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on Post Keynesian Economics |
| By: | Greg Philip Hannsgen (Greg Hannsgen's Economics Blog (US)) |
| Abstract: | This paper proposes a formalization of Hyman P. Minsky’s theory of financial instability. The model includes private-sector borrowing, capacity utilization, and the stock of private-sector debt. The model is based on self-reinforcing borrowing and output dynamics that repeatedly come to a sudden stop, with discontinuous downward jumps in the three variables. The paper treats as endogenous the instantaneous probability of a jump and the size distribution of jump vectors. Formally, the model comprises three ordinary differential equations and a compound Poisson process, with jumps drawn from a heavy-tailed stable distribution. The paper shows it can be stated in three equations in the jump differentials and the usual differentials. A section sketches a nonlinear mechanism that can bound the system. The paper analyzes the dynamics of a simplified version of the main model and a more-SFC model with feedbacks from debt to borrowing and capacity utilization via debt-service effects. The paper reports (1) eigenvalues for the linear parts of both the simplified analytical model and a numerical example of the more-SFC model, (2) a phase diagram for the analytical model, and, (3) analytical stability conditions for the more-SFC model. The model replicates the upward instability and abrupt crises of Minsky’s theory. |
| Keywords: | Minsky model, paradox of debt, Poisson process, financial crisis, dynamical macroeconomic model, Hyman P. Minsky, stable distribution, stock-flow consistency, theory of financial instability, dynamical systems, cádlág process, John Maynard Keynes |
| Date: | 2021–01 |
| URL: | http://d.repec.org/n?u=RePEc:pke:wpaper:pkwp2026&r=all |
| By: | Jan Kregel |
| Abstract: | The success of alternative payment systems has led to discussion of various proposals to replace money with a new technology-based system, though many lack a clear idea of what exactly is the "money" they seek to replace. We begin by presenting the explanation of money's role in the economy embraced by most mainstream economists and policy analysts, based on the idea that money evolved out of the process of market exchange. An alternative explanation that looks on money as a part of the organization of production and distribution based on network clearing systems across balance sheets expressed in a common unit of account is then presented, distinguishing between a purely notional unit of account and means of settlement or discharge of debt. The final section addresses the possibility of a fundamentally different modern extension of this alternative approach that is not inspired by digital technology, distributed ledger accounting, or application operating on a mobile/cell phone system, but rather the actually existing system available from an internet telephone service provider that currently offers subsidiary domestic and international payment services whose operating procedures come close to replicating the alternative explanation of money mentioned above, with the potential to provide all the services of the existing payments system at lower costs and greater stability. |
| Keywords: | Banking Principle; Clearing Union; Imaginary Money; Money; Payment Systems; Unit of Account; Webtel.mobi |
| JEL: | B5 E42 E50 G2 |
| Date: | 2021–01 |
| URL: | http://d.repec.org/n?u=RePEc:lev:wrkpap:wp_982&r=all |
| By: | Julia M. Puaschunder (The New School, Department of Economics, School of Public Engagement, New York, USA) |
| Abstract: | Overall the following article innovatively paints a novel picture of the mass psychological underpinnings of business cycles based on information flows in order to recommend how certain communication strategies could counterweight and alleviate the building of disastrous financial market mass movements. Acknowledging that human beings are connected to and interact with each other in families, ties and larger networks of states, nations and intergovernmental institutions, studying the role of information in building socially-constructed economic correlates promises to explain how market outcomes are developed in the social compound and can be guided by media communication. Addressing problems of the neoclassical assumption of perfect information markets through the lens of ‘real competition,’ the following paper will specifically unravel how contemporary media communication produces certain types of price expectations that form consumption patterns leading to collectively-shared economic outcomes. An introduction to the history of economic cycles will lead to the analysis of the role of information in creating economic booms and busts in the age of globalization. Applying emergent risk theory onto economic fluctuations will serve as an innovative way to explain how and what information represented in the media creates economic ups and downs. Linguistic roots of news about the economy are aimed at shedding light on how media representations and temporal foci echo in economic correlates and shape market outcomes. As business cycles are a collective phenomenon, group interactions’ potential contribution to create business cycles will innovatively be outlined and the role of information flows among groups in creating price expectations unraveled. Business cycles will also be shown to obey some kind of natural complexity, as for being whimsically influenced by socio-historic and political trends. Recommendations how to create more stable economic systems by avoiding emergent risks and communicating market prospects more cautiously will be given in the discussion followed by a prospective future research outlook and conclusion. |
