nep-hpe New Economics Papers
on History and Philosophy of Economics
Issue of 2013‒09‒26
twenty-one papers chosen by
Erik Thomson
University of Manitoba

  1. Computability Theory in Economics - Frontiers and a Restrospective By K. Vela Velupillai
  2. Bayes Correlated Equilibrium and the Comparison of Information Structures By Dirk Bergemann; Stephen Morris
  3. Bribery and Threat By Estrada , Fernando
  4. A Numerical Algorithm to find All Scalar Feedback Nash Equilibria By Engwerda, J.C.
  5. The Comparison of Information Structures in Games: Bayes Correlated Equilibrium and Individual Sufficiency By Dirk Bergemann; Stephen Morris
  6. The generosity effect: Fairness in sharing gains and losses By Guillermo Baquero; Willem Smit; Luc Wathieu
  7. A Journey through the Corridors of a Labyrinth -- Borge's Library, Simon's Mazes and Turing's Librarian By K. Vela Velupillai
  8. The Nonexistence of the cruel dilemma or the unlikely prosperity of the economic system of freedom in the absence of it By Eduardo Sanz-Arcega
  9. The Economics of Coercion and Conflict: an Introduction By Harrison, Mark
  10. Long-Term Barriers to Economic Development By Enrico Spolaore; Romain Wacziarg
  11. The importance of HUMBUG in the Cambridge - Cambridge controversies in capital theory By Geoff C Harcourt
  12. Il problema del tempo libero nell’ambito della civiltà del capitale By Nicolò Bellanca; Hervé Baron
  13. Does the Federal Reserve Care About the Rest of the World? By Barry Eichengreen
  14. Die Entwicklung der Heterodoxie in der universitären Volkswirtschaftslehre: Erste Annäherung an eine Feldanalyse in den Begriffen Pierre Bourdieus By Sander, Henrike
  15. More than thirty years of ultimatum bargaining experiments: Motives, variations, and a survey of the recent literature By Werner Güth; Martin G. Kocher
  16. Is monetary policy a science? the interaction of theory and practice over the last 50 years By William R. White
  17. Error and Inference: an outsider stand on a frequentist philosophy. By Robert, Christian P.
  18. HUMBUGS and other Exotica -- Celebrating Anwar Shaikh By K. Vela Velupillai
  19. Redefining the Economical Power of Nations By Kiss, Christian
  20. Finance, Growth and Fragility: The Role of Government By Beck, Thorsten
  21. The Minsky Perspective on Macroprudential Policy By Oğuz Esen; Ayla Oğuş Binatlı

  1. By: K. Vela Velupillai
    Abstract: This is an outline of the origins and development of the way computability theory was incorporated into formal economic theory. I try to place in the context of the development of computable economics, some of the classics of the subject as well as those that have, from time to time, been credited with having contributed to the advancement of the field. Speculative methodological thoughts and reflections suggest directions in which fruitful research could proceed to reduce the current deficit in the epistemology of computation in economics. Finally, thoughts on where the frontiers of computable economics are, and how to move towards them, conclude the paper. In a precise sense -- both historically and analytically -- it would not be an exaggeration to claim that both the origins of computable economics and its frontiers are defined by two classics, both by Banach and Mazur: that one page masterpiece by Banach and Mazur and the unpublished Mazur conjecture of 1928, and its unpublished proof by Banach. For the undisputed original classic of computable economics is Rabin's effectivization of the Gale-Stewart game; the frontiers, as I see them, are defined by recursive analysis and constructive mathematics, underpinning computability over the computable and constructive reals and providing computable foundations for the economist's Marshallian penchant for curve-sketching and, in general, the contents of Theoretical Computer Science, Vol. 219, Issue 1-2). The former work has its roots in the Banach-Mazur game, at least in one reading of it; the latter in Banach and Mazur (1937), as well as other, earlier, contributions, not least by Brouwer.
