nep-pke New Economics Papers
on Post Keynesian Economics
Issue of 2016‒03‒06
eleven papers chosen by
Karl Petrick
Western New England University

  1. Frederic S. Lee and His Fight for the Future of Heterodox Economics By Jo, Tae-Hee
  3. Collective Household Economics: Why borrowers rather than banks should have been rescued! By De Koning, Kees
  4. Monopoly Capital and Capitalist Inefficiency By Lambert, Thomas; Kwon, Ed
  5. Income Inequality and the Cost of Recessions By Mostafa Shahee; Glenn P. Jenkins
  6. Clower's about-face regarding the 'Keynesian Revolution' By Plassard, Romain
  7. The Postulate of the Three Regimes of Economic Growth Contradicted by Data By Ron W Nielsen
  8. Bread and Bullets By Akerlof, George A.; Snower, Dennis J.
  9. Fact and Fantasy in Soviet Records: The Documentation of Soviet Party and Secret Police Investigations as Historical Evidence By Harrison, Mark
  10. DOES ORGANIC WINE TASTE BETTER? AN ANALYSIS OF EXPERTS’ RATINGS By Delmas, Magali A.; Olivier, Gergaud; Lim, Jinghui
  11. " Inspiration Economy " : A New Journal By Faïz Gallouj

  1. By: Jo, Tae-Hee
    Abstract: Frederic S. Lee (1949-2014) was a dedicated captain of the heterodox economics movement over the past thirty years. In his unfaltering fight for the future of heterodox economics, Lee contributed to both the development of heterodox microeconomic theory and the establishment of a global community of heterodox economists. This short tribute delineates Lee’s unique and important contribution that should be remembered and renewed in order to reproduce heterodox economics.
    Keywords: Frederic S. Lee, Heterodox Economics, Heterodox Microeconomics
    JEL: B21 B31 B50
    Date: 2016–01–12
  2. By: Marion Dieudonné (LEDA-SDFi - LEDA-SDFi - Université Paris IX - Paris Dauphine, PSL - Université Paris-Dauphine)
    Abstract: Thorstein Veblen published an important book in 1904, The Theory of Business Enterprise, in which he focused on the financial theory of the business enterprise. Although this book was an early contribution to corporate finance, it is little-known compared with Absentee Ownership, published in 1923. From the perspective of his institutionalist tradition, Veblen observes and describes the transition of business enterprise to corporation finance. We can identify a trinity: credit, shares and goodwill. For Veblen, this trinity refers to predation, oligarchic power and goodwill-seeking, which are the guiding principles of the new era of corporate governance. Our aim is to bring to the light the links established by Veblen between credit, shares and goodwill that seem too little explored in the literature. According to Veblen, credit, shares and goodwill form a system which lay at the heart of American business in the early 20th century. Through his work The Theory of Business Enterprise, Veblen gives us an early and significant U.S analysis of the two-sided concept of goodwill. The book was one of the first institutionalist studies of the firm, opening the way for many other works on behavior within and between companies. In order to highlight this, we propose a literature review allowing a comprehensive analysis of the evolution of the concept of goodwill, its definition, valorization, and ambiguities. This overall perspective is not made by the literature.
