nep-hpe New Economics Papers
on History and Philosophy of Economics
Issue of 2008‒08‒31
sixteen papers chosen by
Erik Thomson
University of Chicago

  1. The State of Macro By Olivier J. Blanchard
  2. Escaping from a Blind Alley: Disequilibrium in the Dynamic Analysis of Harrod and Kalecki By Peter Kriesler; J W Nevile
  3. The Alert and Creative Entrepreneur: A Clarification By Kirzner, Israel M.
  4. Public Choice and the Economic Analysis of Anarchy: A Survey By Powell, Benjamin; Stringham, Edward P.
  5. Ambiguity, Pessimism, and Religious Choice By Tigran Melkonyan; Mark Pingle
  6. Capital Account Liberalization: Theory, Evidence, and Speculation By Henry, Peter B.
  7. Private Money as a Competing Medium of Exchange By Mark Pingle; Sankar Mukhopadhyay
  8. The Making of a Global European Economist By Dave Colander
  9. 'Imagine There's No Countries:' A Reply to John Lennon By Risse, Mathias
  10. What are Human Rights? Human Rights as Membership Rights in the Global Order By Risse, Mathias
  11. On the Morality of Immigration By Risse, Mathias
  12. What Makes Ethics Practical By Winston, Kenneth
  13. Fair Collective Choice Rules: Their Origin and Relationship By Yukihiro Nishimura
  14. The Labour Theory of Value: A Marginal Analysis By Hagendorf, Klaus
  15. Extremism and Social Learning By Glaeser, Edward L.; Sunstein, Cass R.
  16. The Effect of Prayer on God's Attitude Toward Mankind By Heckman, James J.

  1. By: Olivier J. Blanchard
    Abstract: For a long while after the explosion of macroeconomics in the 1970s, the field looked like a battlefield. Over time however, largely because facts do not go away, a largely shared vision both of fluctuations and of methodology has emerged. Not everything is fine. Like all revolutions, this one has come with the destruction of some knowledge, and suffers from extremism and herding. None of this deadly however. The state of macro is good. The first section sets the stage with a brief review of the past. The second argues that there has been broad convergence in vision, and the third reviews the specifics. The fourth focuses on convergence in methodology. The last looks at current challenges.
    JEL: E0 E2 E3 E4 E50
    Date: 2008–08
  2. By: Peter Kriesler (School of Economics, University of New South Wales); J W Nevile (School of Economics, University of New South Wales)
    Abstract: The pioneers of dynamic Keynesian economics, Harrod and Kalecki, began with an analysis of the trade cycle, but are remembered for their contributions to growth theory. Unlike most twentieth century growth theory, they both had a major focus on disequilibrium situations and an examination of this aspect of their theory is the purpose of this paper. Harrod distinguished three stages in his dynamic analysis. The first was the derivation of the fundamental equation and consequent theorems. Fundamental meant underlying: even apart from random factors the equation may never hold exactly in real life. In the second stage, detailed analysis was made of the factors (in addition to the fundamental equation) which have a systematic effect on the path the economy follows. The final stage is policy prescriptions. Except in his 1936 book on the trade cycle, Harrod did relatively little “second stage” work but this did not stop him putting forward policy prescriptions. This three stage structure of analysis contributed to the widespread misunderstanding of the nature of his fundamental equation leading to a widely accepted view of a Harrod growth model which was completely different to what Harrod thought he was putting forward. Kalecki, on the other hand, rejected what Harrod had called “first stage analysis” as being of little interest. His main criticisms of growth theory were aimed at, what he saw, as the vacuousness of such theorising. Instead, his work concentrated on second and third stage analysis, that is, in attempting to understand the non-equilibrium, dynamics of the economy with a view towards policy prescription. For this reason, Kalecki’s contribution was less open to misunderstanding than was Harrod’s.
    Date: 2008–08
  3. By: Kirzner, Israel M. (New York University)
    Abstract: Israel M. Kirzner is the 2006 winner of The International Award for Entrepreneurship and Small Business Research (the FSF-Nutek Award). In this Prize Lecture he argues that a number of those who have commented on his work have misunderstood certain aspects of his theoretical system, and as a result the common distinction in the literature between “Schumpeterian” and “Kirznerian” entrepreneurs is flawed. He also argues that his understanding of the market process (set in motion by entrepreneurial decisions) provides a theoretical underpinning for public policy vis-à-vis entrepreneurship. Professor Kirzner’s main contributions to the economics of entrepreneurship were also presented and evaluated by Douhan, Eliasson and Henrekson (2007).
