nep-pke New Economics Papers
on Post Keynesian Economics
Issue of 2014‒11‒28
twelve papers chosen by
Karl Petrick
Western New England University

  1. "Growth for Whom?" By Pavlina R. Tcherneva
  2. The Triumph of the Rentier? Thomas Piketty vs. Luigi Pasinetti & John Maynard Keynes By Lance Taylor
  3. Explaining Differences in the Productivity of Capital Across Countries in the Context of ‘New’ Growth Theory By Kevin S. Nell; A.P. Thirlwall
  4. The deposit financing gap: Another Dutch disease By Meijers H.H.M.; Muysken J.; Sleijpen O.C.H.M.
  5. Inequality, Debt Servicing, and the Sustainability of Steady State Growth By Mark Setterfield; Yun K. Kim; Jeremy Rees
  6. Price Sustainability and Stability – An Achievable Goal? A Case Study of Organic Valley By Su, Ye; Cook, Michael L.
  7. A Progressive Report on Marxian Economic Theory: On the Controversies in Exploitation Theory since Okishio (1963) By Yoshihara, Naoki;
  8. Diversification and democracy By Ivar Kolstad; Arne Wiig
  9. Greener Skills and Jobs for a Low-Carbon Future By OECD
  10. The Crucial Role of Policy Surveillance in International Climate Policy By Aldy, Joseph E.
  11. Notes sur Keynes et la crise By Paulo Nakatani; Rémy Herrera
  12. On the Definition of Public Goods. Assessing Richard A. Musgrave's contribution By Maxime Demarais-Tremblay

  1. By: Pavlina R. Tcherneva
    Abstract: In the postwar period, income growth has become more inequitably distributed with virtually every subsequent economic expansion. From 2009 to 2012, while the economy was recovering from one of the biggest economic downturns in recent memory, the top 1 percent took home 95 percent of the income gains. To reverse this pattern, Research Associate Pavlina R. Tcherneva recommends policy strategies to promote growth from the bottom up—to change the income distribution directly by funding employment opportunities in the public, nonprofit, or social entrepreneurial sector.
    Date: 2014–10
  2. By: Lance Taylor (Schwartz Center for Economic Policy Analysis (SCEPA))
    Abstract: Thomas Piketty attributes increasing wealth inequality to the characteristics of a neoclassical aggregate production function, which is known not to exist. A more plausible narrative is that wage repression can lead to secular stagnation by enriching the rentier. Lower economic activity decreases labor’s bargaining power so that the share of profits in output (pi) tends to rise. Activity (or the output/capital ratio u) is stimulated by increased investment due to a higher pi. Wealth distribution is measured à la Luigi Pasinetti by the ratio Z of capital owned by a capitalist rentier class to the total. Suppose that Z goes up. Rentiers have a high saving rate implying that in a demand driven Keynesian economy u goes down. With the reduction in u the profit share increases, pushing up the growth rate of Z. Depending on economic structure (in particular, differences in saving rates between the classes), this positive feedback may or may not destabilize the system. If stability reigns, there will be a persistent steady state level of Z. If not, there may be euthanasia or triumph of the rentier. In the long run Z is reduced and increased by a downward shift in pi, i.e. less wage repression improves economic performance overall.
    Keywords: demand-driven growth, functional income distribution, steady state wealth distribution, Pasinetti, Piketty
    JEL: E12 E21 E25 B22
    Date: 2014–06
  3. By: Kevin S. Nell (Center for Economics and Finance, University of Porto); A.P. Thirlwall (School of Economics, University of Kent)
    Abstract: The purpose of this paper is to explain differences in the productivity of capital across countries taking 84 rich and poor countries over the period 1980-2011, and to test the orthodox neoclassical assumption of diminishing returns to capital. The marginal product of capital is measured as the ratio of the long-run growth of GDP to a country’s investment ratio. Twenty potential determinants are considered using a general-to-specific model selection procedure. Education, government consumption, geography, export growth, openness, political rights and macroeconomic instability turn out to be the most important variables. The data also suggest constant returns to capital, so investment matters for long-run growth.
