nep-pke New Economics Papers
on Post Keynesian Economics
Issue of 2017‒11‒12
eleven papers chosen by
Karl Petrick
Western New England University

  1. Directed technological change in a post-Keynesian ecological macromodel By Asjad Naqvi; Engelbert Stockhammer
  2. Are current accounts driven by competitiveness or asset prices? A synthetic model and an empirical test By Guschanski, Alexander; Stockhammer, Engelbert
  3. Kalecki on Technology and Military Keynesianism By Jan Toporowski
  4. The economics and the political economy of new-developmentalism By Pereira, Luiz C. Bresser
  5. The Research Excellence Framework 2014, journal ratings and the marginalization of heterodox economics By Engelbert Stockhammer; Quirin Dammerer; Sukriti Kapur
  6. Secular stagnation in the framework of rentier-financier capitalism and globalization By Pereira, Luiz C. Bresser
  7. A Skeptical View of Financialized Corporate Governance By Admati, Anat R.
  8. The Political Economy of Liberal Democracy By Sharun Mukand; Dani Rodrik
  9. Economic Growth, Income Distribution, and Climate Change By Rezai, Armon; Taylor, Lance; Foley, Duncan K.
  10. Learning by Doing, Inequality, and Sustained Growth: A Middle-class Perspective By Alain Desdoigts; Fernando Jaramillo
  11. Reactivity in Economic Science By Bruno S. Frey