    Keywords: Austrian economics; Economic development; Entrepreneurship; Small business economics
    JEL: B49 B52 B53 O31
    Date: 2008–08–12
  4. By: Powell, Benjamin (Suffolk University, Department of Economics); Stringham, Edward P. (Klagenfurt University)
    Abstract: Public choice economists began studying the economics of anarchy in the 1970s. Since then, the amount of research on anarchy has burgeoned. This article surveys the important public choice contributions to the economics of anarchy. Following the lead of the early public choice economists, many current economists are researching and analyzing how individuals interact without government. From their non-public-interested explanations of the creation of government law enforcement to their historical studies of attempts to internalize externalities under anarchy, public choice scholars are arriving at a more realistic perspective on government and how people interact when government law enforcement is lacking. Although the economics of politics often receives more attention, the economics of anarchy is an important area of research in public choice.
    Keywords: Anarchism; Lawlessness; Order; Internalization of Externalities; Self-Governance
    JEL: D74 H11 K42
    Date: 2008–08–19
  5. By: Tigran Melkonyan (Department of Resource Economics, University of Nevada, Reno); Mark Pingle (Department of Economics, University of Nevada, Reno)
    Abstract: Using a relatively mild restriction on the beliefs of the MMEU-apreference functional, in which the decision maker’s degree of ambiguity and degree of pessimism are each parameterized, we present a rather general theory of religious choice in the decision theory tradition, one that can resolve dilemmas, address the many Gods objection, and address the inherent ambiguity. Using comparative static analysis, we are able to show how changes in either the degree of ambiguity or the degree of pessimism can lead a decision maker to “convert” from one religion to another. We illustrate the theory of religious choice using an example where the decision maker perceives three possible religious alternatives.
    Keywords: Religion; Decision Theory; Ambiguity; Optimism; Pessimism
    JEL: C44 D81 D83
    Date: 2008–08
  6. By: Henry, Peter B. (Henry, Peter B.)
    Abstract: Research on the macroeconomic impact of capital account liberalization finds few, if any, robust effects of liberalization on real variables. In contrast to the prevailing wisdom, I argue that the textbook theory of liberalization holds up quite well to a critical reading of this literature. The lion’s share of papers that find no effect of liberalization on real variables tell us nothing about the empirical validity of the theory, because they do not really test it. This paper explains why it is that most studies do not really address the theory they set out to test. It also discusses what is necessary to test the theory and examines papers that have done so. Studies that actually test the theory show that liberalization has significant effects on the cost of capital, investment, and economic growth.
    Date: 2007–08
  7. By: Mark Pingle (Department of Economics, University of Nevada, Reno); Sankar Mukhopadhyay (Department of Economics, University of Nevada, Reno)
    Abstract: Using a relatively mild restriction on the beliefs of the MMEU-apreference functional, in which the decision maker’s degree of ambiguity and degree of pessimism are each parameterized, we present a rather general theory of religious choice in the decision theory tradition, one that can resolve dilemmas, address the many Gods objection, and address the inherent ambiguity. Using comparative static analysis, we are able to show how changes in either the degree of ambiguity or the degree of pessimism can lead a decision maker to “convert” from one religion to another. We illustrate the theory of religious choice using an example where the decision maker perceives three possible religious alternatives.
    Keywords: Private money; Speculative demand; Search theory; Medium of exchange
    JEL: E41 E42 E51
    Date: 2008–08
  8. 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: 2008–09
  9. By: Risse, Mathias (Harvard U)
    Abstract: In earlier work I argue that, despite increasing global interconnectedness, shared membership in states remains morally relevant. At the same time states are historically contingent forms of political organization with considerable drawbacks. Once we have clarified what an assessment of the state’s normative peculiarity contributes to its overall normative evaluation, the historical contingency and the drawbacks of the state come in view when we explore how to respond to another question central to that evaluation, whether there ought to be states (or, synonymously, countries) in the first place. One could answer affirmatively, negatively, or in a manner that finds the question problematic. My response is of the latter sort, but entails that, since ours is a world of states, we should try to make this world as good as possible, rather than to aspire at a world with a fundamentally different political structure. Together with the account of the state’s normative peculiarity in my earlier work, this view aims to get into focus both the moral relevance and the historical contingency of the state. To explain the Lennon-reference: “Imagine there’s no countries:” this is how the second stanza of one of the most famous songs of recent times begins. “You may say I’m a dreamer,” sings John Lennon, “But I’m not the only one/I hope someday you’ll join us,” suggesting that reaching a stage without certain alleged evils is realistic enough to be action-guiding. Yet Lennon’s is not a dream in which we ought to join. We cannot imagine what he asks us to imagine in any action-guiding way.
    Date: 2008–04
  10. By: Risse, Mathias (Havard U)
    Abstract: Why do we have human rights? What ought to be the function of such rights in the global order, and to what extent does this help define what they are? Who needs to do what to realize these rights? In response to such questions this paper develops a conception of human rights that thinks of them as membership rights in the global order. Human rights are derived from contingent but relatively abiding political and economic arrangements. This conception has some intuitive disadvantages, but makes clear how human rights can be of genuinely global relevance; can explain why the language of rights (rather than goals or values) is appropriate here in the first place; derives human rights from relatively simple foundations; and can account of the range of disagreement that persists about precisely what should count as a human right.
