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on Post Keynesian Economics |
| By: | L. Randall Wray |
| Abstract: | This paper examines heterodox theories of the determinants of the value of money. Orthodox approaches that tie money's value to relative scarcity of money or to the price level are rejected as inconsistent with the monetary theory of production embraced by heterodox traditions linked to Marx, Veblen, and Keynes. This paper examines and integrates (1) recent contributions by David Graeber and Duncan Foley that reinterpret Marx's labor theory of value, (2) the interpretation of Keynes's liquidity preference theory as a theory of asset pricing that began with Sraffa and was further developed by Minsky and Kregel, and (3) Modern Money Theory's approach to sovereign currency. As Heilbroner argued, money is central to the internal logic of the capitalist system, and is what makes capitalism truly different from other social organizations. Our theory of value informs our beliefs about how the deep structure of the economic system generates a system of prices denominated in the money of account. |
| Keywords: | Labor theory of value; Modern Money Theory; Liquidity Preference; Monetary Theory of Production; Marx; Keynes; Minsky; Graeber; Foley; Sraffa; Heilbroner |
| JEL: | B14 B24 B25 B51 B52 E11 E12 |
| Date: | 2024–12 |
| URL: | https://d.repec.org/n?u=RePEc:lev:wrkpap:wp_1062 |
| By: | Joerg Bibow |
| Abstract: | This paper revisits Keynes's (1930) essay titled "The economic possibilities for our grandchildren." We discuss the three broader trends identified by Keynes that he expected would come to characterize the socio-economic evolution of advanced countries under individualistic capitalism: first, continued technological progress and capital accumulation as the main drivers of exponential growth in economic possibilities; second, a gradual general rebalancing of life choices away from work; and third, a change in the code of morals in societies approaching an envisioned stationary state of zero net capital accumulation in which mankind has solved its economic problem and enjoys a lifestyle predominantly framed by leisure rather than disutility-yielding work. We assess actual outcomes by 2023 and attempt to peek into the future economic possibilities for this generation's grandchildren. |
| Keywords: | Keynes; technology; growth; work; leisure; capitalism |
| JEL: | B22 B31 E20 J22 N10 Q40 |
| Date: | 2024–01 |
| URL: | https://d.repec.org/n?u=RePEc:lev:wrkpap:wp_1038 |
| By: | L. Randall Wray; Eric Lin |
| Abstract: | This paper looks at the relationship between government budget deficits and the growth rate of GDP. While orthodox economic theory offers several reasons to believe that growing deficits might be associated with slower growth, and would ultimately be unsustainable, Keynesians assert that deficits could stimulate growth--at least in the short run--implying the relation between deficits and growth could be positive. Modern Money Theory, adopting Godley's sectoral balance approach, Lerner's functional finance approach, and Minsky's theory of financial instability takes a more nuanced approach. Historical data for a number of countries is presented, showing that there is no obvious relation between the deficit ratio and economic growth over long time periods. However, there is a predictable path of the relationship over the course of the business cycle for all countries examined. |
| Keywords: | government budget deficit; deficit ratio; GDP growth rate; MMT; sectoral balance; functional finance; Wray curve; automatic stabilizer; Godley; Lerner |
| JEL: | F30 N10 N14 P16 |
| Date: | 2024–09 |
| URL: | https://d.repec.org/n?u=RePEc:lev:wrkpap:wp_1055 |
| By: | Eric Tymoigne |
| Abstract: | Drumetz and Pfister make several claims about the inadequacy and fallacies of Modern Money Theory (MMT) and conclude that MMT is nothing more than a political manifesto; there are no theoretical and empirical foundations behind it. This paper addresses this last point by focusing on the fiscal and monetary policy aspects of their criticisms. Contrary to what they claim, MMT is backed by a large body of empirical evidence, a rich institutional analysis, and a well-developed theoretical framework (including mathematical models). MMT provides a detailed analysis of the coordination between the fiscal and monetary branches of government, emphasizes that fiscal deficits are a stylized fact, and uses theoretical tools grounded in institutional realities to explain this stylized fact. In line with a large body of work, MMT concludes that fiscal policy, the provision of an elastic currency, and financial regulations have contributed to economic stability and growth; however government involvement can be improved by changing the policymaking praxis. MMT also concludes that fine-tuning of the economy via monetary policy is not effective and does not attribute the "great moderation" to better monetary management. Originally issued as EDI Working Paper No. 04, 2022. |
