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on Post Keynesian Economics |
| By: | Jan Kregel |
| Abstract: | Emerging market economies are taking an ill-targeted and far too limited approach to addressing their ongoing problems with the international financial system, according to Senior Scholar Jan Kregel. In this policy brief, he explains why only a wholesale reform of the international financial architecture can adequately address these countries' concerns. As a blueprint for reform, Kregel recommends a radical proposal advanced in the 1940s, most notably by John Maynard Keynes. Keynes was among those who were developing proposals for shaping the international financial system in the immediate postwar period. His clearing union plan, itself inspired by Hjalmar Schacht's system of bilateral clearing agreements, would have effectively eliminated the need for an international reserve currency. Under Keynes's clearing union, trade and other international payments would be automatically facilitated through a global clearinghouse, using debits and credits denominated in a notional unit of account. The unit of account would have a fixed conversion rate to national currencies and could not be bought, sold, or traded--meaning no market for foreign currency would be required. Clearinghouse credits could only be used to offset debits by buying imports, and if not used within a specified period of time, the credits would be extinguished, giving export surplus countries an incentive to spend them. As Kregel points out, this would help support global demand and enable a shared adjustment burden. Though Keynes's proposal was not specifically designed for emerging market economies, Kregel recommends combining this plan with current ideas for regionally governed institutions--to create, in other words, "regional clearing unions," building on existing swaps arrangements. Under such a system, emerging market economies would be able to pursue their development needs without reliance on the prevailing international financial architecture, in which their concerns are, at best, diluted. |
| Date: | 2015–02 |
| URL: | http://d.repec.org/n?u=RePEc:lev:levppb:ppb_139&r=pke |
| By: | Mariana Mazzucato; L. Randall Wray |
| Abstract: | This paper discusses the role that finance plays in promoting the capital development of the economy, with particular emphasis on the current situation of the United States and the United Kingdom. We define both "finance" and "capital development" very broadly. We begin with the observation that the financial system evolved over the postwar period, from one in which closely regulated and chartered commercial banks were dominant to one in which financial markets dominate the system. Over this period, the financial system grew rapidly relative to the nonfinancial sector, rising from about 10 percent of value added and a 10 percent share of corporate profits to 20 percent of value added and 40 percent of corporate profits in the United States. To a large degree, this was because finance, instead of financing the capital development of the economy, was financing itself. At the same time, the capital development of the economy suffered perceptibly. If we apply a broad definition--to include technological advances, rising labor productivity, public and private infrastructure, innovations, and the advance of human knowledge--the rate of growth of capacity has slowed. The past quarter century witnessed the greatest explosion of financial innovation the world had ever seen. Financial fragility grew until the economy collapsed into the global financial crisis. At the same time, we saw that much (or even most) of the financial innovation was directed outside the sphere of production--to complex financial instruments related to securitized mortgages, to commodities futures, and to a range of other financial derivatives. Unlike J. A. Schumpeter, Hyman Minsky did not see the banker merely as the ephor of capitalism, but as its key source of instability. Furthermore, due to "financialisation of the real economy," the picture is not simply one of runaway finance and an investment-starved real economy, but one where the real economy itself has retreated from funding investment opportunities and is instead either hoarding cash or using corporate profits for speculative investments such as share buybacks. As we will argue, financialization is rooted in predation; in Matt Taibbi's famous phrase, Wall Street behaves like a giant, blood-sucking "vampire squid." In this paper we will investigate financial reforms as well as other government policy that is necessary to promote the capital development of the economy, paying particular attention to increasing funding of the innovation process. For that reason, we will look not only to Minsky's ideas on the financial system, but also to Schumpeter's views on financing innovation. |
| Keywords: | Banker as Ephor of Capitalism; Capital Development; Finance; Global Financial Crisis; Innovation; Minsky; Schumpeter |
| JEL: | B5 B51 B52 G G1 G2 H6 L5 N1 O1 O2 O3 O4 P1 |
| Date: | 2015–05 |
| URL: | http://d.repec.org/n?u=RePEc:lev:wrkpap:wp_837&r=pke |
| By: | Matthew Berg |
| Abstract: | The 2008 Federal Open Market Committee (FOMC) transcripts provide a rare portrait of how policymakers responded to the unfolding of the world's largest financial crisis since the Great Depression. The transcripts reveal an FOMC that lacked a satisfactory understanding of a shadow banking system that had grown to enormous proportions--an FOMC that neither comprehended the extent to which the fate of regulated member banks had become intertwined and interlinked with the shadow banking system, nor had considered in advance the implications of a serious crisis. As a consequence, the Fed had to make policy on the fly as it tried to prevent a complete collapse of the financial system. |
| Date: | 2015–05 |
| URL: | http://d.repec.org/n?u=RePEc:lev:levyop:op_49&r=pke |
| By: | Kakarot-Handtke, Egmont |
