nep-hpe New Economics Papers
on History and Philosophy of Economics
Issue of 2012‒10‒20
fifteen papers chosen by
Erik Thomson
University of Manitoba

  1. "Building Effective Regulation Requires a Theory of Financial Instability" By Jan Kregel; Dimitri B. Papadimitriou
  3. The Petersburg Paradox at 300 By Seidl, Christian
  4. Embedding Minsky´s taxonomy of cash flows into a corporate finance framework (The microeconomic linkage between speculative and Ponzi schemes) By Rodolfo Apreda
  5. Quantizing Money By Ternyik, Stephen I.
  6. Alvin E. Roth and Lloyd S. Shapley: Stable matching: Theory, evidence, and practical design By Committee, Nobel Prize
  7. Why do Shared Societies make economic sense? Three theoretical approximations By Aldo Caliari
  8. Happiness and Public Policies: Fundamental Issues By Bruno S. Frey
  9. Exegesis of Digital Text from the History of Economic Thought: A Comparative Exploratory Test By Karen Knight
  10. The Value to the Environmental Movement of the New Literature on the Economics of Happiness By Oswald, Andrew J.
  11. L’économie politique, à la lumière de son objet. La démarhe et les concepts fondateurs THE POLITICAL ECONOMY, UNDER THE LIGHT OF FOUNDERS’ CHOICES, AND THEIR METHODOLOGY DIRECTED TO CONCEPTUAL WORK By Eric THOSUN MANDRARA
  12. Notes for a new guide to Keynes (I): Wages, aggregate demand, and employment By Jordi Galí
  13. Liberté et société post-utilitariste By Saint-Paul, Gilles
  14. Equalitarian Societies are Economically Impossible By Bojin Zheng; Wenhua Du; Wanneng Shu; Jianmin Wang; Deyi Li
  15. Financialization and Marx: some reflections on Bryan’s, Martin’s and Rafferty’s argumentation By Sotiropoulos, Dimitris P.; Lapatsioras, Spyros

  1. By: Jan Kregel; Dimitri B. Papadimitriou
    Abstract: Hyman Minsky had particular views about how the regulatory system and financial architecture should be reformulated, and one of the many lessons we can learn from his work is that there is an intimate connection between how we think about the prospect of financial market instability and how we approach financial regulation. Regulation cannot be effective if it is simply based on "piecemeal" measures produced in response to the current "moment," Minsky wrote. It needs to reformulate the structure of the financial system itself.
    Date: 2012–05
  2. By: Ori Haimanko (BGU); Atsushi Kajii (KIER, Kyoto University)
    Abstract: We relax the Kajii and Morris (1997a) notion of equilibrium ro- bustness by allowing approximate equilibria in close incomplete infor- mation games. The new notion is termed "approximate robustness". The approximately robust equilibrium correspondence turns out to be upper hemicontinuous, unlike the (exactly) robust equilibrium corre- spondence. As a corollary of the upper hemicontinuity, it is shown that approximately robust equilibria exist in all two-player zero-sum games and all two-player two-strategy games, whereas (exactly) robust equilibria may fail to exist for some games in these categories.
    Keywords: incomplete information, robustness, Bayesian Nash equi- librium, ?-equilibrium, upper hemicontinuity, zero-sum games.
    JEL: C72
    Date: 2012
  3. By: Seidl, Christian
    Abstract: In 1713 Nicolas Bernoulli sent to de Montmort several mathematical problems, the fifth of which was at odds with the then prevailing belief that the advantage of games of hazard follows from their expected value. In spite of the infinite expected value of this game, no gambler would venture a major stake in this game. In this year, de Montmort published this problem in his Essay d'analyse sur les jeux de hazard. By dint of this book the problem became known to the mathematics profession and elicited solution proposals by Gabriel Cramer, Daniel Bernoulli (after whom it became known as the Petersburg Paradox), and Georges de Buffon. Karl Menger was the first to discover that bounded utility is a necessary and sufficient condition to warrant a finite expected value of the Petersburg Paradox. It was, in particular, Menger's article which provided an important cue for the development of expected utility by von Neumann and Morgenstern. The present paper gives a concise account of the origin of the Petersburg Paradox and its solution proposals. In its third section, it provides a rigorous analysis of the Petersburg Paradox from the uniform methodological vantage point of d'Alembert's ratio text. Moreover, it is shown that appropriate mappings of the winnings or of the probabilities can solve or regain a Petersburg Paradox, where the use of probabilities seems to have been overlooked by the profession. --
    Date: 2012
  4. By: Rodolfo Apreda
    Abstract: When Minsky put forward his financial instability hypothesis, he resorted – among other macroeconomic tools of analysis – to categories like income, balance-sheet, and portfolio cash flows, so as to cope with the successive stages of hedging, speculative and Ponzi schemes. This paper makes two contributions to the lively debate arousing from Minsky’s ideas. Firstly, it embeds Minsky’s taxonomy into the incremental cash-flow model that has become part and parcel of the modern approach to Corporate Finance. Secondly, and by means of the referred model, we set up a microeconomic linkage to financial instability, by showing how hedging, speculative and Ponzi devices actually break off the natural mutuality that binds together so effectively cash flows from assets – which create economic value – with those to be delivered toward both creditors and stockholders.
