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on History and Philosophy of Economics |
| By: | Hugh Rockoff |
| Abstract: | O.M.W. Sprague was America’s leading expert on financial crises when America was debating establishing the Federal Reserve. His History of Crises under the National Banking Act is one of the most enduring legacies of the National Monetary Commission; a still frequently cited classic. Since the Commission recommended a central bank, and its recommendation after some modifications became the Federal Reserve System, it might be assumed that Sprague was a strong supporter of establishing a central bank. But he was not. Initially, Sprague favored more limited reforms, a position that he did not abandon until the Federal Reserve became a fait accompli. Here I discuss the sources of Sprague’s opposition to a central bank and the relationship of that opposition to his understanding of the history and structure of the American banking system at the turn of the nineteenth century. |
| JEL: | B26 N1 |
| Date: | 2013–12 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:19758&r=hpe |
| By: | Grieve, Roy H |
| Abstract: | It has been alleged that J M Keynes, quoting in the General Theory a passage from J S Mill's Principles, misunderstood the passage in question and was therefore wrong to cite Mill as an upholder of the 'classical' proposition that 'supply creates its own demand'. We believe that, although Keynes was admittedly in error with respect to, so-to-say, the 'letter' of Mill's exposition, he did not mislead readers as to the 'substance' of Mill's conception. The purpose of this paper is to demonstrate that J S Mill did indeed stand for a 'classical' position, vulnerable to Keynes's critique as developed in the General Theory. [This is a revised version of an earlier working paper: 'Keynes, Mill and Say's Law', Strathclyde Papers in Economics, 2000/11] |
| Keywords: | Keynes and the 'classics', John Stuart Mill, Say's Law, |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:edn:sirdps:527&r=hpe |
| By: | Brian S. Ferguson (Department of Economics and Finance, University of Guelph) |
| Abstract: | Chapter 2 is one of the most important chapters in the General Theory. Not only does it set out Keynes’ disagreements with key elements of the classical model, it lays out his own model of the working of the labour market, which underlies the analysis in the remainder of the General Theory. The issue of how labour’s response to a change in its real wage differs depending on whether the change is driven by a change in the nominal wage or in the price of consumer goods plays a key part in the way Keynes’ theoretical model is developed here. This chapter introduces Keynes’ concept of involuntary unemployment and sets out his argument about the causal relation between the real wage and the level of unemployment, and about the consequent cyclicality of the real wage. Chapter 2 also includes Keynes’ discussion of Say’s Law. |
| Keywords: | Keynes, General Theory, Keynesian Economics, Classical Economics, Involuntary Unemployment, Real Wages, Labour Market Adjustment, Say’s Law. |
| JEL: | B10 B12 B13 B22 B31 E12 N12 N14 |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:gue:guelph:2013-07&r=hpe |
| By: | Brian S. Ferguson (Department of Economics and Finance, University of Guelph) |
| Abstract: | In Chapter 3 of the General Theory, Keynes sketches out what he calls the essence of the General Theory of Employment. He introduces the Keynesian expenditure-based model, his aggregate demand function and also his aggregate supply function, a concept which spawned much debate among Post-Keynesian economists but which was, for a long time, virtually ignored in mainstream macroeconomics. He sets out the Savings = Investment version of Say’s Law and outlines how an economy can settle into an equilibrium at less than full employment. |
| Keywords: | Keynes, General Theory, Keynesian Economics, Classical Economics, Aggregate Demand, Aggregate Supply, Unemployment Equilibrium, Say’s Law. |
| JEL: | B10 B12 B13 B22 B31 E12 N12 N14 |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:gue:guelph:2013-08&r=hpe |
| By: | Brian S. Ferguson (Department of Economics and Finance, University of Guelph) |
| Abstract: | In Chapter 4 of the General Theory, Keynes discusses the units of measurement he will be using in the remainder of the book, in particular his reason for measuring in nominal rather than real terms, objection to aggregate measures of real output and physical capital stock, and his concept of wage units, which is a source of difficulty in following bits of the later exposition. Chapter 5 introduces expectations and discusses the role of short run expectations in determining the behavior of firms and of economic aggregates. |
