nep-pke New Economics Papers
on Post Keynesian Economics
Issue of 2018‒04‒02
thirteen papers chosen by
Karl Petrick
Western New England University

  1. Keynes on the Sequencing of Economic Policy: Recovery and Reform in 1933 By Sebastian Edwards
  2. First steps for a Sraffian ecological economics. An answer to Martins' “The Classical Circular Economy, Sraffian Ecological Economics and the Capabilities Approach” By Yoann Verger
  3. Teaching Behavioral Economics in Psychology By Ansuk Jeong
  4. Promoting structural transformation: strategic diversification vs. laissez-faire approach By Clovis Freire
  5. Accumulation regimes By Agnès Labrousse; Sandrine Michel
  6. Sraffa and Manara: the mystery of the last article of Piero Sraffa By Yoann Verger
  7. Economic Diversification: Explaining the pattern of diversification in the global economy and its implications for fostering diversification in poorer countries By Clovis Freire
  8. Institutional dynamics in an economy seen as a complex adaptive system By Miguel Vazquez;
  9. From “Structural Change” to “Transformative Change”: Rationale and Implications By S. Nazrul Islam; Kenneth Iversen
  10. The Intertemporal Keynesian Cross By Matthew Rognlie; Ludwig Straub; Adrien Auclert
  11. Climate Change and Social Inequality By S. Nazrul Islam; John Winkel
  12. Carbon Taxes from an Economic Perspective By Claudia Kettner-Marx; Daniela Kletzan-Slamanig
  13. Fiscal Policy, Wages, and Jobs in the U.S. By Hyeongwoo Kim

  1. By: Sebastian Edwards
    Abstract: On December 31 1933, The New York Times published an open letter from John Maynard Keynes to President Franklin D. Roosevelt. In it Keynes encouraged FDR to expand public works through government borrowing. He also criticized FDR’s exchange rate policy, and argued that there was a need for lower long-term interest rates. But perhaps the most interesting feature of this letter is that Keynes made comments on the sequencing and speed of economic policies. He argued that “recovery” policies should precede “reform” measures. In this paper I analyze this particular aspect of the open letter, and I argue that for Keynes exchange rate stability was a key component of what he considered to be the appropriate order of policy. I also provide a comparison between Keynes’s views on sequencing and those developed in the 1980s and 1990s.
    JEL: B21 B22 B26 E31 F31 N12 N22
    Date: 2018–03
  2. By: Yoann Verger (REEDS - Centre international de Recherches en Economie écologique, Eco-innovation et ingénierie du Développement Soutenable - UVSQ - Université de Versailles Saint-Quentin-en-Yvelines)
    Abstract: Here I provide some further elaboration on the idea of Sraffian ecological economics and its articulation with the capability approach. This enables addressing some important questions raised by Nuno Ornelas Martins (2018) when commenting on the idea of Sraffian ecological economics as outlined in Verger (2017) while advancing the basis for a capability approach. In a more general way, a research pathway for the development of Sraffian ecological economics is presented, going from an historical work on the epistemological, ethical, and ontological positions of Sraffa, to the investigation of specific areas of research. Finally, to understand the connection between Sraffa's economic theory and the capability approach discussed by Martins (2018), while addressing the environmental impacts of production, an essential aspect is Pasinetti's concept of hyper-subsystem (Pasinetti, 1988), as suggested by Vivian Walsh (2003).
    Date: 2018–02–12
  3. By: Ansuk Jeong (University of Utah Asia Campus)
    Abstract: Our contemporary local and global communities face various forms of social issues. As a community psychologist, the author teaches college students in South Korea about the importance of context that shapes people's behaviors, under the title of Behavioral Economics in Our Community. In this presentation, the author wants to share what she learned from the students when they tried to apply the Behavioral Economics principles in the real communities. Students were required to identify one social issue per each to challenge in their communities and to propose an intervention program that nudges people to the desired direction. By paying attention to the social issues that need to be tackled to improve the individual and community well-being, students reflected on the Community Psychology principles. At the same time, by developing a feasible intervention program that borrows the Behavioral Economics principles, students learned how to make real changes in people?s behaviors. Specific examples of the students? successful projects will be shared in the presentation, including holding door for others, Korean spelling-check application for smartphones, and clean dumping of toilette paper. More importantly, the focus will be made on the process of each project as the students were also required to make a real contact with the person in charge, the person who can make decisions, the person who can influence the implementation of the project. In the presentation, therefore, the audience will learn about the contemporary South Korean socio-cultural environment as the context of Behavioral Economics application.
    Keywords: Behavioral Economics, Community Psychology, Community Project, Social Issues.
