nep-pke New Economics Papers
on Post Keynesian Economics
Issue of 2020‒08‒31
eighteen papers chosen by
Karl Petrick
Western New England University

  1. "Are We All MMTers Now? Not so Fast" By Yeva Nersisyan; L. Randall Wray
  2. Profit maximization or bullshit – where between labour economics and Graeber may employments be? By Mann, Stefan
  3. "The Early Impact of COVID-19 on Job Losses among Black Women in the United States" By Michelle Holder; Janelle Jones; Thomas Masterson
  4. Worker Household Debt, Functional Income Distribution and Growth: a neo-Kaleckian Perspective By Parui, Pintu
  5. "Moral Hazard and the State Budget Crisis" By Alex Williams
  6. The interbank market, Keynes’s degree of confidence and the link between banks’ liquidity and solvency By Konstantinos Loizos
  7. Notes on the Main Analytical Insufficiencies of the Marxist Theoretical Tradition for the Comprehension of the Contemporary Global Economy By Vlados, Charis
  8. Supply and demand in Kaldorian growth models: a proposal for dynamic adjustment By Machago, Guilherme R.; Spinola, Danilo
  9. The Political Economy of Inequality in Rich Democracies By Jonathan Rothwell
  10. The Long Shadow of Slavery: The Persistence of Slave Owners in Southern Law-making By Luna Bellani; Anselm Hager; Stephan E. Maurer
  11. The Conception of Innovation on the Central Theoretical Hubs of Economic Thought By Vlados, Charis
  12. The distributive cycle: Evidence and current debates By Jose Barrales-Ruiz, Ivan Mendieta-Muñoz, Codrina Rada, Daniele Tavani, Rudiger von Arnim
  13. La pluralidad de la crisis: dos interpretaciones de la crisis financiera colombiana de 1998 By Nicolás Sierra Rojas
  14. Theoretical Evolution of Growth Poles and Clusters Analysis: Analytical Divergences and Convergences By Chatzinikolaou, Dimos; Vlados, Charis
  15. Financialization and Income Generation in the 21st Century: Rise of the Petit Rentier Class? By Adam Goldstein; Ziyao Tian
  16. Teaching Economics with Interactive Browser-Based Models By Juan Dominguez-Moran; Rouven Geismar
  17. The Actual U.S. Unemployment Rate Was 24.4% in May 2020 By John Komlos
  18. Elites and inequality: a case study of plutocratic philanthropy in the UK By Glucksberg, Luna; Russell-Prywata, Louise

  1. By: Yeva Nersisyan; L. Randall Wray
    Abstract: As governments around the world explore ambitious approaches to fiscal and monetary policy in their responses to the COVID-19 crisis, Modern Money Theory (MMT) has been thrust into the spotlight once again. Unfortunately, many of those invoking the theory have misrepresented its central tenets, according Yeva Nersisyan and L. Randall Wray. MMT provides an analysis of fiscal and monetary policy applicable to national governments with sovereign, nonconvertible currencies. In the context of articulating the elements of that analysis, Nersisyan and Wray draw out one of the lessons to be learned from the pandemic and its policy responses: that the government’s ability to run deficits is not limited to times of crisis; that we must build up our supplies, infrastructure, and institutions in normal times, and not wait for the next crisis to live up to our means.
    Date: 2020–04
  2. By: Mann, Stefan
    Abstract: The fundamental assumption of labour economics that firms maximize their profits through employment has been challenged through David Graebers “Bullshit Jobs”. We compare the epistemological foundations and empirical grounding of the two concepts. After the methodological paradigms have been explored, the paper looks at the five categories of bullshit jobs that Graeber qualifies and at their contribution to added value on the company and the societal level. Neither the mere assumption of rationality and complete information which labour economists usually pursue nor the complete trust in the narratives of unhappy employees are likely to reveal the full truth. The apparent contradictions can mainly be attributed to the high degree of complexity of the labour world.
