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on Post Keynesian Economics |
| By: | Pavlina R. Tcherneva |
| Abstract: | This paper augments the basic Post-Keynesian markup model to examine the effects of different fiscal policies on prices and income distribution. This is an approach a la Hyman P. Minsky, who argued that in the modern era, government is both "a blessing and a curse," since it stabilizes profits and output by imparting an inflationary bias to the economy, but without stabilizing the economy at or near full employment. To build on these insights, the paper considers several distinct functions of government: 1) government as an income provider, 2) as an employer, and 3) as a buyer of goods and services. The inflationary and distributional effects of each of these fiscal policies differ considerably. First, the paper examines the effects of income transfers to individuals and firms (in the form of unemployment insurance and investment subsidies, respectively). Next, it considers government as an employer of workers (direct job creation) and as a buyer of goods and services (indirect job creation). Finally, it modifies the basic theoretical model to incorporate fiscal policy a la Minsky and John Maynard Keynes, where the government ensures full employment through direct job creation of all of the unemployed unable to find private sector work, irrespective of the phase of the business cycle. The paper specifically models Minsky's proposal for government as the employer of last resort (ELR), but the findings would apply to any universal direct job creation plan of similar design. The paper derives a fundamental price equation for a full-employment economy with government. The model presents a "price rule" for government spending that ensures that the ELR is not a source of inflation. Indeed, the fundamental equation illustrates that in the presence of such a price rule, at full employment inflationary effects are observed from sources other than the public sector employment program. |
| Keywords: | Minsky; Kalecki Model; Alternative Fiscal Polices; Income Transfers; Investment Subsidies; Direct Job Creation; Employer of Last Resort; Inflation; Income Distribution |
| JEL: | E12 E24 E25 E31 E62 H11 |
| Date: | 2012–02 |
| URL: | http://d.repec.org/n?u=RePEc:lev:wrkpap:wp_706&r=pke |
| By: | Michael Hudson |
| Abstract: | What is called "capitalism" is best understood as a series of stages. Industrial capitalism has given way to finance capitalism, which has passed through pension fund capitalism since the 1950s and a US-centered monetary imperialism since 1971, when the fiat dollar (created mainly to finance US global military spending) became the world's monetary base. Fiat dollar credit made possible the bubble economy after 1980, and its substage of casino capitalism. These economically radioactive decay stages resolved into debt deflation after 2008, and are now settling into a leaden debt peonage and the austerity of neo-serfdom. The end product of today's Western capitalism is a neo-rentier economy—precisely what industrial capitalism and classical economists set out to replace during the Progressive Era from the late 19th to early 20th century. A financial class has usurped the role that landlords used to play—a class living off special privilege. Most economic rent is now paid out as interest. This rake-off interrupts the circular flow between production and consumption, causing economic shrinkage—a dynamic that is the opposite of industrial capitalism’s original impulse. The "miracle of compound interest," reinforced now by fiat credit creation, is cannibalizing industrial capital as well as the returns to labor. The political thrust of industrial capitalism was toward democratic parliamentary reform to break the stranglehold of landlords on national tax systems. But today's finance capital is inherently oligarchic. It seeks to capture the government—first and foremost the treasury, central bank, and courts—to enrich (indeed, to bail out) and untax the banking and financial sector and its major clients: real estate and monopolies. This is why financial "technocrats" (proxies and factotums for high finance) were imposed in Greece, and why Germany opposed a public referendum on the European Central Bank’s austerity program. |
| Keywords: | Debt Deflation; Neofeudalism; Economic Rent; Finance Capitalism; Classical Political Economy; Pension Fund Capitalism; Bubble Economy |
| JEL: | B12 N23 |
| Date: | 2012–02 |
| URL: | http://d.repec.org/n?u=RePEc:lev:wrkpap:wp_708&r=pke |
| By: | L. Randall Wray |
| Abstract: | Euroland is in a crisis that is slowly but surely spreading from one periphery country to another; it will eventually reach the center. The blame is mostly heaped upon supposedly profligate consumption by Mediterraneans. But that surely cannot apply to Ireland and Iceland. In both cases, these nations adopted the neoliberal attitude toward banks that was pushed by policymakers in Europe and America, with disastrous results. The banks blew up in a speculative fever and then expected their governments to absorb all the losses. The situation was similar in the United States, but in our case the debts were in dollars and our sovereign currency issuer simply spent, lent, and guaranteed 29 trillion dollars' worth of bad bank decisions. Even in our case it was a huge mistake—but it was "affordable." Ireland and Iceland were not so lucky, as their bank debts were in "foreign" currencies. By this I mean that even though Irish bank debt was in euros, the Government of Ireland had given up its own currency in favor of what is essentially a foreign currency-the euro, which is issued by the European Central Bank (ECB). Every euro issued in Ireland is ultimately convertible, one to one, to an ECB euro. There is neither the possibility of depreciating the Irish euro nor the possibility of creating ECB euros as necessary to meet demands for clearing. Ireland is in a situation similar to that of Argentina a decade ago, when it adopted a currency board based on the US dollar. And yet the authorities demand more austerity, to further reduce growth rates. As both Ireland and Greece have found out, austerity does not mean reduced budget deficits, because tax revenues fall faster than spending can be cut. Indeed, as I write this, Athens has exploded in riots. Is there an alternative path? In this piece I argue that there is. First, I quickly summarize the financial foibles of Iceland and Ireland. I will then-also quickly-summarize the case for debt relief or default. Then I will present a program of direct job creation that could put Ireland on the path to recovery. Understanding the financial problems and solutions puts the jobs program proposal in the proper perspective: a full implementation of a job guarantee cannot occur within the current financial arrangements. Still, something can be done. |
