nep-hpe New Economics Papers
on History and Philosophy of Economics
Issue of 2011‒03‒26
twelve papers chosen by
Erik Thomson
University of Manitoba

  1. “Animal Spirits” in John Maynard Keynes’s General Theory of Employment, Interest and Money : Some Short and Sceptical Remarks By Barens, Ingo
  2. "Keynes after 75 Years: Rethinking Money as a Public Monopoly" By L. Randall Wray
  3. "Financial Markets" By Jorg Bibow
  4. Civilización, economía y orden espontaneo: La inviabilidad evolutiva del socialismo By Rodríguez González, Guillermo
  5. Social Provisioning Process and Socio-Economic Modeling By Jo, Tae-Hee
  6. Contributions of economists to the housing-price bubble By Martha A. Starr
  7. Kaderschmieden der Wirtschaft und/oder Universitäten? Der Auftrag der Wirtschaftsuniversitäten und -fakultäten im 21. Jahrhundert By Gebhard Kirchgässner
  8. Where is the Economics in Spatial Econometrics? By Luisa Corrado; Bernard Fingleton
  9. "Minsky Crisis" By L. Randall Wray
  10. An algebraic approach to general aggregation theory: Propositional-attitude aggregators as MV-homomorphisms By Frederik Herzberg
  11. Economic Doctrines and Approaches to Climate Change Policy By Atkinson, Robert D.; Hackler, Darrene
  12. Cost Innovation: Schumpeter and Equilibrium - Part 1: Robinson Crusoe By Martin Shubik; William D. Sudderth

