nep-pke New Economics Papers
on Post Keynesian Economics
Issue of 2021‒06‒14
thirteen papers chosen by
Karl Petrick
Western New England University

  1. "COVID Relief and the Inflation Warriors" By Yeva Nersisyan; L. Randall Wray
  2. Harrodians and Kaleckians: a suggested reconciliation and synthesis By Mark Setterfield
  3. Theories of Consumption By Drakopoulos, Stavros A.
  4. Standing in the Way of Rigor? Economics’ Meeting with the Decolonizing Agenda By Ingrid Harvold Kvangraven; Surbhi Kesar
  5. "A Keynesian Approach to Modeling the Long-Term Interest Rate" By Tanweer Akram
  6. "Another Bretton Woods Reform Moment: Let Us Look Seriously at the Clearing Union" By Jan Kregel
  7. "Restarting the Greek Economy?" By Dimitri B. Papadimitriou; Christos Pierros; Nikos Rodousakis; Gennaro Zezza
  8. "Anatomy of a Stock Market Bubble" By Frank Veneroso
  9. "Gender and Race in the Spotlight during the COVID-19 Pandemic: The Impact of the Emergency Benefit on Poverty and Extreme Poverty in Brazil" By Luiza Nassif Pires; Luísa Cardoso; Ana Luíza Matos de Oliveira
  10. Women in economics: A UK Perspective By Sevilla, Almudena; Smith, Sarah
  11. Why Does Globalization Fuel Populism? By Rodrik, Dani
  12. Latin America's Income Inequality Under five Political Regimes, 1870-2018 By Giovanni Andrea Cornia
  13. The 15-Hour Week: Keynes’s Prediction Revisited By Crafts, Nicholas

  1. By: Yeva Nersisyan; L. Randall Wray
    Abstract: With the unveiling of President Biden's nearly $2 trillion proposal for addressing the COVID-19 crisis, Democrats appear keen to avoid repeating the mistakes of the Great Recession—most notably the inadequate fiscal response. Yeva Nersisyan and L. Randall Wray observe that while Democrats are not falling for the "deficit bogeyman" this time, critics have pushed the idea that the increase in government spending will cause inflation. Nersisyan and Wray argue that the current fiscal package should be evaluated as a set of relief measures, not stimulus, and that the objections of the inflation worriers should not stand in the way of taking needed action.
    Date: 2021–02
  2. By: Mark Setterfield (Department of Economics, New School for Social Research)
    Abstract: The Kaleckian and Harrodian approaches to growth frequently arrive at antagonistic positions with respect to key issues in heterodox macrodynamics, including the treatment of the rate of capacity utilization and the very nature of the long-run growth process. Nevertheless, this paper is devoted to exploring the possibilities for reconciling and even synthesizing these traditions. It does so by directly addressing three key areas of dispute: the Keynesian stability condition; Harrodian instability; and the question as to whether long-run growth is best conceived in terms of a stable steady state or `corridor instability'. It is shown that reconciliation and even synthesis is possible - the latter producing a `corridor within a corridor' conception of the growth process in which the economy switches between Kaleckian and Harrodian dynamics depending on the extent to which the rate of capacity utilization departs from its normal rate.
    Keywords: Keynesian stability condition, Harrodian instability, corridor instability, shifting equilibrium, Kaleckian pseudo-instability, normal rate of capacity utilization
    JEL: E11 E12 E22 O41
    Date: 2021–06
  3. By: Drakopoulos, Stavros A.
    Abstract: This chapter explains the role of consumption expenditures in modern economies and their significance for the determination of the level of output and employment in an economy. It starts with a presentation of the theory of intertemporal choice that forms the basis of mainstream consumption functions. Next, it discusses Keynes’s approach to consumption, and particularly his criticism of the standard model of consumer behaviour, his emphasis on the role of consumption for the level of employment, and his analysis of aggregate consumption patterns. It also describes the main mainstream theories of consumption, which are the life cycle income hypothesis, the permanent income hypothesis and the random walk theory of consumption. Finally, the chapter explores the heterodox approaches to consumption, focusing mainly on the relative income hypothesis. Additionally, it shows the consequences of consumption theories for the effectiveness of economic policies towards unemployment and economic downturns.
