nep-pke New Economics Papers
on Post Keynesian Economics
Issue of 2017‒10‒22
eight papers chosen by
Karl Petrick
Western New England University

  1. Directed Technological Change in a post-Keynesian Ecological Macromodel By Naqvi, Syed Ali Asjad; Engelbert, Stockhammer
  2. The Fragility of Emerging Currencies Since the 2000s - a Minskyan Analysis By Raquel A. Ramos
  3. Capital as a Social Process: A Marxian Perspective. By Miguel D. Ramirez
  4. Choosing sides in the trilemma: international financial cycles and structural change in developing economies By Mario Cimoli; Jose Antonio Ocampo; Gabriel Porcile
  5. Teaching microeconomic principles with smartphones – lessons from classroom experiments with classEx By Humberto Llavador; Marcus Giamattei
  6. Income and Wealth Inequality in America, 1949-2013 By Moritz Kuhn; Moritz Schularick; Ulrike I. Steins
  7. Beyond wishful thinking: Explorative Qualitative Modeling (EQM) as a tool for achieving the Sustainable Development Goals (SDGs) By Neumann, Kai; Anderson, Carl; Denich, Manfred
  8. Why it makes economic sense to help the have-nots in times of a financial crisis By De Koning, Kees

  1. By: Naqvi, Syed Ali Asjad; Engelbert, Stockhammer
    Abstract: This paper presents a post-Keynesian ecological macro model that combines three strands of literature: the directed technological change mechanism developed in mainstream endogenous growth theory models, the ecological economic literature which highlights the role of green innovation and material ows, and the post-Keynesian school which provides a framework to deal with the demand side of the economy, nancial ows, and inter- and intra-sectoral behavioral interactions. The model is stock-fow consistent and introduces research and development (R&D) as a component of GDP funded by private rm investment and public expenditure. The economy uses three complimentary inputs - Labor, Capital, and (non-renewable) Resources. Input productivities depend on R&D expenditures, which are determined by relative changes in their respective prices. Two policy experiments are tested; a Resource tax increase, and an increase in the share of public R&D on Resources. Model results show that policy instruments that are continually increased over a long-time horizon have better chances of achieving a "green" transition than one-off climate policy shocks to the system, that primarily have a short-run affect.
    Keywords: directed technological change, research and development, green transition, ecological economics,post- keynesian ecomomics, stock-flow consistency
    Date: 2017–10–09
  2. By: Raquel A. Ramos (Centre d'Economie de l'Université de Paris Nord (CEPN))
    Abstract: The currencies of a few emerging market economies (EME) have being following a specific dynamic since the early 2000s: they are strongly connected to financial markets internationally, appreciating in moments of tranquility and presenting sharp depreciations in peaks of uncertainty. What is the mechanism behind this specific dynamic that contradicts mainstream exchange-rate theories? To answer this question, this article applies the Minskyan framework to the context of money managers and their portfolio allocation decisions. The approach allows the analysis of these currencies through money managers’ decisions, putting forward that these might float according to their balance-sheet constraints - reasons not related to the currencies themselves, but to money managers’ assets, liabilities, and currency mismatch. The result is a dynamic characterized by deviation-amplifying system, the opposite of the equilibrium-seeking mechanism needed for clearing markets, and high frequency of depreciations associated to the global extent of these institutions’ balance-sheet.
    Keywords: Exchange rates, emerging market economies, Minsky
    JEL: F41 F31 B50
    Date: 2017–10
  3. By: Miguel D. Ramirez (Department of Economics, Trinity College)
    Abstract: This paper analyzes the very important notion of capital from a Marxian perspective as opposed to a neoclassical one. It is argued that when capital is viewed as a historically determined social process (relation), rather than as a thing or a collection of things, it tends to assume certain specific forms more often than others depending on the particular stage of economic history. Capital thus refers simultaneously to social relations and to things. Given this frame of reference, notions such as money and property capital are more easily accommodated and consequently are not written off as financial or fictitious capital—not real capital—because they “produce nothing.” The paper also focuses on Marx’s important analysis of the time of production and the turnover of capital in terms of the production of surplus-value (profit). It then examines Marx’s equally important and prescient analysis of how the turnover speed of capital is affected by the time of circulation of commodities (the realization of surplus-value) and the growing use of credit (in its various forms) in the capitalist system. Finally, the paper turns its attention to the economic role of time as it relates to interest-bearing (loan) capital and Adam Smith’s important distinction between productive and unproductive labor—one whose clear comprehension rests on viewing capital as a social construct.
    Keywords: Capital; commodity capital; credit; crises; exchange-value; interest-bearing capital; money capital; productive capital; productive and unproductive labor; time of production and circulation; turnover speed of capital; rate of surplus-value (profit).
    JEL: B10 B14 B24
    Date: 2017–10
  4. By: Mario Cimoli; Jose Antonio Ocampo; Gabriel Porcile
    Abstract: This paper analyzes the impact of international financial cycles on structural change in developing economies. It is argued that the impact of these cycles depend on the specific combination of macroeconomic and industrial policies adopted by the developing economy. The cases of Brazil and Argentina are contrasted with those of Korea and China. In the Asian economies, macroeconomic policy has been a complementary tool along with industrial policy to foster the diversification of production and capabilities. Inversely, in the case of the Latin American countries, long periods of real exchange rate (RER) appreciation, combined with the weaknesses (or absence) of industrial policies, gave rise to loss of capabilities and lagging behind. Tests of structural break in times series of indexes of technological intensity of the production structure confirm the long run effects of financial shocks in the Latin American case. In the case of Korea there is evidence of hysteresis à la Baldwin-Krugman: a high RER was initially required to export and diversity the economy, but it was no longer necessary when the country had already built indigenous capabilities.
