nep-hpe New Economics Papers
on History and Philosophy of Economics
Issue of 2014‒02‒02
23 papers chosen by
Erik Thomson
University of Manitoba

  1. A Methodological Reading of “The Economic Consequences of the Peace". By Carabelli, Anna M.; Cedrini, Mario
  2. Rueff et l'analyse du chômage : Quels héritages? By Georges Prat
  3. Keynes's General Theory, Treatise on Money and Tract on Monetary Reform: Different Theories, Same Methodological Approach? By Carabelli, Anna Maria; Cedrini, Mario Aldo
  4. Walter Eucken's role in the early history of the Mont Pèlerin Society By Kolev, Stefan; Goldschmidt, Nils; Hesse, Jan-Otmar
  5. The Role of Homo Oeconomicus in the Political Economy of James Buchanan By Kirchgässner, Gebhard
  6. Еconomic theory and the New-Keynesian school By Josheski, Dushko; Magdinceva-Sopova, Marija
  7. Strategic Ambiguity in Games By Riedel, Frank; Sass, Linda
  8. Selfish Altruism, Fierce Cooperation and the Emergence of Cooperative Equilibria from Passing and Shooting By Askitas, Nikos
  9. A Dynamic Model of Belief-Dependent Conformity to Social Norms By Sontuoso, Alessandro
  10. The average tree permission value for games with a permission tree By Brink J.R. van den; Talman A.J.J.; Herings P.J.J.; Laan G. van der
  11. Subgame perfect equilibria in majoritarian bargaining By Herings P.J.J.; Meshalkin A.V.; Predtetchinski A.
  12. Ex post Nash consistent representation of effectivity functions By Vermeulen A.J.; Schröder M.J.W.; Peters H.J.M.
  13. From sets of equilibria to structures of interaction underlying binary games of strategic complements By Tomas Rodriguez Barraquer
  14. Evolutionary Beliefs and Financial Markets By Elyès Jouini; Clotilde Napp; Yannick Viossat
  15. Rock, Paper, Scissors, Lizard, Spock: Two-Person circulant Games By Kern, Johannes; Granic, Dura-Georg
  16. The Virtue Ethics Hypothesis: Is there a nexus between virtues and well-being? By Koch, Christian
  17. Voting in collective stopping games By Herings P.J.J.; Predtetchinski A.
  18. A Dominance Solvable Global Game with Strategic Substitutes By Rodrigo Harrison; Pedro Jara-Moroni
  19. Determinacy of Games with Stochastic Eventual Perfect Monitoring By Itai Arieliy; Yehuda (John) Levy
  20. Claim games for estate division problems By Vermeulen A.J.; Schröder M.J.W.; Peters H.J.M.
  21. Under the Thumb of History? Political Institutions and the Scope for Action By Abhijit Banerjee; Esther Duflo
  22. Moral hypocrisy: Self-deception or impression management? By Walkowitz, Gari; Lönnqvist, Jan-Erik; Irlenbusch, Bernd
  23. "The Rational Expectations Hypothesis: An Assessment from Popper's Philosophy" By Ivan H. Ayala; Alfonso Palacio-Vera

  1. By: Carabelli, Anna M.; Cedrini, Mario (University of Turin)
    Abstract: The paper provides a methodological reading of Keynes’s “The Economic Consequences of the Peace”. Drawing on the close interdependence between theory and method in Keynes's economics, which he considered as a branch of logic, a correct way of reasoning about a complex economic material, we reconstruct the rationale of Keynes's imaginative solutions for the troubles caused by WWI and the Versailles Treaty. We thereby shed light on a method of thinking out the specific problems of international economic relations that Keynes will be consistently using (though adapting it to changing times and circumstances) in his work of international economics and diplomacy. A method which will have a direct influence on the contents of Key nes's Bretton Woods reform plans, and may be of great importance in directing European policy-makers to a structural reform of the continent's economic architecture.
