nep-pke New Economics Papers
on Post Keynesian Economics
Issue of 2020‒09‒21
sixteen papers chosen by
Karl Petrick
Western New England University

  1. "The COVID-19 Crisis: A Minskyan Approach to Mapping and Managing the (Western?) Financial Turmoil" By Leonardo Burlamaqui; Ernani T. Torres Filho
  2. "Multidimensional Inequality and COVID-19 in Brazil" By Luiza Nassif Pires; Laura Carvalho; Eduardo Rawet
  3. The Macroeconomic Effects of Financialization and the Wage Gap between Blue and White Collar Workers By Parui, Pintu
  4. Income distribution, technical change, and economic growth: A two-sector Kalecki--Kaldor approach By Nishi, Hiroshi
  5. Keynes, Inflation, and the Public Debt: "How to Pay for the War" as a Policy Prescription for Financial Repression? By Teupe, Sebastian
  6. On Multi-Sector and Multi-Technique Models, Production Functions and Goodwin Cycles: A Reply to Libman By Robert Blecker; Mark Setterfield
  7. Bringing the social structure back in: a rents-based approach to inequality By Kerstenetzky, Celia Lessa
  9. How Did U.S. Consumers Use Their Stimulus Payments? By Olivier Coibion; Yuriy Gorodnichenko; Michael Weber; Michael Weber
  11. The emergence of core-periphery structures in the European Union: a complexity perspective By Claudius Graebner; Jakob Hafele
  12. The Economics of Happiness By Nikolova, Milena; Graham, Carol
  13. Notas para un debate sobre el intercambio desigual y la teoría marxista de la dependencia (Unequal exchange and the Marxist theory of dependency. Reclaiming the debate) By Féliz, Mariano
  14. "Moral Hazard in a Modern Federation" By Alex Williams
  15. The differential calculus, mathematicians and economists in the nineteenth century K. Marx and H. Laurent, readers of J. L. Boucharlat By Alain Alcouffe
  16. Understanding the Gains to Capitalists from Colonization: Lessons from Robert E. Lucas, Jr., Karl Marx and Edward Gibbon Wakefield By Edwyna Harris; Sumner La Croix

  1. By: Leonardo Burlamaqui; Ernani T. Torres Filho
    Abstract: The COVID-19 crisis paralyzed huge parts of the planet in weeks. It not only infected the population but injected a gargantuan dose of uncertainty into the system. In that regard, as in many others, it is a phenomenon without precedent. As of the time of writing (May-June 2020), we are witnessing, simultaneously, a health crisis, an economic crisis, and a crisis of global governance as well. In the forthcoming months, it could well turn into a set of financial, social, and political crises most governments and international organizations are ill-prepared to handle. In this paper, what concerns us is the financial dimension of the crisis. The paper is divided into four sections. Following the introduction, the second section maps the financial dimension of the pandemic through an extension of Hyman Minsky's financial fragility analysis. The result is a three-pronged analytical framework that encompasses financial fragility, financial instability, and insolvency-triggered asset-liability restructuring processes. These are seen as three distinct but interconnected processes advancing financial fragility. The third section dissects how these three processes have been managed as they have unfolded since March 2020, underlining the key policy interventions and institutional innovations introduced so far, and suggesting further measures for addressing the forthcoming stages of the financial turmoil. The fourth section concludes the paper by pointing out the results as of June 2020 and highlights our intended analytical contribution to Minsky's theoretical framework.
    Keywords: COVID-19 Crisis; Financial Fragilization; Financial Instability; Asset-Liabilities Restructuring; Minsky
    JEL: E02 G01 G18 G20
    Date: 2020–09
  2. By: Luiza Nassif Pires; Laura Carvalho; Eduardo Rawet
    Abstract: After spending over 6 percent of GDP responding to the COVID-19 crisis, Brazil has suffered among the worst per capita numbers in the world in terms of cases and deaths. In this policy brief, Research Fellow Luiza Nassif-Pires, Laura Carvalho, and Eduardo Rawet explore how stark inequalities along racial, regional, and class lines can help account for why the pandemic has had such a damaging impact on Brazil. Although they find that fiscal policy measures have so far neutralized the impact of the crisis with respect to income inequality, the existence of structural inequalities along racial lines in particular have resulted in an unequally shared public health burden. Broader policy changes are necessary for addressing dimensions of inequality that are rooted in structural racism.
