Post-Keynesianism as political economy: a methodological discussion ∗

The purpose of this article is to develop a means of classifying post-Keynesianism with reference to methodology. I have attempted to achieve this by distinguishing between different types of realism. When we integrate this with the important notion of vision, best viewed as a means of understanding rather than appraising alternative perspectives, a more robust characterization of post-Keynesianism becomes possible.     

Financial repression and economic development: towards a post-Keynesian alternative ∗

The Shaw–McKinnon framework, the foundation of mainstream thinking on the role of financial markets and institutions in economic development and the basis for policy-making in many LDCs for the last 18 years, is shown to be flawed when viewed in a post-Keynesian perspective. Three interrelated aspects of post-Keynesian theory are used to challenge the financial liberalization models and to posit an alternative post-Keynesian perspective on the role of financial institutions and markets in economic development. These aspects are: (1) the finance-investment-saving-funding circuit; (2) the financial fragility hypothesis; and (3) the evolution of institutions and conventions in an uncertain world.     

The Carbon Bubble: climate policy in a fire-sale model of deleveraging∗

Credible implementation of climate change policy, consistent with the 2 °C limit, requires a large proportion of current fossil-fuel reserves to remain unused. This issue, named the Carbon Bubble, is usually presented as a required asset write-off, with implications for investors. We embed the Carbon Bubble in a macroeconomic model exhibiting a financial accelerator: if investors are leveraged, then the Carbon Bubble might precipitate a fire-sale of assets across the economy, and generate a large and persistent fall in output and investment, impairing the economy's ability to invest in the zero carbon assets it needs to produce output in the post-climate-transition world. We find a role for macroeconomic policy protecting investors' balance sheets in mitigating the macroeconomic effects of the Carbon Bubble, and enhancing welfare.     

Agricultural landowners⿿ response to incentives for afforestation

Previous research has shown that afforestation of agricultural land is a relatively low-cost option compared to energy-based approaches for mitigating net carbon dioxide emissions, and that financial incentives affect landowner behavior and can be used to increase carbon sequestration on private land. In this paper we use stated preference data from private landowners in the Pacific Northwest region of the U.S. to examine the key factors affecting participation in an incentive program for carbon sequestration through afforestation. We also estimate the corresponding potential for carbon sequestration and its cost. Our results suggest that incentive payments would significantly and positively affect landowners⿿ level of enrollment in a tree planting program.     

Make a guess: a robust mechanism for King Solomon’s dilemma

We introduce endogenous fees for participating in second-price auction which we use for a two-stage mechanism to solve King Solomon’s dilemma. They are positive for all agents. They are nonetheless shown to maintain the agents’ incentives for truthful bidding and guarantee participation by the highest-value agent. This feature of the endogenous fees is powerful enough for the efficient outcome to uniquely result from one round elimination of weakly dominated strategies, followed by at most four rounds of iterative elimination of strictly dominated stage-strategies. We provide an extension to cases with n agents and k identical prizes. We thank Gary Charness, Harrison Cheng, Jeffrey Ely, Rod Garratt, Mamoru Kaneko, Xiao Luo, Albert Ma, and Steven Morris for helpful discussions. We also thank an anonymous referee for comments that have helped to improve the paper.     

Consumers’ preferences for a local food product: a real choice experiment

This paper analyses consumers’ preferences for a local food in Spain and assesses their willingness to pay (WTP) using a real choice experiment to mitigate possible hypothetical bias. In particular, preferences for fresh lamb meat were investigated and two attributes evaluated, “locally grown” and the type of lamb meat. Data came from an experiment conducted in Spain during 2009. An error component random Parameter model with correlated errors was used to estimate the effect of the attributes on consumers’ utility and derive their WTP. Results suggest that consumers positively value both attributes and are willing to pay a premium of 9 % price increase for the “locally grown” lamb meat (“Ojinegra from Teruel”) and 13 % price increase for the “Ternasco” lamb meat. If we assume a market where only “Ternasco” lamb meat without indication of the local origin is sold, and then a new “Ternasco” lamb is introduced in the market with the “Ojinegra from Teruel” label, this new local lamb meat would capture 18 % of the market if the package is assumed to be sold at 3.5 \(\hbox {C}\!\!\!\!\!=\) and a 10 % market share if the package is assumed to be sold at 4 \(\hbox {C}\!\!\!\!\!=\) .     

Jan Tinbergen: A Quatitative Economist ∗

This paper sees a systematic unity between Smith's theological view and scientific study of society. Smith's theological outlook as to a benevolent deity is grasped as a metaphysical doctrine in his system of social science. It arises from the fact that while Smith's opinion concerning God's attributes is established, in the first instance, on the basis of his empirical study of nature, it also stands irrespective of other facts which are not in line with the patterns of order and design. Smith's metaphysical proposition as such is methodologically suggestive in that it proposes theoretical possibilities for progress and harmony and rules out the features of conflict at the analytic level. This implies a difficulty in subscribing to a conventional interpretation that introduces the “two Smiths's” view (the duality of his method and vision).     

The Emergence of Concentrated Ownership Structures in East Germany: the implications for enterprise restructuring ∗

In the transitional economies of East and Central Europe, privatization is widely considered essential for transforming the large state-owned enterprises. However, eager to expose the public enterprises to ‘hard budget constraints’, economists have neglected the importance of who the owners are. Studies of ownership structures and post-privatization restructuring in east Germany provide evidence that ownership matters for transformation success. The adoption of west German institutions in the east and the sale of state industrial property in concentrated shares to ‘insider’ investors seem to have created good conditions for the long-term committed investments essential for the rebuilding of tangible and intangible assets in east German enterprises. However, the control structures of a sample of enterprises reveal a wide range of investment strategies between types of corporate investors. Just as legal and financial institutions set constraints on ownership structure, the ownership structure sets constraints on the range of investment choices. Whether committed investments occur will depend on constrained strategic decisions of the new private owners.     

