nep-hpe New Economics Papers
on History and Philosophy of Economics
Issue of 2013‒07‒20
fifteen papers chosen by
Erik Thomson
University of Manitoba

  1. The Economic Complexity of Innovation as a Creative Response. By Antonelli, Cristiano
  2. Three Revolutions in Macroeconomics: Their Nature and Influence By David Laidler
  3. Economic Philosophy of Khewa Gul, an Unknown Tribal Economist of 18th Century By Gul, Ejaz
  4. Institutional Cognitive Economics: some recent developments By Gigante, Anna Azzurra
  5. Does economic prosperity bring about a happier society? Mathematical remarks on the Easterlin Paradox debate By Beja Jr, Edsel
  6. Individual Learning and Cooperation in Noisy Repeated Games By Yuichi Yamamoto
  7. Capital's Pons Asinorum: the Rate of Turnover in Karl Marx's Analysis of Capitalist Valorisation By Passarella, Marco; Baron, Hervé
  9. Does Debt Discipline Bankers? An Academic Myth about Bank Indebtedness By Anat Admati; Martin Hellwig
  10. Über Hayek und Keynes, spontane Ordnung und die Möglichkeit erfolgreicher Nachfragesteuerung: Versuch einer Teil-Synthese By Kroll, Matthias
  11. MIT Graduate Networks: the early years By Pedro Garcia Duarte
  12. Social Identity and Punishment. By Butler, Jerey V.; Conzo, Pierluigi; Leroch, Martin A.
  13. Debating the Responsibility of Capitalism in Historical and Global Perspective By Geoffrey G. Jones
  14. The Centennial Issue of the Discussion Papers in Economic and Social History By Rui Esteves
  15. From the Bank Panic of 1907 to the Great Depression of 1929 and the Savings and Loan Crisis of the 1980s: Lessons for the future By Trompatzi, Georgia; Metaxas, Theodore

  1. By: Antonelli, Cristiano (University of Turin)
    Abstract: Evolutionary economics has finally recognized the limits of biological analogies and is now able to apply the tools of complexity analysis. A better appreciation of the Schumpeterian legacy can help building better foundations to this new phase of evolutionary economics. The paper uncovers the merits of the essay “The creative response in economic history” published by Joseph Alois Schumpeter in the Journal of Economic History in 1947 and forgotten since then. The correct appreciation of this Schumpeterian contribution is important not only to better understand the evolution of Schumpeter’s thinking but also to elaborate a more inclusive and robust framework able to integrate the contributions of the Classical School and the Marshallian traditions as well as the tools of historical economics so as to implement the new emerging evolutionary complexity.
    Date: 2013–05
  2. By: David Laidler (University of Western Ontario)
    Abstract: Harry Johnson’s 1971 ideas about the factors affecting the success of the Keynesian Revolution and the Monetarist Counter-revolution are summarised and extended to the analysis of the Rational Expectations - New Classical (RE-NC) Revolution. It is then argued that, whereas Monetarism brought about a revival of the quantity theory of money from the limbo into which Keynesianism had pushed it, RE-NC modelling was responsible for that theory’s most recent disappearance. This happened despite the fact that, initially, RE-NC economics appeared to be a mainly technical extension and refinement of Monetarism, rather than a radically new economic doctrine. Some implications of this story for todays’ macroeconomics are briefly discussed.