| Keywords: | Keynes, General Theory, Keynesian Economics, Classical Economics, Wage Units, Labour Units, Short Run Expectations, Long Run Expectations, Economic Dynamics |
| JEL: | B10 B12 B13 B22 B31 E12 N12 N14 |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:gue:guelph:2013-09&r=hpe |
| By: | Brian S. Ferguson (Department of Economics and Finance, University of Guelph) |
| Abstract: | Chapter Six and its Appendix deal in some detail with the way Keynes is defining income, savings and investment in the General Theory while the appendix to Chapter 6 goes into detail on user cost. His concept of user cost at one point sparked a certain amount of controversy among Keynesians but has since virtually been forgotten. It is of interest to us because user cost is the place where Keynes sees firms taking account of the future consequences of their current production decisions. The General Theory is a theory of the short run, but firms’ cost curves, which are key to many short run decisions, contain a forward looking element. Chapter 7 returns to the concepts of saving and investment, relates Keynes’ definitions to those used by others (including his own from the Treatise) and relates aggregate investment, which refers to additions to physical capital stock, to the way the term is often used at the micro level, in the sense of investment in financial assets. |
| Keywords: | Keynes, General Theory, Keynesian Economics, Savings, Investment, User Cost, Prime Costs, Keynes’ Abominable Footnote, Keynes’ Slip of the Pen. |
| JEL: | B10 B12 B13 B22 B31 E12 N12 N14 |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:gue:guelph:2013-10&r=hpe |
| By: | Brian S. Ferguson (Department of Economics and Finance, University of Guelph) |
| Abstract: | Chapters 8, 9 and 10 set out Keynes’ theory of consumer behavior. Chapter 8 is entitled The Propensity to Consume: I. The Objective Factors, Chapter 9 is The Propensity to Consume: II. The Subjective Factors, and Chapter 10 is The Marginal Propensity to Consume and the Multiplier. Contrary to the widely held belief, Keynes saw the consumer as an intertemporally optimizing agent, in a manner which is quite consistent with Frank Ramsey’s model of intertemporal saving behavior and with modern theories of the behavior of the optimizing consumer. While he did conclude that in the short run income would be the dominant factor underlying consumer behavior, this was an empirical judgement, not simply an assumption about fundamental psychological propensities. Chapter 10 formally introduces the marginal propensity to consume and the multiplier. |
| Keywords: | Keynes, General Theory, Keynesian Economics, Classical Economics, Propensity to Consume, Time Preference, Interest Rate, Bequest Motive, Multiplier, Burying bottles of Banknotes. |
| JEL: | B10 B12 B13 B22 B31 E12 N12 N14 |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:gue:guelph:2013-11&r=hpe |
| By: | Dorian Jullien (University of Nice Sophia Antipolis; GREDEG CNRS) |
| Abstract: | This paper suggests that Amartya Sen's conception of rationality could benefit from insights borrowed to John Searle's philosophy of mind. More precisely, I argue that the work of Searle on intentionality provides a relevant conceptual apparatus to strengthen Sen's conceptualization of context-dependent preferences in a way that suggests further analytical contributions to the latter’s line of research. The arguments developed in the paper are relevant for three interrelated issues on economic rationality that are currently discussed in economic methodology: (1) methodological dualism and intentionalitic explanations in economics, (2) the relationships between economics and philosophy, and (3) the recent rise of behavioral economics within the mainstream of economic theory. |
| Keywords: | rationality, intentionality, preferences, context-dependency, Amartya Sen, John Searle |
| JEL: | B00 B40 B41 B49 |
| Date: | 2013–12 |
| URL: | http://d.repec.org/n?u=RePEc:gre:wpaper:2013-46&r=hpe |
| By: | Grieve, Roy H |
| 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, |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:edn:sirdps:492&r=hpe |
| By: | PARYS, Wilfried |
