nep-hpe New Economics Papers
on History and Philosophy of Economics
Issue of 2007‒06‒11
ten papers chosen by
Erik Thomson
University of Chicago

  1. On the methodology of management research By Rosanas, Josep M.
  2. Adam Smith’s Account of Self-Deceit and Informal Institutions. By Caroline Gerschlager
  3. Is Economics Entering its Post-Witchcraft Era? By Potgieter, Petrus H.; Rosinger, Elemér E.
  4. Measurement in Economics and Social Science By Hillinger, Claude
  5. Non-stabilizing Flexibility:From the Contributions By Keynes and Kalecki Towards a Post-Keynesian Approach By Sau, Lino
  6. Le capital comme volonté et comme représentation : lectures de K. Polanyi et T. Veblen By Jérôme Maucourant
  7. The New Social Science Imperialism and the Problem of Knowledge in Contemporary Economics By William Milberg
  8. Toward an Economic Sociology of Compassionate Charity and Care By Donald W. Light
  9. Bargaining Around the Hearth By Robert A. Pollak
  10. Does more money buy you more happiness? By Baucells, Manel; Sarin, Rakesh K.

  1. By: Rosanas, Josep M. (IESE Business School)
    Abstract: Epistemology, methodology or philosophy of science, i.e., the foundations and validity of knowledge, have never been very popular subjects as applied to management research. Lately, though, the need for better theories and the methodological discussion underlying the creation of such theories appears to be receiving more attention. In this paper, I will review some basic underlying issues in the area by taking a look at to some of the classical authors. I will first analyze Hayek's view of methodological problems in economics and then apply his analysis to the development of management theory. Then, I'll elaborate on Elster's distinction between causal, functional and intentional explanations. Naïve methodological attitudes will be discussed in this context. I will use agency theory as an example of what should and should not be done. Finally, I'll examine the falsification criterion in management theory and discuss the role of mathematics in the development of theory.
    Keywords: epistemology; philosophy of science; methodology; management theory; foundations of management;
    Date: 2007–05–11
  2. By: Caroline Gerschlager (Free University of Brussels, DULBEA, av. F. D. Roosevelt, 50, B-1050 Brussels,)
    Abstract: According to Adam Smith, self-deceit is essential to the economy. In this light the paper draws on the Theory of Moral Sentiments and revisits Adam Smith’s view of the self. The originality of Smith’s account of self-deceit is seen in his insights into self-regulating social forces. The paper illustrates how, in this view, informal institutions are important because they countervail self-deceit in markets. It suggests that Smith overestimated these countervailing forces for the reason that informal norms are also able to amplify selfdeceiving agents.
    Keywords: self-deception, self-love, sympathy, informal norms, self-regulation, positive and negative feedback.
    JEL: B B
    Date: 2007–05
  3. By: Potgieter, Petrus H.; Rosinger, Elemér E.
    Abstract: Recently, an awareness is emerging in economics about the fact that important problems are not solvable algorithmically, that is, by any finite number of steps. This statement can be made mathematically exact and this paper reviews the contributions that have been made in this regard, related to standard topics in economics.
    Keywords: Computability economics; general equilibrium theory; Arrow's impossibility theorem; Debreu's theorem; Malleus Maleficiarum
    JEL: A11 A12 C02
    Date: 2007–05–25
  4. By: Hillinger, Claude
    Abstract: ABSTRACT The paper discusses measurement, primarily in economics, from both analytical and historical perspectives. The historical section traces the commitment to ordinalism on the part of economic theorists from the doctrinal disputes between classical economics and marginalism, through the struggle of orthodox economics against socialism down to the cold-war alliance between mathematical social science and anti-communist ideology. In economics the commitment to ordinalism led to the separation of theory from the quantitative measures that are computed in practice: price and quantity indexes, consumer surplus and real national product. The commitment to ordinality entered political science, via Arrow’s ‘impossibility theorem’, effectively merging it with economics, and ensuring its sterility. How can a field that has as its central result the impossibility of democracy contribute to the design of democratic institutions? The analytical part of the paper deals with the quantitative measures mentioned above. I begin with the conceptual clarification that what these measures try to achieve is a restoration of the money metric that is lost when prices are variable. I conclude that there is only one measure that can be embedded in a satisfactory economic theory, free from unreasonable restrictions. It is the Törnqvist index as an approximation to its theoretical counterpart the Divisia index. The statistical agencies have at various times produced different measures for real national product and its components, as well as related concepts. I argue that all of these are flawed and that a single deflator should be used for the aggregate and the components. Ideally this should be a chained Törnqvist price index defined on aggregate consumption. The social sciences are split. The economic approach is abstract, focused on the assumption of rational and informed behavior, and tends to the political right. The sociological approach is empirical, stresses the non-rational aspects of human behavior and tends to the political left. I argue that the split is due to the fact that the empirical and theoretical traditions were never joined in the social sciences as they were in the natural sciences. I also argue that measurement can potentially help in healing this split.