    Keywords: earning capacity, credit,common shares and preferred shares, corporate finance, goodwill, insiders and outsiders, Veblen
    Date: 2016–01–29
  3. By: De Koning, Kees
    Abstract: In a series of lectures Dr. Ben S. Bernanke , the former Chairman of the Federal Reserve, discussed the two main responsibilities of central banks-financial stability and economic stability. Financial stability is achieved by central banks standing ready to act as lenders of last resort by providing short-term liquidity to financial institutions, replacing lost funding. For economic stability, the principal tool is monetary policy; in normal times that involves adjusting short-term interest rates. Dr. Bernanke admits that when the U.S. financial crisis occurred in 2007-2008, no government entity was in overall control of the measures that needed to be taken to counteract the crisis. This was seen as a managerial shortcoming. There were various other factors at play, which made it difficult for governments to deal with and contain the crisis. The demand for new homes seemed to be out of touch with reality. The shift in borrowing patterns for new homes was taken for granted rather than being scrutinized. The freedom to introduce poor quality mortgage products was left unchallenged. The widespread conversion of long-term mortgage debt into daily liquidity products through securitization was also left to market forces. However what resulted in the financial crisis being unduly prolonged and at much greater expense was that, in sharp contrast to the focus on support for lenders, no serious consideration was given to help the legions of mortgage borrowers who found themselves in trouble. Financial stability won over economic stability; put simply, there was no plan ready to be implemented to assist the 21.3 million households who were faced with foreclosure proceedings during the period 2006-2013. There was also no plan for the homeowners of the 5.8 million homes that were repossessed. Financial stability measures were not for the short term either. The balance sheet of the Federal Reserve as at 7th January 2016 still shows a holding of $1.747 trillion in mortgage-backed securities and $2.461 trillion in U.S. Treasury securities; several years after they were acquired. For the mortgage sector this still represents 18.5% of all outstanding mortgages as at same date. In September 2007, a few members of Congress pushed for direct federal aid to help homeowners in trouble, but most members did not want to spend substantial taxpayers funds on the problem. With the benefit of hindsight, the latter view may be regarded as a serious error of judgment. As this paper will show, the total costs of helping homeowners in trouble would have been $1.173 trillion over the period 2007-2013, which is less than the $1.747 trillion in mortgage bonds still on the books of the Fed. More importantly the U.S. government debt increase would have much lower than the nearly $9 trillion over the period 2007-2014. The only choice on the table should not be between economic growth or inflation, but between individual households’ income stability or instability. Income instability is a major cause of recessions.
    Keywords: financial crisis, financial and economic stability, mortgage lending, Federal Reserve, rescue program for mortgage borrowers
    JEL: E3 E32 E4 E44 E5 E58 E6 E65
    Date: 2016–01–23
  4. By: Lambert, Thomas; Kwon, Ed
    Abstract: This paper examines the arguments and assertions of Baran’s and Sweezy’s Monopoly Capital: An Essay on the American Economic and Social Order (1966) by assessing the degree of economic efficiency or inefficiency in how surplus value and economic surplus were created by 16 major capitalist economies during the 2000s using data envelopment analysis (DEA). After assigning a score to the degree of economic efficiency/inefficiency for each country, one can then assess which factors influence the degree of efficiency/inefficiency. This paper finds empirical support for many of the arguments put forth by the authors, Baran and Sweezy, as well as others regarding the inefficiency of the use of some forms of economic activity to help absorb economic surplus and to create surplus value.
    Keywords: data envelopment analysis, Marxian economics, neoclassical economics, over production, over investment, stagnation thesis, surplus value, under consumption, x-inefficiency
    JEL: B24 B51
    Date: 2014–09–22
  5. By: Mostafa Shahee (Department of Policy Studies, Queen’s University, Kingston, Ontario, Canada); Glenn P. Jenkins (Queen’s University, Canada and Eastern Mediterranean University, North Cyprus)
    Abstract: This article examines empirically the relationship between the severities of the recessions experienced by countries and their income distributions. The analysis is carried out for 36 countries over a period of 40 years. The empirical evidence from this paper suggests that a greater degree of income inequality increases the cumulative loss of GDP inflicted by recessions. The increase cost emerges from both a longer duration and a deeper amplitude for the contractionary phase of the business cycle.
    Keywords: Recession, income inequality, business cycle, income loss
    JEL: E25 E32
    Date: 2016–03
  6. By: Plassard, Romain
    Abstract: Robert W. Clower’s article “The Keynesian Counter-Revolution: A Theoretical Appraisal” (1965) deeply influenced the course of Keynesian macroeconomics by contributing to the transition from IS/LM macroeconomics to fix-price theories. Despite this influence, no scholar proposed to explain its origins, with the notable exception of Roger E. Backhouse and Mauro Boianovsky (2013). They explained that the 1965 piece was the result of an independent research program rooted in the works of Clower during the 1950s. My paper aims to offer an alternative explanation. It is synthesized in the metaphor of an about-face to stress that a theoretical break is at the origin of this contribution. This break, initiated in the early 1960s, is characterized by a double change in perspective (individual equilibrium vs. individual disequilibrium, and compatibility vs. incompatibility between Keynesian and Walrasian theories). The intellectual context, particularly Don Patinkin (1956; 1958), will be invoked to trace the roots of this about-face. Consequently, rather than independency and linearity, I argue that dependency and non-linearity are the two salient features of Clower’s intellectual path.
    Keywords: microfoundations of macroeconomics, disequilibrium theory, instability of the full employment equilibrium, Clower.
