nep-pke New Economics Papers
on Post Keynesian Economics
Issue of 2019‒12‒02
thirteen papers chosen by
Karl Petrick
Western New England University

  1. Journal of the History of Economic Thought Preprints - Economic Analysis of Education in Post-War America: New insights from Theodore Schultz and John Kenneth Galbraith By CHIRAT, alexandre; , Le Chapelain Charlotte
  2. Monism in modern science: The case of (micro-)economics By Beckenbach, Frank
  3. Monetary Circuit, Capitalist Reproduction and Financial Accounting By Hernando Matallana
  4. Economics from the Top Down: Does Hierarchy Unify Economic Theory? By Fix, Blair
  5. Bounded rationality in Keynesian beauty contests: A lesson for central bankers? By Mauersberger, Felix; Nagel, Rosemarie; Bühren, Christoph
  6. Journal of the History of Economic Thought Preprints – Review of Nature in the History of Economic Thought: how natural resources became an economic concept By Franco, Marco Paulo Vianna
  8. Post-Keynesian Theorists and the theory of Economic Development By Chakravarty, Sukhamoy
  9. Antitrust and Economic History: The Historic Failure of the Chicago School of Antitrust By Mark Glick
  10. Journal of the History of Economic Thought Preprints – review of Kurz 'Economic Thought: A Brief History' By Andrews, David
  11. The Economic and Social Roots of Populist Rebellion: Support for Donald Trump in 2016 By Thomas Ferguson; Benjamin Page; Jacob Rothschild; Jie Chen; Arturo Chang
  12. Industrial Structure and Party Competition in an Age of Hunger Games:Donald Trump and the 2016 Presidential Election Donald Trump and the 2016 Presidential Election By Thomas Ferguson; Paul Jorgensen; Jie Chen
  13. The future of work and its implications for social protection and the welfare state By Gassmann, Franziska; Martorano, Bruno

  1. By: CHIRAT, alexandre; , Le Chapelain Charlotte
    Abstract: Human capital theory has suffered much criticism. The filter theory of education (Arrow 1973), the theory of education as a “signal” (Spence 1973) and the theory of “screening” (Stiglitz 1975), for instance, have seriously challenged it from within mainstream economics, and heavy criticism has also come from other paradigms, with Bailly (2016) recently documenting the critique from the radical school. Within this set of ideas that flourished in the post-WWII period and challenged human capital theory, John Kenneth Galbraith’s analysis of the dynamics of the education process is often neglected. In his original institutionalist and firm-based approach to the evolution of education, Galbraith placed great emphasis on the issue of the requirements of the planning system when he tackled the issue of human capital investment. More surprisingly – since he is unanimously recognized as the “founding father” of the “human capital revolution” – Theodore Schultz himself developed a substantial critique of human capital theory that shares some ground with Galbraith’s. The aim of this contribution is to provide new insights into the history of post-WWII ideas in the field of economics of education by reviewing Schultz’s and Galbraith’s respective analyses of education and highlighting their proximities. Both authors raise doubts regarding the idea that the aggregation of individual choices must be regarded as the relevant generative mechanism of the dynamic of education and the basis of the allocation of education resources. Consequently, both question the equivocal concept of student sovereignty.
    Date: 2019–01–21
  2. By: Beckenbach, Frank
    Abstract: This elaboration starts by deciphering modern science as a social subsystem being loosely coupled to the rest of society (section 2.1). Additionally, the way in which modern (monistic) economics was generated within this subsystem will be sketched (section 2.2). This will be contrasted with the views that this monism would have been eroded in recent times due to imports from other sciences into economics. Conclusions as regards the necessity as well as the mode of pluralism will be drawn from this discussion (section 2.3). Picking up the disputable complexity reductions involved in the dominating (monistic) approach in economics other ways to deal with complexity inherent in the economy will be dealt with in section 3. Here a stepwise exit from the established standard approach in economics is suggested for the microeconomic syllabus consisting in the first step of an introductory pluralistic course and in the second step of a heterodox advanced course. Conclusions and perspectives resulting from such an approach are discussed in the final section.
    Keywords: Monism,science,microconomics,pluralism,neoclassical economics
    JEL: A10 A12 A14 A20 B20 B59 D00
    Date: 2019
  3. By: Hernando Matallana
    Abstract: A key issue in heterodox economics is the theoretical determination of the inner logic of the economic process through which the functional conditions of social reproduction are systematically recreated in capitalism. The monetary circuit is a particular moment of the economic process through which the recreation of private property as the capitalist social relation takes place. The understanding of the monetary logic of what Marx called the “process of circulation of capital” is thus a central element of a monetary heterodox theory of capitalism. Financial accounting methods currently applied as a powerful tool of control of society can be used critically to illuminate the capitalist circulation process. *** Una cuestión clave en la economía heterodoxa es la determinación teórica de la lógica interna del proceso económico a través del cual son recreadas sistemáticamente las condiciones funcionales de la reproducción social en el capitalismo. El circuito monetario es un momento particular del proceso económico a través del cual tiene lugar la recreación de la propiedad privada como la relación social capitalista. La comprensión de la lógica monetaria de lo que Marx llamó el “proceso de circulación del capital” es por tanto un elemento central de la teoría heterodoxa monetaria del capitalismo. Los métodos de la contabilidad financiera utilizados comúnmente como una herramienta poderosa de control social son utilizados aquí para iluminar el proceso de circulación capitalista.