    Date: 2020–09
  3. By: Parui, Pintu
    Abstract: In a post-Keynesian growth model with two types of workers (blue and white-collar workers), an attempt is taken to understand changes in financial behaviour and income distribution and their macroeconomic causes and consequences. For a relatively strong speed of adjustment in the financial market and a relatively weak reserve army effect, a stable steady state is achieved in the wage-led demand regime. Unlike Sasaki et. al. (2013), an endogenous and perpetual business cycles may emerge even in the wage-led demand regime. For a relatively strong reserve army effect, a contraction in the wage gap between white and blue-collar employments can make the steady state unstable. On the contrary, in a profit-led demand regime, a rise in the wage gap can destabilize the economy. A rise in the saving propensity of rentiers (and capitalist) is detrimental to aggregate demand and worsens the income distribution. A more regulated labour market and a rise in unionization are desirable as these can mitigate income inequality.
    Keywords: Financialization, Blue and white-collar workers, Wage gap, Post-Keynesian growth model, Limit cycles
    JEL: E12 E25 E32 E44 J31
    Date: 2020–06–28
  4. By: Nishi, Hiroshi
    Abstract: This paper presents a two-sector Kalecki--Kaldor model of income distribution, technical change, and economic growth. The model is Kaleckian in the sense that it incorporates mark-up pricing, investment independent of saving, and excess capacity. It is also Kaldorian in that labour productivity growth is led by Kaldor's technical progress function. In other words, productivity growth is endogenously realised through the technology embodied in new capital stock, which differentiates our model from previous two-sector models. Our extension drastically changes the standard Kaleckian implications. We find that although the economic activity levels in the short run are led by the demand and income distribution parameters, economic growth in the long run is realised by supply-side (i.e. technical change and the associated productivity and wage growth) parameters. The important implication of our findings is that a two-sector economy faces a trade-off between a high economic growth rate and the local stability of the steady state.
    Keywords: Two-sector model, Economic growth, Endogenous productivity growth, Technical change, Income distribution
    JEL: D33 E12 O41
    Date: 2020–07–02
  5. By: Teupe, Sebastian
    Abstract: This paper discusses whether John Maynard Keynes' "How to Pay for the War" provided prescriptions for the policies of "financial repression" that were implemented in England, and other countries, following World War II. It focuses on contemporary understandings of inflation which has been identified as a key factor for driving down public debt levels. Keynes has been widely acknowledged as influential in the management of public debt, and "How to Pay for the War" has been cited as proof for a widely held belief in "money illusion", suggesting the possibility of using inflation for driving down real interest rates of public bonds. It seems reasonable to suppose that Keynes' writings were instrumental in translating English monetary experiences of the 1920s and 1930s into expectations of policy makers during and after the Second World War, and thus provide an important explanation for the why and when of "financial repression". The paper argues that Keynes provided only partly ammunition for a policy of "financial repression", and none for using inflation as a "tax gatherer" to the detriment of domestic savers in general. Crediting him as a source for widespread "money illusion" is also out of line with the historical record.
    JEL: B20 E31 H63 N24 N44
    Date: 2020
  6. By: Robert Blecker (Department of Economics, American University); Mark Setterfield (Department of Economics, New School for Social Research)
    Abstract: Emiliano Libman's constructive comments on our recent book, Heterodox Macroeconomics: Models of Demand, Distribution and Growth (HM), raise three main points of contention: the suitability of single-sector/single-technique (as opposed to multi-sector/multi-technique) models; the appropriate choice of production function; and the distinction between limit cycles and closed orbits as representations of Goodwinian dynamics. In this reply, we respond to Libman's critique in a manner that is designed to develop his arguments into a useful addendum to our book. In so doing, we hope that this exchange will engage interested students and other readers in issues and avenues of inquiry that lie beyond some of the first-pass simpli cations in HM.
    Keywords: Choice of technique, production functions, Goodwin cycles, multi-sectoral models, technological change, factor substitution
    JEL: E11 E12 O33 O41 B51 D24
    Date: 2020–09
  7. By: Kerstenetzky, Celia Lessa
    Abstract: Motivated by a perceived lacuna in theoretical discussions on income inequality, this paper explores an approach based on the place in that inequality of economic rents. Although widely recognized as a subject to be considered in relation to inequality, rents are still failing to receive a conceptually and theoretically unified treatment. In fact, although accepted as an element in the distribution branch of economics, economic rents have been subject to a somewhat incomplete treatment, especially when it comes to understanding the origin in wealth ownership. This blind spot invites cross-disciplinary collaboration as a means of elucidation. So, in this paper, I review and systematize scattered conceptual and theoretical contributions on the subject drawn from the literatures of both economics and sociology. Briefly, while economics delineates the market phenomenon giving rise to rents, sociology sheds light on the influence of background social structure on both the supply and demand blades of the ‘market scissor’. This is to some extent reminiscent of Marx’s class struggle analysis; but Marx’s original view is amplified by the sociological perspectives I review here, as the latter identify and conceptualize rents earned by labour in addition to those earned by capital. Two ideas that sprang from my reading of the sociological perspectives should be placed at the very core of a rents-based approach to inequalities. The first is that the normal functioning of markets does not make economic rents disappear; the second is that all earnings are relative, so that rents, including negative rents, are a vital part of everyone’s remuneration in contemporary capitalist economies. An outline of a rents-based theory of inequality is proposed and normative and policy consequences of undertaking this move are hinted at.
