nep-hpe New Economics Papers
on History and Philosophy of Economics
Issue of 2011‒10‒01
seventeen papers chosen by
Erik Thomson
University of Manitoba

  1. Expectations, Employment and Prices: A Suggested Interpretation of the New ‘Farmerian’ Economics By Marco Guerrazzi
  2. The Contribution of Douglass North to New Institutional Economics By Claude Ménard; Shirley Mary M.
  3. Thesis of religion: normative basis of Islamic economics By Shaikh, Salman Ahmed
  4. Sistemas sociotécnicos, innovación y desarrollo. By Lepratte, Leandro
  5. Finitely repeated games with social preferences By Oechssler, Jörg
  6. Monetarism By Juravle , Daniel
  7. On the set of imputations induced by the k-additive core By Michel Grabisch; Tong Li
  8. The Role of Default in Macroeconomics By Charles A. E. Goodhart; Dimitrios P. Tsomocos
  9. More than Meets the Eye: an Eye-tracking Experiment on the Beauty Contest Game By Müller, Julia; Schwieren, Christiane
  10. A Decade of Editing the European Economic Review By Eckstein, Zvi; Gal-Or, Esther; Gylfason, Thorvaldur; von Hagen, Jürgen; Pfann, Gerard A.
  11. Floating against the tide : Spanish monetary policy, 1870-1931 By Pablo Martín-Aceña; Elena Martínez Ruiz; Pilar Noguer Marco
  12. On Envelope Theorems in Economics: Inspired by a Revival of a Forgotten Lecture By Löfgren, Karl-Gustaf
  13. Ultimata bargaining: generosity without social motives By Breitmoser, Yves; Tan, Jonathan H.W.
  14. Do People Care about Social Context? Framing Effects in Dictator Games By Dreber, Anna; Ellingsen, Tore; Johannesson, Magnus; Rand, David
  15. When Ricardo saw profit, he called it rent: on the vice of parochial realism By Kakarot-Handtke, Egmont
  16. Credible Communication and Cooperation: Experimental Evidence from Multi-stage Games By Andersson, Ola; Wengström, Erik
  17. A formula for Nash equilibria in monotone singleton congestion games By Abderrahmane ZIAD, University of Caen Basse-Normandie, CREM (UMR CNRS); Samir SBABOU, University of Caen Basse-Normandie, CREM (UMR CNRS); Hatem SMAOUI, CEMOI, Université de la Réunion

  1. By: Marco Guerrazzi
    Abstract: This paper aims at providing a critical assessment of the new ‘Farmerian’ economics, i.e. the recent Farmer’s attempt to provide a new micro-foundation of the General Theory grounded on modern search and business cycle theories. Specifically, I develop a theoretical model that summarizes the main arguments of the suggested approach by showing that a special importance has to be attached to the search mechanism, the choice of units and ‘animal spirits’ modelling. Thereafter, referring to self-made real-business-cycle experiments, I discuss the main empirical implications of the resulting framework. Finally, I consider its policy implications by stressing the problematic nature of demand management interventions and the advisability of extending the role of the central bank in preventing financial bubbles and crashes.
    Keywords: New ‘Farmerian’ Economics, Search Theory, Demand Constrained Equilibrium, Bubbles and Crashes.
    JEL: E12 E24
    Date: 2011–01–05
  2. By: Claude Ménard (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I); Shirley Mary M. (RCI - Ronald Coase Institute - Ronald Coase Institute)
    Abstract: Douglass North, along with Ronald Coase and Oliver Williamson, transformed the early intuitions of new institutional economics into powerful conceptual and analytical tools that spawned a robust base of empirical research. NIE arose in response to questions not well explained by standard neoclassical models, such as make or buy and why rich or poor? Today NIE is a success story by many measures: four Nobel laureates in under 20 years, increasing penetration of mainstream journals, and significant impact on major policy debates from anti-trust law to development aid. This paper provides a succinct overview of North's evolving ideas about institutions and explains how North's work shaped the emerging field of new institutional economics and had a potent impact on economics and the social sciences more broadly. North provides a powerful example of how persistent and well placed confidence and hard work can productively transform the status quo. North's influence continues strong and his enthusiasm for exploring new frontiers and cooperating across artificial academic boundaries has never waned.
