nep-hpe New Economics Papers
on History and Philosophy of Economics
Issue of 2014‒11‒28
sixteen papers chosen by
Erik Thomson
University of Manitoba

  1. A Neglected Inconsistency in Milton Friedman's AEA Presidential Address By James Forder
  2. The Nature and Causes of Profits: The Classical Approach from Smith to Marx By Sean Kimpton
  3. Aspects of Behavior in Repeated Games: An Experimental Study By Douglas Davis; Asen Ivanov; Oleg Korenok
  4. Adam Smith's "Tolerable Administration of Justice" and the Wealth of Nations By Douglas A. Irwin
  5. A Progressive Report on Marxian Economic Theory: On the Controversies in Exploitation Theory since Okishio (1963) By Yoshihara, Naoki;
  6. Does classical liberalism imply an evolutionary approach to policy-making? By Schnellenbach, Jan
  7. Making economic growth and well-being compatible: the role of trust and income inequality By Mikucka, Malgorzata; Sarracino, Francesco
  8. La lutte contre la pauvreté à l'épreuve des essais cliniques. Réflexion sur l'approche expérimentale de l'économie du développement By Judith Favereau
  9. Notes sur Keynes et la crise By Paulo Nakatani; Rémy Herrera
  10. On the Existence of Approximate Equilibria and Sharing Rule Solutions in Discontinuous Games By Philippe Bich; Rida Laraki
  11. Growth and Inequality in Public Good Games By Gächter, Simon; Mengel, Friederike; Tsakas, Elias; Vostroknutov, Alexander
  12. It's not the economy, stupid! How social capital and GDP relate to happiness over time By Stefano Bartolini; Francesco Sarracino
  13. Voting on contributions to a threshold public goods game: An experimental investigation By Feige, Christian; Ehrhart, Karl-Martin; Krämer, Jan
  14. Tragedy of Commonly-Shared Debts By Wayne, James J.
  15. Happy Voters By Liberini, Federica; Redoano, Michela; Proto, Eugenio
  16. Moneta del comune e reddito sociale garantito By Laurent Baronian; Carlo Vercellone

  1. By: James Forder
    Abstract: Friedman (1968) - his famous Presidential Address to the American Economic Association - contains an elementary error right at the heart of what is usually supposed to be the paper's crucial argument.  That is the argument to the effect that during an inflation, changing expectations shift in Phillips curve.  It is suggested that the fact of this mistake, and of its having gone all-but unnoticed are points of historical interest.  Further reflections, drawing on the arguments of Forder (2014) Macroeconomics and the Phillips curve myth, are suggested.
    Keywords: Phillips, Friedman, Expectations
    JEL: B22 E31
    Date: 2014–09–17
  2. By: Sean Kimpton (Department of Economics, Faculty of Business and Law, Auckland University of Technology)
    Abstract: The Global Financial Crises has motivated some to rethink the dominance of global capitalism. This has revived an interest in Marxist doctrine and in particular its examination of the notion of exploitation. Marx’s theory of value is central to his examination of exploitation. This paper will show that both these posits of Marx are in error. Further, it will show that Marx draws heavily on Smith’s idea of the primacy of wages. However, this paper will demonstrate that profit, and not wages, are the original source of income. This paper reaffirms the importance of profits and the ability of entrepreneurs and capitalists to pursue them.
    Keywords: Adam Smith; Karl Marx; Profit; Exploitation; Labour Theory of Value; Classical Economics
    Date: 2014–10
  3. By: Douglas Davis (Virginia Commonwealth University); Asen Ivanov (Queen Mary University of London); Oleg Korenok (Virginia Commonwealth University)
    Abstract: We introduce a novel approach to studying behavior in repeated games - one that is based on the psychology of play. Our approach is based on the following six "aspects" of a player's behavior: round-1 cooperation, lenience, forgiveness, loyalty, leadership, and following. Using a laboratory experiment, we explore how aspects are correlated between each other in a given repeated game, how they are correlated with behavior at various histories in a given repeated game, and how each aspect is correlated across different repeated games. We also investigate whether two players' aspects from a given repeated game tend to predict the frequency of the cooperate-cooperate outcome if these two players are matched to play either the same kind of repeated game or an altogether different repeated game. An important feature of our study is that it addresses the question of cross-game prediction.
    Keywords: Repeated games, Prisoner's dilemma, Experiment, Cooperation
    JEL: C92 D03 D70
    Date: 2014–10
  4. By: Douglas A. Irwin
    Abstract: In the Wealth of Nations, Adam Smith argues that a country's national income depends on its labor productivity, which in turn hinges on the division of labor. But why are some countries able to take advantage of the division of labor and become rich, while others fail to do so and remain poor? Smith's answer, in an important but neglected theme of his work, is the security of property rights that enable individuals to "secure the fruits of their own labor" and allow the division of labor to occur. Countries that can establish a "tolerable administration of justice" to secure property rights and allow investment and exchange to take place will see economic progress take place. Smith's emphasis on a country's "institutions" in determining its relative income has been supported by recent empirical work on economic development.
