nep-hpe New Economics Papers
on History and Philosophy of Economics
Issue of 2014‒04‒05
28 papers chosen by
Erik Thomson
University of Manitoba

  1. Institutions as game theory outcomes: toward a cognitive-experimental inquiry By Ambrosino, Angela
  2. From Monetary Theory of Production to Culture-Nature Life Process:Feminist-Institutional Elaborations of Social Provisioning By Todorova, Zdravka
  3. The Economics of the Gift By David Reinstein;
  4. Economics and Genocide: Choices and Consequences By Brauer, Jurgen; Anderton, Charles H.
  5. Discovering economic history in footnotes: the story of Tŏng Tàishēng merchant archive (1790-1850) and the historiography of modern China By Debin Ma; Weipeng Yuan
  6. Identities and Ideals: Psychoanalytic Dialogues of Self and Leadership By Gazi Islam
  7. Playing 'Hard to Get': An Economic Rationale for Crowding Out of Intrinsically Motivated Behavior By Schnedler, Wendelin; Vanberg, Christoph
  8. Metaphors and Analogies in Institutional Economic Theory By Frolov, Daniil; Lavrentyeva, Anna
  9. Quelle intelligence du capital pour demain ? Une lecture du Capital au XXIème siècle de Thomas Piketty By Gaël Giraud
  10. To Predict the Equity Market, Consult Economic Theory By Davide Pettenuzzo
  11. Physics and Financial Economics (1776-2014): Puzzles, Ising and Agent-Based models By D. Sornette
  12. Fear of being left alone drives inefficient exit from partnerships. An experiment By Gaudeul, A.; Crosetto, P.; Riener, G.
  13. Elite Influence? Religion, Economics, and the Rise of the Nazis By Spenkuch, Jörg; Tillmann, Philipp
  14. Independent within—not of—Government: The Emergence of the Federal Reserve as a Modern Central Bank By Humpage, Owen F.
  15. Biophysical Limits of Monetary Systems Behavior By Ternyik, Stephen I.
  16. Reform or Radicalism: Left Social Movements from the Battle of Seattle to Occupy Wall Street By Rowe, James K; Carroll, Myles
  17. Institutional Reform Design: А New Chapter of Economics By Polterovich, Victor
  18. La critique du capital au XXIe siècle:à la recherche des fondements macroeconomiques des ingéalitéd By Guillaume Allègre; Xavier Timbeau
  19. Can't Touch This! Similarity And The Willingness to Keep "Dirty Money" By Sebastian J. Goerg; David B. Johnson; Jonathan D. Rogers
  20. " L'appréhension statistique de l'économie sociale et solidaire " By Edith Archambault
  21. Constrained Interactions and Social Coordination By Mathias Staudigl; Simon Weidenholzer
  22. "A New Approach to Explaining the Value of Colonial Paper Money: Evidence from New Jersey, 1709-1775" By FARLEY GRUBB
  23. Economic Freedom in the Long Run: Evidence from OECD Countries (1850-2007) By Leandro Prados de la Escosura
  24. Evolution of wealth in a nonconservative economy driven by local Nash equilibria By Pierre Degond; Jian-Guo Liu; Christian Ringhofer
  25. Relations internationales et discriminations tarifaires : le cas de la France (1850-1913) By Stéphane BECUWE; Bertrand BLANCHETON
  26. Sociability, Altruism and Subjective Well-Being By Leonardo Becchetti; Nazaria Solferino; M. Elisabetta Tessitore
  27. Military Spending and Democracy By Jennifer Brauner
  28. Growth and Violence: Argument for a Per Capita Measure of Civil War By Hannes Mueller

  1. By: Ambrosino, Angela
    Abstract: The paper investigates two different approaches to the analysis of institutions using game theory and discusses their methodological and theoretical implications for further research. Starting from von Neumann and Morgenstern’s theory, we investigate how game theory has been applied to the analysis of institutions, these being considered, as in Hayek (1967, 1988a) as the unplanned outcomes of self-interested individual behavior. We focus on Schotter’s (1981) and Schelling’s (1960) alternative approaches. The different ways in which these authors use von Neumann and Morgenstern’s concepts of coalition and indeterminacy of solutions play an important role in explaining the spontaneous emergence of institutions from interaction. We argue that this issue is also of importance in explaining how Schotter and Schelling’s theories fit with the main features of Hayek's theory of institutions.
