nep-pke New Economics Papers
on Post Keynesian Economics
Issue of 2015‒02‒28
twelve papers chosen by
Karl Petrick
Western New England University

  1. "Europe at the Crossroads: Financial Fragility and the Survival of the Single Currency" By Jan Kregel
  2. "The Greek Public Debt Problem" By Michalis Nikiforos ; Dimitri B. Papadimitriou ; Gennaro Zezza
  3. The Federal Reserve and Shared Prosperity: A Guide to the Policy Issues and Institutional Challenges By Thomas I. Palley
  4. New Zealand inequality and the struggle between capital and labour By Krawczyk, Jacek B ; Townsend, Wilbur
  5. Mainstreaming. Reflections on the Origins and Fate of Mainstream Pluralism. By Cedrini, Mario ; Fontana, Magda
  6. Premature Deindustrialization By Rodrik, Dani
  7. Corporate Walkover in Progress: The Case of the Southern Company’s “Clean Coal” Plant in Mississippi By Klinedinst, Mark
  8. Are Fairtrade Prices Fair? An Analysis of the Distribution of Returns in the Swedish Coffee Market By Durevall, Dick
  9. Green Development Co-Operation in Zambia: An Overview By Juan Casado-Asensio ; Shannon Wang ; Katlego Moilwa ; Anna Drutschinin
  10. "Small miracles"-- behavioral insights to improve development policy : World Development Report 2015 By Demeritt, Allison ; Hoff, Karla
  11. China’s Contribution to Development Cooperation: Ideas, Opportunities and Finances By Justin Yifu LIN ; Yan WANG
  12. Behavioral Economics of Education: Progress and Possibilities By Lavecchia, Adam M. ; Liu, Heidi ; Oreopoulos, Philip

  1. By: Jan Kregel
    Abstract: Given the continuing divergence between progress in the monetary field and political integration in the euro area, the German interest in imposing austerity may be seen as representing an attempt to achieve, de facto, accelerated progress toward political union; progress that has long been regarded by Germany as a precondition for the success of monetary unification in the form of the common currency. Yet no matter how necessary these austerity policies may appear in the context of the slow and incomplete political integration in Europe, they are ultimately unsustainable. In the absence of further progress in political unification, writes Senior Scholar Jan Kregel, the survival and stability of the euro paradoxically require either sustained economic stagnation or the maintenance of what Hyman Minsky would have recognized as a Ponzi scheme. Neither of these alternatives is economically or politically sustainable.
    Date: 2015–02
  2. By: Michalis Nikiforos ; Dimitri B. Papadimitriou ; Gennaro Zezza
    Abstract: The Greek economic crisis started as a public debt crisis five years ago. However, despite austerity and a bold "haircut," public debt is now around 175 percent of Greek GDP. In this policy note, we argue that Greece's public debt is clearly unsustainable, and that a significant restructuring of this debt is needed in order for the Greek economy to start growing again. Insistence on maintaining the current policy stance is not justifiable on either pragmatic or moral grounds. The experience of Germany in the early post–World War II period provides some useful insights for the way forward. In the aftermath of the war, there was a sweeping cancellation of the country's public and foreign debt, which was part of a wider plan for the economic and political reconstruction of Germany and Europe. Seven decades later, while a solution to the unsustainability of the Greek public debt is a necessary condition for resolving the Greek and European crisis, it is not, in itself, sufficient. As the postwar experience shows, a broader agenda that deals with both Greece's domestic economic malaise and the structural imbalances in the eurozone is also of vital importance.
    Date: 2015–02
  3. By: Thomas I. Palley
    Abstract: The Federal Reserve is a hugely powerful institution whose policies ramify with enormous effect throughout the economy. In the wake of the Great Recession, monetary policy focused on quantitative easing. Now, there is talk of normalizing monetary policy and interest rates. That conversation is important, but it is also too narrow and keeps policy locked into a failed status quo. There is need for a larger conversation regarding the entire framework for monetary policy and how central banks can contribute to shared prosperity. It is doubtful the US can achieve shared prosperity without the policy cooperation of the Fed. That makes understanding the Federal Reserve, the policy issues and institutional challenges, of critical importance.
