nep-hpe New Economics Papers
on History and Philosophy of Economics
Issue of 2007‒02‒24
ten papers chosen by
Erik Thomson
University of Chicago

  1. Lange and his 1938-contribution – An early Keynesian? By Finn Olesen
  2. "Methodology and Microeconomics in the Early Work of Hyman P. Minsky" By Jan Toporowski
  3. Francis Ysidro Edgeworth on the regularity of law and the impartiality of chance By Alberto Baccini
  4. F.Y. Edgeworth’s Treatise on Probabilities By Alberto Baccini
  5. "FisherÕs Theory of Interest Rates and the Notion of ÒRealÓ: A Critique" By Eric Tymoigne
  6. Macroeconomic Implications of Gold Reserve Policy of the Bank of England during the Eighteenth Century By Elisa Newby
  7. "Deep Democracy ; A Political and Social Economy Approach" By Mariko Frame; Haider A. Khan
  8. Polities and Peace By Henry S. Farber; Joanne Gowa
  9. Power and Plenty: Trade, War and the World Economy in the Second Millennium (Preface) By Ronald Findlay; Kevin H. O'Rourke
  10. Did Vasco da Gama Matter for European Markets? Testing Frederick Lane's Hypotheses Fifty Years Later By Kevin H. O'Rourke; Jeffrey G. Williamson