  1. By: Asjad Naqvi; 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 flows, and the post-Keynesian school which provides a framework to deal with the demand side of the economy, financial flows, and inter- and intra-sectoral behavioral interactions. The model is stock-flow consistent and introduces research and development (R&D) as a component of GDP funded by private firm 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 effect.
    Keywords: directed technological change, research and development, green transition, ecological economics, post-Keynesian economics, stock-flow consistency
    JEL: E12 O33 Q57
    Date: 2017–10
  2. By: Guschanski, Alexander; Stockhammer, Engelbert
    Abstract: This paper analyses the emergence of current account imbalances as a result of the co-existence of trade flows and financial flows. The literature has tended to view these factors in isolation: Many post-Kaleckian models, as well as Net-saving approaches assume that financial flows will adjust to trade flows. Models focusing on financial crises feature a strong role for financial flows but ignore drivers of trade flows. Similarly, empirical analyses either ignore drivers of financial flows or insufficiently capture determinants of trade flows. The paper, first, proposes a simple macroeconomic framework of the current account which gives equal emphasis to trade flows, determined by price competitiveness, and financial flows, determined by asset prices. Second, we test a reduced form of the model for 28 OECD countries for the period 1971-2014. Our results indicate that cost competitiveness as well as asset prices play a role in the determination of current accounts, but asset prices have dominated in the last two decades.
    Keywords: current account, financial flows, competitiveness, asset prices,
    JEL: E12 F32 F41
    Date: 2017–10–28
  3. By: Jan Toporowski (SOAS, University of London; University of Bergamo; and International University College, Turin.)
    Abstract: Kalecki’s analysis of military Keynesianism highlights the difficulties of managing aggregate demand in one country, without coordination with trading partners. Military Keynesianism is effective as a means of reflation because, unlike civilian public works, it induces similar expenditure by political rivals. In this way it overcomes some of the trade difficulties that arise if aggregate demand expands in only one country. However, military technology is not immediately transferable to civilian production, and therefore tends to reinforce technological backwardness.
    Keywords: Kalecki, military Keynesianism, aggregate demand management, technology
    JEL: B3 E2 E3 E6 H5
    Date: 2017–11
  4. By: Pereira, Luiz C. Bresser
    Abstract: This paper resumes new developmentalism – a theoretical framework being defined since the early 2000s to understand middle-income countries. It contains a political economy, the beginning of a microeconomics and a macroeconomics. It is originated in development economics or classical developmentalism and in post-Keynesian macroeconomics. While classical developmentalism asked for protection of the manufacturing industry, new developmentalism asks for the levelling of the playing field, which the tendency to the cyclical and chronic overvaluation of the exchange rate denies. New developmentalism is focused in the current account and the corresponding exchange rate. It offers a new theory of the determination of the exchange rate, based on the distinction between a value and a price of the foreign money, and on the tendency to the overvaluation of the exchange rate. Counterintuitively, it argues that middleincome countries do not require foreign finance, and, so, it defends that developing countries show a balanced current account, or, if it faces the Dutch disease, a current account surplus proportional to the severity of the disease.
    Date: 2017–10
  5. By: Engelbert Stockhammer (Kingston University); Quirin Dammerer; Sukriti Kapur
    Abstract: The Research Excellence Framework (REF) is the main research assessment for universities in the UK. It informs university league tables and the allocation of government research funding. This paper analyses the evaluations of the REF 2014 for Economics, Business, Politics and History. We analyse, first, from which journals, articles have been submitted; second, to what extent journal ratings and impact factors predict the REF´s evaluations; third, how many articles from heterodox economics journals have been submitted. We find that a small group of journals dominate the outputs submitted. Journal ratings and impact factors explain 86 to 89% of the variation in the output evaluations for Economics. These values are lower but still substantial for other disciplines. Few papers from heterodox economics journals were submitted to Economics. Overall, the REF in its present form marginalises heterodox economics, pushes it out of the discipline and endangers pluralism in economics research.
    Keywords: research assessment, Research Excellence Framework, journal impact factors, journal ratings, pluralism, heterodox economics
    JEL: A14 A20 B50
    Date: 2017–11
  6. By: Pereira, Luiz C. Bresser
    Abstract: Rentier-financier capitalism, neoliberalism and globalization have been in a crisis since 2008. It is characterized by low growth rates, quasi-stagnant wages and increase of inequality since rentiers replaced business entrepreneurs, neoliberalism became the hegemonic ideology, and globalization became the means to achieve the best of all possible worlds. But the rich capitalist world faces the threat of secular stagnation. In this paper, I discuss this threat, the main authors that have been discussing it, and the new historical facts that are behind such threat. Among the threats are the fall of the productivity of capital associated with information and communication technology, the increase of monopoly power, the profusion of capitals, and globalization, which opened room for the competition of developing countries.
    Date: 2017–10–27
  7. By: Admati, Anat R. (Stanford University)
    Abstract: Financialized corporate governance as commonly practiced causes significant inefficiencies and harm. Corporations and governments routinely fail to design and enforce rules that reduce the opacity of corporations, create effective commitments that prevent harm, and ensure proper accountability. The financial sector provides extreme illustrations of these governance failures, which persist despite repeated scandals and crises. Misleading narratives that obscure reality enable individuals in the private and public sectors, even in well-developed democracies, to abuse power with impunity.
    Date: 2017–06
  8. By: Sharun Mukand; Dani Rodrik
    Abstract: We distinguish between three sets of rights – property rights, political rights, and civil rights – and provide a taxonomy of political regimes. The distinctive nature of liberal democracy is that it protects civil rights (equality before the law for minorities) in addition to the other two. When democratic transitions are the product of a settlement between the elite (who care mostly about property rights) and the majority (who care mostly about political rights), they generically fail to produce liberal democracy. This is because the minority has neither the resources nor the numbers to make a contribution to the settlement. We develop a formal model to sharpen the contrast between electoral and liberal democracies and highlight circumstances under which liberal democracy can emerge. We show that liberal democracy requires quite special circumstances: mild levels of income inequality as well as weak identity cleavages. We provide some evidence consistent with this result, and also present a new classification of countries as electoral or liberal democracies.
    JEL: P48
    Date: 2017
  9. By: Rezai, Armon; Taylor, Lance; Foley, Duncan K.
    Abstract: We present a model based on Keynesian aggregate demand and labor productivity growth to study how climate damage affects the long-run evolution of the economy. Climate change induced by greenhouse gas lowers profitability, reducing investment and cutting output in the short and long runs. Short-run employment falls due to deficient demand. In the long run productivity growth is slower, lowering potential income levels. Climate policy can increase incomes and employment in the short and long runs while a continuation of business-as-usual leads to a dystopian income distribution with affluence for few and high levels of unemployment for the rest.
    Keywords: climate change, economic growth, integrated assessment, demand and distribution, energy productivity, unemployment
    Date: 2017
  10. By: Alain Desdoigts; Fernando Jaramillo
    Abstract: This paper presents a theory of demand-driven economic growth whereby the middle class plays a prominent role in determining technical progress, while at the same time being a growth outcome. Emphasis is placed on the development and implementation process rather than on the innovation process. The entire income distribution affects the composition of demand and both the speed and extent of the learning process, which remains within an intermediate range of activity sectors for which there is middle-class-led consumption. Our framework exhibits an inverted-U relationship between inequality and growth, which has implications for growth-enhancing strategies by means of income redistributions.
    JEL: D31 L16 O33 O40
    Date: 2017–11–08
  11. By: Bruno S. Frey
    Abstract: There is a fundamental difference between the natural and the social sciences due to reactivity. This difference remains even in the age of Artificially Intelligent Learning Machines and Big Data. Many academic economists take it as a matter of course that economics should become a natural science. Such a characterization misses an essential aspect of a social science, namely reactivity, i.e. human beings systematically respond to economic data, and in particular to interventions by economic policy, in a foreseeable way. To illustrate this finding, I use three examples from quite different fields: Happiness policy, World Heritage policy, and Science policy.
    Keywords: economics, social, and natural science, reactivity, data, happiness, economic policy
    JEL: A10 B40 C70 C80 D80 Z10
    Date: 2017

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