nep-pke New Economics Papers
on Post Keynesian Economics
Issue of 2013‒06‒16
nineteen papers chosen by
Karl Petrick
Western New England University

  1. The Monetary Theory of Kalecki and Minsky By Jan Toporowski
  2. The traverse, equilibrium analysis and post-Keynesian economics. By Joseph Halevi; Neil Hart; Peter Kriesler
  3. A Bright Future Can Be Ours! Macroeconomic Policy for Non-Euro-Zone Western Countries. By John Nevile; Peter Kriesler
  4. Fusing Indissolubly the Cycle and the Trend: Richard Goodwin’s Profound Insight. By Geoff Harcourt
  5. Neologism as Theoretical Innovation in Economics: The case of 'Financialisation' By Jan Toporowski
  6. Corporate Liquidity and Financial Fragility: The Role of Investment, Debt and Interest By Jan Toporowski
  7. Full employment. By Geoffrey Harcourt
  8. Lange and Keynes By Jan Toporowski
  9. Introduction [to Handbook of Post-Keynesian Economics: Oxford University Press: USA]. By Geoffrey Harcourt; Peter Kriesler
  10. Michal Kalecki and Rosa Luxemburg on Marx’s schemes of reproduction: two incisive interpreters of capitalism. By Geoffrey Harcourt; Peter Kriesler
  11. Towards a revision of the theory of capital By Cavalieri, Duccio
  12. Notes sur Keynes et la crise By Paulo Nakatani; Rémy Herrera
  13. A Non-Autistic Approach to Socio-Economic Problems: Kathedersozialismusand the Kathedersozialismusand the Kathedersozialismus German Historical School By Wolfgang Drechsler
  14. Unethical dilemmas in derivatives practice By Alqatawni, Tahsen
  15. Who cares about financialization? Explaining the decline in political salience of active markets for corporate control By Callaghan, Helen
  16. The Global Decline of the Labor Share By Loukas Karabarbounis; Brent Neiman
  17. The Human Right to Water and Common Ownership of the Earth By Risse, Mathias
  18. Knowing what not to do: Financial literacy and consumer credit choices By Dick, Christian D.; Jaroszek, Lena M.
  19. What is European Integration Really About? A Political Guide for Economists By Enrico Spolaore

  1. By: Jan Toporowski (Department of Economics, SOAS, University of London, UK)
    Abstract: The monetary theory of Kalecki and Minsky is usually placed within the Post-Keynesian tradition, deriving from the monetary analysis of John Maynard Keynes. The paper argues that Kalecki and Minsky shared a common inheritance in Swedish and German monetary theory, rather than the Marshallian tradition. Thus the monetary analysis of Kalecki and Minsky emphasises the endogeneity of money through capitalist reproduction, rather than through the mechanisms connecting central bank money to credit creation in the banking system. This provides the link between the monetary theory of Kalecki and Minsky and modern circuit theory.
    Keywords: Keynes, Kalecki, Minsky, Money
    JEL: B30 E12 E51
    Date: 2012–03
  2. By: Joseph Halevi (The University of Sydney); Neil Hart (The University of Western Sydney); Peter Kriesler (The University of New South Wales)
    Abstract: The Traverse refers to the movement of the economy outside equilibrium. It requires a consideration of how an economy may achieve equilibrium, and how it may navigate towards a new one if conditions change. Analysis of these themes, from the classical economists onwards, leads to the conclusion that it is difficult to envisage any useful role for equilibrium theory in the absence of some evidence that there are forces in the economy which propel it to equilibrium, without influencing the position to which the economy is gravitating towards. Complicating factors, emphasised in the post-Keynesian literature, include the existence of path-dependency, hysteresis, cumulative causation and the evolutionary nature of economic change.
    Keywords: history of economic thought, post-Keynesian, equilibrium and disequilibrium, path-dependency, hysteresis, cumulative causation and the evolutionary
    JEL: B00 B52 D5 E12
    Date: 2012–05
  3. By: John Nevile (School of Economics, University of New South Wales); Peter Kriesler (School of Economics, University of New South Wales)
    Abstract: Radical changes in macroeconomic policy could produce a brighter future. The neoclassical myth that a free-market economy inevitably moves to an equilibrium position determined solely by supply-side factors must be rejected and replaced by the insight that the position of an economy in the longer-run is path-dependent. Fiscal policy in recessions should be biased towards increasing physical and human capital which will improve the productivity of an economy, raising living standards and hence taxable capacity, thus enabling future public debt to be reduced if this is desirable. Monetary policy should play a very minor role in aggregate demand policy, with interest rate settings largely used to help achieve long-term income distribution goals. All this is fundamental to Geoff Harcourt’s vision of macroeconomic policy and this paper spells out how this vision can be implemented in 2012 in Western countries not hamstrung by Euro-zone rules and regulations.
