nep-hpe New Economics Papers
on History and Philosophy of Economics
Issue of 2014‒08‒28
eighteen papers chosen by
Erik Thomson
University of Manitoba

  1. Who is the Narrator of the Fable of the Individuality in Political Economy: Mandeville or Smith? By Eren, Ahmet Arif; Bozkurt, Ahmet Deniz
  2. Re-Reading the New Institutional Economics in Market-State Dilemma By Akansel, İlkben
  3. The Nature of Corruption - An Interdisciplinary Perspective By Eugen Dimant
  4. The absolute equilibrum theory; a new vision of the goods exchange By Arem, Rim
  5. Evolutionary Economics and Household Behavior By Charles Yuji Horioka
  6. Sensitivity of economists during market allocation By Suttner, Johannes R.
  7. On the Interpretation of Bribery in a Laboratory Corruption Game: Moral Frames and Social Norms By Ritwik Banerjee
  8. Strongly Symmetric Equilibria in Bandit Games By Johannes Horner; Nicolas Klein; Sven Rady
  9. The Genesis of Samuelson and Solow's Price-Inflation Phillips Curve By Kevin D. Hoover
  10. Doubts and Dogmatism in Conflict Behavior By Sidartha Gordon; Alessandro Riboni
  11. Lessons learned for monetary policy from the recent crisis By Michael D. Bordo
  12. An ultimatum game with multidimensional response strategies By Werner Güth; M. Vittoria Levati; Chiara Nardi; Ivan Soraperra
  13. The Solution is Full Reserve / 100% Reserve Banking. By Musgrave, Ralph S.
  14. Altruism and Self Control By Anna Dreber; Drew Fudenberg; David K Levine; David G Rand
  15. Nachhaltige Entwicklung in einer Welt von Dämonen? Max Webers Bild des Politikers und der Homo politicus By Manstetten, Reiner
  16. The Periphery’s Terms of Trade in the Nineteenth Century: A Methodological Problem Revisited By Francis, Joseph A.
  17. A Brief History of Envelope Theorems in Economics: Static and Dynamic By Löfgren, Karl-Gustaf
  18. Ökonomisierung und moralischer Wandel: Die Ausweitung von Marktbeziehungen als Prozess der moralischen Bewertung von Gütern By Akyel, Dominic

  1. By: Eren, Ahmet Arif (Artvin Çoruh University, Department of Economics, Artvin, Turkey); Bozkurt, Ahmet Deniz (Gazi University, Department of Economics, Ankara, Turkey)
    Abstract: In this study, the historical roots of individuality will be examined. According to the view of economic individuality, pursuit of self-interest is the fundamental motivation for all of human beings. When we look into the eighteenth century, the main argument was whether the rise of the commercial society erosions the moral values or not. This argument was especially discussed by the philosophers of the Scottish Enlightenment. This subject was most throughly discussed by Adam Smith who finds a solution which is very important and also debatable to date. This solution actually created a problem which is called the Adam Smith problem. Smith, thanks to his approaches to this subject, became the creator of the individual of political economy. And this creates a situation in which his two important books namely Wealth of Nations and Theory of Moral Sentiments are not considered totally. In this context Theory of Moral Sentiments has been ignored and Smith’s individual is narrowed to an individual prototype which economics needs. In this study the adventure of the creation of the prototype, which has mentioned above, and the contributions of Adam Smith and Bernard Mandeville will be evaluated both with their agreements and contradictions.
    Keywords: Individuality, Scottish Enlightenment, Adam Smith Problem, Mandeville
    JEL: B11 B12 B30 B31
    Date: 2013
  2. By: Akansel, İlkben (Hopa Economics and Administrative Faculty, Artvin Coruh University, Artvin, Turkey)
    Abstract: After Old Institutional economics lost its dominance after the 2nd World War, it entered a new revival period; the beginning of this period was marked with Oliver Williamson’s (1975) use of “New Institutional Economics” (NIE) as a new term in his studies. New Institutional Economics analyzes institutions that influence and determine human life deeply such as government, law, markets and family, by combining different disciplines such as legal science, economics, political sciences, sociology etc. But despite these inter-disciplinary attempts, New Institutional Economics has never been a mainstream that follows Old Institutional Economics in terms of epistemology or politics. On the other hand, the only common feature between New Institutional Economics and Old Institutional Economics is the complete opposition to the established economics which is also named neo-classical economics. Besides all of these, discussions on the market mechanism and role of state have been the topics of dispute in almost all of different economics schools of thought. This is the same in New Institutional Economics. In this study, based on the basic features that distinguish New Institutional Economics from Old Institutional Economics, we will firstly attempt to discuss ideological structure of New Institutional Economics; while doing this, we will analyze which ideological logic of basic assumptions, suggested by New Institutional Economics from the procedural individualism and limited rationalism assumptions to the process of market mechanism, distinguish it from Old Institutional Economics and we will analyze the assumptions that are claimed to be close to the assumptions of established economics. In this way, we will analyze New Institutional Economics on the basis of the question of “will it be able to present a different point of view to market mechanism-state relation?” by presenting market mechanism-state relation in New Institutional Economics, which exists similarly in all school of thought. So, we will attempt to analyze if New Institutional Economics, which reflects a different thought system, can present a new perspective to the market-state dilemma. As a result, by presenting the features of general economic structure of New Institutional Economics, which is sometimes claimed to come close to neo-classical economics, existence of solutions that can shed light on current basic economic problems will be analyzed.
