nep-pke New Economics Papers
on Post Keynesian Economics
Issue of 2016‒08‒21
seven papers chosen by
Karl Petrick
Western New England University

  1. Why economics textbooks must, and how they can, be changed into a real-world and pluralist economics. The example of a fundamentally new complexity-economics micro-textbook By Elsner, Wolfram
  2. A Minskyan criticism on the shareholder pressure approach of financialisation By Dögüs, Ilhan
  3. The euro zone crisis: What would John Maynard do? By Ehnts, Dirk
  4. Autonomous government expenditure growth, deficits, debt and distribution in a neo-Kaleckian growth model By Eckhard Hein
  5. Understanding the Brazilian demand regime: A Kaleckian approach By Tomio, Bruno Thiago
  6. Walras' law in the context of pre-analytic visions: A note By Heise, Arne
  7. (In)Equality and (In)Justice By Jasso, Guillermina

  1. By: Elsner, Wolfram
    Abstract: We argue that economics must, and can, be taught in fundamentally different ways than the simplistic and ideology-laden “economics of x”. We illustrate this with a fundamentally new textbook, “Microeconomics of Complex Economies” (2015). The mainstream’s ambivalence between some relevant research and its simplistic teaching in terms of “optimum”, “equilibrium”, and “market”, and the resulting textbook structure, incoherent between the static and “optimal” equilibrium and some reference to more recent real-world phenomena, will be characterized. We show how this can be changed by showing the process of getting a “heterodox” complexity textbook published, and by the structure of its content.
    Keywords: microeconomics; textbooks; teaching economics; heterodoxy; complexity economics; evolutionary economics; institutional economics; game theory; computational economics; history of economic thought.
    JEL: A11 A20 B00 C63 C70 D00
    Date: 2016–08–15
  2. By: Dögüs, Ilhan
    Abstract: In this paper, the Post-Kaleckian approach on financialisation which argues that investment of Nonfinancial Corporations in real capital assets has been restricted by the rising dividend and interest payments due to shareholder pressure will be criticized based on a Minskyan understanding of investment. It will be put forward that, reinvestment of profits in capital assets has decreased because of declined quasi-rent expectations induced by depressed demand.
    Keywords: financialisation,shareholder pressure,Minsky,capital assets,financial assets
    JEL: E12 E22 E44
    Date: 2016
  3. By: Ehnts, Dirk
    Abstract: In his letter to US President Franklin D. Roosevelt Keynes (1933) wrote about "the technique of recovery itself". An increase in output is brought about by an increase in purchasing power, Keynes argues, which can come from three sectors: households, firms and government. Using the IS/MY macroeconomic model developed by Ehnts (2014), which features sectoral balances and endogenous money, the situation of some euro zone members is examined with a focus on the three techniques of recovery: increases in debt of the respective sectors as defined by Keynes. A fourth technique, an increase in spending by the rest of the world, is added. The conclusion is that the policy recommendation given by Keynes in his letter also holds for the euro zone at present: a rise in debt-financed government expenditure. Some reform at the institutional level in Europe would enable "the technique of recovery" to work via the TARGET2 payment system, which is organized along Keynes' International Clearing Union proposal and a solid foundation to build on.
    Keywords: deficit spending,fiscal policy,sectoral balances,Keynes,Keynesian economics
    JEL: E12 E32 E62
    Date: 2016
  4. By: Eckhard Hein (Berlin School of Economics and Law)
    Abstract: This paper is linked to some recent attempts at including a non-capacity creating autonomous expenditure category as the driver and determinant of growth into Kaleckian distribution and growth models. Whereas previous contributions have focussed on taming Harrodian instability, generated by the deviation of the goods market equilibrium rate of capacity utilisation from a normal or target rate of utilisation, we rather focus on the so far neglected issues of deficit, debt and distribution dynamics in such models. For this purpose we treat the growth of government expenditures on goods and services, financed by credit creation, as the exogenous growth rate driving the system. We examine the medium-run convergence of the system towards such a growth rate, analyse the related long-run debt dynamics and deal with stability and income distribution issues. Finally we touch upon the economic and, in particular, fiscal policy implications of our model results.
    JEL: E11 E12 E25 E62
    Date: 2016–08
  5. By: Tomio, Bruno Thiago
    Abstract: The empirical literature on Kaleckian growth and distribution models has almost exclusively investigated developed countries. These studies have used varied econometric techniques and estimation methods, but little attention was given to the developing countries. Onaran and Galanis (2013) provide an extensive review on this literature, and they complement it by estimating models for some developing countries. Nevertheless, due to lack of data, they were unable to estimate the model for Brazil. The contribution of this paper is to expand this empirical literature by adding the results that were found for Brazil. Hence, the Brazilian demand regime is analyzed in the period of 1956-2008, with the functional distribution of income data supplied by Adalmir Marquetti (which was developed in a paper by Marquetti et al., 2010). By applying the single-equation technique in the open economy Bhaduri/Marglin model, as outlined in Hein and Vogel (2008), the results of the estimation show that the demand regime in Brazil is wage-led, both domestically and as an open economy. Therefore, increases in the profit share tend to harm the demand. Finally, based on the estimated results and findings, policy implications are drawn.
    Keywords: demand-led accumulation regimes,single equation approach,wage-led,Brazil
    JEL: B50 E12 E25
    Date: 2016
  6. By: Heise, Arne
    Abstract: Walras' law is central to the formation of economic theory. For mainstream economics, it is a device for testing rigorousness and consistency of model-building; for heterodox economists, the refutation of Walras' law is key to understanding Keynes' revolutionary contribution to a new economic paradigm. The purpose of this short research note is to elaborate on the possibility of a refutation of Walras' law and to inquire into its preconditions. It will be argued that this can only be achieved on the basis of an alternative pre-analytic vision of a genuine monetary economy as forshadowed by John Maynard Keynes.
    Keywords: Walras' law,equilibrium,disequilibrium,heterodoxy,orthodoxy
    JEL: B50 D50 D51 E
    Date: 2016
  7. By: Jasso, Guillermina (New York University)
    Abstract: Understanding the exact connection between inequality and justice is important because justice is classically regarded as the first line of defense against self-interest and inequality. Absent a strong and clear link between inequality and justice, the sense of justice would not awaken to exert its moral suasion, no matter how great the inequality or how fast its increase. We obtain exact links between economic inequality and three parameters of the justice evaluation distribution–the mean, median, and variance–across a comprehensive set of inequality measures and a substantial starter set of just reward scenarios. This work shows that there is no general necessary connection between inequality and justice–inequality effects can be nonexistent, or can occur in opposite directions. There is, however, a striking pattern in some justice situations: As economic inequality increases, the average of the justice evaluations moves leftward, deeper into the territory of unjust underreward, and the distribution stretches outward, increasing the gulf between underrewarded and overrewarded and hollowing out the middle class. Further work specifying and strengthening the logical foundation will help guide development of sharp new empirical strategies for deeper understanding of the inequality-justice connection in all its manifestations.
    Keywords: lognormal distribution, fairness, justice, inequality, Pareto distribution, power-function distribution, Gini coefficient, Atkinson inequality, Theil MLD, general inequality parameter, justice evaluation, justice evaluation function, justice evaluation distribution
    JEL: C02 C65 D31 D6 I3
    Date: 2016–08

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