nep-hpe New Economics Papers
on History and Philosophy of Economics
Issue of 2015‒01‒03
twenty-two papers chosen by
Erik Thomson
University of Manitoba

  1. Econometrics as a Pluralistic Scientific Tool for Economic Planning: On Lawrence R. Klein's Econometrics. By Erich Pinzón Fuchs
  2. Not Beautiful, not Just, not Virtuous; 'And It Doesn't Deliver the Goods'. Capitalism and “Fear of Goods” in Keynes's Thought. By Carabelli, Anna; Cedrini, Mario
  3. Finance and crisis: Marxian, institutionalist and circuitist approaches By Argitis, Georgios; Evans, Trevor; Michell, Jo; Toporowski, Jan
  4. Gary Becker on the Quantity and Quality of Children By Doepke, Matthias
  5. Sir W. Arthur Lewis By Berhanu Abegaz
  6. Supermodular NTU-games By Koshevoy, G.A.; Suzuki, T.; Talman, A.J.J.
  7. The Federal Reserve's Role: Actions Before, During, and After the 2008 Panic in the Historical Context of the Great Contraction By Michael D. Bordo
  8. Review of Ben S. Bernanke: The Federal Reserve and the Financial Crisis By Michael D. Bordo
  9. Michaël Polanyi on Reality, Knowledge, and Economics By Agnès Festré; Pierre Garrouste
  10. Zukunftsangst! Fear of (and Hope for) the Future and Its Impact on Life Satisfaction By Alan Piper
  11. The superiority of economists By Fourcade, Marion; Ollion, Etienne; Algan, Yann
  12. Under the Thumb of History? Political Institutions and the Scope for Action By Banerjee, Abhijit; Duflo, Esther
  13. Economists: cheaters with altruistic instincts By Muñoz-Izquierdo, Nora; Gil-Gómez de Liaño, Beatriz; Rin-Sánchez, Francisco Daniel; Pascual-Ezama, David
  14. Pierre Quesnay (1897-1937) from the League of Nations to the Franc Poincaré: Financial Discipline and Monetary Pragmatism By Muriel Dal-Pont Legrand; Dominique Torre
  15. Contro il liberoscambismo By Veronese Passarella, Marco
  16. Who Benefits from Economic Freedom? Unraveling the Effect of Economic Freedom on Subjective Well-Being By Gehring, Kai
  17. How Democracy could foster Economic Growth: The Last 200 Years By Carol S. Leonard; Daniel Shestakov; Konstantin Yanovskiy
  18. Capital, richesse et croissance de la recherche empirique aux éclairages theoriques By Jean-Luc Gaffard
  19. Macroeconomics after the crisis – hedgehog or fox? By Miller, Marcus; Zhang, Lei
  20. Happiness of economists By Lars P. Feld; Sarah Necker; Bruno S .Frey
  21. The Public Choice and the traditional view of political science By Vicini, Andrea
  22. Christmas economics: A sleigh ride By Birg, Laura; Goeddeke, Anna

  1. By: Erich Pinzón Fuchs (Centre d'Economie de la Sorbonne)
    Abstract: Lawrence R. Klein (1920-2013) played a major role in the construction and in the further dissemination of econometrics from the 1940s. Considered as one the main developers and practitioners of macroeconometrics, Klein's influence is reflected in his application of econometric modelling “to the analysis of economic fluctuations and economic policies” for which he was awarded the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel in 1980. The purpose of this paper is to give an account of Klein's image of econometrics focusing on his early period as an econometrician (1944-1950), and more specifically on his period as a Cowlesman (1944-1947). Independently of how short this period might appear, it contains a set of fundamental publications and events, which were decisive for Klein's conception of econometrics, and which formed Klein's unique way of doing econometrics. At least four features are worth mentioning, which characterise this uniqueness. First, Klein was the only Cowlesman who carried on the macroeconometric programme beyond the 1940s, even if the Cowles had already abandoned it. Second, his pluralistic approach in terms of economic theory allowed him not only to use the Walrasian framework appraised by the Cowles Commission and especially by T.C. Koopmans, but also the Marxian and Keynesian frameworks, enriching the process of model specification and motivating economists of different stripes to make use of the nascent econometrics. Third, Klein differentiated himself from the rigid methodology praised at Cowles; while the latter promoted the use of highly sophisticated methods of estimation, Klein was convinced that institutional reality and economic intuition would contribute more to econometrics than the sophistication of these statistical techniques. Last but not least, Klein never gave up what he thought was the political objective of econometrics: economic planning and social reform.
