nep-hme New Economics Papers
on Heterodox Microeconomics
Issue of 2012‒07‒23
twenty papers chosen by
Frederic S. Lee
University of Missouri-Kansas City

  1. Marx: From Hegel and Feuerbach to Adam Smith By Eric Rahim
  2. The internal and external governance of cooperatives: the effective membership and consistency of value By Sacchetti, Silvia; Tortia, Ermanno
  3. Does workers' control affect firm survival? Evidence from Uruguay By Burdín, Gabriel
  4. Périodiser les phases de régime et de crise des usages de l'eau. L'apport d'une approche en termes de modes d'usage de l'eau By Arnaud Buchs
  5. Individual Price Adjustment along the Extensive Margin By Etienne Gagnon; David López-Salido; Nicolas Vincent
  6. Gender, Agricultural Commercialization, and Collective Action in Kenya By Fischer, Elisabeth; Qaim, Matin
  7. Do cooperative enterprises create social trust? By Fabio Sabatini; Francesca Modena; Ermanno Tortia
  8. Integrating Equality: Globalization, Women's Rights, and Human Trafficking By Seo-Young Cho
  9. F.A. Hayek and his rational choice of monetary arrangements By Sahoo, Ganeswar
  10. Intimations of Keith Hart's 'Informal Economy' - In the Work of Henry Mayhew, P T Bauer and Richard Salisbury By John D. Conroy
  11. Ecological Economics By David Stern
  12. Income-Related Inequalities in Health Service Utilisation in 19 OECD Countries, 2008-2009 By Marion Devaux; Michael de Looper
  13. A behavioural approach to remittances analysis By Meyer, Wiebke; Mollers, Judith; Buchenrieder, Gertrud
  14. Public Sector Accounting - An Interdisciplinary Field Involving Accounting, Economics, and Jurisprudence By Ryosuke Tao
  15. Foucault, Gouvernementalität und Staatstheorie By Biebricher, Thomas
  16. Circuit theory extended: The role of speculation in crises By Lancastle, Neil
  17. Was the Middle East's economic descent a legal or political failure? Debating the Islamic Law Matters Thesis. By Adeel Malik
  18. Globalization: guidance from Franciscan economic thought and "Caritas in Veritate" By Zamagni, Stefano
  19. Material needs and aggregate demand By Kemp-Benedict, Eric
  20. A Guide to Subsistence Affluence By John D. Conroy

  1. By: Eric Rahim (Department of Economics, University of Strathclyde)
    Abstract: This paper discusses the development of Marx’s thought over a period of something like fifteen months, between the spring of 1843 and the autumn of 1844. The focus of the paper is Marx’s first encounter with classical political economy as he found it in the Wealth of Nations. The outcome of this encounter was presented by Marx in his Economic and Philosophical Manuscripts of 1844. It is argued here that in the classical theory, with which he had hitherto been largely unfamiliar, Marx found all the elements he needed to synthesise the philosophical standpoint he had developed in the preceding months with political economy. The Manuscripts represent the first crucial stage in the development of this synthesis. This first encounter of Marx with classical political economy, and his first steps in the development of his synthesis, have received hardly any attention in the literature. The present paper seeks to fill this gap.
    Date: 2012–06
  2. By: Sacchetti, Silvia (Associazione Italiana per la Cultura della Cooperazione e del Non Profit); Tortia, Ermanno (Associazione Italiana per la Cultura della Cooperazione e del Non Profit)
    Abstract: Cooperatives are characterised by mutual-benefit coordination mechanisms aimed at the fulfilment of members’ participation rights and welfare, consistently with the normative principles of democratic involvement, independence and care for the community. This ideal situation may find, in practice, obstacles within the internal characteristics of the cooperative as well as in the nature of relationship with other actors in the socio-economic environment. Building on evidence from the literature, the paper systematises and highlights some of the potential problems in the governance of cooperative firms concerning the accomplishment of cooperative mutualistic aims by way of means that do not hamper other stakeholders in the socio-economic environment. In exploring the internal conditions that may affect cooperative performance, we focus in particular on the role of rules and incentives towards such aims. In synergy, when analysing the external conditions that may affect cooperative performance, the paper addresses possible sources of external control, such as those related to the nature of the business relationships between the cooperative and its production network. In taking into account both internal and external conditions, we consider an extended notion of governance, whereby those who impact on strategic decision-making are not to be searched only within the internal governance bodies, typically the board of directors or managers, but also outside the cooperative, as in the extended network of production relationships in which the organisation is embedded.
