nep-hme New Economics Papers
on Heterodox Microeconomics
Issue of 2021‒04‒12
fourteen papers chosen by
Carlo D’Ippoliti
Università degli Studi di Roma “La Sapienza”

  1. To Be or Not to Be: The Entrepreneur in Endogenous Growth Theory By Henrekson, Magnus; Johansson, Dan; Karlsson, Johan
  2. An Agent-based Model for Secular Stagnation in the USA: Theory and Empirical Evidence By Andrea Borsato
  3. Introducing Environmental Ethics into Economic Analysis: Some insights from Hans Jonas’ Imperative of Responsibility By Sylvie Ferrari; Damien Bazin; Richard B. Howarth
  4. Sign Systems of Lust and Slavery. Money as the consecration of bread and wine By Hanappi, Hardy
  5. Assessing the Economic Impact of Lockdowns in Italy: A Computational Input-Output Approach By Severin Reissl; Alessandro Caiani; Francesco Lamperti; Mattia Guerini; Fabio Vanni; Giorgio Fagiolo; Tommaso Ferraresi; Leonardo Ghezzi; Mauro Napoletano; Andrea Roventini
  6. Sustainability transition and digital trasformation: an agent-based perspective By Nieddu, Marcello; Bertani, Filippo; Ponta, Linda
  7. Reddit's Self-Organized Bull Runs By Valentina Semenova; Julian Winkler
  8. Agent-Based Computational Economics: Overview and Brief History By Tesfatsion, Leigh
  9. Peripherical Financialization and Premature Deindustrialization: A Theory and the Case of Brazil (2003-2015) By José Luis Oreiro; Carmem Aparecida Feijó; Lionelo Franco Punzo; João Pedro Heringer Machado
  10. The Erroneous Foundations of Law and Economics By Mark Glick; Gabriel A. Lozada
  11. Interactive Network Visualization of Opioid Crisis Related Data- Policy, Pharmaceutical, Training, and More By Olga Scrivner; Elizabeth McAvoy; Thuy Nguyen; Tenzin Choeden; Kosali Simon; Katy B\"orner
  12. A Minimal Probabilistic Minsky Model: 3D Continuous-Jump Dynamics By Greg Philip Hannsgen
  13. The Triple-Store Experiment: A First Simultaneous Test of Classical and Quantum Probabilities in Choice over Menus By Ismaël Rafaï; Sébastien Duchêne; Eric Guerci; Irina Basieva; Andrei Khrennikov
  14. Hypothetical bias in stated choice experiments: Part I. Integrative synthesis of empirical evidence and conceptualisation of external validity By Milad Haghani; Michiel C. J. Bliemer; John M. Rose; Harmen Oppewal; Emily Lancsar

  1. By: Henrekson, Magnus (Research Institute of Industrial Economics (IFN)); Johansson, Dan (Örebro University School of Business); Karlsson, Johan (Centre for Family Entrepreneurship and Ownership (CeFEO))
    Abstract: We examine the conceptualization of entrepreneurs in neo-Schumpeterian growth theory, which has reintroduced entrepreneurs into mainstream economics. Specifically, we analyze how neo-Schumpeterians relate to the contradiction between the entrepreneur-centered view of Schumpeter (1934) and the entrepreneurless framework of Schumpeter (1942), with the two frameworks entailing vastly different economic and policy implications. The analysis is based on a review of approximately 750 peer-reviewed articles over the period 1990–2018. The articles were identified using text mining methodology and supervised machine learning. The results show that the literature leans towards Schumpeter (1942); innovation returns are modeled as following an ex ante known probability distribution. By assuming that the outcomes of innovation activities are (probabilistically) deterministic, the Schumpeterian entrepreneur becomes redundant. In addition, the literature abstracts from genuine uncertainty, thus evading central issues regarding the economic function of the entrepreneur, especially with respect to disruptive innovations, ownership, and profits. To incorporate genuine uncertainty, the literature needs to adopt a broader conceptual foundation that goes beyond equilibrium modeling.
    Keywords: creative destruction; economic growth; entrepreneur; innovation; judgment; bibliometric analysis; Knightian uncertainty
    JEL: B40 O10 O30
    Date: 2021–03–29
  2. By: Andrea Borsato
    Abstract: The paper extends the research started with Borsato (2020). I develop an agent-based, stock-flow consistent growth model to analyze the interplay between income distribution, innovation and productivity growth. Results still show that the mounting shrinkage of the labour share impacts negatively upon firm's innovative effort. Additionally, I question the neoclassical belief on the negative interest-elasticity of investments, since decreases in the rate of interest are not associated with increases in capital accumulation. Finally, the panel cointegration analysis based on US manufacturing industries corroborates the theoretical predictions for the period 1958 - 2011.
