A critical note on the scientific conception of economics: claiming for a methodological pluralism

Opponents of mainstream economics have not yet called attention to the lack of in-depth examination of the general scientific conception of modern economics. However, economic science cannot consistently fulfil the epistemological and ontological requirements of the scientific standards underlying this conception. What can be scientifically recognized as true cannot be answered, neither through the actual ontological structure of the object of observation nor through a methodological demarcation. These limitations necessarily lead to the claim for both a pragmatic and a radical methodological pluralism.

Post Keynesian Economics

Method and scope in Joseph A. Schumpeter's economics: a pluralist perspective

This study aims to evaluate the ideas on the scope and method of economics of Joseph Schumpeter who is one of the important economists of the 20th century. The study consists of four sections: In the first section we underline the interesting points of his life to understand the roots, background, or 'vision' of his thought system. In the second section, we will examine his methodological views that he asserted in his first (but translated into English only in 2010) book. Third section will be concerned with his 'analysis of economics' which refers to his critics of Leon Walras's general equilibrium analysis (as static) and his own alternative (dynamics analysis of capitalist economies) abou..

Post Keynesian Economics

Poverty: What is it and Why do we care?

We discuss the instrumental and intrinsic reasons for concern about poverty, its definition – absolute/relative, unidimensional/multidimensional – and the visual communication of what poverty really means.

Post Keynesian Economics

"Are Concerns over Growing Federal Government Debt Misplaced?"

With the US Treasury cutting checks totaling approximately $5 trillion to deal with the COVID-19 crisis, Senior Scholar L. Randall Wray argues that when it comes to the federal government, concerns about affordability and solvency can both be laid to rest. According to Wray, the question is never whether the federal government can spend more, but whether it should. And while there are still strongly held beliefs about the negative impacts of deficits and debt on inflation, interest rates, growth, and exchange rates, with two centuries of experience the evidence for these concerns is mixed at best.

Post Keynesian Economics

"The Employer of Last Resort Scheme and the Energy Transition: A Stock-Flow Consistent Analysis"

The health and economic crises of 2020-21 have revived the debate on fiscal policy as a major tool for stabilization and meeting long-term goals. The massive surge in unemployment, due to the economic disruption of the lockdown measures, has increased the interest in policies that target employment directly instead of trying to achieve it via a general "demand push." One of the proposals currently under debate is the job guarantee. Under such a policy the government would act as an "employer of last resort" by offering a job to everyone that is able and wants to work but cannot find a job in the private sector. This paper argues that a carefully designed scheme of direct employment and publi..

Post Keynesian Economics

Hilferding, Woytinsky and the fiscal orthodoxy of interwar social democracy

In 1931, when the Great Depression hit Germany, German social democrats discussed a proposal for a (proto-Keynesian) public-debt financed employment program, the so-called WTB plan drafted by Vladimir Woytinsky. But under the leadership of Rudolf Hilferding, the SPD’s main economics spokesperson (and a former finance minister), the SPD rejected the proposal. The paper argues, firstly, that Hilferding’s endorsement of the gold standard and fiscal austerity can be traced to his analysis in Das Finanzkapital. It, secondly, rejects purely ideational interpretation of social democracy’s hostility to public employment programs. This becomes apparent when considering the experience of other E..

Post Keynesian Economics

Bank Money Creation and the Payments System

This article investigates how the role that banks play in the payment system space affects their money creation power and process. In particular, the article analyzes how the payments market share of each bank affects its money creation power and how payment settlement technologies and rules determine the banks’ demand for funding and, hence, their money creation power. Also, as the power to create money enables money creators to extract extra-profits or rents ("seigniorage") from the economy, the article evaluates analytically how banks extract seigniorage through money creation and how bank seigniorage differs from profits from pure financial intermediation. By showing the central role t..

Post Keynesian Economics

Modeling to Inform Economy-Wide Pandemic Policy: Bringing Epidemiologists and Economists Together

Facing unprecedented uncertainty and drastic trade-offs between public health and other forms of human well-being, policy makers during the Covid-19 pandemic have sought the guidance of epidemiologists and economists. Unfortunately, while both groups of scientists use many of the same basic mathematical tools, the models they develop to inform policy tend to rely on different sets of assumptions and, thus, often lead to different policy conclusions. This divergence in policy recommendations can lead to uncertainty and confusion, opening the door to disinformation, distrust of institutions, and politicization of scientific facts. Unfortunately, to date, there have not been widespread efforts ..

