nep-hpe New Economics Papers
on History and Philosophy of Economics
Issue of 2009‒11‒14
sixteen papers chosen by
Erik Thomson
University of Manitoba

  1. Tax collection in Spain in the 18th century: the case of the “décima” By Fernández de Pinedo Echevarría, Nadia
  2. Adam Smith and Moral Knowledge By Konow, James
  3. Über die Natur und das Wesen des Geldes – Johann Heinrich von Thünens unveröffentlichter Beitrag zur Geldtheorie By Ludwig Nellinger
  4. How Mindless Is Standard Economics Really? By Schipper, Burkhard C.
  5. A New World Monetary System: Keynes' view revisited By Mohammed, Shehu Tijjani
  6. The intellectual origins of WTO : Hull’s and Bidwell’s views on organizing the international trade. By Claude Schwob
  7. New Critical Perspectives on the U.S. and the Post-WWII Global Economy: Brenner, Harvey, and Pollin By Merlin Chowkwanyun
  8. Arbeitswerte und die Theorie der Unternehmung. Teil I: Die Unternehmung unter vollständiger Konkurrenz By Hagendorf, Klaus
  9. Honesty and Integrity in Economics By Mayer, Thomas
  10. Economic Theories of Foreign Trade Transactions By Paliu-Popa, Lucia
  11. Lab Experiments Are a Major Source of Knowledge in the Social Sciences By Falk, Armin; Heckman, James J.
  12. How norms can generate conflict By Fabian Winter; Heiko Rauhut; Dirk Helbing
  13. Review Essay: How Rational is International Law? By Niels Petersen
  14. "Minsky Moments, Russell Chickens, and Gray Swans--The Methodological Puzzles of the Financial Instability Analysis" By Alessandro Vercelli
  15. On the Adjudication of Conflicting Claims: An Experimental Study By Carmen Herrero; Juan D. Moreno-Ternero; Giovanni Ponti
  16. Goodwin or Kalecki in Demand? Functional Income Distribution and Aggregate Demand in the Short Run By Engelbert Stockhammer; Robert Stehrer

  1. By: Fernández de Pinedo Echevarría, Nadia (Departamento de Análisis Económico (Teoría e Historia Económica). Universidad Autónoma de Madrid)
    Abstract: If we compare the Castilian fiscal system with English, French or Dutch, two basic differences are apparent: in one hand, in England, France and Holland the fiscal system was a mixture of indirect taxes and direct taxes and in the other hand, the financial revolution had been carried out in the 16th century in Castilia (central Spain), when for different reasons national short-term debt was turned into juros - or long-term debt. But the Dutch Republic in the 16th century and England by the end of 17th century and the beginning of 18th century were able to finance wars thanks to an efficient financial revolution. Traditionally, wars have been the excuse to impose new taxes or to reorganize public funds in order to obtain greater economic resources for financing the deficit originated by the war. Since most of the monarchies’ tax expenses stemmed from war, it is no surprise that the conflict known as the Jenkins´ Ear (1739) contributed to increase the deficit and fuelled a debate regarding a tax reform that would augment income and would be collected in a more egalitarian way. The Castilian tax system was based almost exclusively on indirect taxes. The taxation (alcabalas, millones, cientos, tobacco monopolies, customs…) of consumables ensured that whilst some taxes affected primarily rich consumers (for example tobacco), most taxes targeted the masses. Increasing the fiscal charge via indirect taxes seemed like an unfeasible and damaging option for trade and craftwork. This is the reason why there was an attempt to create a direct tax, similar to the Catalan cadastre. One of these attempts prior to the Marquis of the Ensenada’s cadastre was la décima. It was devised as a direct tax but its manner of collection ultimately depended on the willingness of the local cabildos.
    Keywords: Taxation, Spain, Madrid, Indirect/Direct Taxes, 18th Century Tax Collection, War Expenses, Jenkin’s Ear War, The “Décima”
    JEL: N33 E62 H71
    Date: 2009–10
  2. By: Konow, James
    Abstract: This paper examines the contribution of The Theory of Moral Sentiments to the study of how we acquire moral knowledge. In Smith, this is associated with the moral judgment of an impartial spectator, a hypothetical ideal conjured in the imagination of an agent. This imagined spectator has the properties of impartiality, information and sympathy. I argue Smith develops this construct in the context of personal ethics, i.e., as a guide to moral conduct in personal relationships. There are limitations, however, to this model for personal ethics, as acknowledged by Smith himself and suggested by subsequent social science findings. Moreover, this model does not necessarily extend to social ethics, i.e., to moral judgment in less personal economic and social interactions, such as firms, industries and governments. Hence, I propose modifying the spectator model in light of modern social science methods and of Smith’s own insights to address its limitations for personal ethics and to provide it with a foundation for social ethics. The proposed approach is based on a quasi-spectator, i.e., the empirical analysis of the moral views of real spectators whose properties approximate those of the ideal spectator. A review of quasi-spectator studies suggests this as a promising method for informing both descriptive and prescriptive ethics.
