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Public Policy Brief No. 2

An Economic Assessment: Contained Depression or the Foothills of Recovery?

Robert Barbera and David A. Levy offer contrasting assessments of the United States’ economy during the late 1980s and early 1990s. Barbera suggests that the behavior of the economy was typical for the early part of a recessionary stage in a standard business cycle: policymakers and business leaders, believing the downturn to be temporary, prolong […]

Working Paper No. 80

Growth and Structural Change in China-US Trade

Since the resumption of China-U.S. trade in 1972, and in particular since the establishment of diplomatic relations in early 1979, trade between the two countries has increased dramatically. By 1990, the United States was China’s third-largest trading partner, accounting for 10.2% of China’s total trade, 12.4% of Chinese imports, and 10.1% of total foreign investment. […]

Working Paper No. 79

The Investment Decision of the Post Keynesian Firm

In this paper, Crotty and Goldstein undertake the formulation of a model of enterprise investment decision that can provide a microeconomic foundation for the Keynes-Minsky macromodels developed by Delli Gatti & Gallegati, Jarsulic, Semmler and others. The authors address the difficulties inherent in the formulation of an investmes theory in which the future is unknowable, […]

Working Paper No. 78

The Predication Semantics Model

This paper presents and tests the predication semantics model, a computational model of text comprehension. It goes beyond previous case grammar approaches to text comprehension in employing a propositional rather than a rigid hierarchical tree notion, attempting to maintain a coherent set of propositions in working memory. The authors’ assertion is that predicate class contains […]

Working Paper No. 77

Credit Markets and Narrow Banking

Maurice Allais’s view that the credit created by fractional reserve banking is equivalent to counterfeiting has led him to recommend the separation of the depository and lending functions of banks. This proposal has recently been reintroduced by James Tobin and others under the term "narrow banking." Proponents cite the potential for enhanced safety of the […]

Public Policy Brief No. 1

Restructuring the Financial Structure

To avoid excessive concentration of economic and financial power, Athony M. Solomon recommends institutional and regulatory reform of the financial system by such means as nationwide banking, restrictions on federal deposit insurance, consolidation of financial regulation, balancing numerical standards with supervisory discretion, increased accountability of banks’ management boards, and leveling the playing field across institutions, […]

Working Paper No. 76

The “Chicago Plan” and New Deal Banking Reform

During the 1930s, there were numerous proposals put forth to modify the financial system. The “Chicago Plan,” submitted in 1933 by economists at the University of Chicago, recommended abolition of the fractional reserve system and imposition of 100% reserves on demand deposits. Despite the radical nature of this proposal, Phillips argues that it played an […]

Working Paper No. 75

The Role of Unemployment in Triggering Internal Labor Migration

George McCarthy’s paper explores the internal migration of labor in response to structural changes in the U.S. economy. He presents an empirical study of the relationship between wage determination and the migration decision co evaluate the role of both spiral wage differences and unemployment in motivating migration. Also, the paper assesses the relative homogeneity of […]

Working Paper No. 74

The Financial Instability Hypothesis

The Financial Instability Hypothesis (FIH) has both empirical and theoretical aspects that challenge the classic precepts of Smith and Walras, who implied that the economy can be best understood by assuming that it is constantly an equilibrium-seeking and sustaining system. The theoretical argument of the FIH emerges from the characterization of the economy as a […]

Working Paper No. 73

Money, Growth, Distribution, and Prices in a Simple Sraffian Economy

Rejecting neoclassical notions of supply and demand, Sraffa demonstrated that relative prices are determined by the profit rate. However, a Sraffa model fails to explicitly describe the determination of output, growth, and accumulation. Rao closes this model with a monetary sector, and examines the effects in both a Sraffian and a Classical world. Rao integrates […]

Book Series

Profits, Deficits, and Instability

Business accounting defines profits as total revenue minus total costs. Economic theory uses various definitions of profits according to what is being measured (for example, return to ownership, national income profits, real profits) and for what purpose. The concept of profits, however, cannot and should not be reduced to a matter of measurement, but should […]

Working Paper No. 72

The Capital Development of the Economy and the Structure of Financial Institutions

This paper evolves from the sharp contrast in Smithian and Keynesian views about the relationship between the financial structure and the economy. The Smithian perspective implies that the financial structure is irrelevant, whereas the Keynesian position concludes that effective financing is necessary for the "capital development of the economy"- there is also a need to […]