nep-hpe New Economics Papers
on History and Philosophy of Economics
Issue of 2012‒06‒25
eleven papers chosen by
Erik Thomson
University of Manitoba

  1. Economic Cosmology and the Evolutionary Challenge By John M. Gowdy; Denise E. Dollimore; David Sloan Wilson; Ulrich Witt
  2. Identity, Homophily and In-Group Bias By Sergio Currarini; Friederike Menge
  3. Applying relevant ethical theories to equality By Punabantu, Siize
  4. Happiness, Habits and High Rank: Comparisons in Economic and Social Life By Andrew E. Clark
  5. Revealed cardinal preference By Sákovics, József
  6. The Failure of Financial Macroeconomics and What to Do About it By Jean-Bernard Chatelain; Kirsten Ralf
  7. Economic Coordination and Dynamics: Some Elements of an Alternative "Evolutionary" Paradigm By Giovanni Dosi
  8. Moral Hypocrisy, Power and Social Preferences By Rustichini, Aldo; Villeval, Marie Claire
  9. Marx's theory of crisis in the context of financialization. analytical insights on the current crisis By Stravelakis, Nikos
  10. Ten years of metropolization in economics: a bibliometric approach (In French) By Aurélie LALANNE (GREThA, CNRS, UMR 5113); Guillaume POUYANNE ( GREThA, CNRS, UMR 5113)
  11. The Modular Nature of Trustworthiness Detection By Bonnefon, Jean-François; De Neys, Wim; Hopfensitz, Astrid

  1. By: John M. Gowdy; Denise E. Dollimore; David Sloan Wilson; Ulrich Witt
    Abstract: The intellectual histories of economics and evolutionary biology are closely intertwined because both subjects deal with living, complex, evolving systems. Because the subject matter is similar, contemporary evolutionary thought has much to offer to economics. In recent decades theoretical biology has progressed faster than economics in understanding phenomena like hierarchical processes, cooperative behavior, and selection processes in evolutionary change. This paper discusses three very old "cosmologies" in Western thought, how these play out in economic theory, and how evolutionary biology can help evaluate their validity and policy relevance. These cosmologies, as manifested in economic theory are, (1) rational economic man, (2) the invisible hand of the market, and (3) the existence of a general competitive equilibrium. It is argued below that current breakthroughs in evolutionary biology and neuroscience can help economics go beyond these simple cosmologies.
    Date: 2012–06–12
  2. By: Sergio Currarini (Department of Economics, University of Bristol and Dipartimento di Economia, Universita' Ca' Foscari di Venezia); Friederike Menge (School of Economics, University of Nottingham, University Park Campus and Department of Economics (AE1), Maastricht University)
    Abstract: School of Economics, University of Nottingham, University Park Campus and Department of Economics (AE1), Maastricht University
    Keywords: In-Group Bias, Homophily, Endogenous Matching, Experiments, Game Theory
    JEL: D03 D01 C91 C92 C7
    Date: 2012–05
  3. By: Punabantu, Siize
    Abstract: Nelson Mandela said, “During my lifetime I have dedicated myself to this struggle of the African people. I have fought against White domination, and I have fought against Black domination. I have cherished the ideal of a democratic and free society in which all persons live together in harmony and with equal opportunities. It is an ideal which I hope to live for and to achieve. But if needs be, it is an ideal for which I am prepared to die.” In other words Nelson Mandela did not simply engage in the struggle for Black people, he did so for Black people, White people, Asians, Arabs and people of diverse backgrounds. As a result he has special place in history and in the hearts of many diverse people. Martin Luther King Jnr is respected not because he engaged the civil rights movement for African Americans, but he did so for all Americans and all people alike. Today he is still fondly remembered by a diverse section of society. The question of ethics in society in terms of the regard human beings have for one another be it by gender, race, tribe or group has an impact on business and socio-economic development. It is this issue in governance that this paper will address. It raises interesting questions. When does the integration, for example, of gender equality interfere with the ability of a CEO or leader to make decisions that are in the interests of the institutions they manage and when is it a necessary active policy by which to improve gender equality? When does empowerment become discriminative and when does discrimination betray the more positive expectations of empowerment? If we as members of society are held to the highest ideal then mutual respect and equality between people of different races, of different tribes and groupings is an example of the best possible use of human reason and the most useful application of human emotional and social intelligence.
    Keywords: Scarcity; race; culture; discrimination; prejudice; equality; economic thought; poverty; wealth; rationality; operating level economics; economic growth; paradox
    JEL: D63 A13 A12
    Date: 2012–06–18
  4. By: Andrew E. Clark
    Abstract: The role of money in producing sustained subjective well-being seems to be seriously compromised by social comparisons and habituation. But does that necessarily mean that we would be better off doing something else instead? This paper suggests that the phenomena of comparison and habituation are actually found in a considerable variety of economic and social activities, rendering conclusions regarding well-being policy less straightforward.
