nep-pke New Economics Papers
on Post Keynesian Economics
Issue of 2016‒10‒09
eleven papers chosen by
Karl Petrick
Western New England University

  1. "Greece: Getting Out of the Recession" By Dimitri B. Papadimitriou; Michalis Nikiforos; Gennaro Zezza
  2. Conceptualizing the formation and role of expectations before 1950: George Katona's thought By Pierrick Dechaux
  3. Capital Openness and Income Inequality: A Cross-Country Study and The Role of CCT in Latin America By LaGarda, Guillermo; Gallagher, Kevin; Linares, Jennifer
  4. Financial Globalisation and India: Internal and External Dimensions By Azad, Rohit; Bose, Prasenjit; Dasgupta, Zico
  5. Building a path of equality to economic progress and macroeconomic stability - the economic theory of the Swedish model By Erixon, Lennart
  6. Dynamics of Socio-Economic Systems: Attractors, Rationality and Meaning By Andrzej Nowak; Jørgen Vitting Andersen; Wojciech Borkowski
  7. The Principle of Social Scaling By Paulo dos Santos
  8. Across the crises of modern capitalism By Fusari, Angelo i
  9. Developmental states in the 21st century - analytical structure of a new approach By Judit Ricz
  10. Empowering the vulnerable to be entrepreneurs: An empirical test on the efectiveness of the Ghana microfinance policy 2006 By Díaz Serrano, Lluís; Sackey, Frank G.
  11. Eyes wide shut: John Rawls's silence on racial justice By Ai-Thu Dang

  1. By: Dimitri B. Papadimitriou; Michalis Nikiforos; Gennaro Zezza
    Abstract: The Greek government has agreed to a new round of fiscal austerity measures consisting of a sharp increase in taxes on income and property and further reductions in pension and other welfare-related expenditures. Based on our model of the Greek economy, policies aimed at reducing the government deficit will cause a recession, unless other components of aggregate demand increase enough to more than offset the negative impact of fiscal austerity on output and employment. In this report we argue that the troika strategy of increasing net exports to restart the economy has failed, partly because of the low impact of falling wages on prices, partly because of the low trade elasticities with respect to prices, and partly because of other events that caused a sharp reduction in transport services, which used to be Greece’s largest export sector. A policy initiative to boost aggregate demand is urgently needed, now more than ever. We propose a fiscal policy alternative based on innovative financing mechanisms, which could trigger a boost in confidence that would encourage renewed private investment.
    Date: 2016–09
  2. By: Pierrick Dechaux (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique)
    Abstract: This article analyzes Katona's theory of expectations and compares it to that of Keynes and Hicks. It discusses the implicit and explicit debates on the introduction of psychology in economic theory. The aim of this paper is twofold: define Katona's thought and examine the impact of this work on the debate on expectations in macroeconomics. This paper shows that Katona is the only author, to our knowledge, who develops both an empirical and theoretical research program on expectations that borrows from the epistemology of Keynes. While rediscovering Katona's work, this paper contributes to highlight the forgotten methodology that initiated the construction of confidence (or sentiment) indexes. It also discusses the implicit and explicit debates on the introduction of psychology in economic theory.
    Abstract: Cet article étudie la théorie des anticipations de Katona et la compare à celle de Keynes et de Hicks. Il poursuit deux objectifs : définir la pensée de Katona et examiner son impact dans le débat sur les anticipations en macroéconomie. Ce papier met en évidence que Katona est le seul auteur, à notre connaissance, à développer un programme à la fois empirique et théorique sur les anticipations qui empreinte à l'épistémologie de Keynes. En s'intéressant aux travaux peu étudiés de Katona, cet article remet en avant la méthodologie à l'origine de la construction des indicateurs de confiance. Il discute aussi les débats implicites et explicites sur l'introduction de la psychologie en théorie économique.
    Keywords: psychology,expectations theories,expectations measures,Macroeconomics,George Katona,Keynes,Hicks,psychologie,théories des anticipations,mesures des anticipations,Macroéconomie
    Date: 2015–02
  3. By: LaGarda, Guillermo; Gallagher, Kevin; Linares, Jennifer
    Abstract: Recently, capital controls have made a comeback as both policymakers and academia have questioned the net benefits of liberalization and economic growth, especially after the 2008 Great Recession. While that literature has largely concluded that capital account liberalization may have detrimental effects on growth and accentuate financial instability in emerging markets, relatively little literature has examined the impacts of capital account liberalization on income inequality. Thus, this paper investigates the extent to which liberalization is beneficial for countries, conditional on institutional strength and financial depth. We specifically explore the differential impacts of capital account liberalization on income inequality during periods of economic expansion and contraction. The main findings suggest that the net impact of financial liberalization on income inequality is ambiguous during periods of economic expansion but detrimental during contractions. However, we also find that capital account openness needs not to be detrimental on income inequality if institutions are strong or - as it is the case in Latin America -if social safety nets are available.