    Date: 2017–10
  4. By: Clovis Freire
    Abstract: Economic development is associated with structural transformation and the increase of complexity of production and exports. This paper examines whether strategic diversification is required to increase economic complexity or whether market incentives would be sufficient to drive this process of catching-up. The paper applies empirical methods of the strand of the literature on economic complexity to examine how path dependency and the demand for potential new products affect economic diversification. It argues that strategic diversification is required in cases when demand factors are very likely to create incentives for diversification towards less complex products, which hinders the increase of productive capacities of countries. The paper presents the results of analysis considering 221 economies and shows that less diversified economies would not be able to rely on market incentives alone. They have to strategically diversify towards more complex products, which require the selective promotion of economic activities through the use of targeted industrial, infrastructure, trade, investment and private sector development policies.
    Keywords: Diversification, Structural Transformation, Productive Capacities, Industrial Policy, Economic Development
    JEL: O11 O14 O33 O38 O53 O57
    Date: 2017–09
  5. By: Agnès Labrousse (CRIISEA - Centre de Recherche sur les Institutions, l'Industrie et les Systèmes Economiques d'Amiens - UPJV - Université de Picardie Jules Verne); Sandrine Michel (ART-Dev - Acteurs, Ressources et Territoires dans le Développement - CIRAD - Centre de Coopération Internationale en Recherche Agronomique pour le Développement - UPVD - Université de Perpignan Via Domitia - UM3 - Université Paul-Valéry - Montpellier 3 - UM - Université de Montpellier - CNRS - Centre National de la Recherche Scientifique)
    Abstract: This chapter discusses the way in which the social surplus is distributed and, crucially, used—that is, accumulation regimes. Historical observation shows that accumulation—the process of adding productive capital to the previously invested amount of capital—undergoes long periods of stability, followed by periods of instability and crisis. Thus, especially Régulation theory and the Social Structure of Accumulation approach set out to study the dynamics of production, consumption and the distribution of income through institutional frameworks specific in time and location and which underpin macroeconomic regularities. In this way, authors demonstrate that the evolutionary nature of the economy implies that economics should not assume a canonical accumulation regime but rather be concerned with a much broader variety of regimes.
    Date: 2017–08–04
  6. By: Yoann Verger (REEDS - Centre international de Recherches en Economie écologique, Eco-innovation et ingénierie du Développement Soutenable - UVSQ - Université de Versailles Saint-Quentin-en-Yvelines)
    Abstract: Piero Sraffa is a most famous economist, as well as a very parsimonious writer. So the discovery of an unpublished draft article in his unpublished papers is surely a big news for the history of economic thought, even more considering its subject: to provide an answer for the devastating article of C. F. Manara [1968]. Here I provide a first conjecture on why this draft has never been published - Sraffa was not able to overcome Manara's argument - and I show how Dupertuis and Sinha [2009] provide a solution that would have allowed Sraffa to publish what would have been his last article.
    Date: 2018–02–14
  7. By: Clovis Freire
    Abstract: Economic diversification is very relevant for poorer developing countries to create jobs and foster economic development. That need has been recognized in key internationally agreed development goals. The empirical economic literature has identified several stylized facts about the pattern of diversification of economies, but the development of explanations for those patterns in general has been only loosely associated with economic theory on growth, trade, technology change and structural transformation. Making that connection is relevant because it could inform policymakers in developing countries in designing and implementing policies for promoting diversification. This paper presents a model of structural economic dynamics and endogenous technological change that is able to replicate empirical regularities related to economic diversification. The model is used to study strategies to foster diversification in poorer countries, which could help to better target action in the implementation of internationally agreed goals related to the economic diversification of these countries.
    Keywords: Diversification, Economic Complexity, Structural Transformation, Productive Capacities, Economic Development
    Date: 2017–08
  8. By: Miguel Vazquez;
    Abstract: The primary objective of this paper is to study the role of institutions evolution assuming that economies are generally out of equilibrium. The focus is developing a logical framework that allows describing economies as complex adaptive systems. This will allow deducing the uncertainty inherent to the economy as a consequence of system characteristics (instead of assuming it as hypothesis). Thus, it will be possible to characterize adaptation from fundamental properties of the system. As institutions are mechanisms to facilitate adaptation, the paper will provide a fundamental description of the functioning and logic for institutions within complex adaptive systems.