    Keywords: Old Institutional Economics, New Institutional Economics, Veblen, market, government, Neo-liberalism, capitalism, state
    JEL: B15 B25 B52
    Date: 2013
  3. By: Eugen Dimant (University of Paderborn)
    Abstract: Corruption has fierce impacts on economic and societal development and is subject to a vast range of institutional, jurisdictional, societal and economic conditions. Research indicates that corruption’s predominantly negative effects have arisen to a massive trans-border threat while creating high obstacles to sustainable and prospective development, ultimately impairing everybody’s life. This paper provides a comprehensive state-of-the-art review of existing literature on corruption and its antecedents and effects. Consequently, we bridge the gap between existing theories of different fields of research including economics, psychology, and criminology in order to draw a conclusive picture of corruption on the micro-, meso- and macro-level.
    Keywords: Bribery, Corruption, Development, Interdisciplinarity, Public Economics, Survey
    JEL: D73 H1 O17 K42
    Date: 2014–03
  4. By: Arem, Rim
    Abstract: This paper concerns assimilation between physiques and economics. Assuming fixed time value of goods each year along with a new concept of empty goods and its interpretation on good’s exchange. We redefined the economy and briefly described the macroeconomic, the microeconomic and Islamic economic and changed the game theory and presented a new utility of gambling.
    Keywords: Exchange goods, Relativity theory, Islamic economy, Game theory, and utility of gambling.
    JEL: A11 A12 D51 G1 Z12
    Date: 2014–07–03
  5. By: Charles Yuji Horioka
    Abstract: This paper provides an introduction to the field of evolutionary economics with emphasis on the evolutionary theory of household behavior. It shows that the goal of evolutionary economics is to improve upon neoclassical economics by incorporating more realistic and empirically grounded behavioral assumptions and technological innovation and that the goal of the evolutionary theory of household behavior is to improve upon the neoclassical theory of household behavior by replacing the neoclassical assumption of selfish utility maximization with bounded rationality and satisficing and by incorporating the reaction of households to the introduction of new goods and services. The paper concludes with a brief discussion of loss aversion and self-interest vs. altruism.
    Date: 2014–08
  6. By: Suttner, Johannes R.
    Abstract: In this study, it was found that economists were sensitive to different commodities based on their attitudes in terms of fairness toward the price mechanism, whereas non-economists did not exhibit significant sensitivity. This sensitivity was so strong that no self-selection effect could be found in economists in the case of a survey of a basic commodity, whereas there was a clear self-selection effect with a luxury commodity. After one semester with intensive expo-sure to microeconomic theory, the market affinity of economists increased in both cases, but their sensitivity persisted. Surprisingly, it was the allocation mechanism of "first come, first served" and not the price mechanism that was affected more in terms of fairness. The latter reflects equal treatment in terms of general perceptions, thus this could be interpreted as an increased aversion to inequality among economists. --
    Keywords: attitude change,economics teaching,fairness,selection
    JEL: A12 A13 A20 D63 R49
    Date: 2014
  7. By: Ritwik Banerjee (Department of Economics and Business, Aarhus University, Denmark)
    Abstract: Past studies on laboratory corruption games have not been able to find consistent evidence that subjects make “immoral” decisions. A possible reason, and also a critique of laboratory corruption games, is that the experiment may fail to trigger the intended immorality frame in the minds of the participants, leading many to question the very raison d’être of laboratory corruption games. To test this idea, we compare behavior in a harassment bribery game with a strategically identical but neutrally framed ultimatum game. The results show that fewer people, both as briber and bribee, engage in corruption in the bribery frame than in the alternative, suggesting that moral costs are indeed at work. To provide further support that the bribery game does measure moral costs, we elicit the shared perceptions of appropriateness of the actions or social norm, under the two frames. We show that the social norm governing the bribery game frame and ultimatum game frame are indeed different and that the perceived sense of social appropriateness plays a crucial role in determining the actual behavior in the two frames. Finally, we comment on the external validity of behavior in lab corruption games.