    Keywords: Institutions, Game Theory, Cognition, Hayek, Schotter, Schelling
    JEL: B40 B31 B52 B20
    Date: 2009
  2. By: Todorova, Zdravka
    Abstract: The article seeks to contribute to the literature on social provisioning as an organizing concept in heterodox economics. Particularly, the article details social provisioning as an amalgamation of processes and as a part of a system of culture-nature life process. First, the article delineates a categorization of social provisioning activities with respect to motivation in their organization – monetary and non-monetary, emphasizing the differences, as well as links between those. Second, the article discusses valuation of social activities, applying institutional theory. Third, the concept of a social process is delineated. It is argued that the concept captures agency and structure without reducing one to the other, and allows for theorizing open-endedness of social provisioning. The fourth section offers a categorization of processes and briefly explains each one of those, conceptualizing social provisioning within a historical culture-nature life process. Finally, the article concludes.
    Keywords: Social Provisioning; Social Process; Institutions; Heterodox Economics; Feminist-Institutional Economics; Post Keynesian Economics; Monetary Theory of Production; Social Economics; Political Economy
    JEL: B41 B52 B54 E02 Z1
    Date: 2014–03–21
  3. By: David Reinstein;
    Abstract: This essay broadly considers gifts, giving and gift economies, modern and pre-modern, from a mainstream (and behavioural) economics perspective.
    Date: 2014–03–01
  4. By: Brauer, Jurgen; Anderton, Charles H.
    Abstract: Professional economists rarely write on questions of genocide. This surprises because a workhorse tool of the economics discipline concerns the analysis of behavior that takes place under constraints. All parties in genocide—perpetrators, victims, and third parties—face cost and resource constraints subject to which they seek to achieve their objectives, be it killing, surviving, or intervening. This essay characterizes and illustrates economic thinking about objectives, costs, and resources for each of the three groups. There is potentially much that economics can contribute to genocide studies and, vice versa, much that genocide scholars may learn from welcoming an economic perspective.
    Keywords: Genocide, economics, constrained optimization, rational choice
    JEL: A12 D00 D74 H87
    Date: 2014–04–02
  5. By: Debin Ma; Weipeng Yuan
    Abstract: The Tong Taisheng (统泰升) merchant account books in the Ninjing county of Northern China in 1800-1850 is the most complete and integrated surviving archive of a family business. It contains unusually detailed and high-quality statistics on exchange rates, commodity prices and other information. Utilized once in the 1950s, the archive has been left largely untouched until our recent, almost accidental rediscovery. Tracing the personal history of the original owner and donor, we show that the nature of evidence and records of economic statistics of China’s early 19th century, - indeed - of the entire early modern era – have been profoundly impacted by the development of political ideology and consequently of academic discipline in modern and contemporary China. Our article discusses the important historiographical and epistemological issue in interpreting surviving historical statistics which have been largely neglected in the current Great Divergence debate.
    Keywords: historical archives; Chinese historiography; modernisation
    JEL: N0
    Date: 2014–03
  6. By: Gazi Islam (MC - Management et Comportement - Grenoble École de Management (GEM))
    Abstract: The author contextualizes recent developments in socio-cognitive approaches to leadership by drawing on psychoanalytic conceptions of self-identity. It is argued that psychoanalytic views of the self are complementary to contemporary social-cognitive approaches, although historical divergences in these literatures have impeded mutual dialogue. This initiative at dialogue examines charismatic, schema, and self- identity theories of leadership within a psychoanalytic framework, arguing that when self-identity is viewed broadly, convergences between these approaches become apparent. A broad view of the self makes notions of authority central to the construction of personal identities, underscores the ambivalence and relationality of self-processes, and highlights the normative assumptions underlying followership that may be difficult to theorize with contemporary socio-cognitive approaches.
    Keywords: Identity; charisma; leadership; self-concept
    Date: 2014
  7. By: Schnedler, Wendelin; Vanberg, Christoph
    Abstract: Anecdotal, empirical, and experimental evidence suggests that offering extrinsic rewards for certain activities can reduce people's willingness to engage in those activities voluntarily. We propose a simple rationale for this 'crowding out' phenomenon, using standard economic arguments. The central idea is that the potential to earn rewards in return for an activity may create incentives to play 'hard to get' in an effort to increase those rewards. We discuss two specic contexts in which such incentives arise. In the first, refraining from the activity causes others to attach higher value to it because it becomes scarce. In the second, restraint serves to conceal the actor's intrinsic motivation. In both cases, not engaging in the activity causes others to offer larger rewards. Our theory yields the testable prediction that such effects are likely to occur when a motivated actor enjoys a sufficient degree of 'market power.'