| Abstract: | In the period 1907-1912 the German ‘pure mathematicians’ Oskar Perron and Georg Frobenius developed the fundamental results of the theory of nonnegative matrices. Today Perron-Frobenius mathematics enjoys wide applications in many fields, for example in economics, probability theory, demography and even in Google’s ranking algorithm. In linear economic models of the Leontief-Sraffa type it is often the crucial tool to solve many mathematical economic problems. My paper concentrates on the history of Perron-Frobenius in linear economics, and some related stories. In the 1910s and 1920s, several pioneering publications in linear economics could have benefited from applying Perron-Frobenius results, but failed to do so, even the economic publications authored by the mathematicians Georg Charasoff, Hubert Bray and Robert Remak. Either they didn’t know Perron-Frobenius, or they didn’t realize its usefulness. The only exception was the French Jesuit mathematician Maurice Potron, who used Perron-Frobenius mathematics in the core of his economic model, in many of his writings, as early as 1911. He constructed a sort of disaggregated open input-output system, formulated duality theorems between his quantity system and his price system, and anticipated the Hawkins-Simon conditions. Potron’s economic or mathematical contemporaries didn’t recognize his originality. A general treatment of Charasoff’s economic system needs Perron-Frobenius mathematics, especially Perron’s Limit Lemma. Although some of Charasoff’s mathematical interests (irreducibility, continued fractions) were close to those of Perron or Frobenius, the theory of nonnegative matrices is never explicitly used in Charasoff’s work. It is doubtful whether Charasoff knew the relevant matrix theorems. Probably he just assumed that the properties of his numerical examples with three commodities also hold in the general case with n commodities. Frobenius had been Remak’s doctoral supervisor in 1911. After a forgotten non-mathematical paper in 1918, on the repayment of the national debt, Remak presented his mathematical system of ‘superposed prices’ in 1929, twelve years after Frobenius’ death. With suitable units of measurement, Remak’s system can be handled by Perron-Frobenius tools. However, Remak failed to normalize his units, and provided lengthy proofs of his own. Moreover, he spent most of his mathematical efforts on freak systems in which the most important commodities have zero prices. A few years earlier, in 1922, Bray also had overlooked Perron-Frobenius in a mathematically similar model that studied Cournot’s equations of currency exchange. Contrary to Dorfman’s well-known article on Leontief’s Nobel Prize in 1973, I provide archival evidence that Leontief knew Remak’s results already in the early 1930s, before he submitted a paper containing ideas of input-output theory to Keynes for the Economic Journal in 1933. Keynes quickly rejected Leontief’s paper; a few months later Leontief submitted it to Frisch for Econometrica. Frisch formulated a lot of critical remarks on Leontief’s first and revised version in 1933-34. In the light of this criticism, it is highly probable that Leontief simplified and linearized his mathematics, and a few years later he finally started publishing his Nobel Prize winning empirical and theoretical results in American journals. Just like Leontief, Sraffa started related research in the late 1920s. He didn’t discuss his mathematical problems with competent economic colleagues in Cambridge, nor with the specialists of the Econometric Society, but preferred mathematical help from three non-economists: Ramsey, Watson and especially Besicovitch. I suggest that Besicovitch in his early mathematical research in Russia ‘came close’ to Perron-Frobenius results, but it is well-known that he didn’t know Perron-Frobenius, and tried to invent his own proofs for Sraffa in the 1940s. In the first half of the twentieth century, abstract algebra started to flourish and became a more prestigious and widely researched subject than the ‘old-fashioned’ Perron-Frobenius matrices. In this context, it is less surprising that for many decades even the mathematicians (except Potron) overlooked the usefulness of Perron-Frobenius in linear economics. Results, connections or applications that seem evident after the fact, were not obvious to the original pioneers. |
| Keywords: | Perron-Frobenius, Charasoff, Potron, Bray, Remak, Leontief, Sraffa, Nonnegative matrices, Input-output analysis |
| Date: | 2013–12 |
| URL: | http://d.repec.org/n?u=RePEc:ant:wpaper:2013030&r=hpe |
| By: | Sanjit Dhami; Ali al-Nowaihi |
