nep-pke New Economics Papers
on Post Keynesian Economics
Issue of 2011‒11‒01
nine papers chosen by
Karl Petrick
University of the West Indies

  1. The History of Macroeconomics from Keynes’s General Theory to the Present By Michel DE VROEY; Pierre MALGRANGE
  2. Heterodox macro after the crisis By Peter Skott
  3. Business cycles By Peter Skott
  4. UNICEF, economists and economic policy:Bringing children into development strategies By Sir Richard Jolly
  5. A Multidimensional Approach to Measuring Child Poverty By Sharmila Kurukulasuriya; Solrun Engilbertsdottir
  6. Global Inequality: Beyond the Bottom Billion – A Rapid Review of Income Distribution in 141 Countries By Isabel Ortiz; Matthew Cummins
  7. Freedom, Anarchy and Conformism in Academic Research By K. Vela Velupillai
  8. The 2007-2008 financial crisis : Is there evidence of disaster myopia ? By Camille Cornand; Céline Gimet
  9. Economic thinking and ethics: an ethical approach for economical issues By Thieme, Sebastian

  1. By: Michel DE VROEY (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES)); Pierre MALGRANGE (CEPREMAP, Paris)
    Abstract: This paper is a contribution to the forthcoming Edward Elgar Handbook of the History of Economic Analysis volume edited by Gilbert Faccarello and Heinz Kurz. Its aim is to introduce the reader to the main episodes that have marked the course of modern macroeconomics: its emergence after the publication of Keynes’s General Theory, the heydays of Keynesian macroeconomics based on the IS-LM model, disequilibrium and non-Walrasian equilibrium modelling, the invention of the natural rate of unemployment notion, the new classical attack against Keynesian macroeconomics, the first wave of new Keynesian models, real business cycle modelling and, finally, the second wage of new Keynesian models, i.e. DSGE models. A main thrust of the paper is the contrast we draw between Keynesian macroeconomics and stochastic dynamic general equilibrium macroeconomics. We hope that our paper will be useful for teachers of macroeconomics wishing to complement their technical material with a historical addendum.
    Keywords: Keynes, Lucas, IS-LM model, DSGE models
    JEL: B E E E
    Date: 2011–06–30
  2. By: Peter Skott (University of Massachusetts Amherst)
    Abstract: Macroeconomics is in crisis and this creates openings for alternative perspectives. The dominant heterodox traditions, however, have shortcomings that need to be addressed, both to improve our understanding of the real world and to take advantage of the opportunities offered by the irrelevance of most mainstream macro. This paper discusses three examples of areas that need attention: (i) investment functions (where popular specifications lack behavioral and empirical support), (ii) income distribution (where key developments have received little attention) and(iii) the relation between income inequality and financial markets (where extensions of existing models may help explain financial instability) JEL Categories: E12, E21, E22
    Keywords: investment, earnings inequality, financial instability
    Date: 2011–10
  3. By: Peter Skott (University of Massachusetts Amherst)
    Abstract: This note outlines and discusses some of the strands in the post-Keynesian literature on business cycles. Most post-Keynesians have focused on endogenously generated cycles, but the mechanism varies: some focus on the goods market, others on financial markets, the labor market, or political intervention. The merits of formal modeling of the cycles have also come in for debate. JEL Categories:
    Date: 2011–10
  4. By: Sir Richard Jolly (Division of Policy and Practice,UNICEF)
    Abstract: From as early as 1947, UNICEF recognized the importance of economic policy for children and has sought the help of development economists in mapping out what this might involve. Indeed, at least two Nobel Prize winners in economics have contributed ideas and advice to UNICEF – and with the recent participation of Joe Stiglitz the number is raised to three. This may come as a surprise to many members of the economic profession, who are often unaware of children’s issues and, when they are aware, tend to think of the issues as primarily those of calculating the rates of return on education or finding the resources needed to pay for health, education and other social services.
    Keywords: child poverty, child disparities, policy design, measuring poverty, State of the World’s Children,child education, child social services
    Date: 2011
  5. By: Sharmila Kurukulasuriya; Solrun Engilbertsdottir (Division of Policy and Practice,UNICEF)