    Keywords: Adam Smith; ethics; moral knowledge
    JEL: B31 B12 A12 D60
    Date: 2009–09
  3. By: Ludwig Nellinger
    Abstract: The economic works of Johann Heinrich von Thünen include 1,000 unpublished pages of drafts and notes on the basis of which he prepared the second volume of his famous “Isolated State in Relation to Agriculture and Political Economy”. Thünen wrote his texts in the so-called Deutsche Kanzleischrift, a script which can be read today only by specialised histori-ans, rarely by economists. In a first part of a research project of the Thünen-Gesellschaft e.V. 300 pages were transliterated, from which the first 60 pages were reviewed until October 2009. It becomes obvious that Thünen’s work is much more far-reaching than the contributions pub-lished by himself or edited by Schumacher in 1863 and 1875 show. Its bulk was not made accessible until today. This can be easily demonstrated by the content of these first 60 pages, especially those treating monetary questions and preparing Thünen’s theory of capital and interest. Thünen starts his analysis with a description of the diminishing return of money keeping in an enterprise. He considers both the exchange and the stock function of money. He describes the pros and cons of the creation of paper money as a substitute for coins. Thünen is the first economist who develops an extended quantity theory of money by introducing the velocity of money transactions and formulating the correct algebraic formula. He anticipates the famous Newcomb-Fisher equation but with one difference: in Thünen’s opinion the prod-uct of velocity and quantity of money primarily determines the value of circulating capital goods and assets, an argument which has to be understood with the contemporary rural eco-nomic conditions in mind. He analyses the liquidity effect of positive exogenous money shocks. By describing the adap-tation processes in the case of differences between the monetary market interest rate and the real rate of return on capital goods, Thünen presents important mechanisms of Knut Wick-sell’s “Interest and Prices”, which were published 75 years later and still inspire the monetary economists today. In accordance with Henry Thornton, he adequately describes the conse-quences of liquidity preference in the case of uncertain economic situations. In our opinion Thünen’s 1823 contribution is of the same quality as the contributions of the leading monetary theorists in the early 19th century, David Ricardo and Henry Thornton. With respect to the further theoretic development in the nineteenth and twentieth century and from the perspective of modern monetary theory, Thünen’s drafts are an unexpected discov-ery and of particular interest in the current financial and economic crisis. The paper concludes with a preliminary assessment of Thünen’s text in the context of the sec-ond volume of the “Isolated State”, which was published in 1850 and which contains Thünen’s “Theory of Capital and Interest”.
    Keywords: Dogmengeschichte, Kapital- und Zinstheorie, Quantitätstheorie, Verkehrs-gleichung, Geldnachfrage, Liquiditätspräferenz
    JEL: B13 B16 D53 E31 G12
    Date: 2009
  4. By: Schipper, Burkhard C. (University of California, Davis)
    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.
    JEL: A12 B41 C80 C90 D60 D80 D87
    Date: 2009–10
  5. By: Mohammed, Shehu Tijjani
    Abstract: This essay critically examines the view of Keynes on the reform of the international monetary system. We then apply modern monetary and banking theory, where money is redefined as a pure numerical vehicle in contrast to money being defined as a net asset, to appraise those elements that are required for a functioning and efficient international monetary system. It is suggested that Keynes’ view are still very much relevant today if the world is to move from the present non-system of international monetary arrangements to a system where currencies would no longer be perceived as net assets and countries would no longer be grouped as key and non-key currency countries.
    Keywords: Monetary System; Bank Money; Absolute Exchange Rate
    JEL: F33
    Date: 2009–11–07
  6. By: Claude Schwob
    Abstract: Unlike the monetary and financial international organizations which where born during World War II and in the immediate post-war years, the WTO was created only in 1994. The GATT negotiated in 1947 was initially conceived as a temporary agreement while waiting for the creation of an International Trade Organization, which was finally never created. Nevertheless as like as in financial matters, some thinkers have built projects on such an organization before and during World War II. Among them there are two Americans: Cordell Hull and Percy Wells Bidwell. This paper compares both projects and investigates whether it can be said that Hull was the spiritual father of the WTO as some of the Cordell Hull Institute papers claim it.
