nep-pke New Economics Papers
on Post Keynesian Economics
Issue of 2021‒11‒29
seven papers chosen by
Karl Petrick
Western New England University

  1. Exercising Economic Sovereignty in Today's Global Financial World: The Lessons from John Maynard Keynes By Biagio Bossone
  2. Major Streams in the Economics of Inequality: A Qualitative and Quantitative Analysis of the Literature since 1950s By Lima, Pedro G.; Teixeira, Pedro N.; Silva, Sandra T.
  3. Rawls and the economists: the (im)possible dialogue. By Herrade Igersheim
  4. Entrepreneurs “from within”? Schumpeter and the challenge of endogenizing novelty. By Remy Guichardaz; Julien Pénin
  5. Two scenarios for sustainable welfare: new ideas for an eco-social contract By Gough, Ian
  6. O.M.W. Sprague (the Man Who “Wrote the Book” on Financial Crises) meets the Great Depression By Hugh Rockoff
  7. Intolerance Predicts Climate Skepticism By Johansson, Alva; Berggren, Niclas; Nilsson, Therese

  1. By: Biagio Bossone (World Bank (US))
    Abstract: In this article, I argue that current macroeconomic models (both orthodox and heterodox), centered as they are on local agents or agencies, do not recognize the role that "global investors" play in determining the space for effective macroeconomic policies. I therefore argue that these important players must be placed at the center of macroeconomic analysis if we are to understand how macroeconomic policies really work in the global financial environment. The article describes the key characteristics of global investors, analyzes their power to determine the value at which public sector liabilities (money and debt) are traded on international markets and how this power affects policy effectiveness. Consequently, no country is truly sovereign in a globalized world and the government of every country is subject to an intertemporal budget constraint (IBC), although, of course, not all countries are equal and not all IBCs are equally binding: the IBCs are flexible and endogenous to the decisions of global investors but in any case, unavoidable. I conclude the article by arguing that the policy choices of countries in today's globalized financial environment would benefit from revisiting some of John Maynard Keynes's teachings, considering his in-depth knowledge of global financial markets and how they affect economies. of the countries.
    Keywords: economic sovereignty; exchange rates; global financial markets; global investors; macroeconomic policies; money; policy credibility; policy space; public debt
    JEL: E60 F62 F65 G15
    Date: 2021–11
  2. By: Lima, Pedro G. (University of Porto); Teixeira, Pedro N. (University of Porto); Silva, Sandra T. (University of Porto)
    Abstract: Since the late twentieth century there has been a growing interest in academic and political circles on inequality. In this paper, we develop a systematic analysis of the literature on this topic published in economic journals since the 1950s. This is done through an innovative approach that presents (i) an identification and characterization of the main streams of research about Inequality since the 1950s; (ii) the development of a new method of analysis that combines (ii-a) a quantitative bibliometric analysis using the VOSviewer software, which maps them into different clusters, (ii-b) a qualitative analysis, where we determine the main streams of research, based, not only on the content of each reference, but also on the context where they are cited, and provide context to the development of each cluster by analysing the most important journals, authors, and institutions. The analysis leads to the identification of seven clusters, each of them with several streams of research. Each of the clusters is characterized according to several aspects such as the journals where the contributions were published, the alma matres and academic affiliations of the authors, and the countries in which those authors are based. The leading journals and the dominant academic institutions are the same as found in economics broadly considered, but they vary from cluster to cluster. Among the authors that have had major influence in the development of this field of economic research, stand out Anthony Atkinson, Simon Kuznets, Michael Kalecki, and Thomas Piketty.
    Keywords: inequality, distribution of income, wealth, bibliometrics, Kuznets, Atkinson, Piketty, Kalecki
    JEL: B2 D31 E24
    Date: 2021–10
  3. By: Herrade Igersheim
    Abstract: Although falling within the scope of political and moral philosophy, it is well known that A Theory of Justice has also had a great impact on economists. As such, Rawls put great emphasis on his desire to combine economics and philosophy, and particularly to deal with rational choice theory, notably and famously claiming that “the theory of justice is a part, perhaps the most significant part, of the theory of rational choice” (1971, 15). After the publication of A Theory of Justice, aspects of it came in for criticism – often very vehement – by economists such as Arrow (1973), Musgrave (1974), Harsanyi (1975) and later by Sen (1980). Rawls’s immediate answers (1974a,b in particular) showed that he first wanted to maintain a dialogue with the economists, but the later evolutions of his works (1993, 2001) clearly demonstrated that he had removed himself from the economic realm, returning to his initial philosophical territory in order to overcome the internal inconsistencies of A Theory of Justice. In this paper, by focusing extensively on the letter exchanges between Rawls and the economists before and after the publication of A Theory of Justice, I attempt to shed light on other (complementary) elements which can explain Rawls’s retreat from the realm of economics, and his progressive disenchantment regarding the possibility of a dialogue on equal footing between economists and philosophers.
