nep-hpe New Economics Papers
on History and Philosophy of Economics
Issue of 2013‒05‒05
seventeen papers chosen by
Erik Thomson
University of Manitoba

  1. Bubbles are rational By Pierre Lescanne
  2. Learning in a Black Box By Heinrich H. Nax; Maxwell N. Burton-Chellew; Stuart A. West; H. Peyton Young
  3. The evolution of mixed conjectures in the rent-extraction game By Brito, Paulo; Datta, Bipasa; Dixon, Huw
  4. The mutual gains from trade moderate the parent-offspring conflict By Da Silva, Sergio
  5. Toolism! A Critique of Econophysics By Kakarot-Handtke, Egmont
  6. World System Energetics By Ternyik, Stephen I.
  7. Do happiness indexes truly reveal happiness? : measurin happiness using revealed preferences from migration flows By Helena Marques; Gabriel Pino; Juan de Dios Tena
  8. MODERN ANTI-CAPITALISTIC IDEOLOGIES By Konstantin Yanovsky; Ilia Zatcovetzky; Sergei Zhavoronkov; Ekaterina Reva
  9. Beyond Thomas Mun: the economic ideas of Edward Coke, Francis Bacon and Lionel Cranfield By Carlos Eduardo Suprinyak
  10. The sources of profits and their sustainability: A survey of basic theoretical issues By Skouras, Thanos
  11. Extending the Original Position: Revisiting the Pattanaik Critique of Vickrey/Harsanyi Utilitarianism By Peter J. Hammond
  12. Raison collective et progrès économique : la théorie du cycle de François Simiand By Fabien Vayssière
  13. Conscience Accounting: Emotional Dynamics and Social Behavior By Uri Gneezy; Alex Imas; Kristóf Madarász
  14. Optimal Inequality behind the Veil of Ignorance By Liang, Che-Yuan
  15. Subjective Well-Being and Income: Is There Any Evidence of Satiation? By Betsey Stevenson; Justin Wolfers
  16. Is Giving Equivalent to Not Taking in Dictator Games? By Korenok Oleg; Edward L. Millner; Laura Razzolini

  1. By: Pierre Lescanne (LIP - Laboratoire de l'Informatique du Parallélisme - Université de Lyon - CNRS : UMR5668 - INRIA - École Normale Supérieure - Lyon - Université Claude Bernard - Lyon I)
    Abstract: As we show using the notion of equilibrium in the theory of infinite sequential games, bubbles and escalations are rational for economic and environmental agents, who believe in an infinite world. This goes against a vision of a self regulating, wise and pacific economy in equilibrium. In other words, in this context, equilibrium is not a synonymous of stability. We attempt to draw from this statement methodological consequences and a new approach to economics. To the mindware of economic agents (a concept due to cognitive psychology) we propose to add coinduction to properly reason on infinite games. This way we refine the notion of rationality.
    Keywords: economic game; infinite game;sequential game;bubble; escalation; microeconomics;speculative bubble; induction;coinduction.
    Date: 2013–04–30
  2. By: Heinrich H. Nax (PSE - Paris-Jourdan Sciences Economiques - CNRS : UMR8545 - École des Hautes Études 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); Maxwell N. Burton-Chellew (Department of Zoology - University of Oxford (UK)); Stuart A. West (Department of Zoology - University of Oxford (UK)); H. Peyton Young (Department of Economics - University of Oxford (UK))
    Abstract: Many interactive environments can be represented as games, but they are so large and complex that individual players are in the dark about what others are doing and how their own payo s are a ected. This paper analyzes learning behavior in such 'black box' environments, where players' only source of information is their own history of actions taken and payoff s received. Speci fically we study repeated public goods games, where players must decide how much to contribute at each stage, but they do not know how much others have contributed or how others' contributions a effect their own payoff s. We identify two key features of the players' learning dynamics. First, if a player's realized payoff increases he is less inclined to change his strategy, whereas if his realized payo ff decreases he is more inclined to change his strategy. Second, if increasing his own contribution results in higher payoff s he will tend to increase his contribution still further, whereas the reverse holds if an increase in contribution leads to lower payo ffs. These two e ffects are clearly present when players have no information about the game; moreover they are still present even when players have full information. Convergence to Nash equilibrium occurs at about the same rate in both situations.
    Keywords: Learning ; Information ; Public goods games
    Date: 2013–04
  3. By: Brito, Paulo; Datta, Bipasa; Dixon, Huw (Cardiff Business School)
    Abstract: This paper adopts an evolutionary perspective on the rent-extraction model with conjectural variations (CV). We analyze the global dynamics of the model with three CVs under the replicator equation. We find that the end points of the evolutionary dynamics include the pure-strategy consistent CVs. However, there are also mixed-strategy equilibria that occur. These are on the boundaries between the basins of attraction of the pure-strategy sinks. We develop a more general notion of consistency which applies to mixed-strategy equilibria. In a three conjecture example, we find that in contrast to the pure-strategy equilibria, the mixed-strategy equilibria are not ESS: under the replicator dynamics, there are three or four mixed equilibria that may either be totally unstable, or saddle-stable. There also exist heteroclinic orbits that link equilibria together.
