nep-hpe New Economics Papers
on History and Philosophy of Economics
Issue of 2008‒09‒13
sixteen papers chosen by
Erik Thomson
University of Chicago

  1. The Economic Thought on Poverty Measurement: From the Nineteenth-Century to the Rediscovering Era By Celso Nunes
  2. "Keynes's Approach to Full Employment Aggregate or Targeted Demand?" By Pavlina R. Tcherneva
  3. "Macroeconomics Meets Hyman P. Minsky The Financial Theory of Investment" By L. Randall Wray; Eric Tymoigne
  4. Minsky’s Upward Instability: the Not-Too-Keynesian Optimism of a Financial Cassandra By Elisabetta De Antoni
  5. Poverty Measurement: The Development of Different Approaches and Its Techniques By Celso Nunes
  6. Infrastructure and development : a critical appraisal of the macro level literature By Straub, Stephane
  7. Can We Test for Bias in Scientific Peer-Review? By Oswald, Andrew J.
  8. What determines the academic and professional participation of economists? By Mishra, SK
  9. Is the veil of ignorance only a concept about risk? An experiment By Hannah Hörisch
  10. Conformity, reciprocity and the sense of justice. How social contract-based preferences and beliefs explain norm compliance: the experimental evidence By Lorenzo Sacconi; Marco Faillo
  11. Psychological and Biological Foundations of Time Preference: Evidence from a Day Reconstruction Study with Biological Tracking By Daly, Michael; Delaney, Liam; Harmon, Colm P.
  12. Pure Subgame-Perfect Equilibria in Free Transition Games By Kuipers Jeroen; Flesch Janos; Schoenmakers Gijs; Vrieze Koos
  13. Paradigmatic Experiments: the Dictator Game By Francesco Guala; Luigi Mittone
  14. The Framing of Games and the Psychology of Play By Heike Hennig-Schmidt
  15. Quelle place pour l'entrepreneur dans les théories de la croissance régionale ? By Martin Koning; François Facchini
  16. The appearance of homo rivalis: Social preferences and the nature of rent seeking By Benedikt Herrmann; Henrik Orzen

  1. By: Celso Nunes (Madeira University)
    Abstract: This essay describes the evolution of the Economics of Poverty from the seminal works of Charles Booth and Joseph Rowntree to the Rediscovering Era in the 1960’s. It shows how the leading objectives of its authors changed over the decades. The description is roughly exhaustive, pointing out the way how the leading concepts, many of them frequently used even nowadays, were developed by its authors.
    Keywords: Economic Thought, Poverty, Measurement
    JEL: B19 B29 B49 I32
    Date: 2008
  2. By: Pavlina R. Tcherneva
    Abstract: This paper argues that John Maynard Keynes had a targeted (as contrasted with aggregate) demand approach to full employment. Modern policies, which aim to "close the demand gap," are inconsistent with the Keynesian approach on both theoretical and methodological grounds. Aggregate demand tends to increase inflation and erode income distribution near full employment, which is why true full employment is not possible via traditional pro-growth, pro-investment aggregate demand stimuli. This was well understood by Keynes, who preferred targeted job creation during expansions. But even in recessions, he did not campaign for wide-ranging aggregate demand stimuli; this is because different policies have different employment creation effects, which for Keynes was the primary measure of their effectiveness. There is considerable evidence to argue that Keynes had an "on the spot" approach to full employment, where the problem of unemployment is solved via direct job creation, irrespective of the phase of the business cycle.
