nep-hpe New Economics Papers
on History and Philosophy of Economics
Issue of 2011‒12‒13
sixteen papers chosen by
Erik Thomson
University of Manitoba

  1. From tools to theories: The emergence of modern financial economics By Koehn, Julia
  2. Reconstruction of concept of Paradigm in Thomas S. Kuhn By Estrada, Fernando
  3. The return of Keynes By ciani scarnicci, manuela
  4. Revisiting Adam Smith’s Theory of the Falling Rate of Profit By Lefteris Tsoulfidis; Dimitris Paitaridis
  5. Corporate Social Responsibility: Fundamentalstellung für Kapitalismus und Wirtschaftssoziologie By Boeddeling, Jann
  6. Peace economists and peace economics By Brauer, Jurgen; Caruso, Raul
  7. Conflicted Minds: Recalibrational Emotions Following Trust-based Interaction. By Eric Schniter; Roman M. Sheremeta; Timothy Shields
  8. Greek Debt and American Debt: Graduation Speech at the University of Athens Economics and Business School By John Geanakoplos
  9. Analyse économique et droit pénal : contributions, débats, limites By Eric Langlais
  10. Thünen and the New Economic Geography By FUJITA Masahisa
  11. Etica ed Economia, un binomio possibile ed auspicabile. By ciani scarnicci, manuela
  12. Elasticity of Games By Gilad Bavly
  13. Hedging one’s happiness – Should a sports fan bet on the opponent? By Bart Stemmet
  14. War and the International Trading System in the Twentieth Century By Hugh Rockoff
  15. On Large Games with a Bio-Social Typology By M. Ali Khan; Kali P. Rath; Yeneng Sun; Haomiao Yu
  16. Laws and Norms By Bénabou, Roland; Tirole, Jean

  1. By: Koehn, Julia
    Abstract: It is shown that early research in modern financial economics had substantially been driven by the application of the research strategy of economics and the use of newly developed mathematical methods. For this purpose the professionalization of business education as a consequence of changes in the U.S. economy after Word War II is presented. The emergence of professional Journals in financial economics, similar to the academic culture including the trend of applying abstract mathematical reasoning and during the war developed methods like linear programming are highlighted. Also the meaning of Milton Friedman's 1953 essay The Methodology of Positive Economics for the dominance of abstract and prediction driven research in modern financial economics gets discussed. Finally, the emergence of Harry Markowitz's paper Portfolio Selection (1952) is used to substantiate the hypothesis. --
    Keywords: history of finance,portfolio theory,business schools,modern financial economics,modelling,theories of modern financial economics,risk management,positivism,professionalization,methodology of finance
    Date: 2011
  2. By: Estrada, Fernando
    Abstract: This article aims to discuss an evaluation of the concept of paradigm of T. Kuhn in his representative work: The Structure of Scientific Revolutions ERC, [Ku96] and the complementary version by W. Stegmüller, Structure and dynamics of theories EDT, [Steg83]. This refined interpretation of the concept of paradigm allows for a more complete set of central Kuhnian concept.
    Keywords: Paradigm; Kuhn; Economics; Stegmüller; Epistemology
    JEL: B0 B31 A12 B00 B41 C72
    Date: 2011
  3. By: ciani scarnicci, manuela
    Abstract: Skidelsky’s last work « The Return of the Master” gives a new perspective to his previous studies about J.M. Keynes. In this new light, he studies the Keynesian theories, no longer in the historical context in which they were developed, but using them to explain and to try to find a solution to modern economy. This work almost represents a denunciation towards the new economic theory system that loses sight of the importance of the uncertainty, and overestimated the value of currency, and have not considered other values such as ethics and morals.
    Keywords: the return of Keynes's Theory
    JEL: A13 A11
    Date: 2010–12
  4. By: Lefteris Tsoulfidis (Department of Economics, University of Macedonia); Dimitris Paitaridis (Department of Economics, University of Macedonia)
    Abstract: Smith’s theory of the falling rate of profit has been usually interpreted as a result of the intensification of competition in the markets of goods and services of the factors of production. This aspect of Adam Smith had been initially posed by Ricardo and subsequently was widely adopted by the major economists of the past as well as from the majority of the modern historians of economic thought. In our view, Smith’s analysis of the falling tendency in the rate of profit is by far more complex than usually presented and that the intensification of competition is the result of the falling rate of profit rather than its cause which is the capitalization of the production process.
