Expectations,uncertainty and institutions. An application to the analysis of social security reforms

The aging process that many developed economies will face in the medium-term is leading to reforms in the public pensions systems in order to solve the potential financial unsustainability generated by the foreseeable increase in the expenditure in pension benefits (assuming that the current social security contributions and the eligibility conditions will remain unchanged). Neoclassical economics defends a radical reform of these systems, substituting the current pay-as-you-go (PAYGO) systems by funded systems. In this paper, using the Post-Keynesian theory as a theoretical framework, we provide an alternative reflection to that proposed by the neoclassical economics about the choice between the alternative pension systems. The focus of the paper is the advantages of the PAYGO pension systems to stabilize the expectations of future income.     

Socialism after Hayek: A Post Keynesian Contribution to Burczak's Theory of Social Justice

The paper presents a brief overview of the basic premise of the Burczak's Socialism after Hayek, and shows that Burczak's “applied epistemological postmodernism” presents a unique unifying ground for heterodox economics, breaking down traditional barriers between right and left. This new approach allows us to revisit the Marx-Keynes-Hayek debates in a more constructive way for a unified theory of social justice. However, we argue that Burczak's system does not automatically guarantee full employment, so it cannot be considered an ideal theory of social justice. A Post Keynesian contribution is presented in the form of the Employer of Last Resort (ELR) program which we argue is compatible and complementary to Burczak's theory of social justice. Finally, we argue that an adequate system design of the magnitude proposed here must be infomed by the principles of institutional adjustment as outlined by J. Fagg Foster.     

Second contribution to the ENE critique: Reply to Davidson,part 1

On first encounter, the ergodic/nonergodic (ENE) approach has apparent plausibility. Although concerned by some of its problems for many years, it was only after more concentrated reflection on both its parts and their combinations that I became aware of its manifold deficiencies, some of which I outlined in my previous critique (O’Donnell, 2014 ———. “A Critique of the Ergodic/Nonergodic Approach to Uncertainty.” Journal of Post Keynesian Economics, 2014, 37 (2), 187–209.[Web of Science ®] , [Google Scholar]). In this paper, facilitated by Davidson’s (2015b ———. “A Rejoinder to O’Donnell’s Critique of the Ergodic/Nonergodic Explanation of Keynes’s Concept of Uncertainty.” Journal of Post Keynesian Economics, 2015b, 38, 1–18.[Taylor & Francis Online], [Web of Science ®] , [Google Scholar]) rejoinder, these criticisms are deepened, broadened, and strengthened. Because the debate deals with fundamental matters in several disciplines, a considerable amount of investigation, unpacking, and logical dissection is required to clarify the argumentation beneath the compressed and seemingly smooth surface of the ENE position. For this reason, my reply is divided into two parts. This contribution primarily examines the central role of framing in ENE arguments, and clarifies the various misunderstandings and misrepresentations to which it leads. The subsequent contribution provides more detailed discussion of mathematical, stochastic, and methodological issues.     

The Cambridge School of Keynesian Economics

There have been strong ties between the Cambridge Journal ofEconomics (CJE) and the Cambridge School of Keynesian Economics,from the very beginning. In this paper, the author investigatesthe environment that saw the birth of the CJE at Cambridge (UK),in 1977, and the relationship that linked it to the direct pupilsof Keynes. A critical question is explicitly examined: why didn'tthe ‘Keynesian revolution’ succeed in becoming apermanent winning paradigm? Some behavioural mistakes of themembers of the Keynesian School may explain this lack of success,but only to a certain extent. In any case, there were and therestill are remedies too. But what we are inheriting is a uniqueset of analytical building blocks (the paper lists eight ofthem) that makes this School of economics a viable (and in somedirections definitely superior) alternative to mainstream economics.Admittedly, there is some important work still to be done. Thepaper highlights the need for a two-stage approach, addressingpure theory and extensive institutional analysis. It is arguedthat a combination of the two would strengthen the coherenceof the theoretical foundations, and at the same time would providea fruitful extension of economic analysis to empirical, institutionaland economic dynamics investigations.     