    Keywords: macroeconomic policy, cyclical fluctuations, money and interest, monetary policy, fiscal policy.
    JEL: E00 E52 E62
    Date: 2012–04
  4. By: Geoff Harcourt (School of Economics, University of New South Wales)
    Abstract: none.
    Keywords: none.
    JEL: E00
    Date: 2012–05
  5. By: Jan Toporowski (Department of Economics, SOAS, University of London, UK)
    Abstract: The term 'financialisation' is a recognition that finance has come to play a key role on the modern capitalist economy. But users of the term do not agree on its meaning and recognition of the growing scale of finance has not brought about an increased understanding of financial processes. The paper examines the reasons for increased turnover in financial markets. The main themes in the literature on financialisation are examined and shown to lack a coherent account of financial processes that goes beyond the evidence of financial activity.
    Keywords: Financialisation, debt, credit
    JEL: B26 E11 E12
    Date: 2012–03
  6. By: Jan Toporowski (Department of Economics, SOAS, University of London, UK)
    Abstract: The paper addresses the issue of how debt deflation may arise in a capitalist economy with a sophisticated credit system. It argues that the standard argument of debt deflationists, that debt-financed investment causes a build-up of unsustainable investment, fails to recognise that debt is back by credit. A corollary of this is that the rate of interest is not a factor in investment decisions. Financial fragility is caused by heterogeneity of balance sheets, debt financed operations in financial markets and insufficient debt-financed investment, rather than too much such investment.
    Keywords: Debt, Interest, Investment, Crisis
    JEL: E32 E51 G01 G30
    Date: 2012–03
  7. By: Geoffrey Harcourt (The University of New South Wales)
    Abstract: No abstract available.
    Keywords: no keywaords available
    JEL: B00 B52 D5 E12
    Date: 2012–09
  8. By: Jan Toporowski (Department of Economics, SOAS, University of London, UK)
    Abstract: Lange engaged with Keynes in the matter of Keynes's macroeconomics, and over econometrics. Lange's interpretation of the Keynesian macroeconomic model laid the foundation for the neo-classical synthesis. But it was limited in its monetary economics. Lange also intervened in the Keynes-Tinbergen dispute over the scope and significance of econometrics. Lange collaborated in a paper that conceded Keynes's main point that empirical investigation could not determine theory, but insisted that theories could nevertheless be tested empirically. The paper was never publish and Keynes, unconvinced, planned to recruit Kalecki to his critique of econometrics.
    Keywords: Lange, Keynes, Econometrics
    JEL: B31 B41 C18 E12
    Date: 2012–03
  9. By: Geoffrey Harcourt (The University of New South Wales); Peter Kriesler (The University of New South Wales)
    Abstract: In this Introduction, we discuss the main themes of post-Keynesian economics, and the manner in which they are dealt with by the contributors to the Handbook. In particular, the important aspects of post-Keynesian analysis are identified, and their main critiques of mainstream theory are discussed. According to Joan Robinson “post-Keynesian has a definite meaning; it applies to an economic theory or method of analysis which takes account of the difference between the future and the past”. In other words, historical time forms the basis of post-Keynesian analysis, which also stresses the importance of history, uncertainty, society and institutions in understanding economic phenomena.
    Keywords: history of economic thought, post-Keynesian, equilibrium and disequilibrium, path-dependency, hysteresis, cumulative causation and the evolutionary
    JEL: B00 B52 D5 E12
    Date: 2012–05
  10. By: Geoffrey Harcourt (The University of New South Wales); Peter Kriesler (The University of New South Wales)
    Abstract: Both Rosa Luxemburg and Michal Kalecki utilised Marx’s scheme’s or reproduction as the starting point of their analysis of economic dynamics. However, Luxemburg did not realise that they were not meant to serve as models of capitalist growth, but rather to show that the conditions for stable growth were unachievable. Luxemburg was an early proponent of the stagnationist thesis which was popularised by Kalecki, Steindl, Baran and Sweezy. She argued that capitalist economies were doomed to stagnate unless markets outside the capitalist arena could be utilised, although she also acknowledged the importance of government expenditure on armaments. Kalecki, while acknowledging some of the limitations of her analysis, was able to extend it to incorporate the main elements of modern capitalist growth.
