nep-pke New Economics Papers
on Post Keynesian Economics
Issue of 2019‒12‒09
eighteen papers chosen by
Karl Petrick
Western New England University

  1. Where Do Profits and Jobs Come From? Employment and Distribution in the US Economy By Lance Taylor; Ozlem Omer
  3. Journal of the History of Economic Thought Preprints - Limits to Arbitrage and Interest Rates: A Debate Between Keynes, Hawtrey and Hicks By BRILLANT, Lucy
  4. Keynes Between the Classics and Sraffa: on the Issue of the Numéraire By M. Magnani
  5. Journal of the History of Economic Thought Preprints - Keynes, Public Debt and the Complex of Interest Rates By Aspromourgos, Anthony
  6. Journal of the History of Economic Thought Preprints - Keynes, Mill, and Say’s Law: A Comment on Roy Grieve’s Mistaken Criticisms of Mill By Ahiakpor, James C.W.
  7. Journal of the History of Economic Thought Preprints - "Keynes, Mill and Say's Law: A Comment on Professor Ahiakpor's Mistaken Defence of Mill" By Grieve, Roy H
  8. Journal of the History of Economic Thought Preprints - Eugenics and Socialist Thought in the Progressive Era: The Case of James Medbery Mackaye By Foresti, Tiziana
  9. Journal of the History of Economic Thought Preprints - The Environmental Turn in Natural Resource Economics: John Krutilla and "Conservation Reconsidered" By Banzhaf, H. Spencer
  10. Theories of the Causes of Poverty By Brady, David
  11. The transformation of economic analysis at the Federal Reserve during the 1960s By Acosta, Juan; Cherrier, Beatrice
  12. Who Said or What Said? Estimating Ideological Bias in Views Among Economists By Javdani, Mohsen; Chang, Ha-Joon
  13. Journal of the History of Economic Thought Preprints - Review of ​Karl Polanyi: A Life on the Left​ By Schumacher, Reinhard
  14. Wage Inequality as a Source of Endogenous Macroeconomic Fluctuations By Jaylson Jair da Silveira; Gilberto Tadeu Lima
  15. Embedded cohesion: Social bases of urban public goods distribution By Bradlow, Benjamin H.
  16. American Gothic: How Chicago Economics Distorts `Consumer Welfare` in Antitrust By Mark Glick
  17. How The Legacy of Slavery Has Survived: A Mechanism through Labor Market Institutions and Human Capital By Jung, Yeonha
  18. How Behavioural Economics Relates to Psychology - Some Bibliographic Evidence By Braesemann, Fabian

  1. By: Lance Taylor (New School for Social Research); Ozlem Omer (New School for Social Research)
    Abstract: `Meso` level analysis of 16 producing sectors sheds light on broad forces shaping growth of employment and profits. In a growth decomposition from 1990 through 2016, employment responds positively to output increases and negatively to rising productivity. The macro profit share responds positively to sectoral productivity and demand shifts, and negatively to real wage increases. The decomposition weights suggest that wage repression raises profits in business services, education and health, wholesale and retail trade, and parts of manufacturing. Observed profit growth was robust in manufacturing, trade, finance and insurance, and information. The latter two (and wholesale trade) benefitted from favorable demand shifts. However, they generate less than a quarter of total profits. Owners of real estate receive more than a quarter but their share is not increasing. Growth of the remaining one-half of profits has been due to demand shifts and productivity growth which exceeded real wage increases. Market power matters in all sectors. The strongest effects may act against employment and real wages in labor markets.
    Keywords: income distribution, wealth, monopoly power, rents, low wages
    JEL: D31 D33 E2 E12 E24 J40 L11
  2. By: Sutch, Richard
    Abstract: John Maynard Keynes’s analysis of the Great Depression has strong parallels to recent theorizing about the post-2008 Great Recession. There are also remarkable similarities between the two historical episodes: the collapse of demand for new fixed investment, the role of the zero-lower-bound liquidity trap in hampering conventional monetary policy, the multi-year period of near-zero short-term rates, and the protracted period of subnormal prosperity. A major difference between then and now that monetary authorities in the recent situation actively pursued an unconventional policy with massive purchases of long-term securities. Keynes couldn’t convince authorities of his era to pursue such a plan, but it was precisely the monetary policy he advocated for a depressed economy stuck at the zero lower bound of nominal interest rates.
