nep-hme New Economics Papers
on Heterodox Microeconomics
Issue of 2019‒02‒18
eighteen papers chosen by
Carlo D’Ippoliti
Università degli Studi di Roma “La Sapienza”

  1. Defining institutions - A review and a synthesis By Claudius Graebner; Amineh Ghorbani
  2. Toward a Framework for Time Use, Welfare, and Household Centric Economic Measurement By Coyle, Diane; Nakamura, Leonard I.
  3. Who Said or What Said? Estimating Ideological Bias in Views Among Economists By Javdani, Moshen; Chang, Ha-Joon
  4. Nature humaine et choix rationnel : Pareto contre Walras ? By Richard Arena; Ludovic Ragni
  5. Economic Arbitrage and the Econophysics of Income Inequality By Anwar Shaikh; Juan Esteban Jacobo
  6. Landscape: from common good to human right By Laura Menatti
  7. Contagious Defaults in Inter-bank Networks By Mohammad Ali Elminejad
  8. As Time Went By - Long Waves in the Light of Evolving Evolutionary Economics By Francisco Louçã
  9. Existing and potential solutions to reduce financial exclusion - theoretical considerations and practical initiatives at the meeting point of finance and ethics By Győri, Zsuzsanna
  10. Measuring multi-product banks' market power using the Lerner index By Sherrill Shaffer; Laura Spierdijk
  11. The Financial Instability Hypothesis Applied to the 2007 Financial Crisis. By Lim, Chen
  12. Espace et complexités des systèmes territoriaux By Juste Raimbault
  13. Contemporary Criticism of Corporate Behaviour By Rosca, Paula-Carmen
  14. "Economic Planning under Capitalism: The New Deal and Postwar France Experiments" By Fernando J. Cardim de Carvalho
  15. Global labor flow network reveals the hierarchical organization and dynamics of geo-industrial clusters in the world economy By Jaehyuk Park; Ian Wood; Elise Jing; Azadeh Nematzadeh; Souvik Ghosh; Michael Conover; Yong-Yeol Ahn
  16. El costo social del carbono: una visión agregada desde América Latina By Alatorre, José Eduardo; Caballero, Karina; Ferrer, Jimy; Galindo, Luis Miguel
  17. Complémentarité Banque islamique du Sénégal/institutions de microfinance : un modèle de financement inclusif et durable des PME sénégalaises By SECK, Massamba Souleymane
  18. Are “happy” firms all alike? A comparative analysis of Italian and German manufacturing systems By A. Arrighetti; F. Landini

  1. By: Claudius Graebner (Institute for Comprehensive Analysis of the Economy, Johannes Kepler University Linz, Austria); Amineh Ghorbani (Delft University of Technology)
    Abstract: Despite being a key term in institutional economics, the term 'institution' seems to be used in various different ways. To what extent is this problematic, given that a shared understanding of key terms among scholars is a necessary condition for scientific progress? We review prominent definitions of the term 'institution' and identify a set of shared elements of these definitions, which can be summarized as institutions being “codifiable systems of social structures (in particular norms and rules) that lead to inclinations for people to act in specific ways†. This suggests that the shared understanding of ‘institutions’ is sufficiently concrete.
    Keywords: Definitions, institutions, epistemology
    Date: 2019–02
  2. By: Coyle, Diane (University of Cambridge); Nakamura, Leonard I. (Federal Reserve Bank of Philadelphia)
    Abstract: What is meant by economic progress, and how should it be measured? The conventional answer is growth in real GDP over time or compared across countries, a monetary measure adjusted for the general rate of increase in prices. However, there is increasing interest in developing an alternative understanding of economic progress, particularly in the context of digitalization of the economy and the consequent significant changes Internet use is bringing about in production and household activity. This paper discusses one alternative approach, combining an extended utility framework considering time allocation over paid work, household work, leisure, and consumption with measures of objective or subjective well-being while engaging in different activities. Developing this wider economic welfare measure would require the collection of time use statistics as well as well-being data and direct survey evidence, such as the willingness to pay for leisure time. We advocate an experimental set of time and well-being accounts, with a particular focus on the digitally driven shifts in behavior.
