nep-pke New Economics Papers
on Post Keynesian Economics
Issue of 2021‒01‒11
eight papers chosen by
Karl Petrick
Western New England University

  1. Why the Rich Stay Rich. On dysfunctional institutions’ “ability to persist” (no matter what) By Palma, J. G.
  2. The Circular Economy: an Ancient Term that Became Polysemic By Isabel Mendes
  3. The Limits of Capitalized Power. A 2020 U.S. Update By Bichler, Shimshon; Nitzan, Jonathan
  4. Functional Distribution of Income as a Determinant of Importing Behavior: An Empirical Analysis By Vinicius Curti Cicero; Gilberto Tadeu Lima
  5. Technology Shocks and Predictable Minsky Cycles By Jean-Paul L’Huillier; Gregory Phelan; Hunter Wieman
  6. The Motherhood Penalties: Insights from Women in UK Academia By Troeger, Vera E.; Di Leo, Riccardo; Scotto, Thomas J.; Epifanio, Mariaelisa
  7. No longer “the economy stupid”: how muddled economics contributed to a chaotic Brexit By Begg, Iain
  8. Once the great lockdown is lifted: Post COVID-19 options for the economy By Ritzen, Jozef M.

  1. By: Palma, J. G.
    Abstract: This paper returns to the Ricardian tradition of understanding the distribution of income as the outcome of the political articulation of conflict between rentiers, capitalists, bureaucrats and labour -in which history, politics and institutions matter as much (if not more) than economic ‘fundamentals’. Also, in this tradition economic underperformance arises mostly from the shift in distribution from operating profits to rents. The focus is on a key political economy question: why the rich stay rich, no matter what! This confirms the iron law of oligarchies: dysfunctional institutions tend to rebuild. In the case of Latin America, its élites' “ability to persist” relates to the fact that they have been able to enforce a “Southern-style” rule resembling a ‘stationary process’, whereby the unbalancing impact of shocks tends to have only limited life-spans -as oligarchies are able to landscape new scenarios to continue achieving their fairly immutable rent-seeking goals. They have used three main channels: forcing ‘Buchanan’-style constitutional and legal straitjackets to restrict the scope of change; resourcefulness and collective action for reengineering their distributional strategies to suit the new scenarios, and cleverly absorbing elements of opposing ideologies (such as now accepting the need for ‘social protection’) to maintain theirs hegemonic. Their trump cards are ruthlessness in the first, and “jogo de cintura e jeitinho” (fancy footwork) in the other two. The analysis of these channels is the main subject of this paper
    Keywords: income distribution, inequality, poverty, Palma ratio, “reverse catching-up”, ideology, Gramsci, Foucault, neo-liberalism, ‘new’ left, institutional persistence, Latin America, Chile, emerging Asia, US, Western Europe
    JEL: D31 E12 E22 E24 N16 N36 O50 P16
    Date: 2020–12–18
  2. By: Isabel Mendes
    Abstract: Today, Circular Economy (EC) is a popular concept in the business and financial world, among academics, politicians and decision-making bodies, and governmental and non-governmental institutions. Since 2003 has been intensely produced and published academic and non-academic literature. But despite this growing enthusiasm - and as far as we know so far - there are topics related to EC that remain under discussion, perhaps because they have not yet been the subject of sufficiently clarifying and multidisciplinary analysis. In this article, we intend to contribute to the clarification of some of these topics. The topics were chosen according to the questions that were installed in the author's mind of this article as she reviewed the literature on EC (the scientific areas in which the author is included are Environment and Natural Resources Economics and Ecological Economy). The topics under discussion are as follows: 1) Neoclassical economists also use the EC concept; will this be equal to the current concept of EC? 2) Some authors have argued that EC is an entirely new concept; however, the circular functioning of the economy was already described by economists in the 18th century. In the end, we want to demonstrate: 1) That EC is a polysemic term; that is, although the EC of neoclassical economists is different from the current EC, both share a common root: circularity; 2) The term EC is not new because its genesis lies in the 18th century; 3) the current concept of EC is also not new, because it has been described since the 1960s; 4) What is truly new in today's EC is the recognition and internalization of its principles by the business and governmental worlds. To achieve our objective, we were based on the critical analysis of the literature, supported by the theoretical body of conventional neoclassical economics (micro and macro); Ecological and Environmental Economy; and the History of Economic Thought.
    Keywords: circular economy; circular model of monetary flows; circular throughput model; linear throughput model. JEL Classification: A13, O11, O13, O41, O44, Q01, Q50, Q57.
    Date: 2020–10
  3. By: Bichler, Shimshon; Nitzan, Jonathan
    Abstract: Until the late 2000s, our work focused primarily on why capitalism should be understood as a mode of power. We argued that capital itself is a form of organized power and researched how capitalists sustain, defend and augment their capitalized power. We called our approach ‘capital as power’ – or CasP, for short. But that’s only one side of the picture. Power is never unbounded. It is always resisted, opposed and constrained by those on whom it is imposed. And so, in the early 2010s, we started to examine more closely the limits of capitalized power and of the capitalist mode of power more generally. We called this research ‘the asymptotes of power’. In this paper, we revisit and update some of our work on these asymptotes in the United States and think about what they might mean for the future.
    Keywords: capital accumulation,capital as power,income distribution,profit,sabotage,unemployment,United States
    JEL: P16 E24 E61
    Date: 2020
  4. By: Vinicius Curti Cicero; Gilberto Tadeu Lima
