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on Post Keynesian Economics |
| By: | Brett Palatiello (Ridgewood Analytica); Philip Pilkington (Savenay Advisers) |
| Abstract: | We test the neoclassical loanable funds model which postulates that, ceteris paribus, government borrowing increases the long-term rate of interest. The empirical literature exploring such a connection remains largely mixed. We clarify the conflicting results by deploying an ARDL model to decompose the relationship in the United States into long and short-run effects across multiple measures of the government deficit and long-term interest rate. We find a tendency for changes in the deficit to increase long-term interest rates in the short run but the effect is reversed in the long run. We argue that these results are consistent with John Maynard Keynes’ view of the long-term rate as being heavily influenced by monetary policy, central bank credibility and market convention. |
| Keywords: | budget deficits, interest rates, crowding out, central bank, monetary policy, Keynes |
| JEL: | E43 E50 E58 E60 G10 |
| Date: | 2022–04–09 |
| URL: | http://d.repec.org/n?u=RePEc:thk:wpaper:inetwp183&r= |
| By: | Jacopo Di Domenico (Department of Economics and Social Sciences, Università Politecnica delle Marche, Ancona); Alberto Russo (Department of Management, Università Politecnica delle Marche, Ancona, Italy and Department of Economics, Universitat Jaume I, Castellón, Spain) |
| Abstract: | In this study, we propose the exploration of the characteristics of the Sraffian- Supermultiplier model where technological change and autonomous demand, coming from the public sector, determine the macroeconomic dynamics. The growth rate of the economy is determined by the productivity growth path that frees up labor to be employed in the production of alternative goods, and the public sector that, if not willing to accept high unemployment, has to increase its expenditure and generate the necessary demand for achieving spread (macroeconomic) growth. Because of the dependency of technological change on the sales level (due to the possibilities this offers in terms of labor division) at the macro and meso dimension, in contrast to the majority of the Supermultiplier models, the long-run growth rate of our artificial economy is also affected by the income distribution (both functional and personal) which affects the level of the total demand and shapes its composition across sectors. For the purpose of our research, we develop a multi-sectoral macroeconomic Agent based - Stock Flow consistent model (AB-SFC). The model is grounded on a theoretical framework representing a monetary economy of production (e.g. Graziani, Lavoie) where the principle of effective demand determines the level of output, while innovation is characterized by a typical Schumpeterian process of creation and destruction. The functional income distribution is determined as in classical theory and results from the struggle between capitalists and workers. The markup fixed by companies over normal unit-cost of production determines the normal rate of profit. Money is endogenous and is injected into the system when banks grant loans to companies to finance investments or wages anticipation and Government expenditure is financed by issuing public bonds. We study the impact the yearly performances have on the long-run path of the economy. After showing that the process innovation represents a necessary but not sufficient element for economic growth (and also a possible source of economic instability) which requires a public state with a hands-on approach (that increases its debt every time an increase in productivity occurs and stabilizes the economy) to achieve macroeconomic growth, we study how different productivity gain appropriations (and therefore different distribution configuration) affect the future trend of productivity (and therefore the long-run growth rate of the economy) through changes in the level of aggregate volumes and their allocation between sectors. |
| Keywords: | growth, productivity, distribution, instability, public debt, agent-based model, stock-flow consistency |
| JEL: | C63 H63 O33 O41 |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:jau:wpaper:2022/12&r= |
| By: | William Lazonick (The Academic-Industry Research Network) |
