nep-hpe New Economics Papers
on History and Philosophy of Economics
Issue of 2011‒02‒19
twelve papers chosen by
Erik Thomson
University of Manitoba

  1. On the modernity of Walras By Roger Guesnerie
  2. How to play the games? Nash versus Berge behavior rules By Pierre Courtois; Rabia Nessah; Tarik Tazdaït
  3. Perfect Bayesian Equilibrium: Part II: Epistemic Foundations By Bonanno, Giacomo
  4. Empirical Economic Model Discovery and Theory Evaluation By David F. Hendry
  5. The Theory of Institutional Change Revisited: The Institutional Dichotomy, Its Dynamic, and Policy Implications in a More Formal Analysis By Elsner, Wolfram
  6. Endogenous preferences in games with type indeterminate players By Ariane Lambert-Mogiliansky
  7. Mathematical Models and Economic Forecasting: Some Uses and Mis-Uses of Mathematicsin Economics By David F. Hendry
  8. L’économie de la médecine libérale. By Ducos, Jean
  9. Social Norm, Costly Punishment and the Evolution to Cooperation By Tongkui, Yu; Shu-Heng, Chen; Honggang, Li
  10. College Major Choice and Ability: Why is General Ability not Enough? By Tjasa Loga; Saso Polanec;
  11. The identity of sociology or what to do when the universe is unknown: qualitative solutions against the quantitative obsession By Gomez, José Andrés; Merino, Bernat Roig; Tur, Antonio Aledo
  12. Keynesian and Austrian Perspectives on Crisis, Shock Adjustment, Exchange Rate Regime and (Long-Term) Growth By Mathilde Maurel; Gunther Schnabl

  1. By: Roger Guesnerie (CDF - Collège de France - Collège de France, PSE - Paris-Jourdan Sciences Economiques - CNRS : UMR8545 - Ecole des Hautes Etudes en Sciences Sociales (EHESS) - Ecole des Ponts ParisTech - Ecole Normale Supérieure de Paris - ENS Paris - INRA, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris)
    Abstract: This text is to appear in a volume produced at the occasion of the 100th anniversary of Léon Walras death. The first part (introduction) answers one initial demand (to the solicited authors), i.e the evaluation of Walras influence on their own research and more generally on contemporary research. The second part “Between the Capitol Hill and the Tarpeian Rock?” goes further into the discussion of the contemporary status of the intellectual schemes inherited from the development of the walrasian program. The third part argues that part of the questions raised by Walras, f.e those concerning the mechanics of price adjustments, have not yet received satisfactory answers. It then argued that a post-walrasian program, with a strong focus on the explanation of market expectations, is on the agenda.
    Keywords: Léon Walras ; walrasian program ; market expectations
    Date: 2010–12
  2. By: Pierre Courtois; Rabia Nessah; Tarik Tazdaït
    Abstract: Social interactions regularly lead to mutually beneficial transactions that are sometimes puzzling. The prisoner’s dilemma and the chicken and trust games prove to be less perplexing than Nash equilibrium predicts. Moral preferences seem to complement self-oriented motivations and their relative predominance in games is found to vary according to the individuals, their environment, and the game. This paper examines the appropriateness of Berge equilibrium to study several 2×2 game situations, notably cooperative games where mutual support yields socially better outcomes. We consider the Berge behavior rule complementarily to Nash: individuals play one behavior rule or another, depending on the game situation. We then define non-cooperative Berge equilibrium, discuss what it means to play in this fashion, and argue why individuals may choose to do so. Finally, we discuss the relationship between Nash and Berge notions and analyze the rationale of individuals playing in a situational perspective.
    Date: 2011–05
  3. By: Bonanno, Giacomo (University of CA, Davis)
    Abstract: In a companion paper we introduced a general notion of perfect Bayesian equilibrium which can be applied to arbitrary extensive-form games. The essential ingredient of the proposed definition is the qualitative notion of AGM-consistency. In this paper we provide an epistemic foundation for AGM-consistency based on the AGM theory of belief revision.
