nep-hpe New Economics Papers
on History and Philosophy of Economics
Issue of 2004‒12‒12
24 papers chosen by
Andy Denis
City University

  2. Voting on pensions : a survey By De Walque,G.
  3. The Role of the State in Economic Development By Guido Tabellini
  4. How To Be Better Prepared For A Paradigm Shift In Economic Theory, And Write Better Articles In The Meantime By Welch, P.; Dolfsma, W.
  5. The Social Shaping of the early Dutch Management Schools - Professions and the power of Abstraction By Baalen, P.J. van; Karsten, L.
  7. Conventions - Some Conventional and Some Not So Conventional Wisdom By Siegfried Berninghaus; Werner Güth; Hartmut Kliemt
  8. Approximate Truth in Economic Modelling By Geoffrey Brennan; Werner Güth; Hartmut Kliemt
  9. Darwinism in Economics: From Analogy to Continuity By Christian Cordes
  10. The Flow and Ebb in Mixter's Treatment of Rae By Syed Ahmad
  11. Retrospective on the 1970s Productivity Slowdown By William Nordhaus
  12. Agent-Based Models and Human Subject Experiments By John Duffy
  13. What Do Endogenous Growth Models Contribute? By Dave Mare
  14. Is GARCH(1,1) as good a model as the Nobel prize accolades would imply? By Catalin Starica
  15. Contrasting Traditional Financial Considerations and Behavioralist Analysis of Rational Economic Choice When Determining Capital Budgeting Project Allocation By Kirby Adam J.R. Faciane
  16. Negative Reciprocity: The Coevolution of Memes and Genes By Daniel Friedman; Nirvikar Singh
  17. Research on Forecasting: A Quarter-Century Review, 1960-1984 By JS Armstrong
  18. Hypotheses in Marketing Science: Literature Review and Publication Audit By JS Armstrong; Roderick J. Brodie; Andrew G. Parsons
  19. The Impact of International Labor Standards: A Survey of Economic Theory By Nirvikar Singh
  22. The Labor Market for New Ph.D.s in 2002 By John J. Siegfried; Wendy A. Stock
  23. Creating a Standards-Based Economics Principles Course By W. Lee Hansen; Michael K. Salemi; John J. Siegfried
  24. Open-Access Scholarly Publishing in Economic Perspective By Malcolm Getz

  1. By: Mauro Boianovsky; Hans-Michael Trautwein
    Abstract: The paper discusses the League of Nations's project to produce consensus in the interpretation of aggregate economic fluctuations in the 1930s. G. Haberler started working in 1934 at the League of Nations headquarters in Geneva on a broad enquiry that should lead to a synthesis of the several conflicting explanations of the causes of the business cycles, which culminated with the publication of his classic book in 1937. The paper makes use of archival material hitherto unexplored - such as correspondence and verbatim records of conferences - to show how the discussions with economists at the time were incorporated into Haberler's final report, and to interpret in what extent the attempt to reach a consensus was successful.
    JEL: B22
    Date: 2004
  2. By: De Walque,G. (Nationale Bank van Belgie)
    Date: 2004
  3. By: Guido Tabellini
    Date: 2004–12–02
  4. By: Welch, P.; Dolfsma, W. (Erasmus Research Institute of Management (ERIM), Erasmus University Rotterdam)
    Abstract: The development of economic thought is not unlike the development of technological knowledge: paradigms can be discerned over time and across the field. Indeed, in its history economics has experienced paradigm shifts. There is no reason why it will not do so again in the future. In technology, as in economics, paradigms do not emerge from the blue, but build on precursors, possibly from fields other than our own discipline. Recognizing this draws our attention to other fields, preparing us for a possible paradigm shift. Understanding these other paradigms might best be done using historian Wight?s concepts of plot structure, myths, and cultural endowment. A better understanding of different paradigms allows us to combine ideas from other (sub-) fields with our own so that we are likely to come up with better ideas. In the meantime, as the parallel with the composition of music and the playing of chess shows, we compose better articles in the meantime because we are aware of the rules guiding our own compositions, yet. The history of our own field may be the first and best source for such inspiration.
