nep-pke New Economics Papers
on Post Keynesian Economics
Issue of 2022‒09‒12
four papers chosen by
Karl Petrick
Western New England University

  1. Theorizing dollar hegemony, Part 1: the political economic foundations of exorbitant privilege By Thomas Palley
  2. Harrodian Instability: A Marxian Perspective By Chatzarakis, Nikolaos; Tsaliki, Persefoni
  3. Induced innovation, the distributive cycle, and the changing pattern of labour productivity cyclicality: a SVAR analysis for the US economy By Stamegna, Marco
  4. Market paternalism: Do people really want to be nudged towards consumption? By Braganza, Oliver

  1. By: Thomas Palley
    Abstract: This paper explores dollar hegemony, emphasizing it is a fundamentally political economic phenomenon. Dollar hegemony rests on the economic, military, and international political power of the US and is manifested through market forces. The paper argues there have been two eras of dollar hegemony which were marked by different models. Dollar hegemony 1.0 corresponded to the Bretton Woods era (1946-1971). Dollar hegemony 2.0 corresponds to the Neoliberal era (1980-Today). The 1970s were an in-between decade of dollar distress during which dollar hegemony was reseeded. The deep foundation of both models is US power, but the two models have completely different economic operating systems. Dollar hegemony 1.0 rested on the trade and manufacturing dominance of the US after World War II. Dollar hegemony 2.0 rests on the Neoliberal reconstruction of the US and global economies which have made the US the center of global capitalism and the most attractive place to hold capital. It is a financial model and intrinsically connected to Neoliberalism. Consideration of dollar hegemony leads to two further questions. One is whether there is a better way of organizing the world monetary order, which is associated with debate about the possibility of a new Bretton Woods. The other is what is the future of dollar hegemony?
    Keywords: Dollar hegemony, Neoliberalism, power, currency competition, capital mobility, Bretton Woods
    JEL: F00 F02 F30 F33
    Date: 2022–08
  2. By: Chatzarakis, Nikolaos; Tsaliki, Persefoni
    Abstract: The analysis of a sustained long-run equilibrium path of economic growth goes back to Marx’s discussion of the schemes of reproduction and capital accumulation. In this paper, we indicate that the Harrodian ‘knife edge’ instability is a feature of the inner nature of the capitalist mode of production that is explained by the evolution of the rate of surplus-value. A fundamental category in Marx’s analysis, which is not restricted to income distribution, but also has further repercussions, which we grapple with in our analysis. In particular, we argue that the unbalanced economic growth path is the macroeconomic manifestation of the consequent antithesis between productive forces and productive relations formed during the process of capital accumulation and confined by the evolution of the rate of surplus-value.
    Keywords: Economic Growth; Capital Accumulation; Rate of Surplus-Value; Knife-Edge Instability
    JEL: E11 E12 E32 P16
    Date: 2022–07–22
  3. By: Stamegna, Marco
    Abstract: The empirical literature on induced technical change has explored the long-run relationship between real wages and labour productivity but still lacks an explicit treatment of the implications of the wage-productivity nexus for the business cycle. The present paper aims to fill this gap. By employing a four-dimensional structural vector autoregressive (SVAR) model for the US economy (1948-2019), we test an extended version of the Goodwin model that includes aggregate demand and decomposes the labour share into real wages and labour productivity. This paper adds to the existing literature in some respects. First, it contributes to the induced innovation literature, by showing that wage shocks have positive and persistent effects on labour productivity at business cycle frequencies. Second, it adds to the debate and empirical evidence on the distributive cycle. Impulse response functions show that, even when decomposing the labour share, empirical evidence supports the Goodwin pattern, although the profit-led regime turns out to be driven more by technology than distributive shocks. Finally, we address two relevant cyclical stylized facts of the US economy: since the mid-1980s, the procyclical pattern of labour productivity has vanished, and real wages have no longer been correlated with employment over the business cycle. We explore the hypothesis that the two changes are linked. In light of the theory of induced innovation, we argue that the decline in the cyclical correlation between output and labour productivity can be explained by a lessened incentive to invest in labour-saving innovations due to missing wage growth in the upturn of the business cycle. Impulse response functions qualitatively support this intuition.
    Keywords: Labour productivity; endogenous technical change; income distribution; SVAR
    JEL: E12 E24 E25 E32
    Date: 2022–07–21
  4. By: Braganza, Oliver
    Abstract: Modern societies, almost unequivocally, pursue the goal of economic growth. The central normative reason for this has recently been called the 'consumerist claim', namely the standard economic claim that increases in consumption (i.e. growth), by and large entail welfare increases. However, the consumerist claim does not take account of behavioral economics. Specifically, it disregards that consumption increases can also be achieved by nudging, as practiced e.g. in marketing or advertising. Remarkably, proponents of the consumerist claim are often vocal critics of governmental nudging, which is decried as manipulative and paternalistic, but are simultaneously dismissive or apologetic about market-derived nudging. Here we argue, that in light of behavioral economics Adam Smiths 'invisible hand' will often produce outcomes as if it belonged to an 'invisible paternalist', who systematically and efficiently nudges individuals towards ever increasing consumption. Specifically, we develop the notion of 'market paternalism' (MP), based on a synthesis of behavioral and evolutionary economic reasoning. MP entails three central properties: First, unregulated markets naturally give rise to pervasive nudges, modifying our behavior, preferences and beliefs in ways beyond our conscious awareness and control. Second, these nudges will coalesce towards an emergent system-level end, that cannot be derived from any coherent notion of individual preferences. Third, MP operates in part by a cultural evolutionary mechanism, implying that it will occur with computational and coordinative power far beyond any individual (or government). To assess the potential practical relevance of MP, we survey the literature, finding clear evidence that MP drives or exacerbates numerous pressing societal problems, including rampant obesity, mass surveillance and the climate crisis. It does so by covertly and incessantly nudging not only our behavior, but also our preferences, values and beliefs towards the single goal of increasing consumption. The surprising consequence is that, in light of behavioral economics, unregulated markets should be expected to systematically subvert individual autonomy and rationality, the very values typically invoked to defend the consumerist claim.
    Date: 2022

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