    Keywords: Computability, Effectivization, Constructivity, Uncomputability, Computable Economics
    Date: 2013
  2. By: Dirk Bergemann (Cowles Foundation, Yale University); Stephen Morris (Dept. of Economics, Princeton University)
    Abstract: The set of outcomes that can arise in Bayes Nash equilibria of an incomplete information game where players may or may not have access to more private information is characterized and shown to be equivalent to the set of an incomplete information version of correlated equilibrium, which we call Bayes correlated equilibrium. We describe a partial order on many player information structures -- which we call individual sufficiency -- under which more information shrinks the set of Bayes correlated equilibria. We discuss the relation of the solution concept to alternative definitions of correlated equilibrium in incomplete information games and of the partial order on information structures to others, including Blackwell's for the single player case.
    Keywords: Correlated equilibrium, Incomplete information, Robust predictions, Information structure
    JEL: C72 D82 D83
    Date: 2013–02
  3. By: Estrada , Fernando
    Abstract: In their recent work Thomas S. Schelling (2007, 2010), reiterating original arguments about game theory and its applications to social sciences. In particular, game theory helps to explore situations in which agents make decisions interdependent (strategic communication). Schelling's originality is to extend economic theory to social sciences. When a player can anticipate the options and influence the decisions of others. The strategy, indirect communication plays a crucial role. To illustrate, we investigate how to perform the payoff matrix in cases of bribery and threat
    Keywords: Social Science, Schelling, game theory, strategic communications, bribes, threats.
    JEL: C7 C72 C78 C9 D7 D8 D82 D84
    Date: 2013
  4. By: Engwerda, J.C. (Tilburg University, Center for Economic Research)
    Abstract: Abstract: In this note we generalize a numerical algorithm presented in [9] to calculate all solutions of the scalar algebraic Riccati equations that play an important role in finding feedback Nash equilibria of the scalar N-player linear affine-quadratic differential game. The algorithm is based on calculating the positive roots of a polynomial matrix.
    Keywords: linear-quadratic differential games;linear feedback Nash equilibrium;affine systems;numerical solution;Riccati equations.
    JEL: C02 C61 C63 C72
    Date: 2013
  5. By: Dirk Bergemann; Stephen Morris
    Date: 2013–09–19
  6. By: Guillermo Baquero (ESMT European School of Management and Technology); Willem Smit (SMU, IMD); Luc Wathieu (Georgetown University, McDonough School of Business)
    Abstract: We explore the interaction between fairness attitudes and reference dependence both theoretically and experimentally. Our theory of fairness behavior under reference-dependent preferences in the context of ultimatum games, defines fairness in the utility domain and not in the domain of dollar payments. We test our model predictions using a within-subject design with ultimatum and dictator games involving gains and losses of varying amounts. Proposers indicated their offer in gain- and (neatly comparable) loss- games; responders indicated minimum acceptable gain and maximum acceptable loss. We find a significant “generosity effect” in the loss domain: on average, proposers bear the largest share of losses as if anticipating responders’ call for a smaller share. In contrast, reference dependence hardly affects the outcome of dictator games -where responders have no veto right- though we detect a small but significant “compassion effect”, whereby dictators are on average somewhat more generous sharing losses than sharing gains.
    Keywords: Fairness, loss domain, ultimatum game, dictator game, referencedependent preferences, social preferences
    JEL: D03 D81
    Date: 2013–08–29
  7. By: K. Vela Velupillai
    Date: 2013
  8. By: Eduardo Sanz-Arcega (University of Zaragoza, Zaragoza, Spain)
    Abstract: The controversial relationship between the political system and economic growth induced Bhagwati to coin the concept of cruel dilemma to illustrate the tension that may exist between the economic freedoms and the political homonyms. Thus, and since then, the economic-institutional empirical literature has tried to outline the effect of democracy on the sustained increase in income, with disparate results. However, the very absence of an undisputed conclusion also from the perspective of the history of economic ideas has led, to the best of our knowledge, to the fact that the preference for a political system or another to achieve economic prosperity may turn into an axiologically based argument. This fact would, therefore, endorse the incorporation to the emphasis of the discussion of a double analysis, factual and theoretical-economic –owing to the classical postulates on which the central doctrinal body of the discipline is founded–, whose conjunction with the crucial importance of institutions for economic growth seemed to hide, ultimately, a simple idea. Namely: the indissolubility, on a long-term basis, between economic success and democracy.
