nep-pke New Economics Papers
on Post Keynesian Economics
Issue of 2019‒11‒18
thirteen papers chosen by
Karl Petrick
Western New England University

  1. Keynesian capital theory: Declining interest rates and persisting profits By Spahn, Peter
  2. The Political Economy of Europe since 1945: A Kaleckian perspective By Joseph Halevi
  3. Aggregate demand policy in mature and dual economies By Peter Skott
  4. Synthetic MMT: Old Line Keynesianism with an Expansionary Twist By Lance Taylor
  5. Central Bank Independence By Thomas I. Palley
  6. On the Role of Finance in Sraffa’s System By Dvoskin, Ariel; Feldman, Germán David
  7. Time for a Paradigm Shift: From Economic Growth and Price-Making Markets to Social Ecological Economics By Clive L. Spash
  8. A Theory of Cultural Revivals By Murat Iyigun; Jared Rubin; Avner Seror
  9. Fiscal policy and ecological sustainability By Yannis Dafermos; Maria Nikolaidi
  10. Political acceptability of climate policies : do we need a "just transition" or simply less unequal societies ? By Francesco Vona
  11. The Profit Rate in Chile : 1900-2010 By Diego Polanco
  12. Does female economic empowerment promote development? By Balasubramanian, Pooja; Ibanez, Marcela; Khan, Sarah; Sahoo, Soham
  13. Is There a Link Between Air Pollution and Impaired Memory? Evidence on 34,000 English Citizens By Oswald, Andrew J.; Powdthavee, Nattavudh

  1. By: Spahn, Peter
    Abstract: The current debate whether zero interest rates are caused by a saving glut or a liquidity glut is resolved by the distinction between the market and the natural rate, where saving affects only the latter variable, and monetary policy mainly the first. This topic is linked to a second one: the monetary determination of the rate of profit in Keynesian capital theory. Both topics merge in a critical review of Keynes's vision of the "euthanasia of the rentier". The data show however that we have not reached a state of capital satiation. The rising gap between the rate of profit and the rate of interest poses a challenge for capital theory.
    Keywords: saving vs. liquidity,zero interest rates,capital satiation
    JEL: B1 E4 E5
    Date: 2019
  2. By: Joseph Halevi (International University College of Turin)
    Abstract: This paper analyzes the early stages of the formation of the Common Market. The period covered runs from the end of WW2 to 1959, which is the year in which the European Payments Union ceased to operate. The essay begins by highlighting the differences between the prewar political economy of Europe and the new dimensions and institutions brought in by the United States after 1945. It focuses on the marginalization of Britain and on the relaunching of French great power ambitions and how the latter determined, in a very problematical way, the European complexion of France. Because of France '92s imperial aspirations, France, not West Germany, emerged as the politically crisis prone country of Europe acting as a factor of instability thereby jeopardizing the process of European integration, Among the large European nations, Germany and Italy appear, for opposite economic reasons, as the countries most focused on furthering integration. Germany expressed the strongest form of neomercantilism while Italy the weakest.
    Keywords: European Monetary System, Common Market, France, Germany, Italy, Netherlands, currency depreciation, European Monetary Union
    JEL: E02 F02 F5 N14 N24
    Date: 2019–07
  3. By: Peter Skott (University of Massachusetts - Amherst)
    Abstract: Aggregate demand is important, both in the short and the long run, but a basic distinction must be made between dual and mature economies. Mature economies may suffer from a structural aggregate problem ('secular stagnation'): full-employment growth may be impossible in the absence of sustained fiscal stimulus. Dual economies with high levels of open or hidden unemployment, by contrast, do not face long-run structural aggregate demand problems. They require public investment in key areas, including education and infrastructure, but the key problems concern the composition of demand and the need to expand the modern sector. These economies face structural transformation problems.
    Date: 2019
  4. By: Lance Taylor (New School for Social Research)
    Abstract: Expansionary macroeconomic policy with a strong redistributive component is an attractive proposition, most recently launched on the basis of Modern Monetary Theory or MMT. The Theory is a synthesis of familiar ideas, newly relevant but scarcely path-breaking. Its basics \'96 Chartalist or fiat money, functional finance, and models based on consistent national accounting \'96 come straight from Maynard Keynes, Abba Lerner, and Wynne Godley. Functional finance is the heart of fiscalist Keynesianism built upon automatic stabilizers for the business cycle. MMT'92s job guarantee proposal is one more stabilizer which could be a modest helpful supplement to the system which exists. National accounting comparisons of a possible MMT package with the 2008 crash and the Trump tax cut are presented with emphasis on autonomous shifts in demand. The package could have problems with debt sustainability and external balance. Inflation is unlikely if wage repression in the USA is not reversed. But strong wage increases are presumably a goal of MMT.
