nep-hpe New Economics Papers
on History and Philosophy of Economics
Issue of 2012‒09‒09
seventeen papers chosen by
Erik Thomson
University of Manitoba

  1. Joseph Schumpeter and Modern Nonlinear Dynamics By William Barnett; Morgan Rose
  2. Economic Ideas of Rifa`ah al-Tahtawi By Islahi, Abdul Azim
  3. Two Crises, Two Ideas and One Question By David Laidler
  4. Book Review: "The Current State of Research on Dynamic Economics" A Review Article of: Giancarlo Gandolfo: Economic Dynamics, third edition By William Barnett
  5. A Perspective on the Current State of Macroeconomic Theory By William Barnett
  6. Introduction to Recent Developments in Alternative Finance: Empirical Assessments and Economic Implications By William Barnett; Fredj Jawadi
  7. Are groups more rational, more competitive or more prosocial bargainers? By Ulrike Vollstädt; Robert Böhm
  8. NONLINEAR AND COMPLEX DYNAMICS IN ECONOMICS By William Barnett; Alfredo Medio; Apostolos Serletis
  9. Belief Formation in a Signalling Game without Common Prior: An Experiment By Alex Possajennikov
  10. Symmetric play in repeated allocation games By Christoph Kuzmics; Thomas Palfrey; Brian Rogers
  11. When is the Risk of Cooperation Worth Taking? The Prisoner’s Dilemma as a Game of Multiple Motives By Christoph Engel; Lilia Zhurakhovska
  12. Coalitional Games with Veto Players: Myopic and Rational Behavior By J Arin; V Feltkamp; M Montero
  13. "Diversity and Uniformity in Economic Theory as an Explanation of the Recent Economic Crisis" By Jan Kregel
  14. Beliefs and actions in the trust game: Creating instrumental variables to estimate the causal effect By Costa-Gomes, Miguel A.; Huck, Steffen; Weizsäcker, Georg
  16. Promoting Cooperation: the Distribution of Reward and Punishment Power By Daniele Nosenzo; Martin Sefton
  17. A Conversation with Henri (Hans) Theil: His Experiences in the Netherlands during the Second World War By William Barnett

  1. By: William Barnett (Department of Economics, The University of Kansas); Morgan Rose (Washington University in St.Louis)
    Abstract: This paper explores the conceptual links between Joseph Schumpeter’s theory of instability under capitalism and both theoretical and empirical research that has been done over the past fifteen years in nonlinear dynamics. Recent work related to chaos and bifurcation theory is shown to be consistent with Schumpeter’s view that instability is an inherent feature of capitalism, and that there is a positive, though difficult, role for stabilization policy as a result. The strong claim that modern research has proven Schumpeter correct is not made, but rather that existing recent research is not inconsistent with his views.
    Date: 2012–09
  2. By: Islahi, Abdul Azim
    Abstract: The present paper studies economic ideas of an Azharite graduate of the nineteenth century Egypt - Rifā‘ah Rāfi‘ al-Tahtāwī who was influenced by the French Scholars and Philosophers, Voltaire, Rousseau, and Mantesquieu. He wrote on significance of industry, productive and unproductive labor, importance of foreign trade, competition, and equal opportunity for all. According to him justice, freedom and human brotherhood are the foundations of economic welfare. He strived for women's economic empowerment. He was not simply a follower of Western economic ideas. He added to them human norms and Islamic values. Although born in an age of laissez faire, he advocated for a role of Government in economic matters.
    Keywords: Western Banking and Riba; Nineteenth Century Muslim Economic Thinking; History of Islamic Economic Thought
    JEL: B31 H80 B00
    Date: 2012
  3. By: David Laidler (University of Western Ontario)
    Abstract: Specific ideas about the Fisher relation between real and nominal interest rates and more general ideas about the nature of the central bank's duty to support the financial system in times of crisis were important to the Monetarist re-assessment of the causes of the Great Depression and what this event implied about the inherent stability of the market economy. Aspects of the evolution of these ideas since the Depression and the role that they have played in recent debates about the Great Recession are discussed, and some tentative conclusions about the validity of Monetarist ideas are drawn.
