nep-pke New Economics Papers
on Post Keynesian Economics
Issue of 2019‒10‒14
six papers chosen by
Karl Petrick
Western New England University

  1. Post-Keynesian Controversy About Uncertainty: Methodological Perspective, Part II By Luká? Augustin Máslo
  2. Credit mechanics: a precursor to the current money supply debate By Decker, Frank; Goodhart, C. A. E.
  3. Measuring difference? The United Nations’ shift from progress to poverty By Bach, Maria; Morgan, Mary S.
  4. The Possible Effects of Personal Income Tax and Value Added Tax on Consumer Behaviors By Ahmet Ak; Oner Gumus
  5. Putting Global Governance in its Place By Dani Rodrik
  6. "Indian Fiscal Federalism at the Crossroads: Some Reflections" By Lekha Chakraborty

  1. By: Luká? Augustin Máslo (University of Economics, Prague)
    Abstract: In this paper, the author follows a discussion of two post-Keynesian economists, Paul Davidson and Rod O?Donnell, about the nature of uncertainty in economics. The author focuses on two points of this discussion: a controversy about possibility/impossibility of such a proof and a criticism of Davidson?s allegedly split definition of ergodicity. In a controversy about possibility/impossibility, the author puts O?Donnell to criticism for the latter?s reduction of proving to providing empirical evidence and, in effect, omission of extra-empirical cognition. The author accepts O?Donnell?s argument of Davidson?s split definition and infers his own conclusion: the reason why Davidson keeps ignoring the incompatibility of both definitions of ergodicity is that he does not distinguish cumulative and theoretical probability. The author contends that Davidson?s claim about predetermination of long-run outcomes in ergodic processes draws its persuasiveness from the ambiguity of the concept ?long run?: according to the author, Davidson perceives ?long-run? in the meaning of ?finitely long? while O?Donnell perceives ?long-run? in the meaning of ?limit infinity?.
    Keywords: ergodicity, uncertainty, probability
    JEL: B41 D80
    Date: 2019–10
  2. By: Decker, Frank; Goodhart, C. A. E.
    Abstract: This paper assesses the theory of credit mechanics within the context of the current money supply debate. Credit mechanics and related approaches were developed by a group of German monetary economists during the 1920s-1960s. Credit mechanics overcomes a one-sided, bank-centric view of money creation, which is often encountered in monetary theory. We show that the money supply is influenced by the interplay of loan creation and repayment rates; the relative share of credit volume neutral debtor-to-debtor and creditor-to-creditor payments; the availability of loan security; and the behavior of non-banks and non-borrowing bank creditors . With the standard textbook models of money creation now discredited, we argue that a more general approach to money supply theory involving credit mechanics needs to be established.
    Keywords: balances mechanics; bank credit; money creation; credit creation; credit mechanics; money supply theory
    JEL: E40 E41 E50 E51
    Date: 2018–10
  3. By: Bach, Maria; Morgan, Mary S.
    Abstract: This paper examines how the United Nations Development Program (UNDP) redefined their idea of development over the two decades from 1990, no longer presenting it as only a matter of economic progress but instead focusing more on the problem of poverty and its reduction. This change of definition was closely associated with changes in the preferred measurement of development, from average income (based on national income accounting) to the proportion of the population holding certain characteristics of what it meant to live in poverty (instantiated in various index number formulations). Measurements of development thus became direct measures of socio-economic difference, not just between nations, but also within nations. This change was designed to create numbers that would be effective in capturing and communicating those differences in ways usable for both policy and public purposes. Those numbers thus provided a resource for fighting for poverty reduction – though the UNDP had few powers to hold governments to account.
    JEL: N0
    Date: 2019–08–27
  4. By: Ahmet Ak; Oner Gumus
    Abstract: In economics literature, it is accepted that all people are rational and they try to maximize their utilities as possible as they can. In addition, economic theories are formed with the assumptions not suitable to real life. For instance, indifference curves are drawn with the assumptions that there are two goods, people are rational, more is preferred to less and so on. Hence, the consumer behaviors are guessed according to this analysis. Nevertheless, these are invalid in real life. And this inconsistencey are examined by behavioral economics and neuroeconomics. Behavioral economics claims that people can behave what they are not expected since people can be irrational, their willpower is limited and altruistic behaviors can be seen and they can give more value to what they own. As a result of these, consumer behaviors become more different than that of economic theory. In addition to behavioral economics, neuroeconomics also examines consumer behaviors more differently than mainstream economic theory. It emphasizes the people using prefrontial cortex of the brain are more rational than the people using hippocampus of the brain. Therefore, people can make illogical choices compared to economic theory. In these cases, levying taxes such as personal income tax or value added tax can be ineffective or effective. In other words, the effect becomes ambigious. Hence,the hypothesis that if government desires to levy personal income tax or value added tax, it makes a detailed research in terms of productivity of taxes forms the fundamental of this study.
    Date: 2019–09
  5. By: Dani Rodrik (Center for International Development at Harvard University)
    Abstract: In a world economy that is highly integrated, most policies produce effects across the border. This is often believed to be an argument for greater global governance, but the logic requires scrutiny. There remains strong revealed demand for policy and institutional diversity among nations, rooted in differences in historical, cultural, or development trajectories. The canonical case for global governance is based on two set of circumstances. The first occurs when there is global public good (GPG) and the second under “beggar-thy-neighbor” (BTN) policies. However, the world economy is not a global commons, and virtually no economic policy has the nature of a global public good (or bad). And while there are some important BTN policies, much of our current discussions deal with policies that are not true BTNs. The policy failures that exist arise not from weaknesses of global governance, but from distortions of domestic governance. As a general rule, these domestic failures cannot be fixed through international agreements or multilateral cooperation. The paper closes by discussing an alternative model of global governance called “democracy-enhancing global governance.”
    Keywords: Global Governance
    JEL: F50
    Date: 2019–08
  6. By: Lekha Chakraborty
    Abstract: There is a growing recognition that fundamental changes are happening in Indian fiscal federalism ex post the abolition of the Planning Commission, the creation of the National Institution for Transforming India (NITI) Aayog, the constitutional amendment to introduce the Goods and Services Tax (GST), the establishment of the GST Council, and the historically high tax devolution to the states based on the 14th Finance Commission's recommendations. Recently, policymakers and experts have raised a few issues, including: whether or not to make Finance Commissions "permanent" or to abolish them by making the tax devolution share constant through a constitutional amendment; the need for an institution to redress spatial inequalities in order to fill the vacuum created by abolishing the Planning Commission; and making the case for Article 282 of the constitution to be circumscribed. The debates are also focused on whether there is a need to establish a link between the GST Council and Finance Commissions, and if India should devise a mechanism of transfer that is predominantly based on sharing of grants for equalization of services rather than tax sharing. Creating a plausible framework for debt-deficit dynamics while keeping the fiscal autonomy of states intact and ensuring output gap reduction and public investment at the subnational level without creating disequilibrium were also other matters of concern. These debates are significant, especially when a group of states came together for the first time ever to question the terms of reference of the 15th Finance Commission amid growing tensions in federal-state relations in India.
    Keywords: Fiscal Federalism; Finance Commission; Revenue Sharing; Fiscal Equalization; Goods and Services Tax (GST); Public Debt; Fiscal Rules
    JEL: H77
    Date: 2019–10

This nep-pke issue is ©2019 by Karl Petrick. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.