nep-hpe New Economics Papers
on History and Philosophy of Economics
Issue of 2008‒12‒07
ten papers chosen by
Erik Thomson
University of Manitoba

  1. Coping with Complexity. Keynes and International Economic Relations in the Aftermath of WWI By Anna M. Carabelli; Mario A. Cedrini
  3. Stato e mercato : l'ipotesi liberalsocialista. In ricordo di Franco Momigliano By Antonelli Cristiano
  4. Michael Maschler: In Memoriam By Robert J. Aumann; Ein-Ya Gura; Sergiu Hart; Bezalel Peleg; Hana Shemesh; Shmuel Zamir
  5. Uncovering Simons’ structuralism with cognitive theories: Interactive control systems and processes of learning By Dambrin, Claire; Löning, Hélène
  6. Repeated moral hazard with effort persistence By Arantxa Jarque
  7. Measuring Wellbeing in the SOEP By Ulrich Schimmack
  8. An Experimental Study of Conventions and Norms By Francesco Guala; Luigi Mittone
  9. Homo Reciprocans: Survey Evidence on Behavioural Outcomes By Dohmen Thomas; Falk Armin; Huffman David; Sunde Uwe
  10. The End of the Great Moderation? By William Barnett; Marcelle Chauvet

  1. By: Anna M. Carabelli; Mario A. Cedrini (SEMEQ Department - Faculty of Economics - University of Eastern Piedmont)
    Abstract: In the attempt to deepen the understanding of Keynes's thought as an international macroeconomist, we explore the hypothesis of consistency between his general methodological approach to the economic material and his way of reasoning about international economic relations as shaped by WWI. We argue that the methodology of "The Economic Consequences of the Peace" reflects Keynes's attempt to cope with the attributes of the complexity characterizing the European settlement for the post-war period, and particularly 1) organic interdependence among variables at play, 2) irreducible dilemmas and situations of conflict, as well as 3) the need for external, public assistance to overcome the impasse and promote a "shared responsibilities" approach to the imbalances. Striking similarities appearing with the method of Keynes's economic diplomacy in the Forties call for further research in this sense.
    Keywords: Keynes; complexity; international economic relations
    JEL: B31 F02 B41
    Date: 2008–10
  2. By: Alain Béraud (THEMA - Théorie économique, modélisation et applications - CNRS : UMR8184 - Université de Cergy Pontoise)
    Abstract: Dans le développement des théories de l’équilibre général, Hicks et Allais ont joué un rôle essentiel. On étudie ici les contributions qui furent les leurs respectivement dans Valeur et Capital (1939) et dans le Traité d’économie pure (1943). L’accent est mis sur trois points : la théorie du bien-être, la stabilité de l’équilibre et la construction d’un modèle dynamique.
    Keywords: équilibre, utilité, optimum, surplus, stabilité
    Date: 2008–09–11
  3. By: Antonelli Cristiano (University of Turin)
    Date: 2008–11
  4. By: Robert J. Aumann; Ein-Ya Gura; Sergiu Hart; Bezalel Peleg; Hana Shemesh; Shmuel Zamir
    Date: 2008–11
  5. By: Dambrin, Claire; Löning, Hélène
    Abstract: In this paper, the authors draw from theories of cognition, in particular Piaget (1930, 1931, 1934, 1935, 1949, 1966, 1968) and provide some content analysis of Simons’ writings (1987, 1990, 1991, 1994, 1995, 2000), based on four categories, which stem from our interpretation of Piaget’s thought : the role of MCS as a language, the interactive nature of MCS, the link between strategy and control and how MCS deal with uncertainty.
    Keywords: Simons; Piaget; learning; cognition; interactive control systems
    JEL: D83
    Date: 2008–11–01
  6. By: Arantxa Jarque
    Abstract: I study a problem of repeated moral hazard in which the effect of effort is persistent over time: each period's outcome distribution is a function of a geometrically distributed lag of past efforts. I show that when the utility of the agent is linear in effort, a simple rearrangement of terms in his lifetime utility translates this problem into a related standard repeated moral hazard. The solutions for consumption in the two problems are observationally equivalent, implying that the main properties of the optimal contract remain unchanged with persistence. To illustrate, I present the computed solution of an example. ; See also: WP 07-07
    Keywords: Microeconomics ; Economics
    Date: 2008
  7. By: Ulrich Schimmack
    Abstract: I define wellbeing as preference realization. Wellbeing can be measured with affective (the amount of pleasant versus unpleasant experiences) and cognitive (satisfaction with life in general and life domains) measures. Since its inception 25 years ago, the SOEP has included cognitive measures of wellbeing. In 2007, the SOEP included four items (happy, sad, angry, afraid) as an affective measure of wellbeing. This paper examines similarities and differences between cognitive and affective measures of wellbeing. In the end, I propose a wellbeing index that combines information from measures of life satisfaction, average domain satisfaction, and affect balance.
    Keywords: General welfare, quality of life, happiness, wellbeing
    JEL: I31
    Date: 2008
  8. By: Francesco Guala; Luigi Mittone
    Abstract: Although it is now recognized that norms play an important role in many economic decisions, compliance with conventions is generally considered to be driven by rational self-interest only. We report instead experimental data showing that (1) ‘external’ norms of fairness sustain social conventions that have emerged from repeated play of simple coordination games; and (2) with repetition such conventions acquire an ‘intrinsic’ normative power of their own. This creates pressure towards conformity, and patterns of regular behaviour that are far stronger and more stable than those that would be generated by mere self-interest and rationality.
