nep-pke New Economics Papers
on Post Keynesian Economics
Issue of 2014‒02‒08
nine papers chosen by
Karl Petrick
Western New England University

  1. "What Remains of the Theory of Demand Management in a Globalizing World?" By Amit Bhaduri
  2. "The Social Enterprise Model for a Job Guarantee in the United States" By Pavlina R. Tcherneva
  3. "Wright Patman's Proposal to Fund Government Debt at Zero Interest Rates: Lessons for the Current Debate on the US Debt Limit" By Jan Kregel
  4. "Policy Options for China: Reorienting Fiscal Policy to Reduce Financial Fragility" By L. Randall Wray
  5. "Time Deficits and Hidden Poverty in Korea" By Kijong Kim; Thomas Masterson; Ajit Zacharias
  6. Short‐Run Macro After the Crisis: The End of the “New” Neoclassical Synthesis? By Oliver Landmann
  7. Loanable Funds vs. Endogenous Money: Krugman is Wrong, Keen is Right By Kakarot-Handtke, Egmont
  8. Minsky Financial Instability, Interscale Feedback, Percolation and Marshall-Walras Disequilibrium By Sorin Solomon; Natasa Golo
  9. In memoriam of Professor Ronald Coase By Ana Lourenço

  1. By: Amit Bhaduri
    Abstract: In our era of global finance, the theory of aggregate demand management is alive and unwell, says Amit Bhaduri. In this policy brief, Bhaduri describes what he regards as a prevalent contemporary approach to demand management. Detached from its Keynesian roots, this "vulgar" version of demand management theory is being used to justify policies that stand in stark contrast to those prescribed by the original Keynesian model. Rising asset prices and private-debt-fueled consumption play the starring roles, while fiscal policy retreats into the background. Returning to foundations laid down by Keynes and Kalecki, Bhaduri sets out to clarify whether there is any place for traditional demand management policies—featuring an active role for deficit spending and public investment—in the context of financial globalization. His conclusion: such policies are ultimately unavoidable if we are to revitalize the real economy and achieve stability.
    Date: 2014–01
  2. By: Pavlina R. Tcherneva
    Abstract: The job guarantee is a proposal that provides greater macroeconomic stability and secures a fundamental human right. Despite the economic and moral merits of this policy, often the program is rejected because of concerns about its administration. How would the program be implemented? Who will create the jobs? Can work be found for every unemployed individual who wishes to work? This policy note addresses these concerns by elaborating on a proposal for the United States that would run the job guarantee through the social enterprise sector, which includes traditional nonprofit organizations and emerging nonprofit social entrepreneurial ventures.
    Date: 2014–01
  3. By: Jan Kregel
    Abstract: In 1943, Congress faced unpredictably large war expenditures exceeding the prevailing debt limit. Congressional debates from that time contain an insightful discussion of how the increased expenditures could be financed, dealing with practical and theoretical issues that seem to be missing from current debates. In the '43 debate, Representative Wright Patman proposed that the Treasury should create a nonnegotiable zero interest bond that would be placed directly with the Federal Reserve Banks. As the deadline for raising the US federal government debt limit approaches, Senior Scholar Jan Kregel examines the implications of Patman's proposal. Among the lessons: that the debt can be financed at any rate the government desires without losing control over interest rates as a tool of monetary policy. The problem of financing the debt is not the issue. The question is whether the size of the deficit to be financed is compatible with the stable expansion of the economy.
    Date: 2014–02
  4. By: L. Randall Wray
    Abstract: Since adopting a policy of gradually opening its economy more than three decades ago, China has enjoyed rapid economic growth and rising living standards for much of its population. While some argue that China might fall into the middle-income "trap," they are underestimating the country's ability to continue to grow at a rapid pace. It is likely that China's growth will eventually slow, but the nation will continue on its path to join the developed high-income group--so long as the central government recognizes and uses the policy space available to it.
    Date: 2013–12
  5. By: Kijong Kim; Thomas Masterson; Ajit Zacharias