    Date: 2008–01
  11. By: Risse, Mathias (Harvard U)
    Abstract: My goal here is twofold: First, I wish to make a plea for the relevance of moral considerations in debates about immigration. Too often, immigration debates are conducted solely from the standpoint of "what is good for us," without regard for the justifiability of immigration policies to those excluded. Second, I wish to offer a standpoint that demonstrates why one should think of immigration as a moral problem that must be considered in the context of global justice. More specifically, I will argue that the earth belongs to humanity in common and that this matters for assessing immigration policy. The case I will be particularly interested in is immigration into the United States, where immigration policy continues to be a hotly debated topic. The approach of this paper implies that illegal immigrants should be naturalized and more widespread immigration should be permitted. However, that discussion takes the form of a case study: the relevant considerations apply generally.
    Date: 2008–02
  12. By: Winston, Kenneth (Harvard U)
    Abstract: The place of ethics in the curriculum of schools of public management and policy is not a settled matter. One common approach, called applied ethics, relies primarily on the work of academic philosophers and follows a two-stage process: first, work out the guiding principles (in the academy, where one is protected from worldly pressures), then apply them to the real world (where they are inevitably compromised). This essay defends an alternative approach, practical ethics, which follows John Dewey’s admonition to be guided by problems of life and practice, rather than academic disputes or disciplinary methods. The essay identifies the basic features of practical ethics, and proposes an agenda for future research. It emphasizes, above all, that practical ethics is strategic and depends crucially on the ability to exercise contingent judgment. Practical ethics takes into account the powers, opportunities, and constraints, as well as the interests (including moral interests), of human agents in particular circumstances. The picture of practical reasoning is thus at odds with the prevailing approach. The essay also addresses the peculiar position of the classroom teacher of ethics, who is not confronted by ineluctable features of real decision making, including the necessity to act and the contingencies involved in acting both effectively and well. Suggestions are offered on how the teaching of practical ethics can be improved.
    Date: 2008–03
  13. By: Yukihiro Nishimura (Yokohama National University and Queen's University)
    Abstract: This paper provides a conceptual framework on fair collective choice rules that synthesizes the studies of Goldman and Sussangkarn (1978) and Suzumura (1981) on the one hand and Tadenuma (2002, 2005) on the other. We show that both frameworks have the following binary relation as a common origin: an allocation x is at least as good as an allocation z if (i) x Pareto dominates z, or (ii) x equity-dominates z. Its transitive-closure and the strict relation derive different ranking criteria, but remarkably, with respect to the maximal elements, they have a set-inclusive relationship.
    Keywords: Welfare Economics, Social Choice, Eciency, Equity, No-Envy
    JEL: D61 D63 D71
    Date: 2008–08
  14. By: Hagendorf, Klaus
    Abstract: The difficulties of the classical and Marxian labour theory of value are overcome when labour is measured in terms of marginal labour value. Marginal labour value is the inverse of the marginal productivity of labour. Relative prices are equal to the ratio of marginal labour values. This article presents the marginal approach to the labour theory of value.
    Keywords: Exploitation; Labour Theory of Value; Marginal Analysis; Marxism;
    JEL: D0 B51 D46 D24
    Date: 2008–08–28
  15. By: Glaeser, Edward L. (Harvard U); Sunstein, Cass R. (U of Chicago)
    Abstract: When members of deliberating groups speak with one another, their predeliberation tendencies often become exacerbated as their views become more extreme. The resulting phenomenon -- group polarization – has been observed in many settings, and it bears on the actions of juries, administrative tribunals, corporate boards, and other institutions. Polarization can result from rational Bayesian updating by group members, but in many contexts, this rational interpretation of polarization seems implausible. We argue that people are better seen as Credulous Bayesians, who insufficiently adjust for idiosyncratic features of particular environments and put excessive weight on the statements of others where there are 1) common sources of information; 2) highly unrepresentative group membership; 3) statements that are made to obtain approval; and 4) statements that are designed to manipulate. Credulous Bayesianism can produce extremism and significant blunders. We discuss the implications of Credulous Bayesianism for law and politics, including media policy and cognitive diversity on administrative agencies and courts.
    Date: 2008–01
  16. By: Heckman, James J. (University of Chicago)
    Abstract: This paper uses data available from the National Opinion Research Center's (NORC) survey on religious attitudes and powerful statistical methods to evaluate the effect of prayer on the attitude of God toward human beings.
    Keywords: unobserved variables, kernel estimator
    JEL: Z12
    Date: 2008–08

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