    Abstract: There is a growing consensus that children experience poverty in ways that are different from adults; and looking at child poverty through an income-consumption lens only is inadequate. The 2005 State of the World’s Children presented the following definition of child poverty: “Children living in poverty experience deprivation of the material, spiritual and emotional resources needed to survive, develop and thrive, leaving them unable to enjoy their rights, achieve their full potential or participate as full and equal members of society”. Using evidence from UNICEF’s ongoing Global Study on Child Poverty in Disparities, this Brief illustrates the importance of looking beyond traditional methods of measuring poverty based on income or consumption levels, and emphasizes the importance of seeking out the multidimensional face of child poverty. This approach further recognizes that the method used in depicting child poverty is crucial to the policy design and implementation of interventions that address children’s needs, especially among the most deprived.
    Keywords: child poverty, child disparities, policy design, measuring poverty, State of the World’s Children,Global Study on Child Poverty
    Date: 2011
  6. By: Isabel Ortiz; Matthew Cummins (Division of Policy and Practice,UNICEF)
    Abstract: This working paper: (i) provides an overview of global, regional and national income inequalities based on the latest distribution data from the World Bank, UNU-WIDER and Eurostat; (ii) discusses the negative implications of rising income inequality for development; (iii) calls for placing equity at the center of development in the context of the United Nations development agenda; (iv) describes the likelihood of inequalities being exacerbated during the global economic crisis; (v) advocates for urgent policy changes at national and international levels to ensure a “Recovery for All”; and, (vi) to serve as a general reference source, Annex 2 provides a summary of the most up-to-date income distribution and inequality data for 141 countries
    Keywords: income inequality, income distribution, quintiles, equity,crisis recovery, development policy
    JEL: D6 D63 D3 D31 O1 O2
    Date: 2011
  7. By: K. Vela Velupillai
    Abstract: In this paper I attempt to make a case for promoting the courage of rebels within the citadels of orthodoxy in academic research environments. Wicksell in Macroeconomics, Brouwer in the Foundations of Mathematics, Turing in Computability Theory, Sraffa in the Theories of Value and Distribution are, in my own fields of research, paradigmatic examples of rebels, adventurers and non-conformists of the highest caliber in scientific research within University environments. In what sense, and how, can such rebels, adventurers and non-conformists be fostered in the current University research environment dominated by the cult of 'picking winners'? This is the motivational question lying behind the historical outlines of the work of Brouwer, Hilbert, Bishop, Veronese, Gödel, Turing and Sraffa that I describe in this paper. The debate between freedom in research and teaching, and the naked imposition of 'correct' thinking, on potential dissenters of the mind, is of serious concern in this age of austerity of material facilities. It is a debate that has occupied some of the finest minds working at the deepest levels of foundational issues in mathematics, metamathematics and economic theory. By making some of the issues explicit, I hope it is possible to encourage dissenters to remain courageous in the face of current dogmas
    Keywords: Non-conformist research, economic theory, mathematical economics, 'Hilbert's Dogma', Hilbert's Program, computability theory
    Date: 2011
  8. By: Camille Cornand (BETA CNRS and Strasbourg University – 61, avenue de la forêt noire - 67085 Strasbourg cedex France); Céline Gimet (Université de Lyon, Lyon, F-69007, France ; CNRS, GATE Lyon St Etienne,F-69130 Ecully, France)
    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
    JEL: G21 C23
    Date: 2011
  9. By: Thieme, Sebastian
    Abstract: The worldwide economic crisis of 2007/2008 popularised the ethical questions within economics. Currently, few mainstream economists tackle these questions and the typical curriculum of economics often lacks input on philosophy, ethics and the history of economic thoughts. However, economists confronted with ethical questions believe themeslves capable of answering them. As a result, the popular discussion about ethics and economics becomes a discussion about regulations. In contrast to that, in the context of the “Economics and Ethics” discussion in Germany, the article shows an alternative approach, which concentrates on the question of why something is to be labelled as “moral”. On the base of Peter Ulrich's integrative economic ethics, the relevance of the right of subsistence on the ethical legitimacy of economic decisions, recommendations etc. is explained. The insights are discussed with respect to labour market theories and the German labour market reforms of 2005. Finally, the question of ethical legitimation is connected to the question of democracy and economics.
    Keywords: Peter Ulrich; integrative economic ethics; discourse; ethical legitimation; Karl Polanyi; Subsistence; Viablity; Right of Subsistence
    JEL: B52 P48 B59 Z13 B00
    Date: 2011–10–25

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