|
on Post Keynesian Economics |
| By: | Silvano Cincotti (UNIGE - University of Genoa); Wolfram Elsner (University of Bremen); Nathalie Lazaric (Université Côte d'Azur, CNRS, GREDEG (France)); Anastasia Nesvetailova (City University London); Engelbert Stockhammer (King‘s College London) |
| Abstract: | The present REPE issue 2-2020 is the second part of our inaugural "double pack". We were lucky to receive more papers for the inaugural issue than we could accommodate in one issue. So please enjoy another set of challenging original research papers gauging the field of evolutionary political economy. In Financialisation and the periodisation of capitalism: appearances and processes, Jan Toporowski argues that the analysis of financial processes is essential for understanding changes in the financial system. Only these processes give rise to appearances such as the statistical data that are the basis of most studies of financialization. Those processes are fundamentally determined by the structure of the financial system. Following Minsky, Toporowski focuses on corporate finance which, through its effect on business investment, influences the dynamics of the capitalist system. As financial structures change, this gives rise to particular phases of capitalist development. The paper thus builds on Minsky's historical institutional analysis, but offers a more systematic analysis. It offers a periodization of capitalism through mercantile capitalism, classic, bank-based capitalism, finance capital, state finance capitalism, to pension fund capitalism and capital market inflation. It shows how each period ends with financial difficulties that are overcome with financial innovation leading to a new financial structure with corresponding changes in financial processes. Specifically, the paper argues that the phase of capital market inflation, inaugurated by funded pension schemes in the last decades of the twentieth century, has come to an end in the illiquidity of capital markets that lies behind the 2008 financial crisis. The paper suggests that the measures of "unconventional monetary policy", or "Quantitative Easing", mark a new period of state finance capital with a return to the state support of a structurally illiquid capital market that already had prevailed in Europe and North America from the 1930s to the 1960s. The discipline of International Political Economy-IPE has been flirting with evolutionary approaches for the past decade or so. So far, attempts to develop a take on evolutionary theory have proceeded in a rather unstructured way: They range from potential applications of Darwinian theory of selection to more recent efforts to draw on ecological approaches and complexity theory when analysing crises and transformations. There has also been a renewed interest in institutionalist approaches and heterodox tradition, but this too, has been a fragmented process. Ronen Palan's article An Evolutionary Approach to International Political Economy: The Case of Corporate Tax Avoidance aims to offer a pathway to a more systemic framework of evolutionary political economy, in order to rethink the changes in the regulation on the contemporary system of states. Palan develops his approach by distinguishing between a tradition of political economy based on action of discreet entities (this reflects the roots of IPE in neoclassical economics) and a tradition of thought centred around a concept of transaction (taking root in original institutional economics). This framework |
| Date: | 2020–08 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:halshs-02933700&r=all |
| By: | Tanweer Akram |
| Abstract: | This paper relates Keynes's discussions of money, the state theory of money, financial markets, investors' expectations, uncertainty, and liquidity preference to the dynamics of government bond yields for countries with monetary sovereignty. Keynes argued that the central bank can influence the long-term interest rate on government bonds and the shape of the yield curve mainly through the short-term interest rate. Investors psychology, herding behavior in financial markets, and uncertainty about the future reinforce the effects of the short-term interest rate and the central bank's monetary policy actions on the long-term interest rate. Several recent empirical studies that examine the dynamics of government bond yields substantiate the Keynesian perspective that the long-term interest rate responds markedly to the short-term interest rate. These empirical studies not only vindicate the Keynesian perspective but also have relevance for macroeconomic theory and policy. |
| Keywords: | Money; State Theory of Money; Chartalism; Monetary Theory; Central Bank; Government Bond Yields; Interest Rate; John Maynard Keynes |
| JEL: | E12 E40 E43 E50 E58 E60 F30 G10 G12 H62 H63 |
| Date: | 2020–11 |
| URL: | http://d.repec.org/n?u=RePEc:lev:wrkpap:wp_977&r=all |
