nep-hme New Economics Papers
on Heterodox Microeconomics
Issue of 2012‒11‒03
eighteen papers chosen by
Frederic S. Lee
University of Missouri-Kansas City

  1. Worker Cooperatives and Democratic Governance By John Pencavel
  2. The Epistemology of Simulation, Computation and Dynamics in Economics By K.Vela Velupillai
  3. Iteration, Tâtonnement, Computation and Economic Dynamics By K. Vela Velupillai
  4. The Geometrist of Economic Dynamics: Richard Goodwin's Birth Centennial By K.Vela Velupillai
  5. The Relevance of Computation Irreducibility as Computation Universality in Economics By K. Vela Velupillai
  6. On Richard Goodwin’s Elementary Economics from the Higher Standpoint By Guglielmo Chiodi
  7. Asymmetries in Price-Setting Behavior: New Microeconometric Evidence from Switzerland By Bo E. Honoré; Daniel Kaufmann; Sarah Marit Lein
  9. Goodwin in Siena – Economist, Social Philosopher and Artist By Massimo Di Matteo; Serena Sordi
  10. Business Owners’ Preferences in Marketing Practices and their Impact on Firm Performance By Ghouri, AM; Saleem , F; Malik, A
  11. Towards a Political Economy of the Theory of Economic Policy By K.Vela Velupillai
  12. Not All Price Endings Are Created Equal: Price Points and Asymmetric Price Rigidity By Snir, Avichai; Levy, Daniel; Gotler, Alex; Chen, Haipeng (Allan)
  13. Globalization and culture a study of purchase behavior By Muhammad, Danish; Azam, Rehan; Syed Akbar, Suleman
  14. Identity Realization, Multiple Logics and Organizational Form Legitimacy. Organizational Founding Rates during the Emergence of the Dutch Accounting Industry, 1884-1939 By Divarci A.; Boone Ch.; Van Witteloostuijn A.
  15. Drivers of entrepreneurship and post-entry performance : microeconomic evidence from advanced and developing countries By Vivarelli, Marco
  16. Intra-Firm Trade Law - Contract-Enforcement & Dispute Resolution in Transnational Corporations By Gralf-Peter Calliess; Stephan Freiherr von Harder
  17. What caused the failure of nationalisation of the railway system in Germany? : Malfunction of the German Imperial Railway Office (Reichseisenbahnamt) in the 1870s and 1880s. By Ayumu Banzawa
  18. "Intra-Firm Trade Network in Mitsubishi Corporation, 1922-28" (in Japanese) By Tetsuji Okazaki

  1. By: John Pencavel (Stanford University)
    Abstract: A worker co-operative is a firm that is owned and managed by those who work in it. This paper provides a selective review of research in economics on worker cooperatives. It concentrates on the volatility of earnings and employment in the co-ops compared with conventional capitalist firms; on the long-term viability of co-ops; on the relative productive efficiency of co-ops; and on problems of democratic governance within co-ops. Using modern empirical methods applied to large numbers of observations, recent research has substantially enhanced our understanding of worker co-ops.
    Keywords: worker cooperatives, productivity, viability, governance
    JEL: J54
    Date: 2012–10
  2. By: K.Vela Velupillai
    Abstract: Computation and Simulation have always played a role in economics – whether it be pure economic theory or any variant of applied, especially policy oriented, macro and micro economics or what has increasingly come to be called empirical economics. This is a tradition that can, without too much difficulty, be traced to the spirit and vision of the founding father of Political Economy --as Political Arithmetic -- by William Petty, whose finest exponent was, in my opinion, Richard Stone, in modern times a noble tradition whose living custodian is Lance Taylor. In this paper their spirit is the driving force, but it is given new theoretical foundations, mainly as a result of developments in the mathematics underpinnings of the tremendous developments in the potentials of computing, especially using digital technology. A running theme in this essay is the recognition --never neglected by Petty, Stone or Taylor --that, increasingly, the development of economic theory seems to go hand in hand with advances in the theory and practice of computing, which is, in turn, a catalyst for the move away from too much reliance on any kind of mathematics for the formalisation of economic entities that is inconsistent with the mathematical, philosophical and epistemological foundations of the digital computer.
    Keywords: Simulation, Computation, Computable, Analysis, Dynamics Proof, Algorithm
    Date: 2012
  3. By: K. Vela Velupillai
    Abstract: An attempt is made, in this paper, to extract a mathematical methodology, underpinned by numerical meaning, from a study of Richard Goodwin’s classic contributions from 1943 to 1967 -- and beyond. The key conceptual notions I use are tâtonnement, computation, approximations, the geometry of dynamics, simulations and iteration.
