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Jakob Kapeller University of Duisburg-Essen
Institute for Socio-Economics &
Johannes Kepler University LinzInstitute for Comprehensive Analysis of the Economy (ICAE)
Editor: Heterodox Economics Newsletter
www.jakob-kapeller.org | www.uni-due.de | www.heterodoxnews.com
London, 31st of March 2019
Past & future of pluralism in economics: a personal outlook
Pluralism in economics: A research agenda
Jakob Kapeller
„Justifying Pluralism“ „Analyzing Pluralism“ „Doing Pluralism“
• Three main streams of pluralism-related research
Pluralism in economics: A research agenda
Jakob Kapeller
„Justifying Pluralism“ „Analyzing Pluralism“ „Doing Pluralism“
• Three main streams of pluralism-related research
• Analyzing pluralism
• Current development in economic discourse and economics as a discipline.
• Doing pluralism
• Using pluralism as a template for applied economics.
Analyzing Pluralism
Analyzing Pluralism Retrospective: Citation Patterns between Mainstream & Heterodoxy
Jakob Kapeller
97.15%'
47.58%'
2.85%'
52.42%'
0.00%'
20.00%'
40.00%'
60.00%'
80.00%'
100.00%'
120.00%'
in'top'13'orthodox' in'top'13'heterodox'
Interparadigma,c.Discourse.in.Economics.(198982008).
percentage'of'cita<ons'from'top'13'orthodox'journals' percentage'of'cita<ons'from'top'13'heterodox'journals'
• A classic findingHeterodox Econ is „open“ for mainstream ideas, while mainstream is discursively „closed“.No reciprocity - neither on the level of paradigms, nor when looking on single journals.
Analyzing Pluralism Retrospective: Citation Patterns between Mainstream & Heterodoxy
Jakob Kapeller
98.30%
69.08%
1.70%
30.92%
0.00%
20.00%
40.00%
60.00%
80.00%
100.00%
120.00%
orthodoxjournals(>350.000papers} heterodoxjournals(>50.000papers)
Interparadigma,cDiscourseinEconomics(1969-2013):Analyzingalarge-scalesample
percentageofcitaDonsfromorthodoxjournals(>2.1McitaDons)
percentageofcitaDonsfromheterodoxjournals(>180.000citaDons)
• A classic findingHeterodox Econ is „open“ for mainstream ideas, while mainstream is discursively „closed“.No recopricity - neither on the level of paradigms, nor when looking on single journals.
Aistleitner/Kapeller/Steinerberger (2017): Citation Patterns in Economics and Beyond. Science in Context (forthcoming)
Analyzing Pluralism Retrospective: Citation Patterns within Mainstream Economics
Jakob Kapeller
Aistleitner/Kapeller/Steinerberger (2017): Citation Patterns in Economics and Beyond. Science in Context (forthcoming)
Analyzing Pluralism Retrospective: Citation Patterns within Mainstream Economics
Jakob Kapeller
• A more recent findingMainstream discourse exhibits stronger hierarchies as other fields:
• Major role for top journals (here: Top 5, see also: Fourcade et al. (2015) in JEP)
• Top journals more self-contained as compared to other disciplines.
Jakob Kapeller
“
George Akerlof, ASSA 2017„The Curse of the Big 5“
What I am worried about most of all, is what we don't see. So, I am worried about the analysis that is never seen, that never becomes a paper and it doesn't become a paper, because it can't become a paper. And it can't become a paper, because that's not what a paper in economics is all about. I am quite worried about that and we know such vacuums exist.“
Pluralism, Openness and the economic mainstream
Analyzing Pluralism Outlook: Institutional stalemate and structural asymmetry
• Full SampleProfessors of Economics in the german-speaking
countries (~600)
• Data corpusBiographical data, research interests, publications
• Paradigmatic classification
• Based on: journal publications and
classification of journal by the Heterodox
Economics Directory
• > 90%: „Mainstream“
• ~5 % „pluralist“ (green)
• ~3% „heterodox“ (red)
Jakob Kapeller
Grimm Christian, Kapeller Jakob and Stephan Pühringer: Paradigms and Policies: The state of economics in the german-speaking countries. ICAE Working Paper #77
Jakob Kapeller
“
Heterodox Economics Newsletter, Issue 199 (2016)
Hence, from a traditional disciplinary perspective - where different disciplines are confined by distinct core areas of study - heterodox economics is really ’economics’, while from a discursive perspective heterodox economics may seem like some kind of generalist social science, ready to diffuse its ideas in a series of disciplines and traditions.
Analyzing Pluralism Outlook: Heterodox Economics as a ‚generalist social science‘?
Analyzing Pluralism Outlook: Heterodox Economics as a ‚generalist social science‘?
Jakob Kapeller
!
