nep-hpe New Economics Papers
on History and Philosophy of Economics
Issue of 2014‒07‒21
nineteen papers chosen by
Erik Thomson
University of Manitoba

  1. Chasing the B: A Bibliographic Account of Economics’ Relation to its Past, 1991-2011 By Yann Giraud; Pedro Garcia Duarte
  2. The Life and Work of Martin Stuart (gMartyh) Feldstein By Charles Yuji Horioka
  3. Hybrid Procedures By Yukio KORIYAMA; Matias NUNEZ
  4. Bargaining through Approval By Matias Nunez; Jean-Francois Laslier
  5. The positive core for games with precedence constraints By Michel Grabisch; Peter Sudhölter
  6. Managing Intrinsic Motivation in a Long-Run Relationship By Kfir Eliaz; Ran Spiegler
  7. XVe Colloque de l’Association Charles Gide pour l’étude de la pensée économique By Alain Beraud
  8. Does Europe Need a Demos to Be Truly Democratic? By Daniel Innerarity
  9. A Young Tree Dead? The Story of Economics in Australia and New Zealand By William Coleman
  10. Ancient statistics and the rise of demography. A historiography of demographic debate on Roman Italy By Saskia C. Hin
  11. Games with Money and Status: How Best to Incentivize Work By Pradeep Dubey; John Geanakoplos
  12. Utilitarianism with Prior Heterogeneity By Antoine Billot; Vassili Vergopoulos
  13. Poverty of Agency Theory and Poverty of Managerial Practice: The Royal Bank of Scotland Fiasco By Shanti Chakravarty; Anthony Dobbins; Lynn Hodgkinson
  14. Methods in governance research: a review of research approaches By Lawrence Sáez
  15. Property Rights and Democratic Values in pre-Classical Greece By Economou, Emmanouil Marios Lazaros; Kyriazis, Nicholas
  16. Giving and promising gifts: experimental evidence on reciprocity from the field By J. Michelle Brock; Andreas Lange; Kenneth L. Leonard
  17. Highway to Hitler By Nico Voigtländer; Hans-Joachim Voth
  18. Spinoff and Clustering: a return to the Marshallian district By Lucia Cusmano; Andrea Morrison; Enrico Pandolfo
  19. Uncertainty and Economic Activity: A Global Perspective By Hashem Pesaran; Ambrogio Cesa-Bianchi; Alessandro Rebucci

  1. By: Yann Giraud; Pedro Garcia Duarte (Université de Cergy-Pontoise, THEMA; University of sao Paulo, Economics Department)
    Abstract: Some historians argue that the history of economic thought (HET) is useful and important to economists and that historians should remain in economics departments. Others believe that historians’ initiatives toward economists are doomed in advance to failure and that they should instead ally themselves with historians and sociologists of science located in humanities departments. Generally, the contributions that are devoted to reviewing the state of HET take a firm side for either one of these two positions and therefore have a prescriptive view on how history should be written. By contrast, our paper proposes a descriptive account of the kind of contributions to HET that have been published in major economics journals over the past two decades. To avoid definitional issues over HET, we use the B category of the JEL classification to retrieve and analyze the relevant literature. We show that, though contributions to HET are still found in top economics journals, the rate of publication of such papers has become increasingly uneven and the methods and narrative styles they adopt are increasingly remote from that advocated in the sub-disciplinary literature. For this reason, historians who are still willing to address the economics’ community should be more interested in expanding the frontiers of their field rather than in trying to anticipate their targeted readers’ preferences.
    Keywords: history of economics, economics journals, American Economic Review, Journal of Economic Literature, Journal of Economic Perspectives, Economic Journal
    JEL: B20 A14 B40 B29
    Date: 2014
  2. By: Charles Yuji Horioka
    Abstract: Martin Stuart (gMartyh) Feldstein, currently George F. Baker Professor of Economics at Harvard University and President Emeritus of the National Bureau of Economic Research, Inc. (NBER), is a renowned American economist who has made important contributions to public finance, macroeconomics, social insurance, health economics, the economics of national security, and many other fields of economics.
