nep-hme New Economics Papers
on Heterodox Microeconomics
Issue of 2013‒07‒28
eleven papers chosen by
Frederic S. Lee
University of Missouri-Kansas City

  1. The measurement of labour content: a general approach By Yoshihara, Naoki; Veneziani, Veneziani
  2. The Unmaking of Marx’s Capital: Heinrich’s Attempt to Eliminate Marx’s Crisis Theory By Kliman, Andrew; Freeman, Alan; Potts, Nick; Gusev, Alexey; Cooney, Brendan
  3. Nearer to Straffa than Marx: Adam Smith on productive and unproductive labour By Roy Grieve
  4. How to make the economics profession socially useful? (A reaction to George Soros’ lectures and INET’s activities) By Yefimov, Vladimir
  5. The Gender Balance of Academic Economics 2012: Royal Economic Society Women’s Committee Survey By L.C. Blanco; M. Mitka; K.Mumford; J. Roman
  6. How to Enforce Value-Added Tax? The Role of Inter-Sectoral Linkages By Hoseini, M.
  7. Governance work in inter-organizational networks: driving processes and structures By Chahira Mehouachi; Véronique Perret
  8. The irresistible charm of the Microfoundations, or the overwhelming force of the discipline's Hard Core? By Skouras, Thanos; Kitromilides, Yiannis
  9. The fight against cartels: a transatlantic perspective By E. Dargaud; A. Mantovani; C. Reggiani
  10. Lock-in, path dependence, and the internationalization of QWERTY By Neil Kay
  11. Market experience is a reference point in judgments of fairness By Holger Herz; Dmitry Taubinsky

  1. By: Yoshihara, Naoki; Veneziani, Veneziani
    Abstract: This paper analyses the theoretical issues related to the measurement of labour content in the context of general technologies with heterogeneous labour. A novel axiomatic framework is used in order to formulate the key properties of the notion of labour content and analyse its theoretical foundations. Then, a simple measure of labour content is uniquely characterised, which is consistent with common practice in input-output analysis and with a number of recent approaches in value theory.
    Keywords: labour content, labour productivity, technical change, axiomatic analysis
    JEL: D57 J24 O33 D46
    Date: 2013–05
  2. By: Kliman, Andrew; Freeman, Alan; Potts, Nick; Gusev, Alexey; Cooney, Brendan
    Abstract: Michael Heinrich’s recent Monthly Review article claims that the law of the tendential fall in the rate of profit (LTFRP) was not proved by Marx and cannot be proved. Heinrich also argues that Marx had doubts about the law and that, for this and other reasons, his theory of capitalist economic crisis was only provisional and more or less in continual flux. This response shows that Heinrich’s elementary misunderstanding of the law––his belief that it is meant to predict what must inevitably happen rather than to explain what does happen––is the source of his charge that it is unproved. It then shows that a simple misreading of Marx’s text lies at the basis of Heinrich’s claim that the simplest version of the LTFRP, “the law as such,” is a failure. Marx’s argument that increases in the rate of surplus-value cannot “cancel” the fall in the rate of profit is then defended against Heinrich’s attempt to refute it. Finally, the paper presents evidence that Marx was indeed convinced that the LTFRP is correct and that he regarded the crisis theory of volume 3 of Capital as finished in a theoretical sense.
    Keywords: Crisis Theory;Marxist Economics;TSSI;Rate of Profit
    JEL: B4 E0 E22
    Date: 2013–07–22
  3. By: Roy Grieve (Department of Economics)
    Abstract: We investigate Adam Smith’s analysis of the properties of what he called “productive†- as against “unproductive†- labour, a concept which commentators have frequently found problematic. Puzzles have been noted and inconsistency alleged. A question arises – did Smith confuse two different concepts of productive labour? We believe that, despite the apparent problems, a coherent reading of Smith’s account of productive and unproductive labour is in fact possible: if “productive labour†is understood to refer comprehensively to labour which not only maintains but, through producing a net surplus, adds to the community’s stock of wealth – as regards either the financial or the real resources which make possible economic growth – the difficulties with Smith’s treatment largely disappear.
