nep-pke New Economics Papers
on Post Keynesian Economics
Issue of 2023‒08‒21
nine papers chosen by
Karl Petrick, Western New England University

  1. The Finance-Dominated Accumulation Regime & the Future of Work in the Post-COVID World By Gouzoulis, Giorgos; Stockhammer, Engelbert
  3. History of Economic Thought’s Place in Macroeconomics Revisited By David Laidler
  4. Endogenous Economic Resilience, Loss of Resilience, Persistent Cycles, Multiple Attractors, and Disruptive Contractions By Willi Semmler; Fabio Della Rossa; Giuseppe Orlando; Gabriel R. Padro Rosario; Levent Kockesen
  5. The falling rate of profit as a research program By Michl, Thomas R.
  6. Schools of Athens: Surplus Approach, Marxism and Institutions By Cesaratto, Sergio
  7. Degrowth enthusiasm and the transformation blues of the East: Reflections on integrating post-socialist transformation experiences into the degrowth discourse By Gebauer, Jana; von Jorck, Gerrit; Pungas, Lilian
  8. The Capability Approach and A Critique of the Design of Digital Spaces By Victoria Sgarro; Madhav Tipu Ramachandran
  9. The Racial Wealth Gap: the Role of Entrepreneurship By Daniel Albuquerque; Tomer Ifergane

  1. By: Gouzoulis, Giorgos; Stockhammer, Engelbert
    Abstract: This paper examines the relationship between financialisation and the future of work in the post-COVID era. It combines an analysis of changes in labour relations due to financialization with an analysis of the macroeconomic impact of financialisation. It will discuss these for the periods before and after the financial crisis and analyse the impact of COVID on labour relations and the growth model in this context. The first section discusses the relationship between the employer-employee distribution of income and economic growth under neoliberalism, highlighting that anaemic growth was largely the outcome of declining wages. A significant amount of declining wages has been associated with the rise of shareholder value orientation which induced the management of non-financial corporations to reduce labour costs. Yet, financialisation is a complex development that has been affecting other domains of the economies beyond the non-financial corporate sector. A notable case is the financialisation of households, and more specifically the financialisation of the housing market. Rapidly rising mortgage debt ratios, driven by rising house prices, generated a debt-fueled real estate bubble in most advanced economies. The effects of rising household indebtedness not only positively affect housing prices, but also exhibits significant effects on class dynamics and has led to several changes at the workplace level. On the one hand, high-income employees who have invested in the real estate market enjoy economic returns and their share of financial incomes and capital gains over their wage income increases steadily. Thus, their class identity transforms from working class to a form of mini-rentier. On the other hand, low-income employees who become indebted become more self-disciplined at the workplace on the fear of defaulting on their debt, which makes them more vulnerable to complying with wage cuts and working under flexible contracts. Since COVID has induced a steep rise in household and corporate indebtedness, the purpose of this paper is to explore how the acceleration of financialisation will impact the future of work in the post-COVID era and discusses potential implications.
    Keywords: financialisation, industrial relations, growth models, COVID
    Date: 2023
  2. By: João Alcobia; Ricardo Barradas
    Abstract: The majority of policymakers in the more developed countries have engaged in Reaganomics and Thatcherism in the last four decades by privileging the adoption of wage restraint policies to sustain economic growth. During that time, the wage share has registered a sustained fall, and economic growth has been rather dismal, which seems to support the theoretical claims of post-Keynesian economics that wage restraint policies are detrimental to economic growth because their disruptive effects on private consumption do not counterbalance their supportive effects on private investment and net exports. We analyse the relationship between the wage share and economic growth by performing a panel data econometric analysis of all European Union countries from 1981 to 2021. Results confirm that wage share positively influences economic growth in the European Union countries, which in reality is a wage-led growth model. Results also show that the decline of the wage share has represented one of the main constrainers of growth in all European Union countries in the last four decades, particularly in the euro area countries. These results suggest that policymakers in the European Union countries should adopt pro-labour policies in order to revert the decreasing (increasing) trend of the wage (profit) share and avoid the consolidation of a secular stagnation in Europe.
    Keywords: Post-Keynesian Economics, Functional Income Distribution, Economic Growth Drivers, European Union, Panel Autoregressive Distributed Lag, Pooled Mean-Group Estimator.
