nep-hpe New Economics Papers
on History and Philosophy of Economics
Issue of 2013‒01‒07
thirty-one papers chosen by
Erik Thomson
University of Manitoba

  1. Turing’s Economics-- A Birth Centennial Homage By K. Vela Velupillai
  2. Crisis and methodology: some heterodox misunderstandings By Kakarot-Handtke, Egmont
  3. Eucken, Hayek, and the Road to Serfdom By Goldschmidt, Nils; Hesse, Jan-Otmar
  4. On the origins of the Triffin dilemma: Empirical business cycle analysis and imperfect competition theory By Ivo Maes
  5. Mathematical Institutional Economics By Martin Shubik
  6. The rhetoric of failure: a hyper-dialog about method in economics and how to get things going By Kakarot-Handtke, Egmont
  7. Recent Developments in the Economics of Happiness: A Selective Overview By Stutzer, Alois; Frey, Bruno S.
  8. Why is the Workplace Racially Segregated by Occupation? By Naqvi, Nadeem
  9. Les extensions contextuelles et structurelles du choix économique rationnel By Fabrice Tricou
  10. Six Decades of Top Economics Publishing: Who and How? By Daniel S. Hamermesh
  11. The common error of common sense: an essential rectification of the accounting approach By Kakarot-Handtke, Egmont
  12. Geometrical exposition of structural axiomatic economics (I): Fundamentals By Kakarot-Handtke, Egmont
  13. La responsabilité sociétale des entreprises et la médiation. By Mattei, Laetitia
  14. Biodiversity Conservation: Concepts and Economic Issues with Chinese Examples By Tisdell, Clement A.
  15. The Nature of Ecological and Environmental Economics and its Growing Importance By Tisdell, Clement A.
  16. "ECB Worries/European Woes: The Economic Consequences of Parochial Policy" By Robert J. Barbera; Gerald Holtham
  17. The failure to predict the Great Recession. The failure of academic economics? A view focusing on the role of credit By Gadea Rivas, Maria Dolores; Pérez-Quirós, Gabriel
  18. The Trinity Growth Theory: A Theory of Wealth and Poverty By LIM Chong Yah
  19. "Primary and Secondary Markets" By Egmont Kakarot-Handtke
  20. Beliefs and Public Good Provision with Anonymous Contributors By Wilfredo L. Maldonado; José A. Rodrigues-Neto
  21. 12-04 "Is Dismissing the Precautionary Principle the Manly Thing to Do? Gender and the Economics of Climate Change" By Julie A. Nelson
  22. Economic Science and Political Influence By Saint-Paul, Gilles
  23. As Liberdades Humanas como Bases do Desenvolvimento: Uma Análise Conceitual da Abordagem das Capacidades Humanas de Amartya Sen By Maurício Mota Saboya Pinheiro
  24. Review Of Theories of Financial Crises By Assaf Razin; Itay Goldstein
  25. Hooray for GDP! By Nicholas Oulton
  26. Political Stability, Corruption and Trust in Politicians By Ingmar Schumacher
  27. De la question coloniale chez les anciens et néo-institutionnalistes By Abdallah Zouache
  28. On the coevolution of social norms in primitive societies By L. Bagnoli; G. Negroni
  29. 12-06 "A Financial Crisis Manual Causes, Consequences, and Lessons of the Financial Crisis," By Ben Beachy
  30. Did Established Early Warning Signals Predict the 2008 Crises?* By Theo S. Eicher; Charis Christofides; Chris Papageorgiou
  31. Bretton Woods, swap lines, and the Federal Reserve’s return to intervention By Michael D. Bordo; Owen F. Humpage; Anna J. Schwartz

  1. By: K. Vela Velupillai
    Abstract: In this paper, in homage to Alan Turing’s birth centennial, I try to develop what may be called Turing’s Economics. I characterize the contents of such an ‘economics’ in terms of the conceptual and mathematical tools developed by Alan Turing. It is shown, in more and less detail, how these concepts and tools could be used in core areas of economic theory to raise fundamental queries on claims of computability – and answer them precisely. The conclusion is that the field of Turing’s Economics would – should – contribute to a reorientation of economics in the direction of serious considerations of mathematical epistemology
    Keywords: Computability, Problem Solving, Undecidability, Epistemology, Computational economics
    JEL: B41 C63 C65 C68 D58
    Date: 2012
  2. By: Kakarot-Handtke, Egmont
    Abstract: Whether justified by the concrete circumstances or not, an economic crisis is, by simple association, taken as an implicit refutation of the invisible hand vision and the underlying theory. The fundamental heterodox critique locates the source of apparent theoretical difficulties at the level of methodology. Although acceptable in principle, this belief involves some actual misunderstandings with regard to the respective roles of deterministic laws and deductive reasoning. In order to clarify these, the present paper revisits some key episodes in the history of economic methodology.