| By: | Nogues-Marco, Pilar |
| Abstract: | This paper revisits the relationship between capitalism and colonialism by examining the case of British India under East India Company rule (1757-1858). The Marxist-nationalist historiography claims that colonialism generated a steady drain of wealth and that this drain was responsible for Indian famines, poverty, inequality, and economic retardation. I use the East India Company budgets to measure the extent of the wealth that was drained through three direct channels: oppressive land taxes, unproductive expenditures on the imperial army and civil administration, and the unrequited export of commodities from India to Britain. I conclude that available figures lend empirical support to the Marxist interpretation. There was a drain of wealth, and its effect on the underdevelopment of former European colonies deserves further research. |
| Keywords: | India, Colonialism, Drain of wealth, East India Company, Marxism |
| JEL: | B14 F54 N45 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:gnv:wpaper:unige:144406&r=all |
| By: | Edward Lane; L. Randall Wray |
| Abstract: | As the nation is experiencing the need for ever-increasing government expenditures to address COVID-19 disruptions, rebuild the nation's infrastructure, and many other worthy causes, conventional thinking calls for restoring at least a portion corporate taxes eliminated by the 2017 Tax Cuts and Jobs Act, especially from progressive circles. In this working paper, Edward Lane and L. Randall Wray examine who really pays the corporate income tax and argue that it does not serve the purposes most people believe. The authors provide an overview of the true purposes and incidence of corporate taxation and argue that it is inefficient and largely borne by consumers and employees, not shareholders. While the authors would prefer the elimination of the corporate profits tax, they understand the conventional thinking that taxes are necessary to help finance government expenditures--even if they disagree. Accordingly, the authors present alternatives to the corporate tax that shift the burden from consumers and employees to those who benefit the most from corporate success. |
| Keywords: | Corporate Taxes; Tax Incidence; Modern Money Theory (MMT); Richard and Peggy Musgrave; Beardsley Ruml; Tax Reform |
| JEL: | B52 E12 E6 E62 G30 H20 H25 |
| Date: | 2020–11 |
| URL: | http://d.repec.org/n?u=RePEc:lev:wrkpap:wp_979&r=all |
| By: | David Fettig; James A. Schmitz |
| Abstract: | The Covid-19 crisis has exposed the vast inequalities that exist within the US economy. As the virus has spread silently, it has laid bare other crises that face our nation---especially the economic vulnerabilities of the country's poor and marginalized. Many of these vulnerabilities can, in fact, be traced back to a single cause that itself has spread silently, but over the last several decades, not months: Monopolies. That monopolies are "silent spreaders of poverty and economic inequality" was well known to economic and legal scholars of the 1930s and 1940s. Wendell Berge, who was Assistant Attorney General for Antitrust in the 1940s, wrote: "Monopoly conditions have often grown up almost unnoticed by the public until one day it is suddenly realized that an industry is no longer competitive but is governed by an economic oligarchy." The harm caused by these monopolies that have mostly avoided detection often exist in markets with small firms, low concentration levels, and small price-cost margins, as in residential construction, or wreak their harm in public institutions, where prices and concentration have no meaning. While there has been a very welcome resurgence in the concern about monopolies in the last decade or so, this has primarily involved vast corporations, and often about their threat to democratic institutions. Though greatly welcomed, we should not let apprehension with these larger companies distract us from the many hidden monopolies that have silently spread harm to the poor for the last 100 years -- not just the last 10 or so. We should stand on the shoulders of giants that taught us this about monopolies, not only Berge, but Thurman Arnold, Henry Simons, and others. |
| Keywords: | Monopoly; Competition; Inequality; Cournot; Sabotage; Harberger; COVID-19; Thurman Arnold; Henry Simons; Silent spreaders; Housing |
| JEL: | D22 D42 K0 L0 L12 |
| Date: | 2020–09–22 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedmwp:89028&r=all |
| By: | Luca Fornaro; Martin Wolf |
