nep-pke New Economics Papers
on Post Keynesian Economics
Issue of 2011‒08‒22
four papers chosen by
Karl Petrick
University of the West Indies

  1. "Lessons We Should Have Learned from the Global Financial Crisis but Didn't" By L. Randall Wray
  2. Keynes’s missing axioms By Kakarot-Handtke, Egmont
  3. The return of vulgar economics: A Rejoinder to Colander, Holt and Rosser By Matías Vernengo
  4. Expansionary Austerity New International Evidence By Daniel Leigh; Andrea Pescatori; Jaime Guajardo

  1. By: L. Randall Wray
    Abstract: In this paper, I first quickly recount the causes and consequences of the global financial crisis (GFC). Of course, the triggering event was the unfolding of the subprime crisis; however, I argue that the financial system was already so fragile that just about anything could have caused the collapse. I then move on to an assessment of the lessons we should have learned. Briefly, these include: (a) the GFC was not a liquidity crisis, (b) underwriting matters, (c) unregulated and unsupervised financial institutions naturally evolve into control frauds, and (d) the worst part is the cover-up of the crimes. I argue that we cannot resolve the crisis until we begin going after the fraud. Finally, I outline an agenda for reform, along the lines suggested by the work of Hyman P. Minsky.
    Keywords: Global Financial Crisis; Subprime Crisis; Hyman P. Minsky; Galbraith and the Great Crash; Control Fraud; Underwriting; Deregulation; Financial Reform
    JEL: E3 E11 E12 E32 E44 G21 G38
    Date: 2011–08
  2. By: Kakarot-Handtke, Egmont
    Abstract: Between Keynes’s verbalized theory and its formal basis persists a lacuna. The conceptual groundwork is too small and not general. The quest for a comprehensive formal basis is guided by the question: what is the minimum set of foundational propositions for a consistent reconstruction of the money economy? We start with three structural axioms. The claim of generality entails that it should be possible to prove that Keynes’s formalism is a subset of the structural axiom set. The axioms are applied to a central part of the General Theory in order to achieve consistency and generality.
    Keywords: New framework of concept; Structure-centric; Axiom set; Full employment; Intermediate situation; Emergent money; Singularity; System immanent risk; Distributed profit; Saving; Investment; Allais-Identity
    JEL: E12 E25 E31 E24 E40 B41
    Date: 2011–05–14
  3. By: Matías Vernengo
    Abstract: This paper provides a rejoinder to Colander, Holt and Rosser (2010) strategy to win friends and influence mainstream economics. It is suggested that their strategy is counter-productive, and while it might gain them friends, it will not lead to increased influence of heterodox ideas within what they term the cutting edge of the profession. It is argued that their failure to understand the nature of heterodoxy, and the reason for the eclecticism of the mainstream, associated to the rise of vulgar economics, undermines their arguments.
    Keywords: Methodology, Heterodox Economics JEL Codes: B49, B59
    Date: 2011
  4. By: Daniel Leigh; Andrea Pescatori; Jaime Guajardo
    Abstract: This paper investigates the short-term effects of fiscal consolidation on economic activity in OECD economies. We examine the historical record, including Budget Speeches and IMFdocuments, to identify changes in fiscal policy motivated by a desire to reduce the budget deficit and not by responding to prospective economic conditions. Using this new dataset, our estimates suggest fiscal consolidation has contractionary effects on private domestic demand and GDP. By contrast, estimates based on conventional measures of the fiscal policy stance used in the literature support the expansionary fiscal contractions hypothesis but appear to be biased toward overstating expansionary effects.
    Keywords: Cross country analysis , Fiscal consolidation , Fiscal policy , Government expenditures , International trade , OECD , Sovereign debt ,
    Date: 2011–07–06

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