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on History and Philosophy of Economics |
| By: | Giocoli, Nicola |
| Abstract: | Bayesian rationality is the paradigm of rational behavior in neoclassical economics. A rational agent in an economic model is one who maximizes her subjective expected utility and consistently revises her beliefs according to Bayes’s rule. The paper raises the question of how, when and why this characterization of rationality came to be endorsed by mainstream economists. Though no definitive answer is provided, it is argued that the question is far from trivial and of great historiographic importance. The story begins with Abraham Wald’s behaviorist approach to statistics and culminates with Leonard J. Savage’s elaboration of subjective expected utility theory in his 1954 classic The Foundations of Statistics. It is the latter’s acknowledged fiasco to achieve its planned goal, the reinterpretation of traditional inferential techniques along subjectivist and behaviorist lines, which raises the puzzle of how a failed project in statistics could turn into such a tremendous hit in economics. A couple of tentative answers are also offered, involving the role of the consistency requirement in neoclassical analysis and the impact of the postwar transformation of US business schools. |
| Keywords: | Savage; Wald; rational behavior; Bayesian decision theory; subjective probability; minimax rule; statistical decision functions; neoclassical economics |
| JEL: | B31 B21 D81 |
| Date: | 2011–10–14 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:34117&r=hpe |
| By: | Murray, Michael/ M J |
| Abstract: | Production and distribution needs a proper place in heterodox economics. It has recently been suggested that the construction of production models needs to be empirically grounded. Also it has been stated that empirically grounded production models must be circular production models. This argument then marginalizes the contributions of important economists in heterodox thought. The paper will argue that heterodox production models need not be perfectly circular to make important contributions for heterodox production theory. Furthermore, it will be argued that models which consist of elements of hierarchial structures of production put emphasis on out of equilibrium traverse processes and historical time. |
| Keywords: | Heterodox Economic Theory; Heterodox Price and Production Modeling |
| JEL: | B21 B50 B16 B53 |
| Date: | 2011–10–21 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:34255&r=hpe |
| By: | Carlos Eduardo Suprinyak |
| Abstract: | The turbulent, crisis-ridden first half of the 1620’s was a rich period for economic pamphleteering in England, as has been long recognized in the specialist literature. What is less commonly appreciated is that economic reasoning was not, at that time, exclusively confined to the musings of merchants who sought to influence the course of public policy according to their own practical wisdom or corporate interests. In fact, economic distress was then a central topic for public debate throughout English society at large; it figured prominently both in parliament and at court, thus mobilizing most of the kingdom’s economic and political groups. Using a wide array of primary sources – parliamentary debates, Privy Council records, papers and correspondence by public officials – this paper aims to uncover the place occupied by economic reasoning and discourse within the English public sphere during the early 17th century. When seen against this background, it becomes apparent that the pamphlet literature actually came about as a response to a debate which was already well under way – a rather late chapter of which was the famous controversy among Malynes, Misselden and Mun, played out simultaneously in the political arena and in London’s printing houses. |
| Keywords: | pre-classical economics, mercantilism, 17th century, Stuart England, Thomas Mun |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:fea:wpaper:07-2011&r=hpe |
| By: | Kowalski, Tadeusz |
| Abstract: | The aim of this paper is to present and evaluate the theory and principles of economic policy applied before the 2008-2009 crisis1. Against this backdrop we will attempt to describe the evolution of targets and tools of economic policy in view of the experiences of recent years and the conditions of the globalization in this time. The first Section contains an outline of the world economic situation after 1945. Section two includes presentation and evaluation of the evolution of economic policy theory which co-created the conditions for world economic growth and stabilization in recent decades. The third Section describes macroeconomic mechanisms and conditions of economic policy directly preceding the 2007-2011 situation, and provides an analysis of the 2008-2009 crisis implications for the theory and future practice of economic policy. The paper is summed up in a conclusion. |
| Keywords: | quantitative policy; qualitative policy; monetary policy; exchange-rate policy; financial and economic crisis; globalization |
| JEL: | E12 E30 E13 E61 |
| Date: | 2011–08–15 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:33994&r=hpe |
| By: | Cohen, Joseph N |
| Abstract: | A conventional reading of economic history implies that free market reforms rescued the world’s economies from stagnancy during the 1970s and 1980s. I reexamine a well-established econometric literature linking economic freedom to growth, and argue that their positive findings hinge on two problems: conceptual conflation and ahistoricity. When these criticisms are taken seriously, a very different view of the historical record emerges. There does not appear to be enduring relationship between economic liberalism and growth. Much of the observed relationship between these two variables involves a one-shot transition to freer markets around the Cold War’s end. Several concurrent changes took place in this historical context, and it is hasty to conclude that it was market liberalization alone that produced the economic turnaround of the 1990s and early-2000s. I also question market fundamentalists’ view that all forms of liberalization are helpful, arguing that the data show little to no benefit from reforms that did not attract foreign investment. |
| Keywords: | Economic Growth; Economic Freedom; Economic Liberalization; Economic Development; Foreign Investment; Market Fundamentalism; Inflation; Governance |
| JEL: | P11 P17 O21 E61 O4 |