    Keywords: Great Depression; Great Recession; Fisher relation; interest rate; monetary policy; central bank; lender of last resort; quantitative easing; money supply; deflation; inflation; monetarism; economic stability
    JEL: B22 E44 E58 E65
    Date: 2012
  4. By: William Barnett (Department of Economics, The University of Kansas)
    Date: 2012–09
  5. By: William Barnett (Department of Economics, The University of Kansas)
    Abstract: Historically, microeconomics was the domain of scientific methodology in economics, while macroeconomics attracted less mathematically oriented economists. In recent years, the level of sophistication of macroeconomics has grown dramatically, and that field now attracts many of the most mathematically oriented economists. Nevertheless, the field's set of shared views (i.e., maintained hypothesis) has not grown. The purpose of the scientific method is to permit the maintained hypothesis within a field to grow by establishing a rigorous methodology for deductively deriving and empirically testing hypotheses. The field of macroeconomics has failed that test of scientific success during precisely the decades of most rapid growth in the use of scientific methodology. It is argued that the source of the paradox lies in the fact that the inroads of science in macroeconomics have been asymmetric. Central to the definition and objectives of macroeconomics is dimension reduction and dynamics. Rigorous dimension reduction is impossible without formal aggregation, and complex dynamics is impossible without nonlinearity. Yet applications of formal aggregation theory and nonlinear dynamics to macroeconomics have progressed very slowly, at the time that scientific methodology in other areas of macroeconomics have advanced rapidly. This asymmetry explains the paradox.
    Date: 2012–09
  6. By: William Barnett (Department of Economics, The University of Kansas); Fredj Jawadi (University of Evry and Amiens School of Management, France)
    Abstract: This paper is the introduction to the forthcoming book, Recent Developments in Alternative Finance: Empirical Assessments and Economic Implications, Proceedings of Second International Symposium in Computational Economics and Finance. The conference was held in Tunis, Tunisia, March 15-17, 2012. The volume will appear as volume 22 of the Emerald Press monograph series, International Symposia in Economic Theory and Econometrics. The topic of the conference was alternative approaches to finance.
    Keywords: finance, alternative finance, monetary economics
    JEL: G00 G10 G20 G30 E41 E51 E52
    Date: 2012–09
  7. By: Ulrike Vollstädt (Jena Graduate School "Human Behaviour in Social and Economic Change", University of Jena); Robert Böhm (Center for Empirical Research in Economics and Behavioral Scienes (CEREB), University of Erfurt)
    Abstract: In reality, it is often groups rather than individuals that make decisions. In previous experiments, groups have frequently been shown to act differently from individuals in several ways. It has been claimed that inter-group interactions may be (1) more competitive, (2) more rational, or (3) more prosocial than inter-individual interactions. While some of these observed differences may be due to differences in the experimental designs, it is still not clear which of the three motivations is prevailing as they have often been behaviorally confounded in previous experiments. We use Rubinstein's alternating offers bargaining game to compare inter-individual with inter-group behavior since it allows separating the predictions of competitive, rational and prosocial behavior. We find that groups are, on average, more rational bargainers than individuals.
    Keywords: alternating offers bargaining experiment, inter-group behavior, inter-individual behavior
    JEL: C78 D70
    Date: 2012–08–23
  8. By: William Barnett (Department of Economics, The University of Kansas); Alfredo Medio (Department of Economics, The University of Venice); Apostolos Serletis (Department of Economics, The University of Calgary)
    Date: 2012–09
  9. By: Alex Possajennikov (School of Economics, University of Nottingham)
    Abstract: Using belief elicitation, the paper investigates the formation and the evolution of beliefs in a signalling game in which a common prior on Sender's type is not induced. Beliefs are elicited about the type of the Sender and about the strategies of the players. The experimental subjects often start with diuse uniform beliefs and update them in view of observations. However, the speed of updating is in uenced by the strength of the initial beliefs. An interesting result is that beliefs about strategies are updated faster than beliefs about types. In the medium run, for some specications of game parameters, this leads to outcomes being signicantly dierent from the outcomes of the game in which a common prior is induced. It is also shown that elicitation of beliefs does not considerably change the pattern of play.
