nep-pke New Economics Papers
on Post Keynesian Economics
Issue of 2020‒03‒30
nine papers chosen by
Karl Petrick
Western New England University

  1. "The Economic Response to the Coronavirus Pandemic" By Yeva Nersisyan; L. Randall Wray
  2. "When Two Minskyan Processes Meet a Large Shock: The Economic Implications of the Pandemic" By Michalis Nikiforos
  3. "A Global Slowdown Will Test US Corporate Fragility" By Dimitri B. Papadimitriou; Michalis Nikiforos; Gennaro Zezza
  4. Keynes's investment theory as a micro-foundation for his grandchildren By Nisticò, Sergio
  5. Artificial Intelligence, Historical Materialism, and close enough to a jobless society By Rogerio Silva Mattos
  6. Modeling the out-of-equilibrium dynamics of bounded rationality and economic constraints By Oliver Richters
  7. Postkeynesianismus Ein heterodoxer Ansatz auf der Suche nach einer Fundierung By Heise, Arne
  8. Are Economists Getting Climate Dynamics Right and Does It Matter? By Simon Dietz; Rick van der Ploeg; Armon Rezai; Frank Venmans
  9. Cashless Economies, Data Analysis, and Research-Based Teaching: The Versatility of the Velocity of Money for Teaching Macroeconomics By Philip Gunby; Stephen Hickson

