nep-pke New Economics Papers
on Post Keynesian Economics
Issue of 2015‒07‒04
six papers chosen by
Karl Petrick
Western New England University

  1. Household debt and housing bubble: A Minskian approach to boom-bust cycles By Soon, Ryoo;
  2. Uncertainty and Contradiction: An Essay on the Business Cycle By Michalis Nikiforos
  3. Inequality of income and wealth in the long run: A Kaldorian perspective By Soon, Ryoo;
  4. How does financialisation affect functional income distribution? A theoretical clarification and empirical assessment By Köhler, Karsten; Guschanski, Alexander; Stockhammer, Engelbert
  5. Mentalism versus behaviourism in economics: a philosophy-of-science perspective By Franz Dietrich; Christian List
  6. Keynes tenía razón. lecciones no aprendidas y desafíos por afrontar By Jairo Alexander Neira Sánchez

  1. By: Soon, Ryoo (Department of Finance and Economics, Adelphi University);
    Abstract: This paper examines macroeconomic dynamics of household debt and housing prices. Drawing on Minsky's insights into financial instability and cycles, our framework combines household debt dynamics with behavioral asset price dynamics in a Keynesian macro model. We show that endogenous boom-bust cycles can emerge through the interaction between household debt and housing price dynamics. The resulting long waves are combined with a Kaldorian model of short-run business cycles.
    Keywords: household debt, asset bubble, limit cycle, financial instability hypothesis
    JEL: E12 E32 E44
    Date: 2015
  2. By: Michalis Nikiforos (Levy Economics Institute)
    Abstract: The paper develops a model of economic fluctuations in the medium run and their relation with the short-run macroeconomic equilibrium. The business cycle is the result of two separate forces. On the one hand, there is the Harrodian instability. On the other hand, this instability is contained by the inherent contradictions of capitalism. We focus on two of these contradictions, the profit-squeeze that results from the tightening of the labor market as employment and utilization increase and the financial instability hypothesis, as formulated by Hyman Minsky. With the inclusion of overhead labor, the model can explain the U-shaped behavior of the wage share along the business cycle (wage share decreases for low levels of utilization and increases for higher levels) that prevailed in most of the post-WWII period, as well as the decrease in the wage share as utilization increases that has been observed in the most recent cycles.
    Keywords: Cycles, Harrod, Oscillations, Distribution, Minsky
    JEL: B22 E11 E12 E32
    Date: 2015–06
  3. By: Soon, Ryoo (Department of Finance and Economics, Adelphi University);
    Abstract: The paper examines the determinants of income and wealth inequality in a Kaldorian model where the profit share adjusts to clear the goods market and the long-run output-capital ratio is constant. The approach is radically different from both the mainstream approach that stresses properties of production function and the Kaleckian approach that emphasizes the long-run adjustment of utilization. The Kaldorian model is used to identify several developments that may have caused increasing inequality in income and wealth since the early 1980s, including the shift of the power relation in corporate firms in favor of top managerial pay, the decline in the retention rate, increasing share buybacks, rising indebtedness of lower-income households, and the stock market boom in the 1990s. In contrast to Piketty's explanation, the decline in the natural rate of growth reduces inequality of income and wealth in this Kaldorian framework.
    Keywords: income and wealth distribution, managerial pay, financialization, stock- flow consistency
    JEL: E12 E21 E25 E44
    Date: 2015
  4. By: Köhler, Karsten (Berlin School of Economics and Law); Guschanski, Alexander (University of Greenwich); Stockhammer, Engelbert (Kingston University London)
    Abstract: While it is frequently asserted that financialisation has contributed to the decline in the wage share there are only few econometric studies, which usually focus on a single aspect of financialisation. This paper provides a theoretical clarification and a systematic empirical investigation. We identify four arguments why financialisation would affect the wage share: (1) a political economy approach focusing on the exit options of firms, (2) a neo-Kaleckian approach stressing the role of financial overhead costs for firms, (3) increased competition on capital markets stressed by neo-Marxian approaches and the critical shareholder value literature, and (4) the role of household debt in increasing workers’ financial vulnerability and undermining their class consciousness. The paper compiles a comprehensive set of empirical measures of financialisation and uses it to test the theoretical hypotheses by a panel regression of 14 OECD countries over the 1989-2011 period. We find strong evidence for negative effects of household debt and evidence for negative effects of financial deregulation.
    Keywords: financialisation; functional income distribution; panel regression
    JEL: E25 G34 G35
    Date: 2015–06–22
  5. By: Franz Dietrich; Christian List
    Abstract: Behaviourism is the view that preferences, beliefs, and other mental states in social-scientific theories are nothing but constructs re-describing people’s behaviour. Mentalism is the view that they capture real phenomena, on a par with the unobservables in science, such as electrons and electromagnetic fields. While behaviourism has gone out of fashion in psychology, it remains influential in economics, especially in ‘revealed preference’ theory. We defend mentalism in economics, construed as a positive science, and show that it fits best scientific practice. We distinguish mentalism from, and reject, the radical neuroeconomic view that behaviour should be explained in terms of brain processes, as distinct from mental states.
    Keywords: mentalism; behaviourism; revealed preference; decision theory; scientific realism
    JEL: J1
    Date: 2015
  6. By: Jairo Alexander Neira Sánchez
    Abstract: Las crisis financieras en Estados Unidos y Europa han vuelto a poner sobre el debate la pertinencia y veracidad de los postulados keynesianos. Por ese motivo es relevante estudiar cuál habría sido la posición de Keynes respecto a la formación de las crisis y las diferentes medidas de política económica emprendidas para la recuperación. El ensayo plantea como objetivo principal demostrar que Keynes tenía razón y, en relación a la coyuntura económica, hay muchos argumentos que tendría por decir, especialmente sobre la crisis mundial, el desigualdad, la pobreza y la falta de desarrollo. Para los efectos planteados, el ensayo está dividido en una introducción, dos partes generales y las consideraciones finales. En la primera parte se presenta una aproximación a la teoría keynesiana, principalmente en lo concerniente a los espíritus animales, la teoría de las expectativas, la demanda y oferta monetaria, la demanda agregada, el efecto multiplicador y las consideraciones sobre política fiscal y monetaria. En la segunda parte se estudian las crisis de Estados Unidos y Europa utilizando el contexto histórico y aplicando los planteamientos keynesianos previamente presentados, con el fin de exponer cuáles serían los argumentos de Keynes respecto a la coyuntura económica y qué papel jugaría su teoría. Por último se presentarán las consideraciones finales en donde se recogen los principales argumentos y reflexiones del ensayo.
    Keywords: Economía, Keynes, demanda agregada, consumo, ahorro, inversión, empleo, racionalidad, irracionalidad, política fiscal, política monetaria, gasto público, crisis.
    JEL: E12 E21
    Date: 2014–02–07

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