nep-pke New Economics Papers
on Post Keynesian Economics
Issue of 2016‒03‒17
thirteen papers chosen by
Karl Petrick
Western New England University

  1. Long run convergence in a neo-Kaleckian open-economy model with autonomous export growth By Won Jun Nah; Marc Lavoie
  2. Causes and Consequences of the Financial Crisis and the Implications for a More Resilient Financial and Economic System: Synthesis of FESSUD Work Package 3 By Eckhard Hein
  3. Some Reflections on Methodology of Critical Realism By Lukas Maslo; Zdenek Chytil
  4. Confidence, Fear and a Propensity to Gamble: The Puzzle of War and Economics in an Age of Catastrophe 1914-45 By Roger L. Ransom
  5. Social Structures of disaccumulation: a 101 on the rate of profit and the cause of crisis By Freeman, Alan
  6. The origins, development, and fate of Clower’s ‘stock-flow’ general-equilibrium program By Romain Plassard
  7. Thought for Food: Strengthening Global Governance of Food Security By Rob Vos
  8. Social value orientation and capitalism in societies By Shibly Shahrier; Koji Kotani; Makoto Kakinaka
  9. Adaptation and Influence: The Schumpeterian Perspective on Business-Politics Relations By Thomas Paster
  10. Colonial Legacy and Poverty Reduction in Sub-Saharan Africa By Rumman Khan; Oliver Morrissey; Paul Mosley
  11. Why the ‘Rest’ doesn’t need foreign finance By BRESSER-PEREIRA, Luiz Carlos
  12. Inequality of opportunity in Sub-Saharan Africa By Paolo Brunori; Flaviana Palmisano; Vito Peragine
  13. The FDI-led development model revisited? The case of Hungary By Miklos Szanyi

  1. By: Won Jun Nah; Marc Lavoie (University of Ottawa (CA))
    Abstract: A simple neo-Kaleckian open-economy model is presented and its implications for growth regimes are analyzed. The present model features long run-convergence to its normal rate of capacity utilization, which is conditionally achieved by incorporating the Harrodian principle of instability and autonomous growth in foreign demand. It is demonstrated that some aspects of the main Kaleckian results can be preserved not only in the short run but also in the long run, in the sense that both (i) a decrease in the propensity to save, and (ii) a change in income distribution favoring labor, bring about higher average rates of production growth and capital accumulation. However, the long-run impact of a change in the profit share is shown to be subjected to the condition that the responsiveness of the real exchange rate with respect to the profit share has to be bounded from above, confirming that the scope for wage-led demand or wage-led growth can be limited by open-economy considerations.
    Keywords: neo-Kaleckian, growth, capacity utilization, exports, profit share, real exchange rate
    JEL: E11 F41 O41
    Date: 2016–02
  2. By: Eckhard Hein (Berlin School of Economics and Law and Institute for International Political Economy (IPE) Berlin)
    Abstract: The increasing dominance of finance starting in the late 1970s/early 1980s in the US and the UK, and somewhat later in other countries, was associated with two fundamental and structural processes generating the contradictions of this phase of development and finally the financial and economic crises starting in 2007: the deregulation of the financial (and economic) system and the massive redistribution of income at the expense of labour and low income households. These fundamental processes provided the conditions for the generation of major imbalances within some of the national economies, on the one hand, and at the international level, on the other hand. These imbalances and contradictions led eventually to the deep financial and economic crisis, starting in 2007. Therefore, a more resilient financial and economic system requires the re-regulation and downsizing of the financial sector, the re-distribution of income (and wealth) from top to bottom and from capital to labour, the re-orientation of macroeconomic policies towards stabilizing domestic demand at non-inflationary full employment levels, and the re-creation of international monetary and economic policy coordination.
    Keywords: Financialisation, distribution, growth, financial and economic crisis, resilient financial and economic system
    JEL: D30 E02 E11 E12 E21 E22 E25 E44 E61 E65 G01
    Date: 2015–11–01
  3. By: Lukas Maslo (Department of Economics, Faculty of Economics, University of Economics, Prague); Zdenek Chytil (Department of Economics, Faculty of Economics, University of Economics, Prague)
    Abstract: The subject matter of this paper is the controversy about realism of assumptions from the perspective of critical realism. The authors apply the notional apparatus of philosophical logic to clarify the essence of this controversy. By means of translating the often ambivalent and sometimes mysterious terms of Jespersen (2009) into the straightforward language of classical philosophy, they authors make an effort to tear down some of the barriers of the inter-paradigmatic controversies about methodology. The conclusion is drawn that as long as the assumptions of a model affect but the accidentia logica of the model’s constituting notions, the formalist stand can be taken and Friedman’s instrumentalist approach will be justifiable; as soon as the assumptions of a model affect the differentiae specificae of the model’s constituting notions, the substantivist stand must be taken and Friedman’s instrumentalist approach fails. Finally, the authors assert that the Post-Keynesian notion of critical realism is much more compatible with the perception thereof as a genus that the perception thereof as a species.
