nep-pke New Economics Papers
on Post Keynesian Economics
Issue of 2019‒11‒25
eleven papers chosen by
Karl Petrick
Western New England University

  1. "Too Bad to Be True". Swedish Economists on Keynes's 'The Economic Consequences of the Peace, 1919-1929' By Carlson, Benny; Jonung, Lars
  2. A Global Revolutionary Class will ride the Tiger of Alienation By Hanappi, Hardy
  3. Global inequalities in taxing rights: An early evaluation of the OECD tax reform proposals By Cobham, Alex; Faccio, Tommaso; FitzGerald, Valpy
  4. Technology, profits and wages By Andrea Coveri; Mario Pianta
  5. Nonlinear Effects of Military Spending on Economic Growth in Sub-Saharan Africa By J. Paul Dunne; Christine S. Makanza
  6. Estimating Labor Market Slack, U.S. 1994-2019 By John Komlos
  7. The Interplay of Economic, Social and Political Fragmentation By Steven J. Bosworth; Dennis J. Snower
  8. What Motivates Innovative Entrepreneurs? Evidence from Three Field Experiments By Guzman, Jorge; Oh, Jean Joohyun; Sen, Ananya
  9. The Behavioral Economics of Artificial Intelligence: Lessons from Experiments with Computer Players By Christoph March
  10. The location of the value theories in the complex plane and the degree of regularity-controllability of actual economies By Mariolis, Theodore
  11. Slavery, Corruption, and Institutions By Michael Rauscher; Bianca Willert

  1. By: Carlson, Benny (Department of Economic History, Lund University); Jonung, Lars (Department of Economics, Lund University)
    Abstract: This paper examines the response of five prominent Swedish economists, David Davidson, Gustav Cassel, Eli Heckscher, Knut Wicksell and Bertil Ohlin, to John Maynard Keynes’s "The Economic Consequences of the Peace" and to the German reparations in the 1920s. When Keynes’s book appeared, Davidson and Cassel strongly endorsed it. Heckscher also agreed with Keynes – “a bright spot in a time of darkness” – in a long review entitled "Too bad to be true". Inspired by his Malthusian view, Wicksell found the reparations impossible to meet unless German population growth was arrested. Germany should settle for a stationary population in exchange for reduced reparations. The contacts between the Swedes and Keynes became close after Keynes’s book, in particular between Cassel and Keynes, competing for being the best-known economist in the world in the 1920s. The exchange of views took a new turn when Bertil Ohlin responded to an article by Keynes in The Economic Journal in 1929 on the transfer problem. In his comment, Ohlin summarized two previously overlooked articles from 1928 where he analyzed the transfer of the German reparations by using his theory of international trade. The famous Keynes-Ohlin discussion laid the foundation for the analysis of the transfer problem, bringing Ohlin international recognition. He emerged as the champion in this debate, which marked the end of academic interest in the German reparations in the interwar period. We also trace how Davidson, Cassel and Heckscher changed their appreciation of Keynes in the 1930s with the publication of the General Theory while Ohlin viewed the message of Keynes in the 1930s as consistent with the policy views of the Stockholm school of economics. We rely on newspaper and journal articles published by the Swedish economists, on half a dozen unpublished manuscripts by Wicksell as well as on the correspondence between Keynes and the Swedish economists.
    Keywords: John Maynard Keynes; David Davidson; Gustav Cassel; Eli Heckscher; Knut Wicksell; Bertil Ohlin; Treaty of Versailles; reparations; the transfer problem; United Kingdom; Germany; Sweden; Malthusianism; World War I.
