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on History and Philosophy of Economics |
| By: | Christian Bidard |
| Abstract: | We propose to re-read Ricardo's theory of rent and its modern versions. Ricardo's dynamic approach follows the transformations of a long-term equilibrium with demand. Sraffa adopted the same framework while substituting a value criterion for a physical criterion to determine the incoming marginal method, but he did not state the law of succession of methods explicitly. This prevented him to realize that his critique opens the door to all complications of capital the ory, with the consequence that the Ricardian dynamics fail when a divergence appears between profitability and productivity. Contemporary studies have cast doubts on the validity of some of Ricardo's and Sraffa's over-optimistic conclusions, but the abandonment of the dynamic approach does not allow them to explain the ultimate reason of the phenomena they have pointed at. Ricardo's method has been recently rediscovered by mathematicians. |
| Keywords: | Classical theory, land, rent, Ricardo, Sraffa. |
| JEL: | B12 B51 C61 D33 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:drm:wpaper:2014-54&r=hpe |
| By: | Yehuda Levy |
| Abstract: | A long-standing open question raised in the seminal paper of Kalai and Lehrer (1993) is whether or not the play of a repeated game, in the rational learning model introduced there, must eventually resemble play of exact equilibria, and not just play of approximate equilibria as demonstrated there. This paper shows that play may remain distant - in fact, mutually singular - from the play of any equilibrium of the repeated game. We further show that the same inaccessibility holds in Bayesian games, where the play of a Bayesian equilibrium may continue to remain distant from the play of any equilibrium of the true game. |
| Keywords: | Rational Learning, Repeated Games, Nash Equilibrium |
| JEL: | C65 C72 C73 |
| Date: | 2014–11–06 |
| URL: | http://d.repec.org/n?u=RePEc:oxf:wpaper:731&r=hpe |
| By: | Hanappi, Hardy |
| Abstract: | This paper discusses the works of Joseph Schumpeter and Richard Goodwin using the common perspective that both were theoretical mavericks of mainstream economic theory development in the 20th century. In particular the fact that their activities overlapped during their cooperation at Harvard University is explored. Their contributions are interpreted as entrepreneurial activity in the domain of theory building - with some spillovers to economic policy intervention. It is argued that maverick theoretical activity is indispensable for progress in evolutionary political economy. |
| Keywords: | Evolutionary political economy, Schumpeter, Goodwin, history of thought |
| JEL: | B3 B31 B41 B50 O31 |
| Date: | 2014–11–12 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:59932&r=hpe |
| By: | Fusari, Angelo |
| Abstract: | This article focuses on a broad distinction within economic thinking and the methodological misconceptions that are implied by it. We find today, on the one hand, mainstream economics, which uses both the method of abstract rationality typical of the logical-formal sciences and the method of the natural sciences—two methodologies that, as we shall prove, are inappropriate for the study of social reality. On the other hand we find the opponents of mainstream economics, primarily heterodox economics, who emphasize methodological pluralism and lend, in the extreme, their support to the relativist view that all views may be right in their own way. Such an unconstrained pluralist attitude to method obstructs interaction and reciprocal understanding among students, the scientific appreciation of theoretical contributions and the same fecundating role of pluralism. We shall see that methodological diffuseness is the primary factor explaining the failure of attacks against mainstream economics and we shall look for a solution to this embarrassing impotence by searching for general methodological procedure and rules fully appropriate to the scientific study of social reality. |
| Keywords: | This article focuses on a broad distinction within economic thinking and the methodological misconceptions that are implied by it. We find today, on the one hand, mainstream economics, which uses both the method of abstract rationality typical of the logical-formal sciences and the method of the natural sciences—two methodologies that, as we shall prove, are inappropriate for the study of social reality. On the other hand we find the opponents of mainstream economics, primarily heterodox economics, who emphasize methodological pluralism and lend, in the extreme, their support to the relativist view that all views may be right in their own way. Such an unconstrained pluralist attitude to method obstructs interaction and reciprocal understanding among students, the scientific appreciation of theoretical contributions and the same fecundating role of pluralism. We shall see that methodological diffuseness is the primary factor explaining the failure of attacks against mainstream economics and we shall look for a solution to this embarrassing impotence by searching for general methodological procedure and rules fully appropriate to the scientific study of social reality. |
| JEL: | B40 B41 B49 |
| Date: | 2014–07 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:60097&r=hpe |
| By: | Gaëtan Fournier (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne); Marco Scarsini (Engineering and System Design Pillar - Singapore University of Technology and Design) |