    Keywords: Cruel dilemma, economic liberties, political liberties, democracy, institutions, economic growth
    JEL: E02 N3 K0 O1
    Date: 2013–09
  9. By: Harrison, Mark (University of Warwick)
    Abstract: This chapter introduces the author’s selected papers on the economics of coercion and conflict. It defines coercion and conflict and relates them. In conflict, adversaries make costly investments in the means of coercion. The application of coercion does not remove choice but limits it to options that leave the victim worse off than before. Coercion and conflict are always political, but a number of key concepts from economics can help us understand them. These include rational choice, strategic interaction, increasing and diminishing returns, scale and state capacity, surplus extraction, and Type I errors. The chapter concludes that the economist’s toolkit, although not complete, is useful.
    Keywords: Coercion, Conflict, Games, Errors, Increasing Returns, Rational Choice, Scale, Surplus, Violence.
    Date: 2013
  10. By: Enrico Spolaore; Romain Wacziarg
    Abstract: What obstacles prevent the most productive technologies from spreading to less developed economies from the world's technological frontier? In this paper, we seek to shed light on this question by quantifying the geographic and human barriers to the transmission of technologies. We argue that the intergenerational transmission of human traits, particularly culturally transmitted traits, has led to divergence between populations over the course of history. In turn, this divergence has introduced barriers to the diffusion of technologies across societies. We provide measures of historical and genealogical distances between populations, and document how such distances, relative to the world's technological frontier, act as barriers to the diffusion of development and of specific innovations. We provide an interpretation of these results in the context of an emerging literature seeking to understand variation in economic development as the result of factors rooted deep in history.
    JEL: O1 O11 O33 O43 O57
    Date: 2013–08
  11. By: Geoff C Harcourt (School of Economics, the University of New South Wales)
    Date: 2013–09
  12. By: Nicolò Bellanca (Università degli Studi di Firenze); Hervé Baron
    Abstract: In questo saggio intendiamo discutere la questione del tempo libero nel capitalismo alla luce della problematica della liberazione dal e del lavoro (par. 1). Nel far ciò, dopo aver criticato la concezione dell’essere umano propria della scienza economica, proporremo l’abbozzo di una concezione alternativa (par. 2). Ci chiederemo quindi cosa succederebbe liberando sic et simpliciter del tempo attraverso mere elargizioni di reddito senza rimettere in discussione la concezione dell’essere umano comunemente accettata (par. 3) per poi proporre (par. 4) due real utopias che affrontano congiuntamente il nodo dell’aumento del tempo libero e dell’apertura a forme differenti di società. Infine (par. 5) saranno tratte alcune brevi ma articolate conclusioni. (In this essay we intend to discuss the issue of leisure time in the capitalist system in the light of the issue of the liberation from and of work (par. 1). In doing that, after having criticized the conception of human being wich characterized economics we will propose the sketch of an alternative conception (par. 2). Then, we will wonder what would happen releasing sic et simpliciter some spare time through mere income transferts, without bringing into question the commonly accepted conception of human being (par. 3) to then propose (par. 4) two ‘real utopias’ that jointly deal with the tangle of an increase of leisure time and the opening to different forms of society. Finally (par. 5) some brief but articulated conclusions will be drawn.)
    Keywords: Passion; capitalism; idleness; leisure time; free time; real utopias; social empowerment
    JEL: A13 B51 P17 P27 Z13
    Date: 2013
  13. By: Barry Eichengreen
    Abstract: Many economists are accustomed to thinking about Federal Reserve policy in terms of the institution’s dual mandate, which refers to price stability and high employment, and in which the exchange rate and other international variables matter only insofar as they influence inflation and the output gap – which is to say, not very much. This conventional view is heavily shaped by the distinctive circumstances of the last three decades, when the influence of international considerations on Fed policy has been limited. I discuss how the Federal Reserve paid significant attention to international considerations in its first two decades, followed by relative inattention to such factors in the two-plus decades that followed, then back to renewed attention to international aspects of monetary policy in the 1960s, before the recent period of benign neglect of the international dimension. This longer perspective is a reminder that just because the Fed has not attached priority to international aspects of monetary policy in the recent past is no guarantee that it will not do so in the future.