    Keywords: Productive/unproductive labour; basic/non-basic goods; surplus production
    JEL: B12 E11 O11
    Date: 2013–05
  4. By: Yefimov, Vladimir
    Abstract: The profession of economics does not fulfill its social function to provide people a correct understanding of economic phenomena. In other words, the institution of economics does not work properly. George Soros makes this conclusion in his lectures at the Central European University (Soros, 2010). He sponsored the creation of the Institute for New Economic Thinking (INET) with the objective to change this situation in economics. However activities of the INET are not oriented to change the institution of economics and most of participants in its activities are mainstream economists. This short paper summarizes my ideas in what way it is necessary to change the institution of economics. First, in order to make the profession of economists socially useful, it is necessary to reconsider the methodology and history of economics. At present the former leads the profession in a wrong way and the latter to a great extent justifies this wrong way. Secondly, it is necessary to reform the institution of economics. I define the notion of institution in the following way: an institution is a set of formal and informal rules, and also beliefs, that stand behind these rules, that orient the behaviour of members of a certain community. The rules of the institution of economics relate to the community of university professors and students of economics. These rules provide a framework for developing curricula and syllabi, as well as for the organization of examinations. They define the procedures and directions of economic research, and the criteria for publication of articles in academic economic journals. These rules include formal and informal rules of functioning of professional organizations of economists, such as the American Economic Association. Beliefs that underlie the rules of functioning of the community of academic economists are expressed in different answers to such questions as: What does it mean to undertake economic research? What is the purpose of economic research? What should economists study? How should they carry out the study? In what form should the results of the study be presented? What does it mean to teach economics? What kind of economics should we teach? The answers to these questions, along with formal and informal rules of behaviour based on the answers, together constitute the institutional knowledge of professional economists. Candidates for admission to the profession acquire most of this knowledge during the preparation and defense of PhD dissertations that many do in the framework of post-graduate studies. If someone becomes a member of the profession and does not have this knowledge, or refuses to follow its instructions, then sooner or later she/he will be rejected by the profession. To reform the profession of economists means to reform the institution of economics, i.e. to change their rules and beliefs. I think that the only way for economics to become a socially useful science is the transformation of economics from a kind of applied mathematics (mainstream economics) or social philosophy (heterodox economics) to something similar to social anthropology with its ethnographic method justified in the framework of the constructivist discursive methodology. The methodology that I prone can be expressed very shortly in the following way. The social-economic regularities result from the fact that people behave according to certain socially-constructed rules, and these rules are explained, justified, and kept in mind by telling themselves and others some stories. Taking this statement into consideration, we must agree with the fact that for the identification of social-economic regularities, we must explore and analyse these stories. Modern economics does not study the discourses of economic actors and thereby deprive itself of the ability to understand and predict economic phenomena. The study of discourse is not a deviation from the academic standards which are built into natural sciences, but rather an approximation to it, since almost all social interactions are mediated by language.
    Keywords: institution of economics, radical reform of the economic discipline, manipulative and cognitive functions of economics, new model of scientific research, interpretive paradigm (discursive economics)
    JEL: A11 A13 B4 B41
    Date: 2012–03–12
  5. By: L.C. Blanco; M. Mitka; K.Mumford; J. Roman
    Date: 2013–07
  6. By: Hoseini, M. (Tilburg University, Center for Economic Research)
    Abstract: Abstract: This paper models and empirically tests a self-enforcing feature of the value added tax (VAT) which is absent in the theory: An incentive that makes formal traders buy from suppliers who pay VAT too. In addition, it explores how the government can deploy this feature to enforce VAT more efficiently by reallocating the enforcement spendings among different sectors. The results suggest that the government should identify the non-compliant firms more strictly in the backwardly linked sectors {which buy their inputs from the others{ and focus on revealing within-firm information. In contrast, in forwardly linked industries, the government should zoom on double checking the transaction records with the corresponding input credit claims. Empirical evidence from Indian service sector enterprises strongly confirms the existence of VAT self-enforcement effect, even in the absence of government punishments.
    Keywords: Value-added tax;Informality;Tax enforcement;Linkage analysis.
    JEL: H26
    Date: 2013
  7. By: Chahira Mehouachi (DRM - Dauphine Recherches en Management - CNRS : UMR7088 - Université Paris IX - Paris Dauphine); Véronique Perret (DRM - Dauphine Recherches en Management - CNRS : UMR7088 - Université Paris IX - Paris Dauphine)
    Abstract: There are many calls for further investigation of the underlying processes, practices and specificities of governance when economic exchanges are organized within networks. Through an examination of what governance involves and how it occurs in two clusters specialized in digital and video game industries, our multi-method study provides useful insights in the finalities and purposes of governance in an inter-organizational and collaborative context, the main tools and mechanisms that are being used and the structures supporting network governance. Our findings shed also light upon the processual nature of governance in networks contexts. Governance is a set of processes, or a "meta-process", that are geared toward the (1) creation, the maintenance and the evolution of a set of common interests, (2) the design of a adapted architecture of rights and obligations and (3) the crafting of different mechanisms of coordination and control. These processes aim also to adapt the structure of governance continually to the frequent changes in the network attributes. We coin this process of governance functioning, evolution and continuous (re) actualization as governance work and argue for a new perspective about network governance.
