nep-pke New Economics Papers
on Post Keynesian Economics
Issue of 2019‒07‒29
five papers chosen by
Karl Petrick
Western New England University

  1. Development banking, state of confidence and sustainable growth By Victor Manuel Isidro Luna
  3. The Problem of Bigness: From Standard Oil to Google By Lamoreaux, N.
  4. Sraffian Indeterminacy in General Equilibrium Revisited By Yoshihara, Naoki; Kwak, Se Ho
  5. Dismantling the myth of the growth-inequality trade-off By Negre, Mario; Cuesta, José; Revenga, Ana; Morley, Prescott J.

  1. By: Victor Manuel Isidro Luna
    Abstract: This article outlines the role of three types of development banks (communal, national, and multilateral) in promoting sustainable growth and development in the future. The 2007-2008 crisis made clear the need for: (1) heavy investment in developed as well as peripheral countries, and (2) coordinated financial institutions at the local, national, and international levels. Given a historical and spatial context, development banks can adopt different types of ownership (public or private), can target a myriad of specific sectors, and can promote local and international cooperation. We argue that for sustainable growth to be achieved, “confidence” has to be provided by public financial institutions. In our analysis we follow post-Keynesian ideas, which, considering the use of money with “social responsibility,” are thought to match the ideas of other heterodox approaches.
    Keywords: Development Banks, 2007-2008 Crisis, State of Confidence, Post-Keynesian, Sustainable Growth
    JEL: G10 G20
    Date: 2019–07
  2. By: John Foster (School of Economics, The University of Queensland)
    Abstract: In the United States, the ratio of consumption to GDP has risen steadily over the past half century. In trying to understand why this ratio has increased so much, it is argued that standard models of the consumption function, built up from the neoclassical theory of constrained optimization, cannot offer a satisfactory answer. An alternative perspective is offered whereby aggregate consumption expenditure is seen as primarily the outcome of the population adopting widely upheld rules (‘meso-rules’) in a complex economic system. Aggregate consumption is viewed as the outcome of two contrasting historical processes: one mainly involving pre-committed, rule-bound choices and the other involving open-ended choices, made knowingly in the face of uncertainty, to adopt new meso-rules concerning the consumption of novel kinds of goods and services. The former process provides the degree of order that must be present in any complex system and the latter facilitates evolutionary change to occur. Using over half a century of data, the US consumption function is modelled successfully on the presumption that the economy is a complex system. The evidence supports the hypothesis that the ratio of consumption to GDP has risen because of the diffusion of a ‘culture of consumerism’ in the post-war era and that the limit of this process is now being approached, with important macroeconomic and social implications.
    JEL: E00 E01 E10 E2 E21 E60
    Date: 2019–07–25
  3. By: Lamoreaux, N.
    Abstract: This essay sets recent expressions of alarm about the monopoly power of technology giants like Google and Amazon in the long history of Americans’ response to big business. It argues that we cannot understand that history unless we realize that Americans have always been concerned about the political and economic dangers of bigness, not just the threat of high prices. The problem policy makers faced after the rise of Standard Oil was how to protect society against those dangers without punishing firms that grew large because they were innovative. The antitrust regime put in place in the early twentieth century managed this balancing act by focusing on large firms’ conduct toward competitors and banning practices that were anticompetitive or exclusionary. Maintaining this balance was difficult, however, and it gave way over time—first to a preoccupation with market power during the post-World War II period, and then to a fixation on consumer welfare in the late twentieth century. Refocusing policy on large firms’ conduct would do much to address current fears about bigness without penalizing firms whose market power comes from innovation.
    Date: 2019–07–03
  4. By: Yoshihara, Naoki; Kwak, Se Ho
    Abstract: In contrast to Mandler's (1999a; Theorem 6) impossibility result about the Sraffian indeterminacy of the steady-state equilibrium, we first show that any regular Sraffian steady-state equilibrium is indeterminate in terms of Sraffa (1960) under the simple overlapping generation economy. Moreover, we also check that this indeterminacy is generic. These results are obtained by explicitly defining a simple model of overlapping generation economies with Leontief production techniques, in which we also explain the main source of the difference between our results and Mandler (1999a; section 6).
    Keywords: Sraffian indeterminacy, factor income distribution, general equilibrium framework
    JEL: B51 D33 D50
    Date: 2019–07
  5. By: Negre, Mario; Cuesta, José; Revenga, Ana; Morley, Prescott J.
    Abstract: Conventional economic wisdom has long maintained that there is a necessary trade-off between pursuit of the efficiency of a system and any attempts to improve equity between participants within that system. Economist Robert Lucas demonstrated the implications of this common economic axiom when he wrote: “Of the tendencies that are harmful to sound economics, the most seductive, and in my opinion the most poisonous, is to focus on questions of distribution [...] the potential for improving the lives of poor people by finding different ways of distributing current production is nothing compared to the apparently limitless potential of increasing production.” (Lucas, 2004) Indeed, many economists have suggested that too little inequality or too generous a distribution of benefits may undermine the individual’s incentive to work hard and take risks. Setting aside the harsh rhetoric used by Lucas, the practical and ethical acceptability of such a trade-off is debatable. Moreover, evidence from recent decades suggests that the trade-off itself is, in many cases, entirely avoidable. A large body of research has shown that improved competition and economic efficiency are indeed compatible with government efforts to address inequality and reduce poverty, as assessed in a World Bank report (World Bank, 2016). Contrary to another common belief about economic interventions, this research indicates that such policy interventions can be tailored to succeed in all countries and at all times; even low- and middle-income countries in times of economic crisis can successfully pursue policies to improve economic distribution, with negligible negative impacts on efficiency and, in many cases, even positive ones. Some examples of such pro-equity and pro-efficiency measures include those promoting early childhood development, universal health care, quality education, conditional cash transfers, rural infra-structure investment, and well-designed tax policy. Overall, four critical policy points stand out: A trade-off is not inevitable. Policymakers do not need to give up on reducing inequality for the sake of growth. A good choice of policies can achieve both. In the last two decades, research has generated substantive evidence about which policies work to foster growth and reduce inequalities. Policies can redress the inequalities children are born into while fostering growth. But the wrong sets of policies can magnify inequalities early in life and thereafter. All countries can, under most circumstances, implement policies that are both pro-equity and pro-efficiency.
    Keywords: Agenda 2030,Armut und Ungleichheit
    Date: 2019

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