    Keywords: Secular Stagnation; Innovation dynamics; Income distribution; Agent-based SFC models; US manufacturing industries; Panel cointegration analysis.
    Date: 2021–03–31
  3. By: Sylvie Ferrari (GREThA - Groupe de Recherche en Economie Théorique et Appliquée - UB - Université de Bordeaux - CNRS - Centre National de la Recherche Scientifique); Damien Bazin (GREDEG - Groupe de Recherche en Droit, Economie et Gestion - UNS - Université Nice Sophia Antipolis (... - 2019) - COMUE UCA - COMUE Université Côte d'Azur (2015 - 2019) - CNRS - Centre National de la Recherche Scientifique - UCA - Université Côte d'Azur); Richard B. Howarth (Dartmouth College [Hanover])
    Abstract: This paper analyses how Hans Jonas' Imperative of Responsibility may provide useful insights into the analysis of sustainability issues. The challenges of environmental and social sustainability in terms of inter-generational fairness are analysed and involve a moral duty that is applicable to economic governance. To what extent responsibility is an alternative to utilitarianism and as a principle facilitating the coordination of the agents involved? Exploring this question may be a first step towards the long-term and sustainable conservation of Nature.
    Keywords: Environmental ethics,intergenerational fairness,responsibility principle,self-binding behaviour,sustainability
    Date: 2021–04–01
  4. By: Hanappi, Hardy
    Abstract: Money is real. Few other objects are perceived with comparable attention. At the same time its content, its mystery, evaporates behind its physical form. For every commodity producing human society money has been a steady companion since it emerged . Money forms, the way in which money took on its material cloth, have changed a lot. Money forms, the blood running through almost all social interaction, have been a mirror, a reflection of the essence of a society’s working. This paper is an attempt to look behind the veil that money forms as sign systems for social value produce. Thus two concepts are the starting point for the investigation: Sign systems and social value. Sign systems are directly coupled to the perceptions of human individuals. More precisely, they are connected to a society’s communication processes, including self-communication, i.e. personal thought. The mystic force of money forms, its resemblance to sexual attraction, derives from its root in direct and blunt relevance for each human individual in a fully developed commodity producing society. It can be redemption, it can be disgust. ‘Money speaks, wealth whispers’ expresses this interface between individual and society, distinguishes how the force of the money form is transmitted . The first part of the paper will develop a sketch of a theory of this interface, of sign systems as social systems. The second part will then focus on the concept ‘social value’. The perspective will be changed: What is beneficial from the point of view of the species will be the starting point for a discussion on how it materializes in certain money forms. It turns out that money forms follow an evolutionary trajectory , leading through alternating stages of contributing to the stabilization of a mode of production and then actively destroying it in revolutionary turning points – just to give birth to a new form of representation of social value . Finally, a third part shall provide ideas on the connection between the first two parts. How is desire and pain injected in personal perceptions by the interference of social value loaded money forms; and how are vice versa these passions and grievances shaping the potential constellation of social value regulating institutionalized forms in revolutionary times? In conclusion this part will also present some immediate consequences of the theoretical results on contemporary global economic policy.
