nep-pke New Economics Papers
on Post Keynesian Economics
Issue of 2020‒09‒28
ten papers chosen by
Karl Petrick
Western New England University

  1. How the Disappearance of Unionized Jobs Obliterated an Emergent Black Middle Class By William Lazonick; Philip Moss; Joshua Weitz
  2. Corporate Debt, Endogenous Dividend Rate, Instability and Growth By Parui, Pintu
  3. Germany and China Have Savings Gluts, the USA Is a Sump: So What? By Lance Taylor
  4. Sustaining Cultural Diversity Through Cross-Cultural Competence By Bunce, John
  5. Rethinking inequality in the 21st century – inequality and household balance sheet composition in financialized economies By Szymborska, Hanna Karolina
  6. Never Together:Black and White People in the Postwar Economic Era By Peter Temin
  7. Revisiting the history of welfare economics By Roger E. Backhouse; Antoinette Baujard; Tamotsu Nishizawa
  8. The Long Shadow of Slavery: The Persistence of Slave Owners in Southern Law-Making By Bellani, Luna; Hager, Anselm; Maurer, Stephan
  9. Do Ewe See what I See? Evidence of Conspicuous Consumption for Sustainably Labeled Wool Clothing By Hopkins, Kelsey A.; McKendree, Melissa G. S.
  10. How Did U.S. Consumers Use Their Stimulus Payments? By Coibion, Olivier; Gorodnichenko, Yuriy; Weber, Michael

