nep-hpe New Economics Papers
on History and Philosophy of Economics
Issue of 2013‒05‒22
thirteen papers chosen by
Erik Thomson
University of Manitoba

  1. Reconciling behavioural and neoclassical economics By Guilhem Lecouteux
  2. Individual judgments and social choice in Sen's idea of justice and democracy By Muriel Gilardone; Antoinette Baujard
  3. Sraffa's and Wittgenstein's Crossed Influences: Forms of Life and Snapshots By Richard Arena
  4. What remains of Sraffa's economics By Pier Luigi Porta
  5. Sic et Non: Contribution of Adam Smith to Public Economics By Frantisek Svoboda
  6. Coarse Correlated Equilibria in an Abatement Game By Herve Moulin; Indrajit Ray; Sonali Sen Gupta
  7. Belief free equilibria By Olivier Compte; Andrew Postlewaite
  8. Observable Implications of Nash and Subgame- Perfect Behavior in Extensive Games By Indrajit Ray; Susan Snyder
  9. Abstract Labour Theory of Value and Theory of Price By Samuel Jaramillo González
  10. The Robust Nash Equilibrium and Equilibrium Selection in 2x2 Coordination Games By Raul V. Fabella; Vigile Marie B. Fabella
  11. What niche did human cooperativeness evolve in? By Hannes Rusch
  12. Optimal Inequality behind the Veil of Ignorance By Liang, Che-Yuan
  13. Norms Make Preferences Social By Erik O. Kimbrough; Alexander Vostroknutov

  1. By: Guilhem Lecouteux (Department of Economics, Ecole Polytechnique - CNRS : UMR7176 - Polytechnique - X)
    Abstract: The representation of the individual in economics as a rational homo oeconomicus had been seriously questioned by the development of behavioural economics. Some authors nevertheless argue that economists do not need to produce complex models of human behaviour, since such investigation does not fall within the scope of economic analysis. We show that the mere definition of the scope of economic analysis is quite ambiguous, between on the one hand a conception of economics as a science of individual choice and on the other hand as a science of social institutions: this duality finds its origins during the marginalist revolution with Jevons, Menger and Walras, whose theories seem to be in conflict concerning the scope of economic analysis and the definition of the "economic man". Economists then produced two distinct models of this economic man, one as the simplification of a real individual, and the other as a representative agent. The figure of the homo oeconomicus developed later by Pareto homogenized these two traditions, leading to the indeterminacy of the scope of economic analysis and in fine to the development of behavioural economics. Since behavioural and neoclassical economics are the continuation of these two distinct traditions, we stress that they should be considered as complementary rather than substitute approaches to economic analysis.
    Keywords: homo oeconomicus, marginalist revolution, behavioural economics, economic man, rational choice theory.
    Date: 2013–05–02
  2. By: Muriel Gilardone (Normandie Université, UCBN, CREM (UMR CNRS 6211), France); Antoinette Baujard (Université de Lyon, UJM, GATE L-SE (UMR CNRS 5824), France)
    Abstract: The aim of this paper is to propose a conceptual reconstruction of Sen’s conception of individual judgments, through a back-and-forth analysis between his democratic theory of justice and social choice theory. Firstly, while this is never explicitly presented in Sen’s work, we highlight the importance of the three following elements in the characterization of judgments: position, objectivity and the sense of otherness. Once combined, these three conditions are necessary in order to characterize positional judgments, which, unlike individual preferences, are relevant for justice issues. Secondly, we identify two forces which, in Sen’s view, drive the evolution of such judgments: a widened informational basis and sentiments. This leads us to conclude that a relevant approach to communication, i.e., one which acknowledges the scope of positional judgments and the forces at the source of their evolution, is a third condition for a fruitful transformation of judgments. This last point constitutes, according to us, a missing element in Sen’s idea of justice.
    Keywords: Social choice theory, positional objectivity, democracy, individual judgments, justice
    JEL: A13 B21 D6 D71 I3
    Date: 2013–05
  3. By: Richard Arena
    Abstract: The purpose of this contribution is to investigate Sraffa’s and Wittgenstein’s mutual methodological and philosophical influences to try to point out how they reveal the possibility of an interpretation of Sraffa’s contribution to economics which differs from the most usual ones. The second part of this paper will consider how it is possible to read Production of Commodities by means of Commodities (PCMC) as an attempt to build a classical version of the theory of General Economic Equilibrium. Its third part will focus on the interpretation of Sraffa’s 1960 scheme in terms of “long-period positions”. In a fourth part, we will investigate the notions of “form of life” and “language game” in Wittgenstein post-Tractatus contributions, beginning to connect them to some developments included in Sraffa’s Unpublished Manuscripts. Finally, in the last part of this paper, we will show how these notions offer some similarities with an interpretation of Sraffa’s contribution in terms of morphological and comparative analysis of the economic foundations of surplus-based societies.
