nep-hpe New Economics Papers
on History and Philosophy of Economics
Issue of 2010‒11‒20
fourteen papers chosen by
Erik Thomson
University of Manitoba

  1. “Veiling The Controversies with Dubious Moral Attitudes”? Creditors and Debtors in Keynes’s Ethics of International Economic Relations By Anna M. Carabelli; Mario A. Cedrini
  2. Moral Judgments in Social Dilemmas: How Bad is Free Riding? By Robin P. Cubitt; Michalis Drouvelis; Simon Gaechter; Ruslan Kabalin
  3. Punishment and cooperation: the "old" theory By Ortona, Guido
  4. Competition and equilibrium: Attilio da Empoli’s innovative approach By Massimo Di Matteo
  5. The Relevance of Evolutionary Science For Economic Theory and Policy By John M. Gowdy; David Sloan Wilson
  6. "Bernanke’s Paradox: Can He Reconcile His Position on the Federal Budget with His Recent Charge to Prevent Deflation?" By Pavlina R. Tcherneva
  7. Reversing the Null: Regulation, Deregulation, and the Power of Ideas By David A. Moss
  8. Stratégies évolutionnaires dans un modèle macroéconomique dynamique et complexe peuplé d'agents hétérogènes, autonomes et concurrents By Pascal Seppecher
  9. Democracy under uncertainty: The ‘wisdom of crowds’ and the free-rider problem in group decision making By Kameda, Tatsuya; Tsukasaki, Takafumi; Hastie, Reid; Berg, Nathan
  10. Capabilities and the Process of Development By G. Omkarnath
  11. Genesis and foundations of the multiplier: Marx, Kalecki and Keynes By Serena Sordi; Alessandro Vercelli
  12. The historical place of the 'Friedman-Phelps' expectations critique.. By Forder, James
  13. Re-examining coherent arbitrariness for the evaluation of common goods and simple lotteries By Drew Fudenberg; David K. Levine; Zacharias Maniadis
  14. Swinger Economics By Fabio D'Orlando

  1. By: Anna M. Carabelli; Mario A. Cedrini (SEMEQ Department - Faculty of Economics - University of Eastern Piedmont)
    Abstract: This paper addresses the enduring insistence on the moral dimension of international economic relations in Keynes’s economics and diplomacy. The issue has so far raised scarce attention in the literature, which tend to attribute some outstanding failures of Keynes’s economic diplomacy to the presumed instrumental use Keynes made of moral arguments. The paper provides a comprehensive account of the ethical arguments used by Keynes in his lifelong attempt to design a fair international order, and aims to demonstrate that this moral dimension is part of a well-defined ethics of international relations which privileges national policy space and freedom to choose.
    Keywords: John Maynard Keynes, international economic relations, ethics, complexity
    JEL: B31 B40 F02 F5 A13
    Date: 2010–10
  2. By: Robin P. Cubitt (University of Nottingham); Michalis Drouvelis (University of Birmingham); Simon Gaechter (University of Nottingham); Ruslan Kabalin (University of Lancaster)
    Abstract: In the last thirty years, economists and other social scientists have investigated people’s normative views on distributive justice. Here we study people’s normative views in social dilemmas, which underlie many situations of economic and social significance. Using insights from moral philosophy and psychology we provide an analysis of the morality of free riding. We use experimental survey methods to investigate people’s moral judgments empirically. We vary others’ contributions, the framing (“give-some” vs. “take-some”) and whether contributions are simultaneous or sequential. We find that moral judgments of a free rider depend strongly on others’ behaviour; and that failing to give is condemned more strongly than withdrawing all support.
    Keywords: moral judgments, moral psychology, framing effects, public goods experiments, free riding
    Date: 2010–10
  3. By: Ortona, Guido
    Abstract: The so-called problem of the spontaneous cooperation has been substantially resolved through a mix of biology and economics. All the elements of the solution had been discovered by 1980s, yet they went somehow unnoticed. This "old" solution is the subject of this review. Its most relevant feature was the discovery that the adoption of punishment as an equilibrium-enforcing device makes a cooperative solution in a repeated prisoner's dilemma possible. This opened the way to a biological (or anthropological) explanation otherwise logically inconsistent.
