nep-hpe New Economics Papers
on History and Philosophy of Economics
Issue of 2014‒08‒16
ten papers chosen by
Erik Thomson
University of Manitoba

  1. Evolutionary Games with Group Selection By Martin Kaae Jensen; Alexandros Rigos
  2. Equilibrium delay and non-existence of equilibrium in unanimity bargaining games By Britz V.; Herings P.J.J.; Predtetchinski A.
  3. Scarcity self-interest and maximization from Islamic angle By Hasan, Zubair
  4. When Economics Met Antitrust: The Second Chicago School and the Economization of Antitrust Law By Patrice Bougette; Marc Deschamps; Frédéric Marty
  5. Individual and Societal Wisdom: Explaining the Paradox of Human Aging and High Well-Being By Jeste, Dilip V.; Oswald, Andrew J.
  6. Does Europe Need a Demos to Be Truly Democratic? By Daniel Innerarity
  7. The Liberal Ethics of Non-Interference and the Pareto Principle By Marco Mariotti; Roberto Veneziani
  8. The Contractarian Constitutional Political Economy of James Buchanan By Roger D. Congleton
  9. Entitlement in a Real Effort Ultimatum Game By Michael D. Carr; Phil Mellizo
  10. Direct purchases of U.S. Treasury securities by Federal Reserve banks By Garbade, Kenneth D.