    Keywords: Keynesianism, Monetarism, Rational expectations New Classical economics Quantity Theory; Money; Velocity; Monetary policy; Inflation; Unemployment; Business cycle; Phillips curve
    JEL: B21 E31 E41 E52
    Date: 2013
  3. By: Gul, Ejaz
    Abstract: While the 18th Century economics is generally characterized by economic philosophy of Adam's Smith, its effects could not fully reach the tribal region of Pakistan. This region has a centuries old history. Far from the modern world, people living in these tribal areas had their own rules of life, social norms and traditions. They had their own laws of economics. Exchange of goods for services was very convenient for them as the real money did not exist. The economics related to construction engineering was one of their expert areas. Khewa Gul was an elder of the tribal society from Naryab (a mountainous area in the north of Pakistan). He was very wise and genius person. He was born on 13 March 1736 and died in 1793. He could not get formal education as it was non existent in the mountains of tribal region. However, he had the urge to guide people with his economic thoughts and philosophy. At the age of 16, he started telling people where they should construct homes and other building and which places were to be avoided for construction due to economic and technical reasons. He strongly believed that in every endevour of human, economics should be considered. He can truly be called as the unknown economic philosopher of 18th Century. His used to say that selection of promising site for construction is essential since it has strong linkage with service life of the project. He created maps which showed the most suitable sites for construction from economics and technical point of view. Since, no printing and reproduction facility was available at that time; he drew sketches and maps on the trees, lather sheets and stones. This research is about validation of an economic suitability map created by Khewa Gul in 18th Century to ascertain whether the map produced by him in 18th Century is correct and valid in 21st Century or not. The area represented in the map is located in Naryab, Pakistan. A detailed research methodology was adopted for this validation. First the soil strength was calculated at few selected points of study area, from which a geotechnical suitability map was prepared for the study area. Similarly, basing on tangible factors like cost of material, soil improvement, labour, maintenance requirements and transportation of material to the site, an economic model was developed for economic evaluation of the site. From this evaluation as economic suitability map was prepared for the study area. Surprisingly, there was close similarity between site suitability map produced by Khewa Gul in 18th Century and geotechnical and economic suitability maps produced after research in 21st Century. This research paper truly presents a valuable and interesting study on economic philosophy and vision of the people in 18th Century.
    Keywords: Economic, philosophy, site suitability, map, 18th Century, 21st Century, similarities
    JEL: L74 R14
    Date: 2013–07–16
  4. By: Gigante, Anna Azzurra
    Abstract: By investigating the connection between mind working and institutional processes, Institutional Cognitive Economics turns out to be the most appropriate in order to overcome some limits in New Institutional Economics. This leads us to develop further this approach. This paper integrates F. Hayek’s theory on knowledge production and A. Bandura’s social cognitive theory with the fertile contributions coming from Self-Organization approach and cognitive path-dependence, by considering also the recent cognitive acquisitions in D. North’s analysis. Then, it proposes a further development. Learning process is broken into smaller sub-processes, each of them is investigated through new analytical tools coming from cognitive psychology and neurobiology. They are T. Higgins’s extension of social cognitive theory and semantic priming concept. These mechanisms clarify well reinforcement and evolution processes of institutional norms, while their genesis finds a convincing explanation in social representations’ theory, as it was formulated by S. Moscovici, which investigates the imaginative dimension ordering perceived data before they are processed into new knowledge.
    Keywords: cognitive path-dependence; institutions; knowledge activation/use; semantic priming; social cognitive theory; social representation.
    JEL: A12 B25
    Date: 2013–07–15
  5. By: Beja Jr, Edsel
    Abstract: The Easterlin Paradox—the perceived absence of a relationship between economic progress and happiness—is one of the most important continuing debates in economics. Yet, both sides of the extant debate are anchored on valid mathematical arguments. The preponderance of evidence is therefore necessary to resolve the Easterlin Paradox.
