nep-hpe New Economics Papers
on History and Philosophy of Economics
Issue of 2006‒05‒06
eight papers chosen by
Erik Thomson
University of Chicago

  1. Toward an Economic Theory of Dysfunctional Identity By Hanming Fang; Glenn C. Loury
  2. "Dysfunctional Identities" Can Be Rational By Hanming Fang; Glenn C. Loury
  3. Cooperation and Reciprocity: a Theoretical Approach By Marcello Basili; Maurizio Franzini
  4. Strategic and extensive games By Martin J. Osborne
  5. Is Equality Stable? By Dilip Mookherjee; Debraj Ray
  6. It's a Small World After All: The Convergence of Disclosure Practices Across Legal Regimes over Time By Timothy Fogarty; Garen Markarian; Antonio Parbonetti
  7. Sir George Caswall vs. the Duke of Portland: Financial Contracts and Litigation in the wake of the South Sea Bubble By Gary S. Shea
  8. Decentralization, Corruption and Government Accountability: An Overview By Pranab Bardhan; Dilip Mookherjee

  1. By: Hanming Fang (Department of Economics, Yale University); Glenn C. Loury (Institute for Economic Development, Boston University)
    Abstract: We advance a novel choice-theoretic model of “identity” based on the notions of categories and narratives. Identity is conceived as a matter of “reflexive perception” — how people understand themselves. Choosing an identity is equivalent to making a generalization about one’s past that highlights the most salient aspects of experience. When many individuals make a common choice in this regard, they embrace a collective identity which is dysfunctional if it is Pareto dominated by an alternative self-classificatory schema. Using a simple multi-stage risk sharing game, we explore conditions under which dysfunctional collective identities might be expected to emerge.
    Keywords: Identity: dysfunctional collective identity
    JEL: Z1 Z13
  2. By: Hanming Fang (Department of Economics, Yale University); Glenn C. Loury (Institute for Economic Development, Boston University)
  3. By: Marcello Basili; Maurizio Franzini
    Abstract: Cooperation among genetically unrelated agents occurs in many situations where economic theory would not expect it. A too narrow conception of self-interest is widely considered the culprit. In particular, relying on experimental evidence in plenty, we consider strong reciprocity rules of behaviour, according to which it is worth bearing the cost of punishing those who defect, and we give analytical foundation to such behaviour – and more generally to cooperation-proneness. The basic idea is that most agents may include self-esteem in their utility function and actually produce or destroy self-esteem through their effective behaviour. The latter amounts to introducing a moral system in individual behaviour in such a way to make it amenable to rational maximization. We also show how the presence of cooperation-prone agents may impact on the best contract in Principal-Agents situations by altering the convenience of gift giving and trust.
    Keywords: agency, altruism, self-interest, punishment, reciprocity
    JEL: J41 D64
    Date: 2005–11
  4. By: Martin J. Osborne
    Abstract: The basic theory of strategic and extensive games is described. Strategic game, Bayesian games, extensive games with perfect information, and extensive games with imperfect information are defined and explained. Among the solution concepts discussed are Nash equilibrium, correlated equilibrium, rationalizability, subgame perfect equilibrium, and weak sequential equilibrium.
    Keywords: Strategic games, Bayesian games, extensive games, Nash equilibrium, correlated equilibrium, subgame perfect equilibrium, sequential equilibrium
    JEL: C7
  5. By: Dilip Mookherjee (Institute for Economic Development, Boston University); Debraj Ray
    Keywords: inequallity dynamics, bequests, imperfect capital markets, human capital
    JEL: D31 D63 O12 O15
  6. By: Timothy Fogarty (Case Western Reserve University); Garen Markarian (Bocconi University); Antonio Parbonetti (University of Padua)
    Abstract: The literature on disclosure practices has posited a relationship between legal regime and the amount of voluntary disclosure. Specifically, companies in nations with a civil law tradition were expected to make more voluntary disclosure to compensate for the information that would otherwise be required in common law nations. This expectation was predicted on the assumptions that investors in the former nation would have salient information needs such that the proprietary costs of information production would be overcome. Data collected from 75 firms across the world were used to support the finding that the extent of difference across legal regimes is diminishing over time.
    Date: 2006–04
  7. By: Gary S. Shea
    Abstract: An investigation into the legal wrangles between the first Duke of Portland and his financial antagonists, in particular Sir George Caswall, helps illustrate the nature of private financial contracting during the South Sea Bubble. It also illustrates the special costs of enforcing such contracting after the Bubble. This paper is but a beginning to a wider study of the legal aftermath of the Bubble and the contribution of early modern financial contracting to the general law of contract.
    Keywords: South Sea Company, Bentinck family, Financial Revolution, Bubble Act, legal history.
    JEL: G13 N23
    Date: 2006–04
  8. By: Pranab Bardhan (University of California at Berkeley); Dilip Mookherjee (Institute for Economic Development, Boston University)
    Abstract: The impact of government decentralization on economic performance and growth is a hotly contested issue. Waves of decentralization occurred in many developing countries over the past few decades, following the demise of a development paradigm in which centralized states played a leading role (see for instance, case studies of decentralization covering over half the world’s population in Bardhan and Mookherjee 2005b). The trends toward greater decentralization has been motivated by disenchantment with previous centralized modes of governance, owing partly to a perception that monolithic government bred high levels of rent-seeking, corruption and lack of accountability of government officials. An important research question, therefore, concerns the effects of decentralization on corruption. Can decentralization be a useful institutional reform to reduce corruption, or might corruption increase as political power shifts downward?

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