nep-hpe New Economics Papers
on History and Philosophy of Economics
Issue of 2012‒07‒29
fourteen papers chosen by
Erik Thomson
University of Manitoba

  1. A new stationary game equilibrium induced by stochastic group evolution and rational Individual choice By Dai, Darong; Shen, Kunrong
  2. Does the direct-response method induce guilt aversion in a trust game? By Amdur, David; Schmick, Ethan
  3. The Economics of Austerity By Konzelmann, S.
  4. Buchanan on Freedom By Geoffrey Brennan; Michael Brooks
  5. DELFI : DNB’s Macroeconomic Policy Model of the Netherlands By DNB
  6. Análisis crítico de la Ciencia Económica en tiempos de Crísis By William Orlando Prieto Bustos
  7. Using strong isomorphisms to construct game strategy spaces By Gagen, Michael
  8. Understanding Peer Effects in Financial Decisions: Evidence from a Field Experiment By Leonardo Bursztyn; Florian Ederer; Bruno Ferman; Noam Yuchtman
  9. Criza economică – un fenomen previzibil By Asavoaei, Alexandru
  10. Sanfter Paternalismus, meritorische Güter, und der normative Individualismus By Gebhard Kirchgässner
  11. Teorii privind crizele economice ale sistemului capitalist By Susanu, CG
  12. The Evolution of Science Policy and Innovation Studies By Martin, B.R.
  13. What does a well-being perspective add to our understanding of poverty? By Shams, Khadija
  14. El valor de las obras de arte desde una perspectiva marxista By José María Durán Medraño

  1. By: Dai, Darong; Shen, Kunrong
    Abstract: In the present paper, a new approach to equilibrium selection for very general normal form games has been constructed by introducing stochastic optimal stopping theory into classical evolutionary game theory. That is, the new game equilibrium is induced by both stochastic group evolution and decentralized rational individual choice. Moreover, stability of the game equilibrium is confirmed from both time and space dimensions.
    Keywords: Stochastic replicator dynamics; Rational choice; Normal-form game equilibrium; Stability
    JEL: C70 C62
    Date: 2012–01–15
  2. By: Amdur, David; Schmick, Ethan
    Abstract: We compare the strategy and direct-response methods in a one-shot trust game with hidden action. In our experiment, the decision elicitation method affects neither participants' behavior nor their beliefs about this behavior. We conclude that the direct-response method does not, by itself, induce guilt aversion.
    Keywords: Trust; guilt aversion; strategy method; direct-response method; behavioral economics; experimental economics
    JEL: D03 A13 C91
    Date: 2012–06
  3. By: Konzelmann, S.
    Abstract: The 2007/8 financial crisis has reignited the debate about austerity economics and revealed that it is a highly contested yet poorly understood idea. This article locates the debate in its historical context, tracing it from the early 18th and 19th century Classical debates, which focused mainly on the means by which fiscal deficits should be financed. As capitalism evolved, so did ideas and theories about the economics of austerity. Following World War One, concerns about high levels of government debt produced the 1920s 'Treasury view' - that government deficits are economically damaging and austerity is required to rein them in. During the 1930s Great Depression, when unemployment was the main concern, this perspective was challenged by the 'Keynesian view' - that government deficits could be economically beneficial during the slump, when the private sector was unable to generate sufficient effective demand to pull the economy out of depression. From this perspective, austerity was the policy prescription for the top of the business cycle, to prevent the economy from over-heating and igniting inflation. The 'stagflationary' crises of the 1970s challenged this view; and during the decades preceding the 2007/8 crisis, austerity was considered to be a policy for the bottom of the business cycle, when the excesses of a bubble-inflated boom had been revealed by its collapse. In the aftermath of the 2007/8 financial crisis, however, austerity no longer has the economic objective of macroeconomic stabilization. Instead, it has become the objective itself - demanded by actors in the international financial markets as evidence that governments are serious about managing their deficits and paying back their debts, thereby protecting the financial interests of investors in sovereign debt. However, if austerity undermines economic growth - as it is doing at present - markets are unlikely to remain loyal to those countries suffering the effect. It is therefore important that policy-makers and political leaders learn the lessons of the 2007/8 financial crisis with regard to the economics of austerity - before it is too late.