    Keywords: financial crisis; intellectual crisis; power of ideas; material consistency; logical consistency; determinism; deductive method; failure of reason; common sense; domain of economics; Cournot’s Unfitness Proposition
    JEL: B10 B20 B41
    Date: 2012–06–13
  3. By: Goldschmidt, Nils; Hesse, Jan-Otmar
    Abstract: [Introduction] Walter Eucken (17 January 1891 - 20 March 1950) was the leading and most prominent figure of German liberal economics from the 1920s until well after his death. He represented the convergence between the liberalism of the Austrian school of economics' 'third generation' and the liberal tradition in German economics that gained momentum during the 1930s in opposition to the very strong socialist, national-socialist and romanticist movements in German economics (Goldschmidt and Wohlgemuth 2008; Janssen 2009). Only after the war, when the 'ordoliberal' school of economic thought was erected at the University of Freiburg, did this strand of German economic reasoning become influential, especially in German economic policy pertaining to the reorganization of the West-German economy. Though it was influential after the war, the influence of 'ordoliberalism' in academia faded out after Eucken's death in the 1950s, for many reasons (Hesse 2010). Therefore, the similarities as well as the differences between the German and the Austrian schools of liberal thought have remained neglected in the literature. The differences often appear marginal. They seem to result from the particular historic situation in which they were articulated. But as circumstances evolve over time and fundamental global economic crises return, it is, in our opinion, worthwhile to take a closer look at the differences between these two strands of liberalism, one having been developed within the totalitarian regime of Nazi Germany and the other one 'in exile'. We think the correspondence between two of the most outstanding figures of the two 'schools' of thought might be a fitting starting point for this approach. In the following we first want to shortly describe the evolution and the nature of the contact between Eucken and the last Viennese generation of the Austrian school of economics. In a second step, we will analyze the differences between the schools following a close reading of a detailed comment by Eucken on Friedrich A. Hayek's (1944) 'Road to Serfdom', written in March 1946, a few months after a German translation of the book was published. Our examination begins first with a remark by Eucken criticizing Hayek's neglect of the German liberal tradition. Finally, the third chapter of the article deals with Eucken's observations that highlight the minute yet significant differences between the two approaches of (Neo)Liberalism. --
    Date: 2012
  4. By: Ivo Maes (National Bank of Belgium, Research Department; Université catholique de Louvain, Robert Triffin Chair; ICHEC Brussels Management School)
    Abstract: Robert Triffin became famous with his trenchant analyses of the vulnerabilities of the Bretton Woods system. These are still at the center of many discussions today. This paper argues that there is a remarkable continuity in Triffin's work. From his earliest writings, Triffin developed a vision that the international adjustment process was not functioning according to the classical mechanisms. This view was based on thorough empirical analyses of the Belgian economy during the Great Depression and shaped by a business cycle perspective with an emphasis on the disequilibria and the transition period. His doctoral dissertation on imperfect competition theory and his Latin American experience further reinforced this basic view.
    Keywords: Triffin, Bretton Woods, international liquidity, business cycle theory, imperfect competition theory
    JEL: A11 B22 B31 E30 E50 F02 F32
    Date: 2012–12
  5. By: Martin Shubik (Cowles Foundation, Yale University)
    Abstract: An overview is given of the utilization of strategic market games in the development of a game theory based theory of money and financial institutions.
    JEL: C72 C73 E44
    Date: 2012–12
  6. By: Kakarot-Handtke, Egmont
    Abstract: All are agreed that orthodox economics is unsatisfactory but there is wide disagreement, especially among heterodox critics, whether the problems lie at the level of substantive theory or at the level of methodology. This paper gives first an overview of the methodological questions at issue. The frame of reference includes J. S. Mill, Jevons, Popper, Keynes, and Lawson. Drawing on the conclusions, the domain of economics is subsequently refocused. Human behavior is moved from the center to the periphery. From elementary systemic properties the relation of income and profit is then consistently derived. This solves the profit conundrum.
