nep-hme New Economics Papers
on Heterodox Microeconomics
Issue of 2021‒05‒24
six papers chosen by
Carlo D’Ippoliti
Università degli Studi di Roma “La Sapienza”

  1. Attribute Substitution, Counterfactual Thinking, and Heterodox Economics By John B. Davis
  2. Social Externalities and Economic Analysis By Fleurbaey, Marc; Kanbur, Ravi; Viney, Brody
  3. Behavioural Economics, What Have we Missed? Exploring “Classical” Behavioural Economics Roots in AI, Cognitive Psychology, and Complexity Theory By Steve J. Bickley; Benno Torgler
  4. Agent Based Models and Simulation in Social Sciences: A bibliometric review By Emiliano Alvarez; Gabriel Brida; Silvia London
  5. Derivation of wealth distributions from biased exchange of money By Fei Cao; Sebastien Motsch
  6. The Long Recession and Economic Consequences of the COVID-19 Pandemic By Tsoulfidis, Lefteris; Tsaliki, Persefoni

  1. By: John B. Davis (Department of Economics Marquette University)
    Abstract: This paper examines how attribute substitution (AS), central to the psychology of choice and behavioral economic reasoning, can be understood when combined with counterfactual thinking (CFT), often called �what if� or �if only� thinking, and how their combination creates important opportunities for the seeing heterodox economics as a single research program alternative to mainstream economics. The first section of the paper discusses AS, CFT, and what a AS-CFT behavioral framework involves, and then emphasizes how this framework departs from fundamental assumptions mainstream rational choice theory employs. The second section reviews the foundations of behavioral thinking regarding AS, describes what it involves when it includes attention to CFT, distinguishes between more automatic and more reflective types of behavioral adjustment. It notes that heterodox economics has generally emphasized ecological rationality and bounded rationality in its use of AS. The third section then discusses how six prominent heterodox approaches can each be understood to draw on this combination of AS and CFT, and how this represents common ground for a shared critique of the mainstream economic approach. What distinguishes them is how they differ regarding the weight and emphasis placed on more automatic versus more reflective types of behavioral adjustment. The fourth section argues that within this shared framework these different heterodox approaches practice a division of labor in how they address different aspects of economic life understood in behavioral and counterfactual terms.
    Keywords: counterfactual thinking, attribute substitution, counterfactual thinking, adjustment behavior, automatic versus reflective, heterodox economics
    JEL: A12 A13 B41 D90
    Date: 2021–05
  2. By: Fleurbaey, Marc; Kanbur, Ravi; Viney, Brody
    Abstract: This paper considers and assesses the concept of social externalities through human interdependence, in relation to the economic analysis of externalities in the tradition of Pigou and Arrow, including the analysis of the commons. It argues that there are limits to economic analysis. Our proposal is to enlarge the perspective and start thinking about a broader framework in which any pattern of influence of an agent or a group of agents over a third party, which is not mediated by any economic, social, or psychological mechanism guaranteeing the alignment of the marginal net private benefit with marginal net social benefit, can be attached the "externality" label and be scrutinized for the likely negative consequences that result from the divergence. These consequences may be significant given the many interactions between the social and economic realms, and the scope for spillovers and feedback loops to emerge. The paper also establishes a tentative and probably incomplete list of possible internalizing mechanisms for externalities under this broader framework, which includes: pricing and monetary incentives; altruism and solidarity; moral norms; reciprocity and mutual monitoring; centralized cooperative decision-making; and merger. There are clear reasons why the pricing mechanism is not appropriate in some cases. A more difficult question to answer is what factors determine which of the mechanisms is the appropriate one to rely on in a given sphere of relations and activities. The object of the paper is to encourage research and contributions from all the relevant disciplines of social sciences on the pervasive human interdependence that the notion of social externalities tries to capture.
    Keywords: Commons; Ethical Principles; Externalities; Human Interdependence; Internalizing Mechanisms; Social Externalities
    JEL: A12 A13 B31 D02 D62 D63 H23
    Date: 2020–08