    JEL: B21 B22 D50
    Date: 2015–09
  7. By: Ron W Nielsen
    Abstract: Economic growth in Western Europe, Eastern Europe, Asia, countries of the former USSR, Africa and Latin America were analysed. It is demonstrated that the fundamental postulate of the Unified Growth Theory about the existence of the three regimes of growth (Malthusian regime, post-Malthusian regime and sustained-growth regime) is contradicted by data. These regimes did not exist. In particular, there was no escape from the Malthusian trap because there was no trap. Economic growth in all these regions was not stagnant but hyperbolic. Unified Growth Theory is fundamentally incorrect. However, this theory is also dangerously misleading because it claims a transition from the endless epoch of stagnation to the new era of sustained economic growth, the interpretation creating the sense of security and a promise of prosperity. The data show that the opposite is true. Economic growth in the past was sustained and secure. Now, it is supported by the increasing ecological deficit. The long-term sustained and secure economic growth has yet to be created. It did not happen automatically, as suggested incorrectly by the Unified Growth Theory.
    Date: 2016–02
  8. By: Akerlof, George A. (Georgetown University); Snower, Dennis J. (Kiel Institute for the World Economy)
    Abstract: Standard economics omits the role of narratives (the stories that people tell themselves and others) when they make all kinds of decisions. Narratives play a role in understanding the environment; focusing attention; predicting events; motivating action; assigning social roles and identities; defining power relations; and establishing and conveying social norms. This paper describes the role narratives play in decision making, as it also juxtaposes this description against the backdrop of the Bolshevik-spawned narrative that played a critical role in the history of Russia and the Soviet Union in the 20th Century.
    Keywords: narrative, motivation, attention, prediction, identity, social assignment
    JEL: A12 A13 A14 D03 D04 D20 D23 D30 D62 D71 D72 D74 E02
    Date: 2016–02
  9. By: Harrison, Mark (Department of Economics and CAGE (Centre for Competitive Advantage in the Global Economy) University of Warwick)
    Abstract: When we use Soviet documentation of political and secret police investigations to write history, to what extent are we vulnerable to the biases and inventions of the investigators? The problem is framed as one of principal and agent. It is argued that Soviet principals allowed their agents scope to manipulate facts and bias interpretations, not freely, but within strict limits that were laid down from above and varied from time to time. These limits were set by the leader’s “revolutionary insight,” the communist equivalent of what passes in more open societies today as “truthiness.” An understanding of the Soviet truthiness of the particular time is the best guide we have to interpreting the documentary records of that time. Evaluating them in this light, we see that Soviet historical documents are little different from the records of any other time and place.
    Keywords: communism; dictatorship; information; Soviet Union; truthiness
    JEL: D83 N44
    Date: 2016
  10. By: Delmas, Magali A.; Olivier, Gergaud; Lim, Jinghui
    Abstract: Eco-labels are part of a new wave of environmental policy that emphasizes information disclosure as a tool to induce environmentally friendly behavior by both firms and consumers. Little consensus exists as to whether eco-certified products are actually better than their conventional counterparts. This paper seeks to understand the link between eco-certification and product quality. We use data from three leading wine rating publications (Wine Advocate, Wine Enthusiast, and Wine Spectator) to assess quality for 74,148 wines produced in California between 1998 and 2009. Our results indicate that eco-certification is associated with a statistically significant increase in wine quality rating
    Keywords: eco-labels, credence goods, information disclosure policy, asymmetric information, product quality, Agribusiness, Demand and Price Analysis, Environmental Economics and Policy, Marketing, Q56, Q13, L15, L66, Q21,
    Date: 2016–01
  11. By: Faïz Gallouj (Clersé, Centre lillois d’études et de recherches sociologiques et économiques - USTL - Université des Sciences et Technologies (Lille 1))
    Abstract: It is always good to present something that has only just come into being, which is why it is such a pleasure to be inaugurating the first edition of the Journal of Inspiration Economy. In this foreword, our objective is to outline the general reasons underlying the creation of this review, as well as the objectives assigned to it. The founding hypothesis is that contemporary economies have reached a new stage in evolution such that we are in need for more inspiration in our socioeconomic practices.
    Keywords: Sustainability,Leadership,Inspiration,Innovation,Services,Inclusion
    Date: 2014–09

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