nep-hpe New Economics Papers
on History and Philosophy of Economics
Issue of 2009‒09‒26
ten papers chosen by
Erik Thomson
University of Manitoba

  1. Towards a Political Economy of the Hunters and Gatherers: A Study in Historical Materialism By Hagendorf, Klaus
  2. Financial Crises, Persistent Poverty, and the Terrible Simplifiers in Economics: A Turning Point Towards a New '1848 Moment' By Erik S. Reinert
  3. Doves and hawks in economics revisited. An evolutionary quantum game theory-based analysis of financial crises By Matthias Hanauske; Jennifer Kunz; Steffen Bernius; Wolfgang K\"onig
  4. Rethinking the Economics of Capital Mobilityand Capital Controls By Thomas I. Palley
  5. The anti-materialist project of "The Bourgeois Era" By McCloskey, Deirdre Nansen
  6. Rational expectations in urban economics By Berliant, Marcus; Yu, Chia-Ming
  7. Questions in Decision Theory By Itzhak Gilboa
  8. Being a graduate student in economics By William Thomson
  9. Mathematical analysis of Soros's theory of reflexivity By C. P. Kwong
  10. Wage Stickiness and Unemployment Fluctuations: An Alternative Approach. By Miguel Casares; Antonio Moreno; Jesús Vázquez

