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on History and Philosophy of Economics |
| By: | Ariel Dvoskin |
| Abstract: | The article discusses M. Allais’ contributions on equilibrium and capital during the 1940s. While in his Traité (1943) Allais formalizes for the first time an intertemporal general equilibrium (IGE) in a finitehorizon economy, he subsequently abandons this notion, and in the Économie (1947) resumes, instead, the more traditional method based on the notion of stationary equilibrium. The article argues: i) that Allais’ reasons to leave the IGE framework behind, of which the most important turn round his misgivings about the sufficiently correct foresight entailed by that notion, and that reflect the impossibility to establish a correspondence between observations and theory by means of the IGE method, are well-justified; ii) that his shift to the method based on the notion of stationary equilibrium to connect the results of neoclassical theory with observations cannot be accepted, since a notion of stationary equilibrium that would make this correspondence possible must face an insurmountable difficulty in the treatment of the factor capital. |
| Keywords: | Allais, Intertemporal Equilibrium, Stationary Equilibrium, Perfect Foresight, Centre of Gravitation |
| JEL: | B2 B30 B4 D50 D24 |
| Date: | 2013–12 |
| URL: | http://d.repec.org/n?u=RePEc:usi:wpaper:690&r=hpe |
| By: | George S. Tavlas (Bank of Greece) |
| Abstract: | This paper examines the different policy rules proposed by Henry Simons, who, beginning in the mid-1930s, advocated a price-level stabilization rule, and by Milton Friedman, who, beginning in the late-1950s, advocated a rule that targeted a constant growth rate of the money supply. Although both rules shared the objective of eliminating the policy uncertainty emanating from discretion, they differed because of the different views of Simons and Friedman about the stability of secular relationships. Simons' rule relates to modern rules which emphasize the pursuit of price stability as representing optimal monetary policy. |
| Keywords: | Milton Friedman; Henry Simons; monetary-policy rules |
| JEL: | B22 E52 |
| Date: | 2014–03 |
| URL: | http://d.repec.org/n?u=RePEc:bog:wpaper:177&r=hpe |
| By: | Daniel Detzer (Berlin School of Economics and Law, and Institute for International Political Economy Berlin (IPE)); Hansjorg Herr (Berlin School of Economics and Law, and Institute for International Political Economy Berlin (IPE)) |
| Abstract: | This paper analyses financial crises from a theoretical point of view. For this it reviews what different schools of economic thought have to say about financial crises. It examines first the approaches that regard financial crises as a disturbing factor of a generally stable real economy (Wicksell, Hayek, Schumpeter, Fisher, and the early Keynes). Thereafter, approaches, where the dichotomy between the monetary and the real sphere is lifted are reviewed. Here in particular the later works of Keynes and the contributions of Minsky are of importance. Lastly, it is looked at the behavioural finance approaches. After having reviewed the different approaches it is examined, where those approaches have similarities and where they fruitfully can be combined. Based on this, we develop an own theoretical framework methodologically based on a Wicksellian cumulative process, however, overcoming the neoclassical dichotomy. The paper ends with some policy recommendations based on the developed theoretical framework. |
| Keywords: | Financial crisis, crisis theory, behavioral finance, Hayek, Keynes, Minsky, Schumpeter, Wicksell |
| JEL: | E12 E13 G01 |
| Date: | 2014–02–15 |
| URL: | http://d.repec.org/n?u=RePEc:fes:wpaper:wpaper25&r=hpe |
| By: | Eckhard Hein (Berlin School of Economics and Law, and Institute for International Political Economy Berlin (IPE)); Nina Dodig (Berlin School of Economics and Law, and Institute for International Political Economy Berlin (IPE)); Natalia Budyldina (Berlin School of Economics and Law, and Institute for International Political Economy Berlin (IPE)) |
| Abstract: | This paper surveys some of the important literatures on financial, economic and social systems with an eye towards explaining the tendencies towards ‘financialisation’. We focus on important strands of this literature: the French Regulation School, the US-based Social Structures of Accumulation approach, the contributions by several Post-Keynesian authors, with a focus on the long-run views contained in Hyman Minsky’s work, in particular. In our comparative assessment of these approaches, we adopt the following four steps procedure: First, we sketch the basic structure of the approaches in order to single out how each of them views the interaction between social institutions and the economy and the related dynamics regarding the development of the institutional structure and the associated stages or regimes of economic development. Second, we describe how these approaches view the structural breaks or the regime shifts in the long-run development of modern capitalism, which has triggered or at least has contributed to the emergence of a type of capitalism dominated by finance (financialisation). Third, we outline how these different approaches view the main characteristics and features of financialisation. Fourth, we deal with the respective views on the consequences of financialisation for long-run economic and social development including the crisis of this stage of development. |
