nep-hpe New Economics Papers
on History and Philosophy of Economics
Issue of 2007‒07‒07
eight papers chosen by
Erik Thomson
University of Chicago

  1. Perspectives from the Happiness Literature and the Role of New Instruments for Policy Analysis By Bernard M.S. van Praag
  2. SULLA FELICITÀ IN ECONOMIA. LA TEORIA DEI BENI RELAZIONALI DI MENGER E BÖHM-BAWERK (On Happiness in Economics. Menger’s and Böhm-Bawerk’s Theory of Relational Goods) By Antonio Magliulo
  3. Marshall's Theory of Value and the Strong Law of Demand By Donald J. Brown; Caterina Calsamiglia
  4. The Economics, Technology and Neuroscience of Human Capability Formation By James J. Heckman
  5. Markets vs. Politics, Correcting Erroneous Beliefs Differently By Martin Gregor
  6. Respect By Alan Manning
  7. Human Capital and Economic Growth in the Potterian Economy By Avichai Snir; Daniel Levy
  8. Accounting: A General Commentary on an Empirical Science By Salvary, Stanley C. W.

  1. By: Bernard M.S. van Praag (University of Amsterdam)
    Abstract: After having been ignored for a long time by economists, happiness is becoming an object of serious research in 21st century economics. In Section 2 we sketch the present status of happiness economics. In Section 3 we consider the practical applicability of happiness economics, retaining the assumption of ordinal individual utilities. In Section 4 we introduce a cardinal utility concept, which seems to us the natural consequence of the happiness economics methodology. In Section 5 we sketch how this approach can lead to a normative approach to policy problems that is admissible from a positivist point of view. Section 6 concludes.
    Keywords: Happiness economics; subjective well-being; equivalence scales; economic policy
    JEL: D63
    Date: 2007–06–25
  2. By: Antonio Magliulo (Università degli Studi di Firenze, Dipartimento di Scienze Economiche)
    Abstract: The “paradox of happiness in economics” has aroused a growing interest among scholars all over the world. In opulent societies, many people, despite an increase in income, declare themselves less happy. One explanation is that economic growth can destroy some “relational goods” (personal relationships, friendship, family, love) affecting happiness. Such an explanation is based on an historical interpretation: marginalism would have darkened the theme of happiness in economics. This work shows, however, that two great marginalists, Menger and Böhm-Bawerk, formulated a theory of “relational goods” that complicates, in Hirschman’s sense, the whole history of happiness in economics.
    Keywords: Scuola austriaca, Economia e felicità
    JEL: B13 D60
    Date: 2007
  3. By: Donald J. Brown (Department of Economics, Yale University); Caterina Calsamiglia (Universitat Autonoma de Barcelona)
    Abstract: We show that all the fundamental properties of competitive equilibrium in Marshall's theory of value, as presented in Note XXI of the mathematical appendix to his Principles of Economics (1890), derive from the Strong Law of Demand. This is, existence, uniqueness, optimality, global stability of equilibrium prices with respect to tantonnement price adjustment and refutability follow from the cyclical monotonicity of the market demand function in the Marshallian general equilibrium model.
    Keywords: Partial equilibrium analysis, Short run equilibrium, Strong law of demand, Cyclical monotonicity, Legendre-Frenchel duality
    JEL: B13 C62 D11 D51
    Date: 2007–07
  4. By: James J. Heckman (University of Chicago, American Bar Foundation, University College Dublin and IZA)
    Abstract: This paper begins the synthesis of two currently unrelated literatures: the human capital approach to health economics and the economics of cognitive and noncognitive skill formation. A lifecycle investment framework is the foundation for understanding the origins of human inequality and for devising policies to reduce it.
    Keywords: critical periods, sensitive periods, early childhood, Barker hypothesis
    JEL: I12 I21
    Date: 2007–06
  5. By: Martin Gregor (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic)
    Abstract: In the fields of social choice, public choice and political economics, the main difference between private and political choice is whether individual preferences are aggregated to make a decision. A much less studied difference is whether beliefs are aggregated to make a decision. In this paper, we argue that the need for aggregation creates different incentives for belief updates in private and political choice. We review contemporary theories of biased beliefs in politics: Bayesian misperceptions, behavioral anomalies, and rational irrationality. We examine assumptions and consequences of all the approaches vis-à-vis issues of common knowledge, stability, symmetry, and multiplicity of stable states. As a route for further analysis, we construct an evolutionary model including a coordination failure. Differences in learning dynamics make the political play of this baseline game Pareto-inferior to the private play.
    Keywords: public choice; political economics; beliefs; learning;
    JEL: B53 D72 D83
    Date: 2007–06
  6. By: Alan Manning
    Abstract: Becker (1974) introduced to modern economics the idea that others care about what othersthink about them and derived many useful insights from this assumption. But he did notprovide a very complete description of the general equilibrium of an economy in whichpeople both demand respect from and supply respect to others. This paper analyzes theequilibrium price of respect, showing how it depends on the distribution of materialendowments and discussing whether we would expect that, as society gets richer, the marketfor respect becomes more or less important. It explains why a demand for respect is a humanuniversal in terms of Becker's observation that this helps to provide insurance where marketsare absent. Although the demand for respect is universal, the activities that command respecthave enormous cultural diversity - the paper explains how there can be many Nash equilibriaif respect is withheld from those who violate prescribed behaviour. Finally the paperdiscusses where, in a modern economy, respect is demanded and supplied arguing it isprimarily bundled up with other goods and services because of the nature of the costs ofsupplying it.
    Keywords: Respect, Status, Pro-Social Preferences
    JEL: D51 I31
    Date: 2007–05
  7. By: Avichai Snir; Daniel Levy
    Abstract: In this paper, we analyze the economic structure of the world of wizards as depicted in the Harry Potter books, which we term Potterian economy, and offer an economist’s perspective on it. We look at the economic structure of the life of Harry Potter and his co-actors as an economic model that governs the social organization of their economic activities. Our goal is to study and understand the internal consistency of the Potterian economic model and explore the relationships between its assumptions and the situation in the real world, as reflected in the Potterian model. To accomplish this, we focus on a textbook version of Solow’s economic growth model, which economists often use for studying the process of nations’ income determination and which serves as a standard benchmark for comparative economic growth studies. The analysis of the Potterian economy reveals that the Potterian model fits quite well the predictions of the economic growth model. We discuss potential implications of this finding, and explore the link between Potterian economic structure and performance in a broader context by discussing the link between economic institutions and economic outcomes.
    Date: 2007–02
  8. By: Salvary, Stanley C. W.
    Abstract: Many researchers have questioned the view of accounting as a science. Some maintain that it is a service activity rather than a science, yet others entertain the view that it is an art or merely a technology. While it is true that accounting provides a service and is a technology (a methodology for recording and reporting), that fact does not prevent accounting from being a science. Based upon the structure and knowledge base of the discipline, this paper presents the case for accounting as an empirical science.
    Keywords: national accounting and organizational accounting; risk-sharing arrangements; management of time and other resources; monetization of the economy; command over goods and services; extrinsic value and intrinsic value; commodity money and paper/nominal money; money in relation to credit; the firm and long range planning; market value versus committed finance; explanation and prediction; expectations and uncertainty.
    JEL: M41
    Date: 2007–06–28

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.