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on Post Keynesian Economics |
| By: | L. Randall Wray |
| Abstract: | In this paper I first provide an overview of alternative approaches to money, contrasting the orthodox approach, in which money is neutral, at least in the long run; and the Marx-Veblen-Keynes approach, or the monetary theory of production. I then focus in more detail on two main categories: the orthodox approach that views money as an efficiency-enhancing innovation of markets, and the Chartalist approach that defines money as a creature of the state. As the state's "creature," money should be seen as a public monopoly. I then move on to the implications of viewing money as a public monopoly and link that view back to Keynes, arguing that extending Keynes along these lines would bring his theory up to date. |
| Keywords: | Money; Public Monopoly; Monetary Theory of Production; Keynes; Marx; Veblen; Knapp; Chartalism |
| JEL: | B14 B15 B22 B52 E12 E40 E42 E50 E51 E52 G14 G21 H1 H3 H4 H44 |
| Date: | 2011–03 |
| URL: | http://d.repec.org/n?u=RePEc:lev:wrkpap:wp_658&r=pke |
| By: | Barens, Ingo |
| Date: | 2011–03 |
| URL: | http://d.repec.org/n?u=RePEc:dar:ddpeco:49241&r=pke |
| By: | Jorg Bibow |
| Abstract: | This paper provides a brief exposition of financial markets in Post Keynesian economics. Inspired by John Maynard Keynes's path-breaking insights into the role of liquidity and finance in "monetary production economies," Post Keynesian economics offers a refreshing alternative to mainstream (mis)conceptions in this area. We highlight the importance of liquidity-as provided by the financial system—to the proper functioning of real world economies under fundamental uncertainty, contrasting starkly with the fictitious modeling world of neo-Walrasian exchange economies. The mainstream vision of well-behaved financial markets, channeling saving flows from savers to investors while anchored by fundamentals, complements a notion of money as an arbitrary numeraire and mere convenience, facilitating exchange but otherwise "neutral." From a Post Keynesian perspective, money and finance are nonneutral but condition and shape real economic performance. It takes public policy to anchor asset prices and secure financial stability, with the central bank as the key public policy tool. |
| Keywords: | Financial Markets; Liquidity; Uncertainty; Rate of Interest; Instability; Central Banking |
| JEL: | B31 E44 E50 |
| Date: | 2011–03 |
| URL: | http://d.repec.org/n?u=RePEc:lev:wrkpap:wp_660&r=pke |
| By: | L. Randall Wray |
| Abstract: | Stability is destabilizing. These three words concisely capture the insight that underlies Hyman Minsky's analysis of the economy's transformation over the entire postwar period. The basic thesis is that the dynamic forces of a capitalist economy are explosive and must be contained by institutional ceilings and floors. However, to the extent that these constraints achieve some semblance of stability, they will change behavior in such a way that the ceiling will be breached in an unsustainable speculative boom. If the inevitable crash is "cushioned" by the institutional floors, the risky behavior that caused the boom will be rewarded. Another boom will build, and the crash that follows will again test the safety net. Over time, the crises become increasingly frequent and severe, until finally "it" (a great depression with a debt deflation) becomes possible. Policy must adapt as the economy is transformed. The problem with the stabilizing institutions that were put in place in the early postwar period is that they no longer served the economy well by the 1980s. Further, they had been purposely degraded and even in some cases dismantled, often in the erroneous belief that "free" markets are self-regulating. Hence, the economy evolved over the postwar period in a manner that made it much more fragile. Minsky continually formulated and advocated policy to deal with these new developments. Unfortunately, his warnings were largely ignored by the profession and by policymakers—until it was too late. |
| Keywords: | Stability Is Destabilizing; Hyman Minsky; Money Manager Capitalism; Financial Instability Hypothesis; Global Financial Crisis; Self-Regulating Markets |
| JEL: | B22 B25 B52 E11 E12 E44 O11 |
| Date: | 2011–03 |
| URL: | http://d.repec.org/n?u=RePEc:lev:wrkpap:wp_659&r=pke |
| By: | Schoder, Christian |
| Abstract: | Following Lavoie et al. (2004), this paper empirically assesses four investment functions closing the Kaleckian baseline model in the long-run: (a) the Naive-Kaleckian specification without any long-run adjustment; (b) the Intermediate-Kaleckian specification with an endogenous adjustment of the normal utilization rate; (c) the Hysteresis-Kaleckian specification with an additional endogenous adjustment of autonomous investment; and (d) the French-Marxian specification with an exogenous normal utilization rate and endogenous autonomous investment. Confronting these specifications with data of the US manufacturing sector, we compare them with respect to the plausibility of the parameter estimates, the goodness of fit, the parameter stability, the out-of-sample performances and relative encompassing. We find the Intermediate-Kaleckian specification to be superior. For the Hysteresis-Kaleckian specification, we get implausible results which contradict Lavoie et al. (2004). Yet, their estimates seem to be biased due to endogeneity issues. |
