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on History and Philosophy of Economics |
| By: | Drakopoulos, Stavros A.; Katselidis, Ioannis |
| Abstract: | Although most of the marginalist economists’ methodology was influenced by 19th century classical physics, the work of second generation marginalist Francis Ysidro Edgeworth represents the highest point of classical physics influence to the development of mainstream economic methodology. Edgeworth’s close parallelism between celestial and social mechanics expressed in his analogies between utility and energy and the principle of utility maximization to maximum energy, are important indications of the physics scientific ideal for economics. Subsequent leading theorists were not as explicit, although economic theory continued to be influenced by physics scientific ideal as the work of Pareto, Fisher and Samuelson indicates. However, the physics methodological framework has made a recent reappearance in the relatively new field of econophysics. Although there are methodological similarities, there are also important differences between mainstream economics and econophysics. Econophysicists’ emphasis to statistical mechanics rather to mechanical models, their reservations towards rational agent theory and their rejection of many standard assumptions of mainstream economics, are examples of such differences. This might also explain the resistance of mainstream economic theorists to incorporate econophysics into economics. The paper examines the above from a methodological viewpoint. It also discusses the possible reasons for this historical development and its implications for economic methodology. |
| Keywords: | Economic Method, Econophysics, Edgeworth |
| JEL: | A12 B00 B40 |
| Date: | 2013–05 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:46975&r=hpe |
| By: | Matthijs van Veelen (University of Amsterdam); Julian Garcia (Max-Planck-Institute for Evolutionary Biology) |
| Abstract: | We explore evolutionary dynamics for repeated games with small, but positive complexity costs. To understand the dynamics, we extend a folk theorem result by Cooper (1996) to continuation probabilities, or discount rates, smaller than 1. While this result delineates which payoffs can be supported by neutrally stable strategies, the only strategy that is evolutionarily stable, and has a uniform invasion barrier, is All D. However, with sufficiently small complexity costs, indirect invasions - but now through 'almost neutral' mutants - become an important ingredient of the dynamics. These indirect invasions include stepping stone paths out of full defection. |
| Keywords: | repeated games, evolutionary game theory, complexity costs, indirect invasions, robustness against indirect invasions, neutrally stable strategy, evolutionarily stable strategy, iterated prisoners dilemma |
| JEL: | C73 |
| Date: | 2012–09–06 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:uvatin:2012089&r=hpe |
| By: | Giuseppe De Marco (Università di Napoli Parthenope and CSEF); Maria Romaniello (Seconda Università di Napoli) |
| Abstract: | In this paper, we look at the (Kajii and Ui) mixed equilibrium notion, which has been recognized by previous literature as a natural solution concept for incomplete information games in which players have multiple priors on the space of payoff relevant states. We investigate the problem of stability of mixed equilibria with respect to perturbations on the sets of multiple priors. We find out that the (Painlevé-Kuratowski) convergence of posteriors ensures that stability holds; whereas, convergence of priors is not enough to obtain stability since it does not always implies convergence of posteriors when we consider updating rules (for multiple priors) based on the classical Bayesian approach. |
| Keywords: | Incomplete information games, multiple priors, equilibrium stability |
| Date: | 2013–05–13 |
| URL: | http://d.repec.org/n?u=RePEc:sef:csefwp:332&r=hpe |
| By: | Ojo, Marianne |
| Abstract: | To what extent can monetary and financial crises and cycles be explained through economic theories? This paper is aimed at highlighting why a reliance on economic theories may be necessary given certain flaws which have been revealed from the recent Financial Crisis. Namely, that economic and legal foundations of financial stability cannot always be considered to be credible. Further, the paper aims to accentuate on why despite the valid argument (that a reference to economic theories may be required to explain causalities of financial and monetary crises), causalities could also be explained from other perspectives – even though these perspectives may sometimes, not be as accurate. |
| Keywords: | Theory of Economic Time (TET); Efficient Markets Hypothesis; financial stability; Currency Theory; Euro crisis; Austrian, Keynesian or Quantitativist-monetarist; Random Walk Theory |
| JEL: | E3 E5 E52 E58 K2 M4 |
| Date: | 2013–05–11 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:46911&r=hpe |
| By: | Anita Kopanyi-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: | prisoner's dilemma, cooperation, endogenous punishment |
| JEL: | D03 D81 D83 |
| Date: | 2012–12–04 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:uvatin:2012132&r=hpe |