    Keywords: new framework of concepts; structure-centric; axiom set; income; profit; Mill’s Impossibility Proposition; Physicist’s Nonentity Proposition; Cournot’s Unfitness Proposition; Hudík’s Independence Proposition
    JEL: B10 B30 B20 E10
    Date: 2012–04–28
  7. By: Stutzer, Alois (University of Basel); Frey, Bruno S. (University of Zurich)
    Abstract: What makes people happy in life? This is a crucial question that has the potential to shake up economics. In recent years, the dissatisfaction with the understanding of welfare in economics together with the new opportunities to empirically study people's subjective wellbeing have spurred impressive and stimulating new research in the often called dismal science. The economics of happiness has emerged as one of the most thriving areas in current economic research. This introductory chapter refers to important contributions to the economics of happiness that characterize the recent developments in the area. First, we refer to reviews of the literature, the measurement and the relationship of happiness research to welfare economics. Second, we emphasize four factors from the large literature on the determinants of happiness in economics, i.e. income, employment, social capital and health. In fact, the main body of research in this new area is on the preconditions or covariates of high individual well-being. Third, important studies applying the so-called Life Satisfaction Approach as an alternative valuation approach are discussed. Fourth, we point to contributions that elaborate on the understanding of utility in terms of people's adaptation to circumstances and their difficulties in predicting future utility. Fifth, we provide references to the controversial question regarding the policy consequences of this new development.
    Keywords: happiness, individual welfare, Life Satisfaction Approach, subjective well-being
    JEL: I31
    Date: 2012–12
  8. By: Naqvi, Nadeem
    Abstract: Ken Arrow (1998) asks, “What has economics to say about racial discrimination?” He replies – entirely correctly – that racial “segregation within an industry – that is, firms with either all black or all white labor forces” – may be explained by economic theory, but “the hypothesis of employer discrimination does not at all explain segregation by occupation, [and] discriminatory tastes of other employees … may explain segregation [by firms] within industries but not segregation by occupation[s]” (p. 95), that are filled by racially distinct persons within firms. Becker (1957) and Akerlof and Kranton (2000 and 2010) offer economic theories that deal with social identity differentiation, but these lack rational choice theory foundations, insofar as they impose a utility indicator function as a primitive concept via persuasion, rather than such a function being entailed by derivation from a preference ranking relation defined on a set of outcomes, with restrictions imposed both on the set and the relation. This is a methodological weakness of their work relative to that of Arrow and Debreu (1954). A more serious difficulty with these contributions is that they ascribe a utility function to each individual in an economy, but I prove that assigning to individuals binary preferences, with or without their numerical representation as utility indicator functions, entails the impossibility of interpersonal social-identity diversification, rendering all persons in society indistinguishable by identity. The information necessary to identify a person’s social identity is stripped off the model by the binariness restriction. A person in a binariness-salient model would simply not know against whom to discriminate. Economic theory is, therefore, endogenously color-blind, race-blind, gender-blind, ethnicity-blind, and in general, social-identity-blind. Everybody in the economy is White, or all persons are Black, or all female, or all Hispanics, and so on, but no two persons can endogenously have distinct social identities. This is also true of every player in a game, as in Nash (1951). However, if preferences are non-binary, interpersonal social identity diversification is possible, though their real-valued utility function representation is impossible. This begs the question as to what exact form preferences must take to support the specific utility function of Akerlof and Kranton, which also is non-traditional relative to the utility indicator function in Arrow and Debreu. As it happens, to exhibit diversity of persons by social identity, ascribing a utility function to a person is conceptually too restrictive. By substituting non-binary for binary preferences in the model of Arrow and Debreu, I extend their economic theory. The more general model I thus formulate has the following features: (i) there exists a social state in which all persons maximize their preferences on their feasible sets, (ii) endogenous interpersonal social-identity diversification characterizes this state of the economy, (iii) it is a free-market equilibrium without any state intervention, (iv) it is a Pareto optimal social state, and (v) a sizable proportion of Black workers are segregated into low-rank, low income jobs, whereas White workers in the same observable proficiency domain are placed in high-ranking, high-income jobs, thereby explaining occupational segregation within firms along a racial divide, which entails that (vi) income and wealth distributions vary by social identity. Thus free markets deliver a Pareto optimal state but it is fraught with remediable injustices. Further, my explanation meets standards Arrow sets for such a theory (see p. 21). (543 words)
    Keywords: justice; social identity; discrimination; race; gender; non-binariness; maximization; rational choice theory; social choice theory; general equilibrium; game theory; asymmetric information; social norms
    JEL: D11 D63 D82 Z13 D51 J16 D46 D71 D74 J15
    Date: 2012–12–20
  9. By: Fabrice Tricou
    Abstract: Rational choice theory stretches out in two complementary directions. Its contextual and extensive application fills and then overflows the strict domain of substantive economy, eventually identifying any human choice with an economic decision. Its structural and intensive sophistication surpasses the basic framework of choice without uncertainty to treat the exogenous and endogenous forms of uncertainty. These two forms of progress, thematic and analytical, come together to ensure the general expansion of the field of rational choice. Beyond its advantages and achievements, this attempt at universal “economization” faces limits in the two directions of its development. Contextually, the logic of instrumental choice is unable to grasp deontological morals and axiological rationality. And structurally, the logistics of rational choice is inoperative faced with a radically uncertain environment and/or a one-on-one interaction with another person.
