nep-pke New Economics Papers
on Post Keynesian Economics
Issue of 2011‒02‒26
five papers chosen by
Karl Petrick
University of the West Indies

  1. The Influence of Michal Kalecki on Joan Robinson’s Approach to Economics By Peter Kriesler; G. C. Harcourt
  2. Money and Keynesian Uncertainty By Lucarelli, B.
  3. The Origins and Severity of the Public Pension Crisis By Dean Baker
  4. (Mis)understanding Classical Economics By Thomas, Alex M
  5. The Macroeconomics of the Credit Crisis: In Search of Externalities for Macro-Prudential Supervision By Frank A.G. den Butter

  1. By: Peter Kriesler (School of Economics, University of New South Wales); G. C. Harcourt (Jesus College Cambridge and University of New South Wales)
    Abstract: Joan Robinson and Michal Kalecki were two of the intellectual giants of twentieth century economics, whose contributions over a significant range of issues have had major impacts on economics. This paper examines the significant communications between them, concentrating on the major cross influences which were apparent from the first time that they met. It focuses on Kalecki’s influence on Joan Robinson in a number of areas. In particular, there was much communication between them about developments in Keynesian theory, where Joan Robinson was influenced by Kalecki’s Marxian approach. Further areas of influence included the role and determination of investment and innovation, the nature of price setting in capitalist economies, and methodological issues associated with the nature of economic theory, particularly with respect to economic cycles and trends.
    Keywords: History of Economic Thought since 1925; Current Heterodox Approaches; Economic Methodology
    JEL: B20 B50 B41
    Date: 2010–11
  2. By: Lucarelli, B.
    Abstract: Keynes’s theory of a monetary economy and his liquidity preference theory of investment will be examined in order to highlight the essential properties of money under the conditions of uncertainty, which inevitably prefigures the existence of involuntary unemployment and could – within a laissez faire, deregulated financial system – induce phases of endemic financial instability and crises.
    Keywords: uncertainty; money; liquidity preference; crisis; investment
    JEL: B10 D53 B31 A20 B50 B22 A10
    Date: 2010–06–26
  3. By: Dean Baker
    Abstract: There has been considerable attention given in recent months to the shortfalls faced by state and local pension funds. Using the current methodology of assessing pension obligations, the shortfalls sum to nearly $1 trillion. Some analysts have argued that by using what they consider to be a more accurate methodology, the shortfalls could be more than three times this size. Based on these projections, many political figures have argued the need to drastically reduce the generosity of public sector pensions, and possibly to default on pension obligations already incurred. This paper shows: * Most of the pension shortfall using the current methodology is attributable to the plunge in the stock market in the years 2007-2009. * The argument that pension funds should only assume a risk-free rate of return in assessing pension fund adequacy ignores the distinction between governmental units, which need be little concerned over the timing of market fluctuations, and individual investors, who must be very sensitive to market timing. * The size of the projected state and local government shortfalls measured as a share of future gross state products appear manageable.
    Keywords: pension funds, pensions
    JEL: H H5 H55
    Date: 2011–02
  4. By: Thomas, Alex M
    Abstract: In 1936, Keynes published The General Theory of Employment, Interest and Money, one of the most influential books in economics of the twentieth century. With this publication, Keynes has confused and will continue to confuse generations of economists as to what classical economics means. This short essay argues that the 'classical economists' whom Keynes referred to in The General Theory were actually those economists who primarily employed 'marginal methods' in economics.
    Keywords: Classical economics; Keynes; Ricardo
    JEL: B12 E12 B22 B13
    Date: 2011
  5. By: Frank A.G. den Butter (VU University Amsterdam)
    Abstract: In the analysis of the credit crisis of 2007-2010 a clear distinction should be made between (i) the initial shock; (ii) the propagation and amplification of the initial shock to the systemic crisis of the financial markets; and (iii) the transmission of the credit crisis to the real economic sector causing a major cyclical downturn now known as the great recession. This paper argues that banking supervision failed to anticipate and repair the market failure that caused the huge amplification of the relatively small initial shock. As the repair of market failure is the only sound economic argument for regulation, banking supervisors should now focus on the externalities that caused the amplification of the shock and use that knowledge for adequate macro-prudential supervision in the future. Macro-economic models can be helpful in this search for externalities. The character and timing of future shocks are unpredictable, but contagion in the propagation mechanisms should be mitigated as much as possible.
    Keywords: credit crisis; externalities; macro-prudential supervision; contagion; fallacy of composition
    JEL: E42 E58 G38
    Date: 2010–05–17

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