    JEL: E5 E12 E17
    Date: 2019–10
  5. By: Thomas I. Palley
    Abstract: The case for central bank independence is built on an intellectual two-step. Step one argues there is a problem of inflation prone government. Step two argues independence is the solution to that problem. This paper challenges that case and shows it is based on false politics and economics. The paper argues central bank independence is a product of neoliberal economics and aims to institutionalize neoliberal interests. As regards economics, independence rests on a controversial construction of macroeconomics and also fails according to its own microeconomic logic. That failure applies to both goal independence and operational independence. It is a myth to think a government can set goals for the central bank and then leave it to the bank to impartially and neutrally operationalize those goals. Democratic countries may still decide to implement central bank independence, but that decision is a political one with non-neutral economic and political consequences. It is a grave misrepresentation to claim independence solves a fundamental public interest economic problem, and economists make themselves accomplices by claiming it does.
    Keywords: central bank independence, neoliberalism, class conflict, time consistency, operational independence, democracy
    JEL: E02 E42 E52 E58 E61 G18 G28
    Date: 2019
  6. By: Dvoskin, Ariel (National University of San Martín); Feldman, Germán David (National University of San Martín)
    Abstract: We critically review the previous attempts to introduce money and finance into Sraffa’s price system, whose main difference is, we argue, their conception of the interest rate, either as an opportunity cost or as an effective cost of production. We examine the implications on three different grounds: (i) the formal consistency of the system; (ii) the possibilities to explicitly treat the financial industry as any other productive sector; and (iii) the validity of the so-called “monetary theory of distribution” (MTD). We then suggest a possible route, inspired by Schumpeter’s ideas on economic development, to introduce the banking sector through its role of granting credit to innovation. Unlike previous contributions, this reformulation allows us both to justify the basic nature of the financial sector and simultaneously preserve the validity of MTD.
    Keywords: Banking industry; Innovation; Monetary theory of distribution; Sraffa; Surplus approach.
    JEL: E11 E43 E52
    Date: 2019–10–16
  7. By: Clive L. Spash
    Abstract: Ecological economics has ontological foundations that inform it as a paradigm both biophysically and socially. It stands in strong opposition to mainstream thought on the operations of the economy and society. The core arguments deconstruct and oppose both growth and price-making market paradigms. However, in contradiction of these theoretical foundations, ecological economists can be found who call upon neoclassical economic theory as insightful, price-making and capitalist markets as socially justified means of allocation and economic growth as achieving progress and development. The more radical steady-state and post-growth/degrowth movements are shown to include confused and conflicted stances in relation to the mainstream hegemonic paradigms. Ecological economics personally challenges those trained in mainstream theory to move beyond their orthodox education and leave behind the flawed theories and concepts that contribute to supporting systems that create social, ecological and economic crises. This paper makes explicit the paradigmatic struggle of the past thirty years and the need to wipe away mainstream apologetics, pragmatic conformity and ill-conceived postmodern pluralism. It details the core paradigmatic conflict and specifies the alternative social ecological economic paradigm along with a new research agenda.
    Keywords: Paradigm shift; Economic growth; Markets, Price, Value theory, Social ecological economics, Steady-state economics, Degrowth, Post-Growth, Capitalism, Neoclassical economics, Socialism
    JEL: A11 A12 A13 A14 B29 B50 D40 D46 D62 O44 P1 P2 P16 P28 Q56 Q57
    Date: 2019
  8. By: Murat Iyigun (University of Colorado, Boulder); Jared Rubin (Chapman University); Avner Seror (Aix-Marseille Univ, CNRS, EHESS, Ecole Centrale, AMSE, Marseille, France)
    Abstract: Why do some societies fail to adopt more efficient institutions? And why do such failures often coincide with cultural movements that glorify the past? We propose a model highlighting the interplay—or lack thereof—between institutional change and cultural beliefs. The main insight is that institutional change by itself will not lead to a more efficient economy unless culture evolves in tandem. This is because institutional change can be countered by changes in cultural values complementary to a more "traditional" economy. In our model, forward-looking elites, who benefit from a traditional, inefficient economy, may over-provide public goods that are complementary to the production of traditional goods. This encourages individuals to transmit cultural beliefs complementary to the provision of traditional goods. A horse race results between institutions, which evolve towards a more efficient (less traditional) economy, and cultural norms, which are pulled towards "tradition" by the elites. When culture wins the horse race, institutions respond by giving more political power to traditional elites—even if in doing so more efficient institutions are left behind. We call the interaction between these cultural and institutional dynamics a cultural revival.