| By: | Rene van den Brink (VU University Amsterdam); Jean-Jacques Herings (Maastricht University); Gerard van der Laan (VU University Amsterdam); Dolf Talman (Tilburg University) |
| Abstract: | In the literature various models of games with restricted cooperation can be found. In those models, instead of allowing for all subsets of the set of players to form, it is assumed that the set of feasible coalitions is a proper subset of the power set of the set of players. In this paper we consider such sets of feasible coalitions that follow from a permission structure on the set of players, in which players need permission to cooperate with other players. We assume the permission structure to be an oriented tree. This means that there is one player at the top of the permission structure and for every other player there is a unique directed path from the top player to this player. We introduce a new solution for these games based on the idea of the Average Tree value for cycle-free communication graph games. We provide two axiomatizations for this new value and compare it with the conjunctive permission value. |
| Keywords: | TU game, restricted cooperation, permission structure, Shapley value, Average Tree value, axiomatization |
| JEL: | C71 |
| Date: | 2012–01–24 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:uvatin:2012023&r=hpe |
| By: | Michael D. Bordo; Angela Redish |
| Abstract: | The international gold standard of the late nineteenth century has been described as a system of ‘spontaneous order’, capturing the idea that its architects at the time were fashioning domestic monetary systems which created a system of fixed exchange rates almost as a by-product. In contrast the framers of the Bretton Woods System were intentional in building an international monetary system and so it is by advocates of designing an international monetary order. In this paper we examine the transition from spontaneous order circa 1850 to designed system and then back towards spontaneous order in the late twentieth century, arguing that it is an evolution with multiple stops and starts, and that the threads that underlie the general tendency through these hesitations are the interplay between monetary and fiscal factors and the evolution of the financial system. This transformation is embedded within deep evolving political fundamentals including the rise of democracy, nationalism, fascism and communism and two world wars. |
| JEL: | E00 N1 |
| Date: | 2013–05 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:19026&r=hpe |
| By: | Philip J. Grossman; Mana Komai |
| Abstract: | We report results from a multi-period game designed to stimulate feelings of envy. There are a number of important features of our game that distinguish it from previous games used to examine envy. A unique and important feature of our design is that it addresses the two negative effects of envy: the wasteful expenditure of resources in an attempt to harm others and the wasteful use of resources by those envied in an attempt to protect themselves. We find that as wasteful as attacks are, spending on protection against attacks, while individually rational, results in even more waste. Players purchase insurance at twice the rate of attacks. Our multiperiod game permits us to examine how subjects' behaviour motivated by envy or the threat of envious actions changes over time. We report evidence consistent with players learning that envious feelings are wasteful and are less satisfying than the foregone monetary rewards. |
| Keywords: | anti-social preferences, envy, insurance |
| JEL: | C91 D6 |
| Date: | 2013–05 |
| URL: | http://d.repec.org/n?u=RePEc:mos:moswps:2013-01&r=hpe |
| By: | Greif, Avner (Stanford University); Iyigun, Murat (University of Colorado, Boulder) |
| Abstract: | This paper examines the evolving effects of England's Old Poor Law (1601-1834). It establishes that poor relief reduced social unrest from around the late-17th century through the turn of the 19th century, at which point it began to spur population growth and its social stability effects dissipated. These conclusions are based on a new dataset encompassing 39 English counties from 1650 to 1815. It includes observations on the amount of poor relief offered, occurrences of food riots and other types of social unrest, population growth and a host of other variables. The paper first documents that county-level variations in poor relief had a statistically significant and quantitatively meaningful non-monotonic impact on population growth. Aid to the poor reduced population growth through the 1780s or 1820s when it began to exert significantly positive effects. Moreover, the Old Poor Law reduced food riots in the late-17th century and through most of the 18th century, but this effect dissipated in the early 19th century when poor relief began to generate population growth. Our analyses, thus, establish that the Old Poor Law fostered social order and stability for more than a century after which the Malthusian income effects dominated. |
| Keywords: | social institutions, Malthus, social stability, economic development |
| JEL: | N0 N33 O10 |
| Date: | 2013–05 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp7398&r=hpe |
| By: | Eduard J. Bomhoff; Grace Lee Hooi Yean |
| Keywords: | social capital, general trust, in-trust/out-trust, civicness |
| Date: | 2013–05 |
| URL: | http://d.repec.org/n?u=RePEc:mos:moswps:2013-04&r=hpe |