nep-hpe New Economics Papers
on History and Philosophy of Economics
Issue of 2012‒12‒15
thirteen papers chosen by
Erik Thomson
University of Manitoba

  1. Probability and social science : methodologial relationships between the two approaches ? By Courgeau, Daniel
  2. Central banks and house prices in the run-up to the crisis By David Cobham
  3. Taxation of Intergenerational Transfers and Wealth By Wojciech Kopczuk
  4. Economic Science and Political Influence By Gilles Saint-Paul
  5. Empirical research on sovereign debt and default By Michael Tomz; Mark L. J. Wright
  6. On the Existence of Pareto Optimal Endogenous Matching By Dai, Darong
  7. Dynamic Origin of Evolution and Social Transformation By Andrei Kirilyuk
  8. Fostering Cooperation through the Enhancement of Own Vulnerability By Anita Kopayni-Peuker; Theo Offerman; Randolph Sloof
  9. On games arising from multi-depot Chinese postman problems By Platz, Trine Tornøe; Hamers, Herbert
  10. On 'Consistent' Poverty By Rod Hick
  11. Jugement majoritaire vs. vote majoritaire By Michel Balinski; Rida Laraki
  12. The lender of last resort: lessons from the Fed’s first 100 years By Mark A. Carlson; David C. Wheelock
  13. The ARRA: Some Unpleasant Welfare Arithmetic By Casey B. Mulligan

  1. By: Courgeau, Daniel
    Abstract: This work examines in depth the methodological relationships that probability and statistics have maintained with the social sciences. It covers both the history of thought and current methods. First, it examines in detail the history of the different paradigms and axioms for probability, from their emergence in the seventeenth century up to the most recent developments of the three major concepts: objective, subjective and logicist probability. It shows the statistical inference they permit, different applications to social sciences and the main problems they encounter. In the other side, from social sciences—particularly population sciences— to probability, it shows the different uses they made of probabilistic concepts during their history, from the seventeenth century, according to their paradigms: cross-sectional, longitudinal, event-history, hierarchical, contextual and multilevel approaches. While the ties may have seemed loose at times, they have more often been very close: some advances in probability were driven by the search for answers to questions raised by the social sciences; conversely, the latter have made progress thanks to advances in probability. This dual approach sheds new light on the historical development of the social sciences, probability and statistics, and on the enduring relevance of their links. It permits also to solve a number of methodological problems encountered all along their history.
    Keywords: Probability; Population sciences; Philosophy of science; Social science;
    JEL: B0 C0 B30
    Date: 2012
  2. By: David Cobham
    Abstract: The financial crisis and the role played within it by fluctuations in house prices has reopened the debate about whether monetary policy should respond to asset prices. This paper investigates how the central banks of the euro area, the UK and the US considered, understood and responded to the trends in house prices in the six or seven years preceding the crisis, and how they have analysed those developments since the crisis. It suggests that these central banks, particularly the Anglo-Saxon ones, might have been able to take some useful action if they had devoted more intellectual resources to analysing the possible misalignments of house prices and been willing to act on them.
    Date: 2012
  3. By: Wojciech Kopczuk
    Abstract: In this chapter, I review empirical and theoretical literature on taxation of intergenerational transfers (estates, bequests, inheritances, inter vivos gifts) and wealth. The main message may be summarized as follows. Empirical evidence on bequest motivations and responses to estate taxation is spotty and much remains be done, but what we know points in the direction of (1) mixed motives (2) heterogeneity of preferences and (3) importance of retaining control over wealth. These patterns are important for normative analysis of taxation toward the top of the distribution. Theoretical work should further focus on understanding implications of inequality of inherited wealth: the topic that has been neglected in the past, even though it is closely related to — more carefully studied, but arguably much less important in practice — externalities from giving. Potential externalities from wealth accumulation and concentration are yet to be seriously addressed.
