nep-hpe New Economics Papers
on History and Philosophy of Economics
Issue of 2008‒07‒14
eleven papers chosen by
Erik Thomson
University of Chicago

  1. Economists, Incentives, Judgement and Empirical Work By Dave Colander
  2. "The Collapse of Monetarism and the Irrelevance of the New Monetary Consensus" By James K. Galbraith
  3. Complexity and the History of Economic Though By David Colander
  4. The Myth of the Myth of the Rational Voter By Dave Colander
  5. "Securitization" By Hyman P. Minsky; L. Randall Wray
  6. The Making of a Global European Economist By Dave Colander
  7. "The Keynesian Roots of Stock-flow Consistent Macroeconomic Models Peering Over the Edge of the Short Period" By Antonio Carlos Macedo e Silva; Claudio H. Dos Santos
  8. "The Return of Fiscal Policy Can the New Developments in the New Economic Consensus Be Reconciled with the Post-Keynesian View?" By Pavlina R. Tcherneva
  9. Recursive no-envy By Diego A. Dominguez; Antonio Nicolo
  10. Conceptions of freedom and ranking opportunity sets. A typology By Antoinette Baujard
  11. Firms’ Ethics, Consumer Boycotts, and Signalling By Glazer, Amihai; Kanniainen, Vesa; Poutvaara, Panu

