nep-hpe New Economics Papers
on History and Philosophy of Economics
Issue of 2010‒05‒02
eleven papers chosen by
Erik Thomson
University of Manitoba

  1. Dilemmas of public election By Estrada, Fernando
  2. On the Role of Theory and Evidence in Macroeconomics By Katarina Juselius
  3. A reason-based theory of rational choice By Franz Dietrich; Christian List
  5. The Cliometrics of International Migration: A Survey By Hatton, Timothy J.
  6. The heirs of Schumpeter – an insight view of students’ entrepreneurial intentions at the Schumpeter School of Business and Economics By Sascha Ruhle; Daniel Mühlbauer; Marc Grünhagen; Jens Rothenstein
  7. Are earthquakes needed to shake economics? By Ronald Schettkat
  8. Modularity and Optimality in Social Choice By Gennaro Amendola; Simona Settepanella
  9. The Benefit of Anonymity in Public Goods Games By David Reinstein; David Hugh-Jones
  10. Fragments on the black swan: money, credit and finance in The Arcades Project of Walter Benjamin By Estrada, Fernando
  11. Reading the Recent Monetary History of the U.S., 1959-2007 By Jesús Fernández-Villaverde; Pablo Guerrón-Quintana; Juan F. Rubio-Ramírez

  1. By: Estrada, Fernando
    Abstract: In this brief comment, the public choice theory aims to distinguish the dilemmas and conflicts in formal and empirical. The hypothesis argues that the reality more complex than the principles of choice of Pareto and Liberalism*. Both the ethics and politics are taking decisions that are not always in line with the requirements of rationality and complete information
    Keywords: Public choice theory; public election; rational choice; social welfare; economic psychology.
    JEL: D70 D7 B21 D71 C7 C72
    Date: 2010–04
  2. By: Katarina Juselius
    Abstract: This paper, which is prepared for the Inagural Conference of the Institute for New Economic Thinking in King's College, Cambridge, 8-11 April 2010, questions the preeminence of theory over empirics in economics and argues that empirical econometrics needs to be given a more important and inde- pendent role in economic analysis, not only to have some confidence in the soundness of our empirical inferences, but to uncover empirical regularities that can serve as a basis for new economic thinking.
    Date: 2010–04
  3. By: Franz Dietrich; Christian List
    Date: 2010–04–25
  4. By: Thomas Hazlett (School of Law, George Mason University); David Porter (Economic Science Institute, CHapman University); Vernon L. Smith (Economic Science Institute, Chapman University)
    Abstract: In the Federal Communications Commission, Ronald Coase exposed deep foundations via normative argument buttressed by astute historical observation. The government controlled scarce frequencies, issuing sharply limited use rights. Spillovers were said to be otherwise endemic. Coase saw that Government limited conflicts by restricting uses; property owners perform an analogous function via the “price system.” The government solution was inefficient unless the net benefits of the alternative property regime were lower. Coase augured that the price system would outperform. His spectrum auction proposal was mocked by communications policy experts, opposed by industry interests, and ridiculed by policy makers. Hence, it took until July 25, 1994 for FCC license sales to commence. Today, some 73 U.S. auctions have been held, 27,484 licenses sold, and $52.6 billion paid. The reform is a textbook example of economic policy success. We examine Coase’s seminal 1959 paper on two levels. First, we note the importance of its analytical symmetry, comparing administrative to market mechanisms under the assumption of positive transaction costs. This fundamental insight has had enormous influence within the economics profession, yet is often lost in current analyses. This analytical insight had its beginning in his acclaimed early article on the firm,6 and continued into his subsequent treatment of social cost. Second, we investigate why spectrum policies have stopped well short of the property rights regime that Coase advocated, considering rent-seeking dynamics and the emergence of new theories challenging Coase’s property framework. One conclusion is easily rendered: competitive bidding is now the default tool in wireless license awards. By rule of thumb, about $17 billion in U.S. welfare losses have been averted. Not bad for the first 50 years of this, or any, Article appearing in Volume II of the Journal of Law & Economics.
    Date: 2009–11
  5. By: Hatton, Timothy J. (Australian National University)
    Abstract: This is a survey of some of the key studies in the literature on international migration in history that may be described as cliometric. This literature uses the concepts and approaches of applied economics to investigate a range of historical issues and there are strong parallels with the questions that have been addressed in the literature on contemporary migrations. Here I focus on the period 1850 to 1940 and chiefly on migration from Europe to the New World. The survey is organised around six themes that include: the forces driving migration, over time and across space; the assimilation of migrants and their effects on wages and income distribution in source and destination countries; and the evolution of immigration policy. While this literature has drawn heavily on the tool kit of applied economists it also provides a wider perspective on many of the issues that concern migration today.
    Keywords: international migration, economic history
    JEL: F22 N30 J61
    Date: 2010–04
  6. By: Sascha Ruhle (Schumpeter School of Business and Economics, Bergische Universität Wuppertal); Daniel Mühlbauer (Schumpeter School of Business and Economics, Bergische Universität Wuppertal); Marc Grünhagen (Lehrstuhl für Unternehmensgründung und Wirtschaftsentwicklung, Bergische Universität Wuppertal); Jens Rothenstein (Lehrstuhl für Empirische Wirtschafts- und Sozialforschung, Bergische Universität Wuppertal)
    Abstract: This working paper addresses the question which dimensions of Ajzens (1988) Theory of Planned Behavior, named attitude towards start-up, perceived behavioral control and subjective norms can be used to explain the entrepreneurial intentions of business students. Furthermore we hypotheses an influence of attendance in entre-preneurship lectures, having entrepreneurs within ones family and the cultural background as possible enhancers of entrepreneurial intentions via the dimensions of the TPB. We found not only a highly significant connection between all dimensions of Ajzens model and the entrepreneurial intention, but although evidences for an influ-ence of the individuals social and cultural background on the EI.
