nep-hpe New Economics Papers
on History and Philosophy of Economics
Issue of 2012‒10‒27
thirteen papers chosen by
Erik Thomson
University of Manitoba

  1. Ethics and Finance: the role of mathematics By Timothy C. Johnson
  2. Introduction to the Handbook on the Economics and Theory of the Firm By Michael Dietrich; Jackie Krafft
  3. The Monetary Quantum By Ternyik, Stephen I.
  4. Liberty and the Post-Utilitarian Society By Saint-Paul, Gilles
  5. Baumol, Panzar, and Willig’s Theory of Contestable Markets and Industry Structure: A Summary of Reactions By Amavilah, Voxi Heinrich
  6. Deception: The Role of Guilt By Pierpaolo Battigalli; Gary Charness; Martin Dufwenberg
  7. Universality of Nash Components By Dieter Balkenborg; Dries Vermeulen
  8. Finance and economic development in Islam, historical perspective By Cizakca, Murat
  9. A single-item continuous double auction game By Ruijgrok, Matthijs
  10. Modeling Spatial Equilibrium in Cities: the Isobenefit Lines By Luca D'Acci
  11. The business case for corporate social responsibility in education By Bundaleska, Elena; Dimitrova, Makedonka
  12. Evidence based pursuit of happiness: What should we know, do we know and can we get to know? By Veenhoven, Ruut
  13. Trust, Values and False Consensus By Butler, Jeffrey V.; Giuliano, Paola; Guiso, Luigi

