nep-hpe New Economics Papers
on History and Philosophy of Economics
Issue of 2009‒08‒30
thirteen papers chosen by
Erik Thomson
University of Manitoba

  1. Cartoons and economics: general analysis based on colombian economic cartoons. By Villaveces Niño, Juanita; Rodríguez Lesmes, Paul Andrés
  2. Bourgeois dignity and liberty: Why economics can’t explain the modern world By McCloskey, Deirdre
  3. Institution design in social dilemmas: How to design if you must? By Rockenbach, Bettina; Wolff, Irenaeus
  4. The Interdependence of Private and Public Interests By Mahoney, Joseph; McGahan, Anita; Pitelis, Christos
  5. Institutional Diversity, Agency and Governance for Sustainable Value By Pitelis, Christos
  6. "Financial and Monetary Issues as the Crisis Unfolds" By James K. Galbraith
  7. Correlated Equilibrium via Hierarchies of Beliefs By Du, Songzi
  8. Weak moral motivation leads to the decline of voluntary contributions By Charles FIGUIERES; Marc WILLINGER; David MASCLET
  9. Harnessing the Power of Focal Points To Measure Social Agreement By Jim Engle-Warnick; Stuart Soroka
  10. Del fascismo al movimiento nacional-popular: el peronismo y el intercambio Germani-Lipset, 1956-1961 By Samuel Amaral
  11. Utility, games, and narratives By Fioretti, Guido
  12. Economic thought at the European Commission and the creation of EMU (1957-1991) By Ivo Maes
  13. Crisis and Protectionism: Will History Repeat Itself? By Sumru Oz

  1. By: Villaveces Niño, Juanita; Rodríguez Lesmes, Paul Andrés
    Abstract: May cartoons be considered as a viable and credible source for the study of economics? There is hardly any research on the subject, even though there is a quite significant amount of cartoons with economic content. This suggests that economics (and economists) have not paid enough attention and do not incorporate in their analysis a relevant primary source. The present paper aims to explore the value of using cartoons as a complementary primary source in economic analysis. We present a way of analyzing economic history through cartoons; first, reviewing cartoons which describe particular historical circumstances and second, examining cartoons that represent generic economic situations and are not necessarily linked to a historical period. We choose 17 cartoons, from different cartoonist, especially Colombian cartoonists that may give us an idea of economic matters and economic history.
    Date: 2009–08–13
  2. By: McCloskey, Deirdre
    Abstract: Two centuries ago the world’s economy stood at the present level of Chad. Two centuries later the world supports more than six-and-half times more people. Starvation worldwide is at an all-time low, and falling. Literacy and life expectancy are at all-time highs, and rising. How did average income in the world move from $3 to $30 a day? Economics mattered in shaping the pattern but to understand it economists must know the history and historians must know the economics. Material, economic forces were not the original and sustaining causes of the modern rise, 1800 to the present. Ethical talk runs the world. Dignity encourages faith. Liberty encourages hope. The claim is that the dignity to stand in one’s place and the liberty to venture made the modern world. An internal ethical change allowed it, beginning in northwestern Europe after 1700. For the first time on a big scale people looked with favor on the market economy, and even on the creative destruction coming from its profitable innovations. The world began to revalue the bourgeois towns. If envy and local interest and keeping the peace between users of old and new technologies are allowed to call the shots, innovation and the modern world is blocked. If bourgeois dignity and liberty are not on the whole embraced by public opinion, the enrichment of the poor doesn’t happen. The older suppliers win. The poor remain unspeakably poor. By 1800 in northwestern Europe, for the first time in economic history, an important part of public opinion came to accept creative accumulation and destruction in the economy. People were willing to change jobs and allow technology to progress. People stopped attributing riches or poverty to politics or witchcraft. The historians of the world that trade created do not acknowledge the largest economic event in world history since the domestication of plants and animals, happening in the middle of their story. Ordinary Europeans got a dignity and liberty that the proud man’s contumely had long been devoted to suppressing. The material economy followed.
    Keywords: economics; innovation; industrial revolution; bourgeoisie; modern world
    JEL: B1 O40
    Date: 2009–07
  3. By: Rockenbach, Bettina; Wolff, Irenaeus
    Abstract: Considerable experimental evidence has been collected on how to solve the public-good dilemma. In a 'first generation' of experiments, this was done by presenting subjects with a pre-specified game out of a huge variety of rules. A 'second generation' of experiments introduced subjects to two different environments and had subjects choose between those. The present study is part of a 'third generation', asking subjects not only to choose between two environments but to design their own rule sets for the public-good problem. Whereas preceding 'third-generation' experiments had subjects design and improve their strategies for a specified game, this study is the first to make an attempt at answering the question of how people would shape their environment to solve the public-good dilemma were they given full discretion over the rules of the game. We explore this question of endogenous institution design in an iterated design-and-play procedure. We observe a strong usage of punishment and redistribution components, which diminishes over time. Instead, subjects successfully contextualize the situation. Interestingly, feedback on fellow-players’ individual behavior tends to be rendered opaque. On average, rules do improve with respect to the welfare they elicit, albeit only to a limited degree.
