nep-pke New Economics Papers
on Post Keynesian Economics
Issue of 2020‒10‒26
thirteen papers chosen by
Karl Petrick
Western New England University

  1. " The General Theory as "Depression Economics"? Financial Instability and Crises in Keynes's Monetary Thought" By Joerg Bibow
  2. "The Trade-off between Inflation and Unemployment in an MMT World: An Open Economy Perspective" By Emilio Carnevali; Matteo Deleidi
  3. Corporate Debt, Rentiers' Portfolio Dynamics, Instability and Growth: A neo-Kaleckian Perspective By Parui, Pintu
  4. Corridor stability of the Kaleckian growth model: a Markov-switching approach By Brian Hartley
  5. Finance as Perpetual Orgy. How the ‘new alchemists’ twisted Kindleberger’s cycle of “manias, panics and crashes” to “manias, panics and renewed-manias”. By Palma, J. G.
  6. The Financialized State By Dick Bryan; David Harvie; Mike Rafferty; Bruno Tinel
  7. Circular Economy can Provide a Sustainable Global Society By Mohajan, Haradhan
  8. Computational Methods and Classical-Marxian Economics By Jonathan F. Cogliano; Roberto Veneziani; Naoki Yoshihara
  9. T’was slouching towards an illusion and now it’s scurrying toward a delusion: A COVID19-shocked doughnut model economy By Amavilah, Voxi Heinrich
  10. Why Economics is an Evolutionary, Mathematical Science: How Could Veblen’s View Of Economics Been So Different Than C. S. Peirce’s? By Wible, James R.; Assistant, JHET
  11. Marxism, Logic and the Rate of Profit By Robin Hirsch
  12. The Corporate Tax Haven Index: A New Geography of Profit Shifting By Petr Jansky; Markus Meinzer; Miroslav Palansky; Leyla Ates; Alex Cobham; Moran Harari; Lucas Millan-Narotzky
  13. How Trump Triumphed :Multi-candidate Primaries with Buffoons By Micael Castanheira De Moura; Steffen Huck; Johannes Leutgeb

  1. By: Joerg Bibow
    Abstract: This paper revisits Keynes's writings from Indian Currency and Finance (1913) to The General Theory (1936) with a focus on financial instability. The analysis reveals Keynes's astute concerns about the stability/fragility of the banking system, especially under deflationary conditions. Keynes's writings during the Great Depression uncover insights into how the Great Depression may have informed his General Theory . Exploring the connection between the experience of the Great Depression and the theoretical framework Keynes presents in The General Theory , the assumption of a constant money stock featuring in that work is central. The analysis underscores the case that The General Theory is not a special case of the (neo-)classical theory that is relevant only to "depression economics"--refuting the interpretation offered by J. R. Hicks (1937) in his seminal paper "Mr. Keynes and the Classics: A Suggested Interpretation." As a scholar of the Great Depression and Federal Reserve chairman at the time of the modern crisis, Ben Bernanke provides an important intellectual bridge between the historical crisis of the 1930s and the modern crisis of 2007-9. The paper concludes that, while policy practice has changed, the "classical" theory Keynes attacked in 1936 remains hegemonic today. The common (mis-)interpretation of The General Theory as depression economics continues to describe the mainstream's failure to engage in relevant monetary economics.
    Keywords: John Maynard Keynes; Great Depression; Financial Crises; Central Banks; Interest Rates; Monetary Theory
    JEL: B2 B3 E44 E58 E65 G01
    Date: 2020–10
  2. By: Emilio Carnevali; Matteo Deleidi
    Abstract: This paper is focused on Modern Monetary Theory's (MMT) treatment of inflation from an open economy perspective. It analyzes how the inflation process is explained within the MMT framework and provides empirical evidence in support of this vision. However, it also makes use of a stock-flow consistent (open economy) model to underline some limits of the theory when it is applied in the context of a non-US (relatively) open economy with a flexible exchange rate regime. The model challenges the contention made by MMTers that measures such as the job guarantee program can achieve full employment without facing an inflation-unemployment trade-off.
    Keywords: Central Banking; Post-Keynesian; Open Economy Model; Modern Money Theory
    JEL: E51 E12 F41
    Date: 2020–10
  3. By: Parui, Pintu
    Abstract: Considering a stock-flow consistent neo-Kaleckian macro-model, along with firms' debt dynamics, in the long-run, we incorporate portfolio dynamics of rentiers and investigate the possibility of multiple equilibria and dynamic stability of the economy. Both the debt-led and the debt-burdened demand and growth regimes are possible. We find share buybacks, under certain conditions, not only may lead to the deterioration of the equilibrium rate of capital accumulation in the long-run but may potentially destabilize the entire economy. A strictly regulated financial market is desirable, as otherwise, the economy may lose its stability and produces the limit cycles.