| Keywords: | Modern Money Theory; Monetary Policy; Fiscal Policy; Policy Coordination; Public Debt Sustainability |
| JEL: | E12 E58 E61 H62 H63 |
| Date: | 2024–11 |
| URL: | https://d.repec.org/n?u=RePEc:lev:wrkpap:wp_1061 |
| By: | Pavlina R. Tcherneva |
| Abstract: | Orthodox economic theory presents the policy maker with an impossible choice: eradicate unemployment at the cost of undesirable inflation or keep prices stable by maintaining some level of involuntary unemployment. This is the canon, as embodied in the natural rate of unemployment theory and the Non-Accelerating Inflation Rate of Unemployment (NAIRU). In the mainstream, there is no alternative. Heterodoxy has long criticized the NAIRU and the natural rate, but has not mounted a robust challenge for lack of a clearly articulated policy alternative that can target both goals: full employment and price stability. Modern Money Theory (MMT) has such a proposal--the federal Job Guarantee. Originally issued as EDI Working Paper No. 02, 2022. |
| Date: | 2024–11 |
| URL: | https://d.repec.org/n?u=RePEc:lev:wrkpap:wp_1060 |
| By: | Laura Lisset Montiel-Orozco |
| Abstract: | This working paper contrasts the neo-Keynesian and post-Keynesian theories of monetary policy for an open economy, highlighting the irrelevance of the orthodox theory and the explanatory capacity of heterodoxy for an emerging economy such as Mexico. It focuses on the role of the central bank and the case of the Mexican currency during the economic recovery after the Great Lockout. In the first section, we criticize two proposals of the 3-Equation New-Keynesian model, concluding that, implicitly, both models reaffirm the extreme neutrality of money and the exchange rate in both the short and the long runs. In contrast, we analyze the post-Keynesian exchange rate model proposed by John T. Harvey (2009). In addition, we rely on the fundamentals of the heterodox school of thought such as the financial instability hypothesis of Hyman Minsky (1994) and the relevance of capital flows for the determination of the exchange rate and its implications for economic growth and prices by Jan Kregel (2008). Finally, the erratic behavior of the excessive appreciation of the Mexican Super Peso against the dollar after the recovery of the COVID-19 crisis and in the context of global risk is presented. |
| Keywords: | Monetary Policy; New Keynesian Economics; post-Keynesian Economics; Foreign Exchange Rate; Mexico |
| JEL: | E31 E52 E10 E12 F31 |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:lev:wrkpap:wp_1057 |
| By: | Jesus Felipe; John McCombie |
| Abstract: | This paper offers a retrospective view of the key pillar of Solow's neoclassical growth model, namely the aggregate production function. We review how this tool came to life and how it has survived until today, despite three criticisms that undermined its raison d'etre. They are the Cambridge Capital Theory Controversies, the Aggregation Problem, and the Accounting Identity. These criticisms were forgotten by the profession, not because they were wrong but because of the key role played by Robert Solow in the field. Today, these criticisms are not even mentioned when students are introduced to (neoclassical) growth theory, which is presented in most economics departments and macroeconomics textbooks as the only theory worth studying. |
| Keywords: | Accounting Identity; Aggregation Problem; Cambridge Capital Theory Controversies; Solow |
| JEL: | B22 B31 B32 B41 E13 E25 |
| Date: | 2024–03 |
| URL: | https://d.repec.org/n?u=RePEc:lev:wrkpap:wp_1046 |
| By: | Pavlina R. Tcherneva; Eric Tymoigne |
