nep-hpe New Economics Papers
on History and Philosophy of Economics
Issue of 2009‒04‒13
fifteen papers chosen by
Erik Thomson
University of Manitoba

  1. On the Problem of Vague Terms: A Glossary of Clearly Stated Assumptions & Careful, Patient, Descriptions By Funk, Matt
  2. Does economics need a scientific revolution? By Kitov, Ivan
  3. J. M. Keynes, thinker of economic complexity By Marchionatti Roberto
  4. A historical reconstruction of the connections between the Viennese neopositivists and the American pragmatists: economic theory in the project for the International Encyclopaedia of Unified Science By Becchio Giandomenica
  5. The Institutionalists’ Reaction to Chamberlin’s 'Theory of Monopolistic Competition' By Luca Fiorito
  6. Charles Feinstein (1932-2004), and British Historical National Accounts By Avner Offer
  7. On the Problem of the Island of Earth: Introducing a Universal Theory of Value in an Open Letter to The President of the United States By Funk, Matt
  8. Answer to question what is money: gauge freedom. Physicist’s approach to tendencies in world’s economy By Zeps, Dainis
  9. Measuring Trust: Experiments and Surveys in Contrast and Combination By Naef, Michael; Schupp, Jürgen
  10. Ethics and economics in Karl Menger: how did social sciences cope with Hilbertism By Becchio Giandomenica
  11. On the Problem of Breathing, Eating, & Drinking Poison: An introduction to problem solving, nobility of purpose under adverse circumstances, and the search for truth with Sir Karl Popper on Prince Edward Island By Funk, Matt
  12. World’s Economy: what is money? Physicist’s approach to tendencies in world’s economy By Zeps, Dainis
  13. What can facilitate cooperation: Fairness, ineaulity aversion, punishment, norms or trust? By Urs Steiner Brandt
  14. Endogenous growth theory twenty years on: a critical assessment By Sergio Cesaratto
  15. The Structuralist Growth Model By Bill Gibson

  1. By: Funk, Matt
    Abstract: Coase 1930 endures through the decades as one of the most-cited papers in economics due to the fact that it highlights a fundamental and equally enduring problem: "Economic theory has suffered in the past from a failure to state clearly its assumptions. Economists in building up a theory have often omitted to examine the foundations on which it was erected. This examination is, however, essential not only to prevent the misunderstanding and needless controversy which arise from a lack of knowledge of the assumptions on which a theory is based, but also because of the extreme importance for economics of good judgement in choosing between rival sets of assumptions." In 1944 Von Neumann and Morgenstern offered the simply, yet invariably rejected solution: "In… economics the most fruitful work may be that of careful, patient description; indeed this may be by far the largest domain for the present and some time to come….Economic problems [have been and are often] not formulated clearly and are often stated in such vague terms as to make mathematical treatment a priori appear hopeless because it is quite uncertain what the problems really are. There is no point in using exact methods where there is no clarity in the concepts and issues to which they are to be applied. Consequently the initial task is to clarify the knowledge of the matter by further careful descriptive work." This paper offers a stone along the path to the solution to this problem by offering a glossary in this spirit, a glossary germain to some of the most fundamental, open problems in economics. As the fate of the human race may lay in the balance to finding solutions to these problems, this glossary may be a steop in the right direction.
    Keywords: economic terms; methodology; scientific method; coase 1930; Von Neumann & Morgenstern 1944; definitions; careful; patient descriptions
    JEL: B40 Z10
    Date: 2008–10–31
  2. By: Kitov, Ivan
    Abstract: Economics does not need a scientific revolution. Economics needs accurate measurements according to high standards of natural sciences and meticulous work on revealing empirical relationships between measured variables.
    Keywords: economics; science
    JEL: A1
    Date: 2009–04–04
  3. By: Marchionatti Roberto (University of Turin)
    Date: 2009–03
  4. By: Becchio Giandomenica (University of Turin)
    Abstract: Persuaded by the fact that the philosophical debate in Vienna during the 1930s deeply influenced the subsequent American developments of economic theory, my purpose is to reconstruct, from a historical and theoretical point of view, how Austrian interests in economics (which spread in the interwar period) moved to the USA, and what the subsequent developments were. From a historical point of view, I shall focus on the genesis of the International Encyclopaedia of Unified Science promoted by philosophers belonging to the Vienna Circle (Otto Neurath, Rudolph Carnap and Philipp Frank) and American pragmatists (John Dewey and, above all, Charles Morris) between 1938 and 1969. From a theoretical point of view, I shall focus on the development of economic theory within this project, which was regarded as the most important outcome of logical positivism or new empiricism, this being the common philosophical outlook that they shared. The aim of this paper is to show how the original meaning of economics (as formulated by Neurath) within the Vienna Circle was changed in its transition from Vienna to the USA (when the International Encyclopaedia was organized) and was finally radically transformed in the American context during the following decades.
