nep-pke New Economics Papers
on Post Keynesian Economics
Issue of 2023‒11‒06
four papers chosen by
Karl Petrick, Western New England University

  1. Liquidity premia: the PPP puzzle's missing piece? By Olk, Christopher
  2. Oskar Lange’s Economics and the Socialist Economy By Marques Gomes, Luiz Henrique
  3. HES at 50--Reflections from the Geneva lakeside By maas, harro
  4. Carbon Taxes: Many Strengths but Key Weaknesses By Roger H. Gordon

  1. By: Olk, Christopher
    Abstract: The purchasing power of a given currency varies across countries. Countries’ price levels, measured in USD, diverge significantly. The theoretical literature in Minsky’s tradition explains divergences in the other prices of money (the exchange rate, the interest rate and par) with reference to liquidity premia and monetary hierarchy. This argument has not been connected to the price level, which can be defined as the relationship between exchange rates and purchasing power parity rates. This essay presents a hypothesis for that missing connection: Different currencies with different degrees of liquidity are used as a store of value and international means of payment to different degrees. The resulting divergence between the demand for money in the foreign exchange market and the demand for money in the market for commodities moves the market exchange rate away from a level that would equalize purchasing power rates across countries. Based on a review of the Post-Keynesian literature on the links between interest rates and exchange rates, I develop an empirical measure for currencies’ liquidity premia in the foreign exchange market. I use it to empirically test my hypothesis, which I formalize as a simple regression model. My results suggest that the hypothesized effect is small, but significant. This finding points to a causal link between currency hierarchy and ecologically unequal exchange.
    Date: 2023–10–04
  2. By: Marques Gomes, Luiz Henrique
    Abstract: Oskar Lange is generally known about his contribution in the debate on the feasibility of rational economic calculation under socialism. Although he is recognized as the theoretical "winner" of this debate, his contributions to economics extend over a wide range of topics and involve issues such as the economic organization of a society in transition to socialism, the relevance or not of econometrics, the meaning of Say's law and the use of cybernetics for economic planning. There are two points that are fundamental in Lange’s work, namely: (i) the economic viability of the socialist mode of production and (ii) the economics of the transition to socialism. The objective of the present article is to investigate Lange’s contributions in regard of these two points: the economic viability of socialism and the economics of the transition to socialism.
    Keywords: Oskar Lange, Socialism, Economic Planning, Law of Value, Market Socialism.
    JEL: B24
    Date: 2022–01
  3. By: maas, harro
    Abstract: This paper provides a personal reflection on the development, over 50 years, of the History of Economics Society. The (perhaps obvious) punchline is that history writing is not neutral, but entails stances about power and politics. These stances are all the more relevant in today's context, in which money buys history.
    Date: 2023–10–05
  4. By: Roger H. Gordon
    Abstract: There is a consensus among economists that a carbon tax is the best approach for addressing the effects of CO2 emissions on the global climate. However, past international agreements on climate change instead specify caps on emissions (a quantity target) for each country. This paper explores several advantages of such use of quantity targets. For one, if a country were to impose a carbon tax at a rate high enough to correct for global externalities, this rate would far exceed the rate in that country’s own self-interest. The result is an incentive to make use of other domestic government policies to encourage greater emissions, undercutting the intended abatement under a carbon tax. A quantity target instead by construction caps emissions. Second, the paper argues that a quantity target can better insure that global warming remains below two degrees Celsius, given the uncertainties faced regarding the response to any given carbon tax rate. Third, the set of quantity targets set for each country can more flexibly be adjusted to ensure that most countries benefit from participating in a global accord, while still allowing efficient patterns of abatement by giving countries credit for cross-border abatement efforts.
    JEL: H20 H22 H3 Q54
    Date: 2023–10

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