nep-hpe New Economics Papers
on History and Philosophy of Economics
Issue of 2010‒11‒27
fourteen papers chosen by
Erik Thomson
University of Manitoba

  1. The Economic Ethics of Ezra Pound By Alessandro Lanteri
  2. Calabresi, "law and economics" and the Coase theorem By Alain Marciano
  3. Heterogeneous Economic Evolution: A Different View on Darwinizing Evolutionary Economics By Jack Vromen
  4. Models and Economists: A Methodological Note By Thomas, Alex M
  5. Financial Economists, Financial Interests and Dark Corners of the Meltdown: It’s Time to Set Ethical Standards for the Economics Profession By Gerald Epstein; Jessica Carrick-Hagenbarth
  6. Nachhaltigkeit und Ordnungspolitik in der Krise By Michels, Dr. Gerd
  7. Judge:Don't Vote! By Michel Balinski; Rida Laraki
  8. An Ideal Islamic Economic System: A Gone Case By Shaikh, Salman
  9. Business Ethics: Some Theoretical Issues By Lluka, Valon
  10. Four Essays On Famous Diagrams In Economics: The Scitovsky Paradox; Location Theory, Aggregate Demand and Supply Curves, the Phillips Curve By Richard Lipsey;
  11. Rethinking Emancipation in Organization Studies. In the light of Jacques Rancière's Philosophy By Isabelle Huault; Véronique Perret; André Spicer
  12. International Law, Domestic Political Orders, and the ‘Democratic Imperative’: Has Democracy Finally Emerged as a Global Legal Entitlement? By Christian Pippan
  13. A Conversation with Eric Ghysels Co-President of the Society for Financial Econometrics By Peter C.B. Phillips; Jun Yu
  14. Optimism and commitment: An elementary theory of bargaining and war By Clara Ponsati; Santiago Sanchez-Pages

  1. By: Alessandro Lanteri
    Abstract: The poet Ezra Pound (1885 – 1972) was a moralist who regarded economics as key to understanding human society, and thereby to solve most social problems. He became a prolific writer of economic texts, in which he espoused the ideas of two heretic economists: Major Clifford Douglas’ social credit and national dividend, and Silvio Gesell’s perishable currency. Pound’s economic thought has long been neglected, but in times of financial crisis his crusade against bankers and his utopian visions might make a timely come back. It is therefore unfortunate that, of Pound’s economic lessons, the morally most compelling are also those less economically sound.
    Keywords: Basic Income; Ezra Pound; Major C. Douglas; Silvio Gesell; Social Credit; Stamp Scrip; Usury.
    Date: 2010–10
  2. By: Alain Marciano
    Abstract: In this paper, we show that, in 1961 and before he had read "The Problem of Social Cost", Calabresi reached exactly the same conclusions as the one reached by Coase and summarized by Stigler as the "Coase theorem" but he believed that this result was valid only in the theoretical world of the economists. We also analyze how Calabresi's thought evolved, in particular including transaction costs in his reasoning, but nonetheless remained faithful to his conclusions about the practical validity of the Coase theorem. Calabresi's conclusions remained ignored by economists and by most of legal scholars until the early 1970s. It was only when scholars started to emphasize the unrealistic assumptions upon which rest the Coase theorem that they also started to pay attention to Calabresi. His works were quoted and essentially used to emphasize the limits of the Coase theorem. Calabresi and Coase were then put on the same footing; the works of the former presented as more complete and more practical than the works of the later.
    Keywords: Calabresi, economic analysis of law, Coase theorem, invariance, problem of social cost.
    JEL: A12 B2 B31 K0
    Date: 2010–11
  3. By: Jack Vromen
    Abstract: Inspired by Peter Godfrey-Smith’s book Darwinian Populations and Natural Selection (2009), the paper seeks to develop a view on Darwinizing evolutionary economics that differs from the view espoused in Hodgson and Knudsen project of Generalized Darwinism. It is argued that on Hodgson and Knudsen’s view "Darwinism" is understood on such a high level of abstraction and generality that it is emptied from virtually all content and substance. Only on the basis of a very abstract, general and broad understanding of the Darwinian principles of variation, selection and replication can Hodgson and Knudsen’s claim be defended that any acceptable explanation must invoke the three Darwinian principles. The price they have to pay for this, however, is that the Darwinian principles provide little, if any, heuristic guidance to further theory construction. By contrast, on the alternative view developed in the paper "Darwinism" has a definite content. On the alternative view not all economic processes are Darwinian in kind: some economic processes appear as paradigmatically Darwinian, others only as minimally Darwinian and yet others as not Darwinian at all.