    Keywords: Austerity, Macroeconomic Policy, Financial Crises, Business Cycles
    JEL: B22 E32 E44 N10
    Date: 2012–06
  4. By: Geoffrey Brennan (Research School of Social Sciences, Australian National University, Australia - Duke University, Durham, North Carolina, USA - University of North Carolina-Chapel Hill, USA); Michael Brooks (School of Economics and Finance, University of Tasmania, Australia)
    Abstract: Our object is to explicate Buchanan's conception of individual liberty and to trace its connection to the 'working themes' in his corpus-anarchy, contract, constitution, Pareto optimality, 'public choice' and so on. In doing so, we investigate a number of tensions in Buchanan's conception-between a libertarian affinity with anarchy and constitutional contractarianism; and that between procedural liberalism and classical liberalism.
    Keywords: Freedom, Liberty, Anarchy, Constitutional Contractarianism
    JEL: D63 D79
    Date: 2012–06
  5. By: DNB
    Abstract: This Occasional Study presents DELFI, a new macroeconomic model of the Dutch economy for forecasting and policy analysis. Macroeconomic modelling at de Nederlandsche Bank started some 25 years ago, when Martin Fase and his team built MORKMON, which was quite novel at the time due to the inclusion of a monetary sector. For many years, this model was used fruitfully as an instrument for forecasting, scenario analysis and policy simulation, and its acronym survived during all those years. But the times have changed and so has the economic environment. Already when MORKMON was introduced in 1984, the then president of de Nederlandsche Bank, Wim Duisenberg, noted how our understanding of the economy is never perfect. Indeed, changes in the economic environment and new insights led to various minor and major adjustments to the structure of MORKMON, up to a point where it was decided to build a completely new model. DELFI is the result of a collective effort by researchers and statisticians at the Economics & Research Division of de Nederlandsche Bank. In my view, the team has created a worthy successor of MORKMON. And while history learns that a model is never perfect or finished, I am confident ELFI is in a position to take over the prominent position that MORKMON had so many years within the set of analytical instruments of de Nederlandsche Bank.
    Date: 2011–02
  6. By: William Orlando Prieto Bustos
    Abstract: Resumen La economía parece estar ad portas de una revolución científica que requiere de un cambio del actual paradigma que orienta la política económica. Lo anterior ha traído como consecuencia una tensión en el ejercicio profesional que intenta articular un interés privado que define sus resultados, con un interés público que define su credibilidad. Dichas tensiones han ocasionado fallas sistemáticas en la profesión que están modificando la relación entre el sujeto y el objeto de la ciencia económica, y entre el sujeto y los procedimientos a través de los cuales estudia el objeto en condiciones de incertidumbre. El presente documento discute la importancia de los principios pluralismo crítico, responsabilidad, Primun Non Nocere, y precaución en un esquema de reflexión ética de la economía como ciencia y como técnica. Para tal efecto se realiza un análisis institucional de políticas, normas, y directrices en una muestra de 10 países: 8 de Latinoamérica, junto con Estados Unidos, e Inglaterra. El principal resultado indica que el actual régimen institucional tanto legislativo como ético no soluciona la tensión que genera el interés privado y el interés público en el desempeño profesional de un economista en una economía de mercado. Es necesario incorporar una articulación flexible que facilite una interpretación sencilla y concreta que oriente al mejoramiento de la calidad del servicio privado y público que desempeña un economista. Abstract The 2008 financial crisis has caused a profound impact regarding public interest and the economics profession´s prestige and credibility. Prior to the financial collapse common knowledge about economic assumptions such as the hypothesis of efficient markets and rational expectations were widely supported for orthodox economists albeit their lack of empirical evidence. Upon such theoretical underpinnings dominant economic advice to deal with uncertainty was used to obtain financial yields well beyond efficiency and ethical limits. The financial crisis revealed the profession blindness towards opportunistic behavior whose impact may well be compared with blackmailing public interest forcing the government to step in to preserve the system´s solvency and credibility. According to the opinion of several economists replacing economic human behavior direct observation for a mathematic criterion has shadowed not only the real use of modern economic theory in solving economic recession - to the point that it has been substitute by common sense- , but also has contributed to justify an unethical behavior in the financial markets whose consequences have being paid by the society. The following paper discuses an institutional analysis of the economics profession using a comparative analysis methodology composed by 10 case studies of the profession legal frame. The research´s main finding concludes that the current institutional regime is unsuitable to reduce private-public interest tension in the corpus of the economic profession so that there is a rationale for institutional design oriented to increase high quality scientific behavior in the economic science useful to anticipate economic recessions.
