nep-pke New Economics Papers
on Post Keynesian Economics
Issue of 2009‒08‒22
eight papers chosen by
Karl Petrick
University of the West Indies

  1. Does pluralism in economics education make better educated, happier students? A qualitative analysis. By Andrew Mearman; Tim Wakeley; Gamila Shoib; Don J. Webber
  2. Who do heterodox economists think they are? By Andrew Mearman
  3. "The Second End of Laissez-Faire -- Bootstrapping Nature of Money and Inherent Instability of Capitalism" By Katsuhito Iwai
  4. The Poverty of Statistics By Freeman, Alan
  5. International Trade, Factor Mobility and the Persistence of Cultural-Institutional Diversity By Marianna Belloc; Samuel Bowles
  6. From New Deal institutions to capital markets: commercial consumer risk scores and the making of subprime mortgage finance By Martha Poon
  7. Why the Legal System is Not Necessarily Less Efficient than the Income Tax In Redistributing Income By Dan Usher
  8. Bargaining and social structure By Edoardo Gallo

  1. By: Andrew Mearman (Department of Economics, University of the West of England, UK); Tim Wakeley (Griffith University, Australia); Gamila Shoib (Griffith University, Australia); Don J. Webber (Department of Business Economics, Auckland University of Technology and Department of Economics, UWE, Bristol)
    Abstract: This paper contributes to the debate on pluralism in the Economics curriculum. Here pluralism means a diversity of theoretical perspectives. One set of pedagogical arguments for pluralism are those found in ‘liberal’ philosophy of education. To this end, the first part of the paper presents arguments for pluralism based on ‘liberal’ pedagogical arguments. The paper also notes more instrumental arguments for pluralism; and barriers to such an approach. Finally, the paper considers new primary evidence from focus groups on student perceptions of economics. This evidence shows support for the arguments that a pluralist curriculum is popular and develops cognitive capacities of criticism, comparison and analysis – exactly those argued for in (liberal) pedagogical discussion – as well as judgement, understanding and writing skills. However, pluralism as a teaching strategy may be more difficult for those delivering it.
    Keywords: Students; pedagogy, pluralism, perceptions, focus groups
    JEL: A22 B4 B5
    Date: 2009–08
  2. By: Andrew Mearman (Department of Economics, University of the West of England, UK)
    Abstract: This paper attempts to engage with the established debate on the nature of heterodox economics. However, it starts from the position that previous attempts to classify and identify heterodox economics have been biased towards a priori definition. The paper aims to inform the discussion of the nature of heterodoxy with some empirical analysis. The paper examines survey data collected from a small/medium-sized sample of AHE members on the core concepts in economics. The paper applies factor analysis to the data. It also applies principles of biological taxonomy, and thence cluster analysis to the problem. The paper finds that within the self-identified community of self-identified heterodox economists there is little agreement as to whether members are pluralist, or what their attitude is to the mainstream. Indeed, there is little agreement on any core concepts or principles. The paper argues that there is little structure to heterodox economics beyond that provided by pre-existing (or constituent) schools of thought. Based on this study, heterodox economics appears a complex web of interacting individuals and as a group is a fuzzy set. These results would lead us to question further strict distinctions between heterodox, mainstream and pluralist economists.
    Keywords: heterodox economics, survey, factor analysis, cluster analysis
    JEL: B5 C19
    Date: 2009–08
  3. By: Katsuhito Iwai (Faculty of Economics, University of Tokyo)
    Abstract: "Globalization" can be interpreted as a grand experiment of the laissez-faire doctrine of neoclassical economics that the wider and the deeper markets cover the capitalist economy, the more efficient and the more stable it would become. The "once a hundred years" global economic crisis of 2007-9 demonstrated the grand failure of this grand experiment. Following the lead of Wicksell and Keynes, this article argues that capitalist economy is subject to an inevitable trade-off between efficiency and stability because of its essentially "speculative" nature. First, financial markets need, for their risk-diversifying function, the participation of a large number of risk-taking speculators. But competition among professional speculators is like a Keynesian beauty-contest that constantly exposes financial markets to risks of bubble and bust. Second and more fundamentally, the article maintains that "money" that is the capitalist economy's ultimate source of efficiency is also its ultimate source of instability. Indeed, Wicksell's Interest and Prices showed how a monetary disequilibrium sets off cumulative inflation or deflation, and Keynes' General Theory then pointed out that it is the stickiness of money wage that saves capitalist economy from its inherent instability, albeit at the expense of full employment. This article also contends that such monetary instability has manifested itself in the current crisis in the forms of the collapse of liquidity in the whole financial markets as well as of the decline of confidence on dollar as the global capitalism's key currency.
    Date: 2009–08
  4. By: Freeman, Alan