    Date: 2012
  4. By: K.Vela Velupillai
    Date: 2012
  5. By: K. Vela Velupillai
    Abstract: Stephen Wolfram’s A New Kind of Science should have made a greater impact in economics - at least in its theorising and computational modes – than it seems to have. There are those who subscribe to varieties of agent-based modelling, who do refer to Wolfram’s paradigms - a word I use with the utmost trepidation -- whenever simulational exercises within a framework of cellular automata is invoked to make claims on complexity, emergence, holism, reduction and many such buzz words. Very few of these exercises, and their practitioners, seem to be aware of the deep mathematical -- and even metamathematical-- underpinnings of Wolfram’s innovative concepts, particularly of computational equivalence and computational irreducibility in the works of Turing and Ulam. Some threads of these foundational underpinnings are woven together to form a possible tapestry for economic theorising and modelling in computable modes.
    Keywords: Computational equivalence, Computational irreducibility, Computation universality.
    Date: 2012
  6. By: Guglielmo Chiodi
    Date: 2012
  7. By: Bo E. Honoré; Daniel Kaufmann; Sarah Marit Lein
    Abstract: In this paper we follow the recent empirical literature that has specified reduced-form models for price setting that are closely tied to (S, s)-pricing rules. Our contribution to the literature is twofold. First, we propose an estimator that relaxes distributional assumptions on the unobserved heterogeneity. Second, we use the estimator to examine asymmetries in price-setting behavior. Using micro price data underlying the Swiss CPI we find that a substantial share of asymmetries in the frequency of price changes can be traced back to a rising aggregate price level. We show that asymmetries would be reduced substantially in the absence of aggregate inflation.
    Keywords: Asymmetric price setting, downward nominal price rigidity, front loading, menu-cost model, heterogeneity, CPI micro data, panel data
    JEL: E31 E4 E5 C3 C23
    Date: 2012
  8. By: Hanisch, Markus; Rommel, Jens; Mueller, Malte
    Abstract: With an average market share of about 57%, the European dairy industry is dominated by cooperatives. Large diversity exists in the importance of cooperatives across the EU-27. The cooperative yardstick school of thought suggests that agricultural cooperatives drive competition towards efficiency and “fair” prices. We revisit this argument by analyzing, whether the relative strength of cooperatives in dairy, as measured by market share, explains price variation in average national farm gate milk prices in the EU-27. Our panel data analysis shows that milk prices increase with member states´ market share of cooperatives, when controlling for GDP, fodder prices and new member states. We relate these findings to the policy debate on agricultural cooperatives and conclude that policies promoting cooperatives have the potential to increase farmer welfare.
    Keywords: EU-27, Dairy, Cooperatives, Cooperative Yardstick, Institutional and Behavioral Economics, Livestock Production/Industries,
    Date: 2012
  9. By: Massimo Di Matteo; Serena Sordi
    Abstract: This article describes the years of Goodwin’s ‘third life’ at the University of Siena, stressing in particular his main contributions to economic theory, the evolution in his political and philosophical ideas and his love of art. First, after a brief description of his arrival in Siena and of the background he found there, we explore some of his contributions of the period and we argue that his achievements in the explanation of irregular growth cycles are remarkable and still open to further analysis and generalisation. Second, we remark that, as testified by an unpublished essay, in these years of dramatic changes such as the Fall of the Berlin Wall, his social philosophical beliefs underwent a significant evolution. Finally, we conclude with a tribute to Goodwin, the abstract painter.
    Keywords: Economic dynamics, MKS system, Long waves, Growth cycle, Chaos
    JEL: B31 C61 E32
    Date: 2012
  10. By: Ghouri, AM; Saleem , F; Malik, A
    Abstract: This short paper is the extended part of Ghouri, et al. (2011) study. This paper presents the finding about the owners of restaurant and catering businesses marketing practices. This study showed their mindset about the marketing practices. The findings suggest that owners of restaurants and catering businesses practicing advertising and pricing better as compare to overall results of previous study Ghouri et al. (2011). As owner are the whole and soul of the business and can visualize the business and its activities from the top, so he/ she taking right decision regarding advertising and pricing activities of marketing. Overall marketing practices as perspective of owners are very influential on performance which indicated the owners’ will and believe about the marketing practices.