    Keywords: Capitalism, economic circuit, financial accounting, monetary production economy, social reproduction
    JEL: E11 E12 E25 M41
    Date: 2019–11–22
  4. By: Fix, Blair (York University)
    Abstract: What is the unit of analysis in economics? The prevailing orthodoxy in mainstream economic theory is that the individual is the ‘ultimate’ unit of analysis. The implicit goal of mainstream economics is to root macro-level social structure in the micro-level actions of individuals. But there is a simple problem with this approach: our knowledge of human behavior is hopelessly inadequate for the task at hand. Faced with real-world complexities, economists are forced to make bold (and seldom tested) assumptions about human behavior in order to make models tractable. The result is theory that has little to do with the real world. This dissertation investigates an alternative approach to economics that I call ‘economics from the top down’. This approach begins with the following question: what happens when we take the analytical focus off of individuals and put it into social hierarchy? The effect of this analytical shift is that we are forced to deal with the realities of concentrated power. The focus on hierarchy leads to some surprising discoveries. First, I find evidence that hierarchical organization has a biophysical basis. I show that institution size (firms and governments) is strongly correlated with rates of energy consumption, and that the growth of institutions can be interpreted as the growth of social hierarchy. Second, I find that hierarchy plays an important role in shaping income and income distribution. I find that income scales strongly with hierarchical power (defined as the number of subordinates under one’s control), and that hierarchical power affects income more strongly than any other factor measured. Lastly, using an empirically informed model of the hierarchical structure of US firms, I find that hierarchy plays a dominant role in shaping the income distribution tail. These results hint that hierarchy can be used to unify the study of economic growth (understood in biophysical terms) and income distribution. I conclude by making the first prediction of how the concentration of hierarchical power should relate to the growth of energy consumption. This prediction sheds new light on the origin of inequality. While this ‘top down’ approach to economics is in its infancy, the results are encouraging. Focusing on hierarchy gives fresh insight into many of the important questions facing society — insight that cannot be obtained by focusing on individuals.
    Date: 2018–09–16
  5. By: Mauersberger, Felix; Nagel, Rosemarie; Bühren, Christoph
    Abstract: The goal of this paper is to show how adding behavioral components to micro-foundated models of macroeconomics may contribute to a better understanding of real world phenomena. The authors introduce the reader to variations of the Keynesian Beauty Contest (Keynes, The General Theory of Employment, Interest, and Money, 1936), theoretically and experimentally with a descriptive model of behavior. They bridge the discrepancies of (benchmark) solution concepts and bounded rationality through step-level reasoning, the so-called level-k or cognitive hierarchy models. These models have been recently used as building blocks for new behavioral macro theories to understand puzzles like the lacking rise of inflation after the financial crisis, the effectiveness of quantitative easing, the forward guidance puzzle and the effectiveness of temporary fiscal expansion.
    Keywords: beauty contest game,expectation formation,equilibration,level-k reasoning,macroeconomics,game theory,experimental economics
    JEL: E12 E13 D80 D9 C91
    Date: 2019
  6. By: Franco, Marco Paulo Vianna
    Abstract: A review of Nathaniel Wolloch's Nature in the History of Economic Thought: how natural resources became an economic concept
    Date: 2019–01–23
  7. By: de Carvalho, Andre Roncaglia
    Abstract: The paper analyzes the rise of the Latin American-based inertial inflation theory. Starting in the 1950s, various traditions in economics purported to explain the concept of “inflation inertia”. Contributions ranging from Celso Furtado and M.H. Simonsen to James Tobin anticipated key aspects of what later became the inertial inflation hypothesis, building it into either mathematical or conceptual frameworks compatible with the then contemporaneous macroeconomic theory. In doing so, they bridged the analytical gap with the North-American developments whilst maintaining the key features of the CEPAL approach, such as distributional conflicts and local institutional details. These contributions eventually influenced the second moment of the monetarist-structuralist controversy that unraveled in the 1980s. The paper also highlights how later works by structuralist economists gradually stripped the inertial inflation approach of its previous substance and form, thereby unearthing tensions among Latin-American structuralists that led to the eventual decline of this research program.
