nep-hpe New Economics Papers
on History and Philosophy of Economics
Issue of 2010‒06‒04
thirteen papers chosen by
Erik Thomson
University of Manitoba

  1. Introducing Anthropological Foundations of Economic Behavior, Organization, and Control By Amavilah, Voxi Heinrich
  2. Interpretations of the Classic: The Theory of Wages By Antonella Stirati
  3. The disappointment of expectations and the theory of fluctuations By Meacci, Ferdinando
  4. Anomalies in Economics and Finance By Christopher L. Gilbert
  5. Science, Bourgeois Dignity, and the Industrial Revolution By McCloskey, Deirdre Nansen
  6. Creative Language, Creative Destruction, Creative Politics By McCloskey, Deirdre Nansen
  7. References to Africa in Adam Smith's Wealth of Nations and Some Key Propositions Surrounding Them By Amavilah, Voxi Heinrich
  8. Research standards for the Italian young academics: what has changed over the last thirty years? By Adriano Birolo; Annalisa Rosselli
  9. An Essay on the Nature and Significance of Deception and Telling Lies By Mishra, SK
  10. Managing Forests for Sustainable Economic Development: Optimal Use and Conservation of Forests By Tisdell, Clement Allan
  11. Determination of Money Supply in India: The Great Debate By Das, Rituparna
  12. Social Norms and Preferences By Andrew Postlewaite
  13. The Meaning(s) of Happiness By Kamvar, Sep; Mogilner, Cassie; Aaker, Jennifer

  1. By: Amavilah, Voxi Heinrich
    Abstract: One of the rude awakenings for economists from the current recession is an emerging understanding that economics has gone wild with its highbrow mathematical models that bear little resemblance to reality. The failure of economics to predict and solve the current global recession, has restored the “dismal science” title to the profession. It stems from the cultish fascination with Adam Smith’s Invisible Hand, centered around the belief in the efficient market hypothesis. This fascination exposes analytical holes in the methodology that economics has followed lately, as economics itself has moved too far away from its key social foundations. This situation is incomprehensible and needs redressing. I compiled a book - Selected Readings on the Anthropological Bases of Economic Behavior, Organization, and Control - to help economists and others get back in touch with their genealogy. This current paper is a watered down version of the introduction to Selected Readings. It concludes that real life is neither as simple nor economic as economic theory sometimes suggests. In fact, and for much of human history, non-economic factors and forces have driven economic activities. Selected Readings provides an opportunity for reinforced focus on economics principles. Alone and detached from its social foundations economics has a future only as fiction. As serious non-fiction, economics cannot successfully divorce itself from its elemental foundations in the social sciences. To advance its theory in the past economics needed to borrow from mathematics and physics. Such learning must continue. However, to remain policy-relevant economics cannot wish away the very social bases upon which it is founded. Without social foundations one might as well kiss economics goodbye.
    Keywords: economic behavior; economic organization; economic control; Frank Knight; W. Arthur Lewis; Joan Robinson; Janos Kornai; J. Herskovits; B. Malinowski; anthropological bases
    JEL: A13 A12 Y20 P49 B41
    Date: 2010–05–26
  2. By: Antonella Stirati
    Abstract: The well-known enduring controversy on the interpretation of Ricardo's wage theory, and by implication on classical wage theory, has undoubtedly been fuelled by the existence of some inconsistencies in Ricardo's writings. However, as far as the factors affecting normal wages are concerned, these inconsistencies may carry less weight than is usually believed.. The present paper aims to provide a critical overview of the controversy concerning the interpretation of the theory of wages in classical economists, offering a somewhat unusual perspective. I contend that there are major similarities between the two interpretations that have been regarded as the main contenders, the so-called New view and Fix wage interpretations. Due to these similarities, the controversy has tended to neglect a decisive point for the interpretation of the theory of wages in Ricardo and other classical economists, namely, the meaning of 'demand for labour' in classical thought. I also maintain that there is a third point of view concerning the interpretation of wage theory in the classical economists, which has not been accurately understood and discussed in earlier surveys of the controversy. Unlike the others, this Alternative interpretation, as I shall label it for brevity, centers on the absence of a systematic decreasing relation between real wages and employment in Ricardo and other classical economists. The Alternative interpretation will be presented in some detail, and some questions posed by the New view will be assessed from the point of view of this alternative interpretation.
