nep-hpe New Economics Papers
on History and Philosophy of Economics
Issue of 2007‒04‒09
fourteen papers chosen by
Erik Thomson
University of Chicago

  1. Did F. A. Hayek Embrace Popperian Falsificationism? - A Critical Comment About Certain Theses of Popper, Duhem and Austrian Methodology By van den Hauwe, Ludwig
  2. Some Personal Views of Game Theory By Ehud Kalai
  3. Investment, Profits and Employment in Kalecki & Keynes By Robert Dixon
  4. Marxian Insights from the Mainstream By Howard Petith
  5. Sobre ?Clase y Explotación? en la Corriente Principal de la Economía By Howard Petith
  6. The Rise of Democracy in Europe and the Fight Against Mass Poverty in Latin America: The Implications for Marxist Thought of Some Recent Mainstream Papers By Howard Petith
  7. Policy Evaluation and Economic Policy Advice By Christoph M. Schmidt
  8. Plano x mercado na história do pensamento econômico: diferentes contextos e lições de quatro rodadas de um grande debate By Eduardo da Motta e Albuquerque
  9. The foundations of money, payments and central banking: A review essay By Stephen Millard
  10. What to Maximize if You Must By Aviad Heifetz; Chris Shannon; Yossi Spiegel
  11. Status, Hapiness and Relative Income By John Beath; Felix FitzRoy
  12. Perfect Competition By M. Ali Khan
  13. Mathematical Models in Input-Output Economics By Faye Duchin; Albert E. Steenge
  14. Social Norms and the Evolution of Conditional Cooperation By Spichtig, Mathias; Traxler, Christian

