nep-pke New Economics Papers
on Post Keynesian Economics
Issue of 2015‒03‒05
fifteen papers chosen by
Karl Petrick
Western New England University

  1. "The Rise of Money and Class Society: The Contributions of John F. Henry" By Alla Semenova; L. Randall Wray
  2. Essentials of Constructive Heterodoxy: Money, Credit, Interest By Kakarot-Handtke, Egmont
  3. Growth Cycles with or without price flexibility By Skott, Peter
  4. "Emerging Market Economies and the Reform of the International Financial Architecture: The 'Exorbitant Privilege' of the Dollar Is Only the Symptom of a Structural Problem" By Jan Kregel
  5. Demand and Income Distribution in a Two-Country Kaleckian Model By Hiroaki Sasaki; Shinya Fujita
  6. Paul Krugman's "Liquidity Trap" and other Misadventures with Keynes By Lance Taylor
  7. Inequality, Sustainability and Piketty’s Capital By Nuno Ornelas Martins
  8. "Does Keynesian Theory Explain Indian Government Bond Yields?" By Tanweer Akram; Anupam Das
  9. Structural Interdependence in Monetary Economics: Theoretical Assessment and Policy Implications By Cavalieri, Duccio
  10. Why is this ‘school’ called neoclassical economics? Classicism and neoclassicism in historical context By Nuno Ornelas Martins
  11. Modern slavery the concepts and their practical implications By Plant, Roger
  12. An employment-oriented investment strategy for Europe By International Labour Office
  13. Chameleons: The Misuse of Theoretical Models in Finance and Economics By Pfleiderer, Paul
  14. Choosing a Good Toolkit: An Essay in Behavioral Economics By Kreps, David M.; Francetich, Alejandro
  15. Self-employment and health care reform: evidence from Massachusetts By Tuzemen, Didem; Becker, Thealexa

  1. By: Alla Semenova; L. Randall Wray
    Abstract: This paper explores the rise of money and class society in ancient Greece, drawing historical and theoretical parallels to the case of ancient Egypt. In doing so, the paper examines the historical applicability of the chartalist and metallist theories of money. It will be shown that the origins and the evolution of money were closely intertwined with the rise and consolidation of class society and inequality. Money, class society, and inequality came into being simultaneously, so it seems, mutually reinforcing the development of one another. Rather than a medium of exchange in commerce, money emerged as an "egalitarian token" at the time when the substance of social relations was undergoing a fundamental transformation from egalitarian to class societies. In this context, money served to preserve the façade of social and economic harmony and equality, while inequality was growing and solidifying. Rather than "invented" by private traders, money was first issued by ancient Greek states and proto-states as they aimed to establish and consolidate their political and economic power. Rather than a medium of exchange in commerce, money first served as a "means of recompense" administered by the Greek city-states as they strived to implement the civic conception of social justice. While the origins of money are to be found in the origins of inequality, a well-functioning democratic society has the power to subvert the inequality-inducing characteristic of money via the use of money for public purpose, following the principles of Modern Money Theory (MMT). When used according to the principles of MMT, the inequality-inducing characteristic of money could be undermined, while the current trends in rising income and wealth disparities could be contained and reversed.
    Keywords: Nature of Money; Chartalism; Metallism; Origins of Money; Origins of Coinage; Inequality; Class; Ideology; Religious Ideology; State Formation; State Theory of Money; Modern Money Theory
    JEL: B5 B25 B41 E11 E12 E42 E52 E62 E63 H6 N1 N2 P1 P4 P5 Z1
    Date: 2015–02
  2. By: Kakarot-Handtke, Egmont
    Abstract: The goal of theoretical economics is to explain how the monetary economy works. The fatal methodological defect of Orthodoxy is that it is based on behavioral axioms. Yet, no specific behavioral assumption whatever can serve as a starting point for economic analysis. From this follows for Constructive Heterodoxy that the subjective axiomatic foundations have to be replaced. This amounts to a paradigm shift. Nobody can rest content with a pluralism of false theories. Based on a set of objective axioms all economic conceptions have to be reconstructed from scratch. In the following this is done for the theory of money.
    Keywords: new framework of concepts, structure-centric, Structural Law of Supply and Demand, stock of money, monetary profit, transaction unit, banking unit
    JEL: B59 E10
    Date: 2015–02–28
  3. By: Skott, Peter (The University of Massachusetts at Amherst)
    Abstract: This note -- written in response to von Arnim and Barrales (2015) -- shows that (i) the Kaldor-Goodwin models in Skott (1989a, 1989b) and Skott and Zipperer (2012) provide good approximations to models with fast but finite adjustment of prices, (ii) the models can generate cyclical patterns that match the stylized facts, and (iii) an alternative model with instantaneous output adjustment and fixed prices produces a dynamic system that is virtually identical to the Kaldor-Goodwin; this model may describe parts of the service sector.
    Keywords: Endogenous cycles, Harrodian instability, price ?exibility, rationing, labor hoarding, behavioral foundations.
