nep-pke New Economics Papers
on Post Keynesian Economics
Issue of 2021‒09‒27
four papers chosen by
Karl Petrick
Western New England University

  1. Why Ideology Exists By Jon D. Wisman
  2. New Evidence on Redlining by Federal Housing Programs in the 1930s By Price V. Fishback; Jonathan Rose; Kenneth A. Snowden; Thomas Storrs
  3. Capitalist Systems and Income Inequality By Marco Ranaldi; Branko Milanovic
  4. Salience By Pedro Bordalo; Nicola Gennaioli; Andrei Shleifer

  1. By: Jon D. Wisman
    Abstract: Understanding the role of ideology is of fundamental importance for understanding social dynamics since the rise of the state 5,500 years ago. Yet this importance has not received adequate attention from social scientists and historians. Even when addressed, it most often has suffered from imprecise meaning and a failure to clearly specify why it is effective. Following the usage by Marx, this article defines ideology as an instrument of exploitation which enables the stronger to persuade the weaker to support behavior and institutions that are counter to their interests. Exploitation exists because humans are biologically driven to compete for status which provides them with reproductive advantage. What ultimately drives competition among all species is the struggle to send one’s unique set of genes into posterity. The biological ancestors of all currently living beings did so successfully. This article surveys how this biologically driven struggle eventually led to weapons and social organization that enabled the stronger to subjugate and exploit the weaker. Ideology evolved as religion was transformed to justify this exploitation by depicting it as in accord with cosmic forces. Ideology provided a more efficient means of maintaining exploitation than violence. With the rise of capitalism, secular doctrines, and especially political economy and then economics, joined and eventually mostly replaced religion in serving as ideology justifying exploitation.
    Keywords: Ideology, exploitation, inequality, legitimation, religion
    JEL: B15 N40 Z12 Z13
    Date: 2021
  2. By: Price V. Fishback; Jonathan Rose; Kenneth A. Snowden; Thomas Storrs
    Abstract: We show that the Federal Housing Administration (FHA), from its inception in the 1930s, did not insure mortgages in low income urban neighborhoods where the vast majority of urban Black Americans lived. The agency evaluated neighborhoods using block-level information collected by New Deal relief programs and the Census in many cities. The FHA’s exclusionary pattern predates the advent of the infamous maps later made by the Home Owners’ Loan Corporation (HOLC) and shows little change after the drafting of those maps. In contrast, the HOLC itself broadly loaned to such neighborhoods and to Black homeowners. We conclude that the HOLC’s redlining maps had little effect on the geographic distribution of either program’s mortgage market activity, and that the FHA crafted and implemented its own redlining methodology prior to the HOLC.
    JEL: G21 G22 G28 G5 N22 N42 N92 R31
    Date: 2021–09
  3. By: Marco Ranaldi; Branko Milanovic
    Abstract: The paper investigates the relationship between capitalism systems and their levels of income and compositional inequality (how the composition of income between capital and labor varies along income distribution). Capitalism may be seen to range between Classical Capitalism, where the rich have only capital income, and the rest have only labor income, and Liberal Capitalism, where many people receive both capital and labor incomes. Using a new methodology and data from 47 countries over the past 25 years, we show that higher compositional inequality is associated with higher inter-personal inequality. Nordic countries are exceptional because they combine high compositional inequality with low inter-personal inequality. We speculate on the emergence of homoploutic societies where income composition may be the same for all, but Gini inequality nonetheless high, and introduce a new taxonomy of capitalist societies.
    JEL: D31 P51
    Date: 2020–10
  4. By: Pedro Bordalo; Nicola Gennaioli; Andrei Shleifer
    Abstract: We review the fast-growing work on salience and economic behavior. Psychological research shows that salient stimuli attract human attention “bottom up” due to their high contrast with surroundings, their surprising nature relative to recalled experiences, or their prominence. The Bordalo, Gennaioli and Shleifer (2012, 2013, 2020) models of salience show how bottom up attention can distort economic choice by distracting decision makers from their immediate goals or from certain choice attributes. We show that this approach explains many puzzles: separately treated departures from “rationality” such as probability weighting, menu effects, reference point effects, and framing, emerge as distinct manifestations of the same principle of bottom up attention to salient stimuli. We highlight new predictions and discuss open conceptual questions, as well as potential applications in finance, industrial organization, advertising, and politics.
    JEL: D0 D03 D81 D90
    Date: 2021–09

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