nep-pke New Economics Papers
on Post Keynesian Economics
Issue of 2015‒08‒07
seven papers chosen by
Karl Petrick
Western New England University

  1. "Marx's Theory of Money and 21st-century Macrodynamics" By Tai Young-Taft
  2. Won’t Get Fooled Again – Or Will We? Monetary Policy, Model Uncertainty, and ‘Policy Model Complacency’ By Mark Setterfield
  3. What's it all about? What does good economic management mean in Australia By Quiggin, John; Junankar, Raja
  4. Macroeconomic Policy after the Global Financial Crisis By Quiggin, John
  5. Sustainable Consumption and the Attitude-Behaviour-Gap Phenomenon - Causes and Measurements towards a Sustainable Development By Terlau, Wiltrud; Hirsch, Darya
  6. Do Economic Models Have to be Realistic?: A Methodological Criticism of Rousseau's Discourse on Inequality By Makovi, Michael
  7. Asset Price Keynesianism, Regional Imbalances and the Irish and Spanish Housing Booms and Busts By Michelle Norris; Michael Byrne

  1. By: Tai Young-Taft
    Abstract: Marx's theory of money is critiqued relative to the advent of fiat and electronic currencies and the development of financial markets. Specific topics of concern include (1) today's identity of the money commodity, (2) possible heterogeneity of the money commodity, (3) the categories of land and rent as they pertain to the financial economy, (4) valuation of derivative securities, and (5) strategies for modeling, predicting, and controlling production and exchange of the money commodity and their interface with the real economy.
    Keywords: Macroeconomics; Marx's Theory of Money; Monetary Theory; Transformation Problem
    JEL: B51 E11 G13
    Date: 2015–07
  2. By: Mark Setterfield (Department of Economics, New School for Social Research)
    Abstract: The question addressed in this paper is: can monetary policy succeed in stabilizing the economy even when the policy model on which it is predicated is mis-specified? Using variants of the 3-equation New Consensus Macroeconomics model, it is shown that this question can be answered in the affirmative. The purpose of the paper is not to encourage indifference towards model uncertainty, however, but rather to warn against the perils of “policy model complacency”. This arises if the success of policy is misinterpreted as successful understanding of the workings of the economy, which makes the policy maker vulnerable to surprises: events with systematic origins in the “true” model of the economy that are not anticipated by the (mis-specified) policy model. To safeguard against this problem, policy makers should always entertain eclectic views of the workings of the economy – a task that is easily accomplished by paying more attention to “outside the mainstream” macroeconomic thinking that frequently makes predictions that are at odds with those of the dominant policy model.
    Keywords: Monetary policy, central banking, model uncertainty, Lucas critique, Tinbergen principle
    JEL: E12 E13 E52 E58
    Date: 2015–07
  3. By: Quiggin, John; Junankar, Raja
    Abstract: This paper considers the question of what is meant by good economic management. In addressing this question it considers both the long term perspective and the international perspective. Australia's post GFC experience is contrasted favourably with a broad range of other countries, especially countries that cut government spending as their economies slowed. As Figure 1 shows Australia's economic performance as measured by GDP has been superior to the rest of the developed world, especially when compared to countries that pursued cuts in government spending as their economies slowed. The paper also considers the long term economic management of the major parties through the prism of the broad economic theories to which they have subscribed over time. It argues that, with occasional deviations, Labor’s macroeconomic policy stance has been Keynesian ever since the Working Nation package introduced in the aftermath of the 1990-91 recession.
    Keywords: Australia's macroeconomic policy, Australian government, Classical vs Keynesian, economic management, Political Economy, Public Economics, E6, H5, H11,
    Date: 2013–11
  4. By: Quiggin, John
    Abstract: This chapter describes the ideology of market liberalism, the macroeconomic policies and institutions it produced, and the failure of those policies and institutions that produced the GFC and the subsequent deep recession in most developed countries. Although it is impossible to prescribe a fully-developed alternative policy framework at this point, new directions in macroeconomic policy are sketched out, including countercyclical fiscal policy, the need for an increase in public sector revenue and expenditure, and new approaches to monetary policy and financial regulation.
    Keywords: Global financial crisis, market liberalism, Australia, monetary policy., Political Economy, Public Economics, G28, E6,
    Date: 2013–09
  5. By: Terlau, Wiltrud; Hirsch, Darya