    Date: 2011–01
  4. By: David F. Hendry
    Abstract: Economies are so high dimensional and non-constant that many features of models cannot be derived by prior reasoning, intrinsically involving empirical discovery and requiring theory evaluation. Despite important differences, discovery and evaluation in economics are similar to those of science. Fitting a pre-specified equation limits discovery, but automatic methods can formulate much more general models with many variables, long lag lengths and non-linearities, allowing for outliers, data contamination, and parameter shifts; select congruent parsimonious-encompassing models even with more candidate variables than observations, while embedding the theory; then rigorously evaluate selected models to ascertain their viability.
    Keywords: Empirical discovery, theory evaluation, model selection, Autometrics
    JEL: B40
    Date: 2011
  5. By: Elsner, Wolfram
    Abstract: The original institutionalist theory of institutional change as elaborated by Paul D. Bush (1987) in the traditions of Veblen, Ayres and J.F. Foster (called here the VAFB-paradigm), provides a most important theoretical and empirical device for critical institutional analysis, with its clarification of the value base and of different forms and dynamics of value-behavior patterns. Bush’s paper was certainly one of the most important ones in Institutionalism. The Theory of Institutional Change pushed Institutionalism to a certain limit by elaborating its logical relations and systems that have been underexplored for so long. Coming from different ‘galaxies’, established formal approaches and methods, such as system dynamics, econometrics, network analysis, graph theory, or game theory—in fact, often applied only bluntly in the mainstream—have been interpreted, developed and applied by institutional and evolutionary economists in an evolutionary-institutionalist perspective in recent decades. However, a theoretical and methodological gap somehow still existed until recently that those practicing institutionalists had to deal with. This gap seems to become closed in different areas (such as the Theory of Institutional Change or the Social Fabric Matrix Approach) currently. This paper tries to demonstrate that careful proper interpretations allow, in a ‘dialectical’ process, to bridge the remaining gap and reveal surprising equivalences and complementarities with resulting synergies for the future. The example here is the mutual approximation of the VAFB-paradigm and evolutionary-institutionally interpreted game theory, called the EIGT-paradigm here. Should such bridge-building be corroborated in the near future, Institutionalism would be enabled to cut across traditional and long lasting boundaries with respect to deeper both empirical and logical analysis. This might turn out to be a historical project of the extension of Institutionalism’s reach. The particular asymmetry of the logics of instrumental vs. ceremonial warrants explains a general dominance of the ceremonial. The forms of change of institutional value-behavior structures derived are (1) (reinforced) ‘ceremonial encapsulation’, (2) regressive institutional change and (3) progressive institutional change. In the cases (2) and (3), the degree of ceremonial dominance will have to increase (decrease) and the system’s ‘permissiveness’ to decrease (increase). The conceptualization of institutions, the asymmetric schematization of value-behavior-structures, the reason for ceremonial dominance, and the possibility of progressive institutional change will be reconsidered and compared in this paper using a game-theoretic perspective, with its basically instrumental comprehension of institutions and with the ceremonial warrant comprehensible only as a degeneration of the instrumental. We refer to a most simple social dilemma interaction structure and a supergame solution. Surprising equivalences and complementarities emerge, with potentials of cross-fertilization. An initially instrumental institution is considered to develop (in fact degenerate), together with (1) the emergence, or reproduction, of status and power differentials in hierarchical systems, and (2) the striving for easy, smooth, and cheap decision-making, or ‘economies of scale’ of decision-making, first into a still instrumental norm and eventually into a ceremonial or abstract norm. The latter takes place, when original conditions have changed but the institutional structure will not properly adapt because of the two motives of status gain and economies of scale of institutionalized decision-making. In a game-theoretical perspective, ceremonial dominance and ceremonial encapsulation preventing a new progressive institutional change would translate into an insufficient new collective action capacity, due to (1) habituation, (2) an insufficient incentive structure and (3) a neglect of the common future. The conclusion of the critical role of policy to initiate, accelerate, and stabilize progressive institutional change is shared in the original institutionalist and the game-theoretic perspectives as well. A well-defined institutional policy approach, inferable in some detail from the game-theoretic logic, may initiate a lock-out of ceremonial encapsulation, through a change of the incentive structure and an increase of the importance and awareness of interdependence and a common future. The public agent must be capable of ‘meritorizing’ the private-interaction outcomes through a negotiated, participatory social process. Thus, the public agent would interact with the interaction system of the private agents in a well-defined way, i.e., ‘institutional policy’ as a double interactive policy. In all, large potentials for cross-fertilization of institutionalism and game theory.