    Keywords: Economic epistemology, history of econometrics, history of macroeconometric modelling, pluralism in Econometrics, Lawrence R. Klein, Cowles Commission.
    JEL: B23 B31 B41
    Date: 2014–10
  2. By: Carabelli, Anna; Cedrini, Mario (University of Turin)
    Abstract: Offering a view of the other side of the liquidity-issue, the paper elaborates on the concept of “ fear of goods” in Keynes’s thought. It therefore illustrates numerous evidences of “fear of goods” in his economics , and aims to show that the notion might be considered as playing a quite important role as organising concept, helping to establish connections between ideas that are apparently only weakly related. The article fosters an interpretation of the development of Keynes’s theoretical arguments and proposed policy instruments for both domestic and global economy, as reactions to the “fear of goods” of capitalism, which Keynes saw as an inborn propensity of monetary economies of production.
    Date: 2014–11
  3. By: Argitis, Georgios; Evans, Trevor; Michell, Jo; Toporowski, Jan
    Abstract: Most mainstream neoclassical economists completely failed to anticipate the crisis which broke in 2007 and 2008. There is however a long tradition of economic analysis which emphasises how growth in a capitalist economy leads to an accumulation of tensions and results in periodic crises. This paper first reviews the work of Karl Marx who was one of the first writers to incorporate an analysis of periodic crisis in his analysis of capitalist accumulation. The paper then considers the approach of various subsequent Marxian writers, most of whom locate periodic cyclical crises within the framework of longer-term phases of capitalist development, the most recent of which is generally seen as having begun in the 1980s. The paper also looks at the analyses of Thorstein Veblen and Wesley Claire Mitchell, two US institutionalist economists who stressed the role of finance and its contribution to generating periodic crises, and the Italian Circuitist writers who stress the problematic challenge of ensuring that bank advances to productive enterprises can successfully be repaid.
    Keywords: capitalism,finance,crisis
    JEL: B14 B15 B24 B25 E11 E32
    Date: 2014
  4. By: Doepke, Matthias (Northwestern University)
    Abstract: This paper reviews Gary Becker's contributions to the economic analysis of fertility, from his 1960 paper introducing the quantity-quality tradeoff to later work linking the economics of fertility to the theory of economic growth.
    Keywords: Gary Becker, fertility, quantity-quality model, demographic transition
    JEL: J13 O10 O40
    Date: 2014–11
  5. By: Berhanu Abegaz (Department of Economics, The College of William and Mary)
    Abstract: Raised by school-teacher parents in the Caribbean island of St. Lucia and educated in St. Mary’s College there—a school that also produced poet Derek Walcott, the other Nobel Laureate of St. Lucia—Lewis began his studies and career at the London School of Economics (LSE). He subsequently held distinguished professorships at the universities of Manchester and Princeton. He also served as a senior economic advisor in West Africa in addition to administrative stints as Vice Chancellor of the University of the West Indies and as founding president of the Caribbean Development Bank. Knighted by Queen Elizabeth in 1963, Arthur Lewis retired in 1983 and died in 1991 at the age of 76 in his summer home in Grenada. It was in Manchester that he did some of his most significant works in development economics, especially the seminal article `Economic Development with Unlimited Supplies of Labor' (1954) and the treatise, The Theory of Economic Growth (1955). Lewis is also known for his work, while at Princeton, on the history of the second industrial revolution and the new international economic order. While The Theory of Economic Growth (1955) and Growth and Fluctuations 1870–1913 (1978) are both regarded as classics, it is the 1954 article that constitutes his most influential single contribution having spawned a large literature on development as structural transformation. Lewis’s foundational and pioneering research arguably launched the field of modern development economics. This and a deep knowledge of economic history earned him the ultimate recognition as a Nobel Laureate in Economics in 1979. A gifted scholar and a perceptive public intellectual with the sensibilities of a British Fabian socialist (a view he shared with the likes of Gandhi), he was blessed with the good luck of appearing in an era on the cusp of major world events, including decolonization, the global civil rights movement, centrally planned economies, and the urgency for accelerating economic development felt in the newly independent countries of Africa, Asia, Latin America and the Caribbean. Lewis is also remembered as an independent-minded trailblazer: the first black man to serve on the faculties of LSE, Manchester, and Princeton; to head the University of the West Indies; and to be awarded the Nobel Prize in a field other than peace and literature. Given his origins in a poor outpost of the British Empire and the blatant institutional racism he had to confront at the intellectual centers of the metropole, his life’s journey provides a great inspiration to all who cherish the life of the mind, responsible citizenship, and dream of living in a world free of racial injustice and abject poverty.
