nep-hpe New Economics Papers
on History and Philosophy of Economics
Issue of 2011‒04‒09
twenty-one papers chosen by
Erik Thomson
University of Manitoba

  1. Marx’s Appreciation of James Steuart: A Theory of History and Value By William McColloch
  2. The Veblenian Roots of Institutional Political Economy By Kirsten Ford
  3. "The Financial Crisis Viewed from the Perspective of the “Social Costs” Theory" By L. Randall Wray
  4. Kaderschmieden der Wirtschaft und/oder Universitäten? Der Auftrag der Wirtschaftsuniversitäten und -fakultäten im 21. Jahrhundert By Kirchgässner, Gebhard
  5. An Aristotelian View of Marx’s Method By Nathaniel Cline, William McColloch and Kirsten Ford
  6. Rarer Actions: Giving and Taking in Third-Party Punishment Games By Simon Halliday
  7. "Minsky's Money Manager Capitalism and the Global Financial Crisis" By L. Randall Wray
  8. The emergence of norms from conflicts over just distributions By Luis Miller; Heiko Rauhut; Fabian Winter
  9. Bosses and Kings: Asymmetric Power in Paired Common Pool and Public Good Games By James C. Cox; Elinor Ostrom; James M. Walker
  10. Breve ou Longo? Um estudo comparativo entre as contribuições de Hobsbawm e Arrighi para a interpretação da História Econômica do século XX By Souza, Luiz Eduardo Simões de
  11. Keeping Up With Fashion: Recent Trends in the Subfields of Study of Doctoral Students in Economics By Sheng Guo; Jungmin Lee
  12. Personality Psychology and Economics By Mathilde Almlund; Angela Lee Duckworth; James J. Heckman; Tim D. Kautz
  13. Overcoming Cournot's dilemma on increasing returns and competition By Mario Morroni
  14. Economics as a Social Science: Financial Regulation After The Crisis By John Quiggin
  15. Cosmopolitanism and Democratic Freedom By Hauke Brunkhorst
  16. Emotions, Sanctions and Cooperation By Matteus Joffily; David Masclet; Charles Noussair; Marie-Claire Villeval
  17. Brothers in Arms - An Experiment on the Alliance Puzzle By Changxia Ke; Kai A. Konrad; Florian Morath
  18. "Beauty Is the Promise of Happiness"? By Hamermesh, Daniel S.; Abrevaya, Jason
  19. Individual Welfare and Subjective Well-Being : Commentary Inspired by Sacks, Stevenson and Wolfers By Hammond, Peter J.; Liberini, Federica; Proto, Eugenio
  20. The Great Inflation: Did the Shadow Know Better? By William Poole; Robert H. Rasche; David C. Wheelock
  21. A Compromise Stable Extension of Bankruptcy Games: Multipurpose Resource Allocation By Grundel, S.; Borm, P.E.M.; Hamers, H.J.M.

  1. By: William McColloch
    Abstract: This paper argues that despite a growing body of scholarly literature on Sir James Steuart, his theory of history and influence on Marxian political economy has been largely ignored. The approach of this paper is motivated, in part, by Marx’s sympathetic treatment of Steuart found in the opening of his Theories of Surplus Value, and in scattered asides throughout the remainder of his work. We argue that Steuart’s importance to students of the history of political economy is three-fold: First, following Marx, we consider the unique and dynamic role played by history in Steuart’s system. Steuart appears to have been the first thinker in political economy to both recognize the historical specificity of capitalism, and to conspicuously incorporate that realization into his system. Secondly, in Steuart’s approach to the question of value and profit we find conceptions that defy easy classification. Steuart is seen to plainly abandon the mercantilist understanding of profit as determined in the sphere of exchange alone, and to treat what he calls the real value of a commodity as intimately related to its necessary labor time. Finally, we argue that Steuart’s contemporary notoriety made him far more influential than is commonly recognized. In particular, we contend that Steuart, via Hegel, may have exercised an indirect influence on Marx’s own theory of history, in ways that Marx could not have recognized.
