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on History and Philosophy of Economics |
| By: | Michel Grabisch (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris) |
| Abstract: | In cooperative games, the core is the most popular solution concept, and its properties are well known. In the classical setting of cooperative games, it is generally assumed that all coalitions can form, i.e., they are all feasible. In many situations, this assumption is too strong and one has to deal with some unfeasible coalitions. Defining a game on a subcollection of the power set of the set of players has many implications on the mathematical structure of the core, depending on the precise structure of the subcollection of feasible coalitions. Many authors have contributed to this topic, and we give a unified view of these different results. |
| Keywords: | TU-game; Solution concept; Core; Feasible coalition; Communication graph; Partially ordered set |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:hal:pseose:hal-00803233&r=hpe |
| By: | David Kelsey (Department of Economics, University of Exeter); Sara le Roux (Department of Economics, Oxford Brookes University) |
| Abstract: | We report an experimental test of the influence of ambiguity on behaviour in a coordination game. We study the behaviour of subjects in the presence of ambiguity and attempt to determine whether they prefer to choose an ambiguity safe option. We fi?nd that this strategy, which is not played in either Nash equilibrium or iterated dominance equilibrium, is indeed chosen quite frequently. This provides evidence that ambiguity aversion infl?uences behaviour in games. While the behaviour of the Row Player is consistent with randomising between her strategies, the Column Player shows a marked preference for avoiding ambiguity and choosing his ambiguity-safe strategy. |
| Keywords: | Ambiguity; Choquet expected utility; coordination game; Ellsberg urn, experimental economics. |
| JEL: | C72 C91 D03 D81 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:exe:wpaper:1410&r=hpe |
| By: | Bouchikhi, Hamid (ESSEC Business School); Kimberly, John R. (The Wharton School, University of Pennsylvania) |
| Abstract: | As of July 1, 2010, the College of Humanities and Social Sciences at the University of the Holy Spirit (UHS) has a single Department of Economics. However, in the seven prior years, there were two economics departments, one that was resolutely mainstream and the other that was just as resolutely heterodox. What accounts for this unusual organizational arrangement? We show that this arrangement was part of a protracted conflict about the kind of economics that befits the Catholic identity of UHS that resulted, ultimately, in a full embrace of mainstream economics in July 2010. We draw on and amend Oliver's (1991) typology of organizational responses to institutional processes and investigate why and how UHS went from deliberate avoidance to full acquiescence to mainstream economics. Our analysis suggests that while organizations may be compelled to adapt to dominant norms, as institutional theorists contend, the process of adaptation involves a variety of conflicting moves and counter moves that engage identity and power and that require forceful leadership to resolve. |
| Keywords: | Institutional Isomorphism; Micro-processes; Organizational Adaptation |
| JEL: | I20 |
| Date: | 2014–05 |
| URL: | http://d.repec.org/n?u=RePEc:ebg:essewp:dr-14009&r=hpe |
| By: | Roman V. Belavkin (Middlesex University London) |
| Abstract: | The von Neumann and Morgenstern theory postulates that rational choice under uncertainty is equivalent to maximization of expected utility (EU). This view is mathematically appealing and natural because of the affine structure of the space of probability measures. Behavioural economists and psychologists, on the other hand, have demonstrated that humans consistently violate the EU postulate by switching from risk-averse to risk-taking behaviour. This paradox has led to the development of descriptive theories of decisions, such as the celebrated prospect theory, which uses an S-shaped value function with concave and convex branches explaining the observed asymmetry. Although successful in modelling human behaviour, these theories appear to contradict the natural set of axioms behind the EU postulate. Here we show that the observed asymmetry in behaviour can be explained if, apart from utilities of the out comes, rational agents also value information communicated by random events. We review the main ideas of the classical value of information theory and its generalizations. Then we prove that the value of information is an S-shaped function, and that its asymmetry does not depend on how the concept of information is defined, but follows only from linearity of the expected utility. Thus, unlike many descriptive and `non-expected' utility theories that abandon the linearity (i.e. the `independence' axiom), we formulate a rigorous argument that the von Neumann and Morgenstern rational agents should be both risk-averse and risk-taking if they are not indifferen to information. |
| Date: | 2014–06 |
| URL: | http://d.repec.org/n?u=RePEc:beb:wpseet:201403&r=hpe |
| By: | Rossi, Guido; Spagano, Salvatore |