    Keywords: Comparison, habituation, income, unemployment, marriage, divorce, health, religion, policy
    JEL: D01 D31 H00 I31 J12 J28
    Date: 2012
  5. By: Sákovics, József
    Abstract: I prove that as long as we allow the marginal utility for money (lambda) to vary between purchases (similarly to the budget) then the quasi-linear and the ordinal budget-constrained models rationalize the same data. However, we know that lambda is approximately constant. I provide a simple constructive proof for the necessary and sufficient condition for the constant lambda rationalization, which I argue should replace the Generalized Axiom of Revealed Preference in empirical studies of consumer behavior. 'Go Cardinals!' It is the minimal requirement of any scientifi c theory that it is consistent with the data it is trying to explain. In the case of (Hicksian) consumer theory it was revealed preference -introduced by Samuelson (1938,1948) - that provided an empirical test to satisfy this need. At that time most of economic reasoning was done in terms of a competitive general equilibrium, a concept abstract enough so that it can be built on the ordinal preferences over baskets of goods - even if the extremely specialized ones of Arrow and Debreu. However, starting in the sixties, economics has moved beyond the 'invisible hand' explanation of how -even competitive- markets operate. A seemingly unavoidable step of this 'revolution' was that ever since, most economic research has been carried out in a partial equilibrium context. Now, the partial equilibrium approach does not mean that the rest of the markets are ignored, rather that they are held constant. In other words, there is a special commodity -call it money - that reflects the trade-offs of moving purchasing power across markets. As a result, the basic building block of consumer behavior in partial equilibrium is no longer the consumer's preferences over goods, rather her valuation of them, in terms of money. This new paradigm necessitates a new theory of revealed preference.
    Date: 2012
  6. By: Jean-Bernard Chatelain (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon Sorbonne, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris); Kirsten Ralf (Ecole Supérieure du Commerce Extérieur - ESCE)
    Abstract: The bargaining power of international banks is currently still very high as compared to what it was at the time of the Bretton Woods conference. As a consequence, systemic financial crises are likely to remain recurrent phenomena with large effects on macroeconomic aggregates. Mainstream macroeconomic models dealing with financial frictions failed to explain at least eight stylized facts of the ongoing crisis. We therefore suggest two complementary assumptions : (I) A systemic bankruptcy risk stable equilibrium may be feasible, besides another stable equilibrium related to a stability corridor, (II) inefficient financial markets rarely ensure that the price of an asset is equal to its "fundamental long term value". Both assumptions are compatible with a structural research programme taking into account the Lucas' critique (1976) but may start a creative destruction process of the Lucas' view of business cycles theory.
    Keywords: Asset prices, liquidity trap, monetary policy, financial stability, business cycles, economic growth, dynamic stochastic, general equilibrium models.
    Date: 2012–05
  7. By: Giovanni Dosi
    Abstract: The paper, largely based on the introduction to Dosi (2012), elaborates on the main interpretative ingredients, methodology and challenges ahead of the evolutionary research program in economics. Telegraphically, such a perspective attempts to understand a wide set of economic phenomena - ranging from microeconomic behaviours to the features of industrial structures and dynamics, all the way to the properties of aggregate growth and development - as outcomes of far-from-equilibrium interactions among heterogeneous agents, characterized by endogenous preferences, most often "boundedly rational" but always capable of learning, adapting and innovating with respect to their understandings of the world in which they operate, the technologies they master, their organizational forms and their behavioural repertoires. And on methodological grounds, far from disdaining formal modelling and statistical analysis, the research program is, however, largely inductive, taking very seriously indeed empirical regularities at all levels of observation as discipline for the modelling assumptions. Together, the paper places such interpretative perspective against some fundamental questions addressed by the economic discipline in general and against the answers to such questions that contemporary theory has to offer. Such questions fundamentally concern first, the drivers of dynamics and, second, the conditions of coordination among interacting agents.
