nep-hpe New Economics Papers
on History and Philosophy of Economics
Issue of 2011‒05‒14
sixteen papers chosen by
Erik Thomson
University of Manitoba

  1. Chapter 18 of the General Theory “Further Analysed”: The Theory of Economics as A Method By Anna M. Carabelli; Mario A. Cedrini
  2. History of the economics department at University of Missouri-Kansas City By Lee, Frederic
  3. Is the Veil of Ignorance Transparent ?. By Gaël Giraud; Cécile Renouard
  4. Tullock Challenges: happiness, revolutions and democracy By Bruno S. Frey
  5. The complementarity foundations of industrial organization By CALCIANO, Filippo L.
  6. Geographical economics : a historical perspective By THISSE, Jean - François
  7. Public Goods Agreements with Other-Regarding Preferences By Charles D. Kolstad
  8. Heterodox microeconomics and the foundation of heterodox macroeconomics By Lee, Frederic
  9. Benoit Mandelbrot (1924 - 2011 ) : A Greek among Romans By Estrada, Fernando
  10. Paradigm Shift By Damien Besancenot; Dogguy Habib
  11. Monetary and fiscal policy should be merged, which in turn changes the role of central banks By Musgrave, Ralph S.
  12. Quantum Bayesian implementation and revelation principle By Wu, Haoyang
  13. Formalizing a new approach to economic policy - Bent Hansen, Gösta Rehn and the Swedish model By Erixon, Lennart
  14. "The Levy Institute Measure of Economic Well-Being, Great Britain, 1995 and 2005" By Ajit Zacharias
  15. How Computational Statistics Became the Backbone of Modern Data Science By James E. Gentle; Wolfgang Karl Härdle; Yuichi Mori
  16. L'importance des langues et des mots dans la comparaison : traduction et controverses. By Jean-Claude Barbier

  1. By: Anna M. Carabelli; Mario A. Cedrini (SEMEQ Department - Faculty of Economics - University of Eastern Piedmont)
    Abstract: In 1987, Greenwald and Stiglitz accused Keynes’s summary of the General Theory in chapter 18 of relying upon “neoclassical and Marshallian tools”. A number of contributions have on the contrary emphasized the methodological importance of this chapter, which this paper revisits in the light of A Treatise on Probability. It thereby shows that the notions of cause and dependence used to discuss the relationships between independent and dependent variables of the General Theory are related to the concept of “independence for knowledge”, which concerns logical connections between arguments rather than material connections between events. We demonstrate that such logical connections established in chapter 18 are rediscussed in chapters 19-21, where Keynes allows for probable repercussions between the factors and removes the simplifying assumptions previously introduced. After stressing the methodological continuity this method provides with the analysis of credit cycles in A Treatise on Money, we argue that chapter 18 is an indispensable tool to decode the internal text structure of the General Theory. We thus characterize the latter as a vademecum to the complex economic world, the author providing an analytical method allowing – and requiring – the readers to emulate his efforts to grasp the complexity and interdependence of the economic material.
    Keywords: John Maynard Keynes, The General Theory, complexity, economic methodology
    JEL: B31 B41 A10
    Date: 2011–03
  2. By: Lee, Frederic
    Abstract: This essay provides a short history of the Department of Economics at UMKC from 1929 to 2010. It shows the origins of its Institutionalist roots beginning in 1946 and ends with the development of the department as a internationally known center of Post Keynesian-Institutional-heterodox economics.