    Keywords: cooperative firms; governance; incentives; motivations; production networks
    JEL: L21 L23 L26
    Date: 2012–07–03
  3. By: Burdín, Gabriel (Associazione Italiana per la Cultura della Cooperazione e del Non Profit)
    Abstract: Worker-managed firms (WMFs) represent a marginal proportion of total firms and aggregate employment in most countries. The bulk of firms in real economies is ultimately controlled by capital suppliers. Different theoretical explanations suggest that worker managed firms (WMFs) are prone to failure in competitive environments. Using a panel of Uruguayan firms based on social security records and including the entire population of WMFs over the period January 1997-July 2009, I present new evidence on worker managed firms´ survival. I find that the hazard of exit is 24%-38% lower for WMFs than for conventional firms. This result is robust to alternative estimation strategies based on semi parametric and parametric frailty duration models that impose different distributional assumptions about the shape of the baseline hazard and allow to consider firm-level unobserved heterogeneity. The evidence suggests that the marginal presence of WMFs in market economies can hardly be explained by the fact that these organizations exhibit lower survival chances than conventional firms. This paper adds to the literature on labor managed firms, shared capitalism and to the Industrial Organization literature on firm survival.
    Keywords: labor-managed firms; capitalist firms; survival analysis
    JEL: C41 P13 P51
    Date: 2012–06–25
  4. By: Arnaud Buchs (LEPII - Laboratoire d'Économie de la Production et de l'Intégration Internationale - CNRS : FRE3389 - Université Pierre Mendès-France - Grenoble II)
    Abstract: Cet article présente l'apport analytique du " mode d'usage de l'eau ", mobilisé dans le cadre d'une nouvelle approche institutionnaliste syncrétique développée par Billaudot, pour comprendre l'évolution des usages de l'eau. Dans une version amendée de celle initialement proposée par Arrus (2000), le mode d'usage comme domaine d'observation cadre la constitution du corpus empirique fondé sur une enquête par entretiens à usage complémentaire d'une analyse historiographique de l'évolution des usages de l'eau dans le secteur agricole à Almeria (sud-est de l'Andalousie) entre la fin du XIXe siècle et aujourd'hui. D'une part, le mode d'usage de l'eau nous permet de séquencer cette évolution en quatre périodes : les trois premières correspondent aux phases de genèse, de régime et de crise d'un mode d'usage particulier, tandis que la quatrième témoigne de l'émergence d'un nouveau mode d'usage visant à répondre aux limites du précédent. D'autre part, l'approche théorique mobilisée nous permet de caractériser le premier mode d'usage que nous qualifions d'" hydrauliciste " et de comprendre les déterminants de son entrée en crise (elle-même qualifiée selon une nouvelle typologie des crises). Enfin, nous montrons que, si le nouveau mode d'usage se propose de répondre aux limites du précédent, il ne procède pas d'une rupture paradigmatique mais correspond à un " régime de crise ".
    Keywords: Eau ; normes ; mode d'usage ; institutionnalisme historique ; institutionnalisme sociologique
    Date: 2012–07–05
  5. By: Etienne Gagnon; David López-Salido; Nicolas Vincent
    Abstract: Firms employ a rich variety of pricing strategies whose implications for aggregate price dynamics often diverge. This situation poses a challenge for macroeconomists interested in bridging micro and macro price stickiness. In responding to this challenge, we note that differences in macro price stickiness across pricing mechanisms can often be traced back to price changes that are either triggered or cancelled by shocks. We exploit observed micro price behavior to quantify the importance of this margin of adjustment for the response of inflation to shocks. Across a range of empirical exercises, we find strong evidence that changes in the timing of price adjustments contribute significantly to the flexibility of the aggregate price level.