| Abstract: | "Sustainable prosperity" denotes an economy that generates stable and equitable growth for a large and growing middle class. From the 1940s into the 1970s, the United States appeared to be on a trajectory of sustainable prosperity, especially for white-male members of the U.S. labor force. Since the 1980s, however, an increasing proportion of the U.S labor force has experienced unstable employment and inequitable income, while growing numbers of the business firms upon which they rely for employment have generated anemic productivity growth. Stable and equitable growth requires innovative enterprise. The essence of innovative enterprise is investment in productive capabilities that can generate higher-quality, lower-cost goods and services than those previously available. The innovative enterprise tends to be a business firm - a unit of strategic control that, by selling products, must make profits over time to survive. In a modern society, however, business firms are not alone in making investments in the productive capabilities required to generate innovative goods and services. Household units and government agencies also make investments in productive capabilities upon which business firms rely for their own investment activities. When they work in a harmonious fashion, these three types of organizations - household units, government agencies, and business firms—constitute "the investment triad." The Biden administration's Build Back Better agenda to restore sustainable prosperity in the United States focuses on investment in productive capabilities by two of the three types of organizations in the triad: government agencies, implementing the Infrastructure Investment and Jobs Act, and household units, implementing the yet-to-be-passed American Families Act. Absent, however, is a policy agenda to encourage and enable investment in innovation by business firms. This gaping lacuna is particularly problematic because many of the largest industrial corporations in the United States place a far higher priority on distributing the contents of the corporate treasury to shareholders in the form of cash dividends and stock buybacks for the sake of higher stock yields than on investing in the productive capabilities of their workforces for the sake of innovation. Based on analyzes of the "financialization" of major U.S. business corporations, I argue that, unless Build Back Better includes an effective policy agenda to encourage and enable corporate investment in innovation, the Biden administration's program for attaining stable and equitable growth will fail. Drawing on the experience of the U.S. economy over the past seven decades, I summarize how the United States moved toward stable and equitable growth from the late 1940s through the 1970s under a "retain-and-reinvest" resource-allocation regime at major U.S. business firms. Companies retained a substantial portion of their profits to reinvest in productive capabilities, including those of career employees. In contrast, since the early 1980s, under a "downsize-and-distribute" corporate resource-allocation regime, unstable employment, inequitable income, and sagging productivity have characterized the U.S. economy. In transition from retain-and-reinvest to downsize-and-distribute, many of the largest, most powerful corporations have adopted a "dominate-and-distribute" resource-allocation regime: Based on the innovative capabilities that they have previously developed, these companies dominate market segments of their industries but prioritize shareholders in corporate resource allocation. The practice of open-market share repurchases - aka stock buybacks - at major U.S. business corporations has been central to the dominate-and-distribute and downsize-and-distribute regimes. Since the mid-1980s, stock buybacks have become the prime mode for the legalized looting of the business corporation. I call this looting process "predatory value extraction" and contend that it is the fundamental cause of the increasing concentration of income among the richest household units and the erosion of middle-class employment opportunities for most other Americans. I conclude the paper by outlining a policy framework that could stop the looting of the business corporation and put in place social institutions that support sustainable prosperity. The agenda includes a ban on stock buybacks done as open-market repurchases, radical changes in incentives for senior corporate executives, representation of workers and taxpayers as directors on corporate boards, reform of the tax system to reward innovation and penalize financialization, and, guided by the investment-triad framework, government programs to support "collective and cumulative careers" of members of the U.S. labor force. Sustained investment in human capabilities by the investment triad, including business firms, would make it possible for an ever-increasing portion of the U.S. labor force to engage in the productive careers that underpin upward socioeconomic mobility, which would be manifested by a growing, robust, and hopeful American middle class. |
| Keywords: | Investment triad, productive capabilities, corporate governance, innovative enterprise, strategic control, organizational integration, financial commitment, retain-and-reinvest, dominate-and-distribute, downsize-and-distribute, stock buybacks, stock prices, executive pay, corporate taxation, career learning, Joe Biden, Build Back Better |
| JEL: | B59 D01 D02 D04 D2 D3 G3 H00 J5 L1 L2 L5 M1 O3 O43 |
