Figure 3 - uploaded by Herbert Walther
Content may be subject to copyright.
Source publication
Keynes and Kalecki both assume that private investment determines (but it is not determined by) private savings. For Keynes, the desired level of sav- ing is an increasing function of GDP, somehow related to the psychology of the society; "autonomous" shifts of investment are determined by the state of long-term expectations. For Kalecki, the savin...
Context in source publication
Similar publications
This paper focuses on investment in research and development as a factor of labour productivity and economic growth. Our analysis confirms the link between expenditure for research and development (expressed in % of GDP) and labour productivity (expressed in the number of hours worked) based on selected data for EU Member States in the period 1995-...
Remittances represent about 15 percent of Jamaica’s GDP; being the 16th country worldwide in terms of economic significance of remittances. Therefore, assessing to what extent and through what mechanisms remittances are useful for development is highly relevant. Accordingly, we identify whether remittances facilitate consumption smoothing during he...
Citations
... 16 This is also true in Marx, whose 'reserve army' is the buffer stock regulating the business cycle. Suitably re-interpreted, his reproduction schemes raised the issue of effective demand before Keynes (see for instance Łaski & Walther, 2015). Relying on the heuristic assumption of the absence of capital, Pasinetti (1993) has elegantly illustrated why, when there are several sectors that have different rates of growth due to learning and technical progress, even if the economy starts from full employment, structural dynamics will generate unemployment in the absence of a corrective macroeconomic intervention. ...
... Here the question is introduced by considering either the assumption of 'optimal' and endogenous distribution, deriving from the maximisation of economic welfare (marginal equivalences of Allais, 1978) or the alternative assumption of exogenous distribution within the single period or in the stationary state (Sraffa, 1960), in which there is room for a positive profit. In this respect, it is worth reminding that outside of neo-classical equilibrium conditions, and particularly when the maximum efficiency hypothesis is not applicable, income distribution is not independent from resource allocation, which has important consequences, particularly for spatial policies, in line Kalecki's interpretation of the multiplier (Łaski & Walther, 2015). ...
The recurrence of financial crises in the last fifty years reveals a market coordination failure that regulation and economic policy were unable to prevent. While several explanations exist for the emergence of financial and economic crises, none seems to be fully satisfactory or conclusive. This text develops the idea that the theoretical assumptions that underlie policy and regulation are inadequate to fully map economic reality and that this explains the observed policy and regulatory failures. The paper suggests to assess the adherence of standard economic assumptions to reality from a probability viewpoint. It notes in particular that the no-arbitrage condition is the key assumption retained by modern finance for the pricing of financial assets. It is supported by the same set of logical premises that are associated to competitive markets in general equilibrium theory. Still today, this group of normative requirements remains central in policy advice and regulation, be it through Modern Finance or other applied fields such as Public Choice. Based on simple probabilistic arguments, the paper reminds that the domain of relevance of the above standard normative conditions is necessarily very limited. The inadequacy of the assumptions retained by regulators and policy makers to map actual economic reality can thus explain the regulatory and policy failures that allowed financial crises to develop. Public action should use more wisely normative conditions. A closer look at the adherence of the relevant assumptions to reality may be a way for improving policy and regulation effectiveness in the future.
... Minsky's profit determination according to the Kalekian profit equation is presented in Chapter 2(1982). Moreover, for an investigation of the Kalecki's profit equation seeLaski and Walther (2013). ...