    JEL: E31 E32
    Date: 2012–07
  6. By: Fischer, Elisabeth; Qaim, Matin
    Abstract: With the commercialization of agriculture, women are increasingly disadvantaged because of persistent gender disparities in access to productive resources. Farmer collective action that intends to improve smallholder access to markets and technology could potentially accelerate this trend. Here, we use survey data of small-scale banana producers in Kenya to investigate the gender implications of recently established farmer groups. Traditionally, banana has been a women’s crop in Kenya. Our results confirm that the groups contribute to increasing male control over banana. While male control over banana revenues does not affect household calorie consumption, it has a negative marginal effect on dietary quality. We demonstrate that the negative gender implications of farmer groups can be avoided when women are group members themselves. In the poorest income segments, group membership even seems to have a positive effect on female-controlled income share. Some policy implications towards gender mainstreaming of farmer collective action are discussed.
    Keywords: gender, collective action, market access, agricultural technology, household food security and nutrition, Kenya, Consumer/Household Economics, Food Security and Poverty, Research and Development/Tech Change/Emerging Technologies,
    Date: 2012
  7. By: Fabio Sabatini; Francesca Modena; Ermanno Tortia
    Abstract: This paper contributes to the literature by carrying out the first empirical investigation into the role of different types of enterprises in the creation of social trust. Drawing on a unique dataset collected through the administration of a questionnaire to a representative sample of the population of the Italian Province of Trento in March 2011, we find that cooperatives are the only type of enterprise where the work environment fosters the social trust of workers.
    Keywords: Cooperative enterprises, nonprofit organizations, trust, social capital, motivations, inclusive governance, work organization.
    JEL: L31 L33 P13 Z1 Z13
    Date: 2012–07–10
  8. By: Seo-Young Cho
    Abstract: This paper empirically investigates whether globalization can improve women's rights. Using panel data from 150 countries over the 1981-2008 period, I find that social globalization positively affects women's economic and social rights. When controlling for social globalization however, economic globalization does not have any effect on women's rights. Despite the positive effect of (social) globalization on women's standing in a country, (marginalized) foreign women, proxied with inflows of human trafficking, are not beneficiaries of such 'female-friendly' globalization effects.
    Keywords: economic and social globalization, women’s rights, human trafficking
    Date: 2012
  9. By: Sahoo, Ganeswar
    Abstract: This paper addresses the perspective of Hayek’s doctrine on monetary arrangements in the economy and his favorable argument for an international central bank over national central bank. I also discussed Hayek’s view on free banking (i.e. for the free issue of bank notes) that would enable the banks to provide more and cheaper credit. Furthermore, Hayek comes up with an intellectual debate on “rational choice” of monetary arrangements whether the commercial banks should have the right to issue bank notes (demand for free banking) which can be redeemable in the established national gold or silver currency or an international central bank. This paper focuses on Hayek’s overall philosophy on international money mechanism and his intellectual debate of rational choice between the two arrangements – free banking or an international central bank and his concerned over unstable arrangements in money mechanism,which, he believes, profoundly affects economic and social conditions of people and government. Therefore, to reach the conclusion, I outlined Hayek’s perspectives on central bank and government, then international gold standard, and finally, his choice between free banking and an international central banking which is central theme of this paper.
    Keywords: Money; Banking; Central Bank; Free Banking; Monetary Nationalism
    JEL: E31 E51 B22 E44 E42 E58 E52 E41 B53
    Date: 2012–05–02
  10. By: John D. Conroy
    Abstract: This paper considers the idea of informality in market exchange, as introduced into the economic development literature by Keith Hart in the 1970s. In addition to Hart (1971, 1973) it will discuss three writers who may be considered his intellectual forerunners. Each, to a greater or less degree, anticipated the idea of informal economic activity and described it in a particular historical period and place. They are the mid-Victorian journalist Henry Mayhew (London, c.1850), the libertarian economist P. T. Bauer (British West Africa, c.1948) and the economic anthropologist R. F. Salisbury (colonial New Guinea, c.1952-1963). The principal texts relied upon are Mayhew's monumental London Labour and the London Poor (4 vols, 1851-61), Bauer's Economics of Under-Developed Countries (1957) and Salisbury's From Stone to Steel (1962) and Vunamami: Economic Transformation in a Traditional Society (1970).