    Keywords: Institutionalism; Heterodox; Post Keynesian
    JEL: B23 A14 B5
    Date: 2011–03–23
  3. By: Gaël Giraud (Centre d'Economie de la Sorbonne - Paris School of Economics); Cécile Renouard (ESSEC - Business School)
    Abstract: Theories of justice in the spirit of Rawls and Harsanyi argue that fair-minded people should aspire to make choices for society as if in the original position, that is, behind a veil of ignorance that prevents them from knowing their own social positions. In this paper, we provide a fairly simple framework showing that preferences in front of the veil of ignorance (i.e., in face of everyday risky situations) can be entirely deduced from ethical preferences behind the veil. Moreover, by contrast with Kariv & Zame (2008), in many cases of interest, the converse is not true : Ethical decisions cannot be deduced from economic ones. This not only rehabilitates distributive theories of justice but even proves that standard decision theory in economic environments cannot be exonerated from ethical questioning.
    Keywords: Moral preferences, business ethics, social preferences, distributional justice, theory of justice, social choice, original position, veil of ignorance, utilitarianism, maximin principle, uncertainty.
    JEL: D63
    Date: 2011–04
  4. By: Bruno S. Frey
    Abstract: Gordon Tullock has been one of the most important founders and contributors to Public Choice. Two innovations are typical “Tullock Challenges”. The first relates to method: the measurement of subjective well-being, or happiness. The second relates to digital social networks such as Facebook, Twitter, or to some extent Google. Both innovations lead to strong incentives by the governments to manipulate the policy consequences. In general “What is important, will be manipulated by the government”. To restrain government manipulation one has to turn to Constitutional Economics and increase the possibilities for direct popular participation and federalism, or introduce random mechanisms.
    Keywords: Happiness, social networks, constitutional economics, random mechanisms, public choice
    JEL: D72 H10 I31 P16 D02
    Date: 2011–04
  5. By: CALCIANO, Filippo L. (Université catholique de Louvain, CORE, B-1348 Louvain-la-Neuve, Belgium; Department of Economics, University of Rome 3, Italy)
    Abstract: In this paper we review the state of the art of Games with Strategic Complementarities (GSC), which are fundamental tools in modern Industrial Organization. The originality of the paper lies in the way the material is presented. Indeed, the mathematical aspects of GSC are complex and scattered in a literature which spans a long time period and a variety of research fields such as economics, applied mathematics and operations research. We organize a large amount of material in a unified and self-contained way, and concentrate on the intuitions and conceptual points that lie in the background of the mathematical modeling, with special emphasis on the modeling of complementarity. On the technical side, we investigate in details the choice and content of the assumptions. The scope of the paper is to allow the applied researcher to understand the theory, so that she may rapidly develop her own ability to deal with concrete problems.
    Keywords: strategic complementarity, oligopoly theory, supermodularity, Nash equilibria, lattices
    JEL: C60 C70 C72
    Date: 2011–01–01
  6. By: THISSE, Jean - François (Université catholique de Louvain, CORE, B-1348 Louvain-la-Neuve, Belgium; Paris School of Economics and CEPR)
    Abstract: This paper provides a bird-eye overview of the history of spatial economic theory. It is organized around three main ideas (and authors): (i) land use and urban economics (Thünen), (ii) the nature of competition across space (Hotelling), and (iii) new economic geography and the emergence of economic agglomerations (Krugman).
    Date: 2011–02–01
  7. By: Charles D. Kolstad
    Abstract: Why cooperation occurs when noncooperation appears to be individually rational has been an issue in economics for at least a half century. In the 1960’s and 1970’s the context was cooperation in the prisoner’s dilemma game; in the 1980’s concern shifted to voluntary provision of public goods; in the 1990’s, the literature on coalition formation for public goods provision emerged, in the context of coalitions to provide transboundary pollution abatement. The problem is that theory suggests fairly low (even zero) levels of contributions to the public good and high levels of free riding. Experiments and empirical evidence suggests higher levels of cooperation. This is a major reason for the emergence in the 1990’s and more recently of the literature on other-regarding preferences (also known as social preferences). Such preferences tend to involve higher levels of cooperation (though not always). This paper contributes to the literature on coalitions, public good provision and other-regarding preferences. For standard preferences, the marginal per capita return (MPCR) to investing in the public good must be greater than one for contributing to be individually rational. We find that Charness-Rabin preferences tend to reduce this threshold for individual contributions. We also find that Charness-Rabin preferences reduce the equilibrium size of a coalition of agents formed to provide the public good. In addition to theoretical results, some experimental implications of the theoretical model are provided. In contrast to much of the literature, we treat the wealth of agents as heterogeneous.
