|
on Post Keynesian Economics |
| By: | Perry Mehrling (Pardee School of Global Studies, Boston University) |
| Abstract: | The analytical tension in post-Keynesian thought between the theory of endogenous (credit) money and the theory of liquidity preference, brought to our attention by Dow and Dow (1989), can be viewed through the lens of the money view (Mehrling 2013) as a particular case of the balance between the elasticity of payment and the discipline of funding. Further, updating FullartonÕs 1844 Òlaw of refluxÓ for the modern condition of financial globalization and market based credit, the same money view lens offers a critical entry point into TobinÕs fateful 1963 intervention ÒCommercial Banks as Creators of ÔMoneyÕÓ which established post-war orthodoxy, and also to the challenge offered by so-called Modern Money Theory. |
| Keywords: | credit creation, financial intermediation, law of reflux |
| JEL: | B2 E5 |
| Date: | 2020–01 |
| URL: | http://d.repec.org/n?u=RePEc:thk:wpaper:113&r=all |
| By: | William Lazonick (The Academic-industry Research Network) |
| Abstract: | Edith PenroseÕs 1959 book The Theory of the Growth of the Firm [TGF] provides intellectual foundations for a theory of innovative enterprise, which is essential to any attempt to explain productivity growth, employment opportunity, and income distribution. Properly understood, PenroseÕs theory of the firm is also an antidote to the deception that is foundational to neoclassical economics: The theory, taught by PhD economists to millions upon millions of college students for over seven decades, that the most unproductive firm is the foundation of the most efficient economy. The dissemination of this ``neoclassical fallacy`` to a mass audience of college students began with Paul A. SamuelsonÕs textbook, Economics: An Introductory Analysis, first published in 1948. Over the decades, the neoclassical fallacy has persisted through 18 revisions of Samuelson, Economics and in its countless ``economics principles`` clones. This essay challenges the intellectual hegemony of neoclassical economics by exposing the illogic of its foundational assumptions about how a modern economy functions and performs. The neoclassical fallacy gained popularity in the 1950s, during which decade Samuelson revised Economics three times. Meanwhile, Penrose derived the logic of organizational learning that she lays out in TGF from the facts of firm growth, absorbing what was known in the 1950s about the large corporations that had come to dominate the U.S. economy. Also, during that decade, the knowledge base on the growth of firms on which economists could subsequently draw was undergoing an intellectual revolution, led by the business historian, Alfred D. Chandler, Jr. He was engaged in the first stage of a career that would span more than a half century, during which Chandler documented and analyzed the centrality to U.S economic development of what he would come to call ``the managerial revolution in American business.`` In combination, the works of Penrose and Chandler form intellectual foundations for my own work on the Theory of Innovative EnterpriseÑan endeavor that has enabled me, as an economist, to recognize not only the profound importance of organizational learning for economic theory but also the illogic of the neoclassical theory of the firm for our understanding of the central institution of a modern economy, the business corporation. In this essay, I argue that the key characteristic of the innovative enterprise is fixed-cost investment in the productive capabilities of the companyÕs employees to engage in organizational learning. The purpose of this investment in organizational learning is to develop a higher-quality product than was previously available. When successful, the development of the higher-quality product enables the firm to capture a large extent of the market, transforming high fixed cost into low unit cost. The result is sustainable competitive advantage that enables the growth of the firm, contributing to the growth of the economy as a whole. I argue that to get beyond the neoclassical fallacy, economists have to stop relying on constrained-optimization methodology. Rather, they need to be trained in a ``historical transformation`` methodology that integrates history and theory. It is a methodology in which theory serves as both a distillation of what we have learned from the study of history and a guide to what we need to learn about reality as the ``present as history`` unfolds. |
| Keywords: | Theory of the firm, Penrosian learning, Chandlerian history, innovative enterprise, economic performance, Paul Samuelson, neoclassical fallacy, constrained optimization, historical transformation |
| JEL: | A2 B3 B4 D2 D4 D8 J3 L1 L2 M2 N8 O1 O3 |