  1. By: Hagendorf, Klaus
    Abstract: This paper uses the mode of production of the hunter-gatherers as a background to explain basic economic concepts, in particular the meaning of the labour theory of value and it's relationship to optimization of resources. A proof of the marginal value theorem is presented. A new term is introduced to designate labour surplus value, roundabout labour. The analytical expression for socially necessary labour is derived and Adam Smith's paradox between labour value and the adding-up theorem of wages, rent and profit, is resolved. It is shown that far from being limited to the ancient form of society of the hunter-gatherers the labour theory of value holds also in modern times.
    Keywords: historical materialism; labour theory of value; Marxian economics; roundabout labour; Adam Smith; surplus labour; hunter-gatherer society; marginal value theorem; evolutionary ecology; modes of production; productive forces;
    JEL: D46 B51 B14 Z10 D20 D24 Q57
    Date: 2009–05
  2. By: Erik S. Reinert
    Abstract: A key common element in persistent world poverty and in the financial and (real) economic crisis is the .terrible simplificationÿ . a theoretical overshooting into irrelevant abstractions . that has taken place in economic theory after World War II. As unlikely as it may initially sound, I shall endeavour to explain in this paper how . in spite of its apparent sophistication . equilibrium economics became .mathematized demagogueryÿ based on an extremely simplistic worldview. One element explaining the financial crisis is what Hyman Minsky called .destabilizing stabilityÿ: long periods of stability lead to increasing vulnerability. This paper argues that similar mechanisms are at work inside economics: long periods of economic progress in the core countries lead to increasingly abstract and irrelevant economic theories (.terrible simplificationsÿ). This leads to turning points towards more relevant economic theories, referred to as .1848 momentsÿ. The paper further outlines the key variables that need to be reintroduced into economic theory in order to furnish poor countries with the type of productive structures that makes it possible to eliminate poverty.
    Date: 2009–05
  3. By: Matthias Hanauske; Jennifer Kunz; Steffen Bernius; Wolfgang K\"onig
    Abstract: The last financial and economic crisis demonstrated the dysfunctional long-term effects of aggressive behaviour in financial markets. Yet, evolutionary game theory predicts that under the condition of strategic dependence a certain degree of aggressive behaviour remains within a given population of agents. However, as the consequences of the financial crisis exhibit, it would be desirable to change the 'rules of the game' in a way that prevents the occurrence of any aggressive behaviour and thereby also the danger of market crashes. The paper picks up this aspect. Through the extension of the in literature well-known Hawk-Dove game by a quantum approach, we can show that dependent on entanglement, also evolutionary stable strategies can emerge, which are not predicted by classical evolutionary game theory and where the total economic population uses a non aggressive quantum strategy.
    Date: 2009–04
  4. By: Thomas I. Palley (Economics for Democratic & Open Societies, Washington DC)
    Abstract: This paper reexamines the issue of international financial capital mobility, which is today's economic orthodoxy. Discussion is often framed in terms of the impossible trinity. That framing distorts discussion by representing capital mobility as having equal significance with sovereign monetary policy and control over exchange rates. It also distorts discussion by ignoring possibilities for coordinated monetary policy and exchange rates, and for managed capital flows. The case for capital mobility rests on neo-classical economic efficiency arguments and neo-liberal political arguments. The case against capital mobility is based on Keynesian macroeconomic inefficiency arguments, neo-Walrasian market failure arguments, and neo-Marxian arguments regarding distortion of the social structure of accumulation. Close examination shows the case for capital mobility to be extremely flimsy, pointing to the ideological dimension behind today's policy orthodoxy.
    Keywords: capital mobility, capital controls, impossible trinity.
    JEL: F00 F32 F33
    Date: 2009
  5. By: McCloskey, Deirdre Nansen
    Abstract: It is a materialist prejudice common in scholarship from 1890 to 1980 that economic results must have economic causes. But ideas caused the modern world. The point can be made by looking through each of the materialist explanations, from the “original accumulation” favored by early Marxist historians to the "new institutionalism” favored by late Samuelsonian economists. The book present does so, and finds them surprisingly weak. The residual is ideas, in particular the Bourgeois Revaluation of the 17th and 18th centuries in northwest Europe. The argument takes six books, constituting a full-scale defense of capitalism. One is already published (The Bourgeois Virtues: Ethics for an Age of Commerce 2006), and this is volume 2. Volume 3 will explore exactly how the Revaluation occurred, first in Holland and then by imitation in England, Scotland, Pennsylvania, and the world. Volume 4 explores the balance of interest (Max U) and language in explaining the Industrial Revolution and its longer-term consequences; volume 5 explains why the clerisy of elite artists and intellectuals turned against innovation after 1848; and volume 6 asks which of the present-day complaints about free-market economies has merit. Since the sestet (“The Bourgeois Era”) is a defense, one can expect not to find arguments that globalization is bad for the poor, or that innovation has destroyed the environment. Both left and right are suspicious of the modern world, often for the same reasons. “The Bourgeois Era” argues that both are mistaken: that innovation has elevated people, in more than goods alone.
    Keywords: bourgeois era; innovation; economics; economic history; economic causes; ideas; modern world; capitalism
    JEL: N10 N13 N0
    Date: 2009–06–09
  6. By: Berliant, Marcus; Yu, Chia-Ming
    Abstract: Canonical analysis of the classical general equilibrium model demonstrates the existence of an open and dense subset of standard economies that possess fully-revealing rational expectations equilibria. This paper shows that the analogous result is not true in urban economies. An open subset of economies where none of the rational expectations equilibria fully reveal private information is found. There are two important pieces. First, there can be information about a location known by a consumer who does not live in that location in equilibrium, and thus the equilibrium rent does not reflect this information. Second, if a consumer’s utility depends only on information about their (endogenous) location of residence, perturbations of utility naturally do not incorporate information about other locations conditional on their location of residence. Existence of a rational expectations equilibrium is proved. Space can prevent housing prices from transmitting information from informed to uninformed households, resulting in an inefficient outcome.
    Keywords: Urban Economics; General Equilibrium; Private Information; Rational Expectations
    JEL: R13 D82 D51
    Date: 2009–09–15
  7. By: Itzhak Gilboa
    Date: 2009–09–06
  8. By: William Thomson (University of Rochester)
    Date: 2009–08
  9. By: C. P. Kwong
    Abstract: The mathematical model proposed by George Soros for his theory of reflexivity is analyzed under the framework of discrete dynamical systems. We show the importance of the notion of fixed points for explaining the behavior of a reflexive system governed by its cognitive and manipulative functions. The interrelationship between these two functions induces fixed points with different characteristics, which in turn generate various system behaviors including the so-called "boom then bust" phenomenon in Soros's theory.
    Date: 2009–01
  10. By: Miguel Casares (Departamento de Economía-UPNA); Antonio Moreno (Departamento de Economía-Universidad de Navarra); Jesús Vázquez (Departamento de Fundamentos del Análisis Económico II-Universidad del País Vasco)
    Abstract: Erceg, Henderson and Levin (2000, Journal of Monetary Economics) introduce sticky wages in a New-Keynesian general-equilibrium model. Alternatively, it is shown here how wage stickiness may bring unemployment fluctuations into a New-Keynesian model. Using Bayesian econometric techniques, both models are estimated with U.S. quarterly data of the Great Moderation. Estimation results are similar and provide a good empirical fit, with the crucial difference that our proposal delivers unemployment fluctuations. Thus, second-moment statistics of U.S. unemployment are replicated reasonably well in our proposed New-Keynesian model with sticky wages. In the welfare analysis, the cost of cyclical fluctuations during the Great Moderation is estimated at 0.60% of steady-state consumption.
    Keywords: Wage Rigidity, Price Rigidity, Unemployment
    JEL: C32 E30
    Date: 2009

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