nep-hme New Economics Papers
on Heterodox Microeconomics
Issue of 2012‒09‒22
seventeen papers chosen by
Frederic S. Lee
University of Missouri-Kansas City

  1. The use of mathematics in economics and its effect on a scholar's academic career By Espinosa, Miguel; Rondon, Carlos; Romero, Mauricio
  2. Real Wicksell effect, demand for capital and stability By Saverio M. Fratini
  3. Erasing Class/ (re)Creating Ethnicity: Jobs, Politics, Accumulation and Identity in Kenya By Mwangi wa Githinji
  4. Rising Prices after the Introduction of a New Technique By Melendez-Plumed, Vicenc
  5. Behavioural economics perspectives: Implications for policy and financial literacy By Altman, Morris
  6. Essays on executive remuneration contracting: Managerial power, corporate payout, and gender discrimination. By Geiler, P.H.M.
  7. Self-Interest, Sympathy and the Invisible Hand: From Adam Smith to Market Liberalism By Avner Offer
  8. Impossibility of interpersonal social identity diversification under binary preferences By Naqvi, Nadeem
  9. Economics of Energy and Climate Change: Origins, Developments and Growth By Roger Fouquet
  10. Sociedad cooperativa y socio cooperativo: propuesta de sus funciones objetivo By Carmen Marcuello; Pablo Nachar-Calderón
  11. Policy Implications of Alternative Economic Paradigms: Some surprises from endogenous technological changes By Richard G. Lipsey
  12. Declining inequality in Bolivia: How and Why By Fortun Vargas, Jonathan M.
  13. Microfinance at the Microfinance at the margin: experimental evidence from Bosnia and Herzegovina vidence from Bosnia and Herzegovina By Britta Augsburg; Ralph De Haas; Heike Harmgart; Costas Meghir
  14. A Warrant for Pain: Caveat Emptor vs. the Duty of Care in American Medicine, c. 1970-2010 By Avner Offer
  15. Female Representation but Male Rule? Party Competition and the Political Glass Ceiling By Folke, Olle; Rickne, Johanna
  16. Do Standard Corporate Governance Practices Matter in Family Firms? By Sridhar Arcot; Valentina Bruno
  17. How is non-knowledge represented in economic theory? By Ekaterina Svetlova; Henk van Elst

  1. By: Espinosa, Miguel; Rondon, Carlos; Romero, Mauricio
    Abstract: There has been so much debate on the increasing use of formal mathematical methods in Economics. Although there are some studies tackling these issues, those use either a little amount of papers, a small amount of scholars or cover a short period of time. We try to overcome these challenges constructing a database characterizing the main socio demographic and academic output of a survey of 438 scholars divided into three groups: Economics Nobel Prize winners; scholars awarded with at least one of six prestigious recognitions in Economics; and academic faculty randomly selected from the top twenty Economics departments worldwide. Our results provide concrete measures of mathematization in Economics by giving statistical evidence on the increasing trend of number of equations and econometric outputs per article. We also show that for each of these variables there have been four structural breaks and three of them have been increasing ones. Furthermore, we found that the training and use of mathematics has a positive correlation with the probability of winning a Nobel Prize in certain cases. It also appears that being an empirical researcher as measured by the average number of econometrics outputs per paper has a negative correlation with someone's academic career success.
    Keywords: Nobel Prize, Mathematics, Economics, Reputation
    JEL: N01 B3 C14 C81
    Date: 2012–09
  2. By: Saverio M. Fratini
    Abstract: The aim of this paper is to study the relationship between reverse capital deepening and instability of the equilibrium between investments and savings. It is shown for a model with n commodities, infinitely many linear technique of production, and overlapping generation that a badly-behaved real Wicksell effect, as in the case of a “reswitching of techniques”, can involve instability.