    Keywords: Owners Preferences; Marketing Practices; Firm Performance; SME
    JEL: M31
    Date: 2012
  11. By: K.Vela Velupillai
    Abstract: The theory of economic policy, in its mathematical modes, may be said to have had two incarnations, identified in terms of pre-Lucasian and ultra-Lucasian on a time-scale, whose origin can be traced to the Scandinavian works of the 1920s and early 1930s, beginning with Lindahl (1924, 1929), Frisch (1933) and Myrdal (1933). The end - mercifully (meant perversely) - of the ultra-Lucasian period, in Frances Fukuyama senses, might well have been the date of Prescott's Nobel Prize Lecture (Prescott, 2004). The codification of what may be called the `classical' theory of economic policy was initiated in the pioneering formalisations by Frisch (1949, a, b), and Tinbergen (1952), elegantly summarised in Bent Hansen's early, advanced, text book (Hansen, 1955). The launching pads for the ultra-Lucasian period were the Lucas Critique (Lucas, 1975), the elementary saddle-point dynamics based policy ineffectiveness `theorem' in a Rational Expectations context by Sargent and Wallace (1976) and the Dynamic Programming based Time-Invariance proposition in Kydland and Prescott(1977). In this essay I try, first of all, to trace a path of the mathematisation of the theory of economic policy, from this specific origin to the stated culminating point. Secondly, an attempt is made to expose the nature of the Emperor's New (Mathematical) Clothes in which the mathematisation of the theory of economic policy was attired. Finally, it is shown that the obfuscation by the mathematics of efficiency, equilibrium and the fundamental theorems of welfare economics can be dispelled by an enlightened, alternative, mathematisation that makes it possible to resurrect the poetic tradition in economics and ‘connect the prose in us with the passion’ for policy in the manner in which Geoff Harcourt has `connected' them.
    Date: 2012
  12. By: Snir, Avichai; Levy, Daniel; Gotler, Alex; Chen, Haipeng (Allan)
    Abstract: There is evidence that 9-ending prices are more common and more rigid than other prices. We use data from three sources: a laboratory experiment, a field study, and a large US supermarket chain, to study the cognitive underpinning and the ensuing asymmetry in rigidity associated with 9-ending prices. We find that consumers use 9-endings as a signal for low prices, and that this signal interferes with price information processing. Consequently, consumers are less likely to notice a bigger price when it ends with 9, or a price increase when the new price ends with 9, in comparison to a situation where the prices end with some other digit. We also find that retailers respond strategically to this consumer bias by setting 9-ending prices more often after price increases than after price decreases. 9-ending prices, therefore, usually increase only if the new prices are also 9-ending. Consequently, there is an asymmetry in the rigidity of 9-ending prices: they are more rigid than non 9-ending prices upward but not downward.
    Keywords: Price Points; Price Recall; Sticky Prices; Rigid Prices; Price Adjustment; 9-Ending Prices; Psychological Prices
    JEL: L16 D03 M31 E31 D80 C93 C91
    Date: 2012–10–26
  13. By: Muhammad, Danish; Azam, Rehan; Syed Akbar, Suleman
    Abstract: The purpose of this research is to investigate that whether Globalization, culture and purchase behavior differ across the three demographic factors (age, income and gender). Further study empirically substantiate that the globalization is impacting on consumer culture and purchase behavior of the Pakistani consumer. The data comprised of 250 respondents who are urban, educated, middle-class belongs to the different organizations operating in Karachi. The data was collected through structured and self-administered questionnaire. To test first objective Independent sample t test was used. Results shows that consumers who are young, having high income, and female are more inclined towards globalization, having western life style and conspicuous consumption as compare to old, low income group and male respectively. To test second objective the simple linear regression analysis was used. F and T statistics are significant against .05 level of significance shows that Globalization is impacting on consumer culture and purchase behavior. This paper provides understanding about changing life style and their consumption pattern of consumers in Karachi which would enable organizations to make more sound strategies to cater consumers.
    Keywords: Globalization; Culture; Purchase Behavior
    JEL: M30
    Date: 2012–09–15
  14. By: Divarci A.; Boone Ch.; Van Witteloostuijn A.
    Abstract: We analyze the difficult process of identity realization and legitimation development of a new organizational form. Particularly in the early decades of an emerging population, organizations face the challenging task to construct an identity that facilitates the build-up of legitimacy. The efforts of organizations in search of an identity often trigger collective action that crystallizes into multiple competing institutional logics that, eventually, result in the emergence of different organizational sub-forms. In our paper, we analyze the consequences of this contestation among multiple logics during a population’s emergence stage, fueled by competing self-organizing collective actors, on organizational founding rates. We claim that competition among collective actors affects the founding process in two opposing ways. On the one hand, such contestation spurs founding rates as entry barriers are reduced. On the other hand, identity heterogeneity undermines population-level legitimacy, producing fuzziness that hampers founding rates. We argue that differences in a sub-form’s perceived template quality will moderate the effects of this contestation on organizational founding rates. Our hypotheses are tested with data from the early history of the Dutch accounting industry, which took many years to reach a taken-for-granted status because of contestation among different professional associations.
