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on Post Keynesian Economics |
| By: | Thomas Palley (Economics for Democratic and Open Societies (US)) |
| Abstract: | The last decade has witnessed a significant revival of belief in the efficacy of fiscal policy and mainstream economics is now reverting to the standard positions of mid-1970s Keynesianism. On the coattails of that revival, increased attention is being given to the doctrine of Modern Money Theory (MMT) which makes exaggerated claims about the economic costs and capability of money-financed fiscal policy. MMT proponents are now asserting society can enjoy a range of large government spending programs for free via money financed deficits, which has made it very popular with progressive policy advocates. This paper examines MMT’s assertion and rejects the claim that the US can enjoy a massive permanent free program spree that does not cause inflation. As has long been known by Keynesians, in a static economy money financed deficits can be used to finance programs when the economy is away from the full employment - inflation boundary. However, that window will be temporary to the extent that those deficits drive the economy to full employment. Since the programs are permanent they have to be paid for with taxes or they will generate inflation. That is the economic logic behind the unpleasant Keynesian arithmetic. |
| Keywords: | Fiscal policy, budget deficits, money finance |
| JEL: | E00 E12 E62 E63 |
| Date: | 2019–04 |
| URL: | http://d.repec.org/n?u=RePEc:pke:wpaper:pkwp1910&r=all |
| By: | Alberto Botta; Eugenio Caverzasi; Alberto Russo |
| Abstract: | In the last decade, complexity economics has emerged as a powerful approach to the understanding of the most relevant factors influencing economic development. The concept of economic complexity has been applied to the study of different economic issues such as economic growth, technological change and inequality. With this work we aim at extending the application of this concept to the study of the financial side of the economy, and, in particular, of the macroeconomic effects of rising financial complexity. In this paper, we present an agent-based model integrating an increasingly complex financial sector with a real side of the economy populated, among other sectors, by heterogeneous households. We test the systemic impact that the increasing complexity of both the financial system and the financial products it manufactures bear on economic growth, macroeconomic stability and inequality. We find mixed results with respect to the positive economic implications the existing literature ascribes to products complexity and deepening production capabilities. Despite higher financial complexity may lead to faster growth, our model suggests that this comes at the cost of heightened financial fragility, a more crisis-prone economic system, and increasing levels of income and wealth inequality. According to these findings, and consistently with pioneering insights from Minsky, we claim that rising complexity does not always entail positive consequences for the well-being of the economy. This is particularly true when it comes to financial innovations and financial complexity. |
| Keywords: | AB-SFC model, financial complexity, securitization |
| JEL: | E44 G01 G23 |
| Date: | 2019–04 |
| URL: | http://d.repec.org/n?u=RePEc:pke:wpaper:pkwp1909&r=all |
| By: | Frédéric Gavrel (CREM - Centre de recherche en économie et management - UNICAEN - Université de Caen Normandie - NU - Normandie Université - UR1 - Université de Rennes 1 - UNIV-RENNES - Université de Rennes - CNRS - Centre National de la Recherche Scientifique) |
| Abstract: | In a status game, homogenous individuals first decide on their income (and on the effort necessary to that end) with the aim of Getting ahead of the Smiths (GAS). Next, they make use of a pure positional good to make incomes visible. Although the GAS hypothesis is ordinal, the signaling costs induce cardinal social concerns. The GAS hypothesis, translated into the pure pride concern, generates an equilibrium in which identical agents have unequal income levels. Because individuals decide on their income without taking into account its effect on the signaling costs of higher-ranked participants, this equilibrium is inefficient. Introducing a Pigovian tax to reduce conspicuous consumption generates a rat-race effect in the income-setting stage which neutralizes the effect of this tax on utilities. But a redistributive income tax, if coupled with an appropriate Pigovian tax on conspicuous consumption, increases all utilities. |
| Keywords: | Status game,Social concerns,Income inequalities,Conspicuous con- sumption,Income redistribution,Well-being,Efficiency |
| Date: | 2019–03–29 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:halshs-02083460&r=all |
| By: | Gérard Desmaison (ISEOR - Institut de Socio-économie des Entreprises et des ORganisations - Institut de socio-économie des entreprises et des organisations); Georges Vandenhove |
| Date: | 2017–06–22 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:halshs-02073905&r=all |