| Date: | 2020–01 |
| URL: | http://d.repec.org/n?u=RePEc:thk:wpaper:111&r=all |
| By: | Trevon Logan (Ohio State University); Peter Temin (MIT) |
| Abstract: | This paper records the path by which African Americans were transformed from enslaved persons in the American economy to partial participants in the progress of the economy. The path was not monotonic, and we organize our tale by periods in which inclusiveness rose and fell. The history we recount demonstrates the staying power of the myth of black inferiority held by a changing white majority as the economy expanded dramatically. Slavery was outlawed after the Civil War, and blacks began to participate in American politics en masse for the first time during Reconstruction. This process met with white resistance, and black inclusion in the growing economy fell as the Gilded Age followed and white political will for black political participation faded. The Second World War also was followed by prosperity in which blacks were included more fully into the white economy, but still not completely. The Civil Rights Movement proved no more durable than Reconstruction, and blacks lost ground as the 20th century ended in the growth of a New Gilded Age. Resources that could be used to improve the welfare of whites and blacks continue to be spent on the continued repressions of blacks. |
| Keywords: | Economic History, Slaves, Freedmen, Jim Crow, Great Migration |
| JEL: | N31 N32 J15 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:thk:wpaper:110&r=all |
| By: | Evangelia Apostolopoulou (Department of Geography, University of Cambridge); Elisa Greco (ESPOL - European School of Political and Social Sciences / École Européenne de Sciences Politiques et Sociales - ICL - Institut Catholique de Lille - UCL - Université catholique de Lille); William Adams (Department of Geography, University of Cambridge) |
| Abstract: | In this paper we explore the logic of biodiversity offsetting, focusing on its core promise: the production of 'equivalent natures'. We show how the construction of equivalence unravels the environmental contradictions of capitalism by exploring how and why it is achieved, and its profound implications for nature-society dialectics. We focus on the construction of an ecological equivalence between ecosystems, the construction of ecological credits that are considered equivalent in monetary terms, and, finally, the construction of an equivalence between places. The existing critical literature, in some cases implicitly and unwittingly, assumes that biodiversity offsetting creates value. In contrast to this argument, we draw onMarx's labortheory of value to conclude that in the majority of instances offsetting does not create value, rather it is an instance of rent. We also draw on Marxist analyses on the production of nature and place to show that biodiversity offsetting radically rescripts nature as placeless,obscuring the fact that it facilitates the production of space, place, and nature according to the interests of capital while emphasizing that at the core of offsetting lie social struggles over rights and access to land and nature. Biodiversity offsetting's dystopian vision for the future makes it an important focus for all critical scholars seeking to understand and challenge the contradictions of the capitalist production of nature. |
| Date: | 2019–09–16 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:halshs-02441026&r=all |
| By: | Michael Grubb (University College London); Claudia Wieners (Institute of Economics, Scuola Superiore Sant`Anna, Pisa, Italy.) |
| Abstract: | We analyze and critique how optimizing Integrated Assessment Models, and specifically the widely-used DICE model, represent abatement costs. Many such models assume temporal independence Ðabatement costs in one period are not affected by prior abatement. We contrast this with three dimensions of dynamic realism in emitting systems: inertia, induced innovation, and path dependence. We extend the DICE model with a stylized representation of such dynamic factors. By adding a transitional cost component, we characterize the resulting system in terms of its capacity to adapt in path-dependent ways, and the transitional costs of accelerating abatement. We formalize a resulting metric of the pliability of the system, and the characteristic timescales of adjustment. With the resulting DICE-PACE model, we show that in a system with high pliability, the optimal strategy involves much higher initial investment in abatement, sustained at roughly constant levels for some decades, which generates an approximately linear abatement path and emissions declining steadily to zero. This contrasts sharply with the traditional formulation. Characteristic transition timescales of 20-40 years result in an optimum path which stabilizes global temperatures around a degree below the traditional DICE behavior; with otherwise modest assumptions, a pliable system can generate optimal scenarios within the goals of the Paris Agreement, with far lower long run combined costs of abatement and climate damages. We conclude that representing dynamic realism in such models is as important as Ð and far more empirically tractable than Ð continued debate about the monetization of climate damages and `social cost of carbon`. |
