nep-hpe New Economics Papers
on History and Philosophy of Economics
Issue of 2013‒04‒13
eighteen papers chosen by
Erik Thomson
University of Manitoba

  2. Does The John Bates Clark Medal Boost Subsequent Productivity And Citation Success? By Ho Fai Chan; Bruno S. Frey; Jana Gallus; Benno Torgler
  3. A Review of C.L.R. James and Marxism in the United States By Conrad, Daren A.
  4. On the New Appeal of Chapter 12 of the General Theory. Complicating Remarks on the Keynes-Hume Connection and the Presumed Novelty of the Analysis of Financial Markets in the General Theory By Carabelli Anna M.; Cedrini Mario A.
  5. Some Foreseeable Disasters of the Global Economy: The High Cost of Neglecting Keynes’s Approach By Carabelli Anna M.; Cedrini Mario A.
  6. The entrepreneur in economic theory: from an invisible man toward a new research field By Vera Catarina Rocha
  7. The Alpha of a Survey of the Literature in Economic and Financial Literacy By William T. Alpert; Oskar R. Harmon
  8. Macroculture, Athletics and Democracy in ancient Greece By Economou, Emmanouel/Marios/Lazaros; Kyriazis, Nicholas
  9. Understanding "The Problem of Social Cost" By baffi, enrico
  10. The Rising Strength of Management, High Unemployment and Slow Growth: Revisiting Okun’s Law By Reich, Michael
  11. Equilibrium selection through pu-dominance By Andrea Gallice
  12. Fighting Discrimination: W. Arthur Lewis and the Dual Economy of Manchester in the 1950s By Paul Mosley; Barbara Ingham
  13. The Political Economy of Reform and Development of the Washington Consensus By Alshyab, Nooh
  14. Notes for a New Guide to Keynes (I): Wages, Aggregate Demand, and Employment By Galí, Jordi
  15. The Ethical Dimensions Of Financial Crisis In The World Of Globalized Finance By Saha, Malayendu
  16. Jan Tinbergen's legacy for economic networks: from the gravity model to quantum statistics By Tiziano Squartini; Diego Garlaschelli
  17. Culture, Languages, and Economics By Ginsburgh, Victor; Weber, Shlomo
  18. Do happiness indexes truly reveal happiness? Measuring happiness using revealed preferences from migration flows By Helena Marques; Gabriel Pino; J.D. Tena

  1. By: Mário Graça Moura (FEP.UP); António Almodovar (FEP.UP)
    Abstract: This paper focuses on the gradual decomposition of classical political economy and its transformation into ‘economics’, a process which was to culminate in the conception of ‘theory’ as a mere engine of analysis. Why exactly did modern ‘economics’ become accepted? What was meant to be achieved – and was it? And why did some writers reject both old political economy and modern economics? We intend to contribute to an understanding of these issues by analysing a set of representative histories of economic ideas from this period: those by Luigi Cossa (1880), John Kells Ingram (1915, originally published in 1888), and Charles Gide and Charles Rist (1915).
    Keywords: : History of Economic Thought; Methodology; Classical Economics.
    JEL: B1 B4
    Date: 2012–12
  2. By: Ho Fai Chan; Bruno S. Frey; Jana Gallus; Benno Torgler
    Abstract: Despite the social importance of awards, they have been largely disregarded by academic research in economics. This paper investigates whether a specific, yet important, award in economics, the John Bates Clark Medal, raises recipients’ subsequent research activity and status compared to a synthetic control group of nonrecipient scholars with similar previous research performance. We find evidence of positive incentive and status effects that raise both productivity and citation levels.