14!!
collective proximity Newman (2006) proposes an unbiased measure called ‘modularity’, which will also feature in our analysis in the following and is optimally depicted in force-directed layouts which generate visual densities that denote structural densities (Noack, 2009).
The following figures show the network graphs for the three departments, where node size is ranked by Weighted In-Degree i.e. the number of direct connections (citations) directed to the respective node (journal), considering the weight of the edges (frequency of the citations).
Figure 3: Citation Network Department of Economics WU – Node size ranked by Weighted In-Degree
2 AMERICAN ECONOMIC REVIEW 20 REVIEW OF ECONOMIC STUDIES
15 REVIEW OF ECONOMICS AND STATISTICS 37 JOURNAL OF ECONOMIC PERSPECTIVES
9 QUARTERLY JOURNAL OF ECONOMICS 14 ECONOMICS LETTERS
10 ECONOMETRICA 13 JOURNAL OF PUBLIC ECONOMICS
31 JOURNAL OF FINANCIAL ECONOMICS 50 JOURNAL OF INDUSTRIAL ECONOMICS
28 JOURNAL OF FINANCE 35 JOURNAL OF ECONOMETRICS
4 EUROPEAN ECONOMIC REVIEW 38 RAND JOURNAL OF ECONOMICS
16 JOURNAL OF POLITICAL ECONOMY 39 PUBLIC CHOICE
5 ECONOMIC JOURNAL … …
51 JOURNAL OF INTERNATIONAL ECONOMICS 61 CAMBRIDGE JOURNAL OF ECONOMICS
48 JOURNAL OF ECONOMIC LITERATURE 6 JOURNAL OF ECONOMIC BEHAVIOR AND ORGANIZATION
3 INTERNATIONAL JOURNAL OF NDUSTRIAL ORGANIZATION 69 METROECONOMICA
An orthodox citation network !
17!!
Figure 6: Citation Network Department of Socioeconomics WU – Node size ranked by Weighted In-Degree
1 ECOLOGICAL ECONOMICS 123 ENVIRONMENTAL AND RESOURCE ECONOMICS
2 AMERICAN ECONOMIC REVIEW 9 QUARTERLY JOURNAL OF ECONOMICS
43 URBAN STUDIES 108 JOURNAL OF ENVIRONMENTAL ECONOMICS AND MANAGEMENT
23 REGIONAL STUDIES 127 ACADEMY OF MANAGEMENT REVIEW
34 RESEARCH POLICY 61 CAMBRIDGE JOURNAL OF ECONOMICS
30 EUROPEAN PLANNING STUDIES 15 REVIEW OF ECONOMICS AND STATISTICS
122 CLIMATIC CHANGE 171 INDUSTRIAL AND CORPORATE CHANGE
65 ENVIRONMENT AND PLANNING 178 PHOTOGRAMMETRIC ENGINEERING AND REMOTE SENSING
21 ENVIRONMENTAL VALUES 154 JOURNAL OF ECONOMIC GEOGRAPHY
68 LAND ECONOMICS 27 GLOBAL ENVIRONMENTAL CHANGE HUMAN AND POLICY DIMENSIONS
The different structure of the citation network of the DS-WU also shows in the networks statistics in Table 5. Its graph density is substantially lower reflecting the less concentrated network and the modularity value is higher, suggesting that groups of nodes are tightly connected to each other, but loosely connected to nodes outside the module. The measure is based on an algorithm by Blondel, Guillaume, Lambiotte, & Lefebvre (2008). InFehler! Verweisquelle onnte nicht gefunden werden. in the Appendix the citation network is displayed with different coloring of the modules, and a thematic categorization of the modules, which reveals that the different structure of the network is the result of the broad and interdisciplinary research agenda
A heterodox citation network
… both at Vienna University of Economics & Business
Glötzl/Aigner (2017): Pluralism in the Market of Science? A citation network analysis of economic research at universities in Vienna. Review of Political Economy (forthcoming)
Analyzing Pluralism Outlook: Heterodox Economics as a ‚generalist social science‘?
Jakob Kapeller
since the middle of the 90ies: umbrella-term for alternatives to the standard economic approach.
Analyzing Pluralism Outlook: New institutional venues & the next generation
• Is the future of pluralist economics outside of economics?
• Heterodox economics as generalist social science I: Strongest heterodox departments
in the German-speaking area are now located outside of traditional economics
(Departments for Socio-Economics at WU Vienna and University Duisburg-Essen).
• Heterodox economics as generalist social science II: Support for pluralist research hubs
often comes from outside of economics (e.g. in Bremen from Business Studies, in Linz
from Sociologists.
• The increasing scope of heterodox economics
• Visible in newly founded journals like the Review of Keynesian Economics or the Review
of Evolutionary Political Economy.
• Increasing pluralism within heterodox associations
• Young researcher from the pluralism movement enter post-doctoral stage
• Heterodox economics as generalist social science III: Often work outside economics.
