nep-pke New Economics Papers
on Post Keynesian Economics
Issue of 2018‒05‒14
thirteen papers chosen by
Karl Petrick
Western New England University

  1. "Reflections on the New Deal: The Vested Interests, Limits to Reform, and the Meaning of Liberal Democracy" By John F. Henry
  2. On the question of the relevance of Economics as a science: Postmodern filosofia critique By Jackson, Emerson Abraham
  3. A(nother) Note on the Inconsistency of Neo-Kaleckian Growth Models By Pariboni, Riccardo; Girardi, Daniele
  4. Colonial Origins and Comparative Development: Institutions Matter By Chakraborty, Adrij
  5. The Rehn-Meidner Model of Wage and Productivity Policy. A Sraffian Analysis By Zoltàn Pogàtsa
  6. I see myself as an empirical Keynesian By Henri Sterdyniak
  7. Is Envy Harmful to a Society’s Psychological Health and Wellbeing? A Longitudinal Study of 18,000 Adults By Mujcic, Redzo; Oswald, Andrew J.
  8. Economic inequality and Islamic Charity: An exploratory agent-based modeling approach By Hossein Sabzian; Alireza Aliahmadi; Adel Azar; Madjid Mirzaee
  9. The Political Economy of Ideas By Mukand, Sharun W.; Rodrik, Dani
  10. Big Business and Management: Too Many Bosses and Too Much Pay? By Lambert, Thomas
  11. Book Review: myths and macro: macroeconomics and the Phillips curve myth by James Forder By Goodheart, Charles
  12. The Political Economy of European Populism: Labour Market Dualisation and Protest Voting in Germany and Spain By Dustin Voss
  13. The Paradox of Global Thrift By Luca Fornaro; Federica Romei

  1. By: John F. Henry
    Abstract: I subject some aspects of Roosevelt's "New Deal" to critical analysis, with particular attention to what is termed "liberal democracy." This analysis demonstrates the limits to reform, given the power of "vested interests" as articulated by Thorstein Veblen. While progressive economists and others are generally favorably disposed toward the New Deal, a critical perspective casts doubt on the progressive nature of the various programs instituted during the Roosevelt administrations. The main constraint that limited the framing and operation of these programs was that of maintaining liberal democracy. The New Deal was shaped by the institutional forces then dominant in the United States, including the segregationist system of the South. In the end, vested interests dictated what transpired, but what did transpire required a modification of the understanding of liberal democracy. The following paper provides a compressed account of this tradition of endogenous financial market instability.
    Keywords: Vested Interests; New Deal; Planning; Liberalism
    JEL: B52 N2 N4 P1
    Date: 2018–05
  2. By: Jackson, Emerson Abraham
    Abstract: This article has adopted an open discourse in addressing pertinent concerns about the scientific existence of economics as a discipline. In doing so, some (critical) Filosofia arguments have been provided in ensuring that a well balanced approach is taken on the subject. Obviously, the approach of Popperian falsification used by economic science to address scientific justification through its varied scientific platform of technology applications like EVIEWS, STATA, MatLab and many more, have been applauded. Albeit such advances, the views of modern and postmodern critics have also come out saliently in a bid to ensuring open discourses are brought to the fore as a way of adding scientific value to the subject matter. In concluding, it was acknowledged that more is needed in ensuring that economic science as practiced by economists takes an open approach to critical discourse(s), reflecting reality about its pursed scientific ventures, given the persistence of economic volatility manifested across the global community.
    Keywords: Economic Science; Scientific Methodology; Filosofia; Postmodern Critique
    JEL: B41 B5
    Date: 2018–02–01
  3. By: Pariboni, Riccardo (Roma Tre University); Girardi, Daniele (University of Massachusetts-Amherst)
    Abstract: As a matter of common knowledge, the canonical Neo-Kaleckian growth model is not able to reconcile the actual and normal rates of utilization in equilibrium. Dávila-Fernández et al. (2017) revive an old proposal for solving this problem – making the rate of normal utilization an endogenous variable that converges to the actual utilization rate – justifying it with new premises, based on a recent contribution to production theory (Nikiforos 2013). In this note, we argue that their proposed adjustment mechanism is based on restrictive assumptions, some of which have little economic justification. Moreover, we show that also if one puts aside for the sake of argument the perplexities regarding the ‘endogenization’ of the normal rate of utilization, the existence of autonomous components of demand is sufficient to invalidate their results.