    Keywords: Theory of International Organizations, Bilateralism, Multilateralism, History of International Organizations, International Trade Negotiations, International Trade Organization, World Trade Organization.
    JEL: B10 B20 F02 F13 F53
    Date: 2009
  7. By: Merlin Chowkwanyun
    Abstract: In the current economic crisis, left and progressive political economics has enjoyed renewed attention and credibility, both inside and outside of academia. In this paper, Merlin Chowkwanyun<span style="font-weight: normal;"> surveys recent contributions to this literature by Robert Brenner, David Harvey, and Robert Pollin, summarizing key arguments and identifying  research questions and heuristics for further inquiry.<span> </span>The author considers how these contributions might help to forge more fruitful dialogue between analyses of social movements and economic structures, too often studied apart. The paper stresses the importance of retaining the robust critical power of the left critique while avoiding the fatalism, sectarianism, and “automatic” theories of social change that have bedeviled the left’s recent past.</span>
    JEL: B24 B50 N01 E61
    Date: 2009
  8. By: Hagendorf, Klaus
    Abstract: This paper is the first part of a Marxian critique of the theory of the firm focusing on the analysis of labour values. Starting from Adam Smith's example of the deer hunter, marginal analysis is introduced culminating in the derivation of the Labour Value Function as the supply curve of the competitive firm in terms of labour values. The analysis is based on a new definition of labour value which is Marxian in spirit and respects modern mathematical optimization methods not found in Marx and offers a further development and coherent interpretation of Marx's value theory. The analysis is limited to the case of the competitive firm.
    Keywords: Marxian economics; labour theory of value; value theory; marginal analysis; microeconomics; theory of the firm; marginal cost; labour value function; supply function; Adam Smith
    JEL: B51 D21 D46 B14 A13 D41 B24
    Date: 2009–11–09
  9. By: Mayer, Thomas (University of California, Davis)
    Abstract: When looked at individually there is little reason to think that economists lack integrity and are dishonest. Yet, when we look at academic papers written by economists we can see biases. This paper tries to reconcile these two observations by arguing that the constraints the profession sets on permitted practices are loose enough to allow economists to maintain their biases while conforming to the mores of their profession. There is little reason to think that economics is worse in this respect than some other fields.
    JEL: A14 B41
    Date: 2009–01
  10. By: Paliu-Popa, Lucia
    Abstract: The international experience/practice shows that inside foreign trade relations has sought to lay the ground to uniform rules and to base an orderly development of international trade, so that economic operators engaged in foreign trade can trade with each other in conditions of fair and unmarked competition. The extent and implications of international trade on other areas of social life has increased considerably over the last five centuries, and today's volume has grown as fast. Also, deepening and diversification of economic interlinkings of the world countries, especially after the Second World War were brought to the fore the issue of international economic relations, both for specialists and for the general public. These changes have reactivated the interest of specialists for theories about international trade and hence the history of theoretical controversies regarding this issue. Taking into account the fact that foreign trade transactions is a key factor in sustainable the economic development of national economies, a fact recognized both by classical economists as well as modern ones, but also demonstrated by the economic reality, in this article I addressed/approached the economic theories of international trade.
    Keywords: Economic Theories; Foreign Trade Transactions
    JEL: P33 P45
    Date: 2009–01–17
  11. By: Falk, Armin (University of Bonn); Heckman, James J. (University of Chicago)
    Abstract: Laboratory experiments are a widely used methodology for advancing causal knowledge in the physical and life sciences. With the exception of psychology, the adoption of laboratory experiments has been much slower in the social sciences, although during the last two decades, the use of lab experiments has accelerated. Nonetheless, there remains considerable resistance among social scientists who argue that lab experiments lack "realism" and "generalizability". In this article we discuss the advantages and limitations of laboratory social science experiments by comparing them to research based on non-experimental data and to field experiments. We argue that many recent objections against lab experiments are misguided and that even more lab experiments should be conducted.
    Keywords: laboratory experiments, field experiments, controlled variation
    JEL: C90 C91 C92 C93 D00
    Date: 2009–10
  12. By: Fabian Winter (Max Planck Institute of Economics, Jena); Heiko Rauhut (ETH Zurich, Swiss Federal Institute of Technology); Dirk Helbing (ETH Zurich, Swiss Federal Institute of Technology)
    Abstract: Norms play an important role in establishing social order. The current literature focuses on the emergence, maintenance and impact of norms with regard to coordination and cooperation. However, the issue of norm-related conflict deserves more attention. We develop a general theory of "normative conflict" by differentiating between two different kinds of conflict. The first results from distinct expectations of which means should be chosen to fulfil the norm, the second from distinct expectations of how strong the norm should restrain the self-interest. We demonstrate the empirical relevance of normative conflict in an experiment that applies the "strategy method" to the ultimatum game. Our data reveal normative conflict among different types of actors, in particular among egoistic, equity, equality and "cherry picker" types.
