nep-pke New Economics Papers
on Post Keynesian Economics
Issue of 2014‒07‒28
twelve papers chosen by
Karl Petrick
Western New England University

  1. Consistency in Pluralism and Microfoundations By Sheila C Dow
  2. From Resilient Regions to Bioregions: An Exploration of Green Post-Keynesianism By Rhydian Fôn James; Molly Scott Cato
  3. Milton Friedmans economics and political economy: an old Keynesian critique By Thomas I. Palley
  4. Stimulus and Fiscal Consolidation: The Evidence and Implications By Dean Baker; David Rosnick
  5. America's Jobs Challenges and the Continuing Role of the U.S. Department of Labor By Katz, Lawrence F.
  6. Oskar Lange or how IS-LM came to be interpreted as a Walrasian model By Goulven Rubin
  7. Does The Keynesian Absolute Income Hypothesis Exist in Pakistan? By Muhammad Shahbaz; Kishwar Nawaz; Mohamed Arouri; Frédéric Teulon; Gazi Salah Uddin
  8. Labor Market Slack in the United Kingdom By David N. F. Bell; David G. Blanchflower
  9. Network economics and the environment: insights and perspectives By Sergio Currarini; Carmen Marchiori; Alessandro Tavoni
  10. Conspicuous Consumption in the United States and China By Jinkins, David
  11. Closing coal: economic and moral incentives By Paul Collier; Anthony J. Venables
  12. Beyond carbon pricing: The role of banking and monetary policy in financing the transition to a low-carbon economy By Emanuele Campiglio

