nep-hpe New Economics Papers
on History and Philosophy of Economics
Issue of 2012‒05‒02
fifteen papers chosen by
Erik Thomson
University of Manitoba

  1. Hicks' first impressions on The General Theory By Jorge Eduardo de Castro Soromenho
  2. Os três ciclos da sociedade e do estado By Bresser Pereira, Luiz Carlos
  3. Opportunity and Preference Learning By Christian Schubert
  4. Ziliak and McClosky’s Criticisms of Significance Tests: A Damage Assessment By Thomas Mayer
  5. The tolerance premium as a constitutional element of the protective welfare state By Wyss, Reto
  6. A critical judgement of the applicability of 'New New Trade Theory' to agriculture: Structural change, productivity, and trade By Prehn, Sören; Brümmer, Bernhard
  7. Cognitive ability and learning to play equilibrium: A level-k analysis By Gill, David; Prowse, Victoria
  8. Dependence and Uniqueness in Bayesian Games By A.W. Beggs
  9. Preserving coalitional rationality for non-balanced games. By Stéphane Gonzalez; Michel Grabisch
  10. Almost-Rational Learning of Nash Equilibrium without Absolute Continuity By Thomas W.L. Norman
  11. Individual and group behaviours in the traveller’s dilemma: an experimental study By Morone, Andrea; Morone, Piergiuseppe
  12. The Cooperative Endorsement of a Strategic Game By Hernández, Penélope; Silva-Reus, José A.
  13. Unbeatable Imitation By Peter Duersch; Joerg Oechssler; Burkhard Schipper
  14. Distribution of pure Nash equilibria in n-person games with random best replies By Klaus Kultti; Hannu Salonen; Hannu Vartiainen
  15. On Markovian Cake Sharing Problems By Hannu Salonen

  1. By: Jorge Eduardo de Castro Soromenho
    Abstract: In this article, Hicks' first review article of Keynes´s General Theory is discussed. First we analyze the influence of Hayek's theory on the work of Hicks. We show how Hicks, reflecting on the Austrian theory of the business cycle, created the concepts of "week" and temporary equilibrium. Then we discuss how these concepts of time and equilibrium are reformulated to interpret the General Theory
    Keywords: John Hicks, Keynesian economics
    JEL: B22
  2. By: Bresser Pereira, Luiz Carlos
    Abstract: The history of independent Brazil may be divided in three major political cycles, and, since 1930, we can distinguish five political pacts or class coalitions. Since 1930 these pacts have been nationalist. Only in the 1990s the Brazilian elites surrendered to the neoliberal hegemony. Yet, since the mid 2000s, they are recovering their idea of nation. In fact, the main claim of the essay is that Brazilian elites and the Brazilian society are “national-dependent”, i.e., they are ambiguous and contradictory, requiring an oxymoron to define them. The elite is dependent because it often sees itself as “European” and its people as inferior. But Brazil is big enough and around its domestic market there are enough common interests to make the Brazilian nation less ambiguous. Today, it searches for a synthesis between the two last political cycles – between social justice and economic development in the framework of democracy.
    Date: 2012–04–16
  3. By: Christian Schubert
    Abstract: Robert Sugden has recently elaborated upon the case for a normative standard of freedom as "opportunity" that is supposed to cope with the problem of how to realign normative economics - with its traditional rational choice orientation - with behavioral economics. His standard, though, presupposes that people respond to uncertainty about their own future preferences by dismissing any kind of self-commitment. We argue that the approach lacks psychological substance: Sugden's normative benchmark - the "responsible person" - is a purely artificial construct that can hardly serve as a convincing role model in a contractarian setting. An alternative concept is introduced, and some policy implications are briefly discussed.
    Keywords: Opportunity Criterion, Preference Change, Reconciliation Problem
    JEL: D51 D63
    Date: 2012–04–18
  4. By: Thomas Mayer (Department of Economics, University of California Davis)
    Abstract: D. N. McCloskey and Stephen Ziliak have criticized economists and others for confounding statistical and substantive significance, and for committing the logical error of the transposed conditional. In doing so they sometimes misinterpret the function of significance tests. Nonetheless, economists sometimes make both of these errors – but not nearly as often as Ziliak and McCloskey claim. They also argue –incorrectly – that the existence of an effect, which is what significance tests are about, is not a scientific question. Their complaint that in testing significance economists often do not take the loss function into account is unfounded. But they are right in arguing that confidence intervals should be presented more frequently.