    Keywords: Consumption expenditure; Fiscal policy; Keynesian consumption function; Life-cycle income hypothesis; Permanent income hypothesis; Relative income Hypothesis
    JEL: B0 B21 E21
    Date: 2021–06
  4. By: Ingrid Harvold Kvangraven (University of York, UK); Surbhi Kesar (Azim Premji University, India)
    Abstract: This paper critically engages with various aspects of the decolonization movement in economics and its implications for the discipline. We operationalize the insights from this engagement using a survey of 498 economists that explores how faculty across different kinds of departments, disciplines, geographies, and identities perceive the problems of economics teaching, how they think economics pedagogy should be reformed, if at all, and how they relate to decolonial critiques of economics pedagogy. Based on the survey findings, we conclude that the mainstream of the field’s emphasis on technical training and rigor, within a narrow theoretical and methodological framework, likely stands in the way of the very possibility for decolonizing economics, given its strong contrast to key ideas associated with the decolonization agenda, such as positionality, centering power relations, exposing underlying politics of defining theoretical categories, and unpacking the politics of knowledge production. Nonetheless, the survey responses clearly chart out the challenges that the field faces in terms of decolonizing pedagogy, which is a first step towards debate and change.
    Keywords: Economics teaching, economics pedagogy, decolonial theory, postcolonial theory, decolonizing economics
    JEL: A20 B40 B50 F54
    Date: 2021–05
  5. By: Tanweer Akram
    Abstract: There are several widely used benchmark models of the long-term interest rate in quantitative finance. However, these models have yet to incorporate Keynes's valuable insights about interest rate dynamics. The Keynesian approach to interest rate dynamics can be readily incorporated in the benchmark models of the long-term interest rate. This paper modifies several benchmark interest rate models. In these modified models the long-term interest rate is related to the short-term interest rate and a Wiener process. The Keynesian approach to interest rate dynamics can be useful in addressing theoretical and policy issues.
    Keywords: Long-Term Interest Rate; Bond Yields; Monetary Policy; Short-Term Interest Rate; John Maynard Keynes
    JEL: E12 E43 E50 E58 E60 G10 G12 G41
    Date: 2021–06
  6. By: Jan Kregel
    Abstract: This policy brief explores a route to remaking the international financial system that would avoid the contradictions inherent in some of the prevailing reform proposals currently under discussion. Senior Scholar Jan Kregel argues that the willingness of central banks to consider electronic currency provides an opening to reconsider a truly innovative reform of the international financial system, and one that is more appropriate to a digital monetary world: John Maynard Keynes's original clearing union proposal. Kregel investigates whether such a clearing system could be built up from an already-existing initiative that has emerged in the private sector. He analyzes the operations of a private, cross-border payment system that could serve as a real-world blueprint for a more politically palatable equivalent of Keynes's international clearing union.
    Date: 2021–02
  7. By: Dimitri B. Papadimitriou; Christos Pierros; Nikos Rodousakis; Gennaro Zezza
    Abstract: The Greek economy--still fragile due to the lingering effects of the 2009-10 crisis--was hit particularly hard by the COVID-19 pandemic. Greece's 2020 GDP decline was one of the worst among the group of EU and eurozone member states, along with the highest levels of unemployment and underemployment. Dimitri B. Papadimitriou, Christos Pierros, Nikos Rodousakis, and Gennaro Zezza update their analysis of the state of the Greek economy on the basis of recently released provisional data for 2020Q4, and model three projections through 2023: (1) a baseline scenario in which no agreement is reached on the disbursement of EU funds (the Recovery and Resilience Facility); (2) a scenario in which EU grants and loans are distributed in a timely manner; and (3) an additional scenario that pairs EU funds with implementation of an employer-of-last resort program. The second scenario would see Greece's GDP growth return to its pre-pandemic trend--albeit still leaving the economy below the level of real GDP it reached in 2008. The third scenario has the most favorable impact on growth and employment--raising real GDP above its pre-pandemic trend. Failure to achieve a proper recovery of GDP in Greece would be directly related to an absence of fiscal policy expansion. This Strategic Analysis is the joint product of the Levy Economics Institute of Bard College and INE-GSEE (Athens, Greece). It is simultaneously issued in both English and Greek.
