nep-hme New Economics Papers
on Heterodox Microeconomics
Issue of 2013‒01‒26
sixteen papers chosen by
Frederic S. Lee
University of Missouri-Kansas City

  1. The New Keynesian view of aggregate demand: some reflections from a Sraffian standpoint By White, Graham
  2. Price Rigidity: Microeconomic Evidence and Macroeconomic Implications By Emi Nakamura; Jón Steinsson
  3. Water nationalization and service quality By Borraz, Fernando; Pampillon, Nicolas Gonzalez; Olarreaga, Marcelo
  4. On the bottom-up foundations of the banking-macro nexus By Wäckerle, Manuel
  5. Still more on why we should bury the Marginal Productivity Theory of the Price of Capital: A Supplementary Note By Roy Grieve
  6. Active Ageing and Gender Equality By Marcella Corsi; Manuela Samek Lodovici
  7. Who Earns Minimum Wages in Europe? New Evidence Based on Household Surveys By François Rycx; Stephan K. S. Kampelmann
  8. The role of men in the economic and social development of women : implications for gender equality By Farre, Lidia
  9. Primitivization of the EU Periphery: The Loss of Relevant Knowledge By Erik S. Reinert
  10. Portugal Before and After the European Union: Facts on Nontradables By Fernando Alexandre; Pedro Bação
  11. Anticipatory Systems, Preferences, & Averages By Leonid A. Shapiro
  12. Women Empowerment: An Epistemic Quest By Pillai N., Vijayamohanan; B. P., Asalatha
  13. Monetary policy decisions – comparing theory and “inside” information from MPC members By Mikael Apel; Carl Andreas Claussen; Petra Gerlach-Kristen; Petra Lennartsdotter; Øistein Røisland
  14. Use and abuse of authority: A behavioral foundation of the employment relation By Björn Bartling; Ernst Fehr; Klaus M. Schmidt
  15. Theocracy is just another Form of Dictatorship: Theory and Evidence from the Papal Regimes By Fabio Padovano; Ronald Wintrobe
  16. An ABM for Economics: Micro Explains Macro By Luca Barone

  1. By: White, Graham
    Abstract: The paper contends that the derivation of the aggregate demand curve in the new Keynesian literature is insufficient to provide the theoretical ground for the use to which it is usually put; namely, as a theoretical basis for the claim that long-run wage and price flexibility would push a capitalist economy to the full-employment or "natural" level of output. It is argued that the derivation solely on the basis of the propositions about optimising household consumption expenditures is insufficient to guarantee a decreasing aggregate demand function without circular reasoning. This point is clarified by use of a very simple two-commodity production model of long-run steady states due to Spaventa and Nell. To guarantee a decreasing aggregate demand function, the new Keynesian approach must invoke the kinds of propositions used in more traditional derivations; propositions which themselves are in question on capital-theoretic gr ounds.
    Date: 2012–11
  2. By: Emi Nakamura; Jón Steinsson
    Abstract: We review recent evidence on price rigidity from the macroeconomics literature, and discuss how this evidence is used to inform macroeconomic modeling. Sluggish price adjustment is a leading explanation for large effects of demand shocks on output and, in particular, the effects of monetary policy on output. A recent influx of data on individual prices has greatly deepened macroeconomists' understanding of individual price dynamics. However, the analysis of these new data raise a host of new empirical issues that have not traditionally been confronted by parsimonious macroeconomic models of price-setting. Simple statistics such as the frequency of price change may be misleading guides to the flexibility of the aggregate price level in a setting where temporary sales, product-churning, cross-sectional heterogeneity, and large idiosyncratic price movements play an important role. We discuss empirical evidence on these and other important features of micro price adjustment and ask how they affect the sluggishness of aggregate price adjustment and the economy's response to demand shocks.
    JEL: E30
    Date: 2013–01
  3. By: Borraz, Fernando; Pampillon, Nicolas Gonzalez; Olarreaga, Marcelo
    Abstract: The objective of this paper is to explore the impact of Uruguay's privatization and subsequent nationalization of water services on network access and water quality. The results suggest that although the early privatization of water services had little impact on access to the sanitation network, the subsequent nationalization led to an increase in network access at the bottom of the income distribution as well as an improvement in water quality.
