nep-pke New Economics Papers
on Post Keynesian Economics
Issue of 2016‒10‒02
nine papers chosen by
Karl Petrick
Western New England University

  1. "Minsky at Basel: A Global Cap to Build an Effective Postcrisis Banking Supervision Framework" By Giuseppe Mastromatteo; Giuseppe Mastromatteo
  2. An empirical contribution to Minsky’s financial fragility:Evidence from non-financial sectors in Japan By Hiroshi Nishi
  3. Instituições, Distribuição de Renda e Crescimento Econômico: uma análise pós-keynesiana By Claudio Roberto Amitrano
  4. Reading the General Theory as Economic Sociology: A broader interpretation of an economics classic By Daniyal Khan
  5. It Takes a Village to Maintain a Dangerous Financial System By Admati, Anat R.
  6. Dynamics of Socio-Economic systems: attractors, rationality and meaning By Andrzej Nowak; Jørgen Vitting Andersen; Wojciech Borkowski
  7. The Political Economy of Liberal Democracy By Mukand, Sharun; Rodrik, Dani
  8. The Triple Challenge for Europe: The Economy, Climate Change and Governance By Jan Fagerberg; Staffan Laestadius; Ben Martin
  9. What to do about rising inequality in developing countries? By Klasen, Stephan

  1. By: Giuseppe Mastromatteo; Giuseppe Mastromatteo
    Abstract: The global financial crisis shattered the conventional wisdom about how financial markets work and how to regulate them. Authorities intervened to stop the panic -- short-term pragmatism that spoke volumes about the robustness of mainstream economics. However, their very success in taming the collapse reduced efforts to radically change the "big bank" business model and lessened the possibility of serious banking reform -- meaning that a strong and possibly even bigger financial crisis is inevitable in the future. We think an overall alternative is needed and at hand: Minsky's theories on investment, financial stability, the growing weight of the financial sector, and the role of the state. Building on this legacy, it is possible to analyze which aspects of the post-2008 reforms actually work. In this respect, we argue that the only effective solution is to impose a global cap on the absolute size of banks.
    Keywords: Banking Regulation; Financial Stability; Minsky; Basel 3
    JEL: E12 G01 G28
    Date: 2016–09
  2. By: Hiroshi Nishi
    Abstract: This study presents an empirical analysis to detect Minsky’s financial fragility and its determinants in the non- financial sectors in Japan, with particular attention paid to differences between sectors and sizes. While Minsky developed theoretical analyses of financial fragility for use in economic growth models, its empirical application is limited. Based on the financial fragility indices derived from a cash flow accounting framework and Minsky’s margins of safety, I detect the overall configuration and evolution of financial fragility (hedge, speculative, and Ponzi) in Japan. Then, the factors that determine the probability of being Ponzi finance are detected by using panel logistic regression. In doing so, this study reveals that although speculative finance is dominant in many sectors, the evolution of financial fragility is diversified and its determinants differ according to sector and size in Japan.
    Keywords: Minsky, Financial fragility, Margin of safety, Japanese economy
    JEL: E12 C25 N15
    Date: 2016–09
  3. By: Claudio Roberto Amitrano
    Abstract: O objetivo deste trabalho consiste em analisar a relação entre instituições, distribuição de renda e crescimento na tradição pós-keynesiana. Para tanto, desenvolvemos um modelo que busca ilustrar a maneira pela qual a distribuição de renda condiciona o crescimento econômico. Além disso, procuramos mostrar que a caracterização da economia como wage-led ou profit-led está estritamente relacionada às configurações institucionais de uma economia e tem implicações profundas sobre a dinâmica do crescimento. The aim of this paper is to analyze the relationship between institutions, income distribution and growth in post-Keynesian tradition. Therefore, we developed a model that seeks to illustrate the way in which income distribution affects economic growth. Furthermore, we aim to show that the characterization of the economy as wage-led or profit-led is closely related to institutional settings of an economy and that has profound implications on the dynamics of growth.
    Date: 2016–08
  4. By: Daniyal Khan (Department of Economics, Seeta Majeed School of Liberal Arts and Social Sciences, Beaconhouse National University)
    Abstract: This paper argues that given certain self-definitions and key defining features of economic sociology, The General Theory of Employment, Interest, and Money can be read and interpreted as a text in economic sociology. Around this core argument, a case is built for a more open interaction and mutual appreciation between economic sociology and heterodox approaches to economics. The paper suggests how broader interpretations of classics of social science (such as the General Theory) may help us better appreciate the shared intellectual lineages and legacies of economics and sociology. It concludes with reflections on the historical development of the relationship between economics and sociology, and some speculation about their future.
    Keywords: John Maynard Keynes, The General Theory, economic sociology, heterodox economics, capitalism
    JEL: B31 B50 P10 Z13
    Date: 2016–09
  5. By: Admati, Anat R. (Stanford University)
    Abstract: I discuss the motivations and actions (or inaction) of individuals in the financial system, governments, central banks, academia and the media that collectively contribute to the persistence of a dangerous and distorted financial system and inadequate, poorly designed regulations. Reassurances that regulators are doing their best to protect the public are false. The underlying problem is a powerful mix of distorted incentives, ignorance, confusion, and lack of accountability. Willful blindness seems to play a role in flawed claims by the system's enablers that obscure reality and muddle the policy debate.
    Date: 2016–05
  6. By: Andrzej Nowak (Institute for Social Studies, University of Warsaw - Institute for Social Studies, University of Warsaw,, Florida Atlantic University [Boca Raton]); Jørgen Vitting Andersen (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique); Wojciech Borkowski (University of Social Sciences and Humanities - University of Social Sciences and Humanities)