Third contribution to the ergodic/nonergodic critique: Reply to Davidson,part 2

This second part of my reply to Davidson (2015 Davidson, P. “A Rejoinder to O'Donnell's Critique of the Ergodic/Nonergodic Explanation of Keynes's Concept of Uncertainty.” Journal of Post Keynesian Economics, 2015, 38 (1), 1–18.[Taylor & Francis Online], [Web of Science ®] , [Google Scholar]) discusses mathematical and statistical matters using a simple model of ergodicity whose properties do not match many of those asserted by ENE. It responds to Davidson's counterarguments against pre-infinity indeterminacy, examines the works of Billingsley, Uffink, and Malinvaud as cited by Davidson, and then turns to important methodological issues. As in Part 1 of my reply, Davidson's rejoinder helps make the critique stronger, deeper, and more relevant.     

On Closed Systems and the Language of Economic Discourse

This article addresses a few of the major points identified by Tony Lawson in his book Reality and Economics(Routledge 1997). Traditional economic models are profoundly closed, emanating from reasoning processes that are both deductivist and positivist by nature. Here, individuals are prescribed to behave according to mechanical, socially abstracted fashions that, in fact, belie any semblance of real human choice. Moreover, as Lawson observes, relationality in these models is strictly external, in that the natures of individuals are not affected by their participation in market activity. Under these conditions, models can be easily constructed by which markets yield unique equilibrium outcomes, whereby the constancy of the conjunctions of events yield law-like economic assertions.

Instead, Lawson embraces a critical realist perspective that posits human behavior to be both structured and internallyrelational, i.e., where interactions with others can affect the very natures of those individuals. As such, human relations can be temporally situated in the context of structured social contracts, while still embodying the organic elements from which those agents and structures can be reproduced and transformed.

From these principles, this essay explores some recent work in Keynesian and Post Keynesian thought. In addition, this critical realist framework considers some developments in New Keynesian Economics and Endogenous Growth Theory.     

试论凯恩斯经济学研究方法的新取向

随着主流凯恩斯主义经济学的流行，原创性的凯恩斯经济学实际上已经“夭折”了，它的革命思想并没有得到真正的阐发与传播。从范式角度比较和分析原创性凯恩斯经济学和三个凯恩斯经济学流派之间的本质关系后发现，后凯恩斯经济学对原创性凯恩斯经济学的研究提供了重要启示；但是后凯恩斯经济学的理论局限性说明，必须探索一种新的研究方法，即一种制度的演化的经济学范式，从而推动凯恩斯经济学的进一步发展。     

The modern foundations of Marx's monetary economics

The first chapters of Capital are still often ‘tlerated’, Mirowski (1986: 222) reminds us, as a ‘regrettable metaphysical residuum of [Max's] Hegelian [past]’. Such ‘tolerance’ has unfortunate consequences, howeve, not the least of which is Marx's reputation for ‘theoretical metallism’, simple and derivative. This paper builds on the recent efforts of de Brunhoff (1981), Lavoie (1983) and others to deconstruct, with support from Grundrisse and related texts, the important thrid chapter of Capital, Marx's account of the universal equivalent's four functions. As it is identified here, the chapter's core includes ‘pody-Keynesian’ elements– a reversal of the Ricardian view of the quantity equation, an effective demand principle in which capitalists’ dcisions about the recommitment of hoards assume a prominent role, and the deermination of interest rates, in the short term, on the basis of liquidity preference-– but does not include, in the conventional sense, a commodity theory of money.     

