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on Post Keynesian Economics |
| By: | Thomas I. Palley |
| Abstract: | Keynes' General Theory was a massive step forward relative to classical economics, but it was also a step backward in its denial of the conflictual nature of capitalism. There is need to understand Keynes' technical contributions regarding the workings of monetary economies, but also need to understand the flaws within his thinking and the consequences thereof. Keynes made a fundamental contribution elucidating the mechanism of effective demand, and he also has claim to be the preeminent monetary theorist. However, owing to his denial of conflict, he had a flawed view of capitalism which is why establishment Keynesianism struggles to explain contemporary stagnation. That flawed view also undermines the case for Social Democracy. Contrary to conventional wisdom, his view of capitalism is supportive of Neoliberalism and Keynes can be viewed as a compassionate (Third Way) Neoliberal. |
| Keywords: | Keynes, The general theory, conflict, capitalism, stagnation, bastard Keynesians |
| JEL: | B2 B22 B3 B31 E00 P1 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:imk:fmmpap:88-2023&r= |
| By: | Mark Setterfield |
| Abstract: | Neoliberalism eviscerated the value-sharing ethos of the post-war Golden Age (1945-73), seeking to maintain social cohesion in civil society by 'managing the discontent of the losers'. This involved reconciling working households to the realities of the neoliberal labour market by means of coercion, distraction, and debt accumulation - the latter serving to limit the growth of consumption inequality in the face of burgeoning income inequality. The global financial crisis (GFC) and Great Recession undermined the process of household debt accumulation, creating a crisis of neoliberal accumulation. Key to the institutional renewal required to address this crisis will be managing the discontent of the losers inherited from the neoliberal era. One possibility is Authoritarian Neoliberalism, based on increasingly illiberal amplification of the 'coerce and distract' elements inherited from the Neoliberal Boom (1990-2007). The only viable alternative is Social Capitalism. This involves a renewal of social democracy that manages the discontent of the losers at its source, by creating inclusive and sustainable growth that both reduces the need and desire for illiberalism in the sphere of civil society. |
| Keywords: | Social structure of accumulation, capital-citizen accord, household debt, inequality, populism |
| JEL: | E21 B51 B52 P16 |
| Date: | 2024 |
| URL: | http://d.repec.org/n?u=RePEc:imk:fmmpap:98-2024&r= |
| By: | Ianni, Juan Martin |
| Abstract: | Demand and growth regimes (DGR) and macroeconomic policy regimes (MPR) frameworks have assumed prominence within the post-Keynesian literature. However, most studies based on these conceptual frameworks have focused on developed economies. The main contribution of this paper is to provide a post-Keynesian analysis of the DGR and MPR of an emerging capitalist economy, Argentina, in the period between 2002 and 2019. By providing a novel periodization of the Argentine macroeconomic development, the results show a more precise characterization of the latter, thus allowing a better understanding of economic policy and its results in terms of aggregate demand and growth. In particular, it is possible to observe the MPR and DGR transition between 2002 and 2015, as well as an abrupt change after 2016. |
| Keywords: | Macroeconomía; Política Económica; Demanda Agregada; Crecimiento Económico; Países Periféricos; Argentina; 2002-2019; |
| Date: | 2024–04–05 |
| URL: | http://d.repec.org/n?u=RePEc:nmp:nuland:4076&r= |
| By: | Steven Fazzari (Washington University in St. Louis); Alejandro Gonzalez (Washington University in St. Louis) |
| Abstract: | This paper estimates a demand-led model of macroeconomic growth and fluctuations in which the growth rate of the economy's supply side converges to the growth rate of demand. Convergence happens because labor supply and productivity growth respond to the degree of slack in the economy. Faster demand growth reduces slack and stimulates supply (and vice-versa). We estimate the model using simulated method of moments and find statistically significant and quantitatively important hysteresis effects: the semi-elasticity of productivity and labor supply to the unemployment rate are 0.73 and 0.26, respectively. For an economy with labor market slack, these estimates imply that supply growth could accommodate a one percentage point increase in the growth rate of demand with a reasonable 0.75 percentage point reduction in the long-run unemployment rate. Additionally, we show the model replicates major features of business cycles as well the response of the economy to autonomous demand shocks, providing further validation of this approach to understanding macroeconomic dynamics. |
