nep-hpe New Economics Papers
on History and Philosophy of Economics
Issue of 2012‒04‒17
eight papers chosen by
Erik Thomson
University of Manitoba

  1. Noncomputability, Unpredictability, Undecidability and Unsolvability in Economic & Finance Theories By Ying-Fang Kao; V.Ragupathy; K. Vela Velupillai; Stefano Zambelli
  2. "Control of Finance as a Prerequisite for Successful Monetary Policy: A Reinterpretation of Henry Simons's Rules versus Authorities in Monetary Policy" By Thorvald Grung Moe
  3. The sugar-pie game By Mullat, Joseph E.
  4. Bayesian equilibrium by iterative conjectures: a theory of games with players forming conjectures iteratively starting with first order uninformative conjectures By Teng , Jimmy
  5. Mechanisms of Financial Crises in Growth and Collapse: Hammurabi, Schumpeter, Perez, and Minsky. By Erik S. Reinert
  6. On error: undisciplined thoughts on one of the causes of intellectual path dependency By Yalcintas, Altug
  7. Is There a “Chinese School” of IR? By Nele Noesselt
  8. Ricardo's Theory of Comparative Advantage: Old Idea, New Evidence By Arnaud Costinot; Dave Donaldson

  1. By: Ying-Fang Kao; V.Ragupathy; K. Vela Velupillai; Stefano Zambelli
    Abstract: We outline, briefly, the role that issues of the nexus between noncomputability and unpredictability, on the one hand, and between undecidability and un-solvability, on the other, have played in Computable Economics. The mathematical underpinnings of Computable Economics are provided by (classical) recursion theory, varieties of computable and constructive analysis and aspects of combinatorial optimization. The inspiration for this outline was provided by Professor Graca's thought-provoking recent article.
    Keywords: Computable Economics, Unpredictability, Undecidability, Uncomputability
    Date: 2012
  2. By: Thorvald Grung Moe
    Abstract: Henry Simons's 1936 article "Rules versus Authorities in Monetary Policy" is a classical reference in the literature on central bank independence and rule-based policy. A closer reading of the article reveals a more nuanced policy prescription, with significant emphasis on the need to control short-term borrowing; bank credit is seen as highly unstable, and price level controls, in Simons's view, are not be possible without limiting banks' ability to create money by extending loans. These elements of Simons's theory of money form the basis for Hyman P. Minsky's financial instability hypothesis. This should not come as a surprise, as Simons was Minsky's teacher at the University of Chicago in the late 1930s. I review the similarities between their theories of financial instability and the relevance of their work for the current discussion of macroprudential tools and the conduct of monetary policy. According to Minsky and Simons, control of finance is a prerequisite for successful monetary policy and economic stabilization.
    Keywords: Monetary Policy; Financial Stability; Narrow Banking; Financial Regulation
    JEL: B22 E42 E52 G28
    Date: 2012–04
  3. By: Mullat, Joseph E.
    Abstract: Playing a bargaining game the players are trying to enlarge their share of a sugar-pie. However, HE is not very keen on sweets and does not prefer a piece of the pie if the size of the pie is too small or too large. In HIS view, too small or too large pies are not of a reasonable quality. In contrast, SHE, the second actor, likes sweets what ever they are. HE is a soft negotiator but SHE is a tough negotiator. The paper addresses the problem: what should be HIS power of negotiations if an equal ½-division of the pie is desirable.
    Keywords: bargaining power; bargaining game
    JEL: C78
    Date: 2012–04–07
  4. By: Teng , Jimmy
    Abstract: This paper introduces a new game theoretic equilibrium, Bayesian equilibrium by iterative conjectures (BEIC). It requires agents to make predictions, starting from first order uninformative predictive distribution functions (or conjectures) and keep updating with statistical decision theoretic and game theoretic reasoning until a convergence of conjectures is achieved. In a BEIC, rationality is achieved for strategies and conjectures. The BEIC approach is capable of analyzing a larger set of games than current Nash Equilibrium based games theory, including games with inaccurate observations, games with unstable equilibrium and games with double or multiple sided incomplete information games. On the other hand, for the set of games analyzed by the current games theory, it generates far lesser equilibriums and normally generates only a unique equilibrium. It also resolves inconsistencies in equilibrium results by different solution concepts in current games theory.