    Keywords: Emergence of Institutions; Institutional Change; ‘institutional-game-theoretic’formalism ;Interactive Policy
    JEL: B52 D02 C72
    Date: 2011–02–09
  6. By: Ariane Lambert-Mogiliansky (PSE - Paris-Jourdan Sciences Economiques - CNRS : UMR8545 - Ecole des Hautes Etudes en Sciences Sociales (EHESS) - Ecole des Ponts ParisTech - Ecole Normale Supérieure de Paris - ENS Paris - INRA, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris)
    Abstract: The Type Indeterminacy model is a theoretical framework that uses some elements of quantum formalism to model the constructive preference perspective suggested by Kahneman and Tversky. In this paper we extend the TI-model from simple to strategic decision-making and show that TI-games open a new field of strategic interaction. We first establish an equivalence result between static games of incomplete information and static TI-games. We next develop a new solution concept for non-commuting dynamic TI-games. The updating rule captures the novelty brought about by Type Indeterminacy namely that in addition to affecting information and payoffs, the action of a player impacts on the profile of types. We provide an example showing that TI-game predictions cannot be obtained as Bayes Nash equilibrium of the corresponding classical game.
    Keywords: type indeterminacy ; games ; endogeneous preferences
    Date: 2010–06
  7. By: David F. Hendry
    Abstract: We consider three ‘cases studies’ of the uses and mis-uses of mathematics in economics and econometrics. The first concerns economic forecasting, where a mathematical analysis is essential, and is independent of the specific forecasting model and how the process being forecast behaves. The second concerns model selection with more candidate variables than the number of observations. Again, an understanding of the properties of extended general-to-specific procedures is impossible without advanced mathematical analysis. The third concerns inter-temporal optimization and the formation of ‘rational expectations’, where misleading results follow from present mathematical approaches for realistic economies. The appropriate mathematics remains to be developed, and may end ‘problem specific’ rather than generic.
    Keywords: Economic forecasting, structural breaks, model selections, expectations, impulse-indicator saturation, mathematical analyses
    JEL: C02 C22
    Date: 2011
  8. By: Ducos, Jean
    Abstract: Cette thèse a pour objet de réaliser une analyse économique de la médecine libérale en insistant sur ce qui, à nos yeux, est tu ou non reconnu. Il s’agit d’une analyse institutionnaliste basée sur l’encastrement historique et social de la santé. Après une présentation des spécificités de l’économie de la santé et un historique, nous abordons les institutions de la médecine libérale. Les caractéristiques essentielles de l’offre sont présentées en mettant l’accent sur ce qui fait problème tels que les comportements opportunistes des médecins libéraux, les carences de la régulation et les défaillances de la médecine libérale, sans oublier qu’il s’agit d’une profession en souffrance et en manque de reconnaissance. Concernant la demande, nous nous efforçons d’introduire l’état de maladie dans l’analyse économique. Enfin, après une mise en exergue des problèmes de la médecine libérale, nous faisons des propositions dans une perspective de développement des soins de santé primaires. Nous concluons sur l’utilité de la médecine libérale et sur son avenir fondé sur sa capacité à se réforme.
    Abstract: This thesis aims to undertake an economic analysis of private medical practice while stressing on elements, which in our view, remain unsaid or unrecognised. It is about an institutional analysis, based on the historic and social embedding of the health. After presenting the specificities of health economics and a history, we will deal with the institutions of private medical practice. The essential features of « supply » are introduced by stressing upon the drawbacks of private medical practice concerning the opportunistic behaviour of private practitioners and the deficiencies in regulation, without ignoring the fact that it is a profession that is suffering and needs recognition. As far as « demand » is concerned, we will stress upon the state of sickness in the economic analysis. Finally, after underlining the problems linked with private medical practice, we will outline proposals with a perspective of developing primary health care. The conclusion will treat the utility factory of private medical practice and its future, based upon its capability to reform itself.
