nep-pke New Economics Papers
on Post Keynesian Economics
Issue of 2021‒11‒01
five papers chosen by
Karl Petrick
Western New England University

  1. Multiplicity and not necessarily heterogeneity: implications for the long-run degree of capacity utilization By Lorenzo Di Domenico
  2. Uneven Development in a Kaldor-Pasinetti-Verspagen Model of Growth and Distribution By Jose Luis Oreiro; Vitor Antonio Ferreira Dotta; João Pedro Heringer Machado
  3. Marx's Rate of Profit and the Theory of Labour values as Conservation Law By Giovanni Scarano
  4. A critical note on the scientific conception of economics: claiming for a methodological pluralism By Rouven Reinke
  5. Method and scope in Joseph A. Schumpeter's economics: a pluralist perspective By Turan Yay

  1. By: Lorenzo Di Domenico (University of Warsaw (PL))
    Abstract: The paper discusses the implications of disaggregation within the theoretical debate on the long-run convergence of the degree of capacity utilization towards the normal one. To this end, we develop an Agent Based – Stock Flow Consistent version of a demand-led growth model based on the capacity adjustment principle, fixed normal rate of capacity utilization and non-capacity creating autonomous component of demand. We show that, once the implicit assumption on the centralized control over the aggregate productive capacity characterizing aggregate models is removed, the economy displays emergent properties: the fluctuations of the business cycle endogenously arise, and the long-run aggregate degree of capacity utilization fluctuates around a level lower than the normal one. These proprieties help to explain some empirical evidence about the tendential under-utilization of productive capacity and confute both the traditional wisdom according to which there is only one degree of capacity utilization (the normal one) compatible with a stable accumulation and the neo-Kaleckian “closure”. To this extent, we point out that the long-run growth path determined within a Supermultiplier model can be somehow characterized by neo-Kaleckian features but, differently from the last one, such “undesired equilibrium” does not present Harrodian Instability: in the quasi-steady state firms keep trying to restore the exogenously given normal degree of capacity utilization without succeeding in that. The emerging phenomena derive, precisely, from considering a multiplicity of firms rather than the aggregate macro firm, and not by their heterogeneity. In particular, for any given distribution of demand across firms, the decentralized control over aggregate productive capacity produces over-investment with respect to the normal growth path.
    Keywords: Post-Keynesian economics; Economic growth; Agent Based – Stock Flow Consistent models
    JEL: C63 E11 E12 O42 P16
    Date: 2021–10
  2. By: Jose Luis Oreiro; Vitor Antonio Ferreira Dotta; João Pedro Heringer Machado
    Abstract: The main objective of this paper is to incorporate the technological asymmetries between countries in the formal structure of the so-called Kaldor-Pasinetti model of growth and distribution. We will name such a model as Kaldor-Pasinetti-Verspagen Growth-Model. Our basic contribution for the literature of post-Keynesian models of growth and distribution is to redefine Kaldor´s technical progress function to incorporate the technological gap in the determination of the natural rate of growth. Such incorporation will make possible for such class of models to generate uneven development between countries, at least for mature economies, that is, economies where all labor force is employed in the modern or capitalist sector. Since in such models, income distribution is the adjusting variable between natural and warranted rate of growth, one important result of our model is that income distribution between wages and profits is a non-linear function of the level of technological gap: below some threshold level of technological gap, profit-share will be reduced with the reduction of technological gap; above such threshold level, hover, the opposite effect occurs. Another important contribution of this article is to make a general formulation of the saving function, incorporating in the same model the contributions of both Kaldor and Pasinetti. From this general formulation, we can make different closures for the general model, which will allow the analysis of the implications of different assumptions about saving behavior over the income and wealth distribution in the balanced-growth path of mature economies that operate with different levels of technological gap.
    Keywords: Uneven Development, Post Keynesian Economics, Technological progress
    JEL: E12 O11 O14
    Date: 2021–10
  3. By: Giovanni Scarano
    Abstract: The paper argues that Ricardo’s concern with determining the rate of profit had no central place in Marx’s analysis. Marx, in fact, utilised his own version of the labour theory of value – very different from that of Smith and Ricardo – not to determine the rate of profit, but to analyse the dynamics of economic aggregates and bring to light the inner social nature of production and distribution processes. The present analysis of the peculiar use of Marx’s labour theory of value is also an attempt to explain the role played by it in his system, for better or worse. The final thesis of the paper is that, in his system, Marx’s version of the labour theory of value plays the same role that conservation laws play in most physics theories, with significant consequences for an understanding of the dynamics of capital accumulation, business cycles and economic crises.
    Keywords: Labour theory of value, prices of production, rate of profit, transformation problem, conservation laws
    JEL: B14 B24 B51 C67
    Date: 2021–10
  4. By: Rouven Reinke (University of Hamburg)
    Abstract: Opponents of mainstream economics have not yet called attention to the lack of in-depth examination of the general scientific conception of modern economics. However, economic science cannot consistently fulfil the epistemological and ontological requirements of the scientific standards underlying this conception. What can be scientifically recognized as true cannot be answered, neither through the actual ontological structure of the object of observation nor through a methodological demarcation. These limitations necessarily lead to the claim for both a pragmatic and a radical methodological pluralism.
    Keywords: pluralism,scientific conception,mainstream economics,methodology
    Date: 2021–11–20
  5. By: Turan Yay (Yeditepe University)
    Abstract: This study aims to evaluate the ideas on the scope and method of economics of Joseph Schumpeter who is one of the important economists of the 20th century. The study consists of four sections: In the first section we underline the interesting points of his life to understand the roots, background, or 'vision' of his thought system. In the second section, we will examine his methodological views that he asserted in his first (but translated into English only in 2010) book. Third section will be concerned with his 'analysis of economics' which refers to his critics of Leon Walras's general equilibrium analysis (as static) and his own alternative (dynamics analysis of capitalist economies) about the central subject matter of economics. In the fourth section we will treat his approach about the development/evolution process of economic thought in time. The study concludes with a brief assessment: Schumpeter is one of the rare economists who can build his own thought system in the history of economics, and he embraced a pluralist perspective in the field of the methodology of economics.
    Keywords: Schumpeter,methodology,economic development,sociology of science
    Date: 2021–11–20

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