    Keywords: investments, savings, interest rate, equilibrium stability, reswitching
    JEL: B51 D33 D50 D90
    Date: 2012–09
  3. By: Mwangi wa Githinji (University of Massachusetts Amherst)
    Abstract: A large literature on African economies argues that ethnicity plays a role in the politics and economics of African countries. Unfortunately, much of this literature is speculative or anecdotal because of the lack of data, with the exception of a few papers that examine ethnic networking as a business or employment strategy. In many ways Africa’s failure to develop is a failure of nationhood. Creating nation is handicapped by the use of ethnicity. In this paper, I empirically examine the relationship between employment, wages and ethnicity in Africa via a case study of Kenya. I challenge the pervasive view that ethnicity in Africa is related to a primordial instinct and attempt to show empirically that ethnicity is used by politicians as a political strategy to maintain power. In the process of using ethnicity, class solidarity is explicitly down played by politicians as ethnicity is reified. In this paper I specifically examine whether jobs are being used by politicians as both reward and carrot to ensure ethnic allegiances. This is done by testing whether being a member of a dominant group (in terms of population and also politically) has an impact on the possibility of employment and the level of wages. I do this using data from the 1986 Labour Force Survey which due to timing, uniquely allows me to connect ethnicity and income. I group the observation into 5 groups that are ranked based on kind of employment and wage. Of the five sectors the two desirable sectors are Self-employed above median income and Full time employment above median income. I test whether ethnicity has an impact of one being employed in these sectors. By inter-acting the dummy variable for dominant group in population and the ethnic dummy, I am able to separate out what may be returns just due to ethnic networking that comes from common culture, language etc and returns which are due in some sense to being from a politically dominant ethnicity. I am also able to test for the impact in a change in the ethnicity of the president (a further test of ethnic dominance) by using a difference in difference approach. I find that being in a politically dominant group improves one’s chances of obtaining a full time above median wage job. In fact this improvement in chances was highly correlated with political power and a change of ethnicity of the president resulted in a decrease in the probabilities of the past presidents “kinsfolk” being in desired sectors. Being a member of a locally dominant group in terms of population as compared to a politically dominant national group has no effect on likelihood of employment in one of the premium categories. My findings support the view that in a highly centralized state ethnicity can be reproduced via preferential employment to members of an in-group thus diminishing class solidarity that one may expect to occur between workmates. JEL Categories: Z13 N37, O15, P16.
    Keywords: Social Stratification, Discrimination, ethnicity, Kenya, inequality, class, employment.
    Date: 2012–09
  4. By: Melendez-Plumed, Vicenc
    Abstract: We support labour contents as an absolute and reliable measurement unit and as an accounting procedure that expresses the real costs and profits of the economic system. As far as this measurement capacity of labour is concerned, we try to demonstrate, that, from a theoretical point of view, the introduction of more efficient production techniques of goods and services produces an increase in the “prices divided by their corresponding values” ratio, when the wage is fixed, and, in addition, allows, a lower set of prices at the previous – lower - rate of profit. Current measures of inflation do not detect such price increases and normally interpret price changes – often bundled together with more product features -, as a price decrease. Furthermore, when two economies with different innovation levels, interchange products and services, the one with more intense innovation gives less labour time per unit of price to the other and receives a quantity of labour time proportionally higher than before. These results are obtained in a model under the following assumptions: Simple – not joint - production is considered where only circulating capital exists. Every good or service considered, is a basic commodity; there is only one quality of labour.
    Keywords: Relative prices; labour values; increase in prices; productivity increase; new production techiques
    JEL: B51
    Date: 2012–09
  5. By: Altman, Morris
    Abstract: This paper summarizes and highlights different approaches to behavioural economics. It includes a discussion of the differences between the “old” behavioural economics school, led by scholars like Herbert Simon, and the “new” behavioural economics, which builds on the work of Daniel Kahneman and Amos Tversky and is best exemplified by Richard Thaler and Cass Sunstein’s recent book, Nudge. These important currents in behavioural economics are also contrasted with the conventional economic wisdom. The focus of this comparative analysis is to examine the implications of these different approaches in behavioural economics for financial literacy.
    Keywords: Financial literacy, behavioral economics, imperfect information, heuristics, trust, nudging, decision-­‐making environment,
    Date: 2012–05–04
  6. By: Geiler, P.H.M. (Tilburg University)
    Abstract: Chapter 4 examines the existence of the gender pay gap among top managers in the UK. The study suggests the existence of substantial differences in both the level and mix of executive remuneration between male and female executives, but fails to establish a gender pay gap at the CEO level. The fourth chapter also shows that the pay-for-performance sensitivity of female CEOs is higher than that of male CEOs.
    Date: 2012
  7. By: Avner Offer (All Souls College, University of Oxford)
    Abstract: Adam Smith rejected Mandeville’s invisible-hand doctrine of ‘private vices, publick benefits’. In The Theory of Moral Sentiments his model of the ‘impartial spectator’ is driven by not by sympathy for other people, but by their approbation. Approbation needs to be authenticated, and in Smith’s model authentication relies on innate virtue, which is unrealistic. An alternative model of ‘regard’ is applied, which makes use of signalling and is more pragmatic. Modern versions of the invisible hand in rational choice theory and neo-liberalism are shown to be radical departures from the ethical legacy of Enlightenment and utilitarian economics, and are inconsistent with Adam Smith’s own position.