    JEL: E4 N1
    Date: 2013–09
  14. By: Sander, Henrike
    Abstract: [Ausgangspunkt] Im Januar dieses Jahres und in Zusammenarbeit mit dem Zentrum für die Gesamtanalyse der Wirtschaft der Uni Linz hat das Zentrum für Ökonomische und Soziologische Studien (ZÖSS) die Arbeit an dem von der Hans Böckler Stiftung finanzierten Forschungsprojekt 'Ökonomen und Ökonomie - eine wissenschaftssoziologische Entwicklungsanalyse zum Verhältnis von Ökonomen und Ökonomie im deutschsprachigen Raum ab 1945' aufgenommen. In dem vom ZÖSS zu bearbeitenden Teil des Gesamtprojekts1 geht es um die sozioökonomische Erklärung der Entwicklung der heterodoxen Ökonomie, namentlich der Volkswirtschaftslehre (VWL) an deutschsprachigen Universitäten nach 1970: Untersucht werden soll, wie es nicht gelingen konnte, volkswirtschaftliche Heterodoxie, verstanden als Pluralität ökonomischer Paradigmen (marxistische, (post)keynesianische, schumpeterianische, institutionalistische etc.)2 in Abgrenzung zur volkswirtschaftlichen Orthodoxie (derzeit in Gestalt des neoklassischen Mainstream-Paradigmas), in der Wissenschaftsgemeinschaft der Volkswirte zu etablieren. Anlass dieser Fragestellung ist die jüngste Weltfinanzkrise, die gleichwohl als Krise der VWL zu bewerten ist: als Krise der orthodoxen VWL, denn der fast vollständige Zusammenbruch der internationalen Finanzmärkte und tiefe Einbruch der Realwirtschaft steht im deutlichen Widerspruch zu deren fast schon monokulturell dominanten Mainstream-Paradigma des D(ynamic)-S(tochastic)-G(eneral)-E(quilibrium)-Modells; ebenso aber auch als Krise der heterodoxen VWL, der es nicht gelingen konnte, andere Paradigmen oder Modelle dagegen zu setzen. Ausgehend davon, dass die universitäre Volkswirtschaftslehre das gesellschaftliche Wissen über die Wirtschaft und damit wichtige wirtschaftspolitische Entscheidungen, die auf diesem Wissen beruhen, entscheidend mit formt, sind das Profil und die Ausrichtung der universitären VWL, das Verhältnis zwischen den dort tätigen Ökonomen und den sie umgebenden Bedingungen auf neue Weise kritisch zu hinterfragen (Heise et al. 2013). Um dem nachzugehen, ist das Erfassen der Entwicklung und des aktuellen Befindens der heterodoxen universitären VWL und ihrer Vertreter an deutschsprachigen Universitäten erforderlich. Für die theoretische Rahmung dieser Untersuchung, auch im Hinblick auf die sozioökonomische Erklärung der Ergebnisse, ist die Geeignetheit einer Feldanalyse mit den Denk- und Arbeitswerkzeugen Pierre Bourdieus zu prüfen. --
    Date: 2013
  15. By: Werner Güth (Max Planck Institute of Economics, Strategic Interaction Group); Martin G. Kocher (University of Munich, University of Gothenburg and CESifo Munich)
    Abstract: Take-it or leave-it offers are probably as old as mankind. Our objective here is, first, to provide a, probably subjectively-colored, recollection of the initial ultimatum game experiment, its motivation and the immediate responses. Second, we discuss important extensions of the standard ultimatum bargaining game in a unified framework, and, third, we offer a survey of the experimental ultimatum bargaining literature containing papers published since the turn of the century. The paper argues that the ultimatum game is an extremely versatile tool for research in bargaining and on social preferences. Finally, we provide examples for open research questions and directions for future studies.
