nep-pke New Economics Papers
on Post Keynesian Economics
Issue of 2012‒09‒30
eight papers chosen by
Karl Petrick
University of the West Indies

  1. "The Common Error of Common Sense: An Essential Rectification of the Accounting Approach" By Egmont Kakarot-Handtke
  2. Book review: what money can’t buy: the moral limits of markets. By Shidlo, Gil
  3. A mission-centric view of the firm: Lessons from Social Entrepreneurship By Kevin Levillain; Blanche Segrestin
  4. Social costs and normative economics By Paolo Ramazzotti
  5. Do literacy and numeracy pay off? : on the relationship between basic skills and earnings By Antoni, Manfred; Heineck, Guido
  6. The case against patents By Michele Boldrin; David K. Levine
  7. Another Look at Foreign Aid By Gustav Ranis
  8. Soviet power plus electrification: what is the long-run legacy of communism? By Wendy Carlin; Mark Schaffer; Paul Seabright

  1. By: Egmont Kakarot-Handtke
    Abstract: This paper takes the explanatory superiority of the integrated monetary approach for granted. It will be demonstrated that the accounting approach could do even better, provided it frees itself from theoretically ill-founded notions like GDP and other artifacts of the equilibrium approach. National accounting as such does not provide a model of the economy but is, rather, the numerical reflex of the underlying theory. It is this theory that will be scrutinized, rectified, and ultimately replaced in what follows. The formal point of reference is "the integrated approach to credit, money, income, production and wealth" of Wynne Godley and Marc Lavoie.
    Keywords: New Framework of Concepts; Structure-Centric; Axiom Set, Primacy of Theory; Income; Profit; Distributed Profit; Money; Flow; Residual; Transaction Matrix; General Complementarity
    JEL: B41 E01
    Date: 2012–09
  2. By: Shidlo, Gil
    Abstract: In What Money Can’t Buy, Sandel examines one of the biggest ethical questions of our time and provokes a debate that’s been missing in our market-driven age: What is the proper role of markets in a democratic society, and how can we protect the moral and civic goods that markets do not honour and money cannot buy? Gil Shidlo feels that Sandel brings the issue to be debated and raises it in a way each one of us feels fully equipped to voice concerns.
    Date: 2012–06–17
  3. By: Kevin Levillain (CGS - Centre de Gestion Scientifique - Mines ParisTech); Blanche Segrestin (CGS - Centre de Gestion Scientifique - Mines ParisTech)
    Abstract: Social Entrepreneurship causes increasing debate in the literature and represents a growing enigma for theories of the firm. Beyond the divergences in its definitions, we show that its mission to create "social value" is an identifiable common feature that cannot be satisfactorily described within the main existing theories. Indeed, social entrepreneurship is, by definition, inconsistent with the shareholder primacy advocating for the too narrow only objective of shareholder profit maximization. But it departs also from stakeholder views that focus on the survival of the firm by aligning its interests with discrepant and "overbroad" crucial stakeholders. Outwardly oriented missions in fact necessitate forgetting the dominant "principal-agent"-like settings, even if principals might be carefully and rightfully chosen. We support our arguments with the study of two empirical cases that are successful long-lasting businesses related to social entrepreneurship: John Lewis Partnership and Equal Exchange. These companies have built pioneering custom-made governance systems - ensuring both performance and social fairness - that dispense with standard implicit hypotheses: their clearly explicit mission identifies "beneficiaries" that are distinct from crucial stakeholders, financial contributors, and principals. Instead, the mission becomes a pivotal attribute to explain and design these organisations' structure and mechanisms. Consequently, we delineate three main theoretical and managerial implications of revealing this mission: it lends a strong legitimacy to the directors and officers by clearly defining the boundaries of their discretion, it specifies and justifies the participants' engagement in the management authority, and it calls for new control mechanisms that are fundamentally different from the monitoring systems of principal-agent relationships. Thus our model clarifies the firms' boundaries and escapes the traditional stakeholders' conflicts of interest. We postulate that this model opens an interesting field for future research, both on social and conventional entrepreneurship, and may entail a deep change in managerial and governance techniques that may have reached a dead-end in the recent economic crisis.
    Keywords: Social Entrepreneurship; Social purpose; Corporate Governance; Management Discretion
    Date: 2012–05–23
  4. By: Paolo Ramazzotti (University of Macerata)
