nep-pke New Economics Papers
on Post Keynesian Economics
Issue of 2021‒09‒06
eight papers chosen by
Karl Petrick
Western New England University

  1. Expectational and Portfolio-Demand Shifts in a Keynesian Model of Monetary Growth Fluctuations By Greg Philip Hannsgen; Tai Young-Taft
  2. "Modeling Monopoly Money: Government as the Source of the Price Level and Unemployment" By Sam Levey
  3. Reading Keynes’s policy papers through the prism of his Treatise on Probability: information, expectations and revision of probabilities in economic policy By Rivot, Sylvie
  4. Global Capital, the Exchange Rate, and Policy (In)Effectiveness By Biagio Bossone
  5. Pluralist Economics as a Democratizing Force: A Review Essay about The Routledge Handbook of Heterodox Economics and Democratizing the Economics Debate: Pluralism and Research Evaluation By Eichacker, Nina
  6. The Baran Ratio, Investment, and British Economic Growth and Investment By Lambert, Thomas
  7. An Institutional Analysis of Social Value in Property Development By Nagwa Kady
  8. The coercive logic of fake news By Alexander J. Stewart; Antonio A. Arechar; David G. Rand; Joshua B. Plotkin

  1. By: Greg Philip Hannsgen; Tai Young-Taft
    Abstract: We develop a pair of models to show how non-ad-hoc shifts to expectational variables can be used to model tendencies toward crisis. In the Shackle model, as developed in the book Keynesian Kaleidics (1974), uncertainty can lead to a collapse in the marginal efficiency of investment and a jump in liquidity preference. In the Minsky version of the model, excessive private debt can lead to a financial collapse–again an endogenous breakdown in forces supporting growth. We extend the models to indicate how the dynamics of inflation and distribution affect the dynamics.
    Keywords: Post Keynesian macro model, Poisson model of financial fragility, Keynesian dynamics, Hyman Minsky, G.L.S. Shackle, Keynesian Kaleidics, endogenous MEI and liquidity preference, financial fragility hypothesis
    JEL: E12 E32
    Date: 2021–08
  2. By: Sam Levey
    Abstract: Many of the claims put forth by Modern Monetary Theory (MMT) center around the state's monopoly over its own currency. In this paper I interrogate the plausibility of two claims: 1) MMT’s theory of the price level--that the price level is a function of prices paid by government when it spends--and 2) the claim that the cause of deficient effective demand is the state's failure to supply government liabilities so as to meet the demand for net financial assets. I do so by building a model of "monopoly money" capable of producing these two outcomes.
    Keywords: Modern Monetary Theory; Price Level; Monopoly Money; Durapoly; Deficient Effective Demand
    JEL: E4 E62 B52 D42
    Date: 2021–08
  3. By: Rivot, Sylvie
    Abstract: When scholars investigate the legacy of Keynes’s Treatise on Probability (1921) for the development of Keynes’s thinking, the attention usually focuses on the connections between Keynes’s probability theory, his conception of decision-making under uncertainty and the theory of the functioning of the macroeconomic system that derives from it - through the marginal efficiency of capital, the preference for liquidity and the self-referential functioning of financial markets. By contrast, the paper aims to investigate the connections between Keynes’s probability theory on the one hand, and his economic policy recommendations on the other. It concentrates on the policy recommendations defended by Keynes during the Great Depression but also after the General Theory. Keynes’s economic policy can be understood as a framework for decision-making in situations of uncertainty: fiscal policy aims to induce private agents to change their “rational” probability statements, while monetary policy aims to allow more weight to these statements.
    Date: 2021–08–24
  4. By: Biagio Bossone
    Abstract: In line with JMK’s liquidity preference theory, this article holds that in a world of highly internationally financially integrated economies the exchange rate between any two currencies is determined by the financial market views as to what its value is expected to be in the future. These views are influenced by the policy credibility that markets themselves attribute to the currency-issuing countries. After briefly reviewing the established theories of the exchange rate, the article proposes a very simple, aggregate model of equilibrium exchange rate determination based on market views and discusses its basic features and policy implications. It shows that whereas macro policy shocks in highly credible countries affect mostly real output with only a moderate impact on the exchange rate, the same shocks in poorly credible countries dissipate almost entirely in exchange rate movements. The exchange rate ultimately reflects the space that markets make available to national authorities for effective macro policies.
    Keywords: Credibility; Exchange rate; Global investors and capital; Inflation; Macroeconomic policy
    JEL: F41 F62 G15
    Date: 2021–09
  5. By: Eichacker, Nina
    Abstract: The Routledge Handbook of Heterodox Economics and Democratizing the Economics Debate: Pluralism and Research Evaluation, two recently published books about heterodox economics and its role in broader academic and policy discourses, serve as an antidote to some recent popular narratives equating economics and economists with policies that are inherently pro-market, anti-regulation, and based in neoclassical theories. These texts illuminate challenges in current economic discourse about (1) the place of economic pluralism, (2) the role economics and economists should play in guiding policy relative to other social science disciplines, and (3) the consequences of the reliance of policy-makers on economists that train at the most elite institutions that are likely to recommend a narrow band of policies informed by a restricted range of economic theories. The Routledge Handbook of Heterodox Economics, edited by Tae-Jee Ho, Lynne Chester, and Carlo D’Ippoliti, presents positive visions for new questions that heterodox economists are researching, alternative explanations for global economic dynamics, and a counter-narrative to the notion that economists are bound to propose neoliberal policies based on neoclassical and new classical economic theories, and that economic analysis must demonstrate causality using different statistical methodologies to validate its rigor. Carlo D’Ippoliti’s Democratizing the Economics Debate examines the dialectical process by which economic rankings prioritize economic work informed by a narrow range of theories, and serve as a springboard for economists studying and working at the most elite institutions to land in powerful government advisory positions. D’Ippoliti highlights the stakes for governments that continue to hire economic policymakers from these top-tier programs with limited demonstrated curiosity in theories that might be considered heterodox, and the benefits for the economics discipline as a whole for better engagement with pluralist economics writ large.