Jakob Kapeller
Doing Pluralism
Pluralism as ‚Integration‘: Minsky-Veblen Cycles
Jakob Kapeller
Journal of Post Keynesian Economics / Summer 2014, Vol. 36, No. 4 781© 2014 M.E. Sharpe, Inc. All rights reserved. Permissions: www.copyright.com
ISSN 0160–3477 (print) / ISSN 1557–7821 (online)DOI: 10.2753/PKE0160-3477360409
JAKOB KAPELLER AND BERNHARD SCHÜTZ
Debt, boom, bust: a theory of Minsky–Veblen cycles
Abstract: This article reflects on the economic development leading to the recent crisis and interprets this development as a series of events within a Minsky–Veblen cycle. To illustrate this claim we introduce conspicuous con-sumption concerns, as described by Veblen, into a stock-flow-consistent post Keynesian model and demonstrate that, under these conditions, a decrease in income equality leads to a corresponding increase in debt-financed consump-tion demand. Here Minskian dynamics come into play: if perceived economic stability causes banks’ margins of safety to decrease sufficiently, increased credit demand is accommodated by credit supply giving rise to a debt-financed consumption boom. As the solvency of households decreases and interest rates move up, banks reduce lending, triggering household bankruptcies and, finally, a recession. What follows is a stable period of consolidation, where past debts are repaid, financial stability is regained and conspicuous consumption motives may gradually take over again. We illustrate this approach to the current crisis and its explanatory validity by extending our stock-flow-consistent model into a dynamic simulation.
Key words: financial instability, inequality, business cycle, stock-flow consistency, Minsky, Veblen.
JEL classifications: B52, D11, E12, E20, G01.
If one were asked by an educated layperson about the best way to under-stand the “current crisis,” which has already evolved from a financial or private debt crisis to a sovereign debt crisis, we claim that one legitimate answer would be the following: first, read Thorstein Veblen’s seminal book The Theory of the Leisure Class (especially chapters 4–5), and pay
Jakob Kapeller is an assistant professor in the Department of Philosophy and Theory of Science at the University of Linz. Bernhard Schütz is an assistant professor in the Department of Economics at the University of Linz. For helpful comments, the authors would like to thank Michael Landesmann, Martin Riese, Thomas Palley, Engelbert Stockhammer, and Octavio Fernández-Amador. Furthermore, we are greatly indebted to Miriam Rehm, who started us off on Minsky, and Stefan Steinerberger,whose patient advice guided us through our first steps in Mathematica. Remaining errors are ours.
Pluralism as ‚Integration‘: Minsky-Veblen Cycles
Debt, Boom, Bust: A Theory of Minsky-Veblen Cycles
Jakob Kapeller
University of Linz
Department of Philosophy and Theory of Science
Bernhard Schütz
University of Linz
Department of Economics
The basic story
The research questions
1.) Can the recent crisis be interpreted as a part of a larger cycle?2.) Is it possible to create such cycles in a post-Keynesian, stock-flow consistent framework?3.) If yes, what assumptions are sufficient to acquire such a result?
Out
put
Debt
Expansion Compression
Panic
Consolidation
Framework and main assumptions
stock-flow-consistent closed economy model with no state
a Minskyian financial sector, where banks become more confident in stable periods and get more anxious in volatile periods
two classes (workers and capitalists)
two types of workers, where type 2 workers lose income relative to type 1 workers, which gives rise to conspicuous consumption motives that increase the demand for consumer credit and boost aggregate demand
The answer
Expansion
Compression
Panic
Consolidation
A simulation model based on these specs delivers the following cyclical behavior of aggregate output...
...which is accompanied by the expected debt-output cycle (the amount of dots indicates the duration of the respective phase).