    Keywords: Town Water Supply and Sanitation,Water Supply and Sanitation Governance and Institutions,Water and Industry,Water Conservation,Infrastructure Regulation
    Date: 2013–01–01
  4. By: Wäckerle, Manuel
    Abstract: The complexity of credit money is seen as the central issue in the banking-macro nexus, which the author considers as a structural as well as a process component of the evolving economy. This nexus is significant for the stability/fragility of the economic system because it links the monetary domain with the real domain of economic production and consumption. The evolution of credit rules shapes economic networks between households, firms, banks, governments and central banks in space and time. The author discusses the properties and characteristics of this process in three sections. First, he discusses the origins of the theory of money and its role in contemporary monetary economics. Second, he briefly discusses current theoretical foundations of top-down and bottom-up approaches to the banking-macro nexus, such as DSGE or ABM. Third, he suggests an evolutionary framework, building on the generic-rule based approach, to arrive at standards for bottom-up foundations in agent-based models of the banking-macro nexus. --
    Keywords: 20th century origins of the theory of money,Schumpeterian credit-driven innovation,Post-Keynesian endogenous money,top-down versus bottom-up,evolutionary institutional approach to bank lending,generic credit rules as bottom-up foundations
    JEL: E41 G21 B52 B25 C63 E51
    Date: 2013
  5. By: Roy Grieve (Department of Economics, University of Strathclyde)
    Abstract: The purpose of this note is to supplement the author’s earlier remarks on the unsatisfactory nature of the neoclassical account of how the return on capital is determined. (See Strathclyde Discussion Paper 12-03: “The Marginal Productivity Theory of the Price of Capital: An Historical Perspective on the Origins of the Codswallopâ€). The point is made via a simple illustration that certain matters which are problematical in neoclassical terms are perfectly straightforward when viewed from a classical perspective. Basically, the marginalist model of the nature of an economic system is not fit for purpose in that it fails to comprehend the essential features of a surplus-producing economic system as distinct from one merely of exchange.
    Keywords: marginal productivity theory of distribution; reswitching
    JEL: B13 B51 D33
    Date: 2012–10
  6. By: Marcella Corsi; Manuela Samek Lodovici
    Abstract: Ageing is a distinctly gendered phenomenon, women being increasingly represented in the older cohorts of the European population, due to their longer life expectancy than men. Furthermore, gender differences and inequalities are a fundamental feature of social exclusion and poverty in old age. The twofold discrimination against older women workers based on gender and age stereotypes, combined with their greater vulnerability in the labour market caused by women-specific work trajectories (i.e. career breaks, part-time employment and the gender pay gap) compound with institutional arrangements in producing higher risks of poverty in old age for women than for men. While inadequate or obsolete skills remain the main barriers for older workers to remain in or re-enter the labour market, for women also unpaid work responsibilities (in particular care burdens) constitute severe constraints. Indeed crucial gender issues in old age relate to the role of older women as both major providers and users of care services.This paper discusses gender inequalities in old age and analyses measures implemented in the main policy areas of active ageing (employment; training and life-long learning; volunteer/community work; age-friendly environment and supportive services), in order to identify effective strategies in a gender equality perspective.
    Date: 2013–01–18
  7. By: François Rycx; Stephan K. S. Kampelmann
    Abstract: This paper aims to provide a comprehensive, evidence-based, and up-to-date assessment of minimum wages in a range of European countries. A first step towards a better understanding of where Europe stands today on this issue requires to grasp the diversity of European minimum wage systems, a key objective of the paper at hand. The second objective is to document international differences in the so-called "bite" of the minimum wage. This leads to questions such as "how do national minimum wages compare to the overall wage distribution?" and "how many people earn minimum wages in each country?" that are assessed for a set of nine countries from Western, Central and Eastern Europe: Belgium, Bulgaria, Germany, Hungary, Ireland, Poland, Romania, Spain, and the United Kingdom. This sample was designed to include countries for which recent evidence has been missing prior to this paper. What is more, the study also overcomes the narrow focus of extant overviews that have typically focussed only on full-time employment. Crucially, the study improves on existing work by looking beyond aggregate numbers; it provides a detailed panorama of the population of minimum wage earners in each country under investigation, notably by describing their composition in terms of a range of socio-demographic characteristics.
    Keywords: Minimum wage systems; Socio-economic consequences; Europe
    Date: 2013–01–10
  8. By: Farre, Lidia
    Abstract: This paper is a critical review of the literature on the issue of how male behavior affects female outcomes in the promotion of gender equality. It employs the family as the main unit of analysis because a large part of gender interactions occurs within this institution. This survey first summarizes recent studies on the distribution of power within the family and identifies several factors that have altered the bargaining position of men and women over the last decades. It then reviews empirical work on the contribution of men, as fathers and husbands, to the health and socioeconomic outcomes of women in both developed and developing countries. Finally, it discusses a set of economic policies that have intentionally or unintentionally affected men's attitudes and behaviors. The main implication is that policies meant to achieve gender equality should focus on men rather than exclusively target women.