    Abstract: The aim of the paper is to assess the notion of social costs from an evolutionary institutionalist perspective. It argues that: social costs can be defined as the difference between the actual outcome of a historically defined capitalist market economy and the outcome desired by the members of society; markets are only one of the possible coordinating instances in such economies, albeit the prevalent one, the others including non-profit organizations, the welfare state, households, etc.; under these circumstances, the assessment and organization of economic activities requires a meta-coordinating instance; the extension of capabilities, as theorized by Amartya Sen, may provide such an instance. The paper begins with a brief discussion of the themes of, and problems related to, the conventional theory of social costs. It then specifies the context of the discussion by situating it in a historically defined economy: a capitalist market one. It contends that the rationale of such an economy involves treating labor, nature and money as "fictitious commodities", and that the existence of social costs ultimately depends on this central feature. Based on this approach, it discusses Kapp's suggestion that policy should focus on minimal social requirements. It points out, in this respect, that a broader criterion is required. Drawing on Sen, the paper stresses that choices cannot be reduced to a single dimension - such as (economic) welfare - and that the economic context may preclude the freedom to choose how to conduct one's life. The implication is a qualification of social costs: they are determined by economic activities that prevent people from achieving the capabilities they need. The public policy implications of the above approach are that many alternatives to the status quo are possible. In the light of these features, the discussion reasserts the need for a normative approach to economic inquiry.
    Date: 2012–03
  5. By: Antoni, Manfred (Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany]); Heineck, Guido
    Abstract: "Is there a reward for basic skills in the German labor market? To answer this question, we examine the relationship between literacy, numeracy and monthly gross earnings of full-time employed workers. We use data from the ALWA survey, augmented by test scores on basic cognitive skills as well as administrative earnings data. Our results indicate that earnings are positively related to both types of skills. There furthermore is no evidence for non-linearity in this relationship and only little heterogeneity when differentiating by sub-groups." (Author's abstract, IAB-Doku) ((en))
    JEL: I21 J31
    Date: 2012–09–18
  6. By: Michele Boldrin; David K. Levine
    Abstract: The case against patents can be summarized briefly: there is no empirical evidence that they serve to increase innovation and productivity. There is strong evidence, instead, that patents have many negative consequences.
    Keywords: Patents ; Productivity
    Date: 2012
  7. By: Gustav Ranis (Economic Growth Center, Yale University)
    Abstract: The discussion of the effectiveness of foreign aid has reached a high pitch. This paper assesses the sorry past and present key arguments for a potentially more effective and sustainable method of aid delivery. A key ingredient is to shake off the vestiges of structural adjustment and move towards true recipient country ownership complete with “self-conditionality” with aid recipients formulating their own reform packages. This means donors become much more passive, act like a bank and respond to proposals which concentrate on a few critical areas over a three to five-year period. Policy-based program lending should respond to packages put together by the main domestic stakeholders with the help, if necessary, of independent third parties. There should be no compulsion to lend; indeed, an aid hiatus is an indication that the new system is effective. What is required is for donors to stop using aid as a short-term foreign policy tool and for recipients to accept the notion that aid provides the opportunity to reduce the inevitable adjustment pains caused by real reforms.
    Keywords: foreign aid, self-conditionality, program lending, new donors
    JEL: O11 O20 O38 P45
    Date: 2012–08
  8. By: Wendy Carlin (University College London and CEPR); Mark Schaffer (Heriot-Watt University); Paul Seabright (Toulouse School of Economics and CEPR)
    Abstract: <div style="text-align: justify;">Two decades after the end of central planning, we investigate the extent to which the advantages bequeathed by planning in terms of high investment in physical infrastructure and human capital compensated for the costs in allocative inefficiency and weak incentives for innovation. We assemble and analyse three separate types of evidence. First, we find that countries that were initially relatively poor prior to planning benefited more, as measured by long-run GDP per capita levels, from infrastructure and human capital than they suffered from weak market incentives. For initially relatively rich countries the opposite is true. Second, using various measures of physical stocks of infrastructure and human capital we show that at the end of planning, transition countries had substantially different endowments from their contemporaneous non-transition counterparts. However, these differences were much more important for poor than for rich countries. Finally, we use firm-level data to measure the cost of a wide range of constraints on firm performance, and we show that after more than a decade of transition in 2002–05, poor transition economies differ much more from their non-transition counterparts, in respect to both good and bad aspects of the planning legacy, than do relatively rich transition countries. However, the persistent beneficial legacy effects disappeared under the pressure of strong growth in transition economies in the run-up to the global financial crisis.</div>
    Keywords: business environment,transition,institutions,infrastructure,planned economy
    JEL: O43 P21
    Date: 2012–06

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