nep-hme New Economics Papers
on Heterodox Microeconomics
Issue of 2015‒03‒22
fifteen papers chosen by
Carlo D’Ippoliti
Università degli Studi di Roma “La Sapienza”

  1. Frederic S. Lee’s contributions to heterodox economics By Tae-Hee Jo; Zdravka Todorova
  2. Heterodox economics, social ontology, and the use of mathematics By Mark Setterfield
  3. Theories of finance and financial crisis: Lessons for the Great Recession By Dodig, Nina; Herr, Hansjörg
  4. The Demise of Marx’s Labour Theory of Value and the ‘New Interpretation’: A Recap Note By Ernesto Screpanti
  5. The formal-informal economy dualism in a retrospective of economic thought since the 1940s By Clement, Christine
  6. The Trade-off Unemployment Rate/External Deficit: Assessing the Economic Adjustment Program of the Troika (European Commission, ECB and IMF) for Portugal using an Input-Output Approach By João Ferreira do Amaral; João Carlos Lopes
  7. The Economics of Ethical Consumption By Martha A. Starr
  8. Production sharing, demand spillovers and CO2 emissions : the case of Chinese regions in GVCs By Pei, Jiansuo; Meng, Bo; Wang, Fei; Xue, Jinjun
  9. Smith, Malthus and Recent Evidence in Global Population Dynamics By Xiao Jiang; Luis Villanueva
  10. Intuitive cooperation refuted: Commentary on Rand et al. (2012) and Rand et al. (2014) By Myrseth, Kristian Ove R.; Wollbrant, Conny E.
  11. Determinants of Female Entrepreneurship in India By Arnaud Daymard
  12. Methodology Does Matter: About Implicit Assumptions in Applied Formal Modelling. The case of Dynamic Stochastic General Equilibrium Models vs Agent-Based Models By Gräbner, Claudius
  13. Gender and the Business Cycle: A Stocks and Flows Analysis of US and UK Labour Market States By Giovanni Razzu; Carl Singleton
  14. The Impact of Affirmative Action on the Employment of Minorities and Women over Three Decades: 1973-2003 By Fidan Ana Kurtulus
  15. Efficiency versus Stereotypes: an Experiment in Domestic Production By Hélène Couprie; Elisabeth Cudeville; Catherine Sofer

  1. By: Tae-Hee Jo (SUNY Buffalo State); Zdravka Todorova
    Abstract: The community of heterodox economists has lost Fred Lee, one of its fervent leaders, who has been at the center of the heterodox movement for the past three decades. The paper delineates Fred Lee’s wide-ranging contributions to heterodox economics focusing on the making of the history and identity of heterodox economics, on heterodox microeconomic theory, and on the analysis of the social provisioning process. What do these contributions mean for heterodox economics? Fred Lee has left us heterodox theories, institutions, and goodwill that will continue developing in the work of economists who are concerned with establishing an alternative critical theory to the status quo.
    Keywords: Frederic S. Lee; heterodox economics; heterodox theory; heterodox microfoundations; heterodox microeconomics; surplus approach.
    JEL: B3 B5 D2 D4 P1
    Date: 2015–03
  2. By: Mark Setterfield (Department of Economics, New School for Social Research)
    Abstract: In a recent article (Lawson, 2013), Tony Lawson argues for a Veblenian interpretation of the term “neoclassical”, according to which a neoclassical economist is one whose methodology is at odds with their ontological presuppositions. This leads him to categorize many heterodox economists as neoclassical on the basis that their use of mathematical modeling is at odds with their (implicit) acceptance of an open-systems ontology. The reason is that, according to Lawson, mathematical modeling is deductivist: it presupposes that social systems are closed. The argument advanced in this paper is that this last claim is true only some of the time, and problematic only some of the time that it is true. It therefore amounts to a defense of mathematical modeling by heterodox economists that is, at the same time, sympathetic to Lawson’s claims that the social realm is structured but open and that this ontology is (implicitly) accepted by many heterodox economists.