    Keywords: inequality; economic rents; social structure; capital; social surplus
    JEL: J1 R14 J01 N0
    Date: 2020–09–01
  8. By: Assistant, JHET; Dimand, Robert; Saffu, Kojo
    Abstract: Polly Hill spent her long, productive and at times controversial career crossing and contesting disciplinary boundaries. She graduated in economics at Cambridge, but her doctorate was in social anthropology – with economist Joan Robinson as dissertation supervisor. Her thirteen years at the University of Ghana were initially in Economics, then in African Studies, and her readership at Cambridge was in Commonwealth Studies. As a woman in several male-dominated academic disciplines without a secure base in any (and with distinctive, unorthodox opinions in each), she never obtained a tenure-track appointment despite ten books and fifty scholarly articles. Her books drew attention to the underrecognized agency of indigenous entrepreneurs while her Development Economics on Trial: The Anthropological Case for the Prosecution (1986) critiqued a discipline, of disciplinary boundaries, and of outside experts, both mainstream and radical.
    Date: 2020–08–20
  9. By: Olivier Coibion; Yuriy Gorodnichenko; Michael Weber; Michael Weber
    Abstract: Using a large-scale survey of U.S. consumers, we study how the large one-time transfers to individuals from the CARES Act affected their consumption, saving and labor-supply decisions. Most respondents report that they primarily saved or paid down debts with their transfers, with only about 15 percent reporting that they mostly spent it. When providing a detailed breakdown of how they used their checks, individuals report having spent or planning to spend only around 40 percent of the total transfer on average. This relatively low rate of spending out of a one-time transfer is higher for those facing liquidity constraints, who are out of the labor force, who live in larger households, who are less educated and those who received smaller amounts. We find no meaningful effect on labor-supply decisions from these transfer payments, except for twenty percent of the unemployed who report that the stimulus payment made them search harder for a job.
    Keywords: expectations, surveys, marginal propensity to consume, labor supply, fiscal policy, COVID-19
    JEL: E30 E40 E50
    Date: 2020
  10. By: Assistant, JHET; Baronian, Laurent
    Abstract: The paper is dedicated to Suzanne de Brunhoff’s monetary thought and shows how her analysis of very concrete monetary and financial problems of her time led her to develop the most innovative contributions to Marxist theory of money since classical Marxism. Concepts such as noncontemporaneity of capitalism with itself, pseudo-social validation, conflict centralization or State management of money and labor power reflect her profound analysis of the ways capitalism generates very particular relationships to space and time. It is by looking at this spatio-temporal dimension of Brunhoff’s concepts that this paper aims to reveal the novelty, power and fruitfulness of her monetary analysis. The first part of the paper seeks to define the meaning of the notion of general equivalent extracting from her reading of Marx's Capital, before situating her approach in relation to Institutionalist theories of money. The second turns to Brunhoff’s analysis of the particular time-spaces of capitalism.
    Date: 2020–08–20
  11. By: Claudius Graebner (Institute for Socio-Economics, University of Duisburg-Essen, Germany; Institute for Comprehensive Analysis of the Economy, Johannes Kepler University Linz, Austria; ZOE. Institue for Future-Fit Economies); Jakob Hafele (ZOE. Institue for Future-Fit Economies; Institute for Comprehensive Analysis of the Economy, Johannes Kepler University Linz, Austria)
    Abstract: This paper investigates the emergence of polarisation patterns in the EU during the last 60 years from a structuralist and complexity economics perspective. Based on the results, feasible opportunities for EU policy-making, which aim to counteract a tendency of polarization, are delineated. The study comprises of a historical analysis of the politico-economic events during this time and a complementary quantitative analysis of the European trade network. The results suggest that trade in the Eurozone is unequal at the expense of the peripheries and follows a pattern of “unequal technological exchange†. The paper also assesses the usefulness of country taxonomies such as ‘cores’ and ‘peripheries’ for identifying the roots of polarization patterns. While it generally affirms the relevance of structural dependencies, and confirms the epistemic usefulness of country taxonomies, it also highlights three challenges – the challenges of dynamics, of ambiguity and granularity – that any such taxonomy necessarily faces, and which must be dealt with explicitly in any structuralist analysis using such taxonomies.