    Keywords: régulation médicale; primary health care; private medical practice; ethics; embedding; demand of care; soins de santé primaires; médecine libérale; institutions; éthique; encastrement; demande de soins;
    JEL: I18 I11
    Date: 2010–11
  9. By: Tongkui, Yu; Shu-Heng, Chen; Honggang, Li
    Abstract: Both laboratory and field evidence suggest that people tend to voluntarily incur costs to punish non-cooperators. While costly punishment typically reduces the average payoff as well as promotes cooperation. Why does the costly punishment evolve? We study the role of punishment in cooperation promotion within a two-level evolution framework of individual strategies and social norms. In a population with certain social norm, players update their strategies according to the payoff differences among different strategies. In a longer horizon, the evolution of social norm may be driven by the average payoffs of of all members of the society. Norms differ in whether they allow or do not allow for the punishment action as part of strategies, and, for the former, they further differ in whether they encourage or do not encourage the punishment action. The strategy dynamics are articulated under different social norms. It is found that costly punishment does contribute to the evolution toward cooperation. Not only does the attraction basin of cooperative evolutionary stable state (CESS) become larger, but also the convergence speed to CESS is faster. These two properties are further enhanced if the punishment action is encouraged by the social norm. This model can be used to explain the widespread existence of costly punishment in human society.
    Keywords: social norm; costly punishment; cooperative evolutionary stable state; attraction basin; convergence speed
    JEL: C02 D64 C73
    Date: 2011–02–01
  10. By: Tjasa Loga; Saso Polanec;
    Abstract: The choice of college major is one of the most important decisions students make. In this paper we study the impact of ability on college major choice,using a data set for full-time students enrolled in four-year business and economics programs offered by the Faculty of Economics, University of Ljubljana. We distinguish between general and major-specific ability, which measure different dimensions of cognitive ability. We show that both measures are important in explaining individual decisions and that misleading results can follow from observing only commonly employed general ability. We also find important gender differences as males are more likely to base their major choice on the ability to complete coursework, while females are more likely to decide according to unobserved preferences.
    Keywords: College Majors, Ability, Gender Differences
    JEL: I23
    Date: 2011
  11. By: Gomez, José Andrés (University of Huelva); Merino, Bernat Roig (Polytechnic University of Valencia); Tur, Antonio Aledo (University of Alicante)
    Abstract: Social Sciences can, on occasions, be similar to the so called “hard” sciences. However, in many cases, neither the object nor the classical methods fit in with the objectives of the work. The object requires methodological and technical adjustments, which are often avoided by means of an improper rigidity of the object’s needs. These adjustments can even alter the original research idea. The main objective of this article consists of proving that those objects of study, less suitable to be addressed by rigid positivistic strategies, can be approached both scientifically and sociologically. This can be achieved with the use of different strategies and flexible methodologies to ensure validity and reliability standards. This paper will be posed, firstly, a reflection on the epistemological nature of the debate about the rigid-flexible perspectives. Secondly, the strategies and tools used by the research team to achieve the reduction of the uncertainty about the size and characteristics of the population studied will be described. Finally, some of the survey results obtained in this project will be compared to those provided by the FAMILITUR Survey (2008), conducted by the Spanish Institute of Tourist Studies (IET)
    Keywords: methodological flexibility; quantitative-qualitative approach; identity of social sciences; residential tourism
    JEL: C10
    Date: 2010–12–30
  12. By: Mathilde Maurel (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I); Gunther Schnabl (University of Leipzig - Institute for Economic Policy)
    Abstract: The 2010 European debt crisis has revived the discussion concerning the optimum adjustment strategy in the face of asymmetric shocks. Whereas Mundell's (1961) seminal theory on optimum currency areas suggests depreciation in the face of crisis, the most recent emergence of competitive depreciations, competitive interest rate cuts or currency wars questions the exchange rate as an adjustment tool to asymmetric economic development. This paper approaches the question from a theoretical perspective by confronting exchange rate based adjustment with crisis adjustment via price and wage cuts. Econometric estimations yield a negative impact of exchange rate flexibility/ volatility on growth, which is found to be particularly strong for countries with asymmetric business cycles and during recessions. Based on these findings we support a further enlargement of the European Monetary Union and recommend more exchange rate stability for the rest of the world.
    Keywords: Exchange rate regime, crisis, shock adjustment, theory of optimum currency areas, Mundell, Schumpeter, Hayek, competitive depreciations, currency war.
    Date: 2011–01

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