    Keywords: Length 24 pages
    Date: 2010–11
  4. By: Thomas, Alex M
    Abstract: Ever since the discipline of economics began, its practitioners have tried to infer laws, tendencies, causal relationships and associations about the real world. These claims are made through the construction of models – mathematical, statistical, verbal or a mix of all three. This note examines the methodological issues faced by models in the context of the Indian economy. It concludes by pointing that out that economists need to be more cautious while using models to intervene in the Indian economy.
    Keywords: Indian economy; Models; Economic methodology
    JEL: C5 C01 B41
    Date: 2010–11
  5. By: Gerald Epstein; Jessica Carrick-Hagenbarth
    Abstract: Epstein and Carrick-Hagenbarth analyze the conflict of interest that exists when academic financial economists, acting in their roles as presumed objective experts in the media and academia on topics, such as financial regulation, fail to report their private financial affiliations. The authors analyze the linkages between academia, private financial institutions and public institutions of nineteen academic financial economists who are members of two groups who have put forth proposals on financial reform.<span> </span>In addition, they review media writings and appearances, as well as the academic papers of these economists between 2005 and 2009, to determine the portion of the time these economists identified their affiliations with private or public financial institutions when writing about or commenting on financial policy issues. The vast majority of the time, these economists did not identify these affiliations and possible conflicts of interest. In light of these and related findings the authors call for an economists’ code of ethics which would require academic economists to identify these connections in appropriate contexts.
    Keywords: Professional Ethics, Financial Regulation, Academic Economists, Codes of Ethics, conflicts of interest
    JEL: A11 A13
    Date: 2010
  6. By: Michels, Dr. Gerd
    Abstract: The financial crisis challenges the economic system of the western sphere and its ethical, theoretical and economic foundations. It questions also its claim for superiority. The article reflects on the outcomes of its institutions and policies and it investigates these institutional outcomes by shedding light on its mechanistic foundations in policy and management. Following on from that, the underlying ,,logic of failure’’ is compared with an evolutionary and systemic management approach, that rests on a completely different understanding of ourselves and the environment. This policy and management approach explicitly focuses on the viability and sustainability of the system. Finally, major application fields are described and consequences are drawn for the respective goal definition and the process design transformation in business and public policy.
    Keywords: economic history, logic of failure, evolutionary economics, systemic management approach, reflexivity, decision making theory, sustainable institutions,
    JEL: D53 B52 E61
    Date: 2010–11–01
  7. By: Michel Balinski (Department of Economics, Ecole Polytechnique - CNRS : UMR7176 - Polytechnique - X); Rida Laraki (Department of Economics, Ecole Polytechnique - CNRS : UMR7176 - Polytechnique - X)
    Abstract: This article explains why the traditional model of the theory of social choice misrepresents reality, it cannot lead to acceptable methods of ranking and electing in any case, and a more realistic model leads inevitably to one method of ranking and electing—majority judgment—that best meets the traditional criteria of what constitutes a good method.
    Keywords: Arrow's paradox ; Condorcet's paradox ; Majority judgment ; Skating ; Social choice ; Strategic manipulation ; Voting
    Date: 2010–11–18
  8. By: Shaikh, Salman
    Abstract: Islamic finance industry mostly uses LIBOR linked financial contracts which are akin to debt financing than the more preferable participatory modes of Mudarabah and Musharakah. As per the current orthodox understanding and practice of Islamic finance, the often cited preferable modes like Mudarabah and Musharakah are incapable even in a simple model economy with them as the only mode of financing. Hence, they are rarely used. The prevalent Islamic products which are linked with LIBOR are and will predominantly be used and practiced Islamic finance may remain incapable of providing egalitarian benefits it once promised. Ironically, Islamic values like justice, equality, truth, trust, kindness, honesty and responsibility are often discussed in literature and seminars on Islamic Economics; whereas, in reality, the lack of these values in practice is the major reason why preferable participatory modes remain unusable! As discussed, the current orthodox understanding of Islamic fiscal redistribution mechanisms like Zakat and Inheritance also make them incapable of contributing towards the establishment of an egalitarian economic framework. This paper proposes an alternate approach to practiced Islamic finance and orthodox understanding of Zakat and inheritance laws and shows that the alternate approach could still be sufficient to contribute towards egalitarian objectives effectively.