    Date: 2020–09
  12. By: Nikolova, Milena; Graham, Carol
    Abstract: Welfare and well-being have traditionally been gauged by using income and employment statistics, life expectancy, and other objective measures. The Economics of Happiness, which is based on people’s reports of how their lives are going, provides a complementary yet radically different approach to studying human well-being. Typically, subjective well-being measures include positive and negative feelings (e.g., momentary experiences of happiness or stress), life evaluations (e.g., life satisfaction), and feelings of having a life purpose. Both businesses and policymakers now increasingly make decisions and craft policies based on such measures. This chapter provides an overview of the Happiness Economics approach and outlines the promises and pitfalls of subjective well-being measures.
    Date: 2020
  13. By: Féliz, Mariano
    Abstract: Resumen El debate en torno a la caída de los términos del intercambio en los países dependientes nunca fue del todo integrado en la teoría marxista de la dependencia. El intento de articularlo a través de la categoría de intercambio desigual fue poco sistemático. Este trabajo busca recuperar esos debates e intentará dar cuenta de la articulaciones relevantes a la luz de una revitalización presente de los estudios en el campo de la teoría marxista de la dependencia. Para ello, recuperaremos la discusiones clásicas en torno al intercambio desigual para recuperar sus puntos de contacto con la teoría marxista de la dependencia y algunos debates contemporáneos en torno a la transferencia de valor y la superexplotación de la fuerza de trabajo y la naturaleza. Abstract The debate into the falling terms of trade in dependent countries was never fully integrated into the Marxist dependency theory. The attempt at its articulation though the category of unequal exchange was not too systematic. In this work we will recover those debates and attempt to account of the relevant articulations in light of the revitalization of studies within the field of the Marxist dependency theory. To that aim, we will recover classical discussions on unequal exchange to take on its points of contact with the Marxist dependency theory and some of the contemporary debates on value transfer, and superexploitation of labour force and nature.
    Date: 2020–09–03
  14. By: Alex Williams
    Abstract: The mainstream fiscal federalism literature has led to an instinctive belief that states receiving fiscal aid during a recession are taking advantage of the federal government in pursuit of localized benefits with dispersed costs. This policy brief by Alex Williams challenges this unreflective argument and, in response, offers a novel framework for understanding the relationship between the business cycle and fiscal federalism in the United States. Utilizing the work of Michael Pettis, Williams demonstrates that a government unable to design its own capital structure is not meaningfully an agent with respect to the business cycle. As such, they cannot be considered agents in a moral hazard problem when receiving support from the federal government during a recession. From the perspective of this policy brief, the operative moral hazard problem is one in which federal-level politicians reap a political benefit from a seemingly principled refusal to increase federal spending, while avoiding blame for crisis and austerity at the state and local government level. Williams' proposed solution is to impose macroeconomic discipline on federal policymakers by creating automatic stabilizers that take decisions about the level of state fiscal aid in a recession out of their hands.
    Date: 2020–08
  15. By: Alain Alcouffe (UT1 - Université Toulouse 1 Capitole)
    Abstract: Among the references used by Marx when he wrote his Mathematical Manuscripts, the book of Jean-Louis Boucharlat on Calculus is remarkable by its multiple editions till 1926. It was also criticized by Herman Laurent, an actuary and one of the first disciple of Léon Walras. The paper shows that the genetic method (history of the concepts) and dialectic (Marx scrutinized the transformations of the various approaches used in the calculus) deserves attention and highlights the history of calculus till the XXth century.
    Abstract: Parmi les sources des Manuscrits mathématiques de Marx figure notamment le livre sur le calcul différentiel de Jean-Louis Boucharlat, qui connut de multiples éditions jusqu'en 1926. Ce livre fera aussi l'objet de remarques de la part de Herman Laurent, un actuaire et relation de Léon Walras. Le traitement L'article montre que la méthode génétique (histoire des concepts) et dialectique (Marx s'est intéressé aux transformations que provoquait le développement même des différentes approches du calcul différentiel) mérite de retenir l'attention et éclaire l'histoire du calcul différentiel jusqu'à ces développements du 20 e siècle.
    Keywords: Marx,Boucharlat,Laurent,calculus,methodology
    Date: 2019–08
  16. By: Edwyna Harris (Monash University); Sumner La Croix (University of Hawai‘i)
    Abstract: Britain after the Napoleonic wars saw the rise of colonial reformers, such as Edward Wakefield, who had extensive influence on British colonial policy. A version of Wakefield’s “System of Colonization” became the basis for legislation establishing the South Australia colony in 1834 and the New Zealand colony in 1840. We use extended versions of Robert Lucas’s 1990 model of coordinated colonial investment to show how Wakefield’s institutions were designed to work. We also show that the critique of Wakefield’s system by Karl Marx in Das Kapital closely follows Lucas’s analysis of colonial institutions.
    Keywords: Robert Lucas; Karl Marx; Edward Gibbon Wakefield; emigration; settler colonization; South Australia
    JEL: N47 N57 N97 R30 D44
    Date: 2020–09

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