nep-pke New Economics Papers
on Post Keynesian Economics
Issue of 2013‒10‒02
nine papers chosen by
Karl Petrick
Western New England University

  1. Why do students study economics? By Andrew Mearman; Aspasia Papa; Don J. Webber
  2. An issue with own-rates: Keynes borrows from Sraffa , Sraffa criticises Keynes, and present-day commentators get hold of the wrong end of the stick By Grieve Roy H
  3. Politicising poverty in Latin America in the light of Rawls’ ‘strains of commitment’ argument for a social minimum By Armando Barrientos
  4. Liquidity and credit risks in the UK’s financial crisis By Woon Wong; Iris Biefang-Frisancho Mariscal; Wanru Yao; Peter Howells
  5. Puzzling over the Anatomy of Crises: Liquidity and the Veil of Finance By Guillermo Calvo
  6. How should economics curricula be evaluated? By Andrew Mearman
  7. Workers’ agency and re-working power relations in Cambodia’s garment industry By Dennis Arnold
  8. What determines students’ choices of elective modules? By Mary R Hedges; Gail A Pacheco; Don J webber
  9. Why High Human Capital Makes Good Revolutionaries: The Role of the Middle Classes in Democratisation By Frederik Toscani

  1. By: Andrew Mearman (University of the West of England, Bristol); Aspasia Papa (University of the West of England, Bristol); Don J. Webber (University of the West of England, Bristol)
    Abstract: This paper presents a chronological, adaptive and reflective investigation into students’ perceptions of and motivations for choosing to study economics. Applications of multiple techniques to student-level primary data reveal the following. First, students’ perceptions of economics are on average somewhat negative, although there is considerable variation. Second, they regard economics as having value, in terms of providing insight, specialist knowledge, and skills of argumentation (all of which are perceived to be superior to peers). Third, they recognise the subject yields financial and other career advantages and has kudos. Fourth, they suggest that the relevance and usefulness of economics is important and consequently that excessive theorisation and a lack of practicality are problematic. These findings have considerable implications for how economics is taught, and for the nature of the subject itself.
    Keywords: Mixed-methods; UK student perceptions; Realisticness; Focus groups; Survey
    JEL: A11 A20
  2. By: Grieve Roy H (Department of Economics, University of Strathclyde)
    Abstract: Scholars who in recent years have studied the Sraffa papers held in the Wren Library of Trinity College, Cambridge, have concluded from Sraffa’s critical (but unpublished) observations on Chapter 17 of Keynes’s General Theory that he rejected Keynes’s central proposition that the rate of interest on money may come to ‘rule the roost’, thus dragging the economy into recession. While Sraffa does indeed express dissatisfaction with Chapter 17, the commentators have, we believe, misunderstood his concern: we suggest that he was unhappy with the ‘own-rates’ terminology employed by Keynes rather than with the substance of the theory developed in Chapter 17.
    Keywords: Chapter 17 of Keynes’s General Theory, commodity-rates, own-rates of interest
    JEL: B22 B31 E12 E43
    Date: 2013–09
  3. By: Armando Barrientos
    Abstract: Abstract The paper discusses the rise of poverty and poverty reduction in the political and policy agenda in Latin America, reflected inter alia in the growth of social assistance. It identifies and discusses two main explanations offered in the literature: democratisation and left partisan power. It then introduces a third explanation based on Rawls’ theory of justice, in which a social minimum is essential for preventing the ‘strains of commitment’ from becoming excessive. Analysis of cross-country panel data for 18 Latin American countries for the period 1990-2008 assesses the plausibility of these explanations.
    Date: 2013
  4. By: Woon Wong (University of the West of England, Bristol); Iris Biefang-Frisancho Mariscal (University of the West of England, Bristol); Wanru Yao (University of the West of England, Bristol); Peter Howells (University of the West of England, Bristol)
    Abstract: This paper investigates the relationship between credit risk and liquidity components in the interbank spread and how this relationship unfolded during the recent financial crisis. We find that prior to the central bank’s Bank of England’s intervention counterpart risk was a major factor in the widening of the spread and also caused a rise in liquidity risk. However, this relationship was reversed after central bank started quantitative easing (QE). Using the accumulated value of asset purchases as a proxy for central bank’s liquidity provisions, we provide evidence that the QE operations were successful in reducing liquidity premia and ultimately, indirectly, credit risk.
    Keywords: interbank spreads, liquidity premia, credit risk, quantitative easing, financial crisis
  5. By: Guillermo Calvo (Columbia University and NBER (E-mail:
    Abstract: The paper claims that conventional monetary theory obliterates the central role played by media of exchange in the workings and instability of capitalist economies; and that a significant part of the financial system depends on the resiliency of paper currency and liquid assets that have been built on top of it. The resilience of the resulting financial tree is questionable if regulators are not there to adequately trim its branches to keep it from toppling by its own weight or minor wind gusts. The issues raised in the paper are not entirely new but have been ignored in conventional theory. This is very strange because disregard for these key issues has lasted for more than half a century. Are we destined to keep on making the same mistake? The paper argues that a way to prevent that is to understand its roots, and traces them to the Keynes/Hicks tradition. In addition, the paper presents a narrative and some empirical evidence suggesting a key channel from Liquidity Crunch to Sudden Stop, which supports the view that liquidity/credit shocks have been a central factor in recent crises. In addition, the paper claims that liquidity considerations help to explain (a) why a credit boom may precede financial crisis, (b) why capital inflows grow in the run-up of balance-of-payments crises, and (c) why gross flows are pro-cyclical.
    Keywords: Financial Crises, Bubbles, Sudden Stop
    JEL: E32 E65 F32
    Date: 2013–09
  6. By: Andrew Mearman (University of the West of England, Bristol)
    Abstract: This paper explores the evaluation of economics curricula. It argues that the dominant approach in economics education, experimentalism, has serious limitations which render it an unsuitable evaluation method in some cases. The arguments against experimentalism are practical, ethical and also rest on a view of the world as a complex, open system in which contexts are unique and generalised regularities are unlikely. In such an environment, as often found in educational contexts, alternative methods are advisable, at least as part of a suite of approaches in a realistic, case-based, mixed-methods approach to evaluation. Thus, economics curricula should be evaluated using a method or set of methods most appropriate to the particular object case. As such, there is no single answer to the question posed.
    JEL: A20 A22 B4 B5 C80 C9
  7. By: Dennis Arnold
    Abstract: Abstract This paper explores Cambodian garment factory workers’ collective voice and ability to negotiate a living wage. Workers’ agency is examined through a case study of a large-scale strike in September 2010 over national minimum wage negotiations, led by two Cambodian trade union federations. Analysis is centred on four structural impediments to workers’ wage demands. First, the Cambodian People’s Party (CPP) consolidated power in 2008. As a result, space for independent trade unions and civil society is decreasing. Second, Cambodia is not deemed ‘competitive’ as a global sourcing option in terms of price, quality and speed to market. As a result, low wages and a proliferation of unmonitored subcontract factories are increasingly becoming the industry’s competitive advantage vis-à-vis Bangladesh and Vietnam. Third, the proliferation of fixed-duration contracts in Cambodia means work is less secure, with attendant impacts on workers and unions’ negotiating strength. And fourth, the unusually high number of plant-level and national trade union federations makes it difficult for ‘genuine’ unions to promote the rights of their members, and workers’ agency potential is marginalized. The intersection of these four structural forces circumscribes workers and independent trade unions’ ability to rework power relations with the employers association, the Garment Manufacturers Association in Cambodia (GMAC). Despite the challenges, workers and independent unions recognize themselves as the agents who must shape key demands, including on wages.
    Date: 2013
  8. By: Mary R Hedges (University of Auckland); Gail A Pacheco (Auckland University of Technology); Don J webber (University of the West of England, Bristol)
    Abstract: Prior literature emphasises supply side issues concerning the modularisation of university programmes such as curricula issues and enhanced learning opportunities. Comparatively little is known about the demand side, such as why students choose specific modules. This article presents an investigation that was specifically designed to improve understanding of the factors that contribute to student module choices and draws on a large primary dataset comprised of students following a wide range of majors at a new university business school.
    Keywords: banana, toast, fish
    JEL: A22
  9. By: Frederik Toscani
    Abstract: This paper studies how human capital affects agents' tendency to participate in revolutions and consequently political outcomes. We show that since human capital is not expropriatable in the way land or other assets are, revolutions are more attractive if human capital is an important source of income. Specifically, we present a model of involuntary franchise extensions in which we establish a formal link between the increasing importance of human capital as a source of income for mainly the middle classes in 19th century Europe and franchise extensions. Intuitively, agents become less change averse when their income cannot be expropriated and thus larger and larger concessions from the elite are necessary to avoid any upheaval. We show that the higher human capital is in a country, the more the elite use 'populist' policies aimed at garnering the support of the poor and the larger are the franchise extensions which the elite use to counter a revolutionary threat. While we derive the mechanism linki ng human capital and democratisation by looking at 19th century Europe it might play an important role more generally, notably in the wave of democratisations in Latin America in the 1980s and in the current Arab uprisings.
    Keywords: Democratisation, Involuntary Franchise Extensions, Human Capital, Middle Class
    JEL: D72 D74 J24 P16 H1
    Date: 2013–09–24

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