    JEL: B13 E12 E44 F21 F35 F55 J11 N24 N44
    Date: 2019–11–18
  2. By: Hanappi, Hardy
    Abstract: This paper investigates how the global class of organic intellectuals will emerge. It thus updates Marx view on class struggle dynamics of the 19th century by taking the quantum leap of productive forces during the last 200 years serious. The most striking new element is the tremendous increase of the force of information power brought about by ICT. The emergence of Fascism and Stalinism in the first half of the 20th century was just a frightening first symptom of the coming age of alienation. Today, basing class membership – including the emergence of class consciousness - only on the (physical) local position in industrial production units is insufficient, even misleading. Global production is by its inbuilt complexity blurring the visibility of a specific worker’s exploitation status. There is necessary alienation, but then class struggle managed disinformation and manipulation is added. For the progressive classes this implies that they are split along the lines of their respective education status – how far the fog can be dissolved. This is where the concept of the global class of organic intellectuals, of an avant-garde, enters. The paper shows that already in the emergence of this new socialist agent the structures, in particular the information structures, of the next mode of production have to be present. It turns out that features, which are evil for capitalist thought are often the most important ingredients for the constitution of the forerunners of a socialist global society: persistent contradictions and diversity, exploding oscillations, deep and time consuming dialogues, irrational solidarity, aesthetic stubbornness. The new intellectuals can remain rooted in local circumstances, can be organic, because they share many of these features with the exploited classes within which they act as catalyst, as avant-garde. In the end global socialism, organized by a revolving class of organic intellectuals, has to master alienation. This is the challenge.
    Keywords: Political Economy, Alienation, Socialism, Oraganic Intellectuals
    JEL: B51 P00 P16 P40
    Date: 2019–11–05
  3. By: Cobham, Alex; Faccio, Tommaso; FitzGerald, Valpy
    Abstract: The current OECD process to reform the international rules governing corporate tax, aimed to achieve a consensus solution by 2020, has finally recognised the need to introduce elements of formulary apportionment to allocate the profits of multinationals and is framed explicitly in terms of redistributing taxing rights between countries. In this paper we provide the first public evaluation of the redistribution of taxing rights associated with the leading proposals of the OECD, IMF and the Independent Commission for the Reform of International Corporate Taxation (ICRICT). The first key finding is that that reallocation of taxing rights towards “market jurisdictions”, as it is currently understood, is likely to be of little benefit to non-OECD countries. Indeed, the proposal is likely to reduce revenues for a range of lower-income countries. Second, all of the proposals deliver a much broader distribution of benefits if some element of taxing rights is apportioned according to the location of multinationals’ employment, and not only of sales.
    Date: 2019–10–03
  4. By: Andrea Coveri; Mario Pianta
    Abstract: Building on a Post-Keynesian theoretical framework, integrated with an analysis of technology, this article investigates the structural determinants of income distribution. We develop a simultaneous model on wage and profit dynamics identifying as key determinants productivity growth, capital-labour conflict, the relevance of trade unions and different strategies of technological change and offshoring. We perform an industry-level analysis on 38 manufacturing and service sectors for six major European countries from 1994 to 2014. Wage and profit dynamics is shown to be rooted in structural change, productivity growth and capital-labour conflict, with profits driven by product innovation and offshoring, and wages rising faster where new products are relevant and trade unions have a greater role.
    Keywords: Income distribution; innovation; offshoring; Europe; industries.
    Date: 2019–11–13
  5. By: J. Paul Dunne (School of Economics, University of Cape Town); Christine S. Makanza (School of Economics, University of Cape Town)
    Abstract: While the military spending-growth nexus has been widely researched, most of this work tends to assume a linear relationship between military expenditure and growth. This ignores the possibility that the relationship may be non linear, and the impact of military burden on growth may vary by its size. A few studies have considered such non-linearities, but they have been mainly been country specific case studies. This paper applies models that allow for changing regimes to a balanced panel of Sub Saharan African countries. It finds there to be a differential of military spending on growth for countries with high and low burdens, with military spending positively contributing to growth in the low burden regime, while it deters growth in the high burden regime in the long run.
    Date: 2019
  6. By: John Komlos
    Abstract: U3, the official unemployment rate, is an inadequate gauge of labor-market slack and the extent to which it misinforms varies substantially over the business cycle. The U6 unemployment rate is usually about 4 percentage points above U3. However, during the Great Recession it exceeded U3 by 7 percentage points for three years. Moreover, the U6-U3 gap is magnified among disadvantaged groups such as minorities, youth, and for the less educated. For instance, in January 2011 the U6-U3 gap among African American youth was 17.9 pps as U6 climbed to 47.5% and was similarly large among African Americans without a high-school diploma.