| Date: | 2022–03–30 |
| URL: | http://d.repec.org/n?u=RePEc:thk:wpaper:inetwp182&r= |
| By: | Malcolm Rutherford (Department of Economics, University of Victoria) |
| Abstract: | Previous discussions concerning the relationship between John Dewey’s pragmatic instrumentalism and institutional economics have focused on Clarence Ayres and on issues of valuation. This paper gives attention to the actual conduct of economic investigations by institutionalists such as Wesley Mitchell, Walton Hamilton, and John R. Commons. It is argued that many aspects of Dewey’s instrumentalism are clearly displayed in the problem centered, investigational, and experimental methods employed by institutionalists, and in their commitment to problem solving and social control. The association of institutionalist methods with Dewey’s instrumentalism implies that many of the standard criticisms of institutionalist methods are misplaced. These criticisms, that institutionalism lacked proper theoretical perspective and produced work that was overly descriptive, have been made predominantly from a logical positivist methodological perspective, and ignore Dewey’s notions of science that informed the institutionalist approach. Appraising institutionalist successes and failures from the point of view of the methodology they actually adopted provides a much more nuanced criticism, one based on the strengths and weaknesses of the underlying instrumentalist methods they employed. In particular, some serious difficulties with the application of Dewey’s experimentalism to social science are located. |
| Keywords: | Institutionalism, Instrumentalism, John Dewey, Wesley Mitchell, Walton Hamilton, J. R. Commons |
| Date: | 2022–07–12 |
| URL: | http://d.repec.org/n?u=RePEc:vic:vicddp:2008&r= |
| By: | Mark Glick (University of Utah) |
| Abstract: | Two recent papers by prominent antitrust scholars argue that a revived antitrust movement can help reverse the dramatic rise in economic inequality and the erosion of political democracy in the United States. Both papers rely on the legislative history of the key antitrust statutes to support their case. Not surprisingly, their recommendations have been met with alarm in some quarters and with skepticism in others. Such proposals by antitrust reformers are often contrasted with the Consumer Welfare Standard that pervades antitrust policy today. The Consumer Welfare Standard suffers from several defects: (1) It employs a narrow, unworkable measure of welfare; (2) It excludes important sources of welfare based on the assumption that antitrust seeks only to maximize wealth; (3) It assumes a constant and equal individual marginal utility of money; and (4) It is often combined with extraneous ideological goals. Even with these defects, however, if applied consistent with its theoretical underpinnings, the consideration of the transfer of labor rents resulting from a merger or dominant firm conduct is supported by the Consumer Welfare Standard. Moreover, even when only consumers (and not producers) are deemed relevant, the welfare of labor still should consistently be considered part of consumer welfare. In contrast, fostering political democracy—a prominent traditional antitrust goal that was jettisoned by the Chicago School—falls outside the Consumer Welfare Standard in any of its constructs. To undergird such important broader goals requires that the Consumer Welfare Standard be replaced with the General Welfare Standard. The General Welfare Standard consists of modern welfare economics modified to accommodate objective analyses of human welfare and purged of inconsistencies. |
| Keywords: | New Brandeis School, Antitrust economics, Antitrust law, Neoliberal Economic Theory, Chicago School Economics, History of Antitrust law; market concentration; corporation size. |
| JEL: | K21 L40 N12 |
| Date: | 2022–03–21 |
| URL: | http://d.repec.org/n?u=RePEc:thk:wpaper:inetwp181&r= |
| By: | Karaarslan, Can |
| Abstract: | The present essay discusses several channels of social policy on climate mitigation and utilizes the Universal Basic Income (UBI) scheme as an example for endowment increasing and inclusive social policy instruments. UBI comprises the payment of a fixed amount of money to every member of a society from birth to death and is not bounded to any precondition. It is expected to increase resilience of individuals against disruptive and unexpected processes, such as climate change, digitization, aging population and the changing world of work, rather than particular life-trajectories. UBI is found to be a social policy instrument whose effects can contribute to climate mitigation. This essay is far from being conclusive and rather aims to raise questions which require further analysis. |
| Keywords: | Climate mitigation,Social policy,Universal Basic Income |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:ouwpmm:64&r= |