    Date: 2012–05–15
  7. By: Gagen, Michael
    Abstract: When applied to the same game, probability theory and game theory can disagree on calculated values of the Fisher information, the log likelihood function, entropy gradients, the rank and Jacobian of variable transforms, and even the dimensionality and volume of the underlying probability parameter spaces. These differences arise as probability theory employs structure preserving isomorphic mappings when constructing strategy spaces to analyze games. In contrast, game theory uses weaker mappings which change some of the properties of the underlying probability distributions within the mixed strategy space. In this paper, we explore how using strong isomorphic mappings to define game strategy spaces can alter rational outcomes in simple games, and might resolve some of the paradoxes of game theory.
    Keywords: non-cooperative games: isomorphic probability distributions: mixed strategy spaces
    JEL: C72
    Date: 2012–07–21
  8. By: Leonardo Bursztyn; Florian Ederer; Bruno Ferman; Noam Yuchtman
    Abstract: Using a field experiment conducted with a financial brokerage, we attempt to disentangle channels through which a person’s financial decisions affect his peers’. When someone purchases an asset, his peers may also want to purchase it because they learn from his choice (“social learning”) and because his possession of the asset directly affects others’ utility of owning the same asset (“social utility”). We randomize whether one member of a peer pair who chose to purchase an asset has that choice implemented, thus randomizing possession of the asset. Then, we randomize whether the second member of the pair: 1) receives no information about his peer, or 2) is informed of his peer’s desire to purchase the asset and the result of the randomization determining possession. We thus estimate the effects of: (a) learning plus possession, and (b) learning alone, relative to a control group. In the control group, 42% of individuals purchased the asset, increasing to 71% in the “social learning only” group, and to 93% in the “social learning and social utility” group. These results suggest that herding behavior in financial markets may result from social learning, and also from a desire to own the same assets as one’s peers.
    JEL: C93 D03 D14 D83 G0 G11 M31
    Date: 2012–07
  9. By: Asavoaei, Alexandru
    Abstract: The main aim of this paper is to emphasize the fact that the economic crisis are common phenomena. We aim to prove that these phenomena are not so unpredictable and surprising as some economists claim nowadays. We are trying to identify and disclose the pattern of a typical period of economic recession. Hence, we focused our analysis on several of the most significant depressions in the economic history, trying to find the similarities between them, but also to point out their specific elements. The purpose of this paper is to show that the main causes of different crises are, more or less, identical, and therefore such phenomena could and should be anticipated more accurately in the future
    Keywords: economic crises; recession; speculative bubble; manias; irrational behavior; overconfidence; economic cycle; financial markets
    JEL: D53 N20 E3
    Date: 2012–07–18
  10. By: Gebhard Kirchgässner
    Abstract: Paternalism is an attempt to influence the decisions of individuals for their own benefit even if there are no third parties involved. This seems to be a contradiction to normative individualism which provides the general or ientation of our modern demo cracies. Soft or libertarian paternalism accepts the necessity of paternalism due to the existence of behavioural anomalies, but intends to apply only such measures that do not restrict the decision leeway of individuals. Nevertheless, the same objections which can be raised against its strong version can also be raised against soft paternalism. On the other hand, as soon as we accept that human beings are able to reflect not only on their actions but also on the preferences guiding them, there exists no longer a necessary contradiction between paternalism and normative individualism. As far as we know today, the possibilities to successfully apply soft paternalistic measures are rather limited. On the other hand, while some of its criticisms are justified, others are largely overshooting the mark and seem at least partly to be ideologically motivated.