    Date: 2009–04
  5. By: Luca Fiorito
    Abstract: Edwin Chamberlin's The Theory of Monopolistic competition is often described as containing omportant traces of institutionalist influence. This is also confimred by Chamberlin himself who, repeadetly, referred to the work of Veblen, and John Maurice Clark among his inspirational sources. The aim of this paper is to analyse the institutionalist rection to the publication of the Theory of Monopolistic Competition. What will be argued is that the institutionalist response to Chamberlin was a mixed one, and involved some substantial criticisms of his analysis of market structures both on methodological and theoretical grounds. The paper is organized as follows. The first section presents a sketch of the main theoretical implications contained in The Theory of Monopolistic Competition. The second section analyses the general aspects of the institutionalist reaction to Chamberlin. The third and fourth sections deal with the more theoretical aspects of the institutionalist criticism of Chamberlin. The final section presents a conclusion
    JEL: B25
    Date: 2009–03
  6. By: Avner Offer (All Souls College, Oxford University)
    Abstract: The Meade and Stone approach to national accounting (first published for the UK in 1941) eventually provided the template for the United Nations System of National Accounts. Feinstein’s historical national accounts for the UK developed out of this project and built on its earlier contributions. He was the foremost constructor of historical accounts in the UK, and shared with other national accounting pioneers a pragmatic approach and a bias against neo-classical general equilibrium. He made important contributions to growth accounting and the measurement of standards of living, and also left his mark as a teacher and as an academic leader. His commitment to racial equality in South Africa preceded his academic career, and continued after his formal retirement.
    Date: 2008–06–02
  7. By: Funk, Matt
    Abstract: This paper introduces a unified theory of value.
    Keywords: theory of value; evolutionary stable solution; economic power; military power; national security; global threat mitigation; extinction; human evolution; ideological environmentalism; the problem of induction; karl popper; F.A. von Hayek; austrian economics
    JEL: B40 A12 Z10
    Date: 2008–07–04
  8. By: Zeps, Dainis
    Abstract: We suggest new approach to what should be considered money. We argue that not money itself should be measurable quantity but change of it, thus, entering gauge freedom action in economics in analogy with what we perceive in nature how it is described by theoretical physics.
    Keywords: world’s economy; money; gauge freedom; physics; commonwealth
    JEL: C0
    Date: 2009–04–03
  9. By: Naef, Michael (University of London); Schupp, Jürgen (DIW Berlin)
    Abstract: Trust is a concept that has attracted significant attention in economic theory and research within the last two decades: it has been applied in a number of contexts and has been investigated both as an explanatory and as a dependent variable. In this paper, we explore the questions of what exactly is measured by the diverse survey-derived scales and experiments claiming to measure trust, and how these different measures are related. Using nationally representative data, we test a commonly used experimental measure of trust for robustness to a number of interferences, finding it to be mostly unsusceptible to stake size, the extent of strategy space, the use of the strategy method, and the characteristics of the experimenters. Inspired by criticism of the widespread trust question used in many surveys, we created a new, improved survey trust scale consisting of three short statements. We show that the dimension of this scale is distinct from trust in institutions and trust in known others. Our new scale is a valid and reliable measure of trust in strangers. The scale is valid in the sense that it correlates with trusting behaviour in the experiment. Both survey and experimental measure correlate with related factors such as risk aversion, being an entrepreneur or a shareholder. Furthermore, we demonstrate that the survey measure's test-retest reliability (six weeks) is high. The experimental measure of trust is, on the other hand, not significantly correlated with trust in institutions nor with trust in known others. We conclude that the experimental measure of trust refers not to trust in a general sense, but specifically to trust in strangers.
    Keywords: representativity, survey, experiment, trust, SOEP
    JEL: C91 D63 Z13
    Date: 2009–03
  10. By: Becchio Giandomenica (University of Turin)
    Abstract: This paper deals with the contributions made to the social sciences by the mathematician Karl Menger (1902-1985), the son of the more famous economist, Carl Menger. Mathematician and a logician, he focused on whether it was possible to explain the social order in formal terms.1 He stressed the need to find the appropriate means with which to treat them, avoiding recourse to historical descriptions, which are unable to yield social laws. He applied Hilbertism to economics and ethics in order to build an axiomatic and formalized model of the individual behavior and the dynamics of social groups.