    Keywords: Islamic Finance; Islamic Economics; Welfare Economics; Experimental Economics; Heterodox Economics; Zakat; Fiscal Redistribution
    JEL: A1 H2 G0 B5
    Date: 2010–11–01
  9. By: Lluka, Valon
    Abstract: Ethics can be defined as a process of evaluating actions according to moral principal of values. Throughout the centuries people were trying to choose between profit and moral. Perhaps, some of them obtain both, but every time it could have roused ethical issues. Those issues concern fairness, justice, rightness or wrongness; as a result it can only be resolved according to ethical standards. Setting the ethical standards for the way of doing business in corporation is primarily task of management. Corporations have to maintain the same standards as an individual person and, in addition, corporations, as organizational units, have their own social responsibilities toward customers, employees and society. However, any business should keep its original purpose of functioning - making profit. Balancing the traditional standards of profitability and burden of social responsibilities is not an easy task. In recent years it has been a trend of setting standards of corporate ethics according to high degree of morale. The central inquiry in this paper is to determine what difference it makes if businesses in a community act ethically or ignore ethics. Since business is the subject, our inquiry centers on money – a value highly appreciated in the U.S., as well as in varying degrees in other countries; ethics is often ignored when faced with the possibility of earning or acquiring large sums of money. The purpose of this paper is to examine ethics and the various ethical problems which business faces in the hope of increasing our understanding. To the extent knowledge is increased, if it appears that more ethical conduct is desirable, we will consider ways to develop more ethical conduct in business.
    Keywords: Business ethics; profit; moral values; social responsibility; ethical issues; ethical standards; fairness; justice; rightness; wrongness
    JEL: M14 Q50 M1 M10
    Date: 2010–08–03
  10. By: Richard Lipsey (Simon Fraser University);
    Abstract: The first of these four essays covers the Scitovsky paradox and community indifference curves. It argues that the so-called paradox is not a paradox but instead reveals an important social conflict that cannot be resolved by economic means and whose existence was suppressed when consumers’ surplus replaced community indifference curves as the main tool for assessing the welfare effects of economic changes. The second essay first repeats von Th?nen’s analysis of the location of economic activity around a central market. It then considers Lösches’ analysis of the hexagonal lattice as the optimal way to locate firms selling a product to customers evenly spread in space. The essay argues that under free entry of firms this configuration is neither produced nor preserved if imposed. Also such entry permits the existence in equilibrium of significant pure profits. The third essay puts the AD-AS analysis through its paces and argues that Colander’s criticisms of the theoretical underpinnings of the AD curve are invalid. The final essay deals with the evolution of the Philips curve, placing it in its historical context. It argues that the literature is bedeviled by an important confusion between the two different theories underlying the AD and the Philips curves.
    Keywords: Scitovsky paradox, community indifference curves, von Th?nen, optimal spatial location, aggregate demand curve, aggregate supply curve, short-run marginal cost curves, Phillips curve,
    JEL: D6 D60 R00 E31
    Date: 2010–11
  11. By: Isabelle Huault (DRM - Dauphine Recherches en Management - CNRS : UMR7088 - Université Paris Dauphine - Paris IX); Véronique Perret (DRM - Dauphine Recherches en Management - CNRS : UMR7088 - Université Paris Dauphine - Paris IX); André Spicer (Warwick Business School - Warwick Business School)
    Abstract: The demand for emancipation was once something we only associated with oppressed social groups such as Women, Workers or the colonized who were seeking to escape from various forms of domination which they had long been subjected to. Today, some of the most privileged groups in our society such as middle managers and professions talk about their thirst for emancipation. They seek this precious and awe inspiring goal through participating in management courses (Gosling, 2000), reading various forms of management literature which promises to turn them into revolutionaries (Jacques, 1996), and engaging with various journeys to free themselves from the shackles of thought control and simply ‘be themselves' at work (Fleming, 2009). Corporations routinely sell themselves as a route to emancipation for their consumers and employees. One only needs to think about the recent advertisement for Virgin which replaced the famous images of the revolutionary Ché Guevara with Richard Branson. The message seems to be clear – it is not just radical political movements that can provide emancipation, corporations can too! The fact that emancipation has lost its anchor in radical political movements and shocks and scandalizes some. For others, it is a kind of an indication of how endlessly flexible and omnivorous capitalism is insofar as it is able to adopt nearly anything – include forms of virulent anti-capitalism – to further itself. While these two explanations are certainly appealing, we