nep-hpe New Economics Papers
on History and Philosophy of Economics
Issue of 2005‒01‒02
eleven papers chosen by
Andy Denis
City University

  1. Organizational Routines: A Sceptical Look By Teppo Felin; Nicolai J. Foss
  2. Arrow-Debreu and the classical and neoclassical economics By Cláudio Gontijo
  3. Market and Society: How do they relate, and contribute to welfare? By Dolfsma, W.; Finch, J.; McMaster, R.
  4. Is Economic Analysis of Any Help in Studies of Legitimacy in the EU? By Jan Gunnarsson
  5. Utilitarian Collective Choice and Voting By Hillinger, Claude
  6. Integrating Ethics and Altruism with Economics By David Colander
  7. Economic Geography: Real or Hype? By Jun Koo; Somik V. Lall
  9. The Nobel Memorial Prize for Robert F. Engle By Francis X. Diebold
  10. Rationality of Belief Or Why Bayesianism is neither necessary nor sufficient for rationality By Itzhak Gilboa; Andrew Postlewaite; David Schmeidler
  11. Literature review: R&D cooperation in oligopoly with spill-overs: an experimental economic approach By Suetens S.

  1. By: Teppo Felin; Nicolai J. Foss
    Abstract: Organizational routines and capabilities have become key constructs not only in evolutionary economics, but more recently also in business administration, specifically strategic management. In this chapter we explicate some of the underlying theoretical problems of these concepts, and discuss the need for micro-foundations. Specifically, we focus on some of the explanatory problems of collective-level theorizing, and what we think are tenuous assumptions about human beings. We argue that individual-level considerations deserve significantly more consideration, and that evolutionary economics and strategic management would be well served by building on methodological individualism.
    JEL: D2 L2 M1
    Date: 2004
  2. By: Cláudio Gontijo (UFMG)
    Abstract: This article challenges the notion that the modern general equilibrium theory of Arrow-Debreu is a rigorous formulation of neoclassical economics and that, by contrast, Sraffian and Marxian economics are not compatible with it. It shows that the standard Arrow-Debreu assumptions regarding the production sets and profit maximization are sufficient to determine equilibrium prices, which then do not depend on consumers’ preferences. Arrow-Debreu equilibrium prices are similar to Marxian labor values since they are proportional to labor time and factor prices are variables that determine the distribution of income but not commodity prices. Instead of being related to the quantity of capital, profits are also proportional to the quantity of labor, causing capital to have different prices at the same point in time and at the same market, which is hardly compatible with the hypothesis of free competition. If the notion of equilibrium prices is modified as to make capital to be rewarded at the same rate in all sectors of the economy, the hypothesis of decreasing returns to scale ensures that competitive prices are an increasing function of demand and, as a consequence, they can be viewed as a product of the interaction between supply and demand. However, in any case there is no inverse relationship between the quantity of capital and its rate of rewards, as requires the neoclassical law of diminishing returns.
    Keywords: Arrow-Debreu model, general equilibrium theory, Marxian economics, Sraffian economics, capital controversy
    JEL: B51 C62 D50
    Date: 2004–12
  3. By: Dolfsma, W.; Finch, J.; McMaster, R. (Erasmus Research Institute of Management (ERIM), Erasmus University Rotterdam)
    Abstract: This paper discusses how markets and society relate to each other. We present and discuss three views: markets as separate, markets as embedded, and markets as impure. One?s stance on the contribution of markets to welfare hinges on the conceptualization of market and other spheres in society. If, for instance, one perceives of the economy (the economic domain) as an all-encompassing sphere or as a sphere totally separate from others, then one would believe markets necessarily contribute to welfare. Markets are presumed to be ubiquitous in mainstream economics; the orthodox view is that of the ?market as separate?. Indeed, Frank Hahn notably conceded that neoclassical economics does not describe markets, but ?conjures? them up. Mainstream conceptions of the market are functionalist ? in the appropriate conditions the market is an efficiency conduit, and hence wealth and welfare generating. Creating these appropriate conditions then drives policy, such as the provision of health care, and tends to produce a one size fits all approach. This paper argues that this is an overly restrictive conceptualization of markets, and is an inadequate basis for conceptualizing the potential effects of markets. Conceptualizing the market as impure and embedded must be added. We contribute to this discussion by developing the concepts of ?boundaries? separating spheres. Such an approach broadens the notion of welfare and well-being beyond the monetized parameters of economic orthodoxy.
    Keywords: market;society;market as separate;markets as impure;markets as embedded;health care;
    Date: 2004–12–14
  4. By: Jan Gunnarsson (Institute of Economics, University of Copenhagen)
    Abstract: The transaction cost approach in economics has been applied in theorizing how Europe is governed. In providing a functionalist explanation of political organization, it encourages beliefs that reforms improving organizational efficiency also increase the legitimacy of European leadership. This paper discusses institutional perspectives on how democratic legitimacy is built by those, who aspire to rule the EU. An economist’s view will be discussed against a background of models of legitimacy by Scharpf and Schmitter. In addition, a governance practice directed to diffusion policy is fenced off and a future empirical study is outlined.