    Keywords: Neo-Kaleckian model; Autonomous Demand; Sraffian Supermultiplier; normal utilization
    JEL: E11 E12 E22
    Date: 2018–05
  4. By: Chakraborty, Adrij
    Abstract: A large literature is present on how colonial origins through the channels of Institutions and human capital explain the income variation between countries. In most cases, it is argued that colonial European settlement outside of Europe has shaped the type of institutions present today that explain the gap between income levels of countries. Others criticize this claim on the basis that firstly, geography plays a prominent role in income variation and secondly, the studies in favor of the primacy of the role of institutions suffer from measurement error and bias. In this study, we analyze the role colonial origins and geography play in comparative income levels of countries today. In this study, we present a theoretical analysis for what determines growth in the long run and how colonial origins come into play and then make an empirical study using OLS and IV techniques, while utilizing recent data and different proxies, into the claims that colonial origins and/or geography play the prominent role. We also investigate whether the institutions primacy studies suffer from measurement error. Our findings point out that while geography may play a small role, majority of the income variation is associated with institutions and colonial origins.
    Keywords: Colonial Origins, Comparative Development, Institutions, Economic Growth
    JEL: I12 N10 O1 O11 O4 O57 P16 P51
    Date: 2017–03
  5. By: Zoltàn Pogàtsa
    Abstract: The mainstream neoclassical school treats labour as any other commodity, where demand and supply meet on a voluntary and equal basis. It also assumes that the best method for its allocation is open market coordination. The paper first outlines the epistemological faults in this model. It then continues to discuss the alternative model, as charted by two Swedish economists, Gösta Rehn and Rudolf Meidner.
  6. By: Henri Sterdyniak (Observatoire français des conjonctures économiques)
    Abstract: Henri Sterdyniak is a scientific adviser at the OFCE research institute – the Observatoire français des conjonctures économiques – where he has been working for more than 30 years, among other posts as a director of the department ‘economics of globalization’. From 1985 until 2013 he was also a professor of economics at the University Paris Dauphine, France. He is also one of the founding members of the Économistes Atterrés (the Appalled Economists), an association of French economists who object to neoliberal policies, formed in 2010. He has written extensively on various topics, including empirical macroeconomics, monetary policies, fiscal policies, globalization, European policies, and more specifically social policies and retirement systems. He has published hundreds of articles and reports, lately with Catherine Mathieu.
    Keywords: Keynes; Economist
    Date: 2017–12
  7. By: Mujcic, Redzo (Wirtschaftsuniversität Wien, Vienna); Oswald, Andrew J. (University of Warwick, CAGE, and IZA)
    Abstract: Nearly 100 years ago, the philosopher and mathematician Bertrand Russell warned of the social dangers of widespread envy. One view of modern society is that it is systematically developing a set of institutions - such as social media and new forms of advertising - that make people feel inadequate and envious of others. If so, how might that be influencing the psychological health of our citizens? This paper reports the first large-scale longitudinal research into envy and its possible repercussions. The paper studies 18,000 randomly selected individuals over the years 2005, 2009, and 2013. Using measures of SF-36 mental health and psychological well-being, four main conclusions emerge. First, the young are especially susceptible. Levels of envy fall as people grow older. This longitudinal finding is consistent with a cross-sectional pattern noted recently by Nicole E. Henniger and Christine R. Harris, and with the theory of socioemotional regulation suggested by scholars such as Laura L.Carstensen. Second, using fixed-effects equations and prospective analysis, the analysis reveals that envy today is a powerful predictor of worse SF-36 mental health and well-being in the future. A change from the lowest to the highest level of envy, for example, is associated with a worsening of SF-36 mental health by approximately half a standard deviation (p
    Date: 2018
  8. By: Hossein Sabzian; Alireza Aliahmadi; Adel Azar; Madjid Mirzaee
    Abstract: Economic inequality is one of the pivotal issues for most of economic and social policy makers across the world to insure the sustainable economic growth and justice. In the mainstream school of economics, namely neoclassical theories, economic issues are dealt with in a mechanistic manner. Such a mainstream framework is majorly focused on investigating a socio-economic system based on an axiomatic scheme where reductionism approach plays a vital role. The major limitations of such theories include unbounded rationality of economic agents, reducing the economic aggregates to a set of predictable factors and lack of attention to adaptability and the evolutionary nature of economic agents. In tackling deficiencies of conventional economic models, in the past two decades, some new approaches have been recruited. One of those novel approaches is the Complex adaptive systems (CAS) framework which has shown a very promising performance in action. In contrast to mainstream school, under this framework, the economic phenomena are studied in an organic manner where the economic agents are supposed to be both boundedly rational and adaptive. According to it, the economic aggregates emerge out of the ways agents of a system decide and interact. As a powerful way of modeling CASs, Agent-based models (ABMs) has found a growing application among academicians and practitioners. ABMs show that how simple behavioral rules of agents and local interactions among them at micro-scale can generate surprisingly complex patterns at macro-scale. In this paper, ABMs have been used to show (1) how an economic inequality emerges in a system and to explain (2) how sadaqah as an Islamic charity rule can majorly help alleviating the inequality and how resource allocation strategies taken by charity entities can accelerate this alleviation.