    Keywords: new growth theory, investment, productivity of capital
    JEL: O11 O33 O43 O47
    Date: 2014–11
  4. By: Meijers H.H.M.; Muysken J.; Sleijpen O.C.H.M. (UNU-MERIT)
    Abstract: In the last two decades the Netherlands have experienced an increase in real-estate prices, accompanied by an increase in mortgages and a marked decline in household savings. As a consequence banks are faced with a large retail funding gap outstanding mortgage debt is insufficiently matched by retail deposits, whereas other funding possibilities of banks have increasingly been constrained - also due to their large foreign exposures. In this paper we argue that traditional macroeconomic models cannot analyse this phenomenon appropriately since they lack a proper model of the financial sector and underestimate the potential for interactions between the monetary and the real sphere. We present a stock-flow consistent approach developed by Godley and Lavoie as a valuable alternative to traditional and new Keynesian macroeconomic models and we use this approach to analyse the deposit financing gap for the Netherlands.
    Keywords: Current Heterodox Approaches: General; Financial Markets and the Macroeconomy; Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook: General; Banks; Depository Institutions; Micro Finance Institutions; Mortgages;
    JEL: E44 B50 E60 G21
    Date: 2014
  5. By: Mark Setterfield; Yun K. Kim; Jeremy Rees
    Abstract: We investigate the claim that the way in which debtor households service their debts matters for macroeconomic performance. A standard Kaleckian growth model is modidied to incorporate working households who borrow to finance consumption that is determined, in part, by the desire to emulate the consumption patterns of more affluent households. The impact of this behavior on the sustainability of the growth process is then studied by means of a numerical analysis that captures various dimensions of income inequality. When compared to previous contributions to the literature, our results show that the way in which debtor households service their debt has both quantitative and qualitative effects on the economy's macrodynamics.
    Keywords: Consumer debt, emulation, income distribution, Golden Age regime, Neoliberal regime, expenditure cascades, growth
    JEL: E12 E44 O41
    Date: 2014–11
  6. By: Su, Ye; Cook, Michael L.
    Abstract: Originating from a bold idea, Organic Valley currently reigns as the largest organic cooperative in North America. In 1988, from the non-glaciated, hilly part of Southwestern Wisconsin, seven progressive rural entrepreneurs started a courageous and visionary journey. The founders’ original objectives were to create an organization that would provide stable pay-prices to farmers and a sustainable family farm life style. For much of its more than 25 year history, Organic Valley has achieved this mission. However, in the past few years a more hostile economic environment emerged testing the resolve of George Siemon, CEO, and the Organic Valley leadership team. This case shares the evolution of a determined, idealistic group of mostly small rural producers leading a farmer owned firm from nothing but a dream to a complex international cooperative facing an important set of challenges. The current quandary: can the original mission of Organic Valley – to simultaneously deliver a stable producer pay-price and a sustainable life style to member suppliers – be maintained?
    Keywords: Agribusiness, Community/Rural/Urban Development, Industrial Organization, A22, A23, Q01, Q11, Q13,
    Date: 2014–07
  7. By: Yoshihara, Naoki (The Institute of Economic Research, Hitotsubashi University);
    Abstract: This report explores the development of exploitation theory in mathematical Marxian economics by reviewing the main controversies surrounding the definition of exploitation since the contribution of Okishio (1963). The report first examines the robustness and economic implications of the debates on the Fundamental Marxian Theorem, developed mainly in the 1970s and 1980s, followed by the property relation theory of exploitation by Roemer (1982). Then, the more recent exploitation theory proposed by Vrousalis (2013) and Wright (2000) is introduced, before examining its economic implications using a simple economic model. Finally, the report introduces and comments on recent axiomatic studies of exploitation by focusing on the work of Veneziani and Yoshihara (2013a).
