nep-hpe New Economics Papers
on History and Philosophy of Economics
Issue of 2010‒05‒15
eleven papers chosen by
Erik Thomson
University of Manitoba

  1. Harvard, the Chicago Tradition and the Quantity Theory: A Reply to James Ahiakpor By David Laidler; Roger Sandilands
  2. The classical notion of competition revisited By Salvadori, Neri; Signorino, Rodolfo
  3. A discussion of stock market speculation by Pierre-Joseph Proudhon By Jean-Claude Juhel; Dominique Dufour
  4. Marx, Globalization, and the Falling Rate of Profit: A Critical Study. By Miguel D. Ramirez
  5. Rational Expectations in Urban Economics By Berliant, Marcus; Yu, Chia-Ming
  7. An Economist’s Guide to Heaven By muller, Nick; gray, jo anna; stone, joe
  8. The historical relationship between inflation and political rebellion, and what it might teach us about neoliberalism By Cohen, Joseph N; Linton, April
  9. Is More Entrepreneurship better? By Philipp Koellinger; Christian Roessler
  10. Was there an ‘Industrious Revolution’ before the Industrial Revolution? An Empirical Exercise for England, c. 1300-1830 By Robert C. Allen; Jacob Weisdorf
  11. The Economic Origins of Twentieth Century Decolonisation in West Africa By J.A. Agbor

