|
on History and Philosophy of Economics |
| By: | Alan Kirman (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) |
| Abstract: | What I argue in this paper is that the direction economics ,and particularly theoretical economics, took in the 20th century was to a great extent due to Walras' influence. This was not so much the result of his own results but rather a reflection of his vision. He was convinced that economics should have “sound mathematical foundations” and his concern for this is reflected in his correspondence with his contemporaries such as Poincaré. However, his specific vision of the nature of equilibrium became the benchmark for modern economic theory and led us to the Arrow-Debreu model which is characterised by its lack of institutional features, and the lack of any proof of stability under adjustment, as later to be shown by Sonnenschein, Mantel and Debreu. Above all there is no place in this framework for out of equilibrium dynamics. Whilst Walras is to be lauded for his insistence on the interdepence of markets, we should also be aware that he set us on a path towards economic models which, while admirably internally consistent, seem to be unable to match the empirical evidence. I fear that Walras would not have been unhappy with this outcome. |
| Keywords: | Walras; mathematical foundations; equilibrium; Arrow-Debreu model; interdependence of markets |
| Date: | 2010–12–09 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:halshs-00545181_v1&r=hpe |
| By: | Frederik Carlsson (Department of Economics, University of Gothenburg); Mitesh Kataria (Max Planck Institute of Economics, Strategic Interaction Group, Jena); Elina Lampi (Department of Economics, University of Gothenburg); M. Vittoria Levati (Max Planck Institute of Economics, Strategic Interaction Group, Jena) |
| Abstract: | We augment a standard dictator game to investigate how preferences for an environmental project relate to willingness to limit others' choices. We explore this issue by distinguishing three student groups: economists, environmental economists, and environmental social scientists. We find that people are generally disposed to grant freedom of choice, but only within certain limits. In addition, our results are in line with the widely held belief that economists are more selfish than other people. Yet, against the notion of consumer sovereignty, economists are not less likely to restrict others' choices and impose restrictions closer to their own preferences than the other student groups. |
| Keywords: | dictator game, charitable giving, social preferences, paternalism |
| JEL: | C92 D64 |
| Date: | 2010–12–15 |
| URL: | http://d.repec.org/n?u=RePEc:jrp:jrpwrp:2010-089&r=hpe |
| By: | Sebastián Dellepiane Avellaneda (Institute of Development Policy and Management, University of Antwerp) |
| Abstract: | This article combines theory and historical narratives to shed new light on the politics surrounding the making of central bank independence in contemporary Britain. Its central argument is that Gordon Brown’s decision to rewrite the British monetary constitution in May 1997 constituted an act of political manipulation in a Rikerian sense. The institutional change involved can be conceptualized as a heresthetic move, that is, structuring the process of the political game so you can win. The incoming government removed a difficult issue from the realm of party politics in order to signal competence and enforce internal discipline in the context of a government that was moving toward the right. But building on Elster’s constraint theory, the paper argues that the institutional reform was not a case of self-binding in an intentional sense. Rather, Brown adopted a precommitment strategy that was aimed at binding others, including members of his government. The reform had dual consequences: it was not only constraining, it was also enabling. The institutionalization of discipline enabled New Labour to achieve key economic and political goals. By revisiting the political rationality of precommitment, this paper questions the dominant credibility story underlying the choice of monetary and fiscal institutions. |
| Date: | 2010–12–16 |
| URL: | http://d.repec.org/n?u=RePEc:ucd:wpaper:201052&r=hpe |
| By: | Sophie BOUTILLIER (labrii, ULCO) |
| Abstract: | L. Walras, comme J. A. Schumpeter, avaient la même ambition : révolutionner la théorie économique. Ils atteignent cet objectif par des voies différentes (le premier par les mathématiques, le second par l’analyse sociohistorique). Ils formulent ainsi deux théories différentes de l’entrepreneur, agent économique central du capitalisme. Le modèle de Walras est statique. L’entrepreneur est rationnel par son comportement maximisateur. Le modèle de Schumpeter est dynamique. L’entrepreneur est le moteur du changement économique. Une analyse parallèle des deux théories montre cependant que l’écart entre ces deux analyses n’est pas aussi profond. L. Walras, like J. A. Schumpeter, had the same ambition: to revolutionize the economic theory. They achieved this goal by various ways (the first through the use of mathematics, the second by a socio-historical analysis). They formulate two different theories of the entrepreneur, the central economic agent of capitalism. The Walras’ model is static. The entrepreneur is rational by his maximizing behaviour. The Schumpeter’s model is dynamic. The entrepreneur is the engine of economic change. Nevertheless, the parallel of both theories shows that the gap between these analyses is not so deep. |