    Keywords: Libertarian Paternalism; Soft Paternalism; Merit Goods; Normative Individualism; Democracy
    JEL: H11 D63 D72
    Date: 2012–07
  11. By: Susanu, CG
    Abstract: Last decades have been the most turbulent in international monetary history in terms of the number, extent and severity of the economic and financial crises. There were more speculative bubbles in the period 1980-2000 than in any previous period, and Japan and Latin American countries experienced the worse of them in the late 1980s. Sometimes crises were triggered by the concerns regarding borrowers’ excessive indebtedness and sometimes they occurred sequentially in a very short time period. Some of the crises involved the bankruptcy of several banks; others were related to the lack of confidence in a country’s ability to maintain its currency parity, and others were the result of the burst of a speculative bubble, such as real estate or financial bubbles. Therefore, in the present global economic context the analysis of theories on economic and financial crises is justified by the attempt to deepen the understanding of the triggering causes and evolution of the crises in a capitalist economic system.
    Keywords: capitalist system; economic crisis; economic cycle
    JEL: E30 P16
    Date: 2012–07–03
  12. By: Martin, B.R.
    Abstract: This article examines the origins and evolution of the field of science policy and innovation studies (SPIS). In particular, it seeks to identify the key intellectual developments in the field over the last 50 years by analysing the publications that have been highly cited by other researchers. Along with other studies reported in this Special issue, it represents one of the first and most systematic attempts to identify and analyse the most influential contributions to an emerging field on the basis of highly cited books and articles. The analysis reveals how the emerging field of SPIS drew upon a growing range of disciplines in the late 1950s and 1960s, and how the relationship with these disciplines evolved over time. Around the mid-1980s, SPIS started to become a more coherent field centred on the adoption of an evolutionary (or neo-Schumpeterian) economics framework, and an interactive model of the innovation process, and (a little later) the concept of 'systems of innovation' and the resource-based view of the firm. The article concludes with a discussion of whether SPIS is perhaps in the early stages of becoming a discipline.
    Keywords: innovation studies, science policy, history, evolution, highly cited publications, key contributions
    JEL: O30 O31 O32 B25
    Date: 2012–06
  13. By: Shams, Khadija
    Abstract: Drawing on unique survey data for rural Pakistan, we investigate the impact of socio-demographic factors on life satisfaction with particular emphasis on subjective well-being measurement to evaluate poverty and its different components. The data elicits information on overall well-being in terms of households’ satisfaction with the current socio-economic status as well as financial well-being regarding satisfaction with the current income or expenditure. We estimate a happiness model to explore to what extent a well-being perspective adds to our understanding of poverty. We find that the well-being approach closely depicts the idea of capability poverty in terms of the level education and health which both matter significantly. Our results moreover suggest that the proposed financial well-being approach is more promising in capturing both income and capability poverty on subjective grounds. This paper’s main contributions are as follows. First, we link the emerging field of happiness economics with development studies. We believe that this paper fills an important gap in the literature and may well inspire a new holistic look at poverty, beyond the conventional dimension of the lack of income. Second, we intend to challenge the view that poverty is best understood from a more macro-level without properly accounting for individuals’ own valuation of their well-being. Since poverty is often linked with human development, or the lack of it, this paper takes a special look at poverty and suggests that income poverty is only part of the picture.
    Keywords: Well-being measurement; poverty evaluation; life satisfaction; socioeconomic indicators; rural Pakistan
    JEL: O15 R20 I32 O12
    Date: 2012–01
  14. By: José María Durán Medraño
    Abstract: Este artículo trata de plantear una serie de cuestiones preliminares en torno al estudio del valor de las obras de arte desde una perspectiva marxista, es decir, desde una perspectiva que tenga en cuenta la teoría laboral del valor desarrollada por Marx. El artículo comienza con una serie de cuestiones preliminares que desde nuestro punta de vista son fundamentales a la hora de exponer el problema del valor/precio de las obras de arte. Continúa examinando críticamente planteamientos recientes sobre la teoría de formación precios en Adam Smith; y concluye volviendo a Marx y la teoría laboral del valor con el fin de proponer un posible camino para la investigación futura.
    Date: 2012–06–14

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