nep-hpe New Economics Papers
on History and Philosophy of Economics
Issue of 2010‒05‒22
eight papers chosen by
Erik Thomson
University of Manitoba

  1. Luigi Einaudi's economics of liberalism By Forte Francesco; Marchionatti Roberto
  2. Lab Labor: What Can Labor Economists Learn from the Lab? By Charness, Gary; Kuhn, Peter J.
  3. Contracting under Reciprocal Altruism By Shchetinin, Oleg
  4. Teaching Macro Principles after the Financial Crisis By Alan S. Blinder
  5. Rational and Irrational Bubbles: an Experiment By Moinas, Sophie; Pouget, Sébastien
  6. ”Thou shalt not covet ...”: Prohibitions, Temptation and Moral Values By Matteo Cervellati; Paolo Vanin
  7. Do Spouses Cooperate? And If Not: Why? By Cochard, François; Couprie, Hélène; Hopfensitz, Astrid
  8. The Circulation of Ideas in Firms and Markets By Thomas Hellman; Enrico Perotti

  1. By: Forte Francesco; Marchionatti Roberto (University of Turin)
    Date: 2010–05
  2. By: Charness, Gary (University of California, Santa Barbara); Kuhn, Peter J. (University of California, Santa Barbara)
    Abstract: This paper surveys the contributions of laboratory experiments to labor economics. We begin with a discussion of methodological issues: why (and when) is a lab experiment the best approach; how do laboratory experiments compare to field experiments; and what are the main design issues? We then summarize the substantive contributions of laboratory experiments to our understanding of principal-agent interactions, social preferences, union-firm bargaining, arbitration, gender differentials, discrimination, job search, and labor markets more generally.
    Keywords: labor economics, laboratory experiments, principal-agent theory, personnel economics
    JEL: C9 J0
    Date: 2010–05
  3. By: Shchetinin, Oleg
    Abstract: I develop a model of reciprocal altruism which accounts for some evidence in contracting situations, which are paradoxical from the point of view of neoclassical contract theory with selfish actors. My model predicts the crowding-out effect, observed in the Trust Game with the possibility of a fine; for the Control Game the model predicts that an equilibrium can exhibit ”no effect of control”, ”hidden cost of control”, or ”positive effect of control”, depending on the characteristics of the actors, as observed in the experiments. This suggests that reciprocal altruism modeling could be fruitful more generally in applications of contract theory.
    Keywords: contract theory, signaling, behavioral economics
    JEL: D82 M54
    Date: 2009–08
  4. By: Alan S. Blinder (Princeton University)
    Abstract: The stunning events of 2007-2009 both shook the world and piqued interest in economics. In the 30-plus years that I have been teaching macro principles, I have never seen the level of interest in students as high as what I observed last year rapt attention and no sleepers! Interest in economics has grown, and our students will want, expect, and deserve explanations of these events for years to come. This is truly a teaching moment, and that moment is going to be a long one. That’s the good news. The bad news is that the current curriculum fails to give students even imperfect answers. This means that the macro principles course will have to be changed. Although we can’t provide beginning students with complete answers, we can do a lot better than we have been doing.
    Keywords: macroeconomics, financial crisis, economic curriculums in schools
    JEL: A22 A23 E20 D40
    Date: 2010–04
  5. By: Moinas, Sophie; Pouget, Sébastien
    Abstract: This paper proposes a theory of rational bubbles in an economy with finite trading opportunities. Bubbles arise because agents are never sure to be last in the market sequence. This theory is used to design an experimental setting in which bubbles can be made rational or irrational by varying one parameter. This complements the experimental literature on irrational bubbles initiated by Smith, Suchanek and Williams (1988). Our experimental results suggest that it is pretty difficult to coordinate on rational bubbles even in an environment where irrational bubbles flourish. Maximum likelihood estimations show that these results can be reconciled within the context of Camerer, Ho, and Chong (2004)'s cognitive hierarchy model, and Mc Kelvey and Palfrey (1995)'s quantal response equilibrium.
    Date: 2009–05
  6. By: Matteo Cervellati (University of Bologna and IZA Bonn); Paolo Vanin (University of Bologna)
    Abstract: We propose a theory studying temptation in presence of both externally and internally sanctioned prohibitions. Moral values that (internally) sanction prohibited actions and their desire may increase utility by reducing self-control costs, thereby serving as partial commitment devices. We apply the model to crime and study the conditions under which agents would optimally adhere to moral values of honesty. Incentives to be moral are non- monotonic in the crime premium. Larger external punishments increase temptation and demand for morality, so that external and internal sanctions are complements. The model helps rationalizing stylized facts that proved difficult to explain with available theories.
    Keywords: Prohibitions, Temptation, Self-Control, Moral Values, Crime
    JEL: K42 Z13
    Date: 2010–05
  7. By: Cochard, François; Couprie, Hélène; Hopfensitz, Astrid
    Abstract: Models of household economics require an understanding of economic interactions in families. Social ties, repetition and reduced strategic uncertainty make social dilemmas in couples a very special case that needs to be empirically studied. In this paper we present results from a large economic experiment with 100 maritally living couples. Participants made decisions in a social dilemma with their partner and with a stranger. We predict behavior in this task with individual and couples' socio-demographic variables, efficiency preferences and couples' marital satisfaction. As opposed to models explaining behavior amongst strangers, the regressions on couples’ decisions highlight clear patterns concerning cooperation behavior which could inspire future household decision-making models.
    Keywords: noncooperative games, laboratory, individual behavior
    JEL: C72 C91 D13
    Date: 2009–12
  8. By: Thomas Hellman (University of British Columbia); Enrico Perotti (University of Amsterdam)
    Abstract: Novel early stage ideas face uncertainty on the expertise needed to elaborate them, which creates a need to circulate them widely to find a match. Yet as information is not excludable, shared ideas may be stolen, reducing incentives to innovate. Still, in idea-rich environments inventors may share them without contractual protection. Idea density is enhanced by firms ensuring rewards to inventors, while their legal boundaries limit idea leakage. As firms limit idea circulation, the innovative environment involves a symbiotic interaction: firms incubate ideas and allow employees to leave if they cannot find an internal fit; markets allow for wide circulation of ideas until matched and completed; under certain circumstances ideas may be even developed in both firms and markets.
    Keywords: Ideas, Innovation, Entrepreneurship, Firm Organization, Start-Ups
    JEL: D83 L22 M13 O31
    Date: 2010–05

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