    Date: 2009–04
  11. By: Funk, Matt
    Abstract: This paper introduces Karl Popper's approach to problem solving in the social sciences. These methods fundamentally represent the scientific method of the natural sciences. Popper's problem solving technique is outlined in six steps, including an introductory treatment of his solution to Hume's Problem of Induction. These six steps are then applied in the form of a test and logical deduction of our illustrative theory: Cancer rates on Prince Edward Island have dramatically increased as a result of an extraordinary increase (900% in the past decade) in potato production, and a corollary increase of secondary agricultural inputs, namely an increase of chlorothalonil (trade name: Bravo) applications in less than ten years. We conclude our theory is true and, in order to complete our demonstration of Popper's methods, open this theory to criticism and refutations. APPENDIX A offers a brief review of relevant literature on the philosophy of science, and APPENDIX B offers readers a brief introduction to the fundamentals of relevant island-based methods.
    Keywords: scientific method; karl popper; truth; falsity; probability theory; the problem of induction; industrial agriculture; prince edward island; insularity; manufacture of consent; the tragedy of the commons
    JEL: B0 D80 B41
    Date: 2008–11–01
  12. By: Zeps, Dainis
    Abstract: We run economy not knowing rules of what we are running. Commonwealth maybe should be allowed to functionate under its own rules that should be discovered, similar to these in physics or biology. By the way, quantity value of what money measures should be discovered too. Greed in whatever appearance, direct or hidden, should be excluded completely.
    Keywords: world’s economy; crisis; money; bubble of value; greed; noosphere; psychology; religion; physics; commonwealth; common benefit.
    JEL: C0
    Date: 2009–03–24
  13. By: Urs Steiner Brandt (Department of Environmental and Business Economics, University of Southern Denmark)
    Abstract: Almost all economic and public choice models assume that all people are exclusively pursuing their own material self-interests and do not care about "social" goals per se. Several (laboratory) experiments address the question of the general validity of this assumption. A consistent conclusion emerges that a significant number of people deviate from the assumption of selfish rational behaviour; this conclusion is robust with respect to the design of the experiments. Therefore, public choice comes with a price: the conclusions are based on the stylized stereotype of economic man, an assumption that is not fully satisfied. The purpose of this paper is to show how to incorporate otherregarding preferences into an otherwise traditional utility approach without losing predicting power or compromising the rationality assumption. On the contrary, since other-regarding preferences are based on observed behaviour, the predicting power increases; this is demonstrated at the end of this paper, where it is shown how other-regarding preferences can explain the existence and persistence of a welfare state and why people might act sustainably.
    Date: 2008–11
  14. By: Sergio Cesaratto
    Abstract: Endogenous growth literature emerged from dissatisfaction with one result of the neoclassical growth model: the independence of the growth rate from the saving ratio, which is seen as a variable subject to policy influence. There are at least three generations of EGT models: the old one of the sixties; the new one of the late eighties; and the most recent one, from the second half of the nineties. EGT models of any vintage fall into one of two fields: neo-Solowian (or semi-endogenous models) or fully endogenous models. Models from the sixties would generally fall into the first class and for good reasons. Indeed, most of the early generation of fully endogenous models from the late eighties fell under the ‘Jones critique’ (Jones 1995b), which pointed out some of the difficulties of these models. The most recent models have found various ways to avoid those problems. It is shown that these stratagems were anticipated by Marvin Frankel in the sixties and by Lucas in the eighties. One suspects that these devices arose in order to fix the theory rather than from, say, some ex-ante empirical observation (which is often provided ex post). More importantly, this paper indicates some problems common to all vintages of EGT models, beginning with the Cambridge capital theory critique, and suggests some alternative routes for growth analysis outside neoclassical theory.
    JEL: O3 O4
    Date: 2009–03
  15. By: Bill Gibson (University of Vermont, Burlington, VT 05045; University of Massachusetts Amherst)
    Abstract: This paper examines the underlying theory of structuralist growth models in an effort to compare that framework with the standard approach of Solow and others. Both the standard and structuralist models are solved in a common mathematical framework that emphasizes their similarities. It is seen that while the standard model requires the growth rate of the labor force to be taken as exogenously determined, the structuralist growth model must take investment growth to be determined exogenously in the long run. It is further seen that in order for the structuralist model to reliably converge to steady growth, considerable attention must be given to how agents make investment decisions. In many ways the standard model relies less on agency than does the structuralist. While the former requires a small number of plausible assumptions for steady growth to emerge, the structuralist model faces formidable challenges, especially if investment growth is thought to be determined by the rate of capacity utilization.
    Date: 2009–03

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