    Keywords: Mathematical modeling, social ontology, open systems, critical realism, heterodox economics
    JEL: B41 B50 C02
    Date: 2015–03
  3. By: Dodig, Nina; Herr, Hansjörg
    Abstract: This paper presents an overview of different models which explain financial crises, with the aim of understanding economic developments during and possibly after the Great Recession. In the first part approaches based on efficient markets and rational expectations hypotheses are analyzed, which however do not give any explanation for the occurrence of financial crises and thus cannot suggest any remedies for the present situation. A broad range of theoretical approaches analyzing financial crises from a medium term perspective is then discussed. Within this group we focused on the insights of Marx, Schumpeter, Wicksell, Hayek, Fisher, Keynes, Minsky, and Kindleberger. Subsequently the contributions of the Regulation School, the approach of Social Structures of Accumulation and Post-Keynesian approach, which focus on long-term developments and regime shifts in capitalist development, are presented. International approaches to finance and financial crises are integrated into the analyses. We address the issue of relevance of all these theories for the present crisis and draw some policy implications. The paper has the aim to find out to which extent the different approaches are able to explain the Great Recession, what visions they develop about future development of capitalism and to which extent these different approaches can be synthesized.
    Keywords: theories of crisis,Marxian,Institutional,Keynesian,capitalism,finance,financial crisis
    JEL: B14 B15 B24 B25 E11 E12 E13 E32
    Date: 2015
  4. By: Ernesto Screpanti
    Abstract: Marx’s theory of labour value is flawed. This note summarizes the main reasons why this is so. At the same time, it claims that the theory of exploitation does not depend on a labour embodied valuation and can be expounded by resorting to the theory of production prices. Almost all Marxists have now accepted this truth. Most of them have been convinced by a ‘new interpretation’ which has been able to translate the price of net output into an amount of ‘living labour’ and the rate of exploitation into a ratio between unpaid and paid labour. What produced such a surprising result is the use of labour productivity as a numeraire
    Keywords: Marxian Economics, Labour Values, Prices of Production, Theory of Exploitation
    JEL: B14 E11
    Date: 2015–03
  5. By: Clement, Christine
    Abstract: Central to the scientific debate about the 'informal sector' and the validity of the concept used to be a twofold challenge. The crux laid not only in the objective to explain the widely visible persistence of the informal economy in developing countries, but also in the identification of its roots and the proliferation conditions to be met ex ante. The present paper aims at establishing a link between the theories on informality and marginalization which is another important issue that has arisen within the discussions on the causes of persistent poverty a few years ago. Both concepts are interlinked and self-enforcing. On the macroeconomic level, any economy - be it formal or informal - consists of a set of different economic sectors and any of these sectors basically consists of an accumulation of people on the microeconomic level. Every time one looks at the macro level where political and economic conditions frame the dynamics of the formal and the informal economy, one has at the same time to look at the micro-level where the social and economic conditions determine the incentives for every actor to participate either in the formal, the informal or in both economies. Informality has multiple sources depending on whether the agent took a voluntary choice or had to involuntary opt-out from an institutional system. In this paper, the connection between informality and involuntary exclusion shall be examined in a retrospective of economic thought since the 1940s. The roots of the intertwined concepts of informality and economic exclusion have been laid in the dual economy theories of the 1940s-1950s. Recapitulating the works of Julius BOEKE, Arthur LEWIS, John HARRIS & Michael TODARO, Albert HIRSCHMAN and other socio-economists of that time, it will be argued that one of the necessary reasons for the persistence of the informal economy in developing countries is the dualism in institutional frameworks that leads to the marginalization of social groups and their subsequent exclusion from formal economic activities. By referring to the groundbreaking Africa studies of Keith HART (1971) and the INTERNATIONAL LABOUR ORGANIZATION (1972), special emphasis will be given to the causal reciprocity between informality, marginalization and economic exclusion. The paper closes with a brief overview of current schools of thought that deal very differently with the issue of informality and economic exclusion.