| Keywords: | Euro Crisis; Financial Crisis in Ireland; Employer of Last Resort; Job Guarantee; Bank Bailout; Irish Debt Crisis; Government Debt Crisis; Minsky |
| JEL: | E12 E32 E62 E65 G01 H62 H63 |
| Date: | 2012–02 |
| URL: | http://d.repec.org/n?u=RePEc:lev:wrkpap:wp_707&r=pke |
| By: | Robert; Claudia Klaerding |
| Abstract: | Economic geographers have recently been confronted with attempts to constitute a new paradigm of evolutionary economic geography. The paper aims at advancing theoretical economic geography by reviewing its core critique and proposed solutions, particularly that of integrating the perspective of a geographical political economy. Although we sympathize with the identified shortcomings of an evolutionary economic geography we criticise the alternative approach for being too narrow and reductionist. In contrast, a relational economic perspective is argued to theorize the core weaknesses of EEG, namely power, social agency and particularly the interrelatedness of influences on different scales, more comprehensively. By combining evolutionary and relational approaches in certain respects we, furthermore, plead for an advancement of theoretical economic geography by engaged pluralism. |
| Keywords: | Evolutionary economic geography, sympathetic critique, relational perspective, engaged pluralism |
| JEL: | R11 N94 O14 |
| Date: | 2012–01 |
| URL: | http://d.repec.org/n?u=RePEc:egu:wpaper:1202&r=pke |
| By: | Gerardo Marletto (University of Sassari) |
| Abstract: | This paper draws on institutional and evolutionary economics and contributes to an approach to environmental policy which diverges from mainstream prescriptions. The 'socio-technical system' is the core concept: this is a complex made of co-evolving institutions, technologies, markets and actors that fulfils an overall societal need (such as housing, production, mobility, etc.). A systemic and dynamic analysis of those structural changes which are needed to create more sustainable socio-technical systems is provided; actors – and their ability to influence politics and policy – are explicitly taken into consideration. Unsustainable socio-technical systems feature a relevant resistance to change, because they are embedded in the very structure of our society and because of the conservative action of dominant stakeholders; this is why no environmental policy will be effective unless it aims at 'unlocking' our societies from their dominance. But also a constructive side of environmental policy is needed in order to establish new and more sustainable socio-technical systems; consistently, environmental policy is viewed as a combination of actions that can trigger, make viable and align those institutional, technological and economic changes which are needed to reach sustainability. Again, actors (for change) are at the heart of this vision of environmental policy: as subject, because the creation of new and sustainable socio-technical systems is made possible by (coalitions of) actors for change; as object, because environmental policy – to be effective – must actively support the empowerment, legitimation and social networking of such coalitions. A 'chicken and egg' problem remains: who comes first? Actors for change advocating policies for sustainability or policies for sustainability supporting actors for change? |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:rcr:wpaper:01_12&r=pke |
| By: | Dobler, Constanze; Hagemann, Harald |
| Abstract: | The paper emphasizes the transition in Russia and the role institutions played before and during the process. In Russia, a big bang approach was applied. That is to say, transition was conducted all of a sudden, omitting important underlying reforms. This practice should function as a shock therapy. Hence, the approach should leave no other chance than an abrupt adaption to the new free-market rules. These rules would then lead to fast economic growth and development, as they did in other places. However, since Russian GDP per capita and thereby living standards deteriorated dramatically in the years after the collapse of the Soviet Union, the plan did not work. At any rate, since then Russian economic indicators recovered and partly achieved their pre-1991 levels at the end of the last decade. The paper depicts Russia's reform efforts and the subsequent developments. The close ties among the political elite, the banking sector and the old nomenklatura are demonstrated. The patrimonial system that persisted for centuries is still observable at the state level. At any rate, Russia can neither evade its historical and institutional development path nor its societal structures that are based on networks and nepotism. Russia's systemic lack of the rule of law and therewith of secure property, the character of the Russian political system with the patriarch as the head of state and the resulting necessity of corruption and bribes inhibit the realization of its full growth potential. -- |
| Keywords: | country studies,economic systems,formerly centrally planned economies,growth,institutions,transition economies |
| JEL: | N14 N24 N44 O43 O52 P20 P30 |
| Date: | 2011–12 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:hohpro:342011&r=pke |