    Date: 2008–08
  3. By: L. Randall Wray; Eric Tymoigne
    Abstract: Expanding on an approach developed by financial economist Hyman Minsky, the authors of this new working paper present an alternative to the standard "efficient markets hypothesis"--the relevance of which Minsky vehemently denied. Minsky recognized that, in a modern capitalist economy with complex, expensive, and long-lived assets, the method used to finance asset positions is of critical importance, both for theory and for real-world outcomes—one reason his alternate approach has been embraced by Post Keynesian economists and Wall Street practitioners alike. Coauthors L. Randall Wray and Eric Tymoigne argue that the current financial crisis, which began with the collapse of the U.S. subprime mortgage market in 2007, provides a compelling reason to show how Minsky's approach offers us a solid grounding in the workings of financial capitalism. They examine Minsky's extension to Keynes's investment theory of the business cycle, which allowed Minsky to analyze the evolution, over time, of the modern capitalist economy toward fragility--what is well known as his financial instability hypothesis. They then update Minsky's approach to finance with a more detailed examination of asset pricing and the evolution of the banking sector, and conclude with a brief review of the insights that such an approach can provide for analysis of the current global financial crisis.
    Date: 2008–09
  4. By: Elisabetta De Antoni
    Abstract: According to this work, the ‘financial instability hypothesis’ is not an interpretation of The General Theory as Minsky (1975, 1986) thought. Keynes and Minsky undoubtedly have much in common. Specifically, both of them recognize the limits of individual and collective rationality. Minsky, however, introduced an upward instability that seems totally foreign to The General Theory. Living in different historical periods, the two authors focused on different realities. Keynes looked at a depressed economy that, as a consequence of its low profit expectations, is dominated by the downswings (by the excess of saving over investment). Minsky looked at a vibrant economy that, as a consequence of its high profit expectations, is dominated by the upswings (by the excess of investment over saving). As a consequence, while a stagnant economy à la Keynes tends to chronic underinvestment and to high and long-lasting unemployment, a vibrant economy à la Minsky is naturally inclined to over-investment and over-indebtedness. In the last decades, useful examples might be the European economy on the one hand and the U.S.A. and U.K. economies on the other. Under this perspective, Minsky might be considered as an author who has extended the economics of Keynes to a vibrant economy, making it more general and modern. The recent sub prime crisis confirms the validity of Minsky’s insights.
    Keywords: Minsky, bounded rationality, business cycles, financial instability
    JEL: B22 E12 E32 G11
    Date: 2008
  5. By: Celso Nunes (Madeira University)
    Abstract: This work concentrates in the fundamental ideas that constitute the existing theoretical framework of the poverty measurement from the 1960’s to the state-of-the-art, with an extended comment on the more relevant issues, the presentation of more influencing approaches and the probable path of future research in Poverty Economics.
    Keywords: Approaches, Poverty Measurement, Techniques
    JEL: B49 I32
    Date: 2008
  6. By: Straub, Stephane
    Abstract: This survey reviews the existing macro-level empirical literature on the link between infrastructure and development outcomes in a critical light. After providing a general framework that casts the relevant terms of the controversy on the real effect of infrastructure on growth in the context of an aggregate production function, it signals what are the relevant empirical questions to be addressed. This guides the systematic review of a number of empirical studies and the discussion of the main econometric challenges to the identification of the effect of infrastructure on output and productivity. Finally, building on related research, in particular in contract theory and political economy, the paper spells out several promising research avenues.
    Keywords: Transport Economics Policy&Planning,Banks&Banking Reform,Economic Theory&Research,Political Economy,Non Bank Financial Institutions
    Date: 2008–04–01
  7. By: Oswald, Andrew J. (University of Warwick)
    Abstract: Science rests upon the reliability of peer review. This paper suggests a way to test for bias. It is able to avoid the fallacy – one seen in the popular press and the research literature – that to measure discrimination it is sufficient to study averages within two populations. The paper’s contribution is primarily methodological, but I apply it, as an illustration, to data from the field of economics. No scientific bias or favoritism is found (although the Journal of Political Economy discriminates against its own Chicago authors). The test’s methodology is applicable in most scholarly disciplines.
