nep-pke New Economics Papers
on Post Keynesian Economics
Issue of 2014‒12‒29
ten papers chosen by
Karl Petrick
Western New England University

  1. US Financial Regulation: The Dodd-Frank Wall Street Reform and Consumer Protection Act in Current and Historical Perspective By Jan Kregel
  2. Balance of payments or monetary sovereignty? In search of the EMU’s original sin – a reply to Lavoie By Sergio Cesaratto
  3. Shifting to a Green Economy: Lock-in, Path Dependence, and Policy Options By Kemp-Benedict, Eric
  4. Sraffa’s price equations in light of Garegnani and Pasinetti - The ‘core’ of surplus theories and the ‘natural’ relations of an economic system By Bellino, Enrico
  5. Micro and macro policies in the Keynes + Schumpeter evolutionary models By Giovanni Dosi; Mauro Napoletano; Andrea Roventini; Tania Treibich
  6. An Analysis of J.R. Commons’s Changing Views on the Role of Sovereignty in the Political Economy By Kota Kitagawa
  7. Climate Science and Climate Economics By Fisher, Anthony
  8. Time to Abandon Group Thinking in Economics - Updated By Da Silva, Sergio
  9. Becoming Applied: The Transformation of Economics after 1970 By Roger Backhouse; Beatrice Cherrier
  10. Economics in Times of Crisis. In Search of a New Paradigm By Joanna Dzionek-Kozlowska