    Keywords: informal economy, informal sector, Keith Hart, Henry Mayhew, P. T. Bauer, Richard Salisbury
    JEL: B20 B25 B31 J40 J49 O10 O17 Z10
    Date: 2012–03
  11. By: David Stern (The Australian National University (ANU) - Crawford School of Public Policy)
    Abstract: Ecological economics is a relatively new interdisciplinary field concerned with the relationship between economic systems and the biological and physical world. This article covers the following topics: A discussion of views on whether ecological economics is just a field or approach within economics or a new ÒtransdisciplinaryÓ field in its own right; Origin of the name of the field; Core common principles of ecological economics; Comparison with environmental economics; Applications; History and institutions of ecological economics. The core principles are that the economy is embedded and dependent upon the ecosphere and that, therefore, models of the economy have to comply with biophysical principles. Ecological economists believe that there are limits to our ability to substitute human-made inputs and knowledge for natural resources and the environment in both production and consumption. They also argue that economic policy must consider jointly the objectives of economic efficiency, equity, and sustainability.
    JEL: Q57
    Date: 2012–05
  12. By: Marion Devaux; Michael de Looper
    Abstract: This Working Paper examines income-related inequalities in health care service utilisation in OECD countries. It extends a previous analysis (Van Doorslaer and Masseria, 2004) to 2008-2009 for 13 countries, and adds new results for 6 countries, for doctor and dentist visits, and cancer screening. Quintile distributions and concentration indices were used to assess inequalities. For doctor visits, horizontal equity was assessed, i.e. the extent to which adults in equal need of physician care appear to have equal rates of utilisation. The paper considers the evolution of inequalities over time by comparing results with the previous study, as data permit. Health system financing arrangements are examined to see how these might affect inequalities in health service use.<BR>Ce document de travail examine les inégalités liées aux revenus dans l’utilisation des services de santé dans les pays de l’OCDE. Il met à jour une étude précédente (Van Doorslaer and Masseria, 2004) pour 13 pays, et inclut 6 nouveaux pays, utilisant des données de 2008-2009, portant sur les consultations de médecins et dentistes, et le dépistage du cancer. Les inégalités sont mesurées à l’aide de distributions par quintile et d’indices de concentration. Cette étude s’intéresse à l’équité horizontale pour les consultations de médecins, i.e. dans quelle mesure des adultes ayant un besoin égal de soins médicaux ont apparemment des taux identiques d’utilisation de soins. Elle examine l’évolution des inégalités en comparant les résultats avec l’étude précédente lorsque les données le permettent. Le cadre d’analyse s’intéresse aux caractéristiques de financement des systèmes de santé et à leurs possibles influences sur les inégalités d’utilisation des services de santé.
    Keywords: health care, private health insurance, inequality
    JEL: I14 I18
    Date: 2012–07–10
  13. By: Meyer, Wiebke; Mollers, Judith; Buchenrieder, Gertrud
    Abstract: This paper approaches the migrant’s motivation to remit from a new, behavioural perspective. We apply the well-established Theory of Planned Behaviour (TPB) using a structural equation model for the first time for this specific research question. Our micro-dataset stems from a 2009/10 survey, covering Albanian migrants from Kosovo living in Germany as well as their home-country households. More than 90% of Kosovar migrants living in Germany remit. However, little is known about their underlying motivations. Our analytical results show that the migrant’s attitude and norms are decisive for the remitting behaviour. The common socio-economic approach lacks explanatory power backed by theory.
