nep-pke New Economics Papers
on Post Keynesian Economics
Issue of 2021‒08‒09
eight papers chosen by
Karl Petrick
Western New England University

  1. Financialization revisited: the economics and political economy of the vampire squid economy By Thomas Palley
  2. Sustainability and social policy nexus By Messkoub, M.
  3. Economic Growth as a Double-Edged Sword: The Pollution-Adjusted Kaldor-Verdoorn Effect By Guilherme de Oliveira; Gilberto Tadeu Lima
  4. Generation Post-COVID-19: The Time for Anti-Economics Has Come: Health, Minimalism and Rest By Julia M. Puaschunder
  5. Mission-Oriented Policies and the “Entrepreneurial State” at Work: An Agent-Based Exploration By Giovanni Dosi; Francesco Lamperti; Mariana Mazzucato; Mauro Napoletano; Andrea Roventini
  6. An elementary mathematical model for MMT (Modern Monetary Theory) By Tanaka, Yasuhito
  7. Transplantation of economic institutions: a post-institutional theory (expanded version) By Frolov, Daniil
  8. What’s Worth Knowing? Economists’ Opinions About Economics By Peter Andre; Armin Falk

  1. By: Thomas Palley (Economics for Democratic and Open Societies (US))
    Abstract: This paper explores the economics and political economy of financialization using Matt Taibbi’s vampire squid metaphor to characterize it. The paper makes five innovations. First, it focuses on the mechanics of the “vampire squid” process whereby financialization rotates through the economy loading sector balance sheets with debt. Second, it identifies the critical role of government budget deficits for the financialization process. Third, it identifies the critical role of central banks, which are the lynchpin of the system and now serve as de facto guarantors of the value and liquidity of private sector liabilities. Fourth, the paper argues financialization imposes a form of policy lock-in. Fifth, it argues financialization transforms popular attitudes and understandings, thereby generating political support despite poor economic outcomes. In effect, there is a politics of financialization that goes hand-in-hand with the economics. The paper concludes with some observations on why mainstream macroeconomics has no equivalent construct to financialization and discusses the disquieting unexplored terrain that the economy is now in.
    Keywords: financialization, debt, central banks, lock-in
    JEL: E10 E44 E58 G18
    Date: 2021–07
  2. By: Messkoub, M.
    Abstract: Social policies predate the welfare state and have left their mark on the genesis and development of the welfare state in different countries, that testifies to the importance of historical and ideological path-dependencies of social policies in different countries. The political/political-economy ecology literature links theories of social welfare and welfare state to environmental issues like resource use through the relationship between economic growth and sustainability. Orthodox mainstream neo-classical and Keynesian economics rely on economic growth in order to raise living standards but using different channels and mechanisms. It is this reliance on economic growth and its depletive effect on environmental resources that has lied at the heart of the critiques of growth oriented liberal/neo-liberal or Keynesian economic policies, and for that matter, economic policies of centralised economies of socialist countries. This paper will start with a critique of conservative environmentalism that is inspired by Malthusian population pressure (with all its social policy implications), that to some extent also informs the degrowth approach. It would then ask how to meet the increasing health, education and other social needs whilst minimising the depletion of natural resources. I argue that the answer to the question of a sustainable social policy in part lies in an economic model, a la Kalecki and others, that can manage/negotiate the composition of output whilst investing in resources to reduce depletion of natural resources and greenhouse emissions. This is a growth strategy based on ‘the human theory of needs’ that meets the needs of current generation and provides some measure of inter-generational justice. The welfare and social policy counterpart of this should involve public and collective provisioning of socially necessary services of health and education as well as a range of other care services that will reduce per capita cost through economies of scale and scope whilst providing an equitable access to these services – universal provision and access and not targeting is at the heart of this approach.