    Date: 2018–03–13
  3. By: BRILLANT, Lucy
    Abstract: This paper deals with a debate between Hawtrey, Hicks and Keynes concerning the capacity of the central bank to influence the short-term and the long-term rates of interest. Both Hawtrey and Keynes considered the central bank’s ability to influence short-term rates of interest. However, they do not put the same emphasis on the study of the long-term rates of interest. According to Keynes, long-term rates are influenced by future expected short-term rates (1930, 1936), whereas for Hawtrey (1932, 1937, 1938), long-term rates are more dependent on the business cycle. Short-term rates do not have much effect on long-term rates according to Hawtrey. In 1939, Hicks enters the controversy, giving credit to both Hawtrey’s and Keynes’s theories, and also introducing limits to the operations of arbitrage. He thus presented a nuanced view.
    Date: 2018–04–11
  4. By: M. Magnani
    Abstract: The paper sketches a coherent history of the choice of the measure standard from Adam Smith’s Wealth of Nations to Sraffa’s Production of Commodities. As neither the Smithian labour commanded unit nor the Ricardian-Marxian labour embodied one provide a general solution to the dilemma concerning the finding of an invariable standard, the author shows the shortcomings of both methods in an analytically rigorous way. Several years later, the largely unacknowledged fourth chapter of the General Theory once again tackles the matter of measuring aggregate values adopting a net approach and introducing an ad hoc unit. Concerned by the inherent difficulties of the operation, Keynes starts from an harsh criticism towards Pigou’s notion of national dividend to end up asking himself a number of questions that makes him partially lean towards the later Sraffian approach as presented in Production of Commodities, though his stance is not fully compliant either with the premises or the aims of Piero Sraffa’s theoretical framework. In the final part, a general solution based on net labour productivity is considered.
    JEL: B12 B14 B24 B51
    Date: 2019–11
  5. By: Aspromourgos, Anthony
    Abstract: John Maynard Keynes consistently offered qualified endorsement of Abba Lerner’s “functional finance” doctrine – the qualifications particularly turning on Keynes’s attentiveness to policy management of the psychology of the debt market. This article examines Keynes’s understanding of the possible influence of public debt on interest rates, from 1930 forward. With the multiplier a mechanism whereby debt-financed public investment generates matching private saving (net of private investment) plus public saving, it becomes possible for Keynes to conclude that increasing public debt need not place upward pressure on the level of interest rates, so long as policy can successfully manage the psychology of the debt market. This particularly concerns long interest rates and hence, the term structure of rates. His theory of the term structure enables Keynes’s conviction that policy can manage and shape long rates. The conclusion considers also whether Keynes’s caution concerning public debt and interest rates retains relevance today.
    Date: 2018–04–04
  6. By: Ahiakpor, James C.W.
    Abstract: Employing different meanings of classical concepts of saving, capital, investment, and money, and incorrectly attributing the assumption of full employment of labor and a world of certainty to classical analysis, Keynes (1936) faulted Say’s Law as irrelevant to the real world. Roy Grieve (2016) ignores previous clarifications of Keynes’s misrepresentations and misunderstandings of Mill’s restatements of the law. He employs similar misrepresentations and misunderstandings of Mill’s explanations as Keynes. His model of Mill’s analysis is incapable of explaining how variations in relative prices, the value of money, and interest rates coordinate production, consumption and savings decisions in a monetary economy.
    Date: 2017–11–29
  7. By: Grieve, Roy H
    Abstract: This note is a reply to James Ahiakpor's critical blast against my 2016 paper on the subject of Keynes, Mill and Say's Law. Professor Ahiakpor has apparently missed the point I was trying to make: his slings and arrows hit no targets.
    Date: 2018–01–03
  8. By: Foresti, Tiziana
    Abstract: The article proposes an analysis of James MacKaye’s socialism and its relation to eugenics in the early years of the Progressive Era. In this respect, our work, showing as it does the pervasiveness of eugenics independently from traditional ideological boundaries, represents a further contribution to the Eugenics in the Progressive era debate inaugurated by Thomas Leonard’s Illiberal Reformers: Race, Eugenics, and American Economics in the Progressive Era (2016). At the same time, this paper contributes to the strand of literature that deals with the economic elaboration of the idea of differential capacities for happiness, of which the works of Levy and Peart represent the most recent examples. MacKaye is almost an unknown character today, but in his day he was quite influential and his peculiar brand of socialism deserves some critical attention.