    Keywords: Money, Sign Systems, Political Economy, Individual Perception
    JEL: B40 B51 E4 Z1
    Date: 2021–01–03
  5. By: Severin Reissl (IUSS Pavia); Alessandro Caiani (IUSS Pavia); Francesco Lamperti (Institute of Economics and EMbeDS, Scuola Superiore Sant'Anna; RFF-CMCC European Institute on Economics and the Environment); Mattia Guerini (Université Côte d'Azur, CNRS, GREDEG, France; Sant'Anna School of Advanced Studies; Sciences Po., OFCE); Fabio Vanni (Sciences Po, OFCE); Giorgio Fagiolo (Institute of Economics and EMbeDS, Scuola Superiore Sant'Anna); Tommaso Ferraresi (Istituto Regionale per la Programmazione Economica della Toscana); Leonardo Ghezzi (Istituto Regionale per la Programmazione Economica della Toscana); Mauro Napoletano (OFCE Sciences-Po; SKEMA Business School); Andrea Roventini (Institute of Economics and EMbeDS, Scuola Superiore Sant'Anna; Sciences Po, OFCE)
    Abstract: We build a novel computational input-output model to estimate the economic impact of lockdowns in Italy. The key advantage of our framework is to integrate the regional and sectoral dimensions of economic production in a very parsimonious numerical simulation framework. Lockdowns are treated as shocks to available labor supply and they are calibrated on regional and sectoral employment data coupled with the prescriptions of government decrees. We show that when estimated on data from the first "hard" lock-down, our model closely reproduces the observed economic dynamics during spring 2020. In addition, we show that the model delivers a good out-of-sample forecasting performance. We also analyze the e ects of the second "mild" lockdown in fall of 2020 which delivered a much more moderate negative impact on production compared to both the spring 2020 lockdown and to a hypothetical second "hard" lockdown.
    Keywords: Input-output, Covid-19, Lockdown, Italy
    JEL: C63 C67 D57 E17 I18 R15
    Date: 2021–04
  6. By: Nieddu, Marcello; Bertani, Filippo; Ponta, Linda
    Abstract: Digital transformation and sustainability transition are complex phenomena characterized by fun-damental uncertainty. The potential consequences deriving from these processes are the subject of open de-bates among economists and technologists. In this respect, adopting a modelling and simulation approachrepresents one of the best solution in order to forecast potential effects linked to these complex phenom-ena. Agent-based modelling represents an appropriate paradigm to address complexity. This research aimsat showing the potential of the large-scale macroeconomic agent-based model Eurace in order to investigatechallenges like sustainability transition and digital transformation. This paper discusses and compares resultsof previous works where the Eurace model was used to study the digital transformation, while it presents newresults concerning the framework on the sustainability transition, where a climate agent is introduced to ac-count the climate economy interaction. As regards the digital transformation, the Eurace model is able to cap-ture interesting business dynamics characterizing the so-called increasing returns world and, in case of highrates of digital technological progress, it shows a significant technological unemployment. As regard the sus-tainability transition, it displays a rebound effect on energy savings that compromises efforts to reduce greenhouse gases emissions via electricity efficiency improvements. Furthermore, it shows that a carbon tax couldbe not sufficient to decouple economy from carbon consumption, and that a feed-in tariff policy fosteringrenewable energy production growth may be more effective.
    Keywords: Sustainability; Climate change mitigation policies; Digital Transformation; Technologicalunemployment; Agent-Based Modelling
    JEL: C63 O33 Q43 Q54
    Date: 2021–04–01
  7. By: Valentina Semenova; Julian Winkler
    Abstract: Tracking endogenous fluctuations in stock prices emerged as a key challenge for empirical work in behavioural and evolutionary finance. This paper uses new data from an online discussion forum, Reddit, to quantify social contagion, or 'hype,' in specific stock market movements, using state of the art opinion dynamics modelling and sentiment analysis. The influence between users on the WallStreetBets (WSB) subreddit is measured by tracing the probability of a user starting a fresh discussion on an asset given their previous involvement in a discussion on the same asset, measured by their comment history. This paper finds that users who comment on one discussion involving a particular asset are approximately four times more likely to start a new discussion about this asset in the future, with the probability increasing with each additional discussion the user engages in. This is a strong indication that investment strategies are reproduced through social interaction. This is further validated by findings that sentiments expressed in the linked submissions are strongly correlated in a set of spatial regression models. In particular, bearish sentiments seem to spread more than their bullish counterparts.
    Date: 2021–04
  8. By: Tesfatsion, Leigh
    Abstract: Scientists seek to understand how real-world systems work. Models devised for scientific purposes must always simplify reality. However, scientists should be permitted to tailor these simplifications to purposes at hand; they should not be forced to distort reality in specific predetermined ways in order to apply a modeling approach. Adherence to this modeling precept was a key goal motivating my development of Agent-Based Computational Economics (ACE), a variant of agent-based modeling characterized by seven specific modeling principles. This perspective provides an overview of ACE and a brief history of its development.
