nep-hpe New Economics Papers
on History and Philosophy of Economics
Issue of 2010‒06‒11
ten papers chosen by
Erik Thomson
University of Manitoba

  1. The birth of modern economic science Reading Gilles Campagnolo’s book By Nikolay Nenovsky
  2. Dissolving the Chimera of the ‘Adam Smith Problem’ By Suri Ratnapala
  3. Is economics coursework, or majoring in economics, associated with different civic behaviors? By Sam Allgood; William Bosshardt; Wilbert van der Klaauw; Michael Watts
  4. The Collapse of Interwar Vienna: Oskar Morgenstern’s Community, 1925 - 1950 By Robert Leonard
  5. From Weight Watchers to State Watchers: Towards a Narrative of Liberalism By Klein, Daniel B.
  6. A neo-Ricardian critique of the traditional static theory of trade, customs unions and common markets By Mariolis, Theodore
  7. Economic and Social Thoughts of Ivan Pososhkov (1652-1726) By Nikolay Nenovsky
  8. The Ecological and Civil Mainsprings of Property: An Experimental Economic History of Whalers’ Rules of Capture By Bart J. Wilson; Taylor Jaworski; Karl Schurter; Andrew Smyth
  9. The current financial crisis, monetary policy and Minsky's structural instability hypothesis By Domenica Tropeano
  10. Adam Smith's Answer to the Feldstein-Horioka Paradox: The Invisible Hand Revisited By Ayumu Yasutomi; Charles Yuji Horioka