    JEL: B12 B25 B31 K2 O43 P14 P16 P48
    Date: 2014–10
  5. By: Yoshihara, Naoki (The Institute of Economic Research, Hitotsubashi University);
    Abstract: This report explores the development of exploitation theory in mathematical Marxian economics by reviewing the main controversies surrounding the definition of exploitation since the contribution of Okishio (1963). The report first examines the robustness and economic implications of the debates on the Fundamental Marxian Theorem, developed mainly in the 1970s and 1980s, followed by the property relation theory of exploitation by Roemer (1982). Then, the more recent exploitation theory proposed by Vrousalis (2013) and Wright (2000) is introduced, before examining its economic implications using a simple economic model. Finally, the report introduces and comments on recent axiomatic studies of exploitation by focusing on the work of Veneziani and Yoshihara (2013a).
    Keywords: Fundamental Marxian Theorem; Property Relations Definition of Exploitation; Profit-Exploitation Correspondence Principle.
    JEL: D63 D51
    Date: 2014
  6. By: Schnellenbach, Jan
    Abstract: This paper argues that an evolutionary approach to policy-making, which emphasizes openness to change and political variety, is particularly compatible with the central tenets of classical liberalism. The chief reasons are that classical liberalism acknowledges the ubiquity of uncertainty, as well as heterogeneity in preferences and beliefs, and generally embraces gradual social and economic change that arises from accidental variation rather than deliberate, large-scale planning. In contrast, our arguments cast doubt on a different claim, namely that classical liberalism is particularly compatible with the evolutionary biological heritage of humans.
    Keywords: classical liberalism,evolution,Darwinism,economic policy,cultural evolution,institutional evolution
    Date: 2014
  7. By: Mikucka, Malgorzata; Sarracino, Francesco
    Abstract: To what extent is economic growth liable to improve people’s subjective well-being in the long run? Recent studies identified three possible answers: economic growth matters a great deal; economic growth does not matter at all; economic growth matters, but other things matter more. Each of these conclusions has different policy implications to promote people’s well-being. Despite the progress of social science research, the disagreement persists for at least two reasons: first, current policy conclusions hinge on weak methodological grounds; second, the literature missed to identify the conditions shaping the relationship between economic growth and well-being. Our paper addresses these issues overcoming some of the methodological shortcomings of previous literature. Additionally, we test the hypotheses that economic growth has a positive effect on subjective well-being in presence of increasing social trust and decreasing income inequality. To this aim we use multilevel regression analysis and the integrated World Values Survey - European Values Study data-set. We confirm previous evidence showing that in the long run economic growth does not increase people’s well-being. We also document that decreasing income inequality and non decreasing social trust allow a long-term positive relationship between economic growth and subjective well-being.
    Keywords: economic growth, subjective well-being, social trust, income inequality, Easterlin paradox, sustainability
    JEL: D60 I0 I1 I31
    Date: 2014–11–04
  8. By: Judith Favereau (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne)
    Abstract: Les évaluations randomisées développées par Esther Duflo au sein du J-PAL ont transformé la lutte contre la pauvreté, cherchant à en faire une lutte " rigoureuse " fondée sur des preuves " scientifiques ". Cette approche tire son originalité d'une volonté de se rapprocher de la méthodologie d'un essai clinique médical, afin d'aboutir à une démarche neutre et impartiale. Cet article questionne la méthodologie du J-PAL en la rapprochant de celle des essais cliniques médicaux. Pour cela, nous utiliserons l'analyse de Georges Canguilhem, afin de pointer les principaux enjeux épistémologiques de l'approche du J-PAL. Nous montrons ensuite que cette approche peine à produire des remèdes efficaces contre la pauvreté et qu'elle ne peut, de ce fait, offrir qu'un panorama des symptômes de la pauvreté.
    Keywords: Randomisation; essais cliniques médicaux; épistémologie économique; pauvreté; économie du développement
    Date: 2014–03
  9. By: Paulo Nakatani (UFES - Université Fédérale de Espirito Santo); Rémy Herrera (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne)
    Abstract: Ce cahier de recherche propose une analyse - d'un point de vue d'inspiration marxiste - des relations entretenues par John Maynard Keynes avec l'économie dominante à son époque (première partie), puis présente les éléments théoriques sur la crise qu'il développa lui-même (deuxième partie), et s'interroge enfin, dans le contexte de la crise actuelle, sur l'opportunité d'un retour aux politiques dites " keynésiennes " (troisième partie).