    Keywords: New Institutional Economics, institutions, transaction costs, development and growth
    Date: 2011–06
  3. By: Shaikh, Salman Ahmed
    Abstract: This paper discusses the ethical void in Capitalism which does not look prominent in welfare societies and states. But, its effects become more eminent in tough economic conditions. Unbridled pursuit of self interest, moral relativism, incentive-led economic choices and apathy to communal responsibilities would lead to a society where economic interests become the sole basis of maintaining and sustaining relationships. This inner void of identity and purpose at individual level and social void in the form of a stratified society bound together only for economic interests can be better filled with incorporating religion. Humans are much more than utility driven species, they are capable of using both instrumental and critical reasons to differentiate right from wrong and need reinforcement to adopt virtues influenced by an inner urge other than material interests as in Capitalism. This inner urge can be rekindled by looking beyond utility maximization to re-acknowledge the fundamental identity that humans are moral being than just an instrument for material advancement. Other sections of the paper provide an outline and salient features of Islamic Economics on different economic themes and perspectives for a comparative study. These provide a unique introduction to Islamic Economics in a mainstream framework.
    Keywords: Islamic Microeconomics; Institutional Economics; Islamic Economics; Islamic Ethics; Islamic Morality; Secular Ethics; Moral Relativism; Ethical Relativism
    JEL: Z12 A13 A14
    Date: 2011–09–16
  4. By: Lepratte, Leandro
    Abstract: From an Latin American perspective, a framework has been developed with input from social studies of technology (SST) and the complex systems evolutionary economics (EE) to address issues related to innovation processes, technological change and development in this region. The framework operates under assumptions of middle-range theory, bounded field-oriented problems, making combinations of concepts and generating an explanatory framework. The framework states: simplicity in the selection of concepts (convergent), specificity to understand and describe the dynamics, trajectory, joints and configurations of socio-technical systems of production and innovation. Finally, it provides a perspective of generality and scope, an explanatory model (medium range) that incorporates the contributions of empirical research generated in the political debate about development in the region. Raised in the working paper presented in paragraph 1, the contributions of the social studies of technology and evolutionary economics of complex systems to be used in the framework. Paragraph 2 sets out the key concepts of the framework and the connection between them, together with the assumptions that structure it. In section 3 describes the concepts in the context of the functioning of socio-technical systems of production and innovation. Then as a closure raises some issues to address research problems specific to the Latin American context, where you can apply the methodological framework and the implications thereof.
    Keywords: innovation; development; sociotechnical systems; complex systems; evolutionary economics; STS
    JEL: P0 B0 A12 Z13 O3 A14
    Date: 2011
  5. By: Oechssler, Jörg
    Abstract: A well—known result from the theory of finitely repeated games states that if the stage game has a unique equilibrium, then there is a unique subgame perfect equilibrium in the finitely repeated game in which the equilibrium of the stage game is being played in every period. Here I show that this result does in general not hold anymore if players have social preferences of the form frequently assumed in the recent literature, for example in the inequity aversion models of Fehr and Schmidt (1999) or Bolton and Ockenfels (2000). In fact, repeating the unique stage game equilibrium may not be a subgame perfect equilibrium at all.
    Keywords: social preferences; finitely repeated games; inequity aversion; ERC
    Date: 2011–09–22
  6. By: Juravle , Daniel
    Abstract: The monetarism, as I have tried to outline in this work is based on the ideas of the American professor Milton Friedman, who tried to revitalize and reconfigure the old quantity theory of money. These ideas were transposed and discussed by authors like Ion Pohoață, Tiberiu Brăilean or Al. Tașnadii and Claudiu Doltu in the works that I have guided the construction of this essay. Thus we observ that one of the basic principles of Friedman’s conceptions was related on budget actions rejection. Actions which in the absence of such money, have little influence on total spending, output and prices, on the significant variables such as macroeconomic. So find a substantive argument in favor of interlocking key economic policies, which can not exist without the other and some which ensures sustainability of state institutions and the economy.
    Keywords: money; prices; liberalism; inflation; unemployment
    JEL: N1 E42 P24 E52 E4 E41
    Date: 2011–09–25
  7. By: Michel Grabisch (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I); Tong Li (Beijing Institute of Technology - Beijing Institute of Technology)
    Abstract: An extension to the classical notion of core is the notion of $k$-additive core, that is, the set of $k$-additive games which dominate a given game, where a $k$-additive game has its Möbius transform (or Harsanyi dividends) vanishing for subsets of more than $k$ elements. Therefore, the 1-additive core coincides with the classical core. The advantages of the $k$-additive core is that it is never empty once $k\geq 2$, and that it preserves the idea of coalitional rationality. However, it produces $k$-imputations, that is, imputations on individuals and coalitions of at most $k$ individuals, instead of a classical imputation. Therefore one needs to derive a classical imputation from a $k$-order imputation by a so-called sharing rule. The paper investigates what set of imputations the $k$-additive core can produce from a given sharing rule.