    Keywords: Internet; time use; measurement; welfare; household
    JEL: D11 D60 I31
    Date: 2019–02–12
  3. By: Javdani, Moshen; Chang, Ha-Joon
    Abstract: There exists a long-standing debate about the influence of ideology in economics. Surprisingly, however, there is no concrete empirical evidence to examine this critical issue. Using an online randomized controlled experiment involving economists in 19 countries, we examine the effect of ideological bias on views among economists. Participants were asked to evaluate statements from prominent economists on different topics, while source attribution for each statement was randomized without participants’ knowledge. For each statement, participants either received a mainstream source, an ideologically different less-/non-mainstream source, or no source. We find that changing source attributions from mainstream to less-/non-mainstream, or removing them, significantly reduces economists’ reported agreement with statements. Using a model of Bayesian updating we examine two competing hypotheses as potential explanations for these results: unbiased Bayesian updating versus ideologically-biased Bayesian updating. While we find no evidence in support of unbiased updating, our results are consistent with biased Bayesian updating. More specifically, we find that changing/removing sources (1) has no impact on economists’ reported confidence with their evaluations; (2) similarly affects experts/non-experts in relevant areas; and (3) affects those at the far right of the political spectrum much more significantly than those at the far left. Finally, we find significant heterogeneity in our results by gender, country, PhD completion country, research area, and undergraduate major, with patterns consistent with the existence of ideological bias.
    Keywords: Ideology, ideological bias, authority bias, Bayesian updating, views among economists
    JEL: A11 A14 C93 D83
    Date: 2019–02–04
  4. By: Richard Arena (Université Côte d'Azur, France; GREDEG CNRS); Ludovic Ragni (Université Côte d'Azur, France; GREDEG CNRS)
    Abstract: The article shows that there is a profound contrast between the concepts of economics that Walras and Pareto support. This contrast is based on the way each author views human nature and, from this the pricing mechanisms and forms of rationality they assign to the agents. We show that Walras’ approach to human nature structures the connection he proposes between pure, applied and social economics while Pareto’s leads him to methodologically separate his pure economics from his sociology. According to Walras the starting point of the study of economics is not market exchange between rational individuals as many authors propose, but a specific conception of human nature that promotes a synthesis between pure and social economies. However, we show that Pareto separates pure economics and sociology by means of specific representations of real man and homo œconomicus. These differences imply that Walras and Pareto’s works no longer be related in the same way to the Lausanne School.
    Keywords: Walras, Pareto, Lausanne School, Human Nature, Sociology, Rationality
    Date: 2019–02
  5. By: Anwar Shaikh (Department of Economics, New School for Social Research); Juan Esteban Jacobo (Department of Economics, New School for Social Research and Departamento de Economía, Universidad Externado de Colombia)
    Abstract: Yakovenko and his co-authors have established that the bottom 97-99 percent of individual incomes (labor incomes) follow a near-exponential distribution while the top incomes (property incomes) follow a power law. Traditional econophysics explanations of these patterns rely on various monetary analogues to the physics principle of energy conservation. We turn instead to the fundamental economic principle of turbulent arbitrage, modeled as a mean-reverting drift-diffusion process, to explain the observed distributions of wages, rates of return on assets, and property income. Entropy maximization plays different roles in two approaches. In the physics approach, stationary distributions are derived from the assumption of entropy maximization. In the economics approach, the dynamic paths generated by Fokker-Planck equations give rise to stationary distributions that turn out to be also entropy maximizing.
    Keywords: Economics, arbitrage, econophysics, income distribution, classical statistical mechanics
    Date: 2019–02
  6. By: Laura Menatti (Passages - CNRS - Centre National de la Recherche Scientifique - Université Bordeaux Montaigne - UPPA - Université de Pau et des Pays de l'Adour - MCC - Ministère de la Culture et de la Communication - UB - Université de Bordeaux, ENSAP Bordeaux - École nationale supérieure d'architecture et du paysage de Bordeaux, Universidad del Desarrollo)
    Abstract: This paper analyses how the current concept of landscape, which overcomes a scenery-based characterisation and a confinement to classical aesthetics and art, relates to the notions of the common good, commons and commons pool resources (CPRs). I consider landscape as a complex process in which human beings (with their history and culture) and their environment are mutually defined. On the basis of this approach to landscape studies, and by considering contemporary documents on landscape (i.e. the European Landscape Convention, the Latin American Initiative for Landscape and the UNESCO Florence Declaration) I analyse the similarity between the notion of landscape and the concepts of common good, the management of commons and the commons pool resources institutions. Through theoretical research supported by practical examples (e.g. community gardens) I argue that landscape can be defined as a common good, can include the commons, and the collective management of lands and common pool resources institutions. The paper relies on an excursus through the theories and legal documents , with a specific regard to the theoretical foundations of these different notions. The analysis carried out in the paper leads, in the end, to the possibility of defining the 'right to landscape'. Even if the concept is new in the literature, and a right to landscape is not recognised as a right per se, it is already implicated and studied in many international rights laws. Three approaches to landscape as a right have been distinguished: the right to landscape as a perceived landscape (a collective right), as a right to the environment and a right for addressing human rights. I integrated these approaches by arguing that landscape is a domain in relation to which human rights can be claimed, and that landscape can be considered as a right to which human beings are entitled.