Out
put
Debt
7.5
8.0
8.5
9.0
108 110 112 114 116 118
Expansion Compression
Panic
Consolidation 7.5
8.0
8.5
9.0
13.0 13.5 14.0 14.5 15.0 15.5
Out
put
Debt / Output
Expansion
Compression
Panic
Consolidation
Detailed simulation results
88 Scenario 1: Baseline Case Scenario 2: Inequality and contraction Scenario 3: Inequality and expansion
200
100
6
8
4
2
100 200 300 400
GDP Cw1 Cw2 Cc I
YDw2 Profits Banks Profits Firms
Mw2 Mc Mw1 Bank Equity
100 200 300 400
0.5
1.0
1.5
2.0
100 200 300 400
20
40
60
80
100
Mw2 Mc Mw1 Bank Equity
100 200 300 400
20
40
60
80
100
Mw2 Mc Mw1 Bank Equity
100 200 300 400
-200
400
200
YDw2 Profits Banks Profits Firms
100 200 300 400
YDw2 Profits Banks Profits Firms
100 200 300 4000.5
1.0
1.5
1
2
3
4
-1
100 200 300 400
GDP Cw1 Cw2 Cc I
6
8
4
2
6
8
4
2
10
100 200 300 400
GDP Cw1 Cw2 Cc I
Scenario 4a: Minsky-Veblen Cycles - Speculative Dynamics
Scenario 4b: Minsky-Veblen Cycles - Ponzi Dynamics
Scenario 4c: Minsky-Veblen Cycles - Hedge Dynamics
GDP Cw1 Cw2 Cc I
YDw2 Profits B. Profits F. Safety Margin
Mw2 Mc Mw1 Bank Equity
interest rate
GDP Cw1 Cw2 Cc I GDP Cw1 Cw2 Cc I
Mw2 Mc Mw1 Bank Equity Mw2 Mc Mw1 Bank Equity
YDw2 Profits B. Profits F. Safety Margin YDw2 Profits B. Profits F. Safety Margin
interest rate
interest rate
100 200 300 400
6
8
4
2
100 200 300 400
6
8
4
2
100 200 300 400
6
8
4
2
100 200 300 400
-1
1
2
3
100 200 300 400
-1.0
1.0
2.0
3.0
100 200 300 400
0.5
1.0
1.5
2.0
100 200 300 40020
40
60
80
100
100200 300 40020
-20
100
100 200 300 400
80
20
100
60
40
100 200 300 400
0.052
0.046
0.054
0.050
0.048
0.056
0.058
100 200 300 400
0.052
0.046
0.050
0.048
100 200 300 400
0.048
0.045
0.049
0.047
0.046
0.050
40
60
80
GDP Cw1 Cw2 Cc I
100 200 300 400
6
8
4
2
• stock-flow consistent model
• Two classes: Some share of workers loses
income.
• Emulation: Losers try to keep up with other
workers/their old living standard - Credit-Demand!
• Minskyian banks: economic stability -
increase in risk-taking: Credit-Supply!
Jakob Kapeller
basic idea
Debt, Boom, Bust: A Theory of Minsky-Veblen Cycles
Jakob Kapeller
University of Linz
Department of Philosophy and Theory of Science
Bernhard Schütz
University of Linz
Department of Economics
The basic story
The research questions
1.) Can the recent crisis be interpreted as a part of a larger cycle?2.) Is it possible to create such cycles in a post-Keynesian, stock-flow consistent framework?3.) If yes, what assumptions are sufficient to acquire such a result?
Out
put
Debt
Expansion Compression
Panic
Consolidation
Framework and main assumptions
stock-flow-consistent closed economy model with no state
a Minskyian financial sector, where banks become more confident in stable periods and get more anxious in volatile periods
two classes (workers and capitalists)
two types of workers, where type 2 workers lose income relative to type 1 workers, which gives rise to conspicuous consumption motives that increase the demand for consumer credit and boost aggregate demand
The answer
Expansion
Compression
Panic
Consolidation
A simulation model based on these specs delivers the following cyclical behavior of aggregate output...
...which is accompanied by the expected debt-output cycle (the amount of dots indicates the duration of the respective phase).
Out
put
Debt
7.5
8.0
8.5
9.0
108 110 112 114 116 118
Expansion Compression
Panic
Consolidation 7.5
8.0
8.5
9.0
13.0 13.5 14.0 14.5 15.0 15.5
Out
put
Debt / Output
Expansion
Compression
Panic
Consolidation
Detailed simulation results
88 Scenario 1: Baseline Case Scenario 2: Inequality and contraction Scenario 3: Inequality and expansion
200
100
6
8
4
2
100 200 300 400
GDP Cw1 Cw2 Cc I
YDw2 Profits Banks Profits Firms
Mw2 Mc Mw1 Bank Equity
100 200 300 400
0.5
1.0
1.5
2.0
100 200 300 400
20
40
60
80
100
Mw2 Mc Mw1 Bank Equity
100 200 300 400
20
40
60
80
100
Mw2 Mc Mw1 Bank Equity
100 200 300 400
-200
400
200
YDw2 Profits Banks Profits Firms
100 200 300 400
YDw2 Profits Banks Profits Firms
100 200 300 4000.5
1.0
1.5
1
2
3
4
-1
100 200 300 400
GDP Cw1 Cw2 Cc I
6
8
4
2
6
8
4
2
10
100 200 300 400
GDP Cw1 Cw2 Cc I
Scenario 4a: Minsky-Veblen Cycles - Speculative Dynamics
Scenario 4b: Minsky-Veblen Cycles - Ponzi Dynamics
Scenario 4c: Minsky-Veblen Cycles - Hedge Dynamics
