nep-pke New Economics Papers
on Post Keynesian Economics
Issue of 2017‒07‒16
twelve papers chosen by
Karl Petrick
Western New England University

  1. Beyond the traditional monetary circuit: endogenous money, finance and the theory of long-period effective demand By Sergio Cesaratto
  2. Minsky models. A structured survey By Maria Nikolaidi; Engelbert Stockhammer
  3. Transformative Social Innovation By Novy, Andreas
  4. Are Labor and Freedom Compatible? Political Economy, Hegel’s Practical Philosophy and the Young Marx By Ormazabal Sánchez, Kepa Mirena
  5. The Contribution of Labour Law to Economic Development & Growth By Simon Deakin
  6. Green production indicators, a guide for moving towards sustainable development By Cervera-Ferri, José L.; Luz Ureña, Mónica
  7. Linkages between financial development, financial instability, financial liberalisation and economic growth in Africa By Enowbi Batuo; Simplice Asongu
  8. Investing for the common good: a sustainable finance framework By Dirk Schoenmaker
  9. Populism and the Economics of Globalization By Dani Rodrik
  10. Some “unexpected proximities” between Schultz and Galbraith on human capital By Alexandre Chirat; Charlotte Le Chapelain
  11. Tony Atkinson and His Legacy By Brandolini, Andrea; Jenkins, Stephen P.; Micklewright, John
  12. Sociology and Capitalism Research By Klaus Kraemer

  1. By: Sergio Cesaratto
    Abstract: The paper is a contribution to a long-run theory of effective demand with elements from monetary circuit theory, Modern Monetary Theory and endogenous finance analysis. Some shortcomings of the still influential neo-Kaleckian growth model and monetary circuit theory are underlined, and the Sraffian supermultiplier is indicated as the most promising heterodox approach to growth and instability in capitalism. The Sraffian supermultiplier allows full consideration of the autonomous components of aggregate demand as the ultimate sources of growth and instability in modern capitalism. Following Steindl, capital gains are included among these components. Autonomous demand and investment are typically fed by endogenous finance. The paper articulates the relation between autonomous demand and investment on one hand, and endogenous finance on the other, in the light of Keynes’s distinction between initial and final finance.
    Keywords: Supermultiplier, endogenous money, monetary circuit theory, modern monetary theory, autonomous demand
    JEL: B51 E11 E12 E42 E5
    Date: 2017–07
  2. By: Maria Nikolaidi (University of Greenwich); Engelbert Stockhammer
    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: 2017–07
  3. By: Novy, Andreas
    Abstract: This paper presents transformative social innovation as a specific type of social innovation which attempts avoiding the trap of being used by the neoliberal mainstream. Unfortunately, utilizing social innovations to strengthen the "human face of neoliberalism" has become a real threat since the Barroso Commission has embraced social innovation as a panacea to solve the social crisis resulting from the financial breakdown in 2008. In this approach, social innovation has increasingly been reduced to a recipe of fostering social entrepreneurship and creating quasi-markets (Jenson, 2015, p. 101), thereby promoting an "enabling welfare state" which uses the creativity and personal commitment of its citizens (Bureau of European Policy Advisors, 2010: 7). In current social innovation policies, attention focuses on the space of manoeuvre of deliberate agency, often by social entrepreneurs or "change maker", to implement "piecemeal changes" in the short run, like improving language skills of migrants or reintegrating of long-term unemployed into the labour market. Nobody can object to "doing more with less" in the form of cost-and resource efficient responses in times of ecological crisis and fiscal constraints. Nor can one oppose incentives for active citizenship in a "participation society". However, these efforts have become increasingly problematic, as a one-sided concern with measureable social impact, offering quick and visible solutions, has impeded to reflect on the deeper causes of the current multiple crises. But without understanding causes, agency can neither grasp important dimensions of a problem nor identify potentials. It, therefore, tends to remain ineffective. This recalls the "old saying that 'when it comes to practicality, nothing beats a good theory" (Danermark, Ekström, Jakobsen, & Karlsson, 2005, p. 187f) - and a good theory of capitalist modernisation is prerequisite for all types of emancipatory agency. In this paper, I will first quickly present attempts at elaborating a more radical version of social innovation that aims at tackling causes, including unequal power relations and systemic elements of capitalist market economies. Frank Moulaert and his colleagues, the research project TRANSIT and Mangabeira Unger offer different analyses for identifying the transformative potential of social innovations. Based on these contributions, I will present my understanding of transformative social innovations, grounding it in Karl Polanyi's The Great Transformation, critical realism and transdisciplinarity.