    Date: 2021–03–29
  9. By: José Luis Oreiro (None); Carmem Aparecida Feijó; Lionelo Franco Punzo; João Pedro Heringer Machado
    Abstract: The main objective of this paper is to discuss the concept of financialization in developing economies, arguing that the broad definition of financialization - understood as a growing role of motivations, markets and financial institutions in the operation of domestic and international economies – does not take into consideration important features of those economies, such as the hierarchy of currencies and the subordination to the principles of the so-called Washington Consensus. The latter imposed the adoption of a foreign savings-driven growth model, which mostly applied to Latin American countries. Hence, the financialization process in LDCs will be denominated peripherical financialization, since it is associated with dependence upon capital inflows from developed countries and with the reduction in the autonomy of their macroeconomic policies, even within flexible exchange rate regimes. Attraction of capital inflows to countries with a subordinate position in international financial markets, requires high interest rate differentials which have as side effect a trend to the overvaluation of real exchange rates. This creates a trap, high interest rates with an associated overvalued exchange rate. This trap reduces policy space, turning procyclical even fiscal policy. Moreover, the overvaluation of real exchange rate reduces price competitiveness of the manufacturing industry, becoming the main drive toward these countries’ premature deindustrialization. It will be shown that the macroeconomic performance of the Brazilian economy in the period 2003-2015 fits almost perfectly this model of peripherical financialization.
    Keywords: Financialization, Premature Deindustrialization, high interest rate-overvalued exchange rate trap
    JEL: O11 O14 O16
    Date: 2021–02
  10. By: Mark Glick (University of Utah); Gabriel A. Lozada (University of Utah)
    Abstract: The fundamental originating principle of law and economics (L&E) is that legal decisions should be (and are) based on maximizing efficiency. But L&E proponents do not define 'efficiency' in the way agreed to by most economists, as Pareto Efficiency. A Pareto optimal condition is obtained when no one can be made better off without making someone worse off. Pareto Improvements are win-win changes where no losers exist. In the judicial system, however, there are always winners and losers, because under Article III § 2 of the Constitution a legal case does not exist unless there is a justiciable 'case or controversy' in need of resolution. Unable to use Pareto Efficiency, L&E scholars have been forced to adopt alternative definitions of efficiency. Most L&E scholars claim to define 'efficiency' based on the work of Kaldor and Hicks, but (perhaps unwittingly) instead use a definition of 'efficiency' derived from the 19th century idea of consumer surplus, which encompasses L&E notions such as 'wealth maximization,' and 'consumer welfare' in antitrust. Neither of these alternative definitions is viable, however. Outside of L&E, the Kaldor-Hicks approach has long been recognized to be riddled with logical inconsistencies and ethical failures, and the surplus approach is even more deficient. Remarkably, virtually none of the numerous L&E textbooks even hint at such problems. Critically, all definitions of efficiency improvements in economics are biased in favor of wealthy individuals or firms, either because they are dependent on the status quo ante distribution of assets, or because they bestow large advantages on parties with political influence or who can afford to bring lawsuits quickly. Many L&E practitioners treat efficiency improvements instead as being objectively good, an error revealing that L&E is primarily motivated by its neoliberal policy agenda.
    Keywords: law and economics, antitrust economics, efficiency, wealth maximization, legal realism, neoliberal theory, Kaldor Hicks, Pareto Optimality
    JEL: K1 D61 L4
    Date: 2021–02–15
  11. By: Olga Scrivner; Elizabeth McAvoy; Thuy Nguyen; Tenzin Choeden; Kosali Simon; Katy B\"orner
    Abstract: Responding to the U.S. opioid crisis requires a holistic approach supported by evidence from linking and analyzing multiple data sources. This paper discusses how 20 available resources can be combined to answer pressing public health questions related to the crisis. It presents a network view based on U.S. geographical units and other standard concepts, crosswalked to communicate the coverage and interlinkage of these resources. These opioid-related datasets can be grouped by four themes: (1) drug prescriptions, (2) opioid related harms, (3) opioid treatment workforce, jobs, and training, and (4) drug policy. An interactive network visualization was created and is freely available online; it lets users explore key metadata, relevant scholarly works, and data interlinkages in support of informed decision making through data analysis.