| Keywords: | climate change, Integrated Assessment Models, DICE, path dependence, Pliable Abatement Cost Mechanisms. |
| JEL: | Q5 H23 Q54 Q55 |
| Date: | 2020–01 |
| URL: | http://d.repec.org/n?u=RePEc:thk:wpaper:112&r=all |
| By: | Ngo-Hoang, Dai-Long |
| Abstract: | Nowadays, we are surrounded by a large number of complex phenomena such as virus epidemic, rumor spreading, social norms formation, emergence of new technologies, rise of new economic trends and disruption of traditional businesses. To deal with such phenomena, social scientists often apply reductionism approach where they reduce such phenomena to some lower-lever variables and model the relationships among them through a scheme of equations (e.g. Partial differential equations and ordinary differential equations). This reductionism approach which is often called equation based modeling (EBM) has some fundamental weaknesses in dealing with real world complex systems, for example in modeling how a housing bubble arises from a housing market, the whole market is reduced into some factors (i.e. economic agents) with unbounded rationality and often perfect information, and the model built from the relationships among such factors is used to explain the housing bubble while adaptability and the evolutionary nature of all engaged economic agents along with network effects go unaddressed. In tackling deficiencies of reductionism approach, in the past two decades, the Complex Adaptive System (CAS) framework has been found very influential. In contrast to reductionism approach, under this framework, the socio-economic phenomena such as housing bubbles are studied in an organic manner where the economic agents are supposed to be both boundedly rational and adaptive. According to CAS framework, the socio-economic aggregates such as housing bubbles emerge out of the ways agents of a socio-economic system interact and decide. As the most powerful methodology of CAS modeling, Agent-based modeling (ABM) has gained a growing application among academicians and practitioners. ABMs show how simple behavioral rules of agents and local interactions among them at micro-scale can generate surprisingly complex patterns at macro-scale. Despite a growing number of ABM publications, those researchers unfamiliar with this methodology have to study a number of works to understand (1) the why and what of ABMs and (2) the ways they are rigorously developed. Therefore, the major focus of this paper is to help social sciences researchers get a big picture of ABMs and know how to develop them both systematically and rigorously. |
| Date: | 2019–01–27 |
| URL: | http://d.repec.org/n?u=RePEc:osf:agrixi:xutyz&r=all |
| By: | Giovanni Dosi (Scuola Superiore Sant’Anna); Richard B. Freeman (Harvard University and NBER); Marcelo C. Pereira (University of Campinas and Scuola Superiore Sant’Anna); Andrea Roventini (Scuola Superiore Sant’Anna and OFCE, Sciences Po); Maria Enrica Virgillito (Scuola Superiore Sant’Anna) |
| Abstract: | This paper presents an Agent-Based Model (ABM) that seeks to explain the concordance of sluggish growth of productivity and of real wages found in macro-economic statistics, and the increased dispersion of firm productivity and worker earnings found in micro level statistics in advanced economies at the turn of the 21st century. It shows that a single market process unleashed by the decline of unionization can account for both the macro and micro economic phenomena, and that deunionization can be modeled as an endogenous outcome of competition between high wage firms seeking to raise productive capacity and low productivity firms seeking to cut wages. The model highlights the antipodal competitive dynamics between a “winner-takes-all economy” in which corporate strategies focused on cost reductions lead to divergence in productivity and wages and a “social market economy” in which competition rewards the accumulation of firm-level capabilities and worker skills with a more egalitarian wage structure. |
| Keywords: | Unionisation, productivity slowdown, market selection, reallocation, agent-based model |
| JEL: | J51 E02 E24 C63 |
| Date: | 2020–02 |
| URL: | http://d.repec.org/n?u=RePEc:fce:doctra:2005&r=all |