nep-hpe New Economics Papers
on History and Philosophy of Economics
Issue of 2009‒10‒31
seven papers chosen by
Erik Thomson
University of Manitoba

  1. How mindless is standard economics really? By Schipper, Burkhard C
  2. Two lemmas that changed general equilibrium theory By Monique Florenzano
  3. General equilibrium and fixed point theory : a partial survey By Hichem Ben-El-Mechaiekh; Philippe Bich; Monique Florenzano
  4. The Marshallian roots of KeynesÕs General Theory By Michel DE VROEY
  5. Contemporary lessons in Economic Philosophy drawn from two recent Indian Films By Tejas A. Desai
  6. Institutions and the environment: the case for a historical political economy By Ali DOUAI (GREThA UMR CNRS 5113); Matthieu MONTALBAN (GREThA UMR CNRS 5113)
  7. A new notion of progress: Institutional quality By Germana Bottone

  1. By: Schipper, Burkhard C
    Abstract: Contrary to claims by Gul and Pesendorfer (2008), I show that standard economics makes use of non-choice evidence in a meaningful way. This is because standard economics solely grounded in the theory of choice is "incomplete". That is, it has content that can not be revealed with any general choice procedure.
    Keywords: Revealed preference; theory of choice; neuroeconomics; non-choice evidence; machines
    JEL: A12 C90 D60 D80 B41 C80 D87
    Date: 2009–10–22
  2. By: Monique Florenzano (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I)
    Abstract: This short paper published in Games and Economic Behavior (July 2009) "In Memoriam" of David Gale, emphasizes the seminal role played by two lemmas of David Gale in the development of the foundations of General Equilibrium Theory.
    Keywords: Fixed points, equilibrium, excess demand correspondence, Gale-Nikaido-Devreu lemma, simultaneous optimization approach, Michael selection theorems.
    Date: 2009–04
  3. By: Hichem Ben-El-Mechaiekh (Brock University - Department of Mathematics); Philippe Bich (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I); Monique Florenzano (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I)
    Abstract: Focusing mainly on equilibrium existence results, this paper emphasizes the role of fixed point theorems in the development of general equilibrium theory, as well for its standard definition as for some of its extensions.
    Keywords: Fixed point, equilibrium, quasiequilibrium, abstract economy, Clarke's normal cone, financial equilibrium, Grassmanian manifold, degree theory.
    Date: 2009–04
  4. By: Michel DE VROEY (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES))
    Abstract: The aim of this paper is to elucidate Keynes's Marshallian lineage. I argue that the result of bringing out the Marshallian antecedents of the General Theory highlights KeynesÕs failure to achieve the theoretical project he was striving at, namely to demonstrate an involuntary unemployment result in the arising of which nominal wage rigidity would play no role. In the first part of the paper, I reexamine MarshallÕs theory of value. This sectionÕs main conclusion is that no theory of unemployment is to be found in MarshallÕs writings. In section two, I study the literature spanning from Marshall to Keynes, focusing on Beveridge, Hicks and Pigou, in order to see whether the lacuna present in MarshallÕs writings happened to be filled. Documenting the emergence of the notion of frictional unemployment, I come to the conclusion that its arising went along with little theoretical elaboration. The third and last part of the paper is a critical reflection on the General Theory. I start by making the point that KeynesÕs theory of effective demand ought to be viewed as an extension of MarshallÕs analysis of firmsÕ short-period production decisions. This enables me to bring out the decisive role played by the wage rigidity assumption in KeynesÕs reasoning. I claim that, except for this assumption, the differences between Ôeffective demand ˆ la MarshallÕ and Ôeffective demand ˆ la KeynesÕ are minor. I close my analysis of KeynesÕs reasoning by showing that no real removal of the nominal rigidity assumption is to be found in chapter 19 of the General Theory.
    Date: 2009–06–30
  5. By: Tejas A. Desai
    Abstract: The aim of this paper is to derive some important lessons in economic philosophy from two recent Indian films. The two films, Mani Ratnam.s Guru (2007) and Madhur Bhandarkar.s Corporate (2006), are explicitly about the world of business and the people who inhabit it. The former film is not only a history lesson about the political and economic environment in India during the first 40 years after India.s independence, but is also a celebration of Adam Smith.s philosophy and, in general, capitalism and the entrepreneurial spirit. At the same time, it brings to the fore the possibly misguided economic policies adopted by India during the first few decades after independence. .Corporate., on the other hand, complements .Guru., in the sense that it highlights the consequences borne by powerless individuals when corporations have profit as their sole aim and are willing to achieve them by hook or by crook. Also, highlighted in .Corporate. is how disastrous events can occur when politics and big business collude to undermine the interests of the working class. Thus, .Corporate. provides a case for Keynesian economics. The role of gender and family in economics is also explored in this film, as is the role and importance of ethics in economics. Last but not least, the limitations of rationality and rational behaviour are highlighted in .Corporate.. Classical economics assumes that people are perfectly rational in their decision-making. This assumption has been challenged by newer economic theories, and is also challenged by .Corporate.
