nep-hpe New Economics Papers
on History and Philosophy of Economics
Issue of 2009‒09‒11
eleven papers chosen by
Erik Thomson
University of Manitoba

  1. The economic analysis of social norms: A reappraisal of Hayek's legacy By Agnès Festré; Pierre Garrouste
  2. Schumpeter on money, banking and finance: An institutionalist perspective By Agnès Festré; Eric Nasica
  3. The Struggle Over the Real Wage In the Monetary Production Economy By Hernando Matallana
  4. Positive Constitutional Economics II—A Survey of Recent Developments By Stefan Voigt
  5. Mental Equilibrium and Rational Emotions By Eyal Winter; Ignacio Garcia-Jurado; Jose Mendez-Naya; Luciano Mendez-Naya
  6. Time to reject the privileging of economic theory over empirical evidence? A Reply to Lawson (2009) By Katarina Juselius
  7. Ethics and the World of Finance By Duvvuri Subbarao
  8. La crise de 2008 : l'emboitement de trois crises By Bernard Billaudot
  9. How (Not) to Measure Institutions By Stefan Voigt
  10. Game Engineering By Robert J. Aumann
  11. Rational Overconfidence and Social Security By Carsten Krabbe Nielsen

  1. By: Agnès Festré (GREDEG - Groupe de Recherche en Droit, Economie et Gestion - CNRS : UMR6227 - Université de Nice Sophia-Antipolis); Pierre Garrouste (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I)
    Abstract: This paper is organized as follows : First we show that the reference to the notion of group selection is coherent with the other parts of Hayek's thought. Second we develop the idea that recent works in terms of the emergence and evolution of social norms corroborate in part Hayek's theses in this domain. Finally we put to the fore some drawbacks in Hayek's approach and propose means to solve them.
    Keywords: Hayek ; social norms ; emergence and evolution ; coherence ; relevance
    Date: 2009
  2. By: Agnès Festré (GREDEG - Groupe de Recherche en Droit, Economie et Gestion - CNRS : UMR6227 - Université de Nice Sophia-Antipolis); Eric Nasica (GREDEG - Groupe de Recherche en Droit, Economie et Gestion - CNRS : UMR6227 - Université de Nice Sophia-Antipolis)
    Abstract: In this paper, we provide an institutional interpretation of Schumpeter's analysis of money, banking and finance. This interpretation is founded on an overall investigation into Schumpeter's writings addressing those issues from different perspectives.In section 1, we discuss the widespread evolutionist interpretation of Schumpeter and rather assert an institutionalist perspective. In support of our interpretation, we highlight the specific role played by economic sociology in Schumpeter's methodological approach. Economic sociology, indeed, provides the foundations of a theory of institutions and institutional change, which is often undermined by the usual evolutionary interpretation. We believe, however, that taking this dimension seriously into account may have implications for our understanding of economic and institutional change in Schumpeter. Section 2 illustrates this general statement by focusing on Schumpeter's analysis of money, banking and finance, and their respective roles in the process of economic development.
    Keywords: Schumpeter; Money; Credit, Financial system, Institutional change; Economic sociology
    Date: 2009
  3. By: Hernando Matallana
    Abstract: Keynes contents in General Theory that the monetary market logic of the aggregate real wage in the monetary production economy conveys: (i) the determination of the average real wage rate, the level of employment, and the possibility of involuntary unemployment through the interaction of the monetary markets and the goods markets; and (ii) the determination of the money wage rate through the bargains of the firms and the workers as a market-theoretical stability condition of the economic system. Accordingly, (iii) the money wage claims of labour (in conformity with changes of the average labour productivity) do not alter the distribution of income between capital and labour; and (iv) the struggle about the money wages by different groups of workers is actually a zerosum game over the distribution of the aggregate real wage between the different fractions of the working class. The paper discusses Keynes’s contention in the context of the monetary-keynesian theory of the endogenous-money monetary production economy.
    Date: 2009–01–08
  4. By: Stefan Voigt (MACIE (Philipps University Marburg), Barfüßertor 2, 35032 Marburg, Germany; CESifo; ICER, Torino)
    Abstract: Analysis of the economic effects of constitutional rules has made substantial progress over the last decade. This survey provides an overview of this rapidly growing research area and also discusses a number of methodological issues and identifies underresearched areas. It argues that the next logical step of Positive Constitutional Economics is to endogenize constitutional rules.
    Keywords: Positive Constitutional Economics, Constitutional Political Economy, Economic Effects of Constitutions, New Institutional Economics, Endogenous Constitutions
    JEL: H11 K10 O17 O43 P51
    Date: 2009
  5. By: Eyal Winter; Ignacio Garcia-Jurado; Jose Mendez-Naya; Luciano Mendez-Naya
    Abstract: We introduce emotions into an equilibrium notion. In a mental equilibrium each player "selects" an emotional state which determines the player's preferences over the outcomes of the game. These preferences typically differ from the players' material preferences. The emotional states interact to play a Nash equilibrium and in addition each player's emotional state must be a best response (with respect to material preferences) to the emotional states of the others. We discuss the concept behind the definition of mental equilibrium and show that this behavioral equilibrium notion organizes quite well the results of some of the most popular experiments in the experimental economics literature. We shall demonstrate the role of mental equilibrium in incentive mechaisms and will discuss the concept of collective emotions, which is based on the idea that players can coordinate their emotional states.
    Date: 2009–09
  6. By: Katarina Juselius (Department of Economics, University of Copenhagen)