  1. By: Yeva Nersisyan; L. Randall Wray
    Abstract: As the coronavirus (COVID-19) spreads across the United States, it has become clear that, in addition to the public health response (which has been far less than adequate), an economic response is needed. Yeva Nersisyan and Senior Scholar L. Randall Wray identify four steps that require immediate attention: (1) full coverage of medical costs associated with testing and treatment of COVID-19; (2) mandated paid sick leave and full coverage of associated costs; (3) debt relief for families; and (4) swift deployment of testing and treatment facilities to underserved communities.
    Date: 2020–03
  2. By: Michalis Nikiforos
    Abstract: The spread of the new coronavirus (COVID-19) is a major shock for the US and global economies. Research Scholar Michalis Nikiforos explains that we cannot fully understand the economic implications of the pandemic without reference to two Minskyan processes at play in the US economy: the growing divergence of stock market prices from output prices, and the increasing fragility in corporate balance sheets. The pandemic did not arrive in the context of an otherwise healthy US economy--the demand and supply dimensions of the shock have aggravated an inevitable adjustment process. Using a Minskyan framework, we can understand how the current economic weakness can be perpetuated through feedback effects between flows of demand and supply and their balance sheet impacts.
    Date: 2020–03
  3. By: Dimitri B. Papadimitriou; Michalis Nikiforos; Gennaro Zezza
    Abstract: The rapidly growing uncertainty about the potential global fallout from an emerging pandemic is occurring against a background in which there is evidence US corporate sector balance sheets are significantly overstretched, exhibiting a degree of fragility that, according to some measures, is unmatched in the postwar historical record. The US economy is vulnerable to a shock that could trigger a cascade of falling asset prices and private sector deleveraging, with severe consequences for both the real and financial sides of the economy.
    Date: 2020–03
  4. By: Nisticò, Sergio
    Abstract: In contrast with the "missing micro-foundations" argument against Keynes's macroeconomics, the paper argues that it is the present state of microeconomics that needs more solid "Keynesian foundations". It is in particular Keynes's understanding of investors' behaviour that can be fruitfully extended to consumption theory, in a context in which consumers are considered as entrepreneurs, buying goods and services to engage in time-consuming activities. The paper emphasizes that the outcome in terms of enjoyment is particularly uncertain for those innovative and path-breaking activities, which Keynes discussed in his 1930 prophetic essay about us, the grandchildren of his contemporaries. Moreover, the Keynes-inspired microeconomics suggested in the paper provides an explanation of why Keynes's prophecy about his grandchildren possibly expanding leisure did not materialize yet. The paper finally points at the need for appropriate economic policies supporting consumers' propensity to enforce innovative forms of time use.
    Keywords: Keynesian microeconomics,consumption,time use,uncertainty,Keynes's grandchildren
    JEL: B41 D11 D81
    Date: 2020
  5. By: Rogerio Silva Mattos (Universidade Federal de Juiz de Fora)
    Abstract: Advancing artificial Intelligence draws most of its power from the artificial neural network, a software technique that has successfully replicated some information processing functions of the human brain and the unconscious mind. Jobs are at risk to disappear because even the tacit knowledge typically used by humans to perform complex tasks is now amenable to computerization. The paper discusses implications of this technology for capitalism and jobs, concluding that a very long run transition to a jobless economy should not be discarded. Rising business models and new collaborative schemes provide clues for how things may unfold. A scenario in which society is close enough to full unemployment is analyzed and strategic paths to tackle the challenges involved are discussed. The analysis follows an eclectic approach, based on the Marxist theory of historical materialism and the job task model created by mainstream economists.
    Keywords: artificial intelligence,historical materialism,task model,neural networks,jobless society
    Date: 2019–01–01
  6. By: Oliver Richters (University of Oldenburg, Department of Economics)
    Abstract: The mathematical analogies between economics and classical mechanics can be extended from constrained optimization to constrained dynamics by formalizing economic (constraint) forces and economic power in analogy to physical (constraint) forces in Lagrangian mechanics. In a differential-algebraic equation framework, households, firms, banks, and the government employ forces to change economic variables according to their desire and their power to assert their interest. These ex-ante forces are completed by constraint forces from unanticipated system constraints to yield the ex-post dynamics. The out-of-equilibrium model combines Keynesian concepts such as the balance sheet approach and slow adaptation of prices and quantities with bounded rationality (gradient climbing) discussed in behavioral economics and agent-based models. Depending on the power relations and adaptation speeds, the model converges to a neoclassical equilibrium or not. The framework integrates different schools of thought and overcomes some restrictions inherent to optimization approaches, such as the problem of aggregating individual behavior into macroeconomic relations and the assumption of markets operating in or close to equilibrium.
    Keywords: Simultaneous Equation Models; Stability of Equilibrium; Balance Sheet Approach; Constrained Dynamics; Out-of-equilibrium Dynamics, Lagrangian mechanics.
    Date: 2020–03
  7. By: Heise, Arne
    Abstract: This article takes an in-depth look at post-Keynesianism as a paradigmatic alternative to the dominant neoclassical mainstream. It quickly becomes clear that post-Keynesianism is not a unified school of thought, but rather an assortment of theoretical approaches that share certain methodological and epistemological similarities and characteristic postulates. The Article does not attempt to describe the full array of Kaleckian, Kaldorian and Sraffian variants of post-Keynesian theory but instead analysis the paradigmatic and formal structure of one particular form of post-Keynesianism, the monetary theory of production in order to reconstruct these characteristic postulates from the axiomatic core of post-Keynesianism. It then sets out the theory of market participation, an alternative theory of economic policy that builds on monetary production economics.
    Keywords: Postkeynesianismus,heterodoxe Ökonomik,Neoklassik, Paradigma
    JEL: B41 B49 B5 E11 E12 E60
    Date: 2019–04
  8. By: Simon Dietz; Rick van der Ploeg; Armon Rezai; Frank Venmans
    Abstract: We show that several of the most important economic models of climate change produce climate dynamics inconsistent with the current crop of models in climate science. First, most economic models exhibit far too long a delay between an impulse of CO2 emissions and warming. Second, few economic models incorporate positive feedbacks in the carbon cycle, whereby carbon sinks remove less CO2 from the atmosphere, the more CO2 they have already removed cumulatively, and the higher is temperature. These inconsistencies affect economic prescriptions to abate CO2 emissions. Controlling for how the economy is represented, different climate models result in significantly different optimal CO2 emissions. A long delay between emissions and warming leads to optimal carbon prices that are too low and too much sensitivity of optimal carbon prices to the discount rate. Omitting positive carbon cycle feedbacks also leads to optimal carbon prices that are too low. We conclude it is important for policy purposes to bring economic models in line with the state of the art in climate science.
    Keywords: carbon cycle, carbon price, climate change, integrated assessment modelling, positive feedbacks, social cost of carbon
    JEL: Q54
    Date: 2020
  9. By: Philip Gunby (University of Canterbury); Stephen Hickson (University of Canterbury)
    Abstract: Simple concepts such as the velocity of money can be powerful tools to stimulate classroom discussions about complex issues in macroeconomics classes. For example, are cashless societies likely or is monetary policy likely to be effective? Such concepts are also ideal for in-class data analysis and for research-based teaching. The velocity of money for example only requires values from three commonly available variables, a simple calculation, and can be analysed by plotting it on a graph. In this paper we provide a summary of the velocity of money, what affects it, and illustrate these with two fascinating cases. We also provide two assignments, including how to create data sets, along with grading rubrics. Finally, we discuss experiences from an assignment we set our class.
    Keywords: Teaching Macroeconomics, Velocity of Money, Cashless Society, Data Analysis, FRED, Undergraduate Research
    JEL: A22 B22 E41 E42 E51
    Date: 2020–03–01

This nep-pke issue is ©2020 by Karl Petrick. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.