nep-pke New Economics Papers
on Post Keynesian Economics
Issue of 2021‒03‒22
eleven papers chosen by
Karl Petrick
Western New England University

  1. Contemporary Macroeconomic Outcomes: A Tragedy in Three Acts By Peter Flaschel; Sigrid Luchtenberg; Hagen Kramer; Christian Proano; Mark Setterfield
  2. Michael Polanyi's Neutral Keynesianism and The First Economics Film, 1933 to 1945 By Bíró, Gábor
  3. Do liberal policy regimes condemn Latin America to quasi-stagnation? By Bresser-Pereira, Luiz Carlos; Feijó, Carmem; Araújo, Eliane Cristina de
  4. What has driven the delinking of wages from productivity? A political economy-based investigation for high-income economies By Walter Paternesi Meloni; Antonella Stirati
  5. The 1-2-3 Toolbox of Mainstream Economics: Promising Everything, Delivering Nothing By Bichler, Shimshon; Nitzan, Jonathan
  6. Because of Monopolies, Income Inequality Significantly Understates Economic Inequality By James A. Schmitz
  7. Understanding Clarence Ayres’s criticism to an emerging mainstream and birthing institutionalism through the 1930s Ayres-Knight debate By Almeida, Felipe; Cavalieri, Marco
  8. Philosophical Foundations of Environmental Policy Analysis: Can Critical Realism Bridge the Neopositivist/Interpretivist Divide? By Carter, Andrew Pearce
  9. Are Neoliberalism Policies Undermining Free and Democratic Societies? By Danielle Araujo
  10. Keynes's Methodology and the Analysis of Economic Agent Behavior in a Complex World By Richard Arena; Eric Nasica
  11. A Marxist Response to the CEA’s Report “The Opportunity Cost of Socialism” By McMullen, David

  1. By: Peter Flaschel (Department of Economics and Business Administration, Bielefeld University); Sigrid Luchtenberg (Faculty of Edication, University of Duisberg-Essen); Hagen Kramer (Department of Management and Engineering, Karlsruhe University of Applied Sciences); Christian Proano (Department of Economics, University of Bamberg); Mark Setterfield (Department of Economics, New School for Social Research)
    Abstract: The thesis developed in this paper is that contrary to the claims of its proponents, the main supply-side consequence of neoliberalism was to zap labour, institutionalize worker insecurity, and install an `incomes policy based on fear' in the US economy. Like any successful incomes policy, this diminished con flict over shares of real income and so reduced in flationary pressures - but at the cost of decoupling real wage growth from productivity growth. This last outcome fueled rising income inequality and hollowed out the wage-funded, consumption-led core of the demand-generating process. The demand-side weakness of the neoliberal economy was initially concealed by household borrowing that debt-financed increases in autonomous consumption spending. But it has asserted itself in the wake of the Great Recession, following the exhaustion of the household debt accumulation process. The result was a depressed upswing 2009-2019 that addressed none of the fundamental structural weaknesses evident in the US economy prior to the Great Recession. The institutionally entrenched but exhausted neoliberal paradigm left the US unprepared for the onset of recession in 2020, and for the larger social and economic travails of the COVID-19 pandemic with which the initial onset of the 2020 recession was associated. This paper is excerpted from Capitalism, Inclusive Growth, and Social Protection: Inherent Contradiction or Achievable Vision? (Edward Elgar, forthcoming).
    Date: 2021–03
  2. By: Bíró, Gábor
    Abstract: This paper explores the history of the first economics film, made by Michael Polanyi. It traces the evolution of the film from the first idea to the latest version. It portrays Polanyi's motives for making the film, the contexts in which the film was embedded and its perception by various individuals and communities. The paper demonstrates the novelty of both the content and the presentation of Polanyi's economic ideas through the eyes of his contemporaries. It discusses why it was important for Polanyi to make a film about the circulation of money and the principle of neutrality and comments on what historiographers of economic thought might learn if they put a stronger emphasis on visual representations in their pursuits.
