nep-hpe New Economics Papers
on History and Philosophy of Economics
Issue of 2010‒10‒23
nineteen papers chosen by
Erik Thomson
University of Manitoba

  1. Derechos de propiedad y subjetivos en Juan de Mariana By Fernandez, Angel
  2. Vilfredo Pareto and the methodology of the Italian tradition in public finance By Amedeo Fossati
  3. A Century of Methodological Individualism Part 1: Schumpeter and Menger By Andy Denis
  4. A Century of Methodological Individualism Part 2: Mises and Hayek By Andy Denis
  5. Paul Davidson: Om Keynes – en kommenterende boganmeldelse By Finn Olesen
  6. "A Post Keynesian Perspective on the Rise of Central Bank Independence: A Dubious Success Story in Monetary Economics" By Jörg Bibow
  7. The Economic Policy of Ronald Reagan. Between Supply-Side and Keynesianism By Magazzino, Cosimo
  8. Economy and economics: the twin crises By Alessandro Vercelli
  9. Dopo la crisi: le responsabilità dell’economista come ricercatore, docente e cittadino By Alessandro Vercelli
  10. The World Cup of Economics Journals: A Ranking by a Tournament Method By Laszlo A. Koczy; Martin Strobel
  11. Brains that make revolutions: the neural theory in the French Revolutions (1789-99, 1848-51, 1870-71), Iran (1977-81) and Bolshevik (1917-1924) By Estrada, Fernando
  12. ‘Marvellous intellectual feasts’:Arthur Lewis at the London School of Economics 1933–1948 By Barbara Ingham; Paul Mosley
  13. The Framing of Games and the Psychology of Play By Martin Dufwenberg; Simon Gaechter; Heike Hennig-Schmidt
  14. Weight of argument and economic decisions By Alessandro Vercelli
  15. Truth in Consequentiality: Theory and Field Evidence on Discrete Choice Experiments By Frédéric Roy-Vigneault; Daniel Rondeau; Maurice Doyon; Christian A. Vossler
  16. Condiciones para el fomento de la felicidad pública By Domingo Gallego
  17. De Finetti on insuring uncertainty By Alberto Feduzzi; Jochen Runde; Carlo Zappia
  18. Awareness and equilibrium By Hill, Brian
  19. Pasinetti’s Structural Change and Economic Growth: a conceptual excursus By Garbellini, Nadia; Wirkierman, Ariel Luis

  1. By: Fernandez, Angel
    Abstract: This working paper aims to point out the ideas defended by the Spaniard Juan de Mariana in the early XVII century in his book “De Rege et Regis Institutione” and in his monetary treatise “De Monetae Mutatione”. Juan de Mariana not only summarized the ideas of the Spanish scholastics in such books, but also added powerful arguments to the defense of private property against the different forms of State coercion, a key concept in the political economics of an open society. That is to say, he bravely defended the strict protection of citizen's private property and subjective rights against the reason of State and tyrants. As a result of it, his book “De Rege et Regis Institutione” was burned in public in the year 1610 by order of the French Parliament. Furthermore, due to his monetary treatise, he was investigated by the court of Inquisition, which ordered his preventive imprisonment for one year. His work "De Monetae Mutatione" was persecuted in Europe by the Spanish ambassadors, who were ordered to recover and destroy all copies of his monetary masterpiece. There is no doubt that he was well known throughout Europe in the early decades of the XVII century, which was precisely when he clearly explained the main economic concepts which have been reflected in the works of later authors.
    Keywords: History of Economic Thought; School of Salamanca; Property Rights; Subjective Rights; Law and Economics.
    JEL: O43 K12 K11 B15 P16
    Date: 2010–09–18
  2. By: Amedeo Fossati (Department of Economics and Quantitative Methods, University of Genoa, Italy)
    Abstract: In the last decade of the nineteenth century, Italian scholars started using a scientific methodology to tackle public finance problems. Their studies are now referred to as the Italian tradition in public finance, whose origin is considered to lie with De Viti de Marco (1888). Shortly before his death in 1950, Fasiani, the last scholar of the Italian tradition, published an important article, in which he showed that, even if Pareto never worked in public finance, he had some influence on the Italian public finance scholars. This paper aims to draw scholarly attention to the above article and to direct new light onto Pareto’s methodological influence on the Italian tradition. Firstly it is pointed out that the Paretian idea of science deeply influenced the late scholars of the Italian tradition. Secondly, it is shown that Paretian sociology was less important than his economic methodology. Thirdly, it is argued that it is necessary to distinguish the problems concerning the explanation of public choices, from the problems of the economic effects of public policies; then, in a generalized Paretian approach, most public policies may be studied under economic hypothesis. It follows that much of the Italian tradition may be taken back to a Paretian approach, even if it remains true that, in the latter, public choices may be explained by sociological reasoning only.