  1. By: Jan Kregel (Tallinn University of Technology)
    Abstract: This paper presents the major changes in financial regulation in the United States starting with the historical background and concluding with the most recent measures contained in, or mandated by, the 2010 Dodd-Frank Act. It will present the most important changes in regulatory legislation proposed in the aftermath of the 2007-8 crisis intended to prevent a collapse of the financial system similar to the recent crisis.
    Keywords: financial regulation, Dodd-Frank regulations
    JEL: G18 G28
    Date: 2014–10–01
  2. By: Sergio Cesaratto (University of Siena)
    Abstract: In a recent paper Marc Lavoie (2014) has criticized my interpretation of the Eurozone (EZ) crisis as a balance of payments crisis (BoP view for short). He rather identified the original sin “in the setup and self-imposed constraint of the European Central Bank”. This is defined here as the monetary sovereignty view. This view belongs to a more general view that see the source of the EZ troubles in its imperfect institutional design. According to the (prevailing) BoP view, supported with different shades by a variety of economists from the conservative Sinn to the progressive Frenkel, the original sin is in the current account (CA) imbalances brought about by the abandonment of exchange rate adjustments and in the inducement to peripheral countries to get indebted with core countries. An increasing number of economists would add the German neo-mercantilist policies as an aggravating factor. While the BoP crisis appears as a fact, a better institutional design would perhaps have avoided the worse aspects of the current crisis and permitted a more effective action by the ECB. Leaving aside the political unfeasibility of a more progressive institutional set up, it is doubtful that this would fix the structural unbalances exacerbated by the euro. Be this as it may, one can, of course, blame the flawed institutional set up and the lack an ultimate action by the ECB as the culprit of the crisis, as Lavoie seems to argue. Yet, since this institutional set up is not there, the EZ crisis manifests itself as a balance of payment crisis.
    Keywords: Socialist Marxian Sraffian, Central banks and their policies, Current account adjustment, International lending and debt problems, Macroeconomics issues of monetary unions.
    JEL: B51 E58 F32 F34
    Date: 2014–12
  3. By: Kemp-Benedict, Eric
    Abstract: In the face of increasingly likely dangerous climate change, many developing countries are designing green economy or low-emissions development strategies, but are simultaneously on a course of investment locking them into high-emission infrastructure. Meanwhile, many high-income countries are working to reduce their emissions but are hampered by the cost of switching from an existing capital stock designed for a fossil fuel-based economy. This paper looks at economic aspects of the challenge of escaping carbon lock-in using a “brown-green capital” model. In the model, brown capital is more productive than green capital in a brown capital-dominated economy, while green capital is more productive in a green capital-dominated economy; that is, the model allows for “carbon lock-out”. We explore possible macroeconomic consequences of policies to drive a transition to a low-carbon economy and policy responses in the case that macroeconomic imbalances result. Three results are particularly interesting. First, the effect of policy instruments depends on whether the economy is wage-led or profitled, a distinction that emerges from post-Keynesian theory. Second, if investors hedge against uncertainty over expected levels of green and brown investment, then there is likely to be underinvestment in green capital even at quite high levels of green capital penetration, creating a substantial challenge for policymakers. Third, the model suggests an unusual role for a carbon price, to control inflationary pressure arising from public green capital investment, in addition to its usual role of encouraging emissions reductions at the margin.
    Keywords: green economy; brown-green capital; carbon lock-in; post-Keynesian; Kaleckian
    JEL: E12 E61 G11 Q01
    Date: 2014–11–25
  4. By: Bellino, Enrico
    Abstract: Within the rich literature that has flowed from Sraffa’s framework of Production of Commodities by means of Commodities a prominent position is occupied by the research programmes carried out independently by two authoritative exponents of this school: Pierangelo Garegnani and Luigi Pasinetti. Certain specific features of their approaches might lead one to perceive them as alternative to one another. Yet, when analysed through a constructive perspective, one discovers not only a common origin and methodology, but also strict complementarity in analysing the main characteristics of industrial systems.
    Keywords: surplus approach, ‘core’ of a capitalist system, structural economic dynamics, ‘natural system’, Garegnani, Pasinetti, Sraffa, Keynes, post-Keynesians
    JEL: B12 B24 B51 D33 E11 E12 E2
    Date: 2014–12–18
  5. By: Giovanni Dosi (Laboratory of Economics and Management); Mauro Napoletano (OFCE); Andrea Roventini (Department of economics); Tania Treibich (Maastricht University)
    Abstract: This paper presents the family of the Keynes+Schumpeter (K+S, cf. Dosi et al, 2010, 2013, 2014) evolutionary agent-based models, which study the effects of a rich ensemble of innovation, industrial dynamics and macroeconomic policies on the long-term growth and short-run fluctuations of the economy. The K+S models embed the Schumpeterian growth paradigm into a complex system of imperfect coordination among heterogeneous interacting firms and banks, where Keynesian (demand-related) and Minskian (credit cycle) elements feed back into the meso and macro dynamics. The model is able to endogenously generate long-run growth together with business cycles and major crises. Moreover, it reproduces a long list of macroeconomic and microeconomic stylized facts. Here, we discuss a series of experiments on the role of policies affecting i) innovation, ii) industry dynamics, iii) demand and iv) income distribution. Our results suggest the presence of strong complementarities between Schumpeterian (technological) and Keynesian (demand-related) policies in ensuring that the economic system follows a path of sustained stable growth and employment
    Keywords: agent-based model; Fiscal policy; Economic crises; Austerity policies; Disequilibrium dynamics
    JEL: C63 E32 E52 G21 O4 E6
    Date: 2014–11
  6. By: Kota Kitagawa
    Abstract: This article distills the economic and current significance contained in the political economy of J.R. Commons. It compares descriptions of his three main works that discuss “sovereignty”: A Sociological View of Sovereignty (SVS), Legal Foundations of Capitalism (LFC), and Institutional Economics (IE). Through this comparison, we find that the role of sovereignty in his theory changed dramatically. First, in the period from SVS (1899–1900) to LFC (1924), the theory of sovereignty changes significantly from the standpoint of natural rights, which imply permanence of privileged customs, to “pragmatic philosophy” of the courts, in which laws are relevant to customs at certain times and places. Second, from the manuscripts of IE (1927–1928), sovereignty is defined as comprising part principles, which relate to each other and make up the whole principle, willingness. In other words, Commons views sovereignty as one perspective, which in turn has a high capability of explaining the socioeconomic system. Additional descriptions of IE (1934) derived from its original manuscripts repeatedly emphasize the “power” of economic concerns that are equal to or exceed the power of the state, as well as the importance of the “function” of sovereignty in pragmatic investigations of economic disputes. We distill the economic and current significance of IE. First, the value theory that constructs values institutionally and collectively starts from an analysis of sovereignty and joint evaluations. Second, sovereignty cannot be separated from an analysis of economic transactions. Third, this paper concretely shows elements of a “deliberate space” in which sovereignty and economic interests act in concert. J.R. Commons’s IE sets out specific knowledge on the interface between sovereignty and economic interests, and serves as a useful tool in reconsidering the organ of sovereignty.
    Keywords: J.R. Commons; Institutional Economics; Sovereignty; Supreme Court; Commission
    JEL: B11
    Date: 2014–12
  7. By: Fisher, Anthony
    Keywords: Social and Behavioral Sciences, Climate change, nonlinearities, catastrophic events
    Date: 2014–11–01
  8. By: Da Silva, Sergio
    Abstract: Group thinking is the notion that natural selection favors what is good for the group or the species, not for the individual. Most mainstream evolutionary biology rejects this idea and natural selection is viewed as working on the individual’s genes to promote their own survival and reproduction. Here I show through a couple of examples how group thinking also pervades economics. I argue that the reason for the mistake relies on the fact that economics fails to ground itself in the underlying knowledge provided by biology. Then I suggest how economics can aspire more than being applied logic and turn into a scientific discipline by placing biology on its basis. Finally, I outline how economics should treat group behavior properly.
    Keywords: Economic methodology, Biological basis of economics, Group thinking, Group behavior
    JEL: B41
    Date: 2014–03–31
  9. By: Roger Backhouse; Beatrice Cherrier
    Abstract: This paper conjectures that economics has changed profoundly since the 1970s and that these changes involve a new understanding of the relationship between theoretical and applied work. Drawing on an analysis of John Bates Clark medal winners, it is suggested that the discipline became more applied, applied work being accorded a higher status in relation to pure theory than was previously the case. Discussing new types of applied work, the changing context of applied work, and new sites for applied work, the paper outlines a research agenda that will test the conjecture that there has been a changed understanding of the nature of applied work and hence of economics itself.
    Keywords: Applied economics, theory, Clark Medal, JEL codes, core, policy, computation, data, econometrics
    JEL: A10 B20 B40 C00
    Date: 2014–12
  10. By: Joanna Dzionek-Kozlowska (University of Lodz, Faculty of Economics and Sociology)
    Abstract: The relationship between the development of economics and economic performance is not reducible to any set of simple rules. Among the historians of economic thought there is even a handful of those who perceive the progress in economics mostly as an outcome of the attempts to solve the problems, inconsistencies and paradoxes within economic theory itself. Seen from this perspective, economic reality has minor (or no) importance. On the other hand, the endeavours to modify a mainstream approach are significantly greater in times of economic downturns. Seeing that economics is in such a state of ‘intellectual ferment’ nowadays, it is worth reconsidering the connection between economics and the economy. Thus the main aim of the paper is to analyse the current state of economic science in relation to the last economic slump. Although it is of course not possible to predict the future trajectories of economic theorising, taking into consideration the nature of the crisis the most feasible and potentially most fruitful areas are indicated.
    Keywords: economic methodology, economics imperialism, economic performance, economic crisis, homo economicus, value judgements
    JEL: B41 B50
    Date: 2014–12

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