Post Keynesian Economics

Working Paper 358 - The Colonial Origins of Banking Crisis in Africa

Could initial – colonial and early post-colonial – conditions explain episodes of systemic crisis in banking systems today? We exploit differences in ethnic concentration of initial ownership and management structure of Nigerian banks established during the colonial era to examine banking crisis and vulnerability of the financial system in contemporary Nigeria. Although banking institutions emerged from or were a reaction to British colonial banking structure, they pursued different practices with respect to ownership and management structure. To measure these initial conditions, we use historical data from the Nigerian banking system to construct an index of diversity in the initial own..

Post Keynesian Economics

Coase and the Scottish Political Economy Tradition

Coase’s work took a different approach to that of standard economics and he made a series of reflections over the years setting out his methodological views. He first employed this approach in his path-breaking paper on ‘The Nature of the Firm’, which was drafted while in his first academic post, at the Dundee School of Economics and Commerce. The distinctive Scottish political economy approach still dominated economics in Scotland at the time, although the Dundee School stood apart from it. The purpose of this paper is to consider how far Coase was influenced by being in Dundee, and in particular by the Scottish political economy tradition. We find little evidence of influence from th..

Post Keynesian Economics

The great Covid cash surge - digitalisation hasn't dented cash's safe haven role

There is a debate about the effect of the extremely low, or even negative, interest rate regime on bank profitability. On the one hand it raises demand and thereby adds to bank profits, while on the other hand it lowers net interest margins, especially at the Zero Lower Bound. In this paper we review whether the prior paper by Altavilla, Boucinha and Peydro (2018) on this question for the Eurozone can be generalized to other monetary blocs, i.e. USA and UK. While our findings have some similarity with their earlier work, we are more concerned about the possible negative effects of this regime, not only on bank profitability but also on bank credit extension more widely.

Post Keynesian Economics

Monopoly Capitalism in the Digital Era

The paper applies the radical view of Monopoly Capitalism to the digital platform economy. Based on the seminal ideas of Hymer and Zeitlin that led Cowling and Sugden to define the large monopolistic firm as a means to plan production from a unique centre of strategic decision-making, we attempt to develop a framework where digital platforms are conceived as an evolution of large transnational corporations. Power and control in our Monopoly Capitalism view are then meant not only in terms of market relations, but rather as levers for coordinating global production and influencing world societies. Applying this framework to the Amazon case, we highlight the key analytical dimensions to be con..

Post Keynesian Economics

Lessons of Keynes’s Economic Consequences in a Turbulent Century

Just over a century old, John Maynard Keynes’s The Economic Consequences of the Peace (1919) remains a seminal document of the twentieth century. At the time, the book was a prescient analysis of political events to come. In the decades that followed, this still controversial text became an essential ingredient in the unfolding of history. In this essay, we review the arc of experience since 1919 from the perspective of Keynes’s influence and his changing understanding of economics, politics, and geopolitics. We identify how he, his ideas, and this text became key reference points during times of turbulence as actors sought to manage a range of shocks. Near the end of his life,..

Post Keynesian Economics

The content and structure of reputation domains across human societies: a view from the evolutionary social sciences

Reputations are an essential feature of human sociality and the evolution of cooperation and group living. Much scholarship has focused on reputations, yet typically on a narrow range of domains (e.g. prosociality and aggressiveness), usually in isolation. Humans can develop reputations, however, from any collective information. We conducted exploratory analyses on the content, distribution and structure of reputation domain diversity across cultures, using the Human Relations Area Files ethnographic database. After coding ethnographic texts on reputations from 153 cultures, we used hierarchical modelling, cluster analysis and text analysis to provide an empirical view of reputation domains ..

Post Keynesian Economics

Inflation Regimes and Hyperinflation. A Post-Keynesian/Structuralist typology

The article proposes a typology of inflation regimes that can be applied to any kind of economy based on the Post-Keynesian and structuralist literature. We identify three separate regimes: the low, moderate, and high inflation regimes. Hyperinflation is also defined and described. Each regime presents different characteristics. We identify the key role played by the distributive conflict between workers and capitalists in all the regimes, the role played by the indexation of wages on domestic prices in the moderate and high inflation regimes, and the specific roles played by the widespread indexation on a short term basis in the high inflation regime. Hyperinflation is explained by selffulf..

Post Keynesian Economics

Inflation Regimes and Hyperinflation. A Post-Keynesian/Structuralist typology

The article proposes a typology of inflation regimes that can be applied to any kind of economy based on the Post-Keynesian and structuralist literature. We identify three separate regimes: the low, moderate, and high inflation regimes. Hyperinflation is also defined and described. Each regime presents different characteristics. We identify the key role played by the distributive conflict between workers and capitalists in all the regimes, the role played by the indexation of wages on domestic prices in the moderate and high inflation regimes, and the specific roles played by the widespread indexation on a short term basis in the high inflation regime. Hyperinflation is explained by selffulf..