  1. By: Timothy C. Johnson
    Abstract: This paper presents the contemporary Fundamental Theorem of Asset Pricing as being equivalent to approaches to pricing that emerged before 1700 in the context of Virtue Ethics. This is done by considering the history of science and mathematics in the thirteenth and seventeenth century. An explanation as to why these approaches to pricing were forgotten between 1700 and 2000 is given, along with some of the implications on economics of viewing the Fundamental Theorem as a product of Virtue Ethics. The Fundamental Theorem was developed in mathematics to establish a `theory' that underpinned the Black-Scholes-Merton approach to pricing derivatives. In doing this, the Fundamental Theorem unified a number of different approaches in financial economics, this strengthened the status of neo-classical economics based on Consequentialist Ethics. We present an alternative to this narrative.
    Date: 2012–10
  2. By: Michael Dietrich (University of Sheffield - University of Sheffield); Jackie Krafft (GREDEG - Groupe de Recherche en Droit, Economie et Gestion - CNRS : UMR7321 - Université Nice Sophia Antipolis (UNS))
    Abstract: The Handbook on the Economics and Theory of the Firm explores both the economics of the firm and the theory of the firm, two areas which were traditionally treated separately in the literature. On the one hand, the former refers to the structure, organization and boundaries of the firm, while the latter is devoted to the analysis of behaviours and strategies in particular market contexts. The novel concept underpinning this authoritative volume is that these two areas closely interact, and that a framework must be articulated in order to illustrate how linkages can be created. This introduction is dedicated to comprehensively develop this interpretative framework.
    Keywords: Economis and theory of the firm, Handbook
    Date: 2012–08–24
  3. By: Ternyik, Stephen I.
    Abstract: The physics of monetary systems works like a systemic quantum process and the monetary quantum moves the economic body of production via mechanic and thermodynamic entropy.This research work compiles the foundations and conclusions of quantum monetary science as new methodical tool for achieving a higher level of economic stability as dynamic efficiency.
    Keywords: monetary quantum; monetary production economy; monetophysics
    JEL: B41
    Date: 2012
  4. By: Saint-Paul, Gilles (University of Toulouse I)
    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.
    Keywords: behavioural economics, utilitarianism, government, paternalism
    JEL: B40 D03 D10 H10
    Date: 2012–10
  5. By: Amavilah, Voxi Heinrich
    Abstract: This paper summarizes reactions to the theory of contestable markets and industry structure. The reactions came immediately after the theory was published. The summary finds that the proposed theory stands on sound grounds. However, empirically the theory leaves much to be desired especially for practical policy in developing countries.
    Keywords: Baumol-Panzar-Willig; perfectly contestable; perfectly sustainable; Ramsey welfare criteria; constestable markets; industry structure
    JEL: D21 L16 L11 D63 L22 D43 L29
    Date: 2012–09–16
  6. By: Pierpaolo Battigalli; Gary Charness; Martin Dufwenberg
    Abstract: Gneezy (2005) reports evidence indicating that in some settings people do not like to lie. In many other situations people do not suffer when they lie. We show that the theory of simple guilt can accommodate these observations.
    Date: 2012
  7. By: Dieter Balkenborg (Department of Economics, University of Exeter); Dries Vermeulen (Department of Quantitative Economics, University Maastricht)
    Abstract: We show that Nash equilibrium components are universal for the collection of connected polyhedral sets. More precisely for every polyhedral set we construct a so-called binary game — a common interest game whose common payoff to the players is at most equal to one—whose success set (the set of strategy profiles where the maximal payoff of one is indeed achieved) is homeomorphic to the given polyhedral set. Since compact semi-algebraic sets can be triangulated, a similar result follows for the collection of connected compact semi-algebraic sets.
    Keywords: Strategic form games, Nash equilibrium, Nash component, topology.
    JEL: C72 D44
    Date: 2012
  8. By: Cizakca, Murat
    Abstract: ABSTRACT This article first identifies the basic theoretical characteristics of an Islamic economy as discussed by contemporary Muslim economists. Then inquires whether these characteristics were ever implemented in history. The next question tackled concerns the consequences. The author asks whether an Islamic economy has ever led to sustained economic growth. In view of the powerful evidence, the answer to the question is a resounding and definitive, `yes`. An attempt has also been made to explain the institutional mechanisms by which this success has been achieved. Finally, the question of decline is also tackled followed by policy proposals to remedy the situation.
    Keywords: Islamic capitalism; economic development and Islam;Economic decline and Islam
    JEL: Z12 N00 N40
    Date: 2012–10–18
  9. By: Ruijgrok, Matthijs
    Abstract: A double auction game with an infinite number of buyers and sellers is introduced. All sellers posses one unit of a good, all buyers desire to buy one unit. Each seller and each buyer has a private valuation of the good. The distribution of the valuations define supply and demand functions. One unit of the good is auctioned. At successive, discrete time instances, a player is randomly selected to make a bid (buyer) or an ask (seller). When the maximum of the bids becomes larger than the minimum of the asks, a transaction occurs and the auction is closed. The players have to choose the value of their bid or ask before the auction starts and use this value when they are selected. Assuming that the supply and demand functions are known, expected profits as functions of the strategies are derived, as well as expected transaction prices. It is shown that for linear supply and demand functions, there exists at most one Bayesian Nash equilibrium. Competitive behaviour is not an equilibrium of the game. For linear supply and demand functions, the sum of the expected profit of the sellers and the buyers is the same for the Bayesian Nash equilibrium and the market where players behave competitively. Connections are made with the ZI-C traders model and the $k$-double auction.
    Keywords: Continuous double auction; supply and demand; Bayesian Nash equilibrium; ZI-C model; k-double auction
    JEL: D44 C72
    Date: 2012–10–19
  10. By: Luca D'Acci
    Abstract: I propose and briefly define the concept of Urban Isobenefit Lines by using functions as easy as efficient, whose results can offer a rich tool to use into spatial equilibrium analysis involving cities. They are line joining urban points with equal level of positional advantage from city amenities. The results which one obtain by implementing a chosen function, gave specific scenarios: numerically described by indicators and graphically visualized by efficient city matrix views. This is also a theoretical concept for the Urban Economics theory and Spatial Equilibrium analysis in cities.
    Date: 2012–10
  11. By: Bundaleska, Elena; Dimitrova, Makedonka
    Abstract: In the dynamic global marketplace, understanding the fundamental connections between business, the environment, and society has become essential. The roles and responsibilities of business, as a global force, are becoming more complex, and concepts related to societal responsibility and sustainability are gaining recognition as essential elements in business management. Increasing complexity requires new approaches. Companies need integrative management tools that help incorporate environmental, social, and governance concerns into their strategic thinking and daily operations. They require talented and ethical leaders to do so. That is why companies need the help of the academia. By being involved in the education of current and future managers, academic institutions most directly act as drivers of business behavior. They help shape the attitudes and behavior of business leaders. Through different means, academic institutions have the potential to generate a wave of positive change, thereby helping to ensure a world where both businesses and societies can flourish. However, there is much more that can be done by the academic institutions. This Paper will try to identify and evaluate the actions, methods, means that may be employed by the academic institutions to support and promote social responsibility. The Paper will discuss the Global Compact Principles of Responsible Management Education, as well as other relevant principles or recommendations, and possibly suggest new directions and aspects of improvement. Due to the fact that businesses by definition are profit driven, considering the academic institutions merely from a business perspective, the Paper will also touch upon the question: Do academic institutions have the business case for being socially responsible?
    Keywords: Corporate social responsibility; responsible education; academic institutions
    JEL: I29 M14
    Date: 2011–12–22
  12. By: Veenhoven, Ruut
    Abstract: The rational pursuit of happiness requires knowledge of happiness and in particular answers to the following four questions: 1: Is greater happiness realistically possible? 2: If so, to what extent is that in our own hands? 3: How can we get happier? What things should be considered in the choices we make? 4: How does the pursuit of happiness fit with other things we value? Answers to these questions are not only sought by individuals who want to improve their personal life, they are also on the mind of managers concerned about the happiness of members of their organization and of governments aiming to promote greater happiness of a greater number of citizens. All these actors might make more informed choices if they could draw on a sound base of evidence. In this paper I take stock of the available evidence and the answers it holds for the four types of questions asked by the three kinds of actors. To do this, I use a large collection of research findings on happiness gathered in the World Database of Happiness. The data provide good answers to the questions 1 and 2, but fall short on the questions 3 and 4. Priorities for further research are indicated.
    Keywords: happiness economics; life-satisfaction; research synthesis; utilitarianism
    JEL: B31 I31 A13 D60 H00
    Date: 2012–06–01
  13. By: Butler, Jeffrey V. (Einaudi Institute for Economics and Finance); Giuliano, Paola (University of California, Los Angeles); Guiso, Luigi (Einaudi Institute for Economics and Finance)
    Abstract: Trust beliefs are heterogeneous across individuals and, at the same time, persistent across generations. We investigate one mechanism yielding these dual patterns: false consensus. In the context of a trust game experiment, we show that individuals extrapolate from their own type when forming trust beliefs about the same pool of potential partners – i.e., more (less) trustworthy individuals form more optimistic (pessimistic) trust beliefs - and that this tendency continues to color trust beliefs after several rounds of game-play. Moreover, we show that one's own type/trustworthiness can be traced back to the values parents transmit to their children during their upbringing. In a second closely-related experiment, we show the economic impact of mis-calibrated trust beliefs stemming from false consensus. Mis-calibrated beliefs lower participants' experimental trust game earnings by about 20 percent on average.
    Keywords: trust, trustworthiness, culture, false consensus
    JEL: A1 A12 D1 Z1
    Date: 2012–10

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