    Keywords: Vilfredo Pareto; Italian tradition in public finance
    JEL: B00 B30 B4
    Date: 2010–08
  3. By: Andy Denis (Department of Economics, City University, London)
    Abstract: 2009 marks the centenary of methodological individualism (MI). The phrase was first used in English in a 1909 QJE paper by Joseph Schumpeter. Yet after 100 years there is considerable confusion as to what the phrase means. MI is often invoked as a fundamental description of the methodology both of neoclassical and Austrian economics, as well as other approaches, from New Keynesianism to analytical Marxism. However, the methodologies of those to whom the theoretical practice of MI is ascribed differ profoundly on the status of the individual economic agent, some adopting a holistic and some a reductionist standpoint. The purpose of the research of which this paper is part is to uncover and evaluate some of the meanings of the phrase methodological individualism (MI). This first paper considers the contributions of Joseph Schumpeter, who was the first to use the term, and of Carl Menger, considered by many to be the founder of MI. The approach adopted is to apply the intellectual apparatus developed in Denis (2004) to the arguments of these writers. This constitutes a test of that apparatus: is it able to clarify the standpoints to which it is applied? The conclusion reached is that both Schumpeter and Menger adopt a reductionist ontology in the sense of Denis (2004).
    Date: 2010–02
  4. By: Andy Denis (Department of Economics, City University, London)
    Abstract: 2009 marks the centenary of methodological individualism (MI). The phrase was first used in English in a 1909 paper by Joseph Schumpeter in the Quarterly Journal of Economics. Yet after 100 years there is considerable confusion as to what the phrase means. MI is often invoked as a fundamental description of the methodology both of neoclassical and Austrian economics, as well as of other approaches, from New Keynesianism to analytical Marxism. However, the methodologies of those to whom the theoretical practice of MI is ascribed differ profoundly on the status of the individual economic agent, some adopting a holistic and some a reductionist standpoint. The purpose of the research of which this paper is part is to uncover and evaluate some of the meanings of the phrase methodological individualism (MI). The first paper in the series, ?A Century of Methodological Individualism Part 1: Schumpeter and Menger? (Denis, 2009), considers the contributions of Joseph Schumpeter, who was the first to use the term, and of Carl Menger, considered by many to be the founder of MI. The present paper considers the contributions of von Mises and Hayek. The conclusion drawn is that Mises and Hayek based their methodological stance on fundamentally different ontologies, with von Mises building on the reductionism of previous writers such as Schumpeter and Menger, and Hayek, on the contrary, adopting a holistic ontology more in line with Adam Smith, Marx and Keynes. From an ontological perspective this leaves Hayek as something of an outlier in the Austrian tradition.
    Date: 2010–02
  5. By: Finn Olesen (Department of Environmental and Business Economics, University of Southern Denmark)
    Abstract: Længe har den post keynesianske tænkning angrebet den makroteoretiske mainstream for at have misforstået det fundamentale budskab – teoretisk som metodologisk – som Keynes gav i sin The General Theory. Ifølge post keyne-sianerne har mainstream en for harmonisk opfattelse af, hvorledes det makroøkonomiske systems tilpasningsprocesser forløber. Og dette er en kritik, som har fået en fornyet aktualitet de sidste års internationale finanskrise og økonomiske recession in mente. En af de mest markante røster i dette kor af mere eller mindre heterodoks tænkende økonomer er og har været Paul Davidson. I nærværende bidrag sættes der fokus på Davidsons bog om Keynes i serien Great Thinkers in Economis. Jeg skal takke Svend Ole Madsen, IME, for kommentarer til en tidligere version af nærværende papir.
