nep-pke New Economics Papers
on Post Keynesian Economics
Issue of 2022‒05‒02
seven papers chosen by
Karl Petrick
Western New England University

  1. More on the limits of New Developmentalism By Thomas Palley
  2. The opening of minds towards more active government that steers the production structure By Wade, Robert H.
  3. Entropy, directionality theory and the evolution of income inequality By Fabrizio Germano
  4. The Problems of Inflation Targeting Originate in the Monetary Theory of Knut Wicksell By Jonung, Lars
  5. The measure of monopsony By Langella, Monica; Manning, Alan
  6. Pandemic recession and helicopter money: Venice, 1629-1631 By Masciandaro, Donato; Goodhart, Charles; Ugolini, Stefano
  7. Monetary policy and the racial wage gap By Edmond Berisha; Ram Sewak Dubey; Eric Olson

  1. By: Thomas Palley
    Abstract: Oreiro and de Paula’s (2022) reply to my article (Palley, 2021) further convinces me that New Developmentalism (ND) substantially misconstrues the development challenge and ND’s policy recommendations lean in a Neoliberal direction. The critique of ND is not its emphasis of the importance of manufacturing. It is the regressive inclination, the narrowness of policy recommendations, neglect of the transformation dimension of development, and neglect of the implications of the shift to a post-industrial era.
    Keywords: New Developmentalism, Classical Developmentalism, economic development, transformation
    JEL: O11 O14 O23
    Date: 2022–04
  2. By: Wade, Robert H.
    Abstract: Deep society-wide crises tend to produce new economic thinking. 2020 familiarized many millions with trauma and loss. It also intensified the questioning – already started by the North Atlantic Financial Crisis (NAFC) of 2007-12 and by the dramatic rise of China on world technology and military frontiers – of the conservative ideology or world view which has dominated the economics profession and economic statecraft across the capitalist world for the past four decades – dominated as though simple common sense, quietly transforming western societies. This essay discusses the content of emerging thinking about the role of the state, and causes of the changes. But first, more on where we are coming from: from the deeply entrenched conservative ideology and its anti-government “intervention” in the economy.
    Keywords: industrial policy; neoliberalism; UK; US
    JEL: O20 O14 O38
    Date: 2021–09–23
  3. By: Fabrizio Germano
    Abstract: A macro-evolutionary theory of income inequality is proposed that is based on a society's dynamic income generating process. Two types of processes are distinguished, namely dispersing and concentrating ones. A basic result shows that dispersing processes provide a selective advantage for more balanced and mutualistic interaction; whereas concentrating ones favor weaker, less balanced and less mutualistic interaction. We also show that societies with more balanced and mutualistic interaction induce more income equality and a non-stratified society, while less balanced and less mutualistic ones induce more inequality and a possibly stratified society. Also, more equal societies are more resilient in the sense of being quicker to recover from shocks and return to steady state than less equal ones. Stylized examples of pre-modern and modern societies are briefly discussed.
    Keywords: income generating process, interaction network, entropy, cooperation, mutualism, income, inequality, fragility, pre-modern society
    JEL: C73 D31 Z13
    Date: 2022–04
  4. By: Jonung, Lars (Department of Economics, Lund University)
    Abstract: The theoretical foundation of inflation targeting was laid out by the Swedish economist Knut Wicksell (1851-1926) in his groundbreaking treatise, Interest and Prices, published originally in German in 1898. Here he proposed price stability as the rule for monetary policy. Today, inflation targeting is considered the best-practice approach to monetary policy across the world. It has contributed to stable and low consumer price inflation since the 1990s in many countries. However, inflation targeting has recently been the subject of several objections. Most prominently, the focus on consumer price stability has fostered financial instability, as reflected in the global financial crisis of 2008-09. In addition, the sharp rise in asset prices has led to growing wealth inequality. <p> Why have these problems emerged? This paper provides an answer by comparing Wicksell’s theory of price level determination in a pure credit economy, the “cumulative process”, to the neo-Wicksellian world of today, characterized by inconvertible fiat money, floating exchange rates, advanced financial systems, unregulated interest rates and well-developed asset markets. In this way, it becomes apparent that the neglect of asset markets and asset prices is the source of the flaws of the present Wicksellian regime of unlimited finance. The shortcomings of the neo-Wicksellian approach can be remedied while remaining within a Wicksellian framework. The key is to combine the nominal anchor of price stability with a reformed financial system that maintains credit stability. The paper uses empirical evidence from Sweden and the United States.
    Keywords: Inflation targeting; price level targeting; natural rate; Knut Wicksell; Milton Friedman; financial crises; credit; asset inflation; central banking
    JEL: B10 B22 E10 E31 E40 E50 G01 G20
    Date: 2022–04–11
  5. By: Langella, Monica; Manning, Alan
    Abstract: There has been increasing interest in recent years in monopsony in labour market. This paper discusses how we can measure monopsony power combining insights from models based on both frictions and idiosyncrasies. It presents some evidence from the UK and the US about how monopsony power varies across the wage distribution within markets, over the business cycle and over time.
    Keywords: monopsony; labour market competition
    JEL: J42 J31
    Date: 2021–06–30
  6. By: Masciandaro, Donato; Goodhart, Charles; Ugolini, Stefano
    Abstract: We analyse the money-financed fiscal stimulus implemented in Venice during the famine and plague of 1629-31, which was equivalent to a 'net-worth helicopter money' strategy - a monetary expansion generating losses to the issuer. We argue that the strategy aimed at reconciling the need to subsidize inhabitants suffering from containment policies with the desire to prevent an increase in long-term government debt, but it generated much monetary instability and had to be quickly reversed. This episode highlights the redistributive implications of the design of macroeconomic policies and the role of political economy factors in determining such designs.
    Keywords: helicopter money; monetary policy; pandemic; Venice 1629-31
    JEL: F3 G3 N0
    Date: 2022–01–11
  7. By: Edmond Berisha; Ram Sewak Dubey; Eric Olson
    Abstract: This paper aims to clarify the relationship between monetary policy shocks and wage inequality. We emphasize the relevance of within and between wage group inequalities in explaining total wage inequality in the United States. Relying on the quarterly data for the period 2000-2020, our analysis shows that racial disparities explain 12\% of observed total wage inequality. Subsequently, we examine the role of monetary policy in wage inequality. We do not find compelling evidence that shows that monetary policy plays a role in exacerbating the racial wage gap. However, there is evidence that accommodative monetary policy plays a role in magnifying between group wage inequalities but the impact occurs after 2008.
    Date: 2022–03

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