    Keywords: History of Economic Thought, Sir James Steuart, Classical School JEL Codes: B12, B14, B41, N43
    Date: 2011
  2. By: Kirsten Ford
    Abstract: The term “Institutional Economics” has been applied to some of capitalism’s strongest critics as well as its most ardent apologists. This paradox in terms has bred contradictory literature in development economics, some declaring the death of this line of thought while others herald its resurgence. In examining the roots of Institutional economics, this paper attempts to disentangle the ambiguity surrounding this label. The Institutional Political Economy of Ha-Joon Chang will then be examined as a return to Institutionalism’s radical roots in development economics. Concluding remarks suggest that this approach is capable of encompassing gender as an analytical category, an extension that would improve the ability of policy makers to assess the impacts of macroeconomic policy.
    Keywords: History of Economic Thought, Veblen, Institutionalism, Methodology JEL Classification: B000, B150, B250, B400
    Date: 2011
  3. By: L. Randall Wray
    Abstract: This paper examines the causes and consequences of the current global financial crisis. It largely relies on the work of Hyman Minsky, although analyses by John Kenneth Galbraith and Thorstein Veblen of the causes of the 1930s collapse are used to show similarities between the two crises. K.W. Kapp's "social costs" theory is contrasted with the recently dominant "efficient markets" hypothesis to provide the context for analyzing the functioning of financial institutions. The paper argues that, rather than operating "efficiently," the financial sector has been imposing huge costs on the economy-costs that no one can deny in the aftermath of the economy's collapse. While orthodox approaches lead to the conclusion that money and finance should not matter much, the alternative tradition-from Veblen and Keynes to Galbraith and Minsky-provides the basis for developing an approach that puts money and finance front and center. Including the theory of social costs also generates policy recommendations more appropriate to an economy in which finance matters.
    Keywords: Hyman Minsky; Kapp; Galbraith; Veblen; Coase; Theory of Social Costs; Efficient Markets Hypothesis; Money; Finance; Social Efficiency; Social Provisioning; Shadow Banks; Financial Innovation; Casino Capitalism; Securitization; Deregulation; Self-Supervision
    JEL: B14 B15 B22 B52 E3 E12 E40 E42 E50 E51 E52 G14 G21
    Date: 2011–03
  4. By: Kirchgässner, Gebhard
    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
  5. By: Nathaniel Cline, William McColloch and Kirsten Ford
    Abstract: A number of Marxist scholars have tied aspects of Marx’s thought to certain Aristotelian categories, yet remarkably little is said of Marx’s dialectical materialism in this literature. Here we attempt to lay a foundation for such an effort, paying particular attention to the way in which Aristotle’s mediated starting point resonates in Marx’s method. While Hegel is able to grasp man’s self-creation as a process, his dialectical method proceeds from an unmediated starting point, and impresses Idealism upon the Aristotelian categories. In rejecting the Idealist dimensions of Hegel’s dialectic, Marx implicitly reclaims the materialist dimensions of Aristotle’s system. It will be argued here that such an interpretation sheds important light on the nature of Marx’s departure from Hegel, and on his method in Capital.
    Keywords: Marx, Aristotle, Hegel, Methodology JEL Classification: B000, B140, B490, B510
    Date: 2011
  6. By: Simon Halliday
    Abstract: In attempting to understand cooperation, economists have used the methods of experimental economics to focus on spheres of human behavior in which humans display altruism, reciprocity, or other social preferences through giving and through punishment. Recent work has begun to examine whether allowing allocations in the negative domain, that is, allowing subjects to take (or steal) other subjects' endowments, might affect participants' behavior. If participants' behavior is affected, then our understanding of experimental results generally, and social preferences speci cally, should be affected too (List 2007, Bardsley 2008). In this paper we propose an experimental variation on the Dictator Game with third-party punishment (Fehr and Fischbacher 2004b). We examine, first, a basic Dictator Game with third-party punishment, after which we introduce a treatment allowing the dictator to take from the receiver, in the knowledge that the third party could punish them. The results conflict. Many dictators choose the most self-interested option, while, when taking is introduced as an option for the dictator, third parties punish the most self-interested option more than in the baseline.
