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on Post Keynesian Economics |
| By: | Dean Baker |
| Abstract: | In the years since 1980, there has been a well-documented upward redistribution of income. While there are some differences by methodology and the precise years chosen, the top one percent of households have seen their income share roughly double from 10 percent in 1980 to 20 percent in the second decade of the 21st century. As a result of this upward redistribution, most workers have seen little improvement in living standards from the productivity gains over this period. This paper argues that the bulk of this upward redistribution comes from the growth of rents in the economy in four major areas: patent and copyright protection, the financial sector, the pay of CEOs and other top executives, and protectionist measures that have boosted the pay of doctors and other highly educated professionals. The argument on rents is important because, if correct, it means that there is nothing intrinsic to capitalism that led to this rapid rise in inequality, as for example argued by Thomas Piketty. |
| Keywords: | rents, patents, wall street, financial transactions tax, intellectual property, CEO pay |
| JEL: | P P1 G G3 |
| Date: | 2015–12 |
| URL: | http://d.repec.org/n?u=RePEc:epo:papers:2015-26&r=pke |
| By: | Riccarco Pariboni |
| Abstract: | Within Post-Keynesian macroeconomic theory, the contribution by Marglin and Bhaduri (Marglin and Bhaduri, 1990; Bhaduri and Marglin, 1990) on the relationship between income distribution and growth has progressively asserted itself as a benchmark model, a reference point that has originated and still gives rise to plenty of theoretical and empirical works. Given this popularity, in the related literature it is often claimed that the only open question left is an empirical one - to assess econometrically whether a particular economy is wage or profit-led. In this essay, I will argue that some theoretical issues, related to this model and to the literature inspired by it, can nonetheless be raised. In particular, the treatment of investment appears to be the least convincing aspect of the approach a là Marglin-Bhaduri. More specifically, it seems possible to raise some doubts about an independent long-run influence of the profit rate or of the profit share on investment, influence that is not in general justified or explained in detail by this literature and that to some extent is simply taken for granted. It will be shown that, if the Marglin-Bhaduri model is integrated with an explicit consideration of the autonomous components of demand, income distribution does not exert any permanent influence on the rate of growth of the economy and on the rate of accumulation. Matching this result with the usual assumption, made in Post-Keynesian models of growth and distribution, that capacity utilization is the adjusting variable in equilibrating investment and savings leads to paradoxical results that question the plausibility of an accumulation function like the one used in the Marglin-Bhaduri model. |
| Keywords: | Income distribution, Investment function, Growth, Marglin-Bhaduri |
| JEL: | B51 E11 E12 O41 |
| Date: | 2015–08 |
| URL: | http://d.repec.org/n?u=RePEc:usi:wpaper:715&r=pke |
| By: | Erkan Gurpinar; Altug Yalcintas |
| Abstract: | In this article, we explain in terms of evolutionary ontology whether (and to what extent) economics has become an evolutionary science since Veblen published his seminal paper in 1898, “Why is Economics Not an Evolutionary Science?” We argue that researchers’ habitual and ceremonial behavior as well as ideologies and non-intellectual beliefs cause inertia in the research environment. Inertia caused by the research environment is so significant that economics does not “progress” towards a state advocated by Veblen, where economists revisit their thoughts and change their minds by following the (evolutionary) “drift.” In essence, we stress the evolutionary ontological reasons why economists do not abandon theories when the dominant paradigm in economics is disputed. The “drift” which Veblen thought would turn economics into an evolutionary science has now become an evolutionary process itself, in which economists are unable to displace non-evolutionary preconceptions in economics. |
| Keywords: | Evolutionary ontology, Intellectual path dependence, Intellectual inertia, Epistemic costs, Habits of thought |
| JEL: | B15 B41 B52 |
| Date: | 2015–09 |
| URL: | http://d.repec.org/n?u=RePEc:hpo:wpaper:2_2015&r=pke |
| By: | Ernesto Screpanti |
| Abstract: | Marx develops two different theories of the employment relationship: in one it results from a contract for the sale of a commodity, in the other from a contract establishing a social relationship. According to the first, the worker sells a commodity, which is conceived as a flow of abstract labour springing from a stock of labour power. This commodity seems to be a ‘natural’ abstraction with the properties of a productive force. Exploitation occurs when the value of labour power is lower than the value-creating capacity of abstract labour. According to the second theory, the employment relationship is based on a transaction establishing the conditions for the worker’s subordination to the capitalist and the subsumption of his productive capacity under capital. This is an illuminating anticipation of the modern theory which considers the employment contract as an institution generating an authority relationship. It is not liable to criticisms of essentialism, hyposta-tization or naturalism and is able to sustain a consistent and realistic theory of exploitation, which explains it as being based on the power relationship the worker undergoes in the production pro-cess. Now abstract labour is seen not as a productive force, but as a social relationship, and is con-sidered an abstraction that is real in a socio-historical sense rather than in a natural sense |
