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on Post Keynesian Economics |
| By: | John Harvey (Department of Economics, Texas Christian University) |
| Abstract: | Today, we are in the midst of the worst economic crisis since the Great Depression. Recovery has not been swift, and policymakers and citizens throughout the globe have turned to economists for answers. While in the mainstream, the general opinion is that the collapse was unpredictable and caused by exogenous events (i.e., poor policy decisions), those in the Post-Keynesian school not only raised voices of concern well before the crisis struck, but they have argued consistently that the problems we face are systemic. They base this conclusion on theories developed by John Maynard Keynes. This paper attempts to determine the primary factors creating instability by building and then analyzing a system dynamics model of Keynes’ explanation of the business cycle. It shows that the financial sector is key and that while, of course, exogenous factors can play critical roles, they are unnecessary: cycles are generated endogenously. |
| Keywords: | Keynes, business cycle, system dynamics |
| JEL: | E12 E17 E32 |
| Date: | 2010–03 |
| URL: | http://d.repec.org/n?u=RePEc:tcu:wpaper:1003&r=pke |
| By: | John Harvey (Department of Economics, Texas Christian University) |
| Abstract: | That the economy goes through periods of expansion and recession is obvious. Whether or not this represents endogenously-generated cycles or simply stochastic variation around a trend is, however, a matter of debate. Among mainstream economists, the latter is the predominant position. For Post Keynesians, however, business cycles are a manifestation of the systemic instability inherent to the capitalist system. Endogenous fluctuations in investment spending lie at the heart of the shift from expansion to recession and while various shocks and government policies can, of course, have an impact, they are unnecessary to create the patterns we see. This paper offers evidence in support of the Post Keynesian position by tracing the US business cycle since 1950. With a combination of quantitative and qualitative evidence, it is demonstrated that, from the Korean War cycle to our current financial crisis, the central factor has been the rise and fall in investment. The complete story cannot be told without reference to fiscal and monetary policy, oil shocks, strikes, and so on–but most of it can. |
| Keywords: | business cycle, Keynes, Post Keynesian |
| JEL: | E12 E13 E32 |
| Date: | 2010–08 |
| URL: | http://d.repec.org/n?u=RePEc:tcu:wpaper:1008&r=pke |
| By: | John Harvey (Department of Economics, Texas Christian University) |
| Abstract: | Curiously and in spite of its name, very few business cycle theories actually treat it as a cycle. Mainstream economics, for example, models all macroeconomic fluctuations as a function of exogenous forces. In their view, the economy remains at full employment indefinitely unless impacted by some external event. Post Keynesian economists disagree strongly with this characterization, arguing instead that business-cycle fluctuations are endogenously generated. The goal of this paper is to compare the explanatory power of four business cycle models–three mainstream and one Post Keynesian–for the US economy since 1971. While the test employed is a simple one, the results are very clear: no model’s performance comes even close to that of the one based on Keynes’ seventy-year old analysis. |
| Keywords: | business cycle, Keynes, Post Keynesian |
| JEL: | E12 E13 E32 |
| Date: | 2010–07 |
| URL: | http://d.repec.org/n?u=RePEc:tcu:wpaper:1007&r=pke |
| By: | Peter Skott (University of Massachusetts Amherst) |
| Abstract: | US earnings inequality has increased dramatically since the 1970s, and the prospect of a reversal depends on what caused the trend. The standard explanation emphasizes skill-biased technical change. This paper briefly considers some aggregation issues and then proceeds to outline two alternative perspectives .power biased technical change and the effects of induced mismatch in the labor market .and their implications. JEL Categories: J31, J41, O33 |
| Keywords: | inequality, power-biased technological change, minimum wages, overeducation, mismatch, efficiency wage, aggregation. |
| Date: | 2010–09 |
| URL: | http://d.repec.org/n?u=RePEc:ums:papers:2010-09&r=pke |
| By: | Peter Skott, Ben Zipperer (University of Massachusetts Amherst) |
| Abstract: | Structuralist and post Keynesian models differ in their assumptions about firms’ investment behavior and pricing/output decisions. This paper compares three benchmark models: Kaleckian, Robinsonian and Kaldorian. We analyze the implications of these models for the steady growth path and the cyclical properties of the economy, and evaluate the consistency of the theoretical predictions with empirical evidence for the US. Our regression results and the stylized cyclical pattern of key variables are consistent with the Kaldorian model. The Kaleckian investment function and the Robinsonian pricing behavior find no support in the data. JEL Categories: E12, E32, O41 |
| Keywords: | growth, business cycles, aggregate demand, instability, income distribution,utilization rate, investment function, pricing. |
| Date: | 2010–09 |
| URL: | http://d.repec.org/n?u=RePEc:ums:papers:2010-08&r=pke |
| By: | Masanao Aoki (Department of Economics, University of California, Los Angeles); Hiroshi Yoshikawa (Faculty of Economics, University of Tokyo) |
