nep-pke New Economics Papers
on Post Keynesian Economics
Issue of 2015‒08‒19
twelve papers chosen by
Karl Petrick
Western New England University

  1. Social provisioning and financial regulation: An Institutionalist-Minskyian agenda for reform By Faruk Ulgen
  2. "A Nonbehavioral Theory of Saving" By Michalis Nikiforos
  3. Playing the game the others want to play: Keynes' beauty contest revisited By Camille Cornand; Rodolphe Dos Santos Ferreira
  4. High inequality and its impact on the economy By Francesco Saraceno
  5. Inequality as pollution, pollution as inequality By Eloi Laurent
  6. Social Institutions and Gender Inequality in Fragile States: Are they relevant for the Post-MDG Debate? By Boris Branisa; Carolina Cardona
  7. Neoliberalism, ‘Digitization’, and Creativity: the Issue of Applied Ontology By Juniper, James
  8. 2014-16: Piketty in the Netherlands - The first reception By Paul Beer; Wiemer Salverda
  9. Applying Behavioral Economics to the Public Sector By James Alm; Carolyn J. Bourdeaux
  10. Was Thatcherism Another Case of British Exceptionalism? A Provocation By Bernardo Batiz-Lazo; Andrew Edwards
  11. A Review of James Forder’s Macroeconomics and the Phillips Curve Myth By Kevin D. Hoover
  12. Causes and Consequences of Income Inequality: A Global Perspective By Era Dabla-Norris; Kalpana Kochhar; Nujin Suphaphiphat; Frantisek Ricka; Evridiki Tsounta

  1. By: Faruk Ulgen (CREG - Centre de recherche en économie de Grenoble - Grenoble 2 UPMF - Université Pierre Mendès France)
    Abstract: This article seeks to put social provisioning into perspective with regard to the financial instability issue in capitalism. The analysis rests on an institutionalist-Minskyian endogenous instability assumption and maintains that monetary/financial stability is a peculiar public good or specific commons since it concerns the whole society and its viability conditions in time and not only the individuals involved in private financial relations. Consequently, the provision of financial stability becomes essentially a matter of public policy and requires the intervention of public power in order to prevent finance from becoming a public bad. This result relies on the distinction between private "normal" goods and ambivalent/transversal money (and related financial relations). It then points to the necessity of a public organization and tight regulation of finance and financial markets while standard equilibrium models assume that social optimum and stability can be provided by private self-adjustment and market prices mechanisms.
    Date: 2015–01–02
  2. By: Michalis Nikiforos
    Abstract: We present a model where the saving rate of the household sector, especially households at the bottom of the income distribution, becomes the endogenous variable that adjusts in order for full employment to be maintained over time. An increase in income inequality and the current account deficit and a consolidation of the government budget lead to a decrease in the saving rate of the household sector. Such a process is unsustainable because it leads to an increase in the household debt-to-income ratio, and maintaining it depends on some sort of asset bubble. This framework allows us to better understand the factors that led to the Great Recession and the dilemma of a repeat of this kind of unsustainable process or secular stagnation. Sustainable growth requires a decrease in income inequality, an improvement in the external position, and a relaxation of the fiscal stance of the government.
    Keywords: Inequality; Financial Balances; Saving; Secular Stagnation; Sustainability
    JEL: E12 E21 E32 E60
    Date: 2015–07
  3. By: Camille Cornand (GATE Lyon Saint-Étienne - Groupe d'analyse et de théorie économique - CNRS - UCBL - Université Claude Bernard Lyon 1 - UL2 - Université Lumière - Lyon 2 - Université Jean Monnet - Saint-Etienne - PRES Université de Lyon - ENS Lyon - École normale supérieure - Lyon); Rodolphe Dos Santos Ferreira (BETA - Bureau d'économie théorique et appliquée - CNRS - Université Nancy II - Université de Strasbourg)
    Abstract: In Keynes' beauty contest, agents have to choose actions in accordance with an expected fundamental value and with the conventional value expected to be set by the market. In doing so, agents respond to a fundamental and to a coordination motive respectively, the prevalence of either motive being set exogenously. Our contribution is to consider whether agents favor the fundamental or the coordination motive as the result of a strategic choice that generates a strong strategic complementarity of agents' actions. We show that the coordination motive tends to prevail over the fundamental one, which yields a disconnection of activity away from the fundamental. A valuation game and a competition game are provided as illustrations of this general framework. Abstract In Keynes' beauty contest, agents have to choose actions in accordance with an ex-pected fundamental value and with the conventional value expected to be set by the market. In doing so, agents respond to a fundamental and to a coordination motive re-spectively, the prevalence of either motive being set exogenously. Our contribution is to consider whether agents favor the fundamental or the coordination motive as the result of a strategic choice that generates a strong strategic complementarity of agents' actions. We show that the coordination motive tends to prevail over the fundamental one, which yields a disconnection of activity away from the fundamental. A valuation game and a competition game are provided as illustrations of this general framework.