    Date: 2014–07
  3. By: Yukio KORIYAMA; Matias NUNEZ (Ecole Polytechnique, Department of Economics; Université de Cergy-Pontoise, THEMA)
    Abstract: We consider hybrid procedures: a first step of reducing the game by iterated elimination of weakly dominated strategies (IEWDS) followed by a second step of applying an equilibrium refinement. We show that the set of perfect/proper outcomes of a reduced normal-form game might be larger than the set of the perfect/proper outcomes of the whole game by applying IEWDS. Even in dominance solvable games in which all the orders of IEWDS select a unique singleton in the game, the surviving outcome need not be a proper equilibrium of the whole game. However, in dominance solvable games that satisfy the transference of decision maker indifference condition (TDI of Marx and Swinkels, 1997), the surviving outcome coincides with the unique stable one and hence is proper.
    Keywords: Weak dominance, Iterated elimination, Proper equilibrium.
    JEL: C7 C72
    Date: 2014
  4. By: Matias Nunez; Jean-Francois Laslier (CNRS- Université de Cergy-Pontoise, THEMA; CNRS- Paris SChool of Economics)
    Abstract: The paper considers two-person bargaining under Approval Voting. It first proves the existence of pure strategy equilibria. Then it shows that this bargaining method ensures that both players obtain at least their average and median utility level in equilibrium. Finally it proves that, provided that the players are partially honest, the mechanism triggers sincerity and ensures that no alternative Pareto dominates the outcome of the game.
    Keywords: Bargaining, Approval Voting, Efficiency, Partial Honesty
    JEL: C78 D7
    Date: 2014
  5. 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); Peter Sudhölter (University of Southern Denmark - Department of Business and Economics and COHERE)
    Abstract: We generalize the characterizations of the positive core and the positive prekernel to TU games with precedence constraints and show that the positive core is characterized by non-emptiness (NE), boundedness (BOUND), covariance under strategic equivalence, closedness (CLOS), the reduced game property (RGP), the reconfirmation property (RCP) for suitably generalized Davis-Maschler reduced games, and the possibility of nondiscrimination. The bounded positive core, i.e., the union of all bounded faces of the positive core, is characterized similarly. Just RCP has to be replaced by a suitable weaker axiom, a weak version of CRGP (the converse RGP) has to be added, and CLOS can be deleted. For classical games the prenucleolus is the unique further solution that satisfies the axioms, but for games with precedence constraints it violates NE as well as the prekernel. The positive prekernel, however, is axiomatized by NE, anonymity, reasonableness, the weak RGP, CRGP, and weak unanimity for two-person games (WUTPG), and the bounded positive prekernel is axiomatized similarly by requiring WUTPG only for classical two-person games and adding BOUND.
    Keywords: TU games; restricted cooperation; game with precedence constraints; positive core; bounded core; positive prekernel; prenucleolus
    Date: 2014–04
  6. By: Kfir Eliaz (Tel Aviv University, Eitan Berglas School of Economics; University of Michigan, Economics Department); Ran Spiegler (Tel Aviv University, Eitan Berglas School of Economics; Centre for Macroeconomics (CFM))
    Abstract: We study a repeated principal-agent interaction, in which the principal offers a "spot" wage contract at every period, and the agent’s outside option follows a Markov process with i.i.d shocks. If the agent rejects an offer, the two parties are permanently separated. At any period during the relationship, the agent is productive if and only if his wage does not fall below a "reference point" (by more than an infinitesimal amount), which is defined as his lagged-expected wage in that period. We characterize the game’s unique subgame perfect equilibrium. The equilibrium path exhibits an aspect of wage rigidity. The agent’s total discounted rent is equal to the maximal shock value.
    Date: 2014–06
  7. By: Alain Beraud (Université de Cergy-Pontoise, THEMA)
    Abstract: Say has shown that there is no amount of capital which may not be employed in a country. Such a proposal does not involve the absence of unemployment and crisis. The markets may be glutted. In his first writings, Say advanced that whenever there is a superabundance of several sorts of merchandise, it is because other articles are not produced. People have bought less, because they have made less profit. Disequilibrium in some markets may limit the global demand for goods. Later, he will explain the commercial crises by the abuses of the banks of circulation who, to discount the bills of their customers, issue excessive quantities of notes. The value of the money decreased; the individuals who held notes asked for the payment in species and banks noticing the decrease of their reserves restricted their credits so provoking a crisis.
