nep-pke New Economics Papers
on Post Keynesian Economics
Issue of 2022‒10‒17
three papers chosen by
Karl Petrick
Western New England University

  1. How economics can help mitigate climate change - a critical review and conceptual analysis of economic paradigms By Wolf Rogowski; Wolfram Elsner
  2. Personal income distribution and the endogeneity of the demand regime By Tonni, Lorenzo
  3. Philosphers and Economists Can Agree on the Intergenerational Discount Rate and Climate Policy Paths By Frikk Nesje; Moritz A. Drupp; Mark C. Freeman; Ben Groom

  1. By: Wolf Rogowski; Wolfram Elsner
    Abstract: In economic research about climate change mitigation, there is a tension between the objectives to ensure scientific rigor (focusing on orthodox theory) and to illuminate blind spots of relevance (drawing on different "heterodox" theories). Our aim is to develop an economic perspective on climate change mitigation which considers both objectives. We conduct a critical literature review, searching for coherent economic theory lattices, which meet the requirements of research programs, i.e. contain a pre-analytic vision, an analytical core including a concept of rationality, and examples of applications in empirical research. We develop a framework structuring these research programs and associated research fields and search for examples illustrating their applicability to climate change mitigation. We identify several research fields within four major research programs that perceive economic phenomena as (1) individual optimization decisions (neoclassical analysis of efficient and of inefficient equilibria and behavioral economics); (2) a set of institutions (New and Original institutional economics); (3) a complex evolutionary system (Biophysical and Evolutionary economics); and (4) an objective function (which can guide research focusing on the content or the distribution of the normatively defined units of interest). For each research program and its subdivisions, we present theoretical elements and illustrate how they can improve our understanding of how economic activity contributes to climate change and how these impacts can be alleviated. There is a need for more systematic evidence synthesis to validate the contributions of the different economic research fields and to improve their selection and application to climate change.
    Keywords: Climate change, neoclassical economics, behavioral economics, economic heterodoxies, evolutionary economics, institutional economics, objective functions, research programs, policy implications.
    JEL: A11 A12 B5 H41 Q54
    Date: 2021–08
  2. By: Tonni, Lorenzo
    Abstract: This paper deals with two intrinsically linked issues: the endogeneity of the demand regime and the personal distribution impact on aggregate demand. By microfounding the savings function, the aggregate savings rate is an increasing function of the Gini index, which in turn is decomposed as a function of the functional income distribution and the Gini indices for wages and profits. By assuming that saving is a function of personal rather than functional income distribution, an increase of the labour share is effective in boosting consumption and aggregate demand, not per se, but only as long as it reduces personal inequality. As the labour share increases, depending on the distribution of wages and profits, both the demand regime type – the sign of the slope of the demand schedule - and its strength- the size of the slope of the demand schedule - can endogenously change. Concerning the former, there can be a threshold value for the wage share beyond which there is a shift from wage-led to profit-led demand. The analysis shows that, unlike most Kaleckian models, profit inequality is just as important as wage inequality in determining the demand regime type and its strength.
    Keywords: Personal distribution, functional distribution, wage-led, profit-led, non-linear demand, endogenous demand regime
    JEL: B50 D31 D33 E11 E12
    Date: 2021–06
  3. By: Frikk Nesje; Moritz A. Drupp; Mark C. Freeman; Ben Groom
    Abstract: The estimated values to society from long-term public projects, including climate change mitigation and infrastructure construction, are highly sensitive to the social discount rate (SDR) employed. Governmental guidance on social discounting has predominantly been based on input from expert economists. It is not clear, however, that economists possess any special expertise on the ethical issues that underpin long-term societal decision-making. This study compares expert economists’ views on key components of the long-term SDR with those of a disciplinary group of experts who may be deemed most trained on ethical matters: philosophers. The results indicate that both expert groups provide surprisingly similar recommendations on these components and on the SDR itself, with a real SDR recommendation of 2% receiving most support in both disciplines. An analysis of qualitative remarks shows areas of broad agreement and yet distinct differences in rationales. While economists provide numerous technical extensions within a consequentialist Discounted Utilitarian approach, philosophers advocate more strongly for alternative ethical approaches to standard Utilitarian calculus. In the politicized world of long-term decision-making, this paper illustrates how more inclusive and deliberative approaches to complex issues such as intergenerational justice can guide more nuanced decision-making today and lead to multidisciplinary support for climate action.
    Keywords: intergenerational social discounting, expert survey, philosophy, economics, climate policy
    JEL: C83 D61 H43 Q58
    Date: 2022

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