nep-hpe New Economics Papers
on History and Philosophy of Economics
Issue of 2012‒06‒05
seven papers chosen by
Erik Thomson
University of Manitoba

  1. Value and utility in a historical perspective By Pogany, Peter
  2. Islamic finance revisited: conceptual and analytical issues from the perspective of conventional economics By Singh, Ajit; Sheng, Andrew
  3. Bayesian Games with Unawareness and Unawareness Perfection By Martin Meier; Burkhard Schipper
  4. The Anatomy of Error in Decision-making of Rationally Behaving Agents from the Perspective of the Theory of Bounded Rationality: Extension for Contextual Games By Tomas Otahal; Radim Valencik
  5. On Continuity of Robust Equilibria By Ori Haimanko; Atsushi Kajii
  6. Evolution towards asymptotic efficiency, preliminary version. By Stefano Demichelis
  7. Nota sulle relazioni fra l’analisi di Schumpeter e quella di Sraffa By Mario De Marchi

  1. By: Pogany, Peter
    Abstract: Since value and utility are the highest profile abstractions that underlie an epoch’s intellectual climate and ethical principles, their evolution reflects the transformation of socioeconomic conditions and institutions. The “Classical Phase” flourished during the first global system, laissez-faire/metal money/zero multilateralism (GS1); the second, “Subjective/Utilitarian” phase marked the long transition to the current epoch of “Modern Subjectivism/General Equilibrium,” tied to the second and extant global system, mixed economy/minimum reserve banking/weak multilateralism (GS2). History has witnessed the material de-essentialization of value and substantialization of utility. But now the two concepts face a thorough transvaluation as the world’s combined demographic and economic expansion encounters ecological/physical limitations. An extended macrohistoric implosion may lead to a third form of global self-organization: two-level economy/maximum bank reserve money/strong multilateralism (GS3). If history unfolds along the suggested path, not only economics, but also thinking about economics would change. It would be considered an evolving hermeneutic of the human condition expressed through global-system-specific texts. The implied critical alteration, with the recognition of the entropy law’s importance as its focal point, matches the prediction of Swiss thinker Jean Gebser (1905-1973) about the impending mutation of human consciousness into its integral/arational structure. Such extrapolations form the context in which the fourth historical phase of value and utility is hypothesized, leading to the material re-essentialization of value and de-substantialization of utility.
    Keywords: value; utility; new historical materialism; a new take on universal history
    JEL: A12 Z10 N00 Q01 B00
    Date: 2012–05–15
  2. By: Singh, Ajit; Sheng, Andrew
    Abstract: After a brief recent empirical sketch of Islamic finance, the paper turns to its main theoretical and conceptual purpose. It seeks to relate the concepts of Islamic and conventional finance, and to examine certain important questions which arise from the interaction between these systems. The paper is written from the perspective of conventional modern economics, as the authors are students of the latter. The paper discusses the main tenets of Islamic finance, as well as those of modern economics, including the implications of zero interest rates and those of Modigliani and Miller theorems. The most notable finding of this paper is that John Maynard Keynes’ analysis of employment, interest and money provides, inadvertently, the best rationale for some of the basic precepts of Islamic finance. The paper concludes that there is no inevitable conflict between the two systems and cooperation between them is eminently desirable and feasible.
    Keywords: Islamic Finance; Moral Hazard; Keynes; Zero Interest Rates; Usuary
    JEL: A13 E40 B41
    Date: 2011–11–14
  3. By: Martin Meier; Burkhard Schipper (Department of Economics, University of California Davis)
    Abstract: Applying unawareness belief structures introduced in Heifetz, Meier, and Schipper (2012), we develop Bayesian games with unawareness, define equilibrium, and prove existence. We show how equilibria are extended naturally from lower to higher awareness levels and restricted from higher to lower awareness levels. We apply Bayesian games with unawareness to investigate the robustness of equilibria to uncertainty about opponents' awareness of actions. We show that a Nash equilibrium of a strategic game is robust to unawareness of actions if and only if it is not weakly dominated. Finally, we discuss the relationship between standard Bayesian games and Bayesian games with unawareness.
    Keywords: Awareness, Unawareness, Type-space, Incomplete information, Bayesian games, Equilibrium, Perfection, Undominated equilibrium, Weak dominance, Inattention.
    JEL: C70 C72 D80 D82
    Date: 2012–05–08
  4. By: Tomas Otahal (Department of Economics, Faculty of Business and Economics, Mendel University in Brno); Radim Valencik (University of Finance and Administration)
    Abstract: How can errors in decision-making by rationally behaving individuals be explained? The concepts of bounded rationality proposed by H. Simon and of imperfect information in the complex reality by F. Hayek attack the over-restrictive assumption of perfectly informed individuals or organisms in neoclassical microeconomics. Since this assumption excludes erroneous decision-making, some results must be explained by questioning the rationality assumption. In this paper, we show that erroneous decision-making of individuals and organisms is not necessarily erroneous if we look at the contextual games which individuals and organisms play in the complex reality. This helps to explain errors in the decision-making of individuals or organisms, while maintaining the assumption of rational behavior. At the same time, we show that the errors observed in the contextual analysis of games in the decision-making of individuals or organisms can only be apparent.
    Keywords: Bounded rationality, complex systems, contextual games, erroneous behavior, rational decision-making
    JEL: D01 C73
    Date: 2012–06
  5. By: Ori Haimanko (Department of Economics, Ben-Gurion University); Atsushi Kajii (Institute of Economic Research, Kyoto University)
    Abstract: We relax the Kajii and Morris (1997a) notion of equilibrium ro- bustness by allowing approximate equilibria when information in a game becomes incomplete. The new notion is termed "approximate robustness". The approximately robust equilibrium correspondence turns out to be upper hemicontinuous, unlike the (exactly) robust equilibrium correspondence. Another distinction comes to light when we show that, as a corollary of upper hemicontinuity, approximately robust equilibria exist in all zero-sum games. Thus, although approx- imate robustness is only a small variation of the original notion, it is strictly weaker than the latter, and its adoption enriches the domain of games for which robust equilibria exist.
    Keywords: incomplete information, robustness, Bayesian Nash equi- librium, ε-equilibrium, upper hemicontinuity, zero-sum games
    JEL: C72
    Date: 2012–05
  6. By: Stefano Demichelis (Department of Economics and Business, University of Pavia)
    Abstract: We show that in long repeated games, or in infinitely repeated games with discount rate close to one, payoffs corresponding to evolutionary stable sets are asymptotically efficient, as intuition suggests. Actions played at the beginning of the game are used as messages that allow players to coordinate on Pareto optimal outcomes in the following stages. The result builds a bridge between the theory of repeated games and that of communication games.
    Date: 2012–05
  7. By: Mario De Marchi (Ceris - Institute for Economic Research on Firms and Growth,Rome,Italy)
    Abstract: This paper considers the matter of possible links between Schumpeter’s theory of technological change and the economic theory of the classical or neo-Ricardian school. The paradigm of the neo-Ricardian theory adopted here is that found in Sraffa’s book Production of Commodities by Means of Commodities. The idea of investigating how distribution changes as technology changes take place by adapting a method originally conceived for the determination of rentes is put forth. Shifts in the hierarchy of dominant-dominated techniques are explicitly taken into account here. This way, the model helps explain the shifts in prices and production efficiency caused by the diffusion of innovation as well as the related changes in the volume of surplus generated by the economic system and how such surplus is shared among the various classes.
    JEL: O33
    Date: 2012–06

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