  1. By: David Laidler (University of Western Ontario); Roger Sandilands (University of Strathclyde)
    Abstract: James Ahiakpor's critique of our 2002 work on the relationship between a certain 1932 Harvard Memorandum on anti-depression policies and the 1932 Harris Foundation Manifesto dealing with the same issues misses the significance of these documents, and of the relationships between them, both for the literature of the time, and for later debates about the origins of 1930s Chicago ideas about monetary economics. He is correct to locate these documents in a more general quantity theoretic tradition, but his discussion here is marred by a serious misunderstanding of the so-called forced saving doctrine and its place in that tradition. Finally, Ahiakpor fails to appreciate that the absence of positive policy proposals from the 1934 Harvard studies of The Economics of the Recovery Program, a point which he himself notes, is a major contributing factor to that book's mediocrity.
    Keywords: Chicago tradition; Quantity theory; Forced saving; Depression
    JEL: B12 B22 E52
    Date: 2010
  2. By: Salvadori, Neri; Signorino, Rodolfo
    Abstract: We compare and analyse two different conceptions of market competition: the walrasian notion of perfect competition and the Classical notion of free competition: while the former may be described as an equilibrium state in which atomistic agents treat prices parametrically, the latter is a situation in which agents, endowed by market power, fix prices strategically. We show that price undercutting or outbidding are the typical phenomena that, for the Classical authors, may be observed in a market characterized by free competition. We investigate some problematic aspects of the neoclassical notion of perfect competition and we reconstruct the Classical theory of free competition, as developed, in particular, by Adam Smith and Karl Marx, in the light of the modern notion of mixed strategies equilibria.
    Keywords: Classical Economics; Competition; Adam Smith; Karl Marx; mixed strategies
    JEL: B12 L11
    Date: 2010–05–03
  3. By: Jean-Claude Juhel (CRIFP); Dominique Dufour (CRIFP)
    Abstract: The object of this contribution is to present the ideas behind the thinking of the French economist Pierre-Joseph Proudhon (1809-1865) in relation to the causes and effects of Stock market speculation. It is based upon the works of this author but particularly on his "Manuel du sp\'eculateur \`a la Bourse" (Stock Market Speculator Manual) edited in 1857 in Paris. Compared to the markets of today, however, the stock market described by Proudhon appears embryonic. Nevertheless it represents the location for transactions in financial assets, commodities, precious metals and even some transactions involving options. This contribution is organised in the following manner - the first section is devoted to the development of Proudhon's thought in relation to speculation. It is divided into two parts. The first part is dedicated to Pierre-Joseph Proudhon's definitions of stock market speculation or gambling with shares that for him served no purpose either from a human or economic perspective and was therefore condemnable and to be contrasted with entrepreneurial speculation that, even though it is a highly-risky activity, involves the spirit of enterprise and provides the lifeblood of economic growth. The second part allows us to present Pierre-Joseph Proudhon's propositions in relation to restricting the speculation that he considers obnoxious. The second section has two objectives: one part places in perspective the views of Proudhon and the characteristics of stock market activity under the Second Empire whilst the other part examines current-day aspects of the characteristics evoked by Proudhon. We are interested especially in the question of the regulation and that of the relevance today of certain accounting practices.
    Date: 2010–05
  4. By: Miguel D. Ramirez (Department of Economics, Trinity College)
    Abstract: This paper argues that Marx’s views on globalization and its supposed inevitability underwent a substantial evolution and revision after the publication of the Communist Manifesto. His writings relating to India, and particularly China and Russia, show that he was no longer certain that “the country that is more developed industrially only shows, to the less developed, the image of its own future” (Vol. I, p. 13). In the case of China, a prime example of the Asiatic mode of production, Marx even doubted whether globalization (capitalism) would ever be able to accomplish its historical mission of developing the forces of production and creating the material conditions for a higher mode of production, viz., Communism. While in the Russian case, he seriously entertained the notion that it could bypass the hardships and vicissitudes of capitalism and forge its own unique path to socialism. If accepted, this interpretation represents a serious challenge to the universality and validity of Marx’s materialist conception of history. The paper also addresses the role of the law of the tendency of the falling rate of profit in the geographic expansion of competitive capitalism. It contends that Marx did not believe there was an iron-clad connection between the falling rate of profit and globalization; in addition, it argues that Marx believed that the capitalists’ insatiable search for colonial markets was driven by their desire to overcome recurrent (and growing) realization problems in the home market arising from deficient aggregate demand on the part of both workers and capitalists.
    Keywords: Asiatic Mode of Production, Globalization, Law of the Falling Tendency of the Rate of Profit, Materialist Conception of History, Underconsumptionist Tendencies.
    JEL: B10 E24
    Date: 2010–05
  5. 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 under reasonable modifications for this field. An open subset of economies where none of the modified rational expectations equilibria fully reveals 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 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: 2010–05–08
  6. 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
  7. By: muller, Nick; gray, jo anna; stone, joe
    Abstract: This paper is the first to offer an economic model of God and humanity as optimizing agents in the context of concrete belief archetypes (religious ‘contracts’) in Judeo-Christian theology. Data support the model’s unique predictions, despite their otherwise counterintuitive, unlikely nature. For example, the model requires that in one belief archetype, ‘good works’ not increase with strength of faith, as one might otherwise expect, and that what appears may be God’s dominant contract precisely balances divine penalties for reneging on promises with incentives to seek divine ‘gifts’—an equivalence supported in the data.
    Keywords: economics;religion
    JEL: A1
    Date: 2010–03
  8. By: Cohen, Joseph N; Linton, April
    Abstract: Chronic inflation is argued to be politically destabilizing. We examine data on inflation and political instability that goes as far back as 500 years. Although the behavior of both prices and political rebellion have changed over these five centuries, and enduring relationship between price and political destabilization appears in our analyses. This relationship may provide insight into the context from which neoliberalism emerged, potential reasons for its failure, and some of the key dilemmas upon which the post-2008 global economic order may hinge
    Keywords: inflation; political instability; long-run history;
    JEL: E31 N2 N4
    Date: 2010–02
  9. By: Philipp Koellinger (Erasmus University Rotterdam); Christian Roessler (Brown University)
    Abstract: We develop a new perspective on the boundary of the firm that is consistent with the empirical observation that the share of entrepreneurs first decreases and then increases in the course of economic development. Existing theory based on transaction costs is difficult to relate to these well-established dynamics. Our approach focuses on changing incentives to specialize and adapt, in order to access complementarities that arise from diverse abilities and access to wealth. We discuss why the efficient number of entrepreneurs is bounded and changes in the course of economic development.
    Keywords: Entrepreneurship; theory of the firm; organizations; economic development
    JEL: L26 D20 J24 O10
    Date: 2009–11–19
  10. By: Robert C. Allen (Nuffield College, University of Oxford); Jacob Weisdorf (Department of Economics, University of Copenhagen)
    Abstract: It is conventionally assumed that the pre-modern working year was fixed and that consumption varied with changes in wages and prices. This is challenged by the twin theories of the ‘industrious’ revolution and the consumer revolution, positing a longer working year as people earned surplus money to buy novel goods. In this study, we turn the conventional view on its head, fixing consumption rather than labour input. Specifically, we use a basket of basic consumption goods and compute the working year of rural and urban day labourers required to achieve that. By comparing with independent estimates of the actual working year, we find two ‘industrious’ revolutions among rural workers; both, however, are attributable to economic hardship, and we detect no signs of a consumer revolution. For urban labourers, by contrast, a growing gap between their actual working year and the work required to buy the basket provides great scope for a consumer revolution.
    Keywords: Consumer Revolution; Cost-of-Living Index; Day Wages; ‘Industrious’ Revolution; Industrial Revolution; Labour Supply; Standard of Living
    JEL: J22 J43 N30
    Date: 2010–05
  11. By: J.A. Agbor
    Abstract: This paper argues that the pattern of decolonisation in West Africa was a function of the nature of human capital transfers from the colonisers to the indigenous elites of the former colonies. Underpinning the nature of these human capital transfers is the colonial educational ideology. Where this ideology emphasized the notion of "assimilation", the system generally tended to produce elites that depended highly on the coloniser for their livelihood, hence necessitating a continuation of the imperial relationship even after independence was granted. On the contrary, where the ideology emphasized the "strengthening of the solid elements" of the country-side, the system tended to produce a bunch of elites that were quite independent of the coloniser and consequently had little to lose from a disruption of the imperial relationship at independence. The model raises several predictions based on a single assumption on the nature of the nationalist elite. The paper's contribution, is in providing a framework for understanding the different paths of decolonisation in Africa in general, but more specifically in the British and French West African empires, an approach which unites both the Eurocentric and Afrocentric perspectives.
    Keywords: Decolonisation, Human Capital Transfers, Eurocentrism, Afrocentrism, West Africa
    JEL: I21
    Date: 2010

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