
on History and Philosophy of Economics 
By:  L. Randall Wray 
Abstract:  Before we can reform the financial system, we need to understand what banks do; or, better, what banks should do. This paper will examine the later work of Hyman Minsky at the Levy Institute, on his project titled "Reconstituting the United States’ Financial Structure." This led to a number of Levy working papers and also to a draft book manuscript that was left uncompleted at his death in 1996. In this paper I focus on Minsky’s papers and manuscripts from 1992 to 1996 and his last major contribution (his VeblenCommons Award–winning paper). Much of this work was devoted to his thoughts on the role that banks do and should play in the economy. To put it as succinctly as possible, Minsky always insisted that the proper role of the financial system was to promote the "capital development" of the economy. By this he did not simply mean that banks should finance investment in physical capital. Rather, he was concerned with creating a financial structure that would be conducive to economic development to improve living standards, broadly defined. Central to his argument is the understanding of banking that he developed over his career. Just as the financial system changed (and with it, the capitalist economy), Minsky’s views evolved. I will conclude with general recommendations for reform along Minskyan lines. 
Keywords:  China; Hyman Minsky; Banks and Shadow Banks; Money Manager Capitalism; Finance Capital; Financial Instability Hypothesis; Global Financial Crisis; Debt Deflation Theory 
JEL:  E12 E32 E58 G2 G18 G21 
Date:  2010–08 
URL:  http://d.repec.org/n?u=RePEc:lev:wrkpap:wp_612&r=hpe 
By:  Thieme, Sebastian 
Abstract:  This paper analyses the term “subsistence” to utilise it for scientific purposes. In doing so, the term will be reconstructed by an evolutionary view. Afterwards, the term will be discussed and develpoped with respect to the socalled paradox of the poverty line. 
Keywords:  Viabilität; Subsistenz; Viabilitätsprinzip; Evolutorik; Armut; Gerechtigkeit; Mindestlohn; Niedriglohnsektor; Selbsterhalt; Selbstversorgung; Paradoxie des Existenzminimums; paradox of the poverty line; viability; subsistence; minimum wage; principle of viability; evolutionary economics; ethics 
JEL:  B59 Z13 B00 I32 
Date:  2010–08–21 
URL:  http://d.repec.org/n?u=RePEc:pra:mprapa:24553&r=hpe 
By:  Grossbard, Shoshana (San Diego State University, California) 
Abstract:  Much of the recent literature in household economics has been critical of unitary models of household decisionmaking. Most alternative models currently used are bargaining models and consensual models, including collective models. This paper discusses another alternative: independent individual models of decisionmaking that don't make any specific assumptions of jointness of decisionmaking in households. Unitary models are typically associated with Gary Becker even though most of Becker’s own analyses of the family did not use his unitary model. This is especially the case with the specifically independent individual models presented in his theory of marriage. Decisionmaking models assuming independent individual household members in the Becker tradition are reminiscent of models of labor markets in which firms and workers are independent decisionmakers. As basis for econometric estimations, such models may be preferable to models imposing the structure of a game or a household welfare function. 
Keywords:  unitary model, household model, Gary Becker, marriage, labor 
JEL:  D11 J00 
Date:  2010–08 
URL:  http://d.repec.org/n?u=RePEc:iza:izadps:dp5138&r=hpe 
By:  Wu, Haoyang 
Abstract:  In the field of mechanism design, the revelation principle has been known for decades. Myerson, MasColell, Whinston and Green gave formal proofs of the revelation principle. However, in this paper, we argue that there are serious bugs hidden in their proofs. 
Keywords:  Revelation principle; Mechanism design; Implementation theory. 
JEL:  D71 C72 
Date:  2010–08–19 
URL:  http://d.repec.org/n?u=RePEc:pra:mprapa:24516&r=hpe 
By:  C. D. Aliprantis; I. Topolyan 
Abstract:  This paper discusses the problem of stability of equilibrium points in normal form games in the tremlinghand framework. An equilibrium point is called perffect if it is stable against at least one seqence of trembles approaching zero. A strictly perfect equilibrium point is stable against every such sequence. We give a sufficient condition for a Nash equilibrium point to be strictly perfect in terms of the primitive characteristics of the game (payoffs and strategies), which is new and not known in the literature. In particular, we show that continuity of the best response correspondence (which can be stated in terms of the primitives of the game) implies strict perfectness; we prove a number of other useful theorems regarding the structure of best responce correspondence in normal form games. 
Keywords:  Strictly perfect equilibrium, best responce correspondence, unit simplex, face of a unit simplex 
JEL:  C7 
Date:  2009–08 
URL:  http://d.repec.org/n?u=RePEc:pur:prukra:1224&r=hpe 
By:  Cappelen, Alexander W; Konow, James; Sorensen, Erik O; Tungodden, Bertil 
Abstract:  Choices involving risk significantly affect the distribution of income and wealth in society. This paper reports the results of the first experiment, to our knowledge, to study fairness views about risktaking, specifically whether such views are based chiefly on ex ante opportunities or on ex post outcomes. We find that, even though many participants focus exclusively on ex ante opportunities, most favor some redistribution ex post. Many participants also make a distinction between ex post inequalities that reflect differences in luck and ex post inequalities that reflect differences in choices. These findings apply to both stakeholders and impartial spectators. 
Keywords:  fairness; justice; risk 
JEL:  D63 C91 
Date:  2010–03–10 
URL:  http://d.repec.org/n?u=RePEc:pra:mprapa:24475&r=hpe 
By:  I. Topolyan 
Abstract:  We formulate and prove a modification of EilenbergMontgomery fixedpoint theorem, which is a generalization of Kakutani’s theorem. It enables us to provide a direct proof of the existence of perfect equilibria in finite normal form games and extensive games with perfect recall. We construct a correspondence whose fixed points are precisely the perfect equilibria of a given finite game. Existence of a fixed point is secured by the modified version of EilenbergMontgomery theorem. 
Keywords:  Perfect equilibrium, best response correspondence, unit simplex, absolute neighborhood retract, deformation retract, fixed point 
JEL:  C7 
Date:  2009–10 
URL:  http://d.repec.org/n?u=RePEc:pur:prukra:1226&r=hpe 
By:  David F. Hendry; Grayham E. Mizon 
Abstract:  Almost no economic time series is either weakly or strictly stationary: distributions of economic variables shift over time. Thus, the present treatment of expectations in economic theories of intertemporal optimization is inappropriate. It cannot be proved that conditional expectations based on the current distribution are minimum meansquare error 1step ahead predictors when unanticipated breaks occur, and consequentially, the law of iterated expectations then fails intertemporally. A second consequence is that dynamic stochastic general equilibrium models are intrinsically nonstructural. 
Keywords:  Intertemporal optimization, Conditional expectations, Law of interated expectations, Unanticipated breaks 
JEL:  C02 C22 
Date:  2010 
URL:  http://d.repec.org/n?u=RePEc:oxf:wpaper:497&r=hpe 