    Keywords: Easterlin Paradox; economic growth; income; time; happiness
    JEL: A1 B40 C02 D00 E0 E00 I30 O40
    Date: 2013–07–12
  6. By: Yuichi Yamamoto (Department of Economics, University of Pennsylvania)
    Abstract: We investigate whether two players in a long-run relationship can maintain cooperation when the details of the underlying game are unknown. Specifically, we consider a new class of repeated games with private monitoring, where an unobservable state of the world influences the payoff functions and/or the monitoring structure. Each player privately learns the state over time but cannot observe what the opponent learned. We show that there are robust equilibria in which players eventually obtain payoffs as if the true state were common knowledge and players played a “belief-free” equilibrium. We also provide explicit equilibrium constructions in various economic examples
    Keywords: repeated game, private monitoring, incomplete information, belief-free equilibrium, ex-post equilibrium, individual learning
    JEL: C72 C73
    Date: 2013–07–06
  7. By: Passarella, Marco; Baron, Hervé
    Abstract: This article aims to shed light on the role played by the ‘rate of turnover’ of capital within the Marxian analysis of the working laws of capitalism. Oddly enough, that concept has been neglected by the most part of Karl Marx’s scholars and exegetes, as is demonstrated proved by the small number of scientific works dealing with it. Yet, the rate of turnover plays a crucial role in Marx’s economic thought, since it allows Marx to address the impact of the improvement in finance, transportation and means of communication on the capitalist process of creation (and realization) of surplus-value. As we are going to show, the new manuscripts from the MEGA2 philological edition of Marx’s writings may provide some useful insights. Against this background, the goal of the paper is twofold: first, to bridge the gap in the literature concerning the economic thought of Marx; second, to provide a rigorous (and general) definition of the notion of the ‘rate of turnover’ of capital. This will also allow us: to redefine the concept of the ‘annual rate of profit’; to define a new linked concept – that is, the ‘temporal composition of capital’; and to add a further element in the debate on the counter-tendencies to the law of the tendential fall in the general rate of profit.
    Keywords: Marxian Economics, Turnover of Capital, Financialization
    JEL: B24 B51 E11
    Date: 2013–05–20
  8. By: Marilda Sotomayor
    Abstract: Aiming to obtain new characterizations for the concepts of core, cooperative equilibrium and competitive equilibrium, and new correlations among these concepts, we introduce labor time into the assignment game. Two many-to-many matching models are obtained, distinguished by the nature of the agreements - rigid and flexible. An example illustrates that the characteristic function form does not always fully represent the cooperative structure of the two markets. Two different notions of demand correspondence generate distinct sets of competitive equilibrium allocations. The connection between the cooperative structures of both markets and the cooperative and competitive structures of each market is established through five cooperative solution sets proved to be non-empty, distinct and correlated by the set inclusion - one set is a superset of the next: the maximal set is the core; the second one characterizes the cooperative equilibria for the rigid market; the third set characterizes the cooperative equilibria for the flexible market; the other two sets characterize the competitive equilibrium allocations for the two competitive markets.
    Keywords: stable allocations, core, competitive equilibrium allocations, feasible
    JEL: C78 D78
    Date: 2013–02–19
  9. By: Anat Admati; Martin Hellwig
    Abstract: Supplementing the discussion in our book The Bankers' New Clothes: What's Wrong with Banking and What to Do About It, this paper examines the plausibility and relevance of claims in banking theory that fragility of bank funding is useful because it imposes discipline on bank managers. The assumptions about information and about costs of bank breakdowns underlying these claims are unrealistic and they cannot be generalized without undermining the theory and policy prescriptions. The discipline narrative is also incompatible with the view that deposits and other forms of short-term bank debt contribute to liquidity provision; in this liquidity narrative, fragility of banks are a by-product of useful liquidity provision and can only be avoided by government support. We contrast both narratives with an explanation for banks' avoidance of equity and reliance on short-term debt that appeals to debt overhang and government guarantees and subsidies for debt. In this explanation, fragility of banks arises from a conflict of interest and is neither useful for society nor unavoidable.