    Date: 2013–12
  2. By: Georges Prat
    Abstract: This paper shows that, Rueff (1925, 1931) distinguished [a] a « permanent » unemployment due to excessive real wages relative to the labor productivity, [b] a “temporary” unemployment due to a decline in the economic activity resulting from a cyclic decrease of the price level, and [c] a « minimum » frictional unemployment prevailing in the normal functioning of the economy. Using empirical data, Rueff suggested that the unemployment of type [a] was largely dominant in England during the 1920’s (i.e. the socalled « law of Rueff »). The confrontation between this analysis and the subsequent analysis of unemployment in the literature reveals that : (i) the Phillips curve and its extension with the NAIRU appears as a non-legacy ; (ii) the wage curve is in accordance with the « law of Rueff » and provides an interesting complement to it; (iii) the equation proposed by Allais to explain the french unemployment rate includes the three types of unemployment pointed out by Rueff; (iv) although now abandoned, the fixed price temporary equilibria theory includes the unemployment of type [a] with both the classical regime and the keynesian regime of unemployment ; (v) the new keynesian microeconomy of the labor market shows that unemployment of type [a] can be explained by the behavior of rational agents without involving rigidities imposed by the Government ; this result generalizes the concept of unemployment of type [a] but is a refutation of the possibility accepted by Rueff to get a competitive equilibrium in a labor market without exogenous rigidities; (vi) the imperfect competition WS-PS model based on negotiation between employees and employers appears in accordance with the three kinds of unemployment [a], [b] et [c] so that it can be seen in this model a synthesis joining Rueff and Allais.
    Keywords: unemployment, wage rigidities, Jacques Rueff
    JEL: E24 J2 J30 N34
    Date: 2014
  3. By: Carabelli, Anna Maria; Cedrini, Mario Aldo (University of Turin)
    Abstract: In trying to assess the content and significance of Keynes's attempted revolution in economic methodology, historians have almost exclusively focused on the General Theory. By highlighting the legacy of the Treatise on Probability for Keynes's economic writings, this paper provides evidence of strong methodologic al continuity between the Tract on Monetary Reform, the Treatise on Money and the General Theory, despite radical differences in the theories. We argue that the novelty of Keynes's approach lies in offering a method of analysis requiring cooperation on the part of the reader, in the effort to tackle the complexity of the economic material.
    Date: 2013–10
  4. By: Kolev, Stefan; Goldschmidt, Nils; Hesse, Jan-Otmar
    Abstract: In the history of economic thought Walter Eucken is mostly known for his impact in establishing the Social Market Economy in post-war Germany. Even though there is a growing interest in his ideas especially from an Austrian and a Constitutional Economics perspective, his influence on the discussions within neoliberalism and, more specifically, his impact in the course of the foundation of the Mont Pèlerin Society (MPS) are not yet widely considered. In this paper we attempt to show that Eucken was very influential in the formation of the MPS and that German ordoliberalism had a significant imprint on the early history of the society. It is primarily Eucken's correspondence with F. A. Hayek and Wilhelm Röpke in this context which we present and analyze, complementing it with some hypotheses about early influences between Eucken and Hayek in terms of methodology and epistemology. Subsequently we show, by regarding the first MPS meetings between 1947 and 1949 (general and organizational), that there was - even at this early stage in the development of the MPS - a widening gap between a Continental European and an Anglo-Saxon understanding of neoliberalism, despite the personal friendships and high collegial respect especially between Eucken, Hayek and Röpke; Ludwig von Mises playing a special role in this setting. We illustrate this development also by discussing personal memories of Leonhard Miksch, a student of Eucken and a participant of the MPS meeting in 1949, recorded in his so far unpublished diary. --
    Keywords: Neoliberalism,Mont Pèlerin Society,Ordoliberalism,History of Economic Thought,Political and Economic Order,Role of Economists
    JEL: A11 B25 B31 B41 H11
    Date: 2014
  5. By: Kirchgässner, Gebhard
    Abstract: Whenever the economic model of behaviour is to be applied, the utility function has – at least somewhat – to be specified. Buchanan generally prefers to apply a rather narrow version. However, he acknowledges that it is hardly possible to explain actual behaviour of individuals with such a version, so in performing empirical economic research he accepts that we have to use a more open one. He also acknowledges that people might behave differently in markets than they do in politics; other-regarding behaviour might be more pronounced in politics as compared to markets. Which version should be applied in constitutional economics, however, is a different question. Following a long ongoing tradition in political philosophy, he insists that – for methodological reasons – the narrow version is the correct one to be applied; this is the way to compare different sets of rules when analysing the possible abuse of power by rulers in order to prevent it as far as possible. The same should also be taken into account when analysing the process of policy advice. The narrow Homo Oeconomicus model should, however, not be misunderstood as a normative prescription.