    JEL: C23 D33 E12 O47
    Date: 2023–07
  3. By: David Laidler (University of Western Ontario)
    Abstract: The History of Economics Society was founded at a time when the History of Economic Thought was being expelled from the Economics post-graduate curriculum in many universities, and was one of the key institutions around which the sub-discipline successfully re-organised itself and continued to develop. Laidler (2003) argued that Economics itself, especially Macroeconomics, was suffering serious damage from this expulsion. It has continued to do so since.
    Keywords: History of Economic Thought, Macroeconomics, New Classical Economics, Empiricism, Deductivism
    JEL: B2 B22 B41 E10
    Date: 2023
  4. By: Willi Semmler (Department of Economics, New School for Social Research, USA and Bielefeld University, Germany); Fabio Della Rossa (Department of Electronics, Information, and Bioengineering, Polytechnic of Milan, Milan, Italy); Giuseppe Orlando (Department of Mathematics, University of Bari, Italy and HSE University, Saint Petersburg, Russia); Gabriel R. Padro Rosario (Department of Economics, New School for Social Research, USA); Levent Kockesen (Department of Economics, Koc University, Istanbul, Turkey and Nazarbayev University, Astana, Kazakhstan)
    Abstract: We evaluate Brunnermeir’s Theory of Resilience in the context of complex system dynamics where however, there can be local and global resilience, vulnerability, loss of resilience, cycles, disruptive contractions, and persistent traps. In the paper, we refer to three-time scales. First, for shorter time scales, for the short-run market dynamics, we evaluate resilience in the context of complex market dynamics that have been studied in the history of economic theory for long. Second, with respect to a business cycle medium-term dynamics, we analytically study an endogenous cycle model, built upon Semmler and Sieveking (1993) and Semmler and Kockesen (2017), and discuss the issue of loss of stability, corridor stability, multiple attractors, and trapping dynamics also in the light of complex dynamics. In a financial-real business cycle model, we demonstrate forces that indeed can exhibit multiple dynamic features such as local resilience, known as corridor-stability, but also other dynamic phenomena. Corridor stability pertains to small shocks with no lasting effects, but large enough shocks can lead to persistent cycles and/or contractions. We refer to the Hopf-and-Bautin-Bifurcation theorems, to establish corridor stability, and local resilience, for the interaction of real and financial variables where the trajectories can be stable or unstable in the vicinity of the equilibrium. Thus they can switch dynamic behaviour for small or large shocks. Similar complex dynamic phenomena can be obtained from Kaleckian-Kaldorian nonlinear real business cycle models, particularly when time delays are allowed. Third, whereas the analytical study of the dynamics is undertaken for the above second-time scale, for the longer time scale we study, in the context of multiple equilibria models, the issue of thresholds, tipping points and disruptive contractions, and persistence of traps.
    Keywords: Resilience, complex dynamic models, regime change model, limit cycles, disruptive contractions
    JEL: C32 E32 E44
    Date: 2023–07
  5. By: Michl, Thomas R. (Department of Economics, Colgate University)
    Abstract: This paper argues that the Marxian law of the tendency of the rate of profit to fall defines an important analytical framework for studying the role of capital-using, labor-saving (Marx-biased) technical change in the accumulation process. Using a tractable one-sector model of growth and distribution, the paper examines two viability conditions used in the study of Marx-biased technical change. In the Standard Interpretation, capitalists choose techniques if they increase their transitional rate of profit. As Duncan Foley and others have observed, if wages are rising, Marx’s prediction of a declining rate of profit can go through conditionally. Anwar Shaikh has argued that under †real competition†capitalists will be forced by competitive forces to choose techniques that increase their profit margins, even if they lower the rate of profit. While empirical research on the viability condition under the Standard Interpretation has generally found it to be comfortably satisfied (which would be consistent with real competition as well), there is enough ambiguity in the evidence to warrant further study. Theoretical research has only begun to explore the possibility that a game-theoretic approach might bridge the gap between these accounts. Other issues raised include the origin of Marx-biased technical change and the role of wage growth in mediating technical choices.