    Keywords: institutions, cultural beliefs, cultural transmission, institutional change
    JEL: D02 N40 N70 O33 O38 O43 Z10
    Date: 2019–11
  9. By: Yannis Dafermos; Maria Nikolaidi
    Abstract: Fiscal policy has a strong role to play in the transition to an ecologically sustainable economy. This paper critically discusses the way that green fiscal policy has been analysed in both conventional and post-Keynesian approaches. It then uses a recently developed post-Keynesian ecological macroeconomic model in order to provide a comparative evaluation of three different types of green fiscal policy: carbon taxes, green subsidies and green public investment. We show that (i) carbon taxes reduce global warming but increase financial risks due to their adverse effects on the profitability of firms and credit availability; (ii) green subsidies and green public investment improve ecological efficiency, but their positive environmental impact is partially offset by their macroeconomic rebound effects; and (iii) a green fiscal policy mix derives better outcomes than isolated policies. Directions for future heterodox macroeconomic research on the links between fiscal policy and ecological sustainability are suggested.
    Keywords: post-Keynesian economics, ecological economics, green fiscal policy, stock-flow consistent modelling
    JEL: E12 E62 Q54 Q57
    Date: 2019
  10. By: Francesco Vona (Observatoire français des conjonctures économiques)
    Abstract: This blog post is partly based on the policy paper published in the journal Climate Policy: ‘Job Losses and the Political Acceptability of Climate Policies: why the job killing argument is so persistent and how to overturn it.’ Concerns for a ‘just transition’ towards a low-carbon economy are now part of mainstream political debates as well as of international negotiations on climate change. Key political concerns centre on the distributional impacts of climate policies. On the one hand, the ‘job killing’ argument has been repeatedly used to undermine the political acceptability of climate policy and to ensure generous exemptions to polluting industries in most countries. On the other hand, the rising populist parties point to carbon taxes as another enhancer of socio-economic inequalities. For instance, the Gilets Jaunes (Yellow vest) movement in France is a classic example of the perceived tension between social justice and environmental sustainability.
    Keywords: Low carbon economy; Climate policy; Social justice; Environmental sustainability
    Date: 2019–10
  11. By: Diego Polanco (Department of Economics, University of Massachusetts Amherst)
    Abstract: The interest of this paper is to discuss the main features that characterize the accumulation regimes that have taken place during the twentieth century in Chile. Understanding that a set of institutionalized compromises and political conflicts are inherent to any capitalist society, I rely on the body of literature of Marxist political economy, which focuses on the dynamics of profitability to describe its reproductive patterns. In light of this analysis, I argue that the main institutional transformations in Chilean history are better understood. I characterize long-waves of capitalist accumulation as accumulation regimes and identify three stages: early expansion, late expansion, and crisis. Using decomposition analysis, I identify recurrent patterns in each phase and also argue that the distributional conflict is historically contingent. Moreover, I implement a novel method proposed by Shaikh (2016) to identify the utilization rate, which allows me to discuss issues of aggregate demand in the decomposition analysis more accurately. Furthermore, I also discuss the relation of the process of urbanization with technical change relying on the Okishio-Marx debate. Finally, I argue that unlike previous accumulation regimes, the neoliberal period relies on reproductive patterns of profitability that makes it highly stable.
    Date: 2019
  12. By: Balasubramanian, Pooja; Ibanez, Marcela; Khan, Sarah; Sahoo, Soham
    Abstract: * The empirical evidence supports the view that female economic empowerment is key to end poverty and boost economic prosperity. * Key policies to promote development and reduce poverty are employment programs targeting female labor market participation, asset ownership and increased bargaining power of women within the household. * Social norms might limit the mobility of women and thereby prevent these effects from occurring. * The comparison of the effect of different interventions might be obscured by the lack of comparability in the measures used. * We recommend the adoption of a common framework for the analysis of the impact of interventions that promote female empowerment.
    Date: 2019
  13. By: Oswald, Andrew J. (Economics and CAGE, University of Warwick); Powdthavee, Nattavudh (WBS, University of Warwick)
    Abstract: It is known that people feel less happy in areas with higher levels of nitrogen dioxide NO2 (MacKerron and Mourato, 2009). What else might air pollution do to human wellbeing? This paper uses data on a standardized word-recall test that was done in the year 2011 by 34,000 randomly sampled English citizens across 318 geographical areas. We find that human memory is worse in areas where NO2 and PM10 levels are greater. The paper provides both (i) OLS results and (ii) instrumental-variable estimates that exploit the direction of the prevailing westerly wind and levels of population density. Although caution is always advisable on causal interpretation, these results are concerning and are consistent with laboratory studies of rats and other non-human animals. Our estimates suggest that the difference in memory quality between England’s cleanest and most-polluted areas is equivalent to the loss of memory from 10 extra years of ageing
    Keywords: Memory ; NO2 ; PM10 ; air ; pollution ; particulates
    Date: 2019

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