    Keywords: Key words: collective choice; consumer surplus; money metric; price and quantity indexes; welfare measurement
    JEL: B16 C43 C82 D61 D71
    Date: 2007–05
  5. By: Sau, Lino
    Abstract: New and old mainstream macroeconomics argues that price flexibility stabilizes the economy. After a decline in aggregate demand, the more rapid prices fall, the faster output returns to its full employment level. The theoretical basis for this result is the well known "Pigou effect". However both Keynes and Kalecki rejected the thesis that price flexibility, in a demand-induced recession, can be stabilizistabilizing. This paper seeks to contrast Keynes's and Kalecki's ideas with the mainstream and discuss and alternative approach in the spirit of the post-keynesian's debt-deflation school.
    Keywords: Non-stabilizing flexibily; Pigou effect: Fisher effect; Debt-deflation
    JEL: E32 E31
    Date: 2006
  6. By: Jérôme Maucourant (Triangle : action, discours, pensée politique et économique - [CNRS : UMR5206][IEP LYON] - [Université Lumière - Lyon II] - [Ecole Normale Supérieure Lettres et Sciences Humaines])
    Abstract: Les travaux de Polanyi et Veblen permettent de comprendre quelques mécanismes du Capital comme imago. Ils s'inscrivent ainsi contre les théories économiques libérales les plus modernes appliquées à l'histoire, complexes théoriques qui participent de la projection d'un Capital idéal dans les sociétés passées.
    Keywords: Polanyi ; Veblen ; capital ; histoire de la pensée ;
    Date: 2007–05–31
  7. By: William Milberg (New School for Social Research, New York, NY)
    Keywords: imperialism; contemporary economics; knowledge
    Date: 2007–02–23
  8. By: Donald W. Light (Netherlands Institute for Advanced Study)
    Abstract: Economics and economic sociology are based on an action model of self-interest and exchange, even though tempered by structural and cultural kinds of embeddedness. People are said to always expend their valued scarce resources – time, skill, energy, money, and other resources – to gain income, wealth, or other rewards such as pleasure or prestige which they regard as worth as much as or more than what they expend. Yet there is clear evidence that people employ or give away their scarce resources for other reasons. Motives like moral convictions; compassion; love; a sense of duty such as a duty towards a sick, disabled, or needy relative or other with whom one feels founded solidarity; and principles or beliefs that transcend self-interest and even call for self-sacrifice prompt or contribute to substantial portions of economic and political action that are missing from theories of economic action and from economic sociology. Yet they are morally and culturally important, and they may underlie large societal shifts that shape economic behavior, like the rise of the movements to Make Poverty History and eliminate absolute poverty. REF At a personal level, millions of people give away scarce time and valued resources they worked to earn rather than keep them for themselves and their pleasures.
    Date: 2007–02
  9. By: Robert A. Pollak
    Abstract: In "Unpacking the Household: Informal Property Rights Around the Hearth" (Yale Law Journal, 2006) Robert Ellickson argues that as long as members of a household expect their relationship to continue, norms, rather than law, will determine allocations among them. More specifically, Ellickson argues that in "midgame" household members either ignore the "endgame" completely or, if they do take endgame considerations into account, the relevant endgame considerations are determined by norms rather than by law. This paper examines the fit between Ellickson's claims and four bargaining models that economists have used to understand interactions within household and families.
    JEL: D1 J12 K36
    Date: 2007–05
  10. By: Baucells, Manel (IESE Business School); Sarin, Rakesh K. (UCLA Anderson School of Management)
    Abstract: Why do we believe that more money will buy us more happiness (when in fact it does not)? In this paper, we propose a model to explain this puzzle. The model incorporates both adaptation and social comparison. A rational person who fully accounts for the dynamics of these factors would indeed buy more happiness with money. We argue that projection bias, that is, the tendency to project into the future our current reference levels, precludes subjects from correctly calculating the utility obtained from consumption. Projection bias has two effects. First, it makes people overrate the happiness that they will obtain from money. Second, it makes people misallocate the consumption budget by consuming too much at the beginning of the planning horizon, or consuming too much of adaptive goods.
    Keywords: Happiness; Life Satisfaction; Social Comparison; Consumer Life-Cycle Planning; Projection Bias;
    Date: 2007–02–14

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