    Keywords: Knowledge paradigms;paradigm shifts;myths & plot structure;writing by the rules;history of economics;
    Date: 2004–11–26
  5. By: Baalen, P.J. van; Karsten, L. (Erasmus Research Institute of Management (ERIM), Erasmus University Rotterdam)
    Abstract: In this paper we provide an alternative explanation for the rise of modern management schools at the turn of the 20th century. We argue that these schools were not just responses of the higher education system to the demand of industrializing companies for a new class of professional managers, like Chandler suggests. Based on our historical research we found that the struggle for emancipation of the new professions (engineers and accountants) was the main driver for the founding of these schools. Management schools were viewed as the main vehicles to raise the social status of these new professions. To legitimize their position in the higher education system, abstraction appeared to be the dominant strategy of the professions. By abstraction they could distinguish themselves from the lay public and other professional groups in the domain of management. At the moment the new professions had a foot in the higher education system the engineers and the accountants contested for the new management domain. Abstraction appeared also the successful strategy of the accountants to distinguish themselves from the engineers and to establish a sound base for the development of the Dutch variant of business economics.
    Keywords: Business schools;management education;professions;history of business schools;higher education;
    Date: 2004–12–03
  6. By: Ana Maria Bianchi
    Abstract: This paper discusses Albert Hirschman's writings that resulted from his professional experience in Colombia, Brazil, Chile and other Latin American countries during the 1950s and 1960s. The focus is on the trilogy written by Hirschman in the field of development economics, which comprises: The Strategy of Economic Development (1958), Journeys Toward Progress (1963) and Development Projects Observed (1967). Some methodological aspects of those writings, which tend to be recurrent throughout the author's whole intelectual career, are emphasized.
    JEL: B31 B41
    Date: 2004
  7. By: Siegfried Berninghaus; Werner Güth; Hartmut Kliemt
    Abstract: In this paper we consider conventions as regularities in behavior which help to solve coordination problems in a society. These problems can be formalized as non-cooperative games with several equilibria. We know that in such situations serious problems of equilibrium selection arise which cannot be solved by traditional game theoretical reasoning. Conventions seem to be a powerful tool to solve equilibrium selection problems in real world societies. Essentially, two questions will be addressed in this paper: a) Which conventions will emerge in a society? b) How can a society break away from an inferior and reach a superior convention? It turns out that "risk dominance" of a convention plays a crucial role in dealing with both questions and generally in the evolution of conventions.
    Date: 2004–11
  8. By: Geoffrey Brennan; Werner Güth; Hartmut Kliemt
    Abstract: Economic intuitions concerning rational behaviour in interactive social situations are shaped by idealized models which are regarded as "approximately true". But ideal models cannot be meaningfully deemed approximately true unless asymptotically convergent processes imply them as limit cases. We illustrate by various examples - infinitely patient customers on durable monopoly markets, homogeneity of commodities, super-games etc. - how this necessary methodological requirement is almost routinely neglected. On this basis we draw some conclusions concerning the continuity between abstract and less abstract models on the one and the world modelled by them on the other hand.
    Date: 2004–11
  9. By: Christian Cordes
    Abstract: Currently there is an ongoing discussion about how Darwinian concepts should be harnessed to further develop economic theory. Two approaches to this question, Universal Darwinism and the continuity hypothesis, are presented in this paper. It is shown whether abstract principles can be derived from Darwin’s explanatory model of biological evolution that can be applied to cultural evolution. Furthermore, the relation of the ontological basis of biological and cultural evolution is clarified. Some examples illustrate the respective potential of the two approaches to serve as a starting-point for theory development.
    Keywords: Economic selection theory, Economic theory development, Darwinism, Cultural evolution, Continuity hypothesis
    JEL: B41 B52 A12 D00 O10
    Date: 2004–11
  10. By: Syed Ahmad
    Date: 1998–08
  11. By: William Nordhaus
    Abstract: The present study analyzes the "productivity slowdown" of the 1970s. The study also develops a new data set -- industrial data available back to 1948 -- as well as a new set of tools for decomposing changes in productivity growth. The major result of this study is that the productivity slowdown of the 1970s has survived three decades of scrutiny, conceptual refinements, and data revisions. The slowdown was primarily centered in those sectors that were most energy-intensive, were hardest hit by the energy shocks of the 1970s, and therefore had large output declines. In a sense, the energy shocks were the earthquake, and the industries with the largest slowdown were near the epicenter of the tectonic shifts in the economy.
    JEL: O4 E1
    Date: 2004–12
  12. By: John Duffy (University of Pittsburgh)
    Abstract: This paper considers the relationship between agent-based modeling and economic decision-making experiments with human subjects. Both approaches exploit controlled ``laboratory'' conditions as a means of isolating the sources of aggregate phenomena. Research findings from laboratory studies of human subject behavior have inspired studies using artificial agents in ``computational laboratories'' and vice versa. In certain cases, both methods have been used to examine the same phenomenon. The focus of this paper is on the empirical validity of agent-based modeling approaches in terms of explaining data from human subject experiments. We also point out synergies between the two methodologies that have been exploited as well as promising new possibilities.