| Abstract: | Standard equilibrium concepts in game theory find it difficult to explain the empirical evidence in a large number of static games such as prisoners’ dilemma, voting, public goods, oligopoly, etc. Under uncertainty about what others will do in one-shot games of complete and incomplete information, evidence suggests that people often use evidential reasoning (ER), i.e., they assign diagnostic significance to their own actions in forming beliefs about the actions of other like- minded players. This is best viewed as a heuristic or bias relative to the standard approach. We provide a formal theoretical framework that incorporates ER into static games by proposing evidential games and the relevant solution concept- evidential equilibrium (EE). We derive the relation between a Nash equilibrium and an EE. We also apply EE to several common games including the prisoners’ dilemma and oligopoly games. |
| Keywords: | Evidential reasoning; causal reasoning; evidential games; social projec- tion functions; ingroups and outgroups; evidential equilibria and consistent eviden- tial equilibria; Nash equilibria; the prisoners.dilemma and oligopoly games; common knowledge and epistemic foundations. |
| Date: | 2013–11 |
| URL: | http://d.repec.org/n?u=RePEc:lec:leecon:13/25&r=hpe |
| By: | Mongin, Philippe |
| Abstract: | De tous les problèmes conçus par la théorie de la décision, le paradoxe d'Allais est peut-être celui qui aura suscité l'intérêt le plus persistant. La théorie y a consacré assez de travaux techniques remarquables pour qu'il soit désormais possible à l'histoire et à la philosophie des sciences de l'examiner réflexivement. Dans sa partie historique, l'article restitue le contexte d'apparition du paradoxe - le colloque de Paris, en 1952, auquel assistaient les principaux théoriciens de la décision du moment. L'axiomatique de von Neumann et Morgenstern en 1947 leur avait donné des raisons nouvelles d'approuver l'hypothèse de l'utilité attendue, et le contre-exemple d'Allais visait précisément à ébranler leur conviction. Les questions de la controverse étaient de type normatif, mais elles se perdirent quand le "paradoxe d'Allais" gagna tardivement la célébrité dans des travaux des années 1980 qui le traitaient comme une simple réfutation empirique. Ils en firent l'enjeu de "théories de l'utilité non-espérée" qu'ils développaient de même sous le seul angle empirique. Dans sa partie philosophique, l'article cherche à évaluer ce déplacement d'interprétation. D'un certain côté, les théoriciens de la décision firent bien de libérer leur travail expérimental des complications du normatif, car ils parvinrent ainsi à des résultats éclairants : l'hypothèse de l'utilité espérée était empiriquement réfutée, la responsabilité principale en revenait à l'axiome d'indépendance de von Neumann-Morgenstern, et l'étape suivante était de transformer adéquatement cet axiome. D'un autre côté, ils eurent tort de négliger un trait fondamental de leur domaine : les comportements observés ne sont informatifs que si les agents sont prêts à les assumer de manière réfléchie, c'est-à-dire à leur prêter une certaine valeur normative. D'après la reconstruction proposée ici, Allais ne voulait faire porter les expériences de choix que sur des sujets rationnels, ou bien sélectionnés au départ, ou bien révélés comme tels par l'expérience. L'article développe ces intuitions en revenant aux travaux des années 1970, aujourd'hui très peu connus, qui, sous l'influence d'Allais, proposèrent des traductions expérimentales de la rationalité, et il invite finalement la théorie de la décision à diversifier ses méthodes en s'inspirant de ces tentatives originales. Few problems in decision theory have raised more persisting interest than the Allais paradox. It appears that sufficiently many brilliant works have addressed it from within decision theory proper for history and philosophy of science now to enter stage. In its historical side, the paper recounts the paradox as it arose, i.e., in 1952, at a Paris conference attended by the main decision theorists of the time. They had drawn renewed confidence in expected utility theory (EUT) from the way von Neumann and Morgenstern had axiomatized it in 1947, and Allais devised his puzzle precisely to shaken their confidence. The issues between the two camps were normative, but they became lost in the developments of the 1980s that belatedly brought fame to the "Allais paradox". These works restricted the paradox to be a straightforward empirical refutation, turning it into a stake of also exclusively empirically oriented non-EU theories. In