    Date: 2014–09–10
  6. By: Koshevoy, G.A.; Suzuki, T. (Tilburg University, Center For Economic Research); Talman, A.J.J. (Tilburg University, Center For Economic Research)
    Abstract: A cooperative game with non-transferable utility (NTU-game) consists of a collection of payoffsets for the subsets of a nite set of players, for which it has to be determined how much payof each player must receive. The core of an NTU-game consists of all payoffvectors that are in the payoff set of the coalition of all players and cannot be improved upon by any coalition of players. For cooperative games with transferable utility (TU-games) the notion of convexity was introduced to guarantee that the Shapley value, being the average of all marginal vectors of the game, is an element of the core. Convexity of a TU-game is equivalent to supermodularity of the characteristic function underlying the game. In this paper we introduce the concept of supermodularity for NTU-games. Super-modularity for NTU-games is weaker than other existing types of convexity. Under super-modularity of an NTU-game it is shown that all appropriately dened marginal vectors of the game are elements of the core. As solution concept for NTU-games we propose a set of solutions that is determined by the average of all marginal vectors of the game. For TU-games the solution set coincides with the Shapley value of the game. Also conditions are stated under which the solution set is a subset of the core and is the set of bargaining solutions of a corresponding bargaining problem.
    Keywords: core; shapley value; convexity; supermodularity; marginal vector
    JEL: C71
    Date: 2014
  7. By: Michael D. Bordo
    Abstract: This paper examines the Federal Reserve's actions before, during and after the 2008 financial crisis. It looks to the Great Contraction of 1929-1933 for historical context of the Federal Reserve’s actions.
    Date: 2013–08
  8. By: Michael D. Bordo
    Abstract: This review examines a collection of lectures given by Ben Bernanke on the Federal Reserve's actions during the 2008 financial crisis.
    Date: 2013–08
  9. By: Agnès Festré (GREDEG CNRS; University of Nice Sophia Antipolis); Pierre Garrouste (GREDEG CNRS; University of Nice Sophia Antipolis)
    Keywords: Michael Polanyi, economics, science, reality, tacit knowledge
    Date: 2014–12
  10. By: Alan Piper
    Abstract: The thoughts that an individual has about the future contribute substantially to their life satisfaction in a positive or negative direction. This is a result found via five different methods, some of which control for personality and disposition and the potential endogeneity of thoughts and life satisfaction. The reduction in life satisfaction experienced by individuals who report being pessimistic is greater than that for well-known objective statuses like unemployment. Including individuals’ thoughts about the future substantially increases the explanatory power of standard life satisfaction models. Life satisfaction is made up of objective and subjective factors and methods exist to account for their potential endogeneity to enhance our understanding of well-being. This investigation is an example of such an analysis combining a subjective factor, thoughts about the future (treated as endogenous), with more standard objective factors to aid understanding regarding well-being.
    Keywords: Life Satisfaction, Subjective Well-Being, GMM, Dynamics, Endogeneity, SOEP, ESS
    JEL: C23 D84 I31
    Date: 2014
  11. By: Fourcade, Marion; Ollion, Etienne; Algan, Yann
    Abstract: In this essay, we investigate the dominant position of economics within the network of the social sciences in the United States. We begin by documenting the relative insularity of economics, using bibliometric data. Next we analyze the tight management of the field from the top down, which gives economics its characteristic hierarchical structure. Economists also distinguish themselves from other social scientists through their much better material situation (many teach in business schools, have external consulting activities), their more individualist worldviews, and in the confidence they have in their discipline's ability to fix the world's problems. Taken together, these traits constitute what we call the superiority of economists, where economists' objective supremacy is intimately linked with their subjective sense of authority and entitlement. While this superiority has certainly fueled economists' practical involvement and their considerable influence over the economy, it has also exposed them more to conflicts of interests, political critique, even derision.