    Date: 2017–10–17
  5. By: Humberto Llavador; Marcus Giamattei
    Abstract: Classroom experiments as a teaching tool increase understanding and especially motivation. Traditionally, experiments have been run using pen-and-paper or in a computer lab. Pen-and-paper is time and resource consuming. Experiments in the lab require appropriate installations and impede the direct interaction among students. During the last two years, we have created fully elaborated packages to run a complete course in microeconomics principles using face-to-face experiments with mobile devices. The experiments are based on Bergstrom-Miller (2000), and we used classEx, a free online tool, to run them in the classroom.The packages were used at Universitat Pompeu Fabra with over 500 undergraduate students in the fall 2016. This paper presents our experience on classEx and the Bergstrom-Miller approach working in combination, and the lessons learned.
    Keywords: experiential learning, microeconomics, mobile devices, classroom experiments, classEx
    JEL: A22 C72 C90 D00
    Date: 2017–10
  6. By: Moritz Kuhn; Moritz Schularick; Ulrike I. Steins
    Abstract: This paper studies the distribution of U.S. household income and wealth over the past seven decades. We introduce a newly compiled household-level dataset based on archival data from historical waves of the Survey of Consumer Finances (SCF). Complementing recent work on top income and wealth shares, the long-run survey data give a granular picture of trends in the bottom 90% of the population. The new data confirm a substantial widening of income and wealth disparities since the 1970s. We show that the main loser of rising income and wealth concentration at the top was the American middle class – households between the 25th and 75th percentile of the distribution. The household data also reveal that the paths of income and wealth inequality deviated substantially. Differences in the composition of household portfolios along the wealth distribution explain this divergence. While incomes stagnated, the middle class enjoyed substantial gains in housing wealth from highly concentrated and leveraged portfolios, mitigating wealth concentration at the top. The housing bust of 2007 put an end to this counterbalancing effect and triggered the largest spike in wealth inequality in postwar history. Our findings highlight the importance of portfolio composition, leverage and asset prices for wealth dynamics in postwar America.
    Keywords: income and wealth inequality, household portfolios, historical micro data
    JEL: D31 E21 E44 N32
    Date: 2017
  7. By: Neumann, Kai; Anderson, Carl; Denich, Manfred
    Abstract: The UN's Sustainable Development Goals in their generalized form need to be further reflected in order to identify synergies and trade-offs between their (sub-)targets, and to apply them to concrete nations and regions. Explorative, qualitative cause and effect modeling could serve as a tool for adding crucial factors and enabling a better understanding of the interrelations between the goals, eventually leading to more informed concrete measures better able to cope with their inherent obstacles. This work provides and describes a model that could serve as a template for concrete application. The generalized model already points to some potential ambivalences as well as synergies that can be reflected on using some of the latest theories and concepts from economics and transition research, among other fields. Its first analyses cautiously raise doubts that some possible assumptions behind the original Sustainable Development Goals might overlook some systemic boundaries. For example, an undifferentiated increase of productivity contradicts a lessened environmental impact and need for resources in light of potential planetary boundaries.
    Keywords: SDG,transition,sustainability,modeling,explorative,participatory,qualitative,insight matrix,soft factors,feedback loops,evolutionary psychology,know why,decoupling,circular economy,social lab
    JEL: A19 C19 B49 C38 C69 O10 O19
    Date: 2017
  8. By: De Koning, Kees
    Abstract: August 9, 2007 is often regarded as the starting date of the global financial crisis. BNP Paribas stopped trading in three of its investment funds exposed to the U.S. sub-prime mortgage markets as the liquidity in these markets had all but dried up. Liquidity considerations are a symptom of the supply side of funds: the lenders’ side. The latter could be banks, hedge funds, asset managers or pension funds, but equally rich individuals who would invest directly in these markets. The financial crisis of 2007-2008 was a lenders’ crisis. Generally, banks had insufficient capital to absorb the losses created by the reduced liquidity levels in the financial markets. Central banks had to step in to rescue quite a few of them. The fact was, however, that the underlying cause of the financial crisis was a borrowers’ crisis. In the U.S., over the years 1997-2007, households had to borrow an ever-growing percentage of their earnings in order to get themselves on the property ladder or rent a home. Long before 2007, in fact by 2003, the additional amount that a household had to borrow to get a home was equal to a full year of earnings. Average income growth and mortgage volume growth were on a collision course. Borrowers had to allocate increasing percentages of their earnings to servicing mortgage debts or renting a home. The notion that lenders will rein in their lending as a consequence of free market competition is a fallacy. The key is not the price of funds borrowed, but the volume of funds lend per time period in comparison to average household’ nominal income growth. The consequences of a borrowers’ crisis are different from a financial markets’ liquidity one. When households have to allocate an increasing share of their income to either buy or rent a home, fewer funds are available to spend on other goods and services. When households are subsequently confronted with foreclosure and ultimately repossession of homes, they lose most or all past savings accumulated in the home. The poor get poorer, both in income and asset values terms. The gap between the haves and the have-nots widens dramatically. Volume of lending control and to some extent rent controls can prevent a new financial crisis occurring. More measures are needed to overcome a borrowers’ crisis.
    Keywords: financial crisis, lenders' crisis, borrowers' crisis, income-house price gap, U.S. mortgage lending levels 1996-2016, annual U.S.housing starts, average U.S. home sales price, median U.S. annual household' income, economic versus legal solutions
    JEL: E3 E4 E44 E5 E58
    Date: 2017–08–30

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