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on Post Keynesian Economics |
| By: | L. Randall Wray |
| Abstract: | This paper examines the views of Hyman Minsky and Abba Lerner on the functional finance approach to fiscal policy. It argues that the main principles of functional finance were relatively widely held in the immediate postwar period. However, with the rise of the Phillips curve, the return of the Quantity Theory, the development of the notion of a government budget constraint, and accelerating inflation at the end of the 1960s, functional finance fell out of favor. The paper compares and contrasts the evolution of the views of Minsky and Lerner over the postwar period, arguing that Lerner’s transition went further, as he embraced a version of Monetarism that emphasized the use of monetary policy over fiscal policy. Minsky’s views of functional finance became more nuanced, in line with his Institutionalist approach to the economy. However, Minsky never rejected his early beliefs that countercyclical government budgets must play a significant role in stabilizing the economy. Thus, in spite of some claims that Minsky should not be counted as one of the “forefathers†of Modern Money Theory (MMT), this paper argues that it is Minsky, not Lerner, whose work remains essential for the further development of MMT. |
| Keywords: | Functional Finance; Hyman Minsky; Abba Lerner; Deficit Owl; Budget Deficits; Government Budget Constraint; Phillips Curve; Sovereign Currency; Modern Money Theory |
| JEL: | B10 B15 B22 B25 B31 B5 E12 E32 E62 H62 |
| Date: | 2018–01 |
| URL: | http://d.repec.org/n?u=RePEc:lev:wrkpap:wp_900&r=pke |
| By: | Grillitsch, Markus (Lund University); Sotarauta, Markku (University of Tampere) |
| Abstract: | The study of regional growth paths is a key theme in economic geography and of elemental interest for policy makers concerned with regional development. Evolutionary theory explains the path-dependent nature of regional development, and points to its open-ended nature. This paper addresses the interplay between path-dependent, structural forces and the construction and utilization of opportunities through agentic processes. Extending to the evolutionary framework, it is argued that not only history but also perceived future opportunities influence agentic processes in the present and thus shape regional growth paths. Building on recent work about foresightful, strategic and distributed agency, this paper identifies three forms of agency, Schumpeterian innovative entrepreneurship, institutional entrepreneurship and place leadership, that call for and necessitate each other in the process of shaping regional growth paths. It is argued that such a holistic view is essential to understand regional development processes and in particular structural change as manifested in economic diversification and new industrial path development. |
| Keywords: | Regional development; agency; path-dependency; Schumpeterian innovative entrepreneurship; institutional entrepreneurship; place leadership; economic diversification; new industrial path development |
| JEL: | B52 L16 O30 R10 |
| Date: | 2018–01–31 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:lucirc:2018_001&r=pke |
| By: | Russo, Alberto |
| Abstract: | This paper presents a brief discussion on the evolution of macroeconomics and economic policy after Keynes. Particularly, we describe the emergence of a new standard of economic research, after the «stagflation» of the 1970s, which resurrects the (pre-Keynesian) confidence in the self-correcting properties of the market economy. It also considers economic policy as a potential obstacle for the economic system in reaching the «natural» equilibrium. Finally, some perspectives for macroeconomics in the aftermath of the Great Recession are discussed. |
| Keywords: | John Maynard Keynes; NAIRU; New Classical Macroeconomics; Great Recession; Financialization. |
| JEL: | B22 E60 |
| Date: | 2017–12–18 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:83346&r=pke |
| By: | Eric Rahim (Department of Economics, University of Strathclyde) |
| Abstract: | In The Economic and Philosophical Manuscripts of 1844 (completed in August 1844) Marx takes two crucial steps in the formation of his worldview. The first relates to his rejection of all ‘old’ materialism, including Feuerbach’s, and the adoption of his own version, which he called ‘communist’, ‘practical’. This view was later presented definitively in the first Thesis on Feuerbach (spring of 1845), and elaborated in The German Ideology (1845-46). The second step relates to Marx’s synthesising of the philosophical standpoint that he had developed up to this point (around the spring of 1844) with political economy. Up to this point he had spoken of alienation in largely philosophical terms; now it is rooted in the process of production. On both counts Adam Smith was an important influence. This claim provides the focus of this paper. To make this point successfully I have found it necessary to briefly trace the development of Marx’s philosophical standpoint up to the writing of the Manuscripts, and to distinguish between the two methodologically distinct aspects of Adam Smith’s thought, the one that Marx accepted and the other that he rejected. |
| Date: | 2017–11 |
| URL: | http://d.repec.org/n?u=RePEc:str:wpaper:1712&r=pke |
| By: | Giovanni Dosi (Scuola Superiore Sant'Anna Pisa Italy); Andrea Roventini (Scuola Superiore Sant'Anna Pisa Italy also OFCE Sciences Po Paris); Emanuele Russo (Superiore Sant'Anna,Pisa Italy & OFCE Sciences Po Paris France) |