The Marxian schemes of reproduction and the theory of effective demand

The paper deals with some theoretical and analytical issuesraised by a recent book by Trigg on Marx's schemes of reproduction.The paper presents a generalized model of expanded reproductionand concentrates on the attempt to develop Marx's schemes alongKeynesian lines. Trigg tries to develop a Keynesian interpretationof the schemes without significant changes to Marx's originalapproach; the paper argues that the abandonment of some of Marx'shypotheses, in particular that of free competition, is necessaryto allows us to provide a Marxian determination of underemploymentequilibria and to use a Marxian version of the Keynesian conceptof multiplier. In considering Marx's and Keynes's analyses ofcapitalist economies, the paper also emphasizes their similaritieswith respect to the importance of money and the capitalists'liquidity preference in the process of reproduction and growth.     

The Role of Governments in Aligning Functional Income Distribution with Full Employment

Demand is an incentive for investment. The latter is necessary to create employment. If demand lags behind supply, then unemployment and underemployment rise. Persistent unemployment and underemployment indicate a dysfunctional price mechanism. Then, only governments can stimulate demand. They may equalize ex ante saving and investment by public investment, income redistribution, or market regulation.     

The 'Sussex School' and the history of economic thought: British Intellectual History, 1750-1950

After a brief survey of the Japanese literature on Sraffa, the author explains how his own theory of the microfoundations of Keynesian macro-economics was influenced by Sraff's view of competitive markets. This view can be interpreted that firms perceive kinked demand curves. It is emphasized that Azariadis's theory of implicit contracts can explain unemployment only if we take Sraffa's not Walras's, view of competitive market.     

Hidden links in the warranted rate of growth: the supermultiplier way out

Post Keynesian models consider growth to be demand-led – a logical consequence of Keynes's principle of effective demand. After Harrod's seminal paper in 1939 Harrod, R. F. 1939. An essay in dynamic theory. Economic journal, 49, 14–33.[Crossref], [Web of Science ®] , [Google Scholar] they try to unearth the hidden variables that might allow the adaptation of the warranted rate, determined from the supply side, to demand-growth expectations that supposedly have an autonomous source. The purpose of this paper is to show that an investment function based on the accelerator and integrated in a supermultiplier is able to shape the warranted rate in consonance with the autonomous trend. The supermultiplier reveals itself as a stable and stabilising mechanism when demand is split into permanent and transient. Hopefully the paper will build bridges with other Keynesian, Kaleckian and Sraffian strands that have so far dismissed the supermultiplier solution because of its apparently inherent instability.     

The employment contract with externalised costs: the avatars of Marxian exploitation

Abstract

The paper pursues two aims. The first is to argue that the foundation of Marx’s theory of capitalist exploitation is to be found, not in the labour theory of value, but rather in the contract of employment, the legal frame of the capital-labour relation. The second is to suggest that the partial externalisation of the reproduction cost of labour power has been an important source of relative surplus value, along with the productivity increase, emphasised by Marx, in the industries supplying wage goods.     

Cornelius Castoriadis on the Scope and Content of Neoclassical and Marxian Economics

The paper presents the thought of the political philosopher Cornelius Castoriadis on economic methodology and the neoclassical and Marxian traditions. Castoriadis suggested that the scope of economic theory includes the identification of “local” regularities and not the search for invariant “laws.” He criticized the use of equilibrium and the utilitarian framework in the neoclassical tradition and proposed to approach human agency based on the Aristotelian concept of the “social individual.” In addition, he criticized the deterministic nature of the Marxian “laws.” According to Castoriadis, the use of concepts such as the “production function” and “capital” presents a number of caveats.     

The Menace of Competition and Gambling Deregulation

The present article proposes a typology of the main varieties of uncertainty considered by economists and refines existing concepts. This typology combines three distinctions, between: substantive and procedural uncertainty; weak and strong uncertainty; and ambiguity and fundamental uncertainty. These concepts refer, or fail to refer, to factors such as: a lack of information; complexity; the (im)possibility of building probability distributions that are unique, additive and reliable; structural change; etc. When refining these concepts, the article pays special attention to the conception of social reality underlying each concept. It refers to what each concept may imply about the complexity and changeability of social reality and the limitations and creative potential of the individuals that inhabit this reality, in addition to, in some cases, the roles of institutions and the features of the process of technological change.     