    Keywords: Corruption, Framing Effects, Social Norms, External Validity
    JEL: C91 C92 D03
    Date: 2014–08–14
  8. By: Johannes Horner (Cowles Foundation, Yale University); Nicolas Klein (Universite de Montreal); Sven Rady (University of Bonn)
    Abstract: This paper studies strongly symmetric equilibria (SSE) in continuous-time games of strategic experimentation with Poisson bandits. SSE payoffs can be studied via two functional equations similar to the HJB equation used for Markov equilibria. This is valuable for three reasons. First, these equations retain the tractability of Markov equilibrium, while allowing for punishments and rewards: the best and worst equilibrium payoff are explicitly solved for. Second, they capture behavior of the discrete-time game: as the period length goes to zero in the discretized game, the SSE payoff set converges to their solution. Third, they encompass a large payoff set: there is no perfect Bayesian equilibrium in the discrete-time game with frequent interactions with higher asymptotic efficiency.
    Keywords: Two-armed bandit, Bayesian learning, Strategic experimentation, Strongly symmetric equilibrium
    JEL: C73 D83
    Date: 2014–08
  9. By: Kevin D. Hoover
    Abstract: Samuelson and Solow in their 1960 paper in the American Economic Review: Papers and Proceedings were among the first economists to engage with Phillips’ famous unemployment/wage-inflation analysis, now referred to as the Phillips curve. They addressed the question of the relevance of Phillips’s analysis for the United Kingdom to the United States, and in process formulated the firstunemployment/price-inflation version of the Phillips curve and were the first to interpret the Phillips curve as a menu for policy. Their paper was an informal analysis presented at a conference. The current paper offers a careful reconstruction and assessment of their original formulation, documenting the close relationship between the wage-inflation and price-inflation versions of the Phillips curve. A recent paper of Hall and Hart (2012) that suggests, first, that Samuelson and Solow should have reached different conclusions about the price-Phillips curve on the basis of regression estimates of their own data and, second, that had they done so the “inflationist” course of U.S. macroeconomic policy in the 1960s and 1970s would have been different. With the reconstruction as a background, the current paper demonstrates that Hall and Hart have not grasped the key details of Samuelson and Solow’s analysis, and that they ignore the actual context of the paper, so that neither of their suggestions is likely: Samuelson and Solow would have no reason to reach any different conclusion based on Hall and Hart’s estimates, and the course of macroeconomic policy is unlikely to have been affected in any case.
    Keywords: Phillips curve, Paul A. Samuelson, Robert M. Solow, inflation, unemployment, macroeconomic policy
    JEL: B22 B23 B31 E31 E61 E63
    Date: 2014
  10. By: Sidartha Gordon (Département d'économie); Alessandro Riboni
    Abstract: Conflicts are likely less violent if individuals entertain the possibility that the opponent may be right. Why is it so difficult to observe this attitude? In this paper, we consider a game of conflict where two opponents fight in order to impose their preferred policy. Before entering the conflict, one opponent (the agent) trusts the information received by his principal. The principal wants to a↵ect the agent’s e↵ort, but he also cares that the agent selects the correct policy and that he has the right incentives to acquire information.We find conditions under which the principal induces hawkish attitudes in the agent. As a result, the agent has no doubts about the optimality of his preferred policy, conflicts are violent and bad decisions are sometimes made. Under some other conditions, the agent adopts dovish attitudes of systematic doubt and conflicts are less violent.
    Date: 2014–04
  11. By: Michael D. Bordo
    Abstract: “Most people would say that Europe is still sort of coming out of the financial crisis that we had 5 years ago, which was probably the worst since the Great Depression of 1930s. Now just to keep things in context, at the time people were saying that it was going to be worse than the Great Depression, but it was not. It was big, but it was actually not that big compared to some of the crises, especially compared to what happened in the 1930s.” writes prof. Michael Bordo in the newly published mBank – CASE Seminar Proceedings No. 130. He discusses the lessons learned from the history of previous financial crises for the monetary policy, focusing mainly on the recent experience of the United States (and namely its Federal Reserve), where the current crisis began. He argues that the crisis of 2007-2008 was not as devastating as is commonly believed, and - more importantly – claims that the Fed’s policy during the crisis, based on lessons learn from the Great Depression, not only “did not exactly fit the facts of the recent crisis”, but may in fact have “exacerbated the crisis and may have led to serious problems which could contribute to the next (one)”.