    JEL: C91 D63
    Date: 2011
  7. By: L. Randall Wray
    Abstract: The world's worst economic crisis since the 1930s is now well into its third year. All sorts of explanations have been proffered for the causes of the crisis, from lax regulation and oversight to excessive global liquidity. Unfortunately, these narratives do not take into account the systemic nature of the global crisis. This is why so many observers are misled into pronouncing that recovery is on the way-or even under way already. I believe they are incorrect. We are, perhaps, in round three of a nine-round bout. It is still conceivable that Minsky's "it"-a full-fledged debt deflation with failure of most of the largest financial institutions-could happen again. Indeed, Minsky's work has enjoyed unprecedented interest, with many calling this a "Minsky moment" or "Minsky crisis." However, most of those who channel Minsky locate the beginnings of the crisis in the 2000s. I argue that we should not view this as a "moment" that can be traced to recent developments. Rather, as Minsky argued for nearly 50 years, we have seen a slow realignment of the global financial system toward "money manager capitalism." Minsky's analysis correctly links postwar developments with the prewar "finance capitalism" analyzed by Rudolf Hilferding, Thorstein Veblen, and John Maynard Keynes-and later by John Kenneth Galbraith. In an important sense, over the past quarter century we created conditions similar to those that existed in the run-up to the Great Depression, with a similar outcome. Getting out of this mess will require radical policy changes no less significant than those adopted in the New Deal.
    Keywords: Hyman Minsky; Hilferding; Veblen; Keynes; John Kenneth Galbraith; Financial Crisis; Minsky Crisis; Minsky Moment; Finance Capitalism; Money Manager Capitalism; Debt Deflation; Can It Happen Again?
    JEL: B22 B25 B52 E11 E12 E44 G18 G20 G21
    Date: 2011–03
  8. By: Luis Miller (CESS, Nuffield College, Oxford, Great Britain); Heiko Rauhut (ETH Zurich, Swiss Federal Institute of Technology); Fabian Winter (Max Planck Institute of Economics, Jena, Germany)
    Abstract: Why is it that well-intentioned actions can create persistent conflicts? While norms are widely regarded as a source for cooperation, this article proposes a novel theory in which the emergence of norms can be understood as a bargaining process in which normative conflicts explain the finally emerging norm. The theory is tested with a dynamical experiment on conflicts over the consideration of equality, effort or efficiency for the distribution of joint earnings. Normative conflict is measured by the number of rejected offers in a recursive bargaining game. The emerging normative system is analyzed by feedback cycles between micro- and macro-level. It is demonstrated that more normative cues cause more normative conflict. Further, under the structural conditions of either simple or complex situations, the convergence towards a simple and widely shared norm is likely. In contrast, in moderately complex situations, convergence is unlikely and several equally reasonable norms co-exist. The findings are discussed with respect to the integration of sociological conflict theory with the bargaining concept in economic theory.
    Keywords: social norms, normative conflict, bargaining, cooperation, experiment
    JEL: C91 D63
    Date: 2011–04–04
  9. By: James C. Cox; Elinor Ostrom; James M. Walker
    Abstract: Social dilemmas characterize decision environments in which individuals' exclusive pursuit of their own material self-interest can produce inefficient allocations. Two such environments are those characterized by public goods and common-pool resources in which the social dilemmas can be manifested in free riding and tragedy of the commons outcomes. Much field and laboratory research has focused on the effectiveness of alternative political-economic institutions in counteracting individuals' tendencies to underprovide public goods and over-extract commonpool resources. Previous laboratory research has not focused on the implications of power asymmetries in paired public good and common pool game settings. In our baseline treatments, we experiment with simultaneous move one-period games in which paired comparisons can be made across settings with public good and common pool games. In our central treatments, we experiment with pairs of sequential move one-period games in which second movers with asymmetric power -- "bosses and kings" -- can have large effects on efficiency and equity. The central questions are whether the bosses and kings do have significant effects on outcomes and whether those effects differ across the paired public good and common pool games in ways that can be rationalized by some theories but not others.
