nep-hpe New Economics Papers
on History and Philosophy of Economics
Issue of 2007‒11‒10
ten papers chosen by
Erik Thomson
University of Chicago

  1. The impact of Milton Friedman on modern monetary economics: setting the record straight on Paul Krugman’s 'Who Was Milton Friedman? By Edward Nelson; Anna J. Schwartz
  2. Mirror, Mirror on the Wall, who is the Happiest of Them All? By Benno Torgler; Nemanja Antic; Uwe Dulleck
  3. Professor Becker on Free Banking: A Comment By van den Hauwe, Ludwig
  4. A Stochastic Complexity Perspective of Induction in Economics and Inference in Dynamics By K. Vela Velupillai
  5. What Does Economics Assume About People’s Knowledge? Who knows? By António Caleiro
  6. Non-mainstream Economics: Research Abroad and in Korea By MAN-SEOP PARK
  7. Towards a new theory of economic policy: Continuity and innovation By Acocella Nicola; Di Bartolomeo Giovanni
  8. What do Exogenous Shocks Tell Us about Growth Theories? By Ilan Noy; Aekkanush Nualsri
  9. L'Economie de l'Education fait-elle des Progrès? Une Perspective d'Histoire de la Pensée Economique By Jean-Luc De Meulemeester
  10. The heterogeneous state of modern macroeconomics: a reply to Solow By V. V. Chari; Patrick J. Kehoe