    Keywords: rational choice theory, economics, interest, morals, uncertainty, market
    JEL: B40 D01 D80 C70
    Date: 2012
  10. By: Daniel S. Hamermesh
    Abstract: Presenting data on all full-length articles published in the three top general economics journals for one year in each of the 1960s through 2010s, I analyze how patterns of co-authorship, age structure and methodology have changed, and what the possible causes of these changes may have been. The entire distribution of number of authors has shifted steadily rightward. In the last two decades the fraction of older authors has almost quadrupled. The top journals are now publishing many fewer papers that represent pure theory, regardless of sub-field, somewhat less empirical work based on publicly available data sets, and many more empirical studies based on data assembled for the study by the author(s) or on laboratory or field experiments.
    JEL: B20 J24
    Date: 2012–12
  11. By: Kakarot-Handtke, Egmont
    Abstract: The present paper takes the explanatory superiority of the integrated monetary approach for granted. It will be demonstrated that the accounting approach could do even better provided it frees itself from theoretically ill-founded notions like GDP and other artifacts of the equilibrium approach. National accounting as such does not provide a model of the economy but is the numerical reflex of the underlying theory. It is this theory that will be scrutinized, rectified and ultimately replaced in the following. The formal point of reference is ‘the integrated approach to credit, money, income, production and wealth’ of Godley and Lavoie.
    Keywords: new framework of concepts; structure-centric; axiom set; primacy of theory; income; profit; distributed profit; money; flow; residual; transaction matrix; general complementarity
    JEL: E01 B41
    Date: 2012–08–20
  12. By: Kakarot-Handtke, Egmont
    Abstract: Behavioral assumptions are not solid enough to be eligible as first principles of theoretical economics. Hence all endeavors to lay the formal foundation on a new site and at a deeper level actually need no further vindication. Part (I) of the structural axiomatic analysis submits three nonbehavioral axioms as groundwork and applies them to the simplest possible case of the pure consumption economy. The geometrical analysis makes the interrelations between income, profit and employment under the conditions of market clearing and budget balancing immediately evident. Part (II) applies the differentiated axiom set to the analysis of qualitative and temporal aggregation.
    Keywords: new framework of concepts; structure-centric; axiom set; supersymmetry; general equilibrium; dimensionless variables; income; profit; distributed profit; retained profit; full employment; money; credit; Say’s Law
    JEL: E00 D00
    Date: 2012–05–15
  13. By: Mattei, Laetitia
    Abstract: Les crises actuelles, sous leurs multiples aspects, mettent en lumière la responsabilité des entreprises dans notre société, bousculant ainsi l'un des dogmes néolibéraux résumé par la célèbre formule de Milton Friedman (1970) : « La responsabilité sociétale de l’entreprise est d’accroître ses profits». C’est en réaction à ces crises et grâce au rôle actif de la société civile qui condamne désormais certaines pratiques, que le concept de responsabilité sociétale des entreprises (ciaprès RSE) a émergé. L’enjeu est donc, aujourd’hui, de mettre en place un marché responsable entre l’entreprise et ses parties prenantes. Le législateur, par la loi Grenelle I, dispose que la médiation sera un des outils de mise en oeuvre de la RSE. Il en appelle donc au développement du droit processuel qu’est la médiation pour mettre en oeuvre ce droit substantiel qu’est la RSE. La médiation, à la fois préventive et curative, est donc un outil de mise en oeuvre de la RSE. Le couple RSE et médiation permet ainsi de combiner efficacité économique, respect social,sociétal et environnemental.
    Abstract: Current multifaceted crises bring to light the importance of corporate responsibility in our society, thereby challenging a neoliberal tenet summarized by Milton Friedmand’s famous saying (1970): “The social responsibility of business is to increase its profits”.It is in response to these crises and thanks to the active role played by civil society who now condemns certain practices that the concept of corporate social responsibility (“CSR”) has emerged.Today’s challenge is thus to put in place a responsible marketplace between the company and its stakeholders.In the so-called Grenelle I Law, the French legislator specifies that mediation should be a tool to implement CSR.He therefore advocates the development of mediation as a procedural tool to implement CSR as an integral part of substantive law. Mediation, from both a preventive and a remedial perspective, is accordingly an instrument to implement CSR.The CSR / mediation nexus successfully combines economic efficiency and social, societal and environmental respect.