| Abstract: | This paper evaluates the relationship between monetary and fiscal policy and the relative effectiveness of macroeconomic stabilization through the lens of Modern Money Theory (MMT). We articulate previously-neglected aspects of monetary sovereignty to offer a new interpretation of the Bernanke Doctrine that emerged in the wake of the 2008 Global Financial crisis. This Doctrine validated key MMT precepts and paved the way for fiscal policy activism in response to COVID19. The paper argues that fiscal and monetary policy coordination is not new or rare. It is an intrinsic feature of sovereign monetary regimes, allowing for more effective policy responses to financial crises or pandemics. To the extent that monetary policy is able to stabilize an unstable economy, it is largely due to its fiscal components. This recognition also calls for a rethinking of fiscal policy. Originally issued as EDI Working Paper No. 08, 2022. |
| Keywords: | Modern Money Theory; MMT; Bernanke; Great Financial Crisis; history of money; monetary systems; monetary sovereignty; tax-driven money; consolidated government; government debt and deficit; quantitative easing; fiscal components of monetary policy; nonstandard Open Market Operations; COVID fiscal relief |
| JEL: | E12 E58 E61 H62 H63 |
| Date: | 2024–12 |
| URL: | https://d.repec.org/n?u=RePEc:lev:wrkpap:wp_1064 |
| By: | Ndongo Samba Sylla |
| Abstract: | Most debates and policy proposals about Global South countries' external debt problem take for granted the view that it is normal for their governments to issue debts denominated in foreign currencies. This paper tries to challenge this widely held and usually unquestioned assumption by relying on Modern Money Theory (MMT) insights. The author argues that the MMT lens helps us understand the root causes of the foreign debt problem of Southern countries, those located in Africa in particular, to clarify the ordinarily mis-specified concept of "external constraint" or "balance-of-payments constraint" and to envisage progressive domestic policy measures that are under their control. Originally issued as EDI Working Paper No. 16, March 2024. |
| Date: | 2024–12 |
| URL: | https://d.repec.org/n?u=RePEc:lev:wrkpap:wp_1067 |
| By: | Caio Vilella; Eduardo F. Bastian |
| Abstract: | Minsky (1965) has presented the Job Guarantee program as a recommendation in the war against unemployment and poverty. Kalecki (1943), on the other hand, argued that the full employment situation could be technically feasible but politically hard to implement due to the class struggle, resulting in what we will refer to as the "kaleckian dilemma." Based on this contradiction, this paper aims to extract lessons from the Rehn-Meidner Swedish plan, which successfully combined low unemployment rates and creeping inflation for over three decades, as a means to study the chances of a Job Guarantee overcoming the kaleckian dilemma. From these lessons, this piece highlights the importance of a tripartite council bargaining board at the national level to settle the Job Guarantee’s wage level. In addition, we highly recommended other desirable features, such as international capital control and taxation on extraordinary profits, to raise the chances of the program successfully dealing with the kaleckian dilemma, just as Rehn-Meidner did. Originally issued as EDI Working Paper No. 10, November 2023. |
| Keywords: | Kaleckian dilemma; Job Guarantee; Rehn-Meidner plan |
| JEL: | E11 E31 H53 I30 |
| Date: | 2024–12 |
| URL: | https://d.repec.org/n?u=RePEc:lev:wrkpap:wp_1066 |
| By: | Partha, Partha Roy |
| Abstract: | Artificial intelligence is being touted more and more as something that will supplant human labor, something that inspires some but terrifies most. Giant tech giants are driving this, presenting automation as something inevitable and even desirable. But one would still like to know: can one really dispense with human effort in maintaining the tempo of civilization? This essay contends that while AI can boost productivity and reshape markets, substituting fully for human labor is not feasible or desirable on ethical bases. The analysis is a mix of three arguments. At the labor economies level, the analysis looks at how automation destroys forms of employment, especially in informal and gig economies where dignity and stability are already weak. At the market level, it asks if AI creates truly new demand or only redistributes value, raising questions about the possibility of limitless growth by means of automatization. At the moral level, it considers dignity, autonomy, and value of service, knowing that work is not merely a way of making a living but also a path of meaning and continuity. The implications are that human labor is more than a production factor but the foundation of civilization. Care, ritual, and creativity are key to advancement in ways that are not replicable by machines. To turn a blind eye to facts is to risk hollowing out economies and societies. The paper ends by advocating for a balanced way where AI arrives as a tool that supplements and does not substitute human work. |