its philosophical vein, the paper tries to evaluate this shift of interpretation. To an extent, decision theorists were right because their experimental work was thus freed from a major complication and amenable to illuminating results: EUT was empirically refuted, the independence axiom of von Neumann and Morgentern was the main culprit, and the next theoretical stage was to modify this axiom appropriately. However, they were also wrong in not addressing an essential feature of their field, i.e., that observed behaviour is informative only if agents are prepared to endorse it reflectingly, i.e., to endow it with some normative value. As reconstructed here, Allais meant to reserve choice experiments to rational subjects, who were either selected at the outset, or identified as such by the experimental results. The paper tries to flesh out Allais's intuitions by turning to by now little known works of the 1970s, which under his influence provided experimental renderings of rationality, and it eventually suggests that decision theory might diversify its methods by taking inspiration from these original attempts. |
| Keywords: | Allais Paradox; expected utility theory; von Neumann-Morgenstern; positive vs normative; experimental economics of decision; rationality |
| JEL: | B21 B31 B41 C91 D81 |
| Date: | 2013–06–30 |
| URL: | http://d.repec.org/n?u=RePEc:ebg:heccah:1021&r=hpe |
| By: | Milanovic, Branko |
| Abstract: | Thomas Piketty's "Capital in the 21st century" may be one of the most important recent economics books. It jointly treats theory of growth, functional distribution of income, and interpersonal income inequality. It envisages a future of relatively slow growth with the rising share of capital incomes, and widening income inequality. This tendency could be checked only by worldwide taxation of capital. |
| Keywords: | Income distribution, economic growth, taxation |
| JEL: | D31 D33 E2 E25 |
| Date: | 2013–10 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:52384&r=hpe |
| By: | Malcolm Dunn |
| Abstract: | This book deals with the inner life of the capitalist firm. There we find numerous conflicts, the most important of which concerns the individual employment relationship which is understood as a principal-agent problem between the manager, the principal, who issues orders that are to be followed by the employee, the agent. Whereas economic theory traditionally analyses this relationship from a (normative) perspective of the firm in order to support the manager in finding ways to influence the behavior of the employees, such that the latter – ideally – act on behalf of their superior, this book takes a neutral stance. It focusses on explaining individual behavioral patterns and the resulting interactions between the actors in the firm by taking sociological, institutional, and above all, psychological research into consideration. In doing so, insights are gained which challenge many assertions economists take for granted. |
| Keywords: | Principal Agent Relation, Firm Behaviour, Evolutionary Economics, Transaction Costs, Conflict Management |
| JEL: | D21 D23 L2 |
| Date: | 2013–12 |
| URL: | http://d.repec.org/n?u=RePEc:pot:pestud:01&r=hpe |
| By: | Herings P.J.J.; Meshalkin A.V.; Predtetchinski A. (GSBE) |
| Abstract: | We study the division of a surplus under majoritarian bargaining in the three-person case. In a stationary equilibrium as derived by Baron and Ferejohn 1989, the proposer offers one third times the discount factor of the surplus to a second player and allocates no payoff to the third player, a proposal which is accepted without delay. Laboratory experiments show various deviations from this equilibrium, where different offers are typically made and delay may occur before acceptance. We address the issue to what extent these findings are compatible with subgame perfect equilibrium and characterize the set of subgame perfect equilibrium payoffs for any value of the discount factor. We show that for any proposal in the interior of the space of possible agreements there exists a discount factor such that the proposal is made and accepted. We characterize the values of the discount factor for which equilibria with one-period delay exist. We show that any amount of equilibrium delay is possible and we construct subgame perfect equilibria such that arbitrary long delay occurs with probability one. |
| Keywords: | Noncooperative Games; Bargaining Theory; Matching Theory; |
| JEL: | C72 C78 |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:umagsb:2013072&r=hpe |