    Keywords: norms, cooperation, punishment
    JEL: A12
    Date: 2010–11
  4. By: Massimo Di Matteo
    Abstract: Attilio da Empoli (1904-48) is a relatively unknown Italian economist who for various reasons, included a premature death, is not recognized as an innovative scholar. One of the main preoccupation of da Empoli’s scientific research was to analize and refine the concept of equilibrium. In the paper I review two main attempts in this direction elaborated in books and papers mostly in Italian (or in a not easily accessible book). The first concerns the introduction of the concept of ultramarginal cost to complement Marshall’s analysis. I show that da Empoli is a forerunner of several concepts to be introduced later, such as kinked demand curve, entry preventing price, limit price, etc. In particular I compare da Empoli’s analysis with Sylos Labini-Modigliani’s theory. After this work da Empoli continued his research and, in the context of a discussion about the theory of international trade, came across a difficulty with the Marshallian analysis of short and long periods. In the second part of the paper I review the discussion that took place in the Rivista Italiana di Scienze Economiche stressing three aspects. First, the analysis was not confined to the comparison of two equilibrium positions (as traditionally made in the pure theory of trade) but it was investigated how the costs that the economy incurs in moving from free trade to autarky may modify some traditional results. Secondly, a link can be established between the concept of ultramarginal cost and the analysis of “costi intermedi” put forward by Borgatta and Mazzei. Thirdly, the analysis of those costs calls into question the problem of time and the different definitions of equilibrium according to the temporal dimension involved. Da Empoli spotted a contradiction in the definitions of short run equilibrium that Marshall gave in his Principles and, on the basis also of the most recent literature on the subject, an interpretation of his position that leads to a rejection of the concept of long run stationary equilibrium will be proposed.
    Keywords: competition, equilibrium, ultramarginal cost, limit price
    JEL: B3 B2 B4
    Date: 2010–10
  5. By: John M. Gowdy (Department of Economics, Rensselaer Polytechnic Institute, Troy NY 12180-3590, USA); David Sloan Wilson (Department of Economics, Binghamton University, Binghamton, NY 13903)
    Abstract: NSF’s “Dear Colleague Letter” reflects the widely perceived need to go beyond current economic theory in the formulation of public policy. At the same time, there is a profound lack of unity among the disciplines that comprise the behavioral, social, and economic sciences. This white paper emphasizes the relevance of evolutionary science as a way to integrate the SBE sciences, similar to the integration that is more advanced in the biological sciences. Modern evolutionary science is broadly construed to include cultural in addition to biological evolution and the study of neural and psychological mechanisms (proximate causation) in addition to the environmental factors that brought the mechanisms into existence and result in the expression of specific behaviors (ultimate causation). It provides an exceptionally useful set of theoretical and empirical tools for integrating the many disciplines in the biological and SBE sciences required to formulate economic theory and public policy for the 21st century. The task of integration is already in progress and can be applied to the formulation of public policy without a long academic time lag. We therefore call for integration across disciplines and evolutionary science as an integrative framework to be recognized as a funding priority by NSF.
    JEL: A10 A11 P48
    Date: 2010–11
  6. By: Pavlina R. Tcherneva
    Abstract: This paper examines Federal Reserve Chairman Ben Bernanke’s recipe for deflation fighting and the specific policy actions he took in the aftermath of the 2008 financial crisis. Both in his academic and in his policy work, Bernanke has made the case that monetary policy is able to stem deflationary forces largely because of its "fiscal components," and that governments like those in the United States or Japan face no constraints in financing these fiscal components. On the other hand, he has recently expressed strong concerns about the size of the federal budget deficit, calling for its reversal in the name of financial sustainability. The paper argues that these positions are fundamentally at odds with each other, and resolves the paradox by arguing on theoretical and technical grounds that there are no fundamental differences in financing conventional government spending programs and what Bernanke considers to be the fiscal components of monetary policy.
    Keywords: Bernanke; Deflation; Monetary Policy; Crowding Out; Financial Sustainability
    JEL: E31 E42 E58 E63 E65
    Date: 2010–11
  7. By: David A. Moss (Harvard Business School, Business, Government and the International Economy Unit)
    Abstract: It has been said that deregulation was an important source of the recent financial crisis. It may be more accurate, however, to say that a deregulatory mindset was an important source of the crisis - a mindset that, to a very significant extent, grew out of profound changes in academic thinking about the role of government. As scholars of political economy quietly shifted their focus from market failure to government failure over the second half of the twentieth century, they set the stage for a revolution in both government and markets, the full ramifications of which are still only beginning to be understood. This intellectual sea-change generated some positive effects, but also some negative ones, including (it seems) an excessively negative impression of the capacity of government to address problems in the marketplace. Today, as we consider the need for new regulation, particularly in the wake of the financial crisis, another fundamental shift in academic thinking about the role of government may be required - involving nothing less than a reversal of the prevailing null hypothesis in the study of political economy.
    Date: 2010–10
  8. By: Pascal Seppecher (CEMAFI - Centre d'Etudes en Macroéconomie et Finance Internationale - Université de Nice Sophia-Antipolis)
    Abstract: Suivant la feuille de route tracée par Joan Robinson, nous avons construit un modèle d'économie monétaire de production avec monnaie endogène, peuplé d'agents hétérogènes, autonomes et concurrents. Dans ce papier, on se propose de relâcher l'hypothèse d'entreprises orientées vers la gestion des flux et stocks réels pour la remplacer par l'hypothèse d'entreprises orientées vers la réalisation de profits monétaires. On étudie la question de la modélisation des comportements de maximisation dans le contexte d'incertitude imposé par les systèmes dynamiques complexes. On montre comment les techniques de modélisation évolutionnaire peuvent apporter une réponse pertinente à cette question. On développe un algorithme évolutionnaire original par lequel les entreprises du modèle élaborent elles-mêmes leurs stratégies de fixation des prix pour tenter de maximiser leurs profits.
