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on History and Philosophy of Economics |
| By: | Brian S. Ferguson (Department of Economics, University of Guelph) |
| Abstract: | This paper puts John Maynard Keynes’ "The General Theory of Employment, Interest and Money" into its historical context, both in terms of economic history and in terms of the history of economics. It discusses the post-World War I period as background to the General Theory, looks at the influence of other economists of the period on the evolution of Keynes’ thought and considers the parallels between the post-World War period and the post-Napoleonic War period, when Ricardo and Malthus were debating issues very similar to the ones with which Keynes was wrestling. |
| Keywords: | Keynes, General Theory, Keynesian Economics, Classical Economics, Great Depression, Macro Modelling, Hawtrey, Pigou, |
| JEL: | B10 B12 B13 B22 B31 E12 N12 N14 |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:gue:guelph:2013-06&r=hpe |
| By: | Kliman, Andrew; Freeman, Alan; Potts, Nick; Gusev, Alexey; Cooney, Brendan |
| Abstract: | Michael Heinrich’s recent Monthly Review article claims that the law of the tendential fall in the rate of profit (LTFRP) was not proved by Marx and cannot be proved. Heinrich also argues that Marx had doubts about the law and that, for this and other reasons, his theory of capitalist economic crisis was only provisional and more or less in continual flux. This response shows that Heinrich’s elementary misunderstanding of the law––his belief that it is meant to predict what must inevitably happen rather than to explain what does happen––is the source of his charge that it is unproved. It then shows that a simple misreading of Marx’s text lies at the basis of Heinrich’s claim that the simplest version of the LTFRP, “the law as such,” is a failure. Marx’s argument that increases in the rate of surplus-value cannot “cancel” the fall in the rate of profit is then defended against Heinrich’s attempt to refute it. Finally, the paper presents evidence that Marx was indeed convinced that the LTFRP is correct and that he regarded the crisis theory of volume 3 of Capital as finished in a theoretical sense. |
| Keywords: | Crisis Theory;Marxist Economics;TSSI;Rate of Profit |
| JEL: | B4 E0 E22 |
| Date: | 2013–07–22 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:48535&r=hpe |
| By: | Yefimov, Vladimir |
| Abstract: | The profession of economics does not fulfill its social function to provide people a correct understanding of economic phenomena. In other words, the institution of economics does not work properly. George Soros makes this conclusion in his lectures at the Central European University (Soros, 2010). He sponsored the creation of the Institute for New Economic Thinking (INET) with the objective to change this situation in economics. However activities of the INET are not oriented to change the institution of economics and most of participants in its activities are mainstream economists. This short paper summarizes my ideas in what way it is necessary to change the institution of economics. First, in order to make the profession of economists socially useful, it is necessary to reconsider the methodology and history of economics. At present the former leads the profession in a wrong way and the latter to a great extent justifies this wrong way. Secondly, it is necessary to reform the institution of economics. I define the notion of institution in the following way: an institution is a set of formal and informal rules, and also beliefs, that stand behind these rules, that orient the behaviour of members of a certain community. The rules of the institution of economics relate to the community of university professors and students of economics. These rules provide a framework for developing curricula and syllabi, as well as for the organization of examinations. They define the procedures and directions of economic research, and the criteria for publication of articles in academic economic journals. These rules include formal and informal rules of functioning of professional organizations of economists, such as the American Economic Association. Beliefs that underlie the rules of functioning of the community of academic economists are expressed in different answers to such questions as: What does it mean to undertake economic research? What is the purpose of economic research? What should economists study? How should they carry out the study? In what form should the results of the study be presented? What does it mean to teach economics? What kind of economics should we teach? The answers to these questions, along with formal and informal