New Economics Papers
on Business, Economic and Financial History
Issue of 2010‒05‒29
seventeen papers chosen by

  1. Labour market response to globalisation: spain, 1880-1913 By Concha Beltrán; María A. Pons
  2. The Rhetoric of Economics: Why Words Are Important By Morles, Gustavo
  4. Cultures of Transport: Representation, Practice and Technology By Colin Divall; George Revill
  5. Inflation and its Cures By Raj, Madhusudan
  6. Gross domestic product and its components in recessions By Steven Gjerstad; Vernon L. Smith
  7. Explaining Nineteenth-Century Bilateralism: Economic and Political Determinants of the Cobden-Chevalier Network By Markus Lampe
  8. On beliefs and motives in Richard Wagner's Lohengrin. By Chrissochoidis, I.; Huck, S.
  9. The Distribution of Top Incomes in Five Anglo-Saxon Countries over the Twentieth Century By A B Atkinson; Andrew Leigh
  10. The Influence of Collusion on Price Changes: New Evidence from Major Cartel Cases By Korbinian von Blanckenburg; Alexander Geist; Konstantin A. Kholodilin
  11. From action theory to the theory of the firm By Argandoña, Antonio
  12. Mass privatisation and the post-communist mortality crisis: is there really a relationship. By Earle, J.S.; Gehlbach, S.
  13. Technology Shocks around the World. By Dupaigne, Martial; Fève, Patrick
  14. The classical notion of competition revisited By Salvadori, Neri; Signorino, Rodolfo
  15. Competition and stability in banking By Vives, Xavier
  16. Entrepreneurship in transition economies: the role of institutions and generational change. By Estrin, S.; Mickiewicz, T.
  17. Pleasure and belief in Hume's decision process By Marc-Arthur Diaye; André Lapidus

  1. By: Concha Beltrán (University of Valencia, Faculty of Economics,); María A. Pons (University of Valencia, Faculty of Economics,)
    Abstract: This paper analyses the impact of globalisation (trade and migration) on the Spanish labour market between 1880 and 1913 by examining the influence that globalisation factors had on agricultural and industrial wages. Our results show that the nineteenth century grain invasion had a negative impact on agricultural wages, whereas the fall in wheat prices did not benefit industry workers. We also found that migration pushed up real agricultural and industrial wages. As agriculture was the main sector in the economy the final impact was a wage decrease. The negative impact of trade on agricultural and industrial labour markets partly explains the trade policy response of “integral protection”. However, other alternatives that would have been effective in raising living standards, such as migration policy, were not used
    Keywords: globalisation, trade, migration, tariffs, wages, living standards
    JEL: N33 N73
    Date: 2010–04
  2. By: Morles, Gustavo
    Abstract: By looking at historical evidence McCloskey concludes that the great transformation of the Industrial Revolution was made possible by the change in attitudes, reflected ultimately in the change in rhetoric, towards Bourgeois values. This paper explores the importance of the change in rhetoric by looking at the impact of the more recent change in attitudes against Bourgeois values. This paper argues that what Weigel identifies as the current European crisis of civilizational morale is ultimately a product of turning away from the rhetoric that made the Industrial Revolution possible. Weigel warns that today’s European crisis could be tomorrow’s American crisis. This paper argues that the election of Barack Obama has accelerated America’s turn towards the “European Model” and its anti-Bourgeois rhetoric.
    Keywords: Obama; rhetoric; industrial revolution; European crisis; Bourgeois values
    JEL: O10 P16
    Date: 2010–02
  3. By: George Grantham
    Abstract: This paper argues that the conventional Malthusian account of pre-modern economies as constrained by diminishing returns resulting from a fixed land supplied is flawed because it does not recognize the importance of systematic indivisibilities in the production and distribution of farm produce that supported increasing return to additional inputs when the demand price of produce warranted them. Those indivisibilities locked in low-intensity farming practices in places where the demand for produce was diffuse. Most of pre-industrial Europe was in that situation, so average agricultural productivity was low. It was only in regions where urban concentrations of consumers aggregated demand to a level capable of inducing extra investment to exploit latent returns to scale in farming and transportation that the productivity of traditional mixed farming achieved its full potential.