    Keywords: Homo Oeconomicus, Economic Model of Behaviour, Empirical Public Choice, Constitutional Economics, Self-Interest, Policy Advice
    JEL: B41
    Date: 2014–01
  6. By: Josheski, Dushko; Magdinceva-Sopova, Marija
    Abstract: In this paper it is described the school of neo-Keynesians (Akerlof and Stiglitz are in the group of ”Hard” New-Keynesians, that don’t accept New neo-classical synthesis, i.e. Dynamic Stochastic General equilibrium models-DSGE),that as a basic source of instability in the economies view the demand аnd supply side shocks, short run is important for them, wages and prices are rigid, expectations of the economic agents are rational, but also historical data are of great importance, and they introduced microeconomic foundations for their macroeconomic models. --
    Keywords: New-Keynesians,nominal rigidities,microeconomic foundations
    JEL: E00 E12
    Date: 2014–01–30
  7. By: Riedel, Frank; Sass, Linda
    Abstract: In classic game theory, agents use mixed strategies in the form of objective and probabilistically precise devices to conceal their actions. We introduce the larger set of probabilistically imprecise devices as strategies and study the consequences for the basic results of normal form games. While Nash equilibria remain equilibria in the extended game, there arise new Ellsberg equilibria with distinct outcomes, as we illustrate by negotiation games with three players. We characterize Ellsberg equilibria in two-person conflict and coordination games. These equilibria turn out to be consistent with experimental deviations from Nash equilibrium play. --
    JEL: C72 D81 C70
    Date: 2013
  8. By: Askitas, Nikos (IZA)
    Abstract: There is continuing debate about what explains cooperation and self-sacrifice in nature and in particular in humans. This paper suggests a new way to think about this famous problem. I argue that, for an evolutionary biologist as well as a quantitative social scientist, the triangle of two players in the presence of a predator (passing and shooting in 2-on-1 situations) is a fundamental conceptual building-block for understanding these phenomena. I show how, in the presence of a predator, cooperative equilibria rationally emerge among entirely selfish agents. If we examine the dynamics of such a model, and bias the lead player (ball possessor with pass/shoot i.e. cooperate/defect dilemma) in the selfish direction by only an infinitesimal amount, then, remarkably, the trajectories of the new system move towards a cooperative equilibrium. I argue that "predators" are common in the biological jungle but also in everyday human settings. Intuitively, this paper builds on the simple idea – a familiar one to a biologist observing the natural world but perhaps less so to social scientists – that everybody has enemies. As a technical contribution, I solve these models analytically in the unbiased case and numerically by an O(h5) approximation with the Runge-Kutta method.
    Keywords: evolutionary game theory, fitness, altruism, evolution of cooperation, decoy, Nash equlibrium, repeated matching-pennies game, predator, emergence, autonomous ODE, classical Runge-Kutta method
    JEL: C71 C73 D87
    Date: 2014–01
  9. By: Sontuoso, Alessandro
    Abstract: Human conduct is often guided by “conformist preferences”, which thrive on behavioral expectations within a society, with conformity being the act of changing one’s behavior to match the purported beliefs of others. Despite a growing research line considering preferences for a fair outcome allocation, economic theories do not explain the fundamental conditions for some social norm – whether of fairness or not – to be followed. Inspired by Bicchieri’s account of norms (C.Bicchieri, The Grammar of Society. CambridgeUP [2006]), I develop a behavioral theory of norm conformity building on the Battigalli-Dufwenberg “psychological” framework (P.Battigalli and M.Dufwenberg, Dynamic Psychological Games, J.Econ.Theory, 144:1-35 [2009]).
