nep-hpe New Economics Papers
on History and Philosophy of Economics
Issue of 2014‒01‒24
thirteen papers chosen by
Erik Thomson
University of Manitoba

  1. Milton Friedman: Constructing an Anti-Keynes By Craig Freedman; Geoff C. Harcourt; Peter Kriesler; John Nevilet
  2. Continuity or rupture ? An analysis of some aspects of social philosophy in the works of J.S.Mill, Alfred Marshall and J.M.Keynes By Laura Valladão de Mattos
  3. The economics of happiness and psychology of wealth By Czapinski, Janusz
  4. Lange's 1938 Model: Dynamics and the "Optimum propensity to consume" By Michaël Assous; Roberto Lampa
  5. Towards a Developmental Turn in Evolutionary Economic Geography? By Ron Martin; Peter Sunley
  6. A Formal Proof of Vickrey's Theorem by Blast, Simp, and Rule By Manfred Kerber; Christoph Lange; Colin Rowat
  7. Why myths in neoclassical economics threaten the world economy: a post-Keynesian Manifesto By Geoff C. Harcourt; Peter Kriesler; John Nevilet
  8. Capitalist transformation without political participation: German capitalism in the first half of the 19th century By Wegner, Gerhard
  9. Entertaining Malthus: Bread, Circuses and Economic Growth By Lemin Wu; Rohan Dutta; David K Levine; Nicholas W Papageorge
  10. Appariement: des modèles de Lloyd Shapley à la conception de marchés d'Alvin Roth By Francoise Forges; Guillaume Haeringer; Vincent Iehlé
  11. A Note on Cooperative Strategies in Gladiators' games By Jérôme Ballet; Damien Bazin; Radu Vranceanu
  12. A Creepy World By Didier Sornette; Peter Cauwels
  13. Recovery from Financial Crises: Evidence from 100 Episodes By Carmen M. Reinhart; Kenneth S. Rogoff

  1. By: Craig Freedman (Department of Economics, Macquirie University); Geoff C. Harcourt (School of Economics, Australian School of Business, the University of New South WalesAuthor-Name: Craig Freedman); Peter Kriesler (School of Economics, Australian School of Business, the University of New South WalesAuthor-Name: Craig Freedman); John Nevilet (School of Economics, Australian School of Business, the University of New South Wales)
    Abstract: The paper considers Keynes’s major contributions before "The General Theory", namely "A Tract on Monetary Reform" and "A Treatise on Money", and shows that they were close to the views which Friedman would later develop. However, "The General Theory of Employment, Interest and Money" represented a major challenge to the orthodoxy of the time, and it was to this that Friedman radically objected. We identify the main areas in which Keynes departed from the mainstream theory of the time, and show how Friedman attempted to undermine each of Keynes’s major contributions and the extent to which he was successful. Friedman regarded Keynes’s contributions as detrimental to, and a definitive step backward for, the economics profession.
    Keywords: Friedman, Keynes, History of macroeconomics, Macroeconomic policy
    JEL: B22 B31 E6
    Date: 2013–12
  2. By: Laura Valladão de Mattos
    Abstract: It is argued in this paper that it’s possible to speak of a ‘tradition’ in the field of social and economic philosophy uniting the works of J.S.Mill, Alfred Marshall and John Maynard Keynes. This ‘tradition’ can be characterized by the following concepts: (a) by the rejection of the acquisitive values of capitalism; (b) by the idea that capitalism would be incapable of spontaneously solving the problems of distribution of wealth and poverty; (c) by the idea that, for the sake of the preservation of liberty, diversity and economic efficiency, individual initiative should be free to act wherever it engenders good results, but that the State should intervene whenever the free initiative fails, acting in the good of collectivity; (d) by the belief that it would be possible to make capitalism significantly better by the way of small and gradual changes.
    Keywords: J.S.Mill; Alfred Marshall; J.M.Keynes; social and economic philosophy; social change
    JEL: B12 B13 B2
    Date: 2013–12–20
  3. By: Czapinski, Janusz
    Abstract: The “Easterlin paradox” suggests that there is no link between the economic development of a society and the overall happiness of its members, yet wealthy societies and people are happier than those with low income. Using recent data from Social Diagnosis ( and several surveys on a broader array of countries, I verify a few hypotheses on the relationship between income and psychological well-being at micro and macro levels. The main factor which differentiates the pattern of relationship is the level of income. In poor societies and individuals, income affects well-being but in wealthy societies and individuals, the direction of the relationship is reversed: well-being determines income. Money buys happiness when income is too low to satisfy basic needs, and happiness brings money when income satisfies basic needs.