    Keywords: Awards, Incentives, Research, John Bates Clark Medal, Synthetic control method
    JEL: A13 C23 M52
    Date: 2013–03–14
  3. By: Conrad, Daren A.
    Abstract: The purpose of this paper is to investigate the influence on the theoretical dimension of Marxism, advanced by Cyril Lionel Robert James, on the struggles in the United States in the 1960s and 1970s and to explore the influence that this intellectual had in the development of an understanding of Marxism in the U.S. during this period. In order to do so, it is important to chronologically follow James’s life. For the purpose of this paper, I will discuss some of the aspects of James’s Marxism which will allow us to see how he shaped his thoughts as a Marxist and the extent to which he was able to put his theories into practice. A fragment of James’s autobiography serves as a useful illustration: I had been reading…But the people who had passion, human energy, anger, violence and generosity were the common people whom I saw around me. They shaped my political outlook and from that day to this day those are the people with who I am concerned the most. That’s why I was able to understand Marx very easily, and particularly Lenin. When I went into Marxism I was already well prepared…Even in my days of fiction I had the instinct which enable me to grasp the fundamentals of Marxism so easily and then to work at Marxism having the basic elements of a Marxist view – my concern with the common people. James’s method was more or less empirical and his observations formed the basis for his exploration of ideas.
    Keywords: Marxism, CLR James
    JEL: B0 B00 B10
    Date: 2013–04–09
  4. By: Carabelli Anna M.; Cedrini Mario A. (University of Turin)
    Abstract: A basic presupposition of the rediscovery, in the times of the crisis, of chapter 12 of the General Theory is that Keynes’s treatment of financial markets, and particularly the use of the notion of convention, represents a crucial novelty in both his economics and philosophy. The article offers complicating remarks to critically discuss this interpretation. In particular, we analyse the complex Keynes-Hume theoretical connection in the light of the Keynes-Sraffa correspondence on Hume’s Abstract, and emphasize the theoretical legacy of Keynes's 1910 lectures on speculation for the analysis of financial markets in the General Theory.
    Date: 2012–10
  5. By: Carabelli Anna M.; Cedrini Mario A. (University of Turin)
    Abstract: The paper revisits some foreseeable disasters of the recent history of the global economy, from the consequences of the failed attempt to construct a disciplinary order based on the Washington Consensus paradigm, to the current global crisis, which dramatically showed the vulnerability of the ʺBretton Woods 2ʺ order and contributed to the widespread adoption in Europe of austerity programs. We argue that the historical evolution of the international non‐system since the collapse of the Bretton Woods regime can be regarded as the complete repudiation of the essence itself, and general philosophy, of Keynes’s international economics. We aim at demonstrating, conversely, that Keynesʹs international macroeconomics is the result of the development of an extremely powerful “complexity approach” to international economic relations, and that it still provides a mostly needed theoretical reference to construct, as Keynes himself would say, a "sounder political economy between all nations".
    Date: 2012–10
  6. By: Vera Catarina Rocha (CEF.UP, FEP; CIPES)
    Abstract: Mainstream economics had great difficulty in fitting entrepreneurship into its theory and for long time the theoretical firm remained “entrepreneurless”. However, from the early 20th century onwards, we identify strong attempts of key economists to recognize the role of the entrepreneur as an explanatory force of several economic phenomena. This paper analyzes the evolution of economic thought on entrepreneurship, and in particular the path through which the entrepreneur (re)entered into economic theory over the 20th century, leading to the new and increasingly independent research field Economics of Entrepreneurship. The analysis goes through the main Economics fields where the (re)discover of the entrepreneur figure was most remarkable - namely Labor Economics, Microeconomics and Industrial Organization, and Economic Growth and Development - searching for the rationality to include the entrepreneur figure into the analyses of particular economic phenomena. The study is enriched by a brief bibliometric analysis, which helps to set forth a chronological trace of the entrepreneurship research within Economics literature.