    Date: 2010–09
  6. By: Jörg Bibow
    Abstract: This paper critically assesses the rise of central bank independence (CBI) as an apparent success story in modern monetary economics. As to the observed rise in CBI since the late 1980s, we single out the role of peculiar German traditions in spreading CBI across continental Europe, while its global spread may be largely attributable to the rise of neoliberalism. As to the empirical evidence alleged to support CBI, we are struck by the nonexistence of any compelling evidence for such a case. The theoretical support for CBI ostensibly provided by modeling exercises on the so-called time-inconsistency problem in monetary policy is found equally wanting. Ironically, New Classical modelers promoting the idea of maximum CBI unwittingly reinstalled a (New Classical) “benevolent dictator” fiction in disguise. Post Keynesian critiques of CBI focus on the money neutrality postulate as well as potential conflicts between CBI and fundamental democratic values. John Maynard Keynes’s own contributions on the issue of CBI are found worth revisiting.
    Keywords: Central Banks; Central Bank Independence; Democratic Accountability; Monetary Policy; Time-inconsistency
    JEL: B31 B59 E50 E61
    Date: 2010–09
  7. 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
  8. By: Alessandro Vercelli
    Abstract: This paper explores the interaction between the Great recession triggered by the US subprime mortgages crisis and the twin crisis of macroeconomics. We argue that a major determinant of the subprime crisis and its dire consequences has been an approach to economics that is unable to deal with irregular phenomena. On the other hand, the unexpectedly deep financial crisis that has heavily affected the real economy makes clear that we need a major redirection of macroeconomic theory to make it able to explain, forecast and control irregular phenomena. The recent interaction between the crisis of the economy and the crisis of macroeconomics is analyzed in the light of similar preceding episodes in the 20th century: the Great contraction of the 1930s and the Great stagflation of the 1970s.
    Keywords: subprime crisis, Great recession, Great stagflation, Great contraction, Great depression, liberalism, laissez-faire, Keynesism, neoliberalism, new classical economics, theory and facts, scientific revolutions.
    JEL: A11 B22 B41 E E E G N1
    Date: 2010–06
  9. By: Alessandro Vercelli
    Abstract: The Great Recession triggered by the subprime mortgage crisis raised serious questions on the responsibility of the economists as intellectuals, advisors and decision makers. This essay focuses on the responsibility of the academic economist in his role of researcher, teacher, divulgator, inspirer and supporter of a specific ideology (sometimes malgré lui). In the light of this analysis, the author briefly discusses the limits of the institutionalized and centralized evaluation systems of research quality recently adopted in many countries, and suggests an alternative approach to the evaluation of the merit of academic economists centred on the zeal shown in complying with all their duties.
    Keywords: responsabilità dell’economista, etica ed economia, valutazione della ricerca, grande recessione
    JEL: A11 A13 A20
    Date: 2010–06
  10. By: Laszlo A. Koczy (Institute of Economics - Hungarian Academy of Sciences); Martin Strobel (Maastricht University)
    Abstract: A ranking of journals is manipulable if a particular journal's position can be improved by making additional citations to other journals. We introduce a simple ranking method that is not manipulable and is invariant to citation intensities, journal scaling and article-splitting. The ranking of economics journals is presented and is compared to rankings by alternative methods in the recent years.
    Keywords: journal ranking, incomplete tournaments, manipulation, invariance, scientometrics
    JEL: A1 C8 D72 Y1
    Date: 2010–09
  11. By: Estrada, Fernando
    Abstract: This paper work assesses the key aspects of a framework for research on revolutions. Our approach includes a heuristic based on an idea suggested by Marx in the 18th Brumaire of Louis Bonaparte: “The tradition of all dead generations weighs like a nightmare on the brain of the living”. From this maxim of Marx advance on conventional interpretations by postulating that the language and metaphors are a challenge in several respects: (1) The brain is a physical basis for understanding key political revolutions, (2) advances in neuroscience and language (Lakoff/Johnson/Narayanan) have allowed the reconstruction of conceptual frameworks in various fields, including philosophy, mathematics and politics (3) The language expressed in songs, text, flags, emblems, illustrations, slogans, speeches and rumors is key to represent and demonstrate loyalty to the idea of revolution and, more crucially, to “make” the revolution, (4) Metaphors are a powerful rational action in revolutionary processes. One interpretation of these can contribute to decipher, for example, how the brain are activated in neural systems that link past and present, how to operate the symbolic frameworks of language to influence political opinion, how metaphors interact with processes artificial simulation or how metaphors evolve in a revolution from simple metaphors.