GDP Cw1 Cw2 Cc I
YDw2 Profits B. Profits F. Safety Margin
Mw2 Mc Mw1 Bank Equity
interest rate
GDP Cw1 Cw2 Cc I GDP Cw1 Cw2 Cc I
Mw2 Mc Mw1 Bank Equity Mw2 Mc Mw1 Bank Equity
YDw2 Profits B. Profits F. Safety Margin YDw2 Profits B. Profits F. Safety Margin
interest rate
interest rate
100 200 300 400
6
8
4
2
100 200 300 400
6
8
4
2
100 200 300 400
6
8
4
2
100 200 300 400
-1
1
2
3
100 200 300 400
-1.0
1.0
2.0
3.0
100 200 300 400
0.5
1.0
1.5
2.0
100 200 300 40020
40
60
80
100
100200 300 40020
-20
100
100 200 300 400
80
20
100
60
40
100 200 300 400
0.052
0.046
0.054
0.050
0.048
0.056
0.058
100 200 300 400
0.052
0.046
0.050
0.048
100 200 300 400
0.048
0.045
0.049
0.047
0.046
0.050
40
60
80
GDP Cw1 Cw2 Cc I
100 200 300 400
6
8
4
2
simulation results
Minsky-Veblen Cycles: Results
Jakob Kapeller
Debt, Boom, Bust: A Theory of Minsky-Veblen Cycles
Jakob Kapeller
University of Linz
Department of Philosophy and Theory of Science
Bernhard Schütz
University of Linz
Department of Economics
The basic story
The research questions
1.) Can the recent crisis be interpreted as a part of a larger cycle?2.) Is it possible to create such cycles in a post-Keynesian, stock-flow consistent framework?3.) If yes, what assumptions are sufficient to acquire such a result?
Out
put
Debt
Expansion Compression
Panic
Consolidation
Framework and main assumptions
stock-flow-consistent closed economy model with no state
a Minskyian financial sector, where banks become more confident in stable periods and get more anxious in volatile periods
two classes (workers and capitalists)
two types of workers, where type 2 workers lose income relative to type 1 workers, which gives rise to conspicuous consumption motives that increase the demand for consumer credit and boost aggregate demand
The answer
Expansion
Compression
Panic
Consolidation
A simulation model based on these specs delivers the following cyclical behavior of aggregate output...
...which is accompanied by the expected debt-output cycle (the amount of dots indicates the duration of the respective phase).
Out
put
Debt
7.5
8.0
8.5
9.0
108 110 112 114 116 118
Expansion Compression
Panic
Consolidation 7.5
8.0
8.5
9.0
13.0 13.5 14.0 14.5 15.0 15.5
Out
put
Debt / Output
Expansion
Compression
Panic
Consolidation
Detailed simulation results
88 Scenario 1: Baseline Case Scenario 2: Inequality and contraction Scenario 3: Inequality and expansion
200
100
6
8
4
2
100 200 300 400
GDP Cw1 Cw2 Cc I
YDw2 Profits Banks Profits Firms
Mw2 Mc Mw1 Bank Equity
100 200 300 400
0.5
1.0
1.5
2.0
100 200 300 400
20
40
60
80
100
Mw2 Mc Mw1 Bank Equity
100 200 300 400
20
40
60
80
100
Mw2 Mc Mw1 Bank Equity
100 200 300 400
-200
400
200
YDw2 Profits Banks Profits Firms
100 200 300 400
YDw2 Profits Banks Profits Firms
100 200 300 4000.5
1.0
1.5
1
2
3
4
-1
100 200 300 400
GDP Cw1 Cw2 Cc I
6
8
4
2
6
8
4
2
10
100 200 300 400
GDP Cw1 Cw2 Cc I
Scenario 4a: Minsky-Veblen Cycles - Speculative Dynamics
Scenario 4b: Minsky-Veblen Cycles - Ponzi Dynamics
Scenario 4c: Minsky-Veblen Cycles - Hedge Dynamics
GDP Cw1 Cw2 Cc I
YDw2 Profits B. Profits F. Safety Margin
Mw2 Mc Mw1 Bank Equity
interest rate
GDP Cw1 Cw2 Cc I GDP Cw1 Cw2 Cc I
Mw2 Mc Mw1 Bank Equity Mw2 Mc Mw1 Bank Equity
YDw2 Profits B. Profits F. Safety Margin YDw2 Profits B. Profits F. Safety Margin
interest rate
interest rate
100 200 300 400
6
8
4
2
100 200 300 400
6
8
4
2
100 200 300 400
6
8
4
2
100 200 300 400
-1
1
2
3
100 200 300 400
-1.0
1.0
2.0
3.0
100 200 300 400
0.5
1.0
1.5
2.0
100 200 300 40020
40
60
80
100
100200 300 40020
-20
100
100 200 300 400
80
20
100
60
40
100 200 300 400
0.052
0.046
0.054
0.050
0.048
0.056
0.058
100 200 300 400
0.052
0.046
0.050
0.048
100 200 300 400
0.048
0.045
0.049
0.047
0.046
0.050
40
60
80
GDP Cw1 Cw2 Cc I
100 200 300 400
6
8
4
2
Debt, Boom, Bust: A Theory of Minsky-Veblen Cycles
Jakob Kapeller
University of Linz
Department of Philosophy and Theory of Science
Bernhard Schütz
University of Linz
Department of Economics
The basic story
The research questions
1.) Can the recent crisis be interpreted as a part of a larger cycle?2.) Is it possible to create such cycles in a post-Keynesian, stock-flow consistent framework?3.) If yes, what assumptions are sufficient to acquire such a result?
