nep-hpe New Economics Papers
on History and Philosophy of Economics
Issue of 2013‒10‒02
fifteen papers chosen by
Erik Thomson
University of Manitoba

  1. An issue with own-rates: Keynes borrows from Sraffa , Sraffa criticises Keynes, and present-day commentators get hold of the wrong end of the stick By Grieve Roy H
  2. A reconstructive critique of IPE and GPE from a critical scientific realist perspective: An alternative Keynesian-Kaleckian approach By Khan, Haider; Patomäki, Heikki
  3. Choosing one's preferences By Guilhem Lecouteux
  4. Jacoud, Gilles. Money and Banking in Jean-Baptiste Say's Economic Thought By Alain Béraud
  5. How should economics curricula be evaluated? By Andrew Mearman
  6. Foundations for Cooperation in the Prisoners’ Dilemma By Brendan Daley; Philipp Sadowski
  7. Money, Trust and Hierarchies: To the Question of the Maintenance of Confidence in the Complex Economic Institutions By Alexander Lasco
  8. Mill et la crise de 1825 By Alain Béraud
  9. Puzzling over the Anatomy of Crises: Liquidity and the Veil of Finance By Guillermo Calvo
  10. Waiting to Cooperate? By Kaplan, Todd; Ruffle, Bradley; Shtudiner, Zeev
  11. Discovering Chinese Economic History from Footnotes: the Living Tale of a Private Merchant Archive (1800-1850) By Ma, Debin; Yuan, Weipeng
  12. Notas sobre a crise de 2008: transição para uma nova fase do capitalismo? By Eduardo Albuquerque
  13. An economics angle on the law By Stuart Birks
  14. Why do students study economics? By Andrew Mearman; Aspasia Papa; Don J. Webber
  15. Entitlement in a Real Effort Ultimatum Game By Michael D. Carr; Phil Mellizo

  1. By: Grieve Roy H (Department of Economics, University of Strathclyde)
    Abstract: Scholars who in recent years have studied the Sraffa papers held in the Wren Library of Trinity College, Cambridge, have concluded from Sraffa’s critical (but unpublished) observations on Chapter 17 of Keynes’s General Theory that he rejected Keynes’s central proposition that the rate of interest on money may come to ‘rule the roost’, thus dragging the economy into recession. While Sraffa does indeed express dissatisfaction with Chapter 17, the commentators have, we believe, misunderstood his concern: we suggest that he was unhappy with the ‘own-rates’ terminology employed by Keynes rather than with the substance of the theory developed in Chapter 17.
    Keywords: Chapter 17 of Keynes’s General Theory, commodity-rates, own-rates of interest
    JEL: B22 B31 E12 E43
    Date: 2013–09
  2. By: Khan, Haider; Patomäki, Heikki
    Abstract: This paper offers, first, a critique of the relative lack of economic theory in ‘British’ Global Political Economy and then use of neoclassical rational choice theory in American mainstream IPE from the perspective of critical scientific realism. Keynesian economic theories provide perhaps the most obvious alternative. Keynes’ General Theory has been followed by many, forming also the basis of Minsky’s long ignored but now, after the 2008-9 crisis, all of a sudden famous explorations on the mechanisms of financial markets. While a major leap forward, we argue that these theories are historically and conceptually limited. Keynes’ critique of neoclassical economic theory and his alternative theories of particularly the effective demand and of money and credit can be strengthened by following also a neo-Kaleckian approach which avoids some of the inconsistencies of neo-Keynesianism. We indicate where further conceptual work is required and provide several illustrations from the neo-Kaleckian and neo-Keynesian theory to suggest a partial agenda of further scientific work including the explanation of unnecessary and undesired global fluctuations, tendencies and crises and possible collective responses to them. We also suggest the possibility of going beyond Keynes and Kalecki in terms of a general field theory of global political economy that can accommodate the deep normative and institutional underpinnings of the historically evolving planetary political economy.
    Keywords: Financial Crisis; Policy Space; Keynes; Kalecki; Minsky
    JEL: F3
    Date: 2013–08
  3. By: Guilhem Lecouteux (Department of Economics, Ecole Polytechnique - CNRS : UMR7176 - Polytechnique - X)
    Abstract: A central assumption in economics is that individuals are rational in the sense that they seek to satisfy their preferences, by choosing the action that maximizes a utility function that represents those preferences. However, it appears that in strategic interaction with other rational agents, the individuals can bene t from strategic commitments. We determine the set of games for which strategic commitments can be bene cial to the players, by building an analytical framework in which players can choose their own preferences before playing a game. We show that players make strategic commitments as soon as there exists a Stackelberg equilibrium that is not a Nash equilibrium, but also that there always exists at least one set of preference relations at the equilibrium such that a Nash equilibrium is implemented. We then show that the possibility of making strategic commitments generates cooperative behaviours in the case of supermodular games.