rules of behaviour based on the answers, together constitute the institutional knowledge of professional economists. Candidates for admission to the profession acquire most of this knowledge during the preparation and defense of PhD dissertations that many do in the framework of post-graduate studies. If someone becomes a member of the profession and does not have this knowledge, or refuses to follow its instructions, then sooner or later she/he will be rejected by the profession. To reform the profession of economists means to reform the institution of economics, i.e. to change their rules and beliefs. I think that the only way for economics to become a socially useful science is the transformation of economics from a kind of applied mathematics (mainstream economics) or social philosophy (heterodox economics) to something similar to social anthropology with its ethnographic method justified in the framework of the constructivist discursive methodology. The methodology that I prone can be expressed very shortly in the following way. The social-economic regularities result from the fact that people behave according to certain socially-constructed rules, and these rules are explained, justified, and kept in mind by telling themselves and others some stories. Taking this statement into consideration, we must agree with the fact that for the identification of social-economic regularities, we must explore and analyse these stories. Modern economics does not study the discourses of economic actors and thereby deprive itself of the ability to understand and predict economic phenomena. The study of discourse is not a deviation from the academic standards which are built into natural sciences, but rather an approximation to it, since almost all social interactions are mediated by language. |
| Keywords: | institution of economics, radical reform of the economic discipline, manipulative and cognitive functions of economics, new model of scientific research, interpretive paradigm (discursive economics) |
| JEL: | A11 A13 B4 B41 |
| Date: | 2012–03–12 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:48482&r=hpe |
| By: | Philippe Bich (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris); Rida Laraki (Ecole Polytechnique - Ecole Polytechnique, IMJ - Institut de Mathématiques de Jussieu - CNRS : UMR7586 - Université Pierre et Marie Curie (UPMC) - Paris VI - Université Paris VII - Paris Diderot) |
| Abstract: | New relaxations of the Nash equilibrium concept are shown to exist in any strategic game with discontinuous payoff functions. The new concepts are used (1) to show the equivalence between Reny's better-reply security condition [28] and Simon-Zame's endogenous tie-breaking rule equilibrium concept [32], (2) to obtain conditions for the existence of approximated equilibria in a class of discontinuous games that naturally extends Reny's better-reply secure games, and (3) to show the existence of approximated equilibria in a large family of two-player games that contains all standard models of auctions. |
| Keywords: | Discontinuous games, better-reply security, sharing-rule equilibrium, approximated equilibrium, strategic approximation, auctions, diagonal games. |
| Date: | 2013–07–18 |
| URL: | http://d.repec.org/n?u=RePEc:hal:cesptp:hal-00846143&r=hpe |
| By: | L.C. Blanco; M. Mitka; K.Mumford; J. Roman |
| Date: | 2013–07 |
| URL: | http://d.repec.org/n?u=RePEc:yor:yorken:13/16&r=hpe |
| By: | Michał Gradzewicz (National Bank of Poland); Krzysztof Makarski (National Bank of Poland, Warsaw School of Economics); Joanna Tyrowicz (National Bank of Poland, Warsaw School of Economics; Faculty of Economic Sciences, University of Warsaw) |
| Abstract: | Has the crisis indeed demonstrated that as profession we are misled by the beauty of the mathematical models and the only useful, workable solutions at hand were provided in early 1930s? The objective of this paper is to provide a review of the current state-of-the-art literature from the perspective of its usefulness in the context of economic crises. We argue that although economists might be unable to answer many questions or to “predict” crises, the path the profession is following is approaching the operational ability to provide useful policy guidance in the context of business cycles. Analysing the state of economics after the crisis it is argued that ability to answer these questions relies critically on the development of better models with micro-foundations. Already existing and promising directions for future research are discussed. |
| Keywords: | financial crisis, economic modelling, micro-foundations |
| JEL: | B22 B40 D10 E61 |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:war:wpaper:2013-17&r=hpe |