    Keywords: agent-based models, human subject experiments, zero- intelligence agents, learning, evolutionary algorithms
    JEL: C8 C9
    Date: 2004–12–09
  13. By: Dave Mare (Motu Economic & Public Policy research)
    Abstract: Endogenous growth theory is one of the mainstream economics approaches to modelling economic growth. This paper provides a non-technical overview of some key strands of the endogenous growth theory (EGT) literature, providing references to key articles and texts. The intended audience is policy analysts who want to understand the intuition behind EGT models. The paper should be accessible to someone without much economics training.
    Keywords: Endogenous Growth, Innovation
    JEL: O31 O40
    Date: 2004–12–05
  14. By: Catalin Starica (Chalmers University of Technology, Göteborg, Sweden)
    Abstract: This paper investigates the relevance of the stationary, conditional, parametric ARCH modeling paradigm as embodied by the GARCH(1,1) process to describing and forecasting the dynamics of returns of the Standard & Poors 500 (S&P 500) stock market index. A detailed analysis of the series of S&P 500 returns featured in Section 3.2 of the Advanced Information note on the Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel reveals that during the period under discussion, there were no (statistically significant) differences between GARCH(1,1) modeling and a simple non-stationary, non-parametric regression approach to next-day volatility forecasting. A second finding is that the GARCH(1,1) model severely over-estimated the unconditional variance of returns during the period under study. For example, the annualized implied GARCH(1,1) unconditional standard deviation of the sample is 35% while the sample standard deviation estimate is a mere 19%. Over-estimation of the unconditional variance leads to poor volatility forecasts during the period under discussion with the MSE of GARCH(1,1) 1-year ahead volatility more than 4 times bigger than the MSE of a forecast based on historical volatility. We test and reject the hypothesis that a GARCH(1,1) process is the true data generating process of the longer sample of returns of the S&P 500 stock market index between March 4, 1957 and October 9, 2003. We investigate then the alternative use of the GARCH(1,1) process as a local, stationary approximation of the data and find that the GARCH(1,1) model fails during significantly long periods to provide a good local description to the time series of returns on the S&P 500 and Dow Jones Industrial Average indexes. Since the estimated coefficients of the GARCH model change significantly through time, it is not clear how the GARCH(1,1) model can be used for volatility forecasting over longer horizons. A comparison between the GARCH(1,1) volatility forecasts and a simple approach based on historical volatility questions the relevance of the GARCH(1,1) dynamics for longer horizon volatility forecasting for both the S&P 500 and Dow Jones Industrial Average indexes.
    Keywords: stock returns, volatility, Garch(1,1), non-stationarities, unconditional time-varying volatility, IGARCH effect, longer-horizon forecasts
    JEL: C14 C32
    Date: 2004–11–22
  15. By: Kirby Adam J.R. Faciane (Kirby Faciane / KAJR Faciane)
    Abstract: After a review of concepts from domestic capital budgeting, the issues of international capital budgeting with reference to the general conclusions to be drawn from literature in this area shall be offered. Following a review of work in the choice literature by James March, some trends in multinational resource allocation shall be presented, along with suggestions about why those trends are readily explained by the behavioralist literature. Overall, this paper will contrast some of the traditional financial considerations used as part of rational economic choice when determining capital-budgeting projects for firms with the suggestions one might draw from a behavioralist analysis of such capital budgeting decisions.
    Keywords: project allocation
    JEL: G G0
    Date: 2004–11–29
  16. By: Daniel Friedman (University of California, Santa Cruz); Nirvikar Singh (University of California, Santa Cruz)
    Abstract: A preference for negative reciprocity is an important part of the human emotional repertoire. We model its role in sustaining cooperative behavior but highlight an intrinsic free-rider problem: the fitness benefits of negative reciprocity are dispersed throughout the entire group, but the fitness costs are borne personally. Evolutionary forces tend to unravel people’s willingness to bear the personal cost of punishing culprits. In our model, the countervailing force that sustains negative reciprocity is a meme consisting of a group norm together with low-powered (and low-cost) group enforcement of the norm. The main result is that such memes coevolve with personal tastes and capacities so as to produce the optimal level of negative reciprocity.
