nep-pke New Economics Papers
on Post Keynesian Economics
Issue of 2014‒11‒01
four papers chosen by
Karl Petrick
Western New England University

  1. The Macroeconomics and Financial System Requirements for a Sustainable Future. By Giuseppe Fontana; Malcolm Sawyer
  2. Finance and Crisis; Marxian, Institutionalist and Circuitist approaches By Georgios Argitis; Trevor Evans; Jo Michell; Jan Toporowski
  3. Keeping Up with the Joneses: Who Loses Out? By David Ulph
  4. Rethinking Pro-Growth Monetary Policy in Africa: Monetarist versus Keynesian Approach By Christian Lambert Nguena

  1. By: Giuseppe Fontana (The University of Leeds); Malcolm Sawyer (The University of Leeds)
    Abstract: The paper develops a macro-economic analysis along broadly defined Post Keynesian and Kaleckian lines, which incorporates ecological constraints on the pace of economic growth. Since growth is viewed as demand-driven, this involves bringing demand into line with the sustainable ‘ecological footprint’. A simple model of demand- driven growth is constructed from which some basic conclusions are drawn of the consequences of slower growth and lower investment including those for the rate of interest and the rate of profit. The macroeconomic policy to deliver full employment is indicated. The growth of the effective labour force and the sustainable rate of growth of the ‘ecological footprint’ are introduced and the relationships between them and the demand-driven rate of growth explored. The macroeconomic analysis has to be embedded with analysis of the monetary and financial system. For this purpose a circuitist analysis is presented. The paper considers the ways in which the monetary and financial systems should be re-structured to be consistent with sustainable growth and low unemployment. The major aims of this re-structuring would be to underpin financial stability, and more importantly to focus the financial sector on the allocation of funds into environmentally friendly investment.
    Keywords: ecological macroeconomics, sustainability, financial systems, ecological footprint
    JEL: E00 G20 O11 O44
    Date: 2014–08–01
  2. By: Georgios Argitis (University of Athens); Trevor Evans (Berlin School of Economics and Law); Jo Michell (University of the West of England); Jan Toporowski (School of Oriental and African Studies, London University)
    Abstract: Most mainstream neoclassical economists completely failed to anticipate the crisis which broke in 2007 and 2008. There is however a long tradition of economic analysis which emphasises how growth in a capitalist economy leads to an accumulation of tensions and results in periodic crises. This paper first reviews the work of Karl Marx who was one of the first writers to incorporate an analysis of periodic crisis in his analysis of capitalist accumulation. The paper then considers the approach of various subsequent Marxian writers, most of whom locate periodic cyclical crises within the framework of longer-term phases of capitalist development, the most recent of which is generally seen as having begun in the 1980s. The paper also looks at the analyses of Thorstein Veblen and Wesley Claire Mitchell, two US institutionalist economists who stressed the role of finance and its contribution to generating periodic crises, and the Italian Circuitist writers who stress the problematic challenge of ensuring that bank advances to productive enterprises can successfully be repaid.
    Keywords: Capitalism, finance, crisis
    JEL: B14 B15 B24 B25 E11 E32
  3. By: David Ulph (University of St Andrews)
    Abstract: This paper investigates how well-being varies with individual wage rates when individuals care about relative consumption and so there are Veblen effects – Keeping up with the Joneses – leading individuals to over-work. In the case where individuals compare themselves with their peers – those with the same wage-rate - it is shown that Keeping up with the Joneses leads some individuals to work who otherwise would have chosen not to. Moreover for these individuals well-being is a decreasing function of the wage rate - contrary to standard theory. So those who are worst-off in society are no longer those on the lowest wage.
    Keywords: Veblen Effects; consumer behaviour; Nash equilibrium; wages and well- being
    JEL: D11 I31 J22
    Date: 2014–09–20
  4. By: Christian Lambert Nguena (Association of African Young Economists)
    Abstract: The relative positive economic growth experienced by most African countries in the recent decade has come with insufficient demand stimulation. The concern of poverty at the forefront of economic policy, the need for inclusive growth and sustainable development, inter alia, brings forward the inevitable question of the monetary policy responsibility. Accordingly, the monetarist theory that focuses on price stability inherently neglects the demand stimulation aspect of economic prosperity. Since the mid 1980s, the monetarist school driven by its central aim of fighting inflation and maintaining credibility in markets and economic agents has been priority for monetary authorities (especially in Africa). To this effect, while good results in terms of inflation targeting has been achieved in many African countries; economic growth has sometimes been low. Hence, in light of the above, using a statistical and theoretical debate method, the Credible Monetary Policy (CMP)1 paradox is traceable to Africa. Accordingly, with the promising economic environment in Africa, we recommend the promotion of a monetary policy oriented toward improving economic growth under the constraint of price stability. In light of the above view, there are some note worthy signs such the recent decision by the two CFA zone central banks to either maintain interest rates at a low level or reduce it despite tightening measures of monetary policy taken by the European Central Bank (ECB) earlier in the year. In the same vein, the central bank of South Africa has maintained its policy of low interest rates with an objective of economic expansion. Since, the 2008 financial crisis, the consolidation of the Federal Reserve’s declared final objective of lowering interest rates and making emergency loans is an eloquent example to reassure African central banks in the choice of the pro-growth monetary policy option.
    Keywords: Pro growth monetary policy, CMP paradox, Financing enterprises, African central bank
    JEL: C23 C33 E52 E58
    Date: 2013–05

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