nep-hpe New Economics Papers
on History and Philosophy of Economics
Issue of 2014‒08‒25
seventeen papers chosen by
Erik Thomson
University of Manitoba

  1. Sidney Weintraub and American Post Keynesianism: 1938-1970 By E. Roy Weintraub
  2. James Buchanan's theory of federalism: From fiscal equity to the ideal political order By Feld, Lars P.
  3. The Law of Supply and Demand: Here It Is Finally By Kakarot-Handtke, Egmont
  4. The Role of Belief in the Debate over Austerity Policies By Sheila C Dow
  5. Varieties of capitalism, varieties of crisis response Bank bailouts in comparative perspective By Schneider, Sebastian
  6. Behavioral Dimensions of Contests By Roman M. Sheremeta
  7. And yet it moves (down) By Maito, Esteban Ezequiel
  8. State History and Economic Development: Evidence from Six Millennia By Borcan, Oana; Olsson, Ola; Putterman, Louis
  9. Monetary policy and forward guidance By Rosengren, Eric S.
  10. In the name of god: Managing risk in Islamic finance By Cattelan, Valentino
  11. Robust Equilibria in Location Games By Berno Buechel; Nils Roehl
  12. New monetary policy tools: what have we learned? By Rosengren, Eric S.
  13. Policymaking with a diversity of views By Rosengren, Eric S.
  14. Takings By Thomas J. Miceli; Kathleen Segerson
  15. The Great Depression and the Great Recession: A Comparative Analysis of their Analogies By Peicuti, Cristina
  16. Freie Gewerkschaften By Dilger, Alexander
  17. Autobiography By Roth, Alvin E.

  1. By: E. Roy Weintraub
    Abstract: Sidney Weintraub (1914–1983) was an American economist who spent most of his career at the University of Pennsylvania. A distinguished economic theorist (and the author’s father), he was a co ‐ founder of the Journal of Post Keynesian Economics , and the leading figure in the US in the early years of the Post Keynesian movement. This article shows how the early development of American Post Keynesianism, despite claims to the contrary by historians of Post Keynesianism, had no connection to the UK group centered around Joan Robinson in Cambridge.
    Keywords: Sidney Weintraub, Post Keynesian economics, Paul Davidson, wage-price inflation
    JEL: B2 B3 B5
    Date: 2014
  2. By: Feld, Lars P.
    Abstract: The distinct characteristic in James Buchanan's thinking about federalism in contrast to the traditional theory of fiscal federalism is his view about fiscal competition. In this paper, it is demonstrated that this thinking went through three stages. From the 1950s to the beginning of the 1970s, his analyses were well embedded in the traditional fiscal federalism literature and concerned with equity and efficiency issues. In the Leviathan approach starting from the midseventies, he considered competition between jurisdictions as a means to restrict Leviathan governments. In his interpretation of federalism as an ideal political order, Buchanan binds these perspectives together and adds a procedural view: Federalism enables citizens to exert political control, it raises their interest in politics because one vote has more influence, and it facilitates to act morally within their moral capacity. --
    Keywords: James Buchanan,Fiscal Equity,Fiscal Competition,Federalism as Political Order
    JEL: H77 B31 D78
    Date: 2014
  3. By: Kakarot-Handtke, Egmont
    Abstract: There is no such thing as a law of human or social behavior. The conceptual consequence of the present paper is therefore to discard the subjectivebehavioral axioms and to take objective-structural axioms as new formal foundations. The central piece of economic theory is the interaction of demand and supply which determines prices and quantities. Demand and supply in turn are determined by subjective factors. In the structural axiomatic paradigm the Law of Supply and Demand follows from objective factors alone. The Law consists of measurable variables and is testable in principle. The results prove the superiority of the new paradigm.
    Keywords: new framework of concepts; structure-centric; axiom set; harmonic structure
    JEL: B59 D40
    Date: 2014–08–18
  4. By: Sheila C Dow (University of Stirling)
    Abstract: The purpose of this paper is to argue that awareness of the epistemological issues arising from an open-system ontology is critical to understanding the crisis and the policy response, to challenging that understanding and to encouraging a radical policy shift. The argument is couched in terms of belief as an epistemological concept. In particular the paper addresses the misleading impression, persuasively conveyed by mainstream economists, that their argument for austerity is ‘scientific’ and independent of ideology, power and ethics. The resulting widespread belief in austerity policies as scientifically justified has prevented arguments against austerity gaining more traction. The critique of austerity policies would therefore be strengthened by a critique of this rhetorical (mis)representation of economic theorising.