| Abstract: | We consider a Hotelling game where a finite number of retailers choose a location, given that their potential customers are distributed on a network. Retailers do not compete on price but only on location, therefore each consumer shops at the closest store. We show that when the number of retailers is large enough, the game admits a pure Nash equilibrium and we construct it. We then compare the equilibrium cost bore by the consumers with the cost that could be achieved if the retailers followed the dictate of a benevolent planner. We perform this comparison in term of the induced price of anarchy, i.e., the ratio of the worst equilibrium cost and the optimal cost, and the induced price of stability, i.e., the ratio of the best equilibrium cost and the optimal cost. We show that, asymptotically in the number of retailers, these ratios are two and one, respectively. |
| Keywords: | Induced price of anarchy; induced price of stability; location games on networks; pure equilibria; large games |
| Date: | 2014–04 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:halshs-00983085&r=hpe |
| By: | James Andreoni; Alison Sanchez |
| Abstract: | We study whether actions are justified by beliefs, as is usually assumed, or whether beliefs are justified by actions. In our experiment, subjects participate in a trust game, after which they have an opportunity to state their beliefs about their opponent's actions. Subsequently, subjects participate in a task designed to "reveal" their true beliefs. We find that subjects who make selfish choices and show strategic sophistication falsely state their beliefs in order to project a more favorable social image. By contrast, their "revealed" beliefs were significantly more accurate, which betrayed these subjects as knowing that their selfishness was not justifiable by their opponent's behavior. |
| JEL: | C9 D03 D83 |
| Date: | 2014–10 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:20649&r=hpe |
| By: | Julio J. Rotemberg |
| Abstract: | This paper studies the persistence and some of the consequences of the eventual abandonment by the FOMC of the principles embedded in the Federal Reserve's Tenth Annual Report of 1923. The three principles I focus on are 1) the discouraging of speculative lending by commercial banks, 2) the desire to meet the credit needs of business and 3) the preference of a focus on credit over a focus on monetary aggregates. I show that the first two principles remained important in FOMC deliberations until the mid-1960's. After this, the FOMC also spent less time discussing the composition of bank loans. |
| JEL: | E42 E58 N1 |
| Date: | 2014–09 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:20507&r=hpe |
| By: | Charles Henri DiMaria; Chiara Peroni; Francesco Sarracino |
| Abstract: | This article is about the link between people’s subjective well-being, defined as an evaluation of one’s own life, and productivity. Our aim is to test the hypothesis that subjective well-being contributes to productivity using a two step approach: first, we establish whether subjectivewell-being can be a candidate variable to study Total Factor Productivity; second, we assess how much subjective well-being contributes to productivity at aggregate level through efficiency gains. We adopt Data Envelopment Analysis to compute total factor productivity and efficiency indices using European Social Survey and AMECO data for 20 European countries. Results show that subjective well-being is an input and not an output to production. |
| Keywords: | productivity, subjective well-being, TFP, efficiency gains, life satisfaction, economic growth, DEA. |
| JEL: | E23 I31 O47 |
| Date: | 2014–06 |
| URL: | http://d.repec.org/n?u=RePEc:usi:wpaper:699&r=hpe |
| By: | Pagano, Marco |
| Abstract: | Has economic research been helpful in dealing with the financial crises of the early 2000s? On the whole, the answer is negative, although there are bright spots. Economists have largely failed to predict both crises, largely because most of them were not analytically equipped to understand them, in spite of their recurrence in the last 25 years. In the pre-crisis period, however, there have been important exceptions - theoretical and empirical strands of research that largely laid out the basis for our current thinking about financial crises. Since 2008, a flurry of new studies offered several different interpretations of the US crisis: to some extent, they point to potentially complementary factors, but disagree on their relative importance, and therefore on policy recommendations. Research on the euro debt crisis has so far been much more limited: even Europe-based researchers - including CEPR ones - have often directed their attention more to the US crisis than to that occurring on their doorstep. In terms of impact on policy and regulatory reform, the record is uneven. On the one hand, the swift and massive liquidity provision by central banks in the wake of both crises is, at least partly, to be credited to previous research on the role of central banks as lenders of last resort in crises and on the real effects of bank lending and monetary policy. On the other hand, economists have had limited impact on the reform of prudential and security market regulation. In part, this is due to their neglect of important regulatory choices, which policy-makers are therefore left to take without the guidance of academic research-based analysis. |
| Keywords: | financial crisis,risk taking,systemic risk,financial regulation,monetary policy,politics |
| JEL: | G01 G18 G21 G28 H81 O16 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:cfswop:481&r=hpe |
| By: | Claude Ménard (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne) |