    Date: 2017
  4. By: Ormazabal Sánchez, Kepa Mirena
    Abstract: The question discussed in this paper is whether a political society not emancipated from labor can be a free society. In a less abstract way, the question can be posed as follows; can a society with a laboring class and a labor market be free? The question arises because labor and freedom seem to be in conflict, so a society with a working class and a labor market can neither be free nor democratic. The opposition between labor and freedom has always been a central theme in Practical Philosophy, and its recurrent idea that labor involves an irretrievable loss of self-consciousness and, thereby, of freedom has survived right up to this day. The Marxian treatment of alienation is just an outstanding example of this old idea, but not a real novelty. In this paper I intend to explore an alternative path to the still dominant idea of Practical Philosophy by examining the ontological foundations of the alternative response developed by Hegel in his Philosophy of the Spirit.
    Keywords: liberal, democracy, political, economy, freedom, labor
    JEL: A13
    Date: 2017
  5. By: Simon Deakin
    Abstract: A review of theoretical, historical and quantitative empirical research on the economic effects of labour laws suggests that worker-protective labour regulation generates net positive outcomes for development and growth. Labour law should be seen as a developmental institution which has a symbiotic relationship to the rise of capitalism in the global north and is part of the transition to a market economy being experienced by today's low- and middle-income countries. Claims made for the desuetude of labour law's core mechanisms, including the standard employment relationship, are not borne about by recent evidence. The complex role played by labour regulation in the dynamics of capitalism would repay further investigation.
    Keywords: Labour law, development, growth, inequality, leximetrics
    JEL: J41 J83 K31 O43
    Date: 2016–03
  6. By: Cervera-Ferri, José L.; Luz Ureña, Mónica
    Abstract: This publication is the outcome of a project entitled “Towards a set of indicators for greener production”, co-financed by ECLAC and the International Development Research Centre (IDRC) of Canada, the objective of which was to develop specific knowledge for promoting the design and compilation of harmonized regional indicators on sustainable production and the incorporation of green technologies in firms of Latin America and the Caribbean. The guide should be seen as a set of methodological recommendations for voluntary application. Nevertheless, it is hoped that the use of these guidelines will facilitate the production of data (providing instruments that countries can readily adapt) and enhance their comparability. The production and dissemination of internationally harmonized data on green production will help policymakers in the industrial and environmental areas, as well as businesses and society in general, to understand more thoroughly the environmental processes and practices of firms and allow them to take appropriate decisions for reducing the harmful effects of industrialization, to promote environmentally friendly growth, and to seize new economic opportunities in line with the Sustainable Development Goals (SDGs).
    Date: 2017–01
  7. By: Enowbi Batuo (University of Westminster, UK); Simplice Asongu (Yaoundé, Cameroon)
    Abstract: In the aftermath of the 2008 global financial crisis, the implications of financial liberalisation for stability and economic growth has come under increased scrutiny. One strand of literature posits a positive relationship between financial liberalisation and economic growth and development. However, others emphasise the link between financial liberalisation is intrinsically associated with financial instability which may be harmful to economic growth and development. This study assesses linkages between financial instability, financial liberalisation, financial development and economic growth in 41 African countries for the period 1985-2010. The results suggest that financial development and financial liberalisation have positive effects on financial instability. The findings also reveal that economic growth reduces financial instability and the magnitude of reduction is higher in the pre-liberalisation period compared to post-liberalisation period.