  1. By: Nikolay Nenovsky
    Abstract: The 1870s have always held a special attraction for specialists in the history of thought. For economic theory these are the years of the Great Crossroads when economic theory was at critical breaking point, after which several powerful theoretical streams emerged that were to determine later on the overall course of the evolution of economics. The book by the French economist and philosopher Gilles Campagnolo is an attempt to find out exactly what happened in the years of the Great Crossroads. It offers not only factual and historical reading, but also theoretical interpretation to explaining the evolution, mutual influence and int ermingling of the above individual schools of thought in the economic science. The present paper is a review essay on Gilles Campagnolo’s new book.
    Keywords: history of economic thought, Austrian analysis
    JEL: B10 B40
    Date: 2010–06
  2. By: Suri Ratnapala
    Abstract: In The Wealth of Nations, Adam Smith set out his influential theory that societies achieve prosperity by securing the freedom of individuals to pursue their own end by the means they choose within a framework of rules of justice. In his earlier work The Theory of Moral Sentiments, Smith developed his thesis about the origins of our moral sentiments and the emergence of rules of justice. The socalled ‘Adam Smith Problem’ concerns the perceived inconsistency between Smith’s defence of selfinterest in the Wealth of Nations and his emphasis of sympathy as the origin of moral sentiments in the earlier work. The existence of the ‘Adam Smith Problem’ has been contested by many writers. The present author provides a number of new arguments to demonstrate the illusory nature of the problem by revisiting the key elements Smith’s moral theory. The author argues that the problem dissolves when the role of justice in providing the conditions of free trade is understood. Smith’s tirade against wealth worship is explained as part of his defence of justice and not a condemnation of wealth accumulation. According to this reading, the Theory of Moral Sentiments is a powerful statement of the moral basis of capitalism.
    Date: 2010–03
  3. By: Sam Allgood; William Bosshardt; Wilbert van der Klaauw; Michael Watts
    Abstract: Studies regularly link levels of educational attainment to civic behavior and attitudes, but only a few investigate the role played by specific coursework. Using data collected from students who attended one of four public universities in our study, we investigate the relationship between economics coursework and civic behavior after graduation. Drawing from large samples of students in economics, business, or general majors, we compare responses across the three groups and by the number of undergraduate economics courses completed. We find that undergraduate coursework in economics is strongly associated with political party affiliation and with donations to candidates or parties, but not with the decision to vote or not vote. Nor is studying economics correlated with the likelihood (or intensity of) volunteerism. While we find that the civic behavior of economics majors and business majors is similar, it appears that business majors are less likely than general majors to engage in time-consuming behaviors such as voting and volunteering. Finally, we extend earlier studies that address the link between economics coursework and attitudes on public policy issues, finding that graduates who studied more economics usually reported attitudes closer to those expressed in national surveys of U.S. economists. Interestingly, we find the public policy attitudes of business majors to be more like those of general majors than of economics majors.
    Keywords: Education ; Economics - Study and teaching ; Business and education ; Human behavior ; Volunteers
    Date: 2010
  4. By: Robert Leonard
    Abstract: From the perspective of science, art and intellectual life in general, Interwar Vienna was one of the most vibrant communities in modern European history. Within the field of economics, it was home to, amongst others, Ludwig von Mises, Friedrich von Hayek, Hans Mayer, Gottfried Haberler, Fritz Machlup, Oskar Morgenstern, Karl Menger and Abraham Wald. The community flourished after the end of World War I, and then began to suffer in the early 1930’s as a result of growing political instability and rising anti-semitism. With the Anschluss of Austria by the Third Reich in March 1938, it collapsed completely, never to recover. Drawing on the personal papers of two key participants, Oskar Morgenstern and Karl Menger, and also on the archives of the Rockefeller Foundation, this paper provides a portrait of that community, chronicling its evolution and dramatic collapse. Particular attention is paid to the milieu surrounding Morgenstern, both as director of the Rockefeller-funded Austrian Institute for Business Cycle Research and as philosophical “dissident”. In collaborating with mathematicians Menger, Wald and, later, John von Neumann, he gradually forsook his Austrian theoretical legacy. The account detailed here shows conflict and tension to have been central to both the life and death of this fabled community.
    Date: 2010–02
  5. By: Klein, Daniel B. (George Mason University and the Ratio Institute)
    Abstract: Alan Kahan’s Mind vs. Money: The War between Intellectuals and Capitalism (Transaction Publishers, 2010) treats intellectuals as a class, and tells of intellectuals’ yearning to play the role of cleric and of aristocrat. Kahan says that intellectuals are necessarily alienated from “capitalism.” In this essay I discuss Kahan’s erudite and insightful – though sometimes exasperating – work, and I take the opportunity to develop some ideas on the topic, ideas in line with Hayek’s thought.
    Keywords: Intellectuals; capitalism; liberalism; statism; Hayek
    JEL: A10 B00
    Date: 2010–06–04
  6. By: Mariolis, Theodore
    Abstract: The vast majority of meaningful discussions about the processes of economic integration and liberalization of trade have so far revolved around the neoclassical theory. This paper is based on the neo-Ricardian theory, briefly investigates the issues of free trade, customs unions and common markets, and shows that the relevant neoclassical propositions do not hold and/or make no sense in a world ‘of production of commodities by means of commodities’. Thus, the fundamental theoretical presuppositions of the aforesaid debate are called in question.
    Keywords: common markets; customs unions; free trade; neo-Ricardian theory; traditional static theory
    JEL: B51 F15 F11 D57
    Date: 2010
  7. By: Nikolay Nenovsky
    Abstract: In this paper, I will try to address some criticism to Bruno Leoni’s general theory of law and society. In his well known book Freedom and the Law (1961) –in the opinion of some Italian scholars, to be considered a libertarian Manifesto–, he stressed at least five main points: i) legislation is incompatible with the long-run certainty of the law, that is when the law is not properly the result of the exercise of the arbitrary will of particular men; ii) courts of justice describe or discover the law, and do not make the law; iii) courts cannot be considered as legislators, not only because of their psychological attitude towards the law, which they discover, and do not create, but above all because of their fundamental dependance on the parties concerned in their process of making the law: so, a court must not be allowed to reverse its precedents – at least to a certain extent; iv) the whole process, and so the law, can be described as a sort of vast, continuous, and chiefly spontaneous collaboration between the judges and the judged in order to discover what the people’s will is in a series of definite instances –a collaboration that in many respects may be compared to that existing among all the partecipants in a free market; v) in our time, the mechanism of the judiciary in certain countries where supreme courts are established results in the imposition of the personal views of the members of these courts, or of a majority of them: it is a somewhat contradictory introduction of the legislative process under the deceptive label of lawyers’ or judiciary law at its highest stage. It seems to me that Leoni’s theory of law and society as a normative doctrine for a «libertarian», or «post-hayekian», society is not entirely successful: in particular, topics as the relation between law and legislation, the proper sense of legal concepts (if any), and the possibility to survive for individual freedom as a non-historical but ideological concept within an open, i.e. democratic , society, will be put under scrutiny in the paper, according to Leoni’s doctrine of law as an individual claim
    Keywords: history of economic and social thought, Russia
    JEL: B00 B41
    Date: 2010–01
  8. By: Bart J. Wilson (Economic Science Institute, Chapman University); Taylor Jaworski (Department of Economics, University of Arizona); Karl Schurter (Department of Economics, University of Virginia); Andrew Smyth (Department of Economics, Florida State University)
    Abstract: This paper uses a laboratory experiment to probe the proposition that property emerges anarchically out of social custom. We test the hypothesis that whalers in the 18th and 19th century developed rules of conduct that minimized the sum of the transaction and production costs of capturing their prey, the primary implication being that different ecological conditions lead to different rules of capture. Holding everything else constant, we find that simply imposing two different types of prey is insufficient to observe two different rules of capture. Another factor is essential, namely that the members of the community are civil-minded.
    Keywords: property rights, endogenous rules, whaling, experimental economics
    JEL: C92 D23 K11 N50
    Date: 2010–05
  9. By: Domenica Tropeano (University of Macerata)
    Abstract: <p>In the paper it is argued that Minsky's theory of financial fragility, interpreted as a the-<br />ory of structural instability, is useful to interpret the current crisis. Structural instability<br />means that a small event can change the qualitative characteristic of a system and thus<br />even its dynamic properties. As Minsky wrote, beyond the uncertainty arising from ex-<br />pected inflows and outflows what matters is the state of markets when people need to take<br />positions in them. Before the financial crisis, though many agents were speculative and<br />Ponzi ones, the extreme liquidity of the markets has allowed them to operate quietly for a<br />long time. When the crisis exploded a tiny increase in the bankruptcy rate of mortgages<br />caused the breakdown of the whole financial system. The qualitative change that followed<br />in this case was the destruction of markets. Monetary policy had to use unusual tools<br />in order to cope with this event. The Federal Reserve however has changed its operating<br />procedures to overcome this problem to overcome this problem only late, as the financial<br />crisis had already propagated to the real sector. Thus the paper concludes that the Federal<br />Reserve did not perceive the potential danger for systemic stability of a huge unregulated<br />short term money market and did not switch promptly enough to the new measures once<br />the crisis started.</p>
    Date: 2010–04
  10. By: Ayumu Yasutomi; Charles Yuji Horioka
    Abstract: In this paper, we show that Adam Smith pointed out the existence of the Feldstein-Horioka Paradox or Puzzle and even gave an explanation for it morethan 200 years before the publication of Feldstein and Horioka (1980). Smith argues that it is the pursuit of their own security that leads owners of capital to invest their capital in their own country to as great an extent as possible and that it is the pursuit of security rather than the pursuit of profit that leads individuals to promote the good of society as a whole via the ginvisible hand.h
    Date: 2010–05

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