    Keywords: Say, Débouchés, théorie quantitative de la monnaie, crises commerciales.
    JEL: B12 B31 E E
    Date: 2014
  8. By: Daniel Innerarity
    Abstract: Principal theories about European democracy agree that there is no European demos (unfortunately or inevitably, depending on whether one is a federalist or intergovernmentalist). In my opinion, the “no demos theory,” in all its various manifestations, has, at least tacitly, an excessively demanding concept of demos, utopian for federalists and static for intergovernmentalists. In both cases, it is so categorical that it does not correspond to the history from which political communities have arisen, nor to how a sense of belonging is truly established, nor to the limits on the expectations we can reasonably hold for Europe. The demos could be more practical and contingent, more performative and vulnerable. It can, for that very reason, be constructed or lost; it is more emergent and fragile than those who view it so emphatically believe. Additionally, what if the peoples who “truly exist” were not such a solid group or did not need to be so? In that case, it may even be that European integration represents an opportunity to articulate unity and diversity in a manner that is more respectful of its internal plurality. In order to do that, we obviously need very different concepts and practices than the ones that gave rise to the nation state.
    Keywords: demos, people, democracy, European Union
    Date: 2014–07
  9. By: William Coleman
    Abstract: The key problem of economics in Australia and New Zealand is its marginality. The history of its economics will, then, be at bottom an account of the confrontation of that marginality. Thus any story of economic thought in Australia and New Zealand will necessarily tell of the attempt to plant and cultivate in uncleared ground the long developed vine of older societies. It will relate how the cultivators perforce pondered whether adapting the growth to local conditions would be more or less rewarding than simply perfecting their cultivation of the imported stem, and introducing its ever purer varieties. It will reveal that the adaptation of imported varieties to idiosyncratic condition was in the event limited, though not wholly without significance; and even leaving some trace of cross-fertilisation of the wider world. For all that, the story, I contend, will conclude today with the local strains being submerged by the benefits and snares of globalization. The history of economics in Australia and New Zealand has been written before, both in detail and synoptically, with considerable scholarship and some panache (Goodwin 1966, Groenewegen and McFarlane 1990, La Nauze 1949, King 2007, Cornish 2008, Blythe 2008, Hight 1939). The present history seeks to add through its focus on the predicament of any economics that rationally and usefully bears the adjective 'Australian'.
    Date: 2013–12
  10. By: Saskia C. Hin (Max Planck Institute for Demographic Research, Rostock, Germany)
    Abstract: At the 70th ‘anniversary’ of Münzer’s death, ancient history ‘celebrates’ a more than twice long history of debate on population matters in the Roman Republic and early Empire. More than 170 years of discussion have hitherto not led to any conclusive answer on the basic question against what background of demographic dynamics political, historical and economic developments in Roman Italy ought to be understood. Taking off in the 1840s, the start of demographic debate on Roman history coincided with the rise of statistics and interest in demography across Europe. This paper places the study of ancient population statistics into its wider historiographic context. It draws attention to contemporary thought on the relationship between population, nation and economy, and to the influence of this thought on key contributions to the debate on ancient Roman Italy. As perceptions of citizens as soldiers and of censuses as military devices were strengthened under late 19th century nationalism, the role of censuses as means to secure state finances was marginalized in academic debate. Comparative evidence on the nature and aims of censuses, however, reveals how central state needs or desires to generate tax income have been to the institution of censuses across time and place. A review of census taking throughout history thus adds to earlier arguments made to build a case for the eclipsed perspective that the Roman censuses may have counted citizens sui iuris – or those liable to taxation.
    JEL: J1 Z0
    Date: 2014–07
  11. By: Pradeep Dubey (SUNY); John Geanakoplos (Cowles Foundation, Yale University)
    Abstract: Status is greatly valued in the real world, yet it has not received much attention from economic theorists. We examine how the owner of a firm can best combine money and status together to get his employees to work hard for the least total cost. We find that he should motivate workers of low skill mostly by status and high skill mostly by money. Moreover, he should do so by using a small number of titles and wage levels. This often results in star wages to the elite performers.
