Current Issue

Interview with Barbara R. Bergmann

Leonhard Dobusch, Jakob Kapeller:
Debating and citing: A comment on the paradigmatic stance of current economic theory

Herbert Walther:
Economic policy after the crash

Eckhard Hein, Jan Priewe:
The Research Network Macroeconomics and Macroeconomic Policies (FMM) – Past, present and future

Special Symposium on »Financial instability and crisis«

Philip Arestis
Robert A. Blecker
Marica Frangakis
Marc Lavoie

Special Issue on »Current relevance and perspectives of Keynesian Economics«

Editorial to the Special Issue

Hans-Michael Trautwein, Abdallah Zouache:
Natural rates in the New Synthesis: Same old trouble?

Engelbert Stockhammer, Paul Ramskogler:
Post-Keynesian economics – How to move forward

Matthieu Charpe, Peter Flaschel, Christian Proano, Willi Semmler:
Overconsumption, credit rationing and bailout monetary policy: A Minskyan perspective

Robert Leeson (ed.):
The Keynesian Tradition
The Anti-Keynesian Tradition
(Malcolm Sawyer)

Stefan Ederer:
Einkommensverteilung und gesamtwirtschaftliche Nachfrage in Österreich und den Niederlanden
(Artur Tarassow, Christian Schoder)

Neva Goodwin, Julie A. Nelson, Frank Ackerman, Thomas Weisskopf:
Microeconomics in Context

Neva Goodwin, Julie A. Nelson, Jonathan Harris:
Macroeconomics in Context
(Marc Lavoie)

Mary M. Gregory, Wiemer Salverda, Ronald Schettkat (eds.):
Services and Employment. Explaining the U.S. – European Gap
(Engelbert Stockhammer)

Lilia Costabile (ed.):
Institutions for Social Well Being. Alternatives for Europe
(Martin Schürz)

Natural rates in the New Synthesis: Same old trouble?

Hans-Michael Trautwein and Abdallah Zouache

This paper evaluates the concepts of natural rates of interest and output in Woodford’s »neo-Wicksellian« and »benchmark New Keynesian« version of the New Neoclassical Synthesis (NNS) by comparing them with the original approach of Wicksell and critical assessments and adaptations by Lindahl, Myrdal, Keynes and Friedman. It is shown that the theoretical foundations of the NNS prescriptions for monetary policy are ambiguous and incomplete. Using the NNS definition(s) of the natural rate of output, New Keynesian policy rules do not necessarily yield results superior to those of »Old Keynesian« strategies of output stabilization. Moreover, natural rates of interest can hardly be defined independently of the influences of monetary policy. The use of natural-rate concepts in the NNS disregards essential problems that were identified in the older Wicksellian and Keynesian literature.

JEL classifications: E10, E30, E50

Keywords: natural rate, output gaps, interest-rate gaps, Wicksellian theory

Post-Keynesian economics – how to move forward

Engelbert Stockhammer and Paul Ramskogler

Post-Keynesian Economics (PKE) is at the crossroads. Post-Keynesians (PKs) have become effectively marginalized; the academic climate at universities has become more hostile to survival and the mainstream has become more diverse internally. Moreover, a heterodox camp of diverse groups of non-mainstream economists is forming. The debate on the future of PKE has so far focussed on the relation to the mainstream. This paper argues that this is, in fact, not an important issue for the future of PKE. The debate has so far strangely overlooked the dialectics between academic hegemony and economic (and social) stability. In times of crisis the dominant economic paradigm becomes vulnerable. The important question is, whether PKE offers useful explanations of ongoing socio-economic transformations. PKE has generated valuable insights on core areas such as monetary macroeconomics and medium-term growth theory, but it offers little on important real world phenomena like the globalisation of production and social issues like precarisation and the polarization of income distribution or ecological challenges like climate change. It is these issues that will decide the future of PKE.

JEL classifications: B20, B50, B59, E12

Keywords: post-Keynesian economics, mainstream economics, heterodox economics, neo-liberalism

Overconsumption, credit rationing and bailout monetary policy: A Minskyan perspective

Matthieu Charpe, Peter Flaschel, Christian Proaño, Willi Semmler

We consider a Keynes-Goodwin model of effective demand and the distributive cycle where workers purchase goods and houses with a marginal propensity significantly larger than one. They therefore need credit, supplied from asset holders, and have to pay interest on their outstanding debt. In this initial situation, the steady state is attracting, while a marginal propensity closer to one makes it repelling. The stable excessive overconsumption case can easily turn from a stable boom to explosiveness and from there through induced processes of credit rationing into a devastating bust. In such a situation the central bank may prevent the worst by acting as creditor of last resort, purchasing loans where otherwise debt default (and bankruptcy regarding house ownership) would occur. This bail-out policy can stabilize the economy and also reduces the loss of homes of worker families.

JEL classifi cation: E24, E31, E32

Keywords: mortgage loans, booms, debt default, busts, creditor of last resort

Tax policy and innovation: A search for common ground

Jerry Courvisanos, Anthony J. Laramie and Douglas Mair

The paper is motivated by a desire to find common ground between mainstream and post-Keynesian approaches to fiscal policy. A post-Keynesian approach with origins in Kalecki offers a promising line of enquiry which is developed here. The paper identifies the principal differences between the Keynesian and Kaleckian approaches. The possibilities are explored of finding accommodation between the mainstream and Kaleckian approaches to the taxation of greenhouse gases. The macroeconomic implications of taxing greenhouse gases are identified. However, these may be thwarted by the emergence of ›political aspects of innovation‹, akin to Kalecki’s ›political aspects of full employment‹. A Kaleckian balanced budget approach allied to fiscal incentives to innovate offers some prospect of common ground with the mainstream.

JEL classifi cation: H20, H22, H23

Keywords: tax policy, innovation, greenhouse gases, post-Keynesian mainstream

Fiscal policy and the economics of financial balances

Gennaro Zezza

This paper presents the main features of the macroeconomic model being used at The Levy Economics Institute of Bard College, which has proven to be a useful tool in tracking the current financial and economic crisis. We investigate the connections of the model to the ›New Cambridge‹ approach, and discuss other recent approaches to the evolution of financial balances for all sectors of the economy. We will show the effects of fiscal policy in the model, and its implications for the proposed fiscal stimulus on the US economy. We show that the New Cambridge hypothesis, which claimed that the private sector financial balance would be stable relative to income in the short run, does not hold for the short term in our model, but it does hold for the medium/long term. This implies that the major impact of the fiscal stimulus in the long run will be on the external imbalance, unless other measures are taken.

JEL classification: E12, E17, E21

Keywords: fiscal policy, financial balances, New Cambridge