nep-pke New Economics Papers
on Post Keynesian Economics
Issue of 2015‒01‒19
ten papers chosen by
Karl Petrick
Western New England University

  1. "The Socialization of Investment, from Keynes to Minsky and Beyond" By Riccardo Bellofiore
  2. "Why Raising Rates May Speed the Recovery" By Jan Kregel
  3. A Keynesian factor in monetary policy: the Economic Growth Incentive Method (EGIM) By De Koning, Kees
  4. Green Subsidies and the WTO By Steve Charnovitz
  5. Extractive Institutions and Gains From Trade: Evidence from Colonial Africa By Federico Tadei
  6. On the Missing Macroeconomics of Social Liberalism: From Physiocrats to Pre-war Chicagoans and Freiburg By Soldatos, Gerasimos T.
  7. The Crisis of International Human Rights Law in the Global Market Economy By Daniel Augenstein
  8. Puzzles of public opinion: Why Soviet population supports the transition to capitalism since the 1980S By Popov, Vladimir
  9. Towards understanding economic growth in Africa: A reinterpretation of the Lewis Model: By Diao, Xinshen; McMillan, Margaret S.

  1. By: Riccardo Bellofiore
    Abstract: An understanding of, and an intervention into, the present capitalist reality requires that we put together the insights of Karl Marx on labor, as well as those of Hyman Minsky on finance. The best way to do this is within a longer-term perspective, looking at the different stages through which capitalism evolves. In other words, what is needed is a Schumpeterian-like, nonmechanical view about long waves, where Minsky's financial Keynesianism is integrated with Marx's focus on capitalist relations of production. Both are essential elements in understanding neoliberalism's ascent and collapse. Minsky provided crucial elements in understanding the capitalist "new economy." This refers to his perceptive diagnosis of "money manager capitalism," the new form of capitalism that came from the womb of the Keynesian era itself. It collapsed a first time with the dot-com crisis, and a second time, and more seriously, with the subprime crisis. The focus is on the long-term changes in capitalism, and especially on what L. Randall Wray appropriately calls Minsky's "stages approach." Our aim is to show that this theme has a deep connection with the topic of the socialization of investment, central in the conclusions of the latter's 1975 book on Keynes.
    Keywords: Great Recession; Marx; Minsky; Money Manager Capitalism; Neoliberalism; Schumpeter; Socialization of Investment; Stages Approach
    JEL: E5 E11 E12 E32 E44 E60 G01 G20 N10 P16
    Date: 2014–12
  2. By: Jan Kregel
    Abstract: Criticisms of the Federal Reserve's "unconventional" monetary policy response to the Great Recession have been of two types. On the one hand, the tripling in the size of the Fed's balance sheet has led to forecasts of rampant inflation in the belief that the massive increase in excess reserves might be spent on goods and services. And even worse, this would represent an attempt by government to inflate away its high levels of debt created to support the solvency of financial institutions after the September 2008 collapse of asset prices. On the other hand, it is argued that the near-zero short-term interest rate policy and measures to flatten the yield curve (quantitative easing plus "Operation Twist") distort the allocation and pricing in the credit and capital markets and will underwrite another asset price bubble, even as deflation prevails in product markets. Both lines of criticism have led to calls for a return to a more conventional policy stance, and yet there is widespread agreement that this would have a negative impact on the economy, at least in the short-term. However, since the analyses behind both lines of criticism are mistaken, it is probable that the analyses of the impact of the risks of return to more normal policies are also in error.
