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on Post Keynesian Economics |
| By: | Dimitri B. Papadimitriou ; Michalis Nikiforos ; Gennaro Zezza |
| Abstract: | With the anti-austerity Syriza party continuing to lead in polls ahead of Greece's election on January 25, what is the outlook for restoring growth and increasing employment following six years of deep recession? Despite some timid signs of recovery, notably in the tourism sector, recent short-term indicators still show a decline for 2014. Our analysis shows that the speed of a market-driven recovery would be insufficient to address the urgent problems of poverty and unemployment. And the protracted austerity required to service Greece's sovereign debt would merely ensure the continuation of a national crisis, with spillover effects to the rest of the eurozone--especially now, when the region is vulnerable to another recession and a prolonged period of Japanese-style price deflation. Using the Levy Institute's macroeconometric model for Greece, we evaluate the impact of policy alternatives aimed at stimulating the country's economy without endangering its current account, including capital transfers from the European Union, suspension of interest payments on public debt and use of these resources to boost demand and employment, and a New Deal plan using public funds to target investment in production growth and finance a direct job creation program. |
| Date: | 2014–12 |
| URL: | http://d.repec.org/n?u=RePEc:lev:levysa:sa_dec_14&r=pke |
| By: | Kakarot-Handtke, Egmont |
| Abstract: | The consensus is that orthodox economics is a failure in three dimensions: conceptual, methodological, and empirical. Heterodoxy has meticulously sorted out the multitude of errors, mistakes, and distortions. Yet, this alone does not help out of stagnation. Economists have now to go into constructive mode. The most urgent task is to replace the misleading supply-demandequilibrium representation of the market. The reconstruction of the centerpiece of the market system from scratch paves the way to the new paradigm. Nobody can talk about the market system without a correct idea of how the market works. Heterodox economists must take the innovative lead. |
| Keywords: | new framework of concepts; structure-centric; Law of Supply and Demand; market clearing; budget balancing |
| JEL: | B59 D40 |
| Date: | 2015–01–11 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:61236&r=pke |
| By: | Giuseppe Conti |
| Abstract: | From the 1930s and 1940s, the main industrial economies explored a "third way" between laissez-faire capitalism and collectivist central planning. In this sense, the "third way" represented a continuum of experiments between two opposite banks: on the one hand macroeconomic regulation of Keynesian type; on the other microeconomic regulation of social market economy (Soziale Marktwirtschaft). The theoretical foundation of social market economy is anti-Keynesian. In this approach, market failures depend on weak competition. In this case, the state intervenes by means of various kinds of incentives with no, or little public expenditure. In Keynesian approaches underemployment equilibria justify state interventions by means of public investments though leaving to the private sector both allocative choices and the related risks. The paper argues, contrary to the premises, that the social market economy, by reintroducing microeconomics solutions based upon bureaucratic rules, violates the main individual liberties, even affecting consumer's choices. The Keynesian welfare state on the contrary follows the liberal tradition of the rule of law, and of the primacy of the civil rights of citizens. The paper discusses the economic and social implications of these two "third ways". |
| Keywords: | Varieties of capitalism, Welfare state, Macro-micro regulation, Social market economy. |
| Date: | 2015–01–01 |
| URL: | http://d.repec.org/n?u=RePEc:pie:dsedps:2015/195&r=pke |
| By: | Markus P. A. Schneider ; Daniele Tavani |
| Abstract: | Following a methodology proposed by Jantzen and Volpert (2012), we use IRS Adjusted Gross Income (AGI) data for the United States (1921-2012) to estimate two Gini-like indices representing inequality at the bottom and the top of the income distribution. We also calculate the overall Gini index as a function of the parameters underlying the two indices. Our findings can be summarized as follows. First, we find that the increase in the Gini index from the mid 1940s to the late 1970s seems to be mostly explained by an increase in inequality at the bottom of the income distribution, which more than offsets the decrease in inequality at the top. The implication is that middle incomes gained relative to high incomes, but especially relative to low incomes. Conversely, it is rising inequality at the top that appears to drive the rise in the Gini index since 1981. Second, inequality at the top of the income distribution follows a U-shaped trajectory over time, similar to the pattern of the share of top incomes documented by Piketty and Saez (2003, 2006) and Atkinson, Piketty, and Saez (2011). Third, the welfare effects of the different forces behind an increasing Gini index can be evaluated in light of the Lorenz-dominance criterion proposed by Atkinson (1970): both top-driven and bottom-driven increases in the index appear not to imply strict Lorenz dominance by previous income distributions, and therefore are not associated with lower welfare in an absolute sense. In a relative sense, however, once average growth rates over the two periods are taken into account, the top-driven increase in inequality since 1981 appears to have been welfare reducing. |
