nep-pke New Economics Papers
on Post Keynesian Economics
Issue of 2021‒06‒28
eight papers chosen by
Karl Petrick
Western New England University

  1. "The Pandemic, the Stimulus, and the Future Prospects for the US Economy" By Dimitri B. Papadimitriou; Michalis Nikiforos; Gennaro Zezza
  2. Shareholder Value or Public Purpose? From John Maynard Keynes and Adolf Berle to the Modern Debate By Suzanne J. Konzelmann; Victoria Chick; Marc Fovargue-Davies
  3. Personal income distribution and the endogeneity of the demand regime By Tonni, Lorenzo
  4. Antimonopolism as a Symptom of American Political Dysfunction By Woodcock, Ramsi
  5. Capitalism, Populism and Democracy: Revisiting Samuelson’s Reformulation of Schumpeter By Emilio Ocampo
  6. From ‘Capital and Ideology’ to ‘Democracy and Evidence’: A Review of Thomas Piketty By Ewan McGaughey
  7. The Voltage Effect in Behavioral Economics By John List
  8. Decoding Employment Status By Simon Deakin

  1. By: Dimitri B. Papadimitriou; Michalis Nikiforos; Gennaro Zezza
    Abstract: In this report, Institute President Dimitri B. Papadimitriou and Research Scholars Michalis Nikiforos and Gennaro Zezza analyze how the US economy was affected by the pandemic and its prospects for recovery. Their baseline simulation using the Institute's stock-flow macroeconometric model shows a significant pickup in the growth rate in 2021 as a result of the American Rescue Plan Act. The report includes two additional scenarios simulated on top of the baseline, finding that President Biden's infrastructure and families plans--whether paired with offsetting tax increases on high-earners or "deficit financed"--would have positive macroeconomic effects. Additionally, Papadimitriou, Nikiforos, and Zezza warn that if US policymakers do not prioritize decreasing the trade deficit, maintaining growth will require either continuous and very high government deficits or the private sector once again becoming a net borrower. Finally, they argue that concerns about a sharp increase in inflation spurred by the fiscal stimulus are unwarranted: the US economy was not close to full employment or full utilization of resources before the pandemic, and the propagation mechanisms that could lead to accelerating inflation are not in place.
    Date: 2021–06
  2. By: Suzanne J. Konzelmann; Victoria Chick; Marc Fovargue-Davies
    Abstract: The debate about corporate purpose is a recurring one that has re-emerged today. What should be the guiding principles of business: the pursuit of profit or a contribution to public well-being? We trace key elements in this debate in the UK and the US from the interwar years, when John Maynard Keynes and Adolf Berle made important contributions, to the present. Both the earlier and the current debates are centred around whether we see business institutions as strictly private entities, transacting with their suppliers, workers and customers on terms agreed with or imposed upon these groups, or as part of society at large and therefore expected to contribute to what society deems to be its interests. Whether current developments will ultimately produce a shift in corporate purpose akin to the one that followed the Second World War remains to be seen. But the parallels to the interwar debates, and the uncertain economic, political and social environment in which they took place, are striking. Our objective is to see what might be learned from the past to inform the current direction of thought concerning capitalism and corporate purpose.
    Keywords: Corporate purpose, shareholder primacy, John Maynard Keynes, Adolf Berle
    JEL: B31 L21 P16
    Date: 2020–06
  3. By: Tonni, Lorenzo
    Abstract: This paper deals with two intrinsically linked issues: the endogeneity of the demand regime and the personal distribution impact on aggregate demand. By microfounding the savings function, the aggregate savings rate is an increasing function of the Gini index, which in turn is decomposed as a function of the functional income distribution and the Gini indices for wages and profits. By assuming that saving is a function of personal rather than functional income distribution, an increase of the labour share is effective in boosting consumption and aggregate demand, not per se, but only as long as it reduces personal inequality. As the labour share increases, depending on the distribution of wages and profits, both the demand regime type – the sign of the slope of the demand schedule - and its strength- the size of the slope of the demand schedule - can endogenously change. Concerning the former, there can be a threshold value for the wage share beyond which there is a shift from wage-led to profit-led demand. The analysis shows that, unlike most Kaleckian models, profit inequality is just as important as wage inequality in determining the demand regime type and its strength.
    Keywords: Personal distribution, functional distribution, wage-led, profit-led, non-linear demand, endogenous demand regime
    JEL: B50 D31 D33 E11 E12
    Date: 2021–06
  4. By: Woodcock, Ramsi