| Keywords: | Hysteresis, Demand-Led Growth, Supermultiplier |
| JEL: | E32 E12 O41 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:imk:fmmpap:89-2023&r= |
| By: | Thomas I. Palley |
| Abstract: | This paper presents a new formulation of conflict inflation labeled the "pass-through" approach, which contrasts with the existing "pressure balance" approach. The model generates Phillips styled inflation - unemployment dynamics that are a hybrid of Keynesian and NAIRU dynamics. Conflict inflation arises when economic activity rises above the consistent claims activity level, and it is subject to self-propelled conflict accelerationism. Immediately below that level, inflation holds constant at the expected rate. At low activity, accelerating disinflation can develop. Worker militancy, corporate aggressiveness, negative supply shocks, and upward commodity price shocks all contribute to conflict inflation. They do so via two channels. First, they increase the intensity of conflict by increasing the degree of income claims inconsistency. Second, they lower the activity level at which conflict inflation kicks in. Policy can affect the consistent claims economic activity threshold at which conflict inflation kicks in. However, there may be adverse interaction effects with aggregate demand. Conflict inflation is best addressed by unconventional policies, such as incomes policy. Institutional developments in the Neoliberal era have likely reduced the relevance of conflict inflation. |
| Keywords: | conflict inflation, wage share, mark-up, accelerationism, Phillips curve |
| JEL: | E12 E24 E31 E61 |
| Date: | 2024 |
| URL: | http://d.repec.org/n?u=RePEc:imk:fmmpap:101-2024&r= |
| By: | Sascha Keil; Walter Paternesi Meloni |
| Abstract: | Over the past decades, models of circular and cumulative causation, based on the endogenous relations between prices, exports, and labour productivity, have lost prominence in explaining economic dynamics. We argue that, in the absence of counterbalancing mechanisms, the combination of price-sensitive exports and the triggering effect of exports on productivity can enable feedback loops and can significantly shape macroeconomic reality in the short-to-medium run. We apply an adapted export-led model of cumulative causation to 10 major countries belonging the Euro area, a region characterized by divergent wage growth trajectories reflected in divergent export competitiveness and lack of equilibrating mechanisms. Specifically, the model is tested for the period 1995–2020 employing a country-level system of equations (3SLS-ARDL). Our findings indicate that for the majority of the countries examined, this feedback mechanism – comprising price-sensitive exports and export demand affecting productivity growth – exacerbates macroeconomic disparities in terms of labour productivity. While nominal wages act as a potential trigger through their impact on price competitiveness, they also serve as a central factor that retards the feedback mechanism due to the Verdoorn effect of wage-induced demand. Overall, our results affirm the significance of price-induced and export-led theories of cumulative causation while also delineating its limitations, particularly regarding price competitiveness-oriented export-led growth strategies. |
| Keywords: | international trade, export, competitiveness, unit labour cost, wages, productivity, european imbalances |
| JEL: | F16 F41 J30 |
| Date: | 2024 |
| URL: | http://d.repec.org/n?u=RePEc:imk:fmmpap:103-2024&r= |
| By: | Gilberto Tadeu Lima (University of Sao Paulo); Mark Setterfield (New School for Social Research); Jaylson Jair da Silveira (Federal University of Santa Catarina) |
| Abstract: | We explore the short-term macrodynamics of stabilization policy at the effective lower bound (ELB) of the nominal interest rate, in an environment characterized by heterogenous and endogenously time-varying private-sector output and inflation expectations driven by evolutionary dynamics. We show that at the ELB, fiscal policy conducted in accordance with a well-specified policy rule is particularly effective for purposes of macroeconomic stabilization. This is because fiscal interventions have both a direct effect on output and inflation (via aggregate demand formation) and an indirect effect on these same target variables, via the management of heterogenous and evolving expectations. As a result of the two channels through which it operates, and seemingly despite the logic of the Tinbergen (targets-instruments) principle, fiscal policy is thus revealed as a single policy instrument capable of achieving two policy goals. |
| Keywords: | Stabilization policy, effective lower bound, fiscal policy, heterogeneous inflation and output expectations, satisficing evolutionary dynamics |
| JEL: | E12 E52 E62 E63 E71 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:imk:fmmpap:86-2023&r= |
| By: | Lilian Rolim (Universidade Estadual de Campinas); Laura Carvalho; Dany Lang |