    Date: 2012–09
  15. By: Vivarelli, Marco
    Abstract: The aim of this study is to provide a microeconomic investigation of the concept of entrepreneurship; in particular, it discusses the following issues: 1) the alternative ways of looking at entrepreneurship, distinguishing"creative destruction"from simple"turbulence"; 2) the different microeconomic determinants of new firm formation, distinguishing"progressive"from"regressive"drivers; 3) the relationship between ex-ante characteristics (of the founder) and post-entry performance (of the new firm); and 4) the possible scope for an economic policy aimed at maximizing the impact of entrepreneurship on economic growth. Where possible and appropriate, the paper devotes particular attention to the specific features characterizing entrepreneurship in developing countries.
    Keywords: Microfinance,Access to Finance,Environmental Economics&Policies,Small Scale Enterprise,Banks&Banking Reform
    Date: 2012–10–01
  16. By: Gralf-Peter Calliess (University of Bremen - Faculty of Law & ZenTra); Stephan Freiherr von Harder (University of Bremen - Faculty of Law)
    Abstract: While intra-firm trade accounts for at least one third of world exports, we know very little about the institutions which are employed to resolve intra-firm trade conflicts. According to Oliver Williamson, courts are not accessible and conflicts resulting from intra-firm trade are resolved by directives based on the authority of ownership instead (law of forbearance). Williamson's description of the law of forbearance, however, depicts an ideal typical form of a firm, which is characterised by low incentive intensity and high administrative costs. Yet, in order to improve on these attributes, large transnational enterprises changed their organisational structure in the past decades. Nowadays, large-scale enterprises usually have a decentralised structure and use intra-firm pricing and incentive systems. Against this backdrop, Williamson's description of the contract law regime of intra-firm trade appears all too general. This paper addresses the question of how contract enforcement in transnational corporations is institutionally organized on the basis of preliminary results of expert interviews conducted with officials from transnational corporations. In a first step we illustrate that conflicts originating in intra-firm transactions are basically of the same type and nature than conflicts arising out of market transactions. We argue that the settlement of these disputes is of relevance both for legal (e.g. corporate and tax law) and economic reasons (e.g. coordination, control and motivation functions of profit centers). In a second step we analyze the governance mechanisms which are employed by transnational corporations to resolve intra-firm trade conflicts.
    Keywords: transaction cost economics, intra-firm trade, private ordering, alternative dispute resolution, mediation, arbitration, transnational law
    JEL: D23 D29 D74 K12 K40 L22 M52
    Date: 2012–10
  17. By: Ayumu Banzawa (Graduate School of Economics, Osaka University)
    Abstract: This paper identifies the causes of failure of the nationalisation of the German railway system by the Imperial Railway Office (das Reichseisenbahnamt; REA) that was established during 1873-1874 under the order of Otto v. Bismarck, the first Imperial Chancellor (Reichskanzler). The REA was not able to keep railways in the Reich (unified Germany) under its perfect control as provided by the German Imperial Constitution. What impeded the REAfs mission? We must pay attention to the REAfs problems as an organisation. As the official documents of the REA suggested, the organisation was not free from bureaucratic inflexibility in both structural and personal matters. Furthermore, compared with the other railway administration bodies in Germany in the 19th century, I point out the REAfs incapability in collecting regional information. The REA, the central bureau in the German-Prussian capital, had no regional unit. Its top-heavy structure and the higher-ups in the bureaucracy did not collect the non-lettering information from those who were doing the actual work at each railway, and this caused a criticized edisproportionate emphasis on documentsf. To illustrate this point, I focus on the failure by the REA in playing the leading role in compiling the first German national railway statistics.
    Keywords: Railways, Germany, Nationalisation, 19th century
    JEL: N43 N73
    Date: 2012–10
  18. By: Tetsuji Okazaki (Faculty of Economics, University of Tokyo)
    Abstract: This paper presents the intra-firm trade network in Mitsubishi Corporation (Mitsubishi Shoji) in the 1920s. In this period, Mitsubishi Co. established a global branch network to expand trades. Using original documents of Mitsubishi Co., we obtained the data on the trade flow between every pair of the headquarters and branches in 1922 and 1928. It was confirmed that there was a dense global intra-firm trade network, and that some branches as well as the headquarters played the role of hubs in the network. Also, we found that the structure of the network substantially changed over time for the headquarters to have a central position.
    Date: 2012–10

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