    Keywords: Rent-extraction; evolutionary dynamics; consistent conjectures; global dynamics; mixed-strategy
    JEL: D03 L15 H0
    Date: 2012–12
  4. By: Da Silva, Sergio
    Abstract: By combining basic concepts from economics and genetic economics, I elaborate a rationale for the mutual gains from the exchange of goods between siblings to moderate the famous parent-offspring conflict, an issue of interest for evolutionary psychology. The rationale also fills in the gaps of standard economic theory by justifying why trade (ultimately a cooperative endeavor) is made possible starting from egoistic utility-maximizers.
    Keywords: parent-offspring conflict
    JEL: A20 A22 B52 D1
    Date: 2013
  5. By: Kakarot-Handtke, Egmont
    Abstract: Economists are fond of the physicists’ powerful tools. As a popular mindset Toolism is as old as economics but the transplants failed to produce the same successes as in their aboriginal environment. Economists therefore looked more and more to the math department for inspiration. Now the tide turns again. The ongoing crisis discredits standard economics and offers the chance for a comeback. Modern econophysics commands the most powerful tools and argues that there are many occasions for their application. The present paper argues that it is not a change of tools that is most urgently needed but a paradigm change.
    Keywords: new framework of concepts; structure-centric; axiom set; paradigm; income; profit; money; invariance principle
    JEL: A12 B16 B41
    Date: 2013–04–30
  6. By: Ternyik, Stephen I.
    Abstract: The Snooks/Panov curve is discussed, concerning the economic history of human societies as energy transduction systems. A first formalization and mathematization of world system energetics proposed.
    Keywords: transduction; energetics; economic history; quantization
    JEL: B41
    Date: 2013–04–26
  7. By: Helena Marques; Gabriel Pino; Juan de Dios Tena
    Abstract: n this paper we attempt to establish a nexus between migration decisions and selfassessed 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: 2013–04
  8. By: Konstantin Yanovsky (Gaidar Institute for Economic Policy); Ilia Zatcovetzky (Samuel Neaman Institute for Advanced Studies in Science and Technology, Technion (Israel)); Sergei Zhavoronkov (Gaidar Institute for Economic Policy); Ekaterina Reva (Gaidar Institute for Economic Policy)
    Abstract: Ideology is pretty efficient machinery to decrease collective action's costs. People not need to communicate or even to be familiar one another to participate the joint action, to support the policy or resist the same. The chapter studies the impact which new ideologies of the 21st century (feminism, multiculturalism, and so on) have had on those institutions, through which the Western world has become wealthy and free.
    Keywords: ideology, collective actions, coordination costs, religion; ideologies' competition
    JEL: D74 N10 P16
    Date: 2013
  9. By: Carlos Eduardo Suprinyak (Cedeplar-UFMG)
    Abstract: This paper proposes to approach the economic ideas which prevailed in England during the early 17th century by moving beyond the historical and analytical exegesis of the printed pamphlets of the time, and focusing instead on the intellectual perspectives brought to bear upon economic matters by three of the most prominent public figures of late Jacobean England: Lionel Cranfield, Francis Bacon, and Edward Coke. As civil servants, all three of them were directly involved in the formulation of public policies aimed at economic regulation. Bacon and Coke, however, approached this problem as part of a larger system of public policy whose purpose was to promote order and stability in the commonwealth at large. Cranfield, on the other hand, brought a mercantile perspective to bear on the matter, emphasizing the importance of a favorable balance of trade, and stressing the usefulness of quantitative data in the assessment of economic phenomena. It is concluded that while Tudor political and social philosophy still dominated the way in which the English crown dealt with problems of an economic nature, the new perspective introduced by Cranfield exerted a perceptible influence within official circles.
    Keywords: Stuart England; Lionel Cranfield; Francis Bacon; Edward Coke; public policy.
    JEL: B11
    Date: 2013–04
  10. By: Skouras, Thanos
    Abstract: The volume of profits in an economy is a magnitude, which is out of sight of orthodox macroeconomics textbooks and effectively ignored by neoclassical economics. In contrast, Kalecki's approach brings to the forefront the sources of profits and makes possible their further analysis. The sources of profits are examined one by one and their impacts, as well as the inter-relations among them are studied in some detail. The sustainability of the profits' sources tends to have inevitable limits, which are discussed and elucidated. On the basis of these limits, two phases in the operation of the sources may be distinguished. The beneficial phase is transformed into a pathological one, as the limits are approached. Consequently, profits may be distinguished according to the source from which they flow, as well as the phase in which they arise. Taking into account both source and phase, a terminology is proposed to highlight the distinctive character of the different kinds of profits.