    Abstract: Gintis Helbing and go beyond the traditional boundaries of scientific disciplines and offer the integration of major theories of the main disciplines of the social and natural sciences. The theory captures many ideas of social psychology. Several assumptions of the model, however, can be questioned. The hypothesis that social systems are at equilibrium is too narrow, because social systems can also be out of balance. The concept of dynamic attraction shows that the systems may converge to different types of attractors in accordance with the value of control parameters. The notion of rationality of human behavior can be challenged on the basis of new data of psychology, decision sciences and behavioral economics. Often individuals do not process information, but rather copy the choices of others. Individuals interact by both direct and indirect means – if market mechanisms. More importantly, the social dynamic, unlike physical systems, are governed by a sense. Despite these limitations of the theory and Gintis Helbing is an important step in the integration of social sciences.
    Keywords: Complex system,adaptive system,general equilibrium
    Date: 2015–10
  7. By: Mukand, Sharun (University of Warwick); Rodrik, Dani (Harvard University)
    Abstract: We distinguish between three sets of rights - property rights, political rights, and civil rights - and provide a taxonomy of political regimes. The distinctive nature of liberal democracy is that it protects civil rights (equality before the law for minorities) in addition to the other two. Democratic transitions are typically the product of a settlement between the elite (who care mostly about property rights) and the majority (who care mostly about political rights). Such settlements rarely produce liberal democracy, as the minority has neither the resources nor the numbers to make a contribution at the bargaining table. We develop a formal model to sharpen the contrast between electoral and liberal democracies and highlight circumstances under which liberal democracy can emerge. We discuss informally the difference between social mobilizations sparked by industrialization and decolonization. Since the latter revolve around identity cleavages rather than class cleavages, they are less conducive to liberal politics.
    Date: 2015–09
  8. By: Jan Fagerberg (University of Oslo - TIK - Senteret); Staffan Laestadius (Royal Institute of Technology (KTH)); Ben Martin (Science Policy Research Unit, University of Sussex, UK)
    Abstract: Europe is confronted by an intimidating triple challenge – economic stagnation, climate change, and a governance crisis. This paper demonstrates how the three challenges are closely inter-related, and discusses how they can be dealt with more effectively in order to arrive at a more economically secure, environmentally sustainable and well governed Europe. In particular, a return to economic growth cannot come at the expense of greater risk of irreversible climate change. Instead, what is required is a fundamental transformation of the economy to a new ‘green’ trajectory based on rapidly diminishing emission of greenhouse gases. This entails much greater emphasis on innovation in all its forms (not just technological). Following this path would mean turning Europe into a veritable laboratory for sustainable growth, environmentally as well as socially. The paper is based on a forthcoming book: Fagerberg, J., S. Laestadius and B. R. Martin eds. (2015) The Triple Challenge for Europe: Economic Development, Climate Change and Governance, Oxford University Press.
    Keywords: Europe; European Union; triple challenge; economic stagnation; climate change; governance crisis; innovation policy; transformation process
    Date: 2016–09
  9. By: Klasen, Stephan
    Abstract: In recent years, debates about inequality have reached a renewed intensity in international policy debates. This is partly the result of much better data on the extent of inequality, where the work by Piketty on the top 1% has revealed much larger (and rising) inequality than previously known from household surveys. Similarly, work on global inequality in incomes and wealth have generated eye-catching results about the massive levels of global inequality in incomes, and even more so in wealth. Lastly, the renewed interest in inequality is also the result of rising inequality in many developing countries since the 1980s which has contributed in many places to social and political instability. In consequence, it is not surprising that the Sustainable Development Goals have included reducing inequality as a new goal. When discussing inequality, one needs to distinguish between-country, within-country, and global inequality as they are affected by very different drivers and require actions by different actors. Between-country inequality is related to differences in economic growth, and therefore reducing inequality will require poorer countries to grow faster than richer ones. This is primarily an issue of national growth strategies although the international economic environment can also play a role, as it might affect export opportunities, export prices, FDI, aid, and access to technologies. Within-country inequality is about the distribution of assets within a population, the returns that different groups receive on those assets, and to what extent the state redistributes incomes through tax and transfer systems. Global inequality, lastly, can be the result of between as well as within-country inequality and thus is affected by all of these determinants. For example, global inequality can be high because the average income of people in Sub-Saharan Africa is low compared to the rest of the world; or it can be high because the poorest in Sub-Saharan Africa are much poorer than the average incomes prevailing there. In this policy brief I will first talk briefly about global inequality and its relation to within- and between-country inequality and then focus primarily on the question what can be done to reduce within-country inequality in developing countries, and whether the international community can play a role here.
    Date: 2016

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