| Abstract: | The extraordinary influence of The Problem of Social Cost" is now well acknowledged. Beyond the official recognition coming with the award of the Alfred Nobel Memorial Prize in Economic Sciences as well as the myriad citations, what may matter most, as emphasized by Mary Shirley (2013), is that in introducing the concept of 'transaction costs', Coase initiated a revolution in the way economists and social scientists should look at the organization of economic activities in a market economy. Actually, the concept of transaction could well be considered one of the most important in economic theory, together with the concept of the division of labor. As emphasized by Coase (1998), the two concepts complement each other. In order to take advantage of the division of labor economic actors must specialize their activity; this is sustainable and beneficial if and only if they can organize transactions among them at a cost that is less than the expected benefits. Paradoxically, this organizational dimension that Coase pinpointed as "The Institutional Structure of Production" in his Nobel Lecture has been largely neglected in the literature inspired by "The Problem of Social Cost." In what follows, I would like to show how this missing dimension is rooted in some misinterpretations of the 1960 paper (section 1) and what consequences it should have in partially redefining the research agenda sketched by Coase in his paper (section 2). |
| Keywords: | Transaction costs; property rights; organization; environmental policies |
| Date: | 2013–10–23 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-01059076&r=hpe |
| By: | Fleurbaey, Marc; Zuber, Stéphane |
| Abstract: | Discounted utilitarianism and the Ramsey equation prevail in the debate on the discount rate on consumption. The utility discount rate is assumed to be constant and to reflect either the uncertainty about the existence of future generations or a pure preference for the present. The authors question the unique status of discounted utilitarianism and discuss the implications of alternative criteria addressing the key issues of equity in risky situations and variable population. To do so, they introduce a class of intertemporal social objectives, named Expected Prioritarian Equally Distributed Equivalent (EPEDE) criteria. The class is more flexible than Discounted utilitarianism in terms of population ethics and it disentangles risk aversion and inequality aversion. The authors show that these social objectives imply interesting modifications of the Ramsey formula, and shed new light on Weitzman's "dismal theorem". |
| Keywords: | discounted utilitarianism,social discounting |
| JEL: | D63 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:ifwedp:201440&r=hpe |
| By: | Mauricio Nieto Potes |
| Abstract: | Resumen: En los inicios del siglo XX, las dos guerras mundiales constituyeron un importante antecedente económico y político para la definición de la teoría y las políticas macroeconómicas de las dos escuelas fundamentales: El Keynesianismo y la escuela neoclásica. A partir del Tratado de Versalles y con la aplicación de las políticas del Welfare State y el New Deal, los países hoy desarrollados experimentaron la llamada “época dorada”, en la cual los Estados Unidos, Europa y Japón no solo crecieron a tasas considerables sino que mejoraron significativamente su distribución del ingreso. A partir de los 80, con los procesos de “financiarización mundial” y del “triunfo de la gran corporación”, los países desarrollados están enfrentando una crisis de la cual aún no se recuperan, con deterioros del crecimiento y del GINI. El presente artículo analiza la evolución de estos hechos históricos que sirven de base a planteamientos y debates económicos actuales. |
| Keywords: | Crisis Wall Street; Deuda soberana; Naturaleza; Antecedentes. |
| JEL: | N00 N21 N23 |
| Date: | 2014–07–03 |
| URL: | http://d.repec.org/n?u=RePEc:col:000418:012298&r=hpe |
| By: | Wouter Ryckbosch |
| Abstract: | This paper studies a collection of data on economic inequality in fifteen towns in the Southern and Northern Low Countries from the late Middle Ages until the end of the nineteenth century. By using a single and consistent source type and adopting a uniform methodology, it is possible to study levels of urban economic inequality across time and place comparatively. The results indicate a clear growth in economic inequality in the two centuries prior to the industrial revolution and the onset of sustained economic growth per capita. The general occurrence of this rise throughout regions with dissimilar economic trajectories contradicts the existence of a straightforward trade-off between growth and inequality as conjectured by Simon Kuznets (1955). Instead, the results presented lend support to the ÔclassicalÕ economistsÕ explanation of inequality as the consequence of a changing functional distribution of income favouring capital over labour in the long run. |
| Keywords: | Income Inequality, Pre-Industrial, Economic Growth, super Kuznets curve. |
| Date: | 2014–11 |
| URL: | http://d.repec.org/n?u=RePEc:don:donwpa:067&r=hpe |
| By: | Eichengreen, Barry; Mehl, Arnaud; Chiţu, Livia; Richardson, Gary |
| Abstract: | This paper reconstructs the forgotten history of mutual assistance among Reserve Banks in the early years of the Federal Reserve System. We use data on accommodation operations by the 12 Reserve Banks between 1913 and 1960 which enabled them to mutualise their gold reserves in emergency situations. Gold reserve sharing was especially important in response to liquidity crises and bank runs. Cooperation among reserve banks was essential for the cohesion and stability of the US monetary union. But fortunes could change quickly, with emergency recipients of gold turning into providers. Because regional imbalances did not grow endlessly, instead narrowing when region-specific liquidity shocks subsided, mutual assistance created only limited tensions. These findings speak to the current debate over TARGET2 balances in Europe. JEL Classification: F30, N20 |
| Keywords: | Federal Reserve System, gold standard, liquidity and financial crises, monetary policy, risk sharing, TARGET2 balances |
| Date: | 2014–07 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20141686&r=hpe |