nep-hpe New Economics Papers
on History and Philosophy of Economics
Issue of 2011‒11‒14
nineteen papers chosen by
Erik Thomson
University of Manitoba

  1. Hicks et l'économie de la dépression By Goulven Rubin
  2. Albert Hirschman and his controversial research report By Ana Maria Bianchi
  3. Tableaux économiques et analyse des business cycles chez Marschak, Frisch et Leontief By Akhabbar, Amanar
  4. Monetary policy in disarray By Tatom, John
  5. Count, trade, venture and desire: why money is at the core of decentralized economies By Fabrice Tricou
  6. The Wrong Type of Pluralism: Toward a Transdisciplinary Social Science By Dave Colander
  7. Response to a review of voting theory for democracy, in the light of the economic crisis and the role of mathematicians By Colignatus, Thomas
  8. Rankings games By Bruno S. Frey; Margit Osterloh
  9. The Use of Game Theory in Regional Economics: a quantitative retrospective By Sandra Silva; Isabel Mota; Filipe Grilo
  10. "Orthodox versus Heterodox (Minskyan) Perspectives of Financial Crises: Explosion in the 1990s versus Implosion in the 2000s" By Jesus Munoz
  11. Matching with Couples: a Multidisciplinary Survey By Peter Biro; Flip Klijn
  12. Would You Mind if I Get More? An Experimental Study of the Envy Game By Sandro Casal; Werner Güth; Mofei Jia; Matteo Ploner
  13. Power, theory building, and heuristics By Jean-Claude Thoenig
  14. The birth and the rise of the cluster concept: an evolutionary approach By Annalisa Caloffi; Luciana Lazzeretti; Silvia Rita Sedita
  15. Unemployment, Vacancies, Wages By Diamond, Peter A.
  16. The political economy of neo-liberalism in Italy and France. By Bruno Amable; Elvire Guillaud; Stefano Palombarini
  17. Disadvantageous lies By Urs Fischbacher; Verena Utikal
  18. Laws and Norms By Roland Benabou; Jean Tirole
  19. Marx vs. Weber: does religion affect politics and the economy? By Christoph Basten; Frank Betz

  1. By: Goulven Rubin (LED - Laboratoire d'économie dyonisien - Université de Paris VIII Vincennes-Saint Denis)
    Abstract: Durant les années 1930, Hicks cherche à comprendre la crise à laquelle l'économie mondiale est confrontée. Mais à la différence de la plupart des économistes de l'époque, il tente de se représenter théoriquement la situation dans un cadre d'équilibre général walrassien. Le présent article étudie la façon dont Hicks a développé cette approche dans les derniers chapitres de Valeur et capital (1939). Hicks en vient à affirmer que les fluctuations du système capitaliste mettent son existence en danger et forme le projet d'une théorie des cycles qui accorderait une place centrale aux anticipations de prix et intégrerait un scénario d'effondrement du système. Les difficultés que ce projet rencontre dès 1939 sont analysées afin d'expliquer son abandon dans A Contribution to the Theory of the Trade Cycle (1950).
    Keywords: Hicks, Instabilité, Dépression, histoire de la macroéconomie
    Date: 2011–11–10
  2. By: Ana Maria Bianchi
    Abstract: During the early nineteen sixties, Albert Hirschman negotiated with the International Bank of Reconstruction and Development, part of the World Bank group, the financial support that he needed for an extended visit to several WB development projects scattered throughout the poor areas of the world. The document where he reports his visit was the matter of much controversy between the IBRD staff and Hirschman. One of the major points of disagreement was the latter´s refusal to employ the technique of cost-benefit analysis, then very popular at the WB, as a measure of the success of a project. Hirschman claimed that a one-dimensional scale was unable to grasp the various indirect effects of a project, which, he argued, were so varied as to escape detection by one or even several criteria uniformly applied to all projects. The paper claims that the strong negative reaction that Hirschman found among the WB economists was a crucial factor in his decision to leave the strict realm of economics and to embrace the broader social sciences themes of his subsequent writings.