    Date: 2011
  8. By: Charles A. E. Goodhart (Norman Sosnow Professor of Banking and Finance, London School of Economics (email:; Dimitrios P. Tsomocos (Said Business School, University of Oxford (email:
    Abstract: What is the main limitation of much modern macro-economic theory, among the failings pointed out by William R. White at the 2010 Mayekawa Lecture? We argue that the main deficiency is a failure to incorporate the possibility of default, including that of banks, into the core of the analysis. With default assumed away, there can be no role for financial intermediaries, for financial disturbances, or even for money. Models incorporating defaults are, however, harder to construct, in part because the representative agent fiction must be abandoned. Moreover, financial crises are hard to predict and to resolve. All of the previously available alternatives for handling failing systemically important financial institutions (SIFIs) are problematical. We end by discussing a variety of current proposals for improving the resolution of failed SIFIs.
    Keywords: Default, Transversality, Money, Bankruptcy cost, Asset bubbles, Resolution mechanisms
    JEL: B40 E12 E30 E40 E44 G18 G20 G28 P10
    Date: 2011–09
  9. By: Müller, Julia; Schwieren, Christiane
    Abstract: The beauty contest game has been used to analyze how many steps of reasoning subjects are able to perform. A common finding is that a majority seem to have low levels of reasoning. We use eye-tracking to investigate not only the number chosen in the game, but also the strategies in use and the numbers contemplated. We can show that not all cases that are seemingly level-1 or level-2 thinking indeed are {they might be highly sophisticated adaptations to beliefs about other people's limited reasoning abilities.
    Keywords: beauty contest game; levels of reasoning; level-k model; strategic reason ing; cognitive hierarchy
    Date: 2011–09–22
  10. By: Eckstein, Zvi (Tel Aviv University); Gal-Or, Esther (University of Pittsburgh); Gylfason, Thorvaldur (University of Iceland); von Hagen, Jürgen (University of Bonn); Pfann, Gerard A. (Maastricht University)
    Abstract: This story describes the circumstances that led to all five of us starting as editors at the same time, the unexpected things we have found, the unanticipated reactions we have encountered, how we worked as an editorial team, the central role of the editorial office manager, how we managed to work with five different publishers in ten years, the various initiatives we have developed to involve associate editors and referees, the early electronic editing system, and the creation of the essential database of potential referees. We will also describe the difficulties we have encountered in reaching one of our early goals to reduce the median time of first response to less than four months. Along the way, we will share a few anecdotes to illustrate the work of an academic journal editor.
    Keywords: journal, editing, economics
    JEL: A11 A14
    Date: 2011–09
  11. By: Pablo Martín-Aceña; Elena Martínez Ruiz; Pilar Noguer Marco
    Abstract: The gold standard began to emerge as a universal monetary system in the late 1870s, and it had spread throughout the world economy by 1900. It was unusual for nations to be off the gold standard, and it meant that they were detached from the international financial community. Spain never joined the gold standard club in any of its varieties, either before or after 1914. Unlike the vast majority of the European currencies, the peseta’s exchange rate fluctuated, sometimes widely, against gold and gold currencies. Gold convertibility was suspended in 1883 and never resumed. Nevertheless, the monetary authorities were aware that the Spanish economy, off the gold standard, was an outlier in the international economy and made plans to put the peseta on gold both before and after 1914.Why Spain never adopted the gold standard is a complex issue, and our paper offers a possible answer by examining the behaviour of an issuing bank that refused to accept, or resisted, its role as a central bank. Our study also provides a basis for a comparison between the Bank of Spain, some of its features and policies, with other peripheral issuing institutions. Moreover, our paper encompasses both the pre-war and the post-war periods, which allows us to present both the similarities and the differences in the exchange and monetary policies of the Spanish authorities during the era of the classical gold standard and the years of the gold exchange standard
    Keywords: Gold standard, Monetary policy, Bank of Spain
    JEL: E42 E58 N10
    Date: 2011–09
  12. By: Löfgren, Karl-Gustaf (Department of Economics, Umeå University)
    Abstract: This paper studies how envelope theorems have been used in Economics, their history and also who first introduced them. The existing literature is full of them and the reason is that all families of optimal value functions can produce them. The paper is driven by curiosity, but hopefully it will give the reader some new insights.
