nep-pke New Economics Papers
on Post Keynesian Economics
Issue of 2014‒03‒15
twelve papers chosen by
Karl Petrick
Western New England University

  1. "Full Employment: The Road Not Taken" By Pavlina R. Tcherneva
  2. An essay on horizontalism, structuralism and historical time By Mark Setterfield
  3. "Modern Money Theory and Interrelations between the Treasury and the Central Bank: The Case of the United States" By Eric Tymoigne
  5. "The Myth of the Greek Economic 'Success Story'" By C. J. Polychroniou
  6. The Classical-Keynesian Paradigm: Policy Debate in Contemporary Era By Gul, Ejaz; Chaudhry, Imran Sharif; Faridi, Muhammad Zahir
  7. "Time and Consumption Poverty in Turkey" By Thomas Masterson; Emel Memis; Ajit Zacharias
  8. "Prospects and Policies for the Greek Economy" By Dimitri B. Papadimitriou; Michalis Nikiforos; Gennaro Zezza
  9. Does inequality affect the consumption patterns of the poor? – The role of “status seeking” behaviour By Marjit, Sugata; Santra, Sattwik; Hati, Koushik Kumar
  12. Socialism is dead, long live socialism! By Popov, Vladimir

  1. By: Pavlina R. Tcherneva
    Abstract: It is common knowledge that John Maynard Keynes advocated bold government action to deal with recessions and unemployment. What is not commonly known is that modern "Keynesian policies" bear little, if any, resemblance to the policy measures Keynes himself believed would guarantee true full employment over the long run. This paper corrects this misconception and outlines "the road not taken"; that is, the long-term program for full employment found in Keynes's writings and elaborated on by others in works that are missing from mainstream textbooks and policy initiatives. The analysis herein focuses on why the private sector ordinarily fails to produce full employment, even during strong expansions and in the presence of strong government action. It articulates the reasons why the job of the policymaker is, not to "nudge" private firms to create jobs for all, but to do so itself directly as a matter of last resort. This paper discusses various designs of direct job creation policies that answer Keynes's call for long-run full employment policies.
    Keywords: Unemployment as a Monetary Phenomenon; Long-run Full Employment; John Maynard Keynes; Social Economy; Aggregate Demand Management
    JEL: B3 E2 E6 H1 H31 J68
    Date: 2014–03
  2. By: Mark Setterfield
    Abstract: Beyond agreement on the basic principles of money’s endogeneity, the development of Post-Keynesian monetary theory has been characterized by considerable dissent and debate. One important aspect of this debate concerns the shape of the credit supply curve in quantity of credit/interest rate space. The argument in this chapter is that that there can be, and to an extent already is, agreement that the horizontal credit supply curve is not a special case, and that the existence of an indeterminate dynamic credit supply schedule provides a general framework capable of accommodating both horizontalist and structuralist arguments. These arguments rest on the distinction between logical and historical time and, in particular, the claim that any construct (including, for example, a credit supply schedule) that is akin to a determinate long run equilibrium relationship is anathema to the methodological foundations of Post-Keynesian economics.
    Keywords: Endogenous money, horizontalism, structuralism, historical time, supply of credit
    JEL: E12 E42 E43 E51
    Date: 2014–03
  3. By: Eric Tymoigne
    Abstract: One of the main contributions of Modern Money Theory (MMT) has been to explain why monetarily sovereign governments have a very flexible policy space that is unconstrained by hard financial limits. Not only can they issue their own currency to pay public debt denominated in their own currency, but they can also easily bypass any self-imposed constraint on budgetary operations. Through a detailed analysis of the institutions and practices surrounding the fiscal and monetary operations of the treasury and central bank of the United States, the eurozone, and Australia, MMT has provided institutional and theoretical insights into the inner workings of economies with monetarily sovereign and nonsovereign governments. The paper shows that the previous theoretical conclusions of MMT can be illustrated by providing further evidence of the interconnectedness of the treasury and the central bank in the United States.
    Keywords: Modern Money Theory; Monetary Policy; Fiscal Policy
    JEL: E02 E42 E52 E62
    Date: 2014–03
    Date: 2014
  5. By: C. J. Polychroniou
    Abstract: In 2001, a three-year, multicountry study by the Structural Adjustment Participatory Review International Network (SAPRIN), prepared in cooperation with the World Bank, national governments, and civil society organizations, offered a damning indictment of the policies of structural adjustment reform pursued by the IMF and the World Bank in third world countries. The structural adjustment programs in Greece, combined with the policies of austerity, are producing results that fit the patterns outlined in the SAPRIN study like a glove. This policy note rejects the myth of Greece as an economic success story and argues that current trends and developments in the country make for a bleak economic future. The experiment under way in Greece will produce an economy resembling, not the Celtic Tiger of the mid-1990s to early 2000s, as the current government envisions, but an underdeveloped Latin America country of the 1980s.
    Date: 2014–02
  6. By: Gul, Ejaz; Chaudhry, Imran Sharif; Faridi, Muhammad Zahir
    Abstract: For almost a century, the famous C-K paradigm (formally known as Classics – Keynesian Paradigm) has been the apex of economic debate and research. The paradigm represents two schools of thoughts which, somehow, have prevailed till now. Economists who believe in either of the two schools have been at loggerheads, and they still are, to prove one theory better than the other. Numerous economic scholars of present era believe that with the changes that have occurred in the economic system, the world is turning back to classical model. But, there are others who believe that Keynes theory is still alive and valid. In this paper, we have tried to draw a brief comparison that highlights the major differences between the two theories with specific reference to the economic, political and social environment prevailing at time when these theories were generated. Paper also discusses the relevance of unending policy debate about these theories in the current era with special emphasis on policy implications with a view to draw pertinent lessons for the present and future.
