nep-hpe New Economics Papers
on History and Philosophy of Economics
Issue of 2010‒02‒27
sixteen papers chosen by
Erik Thomson
University of Manitoba

  1. Marshall, Models, and Macroeconomics: Comments on Michel De Vroey’s “The Marshallian Roots of Keynes’s General Theory” By David Colander
  2. The Complexity Era in Economics By David Colander; Richard P.F. Holt; J. Barkley Rosser
  5. Introduction to Judgment Aggregation By Christian List; Ben Polak
  6. Free Lunch By Constantinos Kardaras
  7. Slavery and Imperialism Did Not Enrich Europe By McCloskey, Deirdre Nansen
  8. The economics of growth. By Aghion, P.; Howitt, P.
  9. The Genesis of Macroeconomics: New Ideas from Sir William Petty to Henry Thornton By David Colander
  10. Islamic Finance: Debt versus Equity Financing in the Light of Maqasid al-Shari'ah By Eddy Yusof, Ezry Fahmy; Kashoogie, Jhordy; Anwar Kamal, Asim
  11. The Classification of Economic Activity By Berge, Travis J.; Jorda, Oscar
  12. The impact of studying economics, and other disciplines, on the belief that voluntary exchange makes everyone better off. By Amélie Goossens; Pierre-Guillaume Méon
  13. On continuous ordinal potential games By Kukushkin, Nikolai S.
  14. Bargaining over bets. By Eliaz, K.; Spiegler, R.
  15. Genes, economics, and happiness By Jan-Emmanuel De Neve; James H. Fowler; Bruno S. Frey
  16. Malthus was right: new evidence from a time-varying VAR By Alexander Rathke; Samad Sarferaz

  1. By: David Colander
    Date: 2010–05
  2. By: David Colander; Richard P.F. Holt; J. Barkley Rosser
    Abstract: This article argues that the neoclassical era in economics has ended and is being replaced by a new era. What best characterizes the new era is its acceptance that the economy is complex, and thus that it might be called the complexity era. The complexity era has not arrived through a revolution. Instead, it has evolved out of the many strains of neoclassical work, along with work done by less orthodox mainstream and heterodox economists. It is only in its beginning stages. The article discusses the work that is forming the foundation of the complexity era, and how that work will likely change the way in which we understand economic phenomena and the economics profession.
    Date: 2010–01
  3. By: Stan du Plessis (Department of Economics, University of Stellenbosch)
    Abstract: The Accra Declaration offers a narrowly ideological interpretation of the modern economy and proceeds to reject neoliberalism as the ideological foundation thereof. This article argues for a less ideological approach to public theology in its comment on the economy in a two-step argument. Firstly, Neoliberalsim is neither a coherent ideology nor a plausible historical narrative. Economists, who are the presumed architects of neoliberalism do not recognise the propositions attributed to them by either the Accra Declaration or the critical literature on Neoliberalism. Secondly, the Accra Declaration’s ideological framework causes it to misrepresent both the nature of modern economies and their objective results. An alternative, less ideological approach, would allow the Church to appreciate both the strengths and the many problems of market economies and would allow it to work with economists in resolving these, instead of rejecting the insights of modern economics.
    Keywords: Accra declaration, Neoliberalism, Economics, Public theology, Market economies
    JEL: Z12
    Date: 2010
  4. By: Andrés Alvarez
    Abstract: This paper presents Léon Walras and Augustin Cournot views on monetary regulation. Important differences can be found in their views about the convenience of the issuing of paper money and fiat money in general. Whereas Walras is against bank notes, even if coming from a central bank, Cournot has a moderate position. He accepts the need for bank notes even without a strict adjustment to metal reserves. It can be ascertained that Cournot believes discretionary monetary regulation is convenient and acceptable, while Walras believes the only acceptable monetary system is one based exclusively on the stability of the value of money under a monetary rule following the strict equivalence between metallic reserves and a pure medium of exchange form of money. This paper shows Cournot’s ability to understand more clearly than Walras the evolution of the monetary system of his days. Whereas Walras is trying to guarantee the coherence of his pure theory with his applied theory, and he is then unable to accept the evolution toward a monetary system based on fiat money and he proposes very rigid and complex system of quasi-bimetallic circulation where banks are simple mediators between entrepreneurs and savings.