    Keywords: fiscal austerity; science; belief
    JEL: B4 E1 E62
    Date: 2014–07
  5. By: Schneider, Sebastian
    Abstract: Given recent history it may be necessary to recall that the so-called Great Recession we have been witnessing for more than five years now was, first and foremost, a crisis of financial markets. One reason for rising debt levels at the outset of the crisis have been massive government expenditures to bail out struggling and even failing banks. Yet, I argue that it falls short of a satisfactory explanation to simply view political action as a rational response to "objective" political and economic problems. Therefore, the fundamental question that underlays this study is: How did different institutional settings influence diverging policy reactions to the financial crisis? To answer this question, this study compares bank bailouts in France, Germany and the United Kingdom. Drawing upon the Varieties of Capitalism literature, I identify four central, national institutions that have influenced political decision-making during the financial crisis: the political system, traditions of market intervention, economic discourse and banking and financial systems. The French president, Nicolas Sarkozy, reverting to France's dirigiste tradition and resorting to a dense elitist network, used bank bailouts to support the French financial industry and to create "national champions". This sort of policy was accompanied by a non-liberal discourse criticising "excessive" financial markets. In Germany, on the other hand, the government deliberated with a broad coalition of political and market actors to create a bailout programme aiming at sustaining bank lending to the industry. However, market actors were criticised on a moral and ethical basis and the ordo-liberal state was considered as a necessary corrective safeguarding true economic freedom. Finally, the UK's "elected dictator", Prime Minister Gordon Brown, used his political power and involved his close political allies to carry out a bailout programme that was predominantly designed to defend the international competitiveness of the British financial industry. Albeit market intervention was inevitable it was announced as being temporarily and leaving as much problem solving as possible to the markets. -- Angesichts der jüngeren Geschichte scheint die Erinnerung notwendig, dass die derzeitige Wirtschaftskrise zunächst als Bankenkrise begann. Zur Beilegung dieser Krise und zur Rettung zahlreicher Kreditinstitute, setzten die Regierungen in Europa und Nordamerika Summen bisher ungeahnten Ausmaßes ein. Diese Bankenrettungsprogramme waren jedoch mehr als nur eine rationale Lösung für bestehende wirtschaftliche Probleme. Wie diese Arbeit zeigt, hatten nationale Institutionen großen Einfluss auf politische Entscheidungen im Rahmen der Bankenrettung. Ein Vergleich zwischen Deutschland, Frankreich und Großbritannien zeigt, welche historisch gewachsenen Institutionen dabei eine entscheidende Rolle spielten und wie sie das taten. Vier zentrale, nationale Institutionen lassen sich mithilfe der Varieties of Capitalism-Literatur identifizieren: Das politische System, des Verhältnis Staat-Markt, der ökonomische Diskurs sowie das Banken- und Finanzsystem. Die deutsche Regierung verhandelte die diversen Bankenrettungen mit einer breiten Koalition politischer und Marktakteure, mit dem Ziel, die Kreditvergabe an die heimische Industrie zu stabilisieren. Begleitet wurde dieses Vorgehen von einem ordo-liberalen Diskus. Die Bankenrettung in Frankreich hingegen wurde durch den Präsidenten dominiert, welcher dabei auf ein Netzwerk aus politischen und Wirtschaftseliten zurückgriff, um "nationale Champions" zu schaffen. Hinzu kam ein kapitalismuskritischer öffentlicher Diskurs. In Großbritannien spielte Premier-Minister Gordon Brown eine beinahe ebenso dominante Rolle. Mit dem vorrangigen Ziel, die Wettbewerbsfähigkeit des Finanzstandortes London zu erhalten, griffen in Groß-Britannien vor allem Marktmechanismen und ein neoliberaler Diskurs.
    Date: 2014
  6. By: Roman M. Sheremeta (Weatherhead School of Management, Case Western Reserve University and The Economic Science Institute, Chapman University)
    Abstract: The standard theoretical description of rent-seeking contests is that of rational individuals or groups engaging in socially inefficient behavior by exerting costly effort. Experimental studies find that the actual efforts of participants are significantly higher than predicted in the models based on rational behavior and that over-dissipation of rents (or overbidding or over-expenditure of resources) can occur. Although over-dissipation cannot be explained by the standard rational-behavior theory, it can be explained by incorporating behavioral dimensions into the standard model, such as (1) the utility of winning, (2) relative payoff maximization, (3) bounded rationality, and (4) judgmental biases. These explanations are not exhaustive but provide a coherent picture of important behavioral dimensions to be considered when studying rent-seeking behavior in theory and in practice.
    Keywords: rent-seeking, contests, experiments, overbidding, over-dissipation
    Date: 2014
  7. By: Maito, Esteban Ezequiel
    Abstract: The article presents an estimate of the rate of profit in United Kingdom between 1855 and 2009. By isolating some of the countervailing forces specified by Marx of the law of the tendency of the rate of profit to fall, it demonstrates that the law impose despite those countervailing forces, which do not reverse the tendency in the long term. Finally, the article deals with the tendency and economic cycles based on the historical development of the rate of accumulation and the rate of growth of employees. A statistical annex is included at the end.