| Abstract: | The present paper combines legal history with economic theory so to explain the passage from custom to law. Economists have usually explained the shift from customary to statutory law (that is, from spontaneous to formal rules) either in terms contractualism or evolutionism. In the first case, law is the only efficient solution for a Hobbesian-like immanent social conflict. In the second case, customs do create an efficient enough equilibrium. Law comes on a later stage just to formalise an already accepted rule, vesting the custom with a formal status. Neither theory, however, is fully able to explain the transition from custom to law. One struggles with the very acceptance of customs in the first place. The other fails to provide a satisfactorily explanation of the passage from custom to law. The present work seeks to reconcile the two theories by looking at the economic advantages of statutory law over custom. Unlike the first theory, it does not deny that customs may produce a relatively efficient status, but it seeks to explain why, at a certain point, customs were considered as inadequate and statutory law became more desirable. Our answer lies in the publication of written rules, for the presumption of knowledge it entails. Presumption of knowledge of the applicable rules is one of the elements that (oral) customs could not provide to contracts. Although somewhat neglected in many studies on customs and legislation, publication is a crucial element for our understanding of the passage from spontaneous custom to positive law. The work shall first introduce the passage from customary to statutory law in both legal and economic theories. Then, it will analyse the deep symmetry between the number of agents involved and the number of transactions on the one hand and the progressive replacement of customs with statutes on the other. The conclusions of such an analysis will be used to prove the crucial role played by the presumption of knowledge, which is perhaps the missing link between different economic theories on customs and law. |
| Keywords: | Evolutionary Economics, Constitutional Law |
| JEL: | B25 H10 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:56643&r=hpe |
| By: | de Boyer des Roches, Jérôme |
| Abstract: | Over the past two centuries, the connection David Ricardo made between money and foreign trade was widely commented on the basis of the 1809-1811 writings, notably the High Price of Bullion, Proof of the Depreciation of Bank Notes, of the 1816 Proposals for an Economical and Secure Currency, proposals taken again in the chapter twenty seven “On Currency and Banks” of the 1817 Principles of Political economy an Taxation, and of the 1823 Plan for a National Bank. On the other hand, the chapter seven “On Foreign Trade” of the 1817 Principles was mostly ignored with the exception of J.W. Angell (1926), F.W. Taussig (1927), K. Kojima (1951), M. Blaug (1976), J. de Boyer (1992) et G. Faccarello (2013) who did pay attention to it. Yet, according to Ricardo, the concept of comparative advantage cannot be understood without studying the international distribution of precious metals, and the determination of the natural prices of wine and cloth. In other words, the determination of relative prices includes monetary mechanisms. However the chapter seven of the Principles did not simply resume the 1809-1811 Ricardo’s monetary ideas. Here, Ricardo used arguments he had criticized seven years before. Furthermore, he reconsidered the link between value of money and exchange rate. The aim of this paper is to present and compare Ricardo’s monetary and foreign exchange analysis in the writings of 1809-1811 on one side, and in the chapter seven of his 1817 book on the other side. By means of a numerical example, the second section recalls the main features of the 1809-1811 analysis. According to Ricardo, the value of money in two trading countries must be equal for the foreign exchange equilibrium to be reached. Several notions such as the price specie flow mechanism, the quantity theory and the criticism of Thornton’s gold point mechanism are emphasized in this section. The third section presents the theory of the comparative advantage developed in chapter seven of the Principles; more than half of this text is consecrated to monetary components. Emphasis is placed on the foreign exchange market, the price specie flow between countries, and also the dynamics of money prices and wages that led to international specialization. The fourth section studies first the disconnection established by Ricardo in chapter seven of the Principles between the values of currencies and exchange rates, and second then his comments relative to the bullionist controversy; these comments close the chapter. The fifth section provides some precisions on (1) the "magic numbers" – i.e. 80, 90, 120, 100 -, (2) on the assumptions made to obtain the money prices - i.e. £45, £50, £50, £45 -, so that the terms of trade/exchange are not indeterminate contrary to an opinion inherited from John Stuart Mill, (3) finally on the consequences of an “improvement in making” English wine. Our research provides the following conclusions. First, Ricardo’s statement of the comparative advantage theory involves the monetary theory, specifically it presupposes the validity of the quantity theory. The specie inflow (outflow) in one country drops (increases) the value of money in this country. Secondly, according to the comparative advantage theory, “England would give the produce of the labour of 100 (English) men, for the produce of the labour of 80 (Portuguese)” (Ricardo, 1817, p; 135). It entails that the money price of the produce of 80 Portuguese men is equal to the money price of the produce of 100 English. It means that the money price of the produce of a given quantity of labour is 25% higher in Portugal than in England; i.e. that the value of a given quantity of money is 20% lower in Portugal than in England. Third, the specie flow between countries is not described with Hume’s price specie flow mechanism, but with Thornton’s gold points mechanism. Fourth, fixed exchange rate under gold standard does not involve gold has the same value in various countries. The symmetrical changes, in two countries, in the quantities of money, that lead to symmetrical changes in the values of money, do not modify the market prices of gold in any of these countries. To conclude, the seventh chapter of the Principles does not support Ricardo’s monetary view at the time of the Bullion Committee. |