    Keywords: Social norms, normative conflict, cooperation, ultimatum game, strategy method, equity
    JEL: Z13 C91 D30
    Date: 2009–11–02
  13. By: Niels Petersen (Max Planck Institute for Research on Collective Goods, Bonn)
    Abstract: Economic approaches are becoming increasingly prominent in international law. A few years ago, Jack Goldsmith and Eric Posner caused a great stir with their account of The Limits of International Law, in which they argued that international law did not have any effect on state conduct. This contribution reviews two recent books analyzing the effectiveness of international law from an economic perspective. Both authors, Andrew Guzman and Joel Trachtman, take a much more differentiated approach than did Goldsmith and Posner, thus making analytical methods of economics more acceptable for mainstream international law scholarship. Still, this contribution argues that we should be cautious to perceive the economic perspective as a holistic explanation of “how international law works”. Economic models are, for methodological reasons, based on certain assumptions. The analytical tools are thus only capable to answer a certain range of questions so that they have to be complemented by other theoretical approaches. Therefore, we have to be very cautious with policy recommendations that are based on a purely economical perspective.
    Date: 2009–06
  14. By: Alessandro Vercelli
    Abstract: The recent revival of Hyman P. Minsky's ideas among policymakers, economists, bankers, financial institutions, and the mass media, synchronized with the increasing gravity of the subprime financial crisis, demands a reappraisal of the meaning and scope of the "financial instability hypothesis" (FIH). We argue that we need a broader approach than that conventionally pursued, in order to understand not only financial crises but also the periods of financial calm between them and the transition from stability to instability. In this paper we aim to contribute to this challenging task by restating the strictly financial part of the FIH on the basis of a generalization of Minsky's taxonomy of economic units. In light of this restatement, we discuss a few methodological issues that have to be clarified in order to develop the FIH in the most promising direction.
    Keywords: Financial Instability; Financial Fragility; Financial Fluctuations; Subprime Crisis; Minsky Moments; Minsky Meltdown; Speculative Units; Hedge Units; Ponzi Units; Business Cycles
    JEL: B50 E E32 E44 G
    Date: 2009–11
  15. By: Carmen Herrero (U. de Alicante e IVIE); Juan D. Moreno-Ternero (U. de Málaga, Universidad Pablo de Olavide y CORE, Universit´e catholique de Louvain); Giovanni Ponti (U. de Alicante y Università di Ferrara)
    Abstract: This paper reports an experimental study on three well-known solutions for problems of adjudicating conflicting claims: the constrained equal awards, the proportional, and the constrained equal losses rules. We first let subjects play three games designed such that the unique equilibrium allocation coincides with the recommendation of one of these three rules. In addition, we let subjects play an additional game, that has the property that all (and only) strategy profiles in which players coordinate on the same rule constitute a strict Nash equilibrium. While in the first three games subjects’ play easily converges to the unique equilibrium rule, in the last game the proportional rule overwhelmingly prevails as a coordination device, especially when we frame the game as an hypothetical bankruptcy situation. We also administered a questionnaire to a different group of students, asking them to act as impartial arbitrators to solve (among others) the same problems played in the lab. Also in this case, respondents were sensitive to the framing of the questions, but the proportional rule was selected by the vast majority of respondents.
    Keywords: Claims problems, Proportional rule, Experimental Economics
    JEL: C91 D63 D74
    Date: 2009–11
  16. By: Engelbert Stockhammer; Robert Stehrer
    Abstract: In a seminal paper on Marxian business cycle theory, Richard Goodwin (1967) presented a model which assumed that a higher wage share leads to lower investment and thus a general economic slowdown. In contrast, Michal Kalecki (1971) argued that a higher wage share would have an expansionary effect because the consumption propensity out of wage income is higher than that out of profit income. Based on a general model that allows for wage-led as well as profit-led demand regimes, this paper estimates the effects of a change in the wage share on aggregate private domestic demand with quarterly data for 12 OECD countries.<p></p>
    Keywords: functional income distribution, demand, Goodwin cycle, Kalecki, Post Keynesian economics, Marxian economics
    JEL: E11 E12 E20 E22 E25
    Date: 2009

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