    Date: 2008
  9. By: Dohmen Thomas; Falk Armin; Huffman David; Sunde Uwe (ROA rm)
    Abstract: This paper complements the experimental literature that has shown theimportance of reciprocity for behaviour in stylized labour markets or otherdecision settings. We use individual measures of reciprocal inclinations in alarge, representative survey, and relate reciprocity to real world labour marketbehaviour and life outcomes. We find that reciprocity matters, and we find thatthe way in which it matters is very much in line with the experimental evidence.In particular, positive reciprocity is associated with receiving higher wages andworking harder. Negatively reciprocal inclinations tend to reduce effort. Firmsdo not pay lower wages to individuals with strong negatively reciprocalinclinations. Instead, negative reciprocity increases the likelihood of beingunemployed. Looking at broader measures of success, in terms of number ofclose friends, and subjective well-being, we find that positively reciprocalinclination are associated with greater happiness and ability to sustain friendshiprelations, with the opposite being true for negative reciprocity.
    Keywords: education, training and the labour market;
    Date: 2008
  10. By: William Barnett (Department of Economics, The University of Kansas); Marcelle Chauvet (University of California at Riverside)
    Abstract: The current financial crisis followed the “great moderation,” according to which some commentators and economists believed that the world’s central banks had gotten so good at countercyclical policy that the business cycle volatility had declined to low levels. As more and more economists and media people became convinced that the risk of recessions had moderated, lenders and investors became willing to increase their leverage and risk-taking activities. Mortgage lenders, insurance companies, investment banking firms, and home buyers increasingly engaged in activities that would have been considered unreasonably risky, prior to the great moderation that was viewed as having lowered systemic risk. It is the position of this paper that the great moderation did not reflect improved monetary policy, and the perceptions that systemic risk had decreased and that the business cycle had ended were based on other phenomena, such as improved technology and communications. Contributing to the misperceptions about monetary policy solutions was low quality data provided by central banks. Since monetary assets began yielding interest, the simple sum monetary aggregates have had no foundations in economic theory and have sequentially produced one source of misunderstanding after another. The bad data produced by simple sum aggregation have contaminated research in monetary economics, have resulted in needless “paradoxes,” have produced decades of misunderstandings in economic research and policy, and contributed to the widely held views about decreased systemic risk. While better data, based correctly on index number theory and aggregation theory, now exist, the usual official central bank data are not based on that better approach. While aggregation-theoretic monetary aggregates exist for internal use at the European Central Bank, the Bank of Japan, and many other central banks throughout the world, the only central banks that currently make aggregation-theoretic monetary aggregates available to the public are the Bank of England and the St. Louis Federal Reserve Bank. Dual to the aggregation-theoretic monetary aggregates are the aggregation-theoretic user-cost and interest rate aggregates, which similarly are not in official use by central banks. The failure to use aggregation-theoretic quantity, user-cost price, and interest-rate index numbers as official data by central banks often is connected with the misstatement that expenditure share weights move in a predictable manner, when interest rates change. In fact the direction in which a share will change when an interest rate changes depends upon whether or not the price elasticity of demand is greater than or less than -1. No other area of economics has been so seriously damaged by data unrelated to valid index-number and aggregation theory. We provide evidence supporting the view that misperceptions based upon poor data were responsible for excess risk taking by financial firms and borrowers, and by regulators at central banks. We also provide evidence indicating the poor data may have induced the Federal Reserve to underestimate the rate of growth of monetary services and hence to have fed the bubbles with excess liquidity unintentionally. We also provide evidence indicating that a similar misperception produced an excessively contractionary policy that finally burst the bubble. Many commentators have been quick to blame insolvent financial firms for their “greed” and their presumed self-destructive, reckless risk taking. Perhaps some of those commentators should look more carefully at their own role in propagating the misperceptions that induced those firms to be willing to take such risks. While there are many considerations relevant to the misguided actions of private firms, individuals, and central banks during the period leading up to the current financial crisis, there is one common thread associated with all of them: misperceptions induced by poor data disconnected from the relevant economic aggregation theory.
    Keywords: Measurement error, monetary aggregation, Divisia index, aggregation, monetary policy, index number theory, financial crisis, great moderation, Federal Reserve.
    JEL: E40 E52 E58 C43 E32
    Date: 2008–11

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