nep-pke New Economics Papers
on Post Keynesian Economics
Issue of 2018‒04‒23
nine papers chosen by
Karl Petrick
Western New England University

  1. "The Economics of Instability: An Abstract of an Excerpt" By Frank Veneroso
  3. "'America First,' Fiscal Policy, and Financial Stability" By Michalis Nikiforos; Gennaro Zezza
  4. Interdisciplinary learning in real estate education: the case of the urban redevelopment game By Yawei Chen; Tom Daamen; Erwin Heurkens; Fred Hobma; Wouter Jan Verheul
  5. Eradicating Poverty by 2030: Implications for Income Inequality, Population Policies, Food Prices (and Faster Growth?) By Giovanni Andrea Cornia
  7. Towards a European Full Employment Policy By Ritzen, Jo; Zimmermann, Klaus F.
  8. Race and Economic Opportunity in the United States: An Intergenerational Perspective By Raj Chetty; Nathaniel Hendren; Maggie R. Jones; Sonya R. Porter
  9. The UK (and Western) productivity puzzle: does Arthur Lewis hold the key? By Oulton, Nicholas

  1. By: Frank Veneroso
    Abstract: The dominant postwar tradition in economics assumes the utility maximization of economic agents drives markets toward stable equilibrium positions. In such a world there should be no endogenous asset bubbles and untenable levels of private indebtedness. But there are. There is a competing alternative view that assumes an endogenous behavioral propensity for markets to embark on disequilibrium paths. Sometimes these departures are dangerously far reaching. Three great interwar economists set out most of the economic theory that explains this natural tendency for markets to propagate financial fragility: Joseph Schumpeter, Irving Fisher, and John Maynard Keynes. In the postwar period, Hyman Minsky carried this tradition forward. Early on he set out a “financial instability hypothesis†based on the thinking of these three predecessors. Later on, he introduced two additional dynamic processes that intensify financial market disequilibria: principal–agent distortions and mounting moral hazard. The emergence of a behavioral finance literature has provided empirical support to the theory of endogenous financial instability. Work by Vernon Smith explains further how disequilibrium paths go to asset bubble extremes. The following paper provides a compressed account of this tradition of endogenous financial market instability.
    Keywords: Financial Instability; Joseph Schumpeter; Irving Fisher; John Maynard Keynes; Hyman Minsky; Financial Markets; Macroeconomics
    JEL: D53 E44
    Date: 2018–04
    Date: 2018
  3. By: Michalis Nikiforos; Gennaro Zezza
    Abstract: The US economy has been expanding continuously for almost nine years, making the current recovery the second longest in postwar history. However, the current recovery is also the slowest recovery of the postwar period. This Strategic Analysis presents the medium-run prospects, challenges, and contradictions for the US economy using the Levy Institute’s stock-flow consistent macroeconometric model. By comparing a baseline projection for 2018–21 in which no budget or tax changes take place to three additional scenarios, the authors isolate the likely macroeconomic impacts of: (1) the recently passed tax bill; (2) a large-scale public infrastructure plan of the same “fiscal size†as the tax cuts; and (3) the spending increases entailed by the Bipartisan Budget Act and omnibus bill. Finally, Nikiforos and Zezza update their estimates of the likely outcome of a scenario in which there is a sharp drop in the stock market that induces another round of private-sector deleveraging. Although in the near term the US economy could see an acceleration of its GDP growth rate due to the recently approved increase in federal spending and the new tax law, it is increasingly likely that the recovery will be derailed by a crisis that will originate in the financial sector.
    Date: 2018–04
  4. By: Yawei Chen; Tom Daamen; Erwin Heurkens; Fred Hobma; Wouter Jan Verheul
    Abstract: Fundamental changes in economy, demography, technology, climate and society create tremendous challenges for practitioners involved in the shaping the built environment. Politicians, planners, real estate professionals, engineers, architects and others need to anticipate diverse transitions and increasing uncertainty associated with urban development processes. Many of the problems faced in cities today do not neatly follow the disciplinary boundaries of our academies or professions. To solve these so-called wicked problem, professionals often require diversified knowledge to understand the different dimensions of urban problems and their potential solutions. However, traditional education programs on real estate and urban development are usually developed from a specific disciplinary viewpoint and intent to train students to specialise in one discipline. They often pay limited attention to help students develop skills and the capacity to integrate and synthesize knowledge and identify appropriate courses of action. Interdisciplinary education programmes are proposed to be an appropriate solution that makes connections and integrate knowledge across fields of expertise and handle managerial uncertainty.This research examines how interdisciplinary education is organised within programme the Urban Redevelopment Game course as part of the Management in the Built Environment master curriculum (Faculty of Architecture, Delft University of Technology). The research aims to answer: To what extent does the urban redevelopment game course enable students to have an interdisciplinary learning experience? Based on course evaluations and discussions it was found that the course : attempts to imitate the reality and complexity of urban development processes; emphasise the experience of negotiations bringing awareness of various actor interests and disciplines involved; and connects theory with practice by applying theoretical concepts to an empirical study location. Through the form of role simulation, students not only acquire in-depth knowledge, but also receive mentorship to integrate and synthesize knowledge from different discipline.What is also interesting to highlight the use of competition between teams and in roles greatly enhances students’ motivation and efforts. It is argued that the didactical lessons learned from this course on interdisciplinary learning might be of interest for real estate education courses and further improvements.