    Date: 2015
  4. By: Francesco Saraceno (OFCE - OFCE - Sciences Po)
    Abstract: This brief argues that increasing inequality had deep macroeconomic consequences as it contributed, in combination with credit institutions, to either stagnating aggregate demand or to increasing public and private debt. Inequality may also contribute, along with supply factors, to the drifting towards secular stagnation. Income distribution would then be one of the major determinants of the increasing global imbalances that made the world economy extremely fragile at the outset of the crisis. The crisis in turn exacerbated inequality, especially in peripheral Eurozone countries. The path towards sustainable future growth passes therefore for a reduction of inequality that, in particular in European countries, needs to be coordinated. Finally, if rent-seeking plays an important role in the past increase of inequality, then active fiscal policies and regulation need to be part of the effort to curb inequality.
    Date: 2014–05
  5. By: Eloi Laurent (OFCE - OFCE - Sciences Po)
    Abstract: Ecological crises born with the Anthropocene have arrived at a paradoxical juncture: as environmental degradations gradually become unbearable, environmental concern seems to become intolerable. One can think of two powerful forces at play behind this striking paradox sidestepping environmental emergency when it is most warranted (...).
    Date: 2014
  6. By: Boris Branisa (Institute for Advanced Development Studies); Carolina Cardona (Institute for Advanced Development Studies)
    Abstract: We focus on an issue that appears particularly relevant for fragile states and which has received little attention: social institutions related to gender inequality, defined as societal practices and legal norms that frame gender roles and the distribution of power between men and women in the family, market, and social and political life. We show empirically that fragile states perform worse than other non-fragile developing countries when considering these social institutions. We suggest that a special set of indicators reflecting social institutions related to gender inequality in both fragile states and non-fragile states should be considered in the post-MDG agenda.
    Keywords: Social institutions, Gender inequality, Developing countries, Fragile States, Millennium Development Goals, Post2015 Development Agenda
    JEL: D63 I39 J16 O1
    Date: 2015–06
  7. By: Juniper, James (The University of Newcastle, Newcastle Business School)
    Abstract: The paper extends Foucault’s analysis of neoliberalism in The Birth of Biopolitics. More specifically, I construct and defend an anti-Husserlian approach to the labour process with the objective of investigating how collectively generated forms of intellectual labour have been appropriated under capitalist relations of production. I also interrogate the way that different notions of (computational) applied ontology influence both the nature of and our very conception of social creativity. What, quite wrongly, has been thought of in Spinoza as pantheism is simply the reduction of the field of God to the universality of the signifier, which produces a serene, exceptional detachment from human desire. In so far as Spinoza says—desire is the essence of man, and in the radical dependence of the universality of the divine attributes, which is possible only through the function of the signifier, in so far as he does this, he obtains that unique position by which the philosopher—and it is no accident that it is a Jew detached from his tradition who embodies it—may be confused with a transcendent love. This position is not tenable for us. Experience shows us that Kant is more true, and I have proved that his theory of consciousness, when he writes of practical reason, is sustained only by giving a specification of the moral law which, looked at more closely, is simply desire in its pure state, that very desire that culminates in sacrifice, strictly speaking, of everything that is the object of love in one’s human tenderness—I would say, not only in the rejection of the pathological object, but also in its sacrifice and murder. That is why I wrote Kant avec Sade. (Lacan, 1979: 275-6) But it is like the story of the Resistance fighters who, wanting to destroy a pylon, balanced the plastic charges so well that the pylon blew up and fell back into its hole. From the Symbolic to the Imaginary, from castration to Oedipus, and from the despotic age to capitalism, inversely, there is the progress leading to the withdrawal of the overseeing and overcoding object from on high, which gives way to a social field of immanence where the decoded flows produce images and level them down. Whence the two aspects of the signifier: a barred transcendent signifier taken in a maximum that distributes lack, and an immanent system of relations between minimal elements that come to fill the uncovered field (somewhat similar in traditional terms to the way one goes from Parmenidean Being to the atoms of Democritus). (Deleuze and Guattari,1987: 290-1). Marx was vexed by the bourgeois character of the American working class. But it turned out that the prosperous Americans were merely showing the way for the British and the French and the Japanese. The universal class into which we are merging is not the revolutionary proletariat but the innovative bourgeoisie. (McClosky, D. 2009)
