nep-pke New Economics Papers
on Post Keynesian Economics
Issue of 2017‒04‒09
fourteen papers chosen by
Karl Petrick
Western New England University

  1. The Heckscher-Ohlin-Samuelson Model and the Cambridge Capital Controversies By Kazuhiro Kurose; Naoki Yoshihara
  2. A Vertical Social Accounting Matrix of the U.S. Economy By Nelson H. Barbosa-Filho
  3. Quality and inequality: Taste, value, and power in the third wave coffee market By Fischer, Edward F.
  4. Speculation rather than enterprise? Keynes’ beauty contest revisited in theory and experiment. By Kene Boun My; Camille Cornand; Rodolphe Dos Santos Ferreira
  5. The comparative statics of effective demand By Jochen Hartwig
  6. Theories of (Un)sustainable Consumption By Clive L. Spash; Karin Dobernig
  7. Measuring Extractive Institutions: Colonial Trade and Price Gaps in French Africa By Federico Tadei
  8. The Economist as Plumber By Esther Duflo
  9. Privatized Keynesianism or conspicuous consumption? Status anxiety and the financialization of consumption in Chile By González, Felipe
  10. To What Extent Can Long-Term Investment in Infrastructure Reduce Inequality? By E. Hooper; S. Peters; P. Pintus
  11. Peripherality, Inequality, and Economic Development in Latin American Countries By Yoshimichi MURAKAMI; Nobuaki HAMAGUCHI
  12. Faraway, so Close: Coupled Climate and Economic Dynamics in an Agent-Based Integrated Assessment Model By Francesco Lamperti; Giovanni Dosi; Mauro Napoletano; Andrea Roventini; Alessandro Sapio
  13. Responsible Innovation in the Light of Moral Responsibility By Sophie Pelle; Bernard Reber
  14. Just Another Niche in the Wall? How Specialization Is Changing the Face of Mainstream Economics. By Cedrini, Mario; Magda, Fontana

  1. By: Kazuhiro Kurose; Naoki Yoshihara
    Abstract: This paper examines the validity of the factor price equalisation theorem (FPET) in relation to capital theory. Additionally, it presents a survey of the literature on Heckscher-Ohlin-Samuelson (HOS) models that treat capital as a primary factor, beginning with Samuelson (1953). Furthermore, this paper discusses the Cambridge capital controversy, which contends that marginal productivity theory does not hold when capital is assumed to be as a bundle of reproducible commodities instead of as a primary factor. Consequently, it is shown that under this assumption, the FPET does not hold, even when there is no reversal of capital intensity. This paper also demonstrates that the recent studies on the dynamic HOS trade theory generally ignore the difficulties posed by the capital controversies and are thereby able to conclude that the FPET holds even when capital is modelled as a reproducible factor. Our analysis suggests that there is a need for a basic theory of international trade that does not rely on factor price equalisation and a model that formulates capital as a bundle of reproducible commodities.
    Date: 2016–03–31
  2. By: Nelson H. Barbosa-Filho (Schwartz Center for Economic Policy Analysis (SCEPA))
    Abstract: This paper presents an adaptation ofthe square social accounting matrix used in economic planning and programming to the rectangular or vertical transaction matrix used in post-Keynesian monetary economics. The objective is to obtain a simple and intuitive framework to organize macroeconomic data in terms of the main institutional sectors of the economy, showing how production, distribution, demand and financing are inter-related.
    Keywords: Planning, Transaction Matrix, Post-Keynesian, Monetary
    JEL: E1 E5
    Date: 2017–03
  3. By: Fischer, Edward F.
    Abstract: Based on a case study of the burgeoning high-end ("Third Wave") coffee market in the United States, this discussion paper examines value creation and capital accumulation in an age of neoliberal globalization. Drawing on sociological and economic theories of value, as well as perspectives on world systems and late capitalist accumulation, this paper proposes a framework in which the importance Marx ascribed to control over the material means of production has become eclipsed by control over the means of symbolic production in extracting surplus value through global trade. It shows how roasters, baristas, and marketers have created a new lexicon of quality for coffee, one tied to narratives of provenance and exclusivity that creates much of the value added in the coffee trade. This disadvantages smallholding coffee farmers who are heavily invested in land and the material means of production but lack the social and cultural capital to benefit from the surplus value created through symbolic production. It also perpetuates classic dependency patterns of global capital accumulation.
    Keywords: coffee,Guatemala,values,inequality,means of production,Kaffee,Guatemala,Werte,Ungleicheit,Produktionsmittel
    Date: 2017
  4. By: Kene Boun My; Camille Cornand; Rodolphe Dos Santos Ferreira
    Abstract: In Keynes’ beauty contest, agents make evaluations reflecting both an expected fundamental value and the conventional value expected to be set by the market. They thus respond to fundamental and coordination motives, respectively, the prevalence of either being set exogenously. Our contribution is twofold. First, we propose a valuation game in which agents strategically choose how to weight each motive. This game emphasises how public information leads agents to favour the coordination motive. Second, we test the game through a laboratory experiment. Subjects tend to conform to theoretical predictions, except when fundamental uncertainty is low relative to strategic uncertainty.