    Date: 2015
  4. By: Krawczyk, Jacek B ; Townsend, Wilbur
    Abstract: This paper examines whether changes in New Zealand income inequality can be attributed to the shares of national income taken by capital and labour. Data on income inequality aggregates both capital income (rents, interest, profits) and labour income (wages and salaries). It is possible that changes in inequality correspond only to changes within the distributions of capital income and labour income, and that a rhetoric which emphasises the struggle between capital and labour is misguided. We find this is not the case: both an econometric analysis of income shares and a historical analysis of major policies demonstrates that the struggle between capital and labour matters.
    Keywords: Factor income, Inequality, New Zealand,
    Date: 2015
  5. By: Cedrini, Mario ; Fontana, Magda (University of Turin )
    Abstract: There is considerable discussion on the so-called “mainstream pluralism”, which stems from the growth and coexistence of new research programs in economics that significantly deviate from the neoclassical core. Other disciplines have actively contributed to the birth of such programs, that are carried on by different, often separated communities of researchers. Although “mainstream pluralism” is not the pluralism heterodox economists and students groups have sought for in the recent decades, its persistence over time might provide a possible precondition for the advent of pluralism in economics. While the literature tends to regard mainstream pluralism as a transitory state towards a new, post-neoclassical, mainstream, this paper contributes to the debate by bringing in a different perspective, focusing on economics’ fragmentation and the necessity of specialization. We adopt a “late Kuhnian” framework (derived from Kuhn’s late works on specialization), considering not scientific revolutions but specialization as key engine of progress in science, and interpret mainstream pluralism as the result of economics’ recent growth in size and dive rsity. To account for the necessity of specialization in economics, we employ Ronald Heiner’s work on the competence-difficulty gap, as well as the evidence offered in some recent studies about the impact of the “burden” of previously accumulated knowledge on innovative behaviour. After a bird’s eye view on the recent history of economics in relation to other disciplines (and an analysis of Herbert Gintis’s “unity of behavioral sciences” proposal as possible new mains tream), we discuss the possibility that today’s “mainstream pluralism” might persist over time.
    Date: 2015–02
  6. By: Rodrik, Dani
    Abstract: I document a significant deindustrialization trend in recent decades, that goes considerably beyond the advanced, post-industrial economies. The hump-shaped relationship between industrialization (measured by employment or output shares) and incomes has shifted downwards and moved closer to the origin. This means countries are running out of industrialization opportunities sooner and at much lower levels of income compared to the experience of early industrializers. Asian countries and manufactures exporters have been largely insulated from those trends, while Latin American countries have been especially hard hit. Advanced economies have lost considerable employment (especially of the low-skill type), but they have done surprisingly well in terms of manufacturing output shares at constant prices. While these trends are not very recent, the evidence suggests both globalization and labor-saving technological progress in manufacturing have been behind these developments. Premature deindustrialization has potentially significant economic and political ramifications, including lower economic growth and democratic failure.
    Keywords: Deindustrialization; industrialization
    JEL: O14
    Date: 2015–02
  7. By: Klinedinst, Mark
    Abstract: The project to create an experimental “clean coal” plant in Mississippi is funded by electric utility customers in the poorest state in the United States. The incentives for the project come from the industry capturing the Public Service Commission of Mississippi. The controversial incentives stipulate that the Southern Company can earn a return on money spent to create electrical infrastructure, even if the experimental plant never produces any electricity. The Southern Company’s Kemper County Mississippi “Radcliffe” Plant, originally estimated to cost about $1.2 billion, is approaching $6 billion dollars, is still not operational, and may never be a profitable facility. Despite this, over 180,000 of America’s poorest citizens are expected to foot the bill. Although this is one of the most intense examples of corporate welfare, the “Radcliffe” Plant is hardly the only current case in the utility industry. The “Public Service Commission” of Mississippi facilitated this large transfer of income from ratepayers to investors in this monopoly.
    Keywords: utility, public service commission, coal, rate, electric
    JEL: A1 L5 Q38 Q4
    Date: 2014–11–14
  8. By: Durevall, Dick (Department of Economics, School of Business, Economics and Law, Göteborg University )
    Abstract: Consumers pay a premium for Fair Trade coffee, often assuming that it mainly benefits poor coffee farmers. However, several studies report that most of the premium accrues to actors in the consumer countries, such as roasters and retailers. This paper analyses how the returns to Fair Trade are distributed among bean producer countries, roasters and retailers, and Fairtrade Sweden, using scanner data on 185 products from Sweden and information about costs of production. The distribution depends on how much more costly it is to produce Fair Trade coffee compared to conventional coffee, given costs of beans and licences. Assuming the difference is 5 SEK per kg (about USD 0.80), which is on the high side, roasters and retailers get 61%, while producer countries, i.e., coffee farmers, cooperatives, middlemen, exporters and Fairtrade International, get 31%. The rest accrues to Fairtrade Sweden. These estimates are uncertain, but there is there strong evidence that Fair Trade retail prices are higher than the level attributable to the costs of Fair Trade beans and licences.
