nep-hpe New Economics Papers
on History and Philosophy of Economics
Issue of 2012‒04‒23
fourteen papers chosen by
Erik Thomson
University of Manitoba

  1. Mentalism versus behaviourism in economics: a philosophy-of-science perspective By Dietrich, Franz; List, Christian
  2. Employement theory in the History of Economic thought: an overview By Antonella Stirati
  3. Small is Different Size, Political Representation and Governance By Nicholas Charron; José Fernández-Albertos; Victor Lapuente
  4. Evaluating Robert Frank’s ‘Economic Naturalist’ Writing Assignment By Wayne Geerling
  5. "Stage Theory of Capitalist Development and Principles of Political Economy" (in Japanese) By Michiaki Obata
  6. Harm on an Innocent Outsider as a Lubricant of Cooperation – An Experiment By Christoph Engel; Lilia Zhurakhovska
  7. The Relationship Between Economic Preferences and Psychological Personality Measures By Becker, Anke; Deckers, Thomas; Dohmen, Thomas; Falk, Armin; Kosse, Fabian
  8. Libertad y desempeño económico By Mejía Cubillos, Javier
  9. The Nash Bargaining Solution and Interpersonal Utility Comparisons By Rachmilevitch, Shiran
  10. Gift Exchange versus Monetary Exchange: Theory and Evidence By John Duffy
  11. Crises and Policy Responses within the Political Trilemma: Europe, 1929-1936 and 2008-2011 By Nikolaus Wolf
  12. Sharing as Risk Pooling in a Social Dilemma Experiment By Todd Cherry; E. Lance Howe; James J. Murphy
  13. Kantian Optimization, Social Ethos, and Pareto Efficiency By John E. Roemer
  14. The World our Grandchildren Will Inherit: The Rights Revolution and Beyond By Daron Acemoglu

  1. By: Dietrich, Franz; List, Christian
    Abstract: Behaviourism is the view that preferences, beliefs, and other mental states in social-scienti…c theories are auxiliary constructs re-describing people's behav- ioural dispositions. Mentalism is the view that they capture real phenomena, no less existent than the unobservable entities and properties in the natural sciences, such as electrons and electromagnetic …elds. While behaviourism has long gone out of fashion in psychology and linguistics, it remains the dominant orthodoxy in economics, especially in the form of revealed preferencetheory. We aim to (i) clear up some common conceptual confusions about the two views in economics, (ii) situate the debate in a broader historical and philosophical context, and (iii) defend a mentalist approach to economics. Setting aside normative concerns about behaviourism, we show that mentalism is in line with best scienti…c practice even if economics is treated as a purely positive science of human social behaviour. We distinguish mentalism from, and reject, the radical neuroeconomic view that social behaviour should be explained in terms of people's brain processes, as distinct from their mental states.
    Keywords: behaviourism; mentalism; realism; economic models; preferences; beliefs; rationalization; philosophy of science; neuroeconomics
    JEL: B0 C0 A11 D03 D0 N0 A12 D01 A14 B41
    Date: 2012–04–01
  2. By: Antonella Stirati
    Abstract: The theory of employment is clearly a central question in economic thought. Economists of all traditions and schools have always admitted short run fluctuations in aggregate employment levels associated with the business cycle and explained them with a variety of factors. Yet the central question is, of course, fluctuations around which long run level of employment? Focussing mainly on long run aspects of employment theory, this paper aims at providing an overview of different theoretical approaches that have been prominent in various phases in the history of economics up to the present. It necessarily summarizes and, hence, simplifies approaches and debates, but may be useful in suggesting that textbook accounts of past authors (including Keynes) and approaches may be wrong, or at least very controversial. It may thus stimulate a renewed interest in past authors and suggest the possibility of a different angle in reading past and present controversies.