    Abstract: The present financial and economic crisis has revealed a systemic failure of academic economics and emphasized the need to re-think how to model economic phenomena. Lawson (2009) seems concerned that critics of standard models now will fill academic journals with contributions that make the same methodological mistakes, albeit in slightly different guise. In particular, he is rather sceptical to use of mathematical statistical models, such as the CVAR approach, as a way of learning about economic mechanisms. In this paper I discuss whether this is a relevant claim and argue that it is likely to be based on a misunderstanding of what a proper statistical analysis is and can offer. In particular, I argue that the strong evidence of (near) unit roots and (structural) breaks in economic variables suggests that standard economic models need to be modified or changed to incorporate these strong features of the data. Furthermore, I argue that a strong empirical methodology that allows data to speak freely about economic mechanisms, such as the CVAR, would ensure that important information in the data is not over heard when needed. Adequately applied such models would provide us with an early warnings system signalling that the economy is moving seriously out of equilibrium.
    Keywords: economic crisis; Dahlem report; CVAR approach; Theory-first; Reality-first; Imperfect Knowledge Expectations; non-stationary data
    JEL: A1 B4 C3 C5 E0 E1 E2 E6
    Date: 2009–08
  7. By: Duvvuri Subbarao
    Abstract: How do we, as individuals, approach issues of ethics and values? Are our approaches different in our personal and professional lives? Are issues of ethics different in the financial sector? What are the ethical issues thrown up by the current crisis? Has economics, as an academic discipline, lost its value base? Is that the root cause for the malaise in the financial sector? How do we in the Reserve Bank interpret our mandate towards ethical standards and values in all that we do? Some of these questions are addressed here. [Keynote address at the Conference on ‘Ethics and the World of Finance’ organised by Sri Sathya Sai University, Prasanthi Nilayam, Andhra Pradesh].
    Keywords: finance, economics, reserve bank, India, children, ethics, values, financial sector, ethical standards,
    Date: 2009
  8. By: Bernard Billaudot (LEPII - Laboratoire d'Économie de la Production et de l'Intégration Internationale - CNRS : UMR5252 - Université Pierre Mendès-France - Grenoble II)
    Abstract: Le diagnostic porté sur la "crise de 2008" dans cet article est qu'il s'agit du moment de cristallisation de trois crises emboitées. C'est en premier lieu une crise au sein du régime de croissance économique qui a prévalu depuis le début des années mille neuf cent quatre vingt sur la base de nouvelles formes institutionnelles économiques. Cette première crise est emboitée dans une crise de la légitimité de la version libérale du modèle de modernité dans lequel ce régime s'est constitué et dont ces formes ne sont que l'une des composantes. Cette seconde crise est elle-même emboitée dans une crise de ce modèle de modernité qualifié d'occidental et dont l'une des caractéristiques est d'être fermé sur la nation. L'objectif visé est seulement de faire voir que si on s'arrête à la première dimension, ou même à la seconde, beaucoup des phénomènes dont "la crise de 2008" se compose demeurent incompréhensibles. Ce diagnostic n'implique pas, loin s'en faut, que le régime de croissance passé ne puisse perdurer.
    Keywords: crise économique ; modernité ; régulation ; croissance économique ; crise financière
    Date: 2009
  9. By: Stefan Voigt (MACIE (Philipps University Marburg), Barfüßertor 2, 35032 Marburg, Germany; CESifo; ICER, Torino)
    Abstract: The statement “institutions matter” has become commonplace. A precondition for it to be supported by empirical evidence, is, however, that institutions are measurable. Glaeser et al. (2004) attacks many studies claiming to prove the relevance of institutions for economic development as being based on flawed measures of institutions, or not even on institutions at all. This paper shows that their criticism deserves to be taken seriously, but that it is somewhat overblown. Some of the difficulties in measuring institutions are described and some ways of measuring them are proposed.
    Keywords: Institutions, Institutions vs. Policies, Measurement, Formal vs. Informal Institutions
    JEL: B41 H11 K00 O17 O43 O57
    Date: 2009
  10. By: Robert J. Aumann
    Abstract: "Game Engineering" deals with the application of game theoretic methods to interactive situations or systems in which the rules are well defined, or where the designer can himself specify the rules. This talk, which addressed a business-school audience with no specific knowledge of game theory, describes five examples of game engineering: two dealing with auctions, two with traffic systems, and one with arbitration. At the end of the talk there was a Q & A session, which, too, is recorded here.
    Date: 2009–09
  11. By: Carsten Krabbe Nielsen (Istituto Politica Economica, Universita Cattolica and Korea University)
    Abstract: Two of the features that distinguish Social Security and many other state mandated pension plans around the world are that (i) a minimum level of savings for retirement is imposed on most citizens and (ii) individuals cannot decide how their contributions are invested. Here, a rationale for these two features, based on ratoinal overconfidence, is proposed. Rational overconfidence is present when equally informed agents hold diverse confident, rational beliefs. The fact that beliefs are diverse means that all of them cannot be correct, hence seen as a collective agents do not act optimally. In the face of rational overconfidence, Pareto efficiency is no long the natural criterion for comparing policies and we suggest ex-post welfare optimality instead. This criterion makes amends for the possible inconsistencies of agents beliefs. Our results on social security are based on a methodology that places itself strictly between the traditional neoclassical approach and that championed by behavioral economics. This methodology does not deviate from the neoclassical assumption of ratoinality but only broadens it and can therefore readily be applied to many public policy issues.
    Keywords: Davies Test; Subjective Expectations, Rational Beliefs, Ex-post Welfare Optimality, Social Security, Rational Overconfidence, Portfolio Choice
    JEL: D01 D02 D60 D81 D84 F31 G11
    Date: 2009

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