nep-pke New Economics Papers
on Post Keynesian Economics
Issue of 2017‒07‒02
six papers chosen by
Karl Petrick
Western New England University

  1. Modern (American) Capitalism: A Three Act Tragedy By Mark Setterfield
  2. Minsky models. A structured survey By Nikolaidi, Maria; Stockhammer, Engelbert
  3. The "Modern Monetary Theory": An extension of Radical Political Economy By Esteban Cruz-Hidalgo; Francisco M. Parejo-Moruno
  4. Stagnation policy in the Eurozone and economic policy alternatives: A Steindlian/neo-Kaleckian perspective By Eckhard Hein
  5. Functional “reversal” and dimensional “decoupling” of “finance” and “the real economy”: a reflection on the “Kaleckian” and “Minskian” limits to over-financialization. By Paolo Piacentini
  6. Some “unexpected proximities” between Schultz and Galbraith on human capital By Alexandre Chirat; Charlotte Le Chapelain

  1. By: Mark Setterfield (Department of Economics, New School for Social Research)
    Abstract: This paper examines the process of demand formation in capitalist economies characterized by high levels of household indebtedness, with a particular focus on contemporary developments and their sustainability. The thesis developed is that over the past 35 years, supply-side economics hollowed out the core of the demand-generating mechanism in US capitalism, with disastrous consequences. Particular attention is focused on the interplay of growing inequality, emulation effects, the erosion of social provision, household debt accumulation, and the evolution of consumption spending. The unsustainability of these processes gives rise to a discussion of initiatives that might alter the process of demand-formation so as to make it both more equitable and more sustainable.
    Keywords: Neoliberalism, supply-side economics, zapping labor, incomes policy based on fear, household debt, financial fragility
    JEL: E12 E21 E24 E25 E61 E64
    Date: 2017–06
  2. By: Nikolaidi, Maria; Stockhammer, Engelbert
    Abstract: Minsky’s ideas have recently gained prominence in the mainstream as well as in the heterodox literature. However, there exists no agreement upon the formal presentation of Minsky’s insights. The aim of this paper is to survey the literature and identify differences and similarities in the ways through which Minskyan ideas have been formalised. We distinguish between the models that focus on the dynamics of debt or interest, with no or a secondary role for asset prices, and the models in which asset prices play a key role in the dynamic behaviour of the economy. Within the first category of models we make a classification between (i) the Kalecki-Minsky models, (ii) the Kaldor-Minsky models, (iii) the Goodwin-Minsky models, (iv) the credit rationing Minsky models, (v) the endogenous target debt ratio models and (vi) the Minsky-Veblen models. Within the second category of models, we distinguish between (i) the equity price Minsky models and (ii) the real estate price Minsky models. Key limitations of the models and directions for future research are outlined.
    Keywords: business cycles; financial instability; post-Keynesian economics; debt cycles;
    JEL: B50 E32 G01
    Date: 2017–06–26
  3. By: Esteban Cruz-Hidalgo (Universidad de Extremadura, Spain); Francisco M. Parejo-Moruno (Universidad de Extremadura, Spain)
    Abstract: The rupture of the nexus between monetary and fiscal policies, which derives from the supranational transfer of the monetary sovereignty by the states, is the origin of the great macroeconomic imbalances that shake today some nations inserted in the European integration process. In this paper we try to show the so-called Modern Monetary Theory, from which underlies the urgency of recovering the monetary-fiscal bond, and consequently, the need of conceiving public finances in a functional way. In contrast to the orthodox recommendations, which suggest fiscal balance and austerity as macroeconomic stabilization measures, the MMT contemplates the government and nongovernmental sectors balances as one, being desirable, therefore, fiscal expansion in recession periods to achieve full employment, without neglecting the one related to price stability. Thus, the implementation of job guaranteed programs would act as a powerful corrector of the supply-side imbalance in the labor market, meanwhile stimulating social and/or environmental improvements in the countries concerned, favoring higher levels of well-being in them ultimately.
    Keywords: Money, Modern Monetary Theory, Chartalism, Guarranteed work program, Functional Finance
    JEL: B19 B25 B50
    Date: 2017–06
  4. By: Eckhard Hein (Berlin School of Economics and Law, Berlin (GE))
    Abstract: Empirically, the macroeconomic institutions and the macroeconomic policy approach in the Eurozone have failed badly, both in terms of preventing the global financial and economic crisis from becoming a euro crisis and in generating a rapid recovery from the crisis, in particular. In this paper I will argue that the dominating macroeconomic policy regime in the Eurozone can be seen as a version of what Steindl (1979) had called ‘stagnation policy’. To underline this argument, I will provide a simple Steindlian distribution and growth model in order to identify the main channels through which stagnation policy affects accumulation and productivity growth. This will also provide a set of elements of a Steindlian anti-stagnation policy. Against this theoretical background I will then examine the macroeconomic institutions and the macroeconomic policy approach of the Eurozone which has been based on the New Consensus Macroeconomics (NCM) and I will highlight its main deficiencies. This will then provide the grounds for an outline of an alternative macroeconomic policy approach for the specific institutional setup of the Eurozone based on a post-Keynesian/Steindlian/neo-Kaleckian approach.
    Keywords: Stagnation, stagnation policy, Eurozone, policy alternatives, Steindl.
    JEL: E02 E11 E12 E61 E63 E64 E65 F45
    Date: 2017–06
  5. By: Paolo Piacentini (Department of Social Sciences and Economics - Sapienza University of Rome (Italy))
    Abstract: The predominance of “financial” interests in the operation of present-day capitalism is very much at the centre of the research agenda within the “Post-Keynesian” field. Two “schools”, firmly established in this tradition, and talented scholars, have provided advances for the understanding of the implications and risks of “financialization”. I refer to the schools, intuitively, as the “Kaleckian” and the “Minskian” schools. “Neo-Kaleckians” stress the medium-term implications for growth performance and distributive trends in the real economy; “Minskians” have recently insisted that innovative practices of modern finance such as shadow banking, securitization, etc., will eventually increase the fundamental “fragility” of capitalism, as in Minsky’s seminal intuition. Although extensive literature has produced important results in recent years, there is still ground for further, “comprehensive”, reflection upon the interaction between “finance” and “the real economy”. This contribution is targeted in that direction. Two phenomena are described as “fundamentals”, giving rise to further consequences. The first is reversal: the relationship between the financial and the real spheres of the economy is now “inverted” with respect to the conventional wisdom of economists, which holds that “finance” services the “real economy”, turning savings into investments. With the reversal, it is now the real economy that services finance, as the originator of debt obligations, upon which assets and trading on the financial markets are established. The second is decoupling: this is understood as the dilatation of the value of financial wealth, relative to real output levels and growth. One important piece of evidence for this notion is the decline in investment to profit ratios in mature economies. Can actual trends in real growth “sustain”, for evermore, a disproportional inflation of financial values? Might the ratio to GDP of the value of the “patrimoines”, by which I mean the aggregation of all riches (Piketty) steadily increase? If the valuation of financial assets is essentially founded upon the servicing of debt obligations out of the proceeds of real activities, more and more “decoupling” might imply that there is a risk that capitalism may engage in a global “Ponzi” scheme.
    Keywords: Financialisation; Wealth; Real Investment.
    JEL: E44 E21
    Date: 2017–06
  6. By: Alexandre Chirat (TRIANGLE, University Lyon II); Charlotte Le Chapelain (CLHDPP-BETA, University Lyon III)
    Date: 2017

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