    Keywords: discrimination, citations, science, peer-review system
    JEL: H8
    Date: 2008–08
  8. By: Mishra, SK
    Abstract: The IDEAS publishes every month the rankings of economists (and departments of economics including research institutions working in the related areas) in different countries. These rankings are based on a large number of measures. It is observed that economists of some countries participate more vigorously in academic and professional activities. This paper investigates into the factors responsible for variations in participation of economists of different countries in academic and professional activities reflected in their intellectual output.
    Keywords: Economist; participation; rankings; IDEAS; RePEc; intellectual output; human development; less developed countries; journal articles; working papers; SSRN
    JEL: A11 A14
    Date: 2008–09–08
  9. By: Hannah Hörisch (University of Munich, Seminar for Economic Theory, Ludwigstraße 28 (Rgb.), 80539 Munich, Germany, email:
    Abstract: We implement the Rawlsian veil of ignorance in the laboratory. Our experimental design allows separating the effects of risk and social preferences behind the veil of ignorance. Subjects prefer more equal distributions behind than in front of the veil of ignorance, but only a minority acts according to maximin preferences. Men prefer more equal allocations mostly for insurance purposes, women also due to social preferences for equality. Our results contrast the Utilitarian's claim that behind the veil of ignorance maximin preferences necessarily imply infinite risk aversion. They are compatible with any degree of risk aversion as long as social preferences for equality are sufficiently strong.
    Keywords: deterrence, law and economics, incentives, crowding out, experiment
    JEL: D64 C99 D63
    Date: 2008–02
  10. By: Lorenzo Sacconi; Marco Faillo
    Abstract: Compliance with a social norm is a matter of self-enforceability and endogenous motivation to conform, which is relevant not just to social norm,s but also to a wide array of institutions. Here we consider endogenous mechanisms that become effective once the game description has been enriched with pre-play communication allowing impartial agreements on a norm (even if they remain not binding in any sense). Behavioral models understand conformity as the maximization of some “enlarged” utility function properly defined to make room for the individual’s “desire” to comply with a norm reciprocally adhered to by other participants – whose conformity in turn depends on the expectation that the norm will be in fact reciprocally adhered to. In particular this paper presents an experimental study on the “conformity-with-the-ideal preference theory” (Grimalda and Sacconi 2005), based of a simple experimental three person game called the “exclusion game”. If the players participate in a “constitutional stage” (under a veil of ignorance ) in which they decide the rule of division unanimously, the experimental data show a dramatic change in the participants’ behavior pattern. Most of them conform to the fair rule of division to which they have agreed in a pre-play communication stage, whereas in the absence of this agreement they behave egoistically. The paper also argues that this behavior is largely consistent with what John Rawls (1971) called the “sense of justice”, a theory of norm compliance unfortunately overlooked by economists and which should be reconsidered after the behaviorist turn in economics.
    Keywords: conformist preferences, reciprocity, veil of ignorance, psychological games, fairness, experiments
    JEL: C7 C9 D63 D64
    Date: 2008
  11. By: Daly, Michael (Trinity College, Dublin); Delaney, Liam (University College Dublin); Harmon, Colm P. (University College Dublin)
    Abstract: This paper considers the relationship between the economic concept of time preference and relevant concepts from psychology and biology. Using novel data from a time diary study conducted in Ireland that combined detailed psychometric testing with medical testing and real-time bio-tracking, we examine the distribution of a number of psychometric measures linked to the economic concept of time preferences and test the extent to which these measures form coherent clusters and the degree to which these clusters are related to underlying biological substrates. The paper finds that financial discounting is related to a range of psychological variables including consideration of future consequences, self-control, conscientiousness, extraversion, and experiential avoidance as well as being predicted by heart rate variability and blood pressure.
    Keywords: time preferences, day reconstruction study, economics and psychology, economics and biology
    JEL: C81 D84 D01 D91
    Date: 2008–08
  12. By: Kuipers Jeroen; Flesch Janos; Schoenmakers Gijs; Vrieze Koos (METEOR)
    Abstract: We consider a class of stochastic games, where each state is identified with a player. At any moment during play, one of the players is called active. The active player can terminate the game, or he can announce any player, who then becomes the active player. There is a non-negative payoff for each player upon termination of the game, which depends only on the player who decided to terminate. We give a combinatorial proof of the existence of subgame-perfect equilibria in pure strategies for the games in our class.