    Keywords: Keynes; crise; marxisme; économie dominante; capitalisme
    Date: 2013–05
  10. By: Philippe Bich (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); Rida Laraki (Ecole Polytechnique [Palaiseau] - Ecole Polytechnique, IMJ - Institut de Mathématiques de Jussieu - CNRS : UMR7586 - Université Pierre et Marie Curie (UPMC) - Paris VI - Université Paris VII - Paris Diderot)
    Abstract: This paper studies the existence of some known equilibrium solution concepts in a large class of economic models with discontinuous payo functions. The issue is well understood for Nash equilibria, thanks to Reny's better-reply security condition [34], and its recent improvements [3, 25, 35, 36]. We propose new approaches, related to Reny's work, and obtain tight conditions for the existence of an approximate equilibrium and of a sharing rule solution in pure and mixed strategies (Simon and Zame [38]). As byproducts, we prove that many auction games with correlated types admit an approximate equilibrium, and that in any general equilibrium model with discontinuous preferences, there is a sharing rule solution.
    Keywords: Discontinuous games, better-reply security, sharing rules, approximate equilibrium, Reny equilibrium, strategic approximation, auctions, timing games, exchange economy
    Date: 2014–10–06
  11. By: Gächter, Simon (University of Nottingham); Mengel, Friederike (University of Essex); Tsakas, Elias (Maastricht University); Vostroknutov, Alexander (Maastricht University)
    Abstract: In a novel experimental design we study public good games with dynamic interdependencies. Each agent's income at the end of a period serves as her endowment in the following period. In this setting growth and inequality arise endogenously allowing us to address new questions regarding their interplay and effect on cooperation levels. In stark contrast to standard public good experiments, we find that contributions are increasing over time even in the absence of punishment possibilities. Inequality and group income are positively correlated for poor groups, but negatively correlated for rich groups. There is very strong path dependence: inequality in early periods is strongly negatively correlated with group income in later periods. These results give new insights into why people cooperate and should make us rethink previous results from the literature on repeated public good games regarding the decay of cooperation in the absence of punishment.
    Keywords: public goods, inequality, growth
    JEL: C92 H41 D63
    Date: 2014–09
  12. By: Stefano Bartolini; Francesco Sarracino
    Abstract: What predicts the evolution over time of subjective well-being? We correlate the trends of subjective well-being with the trends of social capital and/or GDP. We find that in the long and medium run social capital largely predicts the trends of subjective wellbeing in our sample of countries. In the short-term this relationship weakens. Indeed, in the short run, changes in social capital predict a much smaller portion of the changes in subjective well-being than over longer periods. GDP follows a reverse path, thus confirming the Easterlin paradox: in the short run GDP is more positively correlated to well-being than in the medium-term, while in the long run this correlation vanishes.
    Date: 2014–11
  13. By: Feige, Christian; Ehrhart, Karl-Martin; Krämer, Jan
    Abstract: We introduce a binding unanimous voting rule to a public goods game with an uncertain threshold for the total group contribution. In a laboratory experiment we find that voting generates significantly higher total contributions than making individual voluntary contributions to the public good. Heterogeneity with regard to marginal costs of contribution makes coordination on the threshold value somewhat more di cult when voting, but apparently facilitates coordination when not voting. Homogeneous non-voting groups instead exhibit a breakdown of contributions commonly observed in linear public goods games, but unusual for a threshold setting. We also notice a preference for payoff symmetry over maximization of expected welfare in heterogeneous voting groups, which to a lesser extent also appears in nonvoting groups. Using a top-down rule, i.e., splitting the voting process into two separate votes on 1) total contribution and 2) individual contributions does not affect these results.
    Keywords: public good,threshold uncertainty,experimental economics,unanimous voting,committee,heterogeneity