    Keywords: Altruism, reciprocity, negative reciprocity, coevolution
    JEL: C7 D8
    Date: 2004–12–06
  17. By: JS Armstrong (The Wharton School - University of Pennsylvania)
    Abstract: Before 1960, little empirical research was done on forecasting methods. Since then, the literature has grown rapidly, especially in the area of judgmental forecasting. This research supports and adds to the forecasting guidelines proposed before 1960, such as the value of combining forecasts. New findings have led to significant gains in our ability to forecast and to help people to use forecasts. What have we reamed about forecasting over the past quarter century? Does recent research provide guidance for making more accurate forecasts, obtaining better assessments of uncertainty, or gaining acceptance of our forecasts? I will first describe forecasting principles that were believed to be the most advanced in 1960. Following that, I will examine the evidence produced since 1960.
    Keywords: forecasting, forecasting research
    JEL: A
    Date: 2004–12–06
  18. By: JS Armstrong (The Wharton School - University of Pennsylvania); Roderick J. Brodie (University of Auckland, New Zealand); Andrew G. Parsons (University of Auckland, New Zealand)
    Abstract: We examined three approaches to research in marketing: exploratory hypotheses, dominant hypothesis, and competing hypotheses. Our review of empirical studies on scientific methodology suggests that the use of a single dominant hypothesis lacks objectivity relative to the use of exploratory and competing hypotheses approaches. We then conducted a publication audit of over 1,700 empirical papers in six leading marketing journals during 1984-1999. Of these, 74% used the dominant hypothesis approach, while 13 % used multiple competing hypotheses, and 13% were exploratory. Competing hypotheses were more commonly used for studying methods (25%) than models (17%) and phenomena (7%). Changes in the approach to hypotheses since 1984 have been modest; there was a slight decrease in the percentage of competing hypotheses to 11%, which is explained primarily by an increasing proportion of papers on phenomena. Of the studies based on hypothesis testing, only 11 % described the conditions under which the hypotheses would apply, and dominant hypotheses were below competing hypotheses in this regard. Marketing scientists differed substantially in their opinions about what types of studies should be published and what was published. On average, they did not think dominant hypotheses should be used as often as they were, and they underestimated their use.
    Keywords: marketing, marketing research, marketing science
    JEL: A
    Date: 2004–12–06
  19. By: Nirvikar Singh (University of California, Santa Cruz)
    Abstract: The main question guiding this study is whether international labor standards will benefit the poor, in particular, developing countries and the poor in those countries. We survey the theoretical literature on international labor standards, and give an overview of the analytical framework and main arguments provided in this literature. Among the situations in which a case for labor standards may arise are imperfections in labor markets, market power effects in international trade, and concerns that consumers, or individuals in general, may have about the working conditions or rights that other individuals enjoy. We emphasize the importance of making clear the value judgments being used, and discuss the different institutional issues that may arise in considering the implementation of labor standards. In general, while there are contexts in which promoting labor standards through some form of collective action is beneficial, we argue that such policies ought to be incorporated into a broader perspective on well-being, and a package of policies that can promote the well-being of the poor.
    JEL: F1 F2
    Date: 2004–12–08
  20. By: Stanley C. W. Salvary (Canisius College)
    Abstract: Historically, generalization about economic fluctuations in an economic system over extended periods of time has proved to be difficult. Yet, it has been even more difficult to generalize across economic systems. In a historical setting, there are many theories offered to explain the creation of business cycles. In this study it is argued that the business cycle is not caused by a single factor but by a multiplicity of factors, therefore, such competing theories constitute special cases of the business cycle. This study maintains that there are families of business cycles, with each family representing a related set of economic systems. Given a family approach to economic systems, then it is conceivable that a general theory can be developed for each family of economic systems by grouping factors identifiable with particular sets of economic systems. Data from the United Nations for 137 countries were used to establish a classification scheme for families of economic systems. US time series data were examined to assess the plausibility of the general theory for one family of economic systems as advanced in this study.
    Keywords: cycle creation theories, families of cycles, money shocks, investment cycle, credit cycle, monetary dislocation, systems philosophies.