    Date: 2021–05
  8. By: Frank Veneroso
    Abstract: According to Frank Veneroso, a broad subset of today's US stock market has become what he calls a "pure price-chasing bubble." Examination of the history of comparable pure price-chasing bubbles shows there has been a set of key causal factors that contributed to these rare market events. The most extreme such case was an over-the-counter market in Kuwait called the "Souk al-Manakh." This exemplar of a pure price-chasing phenomenon may shed light--albeit unflattering--on the current US equity market, Veneroso contends.
    Date: 2021–04
  9. By: Luiza Nassif Pires; Luísa Cardoso; Ana Luíza Matos de Oliveira
    Abstract: Research Scholar Luiza Nassif-Pires, Luísa Cardoso, and Ana Luíza Matos de Oliveira analyze the importance of the "emergency benefit" (Auxílio Emergencial) in containing the increase in poverty and extreme poverty in Brazil during the COVID-19 pandemic. They find the emergency benefit mitigated the loss of income, brought the poverty rate to historically low levels, and reduced inequality: poverty gaps in terms of gender and (to a lesser degree) race narrowed in 2020. However, their simulations show that a planned reduction in transfer levels for 2021 will result in the emergency benefit providing substantially less social protection against loss of income than its more robust 2020 version.
    Date: 2021–05
  10. By: Sevilla, Almudena; Smith, Sarah
    Abstract: The status of women in economics in the US has come increasingly under the spotlight. We exploit high quality administrative data to paint the first comprehensive picture of the status of women in UK academic economics departments in research-intensive universities. Our evidence indicates that, as in the US, women in economics are under-represented and are paid less than men. The issues facing women in economics in the UK are similar to other disciplines particularly STEM but have received less national policy attention to date. We conclude with a discussion of interventions that might improve the status of women in academia and we present new evidence that a UK academic diversity programme (Athena Swan) has narrowed the gender pay gap at a senior level.
    Keywords: Academia; Gender; gender wage gap; Women in Economics
    JEL: A14
    Date: 2020–07
  11. By: Rodrik, Dani
    Abstract: There is compelling evidence that globalization shocks, often working through culture and identity, have played an important role in driving up support for populist movements, particularly of the right-wing kind. I start with an empirical analysis of the 2016 presidential election in the U.S. to show globalization-related attitudinal variables were important correlates of the switch to Trump. I then provide a conceptual framework that identifies four distinct channels through which globalization can stimulate populism, two each on the demand and supply sides of politics, respectively. I evaluate the empirical literature with the help of this framework, discussing trade, financial globalization, and immigration separately. I conclude the paper by discussing some apparently anomalous cases where populists have been against, rather than in favor of trade protection.
    Date: 2020–07
  12. By: Giovanni Andrea Cornia
    Abstract: Most analysts of the Latin American economy believe in the unavoidable persistence of high income and wealth inequality in the region due to a continued structural dependence on primary commodities, the lingering effects of colonial policies, and the emergence of a modernized version of the traditional elites. This paper challenges this view on political economic grounds. It argues that the changes observed over the last one hundred and fifty years in the political orientation of governments affected the nature of economic and social policies that, in their turn, influenced the level of income inequality, both upward and downward. In other words, the evolution of inequality has depended to a considerable extent on ideological and political changes that need to be fully understood. This paper tries to explore this circular relation between `political orientation' of governments and `inequality', and between ‘endogenous changes in economic/social conditions' and `changes in the political orientation of governments'.
    Date: 2021
  13. By: Crafts, Nicholas (University of Sussex and CAGE, University of Warwick)
    Abstract: In 1930 Keynes opined that by 2030 people would work only 15 hours per week. As such, this prediction will not be realised. However, expected lifetime hours of leisure and non-market work in the UK rose by 60 per cent between 1931 and 2011, considerably more than Keynes would have expected. This reflects increases in life expectancy at older ages and much longer expected periods of retirement. Leisure in retirement contributes to high life satisfaction for the elderly but building up savings to pay for it is a barrier to working only 15 hours per week.
    Keywords: Leisure ; Life Expectancy ; Retirement ; Work JEL Classification: J22 ; J26 ; N34
    Date: 2021

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