| Abstract: | What stands before all eyes as failed Orthodoxy is ultimately caused by the wrong answer to Mill's Starting Problem. It is now pretty obvious that one cannot put utility maximization, equilibrium, well-behaved production functions, ergodicity or any other physical or psychological or sociological or behavioral assumption into the premises. No way leads from such premises to the explanation of how the actual market economy works. The logical consequence is to discard them. Having first secured a superior formal starting point, the present paper addresses the question of how the various types of financial markets emerge from the elementary monetary circuit. |
| Keywords: | new framework of concepts; structure-centric; Law of Supply and Demand; Profit Law; IOU; complementarity of retained profit and saving; securities; bonds; common stock; mortgages; consumer financing |
| JEL: | B49 B59 E19 G00 |
| Date: | 2015–05–17 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:64426&r=pke |
| By: | Jan Kregel |
| Abstract: | The developed world's policy response to the recent financial crisis has produced complaints from Brazil of "currency wars" and calls from India for increased policy coordination and cooperation. Chinese officials have echoed the "exorbitant privilege" noted by de Gaulle in the 1960s, and Russia has joined China as a proponent of replacing the dollar with Special Drawing Rights. However, none of the proposed remedies are adequate to achieve the emerging market economies' objective of joining the ranks of industrialized, developed countries. |
| Date: | 2015–02 |
| URL: | http://d.repec.org/n?u=RePEc:lev:levyop:op_48&r=pke |
| By: | Anna Horodecka (Warsaw School of Economics) |
| Abstract: | The main objective of this paper is to characterize the key trends responsible for the changes of the concepts of human nature in the economics. The methodology is both deductive (conclusions from theories developed within social sciences and humanities) and inductive (observation of current trends, which according to the theory are potentially responsible for those changes). Basing on the insights of psychology, philosophy of science, sociology, and cognitive science main potential forces are deduced. From the observation of actual trends, the basic contemporary factors responsible for the changes of the concepts of human nature are distinguished. Those can be divided in three groups. The first group contains factors focusing on the advance in knowledge about the human being, occurring within the general and specific sciences dealing with man (e.g. psychology, sociology, philosophy, cognitive science). The second group of factors includes the increasing complexity of the social processes. The third group refers to those social trends, which are responsible for altering understanding the world, which in turn results in real changes. Virtualization of life, greater sensitivity to human and environmental issues, increased contacts with other cultures and religions, greater sensitivity to the existing social injustice are some of those factors. Basing on those results, the reasons for growing criticism of traditional, orthodox image of man in the economics are discussed and the postulates of the heterodox economics for modifications in the concept of human nature, which reflect the changes taking place in society. |
| Keywords: | concepts of human nature, social trends, economic anthropology, heterodox economics, economic psychology |
| Date: | 2015–05 |
| URL: | http://d.repec.org/n?u=RePEc:pes:wpaper:2015:no131&r=pke |
| By: | Dimitri B. Papadimitriou; Greg Hannsgen; Michalis Nikiforos; Gennaro Zezza |
| Abstract: | In this latest Strategic Analysis, the Institute's Macro Modeling Team examines the current, anemic recovery of the US economy. The authors identify three structural obstacles--the weak performance of net exports, a prevailing fiscal conservatism, and high income inequality--that, in combination with continued household sector deleveraging, explain the recovery's slow pace. Their baseline macro scenario shows that the Congressional Budget Office's latest GDP growth projections require a rise in private sector spending in excess of income--the same unsustainable path that preceded both the 2001 recession and the Great Recession of 2007-9. To better understand the risks to the US economy, the authors also examine three alternative scenarios for the period 2015-18: a 1 percent reduction in the real GDP growth rate of US trading partners, a 25 percent appreciation of the dollar over the next four years, and the combined impact of both changes. All three scenarios show that further dollar appreciation and/or a growth slowdown in the trading partner economies will lead to an increase in the foreign deficit and a decrease in the projected growth rate, while heightening the need for private (and government) borrowing and adding to the economy’s fragility. |
| Date: | 2015–05 |
| URL: | http://d.repec.org/n?u=RePEc:lev:levysa:sa_may_15&r=pke |
| By: | Adolfo Rodriguez (Universidad de Costa Rica) |
| Abstract: | In the first three pages of his Capital, without any warning to the reader, Marx introduces a modification of the traditional meaning of the term “use value”. For Locke, Quesnay, and Smith, “use value” was the ability of a thing to satisfy human needs, for Marx it becomes the thing itself. This change of meaning has not been properly perceived, and many authors continue to attribute to Marx the same conception of use value than his predecessors have. When Marx translates some passages of Aristotle’s Politics from English to German, his translation surprisingly attributes the term “use value” to Aristotle; worse, Marx does not attribute to Aristotle the predominant meaning of this term but the new meaning adopted by him. This note offers a brief history of the term “use value”, summarizes the significant change of meaning introduced by Marx, conjectures about the possible motivations of Marx to act this way, and finally documents the amazing translation of Marx. |
| Date: | 2014–11 |
| URL: | http://d.repec.org/n?u=RePEc:fcr:wpaper:201402&r=pke |
| By: | Adolfo Rodriguez (Universidad de Costa Rica) |
