nep-hpe New Economics Papers
on History and Philosophy of Economics
Issue of 2005‒05‒23
eight papers chosen by
Andy Denis
City University

  1. Alfred Marshall and the quantity theory of money By Thomas M. Humphrey
  2. The Inflation Target Five Years On By Mervyn King
  3. Experiments and Economic Development: Lessons from Field Labs in the Developing World By Juan Camilo Cardenas; Jeffrey P. Carpenter
  4. Intelligenza e Coscienza. L’IA tra Searle e Dennett: sviluppi del l’Intelligenza Artificiale By Matteo FINI; Paola MILANI
  5. 25 Years of IIF Time Series Forecasting: A Selective Review By Jan G. De Gooijer; Rob J. Hyndman
  6. Sterling's Past, Dollar's Future: Historical Perspectives on Reserve Currency Competition By Barry Eichengreen
  7. Studying Texts: A Gemara of the Israel Economy By Michael W. Klein
  8. The Modigliani-Miller Theorems: A Cornerstone of Finance By Marco Pagano

  1. By: Thomas M. Humphrey
    Abstract: Marshall made at least four contributions to the classical quantity theory. He endowed it with his Cambridge cash-balance money-supply-and-demand framework to explain how the nominal money supply relative to real money demand determines the price level. He combined it with the assumption of purchasing power parity to explain (i) the international distribution of world money under metallic standards and fixed exchange rates, and (ii) exchange rate determination under floating rates and inconvertible paper currencies. He paired it with the idea of money wage and/or interest rate stickiness in the face of price level changes to explain how money-stock fluctuations produce corresponding business-cycle oscillations in output and employment. He applied it to alternative policy regimes and monetary standards to determine their respective capabilities of delivering price-level and macroeconomic stability. In his hands the theory proved to be a powerful and flexible analytical tool.
    Keywords: Economists ; Money
    Date: 2004
  2. By: Mervyn King (Bank of England)
    Abstract: Mervyn King is the Deputy Governor of the Bank of England and a co-founder of the LSE Financial Markets Group. On Wednesday 29 October 1997 he gave a public lecture at the LSE to mark the 10th anniversary of the Financial Markets Group and the 5th annivesay of the Bank of England Inflation Target. This Special Paper is the Transcript of that lecture.
  3. By: Juan Camilo Cardenas; Jeffrey P. Carpenter
    Abstract: Along with the traditional primitives of economic development (material preferences, technology, and endowments), there is a growing interest in exploring how psychological and sociological factores (e.g., bounded rationality, norms, or social preferences) also influence economic decisions, the evolution of institutions, and outcomes. Simultaneously, a vast literature has arisen arguing that economic experiments are important tools in identifying and quantifying the role of institutions, socialnorms and preferences on behavior and outcomes. Reflecting on our experience conducting experiments in the field over more than five years, we survey the growing literature at the intersection of these two research areas. Our review has four components. In the introduction we set the stage identifying a set of behavioral factors that seem to be central for understanding growth and economic development./ We then divide the existing literature in two piles: standard experiments conducted in the field and on how to econometrically identify sociological factors in experimental data. We conclude by suggesting topics for future research.
    Keywords: experimental economics, behavioral economics, institutions, social preferences, poverty, development
    JEL: C9 O1
    Date: 2005–05
  4. By: Matteo FINI; Paola MILANI
    Abstract: This work is focused on Artificial Intelligence and the complex d iscussion about the possibilities of creating a machine thinking as man does. Through this analysis, it emerges that the chances of success of IA program change according to the different theori es about mind which were faced in the last years. In this sense, a big part of the matter depends on the meaning attributed to so me mental elements as counsciousness and intentionality: who thin ks that they can be reduced to physical processes, is usually agr ee with the aims of IA and optimist about results. Instead, who doesn’t believe that mental elements can be reduced to physical o nes is sceptical about IA studies and the possible outcome. In t he last part of the article, the argument is the principal themes of IA, starting from the first programs arriving to neural netwo rks and genetic algorithms; in spite of successes that were reach ed, it seems we are still far from reproducing the human mind in all its components. For this reason, recently, some scientists em phasize the importance to support IA with another subject: the Ar tificial Counsciousness, AC.
    Keywords: Artificial Intelligence, counsciousness, intentionality, neural networks, genetic algorithms, Artificial Counsciousness.
  5. By: Jan G. De Gooijer; Rob J. Hyndman
    Abstract: We review the past 25 years of time series research that has been published in journals managed by the International Institute of Forecasters (Journal of Forecasting 1982-1985; International Journal of Forecasting 1985-2005). During this period, over one third of all papers published in these journals concerned time series forecasting. We also review highly influential works on time series forecasting that have been published elsewhere during this period. Enormous progress has been made in many areas, but we find that there are a large number of topics in need of further development. We conclude with comments on possible future research directions in this field.
    Keywords: Accuracy measures; ARCH model; ARIMA model; Combining; Count data; Densities; Exponential smoothing; Kalman Filter; Long memory; Multivariate; Neural nets; Nonlinearity; Prediction intervals; Regime switching models; Robustness; Seasonality; State space; Structural models; Transfer function; Univariate; VAR.
    JEL: C53 C22 C32
    Date: 2005–05
  6. By: Barry Eichengreen
    Abstract: This paper provides an historical perspective on reserve currency competition and on the prospects of the dollar as an international currency. It questions the conventional wisdom that competition for reserve-currency status is a winner-take-all game, showing that several currencies have often shared this role in the past and arguing that innovations in financial markets make it even more likely that they will do so in the future. It suggests that the dollar and the euro are likely to share this position for the foreseeable future. Hopes that the yuan could become a major international currency 20 or even 40 years from now are highly premature.
    JEL: F0
    Date: 2005–05
  7. By: Michael W. Klein
    Abstract: This paper reviews six English-language books on the economy of Israel. Each book was written or edited by Israelis, and each is from a different decade. The earliest book, Don Patinkin%u2019s The Israel Economy: The First Decade, was written in the late 1950s, and the most recent volume, The Israeli Economy, 1985 - 1998: From Government Intervention to Market Economics (edited by Avi Ben-Bassat), was published in 2002. While each book considers the Israeli economy at a different stage of its development, five common themes appear: (i) the relevant comparison group for considering the Israeli economy, (ii) the challenges of immigration, integration and inequality, (iii) the appropriate roles of the government and markets, (iv) openness and dependence, and (v) inflation, crisis, and stabilization. Overall, the chronology of economic views presented in these books corresponds to an increasing acceptance of the role of markets and an increasing desire for open trade in goods and assets.
    JEL: N0
    Date: 2005–05
  8. By: Marco Pagano (Università di Napoli "Federico II", CSEF and CEPR)
    Abstract: The Modigliani-Miller (MM) theorems are a cornerstone of finance for two reasons. The first is substantive and it stems from their nature of “irrelevance propositions”: by providing a crystal-clear benchmark case where capital structure and dividend policy do not affect firm value, by implication these propositions help us understand when these decisions may affect the value of firms, and why. Indeed, the entire subsequent development of corporate finance can be described essentially as exploring the consequences of relaxing the MM assumptions. The second reason for the seminal importance of MM is methodological: by relying on an arbitrage argument, they set a precedent not only within the realm of corporate finance but also (and even more importantly) within that of asset pricing.
    Keywords: Modigliani-Miller theorem, capital structure, leverage, dividend policy
    Date: 2005–05–01

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