    Date: 2019–01–28
  8. By: Chakravarty, Sukhamoy
    Keywords: International Development
  9. By: Mark Glick (University of Utah)
    Abstract: This paper presents an historical analysis of the antitrust laws. Its central contention is that the history of antitrust can only be understood in light of U.S. economic history and the succession of dominant economic policy regimes that punctuated that history. The antitrust laws and a subset of other related policies have historically focused on the negative consequences resulting from the rise, expansion, and dominance of big business. Antitrust specifically uses competition as its tool to address these problems. The paper traces the evolution of the emergence, growth and expansion of big business over six economic eras: the Gilded Age, the Progressive Era, the New Deal, the post-World War II Era, the 1970s, and the era of neoliberalism. It considers three policy regimes: laissez-faire during the Gilded Age and the Progressive Era, the New Deal, policy regime from the Depression through the early 1970s, and the neoliberal policy regime that dominates today and includes the Chicago School of antitrust. The principal conclusion of the paper is that the activist antitrust policies associated with the New Deal that existed from the late 1930s to the 1960s resulted in far stronger economic performance than have the policies of the Chicago School that have dominated antitrust policy since the 1980s.
    Keywords: New Brandeis School, Antitrust economics, Antitrust law, Neoliberal Economic Theory, Chicago School Economics, History of Antitrust law
    Date: 2019–04
  10. By: Andrews, David
    Abstract: review of Heinz Kurz's book 'Economic Thought: A Brief History'
    Date: 2019–01–25
  11. By: Thomas Ferguson (Institute for New Economic Thinking); Benjamin Page (Northwestern University); Jacob Rothschild (Northwestern University); Jie Chen (University of Massachusetts); Arturo Chang (Northwestern University)
    Abstract: This paper critically analyzes voting patterns in the 2016 U.S. presidential election. Using survey data from the American National Election Survey and aggregate data on Congressional districts, it assesses the roles that economic and social factors played in Donald J. Trump’s `Populist` candidacy. It shows the hollowness of claims that economic issues played little or no role in the campaign and that social factors such as race or gender suffice to explain the outcome. While agreeing that racial resentment and sexism were important influences, the paper shows how various economic considerations helped Trump win the Republican primary and then led significant blocs of voters to shift from supporting Democrats or abstaining in 2012 to vote for him. It also presents striking evidence of the importance of political money and Senators` `reverse coattails` in the dramatic final result.
    Keywords: political economy, voting, 2016 presidential election, Donald Trump, Populism, political parties, political money, international economic policy, free trade
    JEL: D71 D72 G38 P16 N22 L51
    Date: 2018–10
  12. By: Thomas Ferguson (University of Massachusetts, Boston); Paul Jorgensen (University of Texas Rio Grande Valley); Jie Chen (University of Massachusetts, Boston)
    Abstract: The U.S. presidential election of 2016 featured frontal challenges to the political establishments of both parties and perhaps the most shocking election upset in American history. This paper analyzes patterns of industrial structure and party competition in both the major party primaries and the general election. It attempts to identify the genuinely new, historically specific factors that led to the upheavals, especially the steady growth of a `dual economy` that locks more and more Americans out of the middle class and into a life of unsteady, low wage employment and, all too often, steep debts. The paper draws extensively on a newly assembled, more comprehensive database of political contributions to identify the specific political forces that coalesced around each candidate. It considers in detail how different investor blocs related to the Republican Party and the Trump campaign as the campaign progressed and the role small contributors played in the various campaigns, especially that of Vermont Senator Bernie Sanders. It also critically evaluates claims about the final weeks of the election in the light of important overlooked evidence.
    Keywords: banking and financial regulation, political economy, presidential elections, Donald Trump, America First, political parties, political money, international economic policy
    JEL: D71 D72 G38 P16 N22 L51
    Date: 2018–01
  13. By: Gassmann, Franziska (UNU-MERIT and SBE, Maastricht University); Martorano, Bruno (UNU-MERIT and SBE, Maastricht University)
    Abstract: During the twentieth century, welfare states were instrumental in confining economic and social inequalities in Europe. Stepping into the twenty-first century, labour market risks have transformed. The unprecedented technological transformation has changed the way we work. The trend towards new forms of employment is no longer a marginal phenomenon. People switch between jobs, type of employment or (temporarily) leave the labour force. Across OECD countries, 16% of workers are self-employed and another 13% are on temporary employment contracts (OECD, 2018b). Employment became more precarious and labour market relations much more diverse. This raises the question how societies can take on the opportunities, challenges and risks that the rapid technological development may bring. The changing nature of work along with other challenges, such as demographic ageing, changes in family structures, globalisation of trade, or migration necessitates adaptations to the welfare state in order for it to continue functioning effectively and efficiently. This paper reviews the challenges for universal social protection in a rapidly changing world of work and discusses policy options for social protection systems that protect and stimulate human development. We first review current trends and predictions as to how the future of work might look like. New types of jobs and forms of employment are already on the rise, which has effects for individual workers and society. We then discuss the implications for social protection and the welfare state. The changing nature of risks associated with new forms of employment may require a redesign of current social protection systems. The discussion provides possible solutions and country examples on changes in social protection systems and financing strategies, including reforms of current social insurance schemes, social assistance programmes and active labour market policies.
    Keywords: non-standard employment, social protection, welfare states, Europe
    JEL: H55 I38 J21 O15
    Date: 2019–10–09

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