    Keywords: Sustainable economy, growth/degrowth, sustainable social policy, distribution
    Date: 2021–07–20
  3. By: Guilherme de Oliveira; Gilberto Tadeu Lima
    Abstract: There is evidence that pollution concentration impacts negatively on labor productivity, which has implications for the Kaldor-Verdoorn law. While the growth rate of labor productivity varies positively with the growth rate of output, the growth rate of pollution concentration also varies positively with the latter. As a result, an increase in pollution concentration leading to environmental degradation might offset the productivity-enhancing effect of a rise in the scale of output production. This paper explores such a double-edged sword feature of output growth in a demand-led macrodynamic framework having pollution concentration as a further influence on the class conflict over the functional distribution of the social product. The stability of the environment-economy system in the long run hinges on how output growth varies with the functional distribution of income. When output growth is positively related to the wage share, the balanced growth path is unstable. When output growth varies positively with the profit share, stability is a possibility, but the system undergoes fluctuations in the wage share and the ratio of capital to pollution concentration when converging to the balanced growth path. Environmental preservation and functional distribution and growth of the social product interact to each other in a complex way.
    Keywords: Economic growth; pollution concentration; labor productivity; functional Distribution of the social product
    JEL: E11 O44 Q52
    Date: 2021–07–26
  4. By: Julia M. Puaschunder (The New School, Department of Economics, USA)
    Abstract: This paper makes the heterodox economic case of missing attention to health, minimization and rest in business, finance and economics. The COVID-19 pandemic has been addressed as a once-in-a-lifetime opportunity to a Great Reset. Started at the end of 2019, COVID-19 has been spreading around the world for over a year by now and no clear end is foreseeable yet. While vaccination and medication opportunities to cure the disease have improved impressively and steadily, the COVID-19 healthcare crisis also entails around 10 to over 30% of previously COVID-infected to be suffering from long haul symptoms. While our first understanding of post-COVID infection long haul symptoms, impetus and cure is still missing, there is hardening evidence that the newly emerging Generation COVID-19 Long Haulers may comprise of 0.3-1.659 billion previously infected with recurrent symptoms of fatigue, headaches and breathing problems as well as a set of debilitating memory fog and emotional distress. With this generation of COVID-19 Long Haulers, who are by around 70-75% female and of a median age in their 30s and 40s, a dramatic shift to demand for health, minimalism and rest is predicted to emerge. Neoclassical ideas of business, finance and economic research have a limited understanding of health. Maximization pledges of productivity driven industries in business, finance and economics do not account for minimalism. Foremost behavioral economics started to address cognitive overload and decision-making failures in a too complex world. There is no appreciation for rest in finance and economics. All these trends of attention to health, minimalism and rest the COVID-19 Long Haulers generation may change lastingly.
    Keywords: Behavioral economics, Business, Coronavirus, COVID-19, Crisis, Debilitation, Economics, Emotional impairment, Fatigue, Finance, Headaches, Heterodox Economics, Generation COVID-19 Long Haulers, Healthcare, Medication, Memory fog, Minimalism, Preventive care, Respiratory symptoms, Rest, Self-measurement, Vaccination
    Date: 2021–05
  5. By: Giovanni Dosi (Laboratory of Economics and Management); Francesco Lamperti (Université Panthéon-Sorbonne - Paris 1 (UP1)); Mariana Mazzucato; Mauro Napoletano (Observatoire français des conjonctures économiques); Andrea Roventini
    Abstract: We study the impact of alternative innovation policies on the short- and long-run performance of the economy, as well as on public finances, extending the Schumpeter meeting Keynes agent-based model (Dosi et al., 2010). In particular, we consider market-based innovation policies such as R&D subsidies to firms, tax discount on investment, and direct policies akin to the “Entrepreneurial State” (Mazzucato, 2013), involving the creation of public research oriented firms diffusing technologies along specific trajectories, and funding a Public Research Lab conducting basic research to achieve radical innovations that enlarge the technological opportunities of the economy. Simu- lation results show that all policies improve productivity and GDP growth, but the best outcomes are achieved by active discretionary State policies, which are also able to crowd-in private investment and have positive hysteresis effects on growth dynamics. For the same size of public resources allocated to market-based interventions, “Mission” innovation policies deliver significantly better aggregate performance if the government is patient enough and willing to bear the intrinsic risks related to innovative activities.