    Date: 2018–03–25
  9. By: Banzhaf, H. Spencer
    Abstract: Environmentalism in the United States historically has been divided into its utilitarian and preservationist impulses, represented by Gifford Pinchot and John Muir, respectively. Pinchot advocated conservation of natural resources to be used for human purposes; Muir advocated protection from humans, for nature's own sake. In the first half of the 20th century, natural re-source economics was firmly in Pinchot's side of that schism. That position began to change as the post-war environmental movement gained momentum. In particular, John Krutilla, an economist at Resources for the Future, pushed economics to the point that it could embrace Muir's vision as well as Pinchot's. Krutilla argued that if humans preferred a preserved state to a developed one, then such preferences were every bit as "economic." Either way, there were opportunity costs and an economic choice to be made.
    Date: 2018–05–21
  10. By: Brady, David
    Abstract: There has been a lack of debate between and frameworks for theories of the causes of poverty. This essay proposes that most theories of poverty can be productively categorized into three broader families of theories: behavioral, structural, and political. Behavioral theories concentrate on individual behaviors as driven by incentives and culture. Structural theories emphasize the demographic and labor market context, which causes both behavior and poverty. Political theories contend that power and institutions cause policy, which causes poverty, and moderates the relationship between behavior and poverty. I review each theory’s arguments, contributions and challenges. Further, I explain how to integrate, classify studies into, and distinguish between theories. Ultimately, I argue that poverty research would benefit from more explicit theory and theoretical debate, as well as greater interdisciplinarity and integration between studies of the U.S., rich democracies, and developing countries.
    Date: 2018–10–15
  11. By: Acosta, Juan; Cherrier, Beatrice
    Abstract: In this paper, we build on data on Fed officials, oral history repositories and hitherto under-researched archival sources to unpack the torturous path toward crafting an institutional and intellectual space for postwar economic analysis within the Fed. We show that growing attention to new macroeconomic research was a reaction to both mounting external criticisms against the Fed’s decision-making process and a process internal to the discipline whereby institutionalism was displaced by neoclassical theory and econometrics. We argue that the rise of the number of PhD economists working at the Fed is a symptom rather than a cause of this transformation. Key to our story are a handful of economists from the Board of Governor’s Division of Research and Statistics (DRS) who paradoxically did not always held a PhD, but envisioned their role as going beyond mere data accumulation and got involved into large-scale macroeconometric model building. We conclude that the divide between PhD and non-PhD economists may not be fully relevant to understand both the shift in the type of economics practiced at the Fed and the uses of this knowledge in the decision making-process. Equally important was the rift between different styles of economic analysis.
    Date: 2018–09–30
  12. By: Javdani, Mohsen (University of British Columbia, Okanagan); Chang, Ha-Joon (University of Cambridge)
    Abstract: There exists a long-standing debate about the influence of ideology in economics. Surprisingly, however, there is no concrete empirical evidence to examine this critical issue. Using an online randomized controlled experiment involving 2425 economists in 19 countries, we examine the effect of ideological bias on views among economists. Participants were asked to evaluate statements from prominent economists on different topics, while source attribution for each statement was randomized without participants' knowledge. For each statement, participants either received a mainstream source, an ideologically different less-/non-mainstream source, or no source. We find that changing source attributions from mainstream to less-/non-mainstream, or removing them, significantly reduces economists' reported agreement with statements. This contradicts the image economists have of themselves, with 82% of participants reporting that in evaluating a statement one should only pay attention to its content. Using a framework of Bayesian updating we examine two competing hypotheses as potential explanations for these results: unbiased Bayesian updating versus ideologically-/authority-biased Bayesian updating. While we find no evidence in support of unbiased updating, our results are consistent with biased Bayesian updating. More specifically, we find that changing/removing sources (1) has no impact on economists' reported confidence with their evaluations; (2) similarly affects experts/non-experts in relevant areas; and (3) has substantially different impacts on economists with different political orientations. Finally, we find significant heterogeneity in our results by gender, country, PhD completion country, research area, and undergraduate major, with patterns consistent with the existence of ideological bias.