    Keywords: Minsky’s taxonomy of cash flows; incremental cash flow model; financial instability; Ponzi scheme; speculative finance.
    JEL: G32 G34
    Date: 2012–09
  5. By: Ternyik, Stephen I.
    Abstract: The quantization of money guides us with methodical precision to the decisive role of the quantitative reserve requirement as the single cause-effect systemics of cyclical processes in the advanced monetary production economy.This research compiles the foundation and ultimate conclusion of quantum monetary science and points to a more exact formulation of monetary economics.
    Keywords: quantum monetary science; monetary quantum; monetophysics
    JEL: B41
    Date: 2012
  6. By: Committee, Nobel Prize (Nobel Prize Committee)
    Abstract: This year’s Prize to Lloyd Shapley and Alvin Roth extends from abstract theory developed in the 1960s, over empirical work in the 1980s, to ongoing efforts to find practical solutions to real-world problems. Examples include the assignment of new doctors to hospitals, students to schools, and human organs for transplant to recipients. Lloyd Shapley made the early theoretical contributions, which were unexpectedly adopted two decades later when Alvin Roth investigated the market for U.S. doctors. His findings generated further analytical developments, as well as practical design of market institutions.
    Keywords: Market Design;
    JEL: C71 D02
    Date: 2012–10–15
  7. By: Aldo Caliari
    Abstract: The concept of Shared Societies may be seen as a moral prescription to offer grounds and guidance to economic policy-making. The task given to the Working Group on the Economic Rationale of Shared Societies to look into “the types of economic policies which stimulate and encourage a shared society and those policies which have a negative impact on the achievement of shared societies” implies such an approach. Such a way to consider the link between Shared Societies and economics might not be consistent with what has come to be the most widespread approach to economics science. But its merits should not be underestimated. The relatively recent past of economics can often makes us forget that economics and ethics were not always the separate fields that they are today. As economic historian Alessandro Roncaglia reminds us, “philosophers… of the Middle Ages considered it their task not so much to describe and interpret the way the economy works, but rather to provide advice on morally acceptable behaviour in the field of economic relations.”1 In fact, the emergence of economics as an autonomous science is a relatively recent phenomenon.2 The exploration of what a normative concept of Shared Societies could suggest in terms of economic policy prescriptions is, therefore, a promising line of thinking. In that link between Shared Societies and economics, however, this paper chooses to explore the other direction. Hence, it posits that Shared Societies make economic sense, that is, the implementation of the principles of Shared Societies can lead to improvements in economic performance. The paper will do so by resorting to at least three theoretical economic frameworks whose intuitions Shared Societies actually rescue and put in practice. First, Nurkse’s contribution to development economics, with its intuition of the importance of mobilizing all labor resources in countries as a way to increase capital formation while suppressing apparent consumption/ investment trade –offs. Second, institutional economics, and its intuition of the role that “institutional technologies” play in economic performance or, as others put it, politics’ impact in influencing the incentives of economic agents to develop new ideas. Finally, structuralist frameworks, and the relevance they attach to the role of heterogeneity in societies as a key factor modeling development outcomes. For each of these frameworks, the paper will develop relevant insights provided by them, how they applicable to Shared Societies and pertinent to the analysis of Shared Societies’ impacts on economic performance.
    Date: 2012–03
  8. By: Bruno S. Frey
    Date: 2012–10
  9. By: Karen Knight (Business School, University of Western Australia)
    Abstract: Textual material relevant to the history of economic thought is today readily available in various digitised forms. This raises the possibility of exegesis being undertaken with the aid of software designed for the purpose of textual analysis. This paper provides an exploratory test of Leximancer, a text analytics program that extracts the content of text, or collections of text, in order to quantify and display the conceptual structure of text content in a visually informative way. The relevance of one particular software product – Leximancer – as a tool enhancing textual exegesis undertaken for the history of economic thought is considered. The exploratory test is a comparative analysis of A.C. Pigou’s first chapter in Wealth and Welfare (1912) and the first chapter of The Economics of Welfare (1920).