    Keywords: Conformist Preferences; Social Norms; Social Dilemmas; Psychological Game Theory; Behavioral Economics
    JEL: A13 C72 C92 D63 H41
    Date: 2013–12–27
  10. By: Brink J.R. van den; Talman A.J.J.; Herings P.J.J.; Laan G. van der (GSBE)
    Abstract: In the literature various models of games with restricted cooperation can be found. In those models, instead of allowing for all subsets of the set of players to form, it is assumed that the set of feasible coalitions is a proper subset of the power set of the set of players. In this paper we consider such sets of feasible coalitions that follow from a permission structure on the set of players, in which players need permission to cooperate with other players. We assume the permission structure to be an oriented tree. This means that there is one player at the top of the permission structure and for every other player there is a unique directed path from the top player to this player. We introduce a new solution for these games based on the idea of the Average Tree value for cycle-free communication graph games. We provide two axiomatizations for this new value and compare it with the conjunctive permission value.
    Keywords: Cooperative Games;
    JEL: C71
    Date: 2013
  11. 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
  12. By: Vermeulen A.J.; Schröder M.J.W.; Peters H.J.M. (GSBE)
    Abstract: We consider effectivity functions for finitely many players and alternatives. We assume that players have incomplete information with respect to the preferences of the other players. Our main result is the characterization of effectivity functions which have an ex post Nash consistent representation, i.e., there is a game form such that i the distribution of power among coalitions of players is the same as in the effectivity function and ii there is an ex post Nash equilibrium in pure strategiesfor any preference profile.
    Keywords: Existence and Stability Conditions of Equilibrium; Game Theory and Bargaining Theory: General; Asymmetric and Private Information; Mechanism Design;
    JEL: C62 C70 D82
    Date: 2013
  13. By: Tomas Rodriguez Barraquer
    Abstract: Consider a setting in which agents can each take one of two ordered actions and in which the incentive of any given agent to take the high action is positively reinforced by the number of other agents that take it. Furthermore, assume that we don't know any other details about the game being played. What can we say about the details of the structure of the interaction between actions and incentives when we observe a set or a subset of all possible equilibria? In this paper we study 3 nested classes of games: (a) binary games of strategic complements; (b) games in (a) that admit a network representation: and (c) games in (b) in which the network is complete. Our main results are the following: It has long been established in the literature that the set of pure strategy Nash equilibria of any binary game of strategic complements among a set N of agents can be seen as a lattice on the set of all subsets of N under the partial order defined by the set inclusion relation. If the game happens to be strict in the sense that agents are never indifferent among outcomes (games in (a)), then the resulting lattice of equilibria satisfies a straightforward sparseness condition. (1) We show that, in fact, the games in (a) express all such lattices. (2) We characterize the collection of subsets of N that can be weakly expressed as the set of equilibria of some game of thresholds (games in (b)). (3) We characterize the collection of subsets of N that can be weakly expressed as the set of equilibria of some game of thresholds on the complete graph (games in (c)).
    Date: 2013–12
  14. By: Elyès Jouini (CEREMADE - CEntre de REcherches en MAthématiques de la DEcision - CNRS : UMR7534 - Université Paris IX - Paris Dauphine); Clotilde Napp (DRM - Dauphine Recherches en Management - CNRS : UMR7088 - Université Paris IX - Paris Dauphine); Yannick Viossat (CEREMADE - CEntre de REcherches en MAthématiques de la DEcision - CNRS : UMR7534 - Université Paris IX - Paris Dauphine)
    Abstract: Why do investors keep different opinions even though they learn from their own failures and successes? Why do investors keep different opinions even though they observe each other and learn from their relative failures and successes? We analyze beliefs dynamics when beliefs result from a very general learning process that favors beliefs leading to higher absolute or relative utility levels. We show that such a process converges to the Nash equilibrium in a game of strategic belief choices. The asymptotic beliefs are subjective and heterogeneous across the agents. Optimism (respectively overconfidence) as well as pessimism (respectively doubt) emerge from the learning process. Furthermore, we obtain a positive correlation between pessimism (respectively doubt) and risk tolerance. Under reasonable assumptions, beliefs exhibit a pessimistic bias and, as a consequence, the risk premium is higher than in a standard setting.