    Keywords: United Kingdom - Rate of profit - Countervailing forces - Marx - Law of the tendency of the rate of profit to fall
    JEL: B51 E22 P10 P16
    Date: 2014–08
  8. By: Borcan, Oana (Department of Economics, School of Business, Economics and Law, Göteborg University); Olsson, Ola (Department of Economics, School of Business, Economics and Law, Göteborg University); Putterman, Louis (Brown University)
    Abstract: All since the rise of the first civilizations, economic development has been closely intertwined with the evolution of states. In this paper, we contribute to the literature on state history and long-run economic development in four ways. First, we extend and complete the state history index from Bockstette, Chanda and Putterman (2002) by coding the experience with states from the first state origins, 3500 BCE, up until 2000 CE. Second, we explore empirically the relationship between time since transition to agriculture and state age, as well as subsequent state history. Our estimated unconditional correlation implies that a 1000 year earlier transition to agriculture is associated with a 470 years earlier emergence of state institutions. We show how this relationship differs between indigenously- and externally- originated states. Third, we show that the relationship between our extended state history index and current levels of economic development has the shape of an inverted u. The results reflect the fact that countries that were home to the oldest states, such as Iraq, Egypt and China, are poorer today than younger inheritors of their civilizations, such as Germany, Denmark and Japan. This pattern was already in place by 1500 CE and is robust to adjusting for migrations during the colonial era. Finally, we demonstrate a very close relationship between state formation and the adoption of writing.
    Keywords: state history; comparative development
    JEL: N00 O11 O43 O50
    Date: 2014–08–12
  9. By: Rosengren, Eric S. (Federal Reserve Bank of Boston)
    Abstract: In a speech at Husson University in Bangor, Maine, Federal Reserve Bank of Boston President Eric Rosengren advanced his view that monetary policy should remain highly accommodative until the economy is on more solid footing. He also explored the Fed's "forward guidance" challenges, and whether certain economic behaviors will return to pre‐crisis norms.
    Date: 2014–04–15
  10. By: Cattelan, Valentino
    Abstract: In Against the gods: the remarkable story of risk (1996), Peter L. Bernstein illustrates how the mastery of risk has driven modern Western society into converting 'the future from an enemy into an opportunity'. Far from being an antagonist, as the unpredictable whim of gods or mysterious fate, this story has transformed the future into a human prospect, where risk is quantified, measured and managed to mitigate the perils of the unexpected, and where risk-taking, -transfer and -pooling have become per se sources of legitimate profit. Commenting on Bernstein's work while moving from the Western 'risk' to the Arabic رزق 'rizq', '(God's) sustenance', this paper dares looking at human hazard, زهر 'zahr', the 'dice' of future chances, through a comparative and inter-cultural perspective. More precisely, it aims to show how specific anthropological assumptions result in an alternative theory and practice of risk management in a market whose peculiarity is to operate not 'against' but 'in the Name of God': the market of Islamic finance. To this end, Islamic finance is depicted within an anthropology of time where not only the future, but also the present are a divine (rather than human) creation, and where, consequently, risk is deeply re-framed both as a concept and as a source of legitimate profit. In fact, to the extent to which the future remains an economic opportunity in Islam (Q. II:275: 'Allah has permitted trade'), it is not conceived as a human product but as a part of man's responsibility to perform Shari'ah, as God's agent in the 'real'/'right' (haqq). Thus, while any legitimate profit follows liability (al-kharaj bi-l-daman), risk management coherently endorses the primacy of the real economy, exchange equilibrium (with any unlawful increase from riba, gharar or maysir being prohibited), and profit-loss sharing. In other terms, if risk continues to hold an economic value in Islamic finance, this value exists only as legitimate profit (kharaj) through liability (daman), and remains linked to asset-based and commercial activities. As a result, the logic underpinning Islamic banking and insurance (takaful), as well as securities (sukuk) trade, becomes hardly comparable to the conventional one, and rejects financial products, such as derivatives, that are deemed lacking in any commercial value since nothing 'real' is actually traded. To conclude, the paper remarks on how this alternative history of risk in Islam requires further consideration in financial theory and regulation, for the benefit of a level playing field where both conventional and Islamic finance are able to co-exist and prosper under the same (God's) sky. --
    Keywords: islamic finance,risk management,anthropology of risk,comparative economic history
    JEL: A12 N20 N25 P48 Z12
    Date: 2014
  11. By: Berno Buechel (University of Hamburg); Nils Roehl (University of Paderborn)
    Abstract: In the framework of spatial competition, two or more players strategically choose a location in order to attract consumers. It is assumed standardly that consumers with the same favorite location fully agree on the ranking of all possible locations. To investigate the necessity of this questionable and restrictive assumption, we model heterogeneity in consumers' distance perceptions by individual edge lengths of a given graph. A profile of location choices is called a ``robust equilibrium'' if it is a Nash equilibrium in several games which differ only by the consumers' perceptions of distances. For a finite number of players and any distribution of consumers, we provide a full characterization of all robust equilibria and derive structural conditions for their existence. Furthermore, we discuss whether the classical observations of minimal differentiation and inefficiency are robust phenomena. Thereby, we find strong support for an old conjecture that in equilibrium firms form local clusters.