    Keywords: critical realism, differentia specifica, essentia generica, accidens logicum, ontology, epistemology
    JEL: A14 B41 E02
  4. By: Roger L. Ransom (Department of Economics, University of California Riverside)
    Date: 2016–02
  5. By: Freeman, Alan
    Abstract: These educational notes were prepared for a summer camp organised by Ideas Left Out at Elbow Lake, Ontario in the summer of 2015. I suggested to the organisers that I could produce a fairly simplified introduction to the discussion which would be pluralist, in the sense that it would introduce the various conflicting ideas about the cause of crisis and the special role that the rate of profit plays within it. I promised, after the discussion, that I would make the notes available for those who expressed interest but could not attend. Here they are. This article contains a shameless amount of self-reference. This is not just because the referenced articles of my own contain more explanation than is reasonable in a 101 introduction, but because these articles also contain bibliographies which will allow the reader to explore the subject in her own chosen way and at her own chosen pace.
    Keywords: TSSI, Value Theory, Rate of Profit, Marx, Geopolitical Economy
    JEL: E11 E12 E22
    Date: 2015–09
  6. By: Romain Plassard
    Abstract: Before becoming the hallmark of macroeconomics à la Wynne Godley, the ‘stock-flow’ analysis was already developed in microeconomics and general equilibrium theory. Basically, the goal was to study the formation of economic plans and the determination of market prices when individuals were supposed to consume, produce, and hold commodities. It is acknowledged that Robert W. Clower was a central figure in this theoretical context. Yet, for both his contemporaries and for historians, his contributions remained essentially technical. No attention was paid to the theoretical project underlying the statics and dynamics analyses of his ‘stock-flow’ price theory. My paper aims to fill this gap. In light of his doctoral dissertation, I show that the elaboration of ‘stock-flow’ market models was part of a project aiming at offering sound microfoundations to a Keynesian business cycle model. I analyze the origins of this microfoundation program, trace its development, and discuss its fate.
    JEL: B2 E12 E32 D4
  7. By: Rob Vos
    Abstract: here are significant threats to sustainable food security and nutrition in the long-run, including demographic and environmental pressures and changing business practices in agriculture with the emergence of global values chains. The global nature and public good aspects of the challenges require coordinated responses and urgent improvement of the global governance of food security. This paper argues for the strengthening of the Committee on World Food Security to ensure greater coherence in the global approach to food security and the multilateral trade, financial and environmental regimes.
    Keywords: agriculture, food security, nutrition, global public goods, global governance, food safety, policy coordination
    JEL: F53 F55 O13 O19 Q15 Q18
  8. By: Shibly Shahrier (School of Economics and Management, Kochi University of Technology); Koji Kotani (School of Economics and Management, Kochi University of Technology); Makoto Kakinaka (International University of Japan)
    Abstract: Cooperation and competition are the core issues in economics and biology since they are claimed to affect evolution for human societies and ecological organization. Therefore, there has been a long-standing debate of whether nature or nurture curves people’s social preference. We hypothesize that the degree of capitalism in societies influences evolution of people’s value orientation, i.e., the degree of competitiveness in societies characterizes people’s social preference. To test this hypothesis, we implemented field experiments of social value orientation and questionnaire surveys with 1000 respondents in the three different fields of Bangladesh: (i) rural, (ii) transitional and (iii) capitalistic societies. The analysis reveals that as society becomes capitalistic, people are likely to be less prosocial. A considerable proportion of “unidentified†people, neither proself nor prosocial, are found in transitional societies, implying a potential existence of unstable states in people’s social preference during a transformation from the rural to the capitalistic. We have also found that having an additional child makes people individualistic, females’ social preferences are more deterministic than males’ ones, and people become more competitive with age and education. These results imply that some important problems such as climate change or sustainability, where “cooperation†rather than “competition†is necessary, shall be more endangered as societies become capitalistic.
