nep-pke New Economics Papers
on Post Keynesian Economics
Issue of 2016‒04‒16
fifteen papers chosen by
Karl Petrick
Western New England University

  1. Veiled Repression: Mainstream Economics, Capital Theory,and the Distributions of Income and Wealth By Lance Taylor
  2. The Italian economic decline in a Kaldorian theoretical perspective By Guglielmo Forges Davanzati; Rosario Patalano; Guido Traficante
  3. "The Empirics of Long-Term US Interest Rates" By Tanweer Akram; Huiqing Li
  4. A Progress Report on Marxian Economic Theory: On the Controversies in Exploitation Theory since Okishio (1963) By Yoshihara, Naoki
  5. The "Veblen" Effect, Targeted Advertising and Consumer Welfare By Lynne Pepall; Joseph Reiff
  6. Fiscal Policy in an Unemployment Crisis By Pontus Rendahl; ; ;
  7. How Successful Was the New Deal? The Microeconomic Impact of New Deal Spending and Lending Policies in the 1930s By Fishback, Price
  8. Economic Theory in Historical Perspective By Tsoulfidis, Lefteris
  9. A Review of the Circular Economy and its Implementation By Heshmati, Almas
  10. "Capitalism A Nuh' Wi Frien'": The Formatting of Farming Into an Asset From Financial Speculation to International Aid By Luigi Russi; Tomaso Ferrando
  11. The Cyclically Adjusted Budget: History and Exegesis of a Fateful Estimate By Orsola Costantini
  12. After the financial crisis: Reforms and reform options for finance, regulation and institutional structure By Herr, Hansjörg
  13. ‘Smart development’. An essay on a new political economy of the environment By Tausch, Arno
  14. Inequality, the Great Recession, and Slow Recovery By Barry Z. Cynamon; Steven M. Fazzari
  15. A Review of Scientific Approach in the Methodology of Social Science Research: Contributions of Kuhn, Popper and Lakatos By George, Justine

  1. By: Lance Taylor (New School for Social Research)
    Abstract: The Cambridge UK vs USA capital theory debates of the 1960s showed that the workhorse mainstream growth model relies on unsustainable assumptions. Its standard interpretation is not consistent with the last four decades of data. Part of an estimated increase in the ratio of personal wealth to income in recent years is due to higher asset prices. The other side of the accounts reveals that financialization and growing business debt partially offset the greater net worth of households. Attempts to interpret growth in wealth principally as a consequence of capitalization of rents are misleading. An alternative growth model based on Cambridge ideas can help correct these misinterpretations.
    Keywords: Income distribution, wealth distribution, Cambridge controversies
    JEL: D3 E1
    Date: 2015–12
  2. By: Guglielmo Forges Davanzati (University of Salento (IT)); Rosario Patalano; Guido Traficante
    Abstract: This paper analyses the Italian economic decline in a Kaldorian theoretical framework. On the theoretical ground we propose an interpretation of the Italian economic decline based on the continuous decline of domestic demand and the constant reduction of the rate of growth of labour productivity. This interpretation is consistent with the concept of decline, which involves a long-run perspective. We also consider the role of the banking sector as a factor driving aggregate demand and, in turn, labour productivity. We estimate a VAR for the period 2002-2015 to analyse jointly the evolution of public consumption, real GDP, private investments, credit supply, labour compensation and productivity. Our main empirical finding is that aggregate demand and credit supply significantly affect the path of labour productivity, consistently with Kaldor's second law.
    Keywords: Kaldor, Italy, aggregate demand, labour productivity
    JEL: B52 E12 E60
    Date: 2016–03
  3. By: Tanweer Akram; Huiqing Li
    Abstract: US government indebtedness and fiscal deficits increased notably following the global financial crisis. Yet long-term interest rates and US Treasury yields have remained remarkably low. Why have long-term interest rates stayed low despite the elevated government indebtedness? What are the drivers of long-term interest rates in the United States? John Maynard Keynes holds that the central bank's actions are the main determinants of long-term interest rates. A simple model is presented where the central bank's actions are the key drivers of long-term interest rates through short-term interest rates and various monetary policy measures. The empirical findings reveal that short-term interest rates, after controlling for other crucial variables such as the rate of inflation, the rate of economic activity, fiscal deficits, government debts, and so forth, are the most important determinants of long-term interest rates in the United States. Public finance variables, such as government fiscal balances or government indebtedness, as a share of nominal GDP appear not to have any discernable effect on long-term interest rates.