    Keywords: strategic commitment, choice of preferences, Stackelberg, supermodularity
    Date: 2013–09–23
  4. By: Alain Béraud (THEMA - Théorie économique, modélisation et applications - CNRS : UMR8184 - Université de Cergy Pontoise)
    Abstract: Book review of a selection of Jean-Baptiste Say's principal writings on money and banking
    Keywords: Say; money; banking
    Date: 2013–08
  5. By: Andrew Mearman (University of the West of England, Bristol)
    Abstract: This paper explores the evaluation of economics curricula. It argues that the dominant approach in economics education, experimentalism, has serious limitations which render it an unsuitable evaluation method in some cases. The arguments against experimentalism are practical, ethical and also rest on a view of the world as a complex, open system in which contexts are unique and generalised regularities are unlikely. In such an environment, as often found in educational contexts, alternative methods are advisable, at least as part of a suite of approaches in a realistic, case-based, mixed-methods approach to evaluation. Thus, economics curricula should be evaluated using a method or set of methods most appropriate to the particular object case. As such, there is no single answer to the question posed.
    JEL: A20 A22 B4 B5 C80 C9
  6. By: Brendan Daley; Philipp Sadowski
    Abstract: We provide axiomatic foundations for a simple model of play in the prisoners’ dilemma. The model accommodates cooperation and suggests that players behave as if their expectations about their opponents’ behavior vary with their own choice. We refer to this nonstandard updating as magical thinking. The degree to which players exhibit magical thinking may be heterogeneous in the population and is captured by a uniquely identified parameter for each player. Further, it is as if all players perceive these parameters to be i.i.d. draws from a common distribution. The model’s identification allows for tractable comparative statics.
    Keywords: Prisoners’ dilemma, magical thinking, cooperation
    JEL: C7 D8
    Date: 2013
  7. By: Alexander Lasco (Russian Presidential Academy of National Economy and Public Administration)
    Abstract: Based on a number of monetary theories proposed as economists and sociologists (including credit theory of money and the concept of "Plurality of money"), this paper examines the mechanisms through which is created in the economy of individual institutional support confidence in money. The author shows that the individuals involved in economic exchanges, rely on the ordered hierarchy of institutions that support the trust, and that the diversity of this type hierarchy reflects many social contexts in which there are cash transactions. Moreover it is assumed that the transition to higher levels of these pyramidal structures due to the increase of liquidity (or security) monetary liabilities arising on the appropriate level of the hierarchy. Together with Nevertheless, despite all the attempts to create a sound institutional structures for protection of confidential relations of the individual agents to money, their work is coupled with serious difficulties, which include the lack of guarantor of the High Court, the problem of infinite regress and general uncontrollability of complex monetary systems. These obstacles entail immediate and profound effect, leading to the destruction of structures which designed to support confidence in all three of the above-mentioned areas (Liquidity, acceptability and stability of money), which are critically important for the implementation of the normal circulation of money.
    Keywords: money, trust, hierarchy
    Date: 2013–05
  8. By: Alain Béraud (THEMA - Théorie économique, modélisation et applications - CNRS : UMR8184 - Université de Cergy Pontoise)
    Abstract: Cet article étudie la crise qui, en 1825, affecta l'économie anglaise et les travaux que John Stuart Mill, Thomas Tooke et John Ramsay McCulloch consacrèrent à son analyse. Alors que McCulloch et Tooke soutiennent que l'organisation du système bancaire anglais a joué, sinon dans l'origine du moins dans le développement de la crise, un rôle crucial, Mill pense qu'elle est l'effet de spéculations hasardeuses et qu'elle se serait tout aussi bien développée dans un système où la monnaie aurait consisté en espèces. La crise est pour lui une crise du crédit. Cette analyse, qui semble la mieux à même de rendre compte de la crise de 1825, est, de surcroît, la plus novatrice. L'article explicite ses implications pour la théorie monétaire et pour l'analyse des cycles économiques.
    Keywords: Crise; crise financière; spéculation; Mill; Tooke; McCulloch
    Date: 2013–03
  9. By: Guillermo Calvo (Columbia University and NBER (E-mail:
    Abstract: The paper claims that conventional monetary theory obliterates the central role played by media of exchange in the workings and instability of capitalist economies; and that a significant part of the financial system depends on the resiliency of paper currency and liquid assets that have been built on top of it. The resilience of the resulting financial tree is questionable if regulators are not there to adequately trim its branches to keep it from toppling by its own weight or minor wind gusts. The issues raised in the paper are not entirely new but have been ignored in conventional theory. This is very strange because disregard for these key issues has lasted for more than half a century. Are we destined to keep on making the same mistake? The paper argues that a way to prevent that is to understand its roots, and traces them to the Keynes/Hicks tradition. In addition, the paper presents a narrative and some empirical evidence suggesting a key channel from Liquidity Crunch to Sudden Stop, which supports the view that liquidity/credit shocks have been a central factor in recent crises. In addition, the paper claims that liquidity considerations help to explain (a) why a credit boom may precede financial crisis, (b) why capital inflows grow in the run-up of balance-of-payments crises, and (c) why gross flows are pro-cyclical.