  1. By: Sheila C Dow (University of Stirling)
    Abstract: John King has made challenging contributions to our thinking in many areas. This paper focuses on two of these: the case for pluralism and the case against requiring macroeconomic theory to be expressed in terms of its microfoundations. The purpose of this paper is to explore further the relationship between the two, requiring discussion of the relationship between the different levels of philosophy, methodology, theory and reality. A particular focus is put on the role of the concept of consistency in these two papers. This concept is explored further here at different levels and according to different methodological approaches. The contrast is drawn between its meaning in classical logic and in human logic.
    Keywords: consistency, pluralism, microfoundations
    JEL: B4 B5
    Date: 2014–07
  2. By: Rhydian Fôn James (Bangor University); Molly Scott Cato
    Abstract: TThis paper develops an answer to the question of what constitutes a resilient region (Bristow, 2010) by arguing that the resilient region can be seen as a prototype bioregion. The transition from a proto-bioregion to a bioregion, and thus from proto-bioregionalism to bioregionalism proper, is examined. The paper begins with a review of the existing literature on regional resilience. The authors then explore the possible heterodox theoretical underpinnings of this approach, drawing on post-Keynesian, Marxian and green economy concepts. The paper’s final section extends the theory to a bioregional conclusion, and discusses the policy approaches that might be applied to extend a resilient region into a bioregion.
    Keywords: bioregion; green economy; resilient regions; post-Keynesian
    JEL: P16 R1 Q57 B50
    Date: 2014–07
  3. By: Thomas I. Palley
    Abstract: Milton Friedman's influence on the economics profession has been enormous. In part, his success was due to political forces that have made neoliberalism the dominant global ideology, but Friedman also rode those forces and contributed to them. Friedman's professional triumph is testament to the weak intellectual foundations of the economics profession which accepted ideas that are conceptually and empirically flawed. His success has taken economics back in a pre-Keynesian direction and squeezed Keynesianism out of the academy. Friedman's thinking also frames so-called new Keynesian economics which is simply new classical macroeconomics with the addition of imperfect competition and nominal rigidities. By enabling the claim that macroeconomics is fully characterized by a divide between new Keynesian and new classical macroeconomics, new Keynesianism closes the pincer that excludes old Keynesianism. As long as that pincer holds, economics will remain under Friedman's shadow.
    Keywords: Friedman, monetarism, new classical macroeconomics, new Keynesian, neoliberalism
    Date: 2014
  4. By: Dean Baker; David Rosnick
    Abstract: This paper examines the evidence on the impact of stimulus and fiscal consolidation in the context of a severe economic slump like the Great Recession. The first part reviews some of the major works on this topic in the last decade. It notes that the research clearly points in the direction of stimulus increasing growth during a prolonged slump. The second part examines the impact of changes in government consumption and investment on growth, using data from advanced countries since 1980. Consistent with most prior literature it finds that increases in government spending during downturns lead to increases in growth. It then constructs simulations for the period since the Great Recession showing multipliers in the neighborhood of 1.5. The third part notes new evidence suggesting that potential GDP appears to have fallensharply as a result of the downturn. A full model of the impact of stimulus would have to incorporate this effect which is likely to be large relative to the size of the stimulus.
    Date: 2014
  5. By: Katz, Lawrence F.
    Date: 2014
  6. By: Goulven Rubin (EQUIPPE - ECONOMIE QUANTITATIVE, INTEGRATION, POLITIQUES PUBLIQUES ET ECONOMETRIE - Université Lille I - Sciences et technologies - Université Lille II - Droit et santé - Université Lille III - Sciences humaines et sociales - PRES Université Lille Nord de France)
    Abstract: A few years after the publication of The General Theory, a number of economists began to present Keynes's model, identified with IS-LM, as a particular case of the Walrasian model. This view of IS-LM has often been rationalized by a basic syllogism: IS-LM was invented by John Hicks, Hicks was a Walrasian, hence IS-LM was Walrasian. But as some historians of macroeconomics have shown, this syllogism is false. Considering this confusion as an established fact, this article studies how and why IS-LM came to be considered as Walrasian. It shows that the standard view took its roots in "The Rate of Interest and the Optimum Propensity to Consume", a paper published by Oskar Lange in 1938, and resulted from a need to clarify the foundations of Keynes's theory.
    Keywords: IS-LM; Oskar Lange; History of macroeconomics; John R. Hicks; Neoclassical Synthesis
    Date: 2014–06–30
  7. By: Muhammad Shahbaz; Kishwar Nawaz; Mohamed Arouri; Frédéric Teulon; Gazi Salah Uddin
    Abstract: The present paper contributes in existing economic literature by investigating the validation of the Keynesian Absolute Income hypothesis in Pakistan by applying the ARDL approach to cointegration. The findings of this paper indicate the validation of the Keynesian absolute income hypothesis in Pakistan, where public savings and financial development add in private savings. This study opens up new insights for government to improve the level of private savings.
    Keywords: Private savings, Co-integration, Pakistan
    JEL: E2 C4
    Date: 2014–07–15
  8. By: David N. F. Bell (University of Stirling, Scotland); David G. Blanchflower (Peterson Institute for International Economics)
    Abstract: This paper examines the amount of slack in the UK labor market. It examines the downward adjustments made by the Monetary Policy Committee (MPC) to both unemployment and underemployment, which in our view are invalid. Without any evidence the MPC in its assessment of the output gap reduces the level of unemployment because of its claim that long-term unemployment has no effect on wages. We produce contrary evidence. The MPC further reduces the level of underemployment in the United Kingdom by half. We present arguments as to why we also think this inappropriate. We set out arguments on why we believe the level of slack is greater than the MPC calibrates. Consistent with that is the fact that real wages in the United Kingdom continue to fall.
    Keywords: wages, underemployment, unemployment
    JEL: J01 J11 J21 J23 J38 J64
    Date: 2014–07
  9. By: Sergio Currarini; Carmen Marchiori; Alessandro Tavoni
    Abstract: Recent research in the field of network economics has shown how explicitly modelling the network structure of social and economic relations can provide significant theoretical insights, as well as account for previously unexplained empirical evidence. Despite their critical importance to many environmental problems, network structures and dynamics have been largely disregarded by the environmental economics literature. This paper aims to begin to fill this gap by analysing how networks can provide new insights for both theory and practice, and identifying several avenues for future research. The paper addresses questions pertaining to a wide range of issues, including the adoption and diffusion of green technologies, access to and distribution of natural resources, common-pool resource management and governance, and the stability of international environmental coalitions.
    Date: 2014–01
  10. By: Jinkins, David (Pennsylvania State University)
    Abstract: I develop a model of conspicuous consumption to empirically measure the importance of peer beliefs to Americans and Chinese. In the model, a consumer cares not only about the direct utility she receives from consumption, but also about the way her consumption pattern affects her peer group's belief about her well-being. I estimate the model on household budget surveys. According to model estimates, a Chinese consumer cares 20% more than an American consumer about peer beliefs. The absolute size of the conspicuous consumption motive in both countries is relatively small. I use the estimated model to evaluate the welfare effect of the 1990-2002 American luxury tax on automobiles. The luxury tax benefited nearly all Americans a small amount, but hurt the small fraction of consumers who love automobiles the most.
    Keywords: behavioral economics, conspicuous consumption, applied microeconomics
    JEL: D12
    Date: 2014–07
  11. By: Paul Collier; Anthony J. Venables
    Abstract: Climate policy required that much of the world’s reserves of fossil fuels remain unburned. This paper makes the case for implementing this directly through policy to close the global coal industry. Coal is singled out because of its high emissions intensity, low rents per unit value, local environmental costs and sheer scale. Direct supply policy – the sequenced closure of coal mines – may lead to less policy leakage (across countries and time) than other policies based on demand or price management. It also has the advantage of involving relatively few players and leading to clear-cut and observable outcomes. Appropriately sequenced closure of the world coal industry could, we suggest, create the moral force needed to mobilise collective international action.
    Date: 2014–05
  12. By: Emanuele Campiglio
    Abstract: It is widely acknowledged that introducing a price on carbon represents a crucial precondition for filling the current gap in low-carbon investment. However, as this paper argues, carbon pricing in itself may not be sufficient. This is due to the existence of market failures in the process of creation and allocation of credit that may lead commercial banks – the most important source of external finance for firms willing to invest – not to respond as expected to price signals. Under certain economic conditions, banks would shy away from lending to low-carbon activities even in presence of a carbon price. This possibility calls for the implementation of additional policies not based on prices. In particular, the paper discusses the potential role of monetary policies and macroprudential financial regulation: modifying the incentives and constraints that banks face when deciding their lending strategy – through, for instance, a differentiation of reserve requirements according to the destination of lending – may fruitfully expand credit creation directed towards low-carbon sectors. This seems to be especially feasible in emerging economies, where the central banking framework usually allows for a stronger public control on credit allocation and a wider range of monetary policy instruments than the sole interest rate.
    Date: 2014–05

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