    Keywords: Government Bond Yields; Long-Term Interest Rates; Short-Term Interest Rates; Monetary Policy
    JEL: E43 E50 E60 G12
    Date: 2016–03
  4. By: Yoshihara, Naoki (Department of Economics, University of Massachusetts, Amherst)
    Abstract: This report explores the development of exploitation theory in mathematical Marxian economics by reviewing the main controversies surrounding the proper definition of exploitation since the contribution of Okishio(1963). The report first examines the debates on the Fundamental Marxian Theorem and Class-Exploitation Correspondence Principle, developed mainly in the 1970s and 1980s, followed by the property relation theory of exploitation by Roemer (1982). Then, the more recent exploitation theory proposed by Vrousalis (2013) and Wright (2000) is introduced. Finally, the report introduces and comments on recent axiomatic studies of exploitation by focusing on the work of Veneziani and Yoshihara (2015a).
    Keywords: Proper Definitions of UE Exploitation, Property Relations Definition of Exploitation, Profit-Exploitation Correspondence Principle.
    JEL: D63 D51
    Date: 2016
  5. By: Lynne Pepall; Joseph Reiff
    Abstract: The technology of advertising in the twenty-first century allows for better targeting of consumers and better identification of consumer subgroups in the population. This makes it easier for firms to create in their advertising a desire to belong to the group identified with a product. We explore this kind of advertising in a monopoly model. The firm has an incentive to target this kind of advertising to the most lucrative segment of a particular social grouping and while advertising does create value for the consumer, it leads to an outcome where less output is sold at a higher price in a narrower or more segmented market than in the standard monopoly model. As a result even though consumers value the identification effect they are worse off. This is because the firm uses advertising to exploit a form of price discrimination and appropriate more surplus.
    Keywords: Targeted Advertising, Peer Effects, Monopoly
    JEL: L12 M3
  6. By: Pontus Rendahl; ; ;
    Abstract: This paper shows that large fiscal multipliers arise naturally from equilibrium unemployment dynamics. In response to a shock that brings the economy into a liquidity trap, an expansion in government spending increases output and causes a fall in the unemployment rate. Since movements in unemployment are persistent, the effects of current spending linger into the future, leading to an enduring rise in income. As an enduring rise in income boosts private demand, even a temporary increase in government spending sets in motion a virtuous employment-spending spiral with a large associated multiplier. This transmission mechanism contrasts with the conventional view in which fiscal policy may be efficacious only under a prolonged and committed rise in government spending, which engineers a spiral of increasing inflation.
    Keywords: Fiscal multiplier, liquidity trap, zero lower bound, unemployment inertia.
    Date: 2014–05–13
  7. By: Fishback, Price (University of Arizona)
    Abstract: The New Deal during the 1930s was arguably the largest peace-time expansion in federal government activity in American history. Until recently there had been very little quantitative testing of the microeconomic impact of the wide variety of New Deal programs. Over the past decade scholars have developed new panel databases for counties, cities, and states and then used panel data methods on them to examine the examine the impact of New Deal spending and lending policies for the major New Deal programs. In most cases the identification of the effect comes from changes across time within the same geographic location after controlling for national shocks to the economy. Many of the studies also use instrumental variable methods to control for endogeneity. The studies find that public works and relief spending had state income multipliers of around one, increased consumption activity, attracted internal migration, reduced crime rates, and lowered several types of mortality. The farm programs typically aided large farm owners but eliminated opportunities for share croppers, tenants, and farm workers. The Home Owners’ Loan Corporation’s purchases and refinancing of troubled mortgages staved off drops in housing prices and home ownership rates at relatively low ex post cost to taxpayers. The Reconstruction Finance Corporation’s loans to banks and railroads appear to have had little positive impact,although the banks were aided when the RFC took ownership stakes.
