nep-pke New Economics Papers
on Post Keynesian Economics
Issue of 2021‒03‒15
six papers chosen by
Karl Petrick
Western New England University

  1. Is capacity utilization variable in the long run? An agent-based sectoral approach to modeling hysteresis in the normal rate of capacity utilization By Federico Bassi; Tom Bauermann; Dany Lang; Mark Setterfield
  2. The History of Pollution ‘Externalities’ in Economic Thought By Clive L. Spash
  3. Stability issues in Kaleckian models driven by autonomous demand growth - Harrodian instability and debt dynamics. By Eckhard Hein; Ryan Woodgate
  4. Development and Underdevelopment from the Perspective of Evolutionary Socioeconomics in the Post-COVID-19 Era By Vlados, Charis
  5. in brief... The long shadow of slavery By Luna Bellani; Anselm Hager; Stephan Maurer
  6. Do institutions and ideology matter for economic growth in Latin America in the first two decades of the 21st century? By Navarrete Gallo, Pamela L.; Ritzen, Jo

  1. By: Federico Bassi (Centre de recherche en économie de l’Université Paris Nord (CEPN)); Tom Bauermann (Ruhr-University Bochum); Dany Lang (Université Sorbonne Paris Nord); Mark Setterfield (New School for Social Research)
    Abstract: Post Keynesian macrodynamic models make various assumptions about the normal rate of capacity utilization. Those rooted in the Classical and neo-Keynesian traditions assume the normal rate is fixed, whereas Kaleckian models treat it as a variable that is endogenous to the actual rate of capacity utilization. This paper contributes to the debate about the normal rate of capacity utilization by developing a model of strong or genuine hysteresis, in which firms make discrete decisions about the normal rate depending on the degree of uncertainty about demand conditions. An agent-based model based on empirical analysis of 25 sectors of the US economy is used to show that hysteresis can cause variation in the normal rate of capacity utilization within a subset of the range of observed variation in the actual capacity utilization rate. This suggests that the economy exhibits both constancy and (endogenous) variability in the normal rate of utilization over different ranges of variation in the actual rate. More broadly speaking, the genuine hysteresis model is shown to provide the basis for a synthesis of Post Keynesian macrodynamics that draws on both the Classical/neo-Keynesian and Kaleckian modeling traditions.
    Keywords: Normal rate of capacity utilization, Harrodian instability, genuine hysteresis, Kaleckian growth theory
    JEL: C36 E11 E12 L6 L7 L9
    Date: 2020
  2. By: Clive L. Spash
    Abstract: Today, environmental economics is the response of the neoclassical economic school to the ecological crisis, but at one time its leading contributors regarded it as a revolutionary development that would change the conduct and content of economics as a discipline. Understanding and addressing environmental pollution was core to that potential paradigm shift. In tracing the history of conceptualising pollution as an externality and market failure this paper covers the development of ideas by Marshall, Pigou, Pareto, Coase, Stigler, Samuelson, Ciciacy-Wantrup and Kapp. Pollution externality theory is shown to have incorporated an elitist ethics and liberal market ideology. As a market failure pollution was deemed a minor correctible error of the price system. Monetary valuation of social and environmental harm became the means of justifying optimal levels of pollution. Neoliberal theories of spreading property rights further watered down potential interventionist aspects. Bio-physical realism, in the work of Kneese, Ayres and dÂ’Arge, and social realism in KappÂ’s theory of cost shifting were lost once environmental economics adopted a deductivist mathematical formalism. KappÂ’s alternative theory is based on a classic institutionalists economic understanding of cost shifting and power relations. It advocates a public policy response in the form of objective social minima achieved via regulation and planning. This theory has until now been successfully supressed to prevent a potential revolutionary paradigm shift in economic price theory
    Keywords: externalities; market failure, cost shifting; price theory; pollution; Pigou; Coase; Kapp; paradigm shift; environmental economics, neoclassical economics; institutional economics, neolibera
    JEL: A13 B2 B55 D61 D62 H21 H23 P16 P18 P48 Q5 Q52 Q53 Q57 Q58
    Date: 2021
  3. By: Eckhard Hein (Berlin School of Economics and Law); Ryan Woodgate (Berlin School of Economics and Law)