Post Keynesian Economics

How Short is the Short Run in the Neo-Kaleckian Growth Model?

The paper provides an analytical solution to the differential equation that regulates the motion of the neo-Kaleckian model in the short run. After presenting a simple open economy neo-Kaleckian model with government activity, the paper analytically derives an expression for the time of adjustment, defined as the time required for the system to make a k-percent adjustment from one steady-state to another. The solution shows that there is an inverse relationship between the strength of the Keynesian stability condition and the the time of adjustment. Last, the model is calibrated for the US, showing that vicinity of the new equilibrium is reached after a period of about 4 quarters. By formall..

Post Keynesian Economics

The network origins of aggregate fluctuations: a demand-side approach

We construct a model of cyclical growth with agent-based features designed to study the network origins of aggregate fluctuations from a demand-side perspective. In our model, aggregate fluctuations result from variations in investment behavior at firm level motivated by endogenously-generated changes in `animal spirits' or the state of long run expectations (SOLE). In addition to being influenced by their own economic conditions, firms pay attention to the performance of first-degree network neighbours, weighted (to differing degrees) by the centrality of these neighbours in the network, when revising their SOLE. This allows us to analyze the effects of the centrality of linked network neig..

Post Keynesian Economics

Multiplicity and not necessarily heterogeneity: implications for the long-run degree of capacity utilization

The paper discusses the implications of disaggregation within the theoretical debate on the long-run convergence of the degree of capacity utilization towards the normal one. To this end, we develop an Agent Based – Stock Flow Consistent version of a demand-led growth model based on the capacity adjustment principle, fixed normal rate of capacity utilization and non-capacity creating autonomous component of demand. We show that, once the implicit assumption on the centralized control over the aggregate productive capacity characterizing aggregate models is removed, the economy displays emergent properties: the fluctuations of the business cycle endogenously arise, and the long-run aggregat..

Post Keynesian Economics

Uneven Development in a Kaldor-Pasinetti-Verspagen Model of Growth and Distribution

The main objective of this paper is to incorporate the technological asymmetries between countries in the formal structure of the so-called Kaldor-Pasinetti model of growth and distribution. We will name such a model as Kaldor-Pasinetti-Verspagen Growth-Model. Our basic contribution for the literature of post-Keynesian models of growth and distribution is to redefine Kaldor´s technical progress function to incorporate the technological gap in the determination of the natural rate of growth. Such incorporation will make possible for such class of models to generate uneven development between countries, at least for mature economies, that is, economies where all labor force is employed in the..

Post Keynesian Economics

Marx's Rate of Profit and the Theory of Labour values as Conservation Law

The paper argues that Ricardo’s concern with determining the rate of profit had no central place in Marx’s analysis. Marx, in fact, utilised his own version of the labour theory of value – very different from that of Smith and Ricardo – not to determine the rate of profit, but to analyse the dynamics of economic aggregates and bring to light the inner social nature of production and distribution processes. The present analysis of the peculiar use of Marx’s labour theory of value is also an attempt to explain the role played by it in his system, for better or worse. The final thesis of the paper is that, in his system, Marx’s version of the labour theory of value plays the same ro..

Post Keynesian Economics

Keynes's Treatise on Probability at 100 Years: Its Most Enduring Message

On the occasion of the assessment of the enduring influence of Keynes's Treatise on Probability at 100 years, this paper focuses on its relevance for decision theory. The paper places emphasis on Keynes's introduction of the epistemic notion of probabilities that often are non-numerical, as a theoretical object intended to replace frequency probabilities. The paper argues that, as non-numerical probabilities make it possible to deal with uncertainty as if individuals were endowed with interval-valued probabilities, Keynes's 1921 critique of contemporary frequency probability theory turns out to be relevant also with regard to the yet to be established subjective probability theory. Although ..

Post Keynesian Economics

"Production Function Estimation: Biased Coefficients and Endogenous Regressors, or a Case of Collective Amnesia?"

The possible endogeneity of labor and capital in production functions, and the consequent bias of the estimated elasticities, has been discussed and addressed in the literature in different ways since the 1940s. This paper revisits an argument first outlined in the 1950s, which questioned production function estimations. This argument is that output, capital, and employment are linked through a distribution accounting identity, a key point that the recent literature has overlooked. This identity can be rewritten as a form that resembles a production function (Cobb-Douglas, CES, translog). We show that this happens because the data used in empirical exercises are value (monetary) data, not ph..

