nep-pke New Economics Papers
on Post Keynesian Economics
Issue of 2015‒07‒18
nine papers chosen by
Karl Petrick
Western New England University

  1. Financialisation, financial structures, economic performance and employment. By Malcolm Sawyer
  2. Alternative Monetary Policy and Central Banking By Giorgios Argitis
  3. Sraffa and the Labour theory of Value - a note By Anderaos de Araujo, Fabio
  4. Structural interdependence in monetary economics: theoretical assessment and policy implications By Cavalieri, Duccio
  5. Kindleberger and Financial Crises By Piero Pasotti; Alessandro Vercelli
  6. Going Green for Esteem: An Extended Uzawa-Lucas Model with Status Driven Environmentalism By Zhou, Sophie Lian
  7. Inequality and Trade: A Behavioral-Economics Perspective By Sugata Marjit; Punarjit Roychowdhury
  8. Networks in Manuel Castells’ theory of the network society By Anttiroiko, Ari-Veikko
  9. How economists understand (or not) the relationship between the real and the financial economy. By Kenneth Hermele

  1. By: Malcolm Sawyer (University of Leeds)
    Abstract: The first major theme is the trends in the processes of financialisation reviewing quantitative and qualitative features of those trends, covering both industrialised and emerging economies. The ways in which the processes of financialisation impact on and interacts with the real sector are discussed with particular reference to the empirical evidence. In this, the financial development—economic growth relations are explored, and whether positive relationship between the two has declined and perhaps reversed in recent decades. There are other ways through which financialisation (particularly in the guise of ownership by the financial sector of the corporate sector and the pursuit of shareholder value) sets the framework for a wide range of decisions taken by corporations including investment and employment. In section 4 the focus is on the ways in which the financial sector could be changed and developed which could be more conducive to supporting sustainable development and high levels of employment and human development. The thrust of the argument is the need to develop diverse financial institutions with a variety of ownership forms whose primary functions are the savings—investment linkages, and to enable funds to flow in a more socially beneficial manner not solely governed by profit calculations of the financial sector.
    Keywords: financialisation, economic development, human development, employment, financial structures
    JEL: E2 E44 G20 O16
    Date: 2015–02–01
  2. By: Giorgios Argitis (National and Kapodistrian University of Athens)
    Abstract: This paper points out policy suggestions for modern central banks to improve their effectiveness in terms of successfully targeting financial stability and employment. The theoretical foundations of the proposed policy suggestions rely on Minsky’s conceptualization of financial fragility and instability. It is argued that Minsky’s Financial Instability Hypothesis contextualizes how the financial structure of the effective demand and financial markets predispose to endogenous non-sustainable leverage and liability structures that result from position-making operations. We stress that Minsky advances an approach to central banking that is based on a cash-flow examination procedure to capture changes in the quality of leverage, solvency and liquidity of firms and banks that destabilize the macroeconomic system. We underline that Minsky patterns central banking and monetary policy within Ponzi financial practices and interconnections among financial institutions and financial markets. Following Minsky, we suggest discount window central banking, lender of last resort operations and targeting Ponzi finance as the most appropriate policies of modern central banks to deal with financial and macroeconomic instability.
    Keywords: Financial Fragility and Instability, Central Banking, Monetary Policy
    JEL: E12 E52 E58 G18
    Date: 2015–01–01
  3. By: Anderaos de Araujo, Fabio
    Abstract: An analysis of the invariable measure of prices proposed by the eminent Italian economist Piero Sraffa, who laid the foundations for a new approach in modern economics. Two mathematical appendices are also provided. The first one shows step by step the construction of the Standard Commodity, which is a consistent solution to the transformation of labour values into prices of production. In Appendix II there is a general numerical example of a price system with two industries which makes the understanding of the distribution of income between wages and profits easier. Using a software spreadsheet, for example, it is possible to make numerical simulations and make comparisons between the results obtained from the Sraffa price system with that obtained from Marx's. This is revised version of the original paper written few years ago.
    Keywords: Sraffa, Standard Commodity, labour values, income distribution
    JEL: A1 B00 B12
    Date: 2015–07–06
  4. By: Cavalieri, Duccio
    Abstract: This is a theoretical analysis of structural interdependence in monetary economics and of its connections with the theories of value and capital. Some recent attempts to integrate money and finance in the theory of income and expenditure – those of the ‘Stock-Flow Consistent Approach’ to macroeconomics, of ‘Modern Monetary Theory’ and of Circuit Theories – are examined. The surplus approach to the theory of value and capital is then formally considered in a model devoid of Sraffian misleading dichotomic connotations, where money plays a fundamental role and flows and stocks are coherently reconciled. In such framework, a method for measuring the unit cost of real capital is indicated and some reasons for reconsidering the traditional approaches to monetary theory and policy in a ‘late Marxian’ updated analytical perspective are highlighted.
    Keywords: monetary theory; monetary policy; fiscal policy; structural interdependence; Sraffian dichotomy; post-Keynesian economics; MEV.
    JEL: B22 E12 E44 E52 M41
    Date: 2015–07–10
  5. By: Piero Pasotti (University of Siena); Alessandro Vercelli (University of Siena)