    Keywords: right to landscape,landscape perception,landscape,Keyword: Common good,common pool resources,commons
    Date: 2017–09
  7. By: Mohammad Ali Elminejad (Institute of Economic Studies, Faculty of Social Sciences, Charles University in Prague, Smetanovo nabrezi 6, 111 01 Prague 1, Czech Republic)
    Abstract: This paper investigates systemic risk and contagion processes in the inter-bank network using network science methods. The inter-bank network consisting 10 banks, similar to the real world inter-bank networks, is studied to understand the contagion process in the network regarding changes in the network structure, as well as changes in the characteristics of components. Simulations support the claim that heterogeneous networks are more resilient to contagious shocks, while systemic shocks are more problematic in homogeneous networks. The study also shows that more interconnections among banks could accelerate or block contagion proces depending on the structure of the network and seniority of debts in the inter-bank network as well.
    Keywords: Complex Networks, Systemic Risk, Contagion, Default Risk, Epidemic Modeling
    JEL: G01 G21
    Date: 2018–12
  8. By: Francisco Louçã (ISEG, Lisbon University, Portugal.)
    Date: 2019–01
  9. By: Győri, Zsuzsanna
    Abstract: Banks and financial intermediators are motivated in two ways in socially responsible activities: we call them moral and business case. On the one hand, it is their moral obligation to serve the welfare and well-being of the whole society, as explained in the stakeholder theory: a company is not only responsible for its owners but must also consider and report its impact on other groups concerned. Expecting multidimensional value creation can be applied even more to financial intermediators than other economic actors, considering their important role as informal regulator and catalyst in the modern economy. On the other hand, they also have a business interest in responding to social and environmental changes as they can increase their competitiveness and business position: they can reduce conflicts of interest between owners and managers, make consumers more committed, motivate employees, and co-operate with other business partners. The state of the environment and society, the strengthening of the community's goals and the changing economic environment create a foundation and a pressure for the strengthening of ethical, values-based financial activities – based on both motivational factors – even in government regulations. In this paper, I present the development of the CSR in banking sector, the theoretical and practical terms that have emerged from that, focusing on the initiatives that can be linked to financial inclusion in the practice of Global Alliance of Banking on Values’ member banks.
    Keywords: social banking, values-based banking, financial inclusion, GABV
    JEL: G21
    Date: 2019–02–07
  10. By: Sherrill Shaffer; Laura Spierdijk
    Abstract: The aggregate Lerner index is a popular composite measure of multi-product banks’ market power, based on the assumption that banks’ single aggregate output factor is total assets. This study identifies three limitations of the aggregate Lerner index that potentially distort its interpretation as a composite measure of market power. We investigate the empirical relevance of these limitations for a sample of U.S. banks covering the years 2011–2017. We establish an economically relevant bias in the value of the aggregate Lerner index and show that this bias may also affect regressions that use the Lerner index as a dependent or explanatory variable.
    Keywords: multi-product banks, market power, Lerner index, consistent aggregation
    JEL: D43 L13 G21
    Date: 2019–02
  11. By: Lim, Chen
    Abstract: The serious dysfunctions observed in the financial markets following the collapse of the mortgage market in the United States have given new life to the ideas of Hyman Minsky,a post-Keynesian economist. Indeed, there are many who believe that thanks to his work, the current financial crisis could have been anticipated. The key mechanism that drives an economy to a crisis is the accumulation of debt during the boom period. The economy becomes more and more fragile. Financial innovations and deregulation in a context of globalization are responsible for this situation. This is an important point of his analysis. This is one of the aspects of the "financial instability hypothesis" (FIH). The other aspect is that during periods of growth, banks and other financial intermediaries try to convince investors to buy debts through sophisticated financial innovations. The role major of financial intermediaries in the crisis process is thus highlighted. Finally, it is possible to show that the current crisis is an application of the Minsky model.