  1. By: Barens, Ingo
    Date: 2011–03
  2. By: L. Randall Wray
    Abstract: In this paper I first provide an overview of alternative approaches to money, contrasting the orthodox approach, in which money is neutral, at least in the long run; and the Marx-Veblen-Keynes approach, or the monetary theory of production. I then focus in more detail on two main categories: the orthodox approach that views money as an efficiency-enhancing innovation of markets, and the Chartalist approach that defines money as a creature of the state. As the state's "creature," money should be seen as a public monopoly. I then move on to the implications of viewing money as a public monopoly and link that view back to Keynes, arguing that extending Keynes along these lines would bring his theory up to date.
    Keywords: Money; Public Monopoly; Monetary Theory of Production; Keynes; Marx; Veblen; Knapp; Chartalism
    JEL: B14 B15 B22 B52 E12 E40 E42 E50 E51 E52 G14 G21 H1 H3 H4 H44
    Date: 2011–03
  3. By: Jorg Bibow
    Abstract: This paper provides a brief exposition of financial markets in Post Keynesian economics. Inspired by John Maynard Keynes's path-breaking insights into the role of liquidity and finance in "monetary production economies," Post Keynesian economics offers a refreshing alternative to mainstream (mis)conceptions in this area. We highlight the importance of liquidity-as provided by the financial system—to the proper functioning of real world economies under fundamental uncertainty, contrasting starkly with the fictitious modeling world of neo-Walrasian exchange economies. The mainstream vision of well-behaved financial markets, channeling saving flows from savers to investors while anchored by fundamentals, complements a notion of money as an arbitrary numeraire and mere convenience, facilitating exchange but otherwise "neutral." From a Post Keynesian perspective, money and finance are nonneutral but condition and shape real economic performance. It takes public policy to anchor asset prices and secure financial stability, with the central bank as the key public policy tool.
    Keywords: Financial Markets; Liquidity; Uncertainty; Rate of Interest; Instability; Central Banking
    JEL: B31 E44 E50
    Date: 2011–03
  4. By: Rodríguez González, Guillermo
    Abstract: The purpose of this paper is to explain the scope of evolutionary infeasibility of socialism in the broad sense, in light of the theory of spontaneous order of F. A. Hayek. To that end we will study the redefinition of socialism in the context of evolutionary praxeology, we apply the theory of the infeasibility of socialism itself, of the Austrian School in two examples, included in the definition of socialism in the broad sense: the monetary and financial policy under fractional banking system and neo malthusian analysis off efficiently ecological and economic sustainability of large populations. Wiht such examples showing the range off diversity of socialism, understood as constructive intellectual error, we will base our analysis on the theory of the Sensory Order Hayek on the human mind and the limits of reason as the cause of the scientific impracticability of any attempt to centralized planning teleological over evolutionary self-regulating systems, whose enormous inherent complexity of information is overwhelming for to human reason except in limited circunstances and only in general strokes.
    Keywords: Spontaneous order; cognitive psychology; evolutionary economics; constructivism; neo-malthusianism
    JEL: B52 P48 P28 B53
    Date: 2011–01–08
  5. By: Jo, Tae-Hee
    Abstract: The radical difference between orthodox and heterodox economics emanates from the different views of the capitalist socio-economic system. Economics as the science of social provisioning felicitously describes the heterodox view that economy is part of the evolving social order; social agency is embedded in the social and cultural context; a socio-economic change is driven by technical and cultural changes; and the provisioning process is open-ended. Such a perspective on economy offers ample methodological and theoretical implications for modeling the capitalist economy in a realistic manner. It lends itself especially to the micro-macro synthetic approach. Thus the objective of this paper is twofold: 1) to examine how the concept of the social provisioning process can be clarified and expanded by virtue of recent development in heterodox methodology and 2) to discuss how methodological development would nourish the heterodox modeling and theorizing of the capitalist social provisioning process.
    Keywords: Social Provisioning; heterodox economics; social fabric matrix; system dynamics; social surplus approach
    JEL: B51 B52 B41
    Date: 2011–03–15
  6. By: Martha A. Starr
    Abstract: After the bursting of the housing-price bubble in 2006 and ensuing financial crisis, there has been much discussion of what economists could have done differently to help avert the crisis and "Great Recession" that followed. One dimension of this concerns information supplied by economists to the general public about causes of high appreciation in home prices and their likely future course, as good information could have helped the public hedge their finances against downside risks while bad information may have encouraged them to take on too much risk. This paper analyzes data from 24 California newspapers on assessments and predictions offered by economists as to whether bubbles were forming in the state's housing markets. In brief, we find that the California public was fairly decently served by economists offering their views via the media -- although with some significant problems of biased forecasts not made in good faith, and of inattention to concerns about "harm avoidance" that ought to apply when economists share their opinions in this way.
    Keywords: JEL classification: R21, D31, D12, E32
    Date: 2011–03
  7. By: Gebhard Kirchgässner
    Abstract: After a short sketch of the history of modern business schools in the German speaking countries, their four major activity fields are considered: (i) academic teaching, (ii) scientific research, (iii) consulting and (iv) executive education. While teaching was traditionally dominant, research has gained more importance in recent decades, not only in Economics but also in Management departments. With respect to consulting, we have to distinguish between consulting for governments by economists and for private companies by professors of management. Executive education is mainly a domain of management (and law) departments; economists only play a minor role in this area. We conclude with discussing some of the ethical questions with which Economics and Management departments are confronted today.
    Date: 2011–03
  8. By: Luisa Corrado; Bernard Fingleton
    Abstract: Spatial econometrics has been criticized by some economists because some model specifications have been driven by data-analytic considerations rather than having a firm foundation in economic theory. In particular this applies to the so-called W matrix, which is integral to the structure of endogenous and exogenous spatial lags, and to spatial error processes, and which are almost the sine qua non of spatial econometrics. Moreover it has been suggested that the significance of a spatially lagged dependent variable involving W may be misleading, since it may be simply picking up the effects of omitted spatially dependent variables, incorrectly suggesting the existence of a spillover mechanism. In this paper we review the theoretical and empirical rationale for network dependence and spatial externalities as embodied in spatially lagged variables, arguing that failing to acknowledge their presence at least leads to biased inference, can be a cause of inconsistent estimation, and leads to an incorrect understanding of true causal processes.
    Keywords: Spatial econometrics, endogenous spatial lag, exogenous spatial lag, spatiallydependent errors, network dependence, externalities, the W matrix, panel data with spatialeffects, multilevel models with spatial effects
    JEL: C21 C31 R0
    Date: 2011–03
  9. By: L. Randall Wray
    Abstract: Stability is destabilizing. These three words concisely capture the insight that underlies Hyman Minsky's analysis of the economy's transformation over the entire postwar period. The basic thesis is that the dynamic forces of a capitalist economy are explosive and must be contained by institutional ceilings and floors. However, to the extent that these constraints achieve some semblance of stability, they will change behavior in such a way that the ceiling will be breached in an unsustainable speculative boom. If the inevitable crash is "cushioned" by the institutional floors, the risky behavior that caused the boom will be rewarded. Another boom will build, and the crash that follows will again test the safety net. Over time, the crises become increasingly frequent and severe, until finally "it" (a great depression with a debt deflation) becomes possible. Policy must adapt as the economy is transformed. The problem with the stabilizing institutions that were put in place in the early postwar period is that they no longer served the economy well by the 1980s. Further, they had been purposely degraded and even in some cases dismantled, often in the erroneous belief that "free" markets are self-regulating. Hence, the economy evolved over the postwar period in a manner that made it much more fragile. Minsky continually formulated and advocated policy to deal with these new developments. Unfortunately, his warnings were largely ignored by the profession and by policymakers—until it was too late.
    Keywords: Stability Is Destabilizing; Hyman Minsky; Money Manager Capitalism; Financial Instability Hypothesis; Global Financial Crisis; Self-Regulating Markets
    JEL: B22 B25 B52 E11 E12 E44 O11
    Date: 2011–03
  10. By: Frederik Herzberg (Institute of Mathematical Economics, Bielefeld University)
    Abstract: This paper continues Dietrich and List's [2010] work on propositional-attitude aggregation theory, which is a generalised unification of the judgment-aggregation and probabilistic opinion-pooling literatures. We first propose an algebraic framework for an analysis of (many-valued) propositional-attitude aggregation problems. Then we shall show that systematic propositional-attitude aggregators can be viewed as homomorphisms in the category of C.C. Chang's [1958] MV-algebras. Since the 2-element Boolean algebra as well as the real unit interval can be endowed with an MV-algebra structure, we obtain as natural corollaries two famous theorems: Arrow's theorem for judgment aggregation as well as McConway's [1981] characterisation of linear opinion pools.
    Keywords: propositional attitude aggregation, judgment aggregation, linear opinion pooling, Arrow's impossibility theorem, many-valued logic, MV-algebra, homomorphism, Arrow's impossibility theorem, functional equation
    JEL: D71
    Date: 2011–03
  11. By: Atkinson, Robert D.; Hackler, Darrene
    Abstract: In climate change, as in all policy issues, economic philosophy has a significant influence on how people view both the problems and the solutions. For the first time, ITIF surveys four dominant schools of economic thought and analyzes how adherents approach policy options for climate change and energy policy. With climate change and major energy legislation stalled, maybe it is time to put aside fixed philosophical notions and take a practical look on ways to address climate change in an economically feasible way. The report reviews the principles and goals of each economic doctrine, and offers a critique of the advantages and limitations of each doctrine's contribution to addressing the challenge of climate change.
    Keywords: Innovation; Economics; Climate Change; Public Policy
    JEL: B50 A10 Q54
    Date: 2010–10
  12. By: Martin Shubik; William D. Sudderth
    Date: 2011–03–20

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