  1. By: Dave Colander
    Abstract: This paper asks the question: Why has the “general-to-specific” cointegrated VAR approach as developed in Europe had only limited success in the US as a tool for doing empirical macroeconomics, where what might be called a “theory comes first” approach dominates? The reason this paper highlights is the incompatibility of the European approach with the US focus on the journal publication metric for advancement. Specifically, the European “general-to specific” cointegrated VAR approach requires researcher judgment to be part of the analysis, and the US focus on a journal publication metric discourages such research methods. The US “theory comes first” approach fits much better with the journal publication metric.
    Date: 2008–06
  2. By: James K. Galbraith
    Abstract: What in monetarism, and what in the "new monetary consensus," led to a correct or even remotely relevant anticipation of the extraordinary financial crisis that broke over the housing sector, the banking system, and the world economy in August 2007 and that has continued to preoccupy central bankers ever since? Absolutely nothing, says Senior Scholar James K. Galbraith. In this new Policy Note, Galbraith reevaluates monetary policy in light of the collateral damages inflicted by the subprime mortgage crisis. He provides a critique of monetarism--what Milton Friedman famously defined as the proposition that "inflation is everywhere and always a monetary phenomenon"--and of the "new monetary consensus" on which Federal Reserve Chairman Ben Bernanke's ostensible doctrine of inflation targeting rests. Given the current economic crisis, Galbraith says, the Fed would do well to embrace the intellectual victory of John Maynard Keynes, John Kenneth Galbraith, and Hyman P. Minsky--and act accordingly.
    Date: 2008–05
  3. By: David Colander
    Date: 2008–04
  4. By: Dave Colander
    Abstract: This paper argues that Bryan Caplan’s Myth of the Rational Voter overstates in case against democracy by not dealing with what might be called the historical/instrumentalist argument for democracy. It argues that the case for democracy that he attacks is primarily an academic exercise, which makes his argument against that case also an academic exercise. It further argues that the supposed policy choice that Caplan presents between the market and democracy is not the correct choice, and that his proposals that economists should be given more voting weight in the democratic decision process is inappropriate.
    Date: 2008–07
  5. By: Hyman P. Minsky; L. Randall Wray
    Abstract: "At the annual banking structure and competition conference of the Federal Reserve Bank of Chicago in May 1987, the buzzword heard in the corridors and used by many of the speakers was 'that which can be securitized, will be securitized.'" So notes Hyman Minsky in a prescient memo on the nature, and the implications, of securitization, written 20 years before an explosion in the securitization of home mortgages helped create the current financial crisis. This memo, which served as the basis for a lecture in Minsky's monetary theory class at Washington University, has not been widely circulated. It is published here in its entirety, with a preface and an afterword by Senior Scholar L. Randall Wray that places Minsky's work in context.
    Date: 2008–06
  6. By: Dave Colander
    Abstract: This paper provides results of a survey of European graduate programs that are designing their programs to be similar to top US programs and compares those results to an earlier study done by the author of US schools. The study (1) provides a profile of European graduate economics students; (2) considers the degree to which European training at these schools differs from U.S. training; (3) offers some insights into the differences that exist among some top European programs in economics, and (4) provides a glimpse of the views that the students have of economics and of the training they are receiving. It finds that these global European programs are similar in many ways to US programs and that the students are satisfied with the programs. However, because of the different job markets in the US and Europe, it is not clear that the training is appropriate for the majority of European students. The paper concludes with a discussion of some of the concerns that should be kept in mind by other programs as they consider adapting their programs to become a global program. These concerns include the argument that the traditional European system did a number of things right; the European academic economics institutional structure is quite different from the U.S. institutional structure; and the U.S. system has its own set of problems.
    Date: 2008–08
  7. By: Antonio Carlos Macedo e Silva; Claudio H. Dos Santos
    Abstract: This paper argues that institutionally rich stock-flow consistent models—that is, models in which economic agents are identified with the main social categories/institutional sectors of actual capitalist economies, the short period behavior of these agents is thoroughly described, and the "period by period" balance sheet dynamics implied by the latter is consistently modeled—are (1) perfectly compatible with John Maynard Keynes's theoretical views, (2) the ideal tool for rigorous post-Keynesian analyses of the medium run, and (3) therefore crucial to the consolidation of the broad post-Keynesian research program.
    Date: 2008–07
  8. By: Pavlina R. Tcherneva
    Abstract: The monetarist counterrevolution and the stagflation period of the 1970s were among the theoretical and practical developments that led to the rejection of fiscal policy as a useful tool for macroeconomic stabilization and full employment determination. Recent mainstream contributions, however, have begun to reassess fiscal policy and have called for its restitution in certain cases. The goal of this paper is to delimit the role of and place for fiscal policy in the New Economic Consensus (NEC) and to compare it to that of Post-Keynesian theory, the latter arguably the most faithful approach to the original Keynesian message. The paper proposes that, while a consensus may exist on many macroeconomic issues within the mainstream, fiscal policy is not one of them. The designation of fiscal policy within the NEC is explored and contrasted with the Post-Keynesian calls for fiscal policy via Abba Lerner's "functional finance" approach. The paper distinguishes between two approaches to functional finance--one that aims to boost aggregate demand and close the GDP gap, and one that secures full employment via direct job creation. It is argued that the mainstream has severed the Keynesian link between fiscal policy and full employment--a link that the Post-Keynesian approach promises to restore.
    Date: 2008–07
  9. By: Diego A. Dominguez (Centro de Investigacion Economica (CIE), Instituto Tecnologico Autonomo de Mexico (ITAM)); Antonio Nicolo (Department of Economics, University of Padua)
    Abstract: In economics the main efficiency criterion is that of Pareto-optimality. For problems of distributing a social endowment a central notion of fairness is no-envy (each agent should receive a bundle at least as good, according to her own preferences, as any of the other agent's bundle). For most economies there are multiple allocations satisfying these two properties. We provide a procedure, based on distributional implications of these two properties, which selects a single allocation which is Pareto-optimal and satisfies no-envy in two-agent exchange economies. There is no straightforward generalization of our procedure to more than two-agents.
    Keywords: no-envy, fair allocation, recursive methods, exchange economies
    JEL: D63 D74
    Date: 2008–07
  10. By: Antoinette Baujard (CREM - Centre de Recherche en Economie et Management - CNRS : UMR6211 - Université Rennes I - Université de Caen)
    Abstract: A wide diversity of rankings of opportunity sets are characterized through what is now commonly called the freedom of choice literature. An op-portunity set is better ranked when it provides more freedom. This survey is or-ganized as a typology of the rankings, according to the specific conception of free-dom they capture: freedom of choice, freedom as autonomy, freedom as exercise of significant choices, negative freedom. The role of preferences in freedom rankings is discussed in the conclusion.<br>Keywords opportunity sets, freedom of choice, well-being, typology
    Keywords: opportunity sets, freedom of choice, well-being, typology
    Date: 2007–06–01
  11. By: Glazer, Amihai (University of California, Irvine); Kanniainen, Vesa (University of Helsinki); Poutvaara, Panu (University of Helsinki)
    Abstract: This paper develops a theory of consumer boycotts. Some consumers care not only about the products they buy but also about whether the firm behaves ethically. Other consumers do not care about the behavior of the firm but yet may like to give the impression of being ethical consumers. Consequently, to affect a firm’s ethical behavior, moral consumers refuse to buy from an unethical firm. Consumers who do not care about ethical behavior may join the boycott to (falsely) signal that they do care. In the firm’s choice between ethical and unethical behavior, the optimality of mixed and pure strategies depends on the cost of behaving ethically. In particular, when the cost is (relatively) low, ethical behavior arises from a prisoners’ dilemma as the firm’s optimal strategy.
    Keywords: firm’s ethical code, consumer morality, boycotts
    JEL: M14 D43
    Date: 2008–05

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