    Keywords: Significance tests, ts, confidence intervals, Zilliak, McCloskey, oomph
    JEL: C12 B4
    Date: 2012–04–20
  5. By: Wyss, Reto
    Abstract: Indeed it is the case that [e]very possible general answer has already been given to the question of how much should be transferred to the poor (Olson, 1986). The underlying motive for this multiplicity of answers can mostly be located in the range of exogenously taken views on the trade-off between equity and efficiency which is supposed to arise every specific set of social policy measures. If however the welfare state is analyzed endogenously, that is from a constitutional economic standpoint, three clear-cut motives for its existence are to be evoked: the insurance motive, the self-protection motive, and the interpretation of charity as a public good. Yet, even if these motives escape the orthodox trade-off, they do not entirely embrace the reciprocal conditionality of the productive and the protective state. A remedy to this can be the tolerance premium (Homann/Pies, 1996), representing the collective measures and payments attributable to the productive state which at all enable the consent of every individual to the productive state. Traces of arrangements resembling a tolerance premium in the mentioned sense can also be found in the work of James Buchanan. They however all essentially remain trapped in an apology of the status quo and thus in practice re-enter the orthodox dualism of efficiency and equity of welfare measures. Only a thoroughly conflict-economic setup accounts for the dynamics initiated by the tolerance premium, but this at the price of overcoming Buchanan's two-stage theory: protective and productive states are so interdependent that they cannot be separated and steadily have to arise from simultaneously taken decisions. This approach in practice relates to other approaches like the power resource theory which interprets the welfare state as ultimately being the reflection of power relations in e.g. collective bargaining. --
    Date: 2011
  6. By: Prehn, Sören; Brümmer, Bernhard
    Abstract: The emergence of 'New New Trade Theory' fundamentally changed the thinking of international trade, and it is now at the heart of science. Here, we are going to take up the discussion of Golpinath et al. [2007], looking at whether 'New New Trade Theory' is applicable to agriculture. Revisiting the recent literature, we can find new theoretical and methodological evidence for its importance: the concepts of 'New New Trade Theory' will impact the modelling of structural change in agriculture and of agricultural trade. Farm productivity and agricultural trade cannot be seen anymore as detached from one another; both concepts are interrelated. We claim that 'New New Trade Theory' and its concepts will become standard for agriculture, too. --
    Keywords: Agriculture Economics,New New Trade Theory,Farm Heterogeneity,Elasticity of Trade Flows,Estimation Methods
    Date: 2012
  7. By: Gill, David; Prowse, Victoria
    Abstract: In this paper we investigate how cognitive ability influences behavior, success and the evolution of play towards Nash equilibrium in repeated strategic interactions. We study behavior in a p-beauty contest experiment and find striking differences according to cognitive ability: more cognitively able subjects choose numbers closer to equilibrium, converge more frequently to equilibrium play and earn more even as behavior approaches the equilibrium prediction. To understand better how subjects with different cognitive abilities learn differently, we estimate a structural model of learning based on level-k reasoning. We find a systematic positive relationship between cognitive ability and levels; furthermore, the average level of more cognitively able subjects responds positively to the cognitive ability of their opponents, while the average level of less cognitively able subjects does not respond at all. Our results suggest that, in strategic environments, higher cognitive ability translates into better analytic reasoning and a better ‘theory of mind’
    Keywords: Cognitive ability; Bounded rationality; Learning; Convergence; Level-k; Nonequilibrium behavior; Beauty contest; Repeated games; Structural modeling; Theory of mind; Intelligence; Raven test
    JEL: D83 C73 C91
    Date: 2012–04–23
  8. By: A.W. Beggs
    Abstract: This paper studies uniqueness of equilibrium in symmetric 2 x 2 bayesian games. It shows that if signals are highly but not perfectly dependent then players play their risk-dominant actions for all but a vanishing set of signal realizations. In contrast to the global games literature, noise is not assumed to be additive. Dependence is modeled using the theory of copulas.
    Keywords: Bayesian games, Global games, Uniqueness, Copulas, Risk dominance
    JEL: C72 D82
    Date: 2012
  9. By: Stéphane Gonzalez (Centre d'Economie de la Sorbonne - Paris School of Economics); Michel Grabisch (Centre d'Economie de la Sorbonne - Paris School of Economics)
    Abstract: In cooperative games, the core is one of the most popular solution concept since it ensures coalitional rationality. For non-balanced games however, the core is empty, and other solution concepts have to be found. We propose the use of general solutions, that is, to distribute the total worth of the game among groups rather than among individuals. In particular, the k-additive core proposed by Grabisch and Miranda is a general solution preserving coalitional rationality which distributes among coalitions of size at most k, and is never ampty for k ? 2. The extended core of Bejan and Gomez can also be viewed as a general solution, since it implies to give an amount to the grand coalition. The k-additive core being an unbounded set and therefore difficult to use in practice, we propose a subset of it called the minimal bargaining set. The idea is to select elements of the k-additive core minimizing the total amount given to coalitions of size greater than 1. Thus the minimum bargaining set naturally reduces to the core for balanced games. We study this set, giving properties and axiomatizations, as well as its relation to the extended core of Bejan and Gomez. We introduce also the notion of unstable coalition, and show how to find them using the minimum bargaining set. Lastly, we give a method of computing the minimum bargaining set.
    Keywords: Cooperative game, core, balancedness, general solution.