    Keywords: Social value orientation, capitalism, field experiments
    Date: 2016–02
  9. By: Thomas Paster
    Abstract: This paper introduces Schumpeter’s views on the relationship between business and politics and argues that we can discern a distinct Schumpeterian perspective of business-politics relations. Schumpeter’s views about the pivotal role of entrepreneurs in economic development attracted substantial interest in economic sociology and in political economy. His views about the role of entrepreneurs in politics have so far however hardly been studied. The paper identifies the following four aspects as central to Schumpeter’s perspective of business-politics relations: (a) entrepreneurs and corporations drive economic change, (b) entrepreneurs and corporations are ineffective in defending their political interests and vulnerable to hostile movements, (c) the resulting divergence of the economic and the political impact of entrepreneurs and corporations makes capitalism socio-politically instable, and (d) the relationship of entrepreneurs and corporations to political institutions and public policies is primarily adaptive, rather than causative. The paper proposes a two-dimensional typology of business-politics relations that combines the Schumpeterian focus on adaptation with the Marxian focus on influence. These two dimensions - adaptation and influence - result in four ideal types: business-dominated social compromise, imposed social compromise, business dominance, and political confrontation. Examples from German welfare state history illustrate these four types. The paper suggests that the Schumpeterian and the Marxian perspective, while in contrast to each other, may be complementary and each perspective valid under different socio-political conditions.
    Keywords: business and politics, Joseph A. Schumpeter, welfare state politics, political economy of entrepreneurship, history of economic ideas.
    JEL: P12 P16 H50 H70 J58
    Date: 2016
  10. By: Rumman Khan; Oliver Morrissey; Paul Mosley
    Abstract: Although growth has improved substantially in most African countries in recent years, poverty across the continent has fallen very little in the aggregate. There have been strong poverty reduction performances in some countries, but others exhibit higher poverty rates now than in 1990 despite economic growth. This paper seeks to understand the reasons for this variance; why there are apparently ‘two Africas’, one with an ability to reduce poverty and one without. The main argument is that some of the reasons for this difference are rooted in colonial times. Countries with strong smallholder cash crop sectors emerged into independence with broad-based labour-intensive economies supporting a more equitable income distribution conducive to inclusive growth and poverty reduction compared to initially more inequitable mineral resource and large farm based economies. This did not necessarily determine the post-colonial path: many peasant export economies achieved no poverty reduction (often because of little growth), and some mine/plantation economies did achieve poverty reduction. The key reasons for this evolution lie in the motivation and ability of African elites to form pro-poor coalitions, which in some cases were then able to implement policies supporting a pro-poor pattern of growth.
    Keywords: Poverty, sub-Saharan Africa, colonial legacy, inclusive growth
    Date: 2016
  11. By: BRESSER-PEREIRA, Luiz Carlos
    Abstract: The Rest will be able to catch up and grow faster than the West only if it goes against a “received truth”, namely that capital-rich countries should transfer their capital to capital-poor countries. This intuitive truth is the mantra that the West cites to justify its occupation of the markets of developing countries with its finance and its multinationals. Classical Developmentalism successfully criticized the unequal exchange involved in trade liberalization, but it didn’t succeed in criticizing foreign finance. This task has been recently achieved by New Developmentalism and its developmental macroeconomics, which shows that countries will invest and grow more if they don’t run current account deficits, even when these deficits are financed by foreign direct investment
    Date: 2016–02–25
  12. By: Paolo Brunori (University of Bari, Italy); Flaviana Palmisano (University of Luxembourg); Vito Peragine (University of Bari, Italy)
    Abstract: In the last decades inequality of opportunity has been extensively studied by economists, on the assumption that, in addition to being normatively undesirable, it can be related to low potential for growth. In this paper we evaluate inequality of opportunity in 11 Sub-Saharan Africa countries. According to our results, the portion of total inequality which can be attributed to exogenous circumstances is between 30% and 40% for the generality of countries considered. We also find a positive association between total consumption inequality and inequality of opportunity and we study the different sources of unequal opportunities. Finally, we address a number of methodological issues that typically arise when measuring inequality of opportunity with imperfect data, which is the typical case in developing countries.
    Keywords: Consumption inequality, equality of opportunity, Sub-Saharan Africa.
    JEL: D63 E24 O15 O40
    Date: 2016–01
  13. By: Miklos Szanyi (Institute of World Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences)
    Abstract: Countries of East-Central Europe underwent fundamental economic and political changes in their transition process. Their economies were restructured and modernized, became integrated part of the world’s most competitive value chains. Although, benefits of the FDI-led development process did not spread spatially evenly, moreover, they might be smaller than what was expected the achieved economic and political results were remarkable. Yet, in some of these countries acknowledgement of benefits have been started to be overshadowed by strong criticism that sometimes queries the advantages of the FDIled development at large. The main question of the paper is if this criticism is reflected in (both positively and negatively) discriminating policies of the Hungarian state towards foreign companies? The main finding of the paper is that the main aim of changing FDI-related policies is not a decisive break with the model, but rather to split the strong networks of multinational business in order to increase the room of selective and arbitrary advantage and disadvantage measures of the government. This means first of all a departure from the concept of “competition state” towards “patronage state”.
    Keywords: FDI policy, crony capitalism, patronage state
    JEL: D72 H82 P16 P31
    Date: 2016–02

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