nep-pke New Economics Papers
on Post Keynesian Economics
Issue of 2012‒05‒22
seven papers chosen by
Karl Petrick
University of the West Indies

  1. "Reorienting Fiscal Policy after the Great Recession" By Pavlina R. Tcherneva
  2. "Guaranteed Green Jobs: Sustainable Full Employment" By Antoine Godin
  3. "The Euro Debt Crisis and Germany's Euro Trilemma" By Jorg Bibow
  4. Economics and ethics: a historical approach By Ciani Scarnicci, Manuela
  5. Towards a new brain science: lessons from the economic collapse By Jaime Gomez-Ramirez; Manuel G. Bedia
  6. "What Are the Driving Factors behind the Rise of Spreads and CDSs of Euro-area Sovereign Bonds? A FAVAR Model for Greece and Ireland" By Nicholas Apergis; Emmanuel Mamatzakis
  7. "Reply to Shigekatu Yamaguchi's "Michiaki Obata's Criticism of Uno's Theory"" (in Japanese) By Michiaki Obata

  1. By: Pavlina R. Tcherneva
    Abstract: The paper evaluates the fiscal policy initiatives during the Great Recession in the United States. It argues that, although the nonconventional fiscal policies targeted at the financial sector dwarfed the conventional countercyclical stabilization efforts directed toward the real sector, the relatively disappointing impact on employment was a result of misdirected funding priorities combined with an exclusive and ill-advised focus on the output gap rather than on the employment gap. The paper argues further that conventional pump-priming policies are incapable of closing this employment gap. In order to tackle the formidable labor market challenges observed in the United States over the last few decades, policy could benefit from a fundamental reorientation away from trickle-down Keynesianism and toward what is termed here a "bottom-up approach" to fiscal policy. This approach also reconsiders the nature of countercyclical government stabilizers.
    Keywords: Fiscal Policy; American Recovery and Reinvestment Act of 2009; Trickle-Down Keynesianism; Countercyclical Employment Policy
    JEL: E24 E25 E61 E62 E65 H1 H5 J2 J6 J48
    Date: 2012–05
  2. By: Antoine Godin
    Abstract: In most economies, the potential of saving energy via insulation and more efficient uses of electricity is important. In order to reach the Kyoto Protocol objectives, it is urgent to develop policies that reduce the production of carbon dioxide in all sectors of the economy. This paper proposes an analysis of a green-jobs employer-of-last-resort (ELR) program based on a stock-flow consistent (SFC) model with three productive sectors (consumption, capital goods, and energy) and two household sectors (wage earners and capitalists). By increasing the energy efficiency of dwellings and public buildings, the green-jobs ELR sector implies a shift in consumption patterns from energy consumption toward consumption of goods. This could spur the private sector and thus increase employment. Lastly, the jobs guarantee program removes all involuntary unemployment and decreases poverty while lowering carbon dioxide emissions. The environmental policy proposed in this paper is macroeconomic and offers a structural change of the economy instead of the usual micro solutions.
    Keywords: Full Employment; Green Jobs; Stock-flow Consistent
    JEL: E24 J08 Q48
    Date: 2012–05
  3. By: Jorg Bibow
    Abstract: This paper investigates the causes behind the euro debt crisis, particularly Germany's role in it. It is argued that the crisis is not primarily a "sovereign debt crisis" but rather a (twin) banking and balance of payments crisis. Intra-area competitiveness and current account imbalances, and the corresponding debt flows that such imbalances give rise to, are at the heart of the matter, and they ultimately go back to competitive wage deflation on Germany's part since the late 1990s. Germany broke the golden rule of a monetary union: commitment to a common inflation rate. As a result, the country faces a trilemma of its own making and must make a critical choice, since it cannot have it all--perpetual export surpluses, a no transfer / no bailout monetary union, and a "clean," independent central bank. Misdiagnosis and the wrongly prescribed medication of austerity have made the situation worse by adding a growth crisis to the potpourri of internal stresses that threaten the euro's survival. The crisis in Euroland poses a global "too big to fail" threat, and presents a moral hazard of perhaps unprecedented scale to the global community.
    Keywords: Euro; Monetary Union; Banking Crisis; Balance-of-Payments Crisis; Sovereign Debt Crisis; Competitiveness Imbalances; Fiscal Transfers; Bailouts; Austerity
    JEL: E42 E52 E58 E65 F36 G01
    Date: 2012–05
  4. By: Ciani Scarnicci, Manuela
    Abstract: Amartya Sen (1933-) is one of the greatest scholars who studied the relationship between ethics and economics and was held the Nobel Economics Prize thanks to this. At the awarding of the Nobel prize, while talking about his studies, the motive was: “...has been highly instrumental in restoring an ethical dimension to economics and related disciplines”. Precisely the theories of this binomial taken from the work of A. Sen “Economics and Ethics” are the basis of this work. Thanks to A. Sen there is proof that there has been a strong detachment of economics from ethics and this is to be considered as one of the greatest lack of the modern economic theory. The basis of the argument of the Nobel Prize winner is the idea that economy can be made more productive in paying more attention to ethical considerations which determine human beings’ behaviour and judgement. Sen, affirms that the predominant economic theory is the one