| By: | Rob H., Grieve |
| 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, |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:edn:sirdps:447&r=hpe |
| By: | Ulrich Witt |
| Abstract: | The label "evolutionary" is currently used in economics to describe a variety of theories and topics. Far from inspiring the paradigmatic shift envisioned by some of the early proponents of evolutionary economics, the patchwork of theories and topics in this field demonstrates the need of an overarching interpretative frame. In other disciplines, the adoption of the Darwinian theory of evolution extended by hypotheses on cultural evolution has led to such a paradigm shift. This paper explores what can be accomplished by adopting that theory as an interpretative frame also for economics. Attention is directed in particular to the modalities of causal explanations that are germane to such a frame. The relevance of these modalities to the various thematic and theoretical specializations carrying the label "evolutionary" in economics is established to demonstrate the suitability as a common frame. Moreover, these modalities suggest a criterion on the basis of which evolutionary research can be distinguished from non-evolutionary research in economics. The case of institutional economics is used to outline some implications in an exemplary fashion. |
| Date: | 2013–12–18 |
| URL: | http://d.repec.org/n?u=RePEc:esi:evopap:2013-09&r=hpe |
| By: | Kurt Dopfer |
| Date: | 2013–12–18 |
| URL: | http://d.repec.org/n?u=RePEc:esi:evopap:2013-08&r=hpe |
| By: | Colin, Jennings |
| Abstract: | This article reviews ‘Pillars of Prosperity’ by Timothy Besley and Torsten Persson and ‘Why Nations Fail’ by Daron Acemoglu and James Robinson. Both books are focussed on the role of institutions in determining the wealth of nations and the review compares and contrasts the different approaches contained in the two texts. The review also attempts to locate the texts within the broader literature in development and political economics and to link them to other recent work in these areas. |
| Keywords: | Institutions, Prosperity, |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:edn:sirdps:488&r=hpe |
| By: | Freeman, Alan |
| Abstract: | This is a pre-publication version of an article published by the journal ‘America Latina XXI’. It was originally produced as a tribute to Hugo Chavez and a critical reflection on his reception outside Venezuela, on the occasion of his death. |
| Keywords: | Chavez, Venezuela, Bolivarianism, Bolshevism |
| JEL: | B00 B50 O10 |
| Date: | 2013–05–06 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:52309&r=hpe |
| By: | Donald A. R., George; Les, Oxley |
| Abstract: | This paper analyses RE macromodels from the methodological perspective. It proposes a particular property, robustness, which should be considered a necessary feature of scienti cally valid models in economics, but which is absent from many RE macromodels. To restore this property many macroeconomists resort to detailed and implausible assumptions, which take their models a long way from simple Rational Expectations. The paper draws attention to the problems inherent in the technique of local linearisation and concludes by proposing the use of nonlinear models, analysed globally. |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:edn:sirdps:472&r=hpe |
| By: | William Barnett (Department of Economics, The University of Kansas; Center for Financial Stability, New York City; IC2 Institute, University of Texas at Austin) |
| Abstract: | This paper explores the relationship between Milton Friedman’s work and the work on Divisia monetary aggregation, originated by William A. Barnett. The paradoxes associated with Milton Friedman’s work are largely resolved by replacing the official simple-sum monetary aggregates with monetary aggregates consistent with economic index number theory, such as Divisia monetary aggregates. Demand function stability becomes no more of a problem for money than for any other good or service. Money becomes relevant to monetary policy in all macroeconomic traditions, including New Keynesian economics, real business cycle theory, and monetarist economics. Research and data on Divisia monetary aggregates are available for over 40 countries throughout the world from the online library within the Center for Financial Stability’s (CFS) program, Advances in Monetary and Financial Measurement. This paper supports adopting the standards of monetary data competency advocated by the CFS and the International Monetary Fund (2008, pp. 183-184). |