    Date: 2013–02
  4. By: Pier Luigi Porta
    Abstract: Recently the Cambridge Journal of Economics have launched a project on New Perspectives on the Work of Piero Sraffa in a Conference and a Special Issue of the Journal. "Almost two decades after the opening of the Sraffa Archives - the Introduction reads - and 50 years on from the publication of PCMC seemed an appropriate moment to reflect on ongoing debates on Sraffa's overall contribution to economics and, in particular, on the relevance of the opening of the Sraffa Archives in this regard. Does Sraffa's lasting contribution to economic analysis essentially remain limited to PCMC or is it taken beyond this by his unpublished writings? In the latter case, is it possible to identify a distinctive research project that Sraffa had in mind?". This paper discusses these problems and proposes an answer to both questions. It is argued that the opening of the Archives changes substantially the judgment that can be given of the intellectual legacy of Piero Sraffa. The contributions to the ongoing debate on Piero Sraffa's economics are discussed. It is argued that the publication of Sraffa's literary remains is the necessary step to make the debate more productive.
    Keywords: Sraffian economics, Structural economic dynamics
    JEL: A10 B12
    Date: 2013–05
  5. By: Frantisek Svoboda (Department of Public Economics, Masaryk University)
    Abstract: The work of Adam Smith is often interpreted as a justification of the natural order of economy, an apology which harmonizes individual and public interests. In addition to the concern for the economic system, Smith’s books comprise valuable passages in which the role of the state is explored within its both negative and positive implications. Generally, the corpus of his work includes three problem areas of fundamental importance for public economics. The first of these fields consists in the presentation of the tendency toward reciprocity as a significant trait of human behaviour. The second main topic constitutes a definition of the role of the State in economy, and it is based not only on the strictly economic assumption that the State ought to finance activities not profitable for a private person, but also on numerous exceptions. The third central issue then concerns the opportunism of individuals in its various forms. As the outlined topics are crucial for public economics, a further insight into Adam Smith’s ways of approaching them may be rewarding.
    Keywords: public economics, Adam Smith, reciprocity, opportunism, role of government, public policies
    JEL: B12 D63 H00
    Date: 2012–12
  6. By: Herve Moulin; Indrajit Ray; Sonali Sen Gupta
    Abstract: We consider coarse correlated equilibria - CCE - (Moulin and Vial 1978) for the well-analyzed abatement game (Barrett 1994) and prove that CCE can strictly improve upon the Nash equilibrium payoffs, while correlated equilibrium - CE - (Aumann 1974, 1987) cannot, because these games are potential games. We compute the largest feasible total utility in any CCE in those games: it is achieved by a CCE involving only two pure strategy profiles, and the efficiency gain is small.
    Keywords: Coarse correlated equilibrium, Abatement game
    JEL: C72 Q52
    Date: 2013–04
  7. By: Olivier Compte (Paris School of Economics); Andrew Postlewaite (Department of Economics, University of Pennsylvania)
    Abstract: The repeated game literature studies long run/repeated interactions, aiming to understand how repetition may foster cooperation. Conditioning future behavior on past play is crucial in this endeavor. For most situations of interest a given player does not directly observe the actions chosen by other players and must rely on noisy signals he receives about those actions. This is typically incorporated into models by defining a monitoring structure, that is, a collection of probability distributions over the signals each player receives (one distribution for each action profile players may play). Although this is simply meant to capture the fact that players don.t directly observe the actions chosen by others, constructed equilibria often depend on players precisely knowing the distributions, somewhat unrealistic in most problems of interest. This paper aims to show the fragility of belief free equilibrium constructions when one adds shocks to the monitoring structure in repeated games.
    Keywords: Repeated games, folk theorem, belief free, robustness
    JEL: C72 C73
    Date: 2013–05–10
  8. By: Indrajit Ray; Susan Snyder
    Abstract: We provide necessary and sufficient conditions for observed outcomes in extensive game forms, in which preferences are unobserved, to be rationalized first, weakly, as a Nash equilibrium and then, fully, as the unique subgame-perfect equilibrium. Thus, one could use these conditions to find that play is (a) consistent with subgame-perfect equilibrium, or (b) not consistent with subgame-perfect behavior but is consistent with Nash equilibrium, or (c) consistent with neither.