    Date: 2020–09–01
  3. By: Bresser-Pereira, Luiz Carlos; Feijó, Carmem; Araújo, Eliane Cristina de
    Abstract: Police regimes are incompatible with economic growth because liberal economists don’t see industrialization as a condition for economic development; because they pressed for trade liberalization, ignoring that the import tariffs were a way of neutralizing the Dutch disease; beause they don’t see that the growth with foreign indebtedness policy as well as the use of the exchange rate as an anchor to control inflation harm growth because the required capital inflows to finance the respective current account deficits appreciate the national currency, and, so, stimulate consumption while discourages investment; because the austerity programs that they defend are rather a way of defending the interests of rentiers and financiers than a sound macroeconomic policy.
    Date: 2021–02
  4. By: Walter Paternesi Meloni; Antonella Stirati
    Abstract: The drop in the labor share experienced in high-income countries in the last three to four decades testifies to a general divergence in the growth rates of labor productivity and average wages. In this respect, we first quantify the magnitude of this decoupling; second, we inquire into the factors that prevented wage growth from keeping pace with productivity. We endorse a ‘political economy’ approach – a line of inquiry which has been recently fueled and followed by the post-Keynesian literature – focusing on the effects on wage dynamics of some macroeconomic and institutional factors in a panel of 22 OECD economies for the post-1970 period. We find that, on average and over the cycle, only 50% of increased productivity went to workers. Our empirics indicate that labor market slack and the weakening of pro-labor institutions have acted as wage-squeezing factors; a negative effect is also found for globalization, specifically for trade openness and international capital mobility. Other aspects of the process of financialization, such as market capitalization and the dynamics of the real interest rate, seem not to have exerted a substantial impact on real wage growth.
    Keywords: political economy; income distribution; labor market institutions; labor market slack; globalization; financialization
    JEL: E25 J30 P16
    Date: 2021–03
  5. By: Bichler, Shimshon; Nitzan, Jonathan
    Abstract: We write this essay for both lay readers and scientists, though mainstream economists are welcome to enjoy it too. Our subject is the basic toolbox of mainstream economics. The most important tools in this box are demand, supply and equilibrium. All mainstream economists – as well as many heterodox ones – use these tools, pretty much all the time. They are essential. Without them, the entire discipline collapses. But in our view, these are not scientific tools. Economists manipulate them on paper with impeccable success (at least in their own opinion). But the manipulations are entirely imaginary. Contrary to what economists tell us, demand, supply and equilibrium do not carry over to the actual world: they cannot be empirically identified; they cannot be observed, directly or indirectly; and they certainly cannot be objectively measured. And this is a problem because science without objective empirical tools is hardly science at all.
    Keywords: demand,econometrics,equilibrium,neoclassical economics,science,supply
    JEL: E13 C01 O47
    Date: 2021
  6. By: James A. Schmitz
    Abstract: In social science research, household income is widely used as a stand-in for, or approximation to, the economic well-being of households. In a parallel way, income-inequality has been employed as a stand-in for inequality of economic well-being, or for brevity, "economic-inequality." But there is a force in market economies, ones with extensive amounts of monopoly, like the United States, which leads income-inequality to understate economic-inequality. This force has not been recognized before and derives from how monopolies behave. Monopolies, of course, raise prices. This reduces the purchasing power of households, or the value of their income. But monopolies, in fact, reduce the purchasing power of low-income households much more than high-income households. What has not been recognized is that, in many markets, as monopolies raise the prices for their goods, they simultaneously destroy substitutes for their products, low-cost substitutes that are purchased by low-income households. In these markets, then, while high-income households face higher prices, low-income households are shut out of markets, markets for goods and services that are extremely important for their economic well-being. It often leaves them with extremely poor alternatives, and sometimes none, for these products. Some of the markets we discuss include those for housing, financial services, and K-12 public education services. We also discuss markets for legal services, health care services, used durable equipment and repair services. Monopolies that infiltrate public institutions to enrich members, including those in foster care services, voting institutions and antitrust institutions, are also discussed.
