nep-hpe New Economics Papers
on History and Philosophy of Economics
Issue of 2007‒06‒18
ten papers chosen by
Erik Thomson
University of Chicago

  1. The Usury Doctrine and Urban Public Finances in Late-Medieval Flanders: Annuities, Excise Taxes, and Income Transfers from the Poor to the Rich By John H. Munro
  2. Proudhon et Smith By Alain Béraud
  3. James Meade By David Vines
  4. A sceptic comment on "A sceptic´s comment on the study of economics" By Jeanette Brosig; Timo Heinrich; Thomas Riechmann; Ronnie Schöb; Joachim Weimann
  5. Towards a Theoretical Foundation for a Multidisciplinary Economics By Piet Keizer
  6. The Foundations of the Economics of Innovation By Antonelli Cristiano
  7. Money, Happiness, and Aspirations: An Experimental Study By Michael McBride
  8. Is there a "pessimistic" bias in individual beliefs ? Evidence from a simple survey By Clotilde Napp; Elyès Jouini; Selima Benmansour
  9. Democracy and globalisation By Barry Eichengreen; David Leblang
  10. Capitalism and Democracy in 2040: Forecasts and Speculations By Robert W. Fogel

  1. By: John H. Munro
    Abstract: The objectives of this paper are three-fold. The first is to rebut Charles Kindleberger’s famous dictum that usury ‘belongs less to economic history than to the history of ideas’; and in particular to demonstrate that the resuscitation of the anti-usury campaign from the early 13th century led to a veritable financial revolution in late-medieval French and Flemish towns: one that became the ‘norm’ in modern European states from the 16th century (in England, from 1693): a shift in public borrowing from interest-bearing loans to the sale of annuities, usually called rentes or renten. That anti-usury campaign had two major features: (1) the decrees of the Fourth Lateran Council of 1215, which provided harsh punishments – excommunication -- for both unrepentant usurers and princes who failed to suppress them; and (2) the establishment of the two mendicant preaching orders: the Franciscans (1210) and the Dominicans (1216), whose monks preached hellfire and eternal damnation against all presumed usurers – including, of course, anyone who received any interest on government loans. There is much evidence that from the 1220s, many financiers in many French and Flemish towns, fearing for their immortal souls, preferred to accept far lower returns on buying rentes than the interest they would have earned on loans. These rentes, based on 8th-century Carolingian census contracts, had two basic forms: (1) life-annuities, by which a citizen purchased from the government, with a lump sum of capital, an annual income stream lasting a lifetime, or the lifetime of his wife as well; (2) perpetual annuities, by which the annual income stream was indeed perpetual, or until such time as the government chose to redeem the rentes, at par. Initially, some theologians opposed sales of rentes as subterfuges to cloak evasion of the usury doctrine. But in 1250-1, Pope Innocent IV declared them to be non-usurious contracts, essentially because they were not loans. Subsequent popes in the 15th century confirmed his views and the non-usurious character of rentes, on two conditions: (1) that the buyer of the rente could never demand redemption or repayment, and (2) that the annual annuity payments (and any ultimate redemptions) be in accordance with actual rent contracts: i.e., that the funds be derived from the products of the land. Ecclesiastical authorities soon agreed that taxes on the consumption of the products of the land (and sea) met this test: i.e., taxes on beer and wine (which always accounted for the largest share), bread, textiles, fish, meat, dairy products, etc. The second objective of this paper is to measure the importance of renten in the civic finances of Flemish towns, in terms of both revenues and expenditures: from the annual town accounts Ghent (14th century only), and Aalst (1395-1550), where they had far greater importance. The related third objective is to measure the burden of the excise taxes for master building craftsmen in Aalst, in tables that measure the values of the excise tax revenues expressed in real terms: first, in the equivalent number of ‘baskets of consumables’ (which form of the base of the Consumer Price Index), and second their value in terms of the annual money-wage incomes of master masons (for 210 days). This provides an entirely new look at the late-medieval ‘standard of living’ controversy – with indications that this consumption-tax burden sometimes rose from about 13,200 to almost 30,000 days’ wage income, for a town of perhaps 3600 inhabitants (but obviously less dramatic on a per capita basis). That tax burden rose the most strongly when, by other indications, real wages (RWI = NWI/CPI) were also finally rising; and thus possibly these real wage gains were largely eliminated. That per capita tax burden would have been all the greater if, in the course of the 15th century, Aalst had experienced the same decline as did small towns of Brabant, to the east, on the order of 25%, and some other Flemish towns, in which the population decline varied from 9% to 28 %. In earlier publications I had challenged the widespread view that the era following the Black Death, with a radical change in the land:labour ratio, came to be a ‘Golden Age’ of the artisan and labourer. I contended instead that frequent inflations eroded or eliminated wage gains, and thus that periodic rises in real wages were due essentially to steep deflations combined with pronounced wage-stickiness. As I also calculated, English artisans in the 1340s had earned real wages that were about 50% of the Flemish; but by the 1480s, they had narrowed that gap (with much less inflation) to about 80%. That gap was probably even smaller, until the 1640s, when England’s Parliament finally imposed similar excise taxes on consumption.
