nep-pke New Economics Papers
on Post Keynesian Economics
Issue of 2023‒09‒04
four papers chosen by
Karl Petrick, Western New England University

  1. (Shadow) money without a central bank: towards a theory of monetary time By Gabor, Daniela
  2. Financial adjustment as a driver of growth model change: a balance-sheet approach to comparative political economy By Spielberger, Lukas; Voss, Dustin
  3. "Balancing Growth and Green: Strategies for Sustainable Development in Developing Economies" By Yeboah, Samuel
  4. Frank Knight and the Problem of the Twentieth Century By Richard N. Langlois

  1. By: Gabor, Daniela
    Abstract: Since (at least) Keynes we think of money as a time machine that links the irrevocable past to the uncertain future by credibly storing value. But time as shorthand for uncertainty downplays its role in the emergence of new forms of money. Instead, this paper theorizes monetary time as the set of practices through which the state and private finance order time on their balance sheets in the process of creating credible promises to pay at par. While time makes money, there is no unique temporal order that characterizes money/credit creation in capitalism. Rather, monetary time varies across different modes of organizing credit creation, in relationship banking vs market-based finance where credit is created via securities markets and financed through shadow money, promises to pay backed by collateral securities. The alchemy of (shadow) banking is the alchemy of monetary time, of money that can extinguish time without the state. To illustrate, the paper explores the money-time order perfected by New York broker-dealers in the call market that powered the American credit machine before the creation of the Federal Reserve in 1913. Brokers developed practices for daily re-pricing of collateral securities that rendered call (shadow) money credible stores of value. The day-based temporal order allowed brokers to pump credit into circulation via securities markets, liquidity into the payment system and moneyness into bank and paper money.
    Date: 2023–08–10
  2. By: Spielberger, Lukas; Voss, Dustin
    Abstract: Growth model theory has turned the focus of comparative political economy scholars on the demand drivers of economic growth. But while its proponents emphasize the variety and inherent instability of growth models, research so far has been more concerned with the emergence and coherence of stable growth models than in the process of change. We argue that growth model change can be understood as a process of financial rebalancing on the level of institutional sectors. When an overindebted sector is forced to deleverage, a politically contested process emerges over the path of adjustment. We derive various ways in which each sector can contribute to this process of financial adjustment, which we conceptualize as the activation of macroeconomic ‘compensation valves’. This process shapes the trajectory of economic performance during financial crisis and determines whether a new feasible growth model can emerge in its aftermath. We apply our analytical lens in a comparative case study of Germany and the Netherlands during the Great Recession. We conclude that future research on growth models should more explicitly problematize the ability of political economies to adapt to financial instability.
    Keywords: balance sheet analysis; financial crisis; Germany; growth models; instability; Netherlands; Balance sheet analysis; Instability; Growth models; Financial crisis
    JEL: E00 G00
    Date: 2022–08–03
  3. By: Yeboah, Samuel
    Abstract: In this systematic review, the intricate relationship between growth and sustainability in developing economies is explored, focusing on Sustainable Development Goal 8 (Decent Work and Economic Growth). The research aims to identify strategies that foster economic growth while promoting responsible consumption and production practices, contributing to a more sustainable future for these nations. By conducting a comprehensive literature search using various databases and keywords, relevant studies meeting the inclusion criteria were selected. Through meticulous data extraction, key insights were gathered to analyse the challenges and opportunities faced by developing economies in achieving a balance between economic prosperity and environmental preservation. The findings shed light on a range of sustainable growth strategies, including those promoting decent work opportunities and social welfare while ensuring environmental sustainability. Successful cases of responsible consumption and production practices are also examined, demonstrating the potential for sustainable development. The implications of this systematic review are vital for policymakers, researchers, and stakeholders. Understanding the interconnectedness of growth and sustainability enables decision-makers to devise informed policies and initiatives, guiding developing economies towards green and inclusive pathways of development. This review emphasizes the urgency of achieving SDG 8 and underscores the critical role of developing economies in global sustainability efforts.
    Keywords: Sustainable development, economic growth, sustainability, developing economies, responsible consumption, production practices, SDG 8, green pathways, environmental preservation, social welfare.
    JEL: O10 O20 O44 Q56
    Date: 2023–04–18
  4. By: Richard N. Langlois (University of Connecticut)
    Abstract: Much has been written, especially in economics and management, about Frank Knight’s account of uncertainty and entrepreneurship. This paper attempts to put that theory in the larger context of the intellectual currents, and to a significant extent the economic history, in which Knight found himself. In response to rapid economic growth and the emergence of the large industrial enterprise in the U. S. in the late nineteenth and early twentieth centuries, many came to believe that the classical liberalism of the nineteenth century would need to be amended – if not jettisoned entirely. Frank Knight was among these. He was, along some dimensions, a Progressive and an Institutionalist. What set him apart from Progressives like John Dewey, however, was his theory of economic knowledge. Whereas Dewey and others insisted on the panacea of science as the solution to the “social question, ” Knight understood that in a world of uncertainty, the cognitive faculty of judgment was essential and unavoidable, thus providing a new intellectual underpinning for many of the institutions of nineteenth-century liberalism. Yet Knight did not follow the implications of his theory of knowledge all the way to their conclusions. This is because – perhaps among other reasons – he began with a well-developed model of perfect competition, which, unlike such contemporaries as Joseph Schumpeter and F. A. Hayek, he was never willing to relinquish as a normative ideal. Perhaps surprisingly, Frank Knight was a Progressive and an Institutionalist because he believed in the neoclassical model of the economy.
    Keywords: Frank Knight, uncertainty, entrepreneurship, liberalism, democracy, central planning
    JEL: B25 B3 B52 L2
    Date: 2023–08

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