    Keywords: Hirschman, World Bank, economic development, development economics
    JEL: B20 B31 O1
    Date: 2011–10–26
  3. By: Akhabbar, Amanar
    Abstract: Ragnar Frisch wrote in 1933 that "The complete macrodynamic problem, as I conceive of it, consists in describing as realistically as possible the kind of relations that exist between the various magnitudes in the Tableau Economique ..., and from the nature of these relations to explain the movements, cyclical or otherwise, of the system." My paper examines how the so-called Tableau Economique was employed by three major economists of the 20th century to make mathematical models in order to analyze business cycles, i.e. Jacob Marschak, Ragnar Frisch and Wassily Leontief. We show that the three of them used intersectorial tables to build mathematical models of business cycles. Theoretical mechanisms behind the model are very different between the three models and were inspired by Marxian, Austrian and Walrasian economics. Hence, the same interindustrial Tableau Economique supported very different analyses of business cycles. These works of Marschak, Frisch and Leontief implemented original concepts and tools like dynamic modeling, expectation theory, collective welfare functions, national accounting, and matrix algebra.
    Keywords: Tableau; economique; sectors; business cycle; Marschak; Frisch; Leontief; matrix; welfare; structural change;
    JEL: B21 B23 B22
    Date: 2011–09–01
  4. By: Tatom, John
    Abstract: Monetary policy has become difficult to characterize or follow since 2007. A debate as to whether interest rate targets or monetary aggregate targets are better indicators of policy and prospective outcomes has given way to a new credit policy built on inflating the Federal Reserve (Fed) balance sheet to provide private sector credit. This policy grew out of the Great Depression and has led the Fed to ignore monetary growth and render a federal funds rate target impotent by pushing it to zero. To implement the more than doubling of the Fed’s assets, the Fed took up commercial banking policies. Three examples are: selling Treasury assets to fund private assets, paying subsidies to banks for holding reserves and attracting a new class of Treasury debt sterilized in Fed deposits. These actions insulated monetary aggregates and the effective monetary base from the explosion in the Fed’s balance sheet. The new credit policy severed the tight link that had existed for over 70 years between Fed credit and its effective monetary base. Fortunately, it also insulated the economy from a more than doubling of the general price level. But these actions have turned the balance sheet of the Fed into a collection of illiquid and risky private assets. A similar portfolio of government securities that has the longest duration in history and therefore the greatest interest rate risk limits the Fed’s ability to reduce its assets or the excess reserve position of banks, exceeding $1.5 trillion and costing the taxpayer over $3.3 billion, from 2009 to mid-2011. The subsidy and excess reserve levels of the first half of 2011 will cost $2.3 billion per year going forward. Finally, the paper rebuts claims by Fed officials that the Fed has successfully followed the framework of monetary policy developed by Milton Friedman. The paper concludes with recommendations for Congressional restrictions on the Fed and Treasury to ensure that the Fed focus on responsible monetary policy and not its failed credit policy.
    Keywords: monetary policy; credit policy; central banking; Milton Friedman; business cycles
    JEL: E5 E3
    Date: 2011–08–27
  5. By: Fabrice Tricou
    Abstract: This paper defends two related ideas: pure market and capitalist economies are different economic societies; neither can be adequately represented by theories of value but both can be accurately distinguished by a monetary approach. Within the framework of a simple modeling, we propose a conceptual clarification in four points. Firstly, market and capitalist economies are instituted by a principle of social quantification: money as the unit of account. Secondly, both economies are set in motion by a medium of circulation: money as the general equivalent. Thirdly, pure market society homogeneity is based on generalized access to money as the vehicle of autonomous expense (the carrier of unilateral action), while capitalist society heterogeneity is based on direct access to money reserved only to entrepreneurs and closed to monetarily dependent wage earners. Fourthly, if independent workers (integrated in a social division of labor) can be seen as motivated by the individual pursuit of utility, capitalists (engaged in an objective logic of capital accumulation) are driven by the subjective desire for money.
    Keywords: money, market, capitalism
    JEL: B00 D51 E42 P00
    Date: 2011
  6. By: Dave Colander
    Abstract: When heterodox economists talk of pluralism they generally are talking about pluralism within the economics professionÑthey are asking: how can we have a more pluralistic economics profession? This paper argues that another, perhaps more useful, way to think of pluralism and economics is from the perspective of all the social sciences. When looked in reference to the social science profession rather than in reference to the economics profession, the amount of pluralism increases significantly, since different social sciences follow quite different methodologies. But looking at pluralism from the social science perspective reveals a different type of pluralism problem in social science. While there may be plenty of pluralism within social science as a whole, there is a serious question about whether it is appropriately distributed. This paper argues that heterodox economistÕs agenda should be a greater blending of all the social science departments. It summarizes proposals to do so on both the undergraduate level and graduate level, and explains why supporting variations of these proposals would be a strategy that would further the objectives of most heterodox economists more so than would their current strategy of pushing for more pluralism in economics.
