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on Post Keynesian Economics |
| By: | Ilene Grabel |
| Abstract: | <p><i></i><span>The response by the IMF (and developing country national governments) to the current global financial crisis represents a moment of what I term “productive incoherence” that has displaced the constraining “neoliberal coherence” of the past several decades.<span> </span>Productive incoherence refers to the proliferation of inconsistent and even contradictory strategies and statements by the IMF that to date have not congealed into any sort of new, organized regime.<span> </span>Those who see </span>continuity at the IMF emphasize the reassertion of the IMF’s authority; the reiteration of pro-cyclical policy adjustment; and the maintenance of existing governance patterns within the institution. In contrast, evidence of discontinuity includes a world now populated by increasingly autonomous states in the South; the normalization of capital controls; and Fund conditionality programs that are inconsistent in key respects. <span> </span>In the face of this evidence, it is best to understand the current conjuncture as an “interregnum” that is pregnant with new development possibilities.</p> |
| Keywords: | Global financial crisis; policy space for development; International Monetary Fund; capital controls; neo-liberal policies and development |
| JEL: | E65 F53 O23 |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:uma:periwp:wp214_revised&r=pke |
| By: | L. Randall Wray |
| Abstract: | Before we can reform the financial system, we need to understand what banks do; or, better, what banks should do. This paper will examine the later work of Hyman Minsky at the Levy Institute, on his project titled "Reconstituting the United States’ Financial Structure." This led to a number of Levy working papers and also to a draft book manuscript that was left uncompleted at his death in 1996. In this paper I focus on Minsky’s papers and manuscripts from 1992 to 1996 and his last major contribution (his Veblen-Commons Award–winning paper). Much of this work was devoted to his thoughts on the role that banks do and should play in the economy. To put it as succinctly as possible, Minsky always insisted that the proper role of the financial system was to promote the "capital development" of the economy. By this he did not simply mean that banks should finance investment in physical capital. Rather, he was concerned with creating a financial structure that would be conducive to economic development to improve living standards, broadly defined. Central to his argument is the understanding of banking that he developed over his career. Just as the financial system changed (and with it, the capitalist economy), Minsky’s views evolved. I will conclude with general recommendations for reform along Minskyan lines. |
| Keywords: | China; Hyman Minsky; Banks and Shadow Banks; Money Manager Capitalism; Finance Capital; Financial Instability Hypothesis; Global Financial Crisis; Debt Deflation Theory |
| JEL: | E12 E32 E58 G2 G18 G21 |
| Date: | 2010–08 |
| URL: | http://d.repec.org/n?u=RePEc:lev:wrkpap:wp_612&r=pke |
| By: | Singh, Ajit |
| Abstract: | This paper explores the question of whether the institution of the stock market is likely to be helpful to developing countries in promoting their real economy and ensuring fast industrial growth. The case for and against the stock market inevitably involves a discussion of the important related subjects of corporate finance and corporate governance. Contrary to the literature the paper arrives at a negative overall assessment of the institution of the stock market in relation to economic development. It also contributes by its policy proposals concerning the markets for corporate control, which again are in conflict with much of the conventional wisdom on the subject. |
| Keywords: | Stock market; Market for corporate control; Corporate finance; Corporate governance |
| JEL: | O1 A1 O16 |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:24346&r=pke |
| By: | Fernández, Raquel (New York University) |
| Abstract: | This paper reviews the literature on culture and economics, focusing primarily on the epidemiological approach. The epidemiological approach studies the variation in outcomes across different immigrant groups residing in the same country. Immigrants presumably differ in their cultures but share a common institutional and economic environment. This allows one to separate the effect of culture from the original economic and institutional environment. This approach has been used to study a variety of issues, including female labor force participation, fertility, labor market regulation, redistribution, growth, and financial development among others. |
| Keywords: | culture, beliefs, preferences, norms |
| JEL: | O10 Z1 D01 D1 |
| Date: | 2010–08 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp5122&r=pke |
| By: | Nancy Birdsall |
| Abstract: | Inclusive growth is widely embraced as the central economic goal for developing countries, but the concept is not well defined in the development economics literature. Since the early 1990s, the focus has been primarily on pro-poor growth, with the “poor” being people living on less than $1 day, or in some regions $2 day. The idea of pro-poor growth emerged in the early 1990s as a counterpoint to a concern with growth alone (measured in per-capita income) and is generally defined as growth which benefits the poor as much or more than the rest of the population. Examples include conditional cash transfers, which target the poor while minimizing the fiscal burden on the public sector, and donors’ emphasizing primary over higher education as an assured way to benefit the poor while investing in long-term growth through increases in human capital. Yet these pro-poor, inclusive policies are not necessarily without tradeoffs in fostering long-run growth. In this paper I argue that the concept of inclusive growth should go beyond the traditional emphasis on the poor (and the rest) and take into account changes in the size and economic command of the group conventionally defined as neither poor nor rich, i.e., the middle class. |
| Keywords: | middle class, developing countries, growth, economics, development, poverty, human capital |
| Date: | 2010–03 |
| URL: | http://d.repec.org/n?u=RePEc:cgd:wpaper:207&r=pke |
| By: | Jon D. Wisman; Barton Baker |
