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on Post Keynesian Economics |
| By: | John Foster; J. Stan Metcalfe |
| Abstract: | The standard neoclassical approach to economic theorizing excludes, by definition, economic emergence and the related phenomenon of entrepreneurship. We explore how the most economic of human behaviours, entrepreneurship, came to be largely excluded from mainstream economic theory. In contrast, we report that evolutionary economists have acknowledged the importance of understanding emergence and we explore the advances that have been made in this regard. We go on to argue that evolutionary economics can make further progress by taking a more 'naturalistic' approach to economic evolution. This requires that economic analysis be fully embedded in complex economic system theory and that associated understandings as to how humans react to states of uncertainty be explicitly dealt with. We argue that 'knowledge,' because of the existence of uncertainty is, to a large degree 'conjectural' and, thus, is closely linked to our emotional states. Our economic behaviour is also influenced by the reality that we, and the systems that we create, are dissipative structures. Thus, we introduce the notions of 'energy gradients' and 'knowledge gradients' as essential concepts in understanding economic emergence and resultant economic growth. |
| Keywords: | Length 34 pages |
| Date: | 2011–06 |
| URL: | http://d.repec.org/n?u=RePEc:esi:evopap:2011-12&r=pke |
| By: | Thomas I. Palley |
| Abstract: | The export-led growth paradigm is a development strategy aimed at growing productive capacity by focusing on foreign markets. It rose to prominence in the late 1970s and became part of a new consensus among economists about the benefits of economic openness. According to Thomas I. Palley, this paradigm is no longer relevant because of changed conditions in both emerging-market (EM) and developed economies. He outlines the stages of the export-led growth paradigm leading to its adoption worldwide, as well as the various critiques of this agenda that have become increasingly prescient. He concludes that we should reduce reliance on strategies aimed at attracting export-oriented foreign direct investment and institute a new paradigm based on a domestic demand-led growth model. Otherwise, the global economy is likely to experience asymmetric stagnation and increased economic tensions between EM and industrialized economies. |
| Date: | 2011–08 |
| URL: | http://d.repec.org/n?u=RePEc:lev:levppb:ppb_119&r=pke |
| By: | Kepa M. Ormazabal (UPV/EHU) |
| Abstract: | In this paper, I would like to bring back to light the forgotten critique of Marx to the widely accepted view that Ricardo succeeded in refuting the universal validity of the labor theory of value in "Principles", chapter 1, sections IV and V. By the hand of Marx, I contend that the arguments of Ricardo are unsuccessful. Nothing of what Ricardo says in his "Principles" implies anything for the question as to whether or not value consists in objectified labor. The problem that Ricardo faces in "Principles". chapter I sections IV and V, without being aware of it, is all about the distribution of profit and, consequently, about the distribution of an already created value through a system of competitive money prices, but not a problem about the creation on the nature of value, which are the themes of the labor (and note wages) theory of value. |
| Keywords: | labor theory of value, Ricardo, Marx |
| Date: | 2011–09–08 |
| URL: | http://d.repec.org/n?u=RePEc:ehu:ikerla:201153&r=pke |
| By: | Andrew Sheng |
| Abstract: | This paper reviews the key insights of Hyman P. Minsky in arguing why finance cannot be left to free markets, drawing on the East Asian development experience. The paper suggests that Minsky's more complete stock-flow consistent analytical framework, by putting finance at the center of analysis of economic and financial system stability, is much more pragmatic and realistic compared to the prevailing neoclassical analysis. Drawing upon the East Asian experience, the paper finds that Minsky's analysis has a system-wide slant and correctly identifies Big Government and investment as driving employment and profits, respectively. Specifically, his two-price system can aid policymakers in correcting the systemic vulnerability posed by asset bubbles. By concentrating on cash-flow analysis and funding behaviors, Minsky's analysis provides the link between cash flows and changes in balance sheets, and therefore can help identify unsustainable Ponzi processes. Overall, his multidimensional analytical framework is found to be more relevant than ever in understanding the Asian crisis, the 2008 global financial crisis, and policymaking in the postcrisis world. |
| Keywords: | Financial Economics; Keynes; Keynesian; Post-Keynesian; Government Policy and Regulation |
| JEL: | E12 G28 |
| Date: | 2011–09 |
| URL: | http://d.repec.org/n?u=RePEc:lev:wrkpap:wp_684&r=pke |
| By: | Jorg Bibow |