The aim of this paper is to identify the euro area economic heterogeneity by disentangling the factors and characteristics shaping and exacerbating growth differentials between surplus and deficit countries. The five Kaleckian determinants of profits are used in the paper as the interpretative framework to assess the sources of divergence. According to an SVAR methodology, eight diverging factors and six reinforcing factors were detected as drivers of the differentials. It follows that the two regions represent different economic structures and that this dichotomy, in turn, means that symmetric shocks have asymmetric effects, while asymmetric shocks reinforce the regional differences. An endogenous investment-GDP feedback process and an investment–unemployment loop are mutually reinforcing mechanisms, which impair the production base and constrain future growth, so temporary shocks have long-lasting effects. The analysis emphasizes the need to rethink the European macro mechanism and to achieve a common and shared macro strategy that goes beyond national political interests and inclusively pursues the same objective: convergence. © 2018 Springer Science+Business Media, LLC, part of Springer Nature
... . This empirical finding seems to support those Kaleckian critics of the post-Kaleckian investment function, who have argued, following Kalecki, that it is difficult to see how redistribution at the expense of labour should stimulate investment, if a lag between investment decision and investment spending is introduced into the model(Laski/Walther 2015;Osiatynski 2015). 15. ...
In this paper the main developments in post-Keynesian macroeconomics since the mid 1990s will be reviewed. For this purpose the main differences between heterodox economics in general, including post-Keynesian economics, and orthodox economics will be reiterated and an overview of the strands of post-Keynesian economics, their commonalities and developments since the 1930s will be outlined. This will provide the grounds for touching upon three important areas of development and progress of post-Keynesian macroeconomics since the mid 1990s: first, the integration of distribution issues and distributional conflict into short-and long-run macroeconomics, both in theoretical and in empirical/ applied works; second, the integrated analysis of money, finance and macroeconomics and its application to changing institutional and historical circumstances, such as the process of financialisation; and third, the development of full-blown macroeconomic models, providing alternatives to the mainstream ‘New Consensus Model’ (NCM), and allowing us to derive a full macroeconomic policy mix as a more convincing alternative to the one implied and proposed by the mainstream NCM, which has dramatically failed in the face of the recent crises.
... Łaski's paper blamed unemployment in Germany at that time on monetary tightness, low wages and trade surplus (Łaski, 2004). A later paper with Herbert Walther, who had been his first assistant in Linz, extended Kalecki's macroeconomic theory of profits (Łaski and Walther, 2015). Łaski spent the final weeks of his life completing the revision of a set of lectures in macroeconomics that provides an unusually systematic approach to a subject whose textbooks tend to provide theories for topics, rather than incorporate topics into any consistent approach to macroeconomics. ...
... The argument for wage-led growth can also be appreciated with reference to Kalecki's interpretation of the multiplier, which sees it as expressing distributive shares, with the denominator that equals the profit share of income in the simplest case of a closed economy where workers do not save. When the economy is open to foreign trade, things get more complicated, but the various parameters at play make it relatively plausible that the positive effect on export demand of a decrease in wages is more than compensated by the negative effect on domestic demand through a deterioration of the distribution between wages and profits to the detriment of wages [see for instance Laski and Walther (2015)]. Therefore, in the short-term, when private investment is constrained by a lack of demand and fiscal space considerations limit public investment, productivity cannot increase because of a lack of investment. ...
This book presents the results of a research on “Investment for Growth and Development in the Western Balkans” undertaken by the University of Nice with the support of the EIB Institute. It assesses the investment needs of the Western Balkans countries (Albania, Bosnia and Herzegovina, Kosovo under UN Security Council resolution 1244, the former Yugoslav Republic of Macedonia,
Montenegro and Serbia) and Croatia, and estimates the growth, employment and public and private debt consequences (internal and external) of different scenarios. Simple tools are built and used to span the future of the Western Balkans, based on alternative variants for investment, taking some linear parameters as given.