  1. By: Edward Nelson; Anna J. Schwartz
    Abstract: Paul Krugman’s essay “Who Was Milton Friedman?” seriously mischaracterizes Friedman’s economics and his legacy. In this paper we provide a rejoinder to Krugman on these issues. In the course of setting the record straight, we provide a self-contained guide to Milton Friedman’s impact on modern monetary economics and on today’s central banks. We also refute the conclusions that Krugman draws about monetary policy from the experiences of the United States in the 1930s and of Japan in the 1990s.
    Date: 2007
  2. By: Benno Torgler; Nemanja Antic; Uwe Dulleck
    Abstract: This paper turns Snow-White’s magic mirror onto recent economics Nobel Prize winners, top economists and happiness researchers, and through the eyes of the “man in the street” seeks to determine who the happiest academic is. The study not only provides a clear answer to this question but also unveils who is the ladies’ man and who is the sweetheart of the aged. It also explores the extent to which information matters and whether individuals’ self-reported happiness affects their perceptions about the happiness of these superstars in economics.
    Keywords: happiness, subjective well-being, perceptions, superstars, economists
    JEL: A11 D10 I31
    Date: 2007–10–17
  3. By: van den Hauwe, Ludwig
    Abstract: Professor Becker´s paper about free banking written in 1956 was originally intended as a reaction to the 100-percent reserve proposals that were then popular at the University of Chicago. Today the original paper clearly illustrates how considerably our views and theories about free banking have evolved in the past 50 years. This development is to a considerable extent the result of the work and the writings of economists of the Austrian School. Professor Pascal Salin is one of the most prominent members of the Austrian free banking school. In a new introduction to the 1956 paper written especially for the Festschrift in honor of Professor Pascal Salin, Professor Gary Becker partially repudiates and mitigates some of his previous conclusions. This event offers a fitting opportunity to review some developments in the theory of free banking and related issues and to add a few clarifications concerning the present “state of the art” as regards an acceptable and adequate notion of free banking.
    Keywords: Free Banking; Monetary Regimes; Monetary Standards; Business Cycles
    JEL: E42 E32 E58
    Date: 2007–10–04
  4. By: K. Vela Velupillai
    Abstract: Rissanen's fertile and pioneering minimum description length principle (MDL) has been viewed from the point of view of statistical estimation theory, information theory, as stochastic complexity theory -.i.e., a computable approximation to Kolomogorov Complexity - or Solomonoff's recursion theoretic induction principle or as analogous to Kolmogorov's sufficient statistics. All these - and many more - interpretations are valid, interesting and fertile. In this paper I view it from two points of view: those of an algorithmic economist and a dynamical system theorist. From these points of view I suggest, first, a recasting of Jevons's sceptical vision of induction in the light of MDL; and a complexity interpretation of an undecidable question in dynamics.
    Date: 2007
  5. By: António Caleiro (Department of Economics, University of Évora)
    Abstract: The purpose of the paper is to explore, from an assessment viewpoint, the ideas below. Economics, as a social science, has always considered sets of individuals with assumed characteristics, namely the level of knowledge, although in an implicit way in most of the cases. In this sense, an influential approach in Economics assumed that society, as a global set of individuals, was characterised by a certain level of knowledge that, indeed, could be associated with the one of its representative agent. In fact, an attentive recall of the evolution of these matters in Economics will immediately recognise that, since the very first economic models of the government, it was assumed that the level of knowledge of society, represented by a set of voters, was not the same as the one of the agent being elected, i.e. the government. The irrelevance of the difference in the level of knowledge of economic agents was soon abandoned after some seminal works of Hayek and Friedman. More recently, the viewpoint of Economics has changed by focusing on the characteristics (e.g. knowledge) of individuals, who may interact in sub-sets of society. From this point of view is clearly relevant, given the close connection with the assumed level of knowledge, to distinguish the adaptive behaviour from the rational one, as well as the full rational from the bounded rationality behaviour by people. Quite recent developments in the Economics of Knowledge, i.e. the so-called learning models, have been considered as more realistic approaches to model the process by which individuals acquire knowledge, for instance from other individuals that are, themselves, acquiring knowledge.
    Keywords: Bounded Rationality, Economics of Knowledge, Knowledge, Learning, Rationality
    JEL: A12 B41 C91 D83
    Date: 2007
  6. By: MAN-SEOP PARK (Department of Economics, Korea University)
    Abstract: This paper surveys the research trends and activities abroad and in Korea since 1980s in the area of '(Non-Marxian) non-mainstream economics', mainly classified into Sraffian Economics and Post-Keynesian Economics. Research in Sraffian Economics is examined under the topics of long-period effective demand, technical change, monetary distribution and other; and Post-Keynesian Economics under the topics of endogenous money, administered prices, Kaleckian growth and distribution models, stock-flow consistent models, Keyne's philosophy and others.
    Keywords: Non-mainstream economics, Sraffian economics, Post-Keynesian economics
    Date: 2007
  7. By: Acocella Nicola; Di Bartolomeo Giovanni
    Abstract: This paper outlines the evolution of the theory of economic policy from the classical contributions of Frisch, Hansen, Tinbergen and Theil to situations of strategic interaction. Andrew Hughes Hallett has taken an active and relevant part in this evolution, having contributed to both the development and recent rediscovery of the classical theory, with possible relevant applications for model building.
    Keywords: policy games, policy effectiveness, controllability, equilibrium existence
    JEL: C72 E52 E61
    Date: 2007–06
  8. By: Ilan Noy (Department of Economics, University of Hawaii at Manoa); Aekkanush Nualsri (Department of Economics, University of Hawaii at Manoa)
    Abstract: The sources of economic growth and development have been puzzling economists from the modern dawn of the profession. While the Solow-Swan neo-classical model dominated research on growth in the 1960s and 1970s, the 1980s saw the emergence of growth theories that disputed, largely on theoretical grounds, the Solow-Swan assumptions and conclusions. In this paper, we do not examine the determinants of the level of per capita income as an indication that a certain theory has better explanatory power. Rather, we focus on the dynamics of growth following external exogenous shocks (natural disasters). We argue that the data analysis we present suggests that the neoclassical model does not accord very well with the growth experience of developingcountries.
    Keywords: growth theory; long run growth; Solow; disasters; exogenous shocks
    JEL: O11 O40 Q54
    Date: 2007–10–29
  9. By: Jean-Luc De Meulemeester (DULBEA, Université libre de Bruxelles, Brussels, Skope, University of Oxford.)
    Abstract: Dans cet article, nous survolons les grandes tendances de l'évolution de la pensée économique en ce qui concerne le rôle de l'éducation et du capital humain, et nous cherchons par là à évaluer s'il y a eu (ou non) progrès dans le champ spécifique de l'économie de l'éducation Si les principales intuitions sur les liens entre éducation et économie étaient déjà là à la fin du 18ième siècle et au début du 19ièmesiècle, les principaux développements datent de l'après-guerre. Nous mettons en avant les grands thèmes débattus depuis la fin des années 50, et mettons en évidence une forme de cyclicité en ce qui concerne la vision des économistes quant au rôle bénéfique ou non de l'éducation pour l'économie. Nous soulignons également un progrès scientifique, menant l'économie de l'éducation à relativiser les premiers enseignements simplistes de la théorie du capital humain. On assiste en effet à une prise de conscience “historique” (rôle des institutions, dépendance à la trajectoire) ainsi qu'à un mouvement vers un travail empirique de plus en plus soigné (tant en termes des idées, des méthodes que des bases de données constituées), le tout menant à une vision nuancée des relations entre éducation et croissance comme celle entre éducation et performances sur le marché du travail. Cette évolution depuis les années 80 a permis à l'économie de l'éducation de servir de fondement plus solide à des prescriptions de politique économique et sociale.
    Keywords: éducation, croissance, marché du travail, histoire de la pensée économique.
    JEL: B1 B2 I2 J24 O4
    Date: 2007–10
  10. By: V. V. Chari; Patrick J. Kehoe
    Abstract: Robert Solow has criticized our 2006 Journal of Economic Perspectives essay describing “Modern Macroeconomics in Practice.” Solow eloquently voices the commonly heard complaint that too much macroeconomic work today starts with a model with a single type of agent. We argue that modern macroeconomics may not end too far from where Solow prefers. He is also critical of how modern macroeconomists use data to construct models. Specifically, he seems to think that calibration is the only way that our models encounter data. To the contrary, we argue that modern macroeconomics uses a wide variety of empirical methods and that this big-tent approach has served macroeconomics well. Solow also questions our claim that modern macroeconomics is firmly grounded in economic theory. We disagree and explain why.
    Date: 2007

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