    JEL: C92 D71 H41
    Date: 2014
  14. By: Wayne, James J.
    Abstract: The debates about how to deal with government budget deficits are raging all over the world. In the US, the federal government was forced to shut down for 16 days in October, 2013 because of the failure to pass a budget through congresses, and barely averted a default of federal government obligations due to failure to raise the federal debt ceiling limit. The city of Detroit filed the largest municipal bankruptcy in the US history on July 18, 2013, despite Michigan State constitution’s balanced budget requirement. In Europe, the sovereign debt crisis has dragged down the entire EU economy since late 2009 with no end in sight. In Japan, the government debt to GDP ratio is well over 200%, which is one of the highest in the world. In the world of academics, the debates of government budget deficits have become the key battlegrounds of different schools of thoughts of economics and political ideologies. Economists and political scientists could not even agree to a framework to solve budget deficit problems, and let alone settle these debates. This paper provides a permanent and equilibrium solution to government budget deficits. Surprisingly the solution comes from the first principles of quantum politics. The political equilibrium structure has the time translational symmetry in treating different generations equally. One result of applying physics laws of social science to study the most stable political structure is that the most stable political structure is not only to require the majority voters must deal with minority voters fairly to avoid the tyranny of the majority, but also to require the voting generation must exercise their fiduciary duty to their children and unborn future generations. In terms of government budget deficits, the fiduciary duty means that the current voting citizens must take the full responsible of the current government budget deficits or surplus. The permanent equilibrium solution of government budget deficits is legally and personally held all the voting citizens accountable for the current fiscal surplus and deficit at all levels of governments. In contrast to the balanced budget approaches, the permanent equilibrium solution in this paper allows deficit spending and the accumulation of government debts as long as the government debts must be paid off by the responsible borrowers and voters. This method to solve the government budget deficit problem is an excellent example of applications of law of equilibrium, which can be used to solve economic, political, and other social problems in a value-free way. The permanent solution to government budget deficits presented in this paper is consistent with a different line of reasoning in economics, which is known as the tragedy of the commons. In cases of government budget deficits, the tragedy of fiscal abuse happens because the US Constitution fails to protect interests of the future generations. Through the commonly-shared responsibility for government debts, current voters and their political representatives have financially taken unfair advantage of their children and the future generations, who virtually have no political power.
    Keywords: fiscal policy, government debt, tragedy of the commons, equilibrium, physics laws of social science, Richardian equivalence, generational accounting, quantum politics, quantum economics
    JEL: A12 D6 H5 H55 H6
    Date: 2014–10–27
  15. By: Liberini, Federica (ETH Zurich); Redoano, Michela (University of Warwick); Proto, Eugenio (University of Warwick)
    Abstract: Motivated by recent interest and initiatives taken by several governments and international organizations to come up with indicators of well-being to inform policy makers, we test if subjective well-being measures (SWB) can be employed to study voting behaviour. Controlling for financial and economic circumstances, we find that when citizens are more satisfied with their life, they are also more likely to cast their vote in favor of the ruling party. We address the possible concern of reverse causality in the relationship between SWB and political support by (i) analysing the political behaviour of a sample of ideologically neutral voters, and (ii) by identifying the effect of SWB on voting intentions in individuals' response to an exogenous shock of (un)happiness (i.e. the death of husband or wife). We conclude that SWB explains voting decisions, even when the event affecting well-being is beyond government's control.
    Keywords: subjective well-being, happiness, retrospective voting
    JEL: H11 H2 H77 H87 D7 N12
    Date: 2014–09
  16. By: Laurent Baronian (PHARE - Pôle d'Histoire de l'Analyse et des Représentations Economiques - CNRS : FRE2541 - Université Paris I - Panthéon-Sorbonne - Université Paris X - Paris Ouest Nanterre La Défense); Carlo Vercellone (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne)
    Abstract: L'ambizione di quest'articolo è quella di gettare le basi per una concezione della moneta del comune a partire da un'interrogazione omessa dalla teoria economica dei beni comuni. Quali sono, dunque, le condizioni capaci di attenuare il vincolo monetario al rapporto salariale e di favorire così lo sviluppo di forme di produzione alternative ai principi d'organizzazione sia del pubblico che del privato? Questa domanda richiede d'introdurre nella teoria del Comune il ruolo strutturante della moneta nei rapporti capitale-lavoro. L'esame del rapporto tra moneta e comune necessita, di conseguenza, di partire da una critica della teoria dei beni comuni dalla quale la moneta, come il lavoro, sono curiosamente assenti. La ragione di quest'assenza si trova nel fatto che questa concezione naturalista dei beni comuni accetta implicitamente uno dei postulati fondatori della teoria economica standard, ovvero la neutralità della moneta, concepita come un semplice strumento tecnico che facilita gli scambi, e non come la cristallizzazione di un rapporto sociale di potere. Su questa base, si tratterà di caratterizzare un approccio dinamico del comune al singolare nel quale la questione della moneta e delle mutazioni della divisione del lavoro occupa un posto centrale. Questo approccio fondato sulla triade lavoro-moneta-plusvalore servirà allora egualmente da filo conduttore per rianimare la controversia che aveva opposto Marx ai proudhoniani, precursori di un approccio della moneta come comune. Infine, fonderemo il nostro ragionamento sulle teorie marxiane del circuito per mostrare che il carattere specificamente monetario del rapporto capitale-lavoro costituisce l'unico punto di partenza adeguato per una riflessione sulla moneta del comune. Questa riflessione farà emergere perché la nozione di reddito sociale garantito corrisponde ad un'istituzione del comune volta a rendere la creazione monetaria endogena non solo al capitale ma anche alla riproduzione autonoma della forza lavoro.
    Keywords: moneta; comune; beni comuni; reddito garantito; rapporto capitale-lavoro
    Date: 2013–04–24

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