Working Paper 2/2016

Autonomous government expenditure growth, deficits, debt and distribution in a neo-Kaleckian growth model

Eckhard Hein

July, 2016

Abstract: This paper is linked to some recent attempts at including a non-capacity creating autonomous expenditure category as the driver and determinant of growth into Kaleckian distribution and growth models. Whereas previous contributions have focussed on taming Harrodian instability, generated by the deviation of the goods market equilibrium rate of capacity utilisation from a normal or target rate of utilisation, we rather focus on the so far neglected issues of deficit, debt and distribution dynamics in such models. For this purpose we treat the growth of government expenditures on goods and services, financed by credit creation, as the exogenous growth rate driving the system. We examine the medium-run convergence of the system towards such a growth rate, analyse the related long-run debt dynamics and deal with stability and income distribution issues. Finally we touch upon the economic and, in particular, fiscal policy implications of our model results.

JEL codes: E11, E12, E25, E62

Keywords: Government deficits and debt, public expenditure growth, Kaleckian distribution and growth model

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Working Paper 1/2016

Some notes on Gossen’s ‘submerged and forgotten’ approach to consumption and time

Sergio Nisticò

January, 2016

Abstract: Hermann Heinrich Gossen (1810-1858) — a civil servant who, in 1854, published at his expense the book Entwickelung der Gesetze des menschlichen Verkehrs und der daraus fließenden Regeln für menschliches Handeln — has traditionally been considered a forerunner of the neoclassical theory of consumption based on the law of diminishing marginal utility.
It is only with the long-awaited publication, in 1983, of the English translation of Gossen’s book, that his editor, Nicholas Georgescu-Roegen, started to see in The Laws of Human Relations and the Rules of Human Action Derived Therefrom the roots of a wholly different theory of consumption in which the flow of calendar time plays a crucial and non-trivial role.
By going through the works of Jevons, Menger and Walras, the paper argues that the logical and theoretical connection between Gossen’s approach to consumption choices and the marginalist school is unwarranted. Theoretical connections, if any, can be found between Gossen and the classical economists on the one hand and the English ‘liberal’ tradition of John Stuart Mill and J.M. Keynes on the other.

JEL codes: B13; D01

Keywords: Gossen, Marginalist consumption Theory; Time.

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Working paper 2/2015

At the origin of the notion of “creative goods” in economics: Scitovsky and Hawtrey

Antonio Bariletti and Eleonora Sanfilippo

October, 2015

Abstract: The notion of “creativity” has assumed a growing importance in the recent economic literature on happiness, motivations and life-satisfaction. Starting from the seminal contribution of Scitovsky, the effects of “creative goods” and “creative activities” on consumers’ well-being, in connection with cultural, sociological, psychological and educational aspects, have been analyzed. An increasing interest in these concepts has also been shown recently by policy-makers and international institutions (see, e.g., the UNCTAD Reports on Creative Economy, 2010, 2013), in particular in relation to economic growth. On the other hand, a clear and rigorous analytical definition of this category of goods and activities and deep investigation of its peculiarity in comparison with other types of products and activities, broadly defined as comfort or defensive ones, is still lacking in the economic literature. This is why, despite its wide use in economics, the nature of the distinction still remains somehow vague and not univocal. The aim of this paper is to provide a contribution to help clarify this distinction by reconstructing its meaning and scope in the works of Scitovsky (1976, 1992) and Hawtrey (1925) – the first economists who have tried to provide an analytical content to the notion of creative goods and activities in their theoretical frameworks.

JEL codes: B31, B41, D01, D11

Keywords: Scitovsky, Hawtrey, Cambridge, creative goods, creative activities, consumers’ satisfaction, education, culture, cultural policy.

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Working paper 1/2015

Disappointment and Public action:
Albert Hirschman’s ways of complicating economic theory

Marina Bianchi

April, 2015

Abstract: In his essay Against Parsimony (1985), Hirschman argued in favor of “complicating” rather that simplifying economic theory. This paper focuses on two of the economic phenomena that, according to Hirschman, are in need of greater complexity.

The first refers to the process of choice and preference formation: a change in tastes that is preceded by the formation of meta-preferences is in fact, for Hirschman, a change in values. These autonomous, reflective kinds of changes as opposed to wanton, non-reflective kinds, do not take place simply in response to price changes. Contrary to the standard assumption made by economists, de valoribus est disputandum.

The second problem refers to the existence of non-instrumental actions. Striving for truth, love, beauty, common good, justice, liberty, friendship and salvation have non-calculable, non-measurable outcomes. According to instrumental reasoning such actions are inexplicable, “a mystery”. Moreover they are often painful and costly to achieve. Why then are they pursued?

According to Hirschman, changes in choice behavior implying changes in values are the expression of a conflict between meta-preferences and preferences, and this, in its turn, is the result of disappointment. If disappointment is with private consumption practices social and public commitments can provide the alternative values; if, vice-versa, disappointment is with public action, private concerns might provide the prevailing values. In discussing these points, I shall show that there are other sources of conflict, besides disappointment, that have both a cognitive and affective dimension and whose effects on preferences might result in altered choices. These contrasts, such as those between the known and the experienced, or between the expected and the realized, belong to a dimension of choice in which exploratory behavior, interest and intrinsic motivation are the positive determinative elements for change. In such cases not only de valoribus, but also de gustibus est disputandum.

JEL codes: D11, D12, D61, H4

Keywords: Preferences, meta-preferences, economic change, public action.

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CreaM Working Papers – Economics

CreaM is an economic centre for theoretical and applied research. The main aim of the Cream Working Papers (CreaM-WP) series is to serve as a first vehicle to disseminate the economic research carried out by CreaM researchers. However, the publication in the CreaM-WP series is open to researchers, postdocs and PhD students around the world. The previous series of working papers is available here