    Date: 2021–08–26
  6. By: Lambert, Thomas
    Abstract: Investment in capital, new technology, and agricultural techniques has not been considered an endeavor worthwhile in a medieval economy because of a lack of strong property rights and no incentive on the part of lords and barons to lend money to or grant rights to peasant farmers. Therefore, the medieval economy and standards of living at that time often have been characterized as non-dynamic and static due to insufficient investment in innovative techniques and technology. Paul Baran’s concept of the economic surplus is applied to investment patterns during the late medieval, mercantile, and early capitalist stages of economic growth in England and the UK. This paper uses Zhun Xu’s Baran Ratio concept to try to develop general trends to demonstrate and to reinforce other historical accounts of these times that a productive and sufficient level of public and private investment out of accumulated capital income, taxation, and rents does not have a real impact on economic per capita growth until around the 1600s in Britain. This would also be about the time of capitalism’s ascent as the dominant economic system in England. Even then, dramatic increases in investment and economic growth do not appear until the late 18th Century when investment more consistently becomes more than one hundred percent of the level of economic surplus and takes in government spending. The types of investment, threshold amounts of investment out of profits and rents along with government spending seem to matter when it comes to a growth path raising GDP per capita and national income per capita to higher levels. Although much of this knowledge perhaps is embodied in current historical accounts, the Baran Ratio nicely summarizes and illustrates the importance of levels of investment to economic growth.
    Keywords: Baran Ratio, Baran multiplier, capitalism, feudalism, Keynesian multiplier
    JEL: B51 E11 E12 N13
    Date: 2021–09–01
  7. By: Nagwa Kady
    Abstract: Social value is gaining unexpected attention in the property industry, triggered by Sustainable Development Goals, social awareness, ethical consumption, and the demand for business transparency and accountability. As such, businesses have transformed their corporate social responsibility (CSR) strategies from philanthropic to creating shared value- i.e., coupling financial performance to social benefit. Interest in environmental, social, and governance (ESG) has accelerated since 2019 due to the global pandemic. Investors have been keen on integrating ESG standards to measure the sustainability and impact of their investments; however, majority of the focus has been on environmental aspects. Only recently have property market actors paid attention to the social aspect, as the current global health crises exasperated social issues in urban areas thus, instigating awareness on the implications of social conditions on investments’ value. Using empirical data, this study looks into the various formal and informal institutions that aid the production of social value in property development in Amsterdam, The Netherlands. More specifically, it studies the structures and mechanisms (i.e. values, norms, rules) that guide property market actors and their practices, which in turn influence development outcomes, and shape urban areas and its wider communities. I argue that harnessing social value requires a better understanding of the complex institutions that guide social outcomes in property developments and urban areas at large. Data will be collected from policy documents, municipal websites, property market publications, and semi-structured in-depth interviews with actors, thus providing a thorough interpretation of social value and assessment of strategies and interests that shape development outcomes.
    Keywords: Corporate Social Responsibility; Property Development; social value; Urban Planning
    JEL: R3
    Date: 2021–01–01
  8. By: Alexander J. Stewart; Antonio A. Arechar; David G. Rand; Joshua B. Plotkin
    Abstract: The spread of misinformation and "fake news" continues to be a major focus of public concern. A great deal of recent research has examined who falls for misinformation and why, and what can be done to make people more discerning consumers of news. Comparatively little work, however, has considered the choices of those who produce misinformation, and how these choices interact with the psychology of news consumers. Here we use game-theoretic models to study the strategic interaction between news publishers and news readers. We show that publishers who seek to spread misinformation can generate high engagement with falsehoods by using strategies that mix true and false stories over time, in such a way that they serve more false stories to more loyal readers. These coercive strategies cause false stories to receive higher reader engagement than true stories - even when readers strictly prefer truth over falsehood. In contrast, publishers who seek to promote engagement with accurate information will use strategies that generate more engagement with true stories than with false stories. We confirm these predictions empirically by examining 1,000 headlines from 20 mainstream and 20 fake news sites, comparing Facebook engagement data with 20,000 perceived accuracy ratings collected in a survey experiment. We then use our model to analyze possible ways to disincentivize fake news, finding that reducing the capacity of news sources to microtarget readers, and increasing readers' level of attention, reduces the efficacy of coercion. Finally, we show that if a publisher incorrectly assumes that readers prefer falsehoods, their resulting publication strategy can manufacture greater engagement with false news - leading to a self-reinforcing cycle of false news promotion.
    Date: 2021–08

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