    Date: 2012
  10. By: Oswald, Andrew J. (University of Warwick and CAGE UK and IZA Germany)
    Abstract: Many environmentalists have not yet discovered and understood the value to them of a new research literature. That literature is the economics of happiness. It offers a potentially important tool for future policy debate. In particular, this literature offers a defensible way to calculate the costs and benefits of the true happiness value of ‘green’ variables – and to weigh those against the happiness value to people of extra income and consumption. Some of the latest research findings turn out to accord well with environmentalists’ intuitions : green variables seem to have large direct effects on human well-being; society would arguably be better to concentrate more on environmental aims and less on monetary or materialistic ones; greater consumption of things in Western society cannot be expected to make us much happier
    Date: 2012
  11. By: Eric THOSUN MANDRARA (Laboratoire de Recherche sur l'Industrie et l'Innovation. ULCO)
    Abstract: « Le monde a le tort de ne pas se découper exactement suivant les frontières qui séparent les spécialistes. » (J.K. Galbraith). Cette étude essaie de soutenir l’importance pour la science économique de retrouver les préoccupations des fondateurs, d’ajouter aux connaissances spécialisées plus d’attention à celles qui embrassent les liens d’ensemble, de revenir à l’économie politique, là où il faut dépasser les questions particulières, variées, atteindre le travail en général, la difficulté à mettre en oeuvre ce travail général, et poser la problématique de la mobilisation comme telle. “The world to its discredit does not divide neatly along the lines that separate the specialists.”(J.K. Galbraith). This survey tries to defend the importance for economics to recover proceedings of founders, to add to specialized knowledge more attention on those that grasp universal ties, to come back to the political economy, where it is necessary to go beyond particular, varied questions, to reach labour in general, reach the difficulties to implement this general labour, and set the problematic of the mobilization as such.
    Keywords: spécialités, universalité, dynamique marchande, conception classique
    JEL: A11 D83 I23
    Date: 2012–04
  12. By: Jordi Galí
    Abstract: I revisit the General Theory's discussion of the role of wages in employment determination through the lens of the New Keynesian model. The analysis points to the key role played by the monetary policy rule in shaping the link between wages and employment, and in determining the welfare impact of enhanced wage flexibility. I show that the latter is not always welfare improving.
    Keywords: wage flexibility, monetary policy rules, employment stability.
    JEL: E32
    Date: 2012–09
  13. By: Saint-Paul, Gilles (TSE)
    Abstract: Utilitarian foundations for limited government are shaky insofar as they assume rational and consistent individuals. Recently economists’ assumption of rational actors has come under sustained attack. Behavioural economics has suggested that people are plagued by irrational biases and inconsistencies. The author elucidates how these developments have led to a post-utilitarianism which is held to justify paternalistic interventions by the state via ‘sin taxes’, direct bans or new obligations. Individual responsibility is seriously undermined, as is faith in markets. He concludes that supporters of individual freedom need to move away from utilitarian reasoning, reassert core values of autonomy and responsibility, and define strict limits on the scope of government intervention.
    Date: 2012–09
  14. By: Bojin Zheng; Wenhua Du; Wanneng Shu; Jianmin Wang; Deyi Li
    Abstract: The inequality of wealth distribution is a universal phenomenon in the civilized nations, and it is often imputed to the Matthew effect, that is, the rich get richer and the poor get poorer. Some philosophers unjustified this phenomenon and tried to put the human civilization upon the evenness of wealth. Noticing the facts that 1) the emergence of the centralism is the starting point of human civilization, i.e., people in a society were organized hierarchically, 2) the inequality of wealth emerges simultaneously, this paper proposes a wealth distribution model based on the hidden tree structure from the viewpoint of complex network. This model considers the organized structure of people in a society as a hidden tree, and the cooperations among human beings as the transactions on the hidden tree, thereby explains the distribution of wealth. This model shows that the scale-free phenomenon of wealth distribution can be produced by the cascade controlling of human society, that is, the inequality of wealth can parasitize in the social organizations, such that any actions in eliminating the unequal wealth distribution would lead to the destroy of social or economic structures, resulting in the collapse of the economic system, therefore, would fail in vain.
    Date: 2012–10
  15. By: Sotiropoulos, Dimitris P. (Kingston University London); Lapatsioras, Spyros (University of Crete)
    Abstract: The recent theoretical works of the authors provide thorough insights into the workings of contemporary capitalism. Derivatives are the key issue involved here. They comprehend financialization as a development within, rather than a distortion of, capitalist production. They nevertheless underestimate the ability of Marx’s analytical categories to capture the essence of contemporary organization of capitalism. A return to Marx is not only helpful but is also indispensable for clarification of some unformed aspects in their analysis. What is actually involved in financialization is not just the emergence of a structure enabling more effective valuation of financial assets; it is also the development of a technology of power that is superimposed on existing power relations for the purpose of organizing their functioning.
    Keywords: Marx; derivatives; financialization; capitalization; risk.
    JEL: B14 B51 G32
    Date: 2012–04–17

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