    Keywords: JEL Classification:
    Date: 2016
  8. By: Tsoulfidis, Lefteris
    Abstract: On the methodological plain, this paper outlines the conditions that contribute to the development of economic theories and it continues with an examination of the concrete circumstances that gave rise to modern neoclassical macroeconomic theories. The paper further claims that the current impasse in macroeconomics is indicative of the need for new directions in economic theory which becomes imperative in the long economic downturn that started in 2007 and concludes by suggesting the need for a synthesis between the classical analysis and the theory of effective demand.
    Keywords: classical approach, neoclassical theory, theory of value, effective demand, paradigm change.
    JEL: B10 B12 B13 B22 B41
    Date: 2010–01–01
  9. By: Heshmati, Almas (Jönköping International Business School (JIBS), Centre of Excellence for Science and Innovation Studies (CESIS),& Department of Economics, Sogang University.)
    Abstract: Circular economy (CE) is a sustainable development strategy that is being proposed to tackle urgent problems of environmental degradation and resource scarcity. CE’s 3R principles are to reduce, reuse and recycle materials. The principles account for a circular system where all materials are recycled, all energy is derived from renewables; activities support and rebuild the ecosystem and support human health and a healthy society and resources are used to generate value. This study is a review of the rapidly growing literature on CE covering its concept and current practices and assessing its implementation. The review also serves as an assessment of the design, implementation and effectiveness of CE related policies. It first presents the concept of CE and compares it with the current linear economy of taking materials, producing goods and disposing waste. It explains why it is imperative to move away from a linear economy towards regenerative sustainable industrial development with a closed loop. The paper then introduces current practices that have been introduced and discusses standards for the assessment of CE’s development and performance. The main focus here is on providing a summary of the data analysis of key CE indicators to give a picture of CE practices. Third, based on an analysis of literature, the paper identifies the underlying problems and challenges to CE in an entrepreneurial perspective. Finally, the review provides a conclusion on CE’s current development and gives policy suggestions for its future development as part of an entrepreneurial and innovative national level development strategy.
    Keywords: Circular economy; environmental policy; national development strategy; sustainable development strategy; entrepreneurial strategy
    JEL: E01 F18 H23 O44 Q50 Q53 Q55 Q58 R11
    Date: 2016–04–05
  10. By: Luigi Russi (International University College of Turin); Tomaso Ferrando (University of Warwick)
    Abstract: This paper deciphers the formatting of farming into an asset by tracking the modalities by which financial calculation is enabled across different sites of agency. The first focus of our analysis are commodity futures markets, which have witnessed a double spike in prices in 2008 and in 2012. In the paper, we look at these hikes as the outcome of endogenous dynamics, caused by the changing makeup of market participants after 2000, which turned futures markets into resources for hedging commodity index-linked derivative products. We subsequently analyse the increasing reliance on financial actors placed by public development agencies that channel funds through private equity initiatives to acquire and invest in farmland. To complete our analysis, we finally set our contribution alongside the alternative represented by food-sovereignty, which offers the promise of heeding to the needs engendered from within the peasant milieu, as opposed to subjugating it to extrinsic quantitative metrics.
    Keywords: futures, commodities, speculation, rural sociology, human geography, land grabbing, public-private partnership, commons, social justice, political economy of development
    JEL: O13 O16 P16 Q17 Q18
    Date: 2015–12
  11. By: Orsola Costantini (Institute for New Economic Thinking)
    Abstract: This paper traces the evolution of the concept of the cyclically adjusted budget from the 1930s to the present. The idea of balancing the budget over the cycle was first conceived in Sweden in the 1930s by the economists of the Stockholm School and was soon reinterpreted and incorporated into the fiscal program of the American political coalition supporting the New Deal, especially by the Committee for Economic Development during and after World War II. In the 1960s, Keynesian economists associated with the Kennedy and Johnson administrations reformulated the notion. Despite their claims at the time, their version differed only in degree from the earlier CED approach, the transformation being largely conditioned by changing political circumstances. In the 1980s, however, the concept changed substantially. Methods for calculating it transformed dramatically, as the notion became a device to limit and direct governments' fiscal policies in a wide sense, that is, including institutional (or “structural†) reforms. The final section of the paper considers the shifting uses of the notion in the European Growth and Stability Pact.