    Date: 2012–08–14
  8. By: Naqvi, Nadeem
    Abstract: Diverse identities, some socially shared, arise from a person’s affiliation with multiple overlapping communities, which are non-disjoint subsets of persons in society. I prove that identification of each individual with binary preferences or their utility function representation, commonplace in economic theory, implies the impossibility of social-identity diversification of persons. Therefore, if the goal is to explain injustices based on social identity distinctions such as racial discrimination, the conceptual reach of economic theory needs extension. I propose a generalization by assigning non-binary preferences to each individual player to achieve endogenous social diversification, to potentially serve as a basis for explaining discrimination.
    Keywords: justice; social identity; discrimination; race; gender; non-binariness; maximization
    JEL: D46 D63 J15 J16
    Date: 2012–09–15
  9. By: Roger Fouquet
    Abstract: This paper briefly highlights some of the most influential ideas in the literature on the economics of energy and (energy-related) climate change. This paper will use bibliometric evidence to examine the trends in related research over the last forty years, and analyse the explosion in energy and climate change research in the last ten years. It will also, more controversially, consider the validity of the hypothesised rise in original ideas in the literature (during the 1990s) and then decline (or relative decline) since the explosion in research output (since 2005). This paper proposes that if economists are going to make an equally important and constructive contribution as they did up to 2012, then their ideas will need to move forward and evolve, offering exciting and stimulating new solutions for the post-Kyoto era.
    Keywords: Energy, Climate Change.
    Date: 2012–09
  10. By: Carmen Marcuello (Universidad de Zaragoza); Pablo Nachar-Calderón (Universidad de Zaragoza)
    Abstract: El análisis económico de las organizaciones se encuentra sometido al criterio neoclásico, asociado a las características de la empresa capitalista. En el caso de las sociedades cooperativas, se han identificado una serie de desventajas, producto de su estructura de propiedad y control, así como su enfoque basado en la cooperación. El objetivo de este trabajo es examinar los modelos de comportamiento de la sociedad cooperativa y de sus socios cooperativos, planteando las funciones objetivo de ambas figuras, esto considerando argumentos asociados a microeconomía, teoría de juegos y teoría de bienes comunes. Las conclusiones sugieren que el planteamiento expuesto permite explicar las razones por las que las sociedades cooperativas permanecen en el panorama económico, complementando lo expuesto en la literatura con respecto a su surgimiento y desaparición. Así mismo, se destaca su capacidad de asumir objetivos mas amplios a los económicos, participando dentro de la economía de mercado con criterios de funcionamiento relacionados a las organizaciones de Economía Social.
    Keywords: Sociedad Cooperativa, Individuos Cooperativos, Función Objetivo, Economía Social, Teoría de Bienes Comunes, Teoría de Juegos Cooperativos
    JEL: M21
    Date: 2012–02
  11. By: Richard G. Lipsey (Simon Fraser Unviersity)
    Abstract: One of the most neglected issues in modern economics concerns the consequences of technological change that is ubiquitous and endogenous. To address these we need to model technology as more than a scalar value in an aggregate production function, dealing with technological change in its messy micro economic details. This paper illustrates these points by considering the policy implications of some alternative economic theories that treat technology differently. The first section contrasts the policy implications of neoclassical and evolutionary economics with respect to the evaluation of the efficiency of the price system, policies with respect to 'distortions,' policies to discourage monopolies, to encourage economic growth in general, and infant industries and specific technological advances in particular. The second section contrasts New Classical and various versions of Keynesian economics with respect to micro behavioural underpinnings of macro relations, the place of technology as a driving force of economic change, and aggregate demand as both a source of fluctuations and a variable to be manipulated by policy makers.
    Keywords: Technological change, Keynesian Economics, New Classical Economics, infant industries, picking winners, aggregate demand, microeconomic underpinnings.
