nep-hpe New Economics Papers
on History and Philosophy of Economics
Issue of 2010‒07‒24
fourteen papers chosen by
Erik Thomson
University of Manitoba

  1. Strategic Interaction and Conventions. By María Paz Espinosa; Jaromír Kovárík; Giovanni Ponti
  2. Pluralism In Economics And The Evaluation Of Economic Research In Italy By Marcella Corsi; Pierre D'Ippolito; Frederico L.F. Lucidi
  3. Economic and Monetary Union: insights into the theoretical conundrum of European Integration By Paulo Vila Maior
  4. The economic policy of Ronald Reagan By Magazzino, Cosimo
  5. State in Religion: Preamble to Pogrom By Garima Gupta; Anupriya Singhal
  6. Equilibre et possibilité de crises dans le modèle de reproduction élargie de Marx By Carlo Benetti; Alain Béraud; Edith Klimovsky; Antoine Rebeyrol
  7. An Institutional Analysis of the Enforcement Problems in Merger Control By Oliver Budzinski
  8. The inequality curse: constraints and political discretion By Pereira, Luiz Carlos Bresser
  9. Implications for models in monetary policy By Stan du Plessis
  10. Economics as a compartmental system: a simple macroeconomic example. By Fabio Tramontana; Mauro Gallegati
  11. Innocent frauds meet Goodhart’s Law in monetary policy By Bezemer, Dirk J; Gardiner, Geoffrey
  12. Léon Walras, précurseur du libertarisme de gauche ? By Jean-Sébastien Gharbi; Pelin Sekerler Richiardi
  13. Women’s Rights and Development By Raquel Fernández
  14. Nash Equilibrium and information transmission coding and decoding rules By Penelope Hernandez; Amparo Urbano Salvador; Jose E. Vila

  1. By: María Paz Espinosa (Universidad del País Vasco); Jaromír Kovárík (Universidad del País Vasco); Giovanni Ponti (Universidad de Alicante and Università di Ferrara)
    Abstract: The scope of the paper is the literature that employs coordination games to study social norms and conventions from the viewpoint of game theory and cognitive psychology. We claim that those two alternative approaches are complementary, as they provide different insights to explain how people converge to a unique system of self-fulfilling expectations in presence of multiple, equally viable, conventions. While game theory explains the emergence of conventions relying on efficiency and risk considerations, the psychological view is more concerned with frame and labeling effects. The interaction between these alternative (and, sometimes, competing) effects leads to the result that coordination failures may well occur and, even when coordination takes place, there is no guarantee that the convention eventually established will be the most efficient.
    Keywords: Behavioral Game Theory, conventions, social norms
    JEL: C72
    Date: 2010–07–12
  2. By: Marcella Corsi; Pierre D'Ippolito; Frederico L.F. Lucidi
    Abstract: We analyse Italy’s research evaluation exercise to discuss the issue of evaluating re-search in economics. We claim that evaluation and its criteria, together with its linkage to research institutions’ financing, are likely to affect the direction of research, in a problematic way. We claim that the ranking criteria adopted in Italy bring to a risk of disregarding histori-cal methods in favour of quantitative and econometric methods, and heterodox schools in favour of mainstream approaches. In order to preserve pluralism and originality of research, we propose a simple quantita-tive index based on field-normalisation.
    Keywords: Research evaluation; Contemporary research in economics; Italy
    JEL: A11 A14 B20 B40 B50
    Date: 2010–03–16
  3. By: Paulo Vila Maior (Faculty of Humanities and Social Sciences)
    Abstract: As part of an ongoing research, this paper focus on European monetary integration depicting to what extent existing theories and theoretical approaches fit with the ontology and subsequent developments of Economic and Monetary Union (EMU). A special emphasis goes to the Stability and Growth Pact (SGP) as a crucial ingredient of European monetary integration, particularly for the political turmoil it produced in recent years. On a previous conference (UACES Annual Conference 2007: Exchanging Ideas on Europe: Common Values and External Policies, Portsmouth, UK, 3-5 September 2007), EMU and the SGP were assessed through the lens of neofunctionalism, liberal intergovernmentalism, supranational governance, new institutionalism and the fusion thesis. This paper turns to the federal theory and the rational choice theory. Some argue that the power of ideas (the monetarist school) and national governments’ adjustment to a new international setting provide the broad explanation of the move towards EMU. Others claim that the project of European monetary integration was independent from such exogenous inputs, understanding the step towards EMU as part of the dynamism encapsulated by European integration. I test these contrasting perceptions against the explanatory power of federal theory and rational choice. The analysis of the SGP (in both the original version and after the November 2005 reform) follows the same methodology. The rationale behind the paper is twofold. On the one hand, whether EMU and the SGP fit into one of the theories under examination, and whether the corresponding mapping is telling of theoretical prevalence or dissemination. On the other hand, whether the SGP (and subsequent reform) converges or diverges with EMU’s theoretical matrix.
