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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:201003&r=pke |
| By: | Dean Baker |
| Abstract: | Recently governments, economists, and international financial institutions have been debating the merits of further fiscal stimulus to combat the Great Recession versus fiscal austerity or “adjustment” – that is, higher taxes and/or lower government spending – to combat budget deficits. Some supporters of austerity have gone as far as arguing that fiscal adjustment could restore economic growth. These analyses are being touted to oppose increased stimulus to boost the economy. This paper examines the arguments for austerity and emonstrates that current economic conditions in the United States do not support the case for fiscal adjustment. |
| Keywords: | budget deficit, deficit, fiscal austerity, stimulus, unemployment, deficit spending |
| JEL: | E E6 E60 E61 E62 E63 E64 E65 E66 H H2 H5 H6 H60 H61 H62 H63 H68 |
| Date: | 2010–10 |
| URL: | http://d.repec.org/n?u=RePEc:epo:papers:2010-23&r=pke |
| By: | Davis, John B (Department of Economics Marquette University) |
| Abstract: | This paper asks whether neuroeconomics will make instrumental use of neuroscience to adjudicate existing disputes in economics or be more seriously informed by neuroscience in ways that might transform economics. The paper pursues the question by asking how neuroscience constructs an understanding of individuals as whole persons. The body of the paper is devoted to examining two approaches: Don Ross’s neurocellular approach to neuroeconomics and Joseph Dumit’s cultural anthropological science organization approach. The accounts are used to identify boundaries on single individual explanations. With that space Andy Clark’s external scaffolding view and Nathaniel Wilcox’s socially distributed cognition view are employed. |
| Keywords: | neuroeconomics, behavioral economics, neurocellular economics, collective brainset, external scaffolding, socially distributed cognition, Economics |
| JEL: | A12 B41 |
| Date: | 2010–09 |
| URL: | http://d.repec.org/n?u=RePEc:mrq:wpaper:2010-08&r=pke |
| By: | Mark Weisbrot; Juan Antonio Montecino |
| Abstract: | The IMF’s most recent World Economic Outlook (WEO), published last week, projects world economic growth will slow, from 4.8 percent in 2010 to 4.2 percent next year. Throughout the report, there are numerous concerns expressed about the “fragility” of the global economic recovery. The Acting Chair of the Executive Board states that “[t]he recovery is losing momentum temporarily during the second half of 2010 and will likely remain weak in the first half of 2011, as extraordinary policy stimulus is gradually withdrawn.” In view of the report and its findings, one might expect a strong bias towards continuing fiscal stimulus in weak economies, and a bias against fiscal consolidation. However, this paper finds that the IMF continues to support pro-cyclical policies in some countries, fiscal consolidation in many others, and clearly does not support central bank financing of fiscal stimulus – even in countries such as the United States – where the threat of high inflation is very remote. |
| Keywords: | IMF |
| JEL: | E E3 E6 E32 E5 E52 F F3 F33 F34 F35 F37 O O1 O2 O3 O4 O5 |
| Date: | 2010–10 |
| URL: | http://d.repec.org/n?u=RePEc:epo:papers:2010-24&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:201001&r=pke |
| By: | Luiz Carlos Bresser-Pereira |
| Abstract: | The 2008 global financial crisis was the consequence of the process (1) of financialization, or the creation of massive fictitious financial wealth, that began in the 1980s; and (2) the hegemony of a reactionary ideology-namely, neoliberalism-based on self-regulated and efficient markets. Although laissez-faire capitalism is intrinsically unstable, the lessons of the 1929 stock market crash of 1929 and the Great Depression of the 1930s were transformed into theories and institutions or regulations that led to the "30 glorious years of capitalism" (1948–77) and that could have helped avoid a financial crisis as profound as the present one. But it did not, because a coalition of rentiers and "financists" achieved hegemony and, while deregulating the existing financial operations, refused to regulate the financial innovations that made these markets even riskier. Neoclassical economics played the role of a meta-ideology as it legitimized, mathematically and "scientifically," neoliberal ideology and deregulation. From this crisis a new democratic capitalist system will emerge, though its character is difficult to predict. It will not be financialized, but the glory years' tendencies toward a global and knowledge-based capitalism in which professionals have more say than rentier capitalists, as well as the tendency to improve democracy by making it more social and participative, will be resumed. |
| Keywords: | Financial Crisis; Neoliberalism; Deregulation; Financialization; Political Coalition |
| JEL: | E30 P1 |
| Date: | 2010–05 |
| URL: | http://d.repec.org/n?u=RePEc:lev:wrkpap:wp_592&r=pke |
| By: | Amit Bhaduri |
| Abstract: | The paper examines three aspects of a financial crisis of domestic origin. The first section studies the evolution of a debt-financed consumption boom supported by rising asset prices, leading to a credit crunch and fluctuations in the real economy, and, ultimately, to debt deflation. The next section extends the analysis to trace gradual evolution toward Ponzi finance and its consequences. The final section explains the link between the financial and the real sector of the economy, pointing to an inherent liquidity problem. The paper concludes with comments on the interactions between the three aspects. |
| Keywords: | Capital Gains; Consumer Debt; Debt-driven Fluctuations; Effective Demand; Financial Fragility; Liquidity Preference |
| JEL: | D84 E12 E21 E32 E41 E44 E51 G12 G18 G24 N22 |
| Date: | 2010–05 |
| URL: | http://d.repec.org/n?u=RePEc:lev:wrkpap:wp_593&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:201005&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:201004&r=pke |