    Keywords: Revolutions; French Revolution; Iran Revolution; Russian Revolutions; Language; Neural Theory
    JEL: B0 Z1 B1 A1 B14 B00 D7 D74 A19 P3 D8 D87
    Date: 2010–10–14
  12. By: Barbara Ingham; Paul Mosley
    Abstract: The paper is concerned with the decade and a half spent by the development economist, Arthur Lewis, at the London School of Economics between 1933 and 1948. It discusses the intellectual traditions of the institution that Lewis joined, and the various influences on the young economist. His research and teaching roles in London and Cambridge are covered, together with his work for the Fabian Society, and his links with the anti-imperialist movements centred in London in the 1930s and 1940s. The aim of the paper is to shed light on this highly significant but little known period in the career of the foremost development economist.
    Date: 2010
  13. By: Martin Dufwenberg (University of Arizona); Simon Gaechter (University of Nottingham); Heike Hennig-Schmidt (University of Bonn)
    Abstract: Psychological game theory can provide rational-choice-based framing effects; frames influence beliefs, beliefs influence motivations. We explain this theoretically and explore empirical relevance experimentally. In a 2?2 design of one-shot public good games we show that frames affect subject’s first- and second-order beliefs, and contributions. From a psychological gametheoretic framework we derive two mutually compatible hypotheses about guilt aversion and reciprocity under which contributions are related to second- and first-order beliefs, respectively. Our results are consistent with either.
    Keywords: framing; psychological game theory; guilt aversion; reciprocity; public good games; voluntary cooperation
    JEL: C91 C72 D64 Z13
    Date: 2010–09
  14. By: Alessandro Vercelli
    Abstract: This paper aims to clarify the controversial concept of “weight of argument” as introduced by Keynes in the Treatise of Probabilities and explicitly resumed in crucial passages of the General Theory (GT), in order to assess its influence on the theoretical framework and methodological approach of the GT. To this end the paper carries on a preliminary examination whether, and for what reason, we should expect that the weight of argument has a significant impact on economic decisions. A few recent development in epistemology and decision theory under uncertainty have reopened the issue, providing at the same time new analytical instruments capable to translate Keynes’s intuitions in rigorous and operational instruments. We suggest an interpretation of the concept of weight of argument that we believe consistent with the spirit of Keynes’s approach and that vindicates its substantial correctness and analytical potential in the light of the recent advances in decision theory under hard uncertainty. This interpretation confirms the practical relevance of the concept getting over the doubts expressed by Keynes himself, as well as its crucial role as a foundation of the theoretical and policy message of Keynes. It is thus possible and opportune to resume the research programme, suggested by Keynes with some timidity, meant to analyze the role of the weight of argument in economic decisions.
    Keywords: weight of argument, decision theory under hard uncertainty
    JEL: B2 B4
    Date: 2010–09
  15. By: Frédéric Roy-Vigneault; Daniel Rondeau; Maurice Doyon; Christian A. Vossler
    Abstract: This paper explores methodological issues surrounding the use of discrete choice experiments to elicit values for public goods. We develop an explicit game-theoretic model of individual decisions to a series of choice sets, providing general conditions under which surveys with repeated binary choices are incentive compatible. We complement the theory with a framed field experiment, with treatments that span the spectrum from incentive compatible, financially binding decisions to decisions with no direct financial consequences. The results suggest truthful preference revelation is possible in surveys, provided that respondents view their decisions as having more than a weak chance of influencing policy. <P>Cette étude s’intéresse à des aspects méthodologiques associés à l’utilisation d’expériences avec choix discrets pour évaluer des biens publics. Nous avons développé un modèle explicite de jeux théoriques pour des décisions individuelles à des séries de choix, avec conditions générales sous lesquelles un questionnaire avec des choix binaires répétés incite la révélation des valeurs. Ce développement théorique est suivi d’expériences terrains avec traitements qui couvrent le spectre des incitatifs de la révélation des valeurs, passant de la décision avec mise en place réelle du projet et paiements réels de la part des participants, à celle sans aucune conséquence financière directe et avec projets hypothétiques. Les résultats indiquent qu’il est possible d’obtenir une révélation des valeurs réelles en situation hypothétique, si les participants pensent que leurs décisions ont un potentiel d’impact significatif sur une éventuelle politique.
