nep-pke New Economics Papers
on Post Keynesian Economics
Issue of 2011‒05‒14
eight papers chosen by
Karl Petrick
University of the West Indies

  1. "Is the Federal Debt Unsustainable??" By James K. Galbraith
  2. Chapter 18 of the General Theory “Further Analysed”: The Theory of Economics as A Method By Anna M. Carabelli; Mario A. Cedrini
  3. Heterodox microeconomics and the foundation of heterodox macroeconomics By Lee, Frederic
  4. Find Me the Money: Financing Climate and Other Global Public Goods By Nancy Birdsall; Benjamin Leo
  5. Economic class and the distribution of income: A time-series analysis of the UK economy, 1955-2010 By Juan Carlos Cuestas; Bruce Philp
  6. "The Levy Institute Measure of Economic Well-Being, Great Britain, 1995 and 2005" By Ajit Zacharias
  7. History of the economics department at University of Missouri-Kansas City By Lee, Frederic
  8. Reconceiving social exclusion By Andrew M. Fischer

  1. By: James K. Galbraith
    Abstract: By general agreement, the federal budget is on an "unsustainable path." Try typing the phrase into Google News: 19 of the first 20 hits refer to the federal debt. But what does this actually mean? One suspects that some who use the phrase are guided by vague fears, or even that they don't quite know what to be afraid of. Some people fear that there may come a moment when the government's bond markets would close, forcing a default or "bankruptcy." But the government controls the legal-tender currency in which its bonds are issued and can always pay its bills with cash. A more plausible worry is inflation-notably, the threat of rising energy prices in an oil-short world-alongside depreciation of the dollar, either of which would reduce the real return on government bonds. But neither oil-price inflation nor dollar devaluation constitutes default, and neither would be intrinsically "unsustainable." After a brief discussion of the major worries, Senior Scholar James Galbraith focuses on one, and only one, critical issue: the actual behavior of the public-debt-to-GDP ratio under differing economic assumptions through time. His conclusion? The CBO's assumption that the United States must offer a real interest rate on the public debt higher than the real growth rate by itself creates an unsustainability that is not otherwise there. Changing that one assumption completely alters the long-term dynamic of the public debt. By the terms of the CBO's own model, a low interest rate erases the notion that the US debt-to-GDP ratio is on an "unsustainable path." The prudent policy conclusion? Keep the projected interest rate down. Otherwise, stay cool: don't change the expected primary deficit abruptly, and allow the economy to recover through time.
    Date: 2011–05
  2. By: Anna M. Carabelli; Mario A. Cedrini (SEMEQ Department - Faculty of Economics - University of Eastern Piedmont)
    Abstract: In 1987, Greenwald and Stiglitz accused Keynes’s summary of the General Theory in chapter 18 of relying upon “neoclassical and Marshallian tools”. A number of contributions have on the contrary emphasized the methodological importance of this chapter, which this paper revisits in the light of A Treatise on Probability. It thereby shows that the notions of cause and dependence used to discuss the relationships between independent and dependent variables of the General Theory are related to the concept of “independence for knowledge”, which concerns logical connections between arguments rather than material connections between events. We demonstrate that such logical connections established in chapter 18 are rediscussed in chapters 19-21, where Keynes allows for probable repercussions between the factors and removes the simplifying assumptions previously introduced. After stressing the methodological continuity this method provides with the analysis of credit cycles in A Treatise on Money, we argue that chapter 18 is an indispensable tool to decode the internal text structure of the General Theory. We thus characterize the latter as a vademecum to the complex economic world, the author providing an analytical method allowing – and requiring – the readers to emulate his efforts to grasp the complexity and interdependence of the economic material.
    Keywords: John Maynard Keynes, The General Theory, complexity, economic methodology
    JEL: B31 B41 A10
    Date: 2011–03
  3. By: Lee, Frederic
    Abstract: The resolution of the controversy over the microfoundations of macroeconomics is important to heterodox economics. In this essay, I argue that the controversy is due to misspecification. That is, the conventional understanding of the controversy is that it is a reductionist exercise of macroeconomics to mainstream microeconomics. However, mainstream microeconomics is theoretically incoherent and hence cannot provide the microfoundations for any macroeconomics, mainstream or heterodox. In addition, a common position in heterodox economics is that heterodox macroeconomics generates a mainstream microeconomics sub-structure. But it is argued that this is not the case; rather it generates a heterodox microeconomics substructure. The essay concludes with the argument that in heterodox economics the micro-macro dichotomy does not exist and hence the controversy should be dismissed.
