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on History and Philosophy of Economics |
| By: | Amitava K. Dutt (University of Notre Dame); Peter Skott (University of Massachusetts Amherst) |
| Abstract: | Contrary to what has been argued by a number of critics, the AD-AS framework is both internally consistent and in conformity with Keynes’s own analysis. Moreover, the eclectic approach to behavioral foundations allows models in this tradition to take into account aggregation problems as well as evidence from behavioral economics. Unencumbered by the straightjacket of optimizing microfoundations, the approach can provide a useful starting point for the analysis of dynamic macroeconomic interactions. In developing this analysis, the AD-AS approach can draw on insights from the Post Keynesian, neo-Marxian and structuralist traditions, as well as from the burgeoning literature on behavioral economics. JEL Categories: E12, O11, B22, B41, B50 |
| Keywords: | AD-AS, Keynes, New Keynesian theory, microeconomic foundations |
| Date: | 2005–08 |
| URL: | http://d.repec.org/n?u=RePEc:ums:papers:2005-11&r=hpe |
| By: | Gil Kalai; Shmuel Safra |
| Date: | 2005–08 |
| URL: | http://d.repec.org/n?u=RePEc:huj:dispap:dp398&r=hpe |
| By: | Hugo E. A. da Gama Cerqueira (Cedeplar-UFMG) |
| Abstract: | This paper examines Adam Smith's understanding of the philosophy and science, the motivations that lead us to investigate nature and society, and the proper methods of investigation and exposition. The paper also criticizes those authors that interpret Smith's work as an example of the mechanical approach or as a kind of positivism 'avant la lettre'. |
| Keywords: | Adam Smith, rhetoric, methodology, Newtonianism, political economy |
| JEL: | B30 B40 |
| Date: | 2005–07 |
| URL: | http://d.repec.org/n?u=RePEc:cdp:texdis:td271&r=hpe |
| By: | Panagis Liossatos (Department of Economics, Florida International University) |
| Abstract: | This essay seeks to develop an integrated account of the workings of statistical mechanics and thermodynamics as a theory of economic equilibrium. It begins with a probabilistic description of general systems (made out of numerous elements), based on the practice of statistical physics and the work of E. T. Jaynes, and a self-contained overview of the arguments that lead to the concept of statistical entropy as a measure of uncertainty or disorder and the maximum statistical entropy principle . This provides the conceptual setting for developing a statistical mechanical model of general equilibrium in pure exchange economies, inspired by the statistical theory of markets of Duncan K. Foley. Emphasis is placed in the derivation of the properties of the entropy function of an economy—the maximized statistical entropy as a function of the amounts of resources in that economy. We then show that the statistical equilibrium theory of pure exchange economies gives rise to a phenomenological or ‘macro’ theory of resource allocation in the image of classical thermodynamics (and the generalized thermodynamics of L. I. Rozonoer). We thus establish the fundamental principle of the phenomenological theory—the maximum entropy principle—and illustrate its use for the study of isolated and small open economies. |
| Keywords: | statistical entropy, thermodynamics, general equilibrium, physics |
| JEL: | D5 |
| Date: | 2004–07 |
| URL: | http://d.repec.org/n?u=RePEc:fiu:wpaper:0414&r=hpe |
| By: | Ernst Fehr (University of Zurich); Jean-Robert Tyran (Department of Economics, University of Copenhagen) |
| Abstract: | There is abundant evidence that many individuals violate the rationality assumptions routinely made in economics. However, powerful evidence also indicates that violations of individual rationality do not necessarily refute the aggregate predictions of standard economic models that assume full rationality of all agents. Thus, a key question is how the interactions between rational and irrational people shape the aggregate outcome in markets and other institutions. We discuss evidence indicating that strategic complementarity and strategic substitutability are decisive determinants of aggregate outcomes. Under strategic complementarity, a small amount of individual irrationality may lead to large deviations from the aggregate predictions of rational models, whereas a minority of rational agents may suffice to generate aggregate outcomes consistent with the predictions of rational models under strategic substitutability. |
| Keywords: | bounded rationality; strategic interaction; strategic complementarity |
| JEL: | D50 D84 |
| Date: | 2005–07 |
| URL: | http://d.repec.org/n?u=RePEc:kud:kuiedp:0509&r=hpe |
| By: | Jonathan Gershuny (Institute for Social and Economic Research) |
| Abstract: | There are three meanings of “industrial”, the first two taking industry as a concrete noun, the third as an abstract: • “industries” as a general term for branches of economic activity or production • “industry” as a particular branch, manufacturing • “industry” as a description of an approach to the activity of work. And there are (at least) three ways in which we have now passed beyond the “industrial” phase of economic development: • The emergence of “value chains” as a new form of economic organisations: the disaggregation of industrial structure and the growing importance of human capital versus industrial capital. • Self-servicing versus service industries: understanding technical change by thinking of “systems of provision for wants”, which combine production, reproduction and consumption. • Developing Veblen’s leisure theory: industry is progressively replaced by exploit as a core characteristic of paid work. The arguments that follow rely (mostly, for the moment) on empirical evidence from time diary studies. |
| Keywords: | 21, family, leisure |
| Date: | 2005–06 |
| URL: | http://d.repec.org/n?u=RePEc:ese:iserwp:2005-07&r=hpe |
| By: | B. Douglas Bernheim; Antonio Rangel |
| Abstract: | This paper has two goals. First, we discuss several emerging approaches to applied welfare analysis under non-standard ("behavioral") assumptions concerning consumer choice. This provides a foundation for Behavioral Public Economics. Second, we illustrate applications of these approaches by surveying behavioral studies of policy problems involving saving, addiction, and public goods. We argue that the literature on behavioral public economics, though in its infancy, has already fundamentally changed our understanding of public policy in each of these domains. |
| JEL: | D0 D1 D6 D9 H0 H1 H4 |
| Date: | 2005–08 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:11518&r=hpe |
| By: | Andrea Morone |
| Abstract: | In the 40's and early 50' two decision theories were proposed and have since dominated the scene of the fascinating field of decision-making. In 1944 - when von Neumann and Morgenstern showed that if preferences are consistent with a set of axioms then it is possible to represent these preferences by the expectation of some utility function - Expected Utility theory provides a natural way to establish "measurable utility". In the early 50's Markowitz introduced the Mean-Variance theory that is the basis of modern portfolio selection theory. Even if both models were analyzed from virtually all possible points of view; although they were tested against several generalizations; even though they seem to be the most attractive theories of decision making, they were never tested against each other. This paper will try to fill this gap. It investigates, using experimental data, which of these two models represent a better approximation of subjects' preferences. |
| Keywords: | Expected utility, Mean variance, preference functional, pair wise choice, experiments. |
| JEL: | C92 G12 |
| Date: | 2005–07 |
| URL: | http://d.repec.org/n?u=RePEc:esi:discus:2005-20&r=hpe |