    Keywords: Entrepreneurship, Entrepreneur, Economic Thought, Labor Economics, Industrial Organization, Economic Development and Growth
    JEL: B00 J01 L26 O10
    Date: 2012–05
  7. By: William T. Alpert (University of Connecticut); Oskar R. Harmon (University of Connecticut)
    Abstract: There is a century long history of economic and financial education laced with implications for both political civic education. It has been argued by some economists that since economics is based on rational self-interested “agents” we don’t need to teach economics at the undergraduate level all. This paper offers a brief review of the literature from the K- college results of economic and financial education extending the survey to the more recent attempts at public financial and economic education. In the review we try to highlight both the results and types of approaches. We then identify some of the areas in which the relatively new areas of behavioral and experimental economics are relevant to economic and financial literacy efforts. We speculate on how these findings may effect economic and financial literacy efforts in the future. JEL Classification: A20, A21, A22, A29
    Keywords: Financial literacy, economic literacy, economic education, financial education
    Date: 2013–03
  8. By: Economou, Emmanouel/Marios/Lazaros; Kyriazis, Nicholas
    Abstract: In the present essay we examine whether and how sports affected the emergence of democracy as a political phenomenon in Classical Greece. To achieve this we introduce in a model the concept of macroculture as a complex of mutually supporting values, norms and beliefs in various areas of human activity, like athletics, war, politics, etc. Then, we proceed through a historical review on the history of sports in Ancient Greece and we investigate various aspects of how and under which terms athletics performed during classical Greece, predominantly, in ancient Athens. We found that the values that gradually emerged through sports during an extended period that goes back as far as the Bronze Age times, led to the development of an environment of mutually supporting norms and values such as equality and trust, that by being correlated and coordinated each other, led to the creation of new values and norms, as the theory of macroculture proposes. We also found that these new values were “diffused” from athletics to the field of politics and played a key role to the emergence of democracy.
    Keywords: Macroculture, sports, democracy, Classical Greece.
    JEL: D71 I28 Z13
    Date: 2012–05–08
  9. By: baffi, enrico
    Abstract: This paper examines the positions of Coase and Pigou in regard to the problem of external effects (externalities). Assessing their two most important works, it appears that Coase has a more relevant preference for an evaluation of total efficiency, while Pigou, with some exceptions, is convinced that it is almost always socially desirable to reach marginal efficiency through taxes or liability. It is interesting that the economist of Chicago, who has elaborated on the renowned theorem, thinks that is not desirable to reach efficiency at the margin every time, and that it is often preferable to evaluate the total, which indicates the solution that is more welfare enhancing. A certain confusion in the work of Coase is noticeable. On one hand he criticizes Pigou for statements regarding the social desirability of relocating some industries away from the towns, and on the other hand, he suggests solutions that give an absolute right for an activity that is incompatible with the activity of another subject. In this way he eliminates the possibility of having a solution that is in accordance with Coase’s idea, which stresses that any external effect is reciprocal. The adjective “reciprocal” means that damage to Y is the consequence of limiting the activity of Y in order to allow for the activity of X. The opposite is also true: A benefit for Y causes damage to X. Beyond this criticism, Coase’s arguments against Pigou’s tools are represented by the famous theorem, according to which a public intervention is not necessary in order to obtain efficiency when transaction costs are low. However, the theorem is not an idea that can be used to say that Pigou’s methods are useless when transaction costs are high. Indeed, when transaction costs are high, efficiency cannot be reached through negotiations. Coase, nonetheless, rejects Pigou’s tools for every situation. Through a deep examination of the paragraphs of “The Problem of Social Costs,” it is understandable why Coase opposes Pigou’s tools. First of all, he considers that the remedy consisting in the compensation of the victim. To Pigou’s way of thinking, this is a strict liability rule. Coase states that the damage is caused by both parties, and, moreover, the amount of the damage depends on both parties. He understands that the compensation method described by Pigou can bring about moral hazards and, therefore, brings about new social costs. Since the article was written in 1960, Coase’s theory has been developed and has become a pillar of tort law and economics. Pigou proposed a tax as an alternative remedy for external effects, which does not bring about a behavior of moral hazard, because the victim bears the expected costs. However, Coase is diffident in regard to the tax. His idea was not developed by other scholars in the subsequent years. Coase understands that efficiency should require a tax on the victim, so that the victim considers the increase of the costs of precaution for the injurer due to creating the nuisance. In other words, Coase understands that the tax does not produce the socially optimal activity level of the parties if the costs of precaution of the other party are not considered as a component of the tax. Therefore, Coase‘s belief is that the tools of Pigou create so many problems as to make them inefficient.
