nep-pke New Economics Papers
on Post Keynesian Economics
Issue of 2019‒03‒04
six papers chosen by
Karl Petrick
Western New England University

  1. Coupling cycle mechanisms: Minsky debt cycles and the multiplier-accelerator By Sakir Devrim Yilmaz; Engelbert Stockhammer
  2. The explosion of the current world crisis: an illustration of the instability of capitalism. A Marxist view By Fabien Tarrit
  3. Toward a cognitive science of markets: Economic agents as sense-makers By Johnson, Samuel G. B.
  4. The Great Recession and the teaching of macroeconomics: A critical analysis of the Blanchard, Amighini and Giavazzi textbook By Giancarlo Bertocco; Andrea Kalajzić
  5. Knapp's 'State Theory of Money' and its reception in German academic discourse By Ehnts, Dirk H.
  6. Teoría del valor en Valenzuela Feijóo: Una representación walrasiana de Marx By Goicoechea, Julio

  1. By: Sakir Devrim Yilmaz; Engelbert Stockhammer
    Abstract: While there exists a substantial literature on different business cycle mechanisms, there is little literature on economies with more than one business cycle mechanism operating and the relation of stability of these subsystems with the stability of the aggregate system. We construct a model where a multiplier-accelerator subsystem in output-investment space (a real cycle) and a Minskyian subsystem in investment-debt space (a financial cycle) can generate stable/unstable cycles in 2D in isolation. We then derive a theorem showing that if two independent cycle mechanisms that generate stable closed orbits in 2D share a self-destabilizing common variable and the true representation of the system is a fully-coupled 3D system where a weighted average of the common variable is in effect, then the 3D system will generate locally stable closed orbits in 3D if and only if the subsystems have the same frequencies and/or the self-destabilizing effects of the common variable evaluated at the fixed point are equal in both subsystems. Our results indicate that in the presence of multiple cycle mechanisms which share common variables in an economy, the stability of the aggregate economy crucially depends on the frequencies of these sub-cycle mechanisms.
    Keywords: Business cycles, Minsky models, multiplier-accelerator
    JEL: C32 E32 E44
    Date: 2019–02
  2. By: Fabien Tarrit (REGARDS - Recherches en Économie Gestion AgroRessources Durabilité Santé- EA 6292 - URCA - Université de Reims Champagne-Ardenne - SFR Condorcet - URCA - Université de Reims Champagne-Ardenne - UPJV - Université de Picardie Jules Verne - CNRS - Centre National de la Recherche Scientifique)
    Abstract: Karl Marx demonstrated that capitalism as a mode of production is a structurally unstable system; this has been illustrated by the recent period, especially the current crisis. This article is a contribution to a Marxian explanation of the current crisis, analyzing it as an expression of the tendency of the rate of profit to fall; it focuses on the first stage of the development of the crisis, understood as an outcome of the instability of capitalism and it identifies its specificities.
    Keywords: capitalism,economic crisis,rate of profit,exploitation
    Date: 2019–02–15
  3. By: Johnson, Samuel G. B.
    Abstract: Behavioral economics characterizes decision-makers using psychologically-informed models. Cognitive science produces psychologically-informed models. Why don't these disciplines talk more? Here, the author presents several arguments for why cognitive science should inform behavioral economics - it characterizes internal psychological states, builds a richer conception of human nature, pays equal attention to cognition's successes and failures, embraces multidisciplinary insights, and avoids blind spots produced by behavioral economics' intellectual lineage. The author illustrates these principles using the cognitive science of sense-making - how humans understand information - including mental tools such as heuristics, stories, and theories. The science of mind can produce new insights to enrich economics.
    Keywords: cognitive science,behavioral economics,experimental economics,behavioral finance,economics methodology,information processing,decision-making under uncertainty
    JEL: A12 B4 D01 D11 D7 D8 D9
    Date: 2019
  4. By: Giancarlo Bertocco; Andrea Kalajzić
    Abstract: The publication of the seventh edition of Blanchard’s textbook (Blanchard 2017) and of the third edition of the textbook authored by Blanchard, Amighini and Giavazzi (2017) represents a significant opportunity to assess the impact of the Great Recession on macroeconomic theory and on the teaching of macroeconomics. The authors acknowledge that the mainstream economic model presented in the previous editions of their textbooks is unable to offer a significant explanation of the causes of the crisis as it completely neglects the role of the financial system. They believe that the economics profession has learned the lesson of the crisis since economists understood the limitations of the theoretical model elaborated over the last decades. In the revised editions of their textbooks they present a new theoretical model taking into account the financial system. The objective of this work is twofold: i) to show that the new model does not allow to elaborate a coherent explanation of the Great Recession and: ii) to present the pillars of an alternative theoretical model based on the lessons of Keynes, Schumpeter and Minsky.
    Keywords: Financial markets, Crises, Keynes, Schumpeter, Minsky
    JEL: E10 E20 E30 E40 E44
    Date: 2019–02
  5. By: Ehnts, Dirk H.
    Abstract: In 1905, Georg Friedrich Knapp published The State Theory of Money in his native German, claiming that money is a "creature of law" and not connected to metals via some intrinsic value. When the English translation appeared in 1924, apparently at the wishes of John Maynard Keynes, the German version had run through four editions, upon which the last the translation builds. There also had been considerable debate about "Chartalism" - the idea that money derived its acceptance by legal means - in the German academic literature. Among others, Knut Wicksell and Georg Simmel commented on it. Since so far there has not been any English-language publication on this issue, it is deemed worthwhile to provide such. After presenting the main arguments that Knapp makes in his book, the academic reviews that followed are presented and evaluated.
    Keywords: chartalism,Modern Monetary Theory,monetary theory,public finance,deficit spending,taxation,value of money,metallism
    JEL: E40 E42 E51 F31 H20
    Date: 2019
  6. By: Goicoechea, Julio
    Abstract: This paper examines the conceptual framework upon which José Valenzuela Feijóo unfolds a theory of value. The elementary form of value gives way to pairs of commodities which in spite of being ordinary, each is to function as money. The general economic equilibrium becomes a means to replace the total or expanded value form. The unit of account, after being reduced to a numeraire, is eliminated. Previously, in an isolated approach to Bortkiewicz, values and prices are to become, each, a self-contained system. The non-dogmatic version of Marx which he claims to provide is shown to be rooted in Walrasian precepts. To expose these precepts, he makes use of Marxian terminology. In an apparent antagonism with Walras, he disqualifies him harshly. The considerable resort to algebraic expressions by Valenzuela Feijóo is kept at a strict minimum.
    Keywords: Value theory, numeraire, general economic equilibrium, Walras, Marx
    JEL: D50
    Date: 2019–01–07

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