    Keywords: Kosovo, Germany, remittances, structural equation modelling, Theory of Planned Behaviour, Consumer/Household Economics, Institutional and Behavioral Economics, Political Economy, F24, H30, O15,
    Date: 2012
  14. By: Ryosuke Tao (Research Fellow, Institute of Administrative Management)
    Abstract: Public sector accounting has recently been improved. Currently, there are requirements to disclose stock information in addition to the flow information presented in budget statements or accounts statements. Public sectors have prepared and disclosed their financial statements (including balance sheets and income statements) based on business accounting approaches. Moreover, as a matter of policy, the government tends to prepare and disclose cost information along with the financial statements for the individual ministries and governmental agencies. The objectives of clarifying the fiscal conditions in a state through the preparation and disclosure of financial statements are to fulfill the statefs accountability to its citizenry and market participants and to optimize and enhance the efficiency of its fiscal activities. Most importantly, the improved information should contribute to democratic decisions on public finance. A perspective different from the business accounting is that public sector accounting places more emphasis on inter-generational fairness. With respect to the inter-generational benefits and burdens, however, various factors must be considered, and the differences between assets and liabilities in the balance sheet may not be the indicators for that purpose. Public sector accounting is considered to have been developed based on the business accounting approach. As such, the objective of the accounting is to retrospectively review how assets and liabilities have changed as a result of past public finance operations. Yet, in considering compelling public finance conditions, there is a need to discuss and consider expected perspectives, in order to clarify what resources will remain in the future by incorporating the aspect of future cash flows (this paper views this as a mixture of accounting thought and economic thought). It is important to recognize that both perspectives are commingled. If the forecast perspective is highlighted, the assets in the balance sheet should include taxation rights that give rise to future tax revenue. Another useful practice, from the perspective of information disclosure, is to prepare an individual balance sheet, in addition to a comprehensive financial statement, for each significant political agenda (e.g., public pension obligations). Public sector accounting has been developed without implementing a necessary legal basis. The effects of this reform may be a matter of not much interest without infringing any democratic control of public finance under cash basis accounting. The focus for public finance, however, has certainly been transferring from flow to stock and from the aspect of political decision to the aspect of administration. The role of public sector accounting should be clarified in conjunction with the various systems.
    Date: 2012–06
  15. By: Biebricher, Thomas
    Abstract: Im Mittelpunkt des vorliegenden Working Papers steht eine Gegenüberstellung der durch Michel Foucault sowie die an ihn anschließenden Governmentality Studies geprägten Gouvernementalitätsperspektive auf den Staat mit den etablierten Herangehensweisen in der Staatstheorie. Zu diesem Zweck werden in einem ersten Schritt die werkimmanenten theoretischen Verschiebungen rekonstruiert, die den Staat seit Ende der 1970er Jahre erstmals explizit zum Gegenstand von Foucaults Denkens werden lassen und die sich mit der Formel 'Von Disziplin zu Regierung' zusammenfassen lassen. In einem zweiten Schritt wird die Entstehung der Forschungstradition der Governmentality Studies nachgezeichnet um zu klären, warum sich hier erst in jüngster Zeit eine Debatte um die genuin staatstheoretischen Aspekte der Gouvernementalitätsperspektive abzeichnet. Das theoretisch-analytische Begriffsinstrumentarium dieser Perspektive auf den Staat bildet dann den Gegenstand des folgenden Abschnitts. Im daran anschließenden zentralen Kapitel werden nun die verschiedenen Aspekte der Foucaultschen Perspektive unter anderem mit neo-marxistischen und neo-institutionalistischen Theorien des Staates konfrontiert, um herauszuarbeiten, inwieweit Foucaults Staatsanalytik originelle Elemente und Überlegungen enthält, die nicht schon in einer anderen Tradition zu finden sind. Diese Gegenüberstellung verfolgt jedoch keine polemischen Ziele, sondern ist vielmehr daran interessiert, eine Debatte zwischen den Governmentality Studies und den etablierten Herangehensweisen in der Staatstheorie zu initiieren, der bis jetzt von beiden Seiten und letztlich auch zu beiderseitigem Nachteil aus dem Weg gegangen wurde. Die Studie endet mit der Einschätzung, dass die Gouvernementalitätsperspektive noch weiterer argumentativer Unterfütterung zur Stützung ihres Anspruchs auf eine eigenständige und innovative Herangehensweise an die staatstheoretische