Out
put
Debt
Expansion Compression
Panic
Consolidation
Framework and main assumptions
stock-flow-consistent closed economy model with no state
a Minskyian financial sector, where banks become more confident in stable periods and get more anxious in volatile periods
two classes (workers and capitalists)
two types of workers, where type 2 workers lose income relative to type 1 workers, which gives rise to conspicuous consumption motives that increase the demand for consumer credit and boost aggregate demand
The answer
Expansion
Compression
Panic
Consolidation
A simulation model based on these specs delivers the following cyclical behavior of aggregate output...
...which is accompanied by the expected debt-output cycle (the amount of dots indicates the duration of the respective phase).
Out
put
Debt
7.5
8.0
8.5
9.0
108 110 112 114 116 118
Expansion Compression
Panic
Consolidation 7.5
8.0
8.5
9.0
13.0 13.5 14.0 14.5 15.0 15.5
Out
put
Debt / Output
Expansion
Compression
Panic
Consolidation
Detailed simulation results
88 Scenario 1: Baseline Case Scenario 2: Inequality and contraction Scenario 3: Inequality and expansion
200
100
6
8
4
2
100 200 300 400
GDP Cw1 Cw2 Cc I
YDw2 Profits Banks Profits Firms
Mw2 Mc Mw1 Bank Equity
100 200 300 400
0.5
1.0
1.5
2.0
100 200 300 400
20
40
60
80
100
Mw2 Mc Mw1 Bank Equity
100 200 300 400
20
40
60
80
100
Mw2 Mc Mw1 Bank Equity
100 200 300 400
-200
400
200
YDw2 Profits Banks Profits Firms
100 200 300 400
YDw2 Profits Banks Profits Firms
100 200 300 4000.5
1.0
1.5
1
2
3
4
-1
100 200 300 400
GDP Cw1 Cw2 Cc I
6
8
4
2
6
8
4
2
10
100 200 300 400
GDP Cw1 Cw2 Cc I
Scenario 4a: Minsky-Veblen Cycles - Speculative Dynamics
Scenario 4b: Minsky-Veblen Cycles - Ponzi Dynamics
Scenario 4c: Minsky-Veblen Cycles - Hedge Dynamics
GDP Cw1 Cw2 Cc I
YDw2 Profits B. Profits F. Safety Margin
Mw2 Mc Mw1 Bank Equity
interest rate
GDP Cw1 Cw2 Cc I GDP Cw1 Cw2 Cc I
Mw2 Mc Mw1 Bank Equity Mw2 Mc Mw1 Bank Equity
YDw2 Profits B. Profits F. Safety Margin YDw2 Profits B. Profits F. Safety Margin
interest rate
interest rate
100 200 300 400
6
8
4
2
100 200 300 400
6
8
4
2
100 200 300 400
6
8
4
2
100 200 300 400
-1
1
2
3
100 200 300 400
-1.0
1.0
2.0
3.0
100 200 300 400
0.5
1.0
1.5
2.0
100 200 300 40020
40
60
80
100
100200 300 40020
-20
100
100 200 300 400
80
20
100
60
40
100 200 300 400
0.052
0.046
0.054
0.050
0.048
0.056
0.058
100 200 300 400
0.052
0.046
0.050
0.048
100 200 300 400
0.048
0.045
0.049
0.047
0.046
0.050
40
60
80
GDP Cw1 Cw2 Cc I
100 200 300 400
6
8
4
2
Pluralism as ‚Diversification‘: Path-Dependency in Europe Typical trajectories and the role of the crisis
Jakob Kapeller
Total debt/GDP: sum of public debt/GDP (AMECO data) and private sector debt/GDP (OECD data)
Pluralism as ‚Diversification‘: Path-Dependency in Europe Typical trajectories and the role of the crisis
Jakob Kapeller
Total debt/GDP: sum of public debt/GDP (AMECO data) and private sector debt/GDP (OECD data)
Debt, Boom, Bust: A Theory of Minsky-Veblen Cycles
Jakob Kapeller
University of Linz
Department of Philosophy and Theory of Science
Bernhard Schütz
University of Linz
Department of Economics
The basic story
The research questions
1.) Can the recent crisis be interpreted as a part of a larger cycle?2.) Is it possible to create such cycles in a post-Keynesian, stock-flow consistent framework?3.) If yes, what assumptions are sufficient to acquire such a result?