    Keywords: coffee supply chains; ethic labels; Fair Trade premium; Fairtrade; market power; organic coffee
    JEL: D43 O19 P46
    Date: 2015–02
  9. By: Juan Casado-Asensio ; Shannon Wang ; Katlego Moilwa ; Anna Drutschinin
    Abstract: Embracing green growth can secure strong, stable and sustainable development. Green growth recognises and integrates the value of natural capital into economic decision-making and development planning, which is critical to avoid natural capital depletion, the worst of climate change and social and national security risks (OECD, 2013). This is particularly true for developing countries, because of their dependence on natural assets and acute exposure and vulnerability to environmental risks, ranging from air, water and soil pollution, as well as natural resource scarcity and extreme weather events exacerbated by climate change. A green growth policy framework recognises and aims to address both micro- and macro-level pressures that countries face to grow their economies, while also managing environmental risks. In poorer developing countries, micro-level pressures may include lack of access to basic services such as shelter, fuel, water; while macro-level pressures are threats to stable livelihoods due to...
    Date: 2014–12–23
  10. By: Demeritt, Allison ; Hoff, Karla
    Abstract: One of the most fruitful advances in modern economics has been the introduction of psychological realism into the model of"economic man."The World Development Report 2015 organizes the evidence about how humans actually think and make decisions into a coherent framework useful for designing development policy. This paper elaborates on the three principles of human thinking that constitute the report's intellectual framework: Human thinking is dual process -- automatic as well as deliberative (thinking automatically); it is conditioned by social context and the salience of social identities (thinking socially); and it is shaped by mental models that are socially constructed (thinking with mental models). Behavioral insights create scope for policy interventions that produce"miracles"from the perspective of traditional economics.
    Keywords: Tertiary Education,Health Monitoring&Evaluation,Educational Sciences,Knowledge for Development,Primary Education
    Date: 2015–02–01
  11. By: Justin Yifu LIN (FERDI ); Yan WANG (FERDI )
    Abstract: Conventional economic theories seem to be inadequate in explaining the diverse and multipolar world we live in. Having lost confidence in the Washington consensus, developing countries are increasingly looking East for development experiences and ideas: what worked, why and how. This paper examines China’s role in development cooperation from the angle of structural transformation as a major driver of growth and job creation.  Being a bit ahead in the structural transformation process, China can contribute ideas, tacit knowledge, implementation capacity, opportunities as well as finances. Based on a joint learning model, developing countries choose partners based on their respective comparative advantages, instruments of interaction and degree of complementarity. Countries that have a higher number of revealed comparative advantage (RCA) in sectors that needed strongly would be in a better position to help in structural transformation. We use empirical evidence to show that China-financed infrastructure projects do address Africa’s infrastructure bottlenecks, and in addition, China’s industrial upgrading and outward investment provide opportunities for light manufacturing development in low-income developing countries. Further, expanding the definitions of international aid or cooperation could induce more development financing from various sources. Rationales of China-led grand vision of “One Belt One Road” are discussed.
    JEL: F35
    Date: 2015–01
  12. By: Lavecchia, Adam M. (University of Toronto ); Liu, Heidi (Harvard University ); Oreopoulos, Philip (University of Toronto )
    Abstract: Behavioral economics attempts to integrate insights from psychology, neuroscience, and sociology in order to better predict individual outcomes and develop more effective policy. While the field has been successfully applied to many areas, education has, so far, received less attention – a surprising oversight, given the field's key interest in long-run decision-making and the propensity of youth to make poor long-run decisions. In this chapter, we review the emerging literature on the behavioral economics of education. We first develop a general framework for thinking about why youth and their parents might not always take full advantage of education opportunities. We then discuss how these behavioral barriers may be preventing some students from improving their long-run welfare. We evaluate the recent but rapidly growing efforts to develop policies that mitigate these barriers, many of which have been examined in experimental settings. Finally, we discuss future prospects for research in this emerging field.
    Keywords: behavioral economics of education, present-bias, student motivation
    JEL: D03 D87 I2 J24
    Date: 2015–02

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