|
on Post Keynesian Economics |
| By: | L. Randall Wray |
| Abstract: | The world's worst economic crisis since the 1930s is now well into its third year. All sorts of explanations have been proffered for the causes of the crisis, from lax regulation and oversight to excessive global liquidity. Unfortunately, these narratives do not take into account the systemic nature of the global crisis. This is why so many observers are misled into pronouncing that recovery is on the way-or even under way already. I believe they are incorrect. We are, perhaps, in round three of a nine-round bout. It is still conceivable that Minsky's "it"-a full-fledged debt deflation with failure of most of the largest financial institutions-could happen again. Indeed, Minsky's work has enjoyed unprecedented interest, with many calling this a "Minsky moment" or "Minsky crisis." However, most of those who channel Minsky locate the beginnings of the crisis in the 2000s. I argue that we should not view this as a "moment" that can be traced to recent developments. Rather, as Minsky argued for nearly 50 years, we have seen a slow realignment of the global financial system toward "money manager capitalism." Minsky's analysis correctly links postwar developments with the prewar "finance capitalism" analyzed by Rudolf Hilferding, Thorstein Veblen, and John Maynard Keynes-and later by John Kenneth Galbraith. In an important sense, over the past quarter century we created conditions similar to those that existed in the run-up to the Great Depression, with a similar outcome. Getting out of this mess will require radical policy changes no less significant than those adopted in the New Deal. |
| Keywords: | Hyman Minsky; Hilferding; Veblen; Keynes; John Kenneth Galbraith; Financial Crisis; Minsky Crisis; Minsky Moment; Finance Capitalism; Money Manager Capitalism; Debt Deflation; Can It Happen Again? |
| JEL: | B22 B25 B52 E11 E12 E44 G18 G20 G21 |
| Date: | 2011–03 |
| URL: | http://d.repec.org/n?u=RePEc:lev:wrkpap:wp_661&r=pke |
| By: | Dirk J. Bezemer |
| Abstract: | Given the economy's complex behavior and sudden transitions as evidenced in the 2007–08 crisis, agent-based models are widely considered a promising alternative to current macroeconomic practice dominated by DSGE models. Their failure is commonly interpreted as a failure to incorporate heterogeneous interacting agents. This paper explains that complex behavior and sudden transitions also arise from the economy's financial structure as reflected in its balance sheets, not just from heterogeneous interacting agents. It introduces "flow-of-funds" and "accounting" models, which were preeminent in successful anticipations of the recent crisis. In illustration, a simple balance-sheet model of the economy is developed to demonstrate that nonlinear behavior and sudden transition may arise from the economy’s balance-sheet structure, even without any microfoundations. The paper concludes by discussing one recent example of combining flow-of-funds and agent-based models. This appears a promising avenue for future research. |
| Keywords: | Credit Crisis; Finance; Complex Systems; DSGE; Agent-based Models; Stock-flow Consistent Models |
| JEL: | B52 C63 E32 E37 E44 |
| Date: | 2011–04 |
| URL: | http://d.repec.org/n?u=RePEc:lev:wrkpap:wp_665&r=pke |
| By: | L. Randall Wray |
| Abstract: | This paper examines the causes and consequences of the current global financial crisis. It largely relies on the work of Hyman Minsky, although analyses by John Kenneth Galbraith and Thorstein Veblen of the causes of the 1930s collapse are used to show similarities between the two crises. K.W. Kapp's "social costs" theory is contrasted with the recently dominant "efficient markets" hypothesis to provide the context for analyzing the functioning of financial institutions. The paper argues that, rather than operating "efficiently," the financial sector has been imposing huge costs on the economy-costs that no one can deny in the aftermath of the economy's collapse. While orthodox approaches lead to the conclusion that money and finance should not matter much, the alternative tradition-from Veblen and Keynes to Galbraith and Minsky-provides the basis for developing an approach that puts money and finance front and center. Including the theory of social costs also generates policy recommendations more appropriate to an economy in which finance matters. |
| Keywords: | Hyman Minsky; Kapp; Galbraith; Veblen; Coase; Theory of Social Costs; Efficient Markets Hypothesis; Money; Finance; Social Efficiency; Social Provisioning; Shadow Banks; Financial Innovation; Casino Capitalism; Securitization; Deregulation; Self-Supervision |