    Keywords: Coase, coase Theorem , Externalities , Pigou, Pigouvian Taxation, Moral hazard, Double tax
    JEL: D61 D62 K10 K11 K12 K13
    Date: 2013
  10. By: Reich, Michael
    Keywords: Economics, General, Applied Economics, Management, High Unemployment, Slow Growth, Okun's Law
    Date: 2012–11–26
  11. By: Andrea Gallice (Department of Economics and Statistics (Dipartimento di Scienze Economico-Sociali e Matematico-Statistiche), University of Torino, Italy)
    Abstract: This paper introduces and discusses the concept of pu-dominance in the context of finite games in normal form. It then presents the pu-dominance criterion for equilibrium selection, a generalization of the risk-dominance criterion to games with more than two players.
    Keywords: equilibrium selection, normal form games, pu-dominance
    JEL: C72 C73
    Date: 2013–03
  12. By: Paul Mosley (Department of Economics, The University of Sheffield); Barbara Ingham
    Abstract: We document, for the first time, the institution-building activities of the development economist W.Arthur Lewis (1915-1991) as founder of Community House and the South Hulme Evening Centre, two further education centres which sought to fight discrimination against the Afro-Caribbean communities of Manchester in the 1950s. We depict the struggle by Afro-Caribbeans to achieve a decent standard of living (and to escape from the ‘subsistence economy’ which provides the basis for Lewis’ most famous model) as a game of snakes and ladders in which the two main potential ladders out of poverty are first, the ability to generate nonwage income through self-employment and second, ‘vertical social capital’, i.e. membership of social networks of a kind which gave the employee the ability to fight back against discrimination. The most imaginative aspect of Lewis’s design for his further education centres is his incorporation of activities which build vertical social capital alongside conventional vocational training. Using a bargaining model to understand the ability of Afro-Caribbeans to resist discrimination, we find that Lewis’ social centres had a significant positive impact on Afro-Caribbean income and poverty levels. Through a merger between Community House and the West Indian Sports and Social Club, Lewis helped to create an innovative institution which has endured through to the present.
    Keywords: Sir Arthur Lewis(1915-1991), Manchester, racial discrimination, inner cities
    JEL: N34 O10 J71
    Date: 2013
  13. By: Alshyab, Nooh
    Abstract: The beginning of the 1980s represented for many developing countries a particularly critical period. To escape economic and financial difficulties, these countries had to engage into economic and political reforms, often under the umbrella of international institutions. Such circumstances offered the chance to collect a wide range of comparable reform experiences and represented thus a big lab for testing existing theories on stability, growth, and development. Focussing on the reform experiences of the 1980s and 1990s, this paper analyses their underlying economic wisdom and tries, according to their main results, to extrapolate some guidelines for reform. Overall, the analysis points at the need for a tailored approach to reform, which takes into account a country’s peculiarities and its specific barriers to growth and development.
    Keywords: Economic reform theory, development economics, Washington Consensus
    JEL: E60 F55
    Date: 2013–04–09
  14. By: Galí, Jordi
    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: employment stability; Monetary policy rules; Wage flexibility
    JEL: E32
    Date: 2013–01
  15. By: Saha, Malayendu
    Abstract: Abstract The global financial crisis and its aftermath, the global economic crisis followed by global recession have raised pertinent questions in appraising theories and practices in more than a few areas. An intently technical view of the proceedings reflects on the predicaments to be, in effect, one of the severe flaws in the financial sector. The broad view, on the other, looks upon the problem as an unethical behavior by several participants in the financial sector as a whole. The various literatures have established that a lack of or absence of ethics and values was at the root of many of the problems facing the global community today. In fact, in an extensive perspective, the financial crises were not stayed put within the terrain of US but multiplied gradually throughout the entire world and exaggerated the economic and political instabilities as well. Given this, one thing is very clear: we should aim at preventing further crises of economic and social nature having multiplier effect. There are also expectations that the corporate should perform on the basis of explicit contracts with the stakeholders in common. The paper focuses on identifying some common characteristics of financial ethics, the various causes behind the financial crisis and to explore the ethical fundamentals of such crisis. The ethical challenges for today are also raised in order to survive and sustain in this globalized financial environment.