    Keywords: European integration theories, Economic and Monetary Union, Liberal intergovernmentalism, Neofunctionalism, Supranational governance, Institutionalism
    JEL: O19 E32
    Date: 2010
  4. By: Magazzino, Cosimo
    Abstract: “Reaganomics” is a popular term used to refer to the economic policies of Ronald W. Reagan, the 40th U.S. President (1981–1989), which called for widespread tax cuts, decreased social spending, increased military spending, and the deregulation of domestic markets. In this paper, we analyze American economic policy during the Eigh-ties. After a brief introduction, where a general economic context of that country is shown, we discuss and revise the economic literature about these issues. Afterwards, we present an augmented IS-LM model for Reagan years, estimated bay VAR techniques.
    Keywords: Reaganomics; Supply-Side Economics; Laffer curve; tax cuts; twin deficits; IS-LM model; VAR.
    JEL: E65 N12
    Date: 2010–06–30
  5. By: Garima Gupta; Anupriya Singhal
    Abstract: India is a secular state in which all faiths enjoy freedom of worship. The concept of secularism is implicit in the Preamble to our Constitution, which declares the resolve of the people to secure to all its citizens “liberty of thought, belief, faith, and worship.†There is no mysticism in the secular character of the state. Secularism is neither anti-god nor pro-god, it treats alike the devout, the agnostic, and the atheist. It eliminates god from the matters of the state and ensures that no one shall be discriminated against on the ground of religion. The state can have no religion of its own. It should treat all religions equally. In a secular state, the state is only concerned with the relation between man and man. It is not concerned with the relationship of man with god. It is left to the individual’s conscience. Man is not answerable to the state for any of his religious views. There can be no compulsions in law for any creed or practice of any form of worship.1 Since time immemorial, institutionalised religion has been “oppressive†and a tool in the hands of a few power-wielding people and it is no different in the contemporary scenario. [Working Paper No. 0037]
    Keywords: liberty of thought, belief, faith, worship,Secularism, freedom of worship, Preamble,Constitution
    Date: 2010
  6. By: Carlo Benetti; Alain Béraud; Edith Klimovsky; Antoine Rebeyrol
    Abstract: In the numerical examples used by Marx to study the reproduction of social capital, the economy reaches a steady growth path in only two periods. This surprising outcome has been interpreted by Marx’s readers as a property of a model which excludes any sort of economic crisis. This paper shows that this is not the case. Depending on the proportion between sectors and on the accumulation rate in the sector producing the means of production, two kinds of crises can occur. Following a suggestion of Marx, we emphasize the analysis of the physical conditions of reproduction and, on such a basis, we determine the critical proportions beyond which a crisis occurs. If, as in Marx, commodities are exchanged at their labor value, the critical proportions will be changed.
