nep-pke New Economics Papers
on Post Keynesian Economics
Issue of 2017‒01‒08
sixteen papers chosen by
Karl Petrick
Western New England University

  1. When Robertson was Keynesian and Keynes Robertsonian: a discussion between D.H.R. and J.M.K. in the early 1930s and the problems with the Monetary Circuit Theory. A note. By Sergio Cesaratto
  2. A theory of economic policy lock-in and lock-out via hysteresis: Rethinking economists' approach to economic policy By Palley, Thomas I.
  3. Top Income Shares and Aggregate Wealth-Income Ratio in a Two-Class Corporate Economy By Soon Ryoo
  4. An Integrated Approach to Climate Change, Income Distribution, Employment, and Economic Growth* By Taylor, Lance; Rezai, Armon; Foley, Duncan K.
  5. Demand Drives Growth All The Way By Lance Taylor; Duncan K Foley; Armon Rezai; Luiza Pires; Ozlem Omer; Ellis Scharfenaker
  6. The modern revival of the Classical surplus approach: implications for the analysis of growth and crises By Sergio Cesaratto
  7. Chicago Economics in the Making, 1926-1940. A Further Look at US Interwar Pluralism By Luca Fiorito; Sebastiano Nerozzi
  8. Changing the world one student at a time? Uncovering subjective understandings of economics instructors' roles By Gruszka, Katarzyna; Scharbert, Annika Regine; Soder, Michael
  9. The Paradox of Thrift in an Inegalitarian Neoclassical Economy By Mabrouk, Mohamed
  10. The Economics and Ethics of Human Induced Climate Change By Spash, Clive L.; Gattringer, Clemens
  11. Ecological Macreconomics: Introduction and Review By Rezai, Armon; Stagl, Sigrid
  12. Evolutionary Political Economy: Content and Methods By Hanappi, Hardy; Scholz-Waeckerle, Manuel
  13. The "Natural" Interest Rate and Secular Stagnation By Lance Taylor
  14. Pluralism in the Market of Science? A citation network analysis of economic research at universities in Vienna. By Glötzl, Florentin; Aigner, Ernest
  15. Progressive Era Racism and its (Jewish) Discontents By Luca Fiorito; Tiziana Foresti
  16. The Role of Development Finance in Climate Action Post-2015 By Tara Shine; Gisela Campillo

  1. By: Sergio Cesaratto
    Abstract: Supporters of the Monetary Circuit Theory argue that workers’ or households’ savings may be used to fix firms’ losses and avoid crises. The question is reminiscent of a discussion that took place between Dennis Robertson (DHR) and Keynes on the Treatise (1930) about Keynes’s idea that workers’ savings might cover firms’ losses. In this discussion, DHR denied that savings could correspond to firms’ losses, arguing that savings do not exist independently of investment. Circuitists like Graziani seem to reiterate the Treatise’s mistake of maintaining that part of savings corresponds to firm’s losses and are lent to firms to fix those losses, while neglecting the effects of those losses on output as DHR pointed out in the early 1930s.
    Keywords: Monetary circuit, Robertson, Keynes, Graziani, Treatise
    JEL: B22 B50 E12
    Date: 2016–04
  2. By: Palley, Thomas I.
    Abstract: This paper explores lock-in and lock-out via economic policy. It argues policy decisions may near-irrevocably change the economy's structure, thereby changing its performance. That causes changed economic outcomes concerning distribution of wealth, income and power, which in turn induces locked-in changes in political outcomes. That is a different way of thinking about policy compared to conventional macroeconomic stabilization theory. The latter treats policy as a dial which is dialed up or down, depending on the economy's state. Lock-in policy is illustrated by the euro, globalization, and the neoliberal policy experiment.
    Keywords: economic policy,lock-in,hysteresis,globalization,euro,neoliberalism
    JEL: D7 E6 F5 H3 L5
    Date: 2016
  3. By: Soon Ryoo (Department of Finance and Economics, Adelphi University)
    Abstract: This paper examines some determinants of top income shares and the aggregate wealth-income ratio in the United States. The paper, first, points out the difficulties in Piketty’s neo-classical version of explanation of US income inequality, which stresses the effect of the rising aggregate wealth-income ratio and high elasticity of factor substitution. Second, the analysis, based on a Cambridge two-class model along the lines of Kaldor (1955/56, 1966) and Pasinetti (1962), highlights the role of financialization in increasing inequality. Third, the analysis suggests that the rise in the aggregate wealth-income ratio from 1980 to 2007 in the US is explained mostly by asset price inflation, not by technical relations. Finally, the analysis examines the effects of the slowdown in capital accumulation on income distribution and wealth-income ratios, which are very different from those in Piketty’s Capital in the twenty first century.