    Keywords: legitimacy; multi-level governance; transaction costs; social norms; institutional leverage
    JEL: H70 L50
    Date: 2004–09
  5. By: Hillinger, Claude
    Abstract: In his seminal Social Choice and Individual Values, Kenneth Arrow stated that his theory applies to voting. Many voting theorists have been convinced that, on account of Arrow?s theorem, all voting methods must be seriously flawed. Arrow?s theory is strictly ordinal, the cardinal aggregation of preferences being explicitly rejected. In this paper I point out that all voting methods are cardinal and therefore outside the reach of Arrow?s result. Parallel to Arrow?s ordinal approach, there evolved a consistent cardinal theory of collective choice. This theory, most prominently associated with the work of Harsanyi, continued the older utilitarian tradition in a more formal style. The purpose of this paper is to show that various derivations of utilitarian SWFs can also be used to derive utilitarian voting (UV). By this I mean a voting rule that allows the voter to score each alternative in accordance with a given scale. UV-k indicates a scale with k distinct values. The general theory leaves k to be determined on pragmatic grounds. A (1,0) scale gives approval voting. I prefer the scale (1,0,-1) and refer to the resulting voting rule as evaluative voting. A conclusion of the paper is that the defects of conventional voting methods result not from Arrow?s theorem, but rather from restrictions imposed on voters? expression of their preferences. The analysis is extended to strategic voting, utilizing a novel set of assumptions regarding voter behavior.
    JEL: D72 D71
    Date: 2004–12
  6. By: David Colander
  7. By: Jun Koo; Somik V. Lall (World Bank)
    Abstract: Economic geography has become a mantra for many economists, geographers, and regional scientists. Previous studies have tested the importance of economic geography for production activities and found a significant association between them. Most of these studies, however, have not taken into account that economic geography influences location decisions at the firm level. Koo and Lall show a potential bias that can arise when firm location choices are not considered in estimating the contribution of economic geography to industry performance. Their analysis using microdata of Indian manufacturing firms shows there is an upward bias in the contribution of economic geography to productivity when firm location choices are not considered in the analysis. This paper—a product of the Infrastructure and Environment Team, Development Research Group—is part of a larger effort in the group to examine industry location decisions. The study was partly funded by the Bank’s Research Support Budget under the research project "Urbanization and the Quality of Life.”
    Keywords: Infrastructure; Industry
    Date: 2004–12–30
  8. By: Stanley C. W. Salvary (Canisius College)
    Keywords: Ideological Dominance and Epistemological Relevance; Modelling and Theory Formulation; Instrumentalism; Free Market and Regulated Market; Theory of Imperfect Competition, Fairness, Consensual Correctness, Representational Correctness.
    JEL: B
    Date: 2004–12–28
  9. By: Francis X. Diebold (Department of Economics, University of Pennsylvania and NBER)
    Abstract: Engle’s footsteps range widely. His major contributions include early work on band-spectral regression, development and unification of the theory of model specification tests (particularly Lagrange multiplier tests), clarification of the meaning of econometric exogeneity and its relationship to causality, and his later stunningly influential work on common trend modeling (cointegration) and volatility modeling (ARCH, short for AutoRegressive Conditional Heteroskedasticity). More generally, Engle’s cumulative work is a fine example of best-practice applied time-series econometrics: he identifies important dynamic economic phenomena, formulates precise and interesting questions about those phenomena, constructs sophisticated yet simple econometric models for measurement and testing, and consistently obtains results of widespread substantive interest in the scientific, policy, and financial communities.
    Keywords: Econometric Theory, Finance
    JEL: B31 C10
    Date: 2004–02–01
  10. By: Itzhak Gilboa (Eitan Berglas School of Economics, Tel Aviv University); Andrew Postlewaite (Department of Economics, University of Pennsylvania); David Schmeidler (Eitan Berglas School of Economics, Tel Aviv University)
    Abstract: Economic theory reduces the concept of rationality to internal consistency. The practice of economics, however, distinguishes between rational and irrational beliefs. There is therefore an interest in a theory of rational beliefs, and of the process by which beliefs are generated and justified. We argue that the Bayesian approach is unsatisfactory for this purpose, for several reasons. First, the Bayesian approach begins with a prior, and models only a very limited form of learning, namely, Bayesian updating. Thus, it is inherently incapable of describing the formation of prior beliefs. Second, there are many situations in which there is not sufficient information for an individual to generate a Bayesian prior. Third, this lack of information is even more acute when we address the beliefs that can be attributed to a society. We hold that one needs to explore other approaches to the representation of information and of beliefs, which may be helpful in describing the formation of Bayesian as well as non-Bayesian beliefs.
    Keywords: Decision making; Bayesian; Behavioral Economics
    JEL: D81
    Date: 2004–03–01
  11. By: Suetens S.
    Date: 2004–11

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