    Keywords: Neoliberalism; Applied ontology; Digitization; Creativity; Foucault
    JEL: B24 B51 E11 L14 L86 O34 P11 P14 P16 P26 Z11 Z18
    Date: 2015
  8. By: Paul Beer (AIAS, Universiteit van Amsterdam); Wiemer Salverda (AIAS, Universiteit van Amsterdam)
    Abstract: The two papers brought together here are revised versions of: * Paul de Beer, _Wat kunnen sociaaldemocraten van Piketty leren?_ * Wiemer Salverda, _Ongelijkheid in Nederland_ S&D Volume 71 Number 3 June 2014 — pages 31-38 and 49-60 respectively. h2. What can we learn from Piketty? h3. Paul de Beer _Piketty’s book tells a compelling and ‘grand’ story. The practical lesson is to aim for a more balanced distribution of wealth without impeding growth: more home ownership without debt, less tax deductions for pension premiums paid by higher earners, more profit sharing for employees._ Capital in the Twenty-First Century by French economist Thomas Piketty has created a shockwave among economists. A few have already welcomed the book as the most important economic work since Marx’s Das Kapital. It is not just the title that has prompted this response, it is also the breadth and depth of Piketty’s analysis. In an age in which ‘big stories’ are supposed to have been dispensed with because today’s world is too complex to be expressed solely in simple formulas, this is exactly what Piketty has done. The essence of his book can be summarised in three elementary formulas: α = r x β, β = s/g and r > g. The latter inequality in particular has captured the imagination of the economist community in the past year, as if it were the formula for the holy grail. The Huffington Post even compared it with Einstein’s E = mc2. The formula has already appeared on hipsters’ T-shirts! Reducing the analysis of modern capitalism to three simple formulas that can be explained fairly easily to non-economists would seem to be an impossible task. Many economists who sang the praises over Piketty’s book seem to be desperately wondering why they had not hit upon the idea themselves, as it is not as if the formulas contain anything that is really new. h2. Wealth/income inequality – the significance of Piketty’s views for the Netherlands h3. Wiemer Salverda *Summary* It is not possible yet to draw a comprehensive comparison of wealth inequality in the Netherlands with the results for other countries found in Piketty’s Capital in the Twenty-first Century survey, if only because consistent Dutch figures on wealth go back no further than the 1990s. By contrast, it is possible to study the ratio between national wealth and income in much the same way as Piketty has done, but from the mid-1990s on only. The results show that from an international perspective the wealth/income ratio in the Netherlands is considerable, and has been growing. Further research is required, first, to improve this comparison and extend it to earlier years and even centuries as in Piketty, and, second, to link that to the distribution of wealth over individuals and households. The discussion on Capital in the Twenty-First Century by Thomas Piketty raises three important questions about the significance of his research for the Netherlands: What is the wealth-income ratio like; is it increasing here too? How concentrated among individuals or households is the possession of wealth, and is this concentration increasing or decreasing? How important is income from wealth in the distribution of incomes? For each of these questions, it is also relevant to know its development and level relative to other countries. I will attempt in this contribution to find a first answer to these questions, using Dutch income and wealth statistics, international macro-economic statistics (national accounts) and of course the top-income shares, which laid the foundation for Piketty’s theory about the role of wealth, economic growth and inequality. One hundred years ago, top incomes in the Netherlands accounted for an extremely high proportion of overall income, possibly due to colonialism, opportunistic profiteering from the First World War, or perhaps because that is simply how things were. In 1916, 53% of all income in the Netherlands, as in Sweden, went to the Top-10% and 29% to the Top-1%. That was considerably more than in Germany, the United Kingdom, or the United States at the time. As was the case elsewhere, the top shares showed a marked decline in the Netherlands, especially after 1945, until reaching their lowest points of 27.5% and 6.1% respectively in 1975. After that, the top-income shares diverged considerably from one country to another, as we shall shortly see. Because minor differences in definitions can have significant effects when it comes to income and wealth - the devil really is in the detail here - I will try to be as accurate as I can in what I have to say.