    Keywords: Marx, reproduction, crisis
    JEL: O41 B14 B51
    Date: 2010
  7. By: Oliver Budzinski (Department of Environmental and Business Economics, University of Southern Denmark)
    Abstract: The literature identifies a significant drop in merger control enforcement activity on both sides of the Atlantic during the last decade. Furthermore, this drop in enforcement activity is convincingly connected to enforcement problems on the sides of the competition agencies. This paper goes beyond the identification of under-enforcement and proceeds to the analysis of causes for the enforcement problems and the discussion of possible solutions. It argues that modern institutional economics suggest that a lack of ‘fit’ between the ‘new’ economic approach to merger control and the ‘old’ institutional environment of the legal enforcement procedures explains the drop of enforcement effectiveness on both sides of the Atlantic by implicitly raising the standard of proof, leading to unattainable standards, virtually eroding merger control enforcement power. As a consequence, the effects-based approach to merger control fails due to its failure to acknowledge its institutional implications. Reconciling industrial and institutional economics – promoting a comprehensive competition economics approach – however offers avenues towards an effective use of sophisticated industrial economic theories and methods. Firstly, incorporating economics into enforceable rules like strong rebuttable presumptions would adjust substantive merger control policy to the procedural institutional environment. Secondly, a reform of the standards of proof provisions would adjust the procedural framework to the characteristics of modern economic evidence and concepts. In summary, the enforcement problems in merger control require even more economic thinking, complementing industrial economic thought with institutional economic thought. I like to thank Arndt Christiansen and Eva Roth as well as the participants of research seminars at the Kiel Institute for the World Economy and at the Düsseldorf Institute for Competition Economics (DICE) for valuable comments on earlier versions of this paper.
    Keywords: Merger control, European competition policy, antitrust, enforcement problems, in-stitutional economics, more economic approach, standard of proof
    JEL: K21 L40 D02
    Date: 2010–06
  8. By: Pereira, Luiz Carlos Bresser
    Abstract: We live in an unjust world characterized by economic inequality. No liberaltheory of justice is able to justify it. Inequality is not “solved” with equality ofopportunity or meritocracy. Nor by the socialist and republican critique. The poor willhave to count with them and with democracy to make social progress reality. In theirpolitical struggle, they will face one economic constraint: the expected profit rate mustremain attractive to business investors. Yet, giving that technological progress inincreasingly capital-saving, this economic constraint does not obstruct that wages growabove the productivity rate and inequality is reduced. What really is an obstacle to socialjustice in the rich countries is, on one hand, the power that capitalist rentiers retain andfinancists acquired, and, on the other, the competition originated in low wage countries.
    Date: 2010–07–14
  9. By: Stan du Plessis (Department of Economics, University of Stellenbosch)
    Abstract: Monetary authorities have been implicated in the financial crisis of 2007-2008. John Muellbauer, for example, has blamed what he thought was initially inadequate policy responses by central banks to the crisis on their models, which are, in his words, “overdue for the scrap heap”. This paper investigates the role of monetary policy models in the crisis and finds that (i) it is likely that monetary policy contributed to the financial crisis and (ii) that an inappropriately narrow suite of models made this mistake easier. The core models currently used at prominent central banks were not designed to discover emergent financial fragility. In that respect John Muellbauer is right. But the implications drawn here are less dramatic than his: while the representative agent approach to microfoundations now seems indefensible, other aspects of modern macroeconomics are not similarly suspect. The case made here is rather for expanding the suite of models used in the regular deliberations of monetary authorities, with new models that give explicit roles to the financial sector, to money and to the process of exchange. Recommending a suite of models for policy making entails no methodological innovation. That is what central banks do; though, of course, how they do it is open to improvement. The methodological innovation is the inclusion of a model that would be sensitive to financial fragility, a sensitivity that was absent in the run-up to the current financial crisis.
    Keywords: Monetary policy, financial crisis, methodology of policy models
    JEL: B40 E13 E44 E52
    Date: 2010
  10. By: Fabio Tramontana (Department of Economics, University of Ancona, Italy.); Mauro Gallegati (Department of Economics, University of Ancona, Italy.)
    Abstract: The application in Economics of methods and tools originally thought for other disciplines is not new. In this paper we show how the compartmental approach, typical of Biology, Medicine, Chemistry, etc., can be used as a tool to represent the heterogeneity of the agents and introduce it into the dynamic models. We also show that in some cases the subdivision of the agents into compartments can be useful for the government in order to obtain some results more efficiently.
    Keywords: Compartmental systems, Heterogeneous agents, Fiscal policy.
    JEL: C60 E0 E1 E12
    Date: 2010
  11. By: Bezemer, Dirk J; Gardiner, Geoffrey
    Abstract: This paper discusses recent UK monetary policies as instances of Galbraith’s ‘innocent frauds’, including the idea that money is a thing rather than a relationship, the fallacy of composition that what is possible for one bank is possible for all banks, and the belief that the money supply can be controlled by reserves management. The origins of the idea of QE, and its defense when it was applied in Britain, are analysed through this lens. An empirical analysis of the effect of reserves on lending is conducted; we do not find evidence that QE ‘worked’ either by a direct effect on money spending, or through an equity market effect. These findings are placed in a historical context in a comparison with earlier money control experiments in the UK.