    Keywords: reproduction schema, Marxian economics, economic growth, economic cycles, effective demand, imperialism
    JEL: B14 B24 B51 E11 E12
    Date: 2012–08
  11. By: Cavalieri, Duccio
    Abstract: This is a proposal to restate the theory of capital along critical Marxian lines aimed at providing a better integration of the theory of capital with the theory of money and finance. The time value of money must be properly accounted for. An analytical method is proposed to accomplish this task. The fundamental Marxian problem of the origin of profit is treated with reference to a specific price index, the monetary expression of labour value (MEV), which accounts for both explicit and implicit cost components, including the financial cost of capital. MEV should not be confused with MELT, the ‘New Interpretation’ money expression of living labour time, which does not consider the opportunity-cost of capital and, following the erroneous net value equality, focuses on the money value of the living labour time commanded by commodities at a given wage rate, rather than on the money value of total abstract labour time embodied in commodities, inclusive of both living and past labour.
    Keywords: Value, capital, labour, profit, Marx, neo-Marxism, accounting, MEV, MELT
    JEL: B12 B13 B22 B5 B51 D46 E22 E4 E41
    Date: 2013–06
  12. By: Paulo Nakatani (UFES - Université Fédérale de Espirito Santo); Rémy Herrera (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne)
    Abstract: Ce cahier de recherche propose une analyse - d'un point de vue d'inspiration marxiste - des relations entretenues par John Maynard Keynes avec l'économie dominante à son époque (première partie), puis présente les éléments théoriques sur la crise qu'il développa lui-même (deuxième partie), et s'interroge enfin, dans le contexte de la crise actuelle, sur l'opportunité d'un retour aux politiques dites " keynésiennes " (troisième partie).
    Keywords: Keynes; crise; marxisme; économie dominante; capitalisme
    Date: 2013–05
  13. By: Wolfgang Drechsler
    Abstract: The by now highly alternative, barely even heterodox economics that dominated Germany, and in fact Continental Europe and much of the world, between the late middle of the 19th Century and the early 20th and that is at the basis both of the Social Market Economy and of much of the modern Welfare State, is particularly interesting once we realize that this is a particularly non-autistic approach to economic problems. Here, the clear recognition of fundamental and pressing social issues . what was called the ´Social Question¡ . gave rise to the realization, by economists and many other intellectuals, that both the analysis of the problem and the suggestion for remedies depend on method, and that method is never neutral. Method shapes how we see reality; it determines the policy outcome . or at least it is employed and promoted by those who want certain outcomes. And some methods, then as now (they are actually by and large the same), preserve the status quoby calling any investigation of what exists, what is wrong, and what should change, unscientific, futile, and impossible. By doing so, one need not openly oppose reform and development . it is enough if one creates a system within which dealing with the real problems is delegitimized. The late 19th century political attitude towards the Social Question, ´Kathedersozialismus¡, by and large led the economists involved to focus on realism (rather than abstraction), on relevance over precision, which by then had become a choice to be made.
    Date: 2013–05
  14. By: Alqatawni, Tahsen
    Abstract: The current global economic crisis and its aftermath resulted of unethical practices of the companies' leaders and their financial management by improper usage of financial derivative, which turned the financial derivatives into a source of gambling, and spread to extremely large volume. Although, the unethical practices from a financial institution observing lack of ethics is made due to self interest that maximizes immediate profit putting shareholder wealth and small investor at risk rather than maximization of shareholder value.