    Keywords: Capital Accumulation, Kaleckian Model, Stock-flow Consistency, Instability, Limit Cycle
    JEL: C62 E12 E32 E44 O41
    Date: 2020–09–11
  4. By: Brian Hartley (Department of Economics, New School for Social Research)
    Abstract: To assess the conditional stability properties of the Kaleckian growth framework in the mediumrun, we investigate behavioral corridors where investment will be unresponsive to departures of actual from desired utilization rates - thus providing for the episodic incidence of Harrodian instability. We empirically assess this relationship using two-state Markov-Switching Structural Vector Auto-Regression t on non-residential xed investment and the rate of capacity utilization for the United States. To directly assess the relevance of a behavioral corridor for the cyclical dynamics of the endogenous variables, the probabilities governing the transition between hidden states are modelled as a time-varying function of gap between realized utilization rates and their long-run average. Results suggest the response of investment to structural utilization shocks is highly regime-dependent and predominantly occurs during business cycle downturns.
    Keywords: Kaleckian Growth Model, Growth and Distribution, Harrodian Instability, Hidden Markov Models, Structural Vector Auto-Regression, Bayesian Econometrics
    JEL: B50 C11 E11
    Date: 2020–10
  5. By: Palma, J. G.
    Abstract: The analysis will focus on how the traditional Kindlebergian financial-crisis cycle of “manias, panics and crashes” has been twisted so that now policymakers make sure that any panic is immediately followed by a renewed mania. Due to a “secular-stagnationists”-style thinking, central bankers, treasury officials and politicians - the ‘new alchemists’ - now believe that only a perpetual-mania can deliver some resemblance of growth. So, they persist in pumping liquidity and relaxing monetary conditions, no matter how much this violates every possible principle of markets economics, and regardless of the fact that the current policies to reactivate mature economies (rocketing the net-worth of a few individuals) have already been tried and failed post-2008. One by-product of this new perpetual-mania is that emerging markets have become what I have labelled “the financial markets of last resort”, and commodities “the financial asset of last resort”. That is, most emerging markets now don’t have to put up anymore with international finance being a “sellers” market (where they had to knock and beg); now, it is the international speculator who has been pushed into a yield-chasing frenzy in emerging markets. This new “buyers” market has proved to be a mixed blessing for emerging markets, as many of them have joined the ‘everything rally’ - in which you have nothing to lose but your real economy.
    Keywords: manias, panics, financialisation, QE, excess liquidity, ‘disconnect’ between the financial and the real worlds, emerging markets, Latin America, Asia, Keynes, Kindleberger, Minsky, Buchanan
    JEL: E22 D70 D81 E24 E51 F02 F21 F32 F40 F44 F63 G15 G20 G28 G30 G38 L51 N20 O16
    Date: 2020–10–08
  6. By: Dick Bryan (The University of Sydney); David Harvie (University of Leicester); Mike Rafferty (The University of Sydney); Bruno Tinel (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique)
    Abstract: In this chapter, we explore states' strategic use of financial ways of thinking in policy formation, resulting in the "financialization" of many aspects of state policy. Specifically, we argue that, following Randy Martin's formulation, a "social logic of the derivative" is being incorporated into the design of state intervention. Paying particular attention to leverage and liquidity we develop three key propositions, namely, that this derivative logic is changing, and even erasing, earlier distinctions between: (i) the state and financial markets; (ii) those state activities-namely, monetary and fiscal policy-once thought to be formally discrete; and (iii) finance and community or social policy. We illustrate our argument with examples of specific policies and initiatives-such as Quantitative Easing, bank liquidity guarantees, and the social impact bond-drawn primarily from the United States and the United Kingdom.
    Date: 2020
  7. By: Mohajan, Haradhan
    Abstract: Since start of the Industrial Revolution about 260 years ago, the negative effects from the traditional linear economy (LE) become threat to the stability of the economies and natural ecosystems. Strength of climate change, reduction of environment pollution and integrity of ecosystems are essential issues for survival of the global humanity. According to LE resources for production are easily available and unlimited, and after use wastes are disposable. The circular economy (CE) is an alternative to the LE where the resources may be used for as long as possible. It tries to capture the value of existing products and materials, and decreases the use of primary materials in industries. The CE is a part of environmental economics and beneficial to the society. It keeps products, components, and materials at their highest utility and maximum value at all times. At present CE is one of the most focused terms among environmental economic scientists. The aim of this study is the implementation of the sustainable development strategies and the transition from LE towards CE.
    Keywords: Circular economy, Economic growth, Recycling, Reuse, Reduction, Sustainable development, SWOT analysis
    JEL: D6 D61 E1
    Date: 2020–01–10
  8. By: Jonathan F. Cogliano (University of Massachusetts Boston); Roberto Veneziani (Queen Mary University of London); Naoki Yoshihara (Kochi University of Technology)
    Abstract: his article surveys computational approaches to classical-Marxian economics. These approaches include a range of techniques { such as numerical simulations, agent-based models, and Monte Carlo methods { and cover many areas within the classical-Marxian tradition. We focus on three major themes in classical-Marxian economics, namely price and value theory; inequality, exploitation, and classes; and technical change, profitability, growth and cycles. We show that computational methods are particularly well-suited to capture certain key elements of the vision of the classical-Marxian approach and can be fruitfully used to make significant progress in the study of classical-Marxian topics.
    Keywords: Computational Methods; Agent-Based Models; Classical Economists; Marx.