  1. By: William Lazonick (Academic-Industry Research Network); Philip Moss (Academic-Industry Research Network); Joshua Weitz (Academic-Industry Research Network)
    Abstract: In this introduction to our project, `Fifty Years After: Black Employment in the United States Under the Equal Employment Opportunity Commission,' we outline the socioeconomic forces behind the promising rise and disastrous fall of an African American blue-collar middle class. During the 1960s and 1970s, blacks with no more than high-school educations gained significant access to well-paid unionized employment opportunities, epitomized by semi-skilled operative jobs in the automobile industry, to which they previously had limited access. Anti-discrimination laws under Title VII of the 1964 Civil Rights Act with oversight by the Equal Employment Opportunity Commission supported this upward mobility for blacks in the context of a growing demand for blue-collar labor. From the late 1970s, however, the impact of global competition and the offshoring of manufacturing combined with the financialization of the corporation to decimate these stable and well-paid blue-collar jobs. Under the seniority provisions of the now beleaguered industrial unions, blacks tended to be last hired and first fired. As U.S.-based blue-collar jobs were permanently lost, U.S. business corporations and government agencies failed to make sufficient investments in the education and skills of the U.S. labor force to usher in a new era of upward socioeconomic mobility. This organizational failure left blacks most vulnerable to downward mobility. Instead of retaining corporate profits and reinvesting in the productive capabilities of employees, major business corporations became increasingly focused on downsizing their labor forces and distributing profits to shareholders in the form of cash dividends and stock buybacks. Legitimizing massive distributions to shareholders was the flawed and pernicious ideology that a company should be run to “maximize shareholder value.†As the U.S. economy transitioned from the Old Economy business model, characterized by a career with one company, to the New Economy business model, characterized by interfirm labor mobility, advanced education and social networks became increasingly important for building careers in well-paid white-collar occupations. Along with non-white Hispanics, blacks found themselves at a distinct disadvantage relative to whites and Asians in accessing these New Economy middle-class employment opportunities. Eventually, the downward socioeconomic mobility experienced by blacks would also extend to devastating loss of well-paid and stable employment for whites who lacked the higher education now needed to enter the American middle class. By the twenty-first century, general downward mobility had become a defining characteristic of American society, irrespective of race, ethnicity, or gender. Since the 1980s, the enemy of equal employment opportunity through upward socioeconomic mobility has been the pervasive and entrenched corporate-governance ideology and practice of maximizing shareholder value (MSV). For most Americans, of whatever race, ethnicity, and gender, MSV is the not-so-invisible hand that has a chokehold on the emergence of the stable and well-paid employment opportunities that are essential for sustainable prosperity.
    Keywords: African American, employment relations, equal employment opportunity, unions, blue-collar, socioeconomic mobility, corporate governance, shareholder value, retain-and reinvest, downsize-and-distribute, discrimination, economic inequality
    JEL: D2 D3 G3 J0 L2 L6 N8 O3 P1
    Date: 2020–06–15
  2. By: Parui, Pintu
    Abstract: In a stock-flow consistent neo-Kaleckian growth-model, we endogenize the dividend rate and debt-level in the long run and investigate the possibility of multiple equilibria and instability in the economy. We find that the economy is in a wage-led demand and debt-burdened growth regime. However, both debt-led and debt-burdened demand regimes are possible. In some instances, the speed of the adjustment parameter related to the dividend dynamics plays a crucial role in stabilizing the economy. Otherwise, the economy may lose its stability and gives birth to limit cycles. A significant rise in the interest rate may cause instability in the economy.
    Keywords: Capital Accumulation, Dividend Rate, Kaleckian Model, Instability, Limit Cycle
    JEL: C62 E12 O41
    Date: 2020–09–02
  3. By: Lance Taylor (New School for Social Research)
    Abstract: A `global saving glut` was invented by Ben Bernanke in 2005 as a label for positive net lending (imports exceeding exports) to the American economy by the rest of the world. This trading situation had already emerged around 1980, and led to the Plaza Accord in 1985. One common explanation is based on the Mundell-Fleming IS/LM/BP model. But this model cannot be valid, since the `BP` equation is not independent of `IS`. Other champions of this saving glut hypothesis rely on loanable funds theory, which is institutionally inadequate. More plausible analyses of the persistent trade imbalance can be derived from a two-country IS/LM set-up devised by Wynne Godley, a Kaleckian description of the political economy of East Asia and the United States, and dissection of the terms of trade due to W. Arthur Lewis and Luigi Pasinetti.
    Keywords: Saving glut, net lending, IS/LM/BP, Mundell-Fleming, productivity growth, terms of trade. China, Japan
    JEL: E12 E16 F32 F41
    Date: 2020–08–05
  4. By: Bunce, John
    Abstract: In much contemporary political discourse, valued cultural characteristics are threatened by interaction with culturally-distinct others, such as immigrants or a hegemonic majority. Such interaction often fosters cross-cultural competence (CCC), the ability to interact successfully across cultural boundaries. However most theories of cultural dynamics ignore CCC, making cultural diversity incompatible with mutually-beneficial inter-group interaction, and contributing to fears of cultural loss. Here, new theory, incorporating competing developmental paths to CCC and group identity valuation, illuminates how a common strategy of disempowered minorities can counter-intuitively sustain cultural diversity: Given strong group identity, minorities in a structurally-unequal, integrative society can maintain their distinctive cultural norms by learning those of the majority. Simple field methods in an Amazonian population demonstrate how to assess such strategies' effectiveness given predicted dynamics.
    Date: 2020–09–06
  5. By: Szymborska, Hanna Karolina
    Abstract: This paper analyses the impact of household wealth heterogeneity on inequality and macroeconomic stability in financialized economies. Based on the case of the USA since the 1980s it argues that transformation of financial sector operations has generated inequality by influencing gains from wealth ownership and leverage levels across the income distribution. Securitization and the subprime lending expansion have led to the emergence of a new class of leveraged homeowners, experiencing large increases in wealth prior to the Great Recession, followed by substantial losses after the crisis. Simultaneously, capitalists have diversified their asset portfolios while earning the highest and fastest growing wages in the economy when employed as financial sector executives. In this light, the paper proposes a new conceptualization of households in macroeconomic models, defined by balance sheet composition rather than income sources alone. To inform this taxonomy, inequality and leverage indicators are simulated in a stock-flow consistent model calibrated to US data with three classes of households distinguished by their wealth composition, and a securitized financial sector. The proposed framework is found to produce more empirically accurate levels of income inequality and greater macroeconomic instability than the two-class division, and establishes an equalizing effect of housing for wealth distribution.
    Keywords: Household wealth; Inequality; Macroeconomic modelling; Financial system; USA
    Date: 2020–09–21
  6. By: Peter Temin (MIT)
    Abstract: This paper recounts American economic history for 60 years after World War II. The unusual part of this paper is that it focuses on not only the conventional tale, but also recounts what whites did to and for Blacks over this period. It starts from the unhappy experience of a Black American soldier, goes through the prosperity that followed the war and ends with the various changes that happened to the economy after 1970. The Civil Rights Movement is in the middle, and it gave rise to more Black education before racial segregation destroyed their gains. Some Blacks graduated from college and became a Black Elite. Obama’s election showed that the Black Elite could interact with relative equality with educated whites.
    Keywords: African Americans, Negroes, slavery, Jim Crow, Great Migration, World War II, Supreme Court.
    JEL: J15 N11 N12 K31
    Date: 2020–07–08
  7. By: Roger E. Backhouse (University of Birmingham and Erasmus University Rotterdam); Antoinette Baujard (Univ Lyon, UJM Saint-Etienne, GATE UMR 5824, F-42023 Saint-Etienne, France); Tamotsu Nishizawa (Teikyo University, Faculty of Economics, Tokyo)
    Abstract: Our forthcoming book, Welfare Theory, Public Action and Ethical Values challenges the belief that, until modern welfare economics introduced issues such as justice, freedom and equality, economists adopted what Amartya Sen called “welfarism.” This is the belief that the welfare of society depends solely on the ordinal utilities of the individuals making up the society. Containing chapters on some of the leading twentieth-century economists, including Walras, Marshall, Pigou, Pareto, Samuelson, Musgrave, Hicks, Arrow, Coase and Sen, as well as lesser-known figures, including Ruskin, Hobson and contributors to the literature on capabilities, the book argues that, whatever their theoretical commitments, when economists have considered practical problems they have adopted a wider range of ethical values, attaching weight to equality, justice and freedom. Part 1 explains the concepts of welfarism and non-welfarism and explores ways in which economists have departed from welfarism when tackling practical problems and public policy. Part 2 explores the reasons for this. When moving away from abstract theories to consider practical problems it is often hard not to take an ethical position and economists have often been willing to do so. We conclude that economics needs to recognise this and to become more of a moral science.
    Keywords: Welfarism, non-welfarism, welfare, public policy, ethics, economics, individualism
    JEL: B21 B31 B41 D63 I31
    Date: 2020
  8. By: Bellani, Luna (University of Konstanz); Hager, Anselm (University of Konstanz); Maurer, Stephan (University of Konstanz)
    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 persistence, slavery
    JEL: D72 J62 N31 H4
    Date: 2020–08
  9. By: Hopkins, Kelsey A.; McKendree, Melissa G. S.
    Keywords: Institutional and Behavioral Economics, Marketing, Agricultural and Food Policy
    Date: 2020–07
  10. By: Coibion, Olivier (University of Texas at Austin); Gorodnichenko, Yuriy (University of California, Berkeley); Weber, Michael (University of Chicago)
    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: E3 E4 E5
    Date: 2020–08

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