think that the widespread adoption of this culture of emancipation actually underlines the increasing uncertainty and fragmentation that has taken place around the term. For us this is due to a shift in focus of understanding of emancipation. Previously, emancipation was understood as a form of wide-scale transformational change in society achieved through intellectuals enlightening people who find themselves dominated. This notion informed studies of emancipation for many years. The result was that research on emancipation tended to focus on either documenting large scale challenges to capitalism and management or agitating for emancipation through a progressive enlightenment of the audience. This approach to emancipation began to fall out of favour as it was accused of being too grandiose - subjects were positioned as victims of managerial knowledge which they could only escape from through the progressive enlightenment under the tutelage of critical intellectuals. Such disenchantment led researchers to turn their focus towards more minor forms of micro-emancipation whereby people momentarily escape from domination in their everyday life through minor activities (eg. Alvesson and Willmott, 1992). This focus produced a deep body of literature that documented the various ways individuals seek out micro-emancipation in the workplace (eg. Zanoni and Jensens, 2007). However, recently we have witnessed some important questions being asked around this research agenda. In particular, some are concerned that it has begun to fundamentally constrain how we think about forms of emancipation, creating a myopic focus on small-scale struggles and fundamentally ignoring many of the broader social struggles that challenge management. In this paper we seek to overcome these problems associated with macro as well as micro-emancipation by positing a new conception of emancipation offered in the recent thought of Jacques Rancière. For Rancière, emancipation should not be seen as an ideal to be reached, but as a postulate to be acualised in day-to-day practice. He points out that equality can be actualized by interrupting the order of sensibility (rather than through quotidian everyday acts), through creating a sense of dissensus (rather than collaboration and attempts to create consensus), and attempts to singularize the universal (rather than through fragmentary struggles). By focusing on these three processes, Rancière enables us to see a range of emancipatory struggles that we were blinded to by both accounts of marco-emancipation (which went looking for grand revolts) as well as micro-emancipation (which focused on everyday transgression). In particular it enables us to register the kinds of emancipation movements that have frequently been left out of accounts of emancipation in organization studies. These include the self-education movements, proliterian intellectual movements, as well as forms art. Rancière's account of emancipation allows us to extend how we think about processes of emancipation in and around organizations in three ways. First, it allows us to register activities in our theoretical gaze that we had previously ignored or discounted. Macro-emancipation focuses our attention on collective movements which are organised and micro-emancipation focuses our attention on often individual every-day activities which are not organised. In contrast, Rancière draws our attention to various emancipatory movements that are often collective, but are not formally organised. This broadens the range of forms of emancipation we can study. Second, Rancière allows us to rethink how exactly emancipation works. Instead of focusing on creation of new states of freedom (as studies of macro emancipation do) or attempts to seize fleeting forms of freedom (as studies of micro emanciption do), Rancière's work allows us to see how emancipation involves the transformation of the sensible. This re-orients our studies to how emancipation movements seek to change what and how we actually see the world. Finally, Rancière allows us to move beyond the assumption that contemporary resistance is fragmented and disorganised by registering how individual forms of resistance are experienced as an embodiment or singularization of universal struggles. Doing this allows us to recognise the link between the specific demands of many resistance movements and more universal claims such as dignity, recognition, and justice. By making these three contributions, we hope to move beyond either an elitist account found in studies of macro-emancipation and the banal account found in studies of micro-emancaiption. In order to make this argument, we proceed as follows. We begin by reviewing the two dominant conceptions of emancipation. First we look at three different modes of emancipation that have been successively pursued – political emancipation, economic emancipation and ideological emancipation. We then look at the ways in which organization studies has suggested these struggles take place – through ‘macro-emancipation' or ‘micro-emancipation'. In this review we highlight the shortcomings of these two existing conceptions of emancipation. We then introduce a third conception of emancipation inspired by the work of Jacques Rancière. After we have outlined this, we then draw out the implications of this for the study of emancipation in organization studies. We conclude by sketching out what new areas of emancipation this allows us to understand and perhaps engage with.