| Keywords: | entrepreneur, leon walras, joseph alois, schumpeter,annalyse, théorie économique, economic theory |
| JEL: | N10 |
| Date: | 2010–11 |
| URL: | http://d.repec.org/n?u=RePEc:rii:riidoc:230&r=hpe |
| By: | André Casajus (Institute of Mathematical Economics, Bielefeld University) |
| Abstract: | We suggest new characterizations of the Banzhaf value without the symmetry axiom, which reveal that the characterizations by Lehrer (1988, International Journal of Game Theory 17, 89-99) and Nowak (1997, International Journal of Game Theory 26, 127-141) as well as most of the characterizations by Casajus (2010, Theory and De- cision, forthcoming) are redundant. Further, we explore symmetry implications of Lehrer's 2-efficiency axiom. |
| Keywords: | Banzhaf value, amalgamation, symmetry, 2-efficiency |
| JEL: | C71 |
| Date: | 2010–12 |
| URL: | http://d.repec.org/n?u=RePEc:bie:wpaper:442&r=hpe |
| By: | Maria Vittoria Levati (Max Planck Institute of Economics, Jena); Topi Miettinen (Aalto School of Economics, Alto); Birendra K. Rai (Monash Univeristy, Clayton) |
| Abstract: | The existing literature acknowledges that a mismatch between the experimenter's and the subjects' models of an experimental task can adversely affect the interpretation of data from laboratory experiments. We discuss why the two common experimental designs (between-subjects and within-subjects) used to conduct experiments may fail to sufficiently account for this concern. An alternative design for laboratory experiments is proposed which may alleviate this concern especially in studies of social preferences. The proposed design is used to answer some questions that have attracted continued attention in the literature on social preferences in general and reciprocity in particular. |
| Keywords: | Experimental design, Context, Trust game |
| JEL: | C70 C90 D63 D64 |
| Date: | 2010–12–14 |
| URL: | http://d.repec.org/n?u=RePEc:jrp:jrpwrp:2010-090&r=hpe |
| By: | Kornhauser, Lewis A. (New York University); MacLeod, W. Bentley (Columbia University) |
| Abstract: | Contract law and the economics of contract have, for the most part, developed independently of each other. In this essay, we briefly review the notion of a contract from the perspective of lawyer, and then use this framework to organize the economics literature on contract. The title, Contracts between Legal Persons, limits the review to that part of contract law that is generic to any legal person. A legal person is any individual, firm or government agency with the right to enter into binding agreements. Our goal is to discuss the role of the law in enforcing these agreements under the hypothesis that the legal persons have well defined goals and objectives. |
| Keywords: | contract law, law and economics, contract breach, contract theory, incomplete contracts |
| JEL: | K12 J33 |
| Date: | 2010–12 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp5352&r=hpe |
| By: | Dietrich Franz; Spiekermann Kai (METEOR) |
| Abstract: | The contemporary theory of epistemic democracy often draws on the Condorcet Jury Theorem to formally justify the `wisdom of crowds''. But this theorem is inapplicable in its current form, since one of its premises---voter independence---is notoriously violated. This premise carries responsibility for the theorem''s misleading conclusion that ''large crowds are infallible''. We prove a more useful jury theorem: under defensible premises, ''large crowds are fallible but better than small groups''. This theorem rehabilitates the importance of deliberation and education, which appear inessential in the classical jury framework. |
| Keywords: | mathematical economics; |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:umamet:2010066&r=hpe |
| By: | Attilio Meucci |
| Abstract: | We propose a unified methodology to input non-linear views from any number of users in fully general non-normal markets, and perform, among others, stress-testing, scenario analysis, and ranking allocation. We walk the reader through the theory and we detail an extremely efficient algorithm to easily implement this methodology under fully general assumptions. As it turns out, no repricing is ever necessary, hence the methodology can be readily applied to books with complex derivatives. We also present an analytical solution, useful for benchmarking, which per se generalizes notable previous results. Code illustrating this methodology in practice is available at http://www.mathworks.com/matlabcentral/f ileexchange/21307 |
| Date: | 2010–12 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1012.2848&r=hpe |
| By: | MacLeod, W. Bentley (Columbia University) |
| Abstract: | This chapter reviews the literature on employment and labor law. The goal of the review is to understand why every jurisdiction in the world has extensive employment law, particularly employment protection law, while most economic analysis of the law suggests that less employment protection would enhance welfare. The review has three parts. The first part discusses the structure of the common law and the evolution of employment protection law. The second part discusses the economic theory of contract. Finally, the empirical literature on employment and labor law is reviewed. I conclude that many aspects of employment law are consistent with the economic theory of contract – namely, that contracts are written and enforced to enhance ex ante match efficiency in the presence of asymmetric information and relationship specific investments. In contrast, empirical labor market research focuses upon ex post match efficiency in the face of an exogenous productivity shock. Hence, in order to understand the form and structure of existing employment law we need better empirical tools to assess the ex ante benefits of employment contracts. |