    Keywords: intrinsic motivation; crowding out; behavioral economics; market power; hidden information
    Date: 2014–03–21
  8. By: Frolov, Daniil; Lavrentyeva, Anna
    Abstract: The article presents the critical review of physical and biological metaphors in the institutional economic theory. It is proved that physical (including mechanistic) analogies are most adequate for the associative characteristic of a statics and kinetics of institutional systems, and biological – for the figurative description of their evolution. Efficiency of use of metaphors and analogies from the most developed, vanguard areas of natural-science researches is shown.
    Keywords: metaphors, institutionalism, institutions, path dependence, vacuum, field, impurities, niche construction, transplantation, genetics, evolution
    JEL: B52
    Date: 2014
  9. By: Gaël Giraud (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris 1 - Panthéon-Sorbonne, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris)
    Abstract: On propose une lecture critique de l'ouvrage Le Capital au XXIème siècle (Seuil, 2013) de Thomas Piketty.
    Keywords: Capital; capitalisme; inégalité; Kaldor; Solow
    Date: 2014–02
  10. By: Davide Pettenuzzo (International Business School, Brandeis University)
    Abstract: Despite more than half a century of research on forecasting stock market returns, most predictive models perform quite poorly when they are put to the test of actually predicting equity returns. In fact, many authors, including Bossaerts and Hillion (1999), Brennan and Xia (2005), and Welch and Goyal (2008) suggest that equity returns cannot be predicted at all. This brief proposes a simple yet very effective solution to improve the quality of stock return predictions by taking economic theory into account.
    Keywords: Economic constraints; Sharpe ratio, Equity premium predictions; Bayesian analysis
    JEL: C11 C22 G11 G12
    Date: 2013
  11. By: D. Sornette (ETH Zurich)
    Abstract: This short review presents a selected history of the mutual fertilization between physics and economics, from Isaac Newton and Adam Smith to the present. The fundamentally different perspectives embraced in theories developed in financial economics compared with physics are dissected with the examples of the volatility smile and of the excess volatility puzzle. The role of the Ising model of phase transitions to model social and financial systems is reviewed, with the concepts of random utilities and the logit model as the analog of the Boltzmann factor in statistic physics. Recent extensions in term of quantum decision theory are also covered. A wealth of models are discussed briefly that build on the Ising model and generalize it to account for the many stylized facts of financial markets. A summary of the relevance of the Ising model and its extensions is provided to account for financial bubbles and crashes. The review would be incomplete if it would not cover the dynamical field of agent based models (ABMs), also known as computational economic models, of which the Ising-type models are just special ABM implementations. We formulate the ``Emerging Market Intelligence hypothesis'' to reconcile the pervasive presence of ``noise traders'' with the near efficiency of financial markets. Finally, we note that evolutionary biology, more than physics, is now playing a growing role to inspire models of financial markets.
    Date: 2014–04
  12. By: Gaudeul, A.; Crosetto, P.; Riener, G.
    Abstract: We explore in an experiment what leads to the breakdown of partnerships. Subjects are assigned a partner and participate in a repeated public good game with stochastic outcomes. They can choose each period between staying in the public project or working on their own. There is excessive exit as subjects overestimate the likelihood their partner will leave. High barriers to exit thus improve welfare. We observe that exit is driven by failure within the common project but also by pay-off comparisons across options and beliefs about being exploited. Those considerations increasingly matter as we lower exit costs across treatments.
    JEL: C23 C92 H41
    Date: 2014
  13. By: Spenkuch, Jörg; Tillmann, Philipp
    Abstract: Adolf Hitler's seizure of power was one of the most consequential events of the twentieth century. Yet, our understanding of which factors fueled the astonishing rise of the Nazis remains highly incomplete. This paper shows that religion played an important role in the Nazi party's electoral success -- dwarfing all available socioeconomic variables. To obtain the first causal estimates we exploit plausibly exogenous variation in the geographic distribution of Catholics and Protestants due to a peace treaty in the sixteenth century. Even after allowing for sizeable violations of the exclusion restriction, the evidence indicates that Catholics were significantly less likely to vote for the Nazi Party than Protestants. Consistent with the historical record, our results are most naturally rationalized by a model in which the Catholic Church leaned on believers to vote for the democratic Zentrum Party, whereas the Protestant Church remained politically neutral.