    Keywords: Flanders, warfare, urban public finances, building craftsmen, annuities (rentes), excise taxes, consumption, living standards, income transfers
    JEL: B11 D31 E25 E31 E42 E62 H2 H31 H71 J10 J31 J45 J81 N93
    Date: 2007–06–11
  2. By: Alain Béraud (THEMA - Théorie économique, modélisation et applications - [CNRS : UMR8184] - [Université de Cergy Pontoise])
    Abstract: Proudhon a lu La Richesse des Nations au début des années 1840. Il a, alors, rédigé des notes qu'Edward Castleton a transcrites. L'analyse de ces notes permet de montrer que cette lecture de Smith est un des facteurs qui explique l'évolution des analyses de Proudhon de Qu'est-ce-que la propriété ? jusqu'au Système des contradictions économiques.
    Keywords: Proudhon, Smith, Propriété, valeur, division du travail
    Date: 2007–06–09
  3. By: David Vines
    Abstract: This article explains the part that Meade played in the creation of Keynes`s General Theory, describes his work with Keynes during the Second World War in the creation of the IMF and the GATT, and summarizes the ideas in The Theory of International Economic Policy for which Meade was awarded the Nobel Prize in 1977. It also sets out the role that Meade played in the construction of the inflation-targeting regime which became the centrepiece of British macroeconomic policymaking in the 1990s.
    Keywords: Balance of Payments, Inflation Targeting, Heckscher-Ohlin Trade Theory, International Monetary Fund, World Trade Organisation
    JEL: E0 F0
    Date: 2007
  4. By: Jeanette Brosig (Department of Economics, University of Cologne); Timo Heinrich (Faculty of Economics and Management, Otto-von-Guericke University Magdeburg); Thomas Riechmann (Faculty of Economics and Management, Otto-von-Guericke University Magdeburg); Ronnie Schöb (Department of Business and Economics, Freie Universität Berlin); Joachim Weimann (Faculty of Economics and Management, Otto-von-Guericke University Magdeburg)
    Abstract: This paper provides a critical re-examination of Rubinstein’s survey in which he questions the way of teaching economics. The observations obtained in our new survey cast some doubts on the original findings, and in particular, question Rubinstein’s conjecture that our students’ views on economic issues are influenced by the way we teach economics.
    Keywords: Survey, Economics Education, Teaching of Economics
    JEL: A2 C9
    Date: 2007–06
  5. By: Piet Keizer
    Abstract: This article analyses the primary motives that set people in motion, namely the economic, the social and the psychic motive. By integrating the three basic analyses, we formulate an integrated paradigm and analysis that can flinction as a theoretical basis for a multidisciplinary economics. Orthodox economics analyses the force that results from the confrontation between humans and their natural environment. In such a situation humans are driven to maximise the utilities they derive from consuming scarce goods. Orthodox sociology analyses the force that results from the confrontation between (different groups of) humans. In such a situation humans are driven to maximise the status they derive from their position in the social structure, under the constraint of the norms that are set by the prevailing culture. Orthodox psychology analyses the force that results from the confrontation between the ‘I’ of a person and his ‘self. We distinguish between an actual and a true self The ‘I’ is a rational decision making centre that is assumed to minimise the difference between the actual self and the true self, thereby maximising the respect of the true self for the actual self (self-respect). The drive to maximize self-respect is contrianed by the limited power of the will. This article integrates the three orthodox approaches into one analytical process on the micro level and one on the macro level. Individuals operate in a cultural context, which is determined on the macro level, but have some discretionary room to take their own decisions.