    Keywords: ultimatum bargaining, experiment, social preferences
    JEL: C91
    Date: 2013–09–16
  16. By: William R. White
    Abstract: In recent decades, the declarations of “independent” central banks and the conduct of monetary policy have been assigned an ever increasing role in the pursuit of economic and financial stability. This is curious since there is, in practice, no body of scientific knowledge (evidence based beliefs) solid enough to have ensured agreement among central banks on the best way to conduct monetary policy. Moreover, beliefs pertaining to every aspect of monetary policy have also changed markedly and repeatedly. This paper documents how the objectives of monetary policy, the optimal exchange rate framework, beliefs about the transmission mechanism, the mechanism of political oversight, and many other aspects of domestic monetary frameworks have all been subject to great flux over the last fifty years. ; The paper also suggests ways in which the current economic and financial crisis seems likely to affect the conduct of monetary policy in the future. One possibility is that it might lead to yet another fundamental reexamination of our beliefs about how best to conduct monetary policy in an increasingly globalized world. The role played by money and credit, the interactions between price stability and financial stability, the possible medium term risks generated by “ultra easy” monetary policies, and the facilitating role played by the international monetary (non) system all need urgent attention. The paper concludes that, absent the degree of knowledge required about its effects, monetary policy is currently being relied on too heavily in the pursuit of “strong, balanced and sustainable growth.”
    Keywords: National security
    Date: 2013
  17. By: Robert, Christian P.
    Abstract: This note is an extended review of the book Error and Inference, edited by Deborah Mayo and Aris Spanos, about their frequentist and philosophical perspective on testing of hypothesis and on the criticisms of alternatives like the Bayesian approach.
    Keywords: frequentist philosophy; criticisms of the Bayesian approach.;
    JEL: C11
    Date: 2013
  18. By: K. Vela Velupillai
    Date: 2013
  19. By: Kiss, Christian
    Abstract: This paper is (over the formulas) self explaining . The measurement of economies no longer by GDP alone, but by an Index that includes other important factors as well, a So-cial factors relativized GDP. This index cuts out the part of the GDP that is long term fro-zen up by social transfers (using the highly aggregated GINI coefficient). Social factors relativized GDP: GDP – GDP x GINI = K_Index Written differently: (1 – GINI) x GDP = K_Index Inflation indexed Version: (1 – GINI – Inflation) x GDP = K_Index_Infl. Productivity Index: K_Index / Labor Force = K_PROD Inflation indexed Productivity Index: K_Index_Infl. / Labor Force = K_PROD_Infl. Debt-to-K_Index: National debt / K_Index = K_Debt Debt-to-K_Index_Infl: National debt / K_Index_Infl. = K_Debt_Infl.
    Keywords: Economic Indicator, GDP, GNP, GINI, Productivity, Inequality, Income Distribution, Poverty Growth, Poverty Measurement, Macro Models, International Economic Order, International Industrial Order, Econometrics, Econometric Methods, Econometric Modeling, Macroeconometrics, Mathematical Methods, Mathematical Models, Numerical Methods, National Income and Product Account, Economic Growth, Wage, Economic Growth, Multisector Growth, Saving Growth, Aggregate Produc-tivity, Gross National Product, Gross Domestic Product, Macroeconomic Model, Macroeconomic Time Series, Micro to Macro, National Income Accounting, National Wealth, Econometric Modeling
    JEL: A10 A13 C10 C12 C60 E10 F02 O47
    Date: 2013–08–11
  20. By: Beck, Thorsten
    Abstract: This paper offers a critical survey of the literature on the role of financial deepening in economic development, focusing on the role of government. Specifically, I distinguish between the policy view that relates financial sector development to an array of necessary policies and institutions, the historic view that relates financial sector development to historic and cultural factors, and the politics view that explains financial sector development as the result of political conflicts and decisions. These three views of financial sector deepening imply a different role for government. I discuss examples from the developed and developing world and repercussions for current reform discussions.
    Keywords: economic growth; financial crisis; financial development; government policies
    JEL: G1 G2 O16
    Date: 2013–08
  21. By: Oğuz Esen; Ayla Oğuş Binatlı
    Abstract: � The recent global financial crisis has underlined the need to go beyond the microprudential perspective to financial instability and move in a macroprudential direction. There is a growing consensus among policymakers and academics that macroprudential policy should be adopted. Through these changes, policymakers appear to be moving in a direction broadly consistent with Minsky’s view. The theoretical framework of macroprudential policy can be found in Minsky’s financial instability theory. Emerging economies, including Turkey, have adopted macroprudential tools to prevent and mitigate system wide risks. This paper offers a Minsky perspective on macroprudential policy and evaluates macroprudential tools through an examination of the Turkish experience as a case study. �
    Keywords: Macroprudential policy, Minsky
    Date: 2013

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