    Keywords: religion, fascism, elite influence, Nazis, Weimar Germany
    JEL: D72 N00 N34 N94 Z12
    Date: 2014–03–30
  14. By: Humpage, Owen F. (Federal Reserve Bank of Cleveland)
    Abstract: Independence is the hallmark of modern central banks, but independence is a mutable and fragile concept, because the governments to whom central banks are ultimately responsible can have objectives that take precedence over price stability. This paper traces the Federal Reserve’s emergence as a modern central bank beginning with its abandonment of monetary policy for debt-management operations during the Second World War and through the controversies that led to the Treasury-Federal Reserve accord in 1951. The accord, however, did not end the Federal Reserve’s search for independence. After the accord, the Federal Reserve’s view of responsibilities "within" government led it to policies—even keel and foreign exchange operations—that complicated the System’s ability to conduct monetary policy.
    Keywords: Second World War; U.S. Treasury-Federal Reserve Accord; Even Keel
    JEL: E4 E5 E6 N1
    Date: 2014–03–27
  15. By: Ternyik, Stephen I.
    Abstract: The biophysical limits of the monetary production economy are being formally explored, concerning the root causes of cyclical crises. At the end of this brief methodical discussion, an open guess is presented for a further investigation to resolve the 'mystery' of monetary systems behavior.
    Keywords: money, production, time, energy, cybernetics, energetics, economic waves, cyclical crises
    JEL: B41
    Date: 2014–03
  16. By: Rowe, James K; Carroll, Myles
    Abstract: We examine two recent cases of relative Left success—the Battle of Seattle and Occupy Wall Street—and argue that in each case an effective dynamism between radical and reform wings drove gains. This analysis is not meant to deny political difference and hawk false unity. Instead we want to challenge the luxury of mutual dismissal with the actually existing benefits of movement dynamism. By dynamism we mean contributions arising from different activist wings and productively interacting to increase overall movement power. Our ultimate claim is that the North American Left will yield greater success by becoming more self-conscious about the concrete benefits of movement dynamism.
    Keywords: Life Sciences, Social and Behavioral Sciences, Reform, Revolution, Battle of Seattle, Occupy Wall Street, Social Movements, Left politics
    Date: 2014–03–01
  17. By: Polterovich, Victor
    Abstract: In this paper I argue that the Theory of Reform may be considered as a comparatively new but intensively forming chapter of Economics. In spite of great variety of concrete reforms, the problem of institutional reforming admits general formulation and general approaches of solving it. I discuss some important steps in the development of the Theory of Reform, and then describe its state-of-the art. Since the theory is new, its architecture is not set completely. In the final part of the paper, I will present my own visions of this architecture. It is a typical case in the practice of reforms, when a reformer, who seeks to build an institution with desired properties, discovers that its immediate implementation is impossible because of resource, technological, cultural, political or institutional constraints. In this case, one has to construct a sequence of interim institutions which, for each moment of time, satisfy the existing constraints, and, in the end, provide the implementation of the desired institution. I describe some methods and constructions that can be used to create sequences of interim institutions; illustrations are extracted from the reform experience of China, Russia, and other countries.
    Keywords: shock therapy and gradualism, institutional trajectories, interim institutions, dysfunctions, institutional trap, transaction and transformation costs, norm fixing mechanisms, promising trajectories, manual for reformers
    JEL: D02 E02 H75 L85 O1 P5
    Date: 2014–03–27
  18. By: Guillaume Allègre (Ofce,Sciences-po); Xavier Timbeau (Ofce, Sciences-po)
    Abstract: Dans son ouvrage Le capital au XXIe siècle, Thomas Piketty propose une analyse critique de la dynamique de l’accumulation du capital. L’auteur montre que si le rendement du capital (r) est plus élevé que la croissance économique (g), ce qui a pratiquement toujours été le cas dans l’histoire, alors il est presque inévitable que les patrimoines hérités dominent les patrimoines constitués et que la concentration du capital atteigne des niveaux extrêmement élevés. Le livre cherche ainsi des fondements macroéconomiques (r>g) aux inégalités alors que les explications habituelles sont d’ordre micro-économique. Nous soulignons que l’on peut interpréter les faits décrits selon une causalité différente où les inégalités découlent du fonctionnement (imparfait) des marchés, des rentes de rareté et de l’établissement des droits de propriété. Selon cette interprétation, ce n’est pas r>g qui a transformé les entrepreneurs en rentiers, mais la mise en place de mécanismes permettant l’extraction d’une rente perpétuelle qui explique la constance historique r>g. Cette interprétation différente des mêmes phénomènes a des conséquences en termes de politique publique. L’imposition ex post du capital, si nécessaire, ne peut être qu’un choix de second rang : il faut d’abord lever les contraintes de rareté et se préoccuper de la définition des droits de propriété ainsi que des droits des propriétaires et des non-propriétaires.