| Keywords: | Income Distribution; Inequality; Gini Index |
| JEL: | D3 D63 |
| Date: | 2015–01 |
| URL: | http://d.repec.org/n?u=RePEc:lev:wrkpap:wp_826&r=pke |
| By: | Jordà, Òscar ; Taylor, Alan M. |
| Abstract: | After the Global Financial Crisis a controversial rush to fiscal austerity followed in many countries. Yet research on the effects of austerity on macroeconomic aggregates was and still is unsettled, mired by the difficulty of identifying multipliers from observational data. This paper reconciles seemingly disparate estimates of multipliers within a unified and state-contingent framework. We achieve identification of causal effects with new propensity-score based methods for time series data. Using this novel approach, we show that austerity is always a drag on growth, and especially so in depressed economies: a one percent of GDP fiscal consolidation translates into 4 percent lower real GDP after five years when implemented in the slump rather than the boom. We illustrate our findings with a counterfactual evaluation of the impact of the U.K. government's shift to austerity policies in 2010 on subsequent growth. |
| Keywords: | Rubin Causal Model,allocation bias,average treatment effect,booms,fiscal multipliers,identification,inverse probability weighting,local projection,matching,output fluctuations,propensity score,regression adjustment,slumps |
| JEL: | C54 C99 E32 E62 H20 H5 N10 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:safewp:79&r=pke |
| By: | Paul de Grauwe (London School of Economics ); Yuemei Ji (University of Leuven ) |
| Abstract: | The nature of fiscal policies was changed dramatically by the creation of the Eurozone. While prior to the start of the Eurozone, national governments were sovereign in that they could back up the issue of debt by the issue of money, they lost this sovereignty in the Eurozone. This had dramatic effects that were largely overlooked by the designers of the Eurozone. First it made self-fulfilling liquidity crises possible that degenerated into solvency crises. Second, it led to the imposition of intense austerity program. We provide empirical evidence for these two effects. We argue that contrary to what was expected, i.e. that a monetary union loosens fiscal discipline, it actually leads to too much fiscal discipline. |
| Keywords: | fiscal policy; austerity; Eurozone; EMS |
| JEL: | E42 E58 F33 F36 |
| Date: | 2013–07 |
| URL: | http://d.repec.org/n?u=RePEc:bog:spaper:21&r=pke |
| By: | Mariana Mazzucato |
| Abstract: | Today, countries around the world are seeking "smart" innovation-led growth, and hoping that this growth is also more "inclusive" and "sustainable" than in the past. This paper argues that such a feat requires rethinking the role of government and public policy in the economy--not only funding the "rate" of innovation, but also envisioning its "direction." It requires a new justification of government intervention that goes beyond the usual one of "fixing market failures." It also requires the shaping and creating of markets. And to render such growth more "inclusive," it requires attention to the ensuing distribution of "risks and rewards." To approach the innovation challenge of the future, we must redirect the discussion, away from the worry about "picking winners" and "crowding out" toward four key questions for the future: 1. Directions: how can public policy be understood in terms of setting the direction and route of change; that is, shaping and creating markets rather than just fixing them? What can be learned from the ways in which directions were set in the past, and how can we stimulate more democratic debate about such directionality? 2. Evaluation: how can an alternative conceptualization of the role of the public sector in the economy (alternative to MFT) translate into new indicators and assessment tools for evaluating public policies beyond the microeconomic cost/benefit analysis? How does this alter the crowding in/out narrative? 3. Organizational change: how should public organizations be structured so they accommodate the risk-taking and explorative capacity, and the capabilities needed to envision and manage contemporary challenges? 4. Risks and Rewards: how can this alternative conceptualization be implemented so that it frames investment tools so that they not only socialize risk, but also have the potential to socialize the rewards that enable "smart growth" to also be "inclusive growth"? |
| Keywords: | Finance; Industrial Policy; Mission-oriented Innovation |
| JEL: | L1 L5 |
| Date: | 2015–01 |