    Keywords: Economic Growth , Financial Development, Financial instability and Africa
    JEL: O16 O47 G23 O55
    Date: 2017–01
  8. By: Dirk Schoenmaker
    Abstract: The issue of sustainable development has multiple aspects, all of which need to be considered if sustainability is to be guaranteed. On the environmental front, climate change and depletion of natural resources are two factors that are threatening the earth’s ability to regenerate. On the economic front, development that does not pay sufficient attention to income inequality and provision of basic needs to all is a process in danger of imploding. This essay explores the role that finance can play to ensure that investment protects the environment and promotes economic systems that are internally sustainable. Dirk Schoenmaker argues that seeing the role of finance as one of allocating funding to productive investments in a narrow sense is no longer appropriate. What constitutes ‘productive’ cannot be independent of a project’s environmental and socio-economic impact because there are often trade-offs between short-term profits and long-term impact. What might appear to be a profitable project over a given time period could have negative impacts that might only become apparent in the longer term. This essay discusses these trade-offs in the context of the conflicting objectives of shareholders and other stakeholders - the motivation of the former to generate profits might at times jeopardise the long-term interests of the latter. This essay shows how that is a consequence of short-termism and a failure to act with the collective interest in mind. But if sustainability is paramount, as it should be, then the shareholders’ and stakeholders’ motives need to be better aligned. This essay provides a framework for moving in this direction and offers guidelines to counter short-termism, with an emphasis on incentive-compatible measures for all. Moving from traditional to sustainable finance means having to counter attitudes that are embedded in the ways our economic systems are organised. Shifting away from them requires both new ways of operating but, importantly, new underlying principles that put sustainability centre stage to guide our thinking. It is important that we put this process in motion, and the earlier the better. Maria Demertzis, Deputy Director of Bruegel Brussels, July 2017
    Date: 2017–07
  9. By: Dani Rodrik
    Abstract: Populism may seem like it has come out of nowhere, but it has been on the rise for a while. I argue that economic history and economic theory both provide ample grounds for anticipating that advanced stages of economic globalization would produce a political backlash. While the backlash may have been predictable, the specific form it took was less so. I distinguish between left-wing and right-wing variants of populism, which differ with respect to the societal cleavages that populist politicians highlight. The first has been predominant in Latin America, and the second in Europe. I argue that these different reactions are related to the relative salience of different types of globalization shocks.
    JEL: F02
    Date: 2017–06
  10. By: Alexandre Chirat; Charlotte Le Chapelain
    Abstract: This contribution highlights some unexpected proximities between Galbraith and Schultz’s thoughts on human capital. Despite apparently strong methodological divergences, both authors analyze the issue of human capital investment in the light of the dynamics of the economic development process. This issue is formulated in Galbraith’s vocabulary in terms of the requirements of the planning system, and in terms of the needs of production activities deriving from the dynamics of growth in Schultz’s. But the logic underlying their analysis is of the same order. The emphasis on the needs of production leads the two authors to address the issue of student sovereignty in making allocative decisions regarding education. By highlighting these proximities, our study shows that Schultz’s thought on human capital must not be conflated, from a methodological point of view, with Becker’s and Mincer’s. We thus question the idea that the human capital research program is characterized by strong methodological unity, in particular that it is characterized by methodological individualism. That Becker and Mincer’s works rely on methodological individualism is not called into question; the idea that Schultz’s thought is grounded on it deserves more careful examination.
    Keywords: Human Capital, Education, Schultz, Galbraith, Methodological Individualism.
    JEL: B41 H52 I15 P46
    Date: 2017
  11. By: Brandolini, Andrea (Bank of Italy); Jenkins, Stephen P. (London School of Economics); Micklewright, John (University College London)
    Abstract: Tony Atkinson is universally celebrated for his outstanding contributions to the measurement and analysis of inequality, but he never saw the study of inequality as a separate branch of economics. He was an economist in the classical sense, rejecting any sub-field labelling of his interests and expertise, and he made contributions right across economics. His death on 1 January 2017 deprived the world of both an intellectual giant and a deeply committed public servant in the broadest sense of the term. This collective tribute highlights the range, depth and importance of Tony's enormous legacy, the product of over fifty years' work.
    Keywords: Anthony B. Atkinson, inequality, poverty, public economics
    JEL: D3 H00 I3
    Date: 2017–06
  12. By: Klaus Kraemer (Department of Sociology, University of Graz)
    Date: 2017–07–03

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