| JEL: | B14 B15 B22 B52 E3 E12 E40 E42 E50 E51 E52 G14 G21 |
| Date: | 2011–03 |
| URL: | http://d.repec.org/n?u=RePEc:lev:wrkpap:wp_662&r=pke |
| By: | Kirsten Ford |
| Abstract: | The term “Institutional Economics” has been applied to some of capitalism’s strongest critics as well as its most ardent apologists. This paradox in terms has bred contradictory literature in development economics, some declaring the death of this line of thought while others herald its resurgence. In examining the roots of Institutional economics, this paper attempts to disentangle the ambiguity surrounding this label. The Institutional Political Economy of Ha-Joon Chang will then be examined as a return to Institutionalism’s radical roots in development economics. Concluding remarks suggest that this approach is capable of encompassing gender as an analytical category, an extension that would improve the ability of policy makers to assess the impacts of macroeconomic policy. |
| Keywords: | History of Economic Thought, Veblen, Institutionalism, Methodology JEL Classification: B000, B150, B250, B400 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:uta:papers:2011_07&r=pke |
| By: | Chassem, Nacisse Palissy |
| Abstract: | The purpose of this study is to test the hypothesis of Thirlwall (1979) for the countries of the Franc Zone. These countries share in common the fixed parity of their currencies against the euro. One issue that concerns most of these countries is the current account deficit. By applying the cointegration bounds test of Pesaran et al. (2001) to annual data (1970-2006), the study shows that Thirlwall's hypothesis is verified for at least 11 of the 15 countries of the Franc Zone. This result raises the question of the effectiveness of current account deficits recorded by these countries and suggests that expansionary monetary policy, strategies for export growth, reevaluation of the CFA franc against the euro would help to relax the constraint of balance of payments on demand and thus accelerate economic growth without damaging the current account in the Franc Zone. |
| Keywords: | Thirlwall’s hypothesis, Balance of payments constrained growth rate, cointegration bounds test, Franc Zone |
| JEL: | C32 F43 |
| Date: | 2011–03–31 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:29990&r=pke |
| By: | Nathaniel Cline, William McColloch and Kirsten Ford |
| Abstract: | A number of Marxist scholars have tied aspects of Marx’s thought to certain Aristotelian categories, yet remarkably little is said of Marx’s dialectical materialism in this literature. Here we attempt to lay a foundation for such an effort, paying particular attention to the way in which Aristotle’s mediated starting point resonates in Marx’s method. While Hegel is able to grasp man’s self-creation as a process, his dialectical method proceeds from an unmediated starting point, and impresses Idealism upon the Aristotelian categories. In rejecting the Idealist dimensions of Hegel’s dialectic, Marx implicitly reclaims the materialist dimensions of Aristotle’s system. It will be argued here that such an interpretation sheds important light on the nature of Marx’s departure from Hegel, and on his method in Capital. |
| Keywords: | Marx, Aristotle, Hegel, Methodology JEL Classification: B000, B140, B490, B510 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:uta:papers:2011_08&r=pke |
| By: | William McColloch |
| Abstract: | This paper argues that despite a growing body of scholarly literature on Sir James Steuart, his theory of history and influence on Marxian political economy has been largely ignored. The approach of this paper is motivated, in part, by Marx’s sympathetic treatment of Steuart found in the opening of his Theories of Surplus Value, and in scattered asides throughout the remainder of his work. We argue that Steuart’s importance to students of the history of political economy is three-fold: First, following Marx, we consider the unique and dynamic role played by history in Steuart’s system. Steuart appears to have been the first thinker in political economy to both recognize the historical specificity of capitalism, and to conspicuously incorporate that realization into his system. Secondly, in Steuart’s approach to the question of value and profit we find conceptions that defy easy classification. Steuart is seen to plainly abandon the mercantilist understanding of profit as determined in the sphere of exchange alone, and to treat what he calls the real value of a commodity as intimately related to its necessary labor time. Finally, we argue that Steuart’s contemporary notoriety made him far more influential than is commonly recognized. In particular, we contend that Steuart, via Hegel, may have exercised an indirect influence on Marx’s own theory of history, in ways that Marx could not have recognized. |