    Keywords: Population Policies,Gender and Development,Gender and Law,Gender and Health,Health Monitoring&Evaluation
    Date: 2013–01–01
  9. By: Erik S. Reinert
    Abstract: The European periphery . from Greece to Spain and the Baltic States . is hard hit by economic crises in the form of unemployment and falling real wages. The immediate reasons for these crises, .the straw that broke the nationsÿ backÿ so to say, are not the same. The countries in crisis may have had irresponsible budget deficits or irresponsible housing and prop-erty booms, but . as this article argues . the present underlying problems in the European Union can partly be attributed to ignoring previously well-understood economic insights and wisdom based on the interplay between geography, technology, and economic structure. This ignored knowledge abounds in the German-speaking literature, in this chapter represented by three economists: Heinrich von Thünen, Friedrich List, and Joseph Schumpeter, whose collective lives span from 1783 to 1950. Although all three worked in the periphery of what is normally referred to as The German Historical School of Economics, they all centered their analysis on a qualitative understanding of economic phenomena which disappeared from ruling economic theory, and consequently also from the understanding of politicians.
    Date: 2013–01
  10. By: Fernando Alexandre (University of Minho and NIPE, Portugal); Pedro Bação (Faculty of Economics University of Coimbra and GEMF, Portugal)
    Abstract: The rise of nontradable sectors has been mentioned as one of the causes of low economic growth and external imbalances in the Portuguese economy. In this paper we describe the main trends and jumps in the evolution of nontradable sectors, since the mid-1950s, using four different databases to shed light on different dimensions of this issue. We show that, despite the pattern of the growth of the share of services being similar to that observed in other developed countries, since the early 1990s it has been significantly larger than in most countries. We find that the shift to nontradables in Portugal has been fast and that it occurred essentially at the expense of agriculture in the period 1953-95, and essentially at the expense of industry in the period 1995-2009. In 2009, the share of nontradables (defined as the sum of services plus construction) in total GVA reached 68%, if we exclude open service sectors, and 81.1%, if we treat all service sectors as nontradable. We also find that more than half of the change towards nontradables since joining the European Union took place in the period 1988-1993. Finally, we show that construction and services facing a strong Government demand were the main drivers of the increasing weight of nontradables in the Portuguese economy since 1986.
    Keywords: nontradable sectors; Portugal; Services; Structural Change.
    JEL: N60 N70 O14
    Date: 2012–12
  11. By: Leonid A. Shapiro
    Abstract: Behavior of systems that are functions of anticipated behavior of other systems, whose own behavior is also anticipatory but homeostatic and determined by hierarchical ordering, which changes over time, of sets of possible environments that are not co-possible, is proven to be highly non-linear and sensitively dependent on precise parameters. Averages and other kinds of aggregates cannot be calculated for sets of measurements of behavior of systems, defined in this essay, that are "index complex" in this way. This includes many systems, for instance, social behavior, where anticipation of behavior of other individuals plays a central role. Analysis by way of generalized functions of complex variables is done for these kinds of systems, and equations of change of state are formally described. Behavior that comprises of responses to market interest rates is taken for example.
    Date: 2013–01
  12. By: Pillai N., Vijayamohanan; B. P., Asalatha
    Abstract: The concept of women empowerment was the outcome of several important critiques and debates generated by the women’s movement throughout the world, and particularly in the developing countries. In essence, the 1980s saw the rise of stringent feminist critiques of development strategies and grassroots interventions: mainly for these strategies having generally failed to make any significant dent in the status of women. The failure was ascribed to the adaptation and the application of such approaches as welfare, anti¬poverty, and to some extent the efficiency approach. Presently, the users of the term ‘empowerment’ tend to assume an understanding of the meaning within some particular context. Often no clear explanation of empowerment is given. We believe that some of the confusion arises because the root concept – power –itself is disputed, and so is understood and experienced in different ways by different people. In fact, the underlying assumption of many interest groups or institutions (such as the World Bank and the UN) unfortunately is that economic empowerment automatically converts to women’s empowerment. As the following epistemic quest of empowerment unfolds in six sections, the major issue reflected upon is the concept of empowerment in its importance to women’s development. We begin in the next section by exploring the definitions of empowerment and then dissects the concept of power in section 3: the concept is discussed in the subsequent sections from different perspectives of power, feminism and personal autonomy and agency in the family framework. We consider three approaches here: theory of human needs, self-determination theory and capability approach. The last section concludes the paper.
