nep-hpe New Economics Papers
on History and Philosophy of Economics
Issue of 2014‒06‒07
eight papers chosen by
Erik Thomson
University of Manitoba

  1. Challenging Standard Non-Cooperative Game Theory? From Bacharach's "Variable Frame Theory" to "Team Reasoning" By Lauren Larrouy
  2. Constructive and Computable Hahn-Banach Theorems for the (Second) Fundamental Theorem of Welfare Economics By K.Vela Velupillai
  3. Life in the First Person and the Art of Political Storytelling:The Rhetoric of Andreas Papandreou By Nick Papandreou
  4. Philosophie morale et économie By Frédéric Teulon
  5. When do the Expectations of Others Matter? An Experiment on Distributional Justice and Guilt Aversion By Riccardo Ghidoni; Matteo Ploner
  6. The Crisis of 1866 By Marc Flandreau; Stefano Ugolini
  7. What is Ambiguity? By Massimiliano AMARANTE
  8. Stabilisation Policy -- Phillips before the `Phillips Curve' By Katherine Moos; K. Vela Velupillai

  1. By: Lauren Larrouy (University of Nice Sophia Antipolis, France; GREDEG CNRS)
    Abstract: The paper purports to stress how the two major contributions of Bacharach: "Variable Frame Theory" (VFT) and "Team Reasoning" (TR) improve Standard Non-Cooperative Game Theory in some relevant aspects which I point out. The aims are to show: (i) how Bacharach respectively justifies coordination and cooperation within these theories, and (ii) how these improvements in both VFT and TR involve a new conception of players and their rationality. I underline how coordination and cooperation rely on contextual and social determinants, which challenge and even contradict some pillars of standard individual rationality in terms of subjective expected utility, in games. Even if Bacharach's conceptual and methodological choices within these theories induce numerous difficulties, I try to show that Bacharach’s work underlines some of the implications and related problems induced by the mere foundations of standard non-cooperation game theory.
    Keywords: non-cooperative game theory, framing, salience, focal points, Team Reasoning, coordination, cooperation, individual rationality, social rationality, collective rationality
    JEL: B21 B41 C72 D03 D79
    Date: 2014–05
  2. By: K.Vela Velupillai
    Abstract: The Hahn-Banach Theorem plays a crucial role in the second fundamental theorem of welfare economics. To date, all mathematical economics and advanced general equilibrium textbooks concentrate on using nonconstructive or incomputable versions of this celebrated theorem. In this paper we argue for the introduction of constructive or computable Hahn-Banach theorems in mathematical economics and advanced general equilibrium theory. The suggested modification would make applied and policy-oriented economics intrinsically computational.
    Keywords: Fundamental Theorems of Welfare Economics, Hahn-Banach Theorem, Constructive Analysis, Computable Analysis
    JEL: C60 C63 C68 D58 D61
    Date: 2014
  3. By: Nick Papandreou
    Abstract: This essay analyzes Andreas Papandreou’s skill as a political “storyteller.” For a great majority of the Greek population, it is his narrative, his tale of modern Greece, the essay argues, that has become the accepted one. It was his narrative that helped bring and keep him in power for eleven years. One of the building blocks was an innate talent to draw conclusions and persuade the audience using events from his own personal experience – life in the first person. Another element was his academic background and a natural linguistic fluency. The analysis emphasizes his rhetorical devices and draws from the tropes of literature (metaphor, simile, suspense) to complete the standard portrait usually provided by political scientists and historians.
    Date: 2014–05
  4. By: Frédéric Teulon
    Abstract: At first sight, economic relations have nothing to do with morals. However, while economics claims to be a science, in other science disciplines, the question of morality would never arise (we do not ask if the physics of particles is moral or not, or if the composition of a particular molecule obeys ethical principles...). The present analysis is largely based on the writings of Bernard Mandeville who drew attention to the ambiguous relationship between vice and virtue. We argued that economic relations have nothing to do with morals. However, the paradox is that the economy cannot function without a certain form of morality. The economy is made up of individuals who are moral beings endowed with the ability to distinguish between good and bad. The generalised practice of vice, as rehabilitated by Mandeville, obviously has its limitations. The search for personal satisfaction is restrained by the need to take other people into consideration. While the economy and capitalism may be amoral, individuals are not.
    Keywords: Economics, Ethics, Economics of welfare.
    Date: 2014–06–02
  5. By: Riccardo Ghidoni; Matteo Ploner
    Abstract: In a modified dictator game experiment, we study how distributional justice, measured by the proportionality between effort exerted and rewards obtained, and guilt feelings triggered by others’ expectations affect dictator’s choices. We consider these two sources of behavior in isolation and in interaction. Our results suggest that both justice concerns and guilt aversion are important drivers of behavior. However, the expectations of others are more relevant when the choice environment is likely to induce less equitable outcomes.
    Keywords: Justice, Guilt Aversion, Entitlement Rights, Experiments
    Date: 2014
  6. By: Marc Flandreau; Stefano Ugolini (IHEID, The Graduate Institute of International and Development Studies, Geneva)
    Abstract: The collapse of Overend Gurney and the ensuing Crisis of 1866 was a turning point in British financial history. The achievement of relative stability was due to the Bank of England’s willingness to offer generous assistance to the market in a crisis, combined with an elaborate system for maintaining the quality of bills in the market. We suggest that the Bank bolstered the resilience of the money market by monitoring leverage-building by money market participants and threatening exclusion from the discount window. When the Bank refused to bailout Overend Gurney in 1866 there was panic in the market. The Bank responded by lending freely and raising the Bank rate to very high levels. The new policy was crucial in allowing for the establishment of sterling as an international currency.
    Keywords: Bagehot, Bank of England, Lending of last resort, Supervision, Moral hazard, Discount, Overend Gurney Panic, Baring.
    JEL: E58 G01 N13
    Date: 2014–05–26
  7. By: Massimiliano AMARANTE
    Abstract: The concept of Ambiguity designates those situations where the information available to the decision maker is insufficient to form a probabilistic view of the world. Thus, it has provided the motivation for departing from the Subjective Expected Utility (SEU) paradigm. Yet, the formalization of the concept is missing. This is a grave omission as it leaves non-expected utility models hanging on a shaky ground. In particular, it leaves unanswered basic questions such as: (1) Does Ambiguity exist?; (2) If so, which situations should be labeled as "ambiguous"?; (3) Why should one depart from Subjective Expected Utility (SEU) in the presence of Ambiguity?; and (4) If so, what kind of behavior should emerge in the presence of Ambiguity? The present paper fi…lls these gaps. Speci…fically, it identifi…es those information structures that are incompatible with SEU theory, and shows that their mathematical properties are the formal counterpart of the intuitive idea of insufficient information. These are used to give a formal de…finition of Ambiguity and, consequently, to distinguish between ambiguous and unambiguous situations. Finally, the paper shows that behavior not conforming to SEU theory must emerge in correspondence of insufficient information and identifi…es the class of non-EU models that emerge in the face of Ambiguity. The paper also proposes a new comparative defi…nition of Ambiguity, and discusses its relation with some of the existing literature.
    Keywords: non-expected utility, information, ambiguity
    JEL: D81
    Date: 2014
  8. By: Katherine Moos; K. Vela Velupillai
    Date: 2014

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