    JEL: E
    Date: 2004–12–08
  21. By: Stanley C. W. Salvary (Canisius College)
    Abstract: The Quantity Theory of Money is implicitly embedded in the arguments for price level adjusted financial statements - inflation accounting. Historically, the instability of commodity prices, which is due to changes in relative prices, is considered by one school of economic thought (monetarism) as a reflection of the instability of the value of nominal money. Monetarists maintain that it is the level of the money supply which accounts for the instability of commodity prices. Hence, (1) all changes in the level of the money supply is deemed responsible for changes in the general level of prices, and (2) with each increase in the general level of prices, paper money is said to lose value. In a money economy, nominal money prices reflect the underlying exchange ratios of the various commodities that are produced and exchanged for nominal money. In the absence of monetary dislocation (monetary revaluation or devaluation), any change in the nominal price of a commodity reflects a change in its purchasing power (a change in its exchange ratio vis-a-vis other commodities). Since the physical form of a commodity is relatively constant while the price varies, the simultaneity of these two conditions produces a sensory illusion that leads the monetarists to argue that the measuring device (money) is defective. This paper attempts to demonstrate (in the absence of monetary dislocation): (1) the stability of paper money, which makes it a valid measuring device; and (2) that the quantity theory of money, which is the basis of constant dollar accounting, is a flawed theory.
    Keywords: price level changes, level of money supply, instability of commodity prices, monetarism, price level adjusted, financial statements, general purchasing power.
    JEL: E
    Date: 2004–12–08
  22. By: John J. Siegfried (Vanderbilt University and American Economic Association); Wendy A. Stock (Department of Agricultural Economics and Economics, Montana State University)
    Abstract: This paper reports results from a survey of the labor market experience of the 2001-02 class of Ph.D. economists. We estimate that 850 economics Ph.D.s were awarded by U.S. universities in 2001-02, down about 100 from five years earlier. Of these, 28 percent were women, and 37 percent U.S. citizens and permanent residents. On average, the graduates took 5.4 years to earn their Ph.D.s. Over 97 percent of the graduates secured a full-time job; 82 percent held permanent jobs; 59 percent were in academe. Ninety-four percent of respondents reported that they like their job. Those who do less research are more likely to be dissatisfied. The median salary of those holding full-time jobs in the U.S. is $74,000, up from $54,000 five years earlier, a compounded annual increase of 6.5 percent. Salaries of starting assistant professors are now significantly larger than the average of incumbent assistant professors at similar category institutions. Salary compression has progressed to salary inversion. A two-tier job market is emerging in academe, as the gap between the median annual nine-month salary of permanent (tenure-track) and temporary (visiting) academics has widened to $21,500. Nevertheless, 86 percent of the doctorates report that had they known at matriculation what they know now, they still would have pursued a Ph.D. in economics.
    Keywords: labor markets for Ph.D. economists, economists' salaries, time-to-degree for economics Ph.D.
    JEL: A11
    Date: 2004–01
  23. By: W. Lee Hansen (Department of Economics, University of Wisconsin); Michael K. Salemi (Department of Economics, University of North Carolina at Chapel Hill); John J. Siegfried (Department of Economics, Vanderbilt University)
    Abstract: America's adult population is economically illiterate. College economics instruction must shoulder some of the blame for this situation. Forty percent of all college graduates take an economics course. Over 95 percent of principles of economics students do not continue on to major in economics, however. For them, introductory economics is a terminal course. To improve adult economic literacy the authors argue for replacing much of the detail and technical material in the traditional two-semester principles of economics course with a single semester introductory course that emphasizes basic concepts, repetitive practice applying those concepts to real circumstances, and active participation of students in the learning process. The goals of this course should be limited to developing a thorough understanding of basic economic principles such as scarcity, opportunity cost, trade-offs, marginal analysis, incentives, specialization, voluntary exchange, markets, prices as signals, and so on, at the expense of breadth. Twenty appropriate principles are identified in the 1997 Voluntary National Content Standards. The authors argue for omitting cost curves, most graphs, analysis of industry structures, elasticity and multiplier computations, and aggregate demand and aggregate supply analysis from the introductory course. .
    Date: 2001–03
  24. By: Malcolm Getz (Department of Economics, Vanderbilt University)
    Abstract: What is the prospect for migrating scholarly journals from paper to digital formats in a way that lowers university expenditures? Although many journals are published digitally, at least so far, the digital format complements paper, increasing university expenditures. Open-access publications that are free to readers and financed by publication fees paid by authors and their agents may both lower costs and allow scholarship to reach a larger audience. However, gains to universities may depend on open-access being quality-assured and controlled by not-for-profit publishers. Potential savings for a typical US research library might be on the order of $2.3 million per year even as the same level of effort goes to reviewing and editing published articles as at present. To launch the initiative, provosts might adopt policies to support publication fees and not-for-profit publishers might invest in start up funds for editing and marketing open-access journals.
    Keywords: electronic publishing, open access,digital library
    JEL: L81
    Date: 2004–06

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