    Keywords: top income share, wealth-income ratio, financialization, top management pay, stock-flow consistency
    JEL: E12 E21 E25 E44
    Date: 2016
  4. By: Taylor, Lance; Rezai, Armon; Foley, Duncan K.
    Abstract: A demand-driven growth model involving capital accumulation and the dynamics of greenhouse gas (GHG) concentration is set up to examine macroeconomic issues raised by global warming, e.g. effects on output and employment of rising levels of GHG; offsets by mitigation; relationships among energy use and labor productivity, income distribution, and growth; the economic significance of the Jevons and other paradoxes; sustainable consumption and possible reductions in employment; and sources of instability and cyclicality implicit in the twodimensional dynamical system. The emphasis is on the combination of biophysical limits and Post- Keynesian growth theory and the qualitative patterns of system adjustment and the dynamics that emerge.
    Keywords: Demand-driven growth; climate change; demand and distribution; energy use; energy productivity; labor productivity; employment
    Date: 2015–03
  5. By: Lance Taylor; Duncan K Foley; Armon Rezai; Luiza Pires; Ozlem Omer; Ellis Scharfenaker (Schwartz Center for Economic Policy Analysis (SCEPA))
    Abstract: This paper makes three contributions to the existing literature on economic growth: first, we provide a demand-driven alternative to the conventional supply side Solow-Swan growth model. The model’s medium run is built around MarxGoodwin cycles of demand and distribution. Second, we introduce wage income of “capitalist” households. The Samuelson-Modigliani steady state “dual” to Pasinetti’s cannot be stable when capitalists have positive wages. Finally, we speak to the discussion triggered by Piketty on the stability of wealth concentration and its relation to the profitability of capital. Our demand-driven model of the long run satisfies Kaldor’s stylized facts (the gold standard of growth theory) and generates sustained economic growth with the capitalists’ share of wealth stabilizing between zero and one. Complications arising from “excess” capital gains and how well the model fits the data are briefly considered.
    Keywords: Demand, Growth, Keynes
    JEL: B51 E12
    Date: 2016–04
  6. By: Sergio Cesaratto
    Abstract: The paper reviews the main elements of Modern Classical Theory in view of the analysis of contemporary societies and in particular: the recovery of the Classical and Marxist “surplus approach” as a solid foundation for the analysis of social conflict; a demand-led theory of the level and growth of output based on the rejection of Say’s Law and the recovery of the notion of “external markets” put forward by Rosa Luxembourg and Kalecki, as the framework for the investigation of growth and crises in different historical phases of capitalism; the dismantling of the analytical core of Marginalism and of its laissez-faire policy prescriptions; and finally, the rejection of methodological individualism and of subjectivism in economic analysis and the preservation of the analytical methods of the Classical economists and Marx. In this regard, the paper underlines some differences with other heterodox schools, but also convergence with endogenous money theory and with systemic views of technical change.
    Keywords: Classical economists, Sraffa, Kalecki, Keynes, Surplus approach, heterodox economics
    JEL: B12 B24 B51 E11
    Date: 2016–08
  7. By: Luca Fiorito; Sebastiano Nerozzi
    Abstract: The aim of this paper is to unfold a rich body of archival material that can shed new light on the nature and evolution of interwar Chicago economics. Specifically, this paper is based on a scrutiny of the PhD qualifying exams on Economic Theory at Chicago from 1926 to 1940. The qualifying tests (supplemented by the courses’ programs) show the existence of two important turning points in the shaping of Chicago economic training. The first one is in 1927, when John M. Clark, the undisputed leader of the Chicago Department of Economics during the heyday of institutionalism, moved to Columbia, leaving open ground to the restructuring of the courses according to a different and more analytical approach already represented in the Department by Viner and, in a narrower field, by Paul Douglas. The arrival at Chicago of figures such as Knight, Schultz and Simons definitely shifted the balance toward neoclassical theory. A second turning point occurred in 1933 when the qualifying test in Economic Theory was divided into two major fields: price and distribution theory on the one side; money and business cycle on the other. This innovation reveals the importance acquired by monetary theory in economic training at a time that is commonly associated with the nurturing of what was later named as the “Chicago monetary tradition.”