    Keywords: economic dualism,informal sector,informal economy,informality,marginalization,economic exclusion,involuntary exclusion,institutions,inequality,traditional sector,urban rural sector,stages of development,Julius Boeke
    JEL: B20 B25 J64 O15 O17 O43 N90 P16
    Date: 2015
  6. By: João Ferreira do Amaral; João Carlos Lopes
    Abstract: This article presents an evaluation of the economic adjustment program negotiated between the Portuguese government and the Troika (European Commission, ECB and IMF) in May 2011, with an assessment different from the usual exercises. Instead of an ex-post comparison between the actual results and the proposed targets, an ex-ante assessment of the forecast errors is made. It is shown that these errors could be avoided if the productive (input-output) structure of the economy and the unemployment/external deficit trade-off were taken into account. The main conclusion of this assessment, a large under-estimation of the unemployment rate of about 4 percentage points, illustrates the technical incompetence of this adjustment program and the huge economic and social costs it unnecessarily caused. The methodology used can easily be replicated in assessing other similar programs, such those applied in Greece, Ireland and Cyprus.
    Keywords: Unemployment, External deficit; Input-output analysis; Economic adjustment program; Troika; Portugal
    JEL: E61 C67 D57
    Date: 2015–03
  7. By: Martha A. Starr
    Abstract: Although there has been little economic research on 'ethical consumption' in a general sense, work on its various aspects is growing. This paper reviews economic research on ethical consumption, examining both demand-and supply-side aspects. It is argued that the most promising way to see ethical consumption through an economic lens is via models with heterogeneous consumers, in which some have strong intrinsic motivation to adopt ethical-consumption practices, others will adopt if they perceive a practice to be becoming a social norm and its extra costs are moderate, and others still will be impervious to it. Implications for the spread of ethical consumption and its ability to affect change are considered.
    Keywords: ethical consumption, consumption ethics, socially responsible consumption, corporate social responsibility, sustainable consumption, consumer behavior, pro-social behavior, consumer economics
    JEL: E21 D11 D12 A13 A12 Q5
    Date: 2015
  8. By: Pei, Jiansuo; Meng, Bo; Wang, Fei; Xue, Jinjun
    Abstract: This study adopts the perspective of demand spillovers to provide new insights regarding Chinese domestic-regions' production position in global value chains and their associated CO2 emissions. To this end, we constructed a new type of World Input-Output Database in which China's domestic interregional input-output table for 2007 is endogenously embedded. Then, the pattern of China's regional demand spillovers across both domestic regions and countries are revealed by employing this new database. These results were further connected to endowments theory, which help to make sense of the empirical results. It is found that China's regions locate relatively upstream in GVCs, and had CO2 emissions in net exports, which were entirely predicted by the environmental extended HOV model. Our study points to micro policy instruments to combat climate change, for example, the tax reform for energy inputs that helps to change the production pattern thus has impact on trade pattern and so forth.
    Keywords: China, International trade, Input-output tables, Environmental protection, Climatic change, Taxation, Energy tax, Carbon tax, Climate change, CGE model, Energy intensive industry
    JEL: C65 Q56 R15
    Date: 2015–02
  9. By: Xiao Jiang (Department of Economics, Denison University); Luis Villanueva (Department of Economics, Denison University)
    Abstract: In conventional economic theories, population is determined outside of the economic system. However, classical political economists such as Adam Smith and Thomas Malthus have long argued for the endogenous determination of population, hence establishing a connection between eco- nomics and demography. Foley (2000) used empirically established global per capita output-fertility schedule based on the 1960-1992 Extended Penn World Tables to project the population stabilizing level of world per capita output and population. In this paper we intend to update this line of re- search using more recent empirical evidences. We find that the world production still exhibits strong pattern of Smithian increasing returns to scale, and most countries' population have been stabilizing along a con- vex path in the income-fertility schedule. Our projection suggests that the world population will stabilize at per capita income around $ 13,550 in 2005 PPP, and by the year of 2011, the world per capita output was still about $2,824 short. The world population will stabilize around 10 billion assuming the absence of any exogenous shocks to the empirically established global income-fertility relation.