| Abstract: | Inequality increased dramatically in the decades leading up to the financial crises of both 1929 and 2008. Yet students of both crises have largely ignored any role that rising inequality might have played in rendering the financial sector more vulnerable to systemic dysfunction. This study draws upon the work of Thorstein Veblen, Michal Kalecki, and Karl Marx to clarify the manner in which growing inequality prior to both crises made U.S. financial markets more prone to systemic dysfunction. Greater inequality generated three dynamics that heightened conditions in which these financial crises might occur. The first is that greater inequality meant that individuals were forced to struggle harder to find ways to consume more to maintain their relative social status, thereby reducing their savings and increasing their indebtedness. The second is that holding ever greater income and wealth, the elite flooded financial markets with credit, helping keep interest rates low and encouraging the creation of new credit instruments. The third dynamic is that, as the rich took larger shares of income and wealth, they gained more command over ideology and hence politics. Reducing the size of government, tax cuts for the rich, deregulating the economy, and failing to regulate newly evolving credit instruments flowed out of this ideology. |
| Date: | 2010–07 |
| URL: | http://d.repec.org/n?u=RePEc:amu:wpaper:2010-10&r=pke |
| By: | Jon D. Wisman |
| Abstract: | Although healthy societies may require a degree of material inequality, higher levels of inequality have been linked to negative social consequences ranging from poorer health to lessened democracy. However, the greatest contemporary threat of excessive inequality might be its contribution to increased environmental degradation. Indeed, avoiding devastation of our habitat may be the greatest challenge ever faced by humanity. This article explores the manner in which inequality encourages consumption, by drawing upon Thorstein Veblen’s theory of consumer behavior, whereby in societies in which fluid social mobility is believed possible, inequality encourages households to seek social certification and social status through consumption. Rising inequality strengthens the intensity with which households struggle to maintain social respectability through increased consumption. The ideology, institutions, and behavior generated by this focus on consumption reduce the potential for people to achieve certification of value through more environmentally friendly domains such as work and community. This article also addresses the manner in which inequality impedes responses aimed at reducing environmental damage by augmenting the political power of those whose interests would be harmed by environmental measures. Indeed, the wealthy benefit threefold from pollution: Their disproportionate consumption is made less expensive, their assets yield higher profits, and they are better able to shield themselves from the negative consequences of environmental destruction. |
| Keywords: | Conspicuous consumption, political power, ideology, work quality, community |
| Date: | 2010–07 |
| URL: | http://d.repec.org/n?u=RePEc:amu:wpaper:2010-09&r=pke |
| By: | Aronsson, Thomas (Department of Economics, Umeå University); Johansson-Stenman, Olof (Department of Economics, School of Business, Economics and Law, Göteborg University) |
| Abstract: | Almost all previous studies on public policy under relative consumption concerns have ignored the role of leisure for status comparisons. Inspired by Veblen (1899), this paper considers a two-type optimal income tax model, where people care about their relative consumption, and where the importance of relative consumption increases with the use of leisure due to increased consumption visibility. We show that increased consumption positionality typically implies higher marginal income tax rates for both ability-types. Using a leisure-weighted measure of reference consumption, rather than a measure where leisure plays no role as in the previous literature, increases the marginal income tax rate implemented for the low-ability type and decreases the marginal income tax rate implemented for the high-ability type, i.e., it gives rise to a regressive tax component.<p> |
| Keywords: | optimal taxation; redistribution; public goods; relative consumption; status; positional goods |
| JEL: | D62 H21 H23 H41 |
| Date: | 2010–08–19 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:gunwpe:0466&r=pke |
| By: | Christian E. Weller; Jeffrey Wenger |
| Abstract: | Rising health care costs and declining personal savings rates are nearly synonymous with household medical debt. For some, defined contribution (DC) retirement savings plans provide a ready source of funds to meet these medical debts. We examine whether health status and health insurance coverage predict the likelihood of having a DC loan using data from the Federal Reserve’s triennial Survey of Consumer Finances from 1989 to 2007. We find that poor health raises the likelihood that a household will borrow from their DC plans, even controlling for other forms of debt, access to credit, and whether households are covered by health insurance. Our estimates of the amount of the DC loan, taking selection effects into account, indicates that DC loan amounts are also influenced by health status; those with poor health borrow more from their DC plans. Apart from health status, once a household decides to borrow from their retirement funds, race and education also influence how much to borrow. We argue that public policy can improve the long-term financial retirement security of households by offering more opportunities to save for medical emergencies, while cautiously maintaining the opportunity to borrow from DC plans.<span> </span><p> </p> |
| Keywords: | Defined contribution retirement savings plans; pension debt; health insurance coverage; health status |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:uma:periwp:wp231&r=pke |
| By: | Jesus Felipe; Utsav Kumar; Arnelyn Abdon |
| Abstract: | We develop an Index of Opportunities for 130 countries based on their capabilities to undergo structural transformation. The Index of Opportunities has four dimensions, all of them characteristic of a country’s export basket: (1) sophistication; (2) diversification; (3) standardness; and (4) possibilities for exporting with comparative advantage over other products. The rationale underlying the index is that, in the long run, a country’s income is determined by the variety and sophistication of the products it makes and exports, which reflect its accumulated capabilities. We find that countries like China, India, Poland, Thailand, Mexico, and Brazil have accumulated a significant number of capabilities that will allow them to do well in the long run. These countries have diversified and increased the level of sophistication of their export structures. At the other extreme, countries like Papua New Guinea, Malawi, Benin, Mauritania, and Haiti score very poorly in the Index of Opportunities because their export structures are neither diversified nor sophisticated, and they have accumulated very few and unsophisticated capabilities. These countries are in urgent need of implementing policies that lead to the accumulation of capabilities. |
| Keywords: | Capabilities; Index of Opportunities; Diversification; Open Forest; Product Space; Sophistication; Standardness |
| JEL: | O10 O57 |
| Date: | 2010–08 |
| URL: | http://d.repec.org/n?u=RePEc:lev:wrkpap:wp_613&r=pke |