| Keywords: | Divisia monetary aggregates, demand for money, monetarism, index number theory. |
| Date: | 2013–12 |
| URL: | http://d.repec.org/n?u=RePEc:kan:wpaper:201312&r=hpe |
| By: | Yannick Viossat (CEREMADE - CEntre de REcherches en MAthématiques de la DEcision - CNRS : UMR7534 - Université Paris IX - Paris Dauphine); Andriy Zapechelnyuk (QMUL - School of Economics and Finance - Queen Mary, University of London) |
| Abstract: | Potential based no-regret dynamics are shown to be related to fictitious play. Roughly, these are epsilon-best reply dynamics where epsilon is the maximal regret, which vanishes with time. This allows for alternative and sometimes much shorter proofs of known results on convergence of no-regret dynamics to the set of Nash equilibria. |
| Keywords: | Regret minimization; no-regret strategy; fictitious play; best reply dynamics; Nash equilibrium; Hannan set; curb set |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-00713871&r=hpe |
| By: | Nina, Boyarchenko; Mario, Cerrato; John, Crosby; Stewart, Hodges |
| Abstract: | Faced with the problem of pricing complex contingent claims, an investor seeks to make his valuations robust to model uncertainty. We construct a notion of a model- uncertainty-induced utility function and show that model uncertainty increases the investor's eff ective risk aversion. Using the model-uncertainty-induced utility function, we extend the \No Good Deals" methodology of Cochrane and Sa a-Requejo [2000] to compute lower and upper good deal bounds in the presence of model uncertainty. We illustrate the methodology using some numerical examples. |
| Keywords: | Asset pricing theory, Good deal bounds, Knightian uncertainty, Model uncertainty, Contingent claim pricing, model-uncertainty-induced utility function, |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:edn:sirdps:452&r=hpe |
| By: | Ulrik H. Nielsen (Department of Economics, Copenhagen University); Jean-Robert Tyran (Centre for Economic Policy Research (CEPR), University of Vienna, Department of Economics, Copenhagen University); Erik Wengström (Department of Economics, Copenhagen University) |
| Abstract: | We use the strategy method to classify subjects into cooperator types in a large-scale online Public Goods Game and find that free riders spend more time on making their decisions than conditional cooperators and other cooperator types. This result is robust to reversing the framing of the game and is not driven by free riders lacking cognitive ability, confusion, or natural swiftness in responding. Our results suggest that conditional cooperation serves as a norm and that free riders need time to resolve a moral dilemma. |
| Keywords: | Response Time, Free Riding, Public Goods, Experiment |
| JEL: | C70 C90 D03 |
| Date: | 2013–09–04 |
| URL: | http://d.repec.org/n?u=RePEc:kud:kuiedp:1308&r=hpe |
| By: | Johannes Horner (Cowles Foundation, Yale University); Satoru Takahashi (National University of Singapore); Nicolas Vieille (HEC Paris) |
| Abstract: | This paper characterizes an equilibrium payoff subset for Markovian games with private information as discounting vanishes. Monitoring is imperfect, transitions may depend on actions, types be correlated and values interdependent. The focus is on equilibria in which players report truthfully. The characterization generalizes that for repeated games, reducing the analysis to static Bayesian games with transfers. With correlated types, results from mechanism design apply, yielding a folk theorem. With independent private values, the restriction to truthful equilibria is without loss, except for the punishment level; if players withhold their information during punishment-like phases, a "folk" theorem obtains also. |
| Keywords: | Bayesian games, Repeated games, Folk theorem |
| JEL: | C72 C73 |
| Date: | 2013–12 |
| URL: | http://d.repec.org/n?u=RePEc:cwl:cwldpp:1933&r=hpe |
| By: | Bresser-Pereira, Luiz Carlos |
| Abstract: | Progress was an idea of the 18th century; development, a project of the 20th century that continues into the 21st century. Progress was associated with the advance of reason, development with the fulfillment of the five political objectives that modern societies set for themselves: security, freedom, economic well-being, social justice and protection of the environment. Today we can view progress and development as equivalent. Both were products of the capitalist revolution, and of the economic development that began with it. Economic development or growth, in its turn, is the process of capital accumulation with the incorporation of technical progress that, mainly through productive sophistication and the increase of the value of labor, increases wages and improves standards of living. The five objectives that define development, as well as the three social instances existing in society change in an interdependent way. |