    JEL: E12 E32
    Date: 2015
  4. By: Jan Kregel
    Abstract: If emerging markets are to achieve their objective of joining the ranks of industrialized, developed countries, they must use their economic and political influence to support radical change in the international financial system. This working paper recommends John Maynard Keynes's "clearing union" as a blueprint for reform of the international financial architecture that could address emerging market grievances more effectively than current approaches. Keynes's proposal for the postwar international system sought to remedy some of the same problems currently facing emerging market economies. It was based on the idea that financial stability was predicated on a balance between imports and exports over time, with any divergence from balance providing automatic financing of the debit countries by the creditor countries via a global clearinghouse or settlement system for trade and payments on current account. This eliminated national currency payments for imports and exports; countries received credits or debits in a notional unit of account fixed to national currency. Since the unit of account could not be traded, bought, or sold, it would not be an international reserve currency. The credits with the clearinghouse could only be used to offset debits by buying imports, and if not used for this purpose they would eventually be extinguished; hence the burden of adjustment would be shared equally--credit generated by surpluses would have to be used to buy imports from the countries with debit balances. Emerging market economies could improve upon current schemes for regionally governed financial institutions by using this proposal as a template for the creation of regional clearing unions using a notional unit of account.
    Keywords: Banking Principle; Bretton Woods; Creditor Countries; Debtor Countries; Emerging Market Economies; Gold Standard; International Monetary Standard; Keynes; Reparations; Schacht; Triffin
    JEL: E42 E52 F12 N44
    Date: 2015–02
  5. By: Hiroaki Sasaki; Shinya Fujita
    Abstract: This study builds a two-country Kaleckian model and investigates the effect of one country’s economic policy on both countries. In contrast to preceding studies, we consider monetary aspects as well as real aspects. Our results show that the effects on output of an increase in the nominal wage rate and in the mark-up rate differ from the results obtained from one-country Kaleckian models. Moreover, we show that the success of monetary easing in one country may depend on the other country’s policy, implying the need for policy coordination between the two countries.
    Keywords: two-country Kaleckian model; income distribution; monetary policy
    JEL: E12 E41 E52 F31 F41 F42
    Date: 2015–02
  6. By: Lance Taylor (Schwartz Center for Economic Policy Analysis (SCEPA))
    Keywords: Krugman, Liquidity Trap, Keynes
    Date: 2013–05
  7. By: Nuno Ornelas Martins (Centro de Estudos em Gestão e Economia da Universidade Católica Portuguesa)
    Abstract: In the present article I address the implications of Thomas Piketty’s book Capital in the Twenty-First Century for our understanding of inequality and sustainability. I argue that although Piketty’s contribution is a significant one which has the potential to lead economic analysis in a more fruitful direction, its potential is constrained by its reliance on marginalist theory. The difficulties in addressing adequately the themes of inequality and sustainability spring from the assumptions employed in marginalist theory, which have been proven inconsistent in several debates throughout the history of economic thought. Once the constraints posed by marginalist theory are removed from Piketty’s contribution, its potential becomes much greater when addressing inequality, and has also important implications for such topics as sustainability, justice, and the environment.
    Keywords: Inequality, Sustainability, Cambridge Controversies, Capitalism
    JEL: B41 I31
    Date: 2014–12
  8. By: Tanweer Akram; Anupam Das
    Abstract: John Maynard Keynes held that the central bank's actions determine long-term interest rates through short-term interest rates and various monetary policy measures. His conjectures about the determinants of long-term interest rates were made in the context of advanced capitalist economies, and were based on his views on ontological uncertainty and the formation of investors' expectations. Are these conjectures valid in emerging markets, such as India? This paper empirically investigates the determinants of changes in Indian government bonds' nominal yields. Changes in short-term interest rates, after controlling for other crucial variables such as changes in the rates of inflation and economic activity, take a lead role in driving changes in the nominal yields of Indian government bonds. This vindicates Keynes's theories, and suggests that his views on long-term interest rates are also applicable to emerging markets. Higher fiscal deficits do not appear to raise government bond yields in India. It is further argued that Keynes's conjectures about investors' outlooks, views, and expectations are fairly robust in a world of ontological uncertainty.
    Keywords: Government Bond Yields; India; Emerging Markets
    JEL: E43 E50 E60 O16
    Date: 2015–03
  9. By: Cavalieri, Duccio
    Abstract: This is a theoretical analysis of structural interdependence in monetary economics. Some recent attempts to integrate money and finance in the theory of income and expenditure are critically examined. The Sraffian dichotomic interpretation of classical political economy is refused. A version of the classical surplus approach devoid of separating connotations is sketched, where flows and stocks are consistently reconciled and net financial wealth vanishes in the aggregate. Marx’s law of value is criticized and set aside, as historically outdated by the advent of cognitive capitalism. New Consensus and New Neoclassical Synthesis macroeconomic models are criticized from an orthodox Keynesian point of view. Two further results emerge from the analysis: the illegitimacy of Marx’s asymmetrical treatment of constant and variable capital in the theory of value and the suggestion of a correct method for measuring the unit cost of real capital. Some reasons for reconsidering in this perspective the traditional approaches to monetary theory and policy are indicated.
