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on Post Keynesian Economics |
| By: | Jakob Kapeller (University of Linz, Linz, Austria); Bernhard Schütz (Department of Economics, University of Linz, Linz, Austria) |
| Abstract: | This paper extends the theoretical concept of wage-led and profit-led demand regimes, first introduced by Amit Bhaduri and Steven Marglin in the early 1990s, by incorporating relative consumption concerns. Specifically, it integrates the Veblenian concept of conspicuous consumption into a typical Bhaduri-Marglin model by assuming that relative consumption concerns matter primarily within the working class. If in such a framework the profit share increases and the corresponding decrease in workers' income is distributed unevenly, efforts to "keep up with the Joneses" may increase consumption and, hence, lead to a consumption- driven profit-led regime. The model's empirical relevance is illustrated with respect to the pre-crisis developments as observed in the U.S. |
| JEL: | B52 D11 E12 E20 |
| Date: | 2012–12 |
| URL: | http://d.repec.org/n?u=RePEc:jku:econwp:2012_13&r=pke |
| By: | Jakob Kapeller (University of Linz, Linz, Austria); Bernhard Schütz (Department of Economics, University of Linz, Linz, Austria) |
| Abstract: | This paper reflects on the development leading to the recent crisis and interprets this development as a series of events within a Minsky-Veblen Cycle. To illustrate this claim we introduce conspicuous consumption concerns, as described by Veblen, into a stock flow consistent Post Keynesian model and demonstrate that, under these conditions, a decrease in income equality leads to a corresponding increase in debt-financed consumption demand. Here Minskyian dynamics come into play: increased credit demand leads to a corresponding rise in credit supply, which, eventually, gives rise to a debt-financed consumption boom. As the solvency of households decreases and interest rates move up, banks reduce lending, triggering household bankruptcies and, finally, a recession. What follows is a stable period of consolidation, where past debts are repaid, financial stability is regained and conspicuous consumption motives may gradually take over again. We illustrate this approach to the current crisis and its explanatory validity by extending our stock-flow consistent model into a dynamic simulation. |
| JEL: | B52 D11 E12 E20 G01 |
| Date: | 2012–12 |
| URL: | http://d.repec.org/n?u=RePEc:jku:econwp:2012_14&r=pke |
| By: | Kakarot-Handtke, Egmont |
| Abstract: | In a programmatic article Alfred Eichner explained, from a Post Keynesian perspective, why neoclassical economics is not yet a science. This was some time ago and one would expect that Post Keynesianism, with a heightened awareness of scientific standards, has done much better than alternative approaches in the meantime. There is wide agreement that this is not the case. Explanations, though, differ widely. The present – strictly formal – inquiry identifies an elementary logical flaw. This strengthens the argument that the Post Keynesian motto ‘it is better to be roughly right than precisely wrong!’ is methodologically indefensible. |
| Keywords: | new framework of concepts; structure-centric; axiom set; consistency; Post Keynesian hard core; logical rigor; loose verbal reasoning; hypothetico-deductive method; profit; retained profit; saving; general complementarity; IS-fallacy |
| JEL: | E12 B22 B41 |
| Date: | 2012–09 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:43171&r=pke |
| By: | Alberto Botta |
| Abstract: | In this paper, we analyze the role of the current institutional setup of the eurozone in fostering the ongoing peripheral euro countries' sovereign debt crisis. In line with Modern Money Theory, we stress that the lack of a federal European government running anticyclical fiscal policy, the loss of euro member-states' monetary sovereignty, and the lack of a lender-of-last-resort central bank have significantly contributed to the generation, amplification, and protraction of the present crisis. In particular, we present a Post-Keynesian eurozone center-periphery model through which we show how, due to the incomplete nature of eurozone institutions with respect to a full-fledged federal union, diverging trends and conflicting claims have emerged between central and peripheral euro countries in the aftermath of the 2007-08 financial meltdown. We emphasize two points. (1) Diverging trends and conflicting claims among euro countries may represent decisive obstacles to the reform of the eurozone toward a complete federal entity. However, they may prove to be self-defeating in the long run should financial turbulences seriously deepen in large peripheral countries. (2) Austerity packages alone do not address the core problems of the eurozone. These packages would make sense only if they were included in a much wider reform agenda whose final purpose was the creation of a government banker and a federal European government that could run expansionary fiscal stances. In this sense, the unlimited bond-buying program recently launched by the European Central Bank is interpreted as a positive, albeit mild step in the right direction out of the extreme monetarism that has thus far shaped eurozone institutions. |