  1. By: van den Hauwe, Ludwig
    Abstract: Hayek´s methodological outlook at the time he engaged in business cycle research was actually closer to praxeological apriorism than to Popperian falsificationism. A consideration of the Duhem thesis highlights the fact that even from a mainstream methodological perspective falsificationism is more problematic than is often realized. Even if the praxeological and mainstream lines of argumentation reject the Popperian emphasis on falsification for different reasons and from a different background, the prospects for falsificationism in economic methodology seem rather bleak.
    Keywords: General Methodology; Austrian Methodology; Falsificationism; Popper; Hayek; Duhem; Duhemian Argument; Testing of Theories; Meaning and Interpretation of Econometric Results; Correlation and Causality;
    JEL: C10 B20 E32 B53 B23 B40 A12
    Date: 2006
  2. By: Ehud Kalai
    Abstract: This is a draft of a chapter for a book called "Game Theory, 5 Questions," to be published by Automatic Pressed/VIP.Below are five questions and my answers. Any feedback is appreciated.
    Keywords: game theory, applications, game science, bounded rationality, behavioral game theory
  3. By: Robert Dixon
    Abstract: This paper sets out my response to the articles by Paul Davidson in the Journal of Post Keynesian Economics in 2000 and 2002 dealing with the (supposed) superiority of Keynes’s explanation of the “ultimate cause” of unemployment over that of Kalecki. I show that there are a number of serious errors in Davidson’s explanation of Kalecki’s theories. I also argue that we would have less of this sort of nonsense if ‘post keynesians’ like Davidson were to recognize that, for Keynes as for Kalecki, aggregate demand shocks are profit shocks. In the final section of the paper I explain why it is that I none-the-less agree most emphatically with Davidson when he says that Kalecki and Keynes had quite different ideas on the ‘causes’ or ‘origins’ of (involuntary) unemployment in a capitalist economy.
    Date: 2007
  4. By: Howard Petith
    Abstract: Starting in 1999 a group of papers have appeared in mainstream journals that treat of the relation between capitalism and democracy in an eminently Marxian fashion. These analyses bear on a number of papers published mainly in S&S, specifically those of Castañada, Ellman, Harnacker, Nimtz and Petras. This paper provides résumés of all of these works and then sets out the implications of the mainstream papers for the left wing ones. It concludes by emphasising the importance for the left of the mainstream results.
    Keywords: Marxism, Democracy
    JEL: E11 O52 O54 N46
    Date: 2007–03–20
  5. By: Howard Petith
    Abstract: :  Recently a number of articles have appeared in the mainstream that deal with the economy in terms of class and exploitation. This paper sets out two of them in a simplified maner and explains why they may be of interest to left wing Latin American economists.
    Keywords: Latin America, Marxism, Democracy
    JEL: E11 O54
    Date: 2007–03–20
  6. By: Howard Petith
    Abstract: Recently a number of mainstream papers have treated the rise of democracy in 19th century Europe and its instability in Latin America in an eminently Marxist fashion. This paper sets out their implications for Marxist thought. With respect to Europe, Marx's emphasis on political action backed by the threat of violence is vindicated but his justification for socialism is not. With respect to Latin America, the unequal distribution of wealth is the cause of political instability that is, in turn, the root cause of mass poverty. In addition it is possible to explain some of the paradoxical characteristics of neo-liberalism and to make a weak argument for socialism in spite of its rejection in Europe.
    Keywords: Marxism, Democracy, Europe, Latin America
    JEL: E11 O52 O54 N46
  7. By: Christoph M. Schmidt
    Abstract: Arguably, one of the most important developments in the field of applied economics during the last decades has been the emergence of systematic policy evaluation, with its distinct focus on the establishment of causality.By contrast to the natural sciences, the objects of our scientific interest typically exert some influence on their treatment status under the policy to be evaluated and on their economic outcomes. Thus, economic policy advice can only be successful, if it is based on an appropriate study design, experimental or observational. It will strive in societies that provide liberal access to data, accept the merits of randomized assignment and guard the independence of research institutions.
    Keywords: Policy evaluation, applied economics, causality, policy advice
    JEL: A11 C01 H50
    Date: 2007–03
  8. By: Eduardo da Motta e Albuquerque (Cedeplar-UFMG)
    Abstract: The collapse of USSR has stimulated a huge scholarly debate on socialist alternatives. This paper surveys four rounds of the debate on market and planning in the transition towards socialism: the socialist calculation debate (Barone, Mises, Lange and Hayek), market and plan in the Soviet industrialization (Preobrajesnky and Bukharin), plan, market and democracy in the USSR's crisis (Nove, Mandel and Elson) and market socialism (Roemer, Wright). This survey summarizes the specific contributions of each round. The concluding section suggests a research agenda for a contemporary elaboration on this subject. This elaboration includes both these lessons and the structural changes within the capitalist system.
    Keywords: socialism; market and plan; economic thought
    JEL: B13 B14 P50
    Date: 2007–03
  9. By: Stephen Millard (Bank of England)
    Abstract: The purpose of this paper is to understand the economics behind the evolution of payments where by payments I mean the ‘transfer of monetary value’ (in return for goods, services, or real or financial assets). It is clear from this definition of payments that, in order for there to be payments, there first needs to be money. So, the paper first discusses why money might evolve as a result of some frictions inherent in real-world economies. It then discusses the evolution of banks, arguing that banks developed in order to provide payment services (making ‘money’ work more efficiently). The paper then discusses how banks can save on the use of collateral to make payments – collateral that they can convert into loans to earn a return – by the development of ‘payment systems’. Such systems will involve some form of netting of payments (clearing) and final settlement in some asset. ‘Central banks’ fit into this picture by providing, in their liabilities, a settlement asset that the other banks are happy to use. In so doing, they are incentivised to worry about monetary and financial stability
    Keywords: Money, banks, payment systems, central banks
    JEL: E42 E58
    Date: 2007–02–02
  10. By: Aviad Heifetz; Chris Shannon; Yossi Spiegel
    Abstract: The assumption that decision makers choose actions to maximize their preferences is a central tenet in economics. This assumption is often justi…ed either formally or informally by appealing to evolutionary arguments. In contrast, we show that in almost every game and for almost every family of distortions of a player’s actual payoffs, some degree of this distortion is bene…cial to the player because of the resulting effect on opponents’ play. Consequently, such distortions will not be driven out by any evolutionary process involving payo¤-monotonic selection dynamics, in which agents with higher actual payoffs proliferate at the expense of less successful agents. In particular, under any such selection dynamics, the population will not converge to payo¤-maximizing behavior. We also show that payoff-maximizing behavior need not prevail even when preferences are imperfectly observed.
    Keywords: dispositions, evolution of preferences, genericity, selection dynamics, imperfect observability
  11. By: John Beath; Felix FitzRoy
    Keywords: status, hapiness, relative income.
  12. By: M. Ali Khan (The Johns Hopkins University, Baltimore, USA)
    Abstract: In his 1987 entry on ‘Perfect Competition’ in The New Palgrave, the author reviewed the question of the perfectness of perfect competition, and gave four alternative formalisations rooted in the so-called Arrow-Debreu-Mckenzie model. That entry is now updated for the second edition to include work done on the subject during the last twenty years. A fresh assessment of this literature is offered, one that emphasises the independence assumption whereby individual agents are not related except through the price system. And it highlights a ‘linguistic turn’ whereby Hayek’s two fundamental papers on ‘division of knowledge’ are seen to have devastating consequences for this research programme
    Keywords: Allocation of Resources, Perfect Competition, Exchange Economy
    JEL: D00
    Date: 2007
  13. By: Faye Duchin (Department of Economics, Rensselaer Polytechnic Institute, Troy NY 12180-3590, USA); Albert E. Steenge (School of Management and Governance, University of Twente, Enschede, The Netherlands)
    Abstract: This paper describes the mathematical basis for input-output economics, the major types of models, and the underlying economic theory. The features of these models that make them especially well suited for understanding the connections between the economy and the environment are emphasized throughout. These include the dual physical and price representations and the representation of resource inputs as factors of production, whether they are priced or not. The basic static physical and price models are described, along with their major properties and associated databases. The most important approaches to analysis involve multipliers, decomposition, and scenario analysis. Going beyond the basic static framework requires the progressive closure of the model by making exogenous variables endogenous while maintaining simplicity, transparency, and the distinctive feature of an input-output model: the simultaneous determination of solutions at the sectoral level and the economy-wide level. Closures for household activities and for investment are described by way of example. The major extensions of the basic model accommodate the representation of pollutant emissions and policies for constraining them, dynamic models, and multi-regional models, the latter including a new version of a world model that solves for bilateral trade flows and region-specific prices based on comparative advantage with factor constraints. The concluding section describes the challenges currently being addressed within the field. An annotated bibliography provides references for further reading and includes both classic articles and a representation of recent research.
    JEL: C67 Q01 F1 O1 O3
    Date: 2007–04
  14. By: Spichtig, Mathias; Traxler, Christian
    Abstract: This paper develops a model of social norms and cooperation in large societies. Within this framework we use an indirect evolutionary approach to study the endogenous formation of preferences and the coevolution of norm compliance. Thereby we link the multiplicity of equilibria, which emerges in the presence of social norms, to the evolutionary analysis: Individuals face situations where many others cooperate as well as situations where a majority free-rides. The evolutionary adaptation to such heterogenous environments will favor conditional cooperators, who condition their pro-social behavior on the others' cooperation. As conditional cooperators react flexibly to their social environment, they dominate free-riders as well as unconditional cooperators.
    Keywords: Conditional Cooperation; Indirect Evolution; Social Norms; Heterogenous Environments
    JEL: C70 Z13
    Date: 2007–03

This nep-hpe issue is ©2007 by Erik Thomson. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.