Contributions to Political Economy - recent issues

Decomposing the Changes in Production Prices into "Capital-Intensity" and "Price" Effects: Theory and Evidence from the Chinese Economy

Mariolis, T., Tsoulfidis, L. — 2009-06-17

This paper deals with the changes in prices of production induced by variations in income distribution on the basis of a linear model of production with circulating capital and homogeneous labour. It is shown that the total effect of income distribution on prices can be decomposed into a "capital-intensity" and a "price" effect and that, in actual economies, the former is expected to dominate the latter. In order to obtain a concrete idea of the actual trajectories of the price movements and to quantify the relative strength of the two effects, we use input–output data of the Chinese economy.

Unemployment Revisited: Empirical Evidence from 20 OECD Countries

Alexiou, C., Tsaliki, P. — 2009-06-17

The undertaken paper attempts to gain further insight into a string of factors thought to condition unemployment. By exposing the theoretical arguments of the Keynesian Neoclassical and radical/Marxian approaches we empirically estimate a hybrid unemployment equation, the generated evidence of which appears to be in line with both the Keynesian and Marxian tradition. For the empirical investigation, dynamic panel data analysis is applied to 20 OECD countries for the period 1970–2003.

Marx and Engels: In Praise of Globalization

Jellissen, S. M., Gottheil, F. M. — 2009-06-17

Marx's vision of history unfolding is one of societal transformation from a set of diverse nation states in a capitalist world to a unified economic society in a yet-to-be communist world. The catalyst that sets this unfolding into action is the globalization process. Its trigger mechanism is the innovating capitalist. Enticed into creating new labor-saving technologies by the prospect of reaping higher rates of profit, these capitalists confront unavoidable competition and technology imitation which undermine their advantage and leads ultimately to falling prices and falling rates of profit. Their only recourse is to venture abroad, to globalize, to invest and produce in the less technologically developed economies. This globalization of resource and product markets is a dual-edged sword: It creates and destroys. It destroys the economic and social fabrics of the less developed economies and creates in its wake a replica of the more technologically advanced. In the end, we are all one global economy, western in character. Marx sees this inevitable globalization process as progressive and praiseworthy.

Sraffa and the Later Wittgenstein

Sinha, A. — 2009-06-17

This paper is an attempt at establishing the philosophical underpinnings and thus a deeper understanding of Sraffa's enigmatic book, particularly in the light of his well acknowledged influence on Wittgenstein's later philosophy or perhaps their mutual influence on each other's thinking during the period of late 1920s and 30s. It identifies and highlights certain parallels between the theoretical propositions of Sraffa in the Production of Commodities and the later Wittgenstein's propositions regarding his philosophy of language and meaning. It argues that both Sraffa and the later Wittgenstein eschew essentialism; both propose descriptive as opposed to predictive theories; and both are concerned with establishing the context that distinguishes sense from non-sense. It goes on to argue that it is unconvincing to suggest, as some scholars have done, that Sraffa's influence on Wittgenstein could either be located at his purported attack on the atomism of the Tractatus or its critique from the Gramscian perspective.

Marx's Theory of Ground Rent: A Critical Assessment

Ramirez, M. D. — 2009-06-17

This critical essay provides the reader with an up-to-date assessment of Marx's relatively neglected theory of absolute ground rent by bringing together in a coherent manner his scattered observations and arguments contained primarily in Capital, Vol. III and Theories of Surplus Value, Vol. II. It also reviews the extant secondary literature which suggests that within Marx's theory of rent is an embryonic theory of monopoly from which scholars can draw important insights into the history of economic thought and the workings of mature capitalism. The paper is organized as follows. After an introductory section, Section II provides the reader with an overview of Marx's theory of differential rent and compares it to that of Ricardo, particularly Marx's discussion of differential rent II and whether nature is productive of exchange value. Section III discusses Marx's theory of absolute rent in light of recent criticisms by prominent scholars and suggests that what determines whether rent is paid on the marginal land is not technical backwardness or lower productivity of labor per se, but a social relation, viz., the monopoly created by the private ownership of land. The last section summarizes the main arguments and suggests some avenues for future research.

"Anglo-Saxon vs Continental Scholarship: On Critical Editions of Economic Classics": A Comment on de Vivo

Charles, L., Perrot, J.-C., There, C. — 2009-06-17

A Reply to Charles, Perrot and There

de Vivo, G. — 2009-06-17

Scritti di Economia, Finanza e Amministrazione

Groenewegen, P. — 2009-06-17

Sraffa or an Alternative Economics

Fratini, S. M. — 2009-06-17

Institutions for Social Well-Being. Alternatives for Europe

Cesaratto, S. — 2009-06-17

Global Finance and Systemic Instability

Argitis, G., Pitelis, C. — 2008-06-09

Mainstream Methodology, Financial Markets and Global Political Economy

Dow, S. — 2008-06-09

The experience of financial markets in the global economy is open to a variety of interpretations, based on different framings, with important consequences for economic policy. Knowledge about financial markets, and the methodology employed to build it, can be understood in terms of framing. The underlying argument of the paper is in favour of considering the framing of financial markets within an open-system approach, allowing input from other disciplines, as well as taking account of the real, often performative, implications of (closed-system) mainstream framing by policy-makers. The methodological underpinnings of, and interdependencies between, different framings among theorists, policy-makers, market players and users is explored.