    Keywords: Growth, Demographic Equilibrium, Classical Economics
    JEL: B12 J11
    Date: 2015–03
  10. By: Myrseth, Kristian Ove R. (School of Management, University of St. Andrews, St Andrews, KY16 9RJ, UK); Wollbrant, Conny E. (Department of Economics, School of Business, Economics and Law, Göteborg University)
    Abstract: We show that Rand et al. (2012) and Rand et al. (2014)—who argue that cooperation is intuitive—provide an incorrect interpretation of their own data. They make the mistake of inferring intuition from relative decision times alone, without taking into account absolute decision times. We re-examine their data and find that the vast majority of their responses are slow, exceeding four seconds, even in time-pressure treatments intended to promote intuitive responses. Further, a plot of the average cooperation rates by decision time presents no clear relationship between decision time and cooperation. However, among the few decisions that were relatively fast (less than four seconds), there appears to be a positive—not negative— correlation between decision time and cooperation. We conclude that the data presented by Rand et al. (2012) and Rand et al. (2014) fail to provide evidence for the hypothesis that cooperation is intuitive. If anything, their data indicate the opposite.
    Keywords: Cooperation; Intuition; Decision times; Pro-social behavior
    JEL: D03 D64 H40
    Date: 2015–03
  11. By: Arnaud Daymard
    Abstract: This paper examines the nature and determinants of female entrepreneurship in India based on survey data. The first part assesses basic characteristics of female entrepreneurship in India, while the subsequent sections analyse key determinants of female entrepreneurship based on the literature, and test their importance at the state level in India with the support of regressions on panel-data. It also reviews existing policies bearing on female entrepreneurship and makes recommendations for further policies in this area. Entrepreneurship can create new economic opportunities for women and contribute to overall growth and exit from poverty. The potential flexibility in time use from entrepreneurship can also facilitate balancing work and family obligations for women. However, entrepreneurs, both male and female, are relatively scarce in India compared to peer countries, and tend to work in small units often outside the formal sector. While many of the barriers to entrepreneurship are common to both genders (access to capital and business networks, adequate training and facilities) female entrepreneurs face gender biases stemming from socio-economic factors or specific biases in laws such as inheritance laws.<P>Les déterminants de l'entreprenariat féminin en Inde<BR>Ce document examine la nature et les déterminants de l'entrepreneuriat féminin en Inde à partir des données de l'enquête. La première partie évalue les caractéristiques de base de l'entrepreneuriat féminin en Inde, tandis que les sections suivantes analysent les principaux déterminants de l'entrepreneuriat féminin basé sur la littérature, et de tester leur importance au niveau de l'État en Inde avec le soutien de régressions sur données de panel. Il examine également les politiques existantes portant sur l'entrepreneuriat féminin et fait des recommandations pour de nouvelles politiques dans ce domaine. L’entreprenariat peut offrir de nouveaux débouchés économiques aux femmes et contribuer à la croissance globale et à la sortie de la pauvreté. La marge de souplesse dans l’utilisation du temps qu’offre l’entreprenariat peut également permettre de mieux concilier les obligations professionnelles et familiales des femmes. Toutefois, qu’ils soient hommes ou femmes, les entrepreneurs sont relativement rares en Inde par rapport à d’autres pays comparables, et ont tendance à travailler dans de petites entreprises souvent situées en dehors de l’économie formelle. Qu’il s’agisse du nombre d’entreprises en phase de démarrage ou du nombre d’entreprises nouvellement créées, l’Inde affiche des chiffres relativement faibles et en stagnation par rapport aux autres BRICS. Si bon nombre des obstacles à la création d’entreprise sont communs aux deux sexes (accès aux financements et aux réseaux économiques, formation adéquate, locaux), les femmes entrepreneurs se heurtent à des préjugés sexistes qui trouvent leur origine dans des facteurs socioéconomiques ou dans certains partis consacrés par le droit, notamment par le droit de l’héritage.
    Keywords: gender, India, gender equality, female entrepreneurship, female economic participation, participation économique des femmes, Inde, égalité des sexes, entreprenariat féminin
    JEL: J16 J18 J21 J22 J71 J82 J83
    Date: 2015–03–12
  12. By: Gräbner, Claudius
    Abstract: This article uses the functional decomposition approach to modeling Mäki (2009b) to discuss the importance of methodological considerations before choosing a modeling framework in applied research. It considers the case of agent-based models and dynamic stochastic general equilibrium models to illustrate the implicit epistemological and ontological statements related to the choice of the corresponding modeling framework and highlights the important role of the purpose and audience of a model. Special focus is put on the limited capacity for model exploration of equilibrium models and their difficulty to model mechanisms explicitly. To model mechanisms that have interaction effects with other mechanisms is identified as a particular challenge that sometimes makes the explanation of phenomena by isolating the underlying mechanisms a difficult task. Therefore I argue for a more extensive use of agent-based models as they provide a formal tool to address this challenge. The overall conclusion is that a plurality of models is required: single models are simply pushed to their limits if one wishes to identify the right degree of isolation required to understand reality.