    Keywords: quantitative easing; UK; innocent frauds; accounting
    JEL: E58 E52
    Date: 2010–07
  12. By: Jean-Sébastien Gharbi (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - Université de la Méditerranée - Aix-Marseille II - Université Paul Cézanne - Aix-Marseille III - Ecole des Hautes Etudes en Sciences Sociales (EHESS) - CNRS : UMR6579); Pelin Sekerler Richiardi (Centre Walras-Pareto - Université de Lausanne, PHARE - Pôle d'Histoire de l'Analyse et des Représentations Economiques - CNRS : FRE2541 - Université Panthéon-Sorbonne - Paris I - Université de Paris X - Nanterre)
    Abstract: Les libertariens de gauche défendent à la fois la pleine propriété de soi et l'égale propriété des ressources naturelles. Pour cette raison, ils présentent Léon Walras, qui prônait la pleine propriété de nos facultés personnelles et la propriété commune des terres (1896), comme un de leurs précurseurs (Vallentyne, 1999 ; Vallentyne & Steiner, 2000). Le seul texte qui a véritablement interrogé cette filiation théorique (Bourdeau, 2006) tentait de distinguer le républicanisme de Walras du libertarisme de gauche contemporain en montrant que ces deux positions adoptaient des conceptions différentes de la propriété des ressources naturelles. Cet argument nous semble pouvoir être discuté. Pour ce faire, nous nous proposons, dans un premier temps, de détailler les similitudes qui existent dans la présentation que Walras et les libertariens de gauche donnent de la propriété de soi et de celle des ressources naturelles. Les deux positions aboutissent en effet à une même remise en cause du terme classique de « propriété » concernant les ressources naturelles. Notre démarche ne consistera toutefois pas à faire de Walras un libertarien de gauche. Nous mettrons, dans un second temps, en évidence les points de divergence entre la théorie de la propriété de Walras et la théorie de la justice sociale défendue par les libertariens de gauche. Cela nous permettra, dans un troisième temps, de réinterroger le rapport de Léon Walras au libertarisme de gauche et de déterminer s'il peut à bon droit être qualifié de « précurseur » de cette théorie contemporaine de la justice.
    Keywords: Léon Walras, Libertarisme de gauche, Justice sociale, Propriété
    Date: 2010–07–12
  13. By: Raquel Fernández (NYU)
    Abstract: Why has the expansion of women’s economic and political rights coincided with economic development? This paper investigates this question, focusing on a key economic right for women: property rights. The basic hypothesis is that the process of development (i.e., capital accumulation and declining fertility) exacerbated the tension in men’s conflicting interests as husbands versus fathers, ultimately resolving them in favor of the latter. As husbands, men stood to gain from their privileged position in a patriarchal world whereas, as fathers, they were hurt by a system that afforded few rights to their daughters. The model predicts that declining fertility would hasten reform of women’s property rights whereas legal systems that were initially more favorable to women would delay them. The theoretical relationship between capital and the relative attractiveness of reform is non-monotonic but growth inevitably leads to reform. I explore the empirical validity of the theoretical predictions by using cross-state variation in the US in the timing of married women obtaining property and earning rights between 1850 and 1920.
    Keywords: Women’s Rights, Property Rights, Economic Development
    JEL: D1 O1 Z13
    Date: 2010–05
  14. By: Penelope Hernandez (ERI-CES); Amparo Urbano Salvador (ERI-CES); Jose E. Vila (ERI-CES)
    Abstract: The design of equilibrium protocols in sender-receiver games where communication is noisy occupies an important place in the Economic literature. This paper shows that the common way of constructing a noisy channel communication protocol in Information Theory does not necessarily lead to a Nash equilibrium. Given the decoding scheme, it may happen that, given some state, it is better for the sender to transmit a message that is different from that prescribed by the codebook. Similarly, when the sender uses the codebook as prescribed, the receiver may sometimes prefer to deviate from the decoding scheme when receiving a message.
    Keywords: Noisy channel, Shannon's Theorem, sender-receiver games, Nash equilibrium
    JEL: C72 C02
    Date: 2010–07

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