nep-pke New Economics Papers
on Post Keynesian Economics
Issue of 2020‒02‒10
five papers chosen by
Karl Petrick
Western New England University

  1. "Can We Afford the Green New Deal?" By Yeva Nersisyan; L. Randall Wray
  2. Fiscal policy as a long-run stabilization tool. Simulations with a stock-flow consistent model By Mario Cassetti
  3. "Demand, Distribution, Productivity, Structural Change, and (Secular?) Stagnation" By Michalis Nikiforos
  4. Labor-Augmenting Technical Change and the Labor Share: New Microeconomic Foundations By Daniele Tavani; Luca Zamparelli
  5. Social Epistemology By Franz Dietrich; Kai Spiekermann

  1. By: Yeva Nersisyan; L. Randall Wray
    Abstract: In this policy brief, Yeva Nersisyan and Senior Scholar L. Randall Wray argue that assessing the "affordability" of the Green New Deal is a question of whether there are suitable and sufficient real resources than can be mobilized to implement this ambitious approach to climate policy. Only after a careful resource accounting can we address the question of whether taxes and other means might be needed to reduce private spending to avoid inflation as the Green New Deal is phased in. Nersisyan and Wray provide a first attempt at resource budgeting for the Green New Deal, weighing available resources--including potential excess capacity and resources that can be shifted away from existing production--against what will be needed to implement the major elements of this plan to fight climate change and ensure a just transition to a more sustainable economic model.
    Date: 2020–01
  2. By: Mario Cassetti
    Abstract: This study examines the real and financial requirements of a regularly progressive economy driven by an autonomous evolution of public expenditure. The proposed model attempts to reconcile features of Kaleckian, Sraffian and horizontalist strands of post-Keynesian economics in a stock-flow consistent framework, which includes a banking sector and a central bank, as well as workers, rentiers,and firms. It focuses on the long-run convergence to a normal capacity utilization rate in a credit economy, where money is endogenous and the interest rate is kept stable by the central bank. The results show that an increase in public expenditure aimed at stabilizing economic activity on a higher long-run trend does not face significant financial constraints. However, the expansion may result in inflation and changes in the income distribution. Furthermore, resolving the conflict between robust steady growth and tolerable inflation rests on political and institutional changes, rather than on tightening fiscal and monetary policies. Rentiers and the financial sector have good reasons to resist expansionary fiscal policies, given the relative decline in the real value of their financial rents and activities caused by inflation and by improvements in the income share of wage earners.
    Keywords: Fiscal policy, Public debt, Income distribution, Supermultiplier, Kaleckian growth models, Stock-flow consistent models
    JEL: E11 E12 E20 E25 E60
    Date: 2020–01
  3. By: Michalis Nikiforos
    Abstract: The present paper emphasizes the role of demand, income distribution, endogenous productivity reactions, and other structural changes in the slowdown of the growth rate of output and productivity that has been observed in the United States over the last four decades. In particular, it is explained that weak net export demand, fiscal conservatism, and the increase in income inequality have put downward pressure on demand. Up until the crisis, this pressure was partially compensated for through debt-financed expenditure on behalf of the private sector, especially middle- and lower-income households. This debt overhang is now another obstacle in the way of demand recovery. In turn, as emphasized by the Kaldor-Verdoorn law and the induced technical change approach, the decrease in demand and the stagnation of wages can lead to an endogenous slowdown in productivity growth. Moreover, it is argued that the increasingly oligopolistic and financialized structure of the US economy also contributes to the slowdown. Finally, the paper argues that there is nothing secular about the current stagnation; addressing the aforementioned factors can allow for growth to resume, as has happened in the past.
    Keywords: Stagnation; Demand; Distribution; Technical Change; Institutions
    JEL: E02 E11 E12 E21 E22 E32 O33
  4. By: Daniele Tavani (Department of Economics, Colorado State University); Luca Zamparelli (Department of Economics and Law, Sapienza University of Rome)
    Abstract: An important question in alternative economic theories has to do with the relationship between the functional income distribution and the growth rate of labor productivity. According to both the induced innovation hypothesis and Marx-biased technical change, labor productivity growth should be an increasing function of the labor share. In this paper, we first discuss the shortcomings of both theories and then provide a novel microeconomic foundation for a direct relationship between the labor share and labor productivity growth. The result arises because of profit-seeking behavior by capitalist firms that face a trade-off between investing in new capital stock and innovating to save on labor costs. Embedding this finding in the Goodwin (1967) growth cycle model, we show that: i) the resulting steady state is locally stable; ii) unlike in the original Goodwin model, the long-run employment rate is sensitive to investment decisions; finally, iii) we numerically identify parametric configurations that establish whether convergence to the long-run growth path is cyclical or monotonic.
    Keywords: Endogenous Technical Change, Income Shares, Labor Productivity, Employment
    JEL: E32 O33
    Date: 2020–01
  5. By: Franz Dietrich (CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics, CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique); Kai Spiekermann (LSE - London School of Economics and Political Science)
    Abstract: Social epistemology studies knowledge in social contexts. Knowledge is 'social' when its holder communicates with or learns from others (Epistemology in groups), or when its holder is a group as a whole, literally or metaphorically (Epistemology of groups). Group knowledge can emerge explicitly, through aggregation procedures like voting, or implicitly, through institutions like deliberation or prediction markets. In the truth-tracking paradigm, group beliefs aim at truth, and group decisions at 'correctness', in virtue of external facts that are empirical or normative, real or constructed, universal or relativistic, etc. Procedures and institutions are evaluated by epistemic performance: Are they truth-conducive? Do groups become 'wiser' than their members? We review several procedures and institutions, discussing epistemic successes and failures. Jury theorems provide formal arguments for epistemic success. Some jury theorems misleadingly conclude that 'huge groups are infallible', an artifact of inappropriate premises. Others have defensible premises, and still conclude that groups outperform individuals, without being infallible.
    Date: 2020

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