nep-hpe New Economics Papers
on History and Philosophy of Economics
Issue of 2014‒09‒29
eleven papers chosen by
Erik Thomson
University of Manitoba

  1. Ce que nous devons à James Mead (1907-1995) By Frederic Teulon
  2. Nash Equilibrium in Discontinuous Games By Philip J. Reny
  3. Albert Aftalion and Business Cycle Theory: A Note By K.Vela Velupillai; Ragupathy Venkatachalam; Stefano Zambelli
  4. In Old Chicago: Simons, Friedman and the Development of Monetary-Policy Rules By George Tavlas
  5. The Emperor Has New Clothes: Empirical Tests of Mainstream Theories of Economic Growth By Greasley, David; Hanley, Nick; McLaughlin, Eoin; Oxley, Les
  6. Correlated equilibria in homogenous good Bertrand competition By Ole Jann; Christoph Schottmüller
  7. Non-Laplacian Beliefs in a Global Game with Noisy Signaling By Chris Edmond
  8. Being a consultant "expert" in a developing country: the legacy and lessons of Albert Hirschman By P. G. Ardeni
  9. Diminished-Dimensional Political Economy By Ronald M. Harstad; Reinhard Selten
  10. Is an Increasing Capital Share under Capitalism Inevitable? By Yew-Kwang NG
  11. Aggregative Oligopoly Games with Entry By Simon P. Anderson, Nisvan Erkal and