    Keywords: Capital Liberalization, Capital Account, Inequality, Income, Financial Depth, Institutional Strength, Safety Nets
    JEL: D31 F2 F20 F3 F36 F38 I30
    Date: 2016–06–11
  4. By: Azad, Rohit; Bose, Prasenjit; Dasgupta, Zico
    Abstract: The Research Project seeks to study the implications of financial liberalisation, global financial integration and cross-border capital flows for the Indian economy. The direction of policy change in India over the past two decades and a half has been in this direction. The domestic financial sector has grown significantly in the past decade, which has impacted the trajectory of real sector growth and economic development. The report contains four chapters. The first one introduces the readers to the Indian macroeconomic scene over the past two decades and the financial aspects of the growth process. The second chapter focuses on the internal dimensions of the growth process and the recent developments in the financial sector, especially the bad loans crisis. The third chapter looks at financial globalisation and its impact on India’s external vulnerability. The concluding chapter presents a theoretical model which seeks to explain the nature and consequences of financial liberalisation and the integration of the Indian economy into the globalised economy.
    Keywords: Corporate Investment, Debt, NPAs, Riskless Capitalism, Kaleckian Model
    JEL: E11 E22 E32 E44 E5
    Date: 2016–06–07
  5. By: Erixon, Lennart (Dept. of Economics, Stockholm University)
    Abstract: The Swedish Rehn-Meidner model is a unique economic- and wage-policy program for the simultaneous achievement of full employment, price stability, growth and equality. This article presents, specifies and develops the model’s underlying macroeconomic theory. The Rehn-Meidner theory is a synthesis between a flex-price Kaldorian model of profit margins and a Kaleckian model where profit margins are squeezed under full-employment conditions. The theory deviates from both Kaldorian and Kaleckian models by stressing the importance of low profit margins for productivity growth. The Rehn-Meidner theory and policy deserve a prominent place in macroeconomics even in the age of globalization and financialization. However, some weaknesses of the model make it necessary to modify the arguments for and partly the composition of its policy program.
    Keywords: Rehn-Meidner model; labor market policy; wage policy of solidarity; structural change; productivity growth; inflation
    JEL: E11 E12 E23 E24 E25 E31 E32 E62 F43
    Date: 2016–09–30
  6. By: Andrzej Nowak (Institute for Social Studies, University of Warsaw - Institute for Social Studies, University of Warsaw,); Jørgen Vitting Andersen (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique); Wojciech Borkowski (Institute for Social Studies, University of Warsaw - Institute for Social Studies, University of Warsaw,)
    Abstract: Gintis and Helbing go beyond traditional boundaries of scientific disciplines and propose integration of major theories from the main disciplines of the social as well as natural sciences. The theory captures well many insights from social psychology. Several assumptions of the model, however, may be questioned. The assumption that social systems are at equilibrium is too narrow, because social systems may also be out of equilibrium. The notion of attractor dynamics shows that systems may converge on different types of attractors depending on the value of control parameters. The notion of rationality of human behavior may be challenged on the basis of new data from psychology, decision science and behavioral economics. Often individuals do not process the information, but rather copy the choices of others. Individuals interact by both direct and indirect means – though market mechanisms. Most importantly, social dynamics, in contrast to physical systems, is governed by meaning. Despite these limitations the theory of Gintis and Helbing represents an important step in the integration of the social sciences.
    Keywords: complex system,adaptive system,general equilibrium
    Date: 2015
  7. By: Paulo dos Santos (Department of Economics, New School for Social Research)
    Abstract: This paper motivates the content and analytical significance of processes of “social scaling” in competitive economic settings, postulating a general Principle that describes the regulations they impose on the functioning of certain economic systems. Economic competition often defines behavioral relationships between individual measures of certain variables and average or social measures of themselves. These relationships ensure a number of behaviorally significant economic variables are socially scaled measures. Individual values of such variables are subject to systemic interdependences, which may take the form of aggregate first-moment constraints on their distributions. The paper shows how processes of social scaling in capital and labor markets can help account for the observed frequency distributions of wage income and Tobin’s q, suggesting such processes may be a pervasive in economic systems. Finally, the paper’s discussion illustrates and motivates the distinctive usefulness of statistical-mechanical methods in Economics, both in defining new conceptualizations of the relationship between individual agencies and aggregate regulations in economic systems, and in the development of logically robust observational methods in economic analysis.