Globalization and Contemporary Banking: On the Impact of New Technology

Lapavitsas, C., Dos Santos, P. L. — 2008-06-09

Technological innovation has contributed to recent changes in the conduct and character of banking, but its impact has been contradictory. First, money-dealing transactions have become cheaper, but investment costs have increased and a broader range of services had to be provided. The cost efficiency of banks has not improved. Second, banks have developed computationally intensive, ‘arms length’ techniques to assess creditworthiness and manage risk. Thus, they have been able to generate new revenue streams from lending to individuals and from fees for money market mediation. This shift has signalled a decline of ‘relational’ banking. Third, new technology and related practices have facilitated the entry of foreign banks into developing countries, where they can exploit ‘arms length’, technologically demanding niches in domestic markets. This has not improved the efficiency of host banking systems, nor increased the availability of credit to the productive sector.

Venture Capital Funds, Financial Foreign Direct Investment and the Generation of Local Comparative Advantage in the Technology Sector in Israel

Agmon, T., Messica, A. — 2008-06-09

The rapid development of a new comparative advantage in the hi-tech sector in Israel in the period 1995–2005 provides an example of a new form of foreign direct investment (FDI). Unlike traditional FDI, this new form of international investment, that we dubbed financial foreign direct investment (FFDI), involves capital flows from developed countries to small countries and to the emerging markets. The providers of this capital, defined in our study as "sector-specific capital", are financial and risk intermediaries like venture capital funds and private equity funds. Like multinational enterprises they transfer factors of production across borders seeking to maximize their value. In doing so, they are a part of a process of generating new comparative advantages. We focus on the case of Israel and show that, due to the inherent asymmetry, it takes government action to trigger the process of importing sector-specific capital to Israel primarily from the US capital market, but once the process has begun, it has led to economic growth via reducing tangible and intangible trade costs, creating trust and thus generating competitive advantage for innovative technology firms from Israel in the global markets.

Financial Crisis Management in Europe and Beyond

Pauly, L. W. — 2008-06-09

Financial and capital market integration in Europe is now well-advanced, but it confronts a serious challenge in the design of workable arrangements for crisis prevention, management and resolution. The expansion of large, complex financial intermediaries exposes the limits of a supervisory regime based strictly on the traditional principle of home-country control. Contemporary European debates on last-resort lending, home-host supervisory responsibilities, and fiscal transfers clarify the fundamental challenge globalizing finance poses more generally for world order. Ultimately, they suggest the necessity of reliable, legitimate and effective instruments for financial burden sharing among integrating polities.

The Mystery of the Missing Sovereign Debt Restructuring Mechanism

Helleiner, E. — 2008-06-09

The absence of a formal international regulatory mechanism to facilitate sovereign debt restructuring has long been recognized as a most serious gap in the architecture of global finance. Why has it proven so difficult to create such a sovereign debt restructuring mechanism (SDRM) at the international level? Political economists have devoted relatively little scholarly attention to this question. This paper attempts to begin to fill this gap in the literature by examining four failed initiatives to create a SDRM over the past century. In place of a realist or structural Marxist account, the paper puts forward a more contingent explanation for these failures that highlights three distinct political problems that must be overcome in the construction of a SDRM: (1) collective action problems on both the side of sovereign debtors and that of private foreign creditors; (2) basic distributional conflicts embodied in any debt restructuring effort; and (3) the uncertain behavior of the private creditors' home states.

Could the Crisis at Northern Rock have been Predicted?: An Evolutionary Approach

Chick, V. — 2008-06-09

Bankers have, from their beginning, made their money by taking risks and deciding how much risk they dare take, by expanding gradually, testing the water. Within this framework, the first risk is of illiquidity, but they must also ensure solvency. The steps taken by Northern Rock in developing their present ‘business plan’ are the same as those taken by most other banks, responding to the same incentives. It is the rapidity of its expansion that resulted in its downfall. The steps that have been taken also by other banks can be traced back to the beginning of banking and are predictable. Northern Rock's difficulties were predictable – and were predicted.