    Abstract: We examine the impact of the functional distribution of income on the demand for imports in developed and developing countries. Drawing upon a motivating accounting structure suggesting a potentially causal effect of the functional distribution of income in an extended version of a standard import function, we find evidence that a fall in the wage share has a statistically significant positive (negative) impact on the volume of imports in developing (developed) countries and the entire sample of countries. Therefore, the neglect of such income distribution effects in import demand functions represents the omission of both an empirically relevant variable and a further theoretically significant channel through which the functional distribution of income affects output growth. A key implication is that the impact of the functional distribution of the social product on the demand for imports has to be considered in growth empirics based on either a binding balanceof-payments constraint in the Kaldor-Thirlwall tradition or a demand-led regime approach or a competitive real exchange rate.
    Keywords: Functional distribution of income; import demand; aggregate demand regimes; balance-of-payments-constrained growth
    JEL: E25 F14 F43
    Date: 2020–12–31
  5. By: Jean-Paul L’Huillier (Brandeis University); Gregory Phelan (Williams College); Hunter Wieman (Williams College)
    Abstract: Big technological improvements in a new, secondary sector lead to a period of excitement about the future prospects of the overall economy, generating boom-bust dynamics propagating through credit markets. Increased future capital prices relax collateral constraints today, leading to a boom before the realization of the shock. But reallocation of capital toward the secondary sector when the shock hits leads to a bust going forward. These cycles are perfectly foreseen in our model, making them markedly different from the typical narrative about unexpected financial shocks used to explain crises. In fact, these cycles echo Minsky’s original narrative for financial cycles, according to which “financial trauma occur as normal functioning event in a capitalistic economy.”(Minsky, 1980)
    Keywords: Endogenous cycles, boom-bust dynamics, optimism, credit markets, predictability.
    JEL: E22 E23 E32 E44
    Date: 2021–01
  6. By: Troeger, Vera E. (University of Warwick and Universitat Hamburg); Di Leo, Riccardo (University of Warwick); Scotto, Thomas J. (University of Glasgow); Epifanio, Mariaelisa (University of Liverpool)
    Abstract: We use an original survey of academic women in the UK to investigate different dimensions of the motherhood penalty. Being a mother has no effect on salaries, but still slows down career progression even in such a high-skilled sector. Motherhood has an ambivalent impact on women’s perception of their working environment: improving satisfaction, but reducing perception of salary fairness relative to men. Our paper also explores how different policies can mitigate the motherhood penalties. We find that more generous maternity provisions are associated with higher salary, potentially because generosity reduces the crowding out of research activity. Better availability of childcare and an even distribution of responsibilities within the household correlate positively with earnings. Our findings also highlight the importance of a supportive work environment for mothers’ career and well-being at the workplace. Taken together, these findings suggest the necessity of a multi-faceted policy response to the motherhood penalties.
    Keywords: satisfaction, salary, career, exclusion, gender pay gap, academia JEL Classification:
    Date: 2020
  7. By: Begg, Iain
    Abstract: The Faustian bargain at the heart of Brexit can be portrayed as a trade-off between enhanced control and economic benefits. Most commentators expect the UK economy to take some sort of hit from leaving the UK, but in the words of one prominent ‘leave’ supporter, it would be a ‘price worth paying’, to regain control over decision-making.2 For convinced Brexiteers, a UK unshackled from the EU will rapidly transform itself to be able to take advantage of opportunities in emerging markets and other dynamic parts of the global economy, while ‘remainers’ see distancing the UK from its largest market as an egregious act of self-harm. Both sides have been culpable of misleading statements. Similar dissembling occurred in relation to the public finances. The article explores how competing, poorly understood and often incoherent interpretations of economic propositions fed into Brexit, leading to misguided policy decisions and confusion in the debates around how to reset the UK’s economic relationship with the EU.
    Keywords: 350 million for NHS; Brexit policy failures; economics of Brexit; no deal Brexit; UK trade
    JEL: N0
    Date: 2019–12–13
  8. By: Ritzen, Jozef M. (UNU-MERIT, Maastricht University)
    Abstract: In 2021 lockdowns still will be necessary to keep COVID-19 in check world-wide. Vaccination might bring sufficient coverage by the end of 2021 for some countries. Priorities in the re-emergence of economies should be for sustainability, health, education, full employment and social cohesion to preserve long-term welfare. Pressures on Government budgets are going to rise in view of the unprecedented high public debt to GDP ratio world-wide. Increased taxation of wealth and of the top 10%-income-group is a superior strategy compared to retrenchment (budget cuts in health, education and social expenditures). International cooperation is top priority. This applies to health, but also to economic and monetary policy: it can lift economic growth in the G20 countries over the short and long run by at least one third. The resumption of trade should be guided by rewarding the achievement of social goals and realizing sustainability. In this way the level playing field is restored for those countries which want to contribute to a sustainable world and to cooperation. International taxation rules for profits should prevent tax havens to make this a negative sum game. This would give developing countries some of the necessary breathing space to re-emerge from the COVID-19 crisis.
    Keywords: COVID-19, employment, economic development, environmental sustainability, social cohesion, education, health, monetary policy, long-term interest rates, conditionalities, taxation, stock market
    JEL: I00 J20 H63 H74 O38 O40 O43 O44 E62 E43 Q58 F18 F23 O52 R30 I25 F30 G15 H25 H87
    Date: 2020–12–18

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