    Abstract: Sustainable development needs sustainable production and sustainable consumption. During the last decades the encouragement of sustainable production has been the focus of research and policy makers under the implicit assumption that the observable increasing ‘green’ values of consumers would also entail a growing sustainable consumption. However, it has been found that the actual purchasing behaviour often deviates from ‘green’ attitudes. This phenomenon is called the attitude-behaviour gap. It is influenced by individual, social and situational factors. The main purchasing barriers for sustainable (organic) food are price, lack of immediate availability, sensory criteria, lack or overload of information as well as the low-involvement feature of food products in conjunction with well-established consumption routines, lack of transparency and trust towards labels and certifications. The last three barriers are mainly of a psychological nature. Especially the low-involvement feature of food products due to daily purchase routines and relatively low prices tends to result in fast, automatic and subconscious decisions based on a so-called human mental system 1, derived from Daniel Kahneman’s2 model in behavioural psychology. In contrast, the human mental system 2 is especially important for the transformations of individual behaviour towards a more sustainable consumption. Decisions based on the human mental system 2 are slow, logical, rational, conscious and arduous. This so-called dual action model also influences the reliability of responses in consumer surveys. It seems that the consumer behaviour is the most unstable and unpredictable part of the entire supply chain and requires special attention. Concrete measures to influence consumer behaviour towards sustainable consumption are highly complex. This paper presents a review of interdisciplinary research literature on the complexity of sustainable food consumption and an empirical analysis of selected countries worldwide. In a ‘best practice’ case study, it analyses the organic food sector in Denmark, especially in the 80ies and 90ies, where the market share rose to a leading position worldwide. The Danish example demonstrates that common efforts and a shared responsibility of consumers, business, interdisciplinary researchers, mass media and policy are needed. It takes pioneers of change who succeed in assembling a ‘critical mass’ willing to increase its ‘sustainable’ behaviour. Considering the strong psychological barriers of consumers and the continuing low market share of organic food, proactive policy measures would be conducive to foster the personal responsibility of the consumers and offer incentives towards a sustainable production. Also, further self-obligations of companies (Corporate Social Responsibility – CSR) as well as more transparency and simplification of reliable labels and certifications are needed to encourage the process towards a sustainable development.
    Keywords: Sustainable development, responsible consumer, homo oeconomicus, behavioural economics, interdisciplinarity, consumer decision models, attitude-behaviour-gap, organic food, asymmetric information, low-involvement products, consumer behaviour, ethical values, dual action model: mental system 1 and 2 (Kahneman), cognitive bias, cognitive dissonances, Danish Association of Organic Farming, nudges, change agents, proactive state, corporate social responsibility (CSR), Agribusiness,
    Date: 2015–05
  6. By: Makovi, Michael
    Abstract: In the Discourse on the Origin and Foundations of Inequality, Jean-Jacques Rousseau (1754) sketches a hypothetical illegitimate social contract to explain the origin of socioeconomic inequality. Rousseau himself notes that his illegitimate social contract is not intended to be historically accurate. But this casts doubt on the methodological validity of his argument. According to Ronald Coase's (1981) criticism of Milton Friedman (1953) statements on the methodology of positive economics, theoretical models, to be valid, must possess a certain degree of realism which Rousseau's does not. This same criticism applies to Carole Pateman's adaptation of Rousseau in her Sexual Contract (1988).
    Keywords: Rousseau, Coase, Pateman, Sexual Contract, methodology, inequality
    JEL: B31 B41 I3
    Date: 2015–07
  7. By: Michelle Norris (School of Social Policy, Social Work and Social Justice, University College Dublin); Michael Byrne (National Institute of Regional and Spatial Analysis, Maynooth University,)
    Abstract: Ireland and Spain were amongst the European countries which experienced the most severe economic and fiscal problems following the global financial crisis. The proximate causes of these economic crashes have been explored in-depth by researchers and governments, who have highlighted strong parallels between the policy, regulatory and economic factors which underpinned them. In both countries residential property price inflation increased dramatically from the late 1990s driven by increased availability of cheap mortgages but unusually was accompanied by marked growth in new house building. Thus, following the international credit crunch in 2008, a simultaneous contraction in both mortgage credit and house building occurred in Ireland and Spain, which precipitated a marked knock-on decline in the employment, tax revenue and consumer spending which the housing boom had underpinned. This paper argues that the Irish and Spanish housing booms and busts are similar not just in terms of scale and proximate causes but also in terms of fundamental causes. In both countries the housing boom/bust cycle was underpinned by a suite of macroeconomic policies which aimed to use asset price growth to underpin rising demand and economic growth, or in other words achieve what Robert Brenner (2006) terms ‘asset-price Keynesianism’. This approach was particularly attractive to the Irish and Spanish governments because it enabled them to resolve historical legacies of industrial underdevelopment and regional imbalances by generating construction jobs in underdeveloped areas. As a result of the latter, local/regional governments in both countries played a key role in facilitating the implementation of this policy.
    Keywords: global financial crisis; economic crash; housing boom and bust; macroeconomic policies; asset price growth; industrial underdevelopment; ‘asset-price Keynesianism’
    Date: 2015–07–20

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