Report from the February 2008 CIBAM Global Business Symposium "Global Finance", 21-22 February 2008, Emmanuel College and Judge Business School

2008-06-09

Mathematical Needs and Economic Interpretations

Duran, M. A. — 2007-08-13

This paper discusses why the disconnection between formal structures and theoretical content in economic model building can lead to undesirable consequences. By contrast, linking formal and verbal contents by means of coherent and relevant interpretations is worth the effort: it is a relatively simple way of helping to improve mathematical economic theorization. By way of illustration, the interpretation that Arrow and Debreu put on the inclusion of free goods in their proof of existence of general equilibrium is also discussed.

A Methodological Note on Long-Period Positions

D'Orlando, F. — 2007-08-13

This brief paper seeks to overcome a number of methodological disagreements among economists who use the long-period method of analysis. In particular, it attempts to clarify the key distinctions between convergence and stability, convergence and gravitation and chronological and theoretical persistence. The conclusion is that the theoretical soundness of the long-period method depends on the convergence of actual magnitudes towards their long-period counterparts, an empirical issue to which theoretical considerations of stability are irrelevant.

Marx, Wages, and Cyclical Crises: A Critical Interpretation

Ramirez, M. D. — 2007-08-13

This paper examines certain theoretical questions and issues relating to Marx's conception of wages under competitive capitalism. First, it is shown that the distinction between labour and the value of labour power is critically important for understanding the source of profits in competitive capitalism. Second, the value of labour power cannot be reduced either to the classical school's bare minimum subsistence level, or a "physically" determined minimum. Next, the paper discusses Marx's neglected distinction between absolute and relative real wages. It is shown that the purely technical relationship between wages and labour productivity is captured by the notion of absolute real wages. Marx, however, considered relative real wages to hold the key to understanding how one class appropriated the surplus labour time of another. Finally, the paper traces the movement of absolute and relative real wages for the active part of the working class during the various phases of the industrial cycle. It is argued that Marx believed that the secular decline in the value of labour power reflecting rising social (labour) productivity would be accompanied by a relative deterioration in the social position of the members of the active working class, and an absolute immiseration of the three major components of the relatively growing industrial reserve army.

Reswitching of Techniques in an Intertemporal Equilibrium Model with Overlapping Generations

Fratini, S. M. — 2007-08-13

We study an overlapping generation model of Diamond's type. In contrast to Diamond, we do not assume that the technology can be represented by an aggregate neoclassical production function. Rather, we study the case in which (i) the technology consists of a finite number of constant coefficient productive activities, (ii) there are capital goods physically heterogeneous with respect to each other and to the economy's only consumption good and (iii) there are two alternative production methods for obtaining the consumption good. We explore the possible linkage between reswitching of techniques and the multiplicity of stationary state equilibria of the model.

Sraffa and the Assumption of Constant Returns to Scale: A Critique of Samuelson and Etula

Sinha, A. — 2007-08-13

In a recent paper Samuelson and Etula claim to have provided three examples of the presence of a constant returns to scale assumption in Sraffa's Production of Commodities. The present paper is a refutation of their interpretation of Sraffa's propositions. It shows that they mistakenly take Sraffa's logical propositions for empirical propositions. This article also provides evidence to refute Samuelson's hypothesis that Sraffa consistently confused the concept of Marshallian "constant cost" with the general equilibrium concept of "constant returns to scale". The paper also argues that Sraffa's prices are not necessarily "equilibrium" prices, and that it is not true that Sraffa maintained that changes in demand had no impact on prices; his position appears rather to be that the impact of demand on prices is unpredictable.

Joan Robinson and Maurice Dobb on Marx

Kerr, P. — 2007-08-13

This paper examines the formation of Joan Robinson's early views on Marx through a dialogue with Maurice Dobb and then the reception of these views at the time by Kalecki, Keynes and some prominent reviewers. It considers how her views were formed and developed in this dialogue and assesses how her position differed from those of others interested in Marx and working in Cambridge at the time, including Piero Sraffa. It concludes that, despite certain misreadings and limitations, Robinson's reading of Marx was not of inconsequence and that she was not unaware of the different approach she took to Marx.

Anglo-Saxon vs Continental Scholarship: On Critical Editions of Economic Classics

de Vivo, G. — 2007-08-13

The present paper discusses different editions of economic classics, in particular focusing on the recent edition of the economic works of François Quesnay, published by the Paris Institut National d'Études Démographiques. It is argued that its quality is well below the standards one is entitled to expect for the critical edition of one of the most important economists of all time.

Selected Economic Essays

Fausto, D. — 2007-08-13

Economists in Cambridge: a Study through their Correspondence, 1907 1946

Backhouse, R. E. — 2007-08-13

Old Age Income Support in the 21st Century: An International Perspective on Pension Systems and Reform

Barba, A. — 2007-08-13