    Keywords: complex adaptive system, agent-based computational economics, evolutionary economics, genetic algorithms, Nelder-Mead algorithm, evolutionary strategies, pricing, mark-up, income distribution, monetary production economy, endogenous money, entrepreneur economy
    Date: 2010–10–26
  9. By: Kameda, Tatsuya; Tsukasaki, Takafumi; Hastie, Reid; Berg, Nathan
    Abstract: We introduce a game theory model of individual decisions to cooperate by contributing personal resources to group decisions versus by free-riding on the contributions of other members. In contrast to most public-goods games that assume group returns are linear in individual contributions, the present model assumes decreasing marginal group production as a function of aggregate individual contributions. This diminishing marginal returns assumption is more realistic and generates starkly different predictions compared to the linear model. One important implication is that, under most conditions, there exist equilibria where some, but not all members of a group contribute, even with completely self-interested motives. An agent-based simulation confirms the individual and group advantages of the equilibria in which behavioral asymmetry emerges from a game structure that is a priori perfectly symmetric for all agents (all agents have the same payoff function and action space, but take different actions in equilibria). And a behavioral experiment demonstrates that cooperators and free-riders coexist in a stable manner in groups performing with the non-linear production function. A collateral result demonstrates that, compared to a ―dictatorial‖ decision scheme guided by the best member in a group, the majority-plurality decision rules can pool information effectively and produce greater individual net welfare at equilibrium, even if free-riding is not sanctioned. This is an original proof that cooperation in ad hoc decision-making groups can be understood in terms of self-interested motivations and that, despite the free-rider problem, majority-plurality decision rules can function robustly as simple, efficient social decision heuristics.
    Keywords: group decision making under uncertainty; free-rider problem; majority-plurality rules; marginally-diminishing group returns; evolutionary games; behavioral experiment
    Date: 2010
  10. By: G. Omkarnath
    Abstract: Sen's concept of capabilities is rooted in welfare theory. For the development economist it has immediate, if somewhat lenuous, appeal on counts. First, the concept provides an ethical basis for evaluating development from the stand point of people and their larger lives. Second, on the more strategic plane, it alerts us to the possibility of an ends and means dichotomy in the pursuit of economic development. [Working Paper No. 275]
    Keywords: capabilities, welfare, theory, economist, ethical, development
    Date: 2010
  11. By: Serena Sordi; Alessandro Vercelli
    Abstract: This paper explores the Marxian genetic root of the multiplier in order to clarify its foundations and validity conditions. Though the analysis is restricted to the first two volumes of Capital and the early contributions by Kalecki in the 1930s, we argue that we can draw from these works valuable insights into the theoretical and empirical scope of the Kahn-Keynes multiplier.
    Keywords: multiplier, reproduction schema, capitalist process of circulation
    JEL: B23 B41 E11 E12
    Date: 2010–10
  12. By: Forder, James
    Abstract: The ‘expectations critique’, usually attributed to Friedman or Phelps and dated towards the end of the 1960s, in fact originates much earlier. And rather than being an insight properly attributable to a particular individual, it was, by that time, a commonplace of economic discussion. This much is easy to establish. It is argued that the common attribution arises at least in part because the Keynesians unwisely chose to express their disagreement with Friedman in terms of expectations rather than in terms of the existence of the natural rate of unemployment. As a result, forty years later, it has become hard to see that two separate points ever existed.
    JEL: E31 B22
    Date: 2010
  13. By: Drew Fudenberg; David K. Levine; Zacharias Maniadis
    Abstract: The assumption that people make decisions based on a constant set of preferences, so that choices should not depend on context-specific cues (anchors), is one of the cornerstones of economic theory. We reexamined the effects of an anchoring manipulation on the valuation of common market goods that was introduced in Ariely, Lowenstein and Prelec (2003). We found much weaker anchoring effects. We performed the same manipulation on the evaluation of binary lotteries, and we found no anchoring effects. This suggests limits on the robustness of strong anchoring effects. Hence, the evidence that people have "arbitrary preferences" may not be conclusive, and economic theory may still be valid in many cases of interest.
    Keywords: preferences, anchoring, willingness to pay, Becker-DeGroot-Marschak mechanism
    Date: 2010–11
  14. By: Fabio D'Orlando (University of Cassino)
    Abstract: Swinging is a sexual behavior of increasing relevance but substantially ignored in theoretical economic investigation. This paper has two major goals. The first is to describe what swinging is, discuss its economic relevance and single out the main characteristics of swinger behavior. To this end, the Italian situation has been considered as a type of case study. The second goal is to use standard and less-standard tools from economic theory to propose some preliminary assessments of the causes and consequences of swinger couples’ behavior. In this respect, some contributions on two-sided markets, hedonic adaptation approaches and equilibrium matching models have proved particularly useful.
    Keywords: Swinging, swingers, hedonic adaptation, sex, sexual customs
    JEL: D11 D12 D21 L82 L83
    Date: 2010–01

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