    Keywords: Chicago School; Institutionalism; Knight, Frank H.; Viner, Jacob
    JEL: B13 B15 B21 B22 B23 B25
    Date: 2016–05
  8. By: Gruszka, Katarzyna; Scharbert, Annika Regine; Soder, Michael
    Abstract: In the wake of the economic crisis, a number of student organisations and researchers came together to highlight the lack of pluralism and heterodox approaches in economics curricula. The high relevance of the pluralism debate becomes clear once set within the considerations of the implications of a given scientific discourse on reality. This is especially relevant for social sciences, where reality-creating is visible in e.g. the influence of economists on policy making. This study explores the role of instructors in co-constructing the dynamics of the pluralism discourse and debates. An empirical field study is conducted with lecturers in introductory economics courses at the WU Vienna University of Economics and Business where they place themselves within the pluralism discourse via a Q-study. Q is a mixed method typically employed for studying subjectivity inherent to a given, socially contested topic. It begins with a set of statements that undergo a sorting procedure on a relative ranking scale, and finishes with factorrendering. Four voices are identified: Moderate Pluralist, Mainstreamers, Responsible Pluralists, and Applied Pluralists. The implications of the ideas brought by these voices are discussed from the point of view of discursive institutionalism, stressing in particular the role of ideas and discourse in institutional change. On top of what is here referred to as discursive readinesses for changes towards more pluralism, strategies for overcoming the difficulties on the institutional level need to be developed. (authors' abstract)
    Date: 2016
  9. By: Mabrouk, Mohamed
    Abstract: [Schilcht 1975] and [Bourguignon 1981] studied the case of a convex saving function in the [Stiglitz 1969] model. They have shown that if one of the two proportions of the rich or the poor is below a certain threshold, there is a two-class equilibrium. However, they have only proved the existence of this threshold. We give here a system of equations to calculate this threshold which we interpret as the maximum proportion of rich for having a stable two-class configuration. If the proportion of rich exceeds this threshold, the economy enters a phase of decline although the golden-rule capital has not yet been reached. This decline is due to a specific articulation between the rate of decrease in the productivity of capital and the rate of increase in the depreciation of capital. The mechanism of this decline recalls the description given in [Keynes 1936], of the decline which happens when there is too much savings in an inegalitarian context. This is an example of what is known as the "paradox of thrift". It is remarkable that this paradox takes place in a neoclassical setting that does not include key Keynesian elements such as saturation of demand, monetization of savings, short-term effects, expectation problems, involuntary unemployment and rigidities. Numerical simulations are given to illustrate and analyze the mechanisms involved.
    Keywords: Paradox of Thrift, Inequality, Saving, Growth.
    JEL: O49
    Date: 2016–12–12
  10. By: Spash, Clive L.; Gattringer, Clemens
    Abstract: Human induced climate change poses a series of ethical challenges to the current political economy, although it has often be regarded by economists as only an ethical issue for those concerned about future generations. The central debate in economics has then concerned the rate at which future costs and benefits should be discounted. Indeed the full range of ethical aspects of climate change are rarely even discussed. Despite recent high profile and lengthy academic papers on the topic the ethical remains at best superficial within climate change economics. Recognising the necessary role of ethical judgment poses a problem for economists who conduct exercises in cost-benefit analysis and deductive climate modelling under the presumption of an objectivity that excludes values. Priority is frequently given to orthodox economic methodology, but that this entails a consequentialist utilitarian philosophy is forgotten while the terms of the debate and understanding is simultaneously restricted. We set out to raise the relevance of a broader range of ethical issues including: intergenerational ethics as the basis for the discount rate, interregional distribution of harm, equity and justice issues concerning the allocation of carbon budgets, incommensurability in the context of compensation, and the relationship of climate ethics to economic growth. We argue that the pervasiveness of strong uncertainty in climate science, incommensurability of values and nonutilitarian ethics are inherent features of the climate policy debate. That mainstream economics is ill-equipped to address these issues relegates it to the category of misplaced concreteness and its policy prescriptions are then highly misleading misrepresentations of what constitutes ethical action. (authors' abstract)
    Keywords: Climate change; economics; ethics; carbon budgets; discounting; compensation; harm; intergenerational equity; intragenerational distribution; justice; consequentialism; utilitarianism; incommensurability; risk; uncertainty; cost-benefit analysis; growth economy
    Date: 2016–06
  11. By: Rezai, Armon; Stagl, Sigrid
    Abstract: The Great Recession of the past years has brought macroeconomics back. Many of the recession's phenomena, causes and consequences alike, cannot be understood using solely microeconomic decisionmaking. Over the past decades the economics profession has pursued the implications of rational choices and enshrined them in so-called "micro foundations" as a hallmark of modern economic theory. By focusing on the choices and actions of individual consumers, firms, or the government, however, one can easily miss important determinants of the economic system which only arise at the meso- or the macroeconomic levels where institutions, coordination, and complexity in general are important and sometimes even can take on a life of their own. To lesser extent, ecological economics has fallen prone to similar pitfalls by mostly focusing the unit of investigation on low-level, small-scale subsystems of the economy. There are, of course, notable exceptions including the early contributors Boulding and Georgescu-Roegen and the general interest of ecological economists in the field of (ecological) macroeconomics has been increasing. (authors' abstract)
    Date: 2016
  12. By: Hanappi, Hardy; Scholz-Waeckerle, Manuel
    Abstract: In this paper we present the major theoretical and methodological pillars of evolutionary political economy. We proceed in four steps. Aesthetics: In chapter 1 the immediate appeal of evolutionary political economy as a specific scientific activity is described. Content: Chapter 2 explores the object of investigation of evolutionary political economy. Power: The third chapter develops the interplay between politics and economics. Methods: Chapter 4 focusses on the evolution of methods necessary for evolutionary political economy. The conclusion positions the field of evolutionary political economy – as we proposed to establish it in this paper - within the wider area of scientific activity. In particular, demarcation lines towards some fashionable economic schools (institutionalism, behavioural economics, post-Keynesianism, etc.) are indicated.
    Keywords: Evolutionary Theory, Political Economy, Methodology of Social Sciences
    JEL: B00 B52 C63
    Date: 2015–10–31
  13. By: Lance Taylor (Schwartz Center for Economic Policy Analysis (SCEPA))
    Abstract: The "natural" interest rate in loanable funds macroeconomic models doesn't always fit the data. New Keynesian models, in which economic performance is determined by loanable funds, are inconsistent with macroeconomic data.
    Keywords: Demand, Growth, Keynes, Interest Rates, Loanable Funds
    JEL: E40 E12 E5
    Date: 2016–06
  14. By: Glötzl, Florentin; Aigner, Ernest
    Abstract: Pluralism has become a central issue not only in the public discourse but also in heterodox economics, as the focus on impact factors and rankings based on citations continues to increase. This marketization of science has been an institutional vehicle for the economic mainstream to promote its ideas. Citations thus have become a central currency in economics as a discipline. At the same time they allow to investigate patterns in the discourse. Analyzing articles published by the two major economics departments and the more interdisciplinary Department for Socioeconomics in Vienna, this paper is novel in applying both bibliometric techniques and citation network analysis on the department level. We find that (1) Articles in heterodox journals strongly reference the economic mainstream, while the mainstream does not cite heterodox journals, (2) Articles written by researchers of the Department of Socioeconomics cite more heterodox journals irrespective of whether they are published in mainstream or heterodox journals, (3) The economics departments display a citation network exhibiting a clear "mainstream core - heterodox periphery" structure, as Dobusch & Kapeller (2012b) suggest the overall discourse in economics to be, while the Department of Socioeconomics could be described as a plural though not pluralistic department with many distinct modules in the network , reflecting various disciplines, topics and schools of thought. (authors' abstract)
    Date: 2015–11
  15. By: Luca Fiorito; Tiziana Foresti
    Abstract: This work analyzes the contribution to the debates on labor and immigration of a group of Jewish academicians and reformers who, during the second half of the Progressive Era, explicitly took a stance against the racialist and eugenic rhetoric of the period. This group includes first-rank economists like Edwin R. A. Seligman, Jacob H. Hollander, and Emanuel A. Goldenweiser; influential field specialists such as Isaac A. Hourwich and Isaac M. Rubinow; and relatively less known figures like Max J. Kohler and Samuel K. Joseph. By focusing on the voices of these dissenters, the work enriches the emerging picture of Progressive Era eugenic and racial thought
    Keywords: American Progressive Era, Edwin R. A. Seligman, Immigration, Race, Anti-Semitism
    JEL: B1 B15
    Date: 2016–11
  16. By: Tara Shine (OECD); Gisela Campillo (OECD)
    Abstract: This working paper reflects on the outcomes of the 2015 agreements on development and environment including the Sendai Framework, the Addis Ababa Action Agenda, the 2030 Agenda and the Sustainable Development Goals, and the Paris Agreement. It identifies common themes emerging from the international agreements and their implications for development co-operation providers and their partners. The paper outlines existing synergies between climate and development finance and proposes factors to improve coherence for sustainable development with a particular focus on the role of development co-operation providers in the post-2015 context. The paper contributes to the discussion about how the international community can successfully deliver on the commitments to sustainable development and climate action made in 2015.
    Keywords: climate change, climate finance, development co-operation, development finance, sustainable development
    JEL: N5 O19 P48 Q56
    Date: 2016–12–22

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