| Keywords: | Affect, Collective moods, Communication, Consumption, Coronavirus, COVID-19, Digitalization, Economic fundamentals, External shock, Information |
| Date: | 2020–12 |
| URL: | http://d.repec.org/n?u=RePEc:smo:upaper:019jp&r=all |
| By: | Julia M. Puaschunder (The New School, Department of Economics, School of Public Engagement, New York, USA) |
| Abstract: | The currently ongoing novel Coronavirus-crisis is an external shock coming down on society with direct impact on societal moods and subsequently connected economic changes. With growing digitalization and quickening of transfer speed, information exchange in the individual involvement to break trends online on a global scale may impose unknown systemic risks in causing social volatility in international economics. Research may explore how human beings’ communication and interaction results in socially constructed volatility that echoes in economic correlates. This paper theoretically covers the history of heterodox economic cycles in order to then propose to explore the role of communication and temporal foci in pandemic communication to create social volatility underlying economic downturns. |
| Keywords: | Affect, Collective moods, Communication, Consumption, Coronavirus, COVID-19, Digitalization, Economic fundamentals, External shock, Information, Lockdown, News, Pandemic, Social volatility, Socio-Economics, Socio-Psychological Foundations, 2008/09 World Financial Crisis |
| Date: | 2020–12 |
| URL: | http://d.repec.org/n?u=RePEc:smo:upaper:024pj&r=all |
| By: | Peter Flaschel; Giorgos Galanis; Daniele Tavani; Roberto Veneziani |
| Abstract: | This paper studies the interaction between epidemiological dynamics and the dynamics of economic activity in a demand-driven model in the structuralist/post-Keynesian tradition. On the one hand, rising aggregate demand increases the contact rate and therefore the probability of exposure to a virus. On the other hand, rising infection lowers aggregate demand because of reduced household spending. The resulting framework is well-suited for policy analysis through numerical exercises. We show that, first, laissez-faire gives rise to sharp fluctuations in demand and infections before herd immunity is achieved. Second, absent any restrictions on economic activity, physical distancing measures have rather limited mitigating effects. Third, lockdowns are effective, especially at reducing death rates while buying time before a vaccine is available, at the cost of a slightly more pronounced downturn in economic activity compared with alternative policies. This casts some doubt on the so-called “lives versus livelihood” policy trade-off. However, we also highlight the importance of policies aimed at mitigating the effects of the epidemic on workers’ income. |
| Keywords: | pandemic, aggregate demand, distribution, public policy |
| JEL: | E12 E25 E60 H00 I10 |
| Date: | 2021–01 |
| URL: | http://d.repec.org/n?u=RePEc:pke:wpaper:pkwp2025&r=all |
| By: | Maria Demertzis; Marta Domínguez-Jiménez; Annamaria Lusardi; Bruegel |
| Abstract: | • The concept of household financial fragility emerged in the United States after the 2007-2008 financial crisis. It grew out of the need to understand whether households’ lack of capacity to face shocks could itself become a source of financial instability, in addition to risks to the stability of banks and the greater financial system. The concept goes beyond assessing the level of assets and encompasses the state of household... |
| Date: | 2020–07 |
| URL: | http://d.repec.org/n?u=RePEc:bre:polcon:37489&r=all |
| By: | Chirag Dhara; Vandana Singh |
| Abstract: | A transformative approach to addressing complex social-environmental problems warrants reexamining our most fundamental assumptions about sustainability and progress, including the entrenched imperative for limitless economic growth. Our global resource footprint has grown in lock-step with GDP since the industrial revolution, spawning the climate and ecological crises. Faith that technology will eventually decouple resource use from GDP growth is pervasive, despite there being practically no empirical evidence of decoupling in any country. We argue that complete long-term decoupling is, in fact, well-nigh impossible for fundamental physical, mathematical, logical, pragmatic and behavioural reasons. We suggest that a crucial first step toward a transformative education is to acknowledge this incompatibility, and provide examples of where and how our arguments may be incorporated in education. More broadly, we propose that foregrounding SDG 12 with a functional definition of sustainability, and educating and upskilling students to this end, must be a necessary minimum goal of any transformative approach to sustainability education. Our aim is to provide a conceptual scaffolding around which learning frameworks may be developed to make room for diverse alternative paths to truly sustainable social-ecological cultures. |
| Date: | 2021–01 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2101.07467&r=all |
| By: | Jakina Debnam Guzman (Amherst College); Marie Christelle Mabeu (Department of Economics, University of Ottawa, Ottawa, ON); Roland Pongou (Department of Economics, University of Ottawa, Ottawa, ON) |