    Date: 2010–02–11
  5. By: Christian List (London School of Economics); Ben Polak (Cowles Foundation, Yale University)
    Abstract: This introduces the symposium on judgment aggregation. The theory of judgment ag­gregation asks how several individuals' judgments on some logically connected propo­sitions can be aggregated into consistent collective judgments. The aim of this intro­duction is to show how ideas from the familiar theory of preference aggregation can be extended to this more general case. We first translate a proof of Arrow's impos­sibility theorem into the new setting, so as to motivate some of the central concepts and conditions leading to analogous impossibilities, as discussed in the symposium. We then consider each of four possible escape-routes explored in the symposium.
    Keywords: Judgment aggregation, Arrow's theorem, Escape routes
    JEL: D70 D71
    Date: 2010–02
  6. By: Constantinos Kardaras
    Abstract: The concept of absence of opportunities for free lunches is one of the pillars in the economic theory of financial markets. This natural assumption has proved very fruitful and has lead to great mathematical, as well as economical, insights in Quantitative Finance. Formulating rigorously the exact definition of absence of opportunities for riskless profit turned out to be a highly non-trivial fact that troubled mathematicians and economists for at least two decades. The purpose of this note is to give a quick (and, necessarily, incomplete) account of the recent work aimed at providing a simple and intuitive no-free-lunch assumption that would suffice in formulating a version of the celebrated Fundamental Theorem of Asset Pricing.
    Date: 2010–02
  7. By: McCloskey, Deirdre Nansen
    Abstract: Since trade was not an engine, neither was a part of trade, such as the trade in slaves. And certainly the profits from the trade did not finance the Industrial Revolution. Imperialism, too, was a mere part of trade, and despite the well-deserved guilt that Europeans feel in having perpetrated it, it was not an engine of their growth. Stealing from poor people is not a good business plan. Certainly the possession of India did little for the great British public, except tax them for the Navy. That Europeans did not benefit from imperialism does not mean that imperialism was good for the imperalized. That a thief kills his victim does not add to the thief’s monetary profit, and some imperialism was certainly killing. The cases of simple theft, such as the Belgian Congo, did nothing to enrich the average Belgian. Nor have internal imperialisms, such as apartheid, been profitable. The episode of economic success in Europe came from domestic sources of innovation, not from exploitation.
    Keywords: trade; industrial revolution; imperialism; England; slavery; europe; innovation; economic innovation
    JEL: N73 N70 N0
    Date: 2009–07
  8. By: Aghion, P.; Howitt, P.
    Abstract: This comprehensive introduction to economic growth presents the main facts and puzzles about growth, proposes simple methods and models needed to explain these facts, acquaints the reader with the most recent theoretical and empirical developments, and provides tools with which to analyze policy design. The treatment of growth theory is fully accessible to students with a background no more advanced than elementary calculus and probability theory; the reader need not master all the subtleties of dynamic programming and stochastic processes to learn what is essential about such issues as cross-country convergence, the effects of financial development on growth, and the consequences of globalization. The book, which grew out of courses taught by the authors at Harvard and Brown universities, can be used both by advanced undergraduate and graduate students, and as a reference for professional economists in government or international financial organizations.
    Date: 2009–01
  9. By: David Colander
    Date: 2010–04
  10. By: Eddy Yusof, Ezry Fahmy; Kashoogie, Jhordy; Anwar Kamal, Asim
    Abstract: A hot topic among Islamic economists is the debt versus equity debate. Which of the two are more in line with justice and equality? Which of them is more productive in fulfilling the greater objectives of the Shariah? This paper is divided into sections. After the introduction, it is followed by problem statement as well as objective of the study. After that, section 4 briefs the research questions for answering the analysis in this paper. Section 5 deals with discussion obtained from literature review whichhighlights important issues regarding Maqasid Al-Shari’ah in term of justice and equality vis-àvis the current practice as well as ideal model of Islamic banking and finance. Finally, this paper ends up with conclusion.
    Keywords: productivity; justice; Equality; Islamic finance; debt financing; equity financing; maqasid shariah
    JEL: D20 D40
    Date: 2009–04
  11. By: Berge, Travis J. (University of California, Davis); Jorda, Oscar (University of California, Davis)
    Abstract: The Business Cycle Dating Committee (BCDC) of the National Bureau of Economic Research provides a historical chronology of business cycle turning points. This paper investigates three central aspects about this chronology: (1) How skillful is the BCDC in classifying economic activity into expansions and recessions? (2) Which indices of business conditions best capture the current but unobservable state of the business cycle? And (3) Which indicators predict future turning points best and at what horizons? We answer each of these questions in detail with methods novel to economics designed to assess classification ability. In the process we clarify several important features of business cycle phenomena.