Sanctions for repeat offenders: a question of wealth?

In a two‐period standard law‐enforcement model, individuals observe or break the law. In addition, individuals may offend accidentally. When sanctions are limited by individual wealth constraints, the government chooses appropriate sanctions for first and repeat offenders and the level of monitoring. We assume a welfare‐oriented government and derive subgame‐perfect equilibria for constant, increasing and decreasing sanctions depending on the individual wealth level.     

Beyond Böhm-Bawerk: Searching for a place for relations in economic theory

Although, in the nineteenth century, Böhm-Bawerk remarked that relations as a category are distinct from goods, economists today increasingly subsume relations as a particular category of goods, both semantically and by applying methods like Contingent Valuation. This paper shows where the main distinctions between goods and relations lie. It categorizes economically relevant relations along the lines of symmetry and relevance for bystanders. The main obstacles to applying valuation techniques developed for public goods are outlined.     

On Keynes' inverse relation between real wages and employment: a debate over excess capacity ∗

This article examines Keynes's argument in favour of an inverse relation between employment and the real wage rate. In examining the debate over the inverse relation that took place during the 1930s the article argues that the failure of Keynes's critics to persuade him to relinquish the inverse relation can be traced to his own unrecognized use of a concept of marginal productivity different from theirs but that the larger unresolved issues persisting throughout that debate and continuing till the present are those relating to the formulation of ‘excess capacity’ during a depression and the specification of the supply side of the underemployed economy. Drawing on that debate but contrary to Keynes's own response, the article will propose a respecification of excess capacity such that the labour market directly incorporates aggregate demand independently of changes in the price level, and where an increase in employment is not predicated on a reduction in real wages even in the presence of (neoclassical synthesis) diminishing returns.     

Agreeing on generalized Darwinism: a response to Geoffrey Hodgson and Thorbj?rn Knudsen

I thank Geoffrey Hodgson and Thorbj?rn Knudsen for their thought-provoking response to my latest generalization of Darwinism, and welcome their proposal to cooperate, after many years of our independent searches. I agree with them that our searches contain more similarities than both they and I had previously seen, but consider our remaining differences—especially in the terms employed and in the definitions of the terms we both employ, including “information,” “instructions,” “programs,” and “Lamarckism”—more important than they do. Their response also exaggerates or distorts some of my arguments. All this needs to be clarified before our cooperation can start.     

Marketed tax avoidance: an economic analysis∗

Recent years have witnessed the growth of mass-marketed tax avoidance schemes aimed at the middle (not top) of the income distribution, with significant implications for tax revenue. We examine the consequences for the structure of income tax, and for tax authority anti-avoidance efforts, of tax avoidance of this type. In a model that allows for both demand- and supply-side considerations, we find that: there is an endogenous threshold income below which taxpayers do not avoid, and above which they avoid maximally; the per-dollar price of tax avoidance is decreasing in income under progressive taxation; endogenous adjustments in the price of avoidance make supply less responsive to anti-avoidance activity than thought previously; and avoidance may drive a non-monotone relationship between tax rates and tax revenue. These findings suggest that new approaches to anti-avoidance, beyond legal enforcement, might be needed.     

Economic Democracy: Solution or New Challenge ∗

Abstract Kaleckians and partisans of the capital monopoly approach have argued that additional outlays on unproductive labor increase economic activity under three conditions: investment is sensitive to realized rates of capacity utilization; savings out of wages and salaries are assumed away; prices are fixed by a markup over unit direct costs. The present model examines what happens when the last hypothesis is modified, i.e., when megacorps are assumed to fix prices on the basis of total unit costs, more specifically on the basis of target-return pricing procedures. Because higher costs are shifted on to productive labor, through higher prices and a reduction in their real wages, additional unproductive outlays may have a negative impact on economic activity. It turns out, in addition, that one must carefully distinguish between unproductive labor outlays and unproductive capital outlays when firms are assumed to shift these additional costs to consumers, on the basis of target-return pricing procedures.     

Boosting confidence: Is there a role for fiscal policy?

This paper investigates the widely held view that expansionary fiscal policy can boost consumer and business confidence, which will stimulate private spending and sustain economic activity. We find evidence in favor of this conjecture, i.e., cuts in direct taxes generate a positive effect on consumer and business confidence, while the same applies in cases of higher non-wage government consumption. However, higher government wage bills and government investment reduce confidence, with the effect being more pronounced when the Debt to GDP ratio is high, possibly because they entail a permanent increase in the size of the public sector, which would have to be financed by higher future taxes.     

Ecosystem services: Foundations for a new rural–urban compact

The traditional rural–urban compact, now almost ten thousand years old, whereby the countryside sent products and people to the city in exchange for the city's products, services and governance is not working anymore. The rural population is increasingly marginalized and natural environments are increasingly destroyed. A new rural–urban compact needs to arise where cities acknowledge and pay for environmental sustainability. In this new rural–urban compact there would be more employment opportunities and more income coming to the rural areas, and the cities would benefit from a sustainable supply of rural products and ecosystem services provided by restored rural environments. This paper describes why this is important and provides several ideas on how to implement programs.     

Itching for a fight?

The Health Insurance Association of America complains that the White House has made it a scapegoat in the health reform debate. But the trade group's brawl with the Administration has also been a rallying point for a badly divided industry.