    Keywords: responsibility; social; company; mediation; stakeholders; responsabilité; sociétal; entreprise; médiation; parties prenantes;
    JEL: K41 M14
    Date: 2012–10
  14. By: Tisdell, Clement A.
    Abstract: After touching on the concerns of natural scientists about biodiversity loss, this article argues that it is a mistake to believe that there are only losses of biodiversity. The process of changes in the stock of biodiversity is more complex. Furthermore, it is pointed out that not all genetic material is an economic asset. Also, it is contended that not all genetic material is natural. Some of the genetic stock is of a heritage type and a portion has recently been developed by human beings. Improved conceptualisation of the stock of biodiversity is needed. Some of the ways are listed in which economics is relevant to issues involving biodiversity conservation. General economic factors, such as market extension and economic growth, which result in loss of genetic diversity among domesticated organisms are outlined. China’s recent experience with biodiversity loss highlights the importance of these factors. Some important reasons why economic factors result in biodiversity loss in the wild are identified and reasons are given why economic systems conserve less biodiversity than is ideal. Before concluding, the subject is discussed of what genetic material and other components of biodiversity should be conserved given economic constraints on what can be conserved.
    Keywords: agricultural biodiversity, biodiversity change, biodiversity economics, biological extinction, China, economics of biodiversity loss, genetic diversity as an asset., Environmental Economics and Policy, Q57, Q10,
    Date: 2012–12
  15. By: Tisdell, Clement A.
    Abstract: Most ecological and environmental resources are scarce. Ecological economics and environmental economics are concerned with ways in which these resources can be better managed to reduce economic scarcity or more generally, administered to achieve particular objectives most economically. The way in which environmental impacts from economic activity can add to economic scarcity is illustrated and the importance of accounting for opportunity costs in assessing environmental changes is stressed. Growing concerns in recent decades about environmental issues have been reflected in important international political initiatives relating to the environment and development. These initiatives are identified and the general sources of environmental change (natural and human-induced) are considered with most attention being given to the relationship between economic growth and the environment. Subsequently, changing views of economists about the relationships between economic growth, the stock of natural resources and the state of the environment are outlined and discussed. The views of classical and neo-classical economics are briefly examined but most attention is given to the views of neo-Malthusians and their concerns about the sustainability of economic growth. The extent of environmental change as a result of global economic growth and development has undoubtedly contributed to the growing importance of ecological and environmental economics.
    Keywords: economic scarcity, environmental change, global environmental arguments, neo-Malthusian economics, opportunity costs, sustainable economic development, sustainable economic growth., Environmental Economics and Policy, Q01, Q50, Q56,
    Date: 2012–12
  16. By: Robert J. Barbera; Gerald Holtham
    Abstract: Financial market crises with the threat of a subsequent debt-deflation depression have occurred with increasing regularity in the United States from 1980 through the present. Almost reflexively, when confronted with such circumstances, US institutions and the policymakers that run them have responded in a fashion that has consistently thwarted debt-deflation-depression dynamics. It is true that these "remedies," as they succeeded, increasingly contributed to a moral hazard in US and global financial markets that culminated with the crisis that began in 2007. Nonetheless, the straightforward steps taken by established institutions enabled the United States to derail depression dynamics, while European 1930s-style austerity proved as ineffective as it was almost a century ago. Europe's, and specifically Germany's, steadfast refusal to embrace the US recipe has fostered mushrooming economic hardship on the continent. The situation is gruesome, and any serious student of economic history had to have known, given European policy commitments, that it was destined to turn out this way. It is easy to understand why misguided policies drove initial European responses. Economic theory has frowned on Keynes. Economic successes, especially in Germany, offered up the wrong lessons, and enduring angst about inflation was a major distraction. At the outset, the wrong medicine for the wrong disease was to be expected. What is much harder to fathom is why such a poisonous elixir continues to be proffered amid widespread evidence that the patient is dying. Deconstructing cognitive dissonance in other spheres provides an explanation. Not surprisingly, knowing what one wants to happen at home completely informs one’s claims concerning what will be good for one’s neighbors. In such a construct, the last best hope for Europe is ECB President Mario Draghi. He seems to be able to speak German and yet act European.