| Keywords: | French Regulation School, Social Structures of Accumulation, Post-Keynesian approach, Minsky, financialisation, stages of capitalist development, finance-led growth regime, global neoliberal SSA, finance-dominated capitalism, money manager capitalism, financial, economic and social systems. |
| JEL: | E02 E11 E12 G01 P10 P16 P51 |
| Date: | 2014–02–15 |
| URL: | http://d.repec.org/n?u=RePEc:fes:wpaper:wpaper22&r=hpe |
| By: | Harrison, Mark (University of Warwick) |
| Abstract: | This chapter introduces the author’s selected papers on the economics of coercion and conflict. It defines coercion and conflict and relates them. In conflict, adversaries make costly investments in the means of coercion. The application of coercion does not remove choice but limits it to options that leave the victim worse off than before. Coercion and conflict are always political, but a number of key concepts from economics can help us understand them. These include rational choice, strategic interaction, increasing and diminishing returns, scale and state capacity, surplus extraction, and Type I errors. The chapter concludes that the economist’s toolkit, although not complete, is useful. |
| Keywords: | Coercion, Conflict, Games, Errors, Increasing Returns, Rational Choice, Scale, Surplus, Violence. |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:cge:wacage:151&r=hpe |
| By: | Jon X. Eguia (University of Bristol); Aniol Llorente-Saguer (Queen Mary University of London); Rebecca Morton (New York University); Antonio Nicolò (University of Manchester) |
| Abstract: | Games with imperfect information often feature multiple equilibria, which depend on beliefs off the equilibrium path. Standard selection criteria such as passive beliefs, symmetric beliefs or wary beliefs rest on ad hoc restrictions on beliefs. We propose a new selection criterion that imposes no restrictions on beliefs: we select the action profile that is supported in equilibrium by the largest set of beliefs. We conduct experiments to test the predictive power of the existing and our novel selection criteria in two applications: a game of vertical multi-lateral contracting, and a game of electoral competition. We find that our selection criterion outperforms the other selection criteria. |
| Keywords: | Equilibrium selection, Passive beliefs, Symmetric beliefs, Vertical contracting, Multiple equilibria, Imperfect information |
| JEL: | C72 D86 H41 D72 |
| Date: | 2014–04 |
| URL: | http://d.repec.org/n?u=RePEc:qmw:qmwecw:wp717&r=hpe |
| By: | Ulrich Faigle (Universität zu Köln - Mathematisches Institut); Michel Grabisch (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: | We study linear properties of TU-games, revisiting well-known issues like interaction transforms, the inverse Shapley value problem and the concept of semivalues and least square values. We embed TU-games into the model of cooperation systems and influence patterns, which allows us to introduce linear operators on games in a natural way. We focus on transforms, which are linear invertible maps, relate them to bases and investigate many examples (Möbius transform, interaction transform, walsh transform, etc.). In particular, we present a simple solution to the inverse problem in its general form: Given a linear value Φ and a game v, find all games v′ such that Φ(v) = Φ(v′). Generalizing Hart and Mas-Colell's concept of a potential, we introduce general potentials and show that every linear value is induced by an appropriate potential. We furthermore develop a general theory of allocations with a quadratic optimality criterion under linear constraints, obtaining results of Charnes et al., and Ruiz et al., and others as special cases. We prove that this class of allocations coincides exactly with the class of all linear values. |
| Keywords: | Cooperation system; cooperative game; basis; transform; inverse problem; potential; linear value; semivalue |
| Date: | 2014–01 |
| URL: | http://d.repec.org/n?u=RePEc:hal:cesptp:halshs-00971393&r=hpe |
| By: | Jim Engle-Warnick; Natalia Mishagina |
| Abstract: | We show that violations of demand theory are more numerous than previously reported in experimental two-player dictator games. We then apply a new procedure consisting of income-compensated price adjustments that makes the choice sets rationalizable. We introduce a “weighted price” function that shows that violations of revealed preference can be interpreted as the dictator's insensitivity to the price of the dictator's allocation relative to the responder's allocation. Our paper is the first to rationalize violations of demand theory in dictator games by examining the relationship between violations of GARP and prices. We suggest that weighted prices, and not only preferences, may be a component of decision making in dictator games |
| Keywords: | Dictator Game, WARP, Revealed Preference, |
| Date: | 2014–02–01 |
| URL: | http://d.repec.org/n?u=RePEc:cir:cirwor:2014s-19&r=hpe |
| By: | Tobie Cusson; Jim Engle-Warnick |
| Abstract: | We experimentally test the ability of subjects to identify repeated-game strategies from prisoner's dilemma choice data. In the experiments, subjects use a finite state grammar to build models to fit game histories. The histories are designed to distinguish between strategies with empirical and theoretical validity. We find that subjects successfully identify unconditional, punishment, and counting strategies. When data are observationally equivalent among different strategies, punishment strategies tend to be inferred. When inferred strategies do not fit the data, they tend to be more complex than necessary and to contain positive reciprocity and forgiveness. Our experiment provides an empirical basis for repeated-game strategies and sheds new light on play in repeated games. |
