nep-pke New Economics Papers
on Post Keynesian Economics
Issue of 2010‒01‒16
five papers chosen by
Karl Petrick
University of the West Indies

  1. Foreign Trade Was Not an Engine of Growth By McCloskey, Deirdre
  2. Growth, Development Policy,Job Creation and Poverty Reduction By Lance Taylor
  3. Strong Subjectivism in the Marxian Theory of Exploitation: A Critique By Roberto Veneziani; Naoki Yoshihara
  4. The Dynamics of Capitalism By Scherer, F. M.
  5. "green stimulus,"economic recovery, and long-term sustainable development By Strand, Jon; Toman, Michael

  1. By: McCloskey, Deirdre
    Abstract: Trade reshuffles. No wonder, then, that it doesn’t work as an engine of growth—not for explaining the scale of growth that overcame the West and then the Rest 1800 to the present. Yet many historians, such as Walt Rostow or Robert Allen or Joseph Inikori, have put foreign trade at the center of their accounts. Yet the Rest had been vigorously trading in the Indian Ocean long before the Europeans got there—indeed, that’s why the West wanted to get there. Trade certainly set the prices that British industrialists faced, such as the price of wheat or the interest rate. But new trade does not put people to work, unless they start unemployed. If they are, then any source of demand, such as the demand for domestic service, would be as important as the India trade. Foreign trade is not a net gain, but a way of producing importables at the sacrifice of exportables. The Harberger point implies that static gains from trade are small beside the 1500% of growth to be explained, or even the 100% in the first century in Britain. Trade is anyway too old and too widespread to explain a uniquely European—even British—event. One can appeal to “dynamic” effects, but these too can be shown to be small, even in the case of the gigantic British cotton textile industry. And if small causes lead to large consequences, the model is instable, and any old thing can cause it to tip. Ronald Findlay and Kevin O’Rourke favor foreign trade on the argument that power led to plenty. But domination is not the same thing as innovation. In short, the production possibility curve did not move out just a little, as could be explained by trade or investment or reshuffling. It exploded, and requires an economics of discovery, not an economics of routine exchanges of cotton textiles for tea.
    Keywords: foreign trade; engines of growth; industrial revolution; economic growth; Britain
    JEL: B10 N10
    Date: 2009–07–07
  2. By: Lance Taylor
    Abstract: Policies seeking to directly help the poor have an important role to play. But without sustained growth in per capita output and significant job creation, they will not succeed. Policies promoting growth have been suggested, most notably by avoiding pro-cyclical responses to macroeconomic shocks (especially from abroad), steering macroeconomic prices, such as exchange and interest rates, to support developmental objectives, pursuing industrial and trade policies involving increasing returns, promoting financial development, and making productive use of foreign aid. Ensuring national economies have sufficient policy space to achieve sustained growth and structural change should be the over-riding policy concern.
    Keywords: Macroeconomic policy; development policy; economic growth; poverty reduction; employment; job creation.
    JEL: O10 I30
    Date: 2009–12
  3. By: Roberto Veneziani (Queen Mary, University of London); Naoki Yoshihara (Hitotsubashi University)
    Abstract: This paper critically analyses the strongly subjectivist approach to exploitation theory recently proposed by Matsuo ([7]), in the context of general convex economies with heterogeneous agents. It is proved that the Fundamental Marxian Theorem is not preserved in his subjectivist approach, contrary to Matsuo's claims, and that no meaningful subjectivist exploitation index can be constructed. It is argued that a minimal objectivism is necessary in exploitation theory, whereby subjective preferences do not play a direct, definitional role. An alternative objectivist approach is briefly analysed, which is related to the 'New Interpretation' ([1]; [3]). It is argued that it captures the core intuitions of exploitation theory and it provides appropriate indices of individual and aggregate exploitation. Further, it is shown that it preserves the FMT in general economies.
    Keywords: Exploitation, Subjective preferences, Fundamental Marxian Theorem, General convex cone economies
    JEL: D31 D46 D63 E11 B51
    Date: 2009–12
  4. By: Scherer, F. M. (Harvard University)
    Abstract: This paper, written for a larger compendium edited by Dennis Mueller, examines key dynamic features of capitalistic economies and how prominent economists such as Schumpeter, Marx, Keynes, and von Mises perceived them. The emphasis is on the growth in real per capita income achieved by capitalistic economies during the past two centuries. A Gedankenexperiment exploring what might have happened if the growth experience began earlier, in the year 800, shows how astonishing the record has been. Technological innovation, in large part endogenous to the capitalist system, is a key explanation for the growth achieved. A briefer discursion deals with breaks in growth trajectories, notably, in the form of business downturns and business fluctuations more generally. They are shown to be small relative to the longer-term growth pattern. An equally important issue is how the gains from growth have been distributed. Contrary to Marx's "immiserization" prediction, the gains have for the most part been widely shared among capitalists and workers alike. However, stagnation of real income growth for American production workers since the 1970s introduces new and troubling questions, several of whose provisional explanations are investigated.
    Date: 2010–01
  5. By: Strand, Jon; Toman, Michael
    Abstract: This paper discusses short-run and long-run effects of"green stimulus"efforts, and compares these effects with"non-green"fiscal stimuli. Green stimulus is defined here as short-run fiscal stimuli that also serve a"green"or environmental purpose in a situation of"crisis"characterized by temporary under-employment. A number of recently enacted national stimulus packages contain sizeable"green"components. The authors categorize effects according to their a) short-run employment effects, b) long-run growth effects, c) effects on carbon emissions, and d)"co-benefit"effects (on the environment, natural resources, and for other externalities). The most beneficial"green"programs in times of crisis are those that can stimulate employment in the short run, and lead to large"learning curve"effects via lower production costs in the longer term. The overall assessment is that most"green stimulus"programs that have large short-run employment and environmental effects are likely to have less significant positive effects for long-run growth, and vice versa, implying a trade-off in many cases between short-run and long-run impacts. There are also trade-offs for employment generation in that programs that yield larger (smaller) employment effects tend to lead to more employment gains for largely lower-skilled (higher-skilled) workers, so that the long-term growth effects are relatively small (large). Ultimately, the results reinforce the point that different instruments are needed for addressing different problems.
    Keywords: Environmental Economics&Policies,Energy Production and Transportation,Climate Change Mitigation and Green House Gases,Climate Change Economics,Transport Economics Policy&Planning
    Date: 2010–01–01

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