| Keywords: | Artificial Intelligence, Labour Economics, Ethics, Inequality, Sustainable Development, AI and productivity |
| JEL: | J11 J18 J2 J24 J7 J70 O1 O11 |
| Date: | 2025–07–09 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:126038 |
| By: | Arturo Huerta G. |
| Abstract: | For Matias Vernengo and Esteban Perez Caldentey (2020), the MMT literature overemphasizes the choice of the exchange rate regime and the relevance of a flexible exchange rate regime, as well as the ultimate effect of that choice upon the policy space. In addition, they argue that the role of capital flows is underexplored, and that the relevance of the balance-of-payments constraint is often underestimated. Vernengo and Perez's criticism fails to consider that exchange-rate flexibility makes it possible to use flexible fiscal and monetary policies as well, to boost growth and employment, and to reduce the balance-of-payments constraint. |
| Keywords: | Capital Mobility; Currency; Exchange Rate; Financial Sector; Fiscal Policy; Foreign; Exchange Policy; Government Spending; Interest Rates; Monetary Policy; Real Activity |
| JEL: | E42 E43 E44 O23 O24 |
| Date: | 2024–06 |
| URL: | https://d.repec.org/n?u=RePEc:lev:wrkpap:wp_1052 |
| By: | Tanweer Akram; Khawaja Mamun |
| Abstract: | This paper critically reviews both mainstream and Keynesian empirical studies of interest rate dynamics. It assesses the key findings of a selected number of these studies, surveying the debates between the mainstream and the Keynesian schools. It also explores the debates on interest rate dynamics within the Post Keynesian school of thought. Lastly, the paper identifies the critical questions relevant for future empirical research. |
| Keywords: | Interest Rate Dynamics; Empirical Modeling of Interest Rates; Mainstream Economics; Keynesian Economics |
| JEL: | E43 E50 E58 E60 G10 G12 |
| Date: | 2024–02 |
| URL: | https://d.repec.org/n?u=RePEc:lev:wrkpap:wp_1043 |
| By: | Yeva Nersisyan |
| Abstract: | This paper explains the MMT approach for evaluating the affordability of spending programs, contrasting it with the mainstream approach. Using the examples of the Green New Deal, Medicare-for-All, and Build Back Better, it argues that rethinking spending and taxes as claims on, and releases of resources, respectively, leads to different conclusions about the affordability of these programs. Unlike the mainstream view, the MMT approach does not lead to the conclusion that taxes necessarily must go up to "pay for" more spending. Conversely, just because money is not a constraint does not mean that every government program is immediately "affordable." The resource demands of certain programs might be beyond the economy's potential, at least in the short-term. The MMT approach thus leads to different solutions for how to make a program "affordable"; to do so it focuses on creating the necessary resource space through the tools the government has at its disposal, such as public investment and taxation. Originally issued as EDI Working Paper No. 09, 2023. |
| Date: | 2024–12 |
| URL: | https://d.repec.org/n?u=RePEc:lev:wrkpap:wp_1065 |
| By: | Eric Tymoigne |
| Abstract: | A monetary approach that combines Chartalism, Nominalism, and Command origins of monetary systems is often deemed to have emerged only recently, while the Aristotelian approach (Commodity, Metallism, and Market origins of monetary systems) is the only one that existed until the end of the eighteenth/early-nineteenth century. In the major studies of the history of monetary thought, the Chartalism-Nominalism-Command approach is mostly left unmentioned, or at best reduced to an incoherent banality. The paper shows that this approach has a long and rich intellectual history among European monetary thinkers. In Europe, Plato was its first exponent, albeit in a very rudimentary way, and so one may call it the "Platonic approach." It is developed by Roman legists (such as Javolenus, Paulus, and Ulpian) and Medieval legists (such as Du Moulin, Hotman, and Butigella) who note that coins are similar to securities and that debts are serviced when nominal sums are paid rather than specific coins tendered. During the Renaissance and early modern period, a series of scholars and financial practitioners (such as Law, Dutot, Thomas Smith, and James Taylor) emphasize the financial logic behind monetary mechanics and the similarity of coins and notes. In the twentieth century, authors