    JEL: B50 H1 O
    Date: 2012–04
  12. By: Fortun Vargas, Jonathan M.
    Abstract: Latin America has often been depicted as one of the most unequal regions in the world. However, after the rising of inequality, the figure decline dramatically starting from the year 2000. In this setting, Bolivia has been one of the poorest performers on income distribution efforts, lately, this situation has been improving. The author investigates the dynamics of this change through an analysis of household level surveys for 4 different years (2003/04, 2005, 2008 and 2009). The research applies a method of inequality decomposition– as developed by (Fields, 2003)-, this technique consists on regressing the expenditure of households against a vector of explanatory variables. The results suggest that education (more than other variables) has contributed on the reduction of inequality in Bolivia. Moreover, the sources of inequality are mainly attributed to the differences on human capital accumulation more than any other variables, such as the gender of the household head or the ethnical origin of the household. The results are in line with similar work made by other authors on the same issue (Gray-Molina, et al., 2001; Gray Molina &Yañez, 2009)
    Keywords: Economic Development; Inequality; Income Distribution; Bolivia
    JEL: D63 O10 I32
    Date: 2012–07
  13. By: Britta Augsburg (Institute for Fiscal Studies); Ralph De Haas (EBRD); Heike Harmgart (EBRD); Costas Meghir (Yale University and University College London)
    Abstract: We use a randomised controlled trial (RCT) to analyse the impact of microcredit on poverty reduction in Bosnia and Herzegovina. The study population are loan applicants that would normally have just been rejected based on regular screening. We find that access to credit allowed borrowers to start and expand small-scale businesses. Households that already had a business and where the borrower had more education, ran down their savings, presumably to complement the loan and to achieve the minimum amount necessary to expand their business. In less-educated households, however, consumption went down. A key new result is that there was a substantial increase in the labour supply of young adults (16-19 year olds). This was accompanied by a reduction in school attendance.
    Keywords: Microfinance; liquidity constraints; human capital; randomised controlled trial
    JEL: G21 D21 I32
    Date: 2012–09
  14. By: Avner Offer (All Souls College, University of Oxford)
    Abstract: Bad ethics can make for bad economic outcomes. Bad ethics are defined hedonically as the infliction of pain on others for private advantage. The infliction of pain is often justified by ‘Just World Theories’, which state that everyone gets what they deserve. Market liberalism (and its theoretical underpinning in neoclassical economics) is one theory of this kind. As an example, the micro and macro underperformance of the American health system c. 1970-2010 is explained in terms of the shift in policy norms from the fiduciary norm "first do no harm" to the neo-liberal market norm of "let the buyer beware" (caveat emptor) since the 1970s.
    Date: 2012–07–20
  15. By: Folke, Olle (Research Institute of Industrial Economics (IFN)); Rickne, Johanna (Research Institute of Industrial Economics (IFN))
    Abstract: A large literature has studied the context that affects women’s numerical representation, but few have moved beyond numbers to study the drivers of a gender gap in political influence among elected politicians. Using panel data for the careers of 35.000 Swedish municipal politicians over six election cycles we first document the said gender gap. Women are substantially less likely to be re-elected for office, which is the most important pre-condition for obtaining influential appointments. Turing to the determinants we find that supply factors, primarily family responsibilities, explain some of this gap. Meanwhile, demand factors such as experience, age, education and income do not. Finding that competition between political parties closes the gap, we argue that a negative bias against women among party selectors thrives in contexts where meritocracy is not enforced. Positive correlations between competition and measures of competence for elected politicians of both genders further support this conclusion.
    Keywords: Careers in politics; Political competition; Supply of politicians
    JEL: H10 J16 J21 J45
    Date: 2012–09–05
  16. By: Sridhar Arcot; Valentina Bruno
    Abstract: We study the unique governance dynamics surrounding family ownership in a voluntary regulatory arena where we can directly observe the impact of firm ownership on corporate governance practices pertaining to the composition of the board of directors. We find that family firms are more likely to deviate from standards of best practice in corporate governance. However, lesser governance standards in family firms are not associated with lower performance because the family shareholder is the monitor in-place. In contrast, governance practices and disclosures matter in widely-held firms because they alleviate the conflicts between managers and dispersed shareholders. More broadly, our results show that family ownership and board governance practices are substitute governance mechanisms.
    Date: 2012–09
  17. By: Ekaterina Svetlova (Karlshochschule International University); Henk van Elst (Karlshochschule International University)
    Abstract: In this article, we address the question of how non-knowledge about future events that influence economic agents' decisions in choice settings has been formally represented in economic theory up to date. To position our discussion within the ongoing debate on uncertainty, we provide a brief review of historical developments in economic theory and decision theory on the description of economic agents' choice behaviour under conditions of uncertainty, understood as either (i) ambiguity, or (ii) unawareness. Accordingly, we identify and discuss two approaches to the formalisation of non-knowledge: one based on decision-making in the context of a state space representing the exogenous world, as in Savage's axiomatisation and some successor concepts (ambiguity as situations with unknown probabilities), and one based on decision-making over a set of menus of potential future opportunities, providing the possibility of derivation of agents' subjective state spaces (unawareness as situation with imperfect subjective knowledge of all future events possible). We also discuss impeding challenges of the formalisation of non-knowledge.
    Date: 2012–09

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