    Date: 2014–03
  19. By: Sebastian J. Goerg (Department of Economics, Florida State University); David B. Johnson (Department of Economics, University of Calgary); Jonathan D. Rogers (New York University, Abu Dhabi)
    Abstract: Traditionally, allocations by dictators in Dictator Games (gifts) have been explained by aspects of altruism, reciprocity, and fairness. However, this assumes the gift to be desirable to the dictators and responder. Giving may also be driven by the source of the endowment. We examine this by using three sources to generate the endowment in a Dictator Game:(1) undergraduate students, (2) Amazon Mechanical Turk workers, and (3) users of a racially/ethnically charged web forum. This endowment is provided to subjects in a traditional laboratory experiment. We find dictator similarity with the source of the endowment influences their allocation decision; the more similar subjects feel to the source the more of the endowment they keep. Our results suggest that decisions can be strongly influenced by the provider of income shocks.
    Keywords: Experiment; Inequality; Approval
    JEL: C78 C91 C99 D31 D64 D74
    Date: 2014–03
  20. By: Edith Archambault (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris 1 - Panthéon-Sorbonne)
    Abstract: Après avoir cerné les causes qui expliquent l'invisibilité statistique des organisations de l'économie sociale et solidaire (OESS), et privilégié les conventions des comptes nationaux, (section 1) ce chapitre analyse les progrès réalisés depuis les 20 dernières années, en insistant sur la démarche qui a permis d'atteindre une méthodologie commune, désormais consacrée par l'ONU (section 2). Puis il montre comment l'application de cette méthodologie permet de construire des comptes satellites des Institutions sans but lucratif, puis, dans un futur que l'on espère proche, de l'ESS (section 3). Il insiste finalement sur la délicate mesure du travail bénévole, désormais normalisée par le BIT.
    Keywords: méthodologie statistique; Sources statistiques; comptabilité nationale; institutions sans but lucratif; coopératives; mutuelles; fondations; bénévolat
    Date: 2014–03–27
  21. By: Mathias Staudigl; Simon Weidenholzer
    Abstract: We consider a co-evolutionary model of social coordination and network formation where agents may decide on an action in a 2x2 - coordination game and on whom to establish costly links to. We find that a payoff domination convention is selected for a wider parameter range when agents may only support a limited number of links as compared to a scenario where agents are not constrained in their linking choice. The main reason behind this result is that whenever there is a small cluster of agents playing the efficient strategy other players want to link up to those layers and choose the efficient action.
    Date: 2014–02–01
  22. By: FARLEY GRUBB (Department of Economics,University of Delaware)
    Abstract: A new approach to explaining the value of colonial paper money that relies on their distinctive character as bills of credit is presented. The market value of these bills is decomposed into their real asset present value and their liquidity premium value. This approach is applied to the newly reconstructed monetary data for colonial New Jersey. The real asset present value of New Jersey bills accounted for at least 80 percent, whereas the value of these bills as “money” accounted for at most 10 to 20 percent, of their market value. Colonial paper money was not primarily a fiat currency.
    Keywords: commodity money, currency depreciation, exchange rates, fiat currency, fiscal backing theory of money, land banks, money supply, present value, price inflation, purchasing power parity, quantity theory of money, Seven Year’s War, value of money, zero-interest bearer bonds
    JEL: E31 E42 E51 N11 N21 N41
    Date: 2014
  23. By: Leandro Prados de la Escosura
    Abstract: This paper presents historical indices for the main dimensions of economic freedom and an aggregate index for nowadays developed countries -(pre-1994) OECD, for short-. Economic liberty expanded over the last one-and-a-half centuries, reaching two thirds of its maximum possible. Its evolution has been, however, far from linear. After a substantial improvement since mid-nineteenth century, World War I brought a major setback. The post-war recovery up to 1929 was followed by a dramatic decline in the 1930s and significant progress took place during the Golden Age but fell short from the pre-World War I peak. A steady expansion since the early 1980s has resulted in the highest levels of economic liberty of the last two centuries. Each main dimension of economic freedom exhibited a distinctive trend and its contribution to the aggregate index varied over time. Nonetheless, improved property rights provided the main contribution to the long-run advancement of economic liberty.