    Keywords: Complex adaptive systems; Institutional dynamics; Algorithmic rationality; Uncertainty
    JEL: D8 D02 O3 B5
    Date: 2018
  9. By: S. Nazrul Islam; Kenneth Iversen
    Abstract: This paper examines the relationship between “Transformative Change,” advocated by the 2030 Agenda for sustainable development, and “Structural Change,” which has been a longstanding and important concept in Development Economics. It shows that while structural change is still relevant, growing concerns for social development and environmental protection made it necessary to switch to the more encompassing concept of “Transformative Change” that provides greater space for inclusion and interaction of all three dimensions of sustainable development. The paper notes that, in the era of greater globalization, countries have followed more varied patterns of structural change, all of which are not equally suitable for sustainable development. The paper notes that Transformative Change subsumes structural change, and it discusses the modifications that structural change needs to be more compatible with sustainable development.
    Keywords: Structural change; Transformative change; 2030 Agenda; Sustainable development
    JEL: O14 O44 Q0 Q56 Q57 Q58
    Date: 2018–02
  10. By: Matthew Rognlie (Princeton University); Ludwig Straub (MIT); Adrien Auclert (Stanford)
    Abstract: We derive a microfounded, dynamic version of the traditional Keynesian cross, which we call the intertemporal Keynesian cross. It characterizes the mapping from all partial equilibrium demand shocks to their general equilibrium outcomes. The aggregate demand feedbacks between periods can be interpreted as a network, and the linkages in the network can be generalized to reflect both the feedback from consumption and other dynamic forces, such as fiscal and monetary policy responses. We explore the general equilibrium amplification and propagation of impulses, and show how they vary with features of the economy. General equilibrium amplification is especially strong when agents are constrained, face uncertainty, or are unequally exposed to aggregate fluctuations, and it plays a crucial role in the transmission of monetary policy.
    Date: 2017
  11. By: S. Nazrul Islam; John Winkel
    Abstract: This paper offers a unifying conceptual framework for understanding the relationship between climate change and “within-country inequalities,” referred here collectively as “social inequality.” Available evidence indicates that this relationship is characterized by a vicious cycle, whereby initial inequality causes the disadvantaged groups to suffer disproportionately from the adverse effects of climate change, resulting in greater subsequent inequality. The paper identifies three main channels through which the inequality-aggravating effect of climate change materializes, namely (a) increase in the exposure of the disadvantaged groups to the adverse effects of climate change; (b) increase in their susceptibility to damage caused by climate change; and (c) decrease in their ability to cope and recover from the damage suffered. The paper presents evidence to illustrate each of the processes above. It also notes that the same analytical framework can be used to discuss the relationship between climate change and inequality across countries. Finally, it points to the ways in which the analysis can be helpful in making relevant policy decisions.
    Keywords: Climate change; inequality; exposure; susceptibility; ability to cope and recover; adaptation
    JEL: Q53 Q56 Q59
    Date: 2017–10
  12. By: Claudia Kettner-Marx (WIFO); Daniela Kletzan-Slamanig (WIFO)
    Abstract: Economic literature generally favours market-based instruments for regulating environmental externalities since they ensure compliance at the least cost to society. Emission taxes have been increasingly introduced internationally, with the focus shifting to CO2 after the adoption of the Kyoto Protocol in 1997. In this paper, the theoretical economic literature on energy and emission taxes is reviewed. The focus is on theoretical recommendations regarding the optimal design of environmental and especially carbon taxes, their performance relative to other instruments, the concept of a double dividend as well as potential competitiveness and distribution effects. Carbon taxation can play a key role in climate policy and for achieving long-term emission reductions. This overview of economic considerations may help in creating a sustainable, effective and efficient regulatory system for reducing emissions.
    Keywords: climate policy, carbon pricing, instrument choice, market-based instruments, environmental tax reform
    Date: 2018–02–23
  13. By: Hyeongwoo Kim
    Abstract: This paper empirically investigates the fiscal policy effects on labor market conditions, employing an array of structural vector autoregressive models for the post-war U.S. data from 1960:I to 2017:II. Fiscal spending shocks increase jobs in the government sector at the cost of private sector jobs, resulting in net losses to the total employment. Private wages increase insignificantly in the short-run, while government wages rise significantly and persistently in response to the fiscal shock. Consequently, the wage gap across the two sectors widens in response to the fiscal shock. The wage shock yields significantly positive responses of corporate profits in the long-run as it enhances productivity, which supports wage-led growth models. On the other hand, I report negligible in-sample and out-of-sample predictive contents for private jobs and wages from corporate profits, meaning that there's virtually no evidence of the trickle-down effect, which is essential for profit-led growth models.
    Keywords: Government Spending; Labor Market Condition; Trickle-Down Effect; Profit-Led Growth; Wage-Led Growth; Out-of-Sample Forecast
    JEL: E24 E52 E62
    Date: 2018–03

This nep-pke issue is ©2018 by Karl Petrick. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.