    Keywords: beliefs,signalling,experiment,learning,belief elicitation
    Date: 2012–06
  10. By: Christoph Kuzmics; Thomas Palfrey; Brian Rogers
    Abstract: We study symmetric play in a class of repeated games when players are patient. We show that, while the use of symmetric strategy profiles essentially does not restrict the set of feasible payoffs, the set of equilibrium payoffs is an interesting proper subset of the feasible and individually rational set. We also provide a theory of how rational individuals play these games, identifying particular strategies as focal through the considerations of Pareto optimality and simplicity. We report experiments that support many aspects of this theory. JEL Code: C73, C92, D63
    Keywords: symmetry, repeated games, focal points, experiments
    Date: 2012–07–01
  11. By: Christoph Engel (Max Planck Institute for Research on Collective Goods, Bonn); Lilia Zhurakhovska (Max Planck Institute for Research on Collective Goods, Bonn)
    Abstract: Both in the field and in the lab, participants frequently cooperate, despite the fact that the situation can be modelled as a simultaneous, symmetric prisoner’s dilemma. This experiment manipulates the payoff in case both players defect, and explains the degree of cooperation by a combination of five motives: the size of gains from cooperation, expectations about cooperativeness in the population in question, the degree of risk and loss aversion, and the degree by which a participant is tempted to inflict harm on another participant if this gives her a chance for an even higher payoff. Information about these motivational forces stems from additional within subjects tests. All five factors are significant only if one controls for all the other motives, which suggests that a prisoner’s dilemma is a game jointly characterised by these five motives. The need to control for the remaining explanations seems to be the reason why earlier attempts at explaining choices in the prisoner’s dilemma with personality have not been
    Keywords: efficiency, Risk aversion, Conditional Cooperation, prisoner’s dilemma, Belief, Loss Aversion, Risky Dictator Game
    JEL: H41 C72 C91 D03
    Date: 2012–08
  12. By: J Arin (Dpto. Ftos. A. Económico I, University of the Basque Country); V Feltkamp (Maastricht School of Management); M Montero (School of Economics, University of Nottingham)
    Abstract: This paper studies a noncooperative allocation procedure for coali- tional games with veto players. The procedure is similar to the one presented by Dagan et al. (1997) for bankruptcy problems. According to it, a player, the proposer, makes a proposal that the remaining play-ers must accept or reject. We present a model where the proposer can make sequential proposals over n periods. If responders are myopic maximizers (i.e. consider each period in isolation), the only subgame perfect equilibrium outcome is the serial rule of Arin and Feltkamp (2012) regardless of the order of moves. If all players are rational, the serial rule still arises as the unique subgame perfect equilibrium out- come if the order of moves is such that stronger players must respond to the proposal after weaker ones.
    Keywords: veto players, noncooperative bargaining, myopic behavior, serial rule
    Date: 2012–11
  13. By: Jan Kregel
    Abstract: Market economies and command economies have long been differentiated by the presence of alternative choice in the form of diversity. Yet most mainstream economic theory is premised on the existence of uniformity. This paper develops the implications of this contradiction for the theory of prices, income creation, and the analysis of the recent financial crisis, and provides a critique of traditional theory from an institutionalist perspective developed by J. Fagg Foster.