    Keywords: work; labour economics; bullshit jobs
    JEL: B59 J21 J28
    Date: 2020–08–12
  3. By: Michelle Holder; Janelle Jones; Thomas Masterson
    Abstract: The COVID-19 pandemic seemingly appeared out of nowhere but changed nearly everything. As the pandemic unfolded, industries deemed nonessential were leveled. Many occupations in these industries are low-wage, and women constitute a greater share of America's low-wage labor force than men. Even as some workers were able to do their jobs from their homes, a high proportion of "essential workers" were African American, other people of color, women, and an intersection of these groups--women of color. The goal of this paper is to closely examine the contours, depth, and causes of COVID-19's impact on Black women's employment in the United States through the lenses of both feminist economic theory and stratification economics.
    Keywords: Occupational Segregation; Racial Discrimination; Gender Discrimination; COVID-19
    JEL: J15 J16 J21
    Date: 2020–07
  4. By: Parui, Pintu
    Abstract: In a stock-flow consistent neo-Kaleckian macro-model, along with worker households' debt dynamics, in the long-run, we incorporate distributional dynamics and demonstrate the possibility of multiple equilibria. Dynamic stability of the economy is also examined. Both debt-led and debt-burdened demand and growth regimes are possible in short-run as well as in the long-run. We find that mergers, acquisitions and hostile takeovers play a crucial role for (de)stabilizing the economy. In some instances, the speed of the adjustment parameter of the distributional dynamics becomes crucial for stabilizing the economy. Otherwise, the economy may lose its stability and gives birth to limit cycles.
    Keywords: Capital Accumulation, Income Distribution, Worker Household Debt, Kaleckian Model, Limit Cycle, Stock-flow Consistency
    JEL: C62 E12 E25 G34 O41
    Date: 2020–08–12
  5. By: Alex Williams
    Abstract: As congressional negotiations stall and state governments are poised to enact significant austerity, Alex Williams argues that fiscal aid to state governments should be tied to economic indicators rather than the capriciousness of federal legislators. Building this case for reform requires confronting a common objection: that state fiscal aid creates situations of moral hazard. This objection misconstrues the agency of state governments and misunderstands the incentives of federal politicians, according to Williams. There is a serious moral hazard problem involved here—but it is not the one widely claimed.
    Date: 2020–08
  6. By: Konstantinos Loizos (University of Athens (GR))
    Abstract: The link between banks’ liquidity and solvency is not adequately addressed in the literature, despite the central role of the interbank market in the spread of the recent crisis. This paper proposes a possible way by which the interbank rate and the required return on equity capital are determined, and are related to each other. Thereby, a link between liquidity and insolvency risk is derived on the grounds of Keynes's concept of ‘degree of confidence’ on held expectations about economic prospects. High degree of confidence and trust prevailing in the interbank market makes risk sharing possible at prices which render bank capital regulation ineffective in the rising phase of the cycle, and overly restricted in the downswing. Basel’s III higher capital, liquidity and leverage ratios might not be enough if measures, in the sense of Minsky’s Big Government-Big Bank, targeting overconfidence in booms and redressing the lack of confidence in the downturns are not taken into account.
    Keywords: Degree of confidence, Interbank market, Liquidity preference, Insolvency risk, Financial cycles
    JEL: E12 E32 G21
    Date: 2020–08
  7. By: Vlados, Charis (Democritus University of Thrace, Department of Economics)
    Abstract: This article aims to analyze how the Marxist and neomarxist approaches demonstrate a relative difficulty in understanding and interpreting the dynamics of the modern world economy (globalization). We attempt in particular to explore the interpretive capabilities and shortcomings in the approach of globalization that stem from Marx’s thought and his followers. We present, in particular, the theoretical contribution of Marx in the study of the internationalized capitalism of his era, the interpretation by Lenin based on the concept of imperialism, the subsequent developments and adjustments in the Marxist analysis of the internationalized developmental phenomenon, as well as some contemporary interpretations that link Marxism and neomarxism with globalization.