    Date: 2013–02–12
  10. By: Kroll, Matthias
    Abstract: [Schlussbetrachtung] Ziel dieser Arbeit war es nicht, aus Hayek einen verkappten Keynesianer zu machen oder aus Keynes einen heimlichen Neoliberalen (was schon deshalb Unsinn wäre, weil die originäre Wortschöpfung 'neoliberal' erst 1947, ein Jahr nach Keynes Tod, entstand). Das Ziel der Arbeit war es zu zeigen, dass die wesentlichen wirtschaftstheoretischen Aussagen des 'Ökonomen' Hayek mit einer expansiven staatliche Nachfragepolitik in Einklang gebracht werden können, auch wenn der 'Ideologe' Hayek dieses Ergebnis sicher nur ungern akzeptiert hätte. Ebenso war es Ziel dieser Arbeit herauszuarbeiten, dass Keynes bei seinen Vorstellungen von Nachfragepolitik nicht zwingend von einer dirigistischen staatlichen Investitionslenkung ausging. Diese Vorstellung hat sich eher in der nach keynesschen Interpretation entwickelt und wurde dann von marktliberaler Seite als Beweis für eine Untauglichkeit jeder staatlichen Nachfragepolitik gewertet. --
    Date: 2013
  11. By: Pedro Garcia Duarte
    Abstract: After World War II economists acquired increasing importance in the American society in general. Moreover, the production of economics PhDs in the United States increased substantially and became a less concentrated industry. This period witnessed also the reformulation of the graduate education in economics in the US, informed by the several changes that were occurring in economics: its mathematization, the neoclassicism, the advancement of econometrics, the “Keynesian revolution”, and the ultimate Americanization of economics. The centrality that the MIT graduate program acquired in the postwar period makes it an important case study of the transformation of American economics more generally. Therefore, my aim here is to scrutinize the formative years of the PhD program, mostly the 1940s and 1950s.
    Keywords: MIT Economics Department, MIT PhD Program, Paul Samuelson, Robert Solow
    JEL: B20 B29 A23
    Date: 2013–07–12
  12. By: Butler, Jerey V.; Conzo, Pierluigi; Leroch, Martin A. (University of Turin)
    Abstract: Third party punishment is crucial for sustaining cooperative behavior. Still, little is known about its determinants. In this paper we use laboratory experiments to investigate a long-conjectured interaction between group identication and bystanders' punishment preferences using a novel measure of these preferences. We induce minimal groups and give a bystander the opportunity to punish the perpetrator of an unfair act against a defenseless victim. We elicit the bystander's valuation for punishment in four cases: when the perpetrator, the victim, both or neither are members of the bystander's group. We generate testable predictions about the rank order of punishment valuations from a simple framework incorporating group-contingent preferences for justice which are largely conrmed. Finally, we conduct control sessions where groups are not induced. Comparing punishment across treatment and control suggests that third-party punishers tend to treat others as in-group members unless otherwise divided.
    Date: 2013–05
  13. By: Geoffrey G. Jones (Harvard Business School, General Management Unit)
    Abstract: This working paper examines the evolution of concepts of the responsibility of business in a historical and global perspective. It shows that from the nineteenth century American, European, Japanese, Indian and other business leaders discussed the responsibilities of business beyond making profits, although until recently such views have not been mainstream. There was also a wide variation concerning the nature of this responsibility. This paper argues that four factors drove such beliefs; spirituality, self-interest; fears of government intervention; and the belief that governments were incapable of addressing major social issues.
    Date: 2013–07
  14. By: Rui Esteves (Dept of Economics, University of Oxford, UK)
    Abstract: TOn the occasion of the hundredth issue of the Discussion Papers, this special number contains reflections on the past and future of economic and social history at Oxford and in general. Five scholars, who have been associated with the subject at Oxford, contribute with personal reflections on this topic. Two introductory studies survey the record of the Discussion Papers and the history of the discipline at Oxford, focussing on the organisation of the teaching at the undergraduate and graduate levels and on the research lineages initiated by the faculty in post since the war.
    Date: 2013–07–15
  15. By: Trompatzi, Georgia; Metaxas, Theodore
    Abstract: This paper goes over three big crises with a global resonance which took place in the American economy during the 20th century. Namely, the Bank Panic of 1907, the Great Depression of 1929 and the Savings and Loan Crisis of the 1980s are examined. The paper lists the major events during the crises in question and probes the causes, consequences and ways through which each crisis was attempted to be encountered. Through this examination, useful lessons to be learned and fatal mistakes to be avoided arise.
    Keywords: Bank Panic, Global Economic Crisis, Great Depression, Savings and Loan Debacle
    JEL: G01
    Date: 2013

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