    Abstract: Official poverty lines in Korea and other countries ignore the fact that unpaid household production contributes to the fulfillment of material needs and wants that are essential to attaining a minimum standard of living. By taking household work for granted, these official estimates provide an inaccurate accounting of the breadth and depth of poverty--and can lead policymakers astray.
    Date: 2014–01
  6. By: Oliver Landmann (Institut für allgemeine Wirtschaftsforschung, Universität Freiburg)
    Abstract: The Financial Crisis of 2008, and the Great Recession in its wake, have shaken up macroeconomics. The paradigm of the “New” Neoclassical Synthesis, which seemed to provide a robust framework of analysis for short‐run macro not long ago, fails to capture key elements of the recent crisis. This paper reviews the current reappraisal of the paradigm in the light of the history of macroeconomic thought. Twice in the past 80 years, a major macroeconomic crisis led to the breakthrough of a new paradigm that was to capture the imagination of an entire generation of macroeconomists. This time is different. Whereas the pre‐crisis consensus in the profession is broken, a sweeping transition to a single new paradigm is not in sight. Instead, macroeconomics is in the process of loosening the methodological straightjacket of the “New” Neoclassical Synthesis, thereby opening a door for a return to its original purpose: the study of information and coordination in a market economy.
    Keywords: Financial Crisis, Great Recession, Macroeconomics, New Neoclassical Synthesis, Keynesian Economics, New Classical Economics, Great Moderation
    JEL: B22 B40 E10 E12 E13
    Date: 2014–01
  7. By: Kakarot-Handtke, Egmont
    Abstract: In a recent article, Keen resumes the debate with Krugman about the effects of debt upon the economy. It is hard to see how the question can be settled as long as all participants apply their idiosyncratic models. Hence the issue boils down, as Krugman rightly put it, to the deeper question: “how should one do economics.” Sketched with a broad brush, the consensus is that Orthodoxy has failed and that Heterodoxy has no convincing alternative to offer. The conceptual consequence of the present paper is to restart from a firm common formal ground. This relocation makes the debate solvable.
    Keywords: new framework of concepts; structure-centric; axiom set; consumption economy; debt; Profit Law; simulation; market clearing; budget balancing
    JEL: B59 E21 G00
    Date: 2014–02–03
  8. By: Sorin Solomon (Racah Institute of Physics, Hebrew University); Natasa Golo (Racah Institute of Physics, Hebrew University)
    Abstract: We study analytically and numerically Minsky instability as a combination of top-down, bottom-up and peer-to-peer positive feedback loops. The peer-to-peer interactions are represented by the links of a network formed by the connections between firms, contagion leading to avalanches and percolation phase transitions propagating across these links. The global parameter in the top-bottom, bottom-up feedback loop is the interest rate. Before the Minsky moment, in the Minsky Loans Accelerator stage, the relevant bottom parameter representing the individual firms micro-states is the quantity of loans. After the Minsky moment, in the Minsky Crisis Accelerator stage, the relevant bottom parameters are the number of ponzi units / quantity of failures, defaults. We represent the top-bottom, bottom-up interactions on a plot similar to the Marshal-Walras diagram for quantity-price market equilibrium (where the interest rate is the analog of the price). The Minsky instability is then simply emerging as a consequence of the fixed point (the intersection of the supply and demand curves) being unstable (repulsive). In the presence of network effects, one obtains more than one fixed point and a few dynamic regimes (phases). We describe them and their implications for understanding, predicting and steering economic instability.
    Date: 2014–02
  9. By: Ana Lourenço (Faculdade de Economia e Gestão - Universidade Católica Portuguesa, Porto)
    Abstract: This article was written as a tribute to Professor Ronald Coase. It acknowledges his scholarly contributions to understanding the existence and boundaries of the firm, and the role of legal rules in organizing economic activity. It also recognizes the reflexivity, realism, simplicity and wit inherent to the work of Professor Ronald Coase.
    Date: 2013–12

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