    Keywords: Pluralism; heterodox; social science; epistemic game theory
    JEL: A2 B4 B5
    Date: 2011–11
  7. By: Colignatus, Thomas
    Abstract: Economic theory needs a stronger defence against unwise application of mathematics. Mathematicians are trained for abstract thought and not for empirical science. Their contribution can wreak havoc, for example in education with real life pupils and students, in finance by neglecting real world risks that contribute to a world crisis, or in voting theory where they don’t understand democracy. In 1951 the mathematician Kenneth Arrow formulated his Impossibility Theorem in social welfare theory and since then mathematicians have been damaging democracy. My book Voting Theory for Democracy (VTFD) tries to save democracy and social welfare from such destruction. VTFD applies deontic logic to Arrow’s Theorem and shows that Arrow’s interpretation cannot hold. The editor of a journal in voting matters has VTFD reviewed by a mathematician instead of a researcher who is sensitive to economics, democracy and empirical issues. Guess what happens. The review neglects economics, democracy and empirical issues. Curiously it also neglects the argument in deontic logic, perhaps given the distinction between mathematics and logic. Given the importance of democracy it is advisable that economists study the situation and rethink how economics and mathematics interact in practice.
    Keywords: economic crisis; voting theory; democracy; economics and mathematics;
    JEL: D71 A10 P16
    Date: 2011–11–09
  8. By: Bruno S. Frey; Margit Osterloh
    Abstract: Research rankings based on publications and citations today dominate governance of academia. Yet they have unintended side effects on individual scholars and academic institutions and can be counterproductive. They induce a substitution of the “taste for science” by a “taste for publication”. We suggest as alternatives careful selection and socialization of scholars, supplemented by periodic self-evaluations and awards. Neither should rankings be a basis for the distributions of funds within universities. Rather, qualified individual scholars should be supported by basic funds to be able to engage in new and unconventional research topics and methods.
    Keywords: Academic governance, rankings, motivation, selection, socialization
    JEL: A10 D02 H83 L23 M50
    Date: 2011–08
  9. By: Sandra Silva; Isabel Mota; Filipe Grilo
    Abstract: The construction of formal models that deal with space observed a huge increase since the late 1980s. As Fujita et al. (1999) stress, the field of regional economics experienced a revival with the emergence of new analytical tools such as the diffusion of imperfect competition models, networks and mathematical programming. One of the most powerful tools within social science in general and economics in particular is game theory. This methodology allows for the formal analysis of the interactions among economic agents and, therefore, it is particularly useful for the study of economic decisions regarding spatial issues such as the location choices of firms and households; infrastructures, transports and communications; regional and urban policy; innovation and regional development; and regional labour markets. For this reason, a concrete, quantitative systematization of the use of this tool on regional economics research seems to be a relevant topic in the agenda concerned with progress in regional science. In this paper we study research in regional economics and provide a quantitative retrospective of the use of game theory in this field. Our main goal is twofold. First, we intend to categorize the contributions in the use of this analytical tool - by main research subjects, by authors’ affiliations, by journal, etc. - using a bibliometric approach. Second, by analysing co-authoring and using Social Network Analysis, we want to test the existence of structures upon which distinct co-authorship emerges. In broader terms, the results of this research will provide a framework for analyzing the potential use of game theory in regional economics, suggesting new future research directions.
    Date: 2011–09
  10. By: Jesus Munoz
    Abstract: Orthodox and heterodox theories of financial crises are hereby compared from a theoretical viewpoint, with emphasis on their genesis. The former view (represented by the fourth-generation models of Paul Krugman) reflects the neoclassical vision whereby turbulence is an exception; the latter insight (represented by the theories of Hyman P. Minsky) validates and extends John Maynard Keynes's vision, since it is related to a modern financial world. The result of this theoretical exercise is that Minsky's vision represents a superior explanation of financial crises and current events in financial systems because it considers the causes of financial crises as endogenous to the system. Crucial facts in relevant financial crises are mentioned in section 1, as an introduction; the orthodox models of financial crises are described in section 2; the heterodox models of financial crises are outlined in section 3; the main similarities and differences between orthodox and heterodox models of financial crises are identified in section 4; and conclusions based on the information provided by the previous section are outlined in section 5. References are listed at the end of the paper.