    Keywords: new equilibrium concept; iterative conjectures; convergence; Bayesian decision theory; Schelling point
    JEL: D84 D81 C72
    Date: 2011–12–15
  5. By: Erik S. Reinert
    Abstract: This paper provides a historical and theoretical overview of the mechanisms leading up to financial crises and financial bubbles. It suggests that the potentially explosive growth of the financial sector at the expense of the real economy fed by compound interest has . since before Ancient Mesopotamia under the rule of Hammurabi . represented a real threat for such crises. A more modern and additional factor that builds up crises is Joseph Schumpeterÿs observation of the clustering of innovations. Carlota Perez has more recently developed Schumpeterÿs vision into a theory of techno-economic paradigms which . about midway in their trajectory . produce the build-up to financial crises. The theories of Schumpeterian economist Hyman Minsky, describing the mechanisms producing the collapse of financial bubbles complete the overview. The paper ends with recommendations to bring the West out of the present crisis by .once again . putting the real economy rather than the financial economy in the driverÿs seat of capitalism.
    Date: 2012–04
  6. By: Yalcintas, Altug
    Abstract: Is there not any place in the history of ideas for the imperfect character of human doings (i.e. capability of error) that is repeated for so long until we lately start to think that it had long been wrong? The answer is: In the conventional histories of ideas there is almost none. The importance of the phenomenon,however, is immense. Intellectual history is full of errors. Scholarly errors are among the factors that generate intellectual pathways in which consequences of historical small events feed back up on each other positively and give rise to historical pathologies in the end. Pathways hold the intellectuals dependent on the consequences of errors which interact upon each other and prevent resulting pathologies to disappear fully. As a result, ideas do not converge to a level of perfection. Evolutionary account of errors suggests that errors in the history of ideas matter even though they are often corrected.
    Keywords: Errors in the history of ideas; intellectual path dependence; intellectual pathologies; the Coase Theorem; historical small events
    JEL: B52 B25 B41
    Date: 2011
  7. By: Nele Noesselt (GIGA German Institute of Global and Area Studies)
    Abstract: Research on Chinese International Relations (IR) theory has produced a variety of discourses, including post-positivist analyses, contributions by area specialists and China watchers, and articles by Chinese IR scholars. These strands, however, hardly overlap or communicate with each other. To close the gap between “the self-reflection of the core” (“Western” IR) (Waever/Tickner 2009: 3) and “the periphery’s revolt against [“Western”] IR” paradigms (ibid.), it is necessary to view China (and other non-“Western” regions) as more than simply a playground for theory testing. This paper thus goes beyond the metatheoretical debate about the possibility of non-“Western” IR. It argues that even though the IR debates in China are heavily influenced by the trends of “Western” IR Studies, the claim regarding the establishment of a “Chinese school of IR” is not a hollow slogan. Indigenous frameworks are already under construction.
    Keywords: China, international relations (IR) theory, post-positivism, tianxia, world order
    Date: 2012–03
  8. By: Arnaud Costinot; Dave Donaldson
    Abstract: When asked to name one proposition in the social sciences that is both true and non-trivial, Paul Samuelson famously replied: 'Ricardo's theory of comparative advantage'. Truth, however, in Samuelson's reply refers to the fact that Ricardo's theory of comparative advantage is mathematically correct, not that it is empirically valid. The goal of this paper is to assess the empirical performance of Ricardo's ideas. We use novel agricultural data that describe the productivity in 17 crops of 1.6 million parcels of land in 55 countries around the world. Crucially, this dataset contains information about the productivity of each parcel of land in all crops, not just those that are currently being grown. This direct information about relative productivity differences across economic activities allows us to compute, for the first time, the output predicted by Ricardo's theory of comparative advantage. Despite all of the real-world considerations from which this theory abstracts, we find that Ricardo's theory of comparative advantage has significant explanatory power in the data, at least within the scope of our analysis.
    JEL: F11 Q11 Q15 Q17 R14
    Date: 2012–04

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