    JEL: C63 B51 B41
    Date: 2020–10–01
  9. By: Amavilah, Voxi Heinrich
    Abstract: An easy way of observing and predicting changes in the structure and behavior of any freemarket economy is to track changes in its circular flow model of economic activity. Using book titles as a literature review in combinations with a few classics, I describe how the circular flows of free -market economies evolved from little, gentle, and now nearly powerless government role, culminating in superduper capitalism. First the evolution generated great wealth and income, and of late also increasinginequality. Processes like globalization that allowed for econ omic convergence also spurred enormous tensions. The resulting stresses and strains are responsible for unpopular populism and nationalism. The doughnut economic model provides a reasonable framework for explaining what we observe. It shows a decline in the social foundations of human rights, made worse by breaches in the “planetary boundaries” both of which squeeze the livable space ever more tightly like a boa-constrictor suffocating its prey. In this paper I do not go as far as measuring my observations, but the directions for policy and future research have clearly been established. Regarding the latter, one may want to examine how COVID19 has shocked into scurrying towards a delusion of a system that was already slouching towards an illusion. It turns out that the illusion is not a new prediction. In his critique of Marx and rationalization of Kondratieff’s waves (K-waves) Schumpeter predicted that capitalism as an innovation is not immune to the “gale of creative destruction.”
    Keywords: Circular flow model, doughnut economic model, social foundations of human rights, inclusive and sustainable development, planetary limits, unpopular populism, super-duper capitalism
    JEL: E19 O33 O47 Y90 Z0
    Date: 2020–10–01
  10. By: Wible, James R.; Assistant, JHET
    Abstract: More than a century ago one of the most famous essays ever written in American economics appeared in the Quarterly Journal of Economics, “Why is Economics Not an Evolutionary Science?” There Thorstein Veblen claimed that economics was too dominated by a mechanistic view to address the problems of economic life. Since the world and the economy had come to be viewed from an evolutionary perspective after Darwin, it was rather straight forward to argue that the increasingly abstract mathematical character of economics was non-evolutionary. However, Veblen had studied with a first-rate intellect, Charles Sanders Peirce, attending his elementary logic class. If Peirce had written about the future of economics in 1898, it would have been very different than Veblen’s essay. Peirce could have written that economics should become an evolutionary mathematical science and that much of classical and neoclassical economics could be interpreted from an evolutionary perspective.
    Date: 2020–09–29
  11. By: Robin Hirsch
    Abstract: It is argued that Marxism, being based on contradictions, is an illogical method. More specifically, we present a rejection of Marx's thesis that the rate of profit has a long-term tendency to fall.
    Date: 2020–09
  12. By: Petr Jansky (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Opletalova 26, 110 00, Prague, Czech Republic); Markus Meinzer (Tax Justice Network, London, United Kingdom); Miroslav Palansky (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Opletalova 26, 110 00, Prague, Czech Republic); Leyla Ates (Tax Justice Network, London, United Kingdom); Alex Cobham (Tax Justice Network, London, United Kingdom); Moran Harari (Tax Justice Network, London, United Kingdom); Lucas Millan-Narotzky (Tax Justice Network, London, United Kingdomuthor-Name:)
    Abstract: The geography of corporate profit shifting is often presented in public discourse in simplistic and inaccurate terms. Not only can this easily mislead audiences, but it shapes political responses to the problem in such a way as to undermine the prospects for genuine progress. In this paper, we set out a new approach to the geography of profit shifting, based on a range of objectively verifiable criteria. These are combined in the Corporate Tax Haven Index, published for the first time in 2019. We present the technical argument for the index as a meaningful representation of the global distribution of the risks of corporate tax abuse and explore the new geography that emerges. The key findings show the UK’s dominant responsibility for corporate tax avoidance risks and the colonial roots of many exploitative double tax treaties. We end by considering the index’s political implications for the immediate process of international tax reform, and for the longer-term prospects for global governance in this area. We conclude that greater clarity about the geography of profit shifting is likely to support growing demands for redistribution not only of taxing rights but also of decision-making power in the global architecture for tax governance.
    Keywords: Corporate tax, multinational corporations, tax, transparency, tax avoidance, tax havens, profit shifting
    JEL: F36 F63 F65 H26 O16
    Date: 2020–09
  13. By: Micael Castanheira De Moura; Steffen Huck; Johannes Leutgeb
    Abstract: While people on all sides of the political spectrum were amazed that Donald Trump won the Republican nomination this paper demonstrates that Trump’s victory was not a crazy event but rather the equilibrium outcome of a multi-candidate race where one candidate, the buffoon, is viewed as likely to self-destruct and hence unworthy of attack. We model such primaries as a truel (a three-way duel), solve for its equilibrium, and test its implications in the lab. We find that people recognize a buffoon when they see one and aim their attacks elsewhere with the unfortunate consequence that the buffoon has an enhanced probability of winning. This result is strongest amongst those subjects who demonstrate an ability to best respond suggesting that our results would only be stronger when this game is played by experts and for higher stakes.
    Keywords: truel; political primaries; Trump
    JEL: C72 C92 D72 D74
    Date: 2020–10

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