| Abstract: | The terms employed by Smith to refer to value and measure of value are used in his time with imprecision, which has led to different interpretations about his position on these issues. It is no coincidence that Smith is considered the father of the theory of labour value developed by David Ricardo and Karl Marx and simultaneously of the cost-of-production theory developed by John Stuart Mill and Alfred Marshall. This note reviews the criticisms made by Ricardo and Marx on Smith’s position about value and measure of value. According to these authors, Smith is not consistent in proposing that value of a commodity is defined or measured as the amount of labour necessary to produce it and simultaneously as the amount of labour that can be purchased by this commodity. After demonstrating that the interpretation made by Ricardo and Marx on Smith’s arguments is wrong and that the criticized inconsistency does not really exist, I will argue that Smith proposes a labour theory of value that substantially corresponds to the one developed later by Marx. |
| Date: | 2014–06 |
| URL: | http://d.repec.org/n?u=RePEc:fcr:wpaper:201401&r=pke |
| By: | Stavros B. Thomadakis |
| Abstract: | The paper reflects a basic premise: Greek participation in the Euro-zone marked a definitive institutional break in the process of contracting and managing public debt. Instead of internal debt, used extensively in earlier decades, euro-denominated sovereign issues were now placed in the international market. Thus, the Greek state became a net ‘exporter’ of financial claims to an extent unprecedented in its recent history. In assessing the prolegomena to crisis, I offer a review of the post-junta, pre-euro period, the forces leading to accumulation of (mostly internal) debt and the predominance of a ‘money illusion’ in distributional politics; I also engage an argument that the institutional shift that occurred with Euro-zone entry brought about a fundamental change to the very ‘sovereignty’ of Greek public debt. It expunged ‘money illusion’ but created the ground for policies that embodied ‘financial’ and ‘fiscal’ illusions. The entrapment of elites and electorates in various ‘illusions’ reflecteda persistent tendency to underestimate the limits imposed by globalization on Greek economic policies. In the euro era, Greek policy became trapped in a self-feeding loop of debt-driven growth that effectively undermined the country’s sovereignty. |
| Date: | 2015–05 |
| URL: | http://d.repec.org/n?u=RePEc:hel:greese:91&r=pke |
| By: | Ronaldo Seroa da Motta |
| Abstract: | This paper focuses on the role of economic factors inducing deforestation in Brazil and thereby threatening biodiversity, giving particular attention to the exploitation pattern of forest resources in Brazil. Some economic factors cannot be easily reverted since reversion would require long-term structural adjustments to alleviate social inequalities, to accomplish a satisfactory land tenure reform and to solve renumeration issues inhibiting human resource enhancement in governmental agencies. However, there is still room to introduce economic incentives in order to mitigate the current trend towards deforestation and biodiversity losses. A economia da biodiversidade neste texto será analisada como os fatores indutores ao desmatamento no Brasil que ameaçam os recursos da biodiversidade e, portanto, o principal objeto de análise será o padrão de uso dos recursos florestais no país. Alguns destes fatores somente poderão ser removidos caso ajustes estruturais na economia ocorram para corrigir as desigualdades de renda, a concentração fundiária e a fragilidade institucional das agências ambientais. Entretanto, conforme será discutido, o uso de instrumentos econômicos na gestão ambiental poderá mitigar estes fatores indutores e alterar a tendência ao desmatamento e as perdas de biodiversidade. |
| Date: | 2015–01 |
| URL: | http://d.repec.org/n?u=RePEc:ipe:ipetds:0063&r=pke |
| By: | Giovanis, Eleftherios |
| Abstract: | Ground-level ozone is an important pollutant regulated under the Clean Air Acts that affects respiratory morbidity, decreases lung function, and negatively affects those with existing respiratory conditions like asthma. This study examines the “Clean Air Works” program on ozone concentration levels, which is operating in Charlotte area of North Carolina State. “Clean Air Works” is a voluntary program which educates people about the negative effects of air pollution on health. Moreover, this program encourages people to reduce air pollution by using voluntarily alternative transportation modes, such as carpooling and public transit, especially when a smog ozone alert is issued. The contribution of this study is that it examines three effects: The effectiveness of the “Clean Air Works” program and whether ozone smog alerts are more effective under this program. Finally, the effects on ozone levels coming from the change in the warning threshold from 80 particles per billion (ppb) to 75 ppb, which took place in 2008, are established. For this purpose a quadruple Differences (DDDD) estimator is applied. In both cases, we find reduction in ground-level ozone levels and improvement of the air quality in the treatment group where the “Clean Air Works” program is implemented. In addition, the air quality is improved when smog alerts are associated with the program. Finally, taken additionally into consideration the change of the threshold at 75 ppb the air quality is improved by 1.5 ppb in the treatment group relatively to the control group. This study suggests that the ozone warning system associated with voluntary programs can help to clean the air and improve the public health. |
| Keywords: | Air Quality, Clean Air Works, Differences-in-Differences, Ozone concentrations, Quadruple DDDD, Regression Discontinuity Design, Smog alerts |
| JEL: | C23 I10 Q50 Q53 Q58 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:64401&r=pke |
| By: | Heitor Almeida |
| Date: | 2015–01 |
| URL: | http://d.repec.org/n?u=RePEc:ipe:ipetds:0060&r=pke |