| Keywords: | Kaleckian growth model; Marxian growth model; investment functions; post-Keynesian economics |
| JEL: | E12 E22 E11 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:29584&r=pke |
| By: | J Paul Dunne (University of the West of England and University of Cape Town); Elisabeth Skons (Stockholm International Peace Research Institute) |
| Abstract: | The first reference to a military industrial complex (MIC) was made by US President Eisenhower in 1961. He then referred to something historically specific: the build-up of a large permanent military establishment and a permanent arms industry, which raised his concerns for the unwarranted influence of these societal forces. Subsequently the meaning of the MIC evolved to refer to the vested interests within the state and industry in expanding the military sector and in increasing military spending, with external threats providing the justification. During the Cold War, when the defence was strongly focused on deterrence, this produced a set of specific state-industry relationships that in turn generated a beneficial environment for the development and strengthening of the MIC. With the end of the Cold War, the conditions for a strong MIC were less favourable, at least initially, with changes in the international security environment, cuts in military spending and arms production, and ensuing privatisation, commercialisation, and internationalisation of military activities as well as of arms production. This paper discusses how the MIC has been affected by these changes and the degree to which there has been continuity of old power structures and a continuing MIC. |
| JEL: | H56 D4 |
| Date: | 2011–03 |
| URL: | http://d.repec.org/n?u=RePEc:uwe:wpaper:1104&r=pke |
| By: | Engelbert Stockhammer |
| Abstract: | The paper argues that the Greek debt crisis, as well as those of other Southern European countries and Ireland, has to be seen in macroeconomic context. The sum of the public sector balance, the (domestic) private sector balance and the current account deficit (or equivalently: the capital inflows) has to add up to zero. By implication in a country that has a current account deficit either the private sector or the public sector has to run a deficit. Therefore the peripheral countries can only solve their public debt problems if there is a change in German current account surpluses. The paper explores the implications of this for wage policy in the euro zone. |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:rmf:dpaper:29&r=pke |
| By: | José Pedro Fique (Faculdade de Economia da Universidade do Porto and LIAAD, INESC-Porto) |
| Abstract: | The turmoil in the financial markets that had its roots in the 2007 US subprime crisis prompted government action all over the world motivated by contagion concerns, leaving a heavy bill for the tax payers to pick up. We find that a contributory regime based on contagion risk exposure changes the trade-off between liquidity coinsurance and counterparty risk that motivates the formation of the financial network in the first place, potentially leading to a less connected architecture. Furthermore, if that regime bestows the weight of the levy on both borrower and lender it has the potential to shift the system towards safer grounds. Since we model bank interactions as a network formation game, we are able to provide an account of the changes that come into play with the introduction of tax, which can be a fundamental factor in the design process of the policy function. |
| Keywords: | Financial Network, Regulation, Counterparty Risk, Liquidity Coinsurance |
| JEL: | D85 G18 G21 |
| Date: | 2011–03 |
| URL: | http://d.repec.org/n?u=RePEc:por:fepwps:408&r=pke |
| By: | Trevor Breusch; Farshid Vahid |
| Abstract: | Are global temperatures on a warming trend? It is difficult to be certain about trends when there is so much variation in the data and very high correlation from year to year. We investigate the question using statistical time series methods. Our analysis shows that the upward movement over the last 130-160 years is persistent and not explained by the high correlation, so it is best described as a trend. The warming trend becomes steeper after the mid-1970s, but there is no significant evidence for a break in trend in the late 1990s. Viewed from the perspective of 30 or 50 years ago, the temperatures recorded in most of the last decade lie above the confidence band of forecasts produced by a model that does not allow for a warming trend. |
| Keywords: | Land and ocean temperatures; deterministic and stochastic trends; persistence; piecewise linear trends |
| JEL: | C2 Q54 |
| Date: | 2011–03 |
| URL: | http://d.repec.org/n?u=RePEc:msh:ebswps:2011-4&r=pke |