    Abstract: Contemporary American interest in using antitrust law to address wealth inequality is a symptom of American political dysfunction rather than a reflection of any intellectual advance regarding the sources of inequality. Indeed, both the original American progressives of a century ago, as well as Thomas Piketty, whose work sparked contemporary intellectual interest in inequality, agree that inequality’s source is scarcity, rather than monopoly, and so will persist even in perfectly competitive markets. The only real solution is taxation, not a potentially destructive campaign of breakup. There are two cause of contemporary American antimonopolism. The first is American anti-statism, which has closed off tax policy as a viable political solution to inequality, forcing scholars and activists to seek a second- or third-best workaround in antitrust policy. The second is the American press, which is actively promoting antimonopolism as a way of fighting back against Google and Facebook, two companies that have badly outcompeted the press for advertising dollars in recent years. Given these idiosyncratic roots of contemporary American antimonopolism, other jurisdictions seeking to address inequality may have little to gain from following the American example, particularly if taxation remains a viable policy option for them.
    Date: 2021–06–10
  5. By: Emilio Ocampo
    Abstract: In the 1970s and early 1980s Paul Samuelson reformulated the conditional prediction made by Joseph Schumpeter in Capitalism, Socialism and Democracy by replacing socialism with populism. According to Samuelson, “populist democracy” had attained its fullest development in the Southern Cone. He viewed Argentina as the paradigmatic case that proved his theory. Samuelson’s thesis was that a strong electoral demand for equality and antipathy to business had hindered sustained economic growth. At the time, Samuelson also believed the advanced Western economies could follow the same path as Argentina. The Reagan and Thatcher revolution proved him wrong. However, the emergence of populism in Europe and the US in recent years makes his reformulation of Capitalism, Socialism and Democracy seem more plausible. The objective of this paper is to review and critique Samuelson’s theory and to assess its relevance and usefulness today. Its main conclusions can be summarized as follows. First, Samuelson’s theory is incomplete and therefore has limited power to explain current or past populist waves. Secondly, his analysis of the Argentine case was based on an erroneous interpretation of Argentine history. Third, despite being an outlier, Argentina’s addiction to populism offers a cautionary tale.
    Keywords: Samuelson, Schumpeter, Capitalism, Socialism, Democracy, Populist Democracy, Argentina, Chile, Uruguay.
    JEL: B20 B30 N16 O54 P48
    Date: 2021–06
  6. By: Ewan McGaughey
    Abstract: Thomas Piketty’s Capital and Ideology (2020) is a major, encyclopaedic and data-driven contribution to the effort of constructing a better human civilisation. This review summarises the main argument: a positive thesis that in every society, ideology feeds laws and institutions that create inequality, and inequality then bolsters ideology; a normative thesis that we need a better ideology, including ‘participatory socialism’, to solve our biggest challenges. The review then complements and critiques three central issues in the argument, that (1) the true concentration of economic power, the votes in the economy, is even more extreme than inequality of wealth and income, (2) the legal construction of markets, through property, contract, corporate, or human rights law, can ‘pre-distribute’ income and wealth to a vast extent before tax, and (3) social justice means expanding (not merely correcting or re-distributing) everyone’s opportunity, creative capacity, and human potential, and helps everyone to develop their personality to the fullest. Social justice is an unparalleled force, and is still the best answer to far-right, authoritarian or other failed ideologies, which have escalated inequality and driven climate damage. Perhaps the greatest achievement of Piketty’s work could be to bring economics firmly back to the values in the Universal Declaration of Human Rights.
    Keywords: Capital, ideology, democracy, evidence, banks, asset managers, codetermination, economic power, social justice
    JEL: K10 K11 K22 K31
    Date: 2021–04
  7. By: John List
    Abstract: All happy families are alike; each unhappy family is unhappy in its own way. -Leo Tolstoy, Anna Karenina
    Date: 2021
  8. By: Simon Deakin
    Abstract: There is much at stake in the classification of work relations: on the one hand, the stability of the tax base and the capacity of the state to deliver public goods; on the other, the structure of enterprise and the rights of workers in the ‘gig’ economy and beyond. Classification decisions, however, are made using legal concepts which many view as artificial and manipulable, to the point where it is hard to discern the considerations which are actually guiding decisions. Decomposing the ‘employment’ concept reveals something of the implicit ‘weighting’ of tests and indicators which underlies judicial and administrative determinations. Viewed in this light, statutory reformulations such as the ‘ABC’ test can play a role in ‘reweighting’ the classification process, extending the protective coverage of labour laws and resisting fiscal erosion.
    Keywords: Labour law, tax law, employment status
    JEL: J83 K31 K34
    Date: 2021–04

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