    Date: 2010–05
  3. By: Meacci, Ferdinando
    Abstract: The role of “errors in time” (Fanno, 1933) or “disappointment of expectations” (Hicks, 1933) was a major object of analysis in the years of high theory when it contributed to the replacement of the paradigm of General Equilibrium Theory by the new paradigm of the Economics of Uncertainty and Expectations that took place in those years. The scope of this paper is to re-evaluate this object of analysis in the light of the evolution of the theory of fluctuations to which it belongs. The paper is thus divided in two Parts. Part I provides a unified account of how the leading authors of those years (Keynes, Hayek, Hicks) dealt with expectations and their disappointment in their theory of fluctuations. Part II provides instead a brief account of the major constructions worked out by some leading authors of what is here called the “years of rational expectations”. The paper shows how the focus on errors in time has been replaced in the latter period by a set of assumptions and arguments which either neglect the impact of the disappointment of expectations on macroeconomic disequilibrium or even exclude the very possibility of this disappointment. The paper concludes by highlighting the decreasing scope and relevance of the theory of fluctuations as one moves from the years of high theory to the more recent years of rational expectations.
    Keywords: Expectations; Disappointment; Errors; Fluctuations
    JEL: E32 E2 E1
    Date: 2009–12
  4. By: Christopher L. Gilbert
    Abstract: The term “anomaly” played a crucial role in Thomas Kuhn’s characterization of scientific progress. For Kuhn, an anomaly is a puzzle which challenges an accepted paradigm. Puzzles only achieve anomalous status once an alternative paradigm becomes available which allows explanation of the puzzle. Anomalies were introduced into the finance literature by Michael Jensen but more as resolvable puzzles than Kuhnian anomalies. They entered economics via Richard Thaler who saw behavioural economics as the alternative to the neoclassical paradigm. Both authors use the term anomaly in a deliberately Kuhnian manner. Kuhn formulated his ideas by looking back across the history of physics. By contrast, behavioural economists use Kuhn’s concepts in a forward-looking manner as a marketing tool for their ideas.
    Keywords: anomaly, behavioural, effects.
    Date: 2010
  5. By: McCloskey, Deirdre Nansen
    Abstract: What happened to make for the factor of 16 were new ideas, what Mokyr calls “industrial Enlightenment.” But the Scientific Revolution did not suffice. Non-Europeans like the Chinese outstripped the West in science until quite late. Britain did not lead in science---yet clearly did in technology. Indeed, applied technology depended on science only a little even in 1900.
    Keywords: scientific revolution; science; technology; industrial enlightenment; applied technology
    JEL: N00 N7
    Date: 2009–07
  6. By: McCloskey, Deirdre Nansen
    Abstract: Why did the North-Sea folk suddenly get so rich, get so much cargo? The answers seems not to be that supply was brought into equilibrium with demand---the curves were moving out at breakneck pace. Reallocation is not the key. Language is, with its inherent creativity. The Bourgeois Revaluation of the 17th and 18th centuries brought on the modern world. It was the Greatest Externality, and the substance of a real liberalism. Left and right have long detested it, expressing their detestation nowadays in environmentalism. They can stop the modern world, and in some places have. The old Soviet Union was admired even by many economists---an instance of a “cultural contradiction of capitalism,” in which ideas permitted by the successes of innovation rise up to kill the innovation. We should resist it.
    Keywords: innovation; bourgeois revaluation; liberalism; success of innovation
    JEL: B1 N00
    Date: 2009–06
  7. By: Amavilah, Voxi Heinrich
    Abstract: Adam Smith sought to illustrate some of his propositions in The Wealth of Nations (WON) with examples from Africa. However, the examples were few, and many were neither profound nor instructive from a principles viewpoint. I find that Africa figures very little in the WON, and nearly every time it appears cursory. With 20/20 hindsight, one may conclude that opinions about Africa have remained invariant with respect to time. Final value-judgment about whether that is a good or bad thing rests with the reader.
    Keywords: Africa in Wealth of Nations; Adam Smith
    JEL: B31 O55 F10 N17 A11
    Date: 2010–05–26
  8. By: Adriano Birolo (University of Padua); Annalisa Rosselli (Faculty of Economics, University of Rome "Tor Vergata")
    Abstract: In this paper the authors present the findings of their research on a vast database containing the relevant information on the scientific characteristics of the three cohorts of assistant professors recruited in Italy in the early 1980s, the 1990s and the first few years of the new millennium. Their first objective is to trace out the scientific profile of the assistant professor in the early 1980s and the changes that came about in the following twenty-five years due to general changes in the profession and in the specific conditions of the Italian academic market. The second aim is to se what turn in direction the scientific standard has taken for access to a career as a young professor of economics, the number and typology of publciations, the fields of reasearch.
    Keywords: Evolution of the scientific standard, research output, "representative" economist, academic market for economists, evaluation.