    Keywords: Entrepreneurial Intentions, Theory of planned behavior, university entrepreneurship, student survey, new firm creation
    JEL: L26
    Date: 2010–04
  7. By: Ronald Schettkat (Schumpeter School University of Wuppertal)
    Abstract: The current crisis is like an earthquake for the theoretical foundations of economic policies, which have guided governments and central banks for the last few decades. The efficient market hypothesis and its application to labor markets –“natural rate theory”- dominated interpretations of economic trends and policy prescriptions since the 1970s. Public policy, public institutions, and regulations were generally regarded as distortions of the otherwise well functioning markets. Economic trends were filtered through the lens of the “natural rate theory,” focusing on labor market institutions only and putting blinds on macroeconomic influences. Therefore, the recipe was a reshaping of institutional arrangements intended to allow markets to operate more freely, i.e. to bring the real world closer to the idealized theoretical model. This paper confronts the economic trends with the interpretations of the “natural rate theory” and argues that they hardly fitting the facts. The paper argues that monetary policy gained importance in the 1970s and enforced deflationary policies – which, in turn reduced growth, especially in upswings – and allowed employment to recover to its initial pre-recession levels. Deflationary bias was also guiding the design of major EU institutions, reducing potential and actual growth.</FONT>
    Keywords: Economic crisis, efficient market hypothesis, natural rate theory, deflationary bias
    JEL: E00 E24 E58 E6 J3
    Date: 2010–04
  8. By: Gennaro Amendola; Simona Settepanella
    Abstract: Marengo and the second author have developed in the last years a geometric model of social choice when this takes place among bundles of interdependent elements, showing that by bundling and unbundling the same set of constituent elements an authority has the power of determining the social outcome. In this paper we will tie the model above to tournament theory, solving some of the mathematical problems arising in their work and opening new questions which are interesting not only from a mathematical and a social choice point of view, but also from an economic and a genetic one. In particular, we will introduce the notion of u-local optima and we study it both from a theoretical and a numerical/probabilistic point of view; we will also describe an algorithm that computes the universal basin of attraction of a social outcome in O(M^3 log M) time (where M is the number of social outcomes)
    Keywords: Social rule, modularity, object, optimum, hyperplane arrangement, tournament, algorithm
    JEL: D71 D72
    Date: 2010–04–22
  9. By: David Reinstein; David Hugh-Jones
    Abstract: Previous work has found that in social dilemmas, the selfish always free-ride, while others will cooperate if they expect their peers to do so as well. Outcomes may thus depend on conditional cooperators’ beliefs about the number of selfish types. An early round of the game may be played anonymously, so that contributions cannot be traced back to particular individuals. By protecting low contributors from potential sanctions, this encourages selfish types to reveal their true preferences in their play. We offer a simple model illustrating when revelation of types can increase contributions, and when only an anonymous game can separate types. As a proof of concept, we run a laboratory experiment involving a two-stage public goods game with an exclusion decision between stages. An anonymous first stage led to significantly higher stage-two cooperation than a revealed first stage, a slower decline across the 15 repetitions, unusually high final-stage contributions relative to previous work, and greater profits. Statistical analysis shows that the anonymous first stage reduced uncertainty about types, and this preserved cooperation and led to greater efficiency. Our results suggest that customs such as anonymous church donations may play an important role in building social trust.
    Date: 2010–04–21
  10. By: Estrada, Fernando
    Abstract: The main objective of this paper is to present a reading of The Arcades Project by Walter Benjamin in the context of the financial crisis, in particular, reflect from a few fragments of Benjamin's work appear to lie around a Black Swan. The recovery of the fragments of The Arcades seems appropriate at a time when the financial crisis should be taught as a deeper crisis. Walter Benjamin is placed beyond its time, with a powerful sense of observation worthy of emulation analytical.
    Keywords: Financial theory, markets, Black swan, stock markets, financial crisis, risk, Walter Benjamin, Arcades Project.
    JEL: A1 G3 G33 D84 D70 D8 C72 B5 D81 B50 D82 C70 C7 D0 D7 A13 A12 G0
    Date: 2010–04
  11. By: Jesús Fernández-Villaverde (Department of Economics, University of Pennsylvania); Pablo Guerrón-Quintana (Federal Reserve Bank of Philadelphia); Juan F. Rubio-Ramírez (Department of Economics, Duke University)
    Abstract: In this paper we report the results of the estimation of a rich dynamic stochastic general equilibrium (DSGE) model of the U.S. economy with both stochastic volatility and parameter drifting in the Taylor rule. We use the results of this estimation to examine the recent monetary history of the U.S. and to interpret, through this lens, the sources of the rise and fall of the great American inflation from the late 1960s to the early 1980s and of the great moderation of business cycle fluctuations between 1984 and 2007. Our main findings are that while there is strong evidence of changes in monetary policy during Volcker’s tenure at the Fed, those changes contributed little to the great moderation. Instead, changes in the volatility of structural shocks account for most of it. Also, while we find that monetary policy was different under Volcker, we do not find much evidence of a big difference in monetary policy among Burns, Miller, and Greenspan. The difference in aggregate outcomes across these periods is attributed to the time- varying volatility of shocks. The history for inflation is more nuanced, as a more vigorous stand against it would have reduced inflation in the 1970s, but not completely eliminated it. In addition, we find that volatile shocks (especially those related to aggregate demand) were important contributors to the great American inflation.
    Keywords: DSGE models, Stochastic volatility, Parameter drifting, Bayesian methods.
    JEL: E10 E30 C11
    Date: 2010–04–15

This nep-hpe issue is ©2010 by Erik Thomson. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.