    Keywords: Austerity; Central Banks; Economic Stability; Euro; European Central Bank; Eurozone; Eurozone Debt Crisis; Financial Crisis; Financial Instability; Financial Markets; Fiscal Policy; Government Policy and Regulation; Hyman Minsky; Sovereign Debt; Stabilization; United States
    JEL: B20 B31 E62 E63 E65 F01 F36 G01 H63
    Date: 2012–12
  17. By: Gadea Rivas, Maria Dolores; Pérez-Quirós, Gabriel
    Abstract: Much has been written about why economists failed to predict the latest financial and real crisis. Reading the recent literature, it seems that the crisis was so obvious that economists must have been blind when looking at data not to see it coming. In this paper, we illustrate this failure by looking at one of the most cited and relevant variables in this analysis, the now infamous credit to GDP chart. We compare the conclusions reached in the literature after the crisis with the results that could have been drawn from an ex ante analysis. We show that, even though credit affects the business cycle in both the expansion and the recession phases, this effect is almost negligible and impossible to exploit from a policymaker’s point of view.
    Keywords: Business Cycles; Credit; Financial Crisis; Forecasting
    JEL: C22 E32
    Date: 2012–12
  18. By: LIM Chong Yah (Division of Economics, Nanyang Technological University, Singapore 637332, Singapore)
    Abstract: A presentation of the Trinity Growth Theory, decomposed into its three parts, is made: the EGOIN Theory, the Triple C Theory and the S Curve Theory. Professor Lim Chong Yah uses the Trinity Growth Theory to explain why growth levels and why growth rates differ among nations, why these two important world economic phenomena also exist among different provinces and cities within a nation, and why the world economy, viewed against world economic history, has grown so unprecedentedly in the last 60 years after World War II.
    Keywords: Growth theory
    JEL: O40
    Date: 2012–03
  19. By: Egmont Kakarot-Handtke
    Abstract: The analytical starting point determines the course of a theoretical investigation and, ultimately, the productiveness of an approach. The classics took production and accumulation as their point of departure; the neoclassics, exchange. Exchange implies behavioral assumptions and notions like rationality, optimization, and equilibrium. It is widely recognized that this approach has led into a cul-de-sac. To change a theory means to change its premises; or, in Keynes's words, to "throw over" the axioms. The present paper swaps the standard behavioral axioms for structural axioms and applies the latter to the analysis of the emergence of secondary markets from the flow part of the economy. Real and nominal residuals at first give rise to the accumulation of the stock of money and the stock of commodities. These stocks constitute the demand-and-supply side of secondary markets. The pricing in these markets is different from the pricing in the primary markets. Realized appreciation in the secondary markets is different from income or profit. To treat primary and secondary markets alike is therefore a category mistake. Vice versa, to take a set of objective propositions as the analytical starting point yields a comprehensive and consistent theory of market exchange and valuation.
    Keywords: New Framework of Concepts; Structure-Centric; Axiom Set; Residuals; Real and Monetary Stocks; Money; Credit; Financial Saving; Nonfinancial Saving; Net Worth; Financial Profit; Nonfinancial Profit; Retained Profit; Appreciation; Wealth
    JEL: D40 D50
    Date: 2012–12
  20. By: Wilfredo L. Maldonado; José A. Rodrigues-Neto
    Abstract: We analyze a static game of public good contributions where finitely many anonymous players have heterogeneous preferences about the public good and heterogeneous beliefs about the distribution of preferences. In the unique symmetric equilibrium, the only individuals who make positive contributions are those who most value the public good and who are also the most pessimistic; that is, according to their beliefs, the proportion of players who value the most the public good is smaller than it would be according to any other possible belief. We predict whether the aggregate contribution is larger or smaller than it would be in an analogous game with complete information (and heterogeneous preferences), by comparing the beliefs of contributors with the true distribution of preferences. A tradeoff between preferences and beliefs arises if there is no individual who simultaneously has the highest preference type and the most pessimistic belief. In this case, there is a symmetric equilibrium, and multiple symmetric equilibria occur only if there are more than two preference types.
    JEL: C72 H41
    Date: 2012–12
  21. By: Julie A. Nelson
    Abstract: Many public debates about climate change now focus on the economic "costs" of taking action. When called on to advise about these, many leading mainstream economists downplay the need for care and caution on climate issues, forecasting a future with infinitely continued economic growth. This essay highlights the roles of binary metaphors and cultural archetypes in creating the highly gendered, sexist, and age-ist attitudes that underlie this dominant advice. Gung-ho economic growth advocates aspire to the role of The Hero, rejecting the conservatism of The Old Wife. But in a world that is not actually as safe and predictable as they assume, the result is guidance from The Fool. Both intellectual and cultural change are necessary if the voice of The Wise Grandmother (which may come through women or men) is to—alongside The Hero—receive the attention it deserves.
    Date: 2012–09
  22. By: Saint-Paul, Gilles
    Abstract: When policymakers and private agents use models, the economists who design the model have an incentive to alter it in order influence 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 statistical institutes, the extent to which intellectual competition between different schools of thought may lead to polarization of views over some parameters and at the same time to consensus over other parameters, and finally how the attempt to preserve influence can lead to degenerative research programs.