    Keywords: Status, Incentives, Wages
    JEL: C70 I20 I30
    Date: 2014–07
  12. By: Antoine Billot (EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris, PSE - Paris-Jourdan Sciences Economiques - CNRS : UMR8545 - École des Hautes Études en Sciences Sociales (EHESS) - École des Ponts ParisTech (ENPC) - École normale supérieure [ENS] - Paris - Institut national de la recherche agronomique (INRA), LEMMA - Laboratoire d'économie mathématique et de microéconomie appliquée - Université Paris II - Panthéon-Assas : EA4442 - Sorbonne Universités); Vassili Vergopoulos (EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris, CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne)
    Abstract: Harsanyi's axiomatic justification of utilitarianism is extended to a framework with subjective and heterogenous priors. Contrary to the existing literature on aggregation of preferences under uncertainty, society is here allowed to formulate probability judgements, not on the actual state of the world as individuals do, but rather on the opinion they each have on the actual state. An extended Pareto condition is then proposed that characterizes the social utility function as a convex combination of individual ones and the social prior as the independent product of individual ones.
    Keywords: Utilitarianism; prior heterogeneity; Pareto condition
    Date: 2014–06
  13. By: Shanti Chakravarty (Bangor University, UK); Anthony Dobbins (Bangor University, UK); Lynn Hodgkinson (
    Abstract: The divergence of ownership and management in modern capitalism gave rise to agency theory as a framework for analysing corporate governance. There is now an emerging body of literature questioning the wisdom of the focus on agency theory in business schools. We argue that the poverty of agency theory is compounded by the culture of deference to authority entailed in reliance on technocratic advice. By reference to the concept of hegemony, we conjecture that hegemonic pressures have produced a homogeneous managerial class with similar preference for maximizing short-term profit. The argument is illustrated empirically by the case example of the collapse of The Royal Bank of Scotland, where shareholder representatives followed management advice in pursuing a course of action that led to the demise of the bank.
    Keywords: Agency theory, Bank collapse, Corporate governance, Hegemony, Management and ownership, Royal Bank of Scotland, Technocracy.
    Date: 2013–12
  14. By: Lawrence Sáez
    Abstract: The extant literature relating to the relationship between governance and inclusive growth does not appear to have reached convergence towards a preferred methodological approach. This paper attempts to review the strengths and shortcomings of different methodological approaches to the study of the relationship between governance and inclusive growth. The paper offers some recommendations on possible new directions in the study of the relationship between good governance and inclusive growth.
    Date: 2013
  15. By: Economou, Emmanouil Marios Lazaros; Kyriazis, Nicholas
    Abstract: In the present essay we introduce the concept of macroculture as a complex of mutually supporting values, norms and beliefs in various areas of human activity, like religion, war, politics, sports etc. in a model. Then, we analyse how some macrocultures that are favorable or the “precondition” for the emergence of democracy and institutions develop, in particular property rights that foster economic development. We analyze this for an extended period that covers Later Bronze Age to Archaic Greece (approximately 1250-510 BC), as being the historical case where such a macroculture favorable to democracy and stable property rights first emerged. We argue that the nature of the Greek polytheist religion (12 gods) depicts a proto-democratic side of the ancient Greek society. We then provide a comparison of the Greek case, in relation to the other, mainly oriental societies, as far as the level of participation in decision making procedures of these societies is concerned. Our main findings indicate that during the last period of the Mycenaean world, as well as during the Geometric and Archaic age periods, the emergence of various elements of macroculture, in religion, warfare, sports and city-state environment evolved into similar proto-democratic values, leading thus to the establishment of democracy as a political phenomenon in Classical Greece, with Athens being the most well-known historical case.
    Keywords: Macroculture, Democracy, Property rights, Ancient Greece.