based on individual interest aimed at the maximization of one’s own benefits, yet there aren’t proofs that this maximization is present in any choice of men. Moreover, it is not true that by only following one’s own interest it is possible to reach excellent economic trends. Adam Smith’s theory itself on self- interest, if careful interpretation is provided, do not represent a support for the defenders of human behavior which is only moved by self-interest. Obviously, there might be peculiar situations too where self-interest might lead to ethical approaches. Ethical economics is based on the behavior that individuals exercise in doing business practices. It is then useful to understand what causes such behaviors, therefore it is important to retrieve an interdisciplinary economic study, as Robert Skidelsky claims in his work “The return of the Master”. In this script he tries to give a perspective on the reasons which push an individual towards justice and equity. This dissertation arises from the theories of a few great political philosophers who found their teachings not only on the intrinsic reasons of the human nature but also on the role a State must have to make possible for a civil society to exercise those principles previously said. All the authors considered assume that the individual is a social animal and so the latter is analyzed and studied as integrated in a social context .
    Keywords: Aritotle; Sen; Hume; Hobbes; Kant; Rousseau; Calvin; D'Aquino; Smith; ASP; Sympathy; aurea medietas; Becker; Locke;
    JEL: D63 I18 Z10 N00 H30 A11
    Date: 2012
  5. By: Jaime Gomez-Ramirez; Manuel G. Bedia
    Abstract: Since the financial crash in 2008, economic science and the economic profession are under siege. Critics point fingers at ivory tower economists, devoted to the construction of unfalsifiable models based on unrealistic assumptions in purely theoretical basis. Economies are complex man-made systems where organisms and markets interact according to motivations and principles not entirely understood yet. Neo-classical economics is agnostic about the neural mechanisms that underlie the valuation of choices and decision making. The increasing dissatisfaction with the postulates of traditional economics i.e. perfectly rational agents, interacting through efficient markets in the search of equilibrium, has created new incentives for different approcahes in economics. Behavioral economics [2],[9] builds on cognitive and emotional models of agents, Neuroeconomics addresses the neurobiological basis of valuation of choices [8],[7] or Evolutionary economics [3], [5], [4],[1],[6] which strives for a new understanding of the economy as a complex evolutionary system, composed of agents that adapt to endogenous patterns out of equilibrium regions. The science of complexity may provide the platform to cross disciplinary boundaries in seemgly disparate fields such as brain science and economics. In this paper we take an integrative stance, fostering new insights into the economic character of neural activity. Key concepts in brain science like Hebbian learning and neural plasticity are revisited and elaborated, inside a new theoretical framework, that is sensitive to the new ideas that econophysics is proposing for financial markets. The objective here is to precisely delineate common topics in both neural and economic science, within a systemic outlook grounded in empirical basis that jolts the unification across the science of complex systems.
    Date: 2012–05
  6. By: Nicholas Apergis; Emmanuel Mamatzakis
    Abstract: This paper examines the underlying dynamics of selected euro-area sovereign bonds by employing a factor-augmenting vector autoregressive (FAVAR) model for the first time in the literature. This methodology allows for identifying the underlying transmission mechanisms of several factors; in particular, market liquidity and credit risk. Departing from the classical structural vector autoregressive (VAR) models, it allows us to relax limitations regarding the choice of variables that could drive spreads and credit default swaps (CDSs) of euro-area sovereign debts. The results show that liquidity, credit risk, and flight to quality drive both spreads and CDSs of five years' maturity over swaps for Greece and Ireland in recent years. Greece, in particular, is facing an elastic demand for its sovereign bonds that further stretches liquidity. Moreover, in current illiquid market conditions spreads will continue to follow a steep upward trend, with certain adverse financial stability implications. In addition, we observe a negative feedback effect from counterparty credit risk.
    Keywords: Sovereign Debt Crisis; Spreads; CDS; FAVAR Model; Greece and Ireland
    JEL: C32 G00 G01
    Date: 2012–05
  7. By: Michiaki Obata (Faculty of Economics, University of Tokyo)
    Abstract: Against my article "Criticsim of Theory of Pure Capitalism" in 2008, Prof. Shigekatu Yamaguchi published the article entitled "Michiaki Obata's Criticism of Uno's Theorety" in 2010 where he reproach me for the excessive "misunderstanding" and "incorrect interpretation" to the "Uno's Theory". This paper is the reply to this. Main points in dispute comes out about (1) difference between "ruin" theory and "collapse" theory of capitalism, (2) relation between the stage theory of capitalist development and "transition process" from capitalism, (3) contrast between "typicality" and "similarity" in the stage theory, and (4) the origin of capitalism. My short remarks on "interpretation" is given to the last.
    Date: 2012–05

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