    Keywords: Macroeconomics, Fiscal policy, Cyclically Adjusted Budget, EU, Keynesian Economics, History of Economic Thought, Economic History
    JEL: B2 C1 E12 E13 E62 H62 H68 N1 N12 N14
    Date: 2015–10
  12. By: Herr, Hansjörg
    Abstract: The finance dominated type of capitalism that has developed from the late 1970s and early 1980s on finds its nucleus in the deregulation of the national and international financial system and the switch to a shareholder oriented corporate governance system. Other aspects such as labour market deregulations (including policies to weaken trade unions), the aim of completely free trade around the globe, increasing freedom and power of multinational companies, and privatisation of formerly state functions also belong to the new regime. This finance dominated economic regime seems to be exhausted. The reforms implemented after the subprime crisis and the Great Recession are not sufficient to overcome the deeply rooted problems of the existing system. Reforms to the financial system did not substantially affect the functioning of the shadow banking system and the basic structures of the financial system were not changed. Both, the international financial system as well as the shareholder oriented corporate governance system were largely spared from reforms. Further labour market deregulations are still on the agenda of governments and international institutions. Policies to change income and wealth distribution are not on the political agenda. What is needed is a comprehensive reform agenda which searches for a new relationship between institutions, government policies, and markets.
    Keywords: financialisation,financial market regulation,demand management,income distribution
    JEL: E12 E44 F33 G28 P10
    Date: 2016
  13. By: Tausch, Arno
    Abstract: In this book, we present a first empirical reflection on ‘smart development’, its measurement and its possible ‘drivers’ and ‘bottlenecks’. We first provide cross-national data, how much ecological footprint is used in the nations of the world system to ‘deliver’ a given amount of democracy, economic growth, gender equality, human development, research and development, and social cohesion. To this end, we first developed UNDP-type performance indicators from current standard international comparative, cross-national social science data on these six main dimensions of development and on the combined performance on the six dimensions (a UNDP type ‘human development index plus’). We then show the non-linear standard OLS regression trade-offs between ecological footprints per capita and their square on these six components of development and the overall super-UNDP development performance index, derived from them. The residuals from these regressions are our new measures of smart development: a maximum of democracy, economic growth, gender equality, human development, research and development, social cohesion, and their combination with a minimum of ecological footprint. Our estimates underline the enormous importance of the positive effects of received worker remittances on smart development.
    Keywords: C43 - Index Numbers and Aggregation Q56 - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth F22 - International Migration F-24 – Remittances
    JEL: C43 F22 F24 Q56
    Date: 2016–03–22
  14. By: Barry Z. Cynamon (Federal Reserve Bank of St. Louis Center for Household Financial Stability); Steven M. Fazzari (Washington University in St. Louis)
    Abstract: Rising inequality reduced income growth for the bottom 95 percent of the US personal income distribution beginning about 1980. To maintain stable debt to income, this group’s consumption-income ratio needed to decline, which did not happen through 2006, and its debt-income ratio rose dramatically, unlike the ratio for the top 5 percent. In the Great Recession, the consumption-income ratio for the bottom 95 percent did finally decline, consistent with tighter borrowing constraints, while the top 5 percent ratio rose, consistent with consumption smoothing. We argue that higher inequality and the associated demand drag helps explain the slow recovery.
    JEL: D12 D31 E21
  15. By: George, Justine
    Abstract: Methodological understanding of the theory is as important as the theory itself, and must show the relationship between theoretical concepts used in the study and its expected conclusions. Measuring scientificity of each theory and then to categorie on the basis of its relative merit often difficult given available theories are concerned. However, theoretical contributions of Thomas Kuhn, Karl Popper and then Imre Lakatos are best to develop a framework to evaluate the progress of social science research.
    Keywords: Theory
    JEL: B40 B41
    Date: 2016–01–01

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