| Keywords: | History of Economic Thought, Sir James Steuart, Classical School JEL Codes: B12, B14, B41, N43 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:uta:papers:2011_09&r=pke |
| By: | Pedro Leao; Alfonso Palacio-Vera |
| Abstract: | The creation of the Economic and Monetary Union (EMU) has not brought significant gains to the Portuguese economy in terms of real convergence with wealthier eurozone countries. We analyze the causes of the underperformance of the Portuguese economy in the last decade, discuss its growth prospects within the EMU, and make two proposals for urgent institutional reform of the EMU. We argue that, under the prevailing institutional framework, Portugal faces a long period of stagnation, high unemployment, and painful structural reform, and conclude that, in the absence of institutional reform of the EMU, getting out of the eurozone represents a serious political option for Portugal. |
| Keywords: | Nominal Wage Cuts; Eurozone; Relative Unit Labor Costs; Zero-sum Game |
| JEL: | E32 E65 F32 F41 J50 |
| Date: | 2011–03 |
| URL: | http://d.repec.org/n?u=RePEc:lev:wrkpap:wp_664&r=pke |
| By: | Peter Nunnenkamp; Rainer Thiele |
| Abstract: | The Monterrey Consensus agreed at the UN summit on Financing for Development in 2002 promised a breakthrough in terms of donor generosity, aid effectiveness and new means of financing. However, the development orientation of world leaders proved to be short-lived. This is even though our evaluation reveals progress since Monterrey in some areas, notably debt relief and private (FDI) flows. Calls for substantially scaling up regular aid had little effect, and financial innovations contributed only marginally to overall development financing so far. There is not much progress either from the perspective of critics focusing on the quality of aid. In particular, we find that the targeting of aid according to need and merit leaves much to be desired. The gap between words and deeds continues to be wide with regard to aid proliferation and donor coordination, too |
| Keywords: | official development assistance, debt relief, aid for trade, donor coordination, financial innovations, foreign direct investment, corruption |
| JEL: | F35 F53 |
| Date: | 2011–03 |
| URL: | http://d.repec.org/n?u=RePEc:kie:kieliw:1691&r=pke |
| By: | Ballinger, Clint |
| Abstract: | This paper proposes that the resurgence of geographic factors in the study of uneven development is not due simply to the recurrent nature of intellectual fashions, nor necessarily because arguments that rely on geographic factors are less simplistic than before, nor because they avoid racialist, imperialistic, and deterministic forms they sometimes took in the past. Rather, this paper argues that geographic factors have been turned to once again because they are an indispensable part of explanation, playing a special role that has not been properly understood, a role especially crucial for the explanation of the inherently spatial questions that development studies seek to address. The paper is made up of two sections and an appendix. The first section discusses why geographic factors are necessary for explanations of uneven development with a brief example from the ‘institutions versus geography’ debate. The second section discusses why the reflexive rejection by social scientists of geographic and environmental factors is misguided, with a separate note on geography and geographers. The ideas in this paper were in part arrived at inductively while surveying instances where social scientists in some way attempt to account for real-world locations/distributions of social phenomena (as opposed to discussing a social theory or process aspatially or with its distribution taken as a starting point). A number of these are included with discussion as an appendix. |
| Keywords: | geographic determinism; environmental determinism; economic development; Daron Acemoglu; Jeffrey Sachs; Jared Diamond; explanation; exogenous factors; location; distribution; colonialism; biogeography; |
| JEL: | Z1 O10 N90 O15 O19 F54 A13 A12 O57 C21 B41 |
| Date: | 2011–01 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:29750&r=pke |