| URL: | http://d.repec.org/n?u=RePEc:lev:wrkpap:wp_824&r=pke |
| By: | Francesco Farina (University of Siena ) |
| Abstract: | This review article presents the evolution of development theory during the XX century, the measurement of poverty, the concept and the indices of multidimensional poverty. A special focus concerns the complex linkages between income inequality, poverty and institutions during the growth process of developing countries. |
| Keywords: | Development theory,Growth,Poverty,Income inequality |
| JEL: | I31 I32 O15 O21 O43 |
| Date: | 2015–01 |
| URL: | http://d.repec.org/n?u=RePEc:mcr:wpaper:wpaper00046&r=pke |
| By: | Felice, Emanuele |
| Abstract: | The last decades have seen a flourishing of new indicators to measure economic progress, but none of them has succeded in replacing GDP. Why? The article reviews what are arguably the three most successful alternatives to GDP (the Human Development Index, the Genuine Progress Indica-tor, and the Happy Planet Index), by focusing on their conceptual foundations (the capability ap-proach, utilitarism, the wealth approach, or a mix of these) − rather than on statistical solidity or mathematical refinement as most of the literature does. After discussing their faults, it is shown that the wealth approach underlying GDP can be easily extended to include environmental and well-being components (non-market wealth measured at market prices), and to substantiate this claim es-timates of environment-augmented GDP for 130 countries are presented and discussed. However, up to the present not even this line of research has been successful. This suggests that among the reasons behind GDP primacy there is not only philosophical consistency or statistical soundness, but also social suitability, being the standard GDP more suitable to reflect the goals of capitalist-market economies. Constructing composite indicators alternative to GDP is trivial, until when the current preference system has not been changed. To achieve this change, a dashboard approach may be preferable to composite indicators, since the former provides the different social groups with in-telligible quantitative instruments. |
| Keywords: | GDP, human development, sustainability, composite indicators, wealth |
| JEL: | B40 E01 I00 O10 Q50 |
| Date: | 2015–01–03 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:61095&r=pke |
| By: | Palea, Vera (University of Turin ) |
| Abstract: | Financial reporting is a powerful practice that shapes social and economic processes. This paper raises several doubts on the wisdom of current attempts to establish a single set of international financial reporting standards, tailored to the needs of stock market - based capitalism, which forces economies to standardize onto a single economic model. It is at time of great uncertainty and change that the advantages of variety can be appreciated. This paper therefore claims that financial reporting regulation should be large enough to accommodate different forms of capitalism and to let them compete on a level playing field. |
| Date: | 2014–12 |
| URL: | http://d.repec.org/n?u=RePEc:uto:dipeco:201442&r=pke |
| By: | Das-Gupta, Arindam (Goa Institute of Management ) |
| Abstract: | This paper develops a framework to assess the growth and distribution effects of fiscal resources. Resources are classified as debt, other capital receipts, foreign aid and other unilateral grants, non-tax revenue, including resource rents, seigniorage, and taxes. The framework is used to assess the fiscal resource bases of economies in developing Asia to the extent permitted by available data. Although there is great diversity in the amount of resources raised in terms of the importance of different revenue sources and in the sophistication of revenue administrations, the analysis suggests that in order to expand their relatively low fiscal resource bases, developing Asian economies need to pay greater attention to non-tax revenue and to taxes other than broad-based taxes on income and consumption, such as property taxes and corrective taxes. |
| Keywords: | fiscal policy; fiscal resources; taxes; non-tax revenue; growth effects; distribution effects; developing Asia |
| JEL: | H20 O40 O53 |
| Date: | 2014–11–01 |
| URL: | http://d.repec.org/n?u=RePEc:ris:adbewp:0416&r=pke |
| By: | Miles S. Kimball |
| Abstract: | Cognitive Economics is the economics of what is in people’s minds. It is a vibrant area of research (much of it within Behavioral Economics, Labor Economics and the Economics of Education) that brings into play novel types of data—especially novel types of survey data. Such data highlight the importance of heterogeneity across individuals and highlight thorny issues for Welfare Economics. A key theme of Cognitive Economics is finite cognition (often misleadingly called “bounded rationality”), which poses theoretical challenges that call for versatile approaches. Cognitive Economics brings a rich toolbox to the task of understanding a complex world. |
| JEL: | B4 D03 D6 G02 J24 |
| Date: | 2015–01 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:20834&r=pke |