    Keywords: Rate of Profit, competition, mechanization, Adam Smith, Stationary State.
    JEL: B10 B12 B13 B14 B16 H50
    Date: 2011–11
  5. By: Boeddeling, Jann
    Abstract: The field of Corporate Social Responsibility is described and the theory on it is critically reviewed. It is argued that present theory is insufficient in explaining the phenomenon of CSR and might fail to recognize some of its deeper significance. A new basis for the theoretical analysis of CSR is henceforth developed that aims at understanding CSR as a discourse on the relation of economy and society. It is shown that a foundation for such theory can be found in Max Weber's Economic Sociology and particularly in his modeling of ideal interests as the locus of discourse-driven changes in the relation between economy and society. It is concluded that analyzing CSR as a phenomenon of ideal interests allows for the modeling of its potential to reshape the prevailing form of capitalism and that such analysis could prove to be a starting point for the development of a distinctively sozialökonomische theory of action. --
    Keywords: capitalism,economy and society,corporate social responsibility,corporate social performance,economic sociology,economic history,theory of action,new institutionalism in economic sociology,Max Weber,protestant ethics,social economics,ideal interests
    Date: 2011
  6. By: Brauer, Jurgen; Caruso, Raul
    Abstract: We define peace economics as the economic study and design of political, economic, and cultural institutions, their interrelations, and their policies to prevent, mitigate, or resolve any type of latent or actual destructive conflict within and between societies. Differentiating peace economics from defense/military economics, conflict economics, and security economics, we assert that while founded on positive precepts, peace economics is distinct for its normative character. We place peace economics within a larger framework of positive peace and social system sustainability and briefly discuss some challenges.
    Keywords: peace; peace economics; normative; positive peace; social system sustainability
    JEL: B40 D74 H56
    Date: 2011–11–21
  7. By: Eric Schniter (Economic Science Institute, Chapman University); Roman M. Sheremeta (Argyros School of Business and Economics, Chapman University); Timothy Shields (Argyros School of Business and Economics, Chapman University)
    Abstract: Consistent with a modular view of the mind, both short-sighted and long-sighted programs may be simultaneously active in the mind and in conflict with one another when individuals face choice dilemmas in trust-based economic interactions. Recalibrational theory helps us identify the adaptive design features shared among subsets of superordinate emotion programs. According to this design logic and the computation of adaptive problem features produced by Trust games, we predict the activation of emotions after Trust games. While this study successfully predicts reports of twenty distinct emotional states, further studies are needed to demonstrate ultimate recalibrational functions of emotions.
    Keywords: emotions, recalibrational theory, modularity, Trust game, experiments
    Date: 2011
  8. By: John Geanakoplos (Cowles Foundation, Yale University)
    Abstract: This is the graduation speech I gave on receiving an honorary doctorate at the University of Athens Economics and Business School. I talk about my Greek family, about how I got interested in economics, and then how in the 1990s I came to think about default, collateral, and leverage as the central features of the financial/macro economy, despite their complete absence (even now) from any textbooks. Finally I suggest that the Greek debt problem, and on a bigger scale, the American debt problem, can only be cured when lenders are prodded to forgive. That would be better for the borrowers but also for the lenders.
    Keywords: Greek, Parents, Mathematical economics, Yale, Mortgage, Collateral, Securitization, Leverage, Foreclosure, Forgive, Principal
    JEL: D52 D53 G01 G10 G12
    Date: 2011–12
  9. By: Eric Langlais
    Abstract: The paper surveys the main criticisms against the economics of crime à la Becker (JPE, 1968). Some of them (external criticisms) are more focused on methological issues, and are mainly addressed by lawyers. Others (internal criticisms) aim at challenging the central result, according to which large monetary penalties (maximal ones, in fact) induce optimal deterrence, while the probability of controling and sanctioning criminals should be as small as possible. In conclusion, the paper discuss some empirical results.
    Keywords: économie du crime, Becker, dissuasion et politique de mise en oeuvre optimale, fonctions du code pénal
    JEL: K14 K42
    Date: 2011
  10. By: FUJITA Masahisa
    Abstract: In this paper, I explain Thünen's pioneering work on industrial agglomeration. In my opinion, Thünen's thinking on industrial agglomeration was not only amazingly advanced for his time, but in many respects remains novel even today. It is shown that if we unify Thünen's well-known theory on agricultural land use with this pioneering work on industrial agglomeration by using modern tools, then we essentially come up with a prototype of New Economic Geography model.