Post Keynesian Economics

Eigenvalues and Eigenlabors: On Iliadi’s, Mariolis’, Soklis’, and Tsoulfidis’ Explanation of the Empirical Regularities in Price Curves

The paper complements Iliadi’s, Mariolis’, Soklis’, and Tsoulfidis’s (IMST) explanation of the regular monotonic/near monotonic behavior of prices and capital intensities as an effect of hypothetical changes in the rate of profit obtained in empirical production price models with data from input-output accounts. We show that the shapes of the theoretical price and capital value curves depend on the product of the eigenvalues and the eigenlabors, i.e., the representation of the labor-coefficient vector in the space spanned by the eigenvectors of the input-coefficients matrix. We report robust evidence that for each economy in the WIOD database the eigenvalues by themselves cannot prod..

Post Keynesian Economics

Why the CHIPS Are Down: Stock Buybacks and Subsidies in the U.S. Semiconductor Industry

The Semiconductor Industry Association (SIA) is promoting the Creating Helpful Incentives to Produce Semiconductors (CHIPS) for America Act, introduced in Congress in June 2020. An SIA press release describes the bill as `bipartisan legislation that would invest tens of billions of dollars in semiconductor manufacturing incentives and research initiatives over the next 5-10 years to strengthen and sustain American leadership in chip technology, which is essential to our country`s economy and national security.`` On June 8, 2021, the Senate approved $52 billion for the CHIPS for America Act, dedicated to supporting the U.S. semiconductor industry over the next decade. This paper highlights a ..

Post Keynesian Economics

Economic Growth and the Rate of Profit in Colombia 1967-2019: A VAR Time-Series Analysis

In recent decades there has been a growing literature dealing with the empirical estimation of the rate of profit and other Marxian variables in several countries. Nonetheless, there has been a paucity of econometric research about the impact of those Marxian variables on the growth rate in developing countries. This paper seeks to evaluate the rate of profit and the rate of accumulation as determinants of the growth rate in Colombia during 1967-2019, using a VAR model. We find that both variables are statistically significant and, in concordance with Marxian theory predictions, affect positively the growth rate. We also identify direct impacts of growth rate over the profit rate and the acc..

Post Keynesian Economics

The Baran Ratio, Investment, and British Economic Growth and Investment

Investment in capital, new technology, and agricultural techniques has not been considered an endeavor worthwhile in a medieval economy because of a lack of strong property rights and no incentive on the part of lords and barons to lend money to or grant rights to peasant farmers. Therefore, the medieval economy and standards of living at that time often have been characterized as non-dynamic and static due to insufficient investment in innovative techniques and technology. Paul Baran’s concept of the economic surplus is applied to investment patterns during the late medieval, mercantile, and early capitalist stages of economic growth in England and the UK. This paper uses Zhun Xu’s Bara..

Post Keynesian Economics

Ambivalence About International Trade in Open- and Closed-ended Survey Responses

Spontaneous, open-ended survey responses can sometimes better reveal what is actually on people`s minds than small sets of forced-choice, closed questions. Our analysis of closed questions and trade-related open-ended responses to 2016 ANES `likes` and `dislikes` prompts indicate that Americans held considerably more complex, more ambivalent, and – in many cases – more negative views of international trade than has been apparent in studies that focus only on closed-ended responses. This paper suggests that contrast between open- and closed-question data may help explain why the effectiveness of Donald Trump`s appeals to trade resentments surprised many observers.

Post Keynesian Economics

How Milton Friedman Exploited White Supremacy to Privatize Education

This paper traces the origins of today`s campaigns for school vouchers and other modes of public funding for private education to efforts by Milton Friedman beginning in 1955. It reveals that the endgame of the ``school choice`` enterprise for libertarians was not then - and is not now--to enhance education for all children; it was a strategy, ultimately, to offload the full cost of schooling onto parents as part of a larger quest to privatize public services and resources. Based on extensive original archival research, this paper shows how Friedman`s case for vouchers to promote ``educational freedom`` buttressed the case of Southern advocates of the policy of massive resistance to Brown v...

Post Keynesian Economics

Global Capital, the Exchange Rate, and Policy (In)Effectiveness

In line with JMK’s liquidity preference theory, this article holds that in a world of highly internationally financially integrated economies the exchange rate between any two currencies is determined by the financial market views as to what its value is expected to be in the future. These views are influenced by the policy credibility that markets themselves attribute to the currency-issuing countries. After briefly reviewing the established theories of the exchange rate, the article proposes a very simple, aggregate model of equilibrium exchange rate determination based on market views and discusses its basic features and policy implications. It shows that whereas macro policy shocks in ..

Post Keynesian Economics