nep-pke New Economics Papers
on Post Keynesian Economics
Issue of 2019‒09‒30
seven papers chosen by
Karl Petrick
Western New England University

  1. Neo-Kaleckian and neo-Marxian regime research: A promising scientific research programme or a scientific cul-de-sac? By Heise, Arne
  2. Neoclassical versus Post-Keynesian Explanations of the Pre-Great Recession Productivity Slowdown: Panel Evidence By Alberto Bagnai; Christian Alexander Mongeau Ospina
  3. A Review of Rent-seekers, Profits, Wages and Inequality, The Top 20%, 2019 by Peter Mihalyi and Ivan Szelenyi By Mehrdad Vahabi
  4. The European economic crisis from 2007 onwards in the context of a global crisis of over-production of capital - a Marxian monetary theory of value interpretation By Gander, Sascha
  5. Performance-based financing is not backed by credible theoretical justifications By Elisabeth Paul; Oriane Bodson; Valéry Ridde
  6. Wealth inequality and aggregate demand By Ederer, Stefan; Rehm, Miriam
  7. From institutions to extitutions to the post-institutional theory of institutional anomalies By Frolov, Daniil

  1. By: Heise, Arne
    Abstract: [Introduction] Over the past three decades, a small but very productive Post-Keynesian and Marxian research community has engaged in the elaboration of a scientific research programme (SRP) that has come to be known as wage and profit-led regime research.1 In dozens of journal articles in almost every heterodox economic journal, particularly the Cambridge Journal of Economics, the primary aim has been to reiterate the classical political economy conception of functional income distribution as a major determinant of economic development and employment, from both a Keynesian (effective demand) and Marxian (class struggle) perspective. Only recently, the Review of Keynesian Economics (RoKE) dedicated - convening almost the entire 'wage and profit-led regime' community - an incredible four (consecutive) issues to delineating and discussing this Denkstil. The International Labour Office (ILO), meanwhile, commissioned a major research initiative investigating the relationship between functional income distribution and growth (see Lavoie/Stockhammer 2013a).2 Since only very few critical voices (such as Peter Skott (2017) joined this illustrious debate, I would like to re-open this discussion about the scientific and political merits of the 'wage and profit-led regime' approach. My intention is to examine whether this SRP can fill an obvious gap in Post-Keynesian theory. In accordance with Keynes' considerable neglect of distributional questions in his General Theory, most Post-Keynesians have underemphasised a phenomenon that has become one of the most socially and politically concerning problems of our times: growing income inequality. This article is structured as follows: in the next section, the main arguments of the wage and profit-led regime approach will be delineated and scrutinised with reference to the Bhaduri-Marglin model, which is regarded as 'a widely used workhorse model' (Stockhammer 2017: 25). I will subsequently question its theoretical bases, its empirical validity, and its policy applicability. Finally, I offer a number of concluding remarks on the merits of the distributional regime approach.
    Date: 2019
  2. By: Alberto Bagnai (Department of Economics, Gabriele d'Annunzio University); Christian Alexander Mongeau Ospina (Department of Economics, Università ‘Gabriele D’Annunzio’)
    Abstract: The productivity slowdown in European countries is among the major stylized facts of the last two decades. Several explanations have been proposed: some focus on demand-side effects, working through Kaldor’s second law of economic growth (also known as Verdoorn’s law), others on supply-side effects determined by misallocation of factors of production, caused either by labour market reforms or by perverse effects of financial integration (in Europe, related to adoption of the euro). The latter explanation is put forward by some recent studies that indicate how low interest rates brought about by monetary union may have lowered productivity by inducing capital misallocation. The aim of this paper is to investigate the robustness of the latter empirical findings and to compare them with the alternative explanation offered by the post-Keynesian growth model, which instead emphasizes the relation between foreign trade and productivity, along lines that go back to Adam Smith. To do so, we use a panel of industry-level data extracted from the EU KLEMS database, comparing these alternative explanations by panel cointegration techniques. The results shed some light on the role played by the single currency in structural divergences between euro area member countries.
    Keywords: firm behaviour, productivity, post-Keynesian model, economic integration, foreign exchange.
    JEL: D22 D24 E12 F15 F31
    Date: 2017–10
  3. By: Mehrdad Vahabi (Centre d'Economie de l'Université de Paris Nord (CEPN))
    Abstract: The authors, Péter Mihályi and Iván Szelényi, set themselves the ambitious task of formulating an alternative discourse about inequality in which the extent of inequality per se is not the problem but rather where inequalities stem from? Herein lies their fundamental divergence with Piketty (2014) for whom the excessive growth of “profits” is assumed to be the source of inequalities. The problem with mainstream economics and Piketty is that “profit” and “rent” are lumped together. A critical distinction between the two is warranted to grasp the relationship between inequalities, innovation and economic growth. In line with Kornai’s criticism of Piketty (2016), the authors insist on the source of inequality. Are they engendered by wages and profits earned on competitive markets or are they originated from rents due to imposed restrictions on market competition? In contrast with Piketty, the general assumption of the authors is that higher profits and wages often add to the annual growth or national income. Rents on the other hand lower annual growth. Although some forms of rent may even be useful, excessive rents breeds economic stagnation.
    Keywords: Inequalities, rents, profits, wages, patrimonial capitalism, political capitalism
    JEL: E02 E25 H27 P10 P16 P29 Z13
    Date: 2019–08
  4. By: Gander, Sascha