    Keywords: Social Scaling, Economic Distribution, Statistical Mechanics, Observational Economics
    JEL: B41 C18 C69
    Date: 2016–09
  8. By: Fusari, Angelo i
    Abstract: This essay provides a preliminary assessment of the transition from the 1929 crisis (and its solution) to the 2008 crisis. It points out how the modalities of the solution of the first crisis have paved the way for the recent crisis. The paper hangs the description and explanation of the whole process on a combination of the notions of business cycles and phases of development, a combination that allows the representation and explanation of the successive and various patterns of capitalism across the considered historical period. Thereafter we underline, mainly using the notion of functional imperatives, the important institutional transformations required in the passage from one type of capitalism to another, and the destabilizing effects that have resulted from the absence of those transformations in the wake of the emergence of conflictualconsumeristic capitalism and financial capitalism. On this analytical basis, we ground the widening of the recent crisis, showing a growing menace of long-term stagnation, contradictions and conflicts. Finally, the paper delineates some institutional reforms essential to overcoming the structural deficiencies inherited by conflictual-consumeristic capitalism and the dawning and no less damaging drawbacks that are being prepared by financial capitalism
    Keywords: Business cycles; Phases of development; The present failure of demand models; The question of money; Oganization of financial markets; Separation principle
    JEL: A1 E5 E6 E60 O3 P50
    Date: 2015
  9. By: Judit Ricz (Institute of World Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences)
    Abstract: The financial and economic crisis of 2008-9 and the following difficulties have brought back the analysis of active state involvement in the economy to the research agenda of economists, and a new renaissance of developmental state (DS) approach can be observed. The aim of our paper is to draw up a new approach of DS in the twenty-first century by reviewing most recent literature. In our analysis we argue that to construct a new DS concept one has to break up with the historical and geographical limitation of the classic DS paradigm and the ideological debate around it. Meanwhile one has to build upon most recent results of new institutional, political and development economics’ analysis as well as the more than half century long experiences of classic DS. While presenting the structure and main elements of the new DS approach we aim to highlight those questions and areas of analysis, where consensus seems to emerge in literature.
    Keywords: developmental state, globalization, inclusive development
    JEL: F63 O20 P11
    Date: 2016–09
  10. By: Díaz Serrano, Lluís; Sackey, Frank G.
    Abstract: The study aims at testing the Ghana Microfinance Policy set up to support the vulnerable through access to credit. We resort to the Blinder-Oaxaca decomposition to determine if there is positive discrimination in favor of women and young entrepreneurs in the rationing behavior of the microfinance companies. This is what we should expect if the policy is effective. Our results show that even after controlling for a large number of borrower characteristics, microfinance type and credit worthiness variables, there is positive discrimination that favors female and young entrepreneurs as this discrimination is largely determined by the differential treatment these groups receive in respect of men and older borrowers from microfinance institutions. Our results show that the Government microfinance is the most severe in the rationing behavior towards the discriminating groups.
    Keywords: Microfinances -- Ghana, Crèdit -- Ghana, Programes d'acció positiva -- Ghana, 334 - Formes d'organització i cooperació en l'economia,
    Date: 2016
  11. By: Ai-Thu Dang (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique)
    Abstract: John Rawls's remarks on race are sparse in his writings. However, three key moments in his conceptual apparatus wherein racial issues appear explicitly can be be highlighted: (1) the status of race as a feature of the veil of ignorance; (2) racial minorities, the least advantaged, and the difference principle; and (3) the role of arguments made by antebellum abolitionist dissidents and Martin Luther King, Jr., in favor of racial equality in his reformulation of his notion of public reason. I show that the introduction of race poses difficulties for Rawls in his theory of justice. I also propose an explanation of why Rawls does not address issues of racial justice more explicitly and in-depth. However, because Rawls himself explained his relative silence on racial justice, I discuss its relevance. I contend that Rawls's conception of justice as fairness as a form of political liberalism is indebted to a strong principle of equal citizenship for all individuals that is blind to race and ethnicity, so his theoretical apparatus addresses the issue of legal racial discrimination or institutional racism. Nevertheless, it fails to address the problem of systemic racial discrimination.
    Abstract: Il n'existe pas de développements systématiques dans les écrits de John Rawls sur la question des inégalités raciales ou fondées sur l'origine ethnique, mais seulement des remarques parcellaires et répétitives sur ce sujet. On peut toutefois repérer trois moments clés dans la construction théorique de Rawls où les questions de justice raciale sont introduites : le statut de la race et le voile d'ignorance ; les minorités raciales, les plus mal lotis de la société et le principe de différence ; le rôle des arguments religieux avancés par les abolitionnistes américains et par Martin Luther King en faveur de l'égalité raciale dans la reformulation par Rawls de sa conception de la raison publique. Je montre que l'introduction des questions de justice raciale déstabilise le cadre théorique de Rawls et soulève des questions dont il est lui-même conscient. Je discute de l'explication donnée par Rawls pour justifier son relatif silence et je montre que ses principes de justice permettent de lutter contre la discrimination directe mais ne permettent pas de répondre au défi de la discrimination systémique.
    Keywords: justice as fairness,racial (in)justice,public reason,ideal and nonideal theory,théorie idéale et théorie non idéale,John Rawls,justice comme équité,(in)justice raciale,raison publique
    Date: 2015–04

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