    JEL: N00 N5 N7 Q1 R00 R1
    Date: 2010–05
  4. By: Colin Divall; George Revill
    Abstract: It is argue that the so-called cultural‘ (and spatial‘) turn that has remodelled so many other areas of the humanities and social sciences over the last two decades might help answer Armstrong‘s plea for an innovative, even controversial, transport history. Such a strategy would not merely bring the discipline into line conceptually and methodologically with what has long been going on elsewhere. By focussing on the practical limits and historical capabilities of transport technologies, the renewed historiography would have something of relevance and value to say to these other fields.
    Keywords: historical, humanities, historiography, innovative, discipline, travel, geographically, socially, vehicles, governance, transport, technologies, social sciences, cultural,
    Date: 2010
  5. By: Raj, Madhusudan
    Abstract: This paper discusses the real understanding of inflation, its true causes and its root solutions.
    Keywords: Inflation; Fractional reserve banking; Welfare warfare state; Money supply; Gold standard; Commodity money; Central bank; Austrian economics.
    JEL: E31
    Date: 2010–03–31
  6. By: Steven Gjerstad (Economic Science Institute, CHapman University); Vernon L. Smith (Economic Science Institute, Chapman University)
    Abstract: The recent economic crisis – already deservedly labeled the ‘great recession’ – continues to plague the health of the economy as a whole and has motivated us to probe its characteristic features and compare it to the typical economic downturn. Events during the boom and crash have been sharply delineated, progressing from (1) an unprecedented housing price bubble from 1997 to 2006, (2) rapid house price decline beginning early in 2007, (3) freezing of credit markets in August 2007, (4) rapid declines in equities prices and economic output by the middle of 2008, and (5) deterioration of the financial system in 2008 and an aggressive and unprecedented Federal Reserve intervention in the fall of 2008. This sequence of events has provided a fresh perspective with which to examine past economic cycles, and, we believe, is likely to change how economists, policy makers, investors, and others think about monetary policy, housing cycles, and business cycles. We find that eleven of the most recent fourteen economic downturns in the U.S. – from the great depression that began in 1929 to the great recession starting in late 2007 – were led by declines in housing investment. In these eleven downturns, housing investment declined before any other major component of GDP and its total decline before and during the recession was larger in percentage terms than the decline in any other major sector. In the 1945 recession – one of the three recessions in which housing was not implicated – national defense expenditures fell while all major components of private expenditure rose. The other two – in 1937-38 and 2001 – resulted primarily from declines in non-residential fixed investment that preceded and exceeded declines in any other major component of GDP. Figure 1 shows the percentage of GDP contributed by housing expenditures over the past 81 years. Although housing is not a large component of GDP – which may explain its limited role in accounts of recessions – it is volatile, it has declined before almost every recession, it has rarely declined substantially without a recession following soon afterward, and the extent of its decline emerges as a good predictor of the depth and duration of the recession that follows.2 In addition to its role as a leading indicator, and its volatility over the business cycle, housing investment has recovered faster than any other sector of the economy in every recession since 1921, with the single exception of the 1980 recession, which lasted only 12 months.
    Date: 2010–04
  7. By: Markus Lampe
    Abstract: This study investigates the empirical determinants of the treaty network of the 1860s and 1870s. It makes use of three central theories about the determinants of PTA formation, considering economic fundamentals from neoclassical and ‘new’ trade theory, political-economy variables, and international interaction due to trade diversion fears (dependence of later PTAs on former). These possible determinants are operationalized using a newly constructed dataset for bilateral cooperation and non-cooperation among 13 European Countries and the US. The results of logistic regression analysis show that the treaty network can be explained by a combination of ‘pure’ welfare-oriented economic theory with political economy and international interaction models.