| Abstract: | Currency market intervention-cum-reserve accumulation has emerged as the favored "self-insurance" strategy in recipient countries of excessive private capital inflows. This paper argues that capital account management represents a less costly alternative line of defense deserving renewed consideration, especially in the absence of fundamental reform of the global monetary and financial order. Mainstream arguments in favor of financial globalization are found unconvincing; any indirect benefits allegedly obtainable through hot money inflows are equally obtainable without actually tolerating such inflows. The paper investigates the experiences of Brazil, Russia, India, and China (the BRICs) in the global crisis and subsequent recovery, focusing on their respective policies regarding capital flows. |
| Keywords: | Capital Flows; Self-Insurance; Capital Controls; Financial Regulation |
| JEL: | F02 F32 F33 F39 G28 O23 |
| Date: | 2011–09 |
| URL: | http://d.repec.org/n?u=RePEc:lev:wrkpap:wp_683&r=pke |
| By: | Robert B. Avery; Kenneth P. Brevoort |
| Abstract: | A growing literature suggests that housing policy, embodied by the Community Reinvestment Act (CRA) and the affordable housing goals of the government sponsored enterprises, may have caused the subprime crisis. The conclusions drawn in this literature, for the most part, have been based on associations between aggregated national trends. In this paper we examine more directly whether these programs were associated with worse outcomes in the mortgage market, including delinquency rates and measures of loan quality. We rely on two empirical approaches. In the first approach, which focuses on the CRA, we conjecture that historical legacies create significant variations in the lenders that serve otherwise comparable neighborhoods. Because not all lenders are subject to the CRA, this creates a quasi-natural experiment of the CRA's effect. We test this conjecture by examining whether neighborhoods that have been disproportionally served by CRA-covered institutions historically experienced worse outcomes. The second approach takes advantage of the fact that both the CRA and GSE goals rely on clearly defined geographic areas to determine which loans are favored by the regulations. Using a regression discontinuity approach, our tests compare the marginal areas just above and below the thresholds that define eligibility, where any effect of the CRA or GSE goals should be clearest. We find little evidence that either the CRA or the GSE goals played a significant role in the subprime crisis. Our lender tests indicate that areas disproportionately served by lenders covered by the CRA experienced lower delinquency rates and less risky lending. Similarly, the threshold tests show no evidence that either program had a significantly negative effect on outcomes. |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgfe:2011-36&r=pke |
| By: | Alfonso Palacio-Vera |
| Abstract: | The main purpose of this study is to explore the potential expansionary effect stemming from the monetization of debt. We develop a simple macroeconomic model with Keynesian features and four sectors: creditor households, debtor households, businesses, and the public sector. We show that such expansionary effect stems mainly from a reduction in the financial cost of servicing the public debt. The efficacy of the channel that allegedly operates through the compression of the risk/term premium on securities is found to be ambiguous. Finally, we show that a country that issues its own currency can avoid becoming stuck in a structural "liquidity trap," provided its central bank is willing to monetize the debt created by a strong enough fiscal expansion. |
| Keywords: | Floor System; Debt Monetization; Functional Finance; Policy Coordination; Neutral Interest Rate |
| JEL: | E10 E12 E44 E52 E58 |
| Date: | 2011–09 |
| URL: | http://d.repec.org/n?u=RePEc:lev:wrkpap:wp_685&r=pke |
| By: | Zaman, Asad; Saglam, Ismail |
| Abstract: | This paper illustrates on a simple model of production economy how the concept of partial equilibrium can be in an unresolvable conflict with the general equilibrium. |
| Keywords: | Demand curve; Partial equilibrium; General equilibrium |
| JEL: | D01 |
| Date: | 2010–09 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:33256&r=pke |
| By: | Yun Kim (Department of Economics, Trinity College); Alan Isaac (Department of Economics, American University) |
| Abstract: | Models of the macrodynamic impact of private debt tend to emphasize the role of corporate debt. Corporate leverage affects macroeconomic outcomes and can contribute to financial fragility. We show that consumer debt is also important. We include consumer as well as corporate debt in a stock-flow consistent neo-Kaleckian growth model and explore the macrodynamic ramifications. We find that consumer credit conditions influence effective demand, the profit rate, and economic growth. The inclusion of consumer debt as well as corporate debt in our model substantially alters the model's dynamics. We compare our short-run, transition, and long-run results to models containing a single type of debt. Some of our results confirm the results of simpler models. For example, we find that a surge in animal spirits is good for steady-state growth. We show that consumer borrowing can also help to sustain aggregate demand, that looser consumer credit conditions have a steady-state growth effect, and that demand augmenting changes can enhance system stability. In this sense, looser consumer credit conditions are good for macroeconomic stability. |