    Keywords: Women empowerment; power; autonomy; agency; capability
    JEL: I30 B54 J16
    Date: 2012–09–11
  13. By: Mikael Apel; Carl Andreas Claussen; Petra Gerlach-Kristen; Petra Lennartsdotter; Øistein Røisland (Norges Bank (Central Bank of Norway))
    Abstract: How do monetary policy committee (MPC) members form their views about the appropriate interest rate? To what extent do they change their minds during the deliberations in the interest rate meeting? How important is the Chairman? The theoretical literature makes assumptions about these issues. We have asked actual MPC members in Sweden and Norway. This paper reports the results from this unique survey and discusses how well existing theories on monetary policy by committee capture the reality.
    Keywords: Monetary Policy Committee, Sveriges Riksbank, Norges Bank, Decision Making, Questionnaire Study.
    JEL: D71 E52 E58
    Date: 2013–01–16
  14. By: Björn Bartling; Ernst Fehr; Klaus M. Schmidt
    Abstract: Employment contracts give a principal the authority to decide flexibly which task his agent should execute. However, there is a tradeoff, first pointed out by Simon (1951), between flexibility and employer moral hazard. An employment contract allows the principal to adjust the task quickly to the realization of the state of the world, but he may also abuse this flexibility to exploit the agent. We capture this tradeoff in an experimental design and show that principals exhibit a strong preference for the employment contract. However, selfish principals exploit agents in one-shot interactions, inducing them to resist entering into employment contracts. This resistance to employment contracts vanishes if fairness preferences in combination with reputation opportunities keep principals from abusing their power, leading to the widespread, endogenous formation of efficient long-run employment relations. Our results inform the theory of the firm by showing how behavioral forces shape an important transaction cost of integration – the abuse of authority – and by providing an empirical basis for assessing differences between the Marxian and the Coasian view of the firm, as well as Alchian and Demsetz’s (1972) critique of the Coasian approach.
    Keywords: Theory of the firm, transaction cost economics, authority, power abuse, employment relation, fairness, reputation
    JEL: C91 D23 D86 M5
    Date: 2012–11
  15. By: Fabio Padovano (Condorcet Center for Political Economy, University of Rennes 1 and CREM-CNRS UMR 6211, France - DIPES, Università Roma Tre, Italy); Ronald Wintrobe (University of Western Ontario, USA)
    Abstract: This paper tests the explanatory and predictive power of a theory of dictatorship (e.g., Wintrobe 1998, 2007) when applied to the case of theocracy and in particular to the history of the temporal power of the Popes. We consider the behaviour of the Catholic theocracy in the Papal States, as this was a very long lasting theocracy, exposed to many historical shocks that reveal information about the incentives and constraints that characterize it. We use this information to test the explanatory power of the theory of dictatorship, showing that never in the history of the temporal power of the Church have the four categories of dictatorship that the theory foresees (tinpot, tyrant, totalitarian and conceivably timocrat) proven inadequate. Theocracy is just like any other form of dictatorship. Furthermore, we test some of the predictions of the theory of dictatorship about the durability of, and the source of opposition to the various regimes on data about the Papacy. The results appear to support the theory.
    Keywords: Matching, Dictatorship, Theocracy, Papacy
    JEL: Z12 N83 D79
    Date: 2012–12
  16. By: Luca Barone (University of Torino, Italy)
    Abstract: The link between micro and macro level has always been difficult to trace, even when variables have strong homogeneous characteristics. What happens when heterogeneous components and random factors interact is even more difficult to define. By adopting an agent-based approach we found a result that does not reflects the classical methods of quantification of an economy. This can be interpreted as an alarm bell signaling a wrong description of the economic framework we want to explain. We illustrate the effectiveness of the "agent-based reasoning machine" and we derive a model to compare with classical methods of aggregation. A more comprehensible description of the model is given by "Unified Modeling Language (UML)" and "ODD standard protocol", allowing us to clarify the internal processes of our model.
    Keywords: Aggregation, NetLogo, Simulations, Micro-Macro link, Agent Based Models (ABMs), Unified Modeling Language (UML), ODD standard protocol
    JEL: C63 D04 O47
    Date: 2013–01

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