    Keywords: Employment theory; History of Economics, Say’s law; schools of thought in macroeconomics
    JEL: B00 E00 E24 J01
    Date: 2012–04
  3. By: Nicholas Charron (Quality of Government Institute University of Gothenburg); José Fernández-Albertos (Institute for Public Goods and Policies, CSIC); Victor Lapuente (Quality of Government Institute University of Gothenburg)
    Abstract: In the theoretical literature on government design, few variables have received more attention than the size of the polity. Since Plato’s famous prediction that the optimal size of a political unit should be 5040 free citizens, the list of thinkers concerned about state size would include Aristotle, Montesquieu, Rousseau, and many of the founding fathers, among many others. One of the fathers of modern political science, Robert Dahl, devoted great attention to what he called the “elemental question of what is appropriate unit for a democratic political system … Among the vast number of theoretically possible ways of dividing up the inhabitants of this globe into more or less separate political systems, … are there any principles that instruct us as to how one ought to bound some particular collection of people, in order that they may rule themselves?” (Dahl 1967: 953). Economists have not neglected these issues, as they conform the core of the fiscal federalism literature (Oates 1972). A more recent literature, pioneered by Alesina and Spolaore’s work (1997, 2003), provides an elegant formal theoretical framework incorporating both political and economic elements in order to highlight the fundamental trade-off that the choice of the size of the policy inevitably faces: Large polities find it easier to provide more public goods, but confront the costly political problem of greater heterogeneity of preferences among the population.
    Date: 2012–04–15
  4. By: Wayne Geerling (School of Economics, La Trobe University)
    Abstract: This paper begins by asking a fundamental question: why do students who take Economics at an introductory level often leave the subject without understanding even the most basic economic principles? The superficial answer seems to be that courses try to cover too many concepts at the expense of mastering the important threshold concepts. Another issue is the way Economics is taught and assessed. I will evaluate an alternative pedagogical device pioneered by Robert Frank: ‘The Economic Naturalist Writing Assignment’, in which students are asked to pose an interesting question about some pattern of events or behaviour they have personally observed (a real life event) and to use basic economic principles to solve the question in no more than 500 words. In addition to being a useful means for teaching economics at an undergraduate level, this writing assignment has practical benefits for teaching economics through real world examples and/or to students who are non-specialists. I will conclude with a series of questions (and answers) posed by students when I piloted this writing assignment in a new subject of mine in 2010.
    Keywords: economic education, multimedia, student engagement, Robert Frank, everyday economics, pedagogy
    JEL: A22
    Date: 2011–03
  5. By: Michiaki Obata (Faculty of Economics, University of Tokyo)
    Abstract: Stage theory of capitalist development proposed by Kozo Uno(1897 - 1977) is a method to clarify the characteristics of imperial capitalism that started at the end of the 19th century typically in Germany. It is founded on the revise of Marx's "Capital". However, in order to depict the new rise of emerging capitalism at the end of the 20th century it is necessary to review the Uno's method, especially on the notion of the mercantilist stage, related to the stage of "development" and "origin" of capitalism. It leads us to replace the traditional "single origin theory" which assumes the capitalist development passes through three stages of rise, progress and decline with the "multiplex origin theory" of capitalism. The new stage theory requires another revise of political economy based on Uno's "pure capitalism" approach.
    Date: 2012–04
  6. By: Christoph Engel (Max Planck Institute for Research on Collective Goods, Bonn); Lilia Zhurakhovska (Max Planck Institute for Research on Collective Goods, Bonn)
    Abstract: If two players of a simultaneous symmetric one-shot prisoner’s dilemma hold standard preferences, the fact that choosing the cooperative move imposes harm on a passive outsider is immaterial. Yet if participants hold social preferences, one might think that they are reticent to impose harm on the outsider. This is not what we find, however severe the externality. A within-subjects measure of reticence to impose harm does not explain cooperation. But the externality makes participants more pessimistic. However conditional on their beliefs participants are more, not less cooperative if cooperation entails harm on an outsider, again however severe the externality.
    Keywords: externality, prisoner’s dilemma, Modified Dictator Game, Beliefs
    JEL: C72 C91 D03 H23
    Date: 2012–01
  7. By: Becker, Anke (University of Bonn); Deckers, Thomas (University of Bonn); Dohmen, Thomas (ROA, Maastricht University); Falk, Armin (University of Bonn); Kosse, Fabian (University of Bonn)
    Abstract: Although both economists and psychologists seek to identify determinants of heterogeneity in behavior, they use different concepts to capture them. In this review we first analyze the extent to which economic preferences and psychological concepts of personality – such as the Big Five and locus of control – are related. We analyze data from incentivized laboratory experiments and representative samples and find only low degrees of association between economic preferences and personality. We then regress life outcomes – such as labor market success, health status and life satisfaction – simultaneously on preference and personality measures. The analysis reveals that the two concepts are rather complementary when it comes to explaining heterogeneity in important life outcomes and behavior.