    Keywords: psychological well-being, happiness, income, economic development
    JEL: I31
    Date: 2013–12
  4. By: Michaël Assous (GREDEG CNRS; University of Paris 1); Roberto Lampa (CONICET (National Scientific and Technical Research Council); University of Buenos Aires, Argentina)
    Abstract: Oskar Lange’s 1938 article “The Rate of Interest and the Optimum Propensity to Consume”, is usually associated with the original IS-LM approach of the late 1930s. However, Lange’s article was not only an attempt to illuminate Keynes’s main innovations but the first part of a wide project that included the development of a theory of economic evolution. This paper aims at showing that Lange’s article can help illuminating critical aspects of this project: in particular, Lange’s idea that a synthesis between Kaldor’s and Kalecki’s theories and that of Schumpeter, might have been possible and that it represented (in intentions) a “modern” and consistent reconstruction of the Marxist theory of the business cycle. Section 1 clarifies Lange’s early reflection on dynamics. Section 2 centers on Lange’s 1938 static model and indicates the effects of a change of saving on investment. Section 3 suggests a dynamic reconstruction from which are addressed important arguments raised by Lange in a series of papers written between 1934 and 1942.
    Keywords: Lange, Kalecki, Marxian theory of the business cycle, marginal propensity to save, non-linearity
    JEL: B22 B24 E32 E12
    Date: 2014–01
  5. By: Ron Martin; Peter Sunley
    Abstract: Over the past couple of decades or so, there have been increasing moves within evolutionary theory to move beyond the neo-Darwinian principles of variety, selection and retention, and to incorporate development. This has led to a richer palette of concepts, mechanisms and models of evolution and change, such as plasticity, robustness, evolvability, emergence, niche construction, and selforganisation, This opens up a different framework for understanding evolution. In this paper we set out the main characteristics of the recent and ongoing ‘developmental turn’ in evolutionary theory, and suggest how these might inform a corresponding ‘developmental turn’ in evolutionary economic geography.
    Keywords: Evolutionary economic geography, Generalised Darwinism, Evolutionary developmental biology, Developmental systems theory, Plasticity, Robustness, Evolvability, Emergence, Self organisation
    Date: 2014–01
  6. By: Manfred Kerber; Christoph Lange; Colin Rowat
    Abstract: Formal methods use computers to verify proofs or even discover new theorems. Interest in applying formal methods to problems in economics has increased in the past decade, but - to date - none of this work has been published in economics journals. This paper applies formal methods to a familiar environment - Vickrey's theorem on second-price auctions - and provides, as background, an introduction to formal methods.
    Keywords: formal proof, mechanized reasoning, auction theory
    JEL: B41 C63 C88 D44
    Date: 2014–01
  7. By: Geoff C. Harcourt (School of Economics, Australian School of Business, the University of New South WalesAuthor-Name: Craig Freedman); Peter Kriesler (School of Economics, Australian School of Business, the University of New South WalesAuthor-Name: Craig Freedman); John Nevilet (School of Economics, Australian School of Business, the University of New South Wales)
    Abstract: There is a myth underlying neoclassical economic analysis of a ‘Western’ economy, which is that in anything but the relatively short run, defined as the length of a business cycle, the economy reaches an equilibrium position determined entirely by supply side factors and unaffected by measures taken to increase aggregate demand during a slump This myth is not based on any factual analysis, it is simply assumed. It threatens the wellbeing of the world economy because it allows those who hold it to deny there is any need to change the deregulated state of the international financial sector, that caused the global crisis which started in 2007 and the effects of which have persisted ever since. The fundamental myth has a number of corollaries, which are worth calling associated myths. One of the most important is that the composition of spending to increase aggregate demand during a slump is irrelevant, so that it does not matter if the spending is directed towards consumer goods or to increasing physical and human capital. Another is that monetary policy has a more desirable impact on the economy than does fiscal policy. The paper focusses on neo-classical growth theory; comparative static implications are not considered. Finally, the policy implications are discussed.