    JEL: D31 E21 H2
    Date: 2012–11
  4. By: Gilles Saint-Paul (PSE - Paris-Jourdan Sciences Economiques - CNRS : UMR8545 - Ecole des Hautes Etudes en Sciences Sociales (EHESS) - Ecole des Ponts ParisTech - Ecole Normale Supérieure de Paris - ENS Paris - Institut national de la recherche agronomique (INRA), EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris, TSE - Toulouse School of Economics - Toulouse School of Economics, New York University Abu Dhabi - New York University Abu Dhabi)
    Abstract: When policymakers and private agents use models, the economists who design the model have an incentive to alter it in order infuence outcomes in a fashion consistent with their own preferences. I discuss some consequences of the existence of such ideological bias. In particular, I analyze the role of measurement infrastructures such as national statisticall institutes, the extent to which intellectual competition between di¤erent schools of thought may lead to polarization of views over some parameters and at the same time to consensus over other parameters, and .nally how the attempt to preserve in.uence can lead to degenerative research programs.
    Keywords: Ideology ; Macroeconomic Modelling ; Self-con.rming equilibria ; Polarization ; Autocoherent Models ; Intellectual Competition ; Degenerative Research Programs ; Identification
    Date: 2012–11
  5. By: Michael Tomz; Mark L. J. Wright
    Abstract: The long history of sovereign debt and the associated enforcement problem have attracted researchers in many fields. In this paper, we survey empirical work by economists, historians, and political scientists. As we review the empirical literature, we emphasize parallel developments in the theory of sovereign debt. One major theme emerges. Although recent research has sought to balance theoretical and empirical considerations, there remains a gap between theories of sovereign debt and the data used to test them. We recommend a number of steps that researchers can take to improve the correspondence between theory and data.
    Keywords: Debts, Public ; Foreign exchange market
    Date: 2012
  6. By: Dai, Darong
    Abstract: In the current paper, we study the asymmetric normal-form game between two heterogeneous groups of populations by employing the stochastic replicator dynamics driven by Lévy process. A new game equilibrium, i.e., the game equilibrium of a stochastic differential cooperative game on time, is derived by introducing optimal-stopping technique into evolutionary game theory, which combines with the Pareto optimal standard leads us to the existence of Pareto optimal endogenous matching.
    Keywords: Stochastic differential cooperative game on time; Endogenous matching; Fair matching; Pareto optimality; Adaptive learning
    JEL: C78 C70 C62
    Date: 2012–12–02
  7. By: Andrei Kirilyuk (Solid State Theory Department - Institute of Metal Physics of the National Academy of Sciences of Ukraine)
    Abstract: We analyse the unreduced, nonperturbative dynamics of an arbitrary many-body interaction process with the help of the generalised effective potential method and reveal the well-specified universal origin of change (emergence), time and evolution in an a priori conservative, time-independent system. It appears together with the universal dynamic complexity definition, where this unified complexity conservation and transformation constitutes the essence of evolution. We then consider the detailed structure of this universal evolutionary process showing its step-wise, "punctuated" character, now provided with the exact mathematical description. Comparing the expected features of a revolutionary complexity transition near a step-like complexity upgrade with the currently observed behaviour of world's social and economic systems, we prove the necessity of complexity revolution towards the superior civilisation level of well-defined nature, the only alternative being an equally dramatic and irreversible degradation, irrespective of efforts applied to stop the crisis at the current totally saturated complexity level.
    Keywords: complexity; chaos; self-organisation; fractal; many-body problem; origin of time; revolution of complexity
    Date: 2012–07–03
  8. By: Anita Kopayni-Peuker (University of Amsterdam); Theo Offerman (University of Amsterdam); Randolph Sloof (University of Amsterdam)
    Abstract: We consider the possibility that cooperation in a prisoner's dilemma is fostered by people's voluntarily enhancement of their own vulnerability. The vulnerability of a player determines the effectiveness of possible punishment by the other. In the "Gradual" mechanism, players may condition their incremental enhancements of their vulnerability on the other's choices. In the "Leap" mechanism, they unconditionally choose their vulnerability. In our experiment, subjects only learn to cooperate when either one of these mechanisms is allowed. In agreement with theory, subjects aiming for cooperation choose higher vulnerability levels in Gradual than in Leap, which maps into higher mutual cooperation levels.
