nep-pke New Economics Papers
on Post Keynesian Economics
Issue of 2012‒10‒27
two papers chosen by
Karl Petrick
University of the West Indies

  1. Are We There Yet? Time for Checks and Balances on New Institutionalism By Iyigun, Murat
  2. "Innovation and Finance: An SFC Analysis of Great Surges of Development" By Alessandro Caiani; Antoine Godin; Stefano Lucarelli

  1. By: Iyigun, Murat (University of Colorado, Boulder)
    Abstract: New institutionalism has had considerable success during the last decade in shepherding the debate on sustained economic development. If the sociopolitical, legal and economic transformations in the Anglo-Saxon world in the last three decades prove anything, however, it is that the late Mancur Olson deserves some long overdue credit. For the relevant question now is why have some constitutional democracies deteriorated to the point of chronic dysfunction with their checks and balances failing. New institutionalists then ought to come to terms with the fact that, in the interest of credible empirical identification, they too narrowly defined what Northian institutions entail. As a matter of fact, political, legal and economic institutions are highly malleable even in advanced economies, while sustained economic growth could well be deep rooted in individual beliefs, social norms and informal cultural organizations.
    Keywords: institutions, economic growth, development
    JEL: O11 O57 N10
    Date: 2012–10
  2. By: Alessandro Caiani; Antoine Godin; Stefano Lucarelli
    Abstract: Schumpeter, a century ago, argued that boom-and-bust cycles are intrinsically related to the functioning of a capitalistic economy. These cycles, inherent to the rise of innovation, are an unavoidable consequence of the way in which markets evolve and assimilate successive technological revolutions. Furthermore, Schumpeter's analysis stressed the fundamental role played by finance in fostering innovation, in defining bank credit as the "monetary complement" of innovation. Nevertheless, we feel that the connection between innovation and firm financing has seldom been examined from a theoretical standpoint, not only by economists in general, but even within the Neo-Schumpeterian research line. Our paper aims at analyzing both the long-term structural change process triggered by innovation and the related financial dynamics inside the coherent framework provided by the stock-flow consistent (SFC) approach. The model presents a multisectoral economy composed of consumption and capital goods industries, a banking sector, and two household sectors: capitalists and wage earners. The SFC approach helps us to track the flows of funds resulting from the rise of innovators in the system. The dynamics of prices, employment, and wealth distribution among the different sectors and social groups is analyzed. Above all, the essential role of finance in fostering innovation and its interaction with the real economy is underlined.
    Keywords: Schumpeter; Innovation; Stock-flow Consistent Models; Monetary Circuit
    JEL: E11 E32 O31
    Date: 2012–10

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