    JEL: C14 E32 E37
    Date: 2009–12
  12. By: Amélie Goossens (DULBEA, Solvay Brussels School of Economics and Management, Université Libre de Bruxelles, Brussels.); Pierre-Guillaume Méon (Centre Emile Bernheim and DULBEA, Solvay Brussels School of Economics and Management, Université Libre de Bruxelles, Brussels.)
    Abstract: Using a survey of a large group of first and final-year students of different disciplines, to study their belief in the existence of mutual benefits of voluntary transactions, we observe significant differences between economics and business students on the one hand, and students of other disciplines on the other hand. Those differences increase over time, due to economics students increasingly supporting that belief, and other students increasingly disagreeing with it. Beliefs of students specializing in the same topic also become more homogeneous over time. We therefore report evidence of both a selection and a learning effect of studying different disciplines.
    Keywords: Higher education, learning, self-selection, beliefs, fairness of the market.
    JEL: A13 A20 B40 D01 D63
    Date: 2010–02
  13. By: Kukushkin, Nikolai S.
    Abstract: If the preferences of the players in a strategic game satisfy certain continuity conditions, then the acyclicity of individual improvements implies the existence of a Nash equilibrium. Moreover, starting from any strategy profile, an arbitrary neighborhood of the set of Nash equilibria can be reached after a finite number of individual improvements.
    Keywords: potential game; compact-continuous game; finite improvement property
    JEL: C72
    Date: 2010–02–15
  14. By: Eliaz, K.; Spiegler, R.
    Abstract: When two agents hold different priors over an unverifiable state of nature, which affects the outcome of a game they are about to play, they have an incentive to bet on the game's outcome. We pose the following question: what are the limits to the agents' ability to realize gains from such speculative bets when their priors are private information? We apply a “mechanism design” approach to this question. We characterize interim-efficient bets and discuss their implementability in terms of the underlying game's payoff structure. In particular, we show that as the costs of unilaterally manipulating the bet's outcome become more symmetric across states and agents, implementation becomes easier.
    Date: 2009–05
  15. By: Jan-Emmanuel De Neve; James H. Fowler; Bruno S. Frey
    Abstract: Research on happiness has produced valuable insights into the sources of subjective well-being. A major finding from this literature is that people exhibit a 'baseline' happiness that shows persistent strength over time, and twin studies have shown that genes play a significant role in explaining the variance of baseline happiness between individuals. However, these studies have not identified which genes might be involved. This article presents evidence of a specific gene that predicts subjective well-being. Using data from the National Longitudinal Study of Adolescent Health, we show that individuals with a transcriptionally more efficient version of the serotonin transporter gene (5HTT) are significantly more likely to report higher levels of life satisfaction. Having one or two alleles of the more efficient type raises the average likelihood of being very satisfied with one's life by 8.5% and 17.3%, respectively. This result may help to explain the stable component of happiness and suggests that genetic association studies can help us to better understand individual heterogeneity in subjective well- being.
    Keywords: Happiness, subjective well-being, genetics
    JEL: A12 Z00
    Date: 2010–02
  16. By: Alexander Rathke; Samad Sarferaz
    Abstract: Although Unified Growth Theory presumes the existence of the Maltusian mechanism in pre-industrial England recent empirical studies challenged this assumption. This paper studies the interaction of vital rates and real wages in the period from 1540 to 1870 in England. We employ time-varying VARs, an approach which addresses potential shortcomings such as parameter instability and declining volatilities in the previous literature. In contrast to recent studies, the main Malthusian mechanisms - the preventive and the positive check - were both at work until the mid-19th century. The preventive check was decreasing and the positive check increasing in importance. Most remarkably, the positive check dominated after the 1750s. The results indicate that instead of disappearing before the advent of the industrial revolution, the Malthusian mechanism rather changed its face over time.
    Keywords: Industrial revolution, Malthusian trap, time-varying vector autoregression, unified growth theory
    JEL: C32 J13 N13 O11
    Date: 2010–02

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