    Keywords: Rancière ; emancipation ; critical theory ; critical management studies ; micro emancipation
    Date: 2010–09–15
  12. By: Christian Pippan
    Abstract: Abstract: After the end of the Cold War, democratic transitions in many parts of the world, a significant increase in the number of signatories to global and regional human rights instruments containing participatory rights, and a growing interest in ‘free and fair’ elections on the part of the UN and other international organizations have led some legal scholars to assert the emergence of an internationally constituted ‘right to democratic governance’. In a certain sense, this was in line with the predominantly liberal reading of the events of 1989 in social science, which interpreted the demise of European communism as a confirmation of the superiority of Western-style democracy over other political regimes. In the controversial debate that followed its initial articulation in the early 1990s, the ‘democratic entitlement thesis’ was hailed by some commentators as finally giving substance to widely accepted but highly ambiguous international concepts such as self-determination, popular sovereignty and political participation, whereas others criticized it as a form of ‘liberal messianism’, or even as a ‘democratic jihad’. The present essay aims to revisit the discussion in light of recent international developments, particularly within the United Nations. Following a general introduction (Section 1), it briefly recapitulates the major strands of the democratic norm thesis and the vivid critique it has received (Section 2). In order to better grasp the overall problématique raised by the thesis, the main section of the paper (Section 3) then addresses three interrelated, yet ultimately distinct, questions: Does the international legal system display any preference for democracy over other domestic political regimes and concurrent constitutional orders? If so, does the contemporary international order embrace any particular vision of democracy? Finally, provided the two prior questions can be answered in the affirmative, do any of the components of an emerging international vision of democracy have a universal legal character? The essay concludes (in Section 4) by arguing that, unless one (inappropriately) equates democracy with free and fair elections, no general rule of international law can be identified requiring states to design their domestic political and constitutional orders in accordance with a particular (e.g. liberal) model of democracy. Moreover, while the persistent refusal to allow for the holding of periodic and genuine elections may today be regarded as constituting a violation of a customary norm (an argument supported here), the responsible government usually does not forfeit its legal standing in the international arena. Notwithstanding these findings, it will be argued that an international regime on domestic democratic governance is progressively taking shape. This regime is comprised of principles, norms, rules, and standards with varying degrees of normativity, around which the expectations of international actors regarding efforts of states ‘to implement the principles and practices of democracy’ increasingly converge.
    Date: 2010–10–18
  13. By: Peter C.B. Phillips (Yale University); Jun Yu (School of Economics, Singapore Management University)
    Abstract: Eric Ghysels is the Bernstein Distinguished Professor of Economics and Professor of Finance at University of North Carolina at Chapel Hill. In 2008, Eric Ghysels and Robert Engle (2003 Nobel co-Laureate in Economic Science with Clive Granger) founded the Society for Financial Econometrics (SoFiE), establishing a global network of academics and practitioners dedicated to the fast-growing field of financial econometrics. In June 2010, Eric visited the Centre for Financial Econometrics (CoFiE) and the Sim Kee Boon Institute (SKBI) of Financial Economics at Singapore Management University. During his visit we conversed with him about SoFiE and the growing toolroom of financial econometric research, what it has to offer industry practice, and how it might assist central banks and regulators in their daunting task of surveillance of financial markets following the turbulence of the last three years.
    Date: 2010–10
  14. By: Clara Ponsati; Santiago Sanchez-Pages
    Abstract: We propose an elementary theory of wars fought by fully rational contenders. Two parties play a Markov game that combines stages of bargaining with stages where one side has the ability to impose surrender on the other. Under uncertainty and incomplete information, in the unique equilibrium of the game, long confrontations occur: war arises when reality disappoints initial (rational) optimism, and it persist longer when both agents are optimists but reality proves both wrong. Bargaining proposals that are rejected initially might eventually be accepted after several periods of confrontation. We provide an explicit computation of the equilibrium, evaluating the probability of war, and its expected losses as a function of i) the costs of confrontation, ii) the asymmetry of the split imposed under surrender, and iii) the strengths of contenders at attack and defense. Changes in these parameters display non-monotonic effects.
    Keywords: Conflict, Income redistribution, Natives, Immigrants.
    JEL: C78 D74
    Date: 2010–11–18

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