    JEL: H4 H41 Q5
    Date: 2011–05
  8. By: Lee, Frederic
    Abstract: The resolution of the controversy over the microfoundations of macroeconomics is important to heterodox economics. In this essay, I argue that the controversy is due to misspecification. That is, the conventional understanding of the controversy is that it is a reductionist exercise of macroeconomics to mainstream microeconomics. However, mainstream microeconomics is theoretically incoherent and hence cannot provide the microfoundations for any macroeconomics, mainstream or heterodox. In addition, a common position in heterodox economics is that heterodox macroeconomics generates a mainstream microeconomics sub-structure. But it is argued that this is not the case; rather it generates a heterodox microeconomics substructure. The essay concludes with the argument that in heterodox economics the micro-macro dichotomy does not exist and hence the controversy should be dismissed.
    Keywords: Heterodox; Microeconomics; Macroeconomics
    JEL: E12 D01 B5
    Date: 2011–04–25
  9. By: Estrada, Fernando
    Abstract: Posthumous tributes to Benoit Mandelbrot (1924-2010) have highlighted his remarkable influence on the natural sciences, from geometry to meteorology, to theories with non-Euclidean spaces and geospatial models approach. Mandelbrot culminates a series of major thinkers going back to classical Greece: a Greek among Romans
    Keywords: Mandelbrot; Fractals; Finance; Financial Markets; Epistemology; Thomas Kuhn
    JEL: G14 B10 C5 B1 B4 C70 G00 D7 B23 B41
    Date: 2011–04–28
  10. By: Damien Besancenot (CEPN - Centre d'Economie de l'Université Paris Nord - Université Paris-Nord - Paris XIII - CNRS : UMR7234); Dogguy Habib (CEPN - Centre d'Economie de l'Université Paris Nord - Université Paris-Nord - Paris XIII - CNRS : UMR7234)
    Abstract: This paper analyses the consequences of young researchers' scientifc choice on the dynamics of sciences. We develop a simple two state mean field game model to analyze the competition between two paradigms based on Kuhn's theory of scientifc revolutions. At the beginning of their career, young researchers choose the paradigm in which they want to work according to social and personal motivations. Despite the possibility of multiple equilibria the model exhibits at least one stable solution in which both paradigms always coexist. The occurrence of shocks on the parameters may induce the shift from one dominant paradigm to the other. During this shift, researchers' choice is proved to have a great impact on the evolution of sciences.
    Keywords: Paradigm shift, Scienti c choice, Research dynamics, Mean eld game.
    Date: 2011–05–03
  11. By: Musgrave, Ralph S.
    Abstract: Keeping monetary and fiscal policy separate causes economic distortions, thus the two should be merged. That is, in a recession for example, the government and central bank should simply spend more (and/or collect less tax), and fund the latter from new or “printed” money. Merging monetary and fiscal policy necessitates a different relationship or split of responsibilities as between governments and central banks, but this is not a big problem. Plus the new relationship dispenses with an illogical element in the current typical relationship, namely that both central bank and government influence aggregate demand.
    Keywords: fiscal policy: monetary policy: distortions: Abba Lerner: central banks: national debt: modern monetary theory: functional finance
    JEL: E62 E58 E52
    Date: 2011–04–25
  12. By: Wu, Haoyang
    Abstract: Bayesian implementation concerns decision making problems when agents have incomplete information. This paper proposes that the traditional sufficient conditions for Bayesian implementation shall be amended by virtue of a quantum Bayesian mechanism. In addition, by using an algorithmic Bayesian mechanism, this amendment holds in the macro world. More importantly, we find that the revelation principle is not always right by using the quantum and algorithmic Bayesian mechanisms.
