nep-pke New Economics Papers
on Post Keynesian Economics
Issue of 2023‒02‒20
three papers chosen by
Karl Petrick
Western New England University

  1. Convergence on inflation and divergence on price-control among Post-Keynesian pioneers: insights from Galbraith and Lerner By Alexandre Chirat; Basile Clerc
  2. International Trade, Global Inequality and Specialization from a Political Economy Perspective By Clara Brenck; Duncan Foley
  3. A Visual Model of Fiscal Policy By Hiermeyer, Martin

  1. By: Alexandre Chirat; Basile Clerc
    Abstract: This article proposes a historical and analytical reconstruction of a debate that never happened between John Kenneth Galbraith and Abba Lerner over the issue of price controls. While they adopted a similar analysis of underemployment inflation, shared by many post Keynesians, Lerner and Galbraith remained fundamentally opposed as to the effectiveness of price controls. Indeed, while both agreed on the relevance of price controls in the specific context of World War II, they disagreed over including price controls within the conventional framework of economic policies, as illustrated by their respective stances in the debate surrounding the stagflation of the 1970s. Throughout the paper, we provide the rationales behind their divergence on price controls by investigating its theoretical, epistemological, and normative roots. Finally, we put into perspective the contemporary debates about price control in the context of resurgent inflationary pressures with some salient points drawn from our reconstruction of the debate that opposed these two pioneering post Keynesians economists.
    Keywords: Price control - Wage control - Inflation - Unemployment - Stagflation
    JEL: B22 B31 E12 E64
    Date: 2023
  2. By: Clara Brenck (Department of Economics, New School for Social Research, USA); Duncan Foley (Department of Economics, New School for Social Research, USA)
    Abstract: In this paper we discuss possible explanations for persistent global inequalities from a political economy perspective. Different from what Smith and Marx assume in the long period method – that both capital and labor are fully mobile – we assume that labor is not mobile across regions. The lack of labor mobility is an important abstract problem to theorize about capitalist development in a globalized context. Including such assumption in the dual problem of consumption-growth and wage-profit rate, the model sheds light on some channels in which uneven development and specialization may occur: different wages and equalized profit rates can be achieved by different labor qualities or different access to technologies. If labor qualities are different, wage differences would represent only the difference in labor productivity and effective wages would be equalized, without any specialization. If technologies are different, on the other hand, specialization may occur, and trade is thus established. The lack of technological mobility can occur due to increasing returns to scale, product differentiation and different socioeconomic characteristics of countries.
    Keywords: Long period method, labor mobility, global inequality, technological differences, specialization, trade
    JEL: D30 E11 F12
    Date: 2023–02
  3. By: Hiermeyer, Martin
    Abstract: Undergraduate textbooks present the IS-LM model in a way that leaves open three questions. (1) How does the government fund a fiscal stimulus in the IS-LM model? (2) Given the unchanged money supply: What money do economic actors use to buy the extra output that a fiscal stimulus brings? (3) What is the appropriate money measure and interest rate for the IS-LM model? To help with those questions, the paper suggests a visual model of fiscal policy that can be seen as a long-form version of the IS-LM model – a long-form version that still contains answers to the three questions.
    Keywords: Economic Education and Teaching of Economics; Fiscal Policy;
    JEL: A2 A22 E62
    Date: 2023–01–25

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