    Date: 2011–03
  10. By: Souza, Luiz Eduardo Simões de
    Abstract: This study aims to conduct a comparative study between the visions of Eric Hobsbawm and Giovanni Arrighi on the economic transformations of the twentieth century. In our view, there are differences in methodology and approach which makes the comparison a matter of methodological discussion in Economic History. Hobsbawm, for example, maintains an understanding of the twentieth century as a brief period, limited primarily by the dispute between the U.S. and the USSR for world supremacy. The historical milestones for Hobsbawm would be the First World War (1914 - 1918) and the end of the USSR (1991). According to Arrighi, the focus would be on the assertion of American supremacy and consolidation of systems designated from the mid-nineteenth century. Besides the obvious difference of approaches and frameworks, there is more to discuss methodically - especially in the field of understanding of economic history – from both authors. This thread runs through processes such as military-political expansion and technological revolutions of the period.
    Keywords: Economic History; Contemporary History; World-Systems; Eric Hobsbawm; Giovanni Arrighi
    JEL: N01 N0
    Date: 2010–04–10
  11. By: Sheng Guo (Department of Economics, Florida International University); Jungmin Lee (School of Economics, Sogang University)
    Abstract: We conduct an analysis of recent trends on the subfields of study that doctoral students in economics choose for their dissertations. By investigating data on the JEL classification codes of dissertations reported by the Journal of Economic Literature from 1991 to 2007, we find that the trends in the subfields of study of doctoral dissertations follow those of articles published at five major general-interest journals (American Economic Review, Quarterly Journal of Economics, Journal of Political Economy, Review of Economic Studies, and Review of Economics and Statistics). In particular, the co-movement pattern is salient in subfields such as Microeconomics (D), Health, Education, and Welfare (I), and Economic Development and Growth (O). Our findings suggest that the fashion exhibited in the top-notch research journals is one of the most influential factors when doctoral students choose a subfield.
    Keywords: Economics Research, Doctoral Dissertation, Journal Publication, Ph.D. Economist, Economics Job Market
    JEL: A11 A14 A20 J44
    Date: 2011–03
  12. By: Mathilde Almlund; Angela Lee Duckworth; James J. Heckman; Tim D. Kautz
    Abstract: This paper explores the power of personality traits both as predictors and as causes of academic and economic success, health, and criminal activity. Measured personality is interpreted as a construct derived from an economic model of preferences, constraints, and information. Evidence is reviewed about the “situational specificity” of personality traits and preferences. An extreme version of the situationist view claims that there are no stable personality traits or preference parameters that persons carry across different situations. Those who hold this view claim that personality psychology has little relevance for economics. The biological and evolutionary origins of personality traits are explored. Personality measurement systems and relationships among the measures used by psychologists are examined. The predictive power of personality measures is compared with the predictive power of measures of cognition captured by IQ and achievement tests. For many outcomes, personality measures are just as predictive as cognitive measures, even after controlling for family background and cognition. Moreover, standard measures of cognition are heavily influenced by personality traits and incentives. Measured personality traits are positively correlated over the life cycle. However, they are not fixed and can be altered by experience and investment. Intervention studies, along with studies in biology and neuroscience, establish a causal basis for the observed effect of personality traits on economic and social outcomes. Personality traits are more malleable over the life cycle compared to cognition, which becomes highly rank stable around age 10. Interventions that change personality are promising avenues for addressing poverty and disadvantage.