    Keywords: Functional decomposition approach, general equilibrium, agent-based models, methodology, epistemology, ontology, formal modeling, isolation
    JEL: B41 C6 C63
    Date: 2015–03–19
  13. By: Giovanni Razzu (Department of Economics, University of Reading); Carl Singleton
    Abstract: In this paper we combine an analysis of all labour market stocks and flows to assess gender gaps during periods of economic recessions and booms in oth the US and the UK. Starting from an improved understanding of the relationship between gender and the business cycle, we analyse three important and related gender issues: how the fluidity of the labour market explains the way gender gaps in population rates behave during economic cycles, whether the well-known stock-flow fallacy in the importance of cyclical differences in participation extends to gender patterns, and the potential presence of the added worker effect at the aggregate level during the latest Great Recession. We find that, for the UK in particular, flows reveal more prevalent gender differences in participation over the cycle than an analysis of stocks would imply. This is consistent with a female specific added worker effect in the UK, which is not present in the US.
    Keywords: business cycles, gender, employment
    JEL: E32 J16 C32
    Date: 2014–11–25
  14. By: Fidan Ana Kurtulus (University of Massachusetts, Amherst)
    Abstract: What role has affirmative action played in the growth of minority and female employment in U.S. firms? This paper analyzes this issue by comparing the employment of minorities and women at firms holding federal contracts and therefore mandated to implement affirmative action, and at noncontracting firms, over the course of three decades spanning 1973–2003. It constitutes the first study to comprehensively document the long-term impact of affirmative action in federal contracting on the U.S. employment landscape. The study uses a new panel data set of over 100,000 large private-sector firms across all industries and regions, obtained from the U.S. Equal Employment Opportunity Commission, and it exploits rich variation across firms in the timing of federal contracting to identify affirmative action effects. The paper’s key results indicate that the primary beneficiaries of affirmative action in federal contracting over 1973–2003 were black and Native American women and men. Analysis of the dynamics of workforce composition around the time of contracting reveals that a large part of the effect of affirmative action on increasing protected group shares occurred within the first four years of gaining a contract, and that these increased shares persisted even after a firm was no longer a federal contractor. The paper also uncovers important results on how the impact of affirmative action evolved over 1973–2003. In particular, it finds that the fastest growth in the employment shares of minorities and women at federal contractors relative to noncontracting firms occurred during the 1970s and early 1980s, decelerating substantially in ensuing years.
    Keywords: Affirmative Action in the Labor Market; Gender; Race; Workforce Composition
    JEL: J15 J16 J21 J7 K31 N32 N42 M51
    Date: 2015–01
  15. By: Hélène Couprie (Université de Cergy-Pontoise); Elisabeth Cudeville (Centre d'Economie de la Sorbonne - Paris School of Economics); Catherine Sofer (Centre d'Economie de la Sorbonne - Paris School of Economics)
    Abstract: Most household models assume that decisions taken inside the family are Pareto optimal. However, empirical studies cast doubts upon the efficiency assumption. The sharing of time among men and women between market work and household work is highly differentiated by gender. In this paper we examine whether couples deviate from efficiency in household production decisions, using an experimental design in which subjects are real couples. The aim of the experiment is to mimic the sharing of highly-gendered household tasks. We compare the sharing of gendered tasks to that of more neutral tasks. By measuring individual productivity in each task, we can see if couples tend to deviate from efficiency, and by how much in each case. As we show that they deviate more when sharing gendered tasks, we also explore why, looking at different possible explanations, and we find evidence of the impact of stereotypes on inefficiencies
    Keywords: Stereotypes; social norms; household production; time allocation; experiment; production function; household behavior; intra-household decision-making
    JEL: D13 J16 J22 C91 C92
    Date: 2015–03

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