| Keywords: | Comparative advantage; Foreign Trade; Money; Specie flow mechanism; Gold points; Ricardo; |
| JEL: | B12 E4 F1 |
| Date: | 2014–05 |
| URL: | http://d.repec.org/n?u=RePEc:dau:papers:123456789/13535&r=hpe |
| By: | Li, Cheng |
| Abstract: | This paper shows that the means-end rationality principle, as an ‘ultimate given’ of economics, delimits the faculty of economists to observe, describe and understand the manifold human behavior. Given such epistemological limitations, as a descriptive science, the main task of economics is to incorporate appropriate empirical content into the a priori analytical framework with the aim of better explaining and predicting some aspect of human behavior. As a normative science, economists should draw on their persuasion and communication skills whereby changing the means and end of the decision makers to the extent that the real world decision-making can be improved. |
| Keywords: | Rationality; Constrained maximization model; Methodology; Epistemology |
| JEL: | A11 A12 B41 |
| Date: | 2014–06–18 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:56651&r=hpe |
| By: | Jagjit S. Chadha; Morris Perlman |
| Abstract: | We examine the relationship between prices and interest rates for seven advanced economies in the period up to 1913, emphasizing the UK. There is a significant long-run positive relationship between prices and interest rates for the core commodity standard countries. Keynes (1930) labelled this positive relationship the 'Gibson Paradox'. A number of theories have been put forward as possible explanations of the Paradox but they do not fit the long-run pattern of the relationship. We find that a formal model in the spirit of Wicksell (1907) and Keynes (1930) offers an explanation for the paradox: where the need to stabilise the banking sector's reserve ratio, in the presence of an uncertain 'natural' rate, can lead to persistent deviations of the market rate of interest from its 'natural' level and consequently long run swings in the price level. |
| Keywords: | disability; Gibson's Paradox; Keynes-Wicksell; Prices; Interest Rates |
| JEL: | B22 E12 E31 E42 |
| Date: | 2014–04 |
| URL: | http://d.repec.org/n?u=RePEc:ukc:ukcedp:1403&r=hpe |
| By: | Erik S. Reinert; Kenneth Carpenter |
| Abstract: | Paper to be presented at the international workshop “Mercantilism and Cameralism – New Approaches and Reconfigurations”, University of Leipzig, July 4-6, 2014. |
| Date: | 2014–06 |
| URL: | http://d.repec.org/n?u=RePEc:tth:wpaper:58&r=hpe |
| By: | Carlson, Mark A. (Federal Reserve Bank of St. Louis); Wheelock, David C. (Federal Reserve Bank of St. Louis) |
| Abstract: | The 1950s are often pointed to as a decade in which the Federal Reserve operated a particularly successful monetary policy. The present paper examines the evolution of Federal Reserve monetary policy from the mid-1930s through the 1950s in an effort to understand better the apparent success of policy in the 1950s. Whereas others have debated whether the Fed had a sophisticated understanding of how to implement policy, our focus is on how the constraints on the Fed changed over time. Roosevelt Administration gold policies and New Deal legislation limited the Fed’s ability to conduct an independent monetary policy. The Fed was forced to cooperate with the Treasury in the 1930s, and fully ceded monetary policy to Treasury financing requirements during World War II. Nonetheless, the Fed retained a policy tool in the form of reserve requirements, and from the mid-1930s to 1951, changes in required reserve ratios were the primary means by which the Fed responded to expected inflation. The inability of the Fed to maintain a credible commitment to low interest rates in the face of increased government spending and rising inflation led to the Fed-Treasury Accord of March 1951. Following the Accord, the external pressures on the Fed diminished significantly, which enabled the Fed to focus primarily on macroeconomic objectives. We conclude that a successful outcome requires not only a good understanding of how to conduct policy, but also a conducive environment in which to operate. |
| Keywords: | Federal Reserve; monetary policy; reserve requirements; Fed-Treasury Accord; inflation |
| JEL: | E52 E58 N12 |
| Date: | 2014–06–01 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedlwp:2014-013&r=hpe |
| By: | Reckendrees, Alfred |
| Abstract: | The Weimar Republic is analysed within the framework of limited and open access orders. Germany had developed into a mature limited access order before World War I, with rule of law and open economic access but only limited access to politics. After the war, Germany developed toward an open access order; this process was, however, not sustainable. Two interpretations are discussed, which both pose a challenge to the limited access-open access framework: (1.) Weimar Germany was the first open access order that failed; (2.) sufficiency conditions of the sustainability of open access are not yet included in the framework. It is proposed that sustainable open access orders do not only depend on open political and economic access and on the state monopolising violence capacities (coercive power); government and the political institutions must also have the capacity to efficiently create legitimacy via coordination capabilities. -- |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:aluord:1405&r=hpe |