    Abstract: This paper is a prepublication version of a paper accepted for publication by Third World Quarterly. It offers a critique of the picture of world growth and world inequality generally disseminated by international agencies. The positive view commonly presented depends, it shows, on the widespread consensus that economic performance should be measured using ‘Purchasing Power Parity’ (PPP) statistics, instead of market exchange rates. Although originally conceived narrowly as a basis for comparing living standards, PPP indicators are now promoted, with scant pause for critical thought, as a unique and unexceptionable standard for comparing and aggregating national income statistics. To get to the heart of the flaws in the PPP concept, this article adopts a unique approach: it accepts the claims made on their behalf at face value. It shows that, even on the basis of these claims, the wrong conclusions have been drawn, which in turn shows that they are not fit for purpose. By comparing PPP and Market Exchange Rate measures of inequality it shows that what really took place, in the closing decades of the last century, was a systematic reduction in the prices of consumption goods in the third world. PPP statistics have concealed this underlying and unsustainable trend, allowing it to be packaged as a stable reduction in poverty. Neither genuine growth, nor lasting and sustainable poverty reduction, were achieved over this period. The fall in the price of consumer goods masked a systematic failure, for much of the third world, to overcome the central problem of development – the high price of capital goods, which PPP statistics understate and, intermediate goods, which PPP statistics completely omit.
    Keywords: Inequality; Development; Value Theory; Temporalism; World Systems Theory; Dependency Theory; Globalization; TSSI; General Equilibrium
    JEL: O10 C0 B4
    Date: 2008–12–01
  5. By: Marianna Belloc (Sapienza University of Rome); Samuel Bowles (Santa Fe Institute, University of Siena, and University of Massachusetts Amherst)
    Abstract: Cultural and institutional differences among nations may result in differences in the ratios of marginal costs of goods in autarchy and thus be the basis of specialization and comparative advantage, as long as these differences are not eliminated by trade. We provide an evolutionary model of endogenous preferences and institutions under autarchy, trade and factor mobility in which multiple asymptotically stable cultural-institutional conventions may exist, among which transitions may occur as a result of decentralized and un-coordinated actions of employers or employees. We show that: i) specialization and trade may arise and enhance welfare even when the countries are identical other than their cultural-institutional equilibria; ii) trade liberalization does not lead to convergence, it reinforces the cultural-institutional differences upon which comparative advantage is based and may thus impede even Pareto-improving cultural-institutional transitions; and iii) by contrast, greater mobility of factors of production favors decentralized transitions to a superior cultural-institutional convention by reducing the minimum number of cultural or institutional innovators necessary to induce a transition. JEL Categories: D23, F15, F16, C73
    Keywords: institutions, incomplete contracts, evolutionary game theory, culture, trade integration, factor mobility, globalization
    Date: 2009–08
  6. By: Martha Poon (CSI - Centre de sociologie de l'innovation - CNRS : UMR7185 - Mines ParisTech)
    Abstract: (Provides original sociological research on the development of consumer credit scoring in the United States and its links to subprime mortgage finance.)
    Keywords: Science and Technology Studies; Economic Sociology; Social Studies of Finance; subprime mortgages; consumer credit; risk
    Date: 2009
  7. By: Dan Usher (Queen's University)
    Abstract: A common, though by no means universally-accepted doctrine among practitioners of law and economics is that redistribution is no business of the law. This efficiency-only doctrine is not that redistribution is unworthy as a social objective, but that any given benefit to the poor is attainable at a lower cost to the rich through taxation than through the choice of legal rules. The rationale for the efficiency-only doctrine is that redistributive law creates a double distortion: an initial distortion arising from redistribution pre se, through taxation or through law, and an additional distortion all its own. The efficiency-only doctrine is sometimes valid, but is far narrower than its advocates would seem to suggest, and is inapplicable to most of what is commonly thought of as redistributive law. Redistribution is best supplied by a balance of law and taxation.
    Keywords: Law, Income Tax, Redistribution
    JEL: K10 K34 H21 H26
    Date: 2009–06
  8. By: Edoardo Gallo
    Abstract: This paper presents a bargaining model between individuals belonging to different groups where the equilibrium outcome depends on the communication network within each group. Belonging to a group gives an informational advantage: connections help to gather information about past transactions and this information can be used to make more accurate demands in future bargaining rounds. In the long-term there is a unique stochastically stable equilibruim which depends on the peripheral or least connected individuals in each group. Comparative statistics shows that a denser and more homogeneous network allows members of a group to obtain a better deal. An empirical analysis of the observed price differential between Asian and white buyers in New York’s Fulton fish market is consistent with these predictions. An extension explores an alternative set-up where buyers and sellers belong to the same communication network: if the network is regular and the agents are homogeneous then the equilibrium division in 50-50.
    Keywords: Network, Noncooperative bargaining, Core-periphery networks, Fulton fish market, 50-50 division.
    JEL: C73 C78 D83
    Date: 2009

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