    Date: 2009–04–20
  6. By: Ali DOUAI (GREThA UMR CNRS 5113); Matthieu MONTALBAN (GREThA UMR CNRS 5113)
    Abstract: This paper provides a critical review of the ‘state of the art’ of institutional analysis applied essentially by social-ecological economists in the environmental domain. It highlights both areas of strength and issues where there is still room for improvement in analytical terms, by construing these approaches in the context of a general taxonomy of institutionalisms – widely used in politics and applied here in the economic realm. This provides the rationale for re-construing a number of related issues drawn from the core insights of a historical institutionalist approach to human-nature.
    Keywords: Ecological economics, institutional analysis, socio-economy, regulation
    JEL: Q01 Q57 B52 P16
    Date: 2009
  7. By: Germana Bottone (ISAE - Institute for Studies and Economic Analyses)
    Abstract: The notions of human capital and growth have been debated for a long time in economic literature. The limits of these concepts are generally recognised. In fact, recently, there has been an attempt to articulate a more extensive definition of “human capital” by considering all the attributes embodied in individuals that are relevant to economic activity. On the other hand, the GDP growth rate has been included into the Human Development Index, taking into account different aspects of development such as life expectation, literacy and health. Nevertheless, the evolution of the definitions of human capital and growth is in some way restricted to their economic meaning, neglecting the intrinsic complexity of concepts demanding an in-depth re-examination of their social, cultural, and historical value. Using an interdisciplinary approach, this paper focuses on the conceptual meaning of progress. Progress was considered as the economic, social, and cultural evolution of a country. The idea of evolution has ancient roots and is subjective. In economic and social terms, evolution may be deemed as the path human beings follow towards freedom. Since the earliest times, humanity has been fighting against poverty, scarcity of resources, disease, abuse of power by a group, environmental disaster. In order to give a more complex definition of progress entailing the idea that freedom is its driving force, we used the main concepts of institutional and evolutionary economics. Highlighting the contributions of the best Old Institutionalists (Veblen, Commons, Dewey, and Ayres), we introduced two alternative notions: “knowledge” in place of human capital and “progress” instead of economic growth. Local knowledge is the most important factor of development, while, on the other hand, the model of ongoing institutional change is the “alarm bell” for progress or stagnation. In this way, institutional change towards freedom and the providing of incentives for progressive forces become a proxy for the level of cultural, social, and economic progress reached by a society. Progressive forces may grow in societies where there are no barriers to the free exchange of opinions and knowledge and where education and training systems are conceived to create autonomous people. The enemy of progressive forces are “ceremonial institutions”, that is institutions opposing any kind of renewal. Using the available data, we showed that the GDP growth rate is not necessarily a factor of human life satisfaction and it does not necessarily improve the quality of life. We compared some European Countries to demonstrate that there is no clear-cut link between material wealth and the quality of life. Instead, at a given level of material wealth, the freedom of choice and the governance indicators seem much more correlated to life satisfaction. Finally, utilizing the Veblen’s notion of “recursive causality”, we highlighted that it is possible for policy makers to foster a given institutional context rather than an alternative one. Therefore, it is possible that the culture of “GDP growth” has influenced institutions and has created a number of problems (pollution, social distrust, social immobility, life dissatisfaction, corruption, and rent-seeking) which emerged in the recent financial and economic crisis.
    Keywords: human capital, growth, institutional economics.
    JEL: J24 J31 O3 B52
    Date: 2009–09

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