  3. By: Steve J. Bickley; Benno Torgler
    Abstract: In this chapter, we ask (conceptually and methodologically) what exactly is behavioural economics and what are its roots? And further, what may we have missed along the way? We argue that revisiting “classical” behavioural economics concepts and methods will benefit the wider behavioural economics program by questioning its yardstick approach to ‘Olympian’ rationality and optimisation and in doing so, exploring the ‘how’ and ‘why’ of economic behaviours (micro, meso, and macro) in greater detail and clarity. We also do the same for fields which share similar ontological and epistemological roots with “classical” behavioural economics. In particular, cognitive psychology, complexity theory, and artificial intelligence. By engaging in debate and investing thought into multiple layers of the ontology-epistemology- methodology, we look to engage in ‘deeper’ (and potentially more profound) scientific discussions. We also explore the utility and implications of mixed methods in behavioural economics research, policy, and practice.
    Keywords: Behavioural Economics; Cognitive Psychology; Complexity Theory; Artificial Intelligence
    Date: 2021–05
  4. By: Emiliano Alvarez (Universidad de la República/Universidad Nacional del Sur); Gabriel Brida (Universidad de la República); Silvia London (Universidad Nacional del Sur)
    Abstract: Since the first agent-based models (ABM), the scientific community has been interested in making not only the results of computational models understandable but also the modeling description, to facilitate their replication. The form that has been adopted to a greater extent has been the ODD (Overview, Design concepts, and Details) protocol, which provides a generic structure for its documentation. This protocol provides a way to clearly explain the procedures and interactions of the complex systems to be analyzed, with applications that have spread across di?erent disciplines. This work will show a bibliometric review of the articles that emerged from the first publication of this protocol in 2006, analyzing the development that ABMs have had in the social sciences. A description will be made of the lines of research with the greatest activity and the links between them will be analyzed; while summarizing the countries, universities, and journals with the highest contributions.
    Keywords: Social Simulation Complex Systems ODD protocol Bibliometric Analysis
    Date: 2020–10
  5. By: Fei Cao; Sebastien Motsch
    Abstract: In the manuscript, we are interested in using kinetic theory to better understand the time evolution of wealth distribution and their large scale behavior such as the evolution of inequality (e.g. Gini index). We investigate three type of dynamics denoted unbiased, poor-biased and rich-biased dynamics. At the particle level, one agent is picked randomly based on its wealth and one of its dollar is redistributed among the population. Proving the so-called propagation of chaos, we identify the limit of each dynamics as the number of individual approaches infinity using both coupling techniques [48] and martingale-based approach [36]. Equipped with the limit equation, we identify and prove the convergence to specific equilibrium for both the unbiased and poor-biased dynamics. In the rich-biased dynamics however, we observe a more complex behavior where a dispersive wave emerges. Although the dispersive wave is vanishing in time, its also accumulates all the wealth leading to a Gini approaching 1 (its maximum value). We characterize numerically the behavior of dispersive wave but further analytic investigation is needed to derive such dispersive wave directly from the dynamics.
    Date: 2021–05
  6. By: Tsoulfidis, Lefteris; Tsaliki, Persefoni
    Abstract: In this article, we argue the rate of profit in combination with the movement of the real net profits determines the phase-change of the economy in its long cyclical pattern. Since WWII, the US and the world economy have experienced two such long cycles. The pandemic COVID-19 has deepened a recession that has been already underway since 2007. The growth rates in the first post-pandemic years are expected to be high; however, soon after, the economies will find themselves back to their old recessionary growth paths. The onset of a new long cycle requires the restoration of profitability, which can be sustained only through the introduction of ‘disruptive’ innovations backed by suitable institutional arrangements.
    Keywords: Long recession, secular stagnation, pandemic, long cycles, institutional changes, disruptive innovations
    JEL: B5 D33 E1 N12 O51
    Date: 2021–05–09

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