such as Innes, Knapp, Keynes, and Commons build onto the groundwork provided by these past scholars. In China, the Chartalism-Nominalism-Command approach develops independently and dominates from the beginning under Confucian and Legist thoughts. They emphasize the statecraft origins of monetary systems, the role of tax redemption, and the irrelevance of the material used to make monetary instruments. Clay, lead, paper, iron, copper, and tin are normal and convenient means to make monetary instruments, they are not special/emergency materials. The essence of a monetary instrument is not defined by its materiality but rather by its chartality, that is, by the promise it embeds. The Platonic approach rejects the categories and conceptualizations used by the Aristotelian approach and develops new ones, which leads to a different set of inquiries and understanding of monetary phenomena, problems, and history. |
| Keywords: | History of monetary thoughts; monetary theory; Chartalism; Nominalism; asset pricing; redemption |
| JEL: | B10 B11 B20 B26 E42 E62 G12 H30 K15 |
| Date: | 2024–11 |
| URL: | https://d.repec.org/n?u=RePEc:lev:wrkpap:wp_1058 |
| By: | Michalis Nikiforos; Simon Grothe |
| Abstract: | The post-pandemic surge in inflation was accompanied by a surge in the corporate share of profits. As a result, several economists and policy makers have given to it names such as "profit-led inflation" or "sellers' inflation." The present paper discusses the extent to which profit-led inflation, as an explanation for the recent surge in inflation, is compatible with what we know about the price-setting behavior of firms, income distribution, and inflation. We do that in juxtaposition to two recent critiques: that the increase in the profit share is the result of cyclical factors, and that the increase in import prices leads to higher profit shares even under constant markups. We show that there is little evidence that the recent surge in profitability is cyclical in nature. Moreover, after outlining the Structuralist/Kaleckian theories of prices and inflation we argue that profit-led inflation does not require an increase in the markup of the firms and is consistent with these theories. In the face of large import and other price shocks even under constant markups, firms are able to pass the burden of adjustment to real wages. Thus, the term profit-led emphasizes the distributional source and consequences of inflation. We also provide an empirical examination of the markups in the post-pandemic period using data from the Compustat database. We show that, on average, firms were able to increase or maintain their markups, although there is significant heterogeneity across sectors or the position of the firms in the distribution of markups. |
| Keywords: | Inflation; Markup; Distribution; Profit-led Inflation |
| JEL: | E11 E12 E31 C67 |
| Date: | 2024–01 |
| URL: | https://d.repec.org/n?u=RePEc:lev:wrkpap:wp_1037 |
| By: | Raul A. Carrillo |
| Abstract: | Scholars and affiliates of the Levy Economics Institute have long demonstrated a granular understanding of the "operations" of money, which entails understanding the financial system's law and technology (Grey 2019, Tymoigne 2014, Fullwiler 2010, Bell and Wray 2002-3, Bell 2000). During the dot-com bubble, many Levy-affiliated economists underscored the relationship between government fiscal surpluses and unsustainable private debt (Godley and Wray 1999). Recently, scholars have written about the collapse of Silicon Valley Bank (Grey 2023; Tankus 2023) and resurgent speculation in the tech sector (Veneroso and Pasquali 2021). These are but a few examples. Here, I present some brief thoughts on money as a technology--money itself. I argue there is value in thinking of money not only as a legal institution, political, economic, or social relation but as technology. The exercise sharpens our vision of the future of money even as we continue to believe in radical uncertainty. I address a few points in this essay. First, I make the case for money as technology. I then survey three applications: 1) the trajectory of state money as a technology of public finance and its relationship to the suppression of indigenous and non-state monies, 2) the regulation of money-like liabilities issued by technology companies, which operate according to the accumulative logic of Silicon Valley rather than Wall Street, and 3) money's future as a technology of surveillance, discipline, and punishment. Finally, I call for scholarship to inform a vision of money as a more democratic technology (per the mission of the Economic Democracy Initiative and Levy Economics Institute). |