    Keywords: unemployment, U6, unemployment by ethnicity, discouraged workers, labor market slack
    JEL: J40 J49 J69
    Date: 2019
  7. By: Steven J. Bosworth; Dennis J. Snower
    Abstract: This paper examines how skill-biased growth can generate economic fragmentation (income dis-parities) that give rise to social fragmentation (the adoption of increasingly incompatible social identities and values), which generate political fragmentation (the adoption of increasingly incompatible economic policies). Our model of social fragmentation focuses on three values-driven identities: individualism (focused on status concerns), communitarianism (focused on the benefits of social affiliations), and multi-affilatedness (encompassing both individualistic and communitarian objectives). Our analysis shows how the high-, middle- and low-skilled people are drawn to individualistic, multi-affiliated and communitarian objectives, respectively. We show how skill-biased growth leads to an expansion of the individualistic and communitarian groups, at the expense of the tolerant multi-affiliates. Consequently, there is a narrowing of the moral foundations driving economic policy. We examine the conditions under which these developments increase size of the political constituency for protectionist-nationalist policies (which destroy productivity, compress the income distribution and promote the benefits of social affiliation).
    Date: 2019
  8. By: Guzman, Jorge; Oh, Jean Joohyun; Sen, Ananya
    Abstract: Entrepreneurial motivation is central for the process of economic growth. However, evidence on the motivations of innovative entrepreneurs, and how those motivations differ across fundamental characteristics, remains scant. We conduct three field experiments with the MIT Inclusive Innovation Challenge to study how innovative entrepreneurs respond to messages of money and social impact, and how this varies across gender and culture. We find consistent evidence that women and individuals located in more altruistic cultures are more motivated by social impact messages than money, while men and those in less altruistic cultures are more motivated by money than social impact. The estimates are not driven by differences in the type of company, its size, or other observable characteristics, but instead appear to come from differences in the underlying motivations of innovative entrepreneurs themselves.
    Date: 2019–10–10
  9. By: Christoph March
    Abstract: Artificial intelligence (AI) is starting to pervade the economic and social life rendering strategic interactions with artificial agents more and more common. At the same time, experimental economic research has increasingly employed computer players to advance our understanding of strategic interaction in general. What can this strand of research teach us about an AI-shaped future? I review 90 experimental studies using computer players. I find that, in a nutshell, humans act more selfishly and more rational in the presence of computer players, and they are often able to exploit these players. Still, many open questions prevail.
    Keywords: experiment, robots, computer players, survey
    JEL: C90 C92 O33
    Date: 2019
  10. By: Mariolis, Theodore
    Abstract: This paper expands the spectral analysis of the Sraffian value system, and shows that: (i) the hitherto alternative value theories can be conceived of as “perturbations” of the so-called pure labour value theory; (ii) these theories correspond to specific complex plane locations of the eigenvalues of the vertically integrated technical coefficients matrix; and (iii) the actual economies cannot be coherently analyzed in terms of the traditional value theories, despite the fact that their Krylov (or controllability) matrices are characterized by rather low degrees of regularity-controllability and relatively low numerical ranks. Hence, on the one hand, the Sraffian value theory is not only the most general one but also provides a sound empirical basis, while on the other hand, real-world economies constitute almost irregular-uncontrollable systems, and this explains the specific shape features of the empirical value-wage-profit rate curves.
    Keywords: Almost irregular-uncontrollable system; Characteristic value distributions; Circulant matrices; Degree of regularity-controllability; Numerical rank; Value theories
    JEL: B51 B53 C67 D46 D57
    Date: 2019–11–13
  11. By: Michael Rauscher; Bianca Willert
    Abstract: We develop a model where firms profit from coercing workers into employment under conditions violating national law and international conventions and where bureaucrats benefit from accepting bribes from detected perpetrators. Firms and bureaucrats are heterogeneous. Employers differ in their unscrupulousness regarding the use of slave labour whereas bureaucrats have differing intrinsic motivations to behave honestly. Moreover, there is a socially determined warm-glow effect: honest bureaucrats feel better if their colleagues are honest too. The determination of bribes is modelled via Nash bargaining between the firm and the corrupt civil servant. It is shown that multiple equilibria and hysteresis are possible. Depending on history, an economy may be trapped in a locally stable high-corruption, high-slavery equilibrium and major changes in government policies may be necessary to move the economy out of this equilibrium. Moreover, we show that trade bans that are effective in reducing slavery in the export industry tend to raise slavery in the remainder of the economy. It is possible that this leakage effect dominates the reduction of slavery in the export sector.
    Keywords: coerced labour, modern slavery, corruption, social norms, trade-related process standards
    JEL: D73 F16 J47
    Date: 2019

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