| Abstract: | In this paper we present a multi-country, multi-industry agent-based model investigating the different growth patterns of interdependent economies. Each country features a Schumpeterian engine of endogenous technical change which interacts with Keyneasian/Kaldorian demand generation mechanisms. National growth trajectories are driven by firms’ accumulation of technological knowledge, which in turn also leads to emergent specialization patterns in different industries. Interactions among economies occur via trade flows, stemming from the competition of firms in international markets. Simulation results show the emergence of persistent income divergence among countries leading to polarization and club formation. Moreover, each country experiences a structural transformation of its productive structure during the development process. Such dynamics results from firm-level virtuous (or vicious) cycles between knowledge accumulation, trade performances, and growth dynamics. The model accounts for a rich ensemble of empirical regularities at macro, meso and micro levels of aggregation. |
| Keywords: | Endogenous growth, structural change, technology-gaps, global divergence, absolute advantages, agent based models |
| JEL: | F41 F43 O4 O3 |
| Date: | 2018–01–15 |
| URL: | http://d.repec.org/n?u=RePEc:fce:doctra:1802&r=pke |
| By: | Roger Sandilands (Department of Economics, University of Strathclyde) |
| Abstract: | This paper introduces a hitherto unpublished 1970 paper written by the distinguished development economist Lauchlin Currie (1902-93) on Paul Rosenstein Rodan’s famous 1943 paper on the “Big Push†which led to the balanced-unbalanced growth debate to which Albert Hirschman (1915-2012) was an important contributor. Both Currie and Hirschman had been key economic advisers to the Colombian government and their respective views on development planning are contrasted. In particular, it is shown how Currie’s 1970 paper illuminates the theory behind the 1971-74 national plan for Colombia that he prepared and helped deliver; and how the related institutional innovations have had an enduring impact on Colombia’s recent economic history. |
| Keywords: | 'linkages theory', 'big push' |
| JEL: | B31 |
| Date: | 2017–12 |
| URL: | http://d.repec.org/n?u=RePEc:str:wpaper:1717&r=pke |
| By: | Bell, Alex; Chetty, Raj; Jaravel, Xavier; Petkova, Neviana; Van Reenen, John |
| Abstract: | We characterize the factors that determine who becomes an inventor in America by using de-identified data on 1.2 million inventors from patent records linked to tax records. We establish three sets of results. First, children from high-income (top 1%) families are ten times as likely to become inventors as those from below-median income families. There are similarly large gaps by race and gender. Differences in innate ability, as measured by test scores in early childhood, explain relatively little of these gaps. Second, exposure to innovation during childhood has significant causal effects on children's propensities to become inventors. Growing up in a neighborhood or family with a high innovation rate in a specific technology class leads to a higher probability of patenting in exactly the same technology class. These exposure effects are gender-specific: girls are more likely to become inventors in a particular technology class if they grow up in an area with more female inventors in that technology class. Third, the financial returns to inventions are extremely skewed and highly correlated with their scientific impact, as measured by citations. Consistent with the importance of exposure effects and contrary to standard models of career selection, women and disadvantaged youth are as under-represented among high-impact inventors as they are among inventors as a whole. We develop a simple model of inventors' careers that matches these empirical results. The model implies that increasing exposure to innovation in childhood may have larger impacts on innovation than increasing the financial incentives to innovate, for instance by reducing tax rates. In particular, there are many "lost Einsteins" - individuals who would have had highly impactful inventions had they been exposed to innovation. |
| Date: | 2017–12 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:12544&r=pke |
| By: | Chang, Pao-Li (School of Economics, Singapore Management University); Fujii, Tomoki (School of Economics, Singapore Management University); Jin, Wei (School of Economics, Singapore Management University) |
| Abstract: | This paper estimates the effects of bilateral and time-varying preference bias on trade flows and welfare. We use a unique dataset from the BBC World Opinion Poll that surveys (annually during 2005-2017 with some gaps) the populations from a wide array of countries on their views of whether an evaluated country is having a mainly positive or negative influence in the world. We identify the effects on bilateral preference parameters due to shifts in these country image perceptions, and quantify their general equilibrium effects on bilateral exports and welfare (each time for an evaluated exporting country, assuming that the exporting country's own preference parameters have not changed). We consider fi ve important shifts in country image: the George W. Bush effect, the Donald Trump effect, the Senkaku Islands Dispute effect, the Brexit effect, and the Good-Boy Canadian effect. We fi nd that such changes in bilateral country image perceptions have quantitatively important trade and welfare effects. The negative impact of Donald Trump's "America First" campaign rhetorics on the US' country image might have cost the US as much as 4% of its total exports and gains from trade. In contrast, the consistent improvement of Canadian country image between 2010 and 2017 has amounted to more than 10% of its total welfare gains from trade. |
| Keywords: | Country image; Consumer preferences; Trade flows; Quantitative welfare analysis |
| JEL: | C23 C51 C54 F14 F50 N40 |
| Date: | 2017–11–29 |
| URL: | http://d.repec.org/n?u=RePEc:ris:smuesw:2018_003&r=pke |