    Keywords: Economic, Scarcity, Social, Status, Psychic, Self-Respect, Rational, Will-Power, Multi-Disciplinary Economics, Isolated Abstraction
    JEL: B4
    Date: 2007–03
  6. By: Antonelli Cristiano (University of Turin)
    Date: 2007–02
  7. By: Michael McBride (Department of Economics, University of California-Irvine)
    Abstract: The past decade has witnessed an explosion of interest in the scientific study of happiness. Economists, in particular, find that happiness increases in income but decreases in income aspirations, and this work prompts examination of how aspirations form and adapt over time. This paper presents results from the first experimental study of how multiple factors -- past payments, social comparisons, and expectations -- influence aspiration formation and reported satisfaction. I find that expectations and social comparisons significantly affect reported satisfaction, and that subjects care relatively more about social comparisons once they have achieved a satisfactory outcome. These findings support an aspirations-based theory of happiness.
    Keywords: Satisfaction; Happiness; Adaptation; Experiment
    JEL: C91 I31
    Date: 2007–03
  8. By: Clotilde Napp (DRM - Dauphine Recherches en Management - [CNRS : UMR7088] - [Université Paris Dauphine - Paris IX], CREST - Centre de Recherche en Économie et Statistique - [INSEE] - [ École Nationale de la Statistique et de l'Administration Économique]); Elyès Jouini (CEREMADE - CEntre de REcherches en MAthématiques de la DEcision - [CNRS : UMR7534] - [Université Paris Dauphine - Paris IX]); Selima Benmansour (DRM - Dauphine Recherches en Management - [CNRS : UMR7088] - [Université Paris Dauphine - Paris IX])
    Abstract: It is an important issue for economic and finance applications to determine whether individuals exhibit a behavioral bias toward pessimism in their beliefs, in a lottery or more generally in an investment opportunities framework. In this paper, we analyze the answers of a sample of 1,540 individuals to the following question: Imagine that a coin will be flipped 10 times. Each time, if heads, you win 10 Euros. How many times do you think that you will win? <br />The average answer is surprisingly about 3.9 which is below the average 5, and we interpret this as a pessimistic bias. We find that women are more "pessimistic" than men, as are old people relative to young. We also analyze how our notion of pessimism is related to more general notions of pessimism previously introduced in psychology.
    Keywords: pessimism; judged probability; lottery
    Date: 2007–06–06
  9. By: Barry Eichengreen (University of California, Berkeley - Department of Economics); David Leblang
    Abstract: The relationship between democracy and globalisation has been the focus of substantial policy and academic debate. Some argue that democracy and globalisation go hand in hand suggesting that unrestricted international transactions leads to increased political accountability and transparency. And, politically free societies are likely to have minimal restrictions on the mobility of goods and services across national borders. Others argue that the causal relationship should be reversed: democracies are more likely to have closed markets and vice versa. We examine these relationships between political democracy and trade and financial globalisation over the period 1870-2000 and treat both democracy and globalisation as both cause and effect. Our empirical strategy uses instrumental variables and estimates relationships using the Generalised Method of Moments framework. Our general findings support the hypothesis of a positive two-way relationship between democracy and globalisation.
    Keywords: Democracy, globalisation
    JEL: D72 F02 F41 N10 P51
    Date: 2006–12
  10. By: Robert W. Fogel
    Abstract: While the economies of the fifteen countries that were in the European Union (EU15) in 2000 will continue to grow from now until 2040, they will not be able to match the surges in growth that will occur in South and East Asia. In 2040, the Chinese economy will reach $123 trillion, or nearly three times the output of the entire globe in the year 2000, despite the influence of several potential political and economic constraints. India's economy will also continue to grow, although significant constraints (both political and economic) will keep it from reaching China's levels. The projected decline of the EU15's global share of GDP means that Asia will be poised to take up the role of promoting liberal democracy across the globe.
    JEL: F47
    Date: 2007–06

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