    JEL: A11 A B23 B41
    Date: 2010–05–28
  9. By: Mishra, SK
    Abstract: A lie is an expression at deviance with the truth known or honestly believed by someone with an intention to deceive others for certain purpose, social or personal. An ability to lie might be evolutionary in nature possibly to help in survival, since it is found in the non-human world also. In the biological perspective, each individual is at war against all others. Thus viewed, lies are the cardinal virtues for survival and, by implication, the carriers of evolution. In the human world, lying is morally blameworthy in a relatively un-obscure way. There may be cases of lying to which it may be difficult to take up a definite moral attitude. Certain types of lies might be morally acceptable and socially beneficial since they may block the otherwise (most damaging) global optimum solution of a negative sum game, while other types of lies are ethically and socially deplorable as they might block the optimal solution of a cooperative game. This must be judged pragmatically with the overall social welfare that they entail or produce.
    Keywords: Lies; morality; economics of lies; Taxonomy; survival; evolution; information asymmetry; gender and lies
    JEL: A13 D83 C70 D82 Z13
    Date: 2010–05–23
  10. By: Tisdell, Clement Allan
    Abstract: The conservation of natural forests contributes significantly to the goal of achieving sustainable economic development. There is, however, growing concern that natural forests (which provide tangible and intangible economic benefits to humankind) are being lost at a rate which (combined with other factors) seriously threatens sustainable economic development because of the environmental and social impacts of such loss. There is little doubt that in order to achieve sustainable development, multifunctional forest ecosystems (as well as other important ecosystems) need to be managed appropriately. However, determining the socially optimal level of conservation and use of forests is a challenging task. From a human point of view, it is clearly not optimal to conserve all natural forests. In other words, only some conservation of natural forest is socially optimal. The extent to which (traditional) neoclassical economics elucidates the matter is explored. It is found that due to market failures, a larger amount of forest conversion occurs than is socially optimal as determined by the application of traditional welfare economics. Nevertheless, neoclassical economics fails to address adequately the requirements for sustainable economic development. When the goal of economic sustainability is taken into account, even less forest conversion than recommended by neoclassical economics is socially optimal. Some economists (for example, Ramsey and Pigou) claim that the sustainability shortcoming of neoclassical economics can be overcome by applying a zero discount rate in making decisions about resource use. This, however, does not solve the problem because it does not give enough weight to the welfare of future generations and may result in too much forest conversion from an economic sustainability viewpoint. In general, variations in the discount rate are ineffective as a means for determining measures that ensure sustainable economic development. This finding seriously undermines established economic theory.
    Keywords: Discount rates, ecosystem services, environmental conservation, forests, intergenerational equity, multifunctionality, resource economics, sustainable development, Community/Rural/Urban Development, Environmental Economics and Policy, Q20, Q23, Q56, Q57,
    Date: 2010–02
  11. By: Das, Rituparna
    Abstract: Researchers reported that - there were two approaches to money supply determination in India: balance sheet or structural approach and money multiplier approach; the former focused on individual items in the balance sheet of the consolidated monetary sector in order to explain changes in money supply and the latter focused on the relationship between money stock and reserve money; the money multiplier approach emerged strongly as a critic to the balance sheet approach; between January 1976 and January 1978 there was a hot and rich debate between two groups of researchers, one group led by Gupta who believed in the money multiplier theory, the other group of RBI economists, who were not accepting this theory; the debate gave rise to a number of research papers where mostly regression techniques were used to estimate and forecast money supply function; Bhattacharya (1972), Gupta (1972) and Marwah (1972) used regression techniques to estimate money multiplier in India four years before the debate took place. The above debate is narrated below in an analytical style.
    Keywords: money supply; high powered money; reserve money; RBI; Working Group; multiplier; balance sheet; forecast; currency
    JEL: E0 E4
    Date: 2010
  12. By: Andrew Postlewaite (Department of Economics, University of Pennsylvania)
    Abstract: Social norms are often posited as an explanation of differences in economic behavior and performance of societies that are difficult to explain by differences in endowments and technology. Economists are often reluctant to incorporate social aspects into their analyses when doing so leads to models that depart from the “standard” model. I discuss ways that agents’ social environment can be accommodated in standard models and the advantages and disadvantages of doing so.
    Keywords: Social norms, social preferences
    JEL: D01
    Date: 2010–05–01
  13. By: Kamvar, Sep (Stanford University); Mogilner, Cassie (Stanford University); Aaker, Jennifer (Stanford University)
    Abstract: An examination of emotions reported on 12 million personal blogs along with the results of three experiments reveal that the meaning of happiness is not fixed; instead, it shifts as people age. Whereas younger people are more likely to associate happiness with excitement, older people are more likely to associate happiness with feeling peaceful. This change is driven by increased feelings of connectedness (to others and to the present moment) as one ages.
    Date: 2009–05

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