    Keywords: ideology, ideological bias, authority bias, Bayesian updating, views among economists
    JEL: A11 A14
    Date: 2019–10
  13. By: Schumacher, Reinhard
    Abstract: A review of Gareth Dale's "Karl Polanyi: A Life on the Left​"
    Date: 2017–11–21
  14. By: Jaylson Jair da Silveira; Gilberto Tadeu Lima
    Abstract: There is extensive evidence on both the endogeneity of labor productivity to the wage remuneration and the persistence of wage inequality across observationally similar workers and firms. The paper builds an evolutionary micro-dynamic model having these two features of the labor market as interconnected, and explores the ensuing implications for the macro-dynamics of the distribution of income, capacity utilization and output growth. Firms periodically revise (and possibly switch) their choice of remunerating workers with a higher or lower wage, and the resulting labor productivity differential across workers is endogenous to the distribution of wage remuneration strategies across firms. The long run features wage inequality as a persistent outcome. Moreover, plausibly low levels of wage inequality suffice to cause the distribution of wage remuneration strategies across firms, and therefore the distribution of income, capacity utilization and output growth, all to experience self-sustaining cyclical fluctuations.
    Keywords: Wage inequality; evolutionary micro-dynamics; distribution of income; capacity utilization; output growth
    JEL: J31 E25 E32 O41 C62
    Date: 2019–11–29
  15. By: Bradlow, Benjamin H.
    Abstract: Theories of urban political economy under globalization predict convergence across cities: growing inequalities of income, wealth, and access to public goods, and the political dominance of business elites. However, São Paulo, Brazil, witnessed surprisingly effective redistribution of residential public goods — housing and sanitation — between 1989 and 2016. I use original interviews and archival research for a comparative-historical analysis of institutional changes in São Paulo’s governance of housing and sanitation. I argue that sequential configurations of a) “embeddedness” of the local state in civil society and b) the “cohesion” of the institutional sphere of the local state, explain why and when cities generate the coordinating capacity to distribute public goods. I further illustrate how these configurations can explain variation in urban governing regimes across the world.
    Date: 2018–08–24
  16. By: Mark Glick (University of Utah)
    Abstract: Since the publication of Robert Bork`s The Antitrust Paradox, lawyers, judges, and many economists have defended `Consumer welfare` (CW) as a standard for decisions about antitrust goals and enforcement priorities. This paper argues that the CW is actually an empty concept and is an inappropriate goal for antitrust. Welfare economists concede that there is no credible measurable link between price and output and human well-being. This means that the concept of CW does not legitimate limited antitrust enforcement, nor does it justify the exclusion of other antitrust goals that require more active enforcement practices. This paper contends that antitrust policy is not welfare based at all, and that if it were, antitrust policy and enforcement would differ significantly from the Chicago School vision. Without the fiction that economists can establish that in the short run lower price and higher output measurably increases welfare more than other goals, recent defenses of the CW standard resolve down to arguments based on unsupported assumptions.
    Keywords: U.S. Consumer Welfare, Goal of Antitrust Law, New Brandeis School, Chicago School of Economics.
    JEL: K21 L40 N12
  17. By: Jung, Yeonha
    Abstract: In spite of sizable qualitative literature on the long-run legacy of slavery, its robust evidence and convincing mechanism have not been established. This research evaluates the legacy of slavery on long-run development and its detailed mechanism which consists of two key factors, labor market institutions and human capital structure. Using county-level data of the U.S. South and exploiting exogenous variation in ecological conditions, I show that slavery has had persistent negative impact on economic development through the human capital structure. To explain the link between slavery and human capital, I find from complete count census data in 1940 that the legacy of slavery impeded integration of black workers into the competitive labor market which accordingly reduced the incentives of blacks to invest in human capital. In addition, evidence from the progressive Era along the border counties shows that the legacy of slavery on the labor market was operated through selective enforcement of labor market regulations. Lastly, I present the roles of racial wage discrimination and selective migration which reinforced persistence of the mechanism.
    Date: 2018–02–23
  18. By: Braesemann, Fabian
    Abstract: Whether behavioural economics has a fundamental influence on economics is debated by behavioural and heterodox economists as well as by methodologists and historians of economics. At the core of this debate is the question whether behavioural economics is shaped by large-scale content imports from psychology, or whether these transfers have been too selective to challenge dominant approaches in economics. This study contributes to the debate in analysing a variety of bibliographic data from the disciplinary boundary between economics and psychology. Two datasets from the boundary of behavioural economics and psychology are compared to sets of economic and psychology publications in quantifying the use of mathematics, the share of empirical contributions, the authors’ academic background, and their cross-citations via network analysis. In contrast to proposals made by some methodologists and behavioural economists, the statistical results confirm content transfers from psychology via behavioural economics only to a limited extend. The observed level of interaction provides evidence for a selective import of specific psychological findings by a small number of established investigators in behavioural economics. These findings were then intensively debated as divergences from rationality within the growing, but econ-centered community of behavioural economists.
    Date: 2018–08–22

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