    Date: 2011–11
  11. By: ciani scarnicci, manuela
    Abstract: the relationship between ethics economy was born with the same economy, from the lessons of A. Sen shows the importance of this relationship. And it is precisely the history of this source can give a new way to new ethical applicazini that can create new economic development
    Keywords: la nascita del rapporto tre etica ed economia
    JEL: O10 A12 Z10 A14
    Date: 2011–12–01
  12. By: Gilad Bavly
    Abstract: We develop an elasticity index of a strategic game. The index measures the robustness of the set of rational outcomes of a game. The elasticity index of a game is the maximal ratio between the change of the rational outcomes and the size of an infinitesimal perturbation. The perturbation is on the players’ knowledge of the game. The elasticity of a strategic game is a nonnegative number. A small elasticity is indicative of the robustness of the rational outcomes (for example, if there is only one player the elasticity is 0), and a large elasticity is indicative of non-robustness. For example, the elasticity of the (normalized) n-stage finitely repeated prisoner’s dilemma is at least exponential in n, as is the elasticity of the n-stage centipede game and the n-ranged traveler’s dilemma. The concept of elasticity enables us to look from a different perspective at Neyman’s (1999) repeated games when the number of repetitions is not commonly known, and Aumann’s (1992) demonstration of the effect of irrationality perturbations.
    Date: 2011–12
  13. By: Bart Stemmet (Department of Economics, University of Stellenbosch)
    Abstract: This paper sets out to show that a risk-averse sport fanatic could hedge his happiness by betting on the opposition. The literature surrounding happiness, risk- and loss aversion is explored and a model is developed to explain the happiness a fan derives from a match. It is shown that expectation as to what the result may be plays a vital role in the emotions awakened. An upset victory is much sweeter than one where one’s team is the outright favourite. Expectations determine the odds offered by bookies. Here lies the beauty of this strategy. Suffering an unexpected loss is more painful than an anticipated beating. That being said, the payout from betting on the underdog opposition (which subsequently won) would be larger the more unexpected the result was. To bet on the opposition to hedge one’s happiness appears to be a plausible strategy for an economically risk-averse sports fan – especially if one supports the odds-on favourite.
    Keywords: Happiness, Sports betting, Risk aversion, Loss aversion
    JEL: D81 D84
    Date: 2011
  14. By: Hugh Rockoff (Rutgers)
    Abstract: Abstract: Wars have been the main forces shaping the international trading system in the twentieth century. The early years of the twentieth century were dominated by the international gold standard. But as a result of World War I, this system was replaced by the troubled gold exchange standards of the 1920s and 1930s. As a result of World War II the interwar system was replaced in turn by the Bretton Woods system. And as a result of inflation of the late 1960s, produced in part by America's war in Vietnam, the Bretton Woods system was replaced by the current system of flexible exchange rates. The European monetary union was a response to German reunification and the perceived need to defuse potential conflicts through a high level of economic cooperation.
    Keywords: war, finance, globalization
    JEL: N40
    Date: 2011–04–13
  15. By: M. Ali Khan; Kali P. Rath; Yeneng Sun; Haomiao Yu
    Abstract: We present a comprehensive theory of large non-anonymous games in which agents have a name and a determinate social-type and/or biological trait to resolve the dissonance of a (matching-pennies type) game with an exact pure-strategy Nash equilibrium with finite agents, but without one when modeled on the Lebesgue unit interval. We (i) establish saturated player spaces as both necessary and sufficient for an existence result for Nash equilibrium in pure strategies, (ii) clarify the relationship between pure, mixed and behavioral strategies via the exact law of large numbers in a framework of Fubini extension, (iii) illustrate corresponding asymptotic results.
    Date: 2011–12
  16. By: Bénabou, Roland; Tirole, Jean
    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 judgements 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".
    Keywords: culture; esteem; expressive content; honor; incentives; law; motivation; norms-based interventions; punishments; reputation; social norms; stigma; taxation
    JEL: D64 D82 H41 K1 K42 Z13
    Date: 2011–11

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