    Keywords: Financial sector, Global/Multiregional, Crisis, credit crisis, financial crisis, banking sector, Fed
    Date: 2014
  12. By: Werner Güth (Max Planck Institute of Economics, Strategic Interaction Group, Jena); M. Vittoria Levati (University of Verona and Max Planck Institute of Economics, Strategic Interaction Group, Jena); Chiara Nardi (University of Verona); Ivan Soraperra (University of Verona)
    Abstract: We enrich the choice task of responders in ultimatum games by allow- ing them to independently decide whether to collect what is offered to them and whether to destroy what the proposer demanded. Such a multidimensional response format intends to cast further light on the motives guiding responder behavior. Using a conservative and strin- gent approach to type classification, we find that the overwhelming majority of responder participants choose consistently with outcome- based preference models. There are, however, few responders that destroy the proposer's demand of a large pie share and concurrently reject their own offer, thereby suggesting a strong concern for integrity.
    Keywords: Ultimatum, Social preferences, Incomplete information, Experiments
    JEL: C72 C91 D63 D74
    Date: 2014–08–19
  13. By: Musgrave, Ralph S.
    Abstract: Section 1 of this work argues the case for full reserve banking. Section 2 explains the flaws in a large number of arguments put AGAINST full reserve, and section 3 explains the flaws in a few arguments put IN FAVOUR of full reserve.
    Keywords: Banking; full reserve; 100% reserve.
    JEL: E32 E4 E41 E42 G01 G21 G24 H5
    Date: 2014–08–14
  14. By: Anna Dreber; Drew Fudenberg; David K Levine; David G Rand
    Date: 2014–08–07
  15. By: Manstetten, Reiner
    Abstract: Die hier vorgelegte Auseinandersetzung mit Webers Essay "Politik als Beruf" soll einen Beitrag leisten zu der Frage, ob eine umfassende verantwortliche Nachhaltigkeitspolitik, realistisch betrachtet, überhaupt möglich ist. Weber eröffnet einen Zugang zu grundsätzlichen Problemen politischen Handelns und zu den Herausforderungen, denen sich politische Akteure zu stellen haben, indem er folgende Fragen angeht: Was ist das Wesen der Politik? Was ist die Eigenlogik politischer Abläufe? Auf welche Strukturen muss man besonders achten, um politisches Geschehen zu verstehen? Worin besteht die Bedeutung der Person innerhalb der Eigenlogik der Politik? Was sind die Möglichkeiten und Grenzen politischen Handelns? Insbesondere finden sich bei Weber prinzipielle Überlegungen zu der Frage: Was bedeutet es im Bereich der Politik, verantwortlich zu handeln? Webers Essay wird hier als Anfrage an die Möglichkeit einer sinnvollen Politik der Nachhaltigkeit interpretiert. Der Artikel untersucht im ersten Teil Webers Verständnis von Politik, insbesondere anhand seines Begriffes von Legitimität. Anschließend wird das Feld der Politik mit seinen Strukturen betrachtet sowie die Typik unterschiedlicher politischer Charaktere. Eine besondere Rolle spielt dabei der Begriff des Charismas. Ursprünglich in der Sphäre des Religiösen beheimatet, wird er von Weber in den Bereich des Politischen übertragen, um die Möglichkeit, dass grundsätzliche Neugestaltung in der Politik möglich ist, theoretisch zu fundieren. Der zweite Teil beschäftigt sich mit Webers Unterscheidung von Gesinnungs- und Verantwortungsethik, mit ihren Stärken und Grenzen. Webers Betrachtungen legen insgesamt eine eher pessimistische Einstellung gegenüber den Möglichkeiten der Politik, Dinge zum Guten zu gestalten, nahe. Denn politisches Handeln ist immer tragisch verstrickt, und da der Handelnde nicht umhin kann, sich mit den Dämonen dieser Welt einzulassen, weil er bereit sein muss, für gute Zwecke Gewalt anzuwenden, macht er sich potenziell schuldig: Weber sagt: "Es ist durchaus wahr und eine - jetzt hier nicht näher zu begründende - Grundtatsache aller Geschichte, dass das schließliche Resultat politischen Handelns oft, nein: geradezu regelmäßig, in völlig unadäquatem, oft in geradezu paradoxem Verhältnis zu seinem ursprünglichen Sinn steht." Dass eine umfassende Politik der Nachhaltigkeit, deren Resultate von bleibendem Wert wären, gelingen könnte, wäre unter solchen Umständen, wenn man Weber folgt, äußerst unwahrscheinlich. Im dritten Teil wird der Politikanalyse Webers das Konzept des Homo politicus (Faber/Manstetten/Petersen 1997) gegenübergestellt. Es zeigt sich dabei, dass Webers Untersuchungen dieses Konzept um wichtige Aspekte ergänzen, dass es aber durch sie nicht grundsätzlich erschüttert werden kann. Dieses Ergebnis ist vor allem deswegen bedeutsam, weil damit zugleich deutlich wird, dass man die Hoffnung auf eine gelingende Nachhaltigkeitspolitik trotz aller Einwände Webers nicht aufgeben muss. --