    JEL: I2 J24
    Date: 2011–02
  13. By: Mario Morroni
    Abstract: This paper shows that the Cournot-Marshall dilemma on the incompatibility of increasing returns and competition may be overcome under an integrated theory of the firm that takes into account not only returns to scale but also knowledge and transaction cost considerations. Knowledge and transaction-based considerations help to understand why, contrary to predictions, the tendency towards an increased dimension and monopoly may not operate in spite of the presence of significant economies of scale. It is argued that the boundaries of the firm cannot be attributed solely to one single cause, but are instead the result of the interplay between knowledge-, scale-scope- and transaction-based considerations. This interaction favours the emergence of a variety of organisational structures and the coexistence of different sizes even in the same sector of activity.
    Keywords: Transaction costs, capabilities, economies of scale.
    JEL: D2 L2
    Date: 2010–12–10
  14. By: John Quiggin (School of Economics, University of Queensland)
    Abstract: One of the most striking developments of the late 20th century was the explosion in the volume, speed and complexity of international financial transactions, and the resulting breakdown of effective regulatory control over the global financial system. The speed with which this process has gone into reverse since the onset of the financial crisis has been equally striking. Transactions in the global foreign exchange market, once confined to financing trade flows, peaked at around $4 trillion per day in mid-2008. At that pace, two days of foreign exchange trading would be sufficient to finance an entire year’s trade flows. The growth of private credit reached an annualised rate of $10 trillion at the same time.
    Keywords: Economics as a Social Science
    Date: 2010–12
  15. By: Hauke Brunkhorst
    Abstract: Cosmopolitanism has a long history. Yet there is a great difference between classical and modern cosmopolitanism. Whereas the latter is an ideology of the classical empire that is grounded in a hierarchical society, modern cosmopolitanism is based on egalitarian and individualistic premises, and is related closely to the constitutional law and the ideological justification of the nation state and its imperial cravings. Whereas the modern nation state in a way has solved the fundamental religious, political and socio-economic crises of modernity within its boarders (at least in the western hemisphere), its greatest advance, the exclusion of inequalities, was at the price of the exclusion of the internal other: of blacks, workers, women, etc., and the other that stemmed from the non-European world that furthermore was under European colonial rule or other forms of European, North-American, or Japanese imperial control. Yet, the wars and revolutions of the 20th century led to a complete reconstruction, new foundation and globalization of all national and international law. The evolutionary advances of the 20th century consisted in the emergence of world law, and this finally enabled the normative (not necessarily factual) construction of international and national welfarism. Nevertheless the dialectic of enlightenment came back again and led to new forms of postnational domination, hegemony, oppression and exclusion, and the emergence of a new formation of transnational class rule. In the final section the possibilities of a democratic ‘Reform nach Prinzipien’ (Kant) are considered.
    Keywords: differentiation; globalization; internationalism; law; European law; legal culture; supranationalism
    Date: 2011–03–15
  16. By: Matteus Joffily (ISC - Institut des Sciences Cognitives - CNRS : UMR5015 - Université Claude Bernard - Lyon I); David Masclet (CREM - Centre de Recherche en Economie et Management - CNRS : UMR6211 - Université de Rennes I - Université de Caen); Charles Noussair (Department of economics, Tilburg University - Tilburg University); Marie-Claire Villeval (GATE Lyon Saint-Etienne - Groupe d'analyse et de théorie économique - CNRS : UMR5824 - Université Lumière - Lyon II - École Normale Supérieure de Lyon)
    Abstract: We use skin conductance responses and self-reports of hedonic valence to study the emotional basis of cooperation and punishment in a social dilemma. Emotional reaction to free-riding incites individuals to apply sanctions when they are available. The application of sanctions activates a "virtuous emotional circle" that accompanies cooperation. Emotionally aroused cooperators relieve negative emotions when they punish free riders. In response, the free-riders experience negative emotions when punished, and increase their subsequent level of cooperation. The outcome is an increased level of contribution that becomes the new standard or norm. For a given contribution level, individuals attain higher levels of satisfaction when sanctioning institutions are in place.