    Keywords: Financial globalization, financial crisis, financial ethics, unethical practices, global economic crisis
    JEL: F3 F39
    Date: 2013–04–06
  16. By: Tiziano Squartini; Diego Garlaschelli
    Abstract: Jan Tinbergen, the first recipient of the Nobel Memorial Prize in Economics in 1969, obtained his PhD in physics at the University of Leiden under the supervision of Paul Ehrenfest in 1929. Among many achievements as an economist after his training as a physicist, Tinbergen proposed the so-called Gravity Model of international trade. The model predicts that the intensity of trade between two countries is described by a formula similar to Newton's law of gravitation, where mass is replaced by Gross Domestic Product. Since Tinbergen's proposal, the Gravity Model has become the standard model of non-zero trade flows in macroeconomics. However, its intrinsic limitation is the prediction of a completely connected network, which fails to explain the observed intricate topology of international trade. Recent network models overcome this limitation by describing the real network as a member of a maximum-entropy statistical ensemble. The resulting expressions are formally analogous to quantum statistics: the international trade network is found to closely follow the Fermi-Dirac statistics in its purely binary topology, and the recently proposed mixed Bose-Fermi statistics in its full (binary plus weighted) structure. This seemingly esoteric result is actually a simple effect of the heterogeneity of world countries, that imposes strong structural constraints on the network. Our discussion highlights similarities and differences between macroeconomics and statistical-physics approaches to economic networks.
    Date: 2013–04
  17. By: Ginsburgh, Victor; Weber, Shlomo
    Abstract: The impact of various facets of cultural diversity on economic outcomes has become a topic of intensive research in economics. This paper focuses on linguistic diversity as one of the important aspects of cultural heterogeneity, and more specifically, The aim of this paper is to formally examine two opposing forces, standardization and efficiency on the one hand, and cultural attachment and linguistic disenfranchisement, on the other, and to outline ways of bringing them to balance each other. In our measurement of disenfranchisement and fractionalization we heavily rely on the notion of linguistic distances or proximity between various linguistic groups. We also analyze the impact of linguistic diversity on trade, migration and markets for translation. We conclude by examining the issue of disenfranchisement in the European Union and possible standardization policies to address this issue.
    Keywords: culture; economic impact; ethnolinguistic fractionalization; linguistic disenfranchisement; measurement of diversity; standardization policies
    JEL: D63 H77
    Date: 2013–02
  18. By: Helena Marques (Universitat de les Illes Balears); Gabriel Pino (Southern Illinois University); J.D. Tena (Universita di Sassari, Italy and Universidad Carlos III, Spain)
    Abstract: In this paper we attempt to establish a nexus between migration decisions and self-assessed happiness, where migration is taken as a mechanism for revealing preferences. The happiness literature has proposed both economic and non-economic determinants of happiness which are very similar to the factors that may be thought of as determinants of migration: absolute income, relative income, demographic and social characteristics, social development, relationship with others and characteristics of the place where we live. To these we add bilateral gravity variables, migration policies, and two survey-based happiness indexes. First, these two indexes are negatively correlated to net migration flows. Second, almost all the other explanatory variables are significant and as such survey-based happiness indexes fail to account for them. Third, we show how an international happiness ranking changes by taking into account those omitted factors. Finally, our migration-based ranking shows that, although many countries "truthfully" reveal happiness levels, in fact 19 countries are net migration senders even though they are self-proclaimed happy in surveys, whereas 23 countries are net migration recipients, even though in surveys they are self-proclaimed unhappy. We identify the sources of this mismatch and suggest where action could be taken to bring people’s self-assessment of happiness in line with revealed preferences.
    Keywords: happiness, subjective wellbeing, revealed preferences, migration, gravity models, FEVD
    JEL: F22 D03 C11 C23
    Date: 2013

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