| Abstract: | We explore the relationship between inequality, unemployment, and inflation by considering the evidence that low-wage workers are more exposed to business cycle fluctuations. The analysis is undertaken in an extended version of the stock-and-flow consistent agent-based model by Rolim et al. (2023), in which inflation and inequality result from the social conflict over income distribution. The inflation-unemployment-inequality nexus leads to the inequality-augmented Phillips curve relating higher levels of unemployment to lower inflation rates and more inequality. We then perform two sets of experiments to investigate the implications of this nexus further. The first experiment shows that the decrease in low-wage workers' bargaining power could explain the flattening of the Phillips curve and the increase in income and wage inequalities. The second experiment contrasts different monetary policy rules and compares the implications for inequality dynamics. In line with the inequality-augmented Phillips curve, the rules have important implications for wage and income inequalities: a monetary policy rule that prioritizes low inflation rates is associated with higher unemployment and higher inequality levels. |
| Keywords: | Phillips curve, inflation, unemployment, inequality, monetary policy, bargaining power |
| JEL: | C63 D3 E2 E3 E4 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:imk:fmmpap:91-2023&r= |
| By: | Claudius Graebner Radkowitsch (Institute for Comprehensive Analysis of the Economy, Johannes Kepler University Linz, Austria; Department of Pluralist Economics, Europa-University Flensburg, Germany); Jakob Kapeller (Institute for Comprehensive Analysis of the Economy, Johannes Kepler University Linz, Austria; Institute for Socio-Economics, University of Duisburg-Essen, Germany) |
| Abstract: | At its core, the discussion on the micro–macro link in heterodox economics is concerned with the correct treatment of aggregates and aggregation in social theory. In this chapter we survey heterodox approaches to the micro-macro link with a focus on shared understandings and convictions that apply across different schools of thought. In addition, we illuminate typical fallacies related to the treatment of aggregation and aggregates as well as the philosophical underpinnings of heterodox ontology to better understand conceptual differences between heterodox economics and competing approaches. Given that economics faces myriad problems of aggregation—as in the case of market interaction, macroeconomic aggregates, or interpersonal coordination and contracting—the quest to provide suitable conceptual tools and philosophical foundations to adequately address aggregates and aggregation should be of special interest to economists of different persuasions. |
| Date: | 2024–05 |
| URL: | http://d.repec.org/n?u=RePEc:ico:wpaper:153&r= |
| By: | Omar Al-Ubaydli; Faith Fatchen; John List |
| Abstract: | Field experiments are a useful empirical tool that can be deployed in any sub-discipline - including institutional economics - to enhance the sub-discipline's empirical insights. However, we here argue that there exist fundamental barriers to the use of field experiments in understanding the impact of institutions on economic growth. Despite these obstacles, we present some significant scholarly contributions that merit exposition, while also proposing some future methods for using field experiments within institutional economics. While field experiments may be limited in answering questions in institutional economics with macroeconomic outcomes, there is great potential in employing field experiments to answer micro founded questions. |
| Date: | 2024 |
| URL: | http://d.repec.org/n?u=RePEc:feb:natura:00787&r= |
| By: | Schlichter, Leo |
| Abstract: | The Degrowth movement advocates a radical shift from our capitalist economic system to one based on human needs, planetary boundaries, and economic democracy. The literature, however, often neglects detailing the concrete coordination mechanisms of a Degrowth economy. This paper addresses this gap by proposing democratic economic planning as a potential solution. I delve into historical and contemporary planning debates, examining practical examples and proposals that leverage artificial intelligence and cybernetics for democratic economic planning. I argue that models such as participatory economics (Parecon) or Daniel Saros's planning model align well with Degrowth principles, forming a foundation for further exploration. Effective economic planning requires democratic participation, free information flow, and safeguards against power abuse. Still, open questions on money, trade, democratic institutions, and privacy protection require further investigation. |
| Keywords: | Degrowth, economic democracy, economic planning, participatory economics |
| JEL: | B50 O49 P11 P21 P40 |
| Date: | 2024 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:ipewps:294825&r= |