    JEL: B51 O3 O4
    Date: 2023–08–02
  6. By: Cesaratto, Sergio (University of Siena)
    Abstract: Relying on the lessons of Marx, Polanyi, Sraffa and Garegnani, the paper moves from the material anchor that the classical surplus approach provides to economic and institutional analysis in anthropology, archaeological and economic history. In surplus theory institutions regulate the material basis of society and in particular the extraction and distribution of the social surplus. Marx’s historical materialism is a natural source of inspiration for this view expunged, of course, of teleological and mechanical readings. The Marxian concept of modes of production has been however object of often over-complicated disputes among Marxists. These are not easily solved since historical results in anthropology, archaeological and economic history do not always deliver uncontroversial pictures of the working of ancient economies and of their transitional dynamics. Since Popper, historical materialism has also been object of methodological criticism. While the suggestions to complement macro analysis with consistent granular accounts of individual choices must be welcomed, methodological individualism is a dead end for social science. Individual and class choices must rather be dealt with through historical analysis. The surplus approach may provide support to both macro and micro analysis of behaviours and institutions. Interdisciplinarity is advocated in the paper.
    Keywords: Surplus approach; Historical materialism; Anthropology; Archaeology; Agency
    JEL: A12 B51 B52 Z13
    Date: 2023–08–01
  7. By: Gebauer, Jana; von Jorck, Gerrit; Pungas, Lilian
    Abstract: This paper traces the links between post-socialist transformations and the degrowth movement. Based on a series of workshops entitled "Degrowth Enthusiasm and the Eastern Blues" that we organised in recent years, this paper focuses on the following questions: what can we learn from the state-socialist societies' transformation processes into capitalist societies? What experiences and practices before and after these transformations can potential degrowth societies build on? To what extent can people's experiences with an alternative system and its transformation contribute to unfolding their potential in a social-ecological transformation and to overcoming 'change fatigue'? We present key findings from our workshops, which we combined with our own empirical evidence from Estonia and a theoretical examination of (post-)socialist economics to form six theses that we consider essential for a decolonial degrowth debate.
    Keywords: degrowth, social-ecological transformation, post-socialist transformation, subsistence farming
    JEL: O44 P28 P30 P31 Q01 Q12
    Date: 2023
  8. By: Victoria Sgarro (Department of Economics, New School for Social Research, USA); Madhav Tipu Ramachandran (Department of Economics, New School for Social Research, USA)
    Abstract: This paper aims to advance two claims about the"public spaces" of the internet (that is, forums of public interaction online, like social media, news media, message boards and forums, and so on). First, we argue that a broadly utilitarian framework guides the technology industry’s approach to the design of digital spaces, and therefore limits the design and evaluation of these spaces to revealed preference satisfaction. As such, this framework lacks the conceptual resources to diagnose or to understand the shortcomings of today’s digital public spaces, or to coherently respond to these shortcomings. We consider a rights-based framework as an alternative philosophical framework for the design of digital spaces, but find it unsatisfactory. Second, we argue that the capability approach, as an objectivist and pluralist value theory, offers a more constructive understanding of individual flourishing in digital spaces. While this paper primarily seeks to argue why we should apply the capability approach to digital spaces, we conclude by suggesting how to apply the capability approach to digital spaces –– a promising area for further research.
    Date: 2023–07
  9. By: Daniel Albuquerque (Bank of England); Tomer Ifergane (London School of Economics (LSE); Centre for Macroeconomics (CFM); Ben-Gurion University)
    Abstract: The racial wealth gap is one of the most striking and persistent disparities between Black and White households in the US. We study the determinants of this gap using a general equilibrium incomplete market model featuring dynamic discrete entrepreneurship choice and an empirically estimated income process. In the model, Black households face: (i) higher capital costs as entrepreneurs; (ii) a labour-income gap; and (iii) greater non-employment risk. We find that access to capital for Black entrepreneurs accounts for most of the racial wealth gap. Our model demonstrates that wealth transfers without social change cannot permanently address this gap and points towards addressing barriers faced by Black entrepreneurs as a key margin of intervention.
    Keywords: Racial wealth gap, entrepreneurship, incomplete markets, wealth accumulation, financial frictions, wealth inequality
    JEL: E21 J15 D31 D52
    Date: 2023–03

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