    Keywords: Financial crisis, Macroeconomic policy, deregulation, neo-classical growth theory
    JEL: E6 E32 O4
    Date: 2013–12
  8. By: Wegner, Gerhard
    Abstract: The paper analyzes the political economy of capitalist transformation in Germany during the first half of the 19th century. Current approaches in institutional economics stress the dependency of economic and political institutions in 'open access orders', which makes economic freedom without political freedom unsustainable. However, the emergence of capitalism in the German states after 1806 gives an example that economic freedom can precede political freedom, which implies that the political power of the 'dominant coalition' remains intact for a longer period of time. The paper argues that the German transformation towards modern capitalism was in stigated by competition among the European states; it was conducive to the monopolization of the coercive power of the state. This competition drove a wedge between the interests of the monarch and his supporting dominant coalition (landed gentry). Accordingly, the monarch had to find a bargain which established capitalist institutions in order to promote economic growth without compromising the interests of the landed gentry. Namely the public administration in Prussia which was deeply influenced by Adam Smith's ideas organized that bargain; it established economic freedom in various sectors but took the economic interests of the landed gentry into account. At the same time, public administration and the legal system gained more independence from the monarch. In various aspects the sweeping institutional change was Pareto-superior for groups, which made capitalism also acceptable for the elite group. Later institutional improvements have relaxed still existing constraints so that high industrialization which brought the German economy to the top of international markets could take place. --
    Date: 2013
  9. By: Lemin Wu; Rohan Dutta; David K Levine; Nicholas W Papageorge
    Date: 2014–01–20
  10. By: Francoise Forges (LEDa - Laboratoire d'Economie de Dauphine - Université Paris IX - Paris Dauphine, CEREMADE - CEntre de REcherches en MAthématiques de la DEcision - CNRS : UMR7534 - Université Paris IX - Paris Dauphine); Guillaume Haeringer (Departament d'Economia i d'Història Econòmica - Universitat Autónoma de Barcelona); Vincent Iehlé (LEDa - Laboratoire d'Economie de Dauphine - Université Paris IX - Paris Dauphine, CEREMADE - CEntre de REcherches en MAthématiques de la DEcision - CNRS : UMR7534 - Université Paris IX - Paris Dauphine)
    Abstract: Alvin Roth et Lloyd Shapley ont reçu en 2012 le prix de sciences économiques de la Banque Royale de Suède à la mémoire d'Alfred Nobel, pour leurs travaux sur l'organisation centralisée de certains marchés économiques, qui dépendent de l'appariement d'agents de deux types distincts (des élèves et des écoles, par exemple). Shapley est le co-auteur, avec David Gale, de l'article fondateur du domaine, qui propose un algorithme pour atteindre un appariement stable. Roth a dirigé la restructuration de la procédure d'affectation des internes dans les hôpitaux aux Etats Unis et la conception d'un marché lié à la transplantation de reins. Après avoir rendu compte de ces contributions, nous évoquons aussi le rôle déterminant de Shapley en théorie des jeux.
    Keywords: appariement, conception de marché, jeu coopératif, stabilité
    Date: 2013–12–01
  11. By: Jérôme Ballet (UMI RESILIENCES - Unité mixte internationale Résiliences - Institut de recherche pour le développement [IRD] : UMI236 - Centre ivoirien de recherches économiques et sociales (CIRES) - Université de Cocody (CIV)); Damien Bazin (GREDEG - Groupe de Recherche en Droit, Economie et Gestion - CNRS : UMR7321 - Université Nice Sophia Antipolis [UNS]); Radu Vranceanu (Economics Department - ESSEC Business School, THEMA - Théorie économique, modélisation et applications - CNRS : UMR8184 - Université de Cergy Pontoise)
    Abstract: Gladiatorial combat was in reality a lot less lethal than it is depicted in the cinema. This short paper highlights how cooperative strategies could have prevailed in the arenas, which is generally what happened during the Games. Cooperation in the arena corresponded to a situation of the professionalization of gladiators, who been trained in gladiatorial schools. This case provides an analogy of the conditions under which cooperation occurs in a context of competition between rival companies.
    Keywords: sustainable competition; cooperation rule; gladiatorial combat
    Date: 2013–05–16
  12. By: Didier Sornette; Peter Cauwels
    Abstract: Using the mechanics of creep in material sciences as a metaphor, we present a general framework to understand the evolution of financial, economic and social systems and to construct scenarios for the future. In a nutshell, highly non-linear out-of-equilibrium systems subjected to exogenous perturbations tend to exhibit a long phase of slow apparent stable evolution, which are nothing but slow maturations towards instabilities, failures and changes of regimes. With examples from history where a small event had a cataclysmic consequence, we propose a novel view of the current state of the world via the logical scenarios that derive, avoiding the traps of an illusionary stability and simple linear extrapolation. The endogenous scenarios are "muddling along", "managing through" and "blood red abyss". The exogenous scenarios are "painful adjustment" and "golden east".
    Date: 2014–01
  13. By: Carmen M. Reinhart; Kenneth S. Rogoff
    Abstract: We examine the evolution of real per capita GDP around 100 systemic banking crises. Part of the costs of these crises owes to the protracted nature of recovery. On average, it takes about eight years to reach the pre-crisis level of income; the median is about 6 ½ years. Five to six years after the onset of crisis, only Germany and the US (out of 12 systemic cases) have reached their 2007-2008 peaks in real income. Forty-five percent of the episodes recorded double dips. Postwar business cycles are not the relevant comparator for the recent crises in advanced economies.
    JEL: E32 E44 F44 G01 N10 N20
    Date: 2014–01

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