| Keywords: | employment law, labor law, employment contract, employment contract, law and economics |
| JEL: | J08 J33 J41 J5 K31 |
| Date: | 2010–12 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp5357&r=hpe |
| By: | Alm, Susanne (Institute for Futures Studies); Bäckman, Olof (Institute for Futures Studies); Gavanas, Anna (Institute for Futures Studies); Kumlin, Johanna (Institute for Futures Studies) |
| Abstract: | <p> This paper has two purposes: the first is to give an introduction to and an analysis of the most important concepts for describing social disadvantage in contemporary Sweden – poverty, social exclusion and the concept “utanförskap”. The latter is difficult to give a proper English translation. The closest may be “alienation”, but in a more general sense than the Marxist one. Besides the fact that all these concepts have been used and are being used within academia, they have also been the subject of political struggle. Both of these arenas are treated in the paper. The second purpose is to discuss these concepts in relation to the research project “Causes and consequences of social alienation” at the Institute for Futures Studies. Despite the name of the project we argue that the well established concept of “Social exclusion” is better suited to be used as an analytical tool within the project. While the concept of utanförskap/alientation in contemporary Swedish political debate lacks a proper theoretical definition, it has in the academic sphere first and foremost been used in a social psychological sense, rather than in analyses of external observable factors such as unemployment and economic disadvantage. It is the latter type of analyses that are the focus of the research project.<p> |
| Keywords: | Social disadvantage; Poverty; Social exclusion; Discrimination; Welfare |
| JEL: | D63 I32 J14 J15 J16 J71 |
| Date: | 2010–12–14 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:ifswps:2010_013&r=hpe |
| By: | Alan Kirman (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) |
| Abstract: | Ce papier, préparé pour un symposium en l'honneur de Marc Barbut, discute des thèmes qui ont lié ses intérêts intellectuels et ceux de son laboratoire le CAMS aux thèmes de l'économie. En particulier il s'agit de l'historique de la notion de marchés efficaces et le refus systématique de la profession économique d'écouter les avertissements de Poincaré, Lévy, Mandelbrot et beaucoup d'autres quant à l'applicabilité de la théorie de Bachelier. Car c'est sur celle la qu'est basée la théorie moderne de la mathématique financière. Un deuxième thème concerne la structure mathématique du théorème d'impossibilité d'Arrow, des travaux de Guilbaud, le premier directeur du CAMS et Monjardet membre du CAMS, ayant largement contribué à notre compréhension de ce théorème. |
| Keywords: | marché efficace; théorie de Bachelier; théorème d'impossibilité d'Arrow |
| Date: | 2010–12–09 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:halshs-00545150_v1&r=hpe |
| By: | José Luis Ferreira |
| Abstract: | In Stackelberg-like games there is an advantage of moving first. However, Bagwell (1995) shows that this result may not hold if the second player can make only imperfect observations. We explore whether this paradox also holds when the advantage comes from forward induction arguments in the class of outside option games. |
| Keywords: | Bagwell's paradox, Commitment, Observability, Noise, Outside option games, Forward induction |
| JEL: | C72 |
| Date: | 2010–12 |
| URL: | http://d.repec.org/n?u=RePEc:cte:werepe:we1035&r=hpe |
| By: | Breitmoser, Yves; Tan, Jonathan H.W. |
| Abstract: | Are "generous" bargaining offers made out of fairness or in fear of rejection? We disentangle risk and social references by analyzing experimental behavior in three majority bargaining games: (1) a random-proposer game with infinite time horizon; 2) a one round proposer game with disagreement payoffs equal to the infinite horizon continuation payoffs; and, (3) a demand commitment game. Inequity aversion predicts very differently across these games, but risk aversion does not. Observed strategies violate neither stationarity nor truncation consistency. This allows us to use structural models of bargaining behavior to estimate the latent type shares of subjects with CES, inequity averse, and Prospect theoretic preferences. The Prospect theoretic, i.e. reference-dependent, model of utility explains the observations far better than any mixture of alternative models. |
| Keywords: | coalitional bargaining; non-cooperative modeling; random utility model; quantal response equilibrium; laboratory experiment |
| JEL: | C78 D78 C72 |
| Date: | 2010–12–14 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:27444&r=hpe |
| By: | Kartik Anand (The Abdus Salam International Center for Theoretical Physics - The Abdus Salam International Center for Theoretical Physics - Commencez à saisir le nom d'un établissementThe Abdus Salam International Center for Theoretical Physics); Alan Kirman (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); Matteo Marsili (The Abdus Salam International Centre for Theoretical Physics - ICTP Trieste) |