    JEL: K11 N44 Z12 Z13
    Date: 2014–06–06
  16. By: J. Michelle Brock (European Bank for Reconstruction and Development); Andreas Lange (University of Hamburg, Department of Economics); Kenneth L. Leonard (University of Maryland, Department of Agricultural and Resource Economics)
    Abstract: In this study, we consider how gift-exchange and bonus systems function in a natural field setting by measuring the effort response of participants to non-monetary gifts over time. Our field experiment tests the difference in effort response to unconditional gifts delivered immediately, promised unconditional gifts delivered later, and conditional gifts linked to reaching a specific performance target. We find important benefits from promising to give an unconditional gift later: participants respond positively to a promised gift twice by increasing effort when the gift is promised and again when it is received. A promised gift outperforms both the unconditional gift delivered immediately, which leads to a single positive response, and the conditional gift based on performance, which does not trigger any significant behavioural change after the gift is delivered. The study lends insights into the relative effectiveness of gift-exchange and bonus systems and the temporal structure of reciprocal exchange.
    Keywords: gift exchange, reciprocity, health care, field experiment, Tanzania
    JEL: C93 I1 J41 O1
    Date: 2014–01
  17. By: Nico Voigtländer; Hans-Joachim Voth
    Abstract: Can infrastructure investment win "hearts and minds"? We analyze a famous case in the early stages of dictatorship – the building of the motorway network in Nazi Germany. The Autobahn was one of the most important projects of the Hitler government. It was intended to reduce unemployment, and was widely used for propaganda purposes. We examine its role in increasing support for the NS regime by analyzing new data on motorway construction and the 1934 plebiscite, which gave Hitler greater powers as head of state. Our results suggest that road building was highly effective, reducing opposition to the nascent Nazi regime.
    Keywords: political economy, infrastructure spending, establishment of dictatorships, pork-barrel politics, Nazi regime
    JEL: H54 P16 N44 N94
    Date: 2014–05
  18. By: Lucia Cusmano; Andrea Morrison; Enrico Pandolfo
    Abstract: The origin and growth of industrial clusters have attracted the attention of scholars and policy makers since the early era of industrialisation. The seminal work by Alfred Marshall has represented the foundation for a rich strand of literature, whose late expansion and refinement were inspired by the experiences of localised development in emerging regions. This is the case of Italian industrial districts, which have emerged as a territorial model of industrial agglomeration, decentralised production and flexible specialisation. Recently, the traditional explananda of the emergence of clusters have been reconsidered. The evidence about the growth of clusters in areas that did not have obvious natural advantages, nor the first comers’ benefits of early agglomeration economies, has inspired a different conceptualisation, which draws consistently from the evolutionary perspective on industrial dynamics. Klepper (2001, 2010) shows that more successful firms have higher spin-off rates and their spin-offs tend to outperform competitors. Organizational reproduction and heredity are thus identified as the primary forces underlying clustering. The present paper investigates the emergence and evolution of an Italian industrial district, the Sassuolo tile district, one of the largest and most successful ceramic districts in the world, and a paradigmatic example of Italian Marshallian district. Overall, our findings confirm that organizational reproduction and heredity represent primary mechanisms of clustering. However, our results also show that spin-offs do not perform better than non-spin-offs. It appears that, in dense industrial environments and social networks, competitive advantages can also be acquired or built through other channels.
    Date: 2014–07
  19. By: Hashem Pesaran; Ambrogio Cesa-Bianchi; Alessandro Rebucci
    Abstract: The 2007-2008 global _financial crisis and the subsequent anemic recovery have rekindled academic interest in quantifying the impact of uncertainty on further assume that these common factors affect volatility and economic activity with a time lag of at least a quarter. Under these assumptions, we show analytically that volatility is forward looking and that the output equation of a typical VAR estimated in the literature is mis-specified as least squares estimates of this equation are inconsistent. Empirically, we document a statistically significant and economically sizable impact of future output growth on current volatility, and no effect of volatility shocks on business cycles, over and above those driven by the common factors. We interpret this evidence as suggesting that volatility is a symptom rather than a cause of economic instability.
    Keywords: Uncertainty, Realized volatility, GVAR, Great Recession, Identication,Business Cycle, Common Factors.
    JEL: E44 F44 G15
    Date: 2014–05–19

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