    Keywords: Classical, Keynesian, economics, theories, policy, debate, implications
    JEL: B10 B11 B12 B15 B2 B22
    Date: 2014–02–25
  7. By: Thomas Masterson; Emel Memis; Ajit Zacharias
    Abstract: The Levy Institute Measure of Time and Consumption Poverty (LIMTCP) is a two-dimensional measure that takes into account both the necessary consumption expenditures and the household production time needed to achieve a minimum standard of living -- factors often ignored in official poverty measures. In the case of Turkey, application of the LIMTCP reveals an additional 7.6 million people living in poverty, resulting in a poverty rate that is a full 10 percentage points higher than the official rate of 30 percent.
    Date: 2014–02
  8. By: Dimitri B. Papadimitriou; Michalis Nikiforos; Gennaro Zezza
    Abstract: In this report, we discuss alternative scenarios for restoring growth and increasing employment in the Greek economy, evaluating alternative policy options through our specially constructed macroeconometric model (LIMG). After reviewing recent events in 2013 that confirm our previous projections for an increase in the unemployment rate, we examine the likely impact of four policy options: (1) external help through Marshall Plan–type capital transfers to the government; (2) suspension of interest payments on public debt, instead using these resources for increasing demand and employment; (3) introduction of a parallel financial system that uses new government bonds; and (4) adoption of an employer-of-last-resort (ELR) program financed through the parallel financial system. We argue that the effectiveness of the different plans crucially depends on the price elasticity of the Greek trade sector. Since our analysis shows that such elasticity is low, our ELR policy option seems to provide the best strategy for a recovery, having immediate effects on the Greek population's standard of living while containing the effects on foreign debt.
    Date: 2014–02
  9. By: Marjit, Sugata; Santra, Sattwik; Hati, Koushik Kumar
    Abstract: We consider a situation where the relatively ‘poor’ are concerned about their relative income status with respect to a relevant reference group. Such a concern is explicitly introduced in a utility function to study the consumption and saving behavior of the poor in terms of a static and dynamic model. The static model points toward a possible conflict between income based and nutrition-based measure of poverty. The dynamic model exhibits the possibility of a higher rate of accumulation coupled with an inadequate nutritional intake, relative to a situation where there is no such concern for status. Thus, growth with malnutrition may also imply a conflict between different measures of poverty. Both the models point toward a direct and negative relationship between inequality and share of nutritional consumption as reflected in the consumption of food. Finally the paper looks at the empirical relationship between inequality and consumption across districts within states of India. The hypotheses that inequality impacts consumption patterns via status effect cannot be rejected. In fact the impact seems to be significant across a number of the Indian states.
    Keywords: Status; Consumption pattern; Inequality; Poverty; Growth;
    JEL: C13 C14 C51 D1 D12 O40
    Date: 2014
    Date: 2014
    Date: 2014
  12. By: Popov, Vladimir
    Abstract: Utopian socialists believed that socialism is inevitable because it is a more rational system to organize production and life, a system more in line with the “good” nature of human beings. Marxism rejected this reasoning replacing it with what is known as historical materialism: social systems, it argued, emerge, develop and die not because they correspond more or less to the “natural” aspirations of the people, but because they become more or less competitive in the process of historical evolution – a version of social Darwinism applied not to individuals, but to communities and countries. In particular, Marxism stated that capitalism develops productive forces up to the point when they can no longer be managed efficiently in societies with markets and private property; at this point social property of the means of production and centrally planned economy (CPE) become a more efficient way of managing productive forces, whose social nature has outgrown the narrow capitalist limits. This prediction did not come true – in the XX century socialism came to being not in most advanced capitalist countries, but in the periphery and semi-periphery (USSR, Eastern Europe, China, North Korea, Cuba), and only in North Korea and Cuba it survived into the XXI century. This paper explains why capitalism was competitive in recent 500 years, and why an attempt in the XX century to replace it by socialist CPEs did not succeed. But it argues that there are other reasons, not associated with “social nature of productive forces”, which are finally going to make socialism competitive: the costs of numerous negative consequences of high income inequalities, like greater social tensions, high crime and poor institutional capacity of the state, become larger than the benefits of high savings and investment rate that were making capitalism competitive for 500 years. This “new socialism” will not be necessarily mean a total elimination of markets and private property, but is likely to limit both substantially for the sake of achieving lower income inequality.
    Keywords: Socialism, inequalities, savings, growth, economic history
    JEL: N00 O1 O10 P0 P1 P2
    Date: 2014–03–09

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