| Date: | 2013–12–09 |
| URL: | http://d.repec.org/n?u=RePEc:fgv:eesptd:350&r=hpe |
| By: | Tsakas E.; Gaechter S.; Mengel F.; Vostroknutov A. (GSBE) |
| Abstract: | In a novel experimental design we study dynamic public good games in which wealth is allowed to accumulate. More precisely each agents income at the end of a period serves as her endowment in the following period. In this setting growth and inequality arise endogenously allowing us to address new questions regarding their interplay and effect on cooperation levels. We find that average cooperation levels in this setting are high between 20-60 of endowments and that amounts contributed do not decline over time. Introducing the possibility of punishment leads to lower group income, but less inequality within groups. In both treatments with and w/o punishment inequality and group income are positively correlated for poor groups with below median income, but negatively correlated for rich groups with above median income. There is very strong path dependence inequality in early periods is strongly negatively correlated with group income in later periods. These results give new insights into why people cooperate and should make us rethink previous results from the literature on repeated public good games regarding the decay of cooperation in the absence of punishment. |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:umagsb:2013070&r=hpe |
| By: | Julia Belau |
| Abstract: | A well known and simple game to model markets is the glove game where worth is produced by building matching pairs. For glove games, diff erent concepts, like the Shapley value, the restricted Shapley value or the Owen value, yield diff erent distributions of worth. Moreover, computational eff ort of these values is in general very high. This paper provides effi cient allocation formulas of the component restricted Shapley value and the Owen value for glove games in case of efficient coalitions. |
| Keywords: | Glove game; imbalanced market; imhapley value; owen value; effi ciency;computational complexity |
| JEL: | C71 |
| Date: | 2013–12 |
| URL: | http://d.repec.org/n?u=RePEc:rwi:repape:0456&r=hpe |
| By: | Darine Bakkour |
| Abstract: | Ce papier a pour objet de préciser la terminologie du concept de gouvernance. Nous allons examiner les modes de gouvernance les plus connus, à savoir la gouvernance d’entreprise, la gouvernance publique, et la gouvernance territoriale. C’est ainsi, que nous évoquerons le concept de la Responsabilité Sociale de l’Entreprise (RSE), le courant du New Public Management (NPM) et le concept de gouvernementalité de Michel Foucault (1978). Nous considérons que la gouvernance s’applique à un « système » et nous proposons une définition du concept de gouvernance d’un système, comme suit : « La gouvernance d’un système désigne les mécanismes au moyen desquels les mandataire(s) et les mandants articulent leurs intérêts et aplanissent leurs différences afin de réaliser leurs objectifs. La gouvernance désigne, par ailleurs, les institutions, qui influent sur l’exercice des pouvoirs dans les entités concernés. Enfin, la gouvernance d’un système est décrite par l’interaction participative entre les acteurs concernés à tous les niveaux ». La gouvernance est un concept holistique qui s’applique à plusieurs niveaux, et pour plusieurs objectifs, dans un environnement marqué par des conflits d’intérêts, des situations d’incertitudes et d’asymétrie d’information. |
| Date: | 2013–12 |
| URL: | http://d.repec.org/n?u=RePEc:lam:estudy:13-05&r=hpe |
| By: | Clausen, Andrew |
| Abstract: | In many moral hazard problems, the principal evaluates the agent's performance based on signals which the agent may suppress and replace with counterfeits. This form of fraud may affect the design of optimal contracts drastically, leading to complete market failure in extreme cases. I show that in optimal contracts, the principal deters all fraud, and does so by two complementary mechanisms. First, the principal punishes signals that are suspicious, i.e. appear counterfeit. Second, the principal is lenient on bad signals that the agent could suppress, but does not. |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:edn:sirdps:442&r=hpe |