    Abstract: This paper aims to assess to what extent the contributions of Kindleberger to the explanation and control of financial crises may still be a source of valuable insights for the present. Kindleberger had the great merit, to be shared with Minsky, of having resumed in the early 1970s, after an eclipses of more than two decades, the investigation on the intrinsic instability of credit and its impact on financial crises. Though his pure model may be considered less pregnant than that of Minsky, it extends its scope to the international and political aspects of financial crises. In addition Kindleberger provides a powerful support to the model by rooting it in the empirical evidence systematically investigated since the early 18th century. The application of Kindleberger’s model has been successfully extended, with the collaboration of Aliber, also to the financial crises occurred after the publication of his major book (Kindleberger, 1978). This paper argues that Kindleberger’s insights are still invaluable to understand the subprime crisis and the ensuing Great recession and to design the institutions and policies necessary to resume a sustainable path of economic progress.
    Keywords: Kindleberger, Financial Crises, International Lender of Last Resort
    JEL: B26 E52 E58 F33 F34
    Date: 2015–02–01
  6. By: Zhou, Sophie Lian
    Abstract: Conspicuous conservation is a newly emerged phenomenon of status driven environmentalism, where individuals undertake publicly visible conservation activities for the purpose of gaining social esteem. This paper studies the role of conspicuous conservation as an additional means of regulating environmental issues in an extended Uzawa-Lucas model with leisure choice, environmental externality and social status. Particular attention is paid to the long-term impact of conspicuous conservation on environmental quality, production culture, and the overall welfare along the balanced growth path (BGP) in a decentralized economy. Conspicuous conservation is found to aid pollution taxation and always increase environmental quality by providing additional incentives for pollution abatement. It however also increases the dirtiness of the aggregate technology, and encourages the use of the polluting factor. The overall welfare impact is positive when pollution control is absent or weak, but eventually turns negative as pollution taxation becomes increasingly stringent. The numerical example further suggests that strong status comparison is generally undesirable except at zero or extremely low pollution control.
    Keywords: Conspicuous conservation, social status, pollution, economic growth, Environmental Economics and Policy, Institutional and Behavioral Economics, Resource /Energy Economics and Policy, Q50, D62, D91, O41, O44,
    Date: 2015–06–30
  7. By: Sugata Marjit; Punarjit Roychowdhury
    Abstract: In this paper we present a version of the Mitra and Trindade (CJE, 38: 1253-1271, 2005) model to examine how differences in preexisiting levels of inequality between countries may determine the pattern of international trade when individual preferences are non-homothetic. In particular, using a standard 2x2x2 Heckscher-Ohlin framework, we propose a behavioral linkage between asset inequality and trade pattern by endogenizing non-homotheticity in terms of status dependent preferences. We show that for sufficiently high ratios of capital to labor earnings, there exists a critical level of inequality such that specificities of the pattern of trade that emerge between the two countries are contingent upon whether the inequality levels prevailing in the countries are above or below this level. For sufficiently low ratios of capital to labor earnings, however, the trade pattern is independent of the exisiting levels of inequality relative to the critical level. Based on our model, we examine the impact of the resultant trade pattern on the levels of income inequality. Finally, we discuss some interesting international spillover effects of redistributive policies.
    Keywords: Heckscher-Ohlin Model, Income Inequality, Non-homothetic preferences, Social Status, Status good, Trade pattern. JEL Classification: D11, F11, Z13
    Date: 2015
  8. By: Anttiroiko, Ari-Veikko
    Abstract: This paper discusses the conceptualization of network in Manuel Castells’ theory of network society. Castells’ early academic works were built on the structural analysis of capitalism and social movements in response to the contradictions of capitalist society, without any explicit connection to network analysis. Networks gradually appeared in Castells’ works in the late 1980s, when he became interested in the configuration of the relationships between technology, economy, and society. The culmination of this phase was his opus magnum, The Information Age trilogy, which introduced network as a key concept of his macro theory, even though he remained laconic about the concept itself. This is paradoxical, for Castells became possibly the most prominent figure globally in adopting network terminology in macro sociological theory, but at the same time made hardly any empirical, theoretical or methodological contribution to social network analysis or network theory in general. This implies that ‘network’ in Castells’ social theory is not an analytical concept but rather a powerful metaphor that served to capture his idea of the new social morphology of late capitalism.
    Keywords: Manuel Castells, network, network society, The Information Age, social theory, political economy, capitalist society, late capitalism, informational city, social morphology
    JEL: A13 A14 B31 B51 B52 H11 H7 I0 J6 L16 L23 L5 O1 O2 O3 O33 P1 P16
    Date: 2015–07–15
  9. By: Kenneth Hermele (Human Ecology Division, Lund University)
    Abstract: Economists’ attempts to understand the relationship between the real and the financial economy, and the impact of the latter on the former, go back to the origins of economics but they have gained renewed strength with the financial crisis of 2008 and the resulting economic crisis. The relationship real-finance is variously portrayed as being non-important, mutually beneficial, or destructive, real economic activities losing out to pure speculation and wasteful consumption patterns. The various economics’ traditions takes concerning the pro- and cons of the rise of finance capital is discussed, and summarized in a table. In the process, classical and neo-classical, as well as Marxist, Neo-Schumpeterian and Ecological perspectives are discussed (and summarized in the Appendix). Three levels of the economy are investigated: the financial, the real (where production of goods and services take place) and the real-real, where the physical pre-conditions for the other two are located. The conclusion is that the various sectors cannot be understood in isolation from each other, and that some of the recipes for a resumption of healthy balance between finance and the real economy forget to anchor this vision in a clear understanding the limits to growth supplied by Ecological Economics.
    Keywords: Real economy, real-real economy, fictitious capital, productive capital, neutrality of money, veil of money, bubbles, financial euphoria. Correlation Index
    Date: 2015–01–01

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