    Keywords: discrete choice experiment, framed field experiment, mechanism design theory, stated preferences, consequentiality , expériences avec choix discrets; expérience terrain; préférences révélées; conséquences, biais hypothétique
    JEL: C93 D72 D82 H41 Q51
    Date: 2010–10–01
  16. By: Domingo Gallego (Departamento de Estructura e Historia Económica y Economía Pública. Universidad de Zaragoza (España))
    Abstract: This paper is based on the hypothesis that to feel individually and collectively respected is vital to private and public happiness because, as well as the sensation of comfort that it produces, respect creates a favorable context both for the acquisition of capabilities and for the opportunity to exercise them. All this may be positive for individuals, for those closest to them, for society as a whole and, even, for future societies. The objective of this paper is to identify the conditions that favor this result. Its main proposition is that respect comes from the capacity to make others respect one, so the paper focuses on the analysis of the circumstances that favor this capacity.
    Keywords: Economic development, institutional economy, public economy, evolutionary economics, collective action, social values, public ethics and morality
    JEL: B52 D71 I30 O10
    Date: 2010–10
  17. By: Alberto Feduzzi; Jochen Runde; Carlo Zappia
    Abstract: In the insurance literature it is often argued that private markets can provide insurance against ‘risk’ but not against ‘uncertainties’ in the sense of Knight (1921) or Keynes (1921). This claim is at odds with the standard economic model of risk exchange which, in assuming that decision-makers are always guided by precise point-valued subjective probabilities, predicts that all uncertainties can, in theory, be insured. Supporters of the standard model argue that the insuring of highly idiosyncratic risks by Lloyd’s of London proves that this is so even in practice. The purpose of this paper is to show that Bruno de Finetti, widely regarded as one of the three founding fathers of the subjective approach to probability assumed by the standard model, actually made a theoretical case for uncertainty within the subjectivist approach. We draw on empirical evidence from the practice of underwriters to show how this case may help explain the reluctance of insurers to cover highly uncertain contingencies.
    Keywords: uncertainty, insurance, probability, de Finetti.
    JEL: B23 D80 G22
    Date: 2010–01
  18. By: Hill, Brian
    Abstract: There has been a recent surge of interest among economists in developing models of doxastic states that can account for some aspects of human cognitive limitations that are ignored by standard formal models, such as awareness. Epistemologists purport to have a principled reason for ignoring the question of awareness: under the equilibrium conception of doxastic states they favour, a doxastic state comprises the doxastic commitments an agent would recognise were he fully aware, so the question of awareness plays no role. The objective of this paper is to scrutinize this argument.
    Keywords: Bounded rationality; awareness; doxastic states; cognitive equilibrium; belief change; formal epistemology.
    JEL: I10
    Date: 2010–08–21
  19. By: Garbellini, Nadia; Wirkierman, Ariel Luis
    Abstract: A clear and organic exposition of Pasinetti’s theoretical framework of Structural Change and Economic Growth is often complicated by misunderstandings and ambiguities concerning the basic categories and terminology. The pre-institutional character of the approach, the nature of its equilibrium paths and the significance of the ‘natural’ economic system — together with its normative character — are some of the most controversial issues. In particular, there seems to be a need for a clearcut distinction between the general dynamic analysis of the price and quantity systems and the specific dynamics they follow when the sectoral proportions and levels of production exactly satisfy dynamic equilibrium conditions, and a particular closure of the price system is adopted, providing for specific functional income distribution and theory of value. The aim of the present paper is therefore that of attempting at a conceptual excursus of the model, in order to establish a solid ground on the basis of which discussions with other Classical approaches can be fruitfully held.
    Keywords: Vertically (hyper-)integrated sectors; functional income distribution; ‘natural’ economic rates of profit; ‘natural’ economic system; pure labour theory of value.
    JEL: B51 O41
    Date: 2010–07–08

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