Problematik bedarf. -- The argumenative core of this Working Paper is a juxtaposition of the governmentality perspective as it is developed by Michel Foucault and the Governmentality Studies on the one hand and the more established frameworks of state theory on the other. The paper begins with an examination of the various shifts (from discipline to government) in Foucault's work that enable him to make the state an explicit focus of his work for the first time at the end of the 1970. The second step investigates the emergence of the so-called Governmentality Studies in order to find out why it is only very recently that the genuinely state-theoretical content of the governmentality lectures has become the subject of debate. The following section offers an outline of the basic premises and the conceptual vocabulary of the governmentality perspective on the state. Based on these preparatory steps, the core section of the paper then compares the various aspects of the governmentality perspective to alternative approaches from Neo-Institutionalism to Neo-Marxism, in order to identify what might be unique and original about the governmentality perspective. The juxtaposition has no polemical purposes; rather the aim of this comparative examination is to initiate a debate between Foucaultians and proponents of other more established state-theoretical frameworks about strengths and limits of the respective approaches. Both sides have foregone this opportunity so far - to the detriment of both. The study concludes that its many merits notwithstanding, the governmentality perspective still is in need of further elaboration in order to redeem its claim to an original and innovative view on the state-theoretical problematic.
    Date: 2012
  16. By: Lancastle, Neil
    Abstract: This paper asks why modern finance theory and the efficient market hypothesis have failed to explain long-term carry trades; persistent asset bubbles or zero lower bounds; and financial crises. It extends Keen (Solving the Paradox of Monetary Profits, 2010) and the Theory of the Monetary Circuit to give a mathematical representation of Minsky's Financial Instability Hypothesis. In the extended model, the central bank rate is not neutral and the path is non-ergodic. The extended circuit has survival constraints that include a living wage, a zero interest rate and an upper interest rate. Inflation is everywhere. The possibility of a high interest rate, hedge economy emerges, where powerful banks invest surplus loan interest. With speculation, banks lobby to enter investment markets and the system is precariously liquid/illiquid. The paradox of a Ponzi economy, where loans never get repaid, is that private banks must speculate to increase reserves and rely on systemic crises to rebuild their balance sheets. Estimating model parameters for the US gives a scissor-graph like the The Financial Crisis Inquiry Commission (The Financial Crisis Inquiry Report, 2011) with other nuances, namely i) a heart attack in 1973-1974 that corresponds to the collapse of Bretton Woods ii) an accelerated decoupling of household wages and loans after the repeal of Glass-Steagall. Simulating bank bailouts, household bailouts and a Keynesian boost suggests that bank bailouts are the least effective intervention, with downward pressure on wages and household spending. Bailing out hedge households is a form of monetary contraction, and boosting hedge business loans is a form of monetary expansion. The appropriate policy choice would seem to depend on the external balance and inflation concerns. The paper concludes that, with international Ponzi sectors, viable resolution mechanisms include reparations (dL < 0), turning Ponzi debt into equity or junk debt (dL → ∞), household bailouts and a Keynesian boost. --
    Keywords: circuit theory,macroeconomic simulation,carry trade,banking regulation,interest rate policy
    JEL: E10 E27 E43 E58 E60
    Date: 2012
  17. By: Adeel Malik
    Abstract: An influential thesis [Kuran, 2011, The Long Divergence] locates the economic failure of the Middle East in Islamic legal arrangements that laid the basis for organizational deficiencies. This article critically scrutinizes this thesis using the lens of political economy and argues that tracing the impact of Islamic law without a discussion of the enforcement environment is unconvincing. Specifically, as a legal explanation for development, it is important to probe the extent to which Islamic law was embedded in the material domain and influenced by preferences of political incumbents. A key contention of the article is that Islamic law can be described, at best, as a proximate rather than a deep determinant of development, and that there is limited evidence to establish it as a causal claim. Finally, I propose that, rather than exclusively concentrating on legal impediments to development, a more promising avenue for research is to focus on the co-evolution of economic and political exchange, and to probe why the relationship between rulers and merchants differed so markedly between the Ottoman Empire and Europe.