| By: | Lombardi, Michele; Miyagishima, Kaname; Veneziani, Roberto |
| Abstract: | This paper analyses the implications of classical liberal and libertarian approaches for distributive justice in the context of social welfare orderings. An axiom capturing a liberal non-interfering view of society, named the Weak Harm Principle, is studied, whose roots can be traced back to John Stuart Mill's essay On Liberty. It is shown that liberal views of individual autonomy and freedom can provide consistent foundations for social welfare judgements, in both the finite and the infinite context. In particular, a liberal non-interfering approach can help to adjudicate some fundamental distributive issues relative to intergenerational justice. However, a surprisingly strong and general relation is established between liberal views of individual autonomy and non-interference, and egalitarian principles in the Rawlsian tradition. |
| Keywords: | Liberal principles, maximin, intergenerational equity, infinite utility streams. |
| JEL: | D0 D01 D6 D60 D63 D7 D70 Q01 |
| Date: | 2013–07 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:48458&r=hpe |
| By: | Roy Grieve (Department of Economics) |
| Abstract: | We investigate Adam Smith’s analysis of the properties of what he called “productive†- as against “unproductive†- labour, a concept which commentators have frequently found problematic. Puzzles have been noted and inconsistency alleged. A question arises – did Smith confuse two different concepts of productive labour? We believe that, despite the apparent problems, a coherent reading of Smith’s account of productive and unproductive labour is in fact possible: if “productive labour†is understood to refer comprehensively to labour which not only maintains but, through producing a net surplus, adds to the community’s stock of wealth – as regards either the financial or the real resources which make possible economic growth – the difficulties with Smith’s treatment largely disappear. |
| Keywords: | Productive/unproductive labour; basic/non-basic goods; surplus production |
| JEL: | B12 E11 O11 |
| Date: | 2013–05 |
| URL: | http://d.repec.org/n?u=RePEc:str:wpaper:1304&r=hpe |
| By: | Lisa Bruttel; Tim Friehe |
| Abstract: | This paper presents results from an experiment studying a two-person 4x4 pure coordination game. We seek to identify a labeling of actions that induces subjects to select all options with the same probability. Such a display of actions must be free from salient properties that might be used by participants to coordinate. Testing 23 different sets of labels, we identify two sets that produce a distribution of subjectsÕ choices which approximate the uniform distribution quite well. Our design can be used in studies intending to compare the behavior of subjects who play against a random mechanism with that of participants who play against human counterparts. |
| Keywords: | coordination game, experiment, mixed strategy, level k |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:twi:respas:0083&r=hpe |
| By: | Ezra Einy (Department of Economics, Ben-Gurion University of the Negev, Israel); Ori Haimanko (Department of Economics, Ben-Gurion University of the Negev, Israel); Diego Moreno (Departamento de Economia, Universidad Carlos III de Madrid.); Aner Sela (Department of Economics, Ben-Gurion University of the Negev. Israel); Benyamin Shitovitz (Department of Economics, University of Haifa) |
| Abstract: | Under standard assumptions about players'cost functions, we show that a Tullock contest with asymmetric information has a pure strategy equilibrium. Next we study Tullock contests in which players have a common value and a common state-independent linear cost function. A two-player contest in which one player has an information advantage has a unique equilibrium. In equilib- rium both players exert the same expected effort, and although the player with an information advantage wins the prize with probability less than one-half, his payoff is greater or equal to that of his opponent. When there are more than two players in the contest, having information advantage leads to higher payoffs, but the other properties of equilibrium no longer hold. |
| JEL: | C72 D44 D82 |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:bgu:wpaper:1303&r=hpe |
| By: | Jianpei Li; Paul Schweinzer |