  1. By: Frederic Teulon
    Abstract: James Meade est un économiste anglais, membre du courant keynésien, il a reçu le prix Nobel en 1977 décerné par l’Académie suédoise, pour sa contribution à l'étude du fonctionnement et des mécanismes d’ajustement de la balance des paiements. Il a mené des travaux novateurs conduisant à une meilleure compréhension de la politique économique en économie ouverte.
    Keywords: Balance des paiements, GATT, James Meade, Politique économique, Taux de change flottants.
    Date: 2014–09–01
  2. By: Philip J. Reny (University of Chicago)
    Abstract: We provide several generalizations of the various equilibrium existence results in Reny (1999), Barelli and Meneghel (2013), and McLennan, Monteiro, and Tourky (2011). We also provide an example demonstrating that a natural additional generalization is not possible. All of the theorems yielding existence of pure strategy Nash equilibria here are stated in terms of the players' preference relations over joint strategies. Hence, in contrast to virtually all of the previous work in the area the present results for pure strategy equilibria are entirely ordinal, as they should be.
    Keywords: discontinuous games, Nash equilibrium, pure strategies, ordinal
    JEL: C60
    Date: 2013
  3. By: K.Vela Velupillai; Ragupathy Venkatachalam; Stefano Zambelli
    Date: 2014
  4. By: George Tavlas (Bank of Greece)
    Abstract: This paper examines the different policy rules proposed by Henry Simons, who, beginning in the mid-1930s, advocated a price-level stabilization rule, and by Milton Friedman, who, beginning in the late-1950s, advocated a rule that targeted a constant growth rate of the money supply. Although both rules shared the objective of eliminating the policy uncertainty emanating from discretion, they differed because of the different views of Simons and Friedman about the stability of secular relationships. Simons' rule relates to modern rules which emphasize the pursuit of price stability as representing optimal monetary policy.    
    Keywords: Milton Friedman, Henry Simons, monetary-policy rules
    Date: 2014
  5. By: Greasley, David; Hanley, Nick; McLaughlin, Eoin; Oxley, Les
    Abstract: Modern macroeconomic theory utilises optimal control techniques to model the maximisation of individual well-being using a lifetime utility function. Agents face choices over current and future consumption (with resultant implied savings decisions) seeking to maximise the present value of current plus future well-being. However, such inter-temporal welfare-maximising assumptions remain empirically untested. In the work presented here we test whether welfare was in (historical) fact maximised in the US between 1870-2000 and find empirical support for the optimising basis of growth theory, but only once a comprehensive view of what constitutes a country's wealth or capital is taken into account.
    Keywords: comprehensive wealth; US; modern growth theory; inter-temporal utility maximisation
    Date: 2014–08
  6. By: Ole Jann (Department of Economics, Copenhagen University); Christoph Schottmüller (Department of Economics, Copenhagen University)
    Abstract: We show that there is a unique correlated equilibrium, identical to the unique Nash equilibrium, in the classic Bertrand oligopoly model with homogenous goods. This provides a theoretical underpinning for the so-called "Bertrand paradox" and also generalizes earlier results on mixed-strategy Nash equilibria. Our proof generalizes to asymmetric marginal costs and arbitrarily many players.
    Keywords: Bertrand paradox, correlated equilibrium, price competition
    JEL: C72 D43 L13
    Date: 2014–06–30
  7. By: Chris Edmond
    Abstract: In standard global games, individual behavior is optimal if it constitutes a best response to agnostic - Laplacian - beliefs about the aggregate behavior of other agents. This paper considers a standard binary action global game augmented with noisy signaling by an informed policy-maker and shows that in this game, equilibrium beliefs depart in quite stark ways from the Laplacian benchmark. In the limit as signals become arbitrarily precise, so that all fundamental uncertainty is removed (leaving only strategic uncertainty), the equilibrium beliefs of the marginal individual concerning the aggregate action collapse to a discrete binomial distribution, giving probability mass only to the polar extreme outcomes. By contrast in the underlying standard global game the marginal individual believes the aggregate action has a continuous uniform distribution, giving equal likelihood to all possible outcomes.
    Keywords: coordination;signaling;bias;strategic uncertainty;noise
    JEL: C7 D7 D8
    Date: 2013
  8. By: P. G. Ardeni
    Abstract: After more than half a century, the reflections of Albert O. Hirschman on development assistance, the role of consultant "experts" in providing policy advice and the "visiting economist's syndrome" are still very current. In as much as Hirschman argued against all-encompassing policy frameworks, overall development plans and universal models, "one-size-fits-all" models abstracting from the local, historical, geographic and institutional conditions have remained the prevailing modus operandi of international development agencies and governments in development assistance. In spite of Paul Krugman's criticism of Hirschman's lack of a mathematically-consistent approach in favor of an ad hoc pragmatism, Hirschman's avoidance of assuming a toy model to deal with practical issues and the specificities of development problems in different countries – while still using rigorous and detailed analysis– appears to be a promising attitude of enormous relevance even today. If the rejection of large-scale models of the hey days of development theory was due to the neoliberal policy wave that led to the "Washington consensus" – more market and less State –, development assistance has remained firmly entrenched in the principles of balanced growth, all-encompassing liberalizing policy reforms and diffused marketization with an increasingly limited role for the State. Development assistance approaches have maintained a standard list of prescriptions, policy-reform recipes for all sectors, social, institutional and even political objectives, under the justification that "everything depends on everything". In this paper, I briefly review the evidence regarding the active pursuit of a paradigm that, sidelining Hirschman's unorthodox approach, has confirmed that we have "forgotten nothing and learned nothing", as Hirschman once said. While Hirschmanian concepts like "linkages" and "leading sectors" and some of his famous parables – like the "tunnel effect" on inequality – have left an enduring mark on economists' perspectives, his "unbalanced-growth" has been dismissed on ineffectual grounds, while his "empirical lantern" has been derided and abandoned. The lessons of Hirschman's consultant experience in the tropics have left a legacy that goes beyond his prescriptions: it is a philosophy, a conception of the world, a guiding sets of principles that survives time. From that wilderness where Hirschman led his followers, it is only by re-igniting that lantern that we can wisely contribute to the "development" of others as savvy and informed "experts".
    JEL: B2 B3 O2
    Date: 2014–09
  9. By: Ronald M. Harstad (Department of Economics, University of Missouri-Columbia); Reinhard Selten
    Abstract: Economists' policy advice is based on models of responses by a variety of economic entities to policy adoptions. There is compelling evidence that these entities do not optimize in at all the fashion that mainstream economics assumes. Rather, they limit decision-making to solving problems of much smaller dimensionality. We consider how political economy goes awry when ignoring diminished dimensionality, and some research avenues opened up by this realization.
    Keywords: political economy, policy advice, problem complexity, dimensionality
    JEL: D6 B41 H42 H11
    Date: 2014–08–06
  10. By: Yew-Kwang NG (Division of Economics, School of Humanities and Social Sciences, Nanyang Technological Univer- sity. Address: 14 Nanyang Drive, Singapore, 637332.)
    Abstract: Piketty’s influential book Capital in the Twenty-First Century and its prominent review by Milanovic in the Journal of Economic Literature both assert the inevitability of an increasing share of capital in total income, given a higher rate of return to capital than the rate of growth in income. This paper shows by a specific example, a logical argument and its intuition that the alleged inevitability is not valid. Even just for capital to grow faster than income, we need an additional requirement that saving of non-capital income is larger than consumption of capital income. Even if this is satisfied, the capital share may not increase as the rate of return may fall and non-capital incomes may increase with capital accumulation.
    Keywords: capital; capitalism; distribution; income; wealth
    JEL: D3 P1
    Date: 2014–10
  11. By: Simon P. Anderson, Nisvan Erkal and
    Abstract: We use cumulative reaction functions to compare long-run market structures in aggregative oligopoly games. We fi?rst compile an IO toolkit for aggregative games. We show strong neutrality properties across market structures. The aggregator stays the same, despite changes in the number of ?rooms and their actions. The IIA property of demands (CES and logit) implies that consumer surplus depends on the aggregator alone, and that the Bertrand pricing game is aggregative. We link together the following results: merging parties? pro?ts fall but consumer surplus is unchanged, Stackelberg leadership raises welfare, monopolistic competition is the market structure with the highest surplus.
    Keywords: Aggregative games; oligopoly theory; entry; strategic substitutes and
    JEL: D43 L13
    Date: 2009

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