nep-pke New Economics Papers
on Post Keynesian Economics
Issue of 2014‒06‒28
seven papers chosen by
Karl Petrick
Western New England University

  1. The collapse of neoliberal capitalism: Causes and cures: a review article By Peter Kriesler; John Nevile
  2. Learning from Roosevelt: His "New Deal" and the Present Crisis of Europe By Stephan Schulmeister
  3. On the Existence and Prevention of Speculative Bubbles By Enders, Zeno; Hakenes, Hendrik Hakenes
  4. Climate Change Challenges for Agriculture By Lecocq, Frank
  5. Marriner S. Eccles and the 1951 Treasury–Federal Reserve Accord: Lessons for central bank By Thorvald Grung Moe
  6. Making the Most of Capital in the 21st Century By Peter H. Lindert
  7. Η θεωρία οικονομικών κρίσεων του Karl Marx By Mariolis, Theodore

  1. By: Peter Kriesler (School of Economics, Australian School of Business, the University of New South Wales); John Nevile (School of Economics, Australian School of Business, the University of New South Wales)
    Abstract: The two books reviewed in this article are very different in style, quite different in content, but completely united in their purpose and major conclusions. Both books analyse the events from 2007 to 2010 to ascertain why the disaster happened and what must be done to put the United States economy (on which both books focus) on a more secure footing and prevent any recurrence of the extended crisis of those years. Both target the increasing influence of market liberalism over the last thirty years, and the institutions of capitalist economies which they have encouraged. Taylor focusses more on the participants in, and those responsible for, regulating the international financial sector, while Palley places more blame on the shoulders of those responsible for labour market policy. Both agree that each of these played a part in precipitating the events of 2007 to 2010 and need to be dealt with if the United States economy is to be restored to health. Both argue strongly that the growing income inequality in the United States must be reversed before the US economy can significantly improve. Finally, they stress the interrelationship between political ideology and economic explanation, and argue that value free positive economics is a myth.
    Keywords: global financial crisis, neoliberalism, Keynesian economics, macroeconomic policy, income inequality
    JEL: E32 E60 E24
    Date: 2014–05
  2. By: Stephan Schulmeister (WIFO)
    Abstract: The economic policy of Roosevelt's New Deal stays in sharp contrast to the course followed by European policy since 2009. At first, Roosevelt focussed on fighting the desperate feelings of people and the generally pessimistic mood of the public, on strictly regulating the financial sector and on setting up investment and employment programs. After that, structural reforms were carried out in order to strengthen confidence and social coherence. The most important measures were the introduction of unemployment insurance and of a public pension scheme as well as regulations to ensure "fair" labour conditions. The New Deal policy was successful: GDP expanded in the USA between 1933 and 1937 by 43 percent, mainly due to a boom in investments (+140 percent). By fighting the social-psychological depression and "speculation with other people's money", Roosevelt anticipated those two main messages of Keynes' "General Theory" (1936) which were later forgotten: first, the importance of uncertainty and the "state of confidence" and, second, the necessity to radically restrict financial speculation.
    Keywords: Makroökonomische Politik, Depressionen, New Deal
    Date: 2014–06–17
  3. By: Enders, Zeno; Hakenes, Hendrik Hakenes
    Abstract: We develop a parsimonious model of bubbles based on the assumption of imprecisely known market depth. In a speculative bubble, traders drive the price above its fundamental value in a dynamic way, driven by rational expectations about future price developments. At a previously unknown date, the bubble will endogenously burst. We provide a general condition for the possibility of bubbles depending on the risk-free rate, uncertainty about market depth, and traders’ degree of leverage. This allows us to discuss several policy measures. Bubbles always reduce aggregate welfare. Among others, certain monetary policy rules, minimum leverage ratios, and a correctly implemented Tobin tax can prevent their occurrence. Implemented incorrectly, however, some of these measures backfire and facilitate bubbles.
    Keywords: Bubbles; Rational Expectations; Market Depth; Liquidity; Financial Crises; Leveraged Investment; Bonuses; Capital Structure.
    Date: 2014–06–18
  4. By: Lecocq, Frank
    Keywords: Agricultural and Food Policy, Environmental Economics and Policy,
    Date: 2014–04
  5. By: Thorvald Grung Moe (Norges Bank)
    Abstract: The 1951 Treasury–Federal Reserve Accord is an important milestone in central bank history. It led to a lasting separation between monetary policy and the Treasury's debtmanagement powers and established an independent central bank focused on price and macroeconomic stability. This paper revisits the history of the Accord and elaborates on the role played by Marriner Eccles in the events leading up to the Accord. As chairman of the Board of Governors since 1934, Eccles was also instrumental in drafting key banking legislation that enabled the Federal Reserve System to assume a more independent role following the Accord. The global financial crisis has generated renewed interest in the Accord and its lessons for central bank independence. This paper shows that Eccles' support for the Accord—and central bank independence—was clearly linked to the strong inflationary pressures in the US economy at the time, and that he was equally supportive of deficit financing in the 1930s. This broader interpretation of the Accord holds the key to a more balanced view of Eccles's role at the Federal Reserve, where his contributions from the mid-1930s up to the Accord are seen as equally important. Accordingly, the Accord should not be viewed as the final triumph of central bank independence, but rather as an enlightened vision for a more symmetric policy role for central banks, with equal weight given to fighting inflation and preventing depressions.
    Keywords: Marriner Eccles; Central Banking; Monetary Policy; Fiscal Policy
    JEL: B31 E52 E58 E63 N12
    Date: 2014–05–15
  6. By: Peter H. Lindert
    Abstract: Thomas Piketty’s monumental Capital in the Twenty-First Century has transported us to a higher understanding of historical movements in inequality. This essay ranks the promise of different paths that scholars can usefully follow from the point to which his book has guided us. The main path to follow is the income inequality history so well paved by Piketty and his team, supported by the book’s history of twentieth-century shocks and political responses. Less promising is the book’s emphasis on wealth, capital, and the rate of return. Following the income route to better inequality predictions requires merging his team’s history of top income shares with the history of inequality movements within the lower 90 percent. It also invites a merger with other scholarship that has shown positive growth effects of the kind of democracy Piketty calls for.
    JEL: D31 D63 E01 H20 N10 N30
    Date: 2014–06
  7. By: Mariolis, Theodore
    Abstract: This paper argues that Marx’s theory of economic crises constitutes a system of three discrete ‘sub-theories’ on: (i) distributive growth cycles; (ii) effective demand; and (iii) the tendency of the average profit rate to fall. The paper explores the relationships between these sub-theories and concludes that the third sub-theory overdetermines the other two. Finally, it evaluates the Marxian system of crises on the basis of modern economic science findings.
    Keywords: Bhaduri-Marglin accumulation function; Goodwin’s growth cycle models; Law of the tendency of the average profit rate to fall; Marx’s system of eco-nomic crises; Sraffian theory; Total factor productivity
    JEL: E11 E22 E32 O33
    Date: 2014–06

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