    Keywords: Inequality; Well-being; Income inequality; Consumption inequality; Monopoly; Antitrust; Housing crisis; Public education; Credit cards; Repair services; Sabotage
    JEL: D22 D42 K0 K21 L0 L12
    Date: 2021–03–09
  7. By: Almeida, Felipe; Cavalieri, Marco
    Abstract: Clarence Ayres was a strong dissenting voice in US economics during the 20th century. In the 1930s, a debate between Ayres and Frank Knight was published by the International Journal of Ethics. Although the debate focused on ethics, the evolution of economics was also discussed. This paper proposes an understanding of Ayres’s ideas based on the context in which he made them. This context is defined by the 1930s Ayres-Knight debate and the archival correspondence between Ayres and Knight during the 1930s.
    Date: 2020–09–01
  8. By: Carter, Andrew Pearce (Defenders of Wildlife)
    Abstract: Traditional environmental policy analysis has followed a neopositivist epistemological frame, using the natural sciences as a template as to how social-ecological problems can be analyzed. Such approaches to policy analysis have been caught up in the same crisis as the social sciences have in general: an overarching failure to create a predictive science of society or to consistently provide solutions to social problems. This has led some policy researchers to align with the interpretivist turn, which has had its own drawbacks. In this review I summarize the historical development and main tenets of both approaches, examining their advantages and disadvantages. I then review an alternative epistemological approach to social science, critical realism, which combines an ontological realism with an epistemological relativism, a focus on elucidating causal mechanisms in the social-ecological systems studied, an approach that may be particularly suited for analyzing the complex social-ecological systems studied in environmental policy analysis.
    Date: 2021–01–28
  9. By: Danielle Araujo (Harvard Extension School, USA)
    Abstract: Neoliberalism is a term that has attracted a remarkable degree of frustration and fury within the academia. Its political ideology is associated with Wall Street greed, union-busting, deregulation, wage theft, privatization and exploitation. Critics claim it has been used as a weapon of the wealthy class to mask their true intentions. It removes decision-making out of popular hands and places decisions in the hands of unelected International Organizations, undoing democracy. The extreme inequalities and empowerment of capital that neoliberalism brings about, reduces human beings into market actors undermining the power and needs of the people. The main conclusion of the paper is that neoliberalism policies are a radicalizing threat to human potential and democracies in the 21st century.
    Keywords: neoliberalism, neoliberalism policies, democracy, democratic societies, international organizations, World Bank, IMF, Structural Adjustment Programmes
    Date: 2021–01
  10. By: Richard Arena (Université Côte d'Azur, France; GREDEG CNRS); Eric Nasica (Université Côte d'Azur, France; GREDEG CNRS)
    Abstract: This article aims to analyze the impact of taking into account a truly uncertain and complex economic environment on the methodology used by Keynes. Our work leads to two main results. The first conclusion is that, even when an ordinal or cardinal measure of probability is impossible, Keynes provides a coherent set of tools for the analysis of economic decisions. In particular, even if a numerical probability cannot be determined, the choices of economic agents will be rationally governed by reasoning based on their limited but real knowledge of the observed reality and on non-numerical probabilities. The second result obtained is that the complex decision-making environment surrounding economic decisions influences the characterization of the individual actor himself and economic and social interactions; this form of economic analysis implies referring to a methodological conception which is open to and even requires the use of philosophy and other social sciences as cognitive psychology, social psychology and even anthropology.
    Date: 2021–03
  11. By: McMullen, David
    Abstract: By setting out the full range of confusion on the subject of socialism, the report by the Council of Economic Advisers (C.E.A.) has provided a good opportunity to both explain and defend the Marxist view on the matter.
    Date: 2019–05–30

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