    Date: 2021–02
  12. By: Greg Philip Hannsgen (Greg Hannsgen's Economics Blog (US))
    Abstract: This paper proposes a formalization of Hyman P. Minsky’s theory of financial instability. The model includes private-sector borrowing, capacity utilization, and the stock of private-sector debt. The model is based on self-reinforcing borrowing and output dynamics that repeatedly come to a sudden stop, with discontinuous downward jumps in the three variables. The paper treats as endogenous the instantaneous probability of a jump and the size distribution of jump vectors. Formally, the model comprises three ordinary differential equations and a compound Poisson process, with jumps drawn from a heavy-tailed stable distribution. The paper shows it can be stated in three equations in the jump differentials and the usual differentials. A section sketches a nonlinear mechanism that can bound the system. The paper analyzes the dynamics of a simplified version of the main model and a more-SFC model with feedbacks from debt to borrowing and capacity utilization via debt-service effects. The paper reports (1) eigenvalues for the linear parts of both the simplified analytical model and a numerical example of the more-SFC model, (2) a phase diagram for the analytical model, and, (3) analytical stability conditions for the more-SFC model. The model replicates the upward instability and abrupt crises of Minsky’s theory.
    Keywords: Minsky model, paradox of debt, Poisson process, financial crisis, dynamical macroeconomic model, Hyman P. Minsky, stable distribution, stock-flow consistency, theory of financial instability, dynamical systems, cádlág process, John Maynard Keynes
    Date: 2021–01
  13. By: Ismaël Rafaï (CEE-M, Univ. Montpellier, CNRS, INRAE, Institut Agro; Université Côte d'Azur, France; GREDEG CNRS); Sébastien Duchêne (CEE-M, Univ. Montpellier, CNRS, INRAE, Institut Agro); Eric Guerci (Université Côte d'Azur, France; GREDEG CNRS); Irina Basieva (Department of Psychology, City University, London, United Kingdom); Andrei Khrennikov (International Center for Mathematical Modeling, in Physics and Cognitive Science Linnaeus University, Växjö, Sweden)
    Abstract: Recently quantum probability theory started to be actively used in studies of human decision-making, in particular for the resolution of paradoxes (such as the Allais, Ellsberg, and Machina paradoxes). Previous studies were based on a cognitive metaphor of the quantum double-slit experiment - the basic quantum interference experiment. In this paper, we report on an economics experiment based on a three-slit experiment design, where the slits are menus of alternatives from which one can choose. The test of nonclassicality is based on the Sorkin equality (which was only recently tested in quantum physics). Each alternative is a voucher to buy products in one or more stores. The alternatives are obtained from all disjunctions including one, two or three stores. The participants have to reveal the amount for which they are willing to sell the chosen voucher. Interference terms are computed by comparing the willingness to sell a voucher built as a disjunction of stores and the willingness to sell the vouchers corresponding to the singleton stores. These willingness to sell amounts are used to estimate probabilities and to test both the law of total probabilities and the Born Rule. Results reject neither classical nor quantum probability. We discuss this initial experiment and our results and provide guidelines for future studies.
    Keywords: Input-output, Covid-19, Lockdown, Italy
    JEL: C63 C67 D57 E17 I18 R15
    Date: 2021–04
  14. By: Milad Haghani; Michiel C. J. Bliemer; John M. Rose; Harmen Oppewal; Emily Lancsar
    Abstract: The notion of hypothetical bias (HB) constitutes, arguably, the most fundamental issue in relation to the use of hypothetical survey methods. Whether or to what extent choices of survey participants and subsequent inferred estimates translate to real-world settings continues to be debated. While HB has been extensively studied in the broader context of contingent valuation, it is much less understood in relation to choice experiments (CE). This paper reviews the empirical evidence for HB in CE in various fields of applied economics and presents an integrative framework for how HB relates to external validity. Results suggest mixed evidence on the prevalence, extent and direction of HB as well as considerable context and measurement dependency. While HB is found to be an undeniable issue when conducting CEs, the empirical evidence on HB does not render CEs unable to represent real-world preferences. While health-related choice experiments often find negligible degrees of HB, experiments in consumer behaviour and transport domains suggest that significant degrees of HB are ubiquitous. Assessments of bias in environmental valuation studies provide mixed evidence. Also, across these disciplines many studies display HB in their total willingness to pay estimates and opt-in rates but not in their hypothetical marginal rates of substitution (subject to scale correction). Further, recent findings in psychology and brain imaging studies suggest neurocognitive mechanisms underlying HB that may explain some of the discrepancies and unexpected findings in the mainstream CE literature. The review also observes how the variety of operational definitions of HB prohibits consistent measurement of HB in CE. The paper further identifies major sources of HB and possible moderating factors. Finally, it explains how HB represents one component of the wider concept of external validity.
    Date: 2021–02

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