    Keywords: D03; D81; D83
    Date: 2012–12–04
  9. By: Platz, Trine Tornøe (Department of Business and Economics); Hamers, Herbert (Department of Econometrics & OR and CentER)
    Abstract: This paper introduces cooperative games arising from multi-depot Chinese postman problems and explores the properties of these games. A multi-depot Chinese postman problem (MDCP) is represented by a connected (di)graph G, a set of k depots that is a subset of the vertices of G, and a non-negative weight function on the edges of G. A solution to the MDCP is a minimum weight tour of the (di)graph that visits all edges (arcs) of the graph and that consists of a collection of subtours such that the subtours originate from different depots, and each subtour starts and ends at the same depot. A cooperative Chinese postman (CP) game is induced by a MDCP by associating every edge of the graph with a different player. This paper characterizes globally and locally k-CP balanced and submodular (di)graphs. A (di)graph G is called globally (locally) k-CP balanced (respectively submodular), if the induced CP game of the corresponding MDCP problem on G is balanced (respectively submodular) for any (some) choice of the locations of the k depots and every non-negative weight function.
    Keywords: Chinese postman problem; cooperative game; submodularity; balancedness
    JEL: C71
    Date: 2012–12–02
  10. By: Rod Hick
    Abstract: The measurement of poverty as 'consistent' poverty offers a solution to one of the primary problems of poverty measurement within Social Policy of the last three decades. Often treated as if they were synonymous, 'indirect' measures of poverty, such as low income measures, and 'direct' measures, such as indices of material deprivation, identify surprisingly different people as being poor. In response to this mismatch, a team of Irish researchers put forward a measure which identified respondents in as being in poverty when they experienced both a low standard of living, as measured by deprivation indicators, and a lack of resources, as measured by a low income line. Importantly, they argued that the two measures required an equal weight. In this paper, I present a reconsideration of the consistent poverty measure from both conceptual and empirical perspectives. In particular, I examine the claim that low income and material deprivation measures should be given an 'equal weight'. I argue that, from a conceptual perspective, the nature of the indicators at hand means that a deprivation-led measurement approach might be understood to align with the definition of poverty which Nolan and Whelan outline and, from an empirical perspective, that it is the material deprivation measure - and not the low income measure - which is particularly effective in identifying individuals at risk of multiple forms of deprivation.
    Keywords: consistent poverty, low income, material deprivation, conceptualisation and measurement of poverty
    JEL: I32
    Date: 2012–12
  11. By: Michel Balinski (Department of Economics, Ecole Polytechnique - CNRS : UMR7176 - Polytechnique - X); Rida Laraki (Department of Economics, Ecole Polytechnique - CNRS : UMR7176 - Polytechnique - X, IMJ - Institut de Mathématiques de Jussieu - CNRS : UMR7586 - Université Paris VI - Pierre et Marie Curie - Université Paris VII - Paris Diderot)
    Abstract: Cet article met en évidence les lacunes du scrutin majoritaire à un ou à deux tours en théorie et en pratique, se reposant sur l'histoire récente des élections présidentielles françaises et de résultats expérimentaux. Et il propose un remède : plus d'information doit être demandée aux électeurs et le sens de la " majorité " doit être reformulé.
    Date: 2012–12–03
  12. By: Mark A. Carlson; David C. Wheelock
    Abstract: We review the responses of the Federal Reserve to financial crises over the past 100 years. The authors of the Federal Reserve Act in 1913 created an institution that they hoped would prevent banking panics from occurring. When this original framework did not prevent the banking panics of the 1930s, Congress amended the Act and gave the Federal Reserve considerably greater powers to respond to financial crises. Over the subsequent decades, the Federal Reserve responded more aggressively when it perceived that there were threats to financial stability and ultimately to economic activity. We review some notable episodes and show how they anticipated in several respects the Federal Reserve’s responses to the financial crisis in 2007-2009. We also discuss some of the lessons that can be learned from these responses and some of the challenges that face a lender of last resort.
    Keywords: Federal Reserve banks ; Banks and banking, Central ; Discount window
    Date: 2012
  13. By: Casey B. Mulligan
    Abstract: Distributions of marginal labor income tax rates for unemployed household heads and spouses are estimated for three benefit and tax rule scenarios: actual rules under the American Reinvestment and Recovery Act, rules as they would have been if they had not been changed since 2007, and rules as they might have been with a bigger fiscal stimulus. About three million unemployed, with a variety of tax situations, had more disposable income while unemployed than they would have by accepting a job that paid 80-100 percent of their previous one. The number would have been less than one million under 2007 rules, and about eight million under a bigger stimulus. Tax obligations and foregone unemployment insurance about equally erode the rewards from retaining a job, or starting a new one.
    JEL: E24 H31 I38
    Date: 2012–12

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