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on Post Keynesian Economics |
| By: | Ettore Gallo (Department of Economics, New School for Social Research); Mark Setterfield (Department of Economics, New School for Social Research) |
| Abstract: | This paper discusses Joan Robinson’s remarks on the importance of historical time in economic analysis. On the one hand, Joan Robinson expressed skepticism with equilibrium analysis as such, arguing that as soon as economists take into account the uncertainty of expectations, history needs to replace equilibrium. On the other, Robinson stressed that, while building economic models, one must be aware that it is historical time rather than logical time that rules reality, warning against the methodological mistake of confusing comparisons of equilibrium positions with a movement between them. We argue that these criticisms point to the possibility of thinking in terms of two different ‘levels’ of historical time – a higher (fundamentalist) level, and a practical (and more analytically tractable) lower level. Using this distinction, we provide a taxonomy of existing strands of post-Keynesian growth theory that are consistent with the concept of low-level historical time. It is shown that despite appearances to the contrary, much post-Keynesian growth theory displays fidelity to Joan Robinson’s concern with the importance of historical time. |
| Keywords: | Historical time, economic growth, provisional equilibrium, traverse, shifting equilibrium |
| JEL: | B31 B41 E11 E12 O41 |
| Date: | 2022–04 |
| URL: | http://d.repec.org/n?u=RePEc:new:wpaper:2204&r= |
| By: | Owen F. Davis (Department of Economics, New School for Social Research) |
| Abstract: | Economic agents must form models of their environments in order to develop expectations and make decisions, yet these models are certain to be misspecified. An agent aware of their own inability to perfectly capture the structural relationships of their observed world will entertain model uncertainty. Under the plausible assumptions that the “true” model is not known to the decision-maker and the decision-maker knows this—known as the M-open case in Bayesian statistics—uncertainty over propositions becomes numerically irreducible. The notion of model uncertainty is developed with reference to Post Keynesian theories of fundamental uncertainty as well as relevant areas of study within decision theory, including the growing literature on unawareness. The model uncertainty view poses challenges for both literatures and provides a novel justification for the types of uncertainty associated with Knight and Keynes. |
| Keywords: | Fundamental uncertainty, model uncertainty, decision theory, Post Keynesian |
| JEL: | C11 D81 E12 |
| Date: | 2022–04 |
| URL: | http://d.repec.org/n?u=RePEc:new:wpaper:2207&r= |
| By: | Jesus Felipe; Scott Fullwiler; Al-Habbyel Yusoph |
| Abstract: | This paper argues that the 40-year-old Feldstein-Horioka "puzzle" (i.e., that in a regression of the domestic investment rate on the domestic saving rate, the estimated coefficient is significantly larger than what would be expected in a world characterized by high capital mobility) should have never been labeled as such. First, we show that the investment and saving series typically used in empirical exercises to test the Feldstein-Horioka thesis are not appropriate for testing capital mobility. Second, and complementary to the first point, we show that the Feldstein-Horioka regression is not a model in the econometric sense, i.e., an equation with a proper error term (a random variable). The reason is that by adding the capital account to their regression, one gets the accounting identity that relates the capital account, domestic investment, and domestic saving. This implies that the estimate of the coefficient of the saving rate in the Feldstein-Horioka regression can be thought of as a biased estimate of the same coefficient in the accounting identity, where it has a value of one. Since the omitted variable is known, we call it "pseudo bias."" Given that this (pseudo) bias is known to be negative and less than one in absolute terms, it should come as no surprise that the Feldstein-Horioka regression yields a coefficient between zero and one. |
| Keywords: | Accounting Identity; Feldstein-Horioka Paradox; Investment; Pseudo Bias; Saving |
| JEL: | E01 F21 F32 F36 F41 G15 |
| Date: | 2022–04 |
| URL: | http://d.repec.org/n?u=RePEc:lev:wrkpap:wp_1006&r= |
| By: | Paul Hufe; Martyna Kobus; Andreas Peichl; Paul Schüle |
| Abstract: | Are the United States still a land of opportunity? We provide new insights on this question by invoking a novel measurement approach that allows us to target the joint distribution of income and wealth. We show that inequality of opportunity has increased by 77% over the time period 1983-2016. Increases are driven by two distinct forces: (i) a less opportunity-egalitarian distribution of income until 2000, and (ii) a less opportunity-egalitarian distribution of wealth after the financial crisis in 2008. In sum, our findings suggest that the US have consistently moved further away from a level playing field in recent decades. |
| Keywords: | fairness, intergenerational mobility, time trends, measurement |
| JEL: | D31 D63 J62 |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_9630&r= |
| By: | Rajashri Chakrabarti; Jessica Lu; Wilbert Van der Klaauw |
| Abstract: | Federal student loan relief was recently extended through August 31, 2022, marking the sixth extension during the pandemic. Such debt relief includes the suspension of student loan payments, a waiver of interest, and the stopping of collections activity on defaulted loans. The suspension of student loan payments was expected to help 41 million borrowers save an estimated $5 billion per month. This post is the first in a two-part series exploring the implications and distributional consequences of policies that aim to address the student debt burden. Here, we focus on the uneven consequences of student debt relief and its withdrawal. With the end-date of the student loan relief drawing near, a key question is whether and how the discontinuation of student debt relief might affect households. Moreover, will these effects vary by demographics? |
| Keywords: | student loans; forbearance; CARES; delinquency; default; relief; debt |
| JEL: | D14 Q12 |
| Date: | 2022–04–21 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fednls:94082&r= |
| By: | Ananth Seshadri; Anson Zhou |
| Abstract: | Nearly 40% of births in the United States are unintended, and this phenomenon is disproportionately common among Black Americans and women with lower education. Given that being born to unprepared parents significantly affects children’s outcomes, could family planning access affect intergenerational persistence of economic status? We extend the standard Becker–Tomes model by incorporating an endogenous family planning choice. When the model is calibrated to match observed patterns of unintended fertility, we find that intergenerational mobility is significantly lower than that in the standard model. In a policy counterfactual where states improve access to family planning services for the poor, intergenerational mobility improves by 0.3 standard deviations on average. When we calibrate the model to match unintended birth rates by race, we find that differences in family planning access alone can account for 20% of the racial gap in upward mobility. Helping women fulfill their goals about family planning and childbearing can improve social mobility and address racial inequality. |
| JEL: | E6 J11 J13 |
| Date: | 2022–03 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:29891&r= |