important as monetary policy in the NCM model. |
| Date: | 2009–05 |
| URL: | http://d.repec.org/n?u=RePEc:lev:wrkpap:wp_563&r=pke |
| By: | Freeman, Alan |
| Abstract: | This paper is a prepublication version of a submission to the International Review of Economics Education. It outlines a code of conduct for economics, in the form of a pluralist benchmark for Quality Assurance in economics education. This is a necessary corrective to the publicly-recognised failure of economics in the face of the 2008 crisis, which Colander et al (2009 term its “systemic failure”. This systemic failure is analysed as a consequence of the regulatory capture of the academic profession of economics, arising from and institutionalised by its present peer ranking procedures. Pluralism is the necessary antidote. It affords two decisive benefits: it produces good economics and better economists. The paper is part of a broad consultation on teaching in economics, organised by the UK-based Association for Heterodox Economists (AHE). It argues that a pluralist subject benchmark, derived from a pluralist code of conduct, is a prerequisite for the reform of the profession. Critical, pluralistic and independent thinking should be the primary requirement good economic practice, and pecific provisions should be made to recognise, promote, defend and guarantee this good practice in teaching and assessment alike. Systemic failure requires a systemic solution. The paper explains how the built-in tendency of the economic profession to select for conformity has led to its regulatory capture. Existing UK benchmarks have substituted peer-ranking – the appointment of judges selected for comformity – for collaborative peer review – the pluralistic integration of the strengths of the academic community. This past practice has become institutionalised at every level. The profoundly non-scientific practice of simply reproducing a politically acceptable consensus has thereby replaced the independent and critical pursuit of knowledge as the primary peer-recognised hallmark of quality. Tomorrow’s economists need to be defended against the systemic failure of the economics of today. This requires a conscious regulatory intervention – benchmarking for pluralism. |
| Keywords: | Economics Teaching; Pluralism; Heterodox Economics |
| JEL: | A13 B5 A11 |
| Date: | 2009–06–14 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:15691&r=pke |