    Keywords: Negative freedom, Economic liberty, OECD
    JEL: O17 P10
    Date: 2014–02
  24. By: Pierre Degond; Jian-Guo Liu; Christian Ringhofer
    Abstract: We develop a model for the evolution of wealth in a non-conservative economic environment, extending a theory developed earlier by the authors. The model considers a system of rational agents interacting in a game theoretical framework. This evolution drives the dynamic of the agents in both wealth and economic configuration variables. The cost function is chosen to represent a risk averse strategy of each agent. That is, the agent is more likely to interact with the market, the more predictable the market, and therefore the smaller its individual risk. This yields a kinetic equation for an effective single particle agent density with a Nash equilibrium serving as the local thermodynamic equilibrium. We consider a regime of scale separation where the large scale dynamics is given by a hydrodynamic closure with this local equilibrium. A class of generalized collision invariants (GCIs) is developed to overcome the difficulty of the non-conservative property in the hydrodynamic closure derivation of the large scale dynamics for the evolution of wealth distribution. The result is a system of gas dynamics-type equations for the density and average wealth of the agents on large scales. We recover the inverse Gamma distribution, which has been previously considered in the literature, as a local equilibrium for particular choices of the cost function.
    Date: 2014–03
  25. By: Stéphane BECUWE; Bertrand BLANCHETON
    Abstract: Cette étude propose une mesure du niveau et de la volatilité des tarifs douaniers appliquée à chacun des partenaires commerciaux de la France au cours de la période 1850-1913. Sur la base des taux moyens, une typologie originale issue de la classification ascendante hiérarchique est proposée. La taxation des produits tropicaux apparait comme un facteur explicatif clef des écarts entre les pays même si le groupe des pays exportateurs de denrées exotiques ne peut être considéré comme homogène.
    Keywords: politique commerciale, tarifs douaniers, commerce international, 1ière mondialisation
    JEL: N7
    Date: 2014
  26. By: Leonardo Becchetti (University of Rome "Tor Vergata"); Nazaria Solferino (University of Rome "Tor Vergata"); M. Elisabetta Tessitore (University of Rome "Tor Vergata")
    Abstract: The choice between performing a task today or procrastinating it until tomorrow or later is the building block of any economic action. In our paper we aim to enrich the theoretical literature on procrastination by outlining conditions for bad and good procrastination and looking at the special cases of pathological procrastination, the curse of perfec- tionism and productive procrastination. We discuss how our theoreti- cal framework may be applied to explain different types of (education, investment and production) microeconomic decisions and which policy measures can be taken to avoid bad procrastination.
    Keywords: Time-Inconsistent Preferences, Optimal Effort, Procras- tination, Intertemporal Choice
    JEL: A12 D03 D11 D74 D91
    Date: 2014–03
  27. By: Jennifer Brauner (Department of Economics, Mathematics & Statistics, Birkbeck)
    Abstract: This paper examines empirically whether democracies allocate fewer resources to the military than dictatorships do. It employs a panel of up to 112 countries over the period 1960-2000 to estimate a standard demand for military spending model. While papers on the determinants of military spending generally include democracy as a control variable, with a few exceptions, it is not the focus of their enquiry. This paper addresses resulting problems in the existing literature concerning data quality and the appropriate measurement of key variables, as well as the question of causality between military spending and democracy. It finds that democracies spend less on the military as a percentage of GDP than autocracies do and that causality runs from regime type to military spending.
    Keywords: Military expenditure, regime type, political economy, defence economics, democracy.
    Date: 2014–03
  28. By: Hannes Mueller
    Abstract: This article proposes a new measure of civil war. The measure defines violence intensity in casualties per capita instead of number of casualties. We discuss the assumptions behind this per capita model and the existing standard model. We show that the two measures behave differently in standard growth regressions and argue that this is because the standard model is a mis-specification in this context. Casualties appear to affect growth more in smaller populations. We argue that a debate on the right model can help distinguish between competing theories in the conflict literature. This is particularly relevant given the current development of new micro-data in this field.
    Keywords: civil war, conflict, growth
    JEL: D74 O11 O47
    Date: 2014–03

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