    Date: 2014–10
  9. By: James Alm (Department of Economics, Tulane University); Carolyn J. Bourdeaux (Department of Public Management and Policy, Andrew Young School of Policy Studies, Georgia State University)
    Abstract: "Behavioral economics", or the application of methods and evidence from other social sciences to economics, has increased greatly in significance in the last two decades. In this paper we discuss the basic elements of behavioral economics. We then assess several applications of behavioral economics to the analysis of the public sector, including specific applications to public economics and, importantly, to the closely related area of public budgeting. We conclude with suggestions on -- and predictions of -- topics in which future applications should prove useful.
    Keywords: behavioral economics, public economics, public budgeting
    JEL: H0 H3 H61 H83
    Date: 2014–04
  10. By: Bernardo Batiz-Lazo (Bangor University); Andrew Edwards (Bangor University)
    Abstract: This paper splits into two main ideas. First, provide a broad overview of the history of management thought in the UK, from its early manifestation in the 19th century to the establishment of the first business schools in London and Manchester in 1965. The second part of the paper deals with developments in the 1980s. Anecdotal evidence suggests that during the governments of Margaret Thatcher there was a radical shift in British management practice and thinking. Some of these changes ran in parallel to global trends in capitalism (and specifically the advent of neo-liberalism). Others were idiosyncratic to the UK. But there is no systematic evidence to clarify whether these changes resulted from deliberate action by the Thatcher government and its supporters in British industry or whether Mrs Thatcher became a rallying point for an episode of globalization. In short, was the era of the ÒWashington ConsensusÓ (Williamson, 1989) in Britain an episode of exceptionalism? Rather than offering empirical evidence to solve this question, the second and last part of the chapter puts forward a research agenda to explore changes in British management at the end of the 20th century.
    Keywords: History of Management Thought, Neo-liberalism, globalization, Thatcher, UK
    JEL: N4 N8
    Date: 2015–07
  11. By: Kevin D. Hoover
    Abstract: A review of James Forder’s important history of the Phillips Curve.
    Keywords: Phillips curve, A.W. Phillips, Milton Friedman, inflation, unemployment
    JEL: B22 B30 E24 E31
    Date: 2015
  12. By: Era Dabla-Norris; Kalpana Kochhar; Nujin Suphaphiphat; Frantisek Ricka; Evridiki Tsounta
    Abstract: This paper analyzes the extent of income inequality from a global perspective, its drivers, and what to do about it. The drivers of inequality vary widely amongst countries, with some common drivers being the skill premium associated with technical change and globalization, weakening protection for labor, and lack of financial inclusion in developing countries. We find that increasing the income share of the poor and the middle class actually increases growth while a rising income share of the top 20 percent results in lower growth—that is, when the rich get richer, benefits do not trickle down. This suggests that policies need to be country specific but should focus on raising the income share of the poor, and ensuring there is no hollowing out of the middle class. To tackle inequality, financial inclusion is imperative in emerging and developing countries while in advanced economies, policies should focus on raising human capital and skills and making tax systems more progressive.
    Keywords: Cross-country analysis;Inequality, Gini coefficient, income, income inequality, middle class, income share, Equity, Justice, and Other Normative Criteria and Measurement, Personal Income and Wealth Distribution,
    Date: 2015–06–15

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