| Abstract: | We study the incentives of noncooperative players to play a cooperative game. That is, we look for individually rational, redistributive, pre-game agreements enacted in order to coordinate towards efficient equilibrium play. Contrasting with standard Nash equilibrium analysis, we assume that players can commit to the agreements they negotiate and that utility is verify and transferable. We show that agreeing on a proportional-exponential redistribution rule is individually rational and implements the socially efficient outcome as Nash equilibrium. Moreover, we show that this class of redistributional contracts may be naturally obtained as the outcome of Nash bargaining. |
| Keywords: | Redistribution, Efficiency, Social contract |
| JEL: | C72 D62 D71 |
| Date: | 2013–07 |
| URL: | http://d.repec.org/n?u=RePEc:yor:yorken:13/19&r=hpe |
| By: | Skouras, Thanos; Kitromilides, Yiannis |
| Abstract: | The appeal of the microfoundations project in economics is strongly supported by the considerable force of the discipline's "hard core" (in Lakatos' sense). This is especially the case, if the microfoundations metaphor is seen as a way of giving precedence to microeconomics in unifying economic theory rather than as requiring that all macroeconomic propositions are reduced to or derived from microeconomic ones. Given the micro-theoretical nature of the "hard core", the microfoundations project and professional respect for the "hard core" have become closely intertwined and the orientating and disciplining role of the latter is of crucial importancε in driving the former. Thus, questioning the microfoundations project is tantamount to confronting the "hard core". Maximization of utility and maximization of profit, which are the two most fundamental tenets of the "hard core", both suffer from serious weaknesses. Maximization of utility is not only contradicted by a lot of experimental and other empirical evidence but it is also neither necessary nor sufficient for establishing the "law" of demand. Profit maximization is falsified both on theoretical and empirical grounds, in the case of large corporations under managerial control, and is inconsistent or implausible in the case of small owner-run firms. Consequently, privileging micro over macro theory does not ensure sound foundations and the microfoundations project makes little sense. It follows that the search for consistency between microeconomics and macroeconomics should best be pursued in terms of the bridge metaphor. |
| Keywords: | microfoundations, "hard core", utility maximization, profit maximization, methodological individualism, fallacy of composition, "unity of science", professionalization of economics |
| JEL: | A14 B41 D01 |
| Date: | 2013–07–08 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:48372&r=hpe |
| By: | Holger Herz; Dmitry Taubinsky |
| Abstract: | People's desire for fair transactions can play an important role in negotiations, organizations, and markets. In this paper, we show that markets can also shape what people consider to be a fair transaction. We propose a simple and generally-applicable model of path-dependent fairness preferences, in which past experiences shape preferences, and we experimentally test the model's predictions. We find that previous exposure to competitive pressure substantially and persistently reduces subjects' fairness concerns, making them more likely to accept low offers. Consistent with our theory, we also find that past experience has little effect on subjects' inclinations to treat others unfairly. |
| Keywords: | Social preferences, reference points, fairness, bargaining |
| JEL: | C78 C91 D01 D03 |
| Date: | 2013–07 |
| URL: | http://d.repec.org/n?u=RePEc:zur:econwp:128&r=hpe |
| By: | Daniel Ladley; Ian Wilkinson; Louise Young |
| Abstract: | Cooperative relations, within and between firms, play important roles in business. How to produce such relations, however, is less well understood. Building on work in evolutionary biology we examine the conditions under which group based incentives result in better performance than individual based incentives. We find that when individual and group interests are not aligned, group incentive systems lead to both higher group and individual performance. Hybrid reward systems, with both group and individual components, are found on average to be inferior to pure group based systems, but superior for some specific cases. |
| Keywords: | Emergence of cooperation, Incentive systems, Iterated games, Group selection |
| JEL: | D00 M52 C63 |
| Date: | 2013–07 |
| URL: | http://d.repec.org/n?u=RePEc:lec:leecon:13/14&r=hpe |
| By: | Beraldo, Sergio; Filoso, Valerio; Marco, Stimolo |