    Keywords: Innovation policy, mission-oriented R&D, entrepreneurial state, agent-based modelling
    JEL: O33 O38 O31 O40 C63
    Date: 2021
  6. By: Tanaka, Yasuhito
    Abstract: In recent years, a school of economics called MMT (Modern Monetary Theory) has been attracting attention, but it has not been analyzed theoretically or mathematically. This study aims to provide a theoretical basis for the skeleton of the MMT argument, while maintaining the basics of the neoclassical microeconomic framework, such as utility maximization of consumers by means of utility functions and budget constraint, profit maximization of firms in monopolistic competition, and equilibrium of supply and demand of goods. Using a simple static model that includes economic growth due to technological progress, we will argue that: 1) a continuous budget deficit is necessary to maintain full employment when the economy is growing, and that this deficit does not have to be covered by future surpluses; 2) Inflation is caused when the actual budget deficit exceeds the level necessary and sufficient to maintain full employment. In order to avoid further inflation, it is necessary to maintain a certain level of budget deficit; 3) A shortfall in the budget deficit leads to recession and involuntary unemployment. To recover from this, a budget deficit that exceeds the level necessary to maintain full employment is required. However, since a continuous budget deficit is necessary after full employment is restored, the deficit created to overcome the recession does not need to be covered by future budget surpluses, nor should it be.
    Keywords: MMT, Economic growth, Budget deficit, Inflation
    JEL: E12 E24
    Date: 2021–08–02
  7. By: Frolov, Daniil
    Abstract: The transplantation of institutions, that is its copying from one country to another, is one of the most challenging areas of institutional economics. At the same time, the overwhelming majority of research on institutional transplantation is based on a set of general methodological principles and theoretical positions, which collectively might be termed the ‘classical theory’. Despite its persuasiveness and wide distribution (including outside the economic discourse), the classical theory of institutional transplantation has many built-in methodological limitations. It has a pronounced one-sided character, is based on reductionist approaches, and has problems with a systemic explanation of transplant processes in the modern economy. The article presents an interdisciplinary research program for the extended theory of institutional transplantation, based on the methodologies of post-institutionalism. The extended theory proposes to pay special attention to bottom-up transplants, as well as the role of institution-based communities – heterogeneous networks of internal and external actors of transplanted institutions. Adaptation of a transplanted institution to the new environment is viewed more as an active transformation of the environment by actors (institutional niche construction). The deviations from foreign prototypes arising in transplanted institutions are interpreted as adaptive refunctionalizations rather than transplant failures. Special emphasis is placed on the interactive communication field in which transplanted institutions develop. As a result of transplantation, it is proposed to consider not the dichotomy of successful adaptation and rejection of a new institution, but the emergence of institutional assemblage – a complex system of borrowed and local institutions based on irreducible institutional logics. A key metaphor for the extended theory is the formation of reef communities around artificial coral reefs.
    Keywords: transplantation of institutions; institutions; institutional environment; actors; assemblages; bricolage; narratives; discourses; niche construction
    JEL: B52
    Date: 2021–07–12
  8. By: Peter Andre; Armin Falk
    Abstract: We document economists’ opinions about what is worth knowing and ask (i) which research objectives economic research should embrace and (ii) which topics it should study. Almost 10,000 economic researchers from all fields and ranks of the profession participated in our global survey. Detailed bibliometric data show that our sample represents the population of economic researchers who publish in English. We report three main findings. First, economists’ opinions are vastly heterogeneous. Second, most researchers are dissatisfied with the status quo, in terms of both research topics and objectives. Third, on average, respondents think that economic research should become more policy-relevant, multidisciplinary, risky and disruptive, and pursue more diverse topics. We also find that dissatisfaction with the status quo is more prevalent among female scholars and associated with lower job satisfaction and higher stress levels. Taken together, the results suggest that economics as a field does not appreciate and work on what economists collectively prefer.
    JEL: A11 A14
    Date: 2021–07

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