    Date: 2014
  12. By: Banerjee, Abhijit; Duflo, Esther
    Abstract: This paper discusses the two leading views of history and political institutions. For some scholars, institutions are mainly products of historical logic, while for others, accidents, leaders, and decisions have a significant impact. We argue that while there is clear evidence that history matters and has long-term effects, there is not enough data to help us distinguish between the two views. Faced with this uncertainty, what is a social scientist to do? We argue that given the possibility that policy decisions indeed make a difference, it makes sense to assume they do and to try to improve policymaking.
    Keywords: determinism; political economy
    JEL: N30 O1
    Date: 2014–06
  13. By: Muñoz-Izquierdo, Nora; Gil-Gómez de Liaño, Beatriz; Rin-Sánchez, Francisco Daniel; Pascual-Ezama, David
    Abstract: Based on an experiment conducted with undergraduate students from three different majors (business economics, psychology and engineering), we study the relationship between honesty and altruism. We asked participants to toss a coin with a black and a white side. Participants won a chocolate if they reported the white outcome, whereas no gift was given if they reported black. It was done privately, so they could decide whether or not to cheat. Reporting the prize-losing side (that is, being honest when losing) could result in 3 effects, depending on the 3 conditions run: (i) no penalty, (ii) paying a penalty, or (iii) paying a penalty with an altruistic end (a donation to a non-profit organization). The amount of penalty was decided by each participant and the payment was also done in private. Although we cannot detect dishonesty on an individual level, we use statistical inference to determine cheating behavior. We find suggestive evidence that economics is significantly the most dishonest major when no penalty is involved. With economists in the lead, the results also indicate that all majors cheat if a penalty is requested. Surprisingly, when altruism plays a role, economists tend to have the most altruistic behavior, followed by psychologists. However, altruism does not reduce engineers' propensity to lie. No significant differences are found regarding gender.
    Keywords: Cheating, altruism, penalty, donation
    JEL: A12 D03 D64
    Date: 2014–12–05
  14. By: Muriel Dal-Pont Legrand (GREDEG CNRS; University of Nice Sophia Antipolis); Dominique Torre (University of Nice Sophia Antipolis, France; GREDEG CNRS)
    Abstract: In a 1958 article, Pierre Dieterlen refers to a 'triumvirate' in order to qualify the team formed in France during the Poincaré stabilization by Emile Moreau, Governor of the Banque de France (BDF), Charles Rist, Professor at La Sorbonne and Deputy-Governor and Pierre Quesnay, his former PhD student, Head of the Department of the Economic Studies and Chief Adviser of the BDF. Pierre Quesnay is the youngest of the trio and has been quite neglected by the historians until the recent paper of Olivier Feiertag (2009) on the Monetary Internationalism during the Inter-War period. From the end of the war in 1918 until 1937, the short life of Pierre Quesnay is fully concerned by the monetary disorders generated by the suspension of the Gold Standard, the difficulties to find alternative monetary solutions, and the management of the monetary consequences of the Great Depression. Building mainly on the Quesnay's papers of the Archives Nationales, the purpose of this paper is to evaluate the effective contribution of the young money doctor to the monetary stabilization process of the interwar period.
    Keywords: Money Doctors, League of Nations, Franc Poincaré, monetary stabilization, Benjamin Strong, Open market policy
    JEL: N24 B22
    Date: 2014–12
  15. By: Veronese Passarella, Marco
    Abstract: The article aims to show that the opposition «welfare or barbarism» is historically linked to the degree of globalization of advanced economies. I argue that the current trend is not the zeroing of the welfare state, but a radical re-definition of it along both «universalist» and «minimalist» lines. In fact, welfare state programmes are being reduced to a unique residual monetary benefit, whose function is to bridge the gap between the actual real wage and the minimum subsistence threshold of the working class. Against this background, this article provides a radical critique to the unconditional, and sometimes apologetic, acceptance of capitalist globalization and of its ideological superstructure, namely, the neo-liberal agenda. In addition, a different idea of the organisation of the economy is proposed, recovering and updating the concept of the «economic planning».
    Keywords: Welfare State, Neoliberal Agenda, Economic Planning, Socialism
    JEL: B5 B51
    Date: 2014–12–02
  16. By: Gehring, Kai
    Abstract: Who benefits from economic freedom? Results from a panel of 86 countries over the 1990–2005 period suggest that overall economic freedom has a significant positive effect on subjective well-being. Its dimensions legal security and property rights, sound money, and regulation are in particular strong predictors of higher well-being. The overall positive effect is not affected by socio-demographics; the effects of individual dimensions vary, however. Developing countries