    Keywords: profits, investment, export surplus, budget deficit, consumption out of profits, saving out of wages, profits' limits and sustainability
    JEL: B5 B59 E12 P16
    Date: 2013–04–26
  11. By: Peter J. Hammond
    Abstract: Harsanyi's original position treats personal identity, upon which each individual's utility depends, as risky. Pattanaik's critique is related to the problem of scaling "state-dependent" von Neumann-Morgenstern utility when determining subjective probabilities. But a unique social welfare functional, incorporating both level and unit interpersonal comparisons, emerges from contemplating an "extended" original position allowing the probability of becoming each person to be chosen. Moreover, the paper suggests the relevance of a "Harsanyi ethical type space", with types as both causes and objects of preference.
    Date: 2013–04
  12. By: Fabien Vayssière (UP1 UFR02 - Université Paris 1, Panthéon-Sorbonne - UFR d'Économie - Université Paris I - Panthéon-Sorbonne - PRES HESAM)
    Abstract: La science économique doit dégager des lois pour Simiand, elle a pour but de fournir une explication des relations entre les différents faits ou "catégories de faits". Simiand critique les théories sans faits (l'économie conceptuelle qui fabrique des "systèmes hypothétiques de relations entre éléments conçus par l'esprit") mais il ne veut pas non plus une accumulation de faits sans théorie (à laquelle aboutit la démarche historique). Cette double critique permet de situer Simiand, il se base sur les faits mais tente de dégager des relations entre ces derniers une "liaison rationnelle". C'est le statut de cette rationalité qui doit être questionné. La démarche de Simiand est intéressante de par les perspectives qu'elle offre à la science économique. La volonté de "connaître et expliquer la réalité économique" semble être un objectif au moins louable, sinon indispensable à une science économique bien constituée. Mais il s'agit de voir si dans l'application de cette méthode, Simiand respecte bien ses propres principes. Pour vérifier cela, nous étudierons sa théorie du cycle, travail théorique essentiel du sociologue. De la même manière que Durkheim a employé les principes de sa méthode pour la première fois dans son étude du suicide, c'est à travers son étude des fluctuations longues que Simiand a éprouvé la sienne. Son attachement à la méthode est tel qu'il revient sans cesse aux préceptes qu'il a fourni, rendant parfois la lecture de ses ouvrages fastidieuse. Mais cette volonté de respecter scrupuleusement une méthode établie et d'expliquer précisément au lecteur la démarche suivie doit être soulignée et saluée. Cette théorie du cycle est particulièrement originale par rapport à celles de ses contemporains en ce sens qu'elle utilise de manière systématique une méthode bien précise. Le résultat auquel elle aboutit est celui d'un progrès économique spontané, non voulu de manière consciente par les individus, mais bien réel. En réalité, si l'on parcours l'ensemble de l'œuvre de Simiand, on comprend mieux comment on aboutit à ce progrès économique. La conception de la monnaie et de la psychologie des individus sont au fondement de ce que Simiand appelle une "raison collective", laquelle entraîne "providentiellement" le progrès. On reconnaît ici le rationalisme de Simiand mais on perçoit aussi, et surtout, une dérive possible de la méthode positive. La question est donc de savoir s'il n'existe pas une contradiction entre la méthode prescrite par Simiand et son application concrète. Plus concrètement, Simiand respecte-il bien sa philosophie dans la construction de sa théorie du cycle ? Le terme "philosophie" ne nous semble pas usurpé, la question du rejet du finalisme dépasse la simple question de l'application d'une méthode, il s'agit bien d'une certaine conception de la science. Si nous en arrivons au dégagement d'une "dérive" au sens d'un "rationalisme forcé" de la théorie, d'une volonté de "faire comprendre coûte que coûte", alors il faudra se poser la question du pourquoi de cette dérive. Nous verrons qu'il est possible de voir en l'appartenance de Simiand à l'école durkheimienne une explication de cette dernière. En creux se trouve bien la question de la possibilité d'une science économique positive. Ou, plus précisément, la question de la possibilité de lois économiques tirées des faits, sans prénotions, comme l'entend Simiand. C'est pour cela que l'étude de l'application de sa méthode est si importante : s'il a échoué cela est aussi porteur d'enseignements. Afin de répondre aux questionnements de ce mémoire, il nous faudra d'abord passer par un détour. Il est essentiel de voir comment Simiand a appliqué sa méthode à l'étude des fluctuations longues. Nous relèverons ainsi les éléments qu'il faudra questionner plus loin. Cela nous permettra également de saisir sa mécanique du cycle (Chapitre 1). Mais, comme nous l'avons évoqué plus haut, les déterminants du cycle chez Simiand sont bien singuliers et conduisent l'auteur à dégager une "raison collective". Il est très important d'étudier ces déterminants et cette "raison collective" à la source du progrès économique, car son statut est bien particulier et devra être questionné (Chapitre 2). Une fois passé par ce détour, nous aurons les éléments pour mettre en perspective de manière sérieuse Simiand et sa méthode, évaluer les contradictions et les dérives de cette "science économique positive" (Chapitre 3).