    Keywords: Marxism; Neomarxism; Marxist adjustments; Marxism and globalization; Criticism on Marxism
    JEL: B14 B24 B51
    Date: 2019–10–12
  8. By: Machago, Guilherme R. (PPGE\UFABC and FGV); Spinola, Danilo (Maastricht University, UNU-MERIT)
    Abstract: This paper analyses the dynamic adjustment of supply and demand in Kaldorian growth models. We discuss how the growth rate of a country given by the demand constraints may adjust towards the growth rate given by the supply-side (and vice-versa), presenting the necessary conditions for this adjustment. Our main conclusion is that, for a monopolistic economy, where firms invest to maintain a constant level of capital utilisation, there are no capital constraints and hence the degree of capacity utilisation is not affected by this adjustment. Nevertheless, depending on specific conditions, an economy may face labour constraints, and thus an adjustment mechanism is necessary. The Palley-Setterfield approach for this dynamic adjustment brings a possible reconciliation to supply- and demand-side long-term growth rates. It emphasises the endogeneity of the income-elasticities of demand for imports and the Verdoorn coefficient to utilisation capacity. However, some considerations about labour market have to be discussed in order to understand the characteristics and limitations of this approach. In this sense, we draw from the McCombie (2011) critique, in which employment adjusts immediately to guarantee equilibrium between supply and demand. We propose reconciliation between the Palley-Setterfield and the McCombie approaches, and present a model with a labour market adjustment in which both types of adjustments represent extreme cases, discussing the existence and the characteristics of intermediate cases.
    Keywords: economic adjustment, demand-led growth, natural rate of growth, Kaldorian growth models
    JEL: E12 F43 O41
    Date: 2020–08–04
  9. By: Jonathan Rothwell
    Abstract: Rich democracies have experienced a large increase in income inequality starting around 1980, coinciding with a rise in international trade and information technology. The leading theories used to explain changes in the income distribution—skilled biased technological change and globalization—have not been called upon to explain why the United States has been more unequal than other democracies even before the recent rise, suggesting other forces are at work. I set out to investigate those forces. First, I clarify the trends in income within the United States. The key rise occurred from 1980 to 2000 in labor income and benefited not just the top 0.1% or even the top 1% but the top 10%. Then, I explore the international correlations using both survey and tax-based sources. Greater exposure to innovation and trade does not predict higher inequality in levels of changes across rich democracies. Political economy relationships are much more successful in explaining the variation, though traditional measures of bias toward capital have mixed results. The strongest predictors of inequality are two variables: an index of excess earnings accruing to elite professionals and racial diversity. Simple regressions confirm this evidence. Digging deeper, I show that the top 1% by income or wealth are disproportionately found in domestic sectors that are not particularly innovative or affected by globalization. This is especially true for the most unequal countries. In the United States, financial sector workers, doctors, and lawyers play a large role in income inequality and are notable for their high levels of sector and occupation-specific regulations. The origins of racial inequality in the United States are well known and reviewed here. I conclude that political economy considerations must be brought into any comprehensive theory of the income distribution in the early 21st century democracies.
    Date: 2019–10
  10. By: Luna Bellani (University of Konstanz and IZA); Anselm Hager (Humboldt University and WZB); Stephan E. Maurer (University of Konstanz and CEP)
    Abstract: This paper documents the persistence of the Southern slave owning elite in political power after the end of the American Civil War. We draw on a database of Texan state legislators between 1860 and 1900 and link them to their or their ancestors’ slaveholdings in 1860. We then show that former slave owners made up more than half of nearly each legislature’s members until the late 1890s. Legislators with slave owning backgrounds differ systematically from those without, being more likely to represent the Democratic party and more likely to work in an agricultural occupation. Regional characteristics matter for this persistence, as counties with higher soil suitability for growing cotton on average elect more former slave owners.
