nep-pke New Economics Papers
on Post Keynesian Economics
Issue of 2011‒06‒11
eight papers chosen by
Karl Petrick
University of the West Indies

  1. Struggling for Political Economy: an Institutional Issue By Bruno Tinel
  2. The Remarkable Durability of Thirlwall’s Law By Mark Setterfield
  3. Distribution, ‘Financialisation’ and the Financial and Economic Crisis – Implications for Post-crisis Economic Policies By Hein, Eckhard
  4. Is the Falling Rate of Profit the Driving Force Behind Globalization? By Miguel Ramirez
  5. Schlock economics By Azmat, Hayat
  6. Competition as an Ambiguous Discovery Procedure: A Reappraisal of Hayek's Epistemic Market Liberalism By Ulrich Witt
  7. The Scorecard on Development, 1960-2010: Closing the Gap? By Mark Weisbrot; Rebecca Ray
  8. Challenging path dependence? ideational mapping of nationalism and the EU’s transformative power: The case of infrastructural politics in SEE By Klimov, Blagoy

  1. By: Bruno Tinel (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I)
    Abstract: The financial crisis has turned into a real economic crisis and then into a public finance crisis: its political and social implications show very obviously, even to the most unaware people, how much economic matters are a social and political phenomenon. Is political economy going to be more influential on economic policy and in the public debate? It depends on the evolution of social and political struggles in the society as a whole. But it also depends on our ability to built an alternative view of the situation and credible alternative solutions. In order to promote our ideas in the future, we have to deal urgently with our own institutional reproduction. What is happening in France on this issue?
    Keywords: political economy; academic reproduction; crisis of economic science
    Date: 2011–05–20
  2. By: Mark Setterfield (Department of Economics, Trinity College)
    Abstract: This paper contemplates the robustness of Thirlwall’s Law, a parsimonious expression that relates long run equilibrium growth in any one region to the product of world income growth and the ratio of the income elasticities of demand for exports and imports. Various extensions of the balance-of-payments-constrained growth model from which Thirlwall’s Law is derived are contemplated. In each case, Thirlwall’s Law is shown to reassert itself as a good approximation of the equilibrium growth rate. It is hypothesized that this robustness helps explain the widespread empirical success of Thirlwall’s Law.
    Keywords: Thirlwall’s law, balance-of-payments-constrained growth, export-led growth, demand-led growth, natural rate of growth.
    JEL: O41 E12
    Date: 2011–06
  3. By: Hein, Eckhard
    Abstract: The severity of the financial and economic crisis which started in 2007 cannot be understood without examining the medium- to long-run developments in the world economy since the early 1980s. The following long-run causes for the crisis can be identified: inefficient regulation of financial markets, increasing inequality in the distribution of income, and rising imbalances at the global (and at the Euro area) level. The focus of the paper is on the changes in distribution triggered by ‘finance-dominated capitalism’ embedded in a ‘neo-liberal’ policy stance since the early 1980s. The three dimensions of re-distribution in the course of ‘financialisation’ and ‘neo-liberalism’ are examined: functional distribution, personal distribution and the development of top incomes. Since the development of functional income distribution is considered to be most important, the channels through which ‘financialisation’ and ‘neo-liberalism’ have contributed to the tendency of the labour income share to fall are identified, the effects of re-distribution on aggregate demand and growth are discussed, and the relationship between re-distribution at the expense of labour and regional (Euro area wide) and global current account imbalances are addressed. Finally, economic policy conclusions with respect to a sustainable income- or wage-led recovery strategy embedded in a ‘Keynesian New Deal at the global and the European level’ are drawn.
    Keywords: Distribution; financialisation; global imbalances; financial and economic crisis; economic policy strategies
    JEL: E64 E25 E22 E65 E63 E21
    Date: 2011–05
  4. By: Miguel Ramirez (Department of Economics, Trinity College)
    Abstract: This paper examines critically the role of the law of the tendency of the falling rate of profit in the geographic expansion (globalization) of competitive capitalism. It contends that Marx did not believe there was an iron-clad connection between the falling rate of profit and globalization; in addition, it argues that Marx believed that the capitalists’ insatiable search for colonial markets was driven by their desire to overcome recurrent (and growing) realization problems in the home market arising from deficient aggregate demand on the part of both workers and capitalists.
    Keywords: Geographic Expansion of Capitalism (Globalization); Law of the Falling Tendency of the Rate of Profit; Underconsumptionist Tendencies; Simple and Expanded Reproduction; Realization Crises.
    JEL: B10 B14 B24
    Date: 2011–05
  5. By: Azmat, Hayat
