nep-hpe New Economics Papers
on History and Philosophy of Economics
Issue of 2005‒01‒23
seven papers chosen by
Andy Denis
City University

  1. Competition and Profit: Varian\'s \"Intermediate Microeconomics\" in the Light of Classi. By Kepa Mirena Ormazabal Sanchez
  2. A Fundamental Contradiction in Standard Rent Theory: A Case Study on Varian\'s \"Inter. By Kepa M. Ormazabal Sanchez
  3. Evolutionary Theories of Cultural Change: An Empirical Perspective By R. R. Nelson
  4. Social Interactions and Economic Behavior By Giulio Zanella
  5. The Economist on 100 years of Einstein By Thomas Colignatus
  7. Economic Analysis By Mitch Leonards

  1. By: Kepa Mirena Ormazabal Sanchez (UPV/EHU)
    Abstract: This papel es a critique of the standard conception of the relation between competition and profit and takes Varian as a representative case. Varian starts defining profit as the surplus of revenues over cost: profit is made by buying cheap and selling dear. But the he stumbles on the fact that selling-price cannot be different from cost-price under competition. As Varian views it, competition annihilates the profit margin. This means that, in the general competitive equilibrium, all the goods must be bought and sold at their value, wich Varian takes it to mean that profit cannot exist in competition. This carries the implication that the notion of competitive profit is a contradiction in terms, for, to the extent that competition prevails, there can be no surplus of selling-price over cost-price and, as long as there is susch a divergence, competition does not prevail. I contrast this standard conception of Varian with Classical Economics, where competition equalizes the profit rate. In Classical Economics, profit is not originated in exchange, but in production and the contradictions that plague Varian treatment do not arise. Standard Micro Theory should have not ignored this way.
    Date: 2005–01–18
  2. By: Kepa M. Ormazabal Sanchez (UPV/EHU)
    Abstract: In this paper, I examine Varian\'s treatment of rent in his textbook on Microeconomics. I argue that he holsd contradictory conceptions: sometimes rent is defined as surplus over cost wheareas sometimes it is defined as cost, as the opportunity cost of fixed factors. I start by arguing thar the distinction betweewn fixed and variable factors is not the key for the definition of rent; ultimately, it is monopoly. Varian\'s conception of rent is, essentially, Ricardo\'s: rent is extraordinary profit turned rent. On the basis of a self-inconsistent notion of opportunity cost, Varian introduces the idea that rent is the opportunity cost of land, when what he acctually defines is the opportunity cost of not renting the land. I also critically examine the related notion of \"producer\'s surplus\", and show that Varian\'s trealment repeats the same contradiction as in rent
    Date: 2005–01–18
  3. By: R. R. Nelson
    Abstract: The last quarter century has seen a renaissance of the proposal that the processes Darwin put forth as driving biological evolution also provide a plausible theoretical framework for analysis of the evolution of human culture. Modern proponents of the idea that human culture evolves through broad Darwinian processes, involving variation and selective retention, of course recognize that the idea is not a new one. There is no doubt, however, that in recent years the idea has become particularly fashionable among scholars. Many advocates of the position use the term "Universal Darwinism", generally believed to have been coined by Richard Dawkins (1983), to denote the theory they are trying to develop. Because it is better known, in what follows I will use that term to denote the broad idea, which I endorse, rather adopting here David Hull’s term "General Selection Processes" (1988) to denote the class of dynamic mechanisms one can see operative in particular form in both biological and cultural change. However, I share with Hull the belief that many of the recent attempts to extend Darwinian theory to human culture have stayed too close to biology, and indeed a narrow perspective on biology. In particular, my concern here is that, while a general theory of evolution driven by variation and selective retention would appear highly relevant to analysis of changes over time in many aspects of human culture, some of the specific features that we now know are involved in the evolution of species, particularly entities like genes, and mechanisms like inclusive fitness, may not carry over easily.
  4. By: Giulio Zanella
    Abstract: This paper is a critical introduction to the new wave of economic literature on the effect of social interactions on individual behavior and aggregate economic outcomes. I refer to this research program, also known as new social economics, as the socioeconomic analysis of behavior, to distinguish it from the more popular economic analysis of social behavior. I discuss the main features of so-called interactions-based models, and I show how they help us to understand substantive economic phenomena. In order to restrict the focus, I choose five possible applications: matching in the labor market, welfare participation, poverty traps and inequality, investor behavior, and consumer behavior. Then I dwell upon two key undecided questions: (i) why economic behavior is affected by social interactions, and (ii) how the social context is shaped by rational individuals. Finally, I briefly discuss the main empirical routes so far used.
    Keywords: new social economics, social interactions, neighborhood effects, social networks, social norms, social multiplier
    JEL: D10 D85 Z13
    Date: 2004–11
  5. By: Thomas Colignatus (Samuel van Houten Genootschap)
    Abstract: An important aspect for economics and its methodology is the relation between its definitions and the reality that those definitions (should) reflect. Creative minds coin definitions that maximize explanatory power. An example that highlights this phenomenon can be found in physics and notably by the article in The Economist January 1 2005 on 100 years of Einstein. Physics with its methodology has had more impact on economics than the other way round. Physics seems to have become an arcane science and one wonders whether economics goes the same road. Both sciences are in danger of losing touch with reality and either blow up the world or destroy the world's economy if they don't spend close attention to their definitions and their transparancy. While it is most likely that the author simply doesn't understand physics, the exposition may still be beneficial for students of economics and its methodology.
    JEL: A00
    Date: 2005–01–20
  6. By: stanley c. w. salvary (Canisius College)
    Abstract: This paper addresses a very profound question concerning financial accounting. Is financial accounting measurement. as represented by diverse valuation rules. hodgepodge or is it logically developed? Salvary [1985. p.28. Chap. IV] advances and provides a theoretical development of the concept of 'recoverable cost' as the measurement property observed in (underlying) financial accounting measurement. Sa/vary [1989, pp.50-51] maintains that 'recoverable cost' is the center of 'economic gravity' and demonstrates that this valuation is derivable from axioms advanced. This paper provides a rigorous proof that 'recoverable cost' is the observed measurement property underlying financial accounting measurement. This analysis draws upon: (a) the concept of recovery underlying the investment decision and (b) the distinction between decision theory and measurement theory. It establishes recoverable cost as the measurement property in financial accounting and leads to the conclusion that financial accounting measurement is logically developed.
    Keywords: measurement rules, capital budgeting, realizable value, lower of cost and market, capitalization, depreciation, decision theory, market simulation, asset specificity.
    JEL: A
    Date: 2005–01–20
  7. By: Mitch Leonards
    Abstract: A framework for economic analysis based on matrix algebra.
    JEL: D1 D2 D3 D4
    Date: 2005–01–18

This nep-hpe issue is ©2005 by Andy Denis. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.