| Keywords: | Eurozone Debt Crisis; Modern Money Theory; Post-Keynesian Center-Periphery Model |
| JEL: | E02 E12 H63 |
| Date: | 2012–12 |
| URL: | http://d.repec.org/n?u=RePEc:lev:wrkpap:wp_740&r=pke |
| By: | Jason Shogren |
| Abstract: | This review aims to improve our understanding of the implications of the insights from behavioural economics for environmental policy design. The review focuses on the question of incentive design in two broad areas — risk, conflict and cooperation; and mechanism design. A number of lessons for policy design emerge from the literature and are highlighted in the paper.<BR>Cet examen vise à améliorer notre compréhension des implications des perspectives de l'économie comportementale pour la conception de la politique environnementale. L'examen porte sur la question de la conception d'incitation dans deux grandes zones: (A) le risque, les conflits et la coopération et (B) la conception du mécanisme. Des leçons émergent de la littérature pour la conception des politiques et sont mis en évidence dans le document. |
| Keywords: | institutions, environmental policy, behavioural economics, mechanism design, institutions, politique environnementale, économie comportementale, conception du mécanisme |
| JEL: | D70 H30 H41 Q28 Q58 |
| Date: | 2012–11–07 |
| URL: | http://d.repec.org/n?u=RePEc:oec:envaaa:49-en&r=pke |
| By: | Claudio Borio |
| Abstract: | It is high time we rediscovered the role of the financial cycle in macroeconomics. In the environment that has prevailed for at least three decades now, it is not possible to understand business fluctuations and the corresponding analytical and policy challenges without understanding the financial cycle. This calls for a rethink of modelling strategies and for significant adjustments to macroeconomic policies. This essay highlights the stylised empirical features of the financial cycle, conjectures as to what it may take to model it satisfactorily, and considers its policy implications. In the discussion of policy, the essay pays special attention to the bust phase, which is less well explored and raises much more controversial issues. |
| Keywords: | financial cycle, business cycle, medium term, financial crises, monetary economy, balance sheet recessions, balance sheet repair |
| Date: | 2012–12 |
| URL: | http://d.repec.org/n?u=RePEc:bis:biswps:395&r=pke |
| By: | Daniel B. Jones; Werner Troesken; Randall Walsh |
| Abstract: | In this paper, we examine the political economy of voting rights in the American South. We begin by measuring the impact of both formal laws and informal modes of voter suppression on African-American political participation. In contrast to prior research, we find evidence that both formal and informal modes of voter suppression were important and mutually reinforcing. Part of our analysis includes explicitly identifying the magnitude and causal effects of lynching on black voter participation. We then turn to analyzing to the relatively unexplored question of how disenfranchisement–and the accompanying shifts in political power–affected policy outcomes, congressional voting, and partisan control of state and federal legislatures. |
| JEL: | H0 J15 N11 |
| Date: | 2012–12 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:18612&r=pke |
| By: | Gary Gorton; Andrew Metrick |
| Abstract: | We survey the literature on securitization and lay out a research program for its open questions. Securitization is the process by which loans, previously held to maturity on the balance sheets of financial intermediaries, are sold in capital markets. Securitization has grown from a small amount in 1990 to a pre-crisis issuance amount that makes it one of the largest capital markets. In 2005 the amount of non-mortgage asset-backed securities issued in U.S. capital markets exceeded the amount of U.S. corporate debt issued, and these securitized bonds – even those unrelated to subprime mortgages -- were at center of the recent financial crisis. Nevertheless, despite the transformative effect of securitization on financial intermediation, the literature is still relatively small and many fundamental questions remain open. |
| JEL: | E0 G0 G2 |
| Date: | 2012–12 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:18611&r=pke |