    Date: 2014
  16. By: Francis, Joseph A.
    Abstract: There is a major downward bias in the trend of most existing estimates of the periphery’s nineteenth-century terms of trade. By using prices from the North Atlantic core as proxies for prices in the peripheral countries themselves, historians ignore the dramatic price convergence that took place during the nineteenth century. This has been reflected in Jeffrey Williamson’s recent work. Measured correctly, the periphery’s nineteenth-century terms-of-trade boom would appear considerably longer, greater, and more widespread than Williamson has suggested. His grand narrative about the relation between globalisation and the ‘great divergence’ would therefore be greatly reinforced. Many of the details of his narrative would, however, need to be revised. This is illustrated by the case of India.
    Keywords: terms of trade; periphery; nineteenth century; price convergence.
    JEL: C0 N10
    Date: 2014–08
  17. By: Löfgren, Karl-Gustaf (Department of Economics, Umeå School of Business and Economics)
    Abstract: This paper studies how envelope theorems have been used in Economics, their history and also who first introduced them. The existing literature is full of them and the reason is that most families of optimal value functions can produce them. The paper is driven by curiosity, but hopefully it will give the reader some new insights.
    Keywords: Envelope theorems; names and history; value functions and cost-benefit analyses
    JEL: B16 B21 B40
    Date: 2014–08–19
  18. By: Akyel, Dominic
    Abstract: Die zeitgenössische Ökonomisierungstheorie hat moralischen und nachfrageseitigen Wandel als Einflussfaktor für Ökonomisierung bislang stark vernachlässigt. Sie erklärt den derzeitigen Ökonomisierungstrend mit Veränderungen der politischen und unternehmerischen Leitbilder sowie gewandelten wirtschaftlichen Kontextbedingungen. Ich zeige in diesem Artikel, dass bei der Entstehung von Ökonomisierungsprozessen auch moralische und nachfrageseitige Veränderungen eine Rolle spielen können. Um die moralische Dimension dieses Phänomens zu erschließen, wird Ökonomisierung dabei als ein Prozess der Legitimierung und Legalisierung des Austauschs von Gütern charakterisiert. Darauf aufbauend arbeite ich vier idealtypische Varianten der Ökonomisierung heraus, durch die sich insbesondere die Interaktion von staatlich initiierter Marktschaffung und Ökonomisierung als einem Prozess der Enttraditionalisierung wirtschaftlichen Handelns besser fassen lässt. Der hier skizzierte Ansatz trägt dazu bei, die vielfältigen Wechselbeziehungen zwischen Ökonomisierung und Modernisierung besser zu verstehen und ebnet so den Weg für eine stärker moralisch fundierte Soziologie der Ökonomisierung. -- The contemporary theory of economization has strongly neglected changes in moral values and consumer orientations as an explanatory variable. The theory explains the current trend towards a market-based model of economic governance in terms of an interplay between two developments: the modification of political and entrepreneurial goals, and changes in economic conditions. In this article I show that changes in moral values and consumer orientations can also contribute to the emergence of economization processes. In order to better understand the moral dimension of this phenomenon, economization is conceptualized as the legitimation and legalization of the exchange of goods. Building on this, I develop four ideal-typical variants of economization which are especially useful to conceive state-driven market formation and economization as a process of detraditionalization. The approach outlined here helps to understand the interrelationship between economization and societal modernization and thus paves the way for a sociology of economization with a stronger moral basis.
    Date: 2014

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