| Abstract: | Conformity behavior, i.e. the agreement between an individual's choices and the prevailing behavior of a reference group, is a commonly observed phenomenon. Though some types of social interactions may give raise to specific incentives to adopt either a majoritarian or a contrarian behavior, we want to investigate whether the same behavioral pattern emerges even when no economic motivator is present. To accomplish this task, we employ an experimental Vickrey median price auction designed to provide incentives to reveal individual preferences truthfully. Whereas we feed the control group with just the median price, we give out additional information on other players' bids for those in the treated groups. These informations are designed to provide hints at revising individual bids. Our main results point to a strong tendency of the individuals to adapt their behavior to those of the individuals which can be observed. Moreover, although a clear shaping effect (a regression toward the median price) does emerge for the control group, the provision of information about the actual behavior of a sample of the relevant group is able to minimize or neutralize the shaping effect. Specifically, we find that players adjust to a divergence between their bids and the average bid of a reference group by a factor of 47.4\%—87.3\%. These figures point to a relevant role for conformity in group behavior. |
| Keywords: | Endogenous preferences, shaping effect, social conformity, Vickrey auction |
| JEL: | C91 C92 D44 |
| Date: | 2013–07–22 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:48539&r=hpe |
| By: | Tausch, Arno |
| Abstract: | Our analysis, based on a variety of standard econometric techniques, aims to be a fairly comprehensive test of the hypotheses about long cycles, associated with the name of Kondratiev/Kondratieff. Our work tries to link the issue of long cycles with the issue of economic convergence and divergence in the world system, because there are very strong cyclical ups and downs of relative convergence in the world system, observable not just in the “national” growth rates and “national” economic cycles. Already the Japanese economist Kaname Akamatsu, who lived from August 7, 1896 to December 20, 1974, and who was a great admirer of Kondratiev/Kondratieff, hinted at this connection. His most well-known tribute to Kondratiev/Kondratieff (Akamatsu, 1961) specifically links the rise and decline of the global peripheries to the larger Kondratiev/Kondratieff cycle. His contribution, which is hardly ever mentioned nowadays in the framework of K-cycle research, is the starting point of our analysis. In fact, these “Akamatsu cycles”, analyzed in this work, are even stronger and seem to be more devastating than the “national Kondratiev/Kondratieff waves” and world systemic waves themselves, leading to the discovery of what might be even termed a “double-Tsunami wave structure”. Both our re-analysis of world industrial production growth data since 1741 as well as the global conflict data since 1495, presented in this article, cautiously support the earlier contentions of world system research with evidence, tested by spectral analysis and auto-correlation analysis. Using the well-known and now updated Maddison data base at http://www.ggdc.net/maddison/maddison-project/data.htm, Kondratiev/Kondratieff cycles of around 60 years duration at a nation state level are most clearly visible in Argentina, Canada, and Russia, with evidence on the existence of longer cycles of more than 35 years also in Belgium; Chile; Greece; Netherlands; India; New Zealand; Spain; and USA; while for the other countries of the Maddison data set, earlier negative spectral density analysis results reported in the ample literature surveyed in this article could not be falsified. By contrast, the evidence about strong long term cycles of convergence seems to be very convincing. Future research is recommended to realize that convergence processes in most nations of the world are discontinuous and of a cyclical nature, thus supporting the pessimism inherent in the writings by the world systems scholar Giovanni Arrighi on the subject. |
| Keywords: | Kondratieff; Long waves: Business cycles |
| JEL: | C65 E32 E37 |
| Date: | 2013–07–16 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:48356&r=hpe |
| By: | Nassim Nicholas Taleb |
| Abstract: | The literature of heavy tails starts with a random walk and finds mechanisms that lead to fat tails under aggregation. We follow the inverse route and show how starting with fat tails we get to thin-tails when deriving the probability distribution of the response to a random variable. We introduce a general dose-response curve and argue that the left and right-boundedness or saturation of the reponse in natural things leads to thin-tails, even when the "underlying" random variable at the source of the exposure is fat-tailed. |
| Date: | 2013–07 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1307.6695&r=hpe |