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on History and Philosophy of Economics |
| By: | Henry G. Manne |
| Abstract: | This Essay briefly reexamines the great debates on the role of insider trading in the corporate system from the perspectives of efficiency of capital markets, harm to individual investors, and executive compensation. The focus is on the mystery of why trading by all kinds of insiders as well as knowledgeable outsiders was studiously ignored by the business and investment communities before the advent of insider trading regulation. It is hardly conceivable that officers, directors, and controlling shareholders would have remained totally silent in the face of widespread insider trading if they had seen the practice as being harmful to the company, to themselves, or to investors. By analogy with the famous article by Friedrich Hayek, The Use of Knowledge in Society, this Essay considers the problem of obtaining necessary information for managers of large corporate enterprises. The suggested analytical framework views the share price, sensitively impacted by informed trading, as a mechanism for timely transmission of valuable information to top managers and large shareholders. Informed trading in the stock market is also compared to “prediction” or “virtual” markets currently used by corporations and policymakers. |
| Date: | 2005–04 |
| URL: | http://d.repec.org/n?u=RePEc:icr:wpicer:07-2005&r=hpe |
| By: | Francesco Boldizzoni (Università Bocconi); Arnaldo Canziani (Università di Brescia) |
| Abstract: | The development of a mechanistic analytical approach – since mid-19th century to WWI, and beyond – is a well-known story in European economic thought, the story of Cournot, Jevons, Walras, Edgeworth, Pareto, and many others. We could refer to this tradition as “mathematical deductivism”, i.e. the use of mathematics as a demonstrative tool, which implies plenty of axioms and theorems, generally connected to maximizing behaviours. But along the 20th century, both the diffusion of more sophisticated mathematics and ‘political’ circumstances – mainly the Keynesian claim to build workable theories – opened a new phase, the “mathematical descriptivism”: mathematics started to be used to give form to the economic matter, and to satisfy the simplest requirements of economic policy as well. Contrary to these vulgatae, a third use of mathematics could be anyway suggested, the approach based on “multiple indeterminations”. Within such a framework, economic dynamics is treated in more and more flexible ways by n degrees of freedom, so reflecting the stochastic complexity of the economic reality. To carry out this task, the paper goes through the work of three Italian pioneers of the 20th century (Demaria, Brambilla, De Finetti) analyzing the interactions between social exogenous variables and their endogenous effects. |
| JEL: | B23 B40 C00 C60 |
| Date: | 2005–04–16 |
| URL: | http://d.repec.org/n?u=RePEc:wpa:wuwpmh:0504003&r=hpe |
| By: | John A. Weymark (Department of Economics, Vanderbilt University) |
| Abstract: | This article reconsiders the Harsanyi--Sen debate concerning whether Harsanyi is justified in interpreting his Aggregation and Impartial Observer Theorems as providing axiomatizations of utilitarianism. Sen's criticism and its formalization by Weymark are based on the claim that von Neumann--Morgenstern utility theory is ordinal, whereas Harsanyi's utilitarian conclusions require cardinal utility. Proposals for overcoming Sen's objection that appeal to formal measurement theory are considered. It is argued that one of these proposals due to Broome and Risse rightly points to a feature of expected utility theory that was ignored by Sen and Weymark, but that this proposal does not provide a normatively compelling justification for cardinal utility. The other proposal due to Broome is shown to make use of a strength of preference relation in addition to the axioms of expected utility theory. |
| Keywords: | Expected utility, measurement theory, utilitarianism, Harsanyi, von Neumann, Morgenstern |
| JEL: | D63 D71 D81 |
| Date: | 2005–04 |
| URL: | http://d.repec.org/n?u=RePEc:van:wpaper:0507&r=hpe |
| By: | William Barnett (Department of Economics, The University of Kansas); Robert Solow (MIT) |
| Date: | 2004–06 |
| URL: | http://d.repec.org/n?u=RePEc:kan:wpaper:200407&r=hpe |