    Keywords: Law and Economics, Islamic Economic, Waqf
    JEL: K00 P4 N4 O3
    Date: 2012
  18. By: Zamagni, Stefano (Associazione Italiana per la Cultura della Cooperazione e del Non Profit)
    Abstract: This essay pursues a threefold purpose: first, to sketch the historical period that provides the backdrop to the formation of Franciscan economic thought; second, to set out the principles governing that doctrine, highlighting its originality and its relevance to the real problems of the day; and lastly, to enumerate the essential reasons for the resurgence of interest, today, in the Franciscan point of view concerning the challenges to our society posed by globalization and by the present economic crisis.
    Date: 2012–06–19
  19. By: Kemp-Benedict, Eric
    Abstract: A central conclusion of the standard theory of consumption is that consumers' preferences can be taken as theoretical primitives. Special categories of consumption, such as "basic needs", or of goods, such as "subsistence goods" are seen as extra theoretical baggage that add few, if any, insights. This theoretical orientation has been absorbed into the theory of aggregate demand, but the aggregate theory has a serious problem that is not shared by the individual-level theory: no matter how well-behaved the individual-level demand functions may be, the aggregate-level function can take on almost any form. This result follows from the SMD theorem, named after Sonnenschein, Mantel, and Debreu, who developed the theory; Kirman and Koch strengthened the results, and the SMD-KK theorem poses a fundamental challenge to models linking micro and macroeconomics. A standard response to the aggregation problem is to introduce a representative agent, but this merely sidesteps the problem. We argue that the aggregation problem arises, in part, because of the exclusion of needs from the theory. Specifically, we argue that material needs--such as basic needs for energy, water, food, and shelter--must be included as theoretical primitives because both the needs and the satisfiers of those needs are universal. We construct a microeconomic model with material needs and show that the form of the aggregate excess demand function is not completely arbitrary, so the SMD-KK theorem does not apply. We discuss the implications of this result.
    Keywords: Sonnenschein-Mantel-Debreu theorem; micro-foundations; aggregation; needs-based consumption; hierarchical consumption; consumer demand
    JEL: B50 D51 D01
    Date: 2012–07–07
  20. By: John D. Conroy
    Abstract: The expression subsistence affluence is a catchphrase for certain perceptions of reality in Papua New Guinea, and after 50 years it still actively conditions opinions of the country (even though its population has trebled in the meantime). The paper examines antecedents of the concept in the economic and anthropological literatures, in which Polanyi's dichotomy between substantivist and formalist analyses bulks large. E.K. Fisk, the originator of 'affluence', is placed in a lineage of economists including Lewis, Myint and Bauer (all owing much to Adam Smith), although his own adherence to neoclassical assumptions and method is emphasized. The paper describes W.R. Stent's attempt to build on Fisk, achieving an 'adaptive use' of neoclassical method to take account of 'hybrid' (ie, non-maximizing) behaviours, and set in a context of competing theories ranging from Boeke's 'dual economy' to those of the Chicago School. Among anthropologists, the paper considers the 'original affluence' of Marshall Sahlins and (among the critics) Chris Gregory on Gifts and Commodities. The account of New Guinea Stone Age Trade by Ian Hughes is seen as offering a counterpoint to Gregory, while Richard Salisbury's formalist and eclectic take on the subject is also considered. A proposition, that the existence of subsistence affluence in 1960s PNG was due to its being somehow a 'special case', is examined through the politely sceptical eye trained on the country by the Faber Mission in 1972. For an independent perspective, the paper turns to Keith Hart (a member of the Faber team) for his account of the transition from subsistence in West Africa (a region to which Fisk was prepared to extend his concept of affluence). The paper concludes by considering what, if any, utility may still reside in the several conceptions of 'affluence' proposed as having existed in PNG.
    Keywords: subsistence affluence, Papua New Guinea, economic anthropology, E. K. Fisk, Keith Hart, gifts and commodities, specialization and exchange, W. R. Stent, formalism, substantivism
    JEL: A12 B12 B20 B25 B31 D13 N57 O10 O13 P46 Q12 Z10
    Date: 2012–04

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