    Keywords: François Simiand, développement économique, cycles économiques
    Date: 2012
  13. By: Uri Gneezy; Alex Imas; Kristóf Madarász
    Abstract: We develop a dynamic model where people decide in the presence of moral constraints and test the predictions of the model through two experiments. Norm violations induce a temporal feeling of guilt that depreciates with time. Due to such fluctuations of guilt, people exhibit an endogenous temporal inconsistency in social preferences—a behavior we term conscience accounting. In our experiments people first have to make an ethical decision, and subsequently decide whether to donate to charity. We find that those who chose unethically were more likely to donate than those who did not. As predicted, donation rates were higher when the opportunity to donate came sooner after the unethical choice than later. Combined, our theoretical and empirical findings suggest a mechanism by which prosocial behavior is likely to occur within temporal brackets following an unethical choice.
    Keywords: Emotions, Temporal Brackets, Deception, Prosocial Behavior
    JEL: D03
    Date: 2012–02
  14. By: Liang, Che-Yuan (Uppsala Center for Fiscal Studies)
    Abstract: In Rawls’ (1971) influential social contract approach to distributive justice, the fair income distribution is the one that an individual would choose behind a veil of ignorance. Harsanyi (1953, 1955, 1975) treats this situation as a decision under risk and arrives at utilitarianism using expected utility theory. This paper investigates the implications of applying prospect theory instead, which better describes behavior under risk. I find that the specific type of inequality in bottom-heavy right-skewed income distributions, which includes the log-normal income distribution, could be socially desirable. The optimal inequality result contrasts the implications of other social welfare criteria.
    Keywords: veil of ignorance; prospect theory; social welfare function; income inequality
    JEL: D03 D31 D63 D81
    Date: 2013–04–29
  15. By: Betsey Stevenson; Justin Wolfers
    Abstract: Many scholars have argued that once “basic needs” have been met, higher income is no longer associated with higher in subjective well-being. We assess the validity of this claim in comparisons of both rich and poor countries, and also of rich and poor people within a country. Analyzing multiple datasets, multiple definitions of “basic needs” and multiple questions about well-being, we find no support for this claim. The relationship between well-being and income is roughly linear-log and does not diminish as incomes rise. If there is a satiation point, we are yet to reach it.
    JEL: D6 I3 N3 O1 O4
    Date: 2013–04
  16. By: Korenok Oleg (Department of Economics, VCU School of Business); Edward L. Millner (Department of Economics, VCU School of Business); Laura Razzolini (Department of Economics, VCU School of Business)
    Abstract: We answer the question: Is giving equivalent to not taking? We show that, if giving is equivalent to not taking, impure altruism could account for List's (2007) finding that the payoff to recipients in a dictator game decreases when the dictator has the option to take. We examine behavior in dictator games with different taking options but equivalent final payoffs. We find that the recipients tend to earn more as the amount the dictator must take to achieve a given final payoff increases. We conclude that not taking is not equivalent to giving and agree with List (2007) that the current social preference models fail to rationalize the observed data.
    Keywords: Dictator Game; Impure Altruism; Taking
    JEL: C91 D01 D64 H30 H41
    Date: 2013–04
  17. By: Konstantin Yanovsky (Gaidar Institute for Economic Policy); Sergey Shulgin (Russian Presidential Academy of National Economy and Public Administration)
    Abstract: In this paper we tested the hypothesis of the "political" basis for the "economic" rights. We constructed our own variables of political regimes' classification for years 1820-2000. We found significant positive interdependencies between the Democracy's indicators and Economic Growth. Protection of the Private property rights requires, first and foremost, due guaranties for the personal immunity as a key precondition. Power to arrest discretionary undermines any formal guaranties of private property, low taxation benefits etc. Personal immunity should be defended even for "unpleasant" person (say, H. Ford or W. Gates) or for the chieftains' challengers (to make "rights of the meanest … respectable to the greatest"). It means the free speech; religious freedom and other "political rights" should be respected. Democracy, as political competition system weakens governments' power to break personal freedoms and property rights.
    Keywords: Rule of Law, Rule of Force, Personal Rights, Private Property Protection, Economic Growth
    JEL: P16 P50 N40 O43
    Date: 2012

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