    Keywords: heterogeneous beliefs, Beliefs formation, evolutionary game theory, risk premium, pessimism
    Date: 2012–03–01
  15. By: Kern, Johannes; Granic, Dura-Georg
    Abstract: This paper presents a class of finite n x n bimatrix (2-player) games we coin Circulant Games. In Circulant Games, each player's payoff matrix is a circulant matrix, i.e.\ each row vector is rotated one element relative to the preceding row vector. We show that when the payoffs in the first row of each payoff matrix are strictly ordered, a single parameter describing the rotation symmetry between the players' matrices fully determines the exact number and the structure of all Nash Equilibria in these games. The class of Circulant Games contains well-known games such as matching pennies, rock-scissors-paper, circulant coordination and common interest games. --
    JEL: C70 C72 D00
    Date: 2013
  16. By: Koch, Christian
    Abstract: Why do some people behave pro-socially while others do not? Using an experimental design based on Konow and Earley (JPubE, 2008), I investigate a reason already proposed by Aristotle in his Nicomachean Ethics: He claims that there is a nexus between virtues and well-being and that enduring well-being cannot be achieved by hedonic pleasures and material affluence, but only by virtuous behavior. In order to analyze this hypothesis, I use a within-subject design. Initially, participants answer an elaborated well-being questionnaire and then play six different cooperation games. I examine two questions in connection with the Aristotelian idea: First, do more virtuously behaving subjects report on average higher well-being? Second, if the answer is affirmative, what is the underlying causal relationship? I find a favorable correlation between well-being and virtuous behavior and examine different hypotheses about what leads to virtuous behavior: My experimental data is mostly in line with the hypothesis that virtuous behavior is both a long-run cause as well as a short effect of a specific type of long-run well-being, called eudaimonic well-being. To this extent, I find evidence in favor of a nexus between virtues and well-being. --
    JEL: C91 D64 D03
    Date: 2013
  17. By: Herings P.J.J.; Predtetchinski A. (GSBE)
    Abstract: At each moment in time, some alternative from a finite set is selected by a dynamic process. Players observe the alternative selected and sequentially cast a yes or a no vote. If the set of players casting a yes–vote is decisive for the alternative in question,the alternative is accepted and the game ends. Otherwise the next period begins.We refer to this class of problems as collective stopping problems. Collective choicegames, quitting games, and coalition formation games are particular examples that fit nicely into this more general framework.When the core of this game is non–empty, a stationary equilibrium in pure strategies is shown to exist. But in general, even mixed stationary equilibria may not exist in collective stopping games. We consider strategies that are pure and action–independent, and allow for a limited degree of history dependence. Under such individual behavior, aggregate behavior can be conveniently summarized by a collective strategy. We consider collective strategies that are simple and induced by two–step game–plans and provide a constructive proof that this collection always contains a subgame perfect equilibrium. The existence of such an equilibrium is shown to imply the existence of a sequential equilibrium in an extended model with incomplete information. Collective equilibria are shown to be robust to perturbations in the dynamic process and in utilities. We apply our approach to the case with three alternatives exhibiting a Condorcet cycle and to the Baron-Ferejohn model of redistributive politics.
    Keywords: Existence and Stability Conditions of Equilibrium; Noncooperative Games; Stochastic and Dynamic Games; Evolutionary Games; Repeated Games; Bargaining Theory; Matching Theory;
    JEL: C62 C72 C73 C78
    Date: 2013
  18. By: Rodrigo Harrison; Pedro Jara-Moroni
    Abstract: Global games emerged as an approach to equilibrium selection. For a general setting with supermodular payoffs unique selection of equilibrium has been obtained through iterative elimination of strictly dominated strategies. For the case of global games with strategic substitutes, uniqueness of equilibrium has not been proved by iterative elimination of strictly dominated strategies, making the equilibrium less appealing. In this work we study a simple three player binary action global game with strategic substitutes for which we provide a condition for dominance solvability. This opens an unexplored research agenda on the study of global games with strategic substitutes.
    Date: 2013
  19. By: Itai Arieliy; Yehuda (John) Levy
    Abstract: We consider an infinite two-player stochastic zero-sum game with a Borel winning set, in which the opponent's actions are monitored via stochastic private signals. We introduce two conditions of the signalling structure: Stochastic Eventual Perfect Monitoring (SEPM) and Weak Stochastic Eventual Perfect Monitoring (WSEPM). When signals are deterministic these two conditions coincide and by a recent result due to [Shmaya (2011)] entail determinacy of the game. We generalize [Shmaya (2011)]'s result and show that in the stochastic learning environment SEPM implies determinacy while WSEPM does not.