    Keywords: Autocoherent models; Degenerative research programs; Identification; Ideology; Intellectual competition; Macroeconomic modelling; Polarization; Self-confirming equilibria
    JEL: A11 E6
    Date: 2012–12
  23. By: Maurício Mota Saboya Pinheiro
    Abstract: Este texto objetiva fazer uma análise conceitual da abordagem das capacidades humanas (desenvolvimento como liberdade) do economista e filósofo indiano Amartya Sen. Procura dar uma visão panorâmica da rede conceitual dessa abordagem e sinalizar algumas questões relevantes para a avaliação de instituições e de políticas públicas em geral. Contudo, o trabalho deve ser entendido como parte de uma pesquisa mais ampla, ainda em curso, cuja finalidade é aumentar nossa capacidade de análise dos grandes problemas do desenvolvimento nacional. Para Amartya Sen, um país é tanto mais desenvolvido quanto mais se promove a expansão do horizonte de liberdade dos seus cidadãos. Assim, a análise de Sen volta-se para o que devem ser os verdadeiros fins do desenvolvimento: as próprias pessoas. Nesse sentido, a abordagem de avaliação social do autor aqui estudado se distingue de outras mais tradicionais, cujo foco recai sobre a renda, a riqueza, e/ou outros meios de que as pessoas se utilizam para atingir seus objetivos. Este trabalho conclui que a abordagem das capacidades humanas pode ser vista como um método geral de avaliação de estratégias de desenvolvimento, instituições e políticas públicas. Ademais, conclui que a obra de Sen é capaz de contribuir com muitos insights e informações relevantes que poderão ser combinados com os diagnósticos e métodos empregados nas outras abordagens. Palavras-chave: desenvolvimento econômico; desenvolvimento humano; liberdade; Amartya Sen. This text aims at making a conceptual analysis of the capabilities approach (development as freedom) proposed by the Indian economist and philosopher Amartya Sen. It seeks to provide a broad view on the conceptual web of Sen?s approach; thereafter it points out some issues that are relevant to the assessment of institutions and public policies in general. This work should be understood as part of an ongoing and broader research that seeks to enlarge our analytical power to deal with the major problems of national development. To Amartya Sen, the more developed a country is, the more expanded is the horizon of its citizens? freedoms. So, Sen?s analysis concerns what should be the true aim of development: persons themselves. In this sense, Sen?s social evaluation approach is to be distinguished from the more traditional ones that focus on income, wealth and/or other means which people employ in order to attain their objectives. This work concludes that the capabilities approach may be seen as a general method of evaluating development strategies, institutions and public policies. Also, that Sen?s ideas can contribute many insights and relevant information that could be combined with diagnoses and methods employed in the more traditional approaches. Keywords: economic development; human development; freedom; Amartya Sen.
    Date: 2012–11
  24. By: Assaf Razin (Tel Aviv University); Itay Goldstein (University of Pennsylvania)
    Abstract: The last few years have been characterized by great turmoil in the world’s financial markets; starting from the collapse of housing prices in the US, followed by the meltdown of leading financial institutions in the US and Europe, and then the ongoing challenge to the European monetary union. These events exhibit ingredients from all types of financial crises in recent history: banking crises, currency crises, credit frictions, market freezes, and the bursting of asset bubbles. In this survey, we provide a review of the analytical underpinnings of these types of crises and the directions in which they influenced future literature and the way they explain recent events.
    Date: 2012
  25. By: Nicholas Oulton
    Abstract: The idea of having GDP growth as the main target of economic policy has been under attack in recent years. The article answers some of the criticisms and argues that continued GDP growth would be good for the UK - and not just in the short term to reduce high levels of unemployment.
    Date: 2012–12
  26. By: Ingmar Schumacher (Department of Economics, Ecole Polytechnique - CNRS : UMR7176 - Polytechnique - X, IPAG - Business School)
    Abstract: In this article we develop a dynamic model where an endogenous evolution of trust impacts a politician's choice for bribe-taking and tax re-distribution. The politician obtains utility from net income that comes from his wage income, tax embezzlements and bribe-taking, and he also has incentives for tax re-distribution. The higher the tax embezzlements and the more bribes the politician takes the lower his citizens' trust and the less likely will he be re-elected. We support the evolution of trust with an econometric investigation. We analyze the necessary and su cient conditions, and nd that withholding taxes and taking bribes may be complements or substitutes for a politician, depending on the politician's incentives for tax re-distribution. Without these incentives, tax embezzlement and bribe taking are necessarily substitutes. With su ciently strong incentives, we nd re-distribution and bribe-taking may become complements. Complements implies that the politician, at least partly, increases bribe-taking because this allows him to increase re-distribution, which aids his additional motives for tax re-distribution. Based on comparative statics at steady state we also nd that the higher the politician's wage the lower the bribe-taking and the higher the trust; stronger social capital leads to less bribe-taking and higher levels of trust; improvements in electoral accountability induce a decrease in bribing while trust increases.
