nep-pke New Economics Papers
on Post Keynesian Economics
Issue of 2023‒03‒20
four papers chosen by
Karl Petrick
Western New England University

  1. Fiscal policy and social infrastructure provision under alternative growth and distribution regimes By Hiroshi Nishi; Kazuhiro Okuma
  2. Myth and Reality in the Great Inflation Debate: Supply Shocks and Wealth Effects in a Multipolar World Economy By Thomas Ferguson; Servaas Storm
  3. Decomposing Surplus-Value: An Analysis of Distribution and Unproductive Labour of the UK Economy, 1992-2020 By Papagiannaki, Eleni; Philp, Bruce; Wheatley, Daniel
  4. Why Economists Should Support Populist Antitrust Goals By Mark Glick; Gabriel A. Lozada; Darren Bush

  1. By: Hiroshi Nishi; Kazuhiro Okuma
    Abstract: Recent crises show that the market economy does not function autonomously but needs re-silient social, natural, and institutional foundations. Accordingly, fiscal sustainability cannot be ignored, and the government’s role in fiscal policy and social infrastructure provision is becoming increasingly important. We build a Kaleckian dynamic model that can comprehen-sively analyse the growth, distribution, and employment rate of the government’s social infra-structure and debt accumulation under alternative growth and distribution regimes. The model allows for not only wage-led growth (WLG) and profit-led growth (PLG) regimes but also labour-market-led (LML) and goods-market-led (GML) distribution regimes. Particular attention is paid to the demand effects of fiscal policy and productivity growth effect of social infrastructure investment. Our model derives the following results. A combination of alterna-tive growth and distribution regimes is important for stability. This demonstrates that the cy-clical behaviours of the WLG/GML and PLG/LML regimes are highly contrasting. When gov-ernment debt also changes in the long run, the Domar condition is required for stability. In contrast to the principally Kaleckian nature, the long-run economic growth rate depends not on demand or fiscal parameters but on supply side parameters determining the natural growth rate. Based on these results, we explain that the government can still play an im-portant role in stabilising the economy, improving the quality of social infrastructure, and achieving a resilient economy.
    Keywords: Fiscal policy, social infrastructure, Kaleckian model, growth regime, distribution regime
    JEL: E11 E12 E25 H54 O40
    Date: 2023–03
  2. By: Thomas Ferguson (Institute for New Economic Thinking); Servaas Storm (Delft University of Technology)
    Abstract: This paper critically evaluates debates over the causes of U.S. inflation. We first show that claims that the Biden stimulus was the major cause of inflation are mistaken: the key data series - stimulus spending and inflation - move dramatically out of phase. While the first ebbs quickly, the second persistently surges. We then look at alternative explanations of the price rises. We assess four supply side factors: imports, energy prices, rises in corporate profit margins, and COVID. We argue that discussions of COVID's impact have thus far only tangentially acknowledged the pandemic's far-reaching effects on labor markets. We conclude that while all four factors played roles in bringing on and sustaining inflation, they cannot explain all of it. There really is an aggregate demand problem. But the surprise surge in demand did not arise from government spending. It came from the unprecedented gains in household wealth, particularly for the richest 10% of households, which we show powered the recovery of aggregate US consumption expenditure especially from July 2021. The final cause of the inflationary surge in the U.S., therefore, was in large measure the unequal (wealth) effects of ultra-loose monetary policy during 2020-2021. This conclusion is important because inflationary pressures are unlikely to subside soon. Going forward, COVID, war, climate change, and the drift to a belligerently multipolar world system are all likely to strain global supply chains. Our conclusion outlines how policy has to change to deal with the reality of steady, but irregular supply shocks. This type of inflation responds only at enormous cost to monetary policies, because it arises mostly from supply-side difficulties that require targeted solutions. But when supply plummets or becomes more variable, fiscal policy also has to adapt: existing explorations of ways to steady demand over the business cycle have to embrace much bolder macroeconomic measures to control over-spending when supply is temporarily constrained.
    Keywords: Monetary policy; fiscal policy; inflation; wealth effect; global supply chains; COVID-19; supply shocks; multipolar world economy, care economy, labor markets
    JEL: E0 E5 E6 E62 O23 I12 J08
    Date: 2023–01–01
  3. By: Papagiannaki, Eleni; Philp, Bruce; Wheatley, Daniel
    Abstract: This article examines the trajectory of the surplus value (SV) rate in the UK economy, in the period 1992–2020, using ONS macroeconomic data (Blue Book) and micro-datasets (Understanding Society). We initially define productive and unproductive labour, proposing a “Marxist Productive Labour Classification System”, framed in critical context. Standard occupational (SOC) and standard industrial (SIC) codes are uniquely combined, using UK data, to derive empirical estimates of Marxian categories, specifically an aggregate model based on the New Interpretation framework. Then, movements in this rate are examined in terms of absolute and relative SV changes. We find that, prior to the 2008 Crisis, SV extraction is more reliant on production-related drivers, while after this dislocation SV is more reliant on the sphere of distribution, with the pandemic impacting all drivers negatively.
    Date: 2023–03–01
  4. By: Mark Glick (University of Utah); Gabriel A. Lozada (University of Utah); Darren Bush (University of Houston)
    Abstract: Antitrust economists have generally supported the Consumer Welfare Standard as a guide to antitrust policy questions because of its origins in Marshall's consumer surplus approach and the general economic surplus approach to welfare economics. But welfare economists no longer support the surplus approach because decades of research pertaining to the surplus approach have uncovered numerous inconsistencies and serious ethical challenges. However, the surplus approach to welfare survives in industrial organization textbooks and among industrial organization economists that specialize in antitrust. We argue in this paper that the Consumer Welfare Standard is not a reliable standard and should be abandoned. We cite several reasons: (1) it limits antitrust goals a priori without any defensible justification, (2) it considers all transfers of surplus between stakeholders in antitrust cases to be welfare neutral, (3) it is biased in favor of big business and the rich, and (4) the accumulation of inconsistencies and problems documented by welfare economists renders the theory completely unreliable. In a final section of the paper, we preliminarily contend that modern research in welfare economics concerning the factors that influence human welfare could be used to inform a more progressive standard for determining antitrust goals.
    Keywords: Consumer Welfare Standard, Consumer Surplus, Antitrust, Law and Economics, Compensating Variation, Equivalent Variation, Kaldor Hicks, Pareto Efficiency.
    JEL: K1 D61 L4
    Date: 2022–12–06

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