| Abstract: | Mobility restrictions have been imposed on over half of the world's population as part of efforts to slow the spread of the novel coronavirus. Given the economic and psychological expense of these policies, understanding how their benefits depend on structural factors is critical for optimal policy design. We find causal evidence that the effectiveness of mobility-restricting policies in the United States has been critically constrained by ethnic divisions-U.S. counties with high levels of ethnic divisions fared worse than their less-divided counterparts after lockdowns in both COVID-19 cases and related deaths. This is especially true in areas with higher racial segregation. Following President Trump's State of Emergency declaration, a one standard deviation increase in the ethnic fragmentation index (EFI) in the most racially segregated counties increased COVID-19 cases and associated deaths by 1; 014 and 63, respectively; in the least segregated counties these outcomes are 112 and 4, respectively. These results highlight that ethnic divisions, rather than ethnic diversity, spurred drastic differences in COVID-19's impact. Consistent with less effective mobility restrictions in more ethnically divided counties, we find smaller mobility reductions and less mask-wearing in these counties following policy implementation. These results are not driven by a lack of physical public goods or by socioeconomic differences. Instead, we interpret our findings as the result of mobility restriction policies' imperfect enforceability. Where ethnic divisions are present, communication is sparser, pro-social norms are weaker, and communities are less able to enforce adherence by enacting social sanctions. Our results suggest that policies promoting ethnic and racial integration can allay the negative social and economic impacts of contagious disease by decreasing the likelihood of disease spread. |
| Keywords: | COVID-19; Ethnic Identity; Ethnic divisions; Racial segregation; Diversity with(out) divisions; Lockdown Policies; Mobility restrictions; Physical distancing; Mask Wearing; Pro-social Norms. |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:ott:wpaper:2101e&r=all |
| By: | Michael S. Kofoed (United States Military Academy); Wyatt J. Frasier (United States Army) |
| Abstract: | One concern with employer-based health insurance is job lock or the inability for employees to leave their current employment for better opportunities for fear of losing benefits. We use the implementation of the Affordable Care Act’s dependency mandate as a natural experiment. Data from the United States Army overcome some limitations in previous studies including the ability to examine workers with fixed contract expiration dates, uniform pay, and health coverage. We find that the ACA decreased reenlistment rates by 3.13 percent for enlisted soldiers aged 23–25. We also find that younger veterans who leave the army are more likely to attend college. These findings show that the ACA reduced job lock and increased college-going. |
| Keywords: | Affordable Care Act, Job Lock, Military Enlistment, GI Bill |
| JEL: | I13 J22 H56 |
| Date: | 2019–02 |
| URL: | http://d.repec.org/n?u=RePEc:upj:weupjo:19-300&r=all |
| By: | Timothy J. Bartik (W.E. Upjohn Institute for Employment Research) |
| Abstract: | Should policymakers seek to increase jobs in particular local labor markets? Yes, but only if these policies are well targeted and designed. Encouraging job growth in distressed places can cause persistent gains in employment-to-population ratios. But our current place-based jobs policies, under which state and local governments provide long-term tax incentives to megacorporations, are poorly targeted and designed. Such incentives are as large in nondistressed areas as in distressed areas, and they are excessively costly. What reforms are needed? First, job growth policies should target distressed areas. Second, tax incentives should be focused on high-multiplier businesses, such as high-tech firms. Third, officials can more effectively promote local job creation by relying less on tax incentives and more on public services. These include customized business services, infrastructure, land development policies, local education, and job training. The federal government can use taxes and intergovernmental grants to discourage city or state officials from giving excessive state and local incentives to the largest firms. The federal government can also provide block grants to state and local governments to provide services that promote job growth in distressed places. |
| Keywords: | distressed places, regional development policies, local labor markets |
| JEL: | R58 R23 H73 H77 |
| Date: | 2019–08 |
| URL: | http://d.repec.org/n?u=RePEc:upj:weupjo:19-308&r=all |
| By: | Julia M. Puaschunder (The New School, Department of Economics, USA) |
| Abstract: | The currently skyrocketing digitalization disruption in the wake of COVID-19 holds the potential to revolutionize higher education. Digitalized education and conglomerates in the educational sector may lead to universities becoming truly global temples of information exchange. The lockdowns have also steered a wave of emotional outcry for social justice and participatory decision making. Future universities may thus also focus on embracing collective decision making and participatory leadership through the students. The future Didemoversity will thus likely feature elements of digitalization globalization and hallmarks of democracy such as participation in flat hierarchies to pursue a higher goal of universities to become social transformers and great equalizers. |
| Keywords: | Conglomerates, Collective decision making, COVID-19, Democracy, Didemoverity, Education, Equality, Inequality, Lottery, Participatory decision making, Social justice, Social transformation |
| Date: | 2020–11 |
| URL: | http://d.repec.org/n?u=RePEc:smo:scmowp:006jpm&r=all |