    Keywords: Interdisciplinary learning; Real Estate Education; role simulation; TU Delft; urban %28re%29development game
    JEL: R3
    Date: 2017–07–01
  5. By: Giovanni Andrea Cornia
    Abstract: The paper examines whether the planned eradication of poverty to the year 2030 part of the Sustainable Development Goals strategy is compatible with the trends expected over the next 15 years in key economic variables such as GDP growth, population growth, income inequality and food prices. To do so, the paper develops a comparative-static, poverty-accounting model that allows to simulate to 2030 the impact on SDG1 (poverty eradication) of the fastest improvements recorded for the above four variables during the last 30 years. Numerous model simulations show that – even under the most favorable assumptions – between 16 and 28 countries (mainly from Africa) out of the 78 analyzed will not reach the SDG1 target. Policy suggestions on how to improve on such results are presented at the end of the paper.
    Keywords: SDG1, poverty eradication, inequality, GDP growth, population growth, food prices, public policies.
    JEL: D31 I32 J11 Q18
    Date: 2018
    Date: 2018
  7. By: Ritzen, Jo; Zimmermann, Klaus F.
    Abstract: Full employment in the European Union member states is a challenge but feasible, also in downswings of the business cycle and during stages of increased robotization. It requires a labor legislation that ensures flexibility and retraining, responsive labor sharing during the business cycle and to individual life cycle needs, government interventions to supply supplemental employment and revamping dual education. The future of work is better ensured with coordinated European full employment labor policies establishing fair work conditions based on long-run business strategies as well as a fair distribution of national income between labor and capital.
    Keywords: Employment,full employment,future of work,robotization,fair work,work-sharing,employment regulations,basic income,vocational training
    JEL: J5 J8
    Date: 2018
  8. By: Raj Chetty; Nathaniel Hendren; Maggie R. Jones; Sonya R. Porter
    Abstract: We study the sources of racial and ethnic disparities in income using de-identified longitudinal data covering nearly the entire U.S. population from 1989-2015. We document three sets of results. First, the intergenerational persistence of disparities varies substantially across racial groups. For example, Hispanic Americans are moving up significantly in the income distribution across generations because they have relatively high rates of intergenerational income mobility. In contrast, black Americans have substantially lower rates of upward mobility and higher rates of downward mobility than whites, leading to large income disparities that persist across generations. Conditional on parent income, the black-white income gap is driven entirely by large differences in wages and employment rates between black and white men; there are no such differences between black and white women. Second, differences in family characteristics such as parental marital status, education, and wealth explain very little of the black-white income gap conditional on parent income. Differences in ability also do not explain the patterns of intergenerational mobility we document. Third, the black-white gap persists even among boys who grow up in the same neighborhood. Controlling for parental income, black boys have lower incomes in adulthood than white boys in 99% of Census tracts. Both black and white boys have better outcomes in low-poverty areas, but black-white gaps are larger on average for boys who grow up in such neighborhoods. The few areas in which black-white gaps are relatively small tend to be low-poverty neighborhoods with low levels of racial bias among whites and high rates of father presence among blacks. Black males who move to such neighborhoods earlier in childhood earn more and are less likely to be incarcerated. However, fewer than 5% of black children grow up in such environments. These findings suggest that reducing the black-white income gap will require efforts whose impacts cross neighborhood and class lines and increase upward mobility specifically for black men.
    JEL: H0 J0
    Date: 2018–03
  9. By: Oulton, Nicholas
    Abstract: I propose a new explanation for the UK productivity puzzle. I graft the Lewis (1954) model onto a standard Solow growth model. What I call the neo-Lewis model is identical to the Solow model in good times. But in bad times foreign demand for a country’s exports is constrained below potential supply. This makes labour productivity growth depend negatively on the growth of labour input. I also argue that the neo-Lewis model can explain the fall in TFP growth, in the UK and elsewhere, after 2007. The predictions of the neoLewis model are tested on data for 23 advanced countries and also on a larger sample of 52 countries and find support.
    Keywords: Productivity; slowdown; TFP; capital; Lewis; immigration
    JEL: E24 F43 J24 O41 O47
    Date: 2018–03–25

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