    Keywords: John Maynard Keynes; Hyman P. Minsky; Paul Krugman; Financial Crises; Financial Fragility; Asset Bubbles; Speculation
    JEL: B00 B20 B30 B50 E0 E12 E13 E60 F0 F3 F4
    Date: 2011–11
  11. By: Peter Biro (Institute of Economics - Hungarian Academy of Sciences); Flip Klijn (Institute for Economic Analysis (CSIC), Spain)
    Abstract: This survey deals with two-sided matching markets where one set of agents (workers/residents) has to be matched with another set of agents (firms/hospitals). We first give a short overview of a selection of classical results. Then, we review recent contributions to a complex and representative case of matching with complementarities, namely matching markets with couples. We discuss contributions from computer scientists, economists, and game theorists.
    Keywords: matching; couples; stability; computational complexity; incentive compatibility; restricted domains; large markets
    Date: 2011–10
  12. By: Sandro Casal (School of Social Sciences, University of Trento); Werner Güth (Max Planck Institute of Economics, Strategic Interaction Group); Mofei Jia (School of Social Sciences, University of Trento); Matteo Ploner (DECO-CEEL, University of Trento)
    Abstract: Envy is often the cause of mutually harmful outcomes. We experimentally study the impact of envy in a bargaining setting in which there is no conflict in material interests: a proposer, holding the role of residual claimant, chooses the size of the pie to be shared with a responder, whose share is exogenously fixed. Responders can accept or reject the proposal, with game types differing in the consequences of rejection: all four combinations of (not) self-harming and (not) other-harming are considered. We find that envy leads responders to reject high proposer claims, especially when rejection harms the proposer. Notwithstanding, maximal claims by proposers are predominant for all game types. This generates conflict and results in a considerable loss of efficiency.
    Keywords: Social Preferences, Conflict, Experimental Economic,, Bargaining
    JEL: D63 D74 C91 C72
    Date: 2011–11–04
  13. By: Jean-Claude Thoenig (DRM - Dauphine Recherches en Management - CNRS : UMR7088 - Université Paris Dauphine - Paris IX)
    Abstract: The concept of power provides a unique analytical tool to study, understand and explain organized action set ups. The paper lists a series of examples derived from the research practice of its author. Such a perspective does not imply that this tool by definition makes sense only for theoretical agendas dealing with power and domination issues. The paper also explores some scientific enigmas that are still open for further inquiry
    Keywords: "Power" "Analytical tool" "scientific enigmas" "organized action"
    Date: 2011
  14. By: Annalisa Caloffi; Luciana Lazzeretti; Silvia Rita Sedita
    Abstract: The cluster concept has become an increasingly popular topic for researchers and policy makers. Although this concept is not new, its importance increased during the last decades. Following some authors, the persistence of the cluster concept, as well as its diffusion across different contexts and scientific fields, is a result of its fuzziness. The absence of a unique definition of cluster, as well as a unique methodology for “measuring†clusters favor its loose application to a wide variety of contexts (from economics to management, to economic geography, innovation studies and so forth). The paper aims at identifying the evolutionary pattern of the cluster concept, from the emergence, to the growth and the potential future development. The theoretical discussion is empirically supported by a bibliographic analysis based on statistical and social network analysis tools. The point of departure is an original database, consisting of 5332 academic articles about industrial clusters or industrial districts that have been published from 1989 to 2010 in international scientific journals (ISI Web of Science). We first identified the masterpieces of the cluster concept, selecting the most cited articles, second we performed a backward and forward citation analysis, in order to get information on the roots and the future development of the concept. The results shed light on the milestones in cluster literature as well as on its possible developments. The backward analysis emphasizes the multidisciplinary ground of the concept, which emerges in the realm of the agglomeration economy and local competitive advantage studies and spans over innovation and internationalization studies. The forward analysis highlights the new dimensions of the cluster concept, which give particular emphasis on the emergent literature on culture and creativity studies, as well as on the open innovation paradigm.
    Date: 2011–09
  15. By: Diamond, Peter A. (Massachusetts Institute of Technology)
    Abstract: Peter A. Diamond delivered his Prize Lecture on 8 December 2010 at Aula Magna, Stockholm University.