    Keywords: monetary theory; monetary policy; fiscal policy; structural interdependence; Sraffian dichotomy; post-Keynesian economics; SFCA; MMT; MEV
    JEL: B22 E12 E44 E52 M41
    Date: 2015–02–25
  10. By: Nuno Ornelas Martins (Centro de Estudos em Gestão e Economia da Universidade Católica Portuguesa)
    Abstract: This article addresses the origins of the term “neoclassical” economics, and the subsequent use of the term. It is argued that the present use of the term “neoclassical” economics is different from its original meaning when it was first introduced by Thorstein Veblen, who used it to denote a methodological inconsistency between vision and method, as Tony Lawson argues. I also argue here that the original meaning of the term, and its present use, are both contradictory with the original meaning of “classical political economy”. In fact, if we follow the original meaning of the term “classical political economy”, as a surplus approach concerned with the reproduction and distribution of the economic surplus, we find that many of those who are critical of “neoclassical economics” are actually in line with the classical perspective, to the extent that they also develop a surplus approach.
    Keywords: Classical, Neoclassical, closed system, surplus, marginalism
    JEL: B41
    Date: 2015–01
  11. By: Plant, Roger
    Keywords: forced labour, trafficking in persons, definition, international law, legislation, national level, travail forcé, trafic d'êtres humains, définition, droit international, législation, niveau national, trabajo forzoso, trata de personas, definición, derecho internacional, legislación, nivel nacional
    Date: 2014
  12. By: International Labour Office
    Abstract: The employment situation remains a major source of concern in the majority of countries in the European Union. Half of the region’s unemployed have been without work for more than a year, and unless the policy approach changes, the prospects are for a sluggish employment recovery. The Investment Plan proposed by the European Commission is thus a welcome initiative that recognizes the immediate need for stimulating growth, fostering Europe’s competitiveness and tackling the employment crisis. This report finds that for the Investment Plan to make a significant dent in unemployment, the design of the programme is crucial. Taking into account the magnitude and diversity of the labour market challenges, placing greater emphasis on complementary labour market policies and ensuring that small enterprises have access to credit will lead to better outcomes. In addition, any measures developed as part of the Investment Plan need to form the basis of a medium-term employment strategy that aims at quality job creation and avoids a “race to the bottom” in terms of wages and working conditions.
    Keywords: employment creation, investment policy, economic recovery, public investment, plan of action, EIB, EU, création d'emploi, politique d'investissement, reprise économique, investissement public, plan d'action, BEI, UE, creación de empleos, política de inversiones, recuperación económica, inversiones públicas, plan de acción, BEI, UE
    Date: 2014
  13. By: Pfleiderer, Paul (Stanford University)
    Abstract: In this essay I discuss how theoretical models in finance and economics are used in ways that make them "chameleons" and how chameleons devalue the intellectual currency and muddy policy debates. A model becomes a chameleon when it is built on assumptions with dubious connections to the real world but nevertheless has conclusions that are uncritically (or not critically enough) applied to understanding our economy. I discuss how chameleons are created and nurtured by the mistaken notion that one should not judge a model by its assumptions, by the unfounded argument that models should have equal standing until definitive empirical tests are conducted, and by misplaced appeals to "as-if" arguments, mathematical elegance, subtlety, references to assumptions that are "standard in the literature," and the need for tractability.
    Date: 2014–03
  14. By: Kreps, David M. (Stanford University); Francetich, Alejandro (?)
    Date: 2014–05
  15. By: Tuzemen, Didem (Federal Reserve Bank of Kansas City); Becker, Thealexa (Federal Reserve Bank of Kansas City)
    Abstract: We study the e ect of the Massachusetts health care reform on the uninsured rate and the self-employment rate in the state. The reform required all individuals to obtain health insurance, required most employers to o er health insurance to their employees, formed a private marketplace that o ered subsidized health insurance options and ex- panded public insurance. We examine data from the Current Population Survey (CPS)for 1994-2012 and its Annual Social and Economic (ASEC) Supplement for 1996-2013. We show that the reform led to a dramatic reduction in the state's uninsured rate due to increased enrollment in both public and private health insurance. Estimation results from di erence-in-di erences models and the synthetic control method indicate that the aggregate self-employment rate was higher in the state after the implementation of the reform. We conclude that easier access to health insurance encouraged self-employment in Massachusetts. There are many similarities between the Massachusetts health care reform and the national health care reform, the Patient Protection and Affordable Care Act (PPACA). Based on Massachusetts' experience, the PPACA will lower the national uninsured rate and may lead to a higher self-employment rate in the nation.
    Keywords: Massachusetts health care reform; Patient Protection and Affordable Care Act; self-employment; health insurance; difference-in-differences model; synthetic control method
    JEL: C10 C15 E24 I13 I18 I38 L26
    Date: 2014–11–25

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