    Keywords: Financial Crises, Bubbles, Sudden Stop
    JEL: E32 E65 F32
    Date: 2013–09
  10. By: Kaplan, Todd; Ruffle, Bradley; Shtudiner, Zeev
    Abstract: Sometimes cooperation between two parties requires exactly one to cede to the other. If the decisions whether to cede are made simultaneously, then neither or both may acquiesce leading to an inefficient outcome. However, inefficiency may be avoided if a party can wait to see what the other does. We experimentally test whether adding a waiting option to such a two-player cooperation game enhances cooperation. Although subjects cede less overall with the waiting option, we show that they coordinate more and consequently achieve higher profits. Yet, a dark side overhangs waiting: the least cooperative pairs do worse with this option. They wait not to facilitate coordination but to disguise their entry.
    Keywords: cooperation, endogenous timing, social dilemmas
    JEL: C9 Z13
    Date: 2013–09–22
  11. By: Ma, Debin (London School of Economics); Yuan, Weipeng (Chinese Academy of Social Science, Beijing)
    Abstract: This article recounts our unique encounter –through the last seven years of our research - with the Tong Taisheng (统泰升) merchant account books in the Ninjing county of Northern China in 1800-1850. By tracing the personal history of the original owner or donor, we address a large historiographical and epistemological issue behind the current Great Divergence debate on why Industrial Revolution occurred in England but not in China. Our article showcases how the development of political ideology and academic discipline in the modern era impacts our understanding of historical statistics and realities of the early modern era, a critical issue largely neglected in the current Great Divergence debate.
    Keywords: Industrial Revolution
    Date: 2013
  12. By: Eduardo Albuquerque (Cedeplar-UFMG)
    Abstract: Metamorphoses of capitalism provide the theoretical background for an investigation of present systemic turbulence. The starting point is the evaluation of the "unprecedented" governmental intervention to contain the 2008 crisis. The crisis and the measures taken to contain it affect five structural changes that pervade the capitalist system. This manuscript integrates those changes to investigate the specificities of today's systemic turbulence. The identification of those specificities puts forward two questions, the first related to the capitalism's instability and propensity to crisis during this phase, the second concerned with the duration of current phase of systemic turbulence.
    Keywords: crisis; metamorphoses of capitalism; systemic turbulence
    JEL: P16 P51
    Date: 2013–09
  13. By: Stuart Birks (University of the West of England, Bristol and Massey University New Zealand)
    Abstract: Law and economics tends to focus on ways in which others respond to the law, or on economic input into legal deliberation. There is another dimension that can benefit from an economics perspective. Many people work in law-related occupations. They are delivering a service. In addition, policy is often formulated in terms of legislation or regulation, so the operation and impact of the law is an important aspect of much policy implementation. This paper considers the nature of law as an economic product, identifying characteristics and considering implications. There are parallels with approaches to economics in other areas, land and health being but two. The law has its own defining features, however. These include the nature of legal transactions, with more than one party making the consumption decision, and the importance of rhetoric, or persuasion, for determining outcomes. The nature of costs and benefits, available information, accountability of participants and conflicting objectives are some additional aspects meriting consideration. Several of these are discussed, using economic concepts as tools of analysis where they appear to suit particular circumstances. As such, the discussion illustrates the way that economics may contribute to understanding without requiring assumptions of complete description within a closed analytical system.
  14. By: Andrew Mearman (University of the West of England, Bristol); Aspasia Papa (University of the West of England, Bristol); Don J. Webber (University of the West of England, Bristol)
    Abstract: This paper presents a chronological, adaptive and reflective investigation into students’ perceptions of and motivations for choosing to study economics. Applications of multiple techniques to student-level primary data reveal the following. First, students’ perceptions of economics are on average somewhat negative, although there is considerable variation. Second, they regard economics as having value, in terms of providing insight, specialist knowledge, and skills of argumentation (all of which are perceived to be superior to peers). Third, they recognise the subject yields financial and other career advantages and has kudos. Fourth, they suggest that the relevance and usefulness of economics is important and consequently that excessive theorisation and a lack of practicality are problematic. These findings have considerable implications for how economics is taught, and for the nature of the subject itself.
    Keywords: Mixed-methods; UK student perceptions; Realisticness; Focus groups; Survey
    JEL: A11 A20
  15. By: Michael D. Carr; Phil Mellizo
    Abstract: Data from lab experiments support the claim that individuals have social preferences. Most models of social preferences, however, consider only the distribution of outcomes, not the source of the endowment used in the game. Once the source is considered, outcomes in the ultimatum game are more difficult to interpret. We extend the ultimatum game to allow for responder-produced endowments. We find that offers increase when the responder produces the endowment, but rejection rates are lower. Further, offers remain below 100% of the endowment, suggesting that unproductive proposers feel entitled to a part of the endowment, and responders respect this right.
    JEL: C91 D30 D63
    Date: 2013–09

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