    Keywords: Public good; strategy method; experiment; public choice
    JEL: C9 D7 D71 C92 D72 C72
    Date: 2009–07–17
  4. By: Mahoney, Joseph; McGahan, Anita; Pitelis, Christos
    Abstract: The predominant focus in research on organizations is either on private or public institutions without consistent consideration of their interdependencies. The emphasis in scholarship on private or public interests has strengthened as disciplinary and professional knowledge has deepened: management scholars, for example, tend to consider the corporation as the unit of analysis, while scholars of public policy often analyze governmental, multilateral, community and non-profit organizations. This article advocates a partial merging of these research agendas on the grounds that private and public interests cannot be fully understood if they are conceived independently. We review three major areas of activity today in which public and private interests interact in complex ways, and maintain that current theories of organization science can be deployed to understand better these interactions. We also suggest that theories of public-private interaction also require development and describe a concept called "global sustainable value creation," which may be used to identify organizational and institutional configurations and strategies conducive to worldwide, intertemporal efficiency and value creation. We conclude that scholarship on organizations would advance if private-public interactions were evaluated by the criterion of global sustainable value creation.
    Date: 2009
  5. By: Pitelis, Christos
    Abstract: Extant views of (shareholder) value, (corporate) governance, and competitiveness have a narrow view of 'agency', a poorly developed theory of value and pay little attention to sustainability. In this paper we develop a perspective on the determinants of value-wealth creation at the firm, meso-, and national levels, explore the limitations of extant theory of the firm, concerning governance and value in its context, and discuss some prerequisites of sustainability. We conclude that the pursuit of value is not antithetical to, but it derives from, the notion of sustainability, that sustainability requires both internal and external controls and that institutional diversity can help effect mutual 'stewardship' and monitoring. Moreover, for sustainable value creation, corporate governance needs to be aligned to national and global governance.
    Keywords: institutions, agency, governance, sustainability, value
    Date: 2009
  6. By: James K. Galbraith
    Abstract: A group of experts associated with the Economists for Peace and Security and the Initiative for Rethinking the Economy met recently in Paris to discuss financial and monetary issues; their viewpoints, summarized here by Senior Scholar James K. Galbraith, are largely at odds with the global political and economic establishment. Despite noting some success in averting a catastrophic collapse of liquidity and a decline in output, the Paris group was pessimistic that there would be sustained economic recovery and a return of high employment. There was general consensus that the precrisis financial system should not be restored, that reviving the financial sector first was not the way to revive the economy, and that governments should not pursue exit strategies that permit a return to the status quo. Rather, the crisis exposes the need for profound reform to meet a range of physical and social objectives.
    Date: 2009–08
  7. By: Du, Songzi
    Abstract: We study a model of correlated equilibrium where every player takes actions based on his hierarchies of beliefs (belief on what other players will do, on what other players believe about others will do, etc.) intrinsic to the game. Our model does away with messages from outside mediator that are usually assumed in the interpretation of correlated equilibrium. We characterize in every finite, complete information game the exact sets of correlated equilibria (both subjective and objective) that can be obtained conditioning on hierarchies of beliefs; the characterizations rely on a novel iterated deletion procedure. If the procedure ends after k rounds of deletion for a correlated equilibrium obtained from hierarchies of beliefs, then players in the equilibrium need to reason to at most k-th order beliefs. Further conceptual and geometric properties of the characterizations are studied.
    Keywords: game theory; correlated equilibrium; higher order beliefs; purification; intrinsic correlation
    JEL: D80 C72
    Date: 2009–08–15
    Abstract: This paper provides a general framework that accounts for the decay of the average contribution observed in most experiments on voluntary contributions to a public good. Each player balances her material utility loss from contributing with her psychological utility loss of deviating from her moral ideal. The novel and central idea of our model is that people.s moral motivation is "weak": their judgement about what is the right contribution to a public good can evolve in the course of interactions, depending partly on observed past contributions and partly on an intrinsic "moral ideal". Under the assumption of weakly morally motivated agents, average voluntary contributions can decline with repetition of the game. Our model also explains other regularities observed in experiments, in particular the phenomenon of over-contributions compared to the Nash prediction and the so-called restart e¤ect, and it is compatible with the conditional cooperation hypothesis.