    Keywords: Financial crisis
    JEL: G01
    Date: 2018–11–01
  12. By: Juste Raimbault (ISC-PIF - Institut des Systèmes Complexes - Paris Ile-de-France - ENS Cachan - École normale supérieure - Cachan - UP1 - Université Panthéon-Sorbonne - UP11 - Université Paris-Sud - Paris 11 - X - École polytechnique - Institut Curie - Sorbonne Université - CNRS - Centre National de la Recherche Scientifique, CASA - UCL - University College of London [London], GC - Géographie-cités - UP1 - Université Panthéon-Sorbonne - UPD7 - Université Paris Diderot - Paris 7 - CNRS - Centre National de la Recherche Scientifique)
    Abstract: Le caractère spatialisé des systèmes territoriaux joue un rôle déterminant dans l'émergence de leurs complexités. Cette contribution vise à illustrer dans quelle mesure différents types de complexités peuvent se manifester dans des modèles de tels systèmes. Nous développons d'un point de vue théorique des arguments illustrant la complexité ontologique, au sens de la multitude et multidimensionalité de représentations possibles, puis la complexité au sens de l'émergence, c'est-à-dire la nécessité de l'existence de plusieurs niveaux autonomes. Nous proposons ensuite des expériences numériques pour explorer des propriétés de la complexité (complexité dynamique et co-évolution) au sein de deux modèles simples de morphogenèse urbaine. Nous suggérons finalement d'autres dimensions de la complexité qui pourraient être typiques des systèmes territoriaux.
    Keywords: Complexités,Systèmes territoriaux,Morphogenèse urbaine,Co-évolution
    Date: 2019–01–21
  13. By: Rosca, Paula-Carmen
    Abstract: Abstract: Nowadays, corporations play an important role in the economic, social and political life. During the last century, they contributed to the economic and technological development of our world. We may say that this evolution led to a better wellbeing, which means more wealth, more speed, more options, more freedom and spare time. They have brought mankind, things without which we couldn’t imagine our existence: planes, communication means, computers, pharmaceutical products etc. But at what price? And who is going to pay it? Over the last decades, people and organizations were getting worried about the negative impact that corporations might have on their lives (and the next generations’ live) from an economic, social and environmental perspective. This paper is focused on corporate dominance and its aim is to bring into light the main critics of corporate behaviour classified according to different criteria.
    Keywords: corporations, criticism, sustainability, behaviour, negative impact
    JEL: G34 L2 M14
    Date: 2018–12–17
  14. By: Fernando J. Cardim de Carvalho
    Abstract: By the beginning of the 20th century, the possibility and efficacy of economic planning was believed to have been proven by totalitarian experiments in Germany, the Soviet Union, and, to a lesser degree, Fascist Italy; however, the possibilities and limitations of planning in capitalist democracies was unclear. The challenge in the United States in the 1930s and in postwar France was to find ways to make planning work under capitalism and democratic conditions, where private agents were free to not accept its directives. This paper begins by examining the experience with planning during the first years of the New Deal in the United States, centered on the creation and operation of the National Recovery Administration (NRA) and the Agricultural Adjustment Administration (AAA), and continues with a discussion of the French experience with indicative planning in the aftermath of World War II. A digression follows, touching on the proximity between the matters treated in this paper and Keynes's view that macroeconomic stabilization could require a measure of socialization of investments, following James Tobin's hunch that French indicative planning, as well as some social democrat experiences in Northern Europe, could be playing precisely that role. The paper concludes by identifying the lessons one can draw from the two experiences.