    Abstract: This paper attempts to clarify how the European economic crisis from 2007 onwards can be understood from the perspective of a Marxian monetary theory of value that emphasizes in-trinsic, structural flaws regarding capitalist reproduction. Chapter two provides an empirical description of the European economic crisis, which to some extent already reflects the struc-tural theoretical framework presented in chapter three. Regarding the theoretical framework Michael Heinrich's interpretation of 'the' Marxian monetary theory of value will be presented. Heinrich identifies connections between production and realization, between profit and inter-est rate as well as between industrial and fictitious capital, which represent contradictory tendencies for which capitalism does not have simple balancing processes. In the context of a discussion of 'structural logical aspects' of Marx's Critique of the Political Economy, explana-tory deficits of Heinrich's approach are analyzed. In the following, it is argued that Fred Mose-ley's view of these 'structural logical aspects' allows empirical 'applications' of Marxian mon-etary theories of value. It is concluded that a Marxian monetary theory of value, with the characteristics of expansive capital accumulation and its limitations, facilitates a structural analysis of the European economic crisis from 2007 onwards. In this line of argument, expan-sive production patterns are expressed, among other things, in global restructuring processes, while consumption limitations are mitigated by expansive financial markets and shifts in ex-port destinations.
    Keywords: Marxian monetary theory of value,change in plan debate,ideal average,transfor-mation problem,European economic crisis,overproduction,Heinrich,Moseley
    JEL: B51 B59 D30 D46 E11 E21 E22 E23 E40 E50 F10 F21 G15 G18 G20 N10 N20 O52 P16
    Date: 2019
  5. By: Elisabeth Paul; Oriane Bodson; Valéry Ridde
    Abstract: Introduction: Pay-for-performance is expanding in many health systems, both in high-income countries and in low- and middle-income countries (LMICs) where it is commonly known as “performance-based financing” (PBF). PBF results are mixed and it has been criticised for its potential perverse effects. Yet, PBF promoters fail to provide a clear and consistent explanation of why and how it is supposed to produce results and to perform better than alternative approaches. The literature on PBF-related approaches is fragmented across disciplines and much of the current cross-disciplinary research on PBF and similar schemes lacks a sound theoretical basis.1Aim: This study explores the theoretical justifications advanced to legitimate the choice of PBF.Methods: We performed a systematic review of the scientific papers and grey literature on PBF so as to identify the theories utilised to justify it, and critically analyse them.Results: The theoretical approach that has most often been advanced to justify PBF is the principal-agent theory – arguing that its objective is to better align healthcare providers’ incentives with populations’ interests. Surprisingly, while many PBF promoters refer to this theory, a correct utilisation of it leads to the conclusion that considering the specificities of the health sector in LMICs, high-powered incentives (as are inherent to PBF) are not recommended. There is now growing consensus on the fact that the principal-agent theory is not appropriate to justify PBF – notably because it rests on wrong assumptions and does not take context into consideration. Other related (New Institutional) Economics currents have also been used to justified PBF, including property right theory, transaction cost economics, political economy theories, or behavioural economics. Non-economic approaches, relating to organisations sciences and management, have also been used to justify PBF (management control theory, operations and supply management).Conclusion: PBF is actually not justified by any credible “grand theory”, and not yet by convincing theories of change. If PBF cannot be justified neither theoretically, nor empirically, one can only conclude it is promoted on an ideological ground.Reference(s):1. Selviaridis K. Wynstra F. Performance-based contracting: a literature review and future research directions. International Journal of Production Research 2015; 53:12, 3505-3540.
    Keywords: Performance-based financing; Theory; Low- and middle-income countries; Scoping review
    Date: 2019–09–18
  6. By: Ederer, Stefan; Rehm, Miriam
    Abstract: The paper investigates how including the distribution of wealth changes the demand effects of redistributing functional income. It develops a model with an endogenous wealth distribution and shows that the endogenous rise in wealth inequality resulting from a redistribution towards profits weakens the growth effects of this redistribution. Consequently, a wage-led regime becomes more strongly wage-led. A profit-led regime on the other hand becomes less profit-led and there may even be a regime switch - in this case the short-run profit-led economy becomes wage-led in the long run due to the endogenous effects of wealth inequality. The paper thereby provides a possible explanation for the instability of demand regimes over time.
    Keywords: Wealth, Distribution, Aggregate Demand
    Date: 2019
  7. By: Frolov, Daniil
    Abstract: The paper proposes to abandon the one-sidedly negative interpretation of institutional anomalies (non-optimal, inefficient, dysfunctional institutions) and rethink them as the main products and manifestations of institutional complexity. The concept of extitutions is introduced, which are understood as models of social order that go beyond the bounds of institutions and are based on variations of norms. The extitutional interpretation of the nature of institutional anomalies allows a critical review of the traditionally associated dichotomies (e.g. opposition of ideal and dysfunctional, inclusive and extractive institutions), analytical approaches (functionalist, mechanistic, isolationist, static, etc.) and stereotypes (e.g. assessment of institutions from the standpoint of public interests, “presumption of guilt” of interest groups, stigmatization of hybrid institutional trajectories, etc.). The article proposed a set of conceptual shifts towards increasing the objectivity and realism of the analysis of institutional anomalies in line with the research program of post-institutionalism.
    Keywords: institutions; extitutions; inefficient institutions; institutional traps; institutional failures; institutional complexity; institutional anomalies; post-institutionalism
    JEL: B41 B52
    Date: 2019–07–12

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