    Keywords: Quantum game theory; Mechanism design; Bayesian implementation; Revelation principle.
    JEL: D71 D80 C72
    Date: 2011–04–28
  13. By: Erixon, Lennart (Dept. of Economics, Stockholm University)
    Abstract: In the early postwar years, two trade-union economists, Gösta Rehn and Rudolf Meidner, presented a Swedish alternative to Keynesianism. The so-called Rehn- Meidner model recommends restrictive macroeconomic policies, labor market policy programs and solidarity wages to combine price stability with economic growth, equity and full employment. In the 1950s, Bent Hansen evaluated the effects of the Rehn-Meidner policy and the validity of its underpinning theory. Hansen’s rigor analysis shall not conceal that, even together with Rehn, he was unable to shed light on the positive relationship between average profits and labor scarcity in the Rehn-Meidner model or all relations between its policy means.
    Keywords: Swedish model; Rehn-Meidner model; unemployment; inflation; wage policy of solidarity
    JEL: B13 B14 B15 B16 B31 E24 E62
    Date: 2011–05–05
  14. By: Ajit Zacharias
    Abstract: Forty-five years ago, the A. Philip Randolph Institute issued "The Freedom Budget," in which a program for economic transformation was proposed that included a job guarantee for everyone ready and willing to work, a guaranteed income for those unable to work or those who should not be working, and a living wage to lift the working poor out of poverty. Such policies were supported by a host of scholars, civic leaders, and institutions, including the Rev. Dr. Martin Luther King Jr.; indeed, they provided the cornerstones for King's "Poor Peoples' Campaign" and "economic bill of rights." This paper proposes a "New Freedom Budget" for full employment based on the principles of functional finance. To counter a major obstacle to such a policy program, the paper includes a "primer" on three paradigms for understanding government budget deficits and the national debt: the deficit hawk, deficit dove, and functional finance perspectives. Finally, some of the benefits of the job guarantee are outlined, including the ways in which the program may serve as a vehicle for a variety of social policies.
    Keywords: Unemployment; Full Employment; Budget Deficits; National Debt; Public Policy
    JEL: B50 E24 E61 H60 P16
    Date: 2011–05
  15. By: James E. Gentle; Wolfgang Karl Härdle; Yuichi Mori
    Abstract: This first chapter serves as an introduction and overview for a collection of articles surveying the current state of the science of computational statistics. Earlier versions of most of these articles appeared in the first edition of Handbook of Computational Statistics: Concepts and Methods, published in 2004. There have been advances in all of the areas of computational statistics, so we feel that it is time to revise and update this Handbook. This introduction is a revision of the introductory chapter of the first edition.
    Keywords: Discrete time series models, continuous time diffusion models, models with jumps, stochastic volatility, GARCH
    JEL: C15
    Date: 2011–05
  16. By: Jean-Claude Barbier (Centre d'Economie de la Sorbonne)
    Abstract: Cross-national comparison of policies is basically linked, albeit implicitly, to translation for two main reasons. On the one hand, understanding policies from a comparative point of view is impossible without taking seriously the central role played by language in any political activity. On the other hand, social science research is bound to remain a limited exercise if it postulates that language has no consequences on its very object. These assumptions are explored in the area of cross-national comparison of social policies. Reforms that were conducted for the last ten years on both sides of the Atlantic, under the label of "workfare" and of "activation of social protection" are a case in point. Exploring these reforms while bearing in mind the importance of their linguistic form and the meanings involved in their political construction, negotiation and discussion leads to stressing the importance of political cultures, a topic often underestimated by mainstream cross-national comparison of social protection and labour markets.
    Keywords: Cross-national comparison, workfare, activation policies, translation and methods, foreign languages.
    JEL: B59 I38
    Date: 2011–04

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