    Keywords: Economic Evolution, Coordination, Dynamics, Bounded Rationality, Agent-based Macro Models, Innovation
    Date: 2012–06–06
  8. By: Rustichini, Aldo (University of Minnesota); Villeval, Marie Claire (CNRS, GATE)
    Abstract: We show with a laboratory experiment that individuals adjust their moral principles to the situation and to their actions, just as much as they adjust their actions to their principles. We first elicit the individuals’ principles regarding the fairness and unfairness of allocations in three different scenarios (a Dictator game, an Ultimatum game, and a Trust game). One week later, the same individuals are invited to play those same games with monetary compensation. Finally in the same session we elicit again their principles regarding the fairness and unfairness of allocations in the same three scenarios. Our results show that individuals adjust abstract norms to fit the game, their role and the choices they made. First, norms that appear abstract and universal take into account the bargaining power of the two sides. The strong side bends the norm in its favor and the weak side agrees: Stated fairness is a compromise with power. Second, in most situations, individuals adjust the range of fair shares after playing the game for real money compared with their initial statement. Third, the discrepancy between hypothetical and real behavior is larger in games where real choices have no strategic consequence (Dictator game and second mover in Trust game) than in those where they do (Ultimatum game). Finally the adjustment of principles to actions is mainly the fact of individuals who behave more selfishly and who have a stronger bargaining power. The moral hypocrisy displayed (measured by the discrepancy between statements and actions chosen followed by an adjustment of principles to actions) appears produced by the attempt, not necessarily conscious, to strike a balance between self-image and immediate convenience.
    Keywords: moral hypocrisy, fairness, social preferences, power, self-deception, self-image
    JEL: D03 D63 C91 C7
    Date: 2012–05
  9. By: Stravelakis, Nikos
    Abstract: In the context of the current crisis a vigorous debate is taking place with regard to its’ cause . A debate which has important policy implications in the sense that it justifies or condemns the main reaction policy to the evolution of the crisis i.e. the persistent securitization of financial capital on a global scale through trillions of government and central bank money resting in private bank vaults until proven insufficient, triggering a new round of bank refinance and / or recapitalization. The main question to be answered, in order to understand the present crisis, is whether the explosion of interest rates and the lack of credit is the cause or the trigger of a depression and why. If financial turmoil is the cause of depressions then each crisis is unique, the result of a «black swan» game and securitization will prove efficient since no risk arises from capitalist production and the reproduction of capital. Of course, history has taught us that capitalist economies experience periods of prosperity followed by depressions with almost periodical recurrence. However, the present crisis poses additional questions for Marxist and heterodox economics, since it prevailed following a period of stable (not declining) profit rates associated with weak corporate growth side by side with an explosion of financial sector growth a phenomenon referred to as financialization of capital. Contributing to the response to these questions is the main scope of this paper.
    Keywords: Marx's Theory of Crisis, Financialization, Rate of Profit, Profit of Enterprise
    JEL: B51 B22 E44
    Date: 2012–06–14
  10. By: Aurélie LALANNE (GREThA, CNRS, UMR 5113); Guillaume POUYANNE ( GREThA, CNRS, UMR 5113)
    Abstract: Research on metropolization has been very active during the 1990s, but it seems to have relatively run out during the next decade. In this paper, we review the way metropolization was dealt with in economics these last ten years. We use bibliometric tools and network analysis so as to bring out four main fields of research. Each one is analyzed from the point of view of the theoretical filiation and of the dynamics of publication. We also bring out the main questions and the controversies of the 2000s. The Global City is based on geographers\' works such as Friedmann and Sassen. Various classifications to qualify the global urban hierarchy are developped. Several authors argue in favour of a more explicit consideration of the territory. The Innovative City is at the intersection of urban economics and the geography of innovation. If the impact of economic diversity and proximity is still studied, the localization of headquarters is an emerging theme. The Cognitive City, which derives from the application of the human capital theory to the city, sees growing research on the nature of the externalities of knowledge. Finally, the Creative City, stemming from Florida’s theses at the beginning of 2000s, is an emergent theme. As such, it is the object of rather lively controversies: on the composition of the creative class, on the \"primacy of location\" of creative people or firms, and on the nature of the \"creative milieu\". This literature brings to the foreground some innovative themes such as the work on cosmopolitanism.
    Keywords: metropolization, global city, creative city, innovative city, learning city, bibliometrics
    JEL: R10 R11 R12 R19
    Date: 2012
  11. By: Bonnefon, Jean-François (Centre national de la recherche scientifique); De Neys, Wim (Centre national de la recherche scientifique); Hopfensitz, Astrid (TSE)
    Abstract: The capacity to trust wisely is a critical facilitator of success and prosperity, and it has been conjectured that people of higher intelligence were better able to detect signs of untrustworthiness from potential partners. In contrast, this article reports five Trust Game studies suggesting that reading trustworthiness on the faces of strangers is a modular process. Trustworthiness detection from faces is independent of general intelligence (Study 1) and effortless (Study 2). Pictures that include non-facial features such as hair and clothing impair trustworthiness detection (Study 3) by increasing reliance on conscious judgments (Study 4), but people largely prefer to make decisions from this sort of pictures (Study 5). In sum, trustworthiness detection in an economic interaction is a genuine and effortless ability, possessed in equal amount by people of all cognitive capacities, but whose impenetrability leads to inaccurate conscious judgments and inappropriate informational preferences.
    Date: 2012–05

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