| JEL: | B14 B24 J41 |
| Date: | 2015–11 |
| URL: | http://d.repec.org/n?u=RePEc:usi:wpaper:720&r=pke |
| By: | Tsoulfidis, Lefteris |
| Abstract: | This paper argues that Keynes’s analysis of the marginal efficiency of capital is consistent with the principle of effective demand and is, in this sense, characteristically different from the related classical or neoclassical conceptualisations. Furthermore, the notion of the marginal efficiency of capital is used not only as an explanation of the short term fluctuations in the level of economic activity but also as an interpretation of more serious long term fluctuations such as that of the great depression. Finally, some of Keynes’s economic policy proposals are critically evaluated. |
| Keywords: | Marginal efficiency of capital, effective demand, great depression, interest rate, overinvestment |
| JEL: | B10 B12 B14 B51 E32 E4 E6 E65 N20 |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:68539&r=pke |
| By: | David Rosnick; Mark Weisbrot |
| Abstract: | This paper examines Spain’s recent economic history, both before and after its recession, with a focus on employment, contributions to GDP growth, and the current account balance. The paper notes that Spain has pursued a set of economic policies since 2011 based on internal currency devaluation, labor market reform, fiscal consolidation, and structural and deregulatory reforms aimed at boosting growth through increased efficiency. It concludes that the economic recovery that began in the second half of 2013 is not the result of austerity policies, and is unlikely to rescue Spain from mass unemployment in the foreseeable future. |
| Keywords: | austerity, Spain, unemployment, euro, European Central Bank, International Monetary Fund, current account balance, labor force participation, construction, eurozone, recession |
| JEL: | E E2 E24 E5 E58 F N N9 N94 |
| Date: | 2015–12 |
| URL: | http://d.repec.org/n?u=RePEc:epo:papers:2015-27&r=pke |
| By: | Mckenzie,David J.; Paffhausen,Anna Luisa |
| Abstract: | This paper uses a combination of survey questions to instructors and data collected from course syllabi and examinations to examine how the subject of development economics is taught at the undergraduate and masters levels in developing countries, and benchmark this against undergraduate classes in the United States. The study finds that there is considerable heterogeneity in what is considered development economics: there is a narrow core of only a small set of topics such as growth theory, poverty and inequality, human capital, and institutions taught in at least half the classes, with substantial variation in other topics covered. In developing countries, development economics is taught largely as a theoretical subject coupled with case studies, with few courses emphasizing data or empirical methods and findings. This approach contrasts with the approach taken in leading U.S. economics departments and with the evolution of development economics research. The analysis finds that country income per capita, the role of the state in the economy, the education level in the country, and the involvement of the instructor in research are associated with how close a course is to the frontier. The results suggest there are important gaps in how development economics is taught. |
| Keywords: | Pro-Poor Growth,Economic Theory&Research,Labor Policies,Tertiary Education,Effective Schools and Teachers |
| Date: | 2015–12–21 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:7521&r=pke |
| By: | Peter Schmidt (University of Potsdam, August-Bebel-Strasse 89, 14482 Potsdam, Germany) |
| Abstract: | This paper reconsiders the explanation of economic policy from an evolutionary economics perspective. It contrasts the neoclassical equilibrium notions of market and government failure with the dominant evolutionary neo-Schumpeterian and Austrian Hayekian perceptions. Based on this comparison, the paper criticises the fact that neoclassical failure reasoning still prevails in non equilibrium evolutionary economics when economic policy issues are examined. This is more than surprising, since proponents of evolutionary economics usually view their approach as incompatible with its neoclassical counterpart. In addition, it is shown that this “fallacy of failure thinking†even finds its continuation in the alternative concept of “system failure†with which some evolutionary economists try to explain and legitimate policy interventions in local, regional or national innovation systems. The paper argues that in order to prevent the otherwise fruitful and more realistic evolutionary approach from undermining its own criticism of neoclassical economics and to create a consistent as well as objective evolutionary policy framework, it is necessary to eliminate the equilibrium spirit. Finally, the paper delivers an alternative evolutionary explanation of economic policy which is able to overcome the theory-immanent contradiction of the hitherto evolutionary view on this subject. |
| Keywords: | market failure, system failure, economic policy, policy advice, evolutionary economics, non equilibrium economics |
| JEL: | A11 B41 B52 H00 H53 O30 |
| Date: | 2015–12–16 |
| URL: | http://d.repec.org/n?u=RePEc:esi:evopap:2015-04&r=pke |
| By: | Carlo Zappia |
| Abstract: | Even though Daniel Ellsberg’s 1961 article “Risk, ambiguity and the Savage axioms” is well-known and increasingly quoted in current decision theory, introducing the counterexample to Bayesian decision-making that got the normative value of Savage’s theory into trouble, its philosophical background remains totally unknown. This paper examines Ellsberg’s motivations in presenting his critique first to his fellow decision theorists at Harvard and RAND in the late 1950s and it goes into his reasons for giving a philosophical justification and defence of the paradox in his doctoral thesis of 1962. By concentrating mainly on Ellsberg’s all-encompassing analysis of decision-making in his thesis, the paper shows that a number of relevant issues connected to the paradox can be thrown light on. These range from its historical background to the way to test the normative value of decision theory through experiments, and a taxonomy of decision rules based on alternative probabilistic set-ups. Crucially, the paper argues that Ellsberg subscribed to a generalised version of the Bayesian approach, one that informs the developments of the multiple prior approach in current decision theory, but finds its origins in Keynes’s Treatise on Probability |