    Date: 2009–08
  9. By: Jim Engle-Warnick; Stuart Soroka
    Abstract: This paper reports results from an application of Thomas Schelling’s (1960) concept of a focal point to the measure of social agreement on the received tone of media content. In our experiments, subjects rate the tone, positive, negative, or neutral, of newspaper articles and news broadcasts, with an incentive to coordinate responses. We compare the content analysis of a traditional subject pool with those of a representative cross-section of the general public. Our application of the coordination game with strategy labels illustrates that the concept of a focal point can be put to use as a measure of social agreement. <P>Le document présente les résultats obtenus en appliquant le concept de point focal, avancé par Thomas Schelling (1960), à la mesure de l’accord social concernant la perception du ton qui se dégage du contenu médiatique. Dans le cadre des expériences mises sur pied, les sujets évaluent le ton, positif, négatif ou neutre, adopté dans des articles de journaux et des bulletins de nouvelles et sont encouragés, par des mesures incitatives, à coordonner leurs réponses. Nous comparons l’analyse du contenu réalisée par un bassin traditionnel de sujets à celle menée par un échantillon représentatif du grand public. Notre application du jeu de coordination faisant appel à des étiquettes de stratégies démontre que la notion de point focal peut être utilisée pour mesurer l’accord social.
    Keywords: Coordination, focal point, experiment, content analysis, media, Coordination, point focal, expérience, analyse du contenu, médias
    Date: 2009–08–01
  10. By: Samuel Amaral
    Abstract: This paper explores Gino Germani’s further interpretations of Peronism after considering it a particular case of Fascism (see Working Paper N° 371). A visit paid to American universities in late 1956 or early 1957 put him in touch with leading sociologists, Seymour Martin Lipset among them. Lipset’s work on “working-class authoritarianism” made an impact on Germani’s views. By mid-1957 he wrote a paper on “Authoritarianism and the popular classes”, following and discussing Lipset’s views. Lipset, however, in his book Political Man (1960), accepted to some extent Germani’s first view while defining Peronism as an extreme left-wing phenomenon, a Fascism of the lower classes, and Fascism of the Left. Germani’s dissatisfaction with Lipset’s definitions moved him to look for a new category for Peronism and what he considered similar ideologically hybrid authoritarian phenomena – national-popular movements. This paper studies the Germani-Lipset exchange and the consequences for Germani’s views on Peronism.
    Date: 2009–08
  11. By: Fioretti, Guido
    Abstract: This paper provides a general overview of theories and tools to model individual and collective decision-making. In particular, stress is laid on the interaction of several decision-makers. A substantial part of this paper is devoted to utility maximization and its application to collective decision-making, Game Theory. However, the pitfalls of utility maximization are thoroughly discussed, and the radically alternative approach of viewing decision-making as constructing narratives is presented with its emerging computational tools.
    Keywords: Interactions; Collective Decision-Making
    JEL: C79 D79
    Date: 2009–08–10
  12. By: Ivo Maes (National Bank of Belgium, Robert Triffin Chair, Universit‚ catholique de Louvain and ICHEC Brussels Management School.)
    Abstract: To understand macroeconomic and monetary thought at the European Commission, two elements are crucial: firstly, the Rome Treaty, as it determined the mandate of the Commission and, secondly, the economic ideas in the different countries of the Community, as economic thought at the Commission was to a large extent a synthesis and compromise of the main schools of thought in the Community. The Rome Treaty transformed economic and legal rules in the countries of the Community. It comprised the creation of a common market, as well as several accompanying policies. Initially, economic thought at the Commission was to a large extent a synthesis of French and German ideas, with a certain predominance of French ideas. Later, Anglo-Saxon ideas would gain ground. At the beginning of the 1980s, the Commission?s analytical framework became basically medium-term oriented, with an important role for supply-side and structural elements and a more cautious approach towards discretionary stabilization policies. This facilitated the process of European integration, also in the monetary area, as the consensus on stability oriented policies was a crucial condition for EMU. Trough time, the Commission has taken seriously its role as guardian of the Treaties and initiator of Community policies, also in the monetary area. The Commission always advocated a strengthening of economic policy coordination and monetary cooperation. In this paper, we first focus on the different schools which have been shaping economic thought at the Commission. This is followed by an analysis of the Rome Treaty, especially the monetary dimension. Thereafter we go into the EMU process and the initiatives of the Commission to further European monetary integration. We will consider three broad periods: the early decades, the 1970s, and the Maastricht process.
    Date: 2009–02
  13. By: Sumru Oz
    Abstract: As a result of the current global financial crisis, in 2009 the world economy is likely to experience the largest contraction since World War II and the unemployment rate to reach historical highs in many countries. The fact that the current global crisis is originated from the U.S. and followed another intensive wave of globalization, has led to an unprecedented public interest towards the Great Depression of 1929-1933. These parallels between the two episodes further fueled the fears that the current crisis would deepen and last a couple of years, similar to the Great Depression. The aim of this paper is to discuss the validity of these worries by studying the root causes of the current crisis in the light of the causes of the Great Depression as laid out by the related literature. The paper concludes that the factors that deepen and widen the Great Depression are not valid anymore to a great extent. Together with the decisions taken by the leaders of the world's largest economies at the London Summit in April, the conclusions of the paper keep the hope that the current global crisis will not turn into a severe global depression.
    Keywords: Great Depression, Global Crisis, International Trade, Protectionism
    JEL: N72 F13 E32
    Date: 2009–07

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