nep-hpe New Economics Papers
on History and Philosophy of Economics
Issue of 2006‒07‒28
four papers chosen by
Erik Thomson
University of Chicago

  1. El libre albdrío y los conceptos de racionalidad y de elección racional en la ciencia económica By Luisa Montuschi
  2. Fair interest rates when lending to the poor: Are fair prices derived from basic principles of justice? By Marek Hudon

  1. By: Luisa Montuschi
    Abstract: The assumption of rationality is one of the most important as well most controversial assumptions of economic science and of the theory of rational choice. But there are many difficulties associated with the concept of economic rationality, or the classical model of rationality, which is usually understood as the principle according to which people act rationally in the sense that they tend to adopt the best means which they suppose are oriented toward the satisfaction of their unquestioned goals. To understand properly the scope of such concept it is important to analyze the meaning of rationality and to distinguish between theoretical rationality and practical rationality and to consider the problem or free will and determinism as well. To understand how people make decisions that depart from the optimal model different notions of rationality are presented: instrumental rationality, substantive rationality and procedural rationality among others.
    Date: 2006–07
  2. By: Marek Hudon (Centre Emile Bernheim, Solvay Business School, Université Libre de Bruxelles, Brussels and Harvard University, Boston.)
    Abstract: This paper addresses the fairness of prices, with a focus on fair interest rates as they apply to microlending transactions for the poor. Under different assumptions on fairness in interest rate policies and the principles of justice as described in A Theory of Justice (Rawsl, 1976), the paper determines the extent of the ‘just’ range of a price. Using the original notion of fair reservation price and fair bargaining range, it is shown that some unfair considerations can make the fair bargaining range negative. Therefore, we propose an additional criterion for fairness: a fair distribution of the benefits within the fair bargaining range between borrowers and lenders. This new criterion is particularly useful and relevant, at minimum, for socially-minded ones active on the microfinance markets.
    Keywords: justice, microfinance, interest rate, principles.
    JEL: L31 M54 O16 Q14
    Date: 2006–07
  3. By: Waymond Rodgers; Susana Gago
    Abstract: Moral issues greet the business community constantly, confronting us with problems on handling accounting rules that can determine a company’s future. We are bombarded with news regarding fraudulent activities in companies that mishandled accounting rules leading to undermining the confidence of customers, employees, suppliers, shareholders and the community. Dealing with ethical issues is often perplexing and without the benefits of a decision making model underlined by ethical positions we may be apt to repeat our old ways. Further, value and belief systems are often times absent and not connected to a decision making model in a useful manner. We argue for a modification of decision-making models that has been accepted in companies with stronger links with ethics and morality. With this aim we propose a return to the base values of Buddhism, Christianity, Hinduism, Judaism, and Islam by scriptures, underlying six dominant ethical approaches that drive practices in organizations.
    Date: 2006–07
  4. By: Waymond Rodgers; Susana Gago
    Abstract: To most individuals, “trust” can be viewed as a knowledge corporate asset that may add, or rest, value to the company. The role of knowledge in achieving a competitive advantage is becoming and increasingly important management issue in all business and non-business sectors. As such, our Throughput Modeling approach indicates how six different trust behaviors can be guided, how trust decision making can be improved and made defensible, and how special problems facing individuals can be dealt with via decision-making pathways leading to an action.
    Date: 2006–07

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