    Keywords: risk preference, time preference, social preferences, locus of control, Big Five
    JEL: C91 D01 D80 D90 I00 J30 J62
    Date: 2012–04
  8. By: Mejía Cubillos, Javier
    Abstract: From a broad philosophical framework, this paper addresses the relation between freedom and economic performance. It argues for the thesis that, although a liberal system does not guarantee absolute harmony, is the only "convenient" and morally valid for a modern society. The core of this argument is the acceptance of the permanent uncertainty about the great results of the world and the inability of a central entity to control them.
    Keywords: Freedom; Economic Development; Economic Growth; Capitalism
    JEL: O10 B00 O40 P50 A13 P00 O20 B53
    Date: 2012–01
  9. By: Rachmilevitch, Shiran (Department of Economics, University of Haifa)
    Abstract: Bargaining theory has a conceptual dichotomy at its core: according to one view, the utilities in the bargaining problem are meaningless numbers (v-N.M utilities), while according to another view they do have concrete meaning (willingness to pay). The former position is assumed by the Nash and Kalai-Smorodinsky solutions, and the latter is assumed by the egalitarian, utilitarian, and equal-loss solutions. In this paper I describe a certain form of equivalence between the set consisting of the former solutions and the set consisting of the latter. This equivalence is the result of an attempt to bridge the gap between the aforementioned views; utilizing this equivalence, I derive a new axiomatization of the Nash solution.
    Keywords: Bargaining; interpersonal utility comparisons; Nash solution
    JEL: D63 D71
    Date: 2012–02–06
  10. By: John Duffy
    Abstract: This paper reports findings from an experiment that implements the Lagos-Wright (2005) model of monetary exchange. We find that subjects generally avoid the autarkic equilibrium of that model and make trading decisions consistent with the model`s monetary equilibrium. Aliprantis, Camera and Puzzello (ACP, 2007) show that providing periodic access to centralized markets as in the Lagos and Wright framework may facilitate the sustainability of social norms of gift exchange, thus rendering money inessential in decentralized exchange. We also explore this hypothesis by replacing the centralized market of the Lagos-Wright model with a version of the centralized market of ACP`s model. We find that the essentiality of money is not threatened by the presence of centralized meetings. Indeed, the efficiency of allocations is significantly higher in the environment with money than without money, suggesting that money plays a role as an efficiency enhancing coordination device.
    Date: 2011–11
  11. By: Nikolaus Wolf (Humboldt-Universität zu Berlin, CEPR and CESifo)
    Abstract: The recent debate on the Eurozone failed to appreciate a particular characteristic of European crisis experiences, namely their fundamentally political character. To make my argument, I borrow from Dani Rodrik (2000) the framework of a “political trilemma” between cross-border economic integration, national institutions and democracy (in the sense of mass politics) and discuss its relation to the more commonly known “macroeconomic trilemma” as well as some limitations of the framework. The recent experience of a European debt crisis and the experience of Europe’s Great Depression can be interpreted as a “political trilemma”: both reflect the problem of designing effective policy responses to major economic shocks within the environment of deep economic integration across political boundaries and the regime choices that this involves. Within this framework I highlight some aspects of the 1930s that are informative to the policy choices in Europe today. Once we accept that some policy choices should be avoided, attention should be shifted to the remaining options and the obstacles that prevent their implementation, notably the challenge to transform democracy beyond national borders.
    Keywords: political trilemma, great depression, euro-crisis
    JEL: F42 F50 N14
    Date: 2012–04
  12. By: Todd Cherry (Department of Economics, Appalachian State University); E. Lance Howe (Department of Economics, University of Alaska Anchorage); James J. Murphy (Department of Economics, University of Alaska Anchorage)
    JEL: C92 D81 O13 Q20
    Date: 2012
  13. By: John E. Roemer
    Date: 2012–04–13
  14. By: Daron Acemoglu
    Abstract: Following on Keynes’s Economic Possibilities for Our Grandchildren, this paper develops conjectures about the world we will leave to our grandchildren. It starts by outlining the 10 most important trends that have defined our economic, social, and political lives over the last 100 years. It then provides a framework for interpreting these trends, emphasizing the role of the expansion of political and civil rights and institutional changes in this process. It then uses this framework for extrapolating these 10 trends into the next 100 years.
    JEL: O10 O30 P16 P17
    Date: 2012–04

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