The first chapter provides a detailed estimate of infrastructure and private sector investment needs for all main sectors and countries. The second chapter examines alternative scenarios for growth, employment and debt associated to given profiles for investment. An original contribution is the linkage between investment and debt, based on a stock-flow consistent model, the first to be applied in this region. The third chapter looks at the coordination of investment policy from a regional
viewpoint. If growth must boost employment, public related investment should be in the range of 6-8% of GDP This implies an increase in total debt which is lower than the corresponding volume of investment in absolute terms, and proportionally lower for public debt than for private debt. Along the “steady growth” investment scenario retained, some 25% of the total public investment needs of the area
could be supported and influenced in the direction of best practice with the help of technical and financial external support. There is thus a concrete opportunity to make the difference for the development of the Western Balkans, now that in every country National Investment Committee have been established with the task to program the assistance available under the Instruments for Pre-Accession (IPAII) program.
... The most effective tool is fiscal policy in the form of deficit spending … . (Laski 2004b: 1, emphasis in original; a similar argument can be found in Laski/Walther 2015) Kalecki's view of the multiplier can be put very straightforwardly in the scheme with two sectors: an increase in investment enlarges the market for consumption goods; but to make available this extra consumption to investment-goods workers, (much) more has to be produced because the workers engaged in this extra production of consumption goods have to be fed themselves. In a nutshell: ...
... The argument for wage-led growth can also be appreciated with reference to Kalecki's interpretation of the multiplier, which sees it as expressing distributive shares, with the denominator that equals the profit share of income in the simplest case of a closed economy where workers do not save. When the economy is open to foreign trade, things get more complicated, but the various parameters at play make it relatively plausible that the positive effect on export demand of a decrease in wages is more than compensated by the negative effect on domestic demand through a deterioration of the distribution between wages and profits to the detriment of wages [see for instance Laski and Walther (2015)]. Therefore, in the short-term, when private investment is constrained by a lack of demand and fiscal space considerations limit public investment, productivity cannot increase because of a lack of investment. ...
This work was presented at various stages in several meetings of the Western Balkans Investment Framework (WBIF) and also in a few academic conferences. It offers a view of the possible future of the Western Balkans. This view is one amongst many possible.
Four scenarios are built for growth around the capital-output ratio relation. Their consequences are examined in terms of employment through the elasticity of employment to growth.
A scenario is chosen as a reference for action. The reference scenario implies a public investment effort of the order of 6-8% of GDP. The descriptive chapter of the report provides evidence for this figure. Consequences for debt, both public and private as well as domestic and external, are examined through a stock-flow consistent model.
The reference scenario can be used to coordinate possible action. It implies that official external support coordinated by the WBIF and the National Investment Committees (NICs), though insufficient to cover all the needs, represents a critical mass (some 16% of the estimated public and private investment needs) that, if suitably planned and coordinated, could also influence choices on the other 84%.
See: https://www.wbif.eu/news-and-events/new-research-study-into-the-western-balkans-development-needs
Note: The work was supported financially by the EIB Institute. It does not represent the views of the EIB or the EIB Institute but only the views of its authors.
This chapter provides a detailed exploration of matrix demand multipliers in Sraffian frameworks for both closed and open economies with linear processes of single and joint production. It reveals the characteristic features of these multipliers, and shows that they involve an autonomous demand–transfer payments curve, which turns out to be a useful tool for dealing with multiplier processes in heterogeneous capital worlds. Finally, it focuses on the dependence of long-run matrix demand multipliers on the exchange rate, income distribution and, therefore, changes in relative commodity prices. Thus, this chapter highlights the distinctive contribution of the Sraffian theory to both the political economy and economic policy of effective demand management.
The mainstream concept of Secular Stagnation provides a comprehensive theoretical picture to explain sluggish economic growth and engenders a renewed role for fiscal policy. For these reasons, it should be praised. Given the difficulties entailed by the theoretical framework in which the theory is located, this paper offers a perspective on US stagnation that is grounded in some of the same foundational elements of the mainstream attempt (inequality, sluggish population growth and ageing, household debt, housing bubble) but relies on a model in which growth is driven by the autonomous components of aggregate demand. Stagnation is the result of the failure to move from a household debt-plus-bubble-led model to a model led by public expenditure. In the course of the analysis, a new treatment of ageing is offered.