    Date: 2014–01
  20. By: Vermeulen A.J.; Schröder M.J.W.; Peters H.J.M. (GSBE)
    Abstract: This paper considers the estate division problem from a non-cooperative perspective. The integer claim game initiated by ONeill 1982 and extended by Atlamaz et al. 2011 is generalized by considering different sharing rules to divide every interval among the claimants. For problems with an estate larger than half of the total entitlements, we show that every sharing rule satisfying four fairly general axioms yields the same set of Nash equilibrium profiles and corresponding payoffs. Every rule that always results in such equilibrium payoff vector is characterized by the properties minimal rights first and lower bound of degree half. Well-known examples are the Talmud rule, the adjusted proportional rule and the random arrival rule. Then our focus turns to more specific claim games, i.e. games that use the constrained equal awards rule, the Talmud rule, or the constrained equal losses rule as a sharing rule. Also a variation on the claim game is considered by allowing for arbitrary instead of integer claims.
    Keywords: Noncooperative Games; Conflict; Conflict Resolution; Alliances;
    JEL: C72 D74
    Date: 2013
  21. By: Abhijit Banerjee; Esther Duflo
    Abstract: This paper discusses the two leading views of history and political institutions. For some scholars, institutions are mainly products of historical logic, while for others, accidents, leaders, and decisions have a significant impact. We argue that while there is clear evidence that history matters and has long-term effects, there is not enough data to help us distinguish between the two views. Faced with this uncertainty, what is a social scientist to do? We argue that given the possibility that policy decisions indeed make a difference, it makes sense to assume they do and to try to improve policymaking.
    JEL: N30 O1
    Date: 2014–01
  22. By: Walkowitz, Gari; Lönnqvist, Jan-Erik; Irlenbusch, Bernd
    Abstract: In four studies (S1-S4; N = 320) we investigated whether moral hypocrisy (MH) is motivated by conscious impression management concerns or whether it is self-deceptive. In a dictator game, MH occurred both within participants (saying one thing, doing another; S1) and between participants (doing one thing when it is inconsequential, doing another thing when it affects payoffs; S2). People were willing to let an ostensibly fair coin determine payoffs only if they could fudge the results of the coin flip, suggesting that hypocrites do not deceive themselves (S3). Also supporting this view, MH was associated with adherence to Conformity values (S1-S2), indicative of a desire to appear moral in the eyes of others but not indicative of self-deception. Universalism values were predictive of moral integrity (S1, S3-S4). Applying our findings, we show that MH can be reduced by increasing the collective awareness about its prevalence in a specific situation (S4). --
    JEL: A13 C91 M14
    Date: 2013
  23. By: Ivan H. Ayala; Alfonso Palacio-Vera
    Abstract: The rational expectations hypothesis (REH) is the standard approach to expectations formation in macroeconomics. We discuss its compatibility with two strands of Karl Popper's philosophy: his theory of knowledge and learning, and his "rationality principle" (RP). First, we show that the REH is utterly incompatible with the former. Second, we argue that the REH can nevertheless be interpreted as a heuristic device that facilitates economic modeling and, consequently, it may be justified along the same lines as Popper's RP. We then argue that, our position as to the resolution of this paradox notwithstanding, Popper's philosophy provides a metatheoretical framework with which we can evaluate the REH. Within this framework, the REH can be viewed as a heuristic device or strategy that fulfils the same function as, for instance, the optimizing assumption. However, we believe that the REH imparts a serious methodological bias, since, by implying that macroeconomic instability is caused exclusively by "exogenous" shocks that randomly hit the economy, it precludes the analysis of any sources of inherent instability caused by the making of (nonrandom) errors by individuals, and hence it favors the creation of an institutional configuration that may be ill suited to address this type of instability.
    Keywords: Popper; Knowledge; Rational Expectations; Learning; Trial; Error Elimination
    JEL: A12 B41 B50 D84
    Date: 2014–01

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