    Keywords: Wealth Inequality, Elites and Development, US South, Intergenerational Per-sistence, Slavery
    JEL: D72 J62 N31 H4
    Date: 2020–08–17
  11. By: Vlados, Charis (Democritus University of Thrace, Department of Economics)
    Abstract: Innovation seems to be one of the most critical concepts in economics discourse nowadays. However, the contribution of some of the central theoretical hubs to economic science concerning innovation is not always exploited systematically. Therefore, this article aims to present and analyze how some of the most prominent economists in the course of history have approached the issue, as well as to attempt to synthesize this knowledge. In particular, we examine the theoretical contributions of Adam Smith, Karl Marx, and Joseph Schumpeter, as well as some relatively recent theoretical approaches to innovation that appear to draw on the work of these theorists. The central conclusion of this study is that the conceptualization of innovation, either explicitly or implicitly, has deep theoretical roots while, in particular, the finding of the dynamic nature of the phenomenon of innovation seems to have been approached by most of the critical hubs of economic analysis.
    Keywords: Innovation; Economic science; Adam Smith; Karl Marx; Joseph Schumpeter; Socioeconomic development; Socioeconomic dynamics
    JEL: B15 B52 O39
    Date: 2019–11–29
  12. By: Jose Barrales-Ruiz, Ivan Mendieta-Muñoz, Codrina Rada, Daniele Tavani, Rudiger von Arnim
    Abstract: This paper surveys current debates on the distributive cycle. The literature builds on R.M. Goodwin's seminal 1967 chapter titled “A growth cycle.†We review theoretical motivations for the distributive cycle, which, despite significant differences, all imply that macroeconomic activity leads the labor share. Subsequently, we summarize and update evidence on the existence of a distributive cycle, with a focus on the post-war US macroeconomy. We analyze activity and labor share series and their interaction in the frequency domain, and also employ standard vector autoregressions. Results confirm the distributive cycle across the entire US post-war period. We contextualize results vis-à -vis current topics, including a financial cycle, technical change and secular stagnation.
    Keywords: Distributive cycle; US labor share of income; neo-Goodwin. JEL Classification:E12; E24; E25; E32.
    Date: 2020
  13. By: Nicolás Sierra Rojas
    Abstract: La crisis financiera colombiana de fin de siglo se enmarca en un período de turbulencia internacional; síntoma del creciente grado de globalización e interrelación de las economías nacionales del mundo. Las causas de la crisis han sido ampliamente debatidas y este escrito busca aportar a tal discusión desde las teorías de John Maynard Keynes y Murray Rothbard; grandes exponentes de dos importantes corrientes de pensamiento económico. En este trabajo se analiza la interacción de factores reales y monetarios desde dos marcos conceptuales distintos sin pretender hacer una crítica a priori. Se concluye que, a pesar de que los dos autores raramente coinciden, la pluralidad en el análisis es crucial para entender el desarrollo de la crisis financiera. *** The Colombian financial crisis that occurred at the turn of the century is framed in a period of international turbulence, a symptom of the rising degree of the globalization process and the interpenetration of national economies around the world. The crisis’ causes have been broadly debated and this essay intends to contribute to such discussion from the theories of John Maynard Keynes and Murray Rothbard; prominent exponents of two important currents of economic thought. In this work, real and monetary factors are analyzed from two distinct theoretical frameworks without the intent of criticizing those in an aprioristic way. I conclude that, in spite of there being few common points between the two authors, the plurality in the analysis is critical if one wants to fully understand the development of the financial crisis.
    Keywords: crisis financiera, inversión, expansión crediticia, tasa de interés, expectativas
    JEL: B22 B53 P16 N16 N26
    Date: 2020–08–10
  14. By: Chatzinikolaou, Dimos (Democritus University of Thrace, Department of Economics); Vlados, Charis (Democritus University of Thrace, Department of Economics)
    Abstract: The theories of growth poles and clusters occupy a prominent position in the debate of regional development and underdevelopment. This article aims to identify focal points of the concept of growth poles and the analytical model of clusters by trying to distinguish differences as well as prospects for future analytical convergence based on recent developments in the field of spatial socio-economic sciences. To achieve this goal, we classify about ten foundational publications and another ten recent contributions to growth poles, along with corresponding publications on the clusters concept. We analyse the evolution of the theoretical perspective and recent developments of growth poles theory and practice in conjunction with the most disseminated ideas of the clusters concept and recent theoretical trends. Some of the main findings are that growth poles remain within the boundaries of economic geography, while clusters/industrial districts withhold a multidisciplinary perspective. Clusters analyses are heading towards a growing study of micro-dynamics, which is not the case in the growth poles, which are limited to the meso domain of analysis (industry, region). These observations help to figure out whether there are opportunities and possibilities for synthesising these two analytical perspectives.