    Keywords: Revealed Preference, Consistency, Subgame- Perfect Equilibrium
    JEL: C72 C92
    Date: 2013–04
  9. By: Samuel Jaramillo González
    Abstract: The renewal of Marx's interpretation of capitalist society implies the recovery and development of his Theory of Value. The stream of thought known as Abstract Labour Theory of Value, or New Interpretation, proposes to do this, and points out that value is a category that is formed in the interaction between production and circulation (and not just in production, as the Ricardian conception). The theory of value exceeds a theory of price, but requires this piece of analysis that for now is underdeveloped. This paper aims to contribute to the task of constructing a price theory compatible with the abstract labor theory of value, and approaches this task in a simple commodity economy scheme.
    Date: 2013–03–11
  10. By: Raul V. Fabella (University of the Philippines School of Economics); Vigile Marie B. Fabella (Universitët Konstanz, Germany)
    Abstract: We propose an equilibrium concept, the Robust Nash equilibrium (RNE), that combines the best-reply rationality and the "first mover invariance" condition. The single-stage 2x2 symmetric information game G is transformed into sequential two-stage games with two sub-trees: STA has the row player starting and STB has the column player starting. A profile in G is robust if it is the strict SPNE of the two branches; it is ephemeral if it is not the SPNE of any branch. We show that every strict dominant strategy equilibrium of G is robust but not every strict Nash equilibrium of G is. We show further that every robust profile of G is always a strict Nash equilibrium of G. A Robust Nash equilibrium (RNE) of G is any robust profile of G. The RNE of G is unique. We show in particular that the payoff dominant strict Nash equilibrium of a coordination game G is RNE while the strictly payoff-dominated Nash equilibrium of G is ephemeral. The original Harsanyi-Selten preference for payoff dominance over risk dominance is supported by robustness without invoking collective rationality.
    Keywords: Nash Equilibrium
    JEL: C02 C72
    Date: 2012–10
  11. By: Hannes Rusch
    Abstract: The Prisoner’s Dilemma (PD) is widely used to model social interaction between un- related individuals in the study of the evolution of cooperative behaviour in humans and other species. Many effective mechanisms and promotive scenarios have been studied which allow for small founding groups of cooperative individuals to prevail even when all social interaction is characterised as a PD. Here, a brief critical discusion of the role of the PD as the most prominent tool in cooperation research is presented, followed by two new objections to such an exclusive focus on PD-based models of social interaction. It is highlighted that only 2 of the 726 combinatorially possible strategically unique ordinal 2x2 games have the detrimental characteristics of a PD and that the frequency of PD-type games in a space of games with random payoffs does not exceed about 3.5%. Although these purely mathematical considerations do not compellingly imply that the relevance of PDs is overestimated, it is proposed that, in the absence of convergent empirical information about the ancestral human social niche, this finding can be interpreted in favour of a so far rather neglected answer to the question of how the founding groups of human cooperation themselves came to cooperate: Behavioural and/or psychological mechanisms which evolved for other, possibly more frequent, social interaction situations might have been applied to PD- type dilemmas only later. Human cooperative behaviour might thus partly have begun as a cooptation.
    Keywords: cooperation, prisoner’s dilemma, cooptation, social niche, human evolution
    JEL: C73 D74 D79
    Date: 2013
  12. By: Liang, Che-Yuan (Department of Economics)
    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
  13. By: Erik O. Kimbrough (Simon Fraser Unviersity); Alexander Vostroknutov (SMaastricht University)
    Abstract: We develop a unifying explanation for prosocial behavior. We argue that people care not about others’ payoffs per se, but whether their own behavior accords with social norms. Individuals who are sensitive to norms will adhere to them so long as they observe others doing the same. A model formalizing this generates both prosociality (without relying on explicit distributional preferences) and well-known context effects (for which distributional preferences cannot account). A simple experiment allows us to measure individual-level normsensitivity and to show that norm-sensitivity explains heterogeneity in prosociality in public goods, dictator, ultimatum, and trust games.
    Keywords: experimental economics, norms, social preferences, reciprocity
    JEL: C91 C92 D03
    Date: 2013–05

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