Out
put
Debt
Expansion Compression
Panic
Consolidation
Framework and main assumptions
stock-flow-consistent closed economy model with no state
a Minskyian financial sector, where banks become more confident in stable periods and get more anxious in volatile periods
two classes (workers and capitalists)
two types of workers, where type 2 workers lose income relative to type 1 workers, which gives rise to conspicuous consumption motives that increase the demand for consumer credit and boost aggregate demand
The answer
Expansion
Compression
Panic
Consolidation
A simulation model based on these specs delivers the following cyclical behavior of aggregate output...
...which is accompanied by the expected debt-output cycle (the amount of dots indicates the duration of the respective phase).
Out
put
Debt
7.5
8.0
8.5
9.0
108 110 112 114 116 118
Expansion Compression
Panic
Consolidation 7.5
8.0
8.5
9.0
13.0 13.5 14.0 14.5 15.0 15.5
Out
put
Debt / Output
Expansion
Compression
Panic
Consolidation
Detailed simulation results
88 Scenario 1: Baseline Case Scenario 2: Inequality and contraction Scenario 3: Inequality and expansion
200
100
6
8
4
2
100 200 300 400
GDP Cw1 Cw2 Cc I
YDw2 Profits Banks Profits Firms
Mw2 Mc Mw1 Bank Equity
100 200 300 400
0.5
1.0
1.5
2.0
100 200 300 400
20
40
60
80
100
Mw2 Mc Mw1 Bank Equity
100 200 300 400
20
40
60
80
100
Mw2 Mc Mw1 Bank Equity
100 200 300 400
-200
400
200
YDw2 Profits Banks Profits Firms
100 200 300 400
YDw2 Profits Banks Profits Firms
100 200 300 4000.5
1.0
1.5
1
2
3
4
-1
100 200 300 400
GDP Cw1 Cw2 Cc I
6
8
4
2
6
8
4
2
10
100 200 300 400
GDP Cw1 Cw2 Cc I
Scenario 4a: Minsky-Veblen Cycles - Speculative Dynamics
Scenario 4b: Minsky-Veblen Cycles - Ponzi Dynamics
Scenario 4c: Minsky-Veblen Cycles - Hedge Dynamics
GDP Cw1 Cw2 Cc I
YDw2 Profits B. Profits F. Safety Margin
Mw2 Mc Mw1 Bank Equity
interest rate
GDP Cw1 Cw2 Cc I GDP Cw1 Cw2 Cc I
Mw2 Mc Mw1 Bank Equity Mw2 Mc Mw1 Bank Equity
YDw2 Profits B. Profits F. Safety Margin YDw2 Profits B. Profits F. Safety Margin
interest rate
interest rate
100 200 300 400
6
8
4
2
100 200 300 400
6
8
4
2
100 200 300 400
6
8
4
2
100 200 300 400
-1
1
2
3
100 200 300 400
-1.0
1.0
2.0
3.0
100 200 300 400
0.5
1.0
1.5
2.0
100 200 300 40020
40
60
80
100
100200 300 40020
-20
100
100 200 300 400
80
20
100
60
40
100 200 300 400
0.052
0.046
0.054
0.050
0.048
0.056
0.058
100 200 300 400
0.052
0.046
0.050
0.048
100 200 300 400
0.048
0.045
0.049
0.047
0.046
0.050
40
60
80
GDP Cw1 Cw2 Cc I
100 200 300 400
6
8
4
2
Pluralism as ‚Diversification‘: Path-Dependency in Europe Keynesian Macro + complexity-inspired visualization
Jakob Kapeller
highly financialized countries
path of hope
valley of d
espair
Heimberger/Kapeller (2018): The performativity of potential output. Review of International Political Economy 24(5)
Pluralism as ‚Diversification‘: Path-Dependency in Europe (+) Technological path-dependency (e.g. Kaldor, Myrdal)
Jakob Kapeller
10
15
20
25
−2.5 0.0 2.5 5.0Product complexity (weighted average over whole period)
Cha
nge
in e
xpor
t val
ue (l
og)
0.0 0.1 0.2 0.3
Greece: WLS on positive changes with recent export shares as weights
16
20
24
−2.5 0.0 2.5 5.0Product complexity (weighted average over whole period)
Cha
nge
in e
xpor
t val
ue (l
og)
0.03 0.06 0.09
Germany: WLS on positive changes with recent export shares as weights
Figure 4: The directedness of technological change in Greece and Germany. While exportexpansions in Germany are positively correlates with product complexity, the inverse holds forGreece. The size and color of the points represent the average share of the products in thecountries’ export basket in 2012-2014. The regression line stems from the WLS estimationas described above. Dashed lines illustrate the estimation errors. Data: Atlas of EconomicComplexity (2018) in its 12-2017 version (see data appendix for details); own calculations.
consistent with Kaldorian e↵ects can be identified within the Eastern European countries, where
they are rather pronounced, as well as (with a weaker intensity) among all the remaining EU
countries. Thereby, large parts of the variety in the results for the Eastern European catch-up
economies seem to be moderated by its closeness to Europe’s industrial core (Stollinger, 2016).