| Keywords: | Repeated game, prisoner's dilemma, finite automata, strategies, |
| JEL: | C90 C73 D03 |
| Date: | 2013–08–01 |
| URL: | http://d.repec.org/n?u=RePEc:cir:cirwor:2013s-26&r=hpe |
| By: | Stefano A. Caria (University of Oxford); Paolo Falco (University of Oxford) |
| Keywords: | poverty, vulnerability, risk, subjective well-being, happiness, loss-aversion |
| JEL: | D60 I31 I32 D81 O12 |
| Date: | 2014–04–07 |
| URL: | http://d.repec.org/n?u=RePEc:csl:devewp:363&r=hpe |
| By: | Crafts, Nicholas (University of Warwick) |
| Abstract: | If the Eurozone follows the precedent of the 1930s, it will not survive. The attractions of escaping from the gold standard then were massive and they point to a strategy of devalue and default for today’s crisis countries. A fully-federal Europe with a banking union and a fiscal union is the best solution to this problem but is politically infeasible. However, it may be possible to underpin the Euro by a ‘Bretton-Woods compromise’ that accepts a retreat from some aspects of deep economic integration since exit entails new risks of financial crisis that were not present eighty years ago. |
| Keywords: | economic disintegration; Eurozone; financial repression; gold standard; macroeconomic trilemma; political trilemma |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:cge:wacage:142&r=hpe |
| By: | Bertrand Lemennicier |
| Abstract: | The purpose of this paper is to challenge the conventional theory of moral hazard and adverse selection. Moral hazard and adverse selection problems in contemporary economic theory are plagued with four major aws: 1) the alleged asymmetrical information between buyer and seller as a problem in the coordination process of the market; 2) the confusion between different concepts or denitions of probability: case or class probabilities, pure subjective beliefs on the occurrence of an event or relative prices on betting markets; 3) the presupposed inability of actors (sellers and buyers) to solve by themselves the problems they face, 4) the pretense of economists to be able to correct these so-called market failures with compulsory insurance without creating new moral hazard and/or adverse selection problems worse than the ones they want to cure. We center our paper mainly on the internal and theoretical inconsistency of the canonical model developed by Akerlof and Rothschild and Stiglitz's theory and their followers based on additive or non additive expected utility associated with the subjective versus frequency tradition in statistics. As an alternative, we propose to approach these phenomena through the eye glasses of betting markets an securitization of insurance contracts. |
| Keywords: | Moral hazard, adverse selection, uncertainty, risk, subjective probability, entrepreneurial judgment, asymmetrical information, contract incentives, compulsory insurance, betting market, free market competition as a discovery process |
| JEL: | B53 D23 D86 G22 |
| Date: | 2014–04 |
| URL: | http://d.repec.org/n?u=RePEc:icr:wpicer:04-2014&r=hpe |
| By: | Leandro Prados de la Escosura (Universidad Carlos III, London School of Economics, CEPR) |
| 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: | N10 O17 P10 |
| Date: | 2014–03 |
| URL: | http://d.repec.org/n?u=RePEc:hes:wpaper:0054&r=hpe |
| By: | Claudia Keser; Andreas Markstädter; Martin Schmidt; Cornelius Schnitzler |
| Abstract: | We compare voluntary contributions to a public good in a symmetric setting to those in a weakly and a strongly asymmetric setting, where the players have different, randomly allocated endowments. We observe that the group-contribution levels are not significantly different between the symmetric and the weakly asymmetric setting. In both situations, participants tend to contribute the same proportion of their respective endowment. In the strongly asymmetric situation, where one of the players has a higher endowment than the three other players together, we observe a significantly lower group contribution than in the other situations. The rich player in this situation does not contribute significantly more than the average contribution of the poor players and thus contributes a significantly lower proportion of the endowment. This player is not as greedy as the rich man in the parable but leaves not more than breadcrumbs to the poor players. |
| Keywords: | Experimental economics, public goods, asymmetries, |
| Date: | 2013–09–01 |
| URL: | http://d.repec.org/n?u=RePEc:cir:cirwor:2013s-32&r=hpe |
| By: | Judith Favereau (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris 1 - Panthéon-Sorbonne) |
| Abstract: | Les évaluations randomisées développées par Esther Duflo au sein du J-PAL ont transformé la lutte contre la pauvreté, cherchant à en faire une lutte " rigoureuse " fondée sur des preuves " scientifiques ". Cette approche tire son originalité d'une volonté de se rapprocher de la méthodologie d'un essai clinique médical, afin d'aboutir à une démarche neutre et impartiale. Cet article questionne la méthodologie du J-PAL en la rapprochant de celle des essais cliniques médicaux. Pour cela, nous utiliserons l'analyse de Georges Canguilhem, afin de pointer les principaux enjeux épistémologiques de l'approche du J-PAL. Nous montrons ensuite que cette approche peine à produire des remèdes efficaces contre la pauvreté et qu'elle ne peut, de ce fait, offrir qu'un panorama des symptômes de la pauvreté. |
| Keywords: | Randomisation; essais cliniques médicaux; épistémologie économique; pauvreté; économie du développement |
| Date: | 2014–03 |
| URL: | http://d.repec.org/n?u=RePEc:hal:cesptp:halshs-00974686&r=hpe |