| Abstract: | This short paper argues that rationally motivated coordination between agents is an important ingredient to understand the current economic crisis. We argue that changes in parameters that model the structure of a macro-economy or financial markets are not exogenous but arise as agents adopt rules that appear to be the norm around them. For example, if a rule is adopted by the majority of ones' neighbors it will become acceptable or, alternatively, if agents learn that changing their rule leads to greater gains, they will modified their rules. However, as rules develop and spread they may have consequences at the aggregate level which are not anticipated by individuals. These rules may be adopted by implicit consensus as they turn out to be profitable for individuals, but they may also weaken the constraints imposed by regulators. Indeed, the emergence of new rules or the modification of old ones may render the whole system more fragile, which may then cease to function. To illustrate this we develop a simple model, motivated by the 2007-2008 crisis in credit derivatives markets, to show how coordination on simple and apparently profitable rules may cause a market to collapse. |
| Keywords: | Coordination; economic crisis; economic rules; information aggregation |
| Date: | 2010–12–09 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:halshs-00545144_v1&r=hpe |
| By: | Mitesh Kataria (Max Planck Institute of Economics, Strategic Interaction Group, Jena) |
| Abstract: | The Porter hypothesis suggests that environmental regulations, such as restricting firms to reduce pollution, stimulates innovations and create a win-win situation for the environment and for firms. It has received a great deal of attention from academics as well as bureaucrats who disagree about the applicability of the Porter hypothesis. This study tests if part of such disagreement can be explained by a preference-expectation relationship and if people more likely to believe in a scientific hypothesis that appeals to their preferences. The results show that individuals' who care more about the environment are more likely to believe in the Porter hypothesis. Males are also found to believe more in the Porter hypothesis while females are more uncertain. Education is found to be insignificant in explaining beliefs about the Porter hypothesis. Based on our results we also discuss if and how scientific and economic methodology can mitigate a preference-expectation bias. |
| Keywords: | Porter Hypothesis, Subjective Beliefs, Economic Methodology |
| JEL: | B4 Q00 Q5 |
| Date: | 2010–12–13 |
| URL: | http://d.repec.org/n?u=RePEc:jrp:jrpwrp:2010-088&r=hpe |
| By: | Rafael Di Tella (Harvard Business School, Business, Government and the International Economy Unit); Juan Dubra (Universidad de Montevideo) |
| Abstract: | We note some problems in Alesina and Angeletos (2005) and suggest a way to maintain the key insight of that paper, which is that a demand for fairness could lead to different economic systems such as those observed in France versus the US (multiple equilibria). |
| Keywords: | Inequality, taxation, redistribution, political economy. |
| JEL: | D31 E62 H2 P16 |
| Date: | 2010–12 |
| URL: | http://d.repec.org/n?u=RePEc:hbs:wpaper:11-059&r=hpe |
| By: | Gabriele Galati; Richhild Moessner |
| Abstract: | The recent financial crisis has highlighted the need to go beyond a purely micro approach to financial regulation and supervision. In recent months, the number of policy speeches, research papers and conferences that discuss a macro perspective on financial regulation has grown considerably. The policy debate is focusing in particular on macroprudential tools and their usage, their relationship with monetary policy, their implementation and their effectiveness. Macroprudential policy has recently also attracted considerable attention among researchers. This paper provides an overview of research on this topic. We also identify important future research questions that emerge from both the literature and the current policy debate. |
| Keywords: | Macroprudential policy |
| JEL: | E58 G28 |
| Date: | 2010–12 |
| URL: | http://d.repec.org/n?u=RePEc:dnb:dnbwpp:267&r=hpe |
| By: | Jesus Felipe; Utsav Kumar; Arnelyn Abdon |
| Abstract: | Becoming a rich country requires the ability to produce and export commodities that embody certain characteristics. We classify 779 exported commodities according to two dimensions: (1) sophistication (measured by the income content of the products exported); and (2) connectivity to other products (a well-connected export basket is one that allows an easy jump to other potential exports). We identify 352 "good" products and 427 "bad" products. Based on this, we categorize 154 countries into four groups according to these two characteristics. There are 34 countries whose export basket contains a significant share of good products. We find 28 countries in a "middle product" trap. These are countries whose export baskets contain a significant share of products that are in the middle of the sophistication and connectivity spectra. We also find 17 countries that are in a "middle-low" product trap, and 75 countries that are in a difficult and precarious "low product" trap. These are countries whose export baskets contain a significant share of unsophisticated products that are poorly connected to other products. To escape this situation, these countries need to implement policies that would help them accumulate the capabilities needed to manufacture and export more sophisticated and better connected products. |
| Keywords: | Bad Product; Capabilities; "Low Product" Trap; "Middle Product" Trap; Proximity; Sophistication; Structural Transformation |
| JEL: | O14 O25 O57 |
| Date: | 2010–12 |
| URL: | http://d.repec.org/n?u=RePEc:lev:wrkpap:wp_644&r=hpe |