    Keywords: Envelope theorems; names and history; value functions
    JEL: B16 B21 B40
    Date: 2011–09–16
  13. By: Breitmoser, Yves; Tan, Jonathan H.W.
    Abstract: We show and explain how generosity beyond that explainable by social preferences can manifest in bargaining. We analyze an ultimata game with two parties vying to coalesce with a randomly chosen proposer. They simultaneously demand shares of the surplus. The proposer must then make an offer that meets at least one demand, or else the game either continues with a new round or breaks down with all earning zero. Self-interest, altruism, and inequity aversion univocally predict miniscule demands due to inter-party competition; proposers thus obtain the lion's share. We experimentally observe that proposers coalesce with the less demanding party by strategically matching demands, like ultimatum bargaining, but also give non-strategically to the other party, like dictator giving. The observations are incompatible with concave utilities, as implied by social preferences, but are compatible with reference dependent preferences.
    Keywords: demand commitment; ultimata bargaining; non-cooperative; laboratory experiment; social preferences; reference dependence
    JEL: C78 D72 C72 C91
    Date: 2011–09–22
  14. By: Dreber, Anna (Dept. of Economics, Stockholm School of Economics); Ellingsen, Tore (Dept. of Economics, Stockholm School of Economics); Johannesson, Magnus (Dept. of Economics, Stockholm School of Economics); Rand, David (Harvard University)
    Abstract: Many previous experiments document that behavior in multi-person settings responds to the name of the game and the labeling of strategies. Usually these studies cannot tell whether frames affect preferences or beliefs. In this Dictator game study, we investigate whether social framing effects are also present when only one of the subjects makes a decision, in which case the frame may only affect preferences. We find that behavior is insensitive to social framing.
    Keywords: beliefs; preferences; framing effects; altruism; cooperation
    JEL: C70 C91 D64
    Date: 2011–09–14
  15. By: Kakarot-Handtke, Egmont
    Abstract: According to Ricardo the principal problem in Political Economy is to determine the laws which regulate the distribution of profits, rents and wages. Ricardo determined the respective shares in real terms and to this end invented an engine of analysis that became paradigmatic. The present paper applies a consistent real and monetary analysis, which is based on a set of objective structural axioms, and contrasts the results with Ricardo’s approach. The general result is that real analysis misses economic reality. The specific result is that rent is a misnomer for the distributed profit of the land owning firm.
    Keywords: New framework of concepts; Structure-centric; Axiom set; Real analysis; Monetary analysis; Pricing of land services; Profit ratio equalization
    JEL: B12 E25
    Date: 2011–09–23
  16. By: Andersson, Ola (Research Institute of Industrial Economics (IFN)); Wengström, Erik (Lund University)
    Abstract: It is well known that communication often serves as a facilitator for cooperation in static games. Yet, communication can serve entirely different purposes in dynamic settings as communication during the game may work as a means for renegotiation, potentially undermining the credibility of cooperative strategies. To explore this issue, this paper experimentally investigates cooperation and non-binding communication in a two-stage game. More specifically, two treatments are considered: one with only pre-play communication and one where subjects can also communicate intra-play between the stages of the game. The results highlight a nontrivial difference concerning the effects of pre-play communication between the two treatments. Pre-play communication only has a significant impact on cooperation when no intra-play communication is possible. The results suggest that the credibility of pre-play messages may depend crucially on future communication opportunities.
    Keywords: Communication; Cooperation; Renegotiation; Experiments
    JEL: C72 C92
    Date: 2011–09–19
  17. By: Abderrahmane ZIAD, University of Caen Basse-Normandie, CREM (UMR CNRS); Samir SBABOU, University of Caen Basse-Normandie, CREM (UMR CNRS); Hatem SMAOUI, CEMOI, Université de la Réunion
    Abstract: This paper provides a simple formula describing all Nash equilibria in symmetric monotone singleton congestion games. Our approach also yields a new and short proof establishing the existence of a Nash equilibrium in this kind of congestion games without invoking the potential function or the nite improvement property.
    Keywords: Singleton congestion games, Nash equilibria, Potential function, Finite improvement property
    JEL: C72
    Date: 2011–09

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