nep-pke New Economics Papers
on Post Keynesian Economics
Issue of 2014‒12‒03
five papers chosen by
Karl Petrick
Western New England University

  1. Debt Servicing, Aggregate Consumption, and Growth By Mark SetterfieldY; Yun K. Kim
  2. "After Austerity: Measuring the Impact of a Job Guarantee Policy for Greece" By Rania Antonopoulos; Sofia Adam; Kijong Kim; Thomas Masterson; Dimitri B. Papadimitriou
  3. Building sustainability through greater happiness By Stefano Bartolini
  4. Keynes, King's and Endowment Asset Management By David Chambers; Elroy Dimson; Justin Foo
  5. Government Solvency, Austerity and Fiscal Consolidation in the OECD: A Keynesian Appraisal of Transversality and No Ponzi Game Conditions By Karim Azizi; Nicolas Canry; Jean-Bernard Chatelain; Bruno Tinel

  1. By: Mark SetterfieldY; Yun K. Kim
    Abstract: We develop a neo-Kaleckian growth model that emphasizes the importance of consumption behavior. In our model, workers first make consumption decisions based on their gross income, and then treat debt servicing commitments as a substitute for saving. Workers' borrowing is induced by their desire to keep up with the consumption standard set by rentiers' consumption, reflecting an aspect of the relative income hypothesis. As a result of this consumption and debt servicing behavior, consumer debt accumulation and income distribution have effects on aggregate demand, profitability, and economic growth that differ from those found in existing models. We also investigate the financial sustainability of the Golden Age and Neoliberal growth regimes within our framework. It is shown that distributional changes between the Golden Age and the Neoliberal regimes, together with corresponding changes in consumption emulation behavior via expenditure cascades, suffice to make the Neoliberal growth regime unsustainabble.
    Keywords: Consumer debt, emulation, income distribution, Golden Age regime, Neoliberal regime, expenditure cascades, growth
    JEL: E12 E44 O41
    Date: 2014–11
  2. By: Rania Antonopoulos; Sofia Adam; Kijong Kim; Thomas Masterson; Dimitri B. Papadimitriou
    Abstract: To mobilize Greece's severely underemployed labor potential and confront the social and economic dangers of persistent unemployment, we propose the immediate implementation of a direct public benefit job creation program--a Greek "New Deal." The Job Guarantee (JG) program would offer the unemployed jobs, at a minimum wage, on work projects providing public goods and services. This policy would have substantial positive economic impacts in terms of output and employment, and when newly accrued tax revenue is taken into account, which substantially reduces the net cost of the program, it makes for a comparatively modest fiscal stimulus. At a net cost of roughly 1 percent to 1.2 percent of GDP (depending on the wage level offered), a midrange JG program featuring the direct creation of 300,000 jobs has the potential to reduce the unemployed population by a third or more, once indirect employment effects are taken into account. And our research indicates that the policy would do all this while reducing Greece’s debt-to-GDP ratio--which leaves little room for excuses.
    Date: 2014–10
  3. By: Stefano Bartolini
    Abstract: The current unsustainable growth of the world economy is largely a consequence of the crisis of social capital experienced by much of the world's population. Declining social capital leads the economies to excessive growth, because people seek economic affluence as compensation for the emotional distress and loss of resources caused by scarce social and affective relationships. To slow down economic growth requires an increase in social capital that is a fundamental contributor to happiness. From a wide range of possible approaches to increasing present happiness, this article suggests policies that would shift the economy to a more sustainable path. It focuses on a more politically sustainable set of proposals for a green ‘new deal’ than some of those currently under discussion.
    Keywords: Common good; environmentalism; ecologism; economic growth; green economy; happiness; negative endogenous growth; private affluence; social capital; social stress; well-being.
    JEL: A13 D63 D90 E20 F01 I31 O10 O40
    Date: 2014–11
  4. By: David Chambers; Elroy Dimson; Justin Foo
    Abstract: Founded in 1441, King's College was one of Cambridge University's wealthiest Colleges, endowed with a vast agricultural portfolio. John Maynard Keynes was appointed bursar just after WWI and initiated a major reallocation to equities, an innovation at least as radical as the late 20th century commitment to illiquid assets by Harvard and Yale. Keynes initially pursued a market-timing approach to investment with mixed success and failed to anticipate the 1929 market crash. Thereafter, his switch to a patient buy-and-hold strategy allowed him to maintain his commitment to equities in the subsequent market slump, reflecting the natural advantages that accrue to long horizon investors. Keynes' innovations in endowment asset management, implemented over a dynamic period of capital market development and economic turbulence remain of great relevance to modern investors emerging from the Great Recession.
    JEL: B26 G11 G14 G23
    Date: 2014–09
  5. By: Karim Azizi (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne); Nicolas Canry (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne); Jean-Bernard Chatelain (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris); Bruno Tinel (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne)
    Abstract: This paper investigates the relevance of the No-Ponzi game condition for public debt (i.e. the public debt growth rates has to be lower than the real interest rate, a necessary assumption for Ricardian equivalence) and of the transversality condition for the GDP growth rate (i.e. the GDP growth rate has to be lower than the real interest rate). First, on the unbalanced panel of 21 countries from 1961 to 2010 available in OECD database, those two conditions were simultaneously validated only for 29% of the cases under examination. Second, those two conditions were more frequent in the 1980s and the 1990s when monetary policies were more restrictive. Third, in tune with the Keynesian view, when the real interest rate is higher than the GDP growth, it corresponds to 75% of the cases of the increases of the debt/GDP ratio but to only 43% of the cases of the decreases of the debt/GDP ratio (fiscal consolidations).
    Keywords: Government solvency; austerity; fiscal consolidation; No-Ponzi game condition; transversality condition; Keynesian countercyclical budgetary policy; monetary policy; economic growth
    Date: 2013–04

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