| Keywords: | Money; Technology; Neochartalism; Privacy; Surveillance; De-monetization |
| Date: | 2024–12 |
| URL: | https://d.repec.org/n?u=RePEc:lev:wrkpap:wp_1070 |
| By: | Lukas Baeurle (Institute for Comprehensive Analysis of the Economy, Johannes Kepler University Linz, Austria; Socio-Ecological Transformation Lab, Johannes Kepler University Linz, Austria; Department of Socioeconomics, University of Hamburg, Germany); Sabine Maasen (Department of Socioeconomics, University of Hamburg, Germany) |
| Abstract: | Contemporary societies face a persistent polycrisis in which socioeconomic, ecological, technological, and geopolitical challenges intersect and reinforce each other. This volatility exposes the limitations of linear, mono-paradigmatic responses and places new demands on the production and circulation of knowledge. This is also true for economic matters, policies and rationales: While mainstream economics remains characterised by abstraction, disciplinary closure, and expertocratic policy advisory, an alternative ecosystem has emerged, also in the German-speaking world: the New Economy Space (NES). This article reconstructs the NES as a boundary-spanning dispositif of knowledge production that combines critical resources from pluralist economics with broader societal trends towards transdisciplinarity and impact orientation. Drawing on interviews, organisational documents, and observations of networking events, the study identifies three defining features of NES knowledge production: the continuous establishment of agile addresses, a pronounced orientation towards political impact, and the organisation of transversality across fields. NES think tanks thereby translate heterogeneous knowledges and normative positions into strategically crafted interventions for policymakers, media, and civil society. The article situates NES practices in contrast to academic economics and highlights their potential to reshape the epistemic and institutional foundations of economic expertise. It concludes by reflecting on the implications of this emerging model for the future of economics as a science and as a mode of public intervention. |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:ico:wpaper:170 |
| By: | Dirk Ehnts; Jussi Ora |
| Abstract: | In this paper, we discuss the balance sheet mechanics of the Swedish government. We examine spending, government bond purchases, and tax payments. As long as the Swedish central bank, which is created through Swedish laws, supports the Swedish central government, it cannot run out of money. The Swedish government therefore plays a large role in the Swedish economy. It can and should target full employment and price stability, bringing to bear its fiscal power. |
| Keywords: | Riksbank; Swedish crowns; public finance; money creation |
| JEL: | E62 B52 E12 |
| Date: | 2024–01 |
| URL: | https://d.repec.org/n?u=RePEc:lev:wrkpap:wp_1035 |
| By: | Tanweer Akram; Shahida Pervin |
| Abstract: | This paper econometrically models the dynamics of long-term Chinese government bond (CGB) yields based on key macroeconomic and financial variables. It deploys autoregressive distributive lag (ARDL) models to examine whether the short-term interest rate has a decisive influence on the long-term CGB yield, after controlling for various macroeconomic and financial variables, such as inflation or core inflation, the growth of industrial production, the percentage change in the stock price index, the exchange rate of the Chinese yuan, and the balance sheet of the People's Bank of China (PBOC). The findings show that the short-term interest rate has an economically and statistically significant effect on the long-term CGB yield of various maturity tenors. John Maynard Keynes claimed that the central bank’s policy rate exerts an important influence over long-term government bond yields through the short-term interest rate. The paper's findings evince that Keynes's claim holds for China, implying that the PBOC's actions are a driver of the long-term CGB yield. This means that policymakers in China have considerable leeway in fiscal and monetary operations, government deficit finance, and central government debt management. |
| Keywords: | Chinese Government Bonds; Long-term Interest Rates; Short-term Interest Rates; People’s Bank of China; John Maynard Keynes |
| JEL: | E43 E50 E58 E60 G10 G12 |
| Date: | 2024–02 |
| URL: | https://d.repec.org/n?u=RePEc:lev:wrkpap:wp_1044 |