| Keywords: | consumer debt, corporate debt, leverage, growth, stability |
| JEL: | E12 E44 O41 |
| Date: | 2011–08 |
| URL: | http://d.repec.org/n?u=RePEc:tri:wpaper:1108&r=pke |
| By: | Dani Rodrik |
| Abstract: | The question addressed in this paper is whether the gap in performance between the developed and developing worlds can continue, and in particular, whether developing nations can sustain the rapid growth they have experienced of late. The good news is that growth in the developing world should depend not on growth in the advanced economies themselves, but on the difference in the productivity levels of the two groups of countries – on the “convergence gap” – which remains quite large. Yet much of this convergence potential is likely to go to waste. Convergence is anything but automatic, and depends on sustaining rapid structural change in the direction of tradables such as manufacturing and modern services. The policies that successful countries have used to achieve this are hard to emulate. Moreover, these policies – such as currency undervaluation and industrial policies – will meet greater resistance on the part of industrial countries struggling with stagnant economies and high unemployment. |
| JEL: | O40 |
| Date: | 2011–09 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:17400&r=pke |
| By: | Camille Cornand (GATE Lyon Saint-Etienne - Groupe d'analyse et de théorie économique - CNRS : UMR5824 - Université Lumière - Lyon II - École Normale Supérieure de Lyon); Céline Gimet (GATE Lyon Saint-Etienne - Groupe d'analyse et de théorie économique - CNRS : UMR5824 - Université Lumière - Lyon II - École Normale Supérieure de Lyon) |
| Abstract: | The disaster myopia hypothesis is a theoretical argument that may explain why crises are a recurrent event. Under very optimistic circumstances, investors disregard any relevant information concerning the increasing degree of risk. Agents' propensity to underestimate the probability of adverse outcomes from the distant past increases the longer the period since that event occurred and at some point the subjective probability attached to this event reaches zero. This risky behaviour may contribute to the formation of a bubble that bursts into a crisis. This paper tests whether there is evidence of disaster myopia during the recent episode of financial crisis in the banking sector. Its contribution is twofold. First, it shows that the 2007 financial crisis exhibits disaster myopia in the banking sector. And second, it identifies macro and specific determinant variables in banks' risk taking since the beginning of the years 2000. |
| Keywords: | disaster myopia; financial crisis; banks; risk taking dynamics; GMM |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:halshs-00617127&r=pke |
| By: | Roemer, J.E. |
| Abstract: | Keynote Lecture GINI Year-One Conference University of Milan 4-5 February 2011 |
| Date: | 2011–03 |
| URL: | http://d.repec.org/n?u=RePEc:aia:ginidp:dp8&r=pke |
| By: | Stefan Bach; Martin Beznoska; Viktor Steiner |
| Abstract: | The idea of higher wealth taxes to finance the mounting public debt in the wake of the financial crises is gaining ground in several OECD countries. We evaluate the revenue and distributional effects of a one-time capital levy on personal net wealth that is currently on the German political agenda. We use survey data from the German Socio-Economic Panel (SOEP) and estimate the net wealth distribution at the very top, based on publicly available information about very rich Germans. Since net wealth is strongly concentrated, the capital levy could raise substantial revenue, even if relatively high personal allowances are granted. We also analyze the compliance and administrative costs of the capital levy. |
| Keywords: | Capital levy, wealth distribution, microsimulation |
| JEL: | H24 D31 H22 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:diw:diwsop:diw_sp397&r=pke |
| By: | Jocelyn Donze and Trude Gunnes (Statistics Norway) |
| Abstract: | This paper sheds light on the role of student motivation in the success of schooling. We develop a model in which a teacher engages in the management of student motivation through the choice of the classroom environment. We show that the teacher is able to motivate high-ability students, at least in the short run, by designing a competitive environment. For students with low ability, risk aversion, or when engaged in a long term relationship, the teacher designs a classroom environment that is more focused on mastery and self-referenced standards. In doing so, the teacher helps to develop the intrinsic motivation of students and their capacity to overcome failures. |
| Keywords: | Education; Student Achievement; Intrinsic and Extrinsic Motivation; Effort; Goal Theory. |
| JEL: | I21 |
| Date: | 2011–09 |
| URL: | http://d.repec.org/n?u=RePEc:ssb:dispap:662&r=pke |