    Keywords: mathematical economics;
    Date: 2008
  13. By: Francesco Guala; Luigi Mittone
    Abstract: Recent experiments with the Dictator Game (and the ensuing discussions) have been affected by considerable confusion regarding the purpose of this design. A common complaint is that the design gives rise to fragile regularities and therefore is of little use for theory-testing. We take issue with this view, and instead argue that the Dictator Game is potentially a very useful tool for experimental game theory, if properly used. It is particularly useful for investigating social norms, but economists have failed to take advantage of the Dictator Game because they still lack an adequate theory of norms.
    Date: 2008
  14. By: Heike Hennig-Schmidt
    Abstract: Psychological game theory can help provide a rational choice explanation of framing effects; frames influence beliefs, beliefs influence motivations. We explain this theoretically, and explore the empirical relevance experimentally. In a 2×2 design of one-shot public good games we show that frames affect subject’s first- and second-order beliefs, and contributions. From a psychological game-theoretic framework we derive two mutually compatible hypotheses about guilt aversion and reciprocity under which contributions are related to second- and first-order beliefs, respectively. Our results are consistent with either.
    Keywords: Framing, psychological games, guilt aversion, reciprocity, public good games, voluntary cooperation
    JEL: C91 C72 D64 Z13
    Date: 2008–07
  15. By: Martin Koning (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I); François Facchini (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I, LAEP - LAboratoire d'Economie Publique - Université Panthéon-Sorbonne - Paris I)
    Abstract: Cet article se propose de mettre en perspective les théories "traditionnelles" de la croissance régionale avec la théorie de l'entrepreneur. La revue de littérature que nous menons montre que, si la figure de l'entrepreneur n'est que très partiellement mobilisée dans les explications de la croissance régionale, il existe à la fois des similitudes et des moyens d'enrichir mutuellement les théories en présence. Le premier apport de la théorie de l'entrepreneur est d'intégrer une variable entrepreneuriale dans la fonction de production du modèle de croissance endogène. Le deuxième apport de la théorie de l'entrepreneur est une contribution à la théorie de la base. En distinguant activités productives et improductives, on se donne les moyens de montrer que la rente et le profit n'ont pas les mêmes effets sur la croissance économique régionale. Le troisième apport de la théorie de l'entrepreneur est de contribuer à la théorie du développement endogène et à ses extensions : école de la régulation et école californienne de géographie économique. Ces courants présentent de nombreuses ressemblances avec la théorie autrichienne de l'entrepreneur, tant dans leurs approches conceptuelles que dans leurs méthodologies. Pour toutes ces raisons, les théories de la croissance régionale devraient prendre plus en considération les figures de l'entrepreneur.
    Keywords: croissance régionale; entrepreneur
    Date: 2008–07
  16. By: Benedikt Herrmann (University of Nottingham); Henrik Orzen (University of Nottingham)
    Abstract: While numerous experiments demonstrate how pro-sociality can influence economic decision-making, evidence on explicitly anti-social economic behavior has thus far been limited. In this paper we investigate the importance of spite in experimental rent-seeking contests. Although, as we show, existing evidence of excessive rent-seeking is in theory compatible with fairness considerations, our social preference elicitations reveal that subjects’ investments are driven by spite, not fairness or reciprocity. We also observe a striking disconnect between individuals’ revealed social preferences in our contest game and in a standard prisoner’s dilemma, rejecting the idea that there are consistent pro-social, selfish or anti-social “types”. Moreover, we find that cooperation and reciprocity rates drop substantially after subjects have been exposed to rent-seeking competition.
    Keywords: Contests; Other-regarding preferences; Experiments
    JEL: A13 C9 D0 D72
    Date: 2008–08

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