| Keywords: | Ambiguity, Ellsberg Paradox, decision theory |
| JEL: | B21 D21 |
| Date: | 2015–09 |
| URL: | http://d.repec.org/n?u=RePEc:usi:wpaper:716&r=pke |
| By: | Roos, Michael W. M. |
| Abstract: | Macroeconomics must take radical uncertainty into account, if it aims at contributing to the solution of serious real-world problems such as climate change. Allowing for radical uncertainty must happen at two levels: the level of modeling and the level of the scientifi c discipline. I argue that the complexity approach which sees the economy as a complex adaptive system is better suited to deal with radical uncertainty than the mainstream DSGE approach. I review a number of agent-based models that are promising starting points to incorporate radical uncertainty into macroeconomics. Discussing the examples of the fi nancial crisis and climate change, I establish why methodological monism is dangerous and why macroeconomics needs more pluralism and openness towards other scientifi c approaches. Radical uncertainty and the complexity approach have important implications for macroeconomic policy and the advice that economists can give to policy makers. Under radical uncertainty it does not make sense to look for optimal policies. |
| Abstract: | Die Makroökonomik muss radikale Unsicherheit berücksichtigen, wenn sie zur Lösung ernster realer Probleme wie dem Klimawandel beitragen will. Die Berücksichtigung von radikaler Unsicherheit muss auf zwei Ebenen erfolgen: der Modellierungsebene und der Ebene der wissenschaftlichen Disziplin. Ich argumentiere in diesem Papier, dass der Komplexitätsansatz, der die Wirtschaft als komplexes adaptives System versteht, besser dafür geeignet ist, mit radikaler Unsicherheit umzugehen, als der DSGE-Ansatz der Mainstream-Makroökonomik. Es folgt ein Überblick über eine Reihe von agentenbasierten Modellen, die ein vielversprechender Startpunkt sind, um radikale Unsicherheit in die Makroökonomik einzubeziehen. Durch eine Diskussion der Finanzkrise und des Klimawandels zeige ich, warum methodologischer Monismus gefährlich ist und weshalb die Makroökonomik mehr Pluralismus und Offenheit gegenüber anderen wissenschaftlichen Ansätzen benötigt. Radikale Unsicherheit und der Komplexitätsansatz haben wichtige Implikationen für die makroökonomische Politik und die Empfehlungen, die Ökonomen politischen Entscheidungsträgern geben können. Unter radikaler Unsicherheit ist es nicht sinnvoll, nach optimalen Politiken zu suchen. |
| Keywords: | complexity economics,agent-based modeling,complex adaptive systems,non-linear dynamics,climate change,pluralism |
| JEL: | B41 B52 B59 C63 E12 E60 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:rwirep:592&r=pke |
| By: | Karla Hoff; Joseph E. Stiglitz |
| Abstract: | This paper is an attempt to broaden the standard economic discourse by importing insights into human behavior not just from psychology, but also from sociology and anthropology. Whereas the concept of the decision-maker is the rational actor in standard economics and, in early work in behavioral economics, the quasi-rational actor influenced by the context of the moment of decision-making, in some recent work in behavioral economics the decision-maker could be called the enculturated actor. This actor's preferences and cognition are subject to two deep social influences: (a) the social contexts to which he has become exposed and, especially accustomed; and (b) the cultural mental models—including categories, identities, narratives, and worldviews—that he uses to process information. We trace how these factors shape individual behavior through the endogenous determination of both preferences and the lenses through which individuals see the world—their perception, categorization, and interpretation of situations. We offer a tentative taxonomy of the social determinants of behavior and describe results of controlled and natural experiments that only a broader view of the social determinants of behavior can plausibly explain. The perspective suggests new tools to promote well-being and economic development. |
| JEL: | A12 D00 D01 D03 D20 D50 Z13 |
| Date: | 2015–12 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:21823&r=pke |
| By: | Maria Cristina Marcuzzo; Giulia Zacchia |
| Abstract: | This paper presents a quantitative investigation into the history of economic thought. Building on previous work (Marcuzzo 2008, 2012), we propose an empirical study in with the aim of describing the dynamics of changes in HET in recent years, detecting three trends: 1) a sort of ‘stepping down from the shoulders of giants’, namely a move towards studies of ‘minor’ figures and/or economists from a more recent past; 2) the blossoming of archival research into unpublished work and correspondence; 3) less theory-laden investigations, connecting intellectual circles, linking characters and events. Using data from Econlit we show the evolution of HET journals and articles for two sub-periods: 1955-2013 and 1993-2013; for the latter, by devising proxies which are amenable to quantitative assessment, we demonstrate that there is some evidence to support these claims. |
| Keywords: | History of economic thought; Bibliometrics; Economics journals; History of economics; Quantitative assessment |
| JEL: | B40 B20 A14 |
| Date: | 2015–12 |
| URL: | http://d.repec.org/n?u=RePEc:hpo:wpaper:4_2015&r=pke |