    Keywords: Fundamental Marxian Theorem; Property Relations Definition of Exploitation; Profit-Exploitation Correspondence Principle.
    JEL: D63 D51
    Date: 2014
  8. By: Ivar Kolstad; Arne Wiig
    Abstract: Does diversification of an economy improve the chances of democracy? This paper estimates the effect of export diversification on democracy levels, using data from 143 countries. The endogeneity of diversification is addressed by using variability within countries in fertile soil as an instrumental variable, controlling for country size. The results show that diversification has a significant, positive effect on levels of democracy. This suggests that less concentrated economic power in a society leads to more widely distributed political power. The results are robust to alternative measures of diversification and democracy, and to additional covariates. Results are also similar for diversification indices excluding oil, suggesting that the uncovered relationship is not entirely about oil.
    Keywords: Diversification, concentration, democracy, political economy
    Date: 2014
  9. By: OECD
    Abstract: Green skills, that is, skills needed in a low-carbon economy, will be required in all sectors and at all levels in the workforce as emerging economic activities create new (or renewed) occupations. Structural changes will realign sectors that are likely to decline as a result of the greening of the economy and workers will need to be retrained accordingly. The successful transition to a low-carbon economy will only be possible if workers can flexibly adapt and transfer from areas of decreasing employment to new industries. This paper suggests that the role of skills and education and training policies should be an important component of the ecological transformation process.
    Date: 2013–12–03
  10. By: Aldy, Joseph E. (Resources for the Future)
    Abstract: An extensive literature shows that information-creating mechanisms enhance the transparency of and can support participation and compliance in international agreements. This paper draws from game theory, international relations, and legal scholarship to make the case for how transparency through policy surveillance can facilitate more effective international climate change policy architecture. I draw lessons from policy surveillance in multilateral economic, environmental, and national security contexts to inform a critical evaluation of the historic practice of monitoring and reporting under the global climate regime. This assessment focuses on how surveillance produces evidence to inform policy design, enables comparisons of mitigation effort, and illustrates the adequacy of the global effort in climate agreements. I also describe how the institution of policy surveillance can facilitate a variety of climate policy architectures. This evaluation of policy surveillance suggests that transparency is necessary for global climate policy architecture.
    Keywords: policy surveillance, climate agreements, monitoring, reporting, compliance
    Date: 2014–09–05
  11. By: Paulo Nakatani (UFES - Université Fédérale de Espirito Santo); Rémy Herrera (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne)
    Abstract: Ce cahier de recherche propose une analyse - d'un point de vue d'inspiration marxiste - des relations entretenues par John Maynard Keynes avec l'économie dominante à son époque (première partie), puis présente les éléments théoriques sur la crise qu'il développa lui-même (deuxième partie), et s'interroge enfin, dans le contexte de la crise actuelle, sur l'opportunité d'un retour aux politiques dites " keynésiennes " (troisième partie).
    Keywords: Keynes; crise; marxisme; économie dominante; capitalisme
    Date: 2013–05
  12. By: Maxime Demarais-Tremblay (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne, Centre Walras Pareto - Université de Lausanne)
    Abstract: This paper provides an explanation of the emergence of the standars textbook definition of public goods in the middle of the 20th century. It focuses on Richard Musgrave's contribution in defining public goods as non-rival and non-excludable - from 1939 to 1969. Although Samuelson's mathematical definition is generally used in models of public goods, the qualitative understanding of the specificity of pure public goods owes more to Musgrave's emphasis on the impossibility of exclusion. This paper also highlights the importance of the size of the group to which benefits of a public good accrue. This analysis allow for a reassessment of the Summary table of goods which first appeared in Musgrave and Musgrave (1973) textbook.
    Keywords: Richard A. Musgrave; social goods; public goods; non-rivalry; non-exclusion
    Date: 2014–01

This nep-pke issue is ©2014 by Karl Petrick. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.