On the Estimation of Skill Coefficients for Heterogeneous Labor

Many economists have questioned the existence of a solution to the problem of reducing the value of skilled to unskilled labor, consistent with the assumptions of the labor theory of value. This article presents a model to account quantitatively for an important component of the reduction—the relation between skills and earnings. The model contains an educational attainment graph and a multivariate linear function, which maps time to labor content. We then compare the resulting relative skill coefficients to earnings relative to an unskilled labor reference. The predictions of the model substantially agree with the empirical data.     

Similitudes and Discrepancies in Post‐Keynesian and Marxist Theories of Investment: A Theoretical and Empirical Investigation1

There has been a substantial amount of convergence between post‐Keynesian and Marxist economics, the writings of Kalecki being common ground for both traditions. Still, some differences remain. While authors in both traditions seem to agree to a large extent on short‐period issues, long‐period matters relating to the role of saving, the rate of profit, inflation, crowding out, excess money supply, are still contentious. All this seems to depend on the exact form taken by the investment function, more specifically the role of capacity utilization. Four different equations are set up to be tested, two of which correspond to two variants of the Marxist view, while the other two equations correspond to a naive and a sophisticated Kaleckian view, the latter being based on hysteresis. The equations are tested on three sets of annual Canadian data. Various statistical tests are applied to all four equations in an effort to rank them, notably information and encompassing tests. The Kaleckian equation with hysteresis generally comes out empirically with the preferred statistical properties, when manufacturing data on actual rates of capital accumulation are considered separately or when both realized and intended rates of investment for the total industrial sector are used.     

Labor supply: Toward the construction of an alternative conception from post Keynesian and institutional economics

Post Keynesian and institutional economics have traditionally maintained a critical stance toward the orthodox model of labor supply, questioning many of its underlying assumptions. Nevertheless, this critical view has not led to the formulation of an alternative conception of labor supply that is sufficiently coherent and structured to be generally accepted within these branches of the literature. Accordingly, the purpose of this study is to contribute to the construction of such an alternative. To do so, the article starts by analyzing the relationship between the reasons that lead to individuals offering their labor and what that activity can bring to human beings in return. Secondly, the authors present an alternative concept of what workers contribute at work. They then analyze how the decision-making process regarding the labor supply actually takes place. Finally, the article concludes by briefly presenting certain additional points, in particular how differentiation is an inherent feature of the labor supply.     

Marx,Sraffa, and Surplus: Observations Prompted by Garegnani (2018)

ABSTRACT

In a posthumously published article, Pierangelo Garegnani (2018. ‘On the Labour Theory of Value in Marx and in the Marxist Tradition.’) depicts Marx’s project in Capital as that of ‘developing systematically the theory of Ricardo and [the] implications of social conflict’ implied by Ricardo’s ‘surplus approach to value and distribution’. This paper argues to the contrary that Marx’s theory of surplus value and exploitation differs from (neo-)Ricardian surplus theory in fundamental ways, and modifies Garegnani’s simple Sraffian model to illustrate the distinctive implications of Marx’s theory.     

Economic Organization,Distribution and the Equality Issue: The Marx-Engels Perspective

This paper has four related themes. It demonstrates that Marx's Communism in its first or Socialist phase would recognize the essential inequality of labour on grounds of efficiency and growth. It offers an explanation for the apparent paradox that Marx and Engels championed a fully-fledged control system notwithstanding appreciation of the allocation functions of a competitive market system. It highlights common ground relating to market process between Marx and Engels and the modern classical liberals Mises and Hayek. And it traces the evolutionary nature of the Marx-Engels perspective on transitions between and within economic systems.