    Keywords: Cobden-Chevalier Network, Bilateralism
    JEL: A
    Date: 2010–05
  8. By: Chrissochoidis, I.; Huck, S.
    Abstract: Once Wagner’s most popular opera, Lohengrin has suffered scholarly neglect in the postwar period. This essay reengages with the work from the novel perspective of game theory analysis. Centering on Elsa’s breach of the Frageverbot, it offers a rigorous epistemological study of the opera’s main characters. Against traditional interpretations of the heroine’s fatal decision, we propose a complex and psychologically more satisfactory account. Elsa asks the forbidden question because she needs to confirm Lohengrin’s belief in her innocence, a belief that Ortrud successfully eroded in Act II. This novel interpretation reveals Elsa as a rational individual, upgrades the dramatic significance of the Act I combat scene, and signals a hermeneutic return to the heart of opera criticism, the drama itself.
    Date: 2010–04
  9. By: A B Atkinson; Andrew Leigh
    Abstract: Taxation data have been used to create long-run series for the distribution of top incomes in quite a number of countries. Most of these studies have focused on the national experience of individual countries, but we can also learn from cross-country comparisons. Comparative analysis is therefore the next stage in the research program. At the same time, we know from other fields that there are dangers in simply pooling all available time series, without regard to the specific nature of data and reality. In this paper, we therefore adopt an intermediate approach, taking five Anglo- Saxon countries that have relatively similar backgrounds and tax systems: Australia, Canada, New Zealand, the UK, and the US. The first part of the paper tackles the challenge of comparability of income-tax based estimates across countries and across time. The second part summarizes the evidence about top income shares. Across these five countries, the shares of the very richest exhibit a strikingly similar pattern, falling in the three decades after World War II, before rising sharply from the mid-1970s onwards. The share of the top 1 percent is highly correlated across Anglo-Saxon countries, more so than the share of the next 4 percent. The third part of the paper looks at the relationship between taxes and top income shares. Controlling for country and year fixed effects, we find that a reduction in the marginal tax rate on wage income is associated with an increase in the share of the top percentile group. Likewise, a fall in the marginal tax rate on investment income (based on a lagged moving average) is associated with a rise in the share of the top percentile group.
    Keywords: inequality, taxation, Australia, Canada, New Zealand, United Kingdom, United States
    JEL: D31 H23 N30
    Date: 2010–04
  10. By: Korbinian von Blanckenburg; Alexander Geist; Konstantin A. Kholodilin
    Abstract: In this paper, we compare the distribution of price changes between collusive and noncollusive periods for ten major cartels. The first moments focus on previous research. We extend the discussion to the third (skewness) and fourth (kurtosis) moments. However, none of the above descriptive statistics can be considered as a robust test allowing a differentiation between competition and cartel. Therefore, we implement the Kolmogorov-Smirnov test. According to our results, 8 out of 10 cartels were successful in controlling the market price for a number of years. The proposed methodology may be used for antitrust screening and regulatory purposes.
    Keywords: Cartel detection, collusion, competition policy
    JEL: L10 L60
    Date: 2010
  11. By: Argandoña, Antonio (IESE Business School)
    Abstract: Since Coase's (1937) pioneering article, the theory of the firm, especially in its neoclassical form, has developed tremendously. The criticisms leveled against it confirm its interest and usefulness - which is not to say that it cannot be improved upon or corrected in many respects. This chapter is intended to contribute to a broadening of the theory of the firm, starting from a theory of human action that encompasses a wide range of motivations. It also suggests specific ways in which the conception of the firm can be improved.
    Keywords: Action; Action theory; Firm; Motivations; Organization; Theory of the firm;
    Date: 2010–04–09
  12. By: Earle, J.S.; Gehlbach, S.
    Abstract: We reexamine the recent, well-publicized claim that "rapid mass privatisation [of state-owned enterprises]... was a crucial determinant of differences in adult mortality trends in post-communist countries" (Stuckler, King and McKee, 2009). Our analysis shows that the estimated correlation of privatization and mortality in country-level data is not robust to recomputing the mass-privatization measure, to assuming a short lag for economic policies to affect mortality, and to controlling for country-specific mortality trends. Further, in an analysis of the determinants of mortality in Russian regions, we find no evidence that privatization increased mortality during the early 1990s. Finally, we reanalyze the relationship between privatization and unemployment in postcommunist countries, showing that there is little support for the proposed mechanism by which privatization might have increased mortality.