    Keywords: Emotions; Sanctions; Cooperation; Experiment; Skin Conductance Responses
    Date: 2011
  17. By: Changxia Ke; Kai A. Konrad; Florian Morath
    Abstract: Our experimental analysis of alliances in conflicts leads to three main findings. First, even in the absence of repeated interaction, direct contact or communication, free-riding among alliance members is far less pronounced than what would be expected from non-cooperative theory. Second, this possible solidarity among 'brothers in arms' when fighting against an outside enemy may rapidly deteriorate or disappear as soon as the outside enemy disappears. Third, when fighting an outside enemy, 'brothers in arms' may already anticipate future internal conflict about dividing the spoils of winning; however, this subsequent internal conflict does not discourage alliance members from expending much effort in the contest against the external enemy.
    Keywords: Alliance, conflict, contest, free-riding, hold-up problem, solidarity
    JEL: D72 D74
    Date: 2011–01
  18. By: Hamermesh, Daniel S. (University of Texas at Austin); Abrevaya, Jason (University of Texas at Austin)
    Abstract: We measure the impact of individuals' looks on their life satisfaction or happiness. Using five data sets from the U.S., Canada, the U.K., and Germany, we construct beauty measures in different ways that allow putting a lower bound on the true effects of beauty on happiness. Personal beauty raises happiness, with a one standard-deviation change in beauty generating about 0.10 standard deviations of additional satisfaction/happiness among men, 0.12 among women. Accounting for a wide variety of covariates, including those that might be affected by differences in beauty, and particularly effects in the labor and marriage markets, the impact among men is more than halved, among women slightly less than halved. The majority of the effect of beauty on happiness may work through its effects on economic outcomes.
    Keywords: life satisfaction, measurement error, looks
    JEL: I30 J10 C20
    Date: 2011–03
  19. By: Hammond, Peter J. (University of Warwick); Liberini, Federica (University of Warwick); Proto, Eugenio (University of Warwick)
    Abstract: Sacks, Stevenson and Wolfers (2010) question earlier results like Easterlin's showing that long-run economic growth often fails to improve individuals'average reports of their own subjective well-being (SWB). We use World Values Survey data to establish that the proportion of individuals reporting happiness level h, and whose income falls below any xed threshold, always diminishes as h increases. The implied positive association between income and reported happiness suggests that it is possible in principle to construct multi-dimensional summary statistics based on reported SWB that could be used to evaluate economic policy
    Date: 2011
  20. By: William Poole; Robert H. Rasche; David C. Wheelock
    Abstract: The Shadow Open Market Committee was formed in 1973 in response to rising inflation and the apparent unwillingness of U.S. policymakers to implement policies necessary to maintain price stability. This paper describes how the Committee’s policy views differed from those of most Federal Reserve officials and many academic economists at the time. The Shadow argued that price stability should be the primary goal of monetary policy and favored gradual adjustment of monetary growth to a rate consistent with price stability. This paper evaluates the Shadow’s policy rule in the context of the New Keynesian macroeconomic model of Clarida, Gali, and Gertler (1999). Simulations of the model suggest that the gradual stabilization of monetary growth favored by the Shadow would have lowered inflation with less impact on output growth and less variability in inflation or output than a one-time reduction in monetary growth. We conclude that the Shadow articulated a policy that would have outperformed the policies actually implemented by the Federal Reserve during the Great Inflation era.
    JEL: E31 E32 E37 E41 E52 E58
    Date: 2011–03
  21. By: Grundel, S.; Borm, P.E.M.; Hamers, H.J.M. (Tilburg University, Center for Economic Research)
    Abstract: This paper considers situations characterized by a common-pool resource, which needs to be divided among agents. Each of the agents has some claim on this pool and an individual reward function for assigned resources. This paper analyzes not only the problem of max- imizing the total joint reward, but also the allocation of these rewards among the agents. Analyzing these situations a new class of transferable utility games is introduced, called multipurpose resource games. These games are based on the bankruptcy model, as intro- duced by O'Neill (1982). It is shown that every multipurpose resource game is compromise stable. Moreover, an explicit expression for the nucleolus of these games is provided.
    Keywords: bankruptcy games;compromise stability;nucleolus.
    JEL: C71
    Date: 2011

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