The patterns of technological change as depicted in Figure 5 also allow us to emphasize
four further observations. First, there is still considerable heterogeneity within the typically
proposed country-groups: core countries di↵er in their development mirroring the fact that
some of these countries struggle to hold on to their position, while others, mostly Germany,
have managed to expand their technological dominance (e.g. Storm and Naastepad (2015a)).
In fact, Germany is the only example of the core countries that finds itself above the value
predicted by a quadratic model fitted to the data. Second, the upper panel of Figure 5 shows
that we currently cannot find a single periphery country with a decidedly positive technological
development: of all periphery countries only Portugal manages to surpass the predicted value,
albeit this country starts from a very low level of complexity. Third, we find that most of
the Eastern catch-up countries are located above, while only two catch-up economies below
the predicted value. This indicates that the economic catch-up process of Eastern European
countries is not necessarily tied to a technological catch-up process, as evidenced most forcefully
by the outliers Bulgaria and Lithuania. Fourth, the heterogeneity among financialized countries
is particularly large, but can be explained by their di↵erent financialization strategies: Ireland’s
15
Gräbner et al. (2018): Structural Change in times of increasing openness. ICAE WP #76
Pluralism as ‚Diversification‘: Path-Dependency in Europe (+) Technological path-dependency (e.g. Kaldor, Myrdal)
Jakob Kapeller
●
●
●
●●
●
●
●●
●
●●
●
●
●
●
●
●
●●
●
●
●
●
●
AUT
BEL
DEU
DNKFIN
SWE
CYP
ESPFRA
GRC
ITAPRT
BGR
CZE
EST
HUN
LTU
LVA
POLROU
SVK
SVN
IRL
MLT NLD
0.0 0.5 1.0 1.5 2.0 2.5
-0.5
0.0
0.5
average country complexity in 1999
averag
eprod
uctcom
plexity
deriv
edfro
mch
ange
sinexpo
rt-c
ompo
sition
(199
5-19
99vs.201
0-14
)
The development of economic complexity in the EMU
Eastern countries:-0.51+0.66 comp***, R2=0.65
All remaining countries:-0.51+0.3 comp**, R2=0.34
● Core
● Periphery
● Eastern
● Finance
Figure 5: Technological capabilities and structural change. Data: Eurostat; Atlas of EconomicComplexity (2018) in its 12-2017 version; own calculations.
role of a corporate tax haven manifests itself in a massive technological upgrading (e.g. Regan
and Brazys (2018)), while the more asset-based strategies of the Netherlands and Malta are
associated with a tendency for deindustrialization (e.g. Visser et al (2016)).
As international competitiveness and technological capabilities are of prime importance for
assessing the future developmental trajectories within given political and institutional con-
straints (Hidalgo and Hausmann, 2009; Cristelli et al, 2015), it is important to note that we
cannot observe convergence in terms of technological capabilities in the current European frame-
work. Quite on the contrary, our results point to the possibility that some countries in Eastern
Europe will indeed manage to slowly catch-up to the core (like the Czech Republic, Hungary or
Slovakia), while others (like Bulgaria or the Baltic countries) are much more likely to join the
16
Gräbner et al. (2018): Structural Change in times of increasing openness. ICAE WP #76
Conclusion
• Pluralist approach leads to new contributions/perspectives
• Integration of different traditions: New Perspectives!
• pluralism ≠ anything goes.
• Pluralist economics in practice: the new heterodoxy?
• Post-Keynesianism + Old Institutionalism ➝ Minsky-Veblen Cycles
• + complexity economics ➝ Polarization in Europe
• + heterodox trade theory ➝ path-dependency in supply-side structures!
• (+ economic sociology ➝ Performativity! Role of models in policy-making!)
• … [many more things]
Jakob Kapeller
Many thanks for your attention!
Backup
Analyzing Pluralism Outlook: Institutional stalemate and structural asymmetry
Jakob Kapeller
1959-1965 1966-1970 1971-1975 1976-1980 1981-1985 1986-1990 1991-1995 1996-2000 2001-2009
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Research interests across cohorts: USA
Microeconomics
Mainstream
Colander's Edge
Focus on (financial) crisis
1971-1980 1981-1985 1986-1990 1991-1995 1996-2000 2001-2005 2006-2012
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100%Research interests across cohorts: Germany
Microeconomics
Mainstream
Colander's Edge
Ordoliberalism
Focus on (financial) crisis