    Date: 2010–02
  13. By: Dupaigne, Martial; Fève, Patrick
    Date: 2009–10
  14. By: Salvadori, Neri; Signorino, Rodolfo
    Abstract: The paper seeks to fill a lacuna within Classical economics concerning the process of market price determination in a short-period equilibrium. To this aim, first we distinguish the Classical notion of free competition from the Walrasian notion of perfect competition and we argue that the latter is beset by some theoretical difficulties alien to the former. Second, we reconstruct in some detail Smith and Marx’s views concerning market price determination and we show that Marx’s extensive use of metaphors and numerical examples foreshadows the modern taxonomy of buyers’ market, sellers’ market and mixed strategy equilibrium in the capacity space of a standard Bertrand duopoly model. Finally, we highlight similarities and differences between the Classical notion of competition and contemporary game-theoretic oligopoly models
    Keywords: Classical and neoclassical notions of competition, Adam Smith, Karl Marx, mixed strategies.
    JEL: B12 L11
    Date: 2010–05–17
  15. By: Vives, Xavier (IESE Business School)
    Abstract: I review the state of the art of the academic theoretical and empirical literature on the potential trade-off between competition and stability in banking. There are two basic channels through which competition may increase instability: by exacerbating the coordination problem of depositors/investors on the liability side and fostering runs/panics, and by increasing incentives to take risk and raise failure probabilities. The competition-stability trade-off is characterized and the implications of the analysis for regulation and competition policy are derived. It is found that optimal regulation may depend on the intensity of competition.
    Keywords: trade-off; competition; stability; banking;
    Date: 2010–04–05
  16. By: Estrin, S.; Mickiewicz, T.
    Abstract: The transition economies have lower rates of entrepreneurship than are observed in most developed and developing market economies. The difference is even more marked in the countries of the former Soviet Union than those of Central and Eastern Europe. We link these differences partly with the legacy of communist planning, which needs to be replaced with formal market-supporting institutions. But many of these developments have now taken place, yet entrepreneurial activity still remains low in many places. To analyse this longer term issue, we highlight the necessarily slow pace of development of new informal institutions and the corresponding social attitudes, notably rebuilding the generalised trust. We argue that changes are even slower in the former Soviet Union than Central and Eastern Europe because communist rule was much longer, leading to a lack of institutional memory. We posit that changes in informal institutions may be therefore delayed until after full generational change.
    Date: 2010–03
  17. By: Marc-Arthur Diaye (CREST - Centre de Recherche en Économie et Statistique - INSEE - École Nationale de la Statistique et de l'Administration Économique, CEE - Centre d'Etudes de l'Emploi - Ministère de la recherche - Ministère chargé de l'Emploi); André Lapidus (PHARE - Pôle d'Histoire de l'Analyse et des Représentations Economiques - CNRS : FRE2541 - Université Panthéon-Sorbonne - Paris I - Université de Paris X - Nanterre)
    Abstract: The purpose of this paper is to introduce explicitly pleasure and belief in what aims at being a Humean theory of decision, like the one developed in Diaye and Lapidus (2005a). Although we support the idea that Hume was in some way a hedonist – evidently different from Bentham's or Jevons' way – we lay emphasis less on continuity than on the specific kind of hedonism encountered in Hume's writings (chiefly the Treatise, the second Enquiry, the Dissertation, or some of his Essays). Such hedonism clearly contrasts to its standard modern inheritance, expressed by the relation between preferences and utility. The reason for such a difference with the usual approach lies in the mental process that Hume puts to the fore in order to explain the way pleasure determines desires and volition. Whereas pleasure is primarily, in Hume's words, an impression of sensation, it takes place in the birth of passions as reflecting an idea of pleasure, whose “force and vivacity” is precisely a “belief”, transferred to the direct passions of desire or volition that come immediately before action. As a result, from a Humean point of view, “belief” deals with decision under risk or uncertainty, as well with intertemporal decision and indiscrimination problems. The latter are explored within a formal framework, and it is shown that the relation of pleasure is transformed by belief into a non-empty class of relations of desire, among which at least one is a preorder.
    Keywords: Hume; decision; pleasure; belief; passion; desire; preference; rationality; indiscrimination; will; choice
    Date: 2012–05

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