    Date: 2014–12
  3. By: De Koning, Kees
    Abstract: In the U.S. over the past 17 years competition among banks to provide home mortgages has failed. The reason is that there is a finite need for new housing starts at around 1.8 million homes per year and that there is a finite need for funds if house prices are to move in line with the CPI inflation index. In 1997 new home mortgage funds of $125,260 were allocated for each new home, with a median house price level of $145,900. The turning point was already reached in 1998 and in 2006 home mortgage funds per new home had grown to $574,550. In 2006 on basis of the CPI index for new homes, not 1.8 million but nearly 5.5 million new homes could have been build; way above the need. Over the period 1998-2007 the economic value of the output achieved with the money input had dropped considerably and the indebtedness of new mortgagees had increased dramatically. Both were a cause of a slow down in economic growth. The funding bubble burst in 2007. The actions taken by the Federal Reserve saved the banks- bar one- and other financial institutions, but the Fed did not address the financial plight of individual households. Quantitative easing bought up $2.4 trillion of past government debt, which helped lower long-term interest rates. What was not considered was to give a cash injection to individual households to be repaid out of future tax revenues. Such tax advance should not be personalized but repaid to the Fed out of future general tax revenues over a period of say 10 years: the Economic Growth Incentive Method. A Keynesian factor can be introduced into monetary policies. The U.S. has gone through a six-year adjustment period since the beginning of 2008 in order to get back to economic growth. The Eurozone has not achieved the same result. The EGIM method would be very helpful for the Eurozone countries.
    Keywords: Keynesian factor in monetary policy; Economic Growth Incentive Method (EGIM); U.S. home mortgages;money input-new housing starts output relationship, money efficiency index; U.S government debt; Federal Reserve response to financial crisis
    JEL: E44 E52 E58 E62 G21
    Date: 2015–01–05
  4. By: Steve Charnovitz
    Abstract: This paper provides a detailed explanation how the law of the World Trade Organization regulates environmental subsidies with a focus on renewable energy subsidies. The paper begins by discussing the economic justifications for such subsidies and the criticisms of them and then gives examples of different categories of subsidies. Next the paper provides an overview of the relevant WTO rules and caselaw, including the recent Canada -Renewable Energy case. The paper also makes specific recommendations for how WTO law can be improved, and discusses the existing literature discussing reform proposals. The study further finds that because of a lack of clarity in WTO rules, for some clean energy subsidies, a government will not know in advance whether the subsidy is WTO-legal.
    Keywords: international trade, international law, environmental protection, climate, subsidies, trade law
    Date: 2014–09
  5. By: Federico Tadei
    Abstract: A common explanation for African current underdevelopment is the extractive character of institutions established during the colonial period. Yet, since colonial extraction is hard to quantify, its precise mecha- nisms and magnitude are still unclear. In this paper, I tackle these issues by focusing on colonial trade in French Africa. By using new data on export prices, I show that the colonizers used trade monopsonies and coercive labor institutions to reduce prices to African agricultural producers way below world market prices. As a consequence, during the colonial period, extractive institutions cut African gains from trade by at least one-half. JEL Classification: N17; O43 Keywords: Africa, Development, Institutions, Colonization, Trade, Labor Markets
    Date: 2014
  6. By: Soldatos, Gerasimos T.
    Abstract: Put in terms of the two fundamental theorems of welfare economics, social or welfare liberalism is being defined as the tenet criticizing classical liberalism for neglecting the second theorem, having nothing to say about the “liberalism” of macroeconomic policymaking. This note claims that the macroeconomic dimension of social liberalism is the one advanced by pre-war, Old Chicago, which, based on the quantity theory of money, was maintaining (i) that it abides by laissez-faire but against classical liberalism’s laissez faire of “let the cycle run its course”, and given (ii) that Old Chicago was seeing government intervention necessary for income-redistribution reasons, too. Which of the two liberalisms holds the true version of laissez faire? Going back to the Physiocrats who had coined the term, one realizes that they had done so from the welfare liberalist point of view abstracting from the macro-monetary issues raised of Jean Bodin separately. This abstraction continues until today neglecting the “fact” that what Old Chicago had really done was to integrate into social liberalism the quantity-theory-of-money macro-monetary considerations having started with Bodin. The German “experiment” with the Freiburg-School-inspired Soziale Marktwirtschaft - an experiment in social liberalism - attests to the need for “Chicago rules” if social liberalism is to stand out as a different system altogether. In sum, the only microeconomics-cum-macroeconomics consistent with the true, the socio-liberal laissez-faire is the Old Chicago economics. Examples in classical liberalism are Monetarism and Austrian economics whereas Keynesianism and Marxism abandon laissez faire altogether.