    JEL: C71
    Date: 2012–04
  10. By: Thomas W.L. Norman
    Abstract: If players learn to play an infinitely repeated game using Bayesian learning, it is known that their strategies eventually approximate Nash equilibria of the repeated game under an absolute-continuity assumption on their prior beliefs. We suppose here that Bayesian learners do not start with such a “grain of truth”, but with arbitrarily low probability they revise beliefs that are performing badly. We show that this process converges in probability to a Nash equilibrium of the repeated game.
    Keywords: Repeated games, Nash equilibrium, Rational learning, Bayesian learning, Absolute continuity
    JEL: C73 D83
    Date: 2012
  11. By: Morone, Andrea; Morone, Piergiuseppe
    Abstract: This paper provides an experimental test of the traveller’s dilemma using individual and group data. Our investigation aims to address three fundamental research questions, which can be summarised as follows: (i) claims are affected by the size of the penalty/reward; (ii) individual decisions differ significantly from group decisions; (iii) individual claims are affected by the induction of a focal point a là Schelling. Experimental findings reported in this paper provide answers to each of these questions showing that: (i) although the size of the penalty/reward did not affect subject choices in the first-period, it played a key role in determining subjects’ behaviour in the repeated game; (ii) overall, groups behave more rationally, in the sense that they were always closer to the Nash equilibrium; (iii) the reference point did not encourage coordination around the Pareto optimal choice.
    Keywords: traveller’s dilemma; focal point; individual and group decision
    JEL: D70 C92 C91
    Date: 2012
  12. By: Hernández, Penélope (ERI-CES. Departamento de Análisis Económico. Facultad de Economía.); Silva-Reus, José A. (Instituto Interuniversitario de Desarrollo Social y Paz)
    Abstract: This note provides a way to translate an n-person strategic game to a characteristic cooperative game assuming that the set of players of the cooperative game is the set of pure actions of the strategic game. The Core is characterized through coalitions generated with only one action for each player and the total coalition. We obtain the worth of the total coalition to guarantee the non-emptyness condition. In particular, for a two-player game, this value is equal to the maximal sum of the diagonals.
    Keywords: Cooperative games; Core
    JEL: C71 C72
    Date: 2012–04–24
  13. By: Peter Duersch; Joerg Oechssler; Burkhard Schipper (Department of Economics, University of California Davis)
    Abstract: We show that for many classes of symmetric two-player games, the simple decision rule ``imitate-if-better'' can hardly be beaten by any strategy. We provide necessary and sufficient conditions for imitation to be unbeatable in the sense that there is no strategy that can exploit imitation as a money pump. In particular, imitation is subject to a money pump if and only if the relative payoff function of the game is of the rock-scissors-paper variety. We also show that a sufficient condition for imitation not being subject to a money pump is that the relative payoff game is a generalized ordinal potential game or a quasiconcave game. Our results apply to many interesting examples of symmetric games including 2 x 2 games, Cournot duopoly, price competition, public goods games, common pool resource games, and minimum effort coordination games.
    Keywords: Imitate-the-best, learning, symmetric games, relative payoffs, zero-sum games, rock-paper-scissors, finite population ESS, generalized ordinal potential games, quasiconcave games
    JEL: C72 C73 D43
    Date: 2012–04–17
  14. By: Klaus Kultti; Hannu Salonen; Hannu Vartiainen
    Abstract: In this paper we study the number of pure strategy Nash equilibria in large finite n-player games. A distinguishing feature of our study is that we allow general - potentially multivalued - best reply correspondences. Given the number K of pure strategies to each player, we assign to each player a distribution over the number of his pure best replies against each strategy profile of his opponents. If the means of these distributions have a limit (mu)i for each player i as the number K of pure strategies goes to infinity, then the limit number of pure equilibria is Poisson distributed with a mean equal to the product of the limit means (mu)i. In the special case when all best reply mappings are equally likely, the probability of at least one pure Nash equilibrium approaches one and the expected number of pure Nash equilibria goes to infinity.
    Keywords: random games, pure Nash equilibria, n players
    JEL: C62 C72
    Date: 2011–12
  15. By: Hannu Salonen
    Abstract: Pure strategy Markov perfect equilibria (MPE) in dynamic cake sharing problems are analyzed. Each player chooses under perfect information how much to eat from the current cake and how much to leave to the next period. The left over cake grows according to a given growth function. With linear utilities and strictly concave increasing growth function the only symmetric equilibrium with continuous strategies is the trivial equilibrium in which a player eats the whole cake whenever it is his turn to move. This is quite different than in the corresponding single person decision problem (or at a social optimum) where the cake grows from small initial values towards the steady state. A non-trivial equilibrium with a positive steady state exist in the game. In such an equilibrium strategies cannot be continuous. When utilities are concave and the growth function is linear, a nontrivial MPE with a positive steady state may not exist.
    Keywords: common pool resources, dynamic cake sharing, Markov perfect equilibrium
    JEL: C72 C73 D92
    Date: 2012–03

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