    Keywords: Rawls, Sen, social justice, rational choice.
    JEL: B21 B31 D63
    Date: 2021
  4. By: Remy Guichardaz; Julien Pénin
    Abstract: The development of a dynamic model of endogenous economic change was a major challenge for Schumpeter throughout his academic career. With regard to this life-long objective, this work provides an explanation of why it was impossible for Schumpeter to offer a convincing endogenous theory of the emergence of novelty. We show that Schumpeter’s view of the apparition of pure novelty is centered around an individual and elitist dimension of entrepreneurship and an energetic and vitalist axiom of social change, which is by nature hardly compatible with endogenous evolution. Furthermore, our revisiting of the last writings of Schumpeter shows that, when it comes to the issue of the emergence of pure novelty, the impossibility persisted until his death. Contrary to the claim of some commentators, even the old Schumpeter remained stuck into an individualistic, elitist and energetic view of the generation of pure novelty.
    Keywords: Schumpeter; entrepreneur; economic evolution; endogenous change; innovation.
    JEL: B15 O3
    Date: 2021
  5. By: Gough, Ian
    Abstract: More and more nation states are now committing to net-zero carbon by 2050 at the latest, which is encouraging, but none have faced up to the transformation of economies, societies and lives that this will entail. This paper considers two scenarios for sustainable welfare and discusses the implications for contemporary incomes, jobs and welfare states. It is necessarily restricted to the EU and similarly rich countries of the developed world. The first scenario is the Green New Deal framework to decarbonise the economy whilst addressing the distributional and welfare issues this would involve. This paper argues that expanded public provision of ‘essentials’ would be a necessary social component of this strategy. The second scenario goes further to counteract runaway private consumption by building an economy of egalitarian sufficiency with ceilings to income, wealth and consumption. This would require a further extension of labour market and welfare state interventions. The paper provides a framework for mapping and developing these two distinct approaches and for identifying a range of policy options on jobs and incomes.
    JEL: J1
    Date: 2021–11
  6. By: Hugh Rockoff
    Abstract: When the Great Depression struck the United States, Oliver M.W. Sprague was America’s foremost expert on financial crises. His History of Crises under the National Banking System is a frequently cited classic. Had he diagnosed a banking panic and called for an aggressive response by the Federal Reserve, it might have made a difference; but he did not. Sprague’s misdiagnosis had, I argue, two causes. First, the crisis lacked the symptoms of a panic, such as high short-term interest rates in the New York money market, which Sprague had identified from his studies of previous crises. Second, Sprague’s macro-economic ideas led him to conclude that an expansionary monetary policy would be of little help once a depression was underway. Sprague’s main concern was that abandoning the gold standard would intensify the crisis, a concern that led him to resign his position as advisor to the U.S. Treasury to protest Roosevelt’s gold policy.
    JEL: B2 N12 N2
    Date: 2021–10
  7. By: Johansson, Alva (Department of Economics, Lund University); Berggren, Niclas (Research Institute of Industrial Economics (IFN)); Nilsson, Therese (Research Institute of Industrial Economics (IFN))
    Abstract: While there is almost unanimous consent among scientists that climate change is real and has detrimental consequences, there is a sizable number of people who are skeptical towards these propositions and who are not worried by climate change. In an attempt to understand the basis of climate skepticism, we look at the role of intolerance, a culturally transmitted attitude to the effect that people with certain characteristics are not to be respected. The theoretical link from intolerance to climate skepticism is driven by two elements: insufficient or biased knowledge formation and a value of not caring very much about the welfare of others. Our empirical analysis confirms that intolerance on the basis of race, ethnicity, immigration status, religion or sexual orientation predicts climate skepticism. By using the epidemiological method, relating the views on climate change of second-generation immigrants in Europe to cultural values in their countries of origin, we are able to rule out reverse causality – a novelty in the literature trying to explain climate skepticism. To get a feeling for the importance of intolerance, an increase in the share who are intolerant towards people of a different race in the individual’s country of origin by 10 percentage points implies a reduced probability of the individual considering the consequences of climate change extremely bad of 4.3 percentage points (21.5%). An important implication of our findings is that to influence climate skeptics, it may be necessary to go beyond argumentation about the facts as such and to find ways to affect more basic individual characteristics.
    Keywords: Climate skepticism; Culture; Intolerance; Causality; Values
    JEL: F64 Q01 Q54 Z10
    Date: 2021–11–15

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