    Keywords: Liberalism, Physiocrats, Pre-war Chicagoans, Soziale Marktwirtschaft, Macro-Monetary Economics
    JEL: B1 B2 D02 E3 P1
    Date: 2014
  7. By: Daniel Augenstein
    Abstract: The article argues that the facticity of the human rights impacts of economic globalisation increasingly undermines the normativity of the state-centred conception of international human rights law. The exposure of the international legal order of states to the operations of global business entities leads to a collusion of sovereign state interest and globalised corporate power at the expense of protecting the rights of victims of human rights violations. The article scrutinises two prominent attempts to address this lacuna of protection: transnational tort litigation and the UN Guiding Principles on Business and Human Rights. It is argued that both approaches are not only an expression of the present crisis of international human rights law but also risk contributing to its perpetuation. While the ‘escape into tort’ results in the privatisation of public human rights in the global market economy, the UN Guiding Principles entrench their territorialisation in the state legal order in the face of global economic challenges. The concluding section reflects on the future pathways of international human rights law by positing a choice between, on the one hand, a more radical departure from human rights’ state-centred heritage and, on the other hand, a transformation of the international legal order of states by virtue of human rights. It highlights the importance of extraterritorial human rights obligations in recovering the state’s legal accountability for human rights violations committed in the course of global business operations.
    Keywords: governance
    Date: 2014–12–03
  8. By: Popov, Vladimir
    Abstract: Why even after the dramatic increase in inequality in the 1990s and after the emergence and enrichment of “oligarchs”, the alternative (leftist, social democratic) economic policies that could have improved material and social wellbeing of the majority of the population is not supported by this majority? It is argued that in immature democracies (without efficient restrictions for the participation of private capital in politics) mass media and electoral campaigns are controlled by the rich, so there is vicious circle: market reforms and private property create the class of the wealthy “oligarchs” that are not only interested in these reforms, but also have power to maintain their political and economic might through mass media and democratic elections. The return of public opinion to the “norm” so that it reflects interests of the majority is possible only if mass media and political process are separated from private capital and private financing.
    Keywords: Public opinion, transition from socialism to capitalism, inequalities, elections, mass media
    JEL: H00 P26 P3
    Date: 2014–12–24
  9. By: Diao, Xinshen; McMillan, Margaret S.
    Abstract: Africa’s recent economic growth is at a historical high, the patterns associated with this growth appear to be quite different from the Asian experiences where rapid growth was fueled by labor intensive, export-oriented manufacturing. Because this pattern differs with our typical view of structural transformation, a heated debate has begun over the sustainability of Africa’s growth. In our view, Africa’s recent growth is still not well understood and thus it is difficult to say much that is meaningful about future prospects for growth on the continent. Against this background, we adapt Lewis’s (1954) dual-economy model to the economies of Africa to better understand the role that the “in-between†sector as defined by Lewis (1979) has played in Africa’s recent growth. Our framework incorporates the coexistence of a closed and an open modern economy and takes into account the diversity and heterogeneity of the activities that characterize modern African economies.
    Keywords: economic growth, Economic development, Mathematical models, structural change, economic models,
    Date: 2014
  10. By: Gopakumar K.U. (Sri Sathya Sai Institute of Higher Learning); V. Pandit (Sri Sathya Sai Institute of Higher Learning)
    Abstract: Persistent increase in food prices and its impact on society and economy have been of prime concern for the government and its policy makers in India since 2005-06. Though these rates have eased to some extent in the recent months; with expected recovery of the economy and inherent supply bottle necks, the problem of inflation remains serious. This paper examines the price movements in rice and wheat, following structuralist principles emphasizing the necessity of long term solutions in combination with short and medium term management. However, unlike completely free systems, markets for these products are characterized by government interventions, calling for a slightly different approach under which interactions of demand and supply need to incorporate government interventions by way of minimum support price and procurement. The sample for this study consists of the period, 1980-81 through 2011-12 on an annual basis. Our results confirm strong impact of demand and supply factors in determining inflation for both the products. These include the role of government interventions as well as public investment in agriculture in ensuring price stability.
    Keywords: Food grain inflation, demand and supply management, procurement, minimum support prices, capital stock.
    JEL: C3 E31 Q11 Q18
    Date: 2014–12

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