    Keywords: network governance, interorganizational networks, video game industry, creative industries
    Date: 2013–07–03
  8. By: Skouras, Thanos; Kitromilides, Yiannis
    Abstract: The appeal of the microfoundations project in economics is strongly supported by the considerable force of the discipline's "hard core" (in Lakatos' sense). This is especially the case, if the microfoundations metaphor is seen as a way of giving precedence to microeconomics in unifying economic theory rather than as requiring that all macroeconomic propositions are reduced to or derived from microeconomic ones. Given the micro-theoretical nature of the "hard core", the microfoundations project and professional respect for the "hard core" have become closely intertwined and the orientating and disciplining role of the latter is of crucial importancε in driving the former. Thus, questioning the microfoundations project is tantamount to confronting the "hard core". Maximization of utility and maximization of profit, which are the two most fundamental tenets of the "hard core", both suffer from serious weaknesses. Maximization of utility is not only contradicted by a lot of experimental and other empirical evidence but it is also neither necessary nor sufficient for establishing the "law" of demand. Profit maximization is falsified both on theoretical and empirical grounds, in the case of large corporations under managerial control, and is inconsistent or implausible in the case of small owner-run firms. Consequently, privileging micro over macro theory does not ensure sound foundations and the microfoundations project makes little sense. It follows that the search for consistency between microeconomics and macroeconomics should best be pursued in terms of the bridge metaphor.
    Keywords: microfoundations, "hard core", utility maximization, profit maximization, methodological individualism, fallacy of composition, "unity of science", professionalization of economics
    JEL: A14 B41 D01
    Date: 2013–07–08
  9. By: E. Dargaud; A. Mantovani; C. Reggiani
    Abstract: The fight against cartels is a priority for antitrust authorities on both sides of the Atlantic. What differs between the EU and the US is not the basic toolkit for achieving deterrence, but to whom it is targeted. In the EU, pecuniary sanctions against the firm are the only instruments available to the Commission, while in the US criminal sanctions are also widely employed. The aim of this paper is to compare two different types of fines levied on managerial firms when they collude. We consider a profit based fine as opposed to a delegation based fine, with the latter targeting the manager in a more direct way. Under the assumption of revenue equivalence, we find that the delegation based fine, although distortive, is more effective in deterring cartels than the profit based one. When evaluating social welfare, a trade-off between deterrence and output distortion can arise. However, if the antitrust authority focuses on consumer surplus, then the delegation based fine is to be preferred.
    JEL: K21 L44 K42 L21
    Date: 2013–07
  10. By: Neil Kay (Department of Economics, University of Strathclyde)
    Abstract: This paper looks at the emergence of what is described here as the QWERTY family of standards (QWERTY and its international adaptations QZERTY, AZERTY, and QWERTZ). QWERTY has been described as an inferior solution and an accident of history. However, the analysis here finds that each member of the family represented highly efficient adaptations to specific user needs and technical challenges encountered in their own environments. These findings may be seen to have wider implications given QWERTY’s role as paradigm case in the literature on increasing returns and path dependence, and these are pursued in the paper.
    Keywords: QWERTY, innovation, invention, path dependence, technological standards
    JEL: O31
    Date: 2013–06
  11. By: Holger Herz; Dmitry Taubinsky
    Abstract: People's desire for fair transactions can play an important role in negotiations, organizations, and markets. In this paper, we show that markets can also shape what people consider to be a fair transaction. We propose a simple and generally-applicable model of path-dependent fairness preferences, in which past experiences shape preferences, and we experimentally test the model's predictions. We find that previous exposure to competitive pressure substantially and persistently reduces subjects' fairness concerns, making them more likely to accept low offers. Consistent with our theory, we also find that past experience has little effect on subjects' inclinations to treat others unfairly.
    Keywords: Social preferences, reference points, fairness, bargaining
    JEL: C78 C91 D01 D03
    Date: 2013–07

This nep-hme issue is ©2013 by Frederic S. Lee. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.