    Keywords: Search frictions;
    JEL: E24 J64
    Date: 2010–12–08
  16. By: Bruno Amable (Centre d'Economie de la Sorbonne, CEPREMAP et IUF); Elvire Guillaud (Centre d'Economie de la Sorbonne); Stefano Palombarini (LED - Université Paris 8)
    Abstract: There are many apparent similarities between the current political and economic situations of France and Italy. The mainstream view is that at least part of the neo-liberal strategy could be a solution to the economic problems of both variants of the European model of capitalism. However, the difficulties met by the implementation of these strategies by Sarkozy and Berlusconi lead to believe that the success or failure of neo-liberalisation has less to do with its (lack of) macroeconomic merits than with the stability of the socio-political alliances that support it. In this respect, France and Italy are markedly different. This paper shows that even if the "hard core" of the neoliberal social bloc is roughly the same in both countries, this core constitutes a minority of the electorate ; a neoliberal strategy must therefore rely on an extended social coalition, which might not be similar between countries. The Great Recession revealed part of the structural characteristics that set both countries apart. The aim of this article is to show that the consideration of the different socio-political alliances found in each country can help to understand how Italy and France ended up on different economic trajectories.
    Keywords: Institutions, model of capitalism, neoliberal reforms, political crisis.
    JEL: P16 P51 B52
    Date: 2011–09
  17. By: Urs Fischbacher; Verena Utikal
    Abstract: We present experimental evidence on the existence of disadvantageous lies. Literature so far assumes that people do not lie to their monetary disadvantage. However, some people have preferences for appearing honest. If the utility gained from appearing honest outweighs the monetary payoff gained from an advantageous lie or the truth, people will tell a disadvantageous lie.
    Keywords: Lying, experiment
    Date: 2011
  18. By: Roland Benabou; Jean Tirole
    Abstract: This paper analyzes how private decisions and public policies are shaped by personal and societal preferences ("values"), material or other explicit incentives ("laws") and social sanctions or rewards ("norms"). It first examines how honor, stigma and social norms arise from individuals' behaviors and inferences, and how they interact with material incentives. It then characterizes optimal incentive-setting in the presence of norms, deriving in particular appropriately modified versions of Pigou and Ramsey taxation. Incorporating agents' imperfect knowledge of the distribution of preferences opens up to analysis several new questions. The first is social psychologists' practice of "norms-based interventions", namely campaigns and messages that seek to alter people’s perceptions of what constitutes "normal" behavior or values among their peers. The model makes clear how such interventions operate but also how their effectiveness is limited by a credibility problem, particularly when the descriptive and prescriptive norms conflict. The next main question is the expressive role of law. The choices of legislators and other principals naturally reflect their knowledge of societal preferences, and these same "community standards" are also what shapes social judgments and moral sentiments. Setting law thus means both imposing material incentives and sending a message about society's values, and hence about the norms that different behaviors are likely to encounter. The analysis, combining an informed principal with individually signaling agents, makes precise the notion of expressive law, determining in particular when a weakening or a strengthening of incentives is called for. Pushing further this logic, the paper also sheds light on why societies are often resistant to the message of economists, as well as on why they renounce certain policies, such as "cruel and unusual" punishments, irrespective of effectiveness considerations, in order to express their being "civilized".
    JEL: D64 D82 H41 K1 K42 Z13
    Date: 2011–11
  19. By: Christoph Basten (European University Institute, Badia Fiesolana, Via dei Roccettini 9, I-50014 San Domenico di Fiesole, Italy.); Frank Betz (European Central Bank, Kaiserstrasse 29, D-60311 Frankfurt, Germany.)
    Abstract: We investigate the effect of Reformed Protestantism, relative to Catholicism, on preferences for leisure and for redistribution and intervention in the economy. With a Fuzzy Spatial Regression Discontinuity Design, we exploit a historical quasiexperiment in Western Switzerland, where in the 16th century a so far homogeneous region was split and one part assigned to convert to Protestantism. We find that Reformed Protestantism reduces the fraction of citizens voting for more leisure by 13, and that voting for more redistribution and government intervention by respectively 3 and 11 percentage points. These preferences are found to translate into greater income inequality, but we find no robust effect on average income. JEL Classification: Z12, D72, H23, N33.
    Keywords: Max Weber, culture, protestant work ethic, political preferences, regression discontinuity design.
    Date: 2011–10

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