| Date: | 2011–09–27 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:33757&r=hpe |
| By: | Brams, Steven J.; Jones, Michael A.; Klamler, Christian |
| Abstract: | A cake is a metaphor for a heterogeneous, divisible good, such as land. A perfect division of cake is efficient (also called Pareto-optimal), envy-free, and equitable. We give an example of a cake in which it is impossible to divide it among three players such that these three properties are satisfied, however many cuts are made. It turns out that two of the three properties can be satisfied by a 3-cut and a 4-cut division, which raises the question of whether the 3-cut division, which is not efficient, or the 4-cut division, which is not envy-free, is more desirable (a 2-cut division can at best satisfy either envy-freeness or equitability but not both). We prove that no perfect division exists for an extension of the example for three or more players. |
| Keywords: | Cake-cutting; fair division; efficiency; envy-freeness; equitability; heterogeneous good |
| JEL: | D71 D63 D30 D74 D61 C61 C72 |
| Date: | 2011–10–22 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:34264&r=hpe |
| By: | Noussair, Charles; van Soest, Daan; Stoop, Jan |
| Abstract: | We report a framed field experiment, in which we study the effectiveness of punishment and reward in sustaining cooperation in a social dilemma. Punishments tend to be directed at non-cooperators and rewards are assigned by those who are relatively cooperative. In contrast to the results typically found in laboratory experiments, however, we find that punishments and rewards fail to increase cooperation. |
| Keywords: | Field experiment; public goods game; social preferences; punishment; reward |
| JEL: | C92 C93 C72 |
| Date: | 2011–09–26 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:34067&r=hpe |
| By: | Renato G. Flores Jr. |
| Abstract: | The crisis has drawn attention to the fact that not only emerging powers but other regions of the world as well may be offering different development models and may constitute into alternative, in some dimensions more positive agents, in the conduct of the present stage of globalisation. Notwithstanding, the traditional western powers have not lost a large amount of control of the world economy. And the crisis proceeds, reallocating world power as in a Hobbesian anarchy. It is difficult to foresee smooth developments in the near future. On the contrary, multilateralism seems to be losing ground to unilateral action or bilateral arrangements. More or less disguised currency wars may lead to serious disequilibria, and turf wars may become more frequent, with motives ranging from securing captive markets to control of specific commodities and energy goods, or targeted regulatory frameworks. As economic policy becomes even more involved with defence and security affairs, the feedbacks from each side to the other seem likely to keep dissent and animosity high, rather than contributing to peaceful and constructive approaches. A more trouble-prone world may be easily expected. JEL codes: |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:unl:unlfep:wp558&r=hpe |
| By: | Thomas, C.D. |
| Abstract: | In this thesis we present a new take on two classic problems of game theory: the "multiarmed bandit" problem of dynamic learning, and the "Colonel Blotto" game, a multidi- mensional contest. In Chapters 2-4 we treat the questions of experimentation with congestion: how do players search and learn about options when they are competing for access with other players? We consider a bandit model in which two players choose between learning about the quality of a risky option (modelled as a Poisson process with unknown arrival rate), and competing for the use of a single shared safe option that can only be used by one agent at the time. We present the equilibria of the game when switching to the safe option is irrevocable, and when it is not. We show that the equilibrium is always inefficient: it involves too little experimentation when compared to the planner solution. The striking equilibrium dynamics of the game with revocable exit are driven by a strategic option-value arising purely from competition between the players. This constitutes a new result in the bandit literature. Finally we present extensions to the model. In particular we assume that players do not observe the result of their opponent's experimentation. In Chapter 5 we turn to the n-dimensional Blotto game and allow battlefields to have different values. We describe a geometrical method for constructing equilibrium distribution in the Colonel Blotto game with asymmetric battlfield values. It generalises the 3-dimensional construction method first described by Gross and Wagner (1950). The proposed method does particularly well in instances of the Colonel Blotto game in which the battlefield weights satisfy some clearly defined regularity conditions. The chapter also explores the parallel between these conditions and the integer partitioning problem in combinatorial optimisation. |
| Date: | 2011–08–28 |
| URL: | http://d.repec.org/n?u=RePEc:ner:ucllon:http://discovery.ucl.ac.uk/1325637/&r=hpe |
| By: | Geoff Kenny (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main); Julian Morgan (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main) |
| Abstract: | The economics profession in general, and economic forecasters in particular, have faced some understandable criticism for their failure to predict the timing and severity of the recent economic crisis. In this paper, we offer some assessment of the performance of the Economic Analysis conducted at the ECB both in the run up to and since the onset of the crisis. Drawing on this assessment, we then offer some indications of how the analysis of economic developments could be improved looking forward. The key priorities identifi ed include the need to: i) extend existing tools and/or develop new tools to account for important feedback mechanisms, for instance, improved real-fi nancial linkages and non-linear dynamics; ii) develop ways to handle the complexity arising from the presence of multiple models and alternative economic paradigms; and iii) given the limitations of point forecasts, to further develop risk and scenario analysis around baseline projections. JEL Classification: E02, E30, E2, C53 |
| Keywords: | EURO AREA, FINANCIAL CRISIS, MACRO ECONOMIC FORECASTING |
| Date: | 2011–10 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbops:20110130&r=hpe |