    Keywords: New Deal; National Recovery Act (NRA); National Industrial Recovery Act (NIRA); Economic Planning; Economic Cooperation
    JEL: E02 E65 N12 N32 O21
    Date: 2019–02
  15. By: Jaehyuk Park; Ian Wood; Elise Jing; Azadeh Nematzadeh; Souvik Ghosh; Michael Conover; Yong-Yeol Ahn
    Abstract: Groups of firms often achieve a competitive advantage through the formation of geo-industrial clusters. Although many exemplary clusters, such as Hollywood or Silicon Valley, have been frequently studied, systematic approaches to identify and analyze the hierarchical structure of the geo-industrial clusters at the global scale are rare. In this work, we use LinkedIn's employment histories of more than 500 million users over 25 years to construct a labor flow network of over 4 million firms across the world and apply a recursive network community detection algorithm to reveal the hierarchical structure of geo-industrial clusters. We show that the resulting geo-industrial clusters exhibit a stronger association between the influx of educated-workers and financial performance, compared to existing aggregation units. Furthermore, our additional analysis of the skill sets of educated-workers supplements the relationship between the labor flow of educated-workers and productivity growth. We argue that geo-industrial clusters defined by labor flow provide better insights into the growth and the decline of the economy than other common economic units.
    Date: 2019–02
  16. By: Alatorre, José Eduardo; Caballero, Karina; Ferrer, Jimy; Galindo, Luis Miguel
    Abstract: El principal objetivo de este estudio es ofrecer una síntesis de los valores del Costo Social del Carbono (CSC) para la construcción de políticas públicas referidas al cambio climático en América Latina. El CSC identifica el costo económico que ocasiona una tonelada adicional de CO2 emitida a la atmosfera para las actividades económicas, el bienestar social y los ecosistemas. En la síntesis de la literatura de los valores del CSC se emplearon diversas técnicas de metaanálisis en las se identificó un costo social del carbono de 25,83 dólares por tonelada.
    Date: 2019–02–01
  17. By: SECK, Massamba Souleymane
    Abstract: The purpose of this article is to analyze the complementary relationship between the Islamic Bank of Senegal (BIS) and microfinance institutions (MFIs) and their contributions to the inclusive and sustainable financing of Senegalese SMEs. Indeed, in Senegal, the SMEs that make up almost the entire productive sector, 99.8% of the economic fabric, 3450.3 billion FCFA of turnover and more than 45% of the active population in 2016 (ANSD / RGE, 2016), have great difficulty in obtaining external and formal financing. The Senegalese financial system, which is predominantly dominated by banks and MFIs, gives SMEs a very limited chance to access financing. This is because the financing needs of SMEs are too important for MFIs but too low for banks to respond optimally to their needs. In addition, the banking sector, which has sufficient liquidity, is struggling to obtain financing mechanisms that are appropriate to the needs of SMEs. On the side of MFIs that have the appropriate financing tools, they are unable to find significant resources to meet the demand for funding of large SMEs. In this momentum, the complementarity between Islamic banking and MFIs seems to be the most appropriate and effective solution to address the financial difficulties of SMEs. Indeed, the research hypothesis of this article is that the refinancing partnership between these two financial structures favorably affects the financing of SMEs. Our panel data estimates confirm our main research hypothesis because they show positively and decisively the role of the complementarity relationship between these two financial institutions on the financing of SMEs.
    Keywords: Complementarity, Islamic banking of Senegal, microfinance institutions, SMEs, inclusive and sustainable finance, panel.
    JEL: C23 G14 G21 O17
    Date: 2019–02
  18. By: A. Arrighetti; F. Landini
    Abstract: Recent works in the socio-economic and comparative political economy literature suggest the emergence of a predominant neoliberal model of capitalism, which is gradually being adopted by most advanced countries. A similar trend is present in the management literature where competitive advantages are increasingly being associated with a predominant strategic paradigm (integrated global engagement) leaning on the complementarities among R&D, human capital and entry into foreign markets, regardless of the country and industry a firm belongs to. While both views imply a growing tendency towards institutional and strategic homologation, other studies show only a partial convergence in institutional settings and highlight the presence of considerable heterogeneity in managerial conducts. In this paper we explore these contrasting interpretations by comparing the characteristics of manufacturing firms in Italy and Germany. The analysis suggests that (a) independently of the country of origin, globally engaged firms are relatively similar in characteristics that are usually positively correlated with economic performance such as size, age and innovation, but remain highly differentiated in terms of institutions-related variables; b) firms that have not adopted a strategy of global engagement are markedly heterogeneous in terms of both structural characteristics and institutions-related variables. In other words, global engagement is associated with a lower degree of the differentiation between Italian and German firms, but the variety of institutional settings continues to affect the evolution of businesses. Policy implications are discussed.
    Keywords: varieties of capitalism; business strategy; global engagement, firm heterogeneity; Italy; Germany
    JEL: P51 B52 L25 D22 F23
    Date: 2018

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