nep-pke New Economics Papers
on Post Keynesian Economics
Issue of 2012‒07‒08
seven papers chosen by
Karl Petrick
University of the West Indies

  1. Heterodox Central Bankers: Eccles, Prebisch and Financial Reform in 1930s By Esteban Pérez Caldentey and Matias Vernengo
  2. Attacking the Treasury View, Again By Dean Baker
  3. Between Progressivism and Institutionalism Albert Benedict Wolfe on Eugenics By Luca Fiorito
  4. J.A. Schumpeter and the Theory of Economic Evolution (One Hundred Years beyond the Theory of Economic Development) By Stan Metcalfe
  5. Did The Globalization of Finance Undermine Financial Stability? By Hugo Bänziger
  6. Corruption, Rule of Law, and Economic Efficiency: Virginia vs. Chicago Public Choice Theories By Ladislava Grochova; Tomas Otahal
  7. Economic growth and welfare state: a debate of econometrics By DING, HONG

  1. By: Esteban Pérez Caldentey and Matias Vernengo
    Keywords: Monetary Policy; Economic History; Heterodox Economics JEL Classification: B31, B50, E58, N10 The Great Depression led to a need to rethink the principles of central banking, as much as it had led to the rethinking of economics in general, with the Keynesian Revolution at the forefront of the theoretical changes. This paper suggests that the role of the monetary authority as a fiscal agent of government and the abandonment of the view of the economy as self-regulated were the central changes in central banking in the center. In addition, in the periphery central banks changed to try to insulate the worst effects of balance of payments crises and the use of capital controls became more common. Marriner S. Eccles, in the United States, and Raúl Prebisch, in Argentina, are paradigmatic examples of those new tendencies of central banking in the 1930s.
    Date: 2012
  2. By: Dean Baker
    Abstract: This paper considers the case for and against 'the treasury view' - the idea that in a downturn, government spending has no effect on economic activity or unemployment. The report covers three areas: the evidence for expansionary fiscal contraction – the idea that somehow cutting budget deficits will lead to an increase in growth, even in the middle of a downturn; the logic of expansionary contraction; and finally, a more sustainable path for the economy that is not designed to generate inequality in the same way that the pre-crisis economy was.
    Keywords: austerity, fiscal stimulus, deficit spending,
    JEL: E E2 E3 E32 E6 E62 E65 H H6 H62
    Date: 2012–06
  3. By: Luca Fiorito
    Abstract: Albeit concerned with the biological element in social evolution, Albert B. Wolfe was among the very few economists of the progressive era who openly expressed his concerns about certain implications of eugenic rhetoric for the social science. Specifically, Wolfe questioned the strong hereditary boundaries that more extreme eugenicists suggested about human beings. As I will attempt to show in paper, a careful examination of Wolfe’s writings reveals that his reaction was rooted in the belief that many of the social problems which eugenicists attributed to hereditary limitations, were actually imputable to the influence that the social, economic, and physical environment exercised on the individuals.
    Keywords: Eugenics; Institutionalism; Social Evolution; Progressivism; Wolfe, Albert Benedict
    JEL: B1 B15
    Date: 2012–06
  4. By: Stan Metcalfe
    Abstract: The centennial of the publication of Schumpeter's Theory of Economic Development is an occasion to look back in appraisal and an opportunity to look forward in anticipation to consider anew the challenges that remain unfulfilled for Schumpeterians. Along with Marx and Marshall, Schumpeter's great achievement was to formulate an evolutionary, open system perspective on modern capitalism, to explain why it could never be at rest and to link its emergent properties to the capacity to change from within. In terms of appraisal, I shall focus on three aspects of Schumpeter's scheme: the link between knowledge, enterprise and the meaning to be attributed to a knowledge economy, the nature of the competitive process in the presence of innovation, and the transient, out of equilibrium nature of all economic arrangements. In looking forward, I shall consider what is missing from evolutionary economic dynamics, pointing to the role of factor markets in the competitive process, the significance of differences in firm's investment strategies and the fine grained nature of competition in markets where differences in the qualities of goods and services matter, and, lastly, on the evolutionary dimensions of international competition. Two lessons are particularly pertinent to advancing the Schumpeterian enterprise. First, that the familiar one-dimensional models of economic evolution are useful but incomplete. Secondly, that, while much evolutionary thinking has naturally focused on the connection between the micro and the meso, we need also to consider the connection between the meso and the macro and in so doing connect to rich literatures in the field of economic growth and development.
    Date: 2012–06–26
  5. By: Hugo Bänziger
    Abstract: None
    Date: 2012–06
  6. By: Ladislava Grochova (Department of Economics, Faculty of Business and Economics, Mendel University in Brno); Tomas Otahal (Department of Economics, Faculty of Business and Economics, Mendel University in Brno)
    Abstract: Can corruption improve economic efficiency? Classical political economists argue that corruption undermines the rule of law (Smith 2001, chap 5). The modern Public Choice proponents argue that corruption and lobbying might influence the efficiency of the rule of law. While Chicago Public Choice scholars model how legal lobbying, which is corruption in Virginia Public Choice perspective, improves efficiency of the rule of law and thus the overall economic efficiency, the Virginia Public Choice models explain how corruption reduces efficiency of the rule of law and thus the overall economic efficiency. In this short paper, we present a brief survey distinguishing between arguments of the Chicago Public Choice and Virginia Public Choice schools on how corruption influences economic efficiency. We argue that the Virginia Public Choice explanation is more realistic because it includes the influence of bureaucratic rent-seeking.
    Keywords: Bureaucracy, corruption, economic efficiency, Chicago Public Choice, Virginia Public Choice, rent-seeking, rule of law
    JEL: D74 K42 P3
    Date: 2012–06
  7. By: DING, HONG
    Abstract: This study uses a two-way fixed effect model for panel data of all OECD nations, which includes most of the determinants of growth in previous empirical growth studies for either cross section or panel data as control variables and carefully checks possible endogeneity of the key variables of interest: welfare measures by Durbin-Wu-Hausman test. The empirical analysis shows a robust negative correlation between welfare spending rate, tax-to-GDP ratio and GDP growth. In particular, the estimates suggest that a 1% increase in welfare spending as percentage of GDP would increase the per capita GDP growth rate by 0.19%. Among three biggest components of welfare expenditure, pension spending is identified as the most important source of detrimental effect on growth while income support and public health expenditure are found to have no significant impact on growth. I also find that a 1% increase in tax revenue-to-GDP ratio would increase the per capita GDP growth rate by 0.18%. Since this estimate is close to that of welfare spending rate and welfare spending is only part of tax revenue used by government, it implies that decreasing welfare expenditure is more important and more effective for promoting growth than cutting tax. All results are subject to robustness checks including unit root test for panel data, slope poolability test, dependent variable persistence test, informal check of IV exogeneity and serial correlation test.
    Keywords: welfare state; economic growth; endogeneity; Durbin-wu-hausman test;
    JEL: I38 H53 O4
    Date: 2012–06–20

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