    Abstract: After the collapse of USSR, Communism came to an end in 1990 and Capitalism emerged alone as the only feasible way to organize a modern economy. But the recent financial crisis which erupted in the US and spread almost in the entire globe proved Capitalism as well a failed economic system. Laissez Faire/Non intervention in the market which is the essence of capitalism was the reason for the current financial crisis. The hegemonic west propagates the rules of capitalism through the subject of economics. The professional job of economist is either to create new models or extend the existing one which always gives misleading results for understanding the ground realities of the Universe. For more than 100 years this tradition was unable to give a single solid discovery. Since there is no concept of intervention in the economic affairs of individuals as well as states therefore immoral and unfair practices are used without any hesitation for running the affairs of business. Ground reality exhibits that the science of economics can claim neither scientific laws nor universal truths. In short there is utmost need for reassessing the entire academy of mainstream Economics.
    Keywords: Errors in capitalism; Unreal; irrelevant and schlock Economics
    JEL: A13 C00
    Date: 2010–10–01
  6. By: Ulrich Witt
    Abstract: Epistemic arguments play a significant role in Hayek's defense of market liberalism. His claim that market competition is a discovery procedure that serves the common good is a case in point. The hypothesis of the markets' efficient use of existing knowledge is supplemented by the idea that markets are also most effectively creating new knowledge. However, in his assessment Hayek neglects the role of new technological knowledge. He ignores that the discovery procedure induces not only price and cost competition but also competition by innovations. Thence he overlooks the ambiguity that follows from the unpredictability of the consequences of innovations. This fact is shown to challenge the epistemic foundations and the stringency of Hayek's version of market liberalism.
    Keywords: competition, innovation, liberalism, knowledge, self-organization, Hayek Length 15 pages
    JEL: B25 D80 O33 P16 Q55
    Date: 2011–05
  7. By: Mark Weisbrot; Rebecca Ray
    Abstract: This paper examines data on economic growth and various social indicators for 193 countries over the past 50 years, divided into three periods: 1960-1980, 1980-2000, and 2000-2010. The paper finds that after a sharp slowdown in economic growth and in progress on social indicators during the second (1980-2000) period, there has been a recovery on both economic growth and, for many countries, a rebound in progress on social indicators (including life expectancy, adult, infant, and child mortality, and education) during the past decade. The paper discusses some of the economic and policy changes that might explain the slowdown and rebound.
    Keywords: economic development, growth, social indicators, growth failure, recovery, developing countries, education, health
    JEL: O10 O40 O11
    Date: 2011–06
  8. By: Klimov, Blagoy
    Abstract: The research employs historical institutionalism, amplified by ideas to explain path dependent political behaviour. The theoretical framework is applied to explain political behaviour in the Balkans, where Greece and Bulgaria, despite many similarities have developed highly antagonistic path-dependent policies of obstruction towards each other that remained remarkably persistent, regardless of changing external factors during most of the XX c. The main hypothesis is that such behaviour could be properly understood neither by leverage of Great Powers, nor by ancient hatreds, but by exploring the crucial role, played by path dependent institutionalized ideas (programmatic beliefs) in shaping policy outcomes. Only when ideas change- policy change does happen. The main task of this research is to outline historical ideational impediments to Balkan regional cooperation and explore if regional cooperation is attainable. The second hypothesis argues that after the 1990s EU was such a powerful idea, that for the first time since the Independence revolutions, started to successfully challenge old institutional settings in the region, that have persisted for decades, even centuries. Political elites in the region encountered a new complicated situation, having to balance between the traditional nationalist ideational contexts and the `integration and cooperation´ ideational impetus, coming from outside. The implications of this tension between continuity and change are explored in the case studies on cooperation over common infrastructure projects between Bulgaria and Greece in the period 1990-2010. So, we are considering the long-term historical force of path dependence and the possibility it can be rooted out, or at least significantly modified. The research is not only an endeavour to study the EU´s role in the Balkans, but to contribute to the growing debate in the field about the role of ideas in political life and to use such theoretical discussions, and the comparative method, to enhance our understanding of the evolution of modern EU states.
    Keywords: historical institutionalism; ideas; constructivist institutionalism; ideational theory; political decision making; path dependence; multi-level governance; democratization; Europeanization; nationalism; national doctrines; Megale Idea; San Stefano; regional cooperation; transport infrastructure; Balkans; Balkan cooperation; Greece; Bulgaria.
    JEL: H11 H7 L98 R5 Q4 N4
    Date: 2010–08–31

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