    Abstract: Sraffian supermultiplier models, as well as Kaleckian distribution and growth models making use of non-capacity creating autonomous demand growth in order to cope with Harrodian instability, have paid little attention to the financial side of autonomous demand growth as the driver of the system. Therefore, we link the issue of Harrodian instability in Kaleckian models driven by non-capacity creating autonomous demand growth with the associated financial dynamics. For a simple model with autonomous government expenditure growth, zero interest rates and no consumption out of wealth, we find that adding debt dynamics does not change the results obtained by Lavoie (2016) for a model without debt, i.e. the long-run equilibrium is stable if Harrodian instability is not too strong and the autonomous growth rate does not exceed a maximum given by the long-run equilibrium saving rate. Introducing interest payments on government debt as well as consumption out of wealth into the model, however, changes the stability requirements: First, the autonomous growth rate of government expenditures should not fall short of the exogenous monetary interest rate. Second, this growth rate should not exceed a maximum given by the saving rate in long-run equilibrium minus the propensity to consume out of wealth. Third, Harrodian instability may be stronger than in the simple model without violating long-run overall stability, in particular, if the rate of interest is very low and the growth rate of government expenditures is close to the mentioned upper limit. We claim that, irrespective of the relevance or irrelevance of Harrodian instability, it is necessary to introduce financial variables into models driven by non-capacity creating autonomous demand in order to assess the long-run (in-)stability and sustainability of growth.
    Keywords: Supermultiplier, autonomous demand growth, Kaleckian models, Harrodian instability, financial (in)stability
    JEL: E11 E12 E25 E62
    Date: 2020
  4. By: Vlados, Charis (Democritus University of Thrace, Department of Economics)
    Abstract: In economics, the problematics of development and underdevelopment is a field of conceptual controversies and constant “re-comprehension,” already since classical economists’ fundamental explorations. Nowadays, especially within the particularly pressing conditions caused by the global pandemic of COVID-19, it seems that this field of research and scientific knowledge must be profoundly re-fertilized in analytical and explanatory terms. The current crisis seems to function as a catalyst for various structural changes globally, leading to a necessary reorientation of the related thematics towards exploring the inner evolutionary “mechanisms” that will drive socio-economic development (and underdevelopment) in the future. This article aims to study the conceptual evolution of the notions of development and underdevelopment in the light of modern evolutionary economics, which we think could offer a foundational repositioning at the interpretative level in response to the new emerging conditions. More specifically, this article tries to respond to what development and underdevelopment mean over time, where analytical readjustments the evolutionary economics lead to nowadays, and whether it is possible to counter-propose a multilevel approach that enriches the theoretical background for an interdisciplinary and unifying understanding of the specific problematics at the dawn of the new global reality that appears in the post-COVID-19 era. At first, we look at essential development and underdevelopment concepts by critically exploring corresponding basic definitions throughout time. Next, we study the essential and associated elements of evolutionary economics, in the light of the problematics of development and underdevelopment of our days, intending to reach a synthesizing theoretical perspective. We counter-propose the multilevel “development web” approach and analysis as a useful repositioned perspective on addressing the developmental/underdevelopmental problem since the compartmentalization of social sciences between the “micro, meso and macro” approaches seems progressively inadequate and sterile.
    Keywords: Development; Underdevelopment; Evolutionary economics; Development web; Micro-meso-macro; Evolutionary microeconomics; Evolutionary mesoeconomics; Evolutionary macroeconomics
    JEL: B52 O40
    Date: 2020–12–30
  5. By: Luna Bellani; Anselm Hager; Stephan Maurer
    Abstract: The politics and economy of the antebellum American South were dominated by those who practiced forced enslavement. Research by Luna Bellani, Anselm Hager and Stephan Maurer, which examines a database of Texas legislators from 1860 to 1900, reveals that the power of slave-owners continued long after the Civil War.
    Keywords: wealth inequality, elites and development, us south, intergenerational persistence, slavery
    Date: 2021–03
  6. By: Navarrete Gallo, Pamela L. (UNU-MERIT, Maastricht University, and Ministry of Education, Government of Peru); Ritzen, Jo (UNU-MERIT, Maastricht University)
    Abstract: Institutions have a positive, strong and significant impact on GDP growth; in 20 Latin American countries between 2002 and 2018. Government size has a negative impact on GDP growth itself but, in interaction with strong institutions, the effect of government size on growth turns to positive and significant, while political ideology has no significant effect on economic growth.
    Keywords: Economic growth, Institutions, Government Size, Political ideology, Latin America
    JEL: F43 N26 O11
    Date: 2021–03–09

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