    Keywords: Financial Crisis; W. Petty; Markets; Equilibrium Prices; Financial Crisis
    JEL: B0 D01 D41 E01 E31 P00
    Date: 2012–08
  14. By: Costa-Gomes, Miguel A.; Huck, Steffen; Weizsäcker, Georg
    Abstract: In many economic contexts, an elusive variable of interest is the agent's belief about relevant events, e.g. about other agents' behavior. A growing number of surveys and experiments ask participants to state beliefs explicitly but little is known about the causal relation between beliefs and other behavioral variables. This paper discusses the possibility of creating exogenous instrumental variables for belief statements, by informing the agent about exogenous manipulations of the relevant events. We conduct trust game experiments where the amount sent back by the second player (trustee) is exogenously varied. The procedure allows detecting causal links from beliefs to actions under plausible assumptions. The IV-estimated effect is significant, confirming the causal role of beliefs. It is only slightly and insignificantly smaller than in estimations without instrumentation, consistent with a mild effect of social norms or other omitted variables. -- In vielen ökonomischen Zusammenhängen sind die Erwartungen der Spieler bezüglich relevanter Ereignisse, z. B. über das Verhalten anderer Spieler, eine schwer zu fassende Variable von Interesse. Zwar werden in einer wachsenden Zahl von Untersuchungen und Experimenten Teilnehmer gebeten, ihre Erwartungen ausdrücklich zu nennen, jedoch ist noch wenig bekannt über die Kausalbeziehung zwischen Erwartungen und anderen Verhaltensvariablen. In diesem Paper wird die Möglichkeit diskutiert, Instrumente zur Erhebung von Erwartungen zu kreieren, bei denen der Spieler über exogene Manipulationen der relevanten Ereignisse informiert wird. Wir führen Experimente zu einem Vertrauensspiel durch, bei denen der Betrag, der durch den zweiten Spieler zurückgesendet wird (trustee), exogen variiert wird. Dieses Vorgehen erlaubt die Entdeckung kausaler Wirkungsketten von Erwartungen auf Entscheidungen unter plausiblen Annahmen. Der IV-geschätzte Effekt ist signifikant und bestätigt die kausale Rolle von Erwartungen. Er ist nur wenig kleiner als in Schätzungen ohne Instrumentation und konsistent mit einem leichten Effekt sozialer Normen oder anderen vernachlässigter Variablen.
    Keywords: Social Capital,trust game,instrumental variables,belief elicitation
    JEL: C72 C81 C91 D84
    Date: 2012
  15. By: Karen Andrea García Rojas
    Abstract: On average women are paid less than men for equal work in every country in the world. In Colombia, the average of the wage gap seems to be between 10% and 13% although women have surpassed men in average years of education. A part of these gap can be explained because of men are greater represented in better paid disciplines, but the main explanation, 'the subjective one', relevant with gender wage discrimination, could explain more than the half of the gap. Historically, the female has had to cope with the existence of a stereotyped division of work, which has assigned her, specific roles with deep traditional roots. For women it has not been easy to get rid of these cultural patterns, which not only involve employment discrimination by employers, but also involve, in general, doubts and dilemmas that make them less competitive in a world dominated by men during centuries. There are several papers about the gender wage gap in Colombia. But this field only considers women professional workers, it means, high and middle classes. If they are in that situation, what happen with the lower classes’ women? This essay constructs a discussion since a political economy critical view, around the difficult situation of labor gender discrimination and particular situations of female workers in all social classes, making a comparison between the roles and dilemmas of women workers of different classes; under the recognition that low class women face a deeper and more dramatic discrimination. In the lower classes, women's situation is far to be ‘liberation’, although in some social circles there is the wrong idea that work gender discrimination ‘is over’. In general, lower classes’ women do have a low possibility of independence, autonomy and gender consciousness, because of the difficult access to quality education and formal jobs. Moreover, there is evidence which proves that executive women and women in leadership jobs have been decisively supported by the domestic work to get 'success' in their careers; which shows that in our society there is a gender gap by social class: the dynamics of modern capitalism has allowed, in general, the improved of the welfare, independence and equality for women in upper class (although there remains a gap with their male counterparts), but has not brought the same benefits to lower class women.
    Date: 2012–01–29
  16. By: Daniele Nosenzo (School of Economics, University of Nottingham); Martin Sefton (School of Economics, University of Nottingham)
    Abstract: Recent work in experimental economics on the effectiveness of rewards and punishments for promoting cooperation mainly examines decentralized incentive systems where all group members can reward and/or punish one another. Many self-organizing groups and societies, however, concentrate the power to reward or punish in the hands of a subset of group members (‘central monitors’). We review the literature on the relative merits of punishment and rewards when the distribution of incentive power is diffused across group members, as in most of the extant literature, and compare this with more recent work and new evidence showing how concentrating reward/punishment power in one group member affects cooperation.
    Keywords: rewards,punishment, discretionary incentives, decentralized incentives, peer-to-peer incentives, centralized incentives, experiment
    Date: 2012–08
  17. By: William Barnett (Department of Economics, The University of Kansas)
    Date: 2012–09

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