    Keywords: spatial competition, Hotelling-Downs, networks, graphs, Nash equilibrium, median, minimal differentiation
    JEL: C72 D49 P16 D43
    Date: 2013–02
  12. By: Rosengren, Eric S. (Federal Reserve Bank of Boston)
    Abstract: In a speech at the Central Bank of Guatemala, Federal Reserve Bank of Boston President Eric Rosengren discussed “new” monetary policy tools (including forward guidance and large-scale asset purchases) and shared his opinion on how U.S. monetary policy could evolve.
    Date: 2014–06–09
  13. By: Rosengren, Eric S. (Federal Reserve Bank of Boston)
    Abstract: In a forum at the American Economic Association's annual meeting in Philadelphia, Federal Reserve Bank of Boston President Eric Rosengren noted the diversity of views that flourish within the Federal Reserve. He spoke alongside fellow Reserve Bank Presidents from the New York, Minneapolis, and Philadelphia Reserve Banks, on a panel moderated by Stanley Fischer, Distinguished Fellow at the Council on Foreign Relations.
    Date: 2014–01–04
  14. By: Thomas J. Miceli (University of Connecticut); Kathleen Segerson (University of Connecticut)
    Abstract: This entry discusses the economics of eminent domain, which is the government’s power to take or regulate privately owned property for the common good. It discusses the origins of the power as well as its limits, particularly as embodied in the public use and just compensation requirements. It also reviews the economics literature on how eminent domain affects incentives for efficient land use.
    Keywords: Eminent domain, takings, regulatory takings, just compensation, public use, land use
    JEL: K11 K32
    Date: 2014–07
  15. By: Peicuti, Cristina
    Abstract: The decades preceding the Great Depression and the U.S. subprime mortgage crisis have close similarities. Both decades were characterized by rapid growth without major contractions, by an increase in liquidity, a lack of inflation, and a generalized decrease in risk premiums. Additional similarities included significant changes in the financing of real estate by commercial banks along with a consolidation of the banking sector and high hopes that the efficiency of monetary policy would prevent financial crises. These decades were also characterized by the consolidation of the powers of young central banks (the Federal Reserve System in the 1920s and the European Central Bank in the 2000s), by unsuccessful attempts to control market speculation, by their international dimensions, and by the eruption of crises after the failure of a major American financial institution that could have been avoided. Understanding these analogies help us better identify the causes of the subprime mortgage crisis and prevent history from repeating itself to the extent of such large-scale devastating consequences.
    Keywords: financial crisis, Great Depression, credit, subprime mortgage crisis, liquidity,inflation, central bank, commercial bank
    JEL: E51 F01 G15 G21
    Date: 2014–06–10
  16. By: Dilger, Alexander
    Abstract: Gewerkschaften werden oft von Liberalen und Libertären kritisiert. Dabei sind sie Ausdruck grundlegender Freiheitsrechte, insbesondere der Vereinigungsfreiheit. Auch das Streikrecht ist innerhalb gewisser Grenzen ein legitimes Freiheitsrecht. Eine freie Gesellschaft ist mehr als Marktwirtschaft und diese geht über Kapitalismus im Sinne der Herrschaft des Kapitals bzw. kapitalgeleiteter Unternehmen hinaus. -- Labour unions are often criticised by liberals and libertarian. However, they embody fundamental liberties, especially the freedom of association. The right to strike is also a legitimate freedom without certain boundaries. A free society is more than a market economy, which exceeds capitalism in terms of the rule of capital or by capital controlled companies.
    JEL: J51 J52 J54 J83 L43 M55 D74 P10 P13 B50
    Date: 2014
  17. By: Roth, Alvin E. (Harvard University)
    Abstract: I was born on December 18, 1951 in the New York City borough of Queens. My parents, Ernest and Lillian, were both public high school teachers of a subject that is probably no longer taught, called Secretarial Studies, which focused on typing and taking dictation via two methods of shorthand stenography, Pitman and Gregg. Their students were young women planning to go directly to work as secretaries after high school.
    Keywords: Market Design;
    JEL: C71 D01
    Date: 2013

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