    Keywords: Unethical, Dilemmas, Derivatives, global financial, crisis,gambling
    JEL: G01
    Date: 2013–05–28
  15. By: Callaghan, Helen
    Abstract: Why is unprecedented financialization failing to provoke a strong political backlash? The role of financial markets, motives, actors, and institutions has expanded continuously in recent decades, but - contrary to Polanyi's 'double movement' theory and despite the current financial crisis - market-containment efforts have grown weaker over time. The present paper approaches this puzzle by explaining how the practice of corporate takeover bids gradually gained political acceptance in the United Kingdom from the 1950s onward. Through its expansion, the market for corporate control contributed directly to eroding political resistance by triggering processes of routinization, adaptation, and elimination. Routinization decreases issue salience for 'average voters' because it lowers the news value of takeover bids. Adaptation to new profit opportunities increases the number of beneficiaries from takeover bids, thereby bolstering promarket clienteles. Elimination of stakeholder-oriented companies - through constant exposure to takeover threats - demoralizes the opponents of active markets for corporate control by leaving them with less to fight for. Empirical evidence is drawn mainly from qualitative and quantitative analysis of British parliamentary debates regarding takeover bids between 1953 and 2011. -- Warum provoziert die historisch beispiellose Finanzialisierung keine starke politische Gegenreaktion? Während der Einfluss der Finanzwelt auf Märkte, Motive, Akteure und Institutionen im vergangenen Jahrzehnt kontinuierlich gewachsen ist, sind Bestrebungen zur Markteindämmung schwächer geworden - entgegen Polanyis Theorie der Doppelbewegung und trotz der gegenwärtigen Finanzkrise. Der vorliegende Aufsatz nähert sich diesem Rätsel, indem dargelegt wird, wie die Praxis von Übernahmeangeboten in Großbritannien seit den 1950er-Jahren allmählich an politischer Akzeptanz gewonnen hat. Durch seine Ausdehnung hat der Markt für Unternehmenskontrolle direkt zur Erosion politischen Widerstands beigetragen, indem er Prozesse der Routinisierung, Anpassung und Eliminierung ausgelöst hat. Routinisierung verringert die Bedeutung des Themas für den 'Durchschnittswähler', da sie den Nachrichtenwert von Übernahmeangeboten senkt. Anpassung an neue Profitmöglichkeiten erhöht die Zahl der Nutznießer von Übernahmeangeboten und stärkt so marktfreundliche Parteien. Eliminierung von stakeholderorientierten Unternehmen durch konstante Übernahmedrohungen demoralisiert die Gegner aktiver Märkte für Unternehmenskontrolle, da sich Widerstand weniger lohnt. Als empirische Belege werden quantitative und qualitative Analysen britischer Parlamentsdebatten zwischen 1953 und 2011 herangezogen.
    Date: 2013
  16. By: Loukas Karabarbounis; Brent Neiman
    Abstract: The stability of the labor share of income is a key foundation in macroeconomic models. We document, however, that the global labor share has significantly declined since the early 1980s, with the decline occurring within the large majority of countries and industries. We show that the decrease in the relative price of investment goods, often attributed to advances in information technology and the computer age, induced firms to shift away from labor and toward capital. The lower price of investment goods explains roughly half of the observed decline in the labor share, even when we allow for other mechanisms influencing factor shares such as increasing profits, capital-augmenting technology growth, and the changing skill composition of the labor force. We highlight the implications of this explanation for welfare and macroeconomic dynamics.
    JEL: E21 E22 E25
    Date: 2013–06
  17. By: Risse, Mathias (Harvard University)
    Abstract: The human rights to water and sanitation have come up for a fair amount of discussion in the last 15 years, especially among lawyers, social scientists, and human rights activists. Relatively little foundational normative work has been done in support of such human rights. The present paper provides philosophical foundations for human rights to water and sanitation, resorting especially to ideas of humanity's common ownership of the earth.
    Date: 2013–02
  18. By: Dick, Christian D.; Jaroszek, Lena M.
    Abstract: Based on a rich panel of household data, we investigate the determinants of the use of consumer credit in Germany. We find that the usage frequency of an easily accessible, but relatively expensive source of consumer credit decreases with financial literacy but is unrelated to household income. This result is robust to household structure, age, formal education, and occupational status. Based on childhood-related information on spending behavior, we control for the influence of self- control on credit decisions. We document that neither self-control, nor low numeracy drive out financial literacy when explaining the frequency of (expensive) credit usage. Hence, financial education plays an important role to improve consumer choices. --
    Keywords: Consumer finance,credit decisions,financial literacy,financial education,numeracy,self-control
    JEL: D12 D14
    Date: 2013
  19. By: Enrico Spolaore
    Abstract: Europe’s monetary union is part of a broader process of integration that started in the aftermath of World War II. In this “political guide for economists” we look at the creation of the euro within the bigger picture of European integration. How and why were European institutions established? What are the goals and determinants of European Integration? What is European integration really about? We address these questions from a political-economy perspective, building on ideas and results from the economic literature on the formation of states and political unions. Specifically, we look at the motivations, assumptions, and limitations of the European strategy, initiated by Jean Monnet and his collaborators, of partially integrating policy functions in a few areas, with the expectation that more integration will follow in other areas, in a sort of chain reaction towards an “ever-closer union.” The euro with its current problems is a child of that strategy and its limits.
    JEL: F15 F50 F55 H40 H77 N44
    Date: 2013–06

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