    Keywords: : trust; corruption; political stability; bribe; dynamic model.
    Date: 2012–12–10
  27. By: Abdallah Zouache (GATE Lyon Saint-Etienne - Groupe d'analyse et de théorie économique - CNRS : UMR5824 - Université Lumière - Lyon II - École Normale Supérieure - Lyon)
    Abstract: L'article propose une analyse comparative du traitement de la question coloniale par les anciens et les néo-institutionnalistes nord-américains. Dans le cas des anciens institutionnalistes, le sujet colonial est indissociable de la question raciale. L'article montre également une convergence conceptuelle entre les deux traditions autour d'une explication culturaliste de la dynamique institutionnelle. Les anciens et les néo-institutionnalistes mettent au premier plan le rôle de la culture religieuse comme facteur explicatif de l'émergence des institutions efficaces. La convergence entre anciens et néo-institutionnalisme sur le rôle de la culture dans la sélection et l'évolution des institutions efficaces illustre l'ambigüité de la relation entre race et culture.
    Keywords: Colonialisme; institutionnalisme; race; développement
    Date: 2012–12–21
  28. By: L. Bagnoli; G. Negroni
    Abstract: Two parties bargaining over a pie, the size of which is determined by their previous investment decisions. The bargaining rule is sensitive to investment behavior. Two games are considered. In both, bargaining proceeds according to the Nash Demand Game when a symmetric investments pro?le is observed. When, on the other hand, an asymmetric investments pro?le is observed, we assume that bargaining proceeds according to the Ultimatum Game in one case and according to a Dictator Game in the other. We hereby show that in both games when a unique stochastically stable outcome exists it supports an homogeneous behavior in the whole population both at the investment stage and at the distribution stage. A norm of investment and a norm of division must therefore coevolve in the two games, supporting both the efficient investment pro?le and the egalitarian distribution of the surplus, respectively. The two games differ depending on the conditions needed for the two norms to coevolve. The games are proposed to explain the social norms used in modern hunter-gatherer societies.
    JEL: C78 D83 L14 Z13
    Date: 2012–12
  29. By: Ben Beachy
    Abstract: On the fifth anniversary of the beginning of the Great Recession, there is still no consensus on the lessons to be gleaned from the lingering crisis. What provoked the largest financial and economic collapse in decades? While the housing bubble and subprime mortgage lending boom provide clear proximate causes, skewed financial sector incentives, errant economic assumptions, and inequitable socioeconomic structures laid the groundwork for crisis. The complex web of underlying factors extends from a 1960s-era economic hypothesis to the deregulation of interstate banking to a shift in how Wall Street CEOs are paid. This paper traces that causal web for a generalist audience, summarizes how the financial crisis morphed into an economy-wide recession, and synthesizes proposals for how to prevent its recurrence. Such proposals are not limited to efforts to rein in Wall Street, as exemplified by the sweeping Dodd-Frank financial reform law, but also include initiatives to harness Wall Street’s vast resources for the needs of the real economy. Meanwhile, the crisis amplified calls to address crisisprone disequilibria in the U.S. economy, and to alter the study of economics itself. As the country continues to grapple with the economic fallout of financial meltdown, such proposals merit continued discussion.
    Date: 2012–12
  30. By: Theo S. Eicher; Charis Christofides; Chris Papageorgiou
    Date: 2012–12
  31. By: Michael D. Bordo; Owen F. Humpage; Anna J. Schwartz
    Abstract: This paper describes the United States’ first line of defense against shortcomings in the Bretton Woods system, which threatened the system’s continuation as early as 1960. The exposition describes the Federal Reserve’s use of swap lines both to provide cover for central banks’ unwanted dollar exposures, thereby forestalling claims on the U.S. gold stock, and to supply dollar liquidity to countries facing temporary balance-of-payments deficits, thereby bolstering confidence in their parities. As suggested by the expansion and growing use of the swap lines, the operations failed to distinguish between temporary and fundamental disequilibrium forces. In substituting temporary for fundamental adjustments, the lines ultimately proved inadequate.
    Keywords: Bretton Woods Agreements Act ; Financial markets ; Monetary policy ; International finance
    Date: 2012

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