| Abstract: | We study the effects of supply disruptions - for instance caused by the emergence of a pandemic - in an economy with Keynesian unemployment and endogenous productivity growth. By negatively affecting investment, even purely transitory negative supply shocks generate permanent output losses. The associated negative wealth effect depresses consumers' demand, which may even fall below the exogenous fall in supply. In this case, the optimal monetary policy response flips relative to conventional wisdom, as monetary expansions are needed to fight negative output gaps. If monetary policy is not expansionary enough a supply-demand doom loop emerges, causing a recession characterized by unemployment and weak productivity growth. Innovation policies, by fostering firms' investment, can restore full employment and healthy growth. |
| Keywords: | supply shocks, COVID-19, hysteresis, investment, endogenous growth, monetary policy, fiscal policy, zero lower bound, Keynesian growth. |
| JEL: | E22 E31 E32 E52 E62 O42 |
| Date: | 2020–10 |
| URL: | http://d.repec.org/n?u=RePEc:bge:wpaper:1214&r=all |
| By: | George Orlov; Douglas McKee; James Berry; Austin Boyle; Thomas DiCiccio; Tyler Ransom; Alex Rees-Jones; Jörg Stoye |
| Abstract: | We use standardized end-of-course knowledge assessments to examine student learning during the disruptions induced by the COVID-19 pandemic. Examining seven economics courses taught at four US R1 institutions, we find that students performed substantially worse, on average, in Spring 2020 when compared to Spring or Fall 2019. We find no evidence that the effect was driven by specific demographic groups. However, our results suggest that teaching methods that encourage active engagement, such as the use of small group activities and projects, played an important role in mitigating this negative effect. Our results point to methods for more effective online teaching as the pandemic continues. |
| JEL: | A2 A22 I21 |
| Date: | 2020–10 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:28022&r=all |
| By: | Giovanni Dosi (Laboratory of Economics and Management); Andrea Roventini; Emmanuele Russo (Scuola Superiore Sant'Anna) |
| Abstract: | In this paper, we study the effects of industrial policies on international convergence using a multi-country agent-based model which builds upon Dosi et al. (2019b). The model features a group of microfounded economies, with evolving industries, populated by heterogeneous firms that compete in international markets. In each country, technological change is driven by firms’ activities of search and innovation, while aggregate demand formation and distribution follows Keynesian dynamics. Interactions among countries take place via trade flows and international technological imitation. We employ the model to assess the different strategies that laggard countries can adopt to catch up with leaders: market-friendly policies;industrial policies targeting the development of firms’ capabilities and R&D investments, as well as trade restrictions for infant industry protection; protectionist policies focusing on tariffs only. We find that markets cannot do the magic: in absence of government interventions, laggards will continue to fall behind. On the contrary, industrial policies can successfully drive international convergence among leaders and laggards, while protectionism alone is not necessary to support catching up and countries get stuck in a sort of middle-income trap. Finally, in a global trade war, where developed economies impose retaliatory tariffs, both laggards and leaders are worse off and world productivity growth slows down. |
| Keywords: | Endogenous growth; Catching up; Technology-gaps; Industrial policies; Agent-based models |
| JEL: | F41 F43 O4 O3 |
| Date: | 2020–05–06 |
| URL: | http://d.repec.org/n?u=RePEc:spo:wpmain:info:hdl:2441/3s3jn8tt5h9mab7fo128gecbhj&r=all |
| By: | Andersson, Fredrik N. G. (Department of Economics, Lund University) |
| Abstract: | Macroeconomic crises are common as well as economically, socially and politically costly. Fiscal policy plays an important role in alleviating the costs of the crisis. However, recent experiences suggest that the public finances often are unprepared for a crisis. Deficits and debt levels prior to the crisis are commonly too high, limiting the government’s ability to respond to the crisis. In this paper, we argue that theoretical macroeconomic models focus on stable equilibriums, may partially explain why governments underestimate the risk of economic crises and carry too much debt prior to such events. In the standard equilibrium models, crises are one-off events caused by external factors. These macro-models thus neither predict nor expect a future crisis, which creates a false impression of long-run economic stability. Using forecast data, we demonstrate how the equilibrium perspective dominates macroeconomic thinking and how it contributes to too-high debt ratios prior to a crisis. We end the paper by discussing how to design fiscal policy rules based on a crisis rather than an equilibrium approach. |
| Keywords: | crisis; equilibrium; macroeconomic models; fiscal policy; national debt; fiscal frameworks |
| JEL: | E17 E37 E62 E63 |
| Date: | 2020–10–15 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:lunewp:2020_021&r=all |