    Keywords: Heterodox; Microeconomics; Macroeconomics
    JEL: E12 D01 B5
    Date: 2011–04–25
  4. By: Nancy Birdsall; Benjamin Leo
    Abstract: In this paper, four categories of existing resource-mobilization options are examined, including (1) transportation levies; (2) currency and financial transaction taxes; (3) capitalization of IMF Special Drawing Rights (SDRs); and (4) the sale, mobilization, or capitalization of IMF gold. [Working Paper No. 248]. URL: [ ns/detail/1424979].
    Keywords: SDRs, resource mobilization, transportation levies, sale, mobilization, capitalization, IMF gold, currency and financial transaction taxes, climate change, public goods, money, developing world, livelihoods, welfare
    Date: 2011
  5. By: Juan Carlos Cuestas (Department of Economics, The University of Sheffield); Bruce Philp (Division of Economics, Nottingham Trent University)
    Abstract: This paper contributes to our understanding of the determinants and dynamics of a Marxian surplus-value rate using quarterly UK data, 1955-2010, and the Johansen (1988, 1991) cointegration and vector error correction model (VECM). A conceptual model is introduced to define surplus-value and its component parts, before elaborating on theoretical issues which are important in estimating the rate. In the empirical analysis we seek to explain distributive conflict, paying attention to three forces which are traditionally seen as drivers of power in distributional struggle: (i) political party; (ii) the size of the “reserve army” of the unemployed; (iii) working class militancy. Our results suggest a positive impact of unemployment on the rate of surplus-value, and that falling working class militancy tends to raise the rate. Political party also affects the rate of surplus-value with a negative impact on the rate emanating from movement to left-wing government. This analysis demonstrates the ongoing relevance of Marxian economics in providing an alternative, robust and significant explanation of distribution in the post-war UK economy.
    Keywords: Educational loan, Risk aversiob
    JEL: D33 B51 C22
    Date: 2011–04
  6. By: Ajit Zacharias
    Abstract: Forty-five years ago, the A. Philip Randolph Institute issued "The Freedom Budget," in which a program for economic transformation was proposed that included a job guarantee for everyone ready and willing to work, a guaranteed income for those unable to work or those who should not be working, and a living wage to lift the working poor out of poverty. Such policies were supported by a host of scholars, civic leaders, and institutions, including the Rev. Dr. Martin Luther King Jr.; indeed, they provided the cornerstones for King's "Poor Peoples' Campaign" and "economic bill of rights." This paper proposes a "New Freedom Budget" for full employment based on the principles of functional finance. To counter a major obstacle to such a policy program, the paper includes a "primer" on three paradigms for understanding government budget deficits and the national debt: the deficit hawk, deficit dove, and functional finance perspectives. Finally, some of the benefits of the job guarantee are outlined, including the ways in which the program may serve as a vehicle for a variety of social policies.
    Keywords: Unemployment; Full Employment; Budget Deficits; National Debt; Public Policy
    JEL: B50 E24 E61 H60 P16
    Date: 2011–05
  7. By: Lee, Frederic
    Abstract: This essay provides a short history of the Department of Economics at UMKC from 1929 to 2010. It shows the origins of its Institutionalist roots beginning in 1946 and ends with the development of the department as a internationally known center of Post Keynesian-Institutional-heterodox economics.
    Keywords: Institutionalism; Heterodox; Post Keynesian
    JEL: B23 A14 B5
    Date: 2011–03–23
  8. By: Andrew M. Fischer
    Abstract: Several ambiguities in the social exclusion literature – in both the fields of social policy and development studies – fuel the common criticism that the concept is redundant with respect to already existing poverty approaches, particularly more multidimensional and processual approaches, such as relative or capability poverty. In order to resolve these ambiguities and to derive value-added from the concept, social exclusion needs to be reconceptualised in a way that decisively opts for a processual definition, without reference to norms and/or poverty. Accordingly, a working definition of social exclusion is proposed as structural, institutional or agentive processes of repulsion or obstruction. This definition gives attention to processes occurring vertically throughout social hierarchies and opens up applications of the social exclusion approach to analyses of stratification, segregation and subordination in development studies, especially within contexts of high or rising inequality. Three strengths and applications include situations where exclusions lead to stratifying or impoverishing trajectories without any short-term poverty outcomes; where upward mobility of poor people is hindered by exclusions occurring among the nonpoor; and situations of inequality-induced conflict.
    Date: 2011

This nep-pke issue is ©2011 by Karl Petrick. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.