    Date: 2018–04
  9. By: Mukand, Sharun W. (University of Warwick); Rodrik, Dani (Harvard University)
    Abstract: We develop a conceptual framework to highlight the role of ideas as a catalyst for policy and institutional change. We make an explicit distinction between ideas and vested interests and show how they feed into each other. In doing so the paper integrates the Keynes-Hayek perspective on the importance of ideas with the currently more fashionable Stigler-Becker (interests only) approach to political economy. We distinguish between two kinds of ideational politics – the battle among different worldviews on the efficacy of policy (worldview politics) versus the politics of victimhood, pride and identity (identity politics). Political entrepreneurs discover identity and policy ‘memes’ (narratives, cues, framing) that shift beliefs about how the world works or a person’s belief of who he is (i.e. identity). Our framework identifies a complementarity between worldview politics and identity politics and illustrates how they may reinforce each other. In particular, an increase in identity polarization may be associated with a shift in views about how the world works. Furthermore, an increase in income inequality is likely to result in a greater incidence of ideational politics. Finally, we show how ideas may not just constrain, but also ‘bite’ the interests that helped propagate them in the first instance.
    Keywords: JEL Classification:
    Date: 2018
  10. By: Lambert, Thomas
    Abstract: The mainstream or neoclassical economics view that labor is rewarded according to its productivity has been extended to managers and management teams as justification for the levels of compensation that they receive. Additionally, the management concept of “span of management” or “span of control” has been used to explain the total number of and per employee number of managers in any organization along with the assumption that the appropriate span of management is where the marginal productivity of the last manager employed should equal his/her marginal cost, or wage. On the other hand, Marxists and institutionalists hold different views of the roles and purposes of managers within organizations and attempt to explain these through either the view of managers exploiting workers on behalf of owners or the view of managers exploiting both workers and owners in order to advance their own agenda. This research note examines managerial compensation and intensity from both traditional/mainstream and alternative views by focusing on measures of managerial salaries, employee productivity, return on owners’ equity, return on assets, and rates of worker exploitation.
    Keywords: big business, bureaucracy, economic systems, management, and productivity
    JEL: B51 D2 D43
    Date: 2018–04
  11. By: Goodheart, Charles
    JEL: J1 F3 G3
    Date: 2018–04
  12. By: Dustin Voss
    Abstract: Many advanced economies around the world have recently witnessed a notable rise in populism stirring severe political unrest and social instability. This paper addresses the apparent academic confusion regarding the origins of this phenomenon and combines politico-economic analysis with electoral data to derive a new theory of populist demand. I conceptualise populism as a problem of political alienation stemming from the incapacity of social democratic parties to comprehensively represent the working class in the context of increased labour market dualisation. If the group of underrepresented workers is not sufficiently numerous to be electorally-relevant, right-wing populist protest parties can make use of the representational vacuum by reframing class-distributional issues along cultural conflict lines. If, however, the group of marginalised workers is large enough to mobilise political attention, left-wing populist parties will address socio-economic issues more directly. I thus assume an inverted hyperbolic causal relationship between labour market segmentation and the demand for populism. This hypothesis is tested in a critical case study on the electoral effects of labour market reforms in Germany and Spain.
    Keywords: populism, right-wing parties, dualisation, labour market reform, political representation
    Date: 2018–03
  13. By: Luca Fornaro; Federica Romei
    Abstract: This paper describes a paradox of global thrift. Consider a world in which interest rates are low and monetary policy cannot stabilize the economy because it is frequently constrained by the zero lower bound. Now imagine that governments complement monetary policy with prudential financial and fiscal policies, because they perceive that limiting private and public borrowing during booms will help stabilize the economy by reducing the risk of financial crises and by creating space for fiscal interventions during busts. We show that these policies, while effective from the perspective of individual countries, might backfire if applied on a global scale. In a financially integrated world, in fact, prudential policies generate a rise in the global supply of savings, or equivalently a drop in global aggregate demand. In turn, weaker global aggregate demand depresses output in countries whose monetary policy is constrained by the zero lower bound. Due to this effect, the world might paradoxically experience a fall in output and welfare following the implementation of well-intended prudential policies.
    Keywords: E32, E44, E52, F41, F42
    Date: 2018–04

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