| Abstract: | When the coefficient of variation, namely the standard deviation relative to mean approaches zero as the number of economic agents becomes large, the system is called self-averaging. Otherwise, it is non-self-averaging. Most economic models take it for granted that economic system is self-averaging. However, they are based on an extremely unrealistic assumption that all the economic agents face the same probability distribution. Once this unrealistic assumption is dropped, non-self averaging naturally emerges. Using a simple stochastic growth model, this paper demonstrates that the coefficient of variation of aggregate output or GDP does not go to zero even if the number of sectors or economic agents goes to infinity. Non-self-averaging implies that even if the number of economic agents is large, dispersion can remain significant, and, therefore, that we can not legitimately focus on the means of aggregate variables. It, in turn, means that the standard microeconomic foundations based on representative agents has little value for they are meant to provide us with accurate dynamics of the means of aggregate variables. Contrary to the main stream view, micro-founded macroeconomics such as a dynamic general equilibrium model does not provide solid micro foundations. |
| Date: | 2010–09 |
| URL: | http://d.repec.org/n?u=RePEc:tky:fseres:2010cf761&r=pke |
| By: | Peter Skott (University of Massachusetts Amherst) |
| Abstract: | This note comments on the state of macroeconomics, arguing that the ‘micro founded’ macro that developed after 1970s has been a wasteful detour. The paper will appear in a symposium in Homo Oeconomicus, vol. 27 (2), 2010, on the crisis and the response from the British Academy to the questions from the British Queen. JEL Categories: E1, B41 |
| Date: | 2010–09 |
| URL: | http://d.repec.org/n?u=RePEc:ums:papers:2010-07&r=pke |
| By: | John Harvey (Department of Economics, Texas Christian University) |
| Abstract: | John Maynard Keynes’ argued that crises were systemic and that, unless serious reforms were implemented, they would tend to grow in frequency and severity. The paper sets out to build a Keynes-style model of crises that captures both the unique characteristics of each type and their common roots. A schematic method is employed that traces the processes in time and shows how events become interrelated and mutually causal. This permits us, as much as possible, to see everything at once, a necessity when the build up to a crisis may manifest itself in so many places |
| Keywords: | financial crisis, Keynes, Minsky |
| JEL: | E12 E32 |
| Date: | 2010–01 |
| URL: | http://d.repec.org/n?u=RePEc:tcu:wpaper:1001&r=pke |
| By: | Amitava Krishna Dutt and Roberto Veneziani (Universty of Notre Dame, Queen Mary University of London) |
| Abstract: | This paper develops a classical-Marxian macroeconomic model to examine the growth and distributional consequences of education. First, the role of education in skill formation is considered and it is shown that an expansion in education will promote growth and have beneficial distributional effects within the working class, but it will redistribute income from workers to capitalists. Second, the model is extended analyze the broader political economic consequences of education on class relations and class conflict. The model suggests the importance of a progressive type of education rather than one which weakens the power workers, for it allows for equitable growth outcomes which improve the position of workers as a whole and reduces inequality within workers. Finally, the model shows that education leads to multiple equilibria and it stresses the importance of providing suitable incentives to workers for taking advantage of greater education access, without which the economy can be caught in a low-skill trap. JEL Categories: E2, E11, O41, J31. |
| Keywords: | education, growth, distribution. |
| Date: | 2010–09 |
| URL: | http://d.repec.org/n?u=RePEc:ums:papers:2010-10&r=pke |
| By: | Nancy Birdsall; Molly Kinder; Wren Elhai |
| Abstract: | This essay draws on the work of the Center for Global Development’s Study Group on U.S. Development Strategy in Pakistan and on the ideas in the group’s open letters to Ambassador Richard Holbrooke to present five recommendations for spending aid money well in Pakistan. [CGD Essay]. |
| Keywords: | global, development, pakistan, money, development, United States, |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:ess:wpaper:id:2971&r=pke |
| By: | Fiori Stefano (University of Turin) |
| Abstract: | Smith was certainly influenced by Newton’s analytic-synthetic method, and by his notion of “principle”. Nonetheless, in many fields of Smith’s inquiry he introduced elements which led him far from the Newtonian perspective. The present essay analyzes how historical dimensions, contingencies, institutions and conflicting human inclinations intervene in Smith’s discourse explaining economic systems. From this perspective, the intellectual Newtonian horizon seems to be profoundly modified. Finally, the paper focuses on how, in Smith’s view, institutions determine “unintended outcomes”, sometimes opposed to those of the market, when the reasons for their emergence have ceased but nevertheless persist over time. In this sense, the “invisible hand” is not only the result of the behaviour of myopic individuals trying to improve their condition, but also the outcome of the work of institutions which operate as structures autonomous with respect to individuals. |
| Date: | 2010–07 |
| URL: | http://d.repec.org/n?u=RePEc:uto:dipeco:201006&r=pke |