  1. By: Finn Olesen (Department of Environmental and Business Economics, University of Southern Denmark)
    Abstract: In February 1936 John Maynard Keynes gave birth to modern macroeconomics when he published The General Theory of Employment, Interest and Money. In some ways Oskar Lange was seemly also very critical of mainstream neoclassi-cal thinking although known as a working marginalist for the greater part of his life. In this note we try to identify what Lange might have had so say of Keynesian nature especially in an important contribution from 1938. I would like to thank Danuta Tomczak, Oestfold University College Remmen, Halden, Norway, and Heine Ruppert, Department of Environmental and Busi-ness Economics, for comments to an earlier draft of this paper.
    Date: 2006–12
  2. By: Jan Toporowski
    Abstract: This paper reviews the recently published Ph.D. thesis of Hyman P. Minsky, summarizing its main contributions to methodology and microeconomics. These were aspects of economics with which Minsky is not usually associated, but which lie at the foundation of his later work. They include critical remarks on Cambridge economics. The paper then draws out some antecedents of Minsky's ideas in the work of Henry Simons, and highlights the Marshallian monetary analysis that he adopted.
    Date: 2006–11
  3. By: Alberto Baccini
    Abstract: This paper proposes a general interpretation of Edgworth’s thought based on the recognition of a unitary philosophical project in his contributions to ethics, economics, probability and statistics. This project consists in the search for a common epistemological foundation for the social sciences. The point is illustrated in reference to the coexistence in Edgworthian scientific programme of the ‘regularity of law’ with the ‘impartiality of chance’. The interpretation here proposed challenges the traditional stereotypes according to which Edgeworth was a crass utilitarian, and an ingenuous advocate of a rather primitive neoclassical economics. His plea for the use of mathematics, and his choice of deterministic models for the description of the economic behaviour, appear more innovative when the role of probability is considered
    JEL: B13 B31 B40
    Date: 2007–01
  4. By: Alberto Baccini
    Abstract: Probability theory has a central role in Edgeworth’s thought; this paper examines the philosophical foundation of the theory. Starting from a frequentist position, Edgeworth introduced some innovations on the definition of primitive probabilities. He distinguished between primitive probabilities based on experience of statistical evidence, and primitive a priori probabilities based on a more general and less precise kind of experience, inherited by the human race through evolution. Given primitive probabilities, no other devices than the rules of calculus are necessary to infer complex probabilities, as the ones defined by Bayes’s theorem –an enlargement of the frequentist tradition as defined by Venn. The notion of probability is objective; the passage from this objective sphere to the epistemic one requires rules external to the theory of probability. Edgeworth distinguishes between two notions: credibility which is the direct translation of probability into the epistemic sphere, and obeys the same rules of the latter; and belief having a weak relation with probability, based as it it not only on experiential knowledge, but also on “instinct and sentiment”. According to a Nineteenth century tradition, belief is the base of human action; Edgeworth concludes therefore that probability is not useful for the theory of decision. We propose to classify Edgeworth’s theory of probability as precursor of modern eclectic or pluralistic tradition on probability, and according to which probability has an irreducible dualistic nature.
    Keywords: F.Y. Edgeworth, Philosophy of probability, Frequentist probability, Bayes’s theorem
    JEL: B13 B31 B40
    Date: 2007–01
  5. By: Eric Tymoigne
    Abstract: By providing five different criticisms of the notion of real rate, the paper argues that this concept, as Fisher defined it or as a definition, is not relevant to economic analysis. Following Keynes and other post-Keynesians, the article shows that the notion of real rate is microeconomically and macroeconomically unfounded. Adjusting interest rates for inflation does not protect the purchasing power of wealth, and it is impossible to do so at the macroeconomic level. In addition, an empirical interpretation of the break in the correlation between interest rates and inflation since 1953 is provided.
    Date: 2006–12
  6. By: Elisa Newby
    Abstract: By imposing a simple adjustment cost on gold purchases the Bank of England was able to manage external drains of monetary gold while maintaining the convertibility of pound during the eighteenth century. This was a period during which constant political disturbances and external shocks on the market price of gold made monetary policy a challenging task. The implications of adjustment cost were not just limited to the gold reserves of the Bank, but stabilised consumption and the price level.
    Keywords: Gold standard, Monetary policy, Monetary regimes, Adjustment Costs.
    JEL: C61 E31 E4 E5 N13
    Date: 2007–02
  7. By: Mariko Frame (GSIS , University of Denver); Haider A. Khan (GSIS , University of Denver)
    Abstract: The main purpose of this paper is to offer a somewhat novel theory of deep democracy from a political and social economy perspective. The theory of deep democracy presented here makes a distinction between formal aspects of democracy and the deeper structural aspects. In order for democracy to be deep, democratic practices have to become institutionalized in such a way that they become part of normal life in a democratic society. In this sense, ontologically, deep democracy overlaps with Barber's (1984) idea of "strong" democracy. There are, however, epistemological differences as well as differences of emphasis, particularly in the economic sphere. Cluster conditions for deep democracy include both cultural-political and socio-economic conditions.
    Date: 2007–02
  8. By: Henry S. Farber; Joanne Gowa
  9. By: Ronald Findlay; Kevin H. O'Rourke
    Abstract: This book provides the first systematic, integrated, analytical account of the evolution of the international economy during the last millennium. It emphasizes the two-way interaction between trade and geopolitics, and the importance of such interactions for world economic development.
    Date: 2007–02–19
  10. By: Kevin H. O'Rourke (Department of Economics, Trinity College); Jeffrey G. Williamson (Department of Economics, Harvard University)
    Abstract: In his seminal publications between the 1930s and 1960s, Frederick Lane offered three hypotheses regarding the impact of the Voyages of Discovery that have guided debate ever since. First, pepper and other spice prices did not rise in European markets in the century before the 1490s, and thus could not have ‘pulled in’ the oceanic explorations by their rising scarcity. Second, Portuguese circumnavigation of A frica did not lower European spice prices across the 16th century, implying that the discovery of the Cape route had no permanent effect on Euro-Asian market integration. Third, 15th century Venetian spice markets were already well integrated with those in Iberia and northern Europe, implying that Portugal could not have had an intra-European market integrating influence in the 16th century. Lane developed these influential hypotheses by relying heavily on nominal spice prices from Venice and the Levant. This paper revisits Lane’s hypotheses by using instead relative spice prices, that is, accounting for inflation. It also draws on evidence from Iberia and northern Europe. In addition, it explores European market integration before and after 1503, the year when da Gama returned from his financially successful second voyage. Lane’s three hypotheses are rejected: the impact of the Portuguese was profound on all fronts. We conclude by using a simple model of monopoly and oligopoly to decompose the sources of the Cape route’s impact on European markets.
    JEL: F14 N7
    Date: 2006–02

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