  1. By: Martin Kaae Jensen; Alexandros Rigos
    Abstract: This paper introduces two new concepts in evolutionary game theory: Nash equilibrium with Group Selection (NEGS) and Evolutionarily Stable Strategy with Group Selection (ESSGS). These concepts generalize Maynard Smith and Price (1973) to settings with arbitrary matching rules, inparticular they reduce, respectively, to Nash equilibrium and ESS when matching is random. NEGS and ESSGS are to the canonical group selection model of evolutionary theory what Nash Equilibrium and ESS are to the standard replicator dynamics: any NEGS is a steady state, any stable steady state is a NEGS, and any ESSGS is asymptotically stable. We exploit this to prove what may be called “the second welfare theorem of evolution”: Any evolutionary optimum will be a NEGS under some matching rule. Our results are illustrated in Hawk-Dove, Prisoners’ dilemma, and Stag Hunt games.
    Keywords: Evolutionary Game Theory, Evolutionarily Stable Strategy, ESS, Group Selection, Non-random Matching, Trait-group Model, Haystack Model.
    JEL: C72 C73
    Date: 2014–07
  2. By: Britz V.; Herings P.J.J.; Predtetchinski A. (GSBE)
    Abstract: We consider a class of perfect information unanimity bargaining games, where the players have to choose a payoff vector from a fixed set of feasible payoffs. The proposer and the order of the responding players is determined by a state that evolves stochastically over time. The probability distribution of the state in the next period is determined jointly by the current state and the identity of the player who rejects the current proposal.This protocol encompasses a vast number of special cases studied in the literature. These special cases have in common that equilibria in pure stationary strategies exist, are efficient, are characterized by the absence of delay, and converge to a unique limit corresponding to an asymmetric Nash bargaining solution. For our more general protocol, we show that subgame perfect equilibria in pure stationary strategies need not exist. When such equilibria do exist, they may exhibit delay. Limit equilibria as the players become infinitely patient need not be unique.
    Keywords: Bargaining Theory; Matching Theory;
    JEL: C78
    Date: 2014
  3. By: Hasan, Zubair
    Abstract: This paper clarifies some misinterpretations of three foundational concepts in mainstream economics from Islamic viewpoint. These are scarcity of resources, pursuit of self-interest and maximizing behavior of economic agents. It argues that stocks of resources that God has provided are inexhaustible. But important is the availability of resources out of stocks to mankind. Availability is a function of human effort and the state of knowledge about resources over time and space. In that sense resources are scarce in relation to multiplicity of human wants for Islamic economics as well. Self-interest must be distinguished from selfishness. The motive operates on both ends of human existence: mundane and spiritual. Its pursuit does not preclude altruism from human life. Counter interests keep balance in society and promote civility. Islam recognizes the motive as valid. Maximization relates to quantifiable ex ante variables. Uncertainty of future outcomes of actions makes maximization a heuristic but useful analytical tool. The concept is value neutral. What is maximized, how and to what end alone give rise to moral issues. Modified in the light of Shari’ah requirements the three concepts can provide a firmer definition for Islamic economics centered on the notion of falah.
    Keywords: Islamic economics, scarcity, self-interest; maximization, falah
    JEL: B11 D63 D64
    Date: 2014–07
  4. By: Patrice Bougette (University of Nice Sophia Antipolis, France; GREDEG CNRS); Marc Deschamps (University of Nice Sophia Antipolis, France; GREDEG CNRS; BETA CNRS); Frédéric Marty (GREDEG CNRS; University of Nice Sophia Antipolis; OFCE - Sciences Po. Paris)
    Abstract: In this article, we use a history of economic thought perspective to analyze the process by which the Chicago School of Antitrust emerged in the 1950s and became dominant in the US. We show the extent to which economic objectives and theoretical views shaped antitrust laws in their inception. After establishing the minor influence of economics in the promulgation of U.S. competition laws, we then highlight U.S. economists' very cautious views about antitrust until the Second New Deal. We analyze the process by which the Chicago School developed a general and coherent framework for competition policy. We rely mainly on the seminal and programmatic work of Director and Levi (1956) and trace how this theoretical paradigm was made collective, i.e. the 'economization' process took place in US antitrust. Finally, we discuss the implications, if not the possible pitfalls, of such a conversion to economics-led competition law enforcement.
    Keywords: Antitrust, Chicago School, Consumer welfare, Efficiency, Monopolization
    JEL: K21 L40
    Date: 2014–07
  5. By: Jeste, Dilip V. (University of California); Oswald, Andrew J. (University of Warwick and CAGE abstract- Objective: Although human aging is characterized by loss of fertility and progressive decline in physical abilities, later life is associated with better psychological health and well-being. Furthermore, there has been an unprecedented increase in average lifespan over the past century without corresponding extensions of fertile and healthy age spans. We propose a possible explanation for these paradoxical phenomena. Method- We reviewed the relevant literature on aging, well-being, and wisdom. Results-An increase in specific components of individual wisdom in later life may make up for the loss of fertility as well as declining physical health. However, current data on the relationship between aging and individual wisdom are not consistent, and do not explain increased longevity in the general population during the past century. We propose that greater societal wisdom (including compassion) may account for the notable increase in average lifespan over the last century. Data in older adults with serious mental illnesses are limited, but suggest that many of them too experience improved psychosocial functioning, although their longevity has not yet increased, suggesting persistent stigma against mental illness and inadequate societal compassion.Conclusions- Research should focus on the reasons for discrepant findings related to ageassociated changes in different components of individual wisdom; also, more work is needed on the construct of societal wisdom. Studies of wisdom and well-being are warranted in older people with serious mental illnesses, along with campaigns to enhance societal compassion for these disenfranchised individuals. Finally, effective interventions to enhance wisdom need to be developed and tested.)
    Keywords: Life-cycle happiness, subjective well-being, wisdom, psychiatry, U shape
    Date: 2014
  6. 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: democracy; European identity
    Date: 2014–07–01
  7. By: Marco Mariotti (University of St Andrews); Roberto Veneziani (Queen Mary University of London)
    Abstract: We analyse the liberal ethics of noninterference applied to social choice. A liberal principle capturing noninterfering views of society and inspired by John Stuart Mill's conception of liberty, is examined. The principle captures the idea that society should not penalise agents after changes in their situation that do not affect others. An impossibility for liberal approaches is highlighted: every social decision rule that satisfies unanimity and a general principle of noninterference must be dictatorial. This raises some important issues for liberal approaches in social choice and political philosophy.
    Keywords: Liberalism, Harm Principle, Non-Interference, Impossibility
    Date: 2014–03–01
  8. By: Roger D. Congleton (West Virginia University, College of Business and Economics)
    Abstract: This paper attempts to outline and summarize the main body of work on one strand of James Buchanan's work, constitutional political economy. The grounding ideas and inferences of Buchanan's approach can be summarized as follows: (a) The appropriate method for analyzing and understanding social phenomena is the individual. (b) There are often mutual gains that can only be realized through collective action. (c) Collective action produces both property right systems (civil law) and collective decision-making systems (political constitutions). (d) One cannot know beforehand the ex-act consequences of rules, nor can one read the minds of those affected by those rules. (e) Every individual counts, so the legitimacy of collective action can only be assured by decision procedures grounded in unanimity. (f) Every agreement that meets the unanimity criteria is, by definition, an improvement. (g) However, the legitimacy of collective action in general and constitutional governance in particular requires that individuals be fundamentally equal in their roles as citizens, both at the constitutional level of choice and in the civil society framed by the constitution chosen. This paper shows how these ideas emerged in Buchanan's research and are used to develop a very rich constitutional political economy.
    Date: 2013–09
  9. By: Michael D. Carr; Phil Mellizo
    Abstract: Data from lab experiments support the claim that individuals have social preferences. Most models of social preferences, however, consider only the distribution of outcomes, not the source of the endowment used in the game. Once the source is considered, outcomes in the ultimatum game are more difficult to interpret. We extend the ultimatum game to allow for responder-produced endowments. We find that offers increase when the responder produces the endowment, but rejection rates are lower. Further, offers remain below 100% of the endowment, suggesting that unproductive proposers feel entitled to a part of the endowment, and responders respect this right.
    JEL: C91 D30 D63
    Date: 2013–09
  10. By: Garbade, Kenneth D. (Federal Reserve Bank of New York)
    Abstract: Until 1935, Federal Reserve Banks from time to time purchased short-term securities directly from the United States Treasury to facilitate Treasury cash management operations. The authority to undertake such purchases provided a robust safety net that ensured Treasury could meet its obligations even in the event of an unforeseen depletion of its cash balances. Congress prohibited direct purchases in 1935, but subsequently provided a limited wartime exemption in 1942. The exemption was renewed from time to time following the conclusion of the war but ultimately was allowed to expire in 1981. This paper addresses three questions: 1) Why did Congress prohibit direct purchases in 1935 after they had been utilized without incident for eighteen years, 2) why did Congress provide a limited exemption in 1942 instead of simply removing the prohibition, and 3) why did Congress allow the exemption to expire in 1981?
    Keywords: Treasury debt issuance; Federal Reserve; direct purchases
    JEL: E58 H62 H63
    Date: 2014–08–01

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