    Keywords: growth poles; clusters; socio-economic development; spatial sciences; micro-level analysis
    JEL: O19 R11 R58
    Date: 2019–10–22
  15. By: Adam Goldstein; Ziyao Tian
    Abstract: This article considers the consequences of asset-based accumulation for household income factors and social class structure in twenty-nine countries from 1998-2016. Are financialization, asset-based welfare institutions, and rising real estate returns fueling a growing class of petit rentiers in capitalist economies? That is, households who accrue more than a trivial share of income from capital rather than labor or government transfers. The analysis draws on the Luxembourg Income Study data. Contrary to expectations, most countries saw declines in the share of households who accrue more than 10%, or 20% of income from assets. Estimates from correlated random effects models indicate that financialization is associated with between-country differences in the size of the petit rentier, but not within-country change over time. The decline of the petit rentier can be partly explained by declining interest rates, which reduces income from bank savings.
    JEL: D14 Z13
    Date: 2020–08
  16. By: Juan Dominguez-Moran; Rouven Geismar
    Abstract: Interactive simulation toolkits come in handy when teaching macroeconomic models by facilitating an easy understanding of underlying economic concepts and offering an intuitive approach to the models' comparative statics. Based on the example of the IS-LM model, this paper demonstrates innovative browser-based features well-suited for the shift in education to online platforms accelerated by COVID-19. The free and open-source code can be found alongside the standalone HTML files for the AD-AS and the Solow growth model at roeconomics/.
    Date: 2020–08
  17. By: John Komlos
    Abstract: The official U.S. unemployment rate is an inadequate measure of actual labor market conditions. This poses a major challenge for researchers and confuses both the public and policy makers. A new definition of unemployment is proposed. It considers those part-time workers who would like to work full time as 62.7% employed and 37.3% unemployed, inasmuch as this is the proportion of time they worked relative to full-time workers prior to the pandemic. In addition, in contrast to the BLS, we consider those workers who are wanting to work but have not searched for work within the prior month as being unemployed. We find that the actual unemployment rate in May 2020 was 24.4% or 183% of the headline rate of 13.3%.
    Keywords: covid-19, pandemic, unemployment rate, labor market slack, discouraged workers, involuntary part-time workers
    JEL: B40 C82 J40 J49 J69
    Date: 2020
  18. By: Glucksberg, Luna; Russell-Prywata, Louise
    Abstract: This paper investigates the role of elite philanthropy in the context of rising global inequality, asking whether large-scale philanthropic donations by elites are well placed to help tackle structural inequality. The challenges posed by such “plutocratic philanthropy” are explored through analysis of a network of the top 30 philanthropists in the United Kingdom and their connections to businesses and foundations, which shows their financial scale and connectivity. This new data is embedded into a review of the most recent social science literature on elites, which focuses on elite reproduction, how wealthy families perceive inequality, and how and why they engage in philanthropic activities. From this data, the paper develops an analysis of the current landscape of inequality, based on the work of British sociologist Mike Savage (2015), arguing that elite philanthropy as an ecosystem— made up of capital, people and institutions—is not well placed to systemically challenge inequalities, because the financial size of elites’ philanthropy tends to be dwarfed by their business activities, and the social functions of philanthropy help maintain the advantaged positions of elites. The paper concludes with informed policy considerations on the role of elite philanthropy in light of the results of the analysis.
    Keywords: elite reproduction; foundations; network analysis; sustainable development; tax
    JEL: J1
    Date: 2020–07–01

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