nep-pke New Economics Papers
on Post Keynesian Economics
Issue of 2011‒08‒15
six papers chosen by
Karl Petrick
University of the West Indies

  1. The great austerity war: what caused the deficit crisis and who should pay to fix it? By Crotty, James
  2. Nordhaus, Stern, and Garnaut: The Changing Case for Climate Change Mitigation By Stephen Howes; Frank Jotzo; Paul Wyrwoll
  3. "Keynesian Fiscal Stimulus: What Have We Learned from the Great Recession?" By Laurence Seidman
  4. Structuralist macroeconomics and new developmentalism By Pereira, Luiz C. Bresser (Luiz Carlos Bresser)
  5. "The Educational Value of the College Fed Challenge" By Vera Brusentsev; Jeffrey Miller
  6. What the keynesian theory said about Portugal? By Martinho, Vítor João Pereira Domingues

  1. By: Crotty, James
    Abstract: Rapidly rising deficits at both the federal and state and local government levels, along with long-term financing problems in the Social Security and Medicare programs, have triggered a one-sided austerity-focused class war in the US. Similar class conflicts have broken out around the globe. A coalition of the richest and most economically powerful segments of society and conservative politicians who represent their interests has demanded that deficits be eliminated by public-sector austerity - severe cuts at all levels of government in spending that either supports the poor and the middle class or funds crucial public investment. These demands constitute a deliberate attempt to destroy the New Deal project, begun in the 1930s, whose goal was to subject capitalism to democratic control. The right-wing coalition seeks to replace that project with a modernized version of the 'free-market' capitalism of the 1920s. In this paper I argue that our deficit crisis is the result of a shift from the New-Deal-based economic model of the early post-war period to today's neoliberal, free-market model, a shift initiated under Ronald Reagan and continued under the presidents who succeeded him. The new model has generated slow growth, rising inequality and rising deficits. Rising deficits in turn created demands for austerity. After tracing the long-term evolution of our current deficit crisis, I show that this crisis can be resolved by raising taxes on upper-income households and large corporations, cutting war spending, and adopting a Canadian or European style health care system. There is no need to accept austerity. Calls for austerity should be seen as what they are - an attack by the rich and powerful against the basic interests of the American people.
    Keywords: deficit crisis; fiscal crisis; austerity; Social Security crisis; health care crisis
    JEL: E62 H60 E60 H6
    Date: 2011–06
  2. By: Stephen Howes (Crawford School of Economics & Government, Australian National University, Canberra, ACT, Australia); Frank Jotzo (Crawford School of Economics & Government, Australian National University, Canberra, ACT, Australia); Paul Wyrwoll (Crawford School of Economics & Government, Australian National University, Canberra, ACT, Australia)
    Abstract: Today the idea that climate change requires a gradual and moderate response no longer commands consensus support among economists. A more demanding approach is gaining ground. This paper traces the changes in economic thinking concerning the case for action on climate change, through an analysis of the work of three eminent economists: William Nordhaus, Nicholas Stern and Ross Garnaut. It shows how from Nordhaus to Stern to Garnaut the case for more urgent and radical mitigation has been strengthened as temperature targets have been lowered and business-as-usual emissions projections raised. It also shows that Stern and especially Nordhaus, who has been working on this subject the longest, have changed their own views in favour of more urgent and radical mitigation. Some disagreements remain between these three economists, and some other economists have more moderate views, but the old consensus has been shattered.
    JEL: Q54
    Date: 2011–07
  3. By: Laurence Seidman (Department of Economics,University of Delaware)
    Abstract: What have we learned from the Great Recession about Keynesian fiscal stimulus? This article contains five sections that develop the following five points: (1) There is confusion about what constitutes Keynesian fiscal stimulus; (2) Economists are deeply divided about fiscal stimulus; (3) A fundamental error has been committed by an influential economist in estimating the recession magnitude of the Keynesian multiplier; (4) A fundamental error has been committed by two influential economists in their analysis of the impact of the 2008 tax rebate on consumption spending; (5) Advocates of fiscal stimulus in recession should support keeping government debt low in prosperity.
    Keywords: fiscal stimulus, fiscal policy, Great Recession
    JEL: E62
    Date: 2011
  4. By: Pereira, Luiz C. Bresser (Luiz Carlos Bresser)
    Abstract: This paper, first, presents some basic ideas and models of a structuralist development macroeconomics that complements and actualizes the thought of structuralist development economics that was dominant between the 1940s and the 1960s including in the World Bank. The new approach focus on the relation between the exchange rate and economic growth, and develops three interrelated models: the tendency to the overvaluation of the exchange, the critique of growth with foreign savings, and a model of the Dutch disease based on the existence of two exchange rate equilibriums: the “current” and the “industrial” equilibrium. Second, it summarizes “new developmentalism” – a sum of growth policies based on these models and on the experience of fast growing Asian countries
    Date: 2011–08–04
  5. By: Vera Brusentsev (Department of Economics,University of Delaware); Jeffrey Miller (Department of Economics,University of Delaware)
    Abstract: The College Fed Challenge, a competition between undergraduate students from different colleges and universities, is designed to enhance the development of research, critical thinking, and presentation skills. This paper analyzes the value of the competition as an instrument for improving undergraduate economics education. We present results from surveys of (a) students who participated in one district in November 2010 and (b) graduates from the University of Delaware who participated in past years. The results reflect the impressive effect on student learning outcomes. We conclude that the visibility of the College Fed Challenge can be an important factor in determining its impact and that the competition could conceivably have a significant and positive impact on economics education in the United States.
    Keywords: economic education, undergraduate economics, education environment, experienced based education
    JEL: A20 A22
    Date: 2011
  6. By: Martinho, Vítor João Pereira Domingues
    Abstract: This work aims to test the Verdoorn Law, with the alternative specifications of (1)Kaldor (1966), for the 28 NUTS III Portuguese in the period 1995 to 1999. It is intended to test, also in this work, the alternative interpretation of (2)Rowthorn (1975) about the Verdoorn's Law for the same regions and periods. With this study we want, also, to test the Verdoorn´s Law at a regional and a sectoral levels (NUTs II) for the period 1995-1999. The importance of some additional variables in the original specification of Verdoorn´s Law is also tested, such as, trade flows, capital accumulation and labour concentration. The main objective is to confirm the presence of economies to scale that characterise the polarisation process with cumulative causation properties, explaining regional divergence. By introducing new variables to the original specification of Verdoorn´s Law we intend to examine how the economies to scale are influenced by the consideration of factors related to the Polarisation (Keynensian tradition) and Agglomeration (spatial economics tradition) phenomena. This study analyses, yet, through cross-section estimation methods, the influence of spatial effects in productivity in the NUTs III economic sectors of mainland Portugal from 1995 to 1999, considering the Verdoorn relationship.
    Keywords: Verdoorn law; spatial autocorrelation; Portuguese regions
    JEL: O18 C23 C21 R11
    Date: 2011

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