    Keywords: dispersed information, public information, beauty contest, coordination, experiment.
    JEL: D84 C92 E12
    Date: 2017
  5. By: Jochen Hartwig (Professur für Wirtschaftspolitik, Faculty of Economics and Business Administration, Chemnitz University of Technology, CESifo Munich, Germany)
    Abstract: Keynes introduces the term ‘effective demand’ in chapter 3 of the General Theory as designating the point of intersection of two functions: the ‘aggregate demand function’ (D) and the ‘aggregate supply function’ (Z). For the first time in the literature, I here specify exact functional forms for the D and Z functions and run numerical simulations which allow to study the comparative statics of the model in the face of various ‘shocks’. The demonstration of how the D/Z model actually works will hopefully prove useful for future students of the economics of Keynes.
    Keywords: Keynes, effective demand, D/Z model
    JEL: B31 E12
    Date: 2017–03
  6. By: Clive L. Spash; Karin Dobernig
    Abstract: In this discussion paper we review and contrast alternative theories of consumption in terms of the intellectual basis they provide for understanding sustainable behaviours. A defining aspect of the modern literature in this field is the emphasis on the individual as a volitional agent who engages wilfully in the decision to consume. This is in stark contrast to earlier literature that concentrated on the structural lock-in of individuals to undesirable consumption patterns and the powers of corporations in creating consumer demand for their products and services. We argue that, in order to unravel consumption in its full complexity, and as a matter of utmost importance, understanding must include both the buy-in of individual agents, whose consumption activities contribute to their self-identity, and the structure imposed by the institutions of society, that frame the context of actors’ decisions. More than this, any move away from the current unsustainable consumption patterns prevalent in modern societies requires a richer conceptualisation of consumption that involves an awareness and examination of the political economy in which humans live.
    Keywords: sustainable consumption, structure, agency, nudging, social practice theory, technostructure, corporate power, social ecological transformation
    Date: 2017
  7. By: Federico Tadei (Department of Economic History, Universitat de Barcelona.)
    Abstract: A common explanation for current African underdevelopment is the extractive character of institutions established during the colonial period. Yet, since colonial extraction is hard to quantify, the magnitude of this phenomenon is still unclear. In this paper, I address this gap in the literature by focusing on monopsonistic colonial trade in French Africa. By using new archival data on export prices, I provide yearly-estimates of colonial extraction via trade, measured as the gap between actual prices that the colonial trading companies paid to African agricultural producers and prices that should have been paid in a counter-factual competitive market (i.e. world prices minus trade costs). The results show that African prices were about half than what they would have been in competitive markets. This suggests that colonial trade dynamics was characterized by a considerable amount of extraction.
    Keywords: Africa, Development, Extractive Institutions, Colonization, Trade, Price Gaps
    JEL: N17 O43
    Date: 2017–03
  8. By: Esther Duflo
    Abstract: As economists increasingly help governments design new policies and regulations, they take on an added responsibility to engage with the details of policy making and, in doing so, to adopt the mindset of a plumber. Plumbers try to predict as well as possible what may work in the real world, mindful that tinkering and adjusting will be necessary since our models gives us very little theoretical guidance on what (and how) details will matter. This essay argues that economists should seriously engage with plumbing, in the interest of both society and our discipline.
    JEL: A0
    Date: 2017–03
  9. By: González, Felipe
    Abstract: Why do people acquire consumer debt? In this article, I draw on the case of Chile and call into question the explanatory power of both the "trickle-down" and "privatized Keynesianism" hypotheses. I argue that these narratives fail to explain why, in the context of wage improvements, consumers use credit to finance "ordinary" forms of consumption that do not aim to protect lifestyles or signal status to others, but rather reflect a subtler expansion of the standard of living. Building on the idea that consumer debt is used to fill a gap between income and a socially constructed standard of living, I show that financialization might be explained by two subtler mechanisms in the case of Chile and, arguably, other developing countries: spurious upward mobility and relative deprivation. In both cases, families consume beyond their means in order to perform their class identities and meet the consumption standards to which they feel entitled. Instead of imitating the rich, consumers seek to perform their belonging to an "imaginary middle class."
    Keywords: trickle-down consumption effect,privatized Keynesianism,status anxiety,spurious mobility,relative deprivation,Trickle-down-Effekt,privatisierter Keynesianismus,Statusangst,Scheinaufstieg,relative Deprivation
    Date: 2017
  10. By: E. Hooper; S. Peters; P. Pintus
    Abstract: By reviewing US state-level panel data on infrastructure spending and on per capita income inequality from 1950 to 2010, this paper sets out to test whether there is an empirical link between infrastructure and inequality. Our main result, obtained from panel regressions with both state and time fixed effects, shows that highways and higher education spending growth in a given decade correlates negatively with Gini indices at the end of the decade. Such a finding suggests a causal effect from growth in infrastructure spending to a reduction in inequality, through better access to job and education opportunities. More significantly, this relationship is stronger with inequality at the bottom 40 per cent of the income distribution. In addition, infrastructure expenditures on highways are shown to be more effective at reducing inequality. A counterfactual experiment reveals which US states ended up with a significantly higher bottom Gini coefficient in 2010 that is attributed to underinvestment in infrastructure over the first decade of the 21st century. From a policy making perspective, this paper aims to present innovations in finance for infrastructure investments, for the US, other industrially advanced countries and also for developing economies.
    Keywords: Public Infrastructure, Education, Highways, Income Inequality, US State Panel Data, Fixed Effects Models.
    JEL: C23 D31 H72 I24 O51
    Date: 2017
  11. By: Yoshimichi MURAKAMI (Research Institute for Economics & Business Administration (RIEB), Kobe University, Japan); Nobuaki HAMAGUCHI (Research Institute for Economics & Business Administration (RIEB), Kobe University, Japan)
    Abstract: In this study, we analyse new peripheral features of Latin American Countries (LACs), conceptualized by neo-structuralism and the triangular relation between peripherality, inequality, and economic development. We analyse the following as peripheral features: primary commodity dependence, low level of technological progress, poor formation of global value chains (GVCs). On the basis of this triangular relation, we empirically analyse how and to what extent peripherality and inequality affect the income levels in LACs during 1995 to 2014. We find that LACs exhibit a virtuous cycle between a decrease in inequality and an increase in income levels. We also find that although primary commodity dependence, technological progress, and GVC integration directly increase the income levels, they also indirectly decrease the income levels through increasing inequality. Additionally, the increasing effects on inequality is mitigated if a country is integrated into GVCs with higher levels of technological progress.
    Keywords: Primary commodity dependence, Technological progress, Global value chains (GVCs), Neo-structuralism
    JEL: F63 O47 O54
    Date: 2017–03
  12. By: Francesco Lamperti; Giovanni Dosi; Mauro Napoletano; Andrea Roventini; Alessandro Sapio
    Abstract: In this paper we develop the first agent-based integrated assessment model, which offers an alternative to standard, computable general-equilibrium frameworks. The Dystopian Schumpeter meeting Keynes (DSK) model is composed of heterogeneous firms belonging to capital-good, consumption-good and energy sectors. Production and energy generation leads to greenhouse gas emissions, which affect temperature dynamics in a non-linear way. Increasing temperature triggers climate damages hitting, at the micro-level, workers' labor productivity, energy efficiency, capital stock and inventories of firms. In that, aggregate damages are emerging properties of the out-of-equilibrium interactions among heterogeneous and boundedly rational agents. We find the DSK model is able to account for a wide ensemble of micro and macro empirical regularities concerning both economic and climate dynamics. Moreover, different types of shocks have heterogeneous impact on output growth, unemployment rate, and the likelihood of economic crises. Finally, we show that the magnitude and the uncertainty associated to climate change impacts increase over time, and that climate damages are much larger than those estimated through standard integrated assessment models. Our results point to the presence of tipping points and irreversible trajectories, thereby suggesting the need of urgent policy interventions.
    Keywords: Climate Change; Agent-Based Models; Integrated Assessment; Macroeconomic Dynamics; Climate Damages.
    Date: 2017–03–04
  13. By: Sophie Pelle (GRESE - Groupe de Recherches Epistémologiques et Socio-Economiques - UP1 - Université Panthéon-Sorbonne, CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique); Bernard Reber (CEVIPOF - Centre de Recherches Politiques de Sciences Po - Sciences Po - CNRS - Centre National de la Recherche Scientifique)
    Abstract: Responsible innovation (RI) has become a powerful tenet of the European Commission discourse on science and society. And yet, the concept has remained surprisingly under-theoretically developed by RI advocates, who appear to be more interested in investigating the ‘ingredients’ or ‘pillars’ of responsibility than the normative dimension of it. In order to fill this gap, the paper below will consider ‘moral responsibility’ in the context of supply chains and innovation networks. It will firstly scrutinize the conception of responsibility developed in corporate social responsibility (CSR) approaches and what impact this conception might have on RI. Somewhat paradoxically, CSR approaches have been neglected by most RI theorists. It will then propose a conceptual mapping of the ten different meanings of responsibility that have emerged in moral philosophy, drawing on a distinction between negative and positive conceptions. Finally, it will scrutinize possible implementation of these various meanings of responsibility in supply chains and innovation networks.
    Keywords: Responsible innovation,Moral innovation,Corporate social responsibility,Moral responsibility,Supply chains
    Date: 2015–12
  14. By: Cedrini, Mario; Magda, Fontana (University of Turin)
    Abstract: There is considerable discussion on so-called ‘mainstream pluralism’, that is, on the co-presence of a variety of research programmes in today’s mainstream economics that: 1. significantly deviate from the neoclassical core; 2. are pursued by different, often separate communities of researchers; 3. have their origins outside economics. The literature tends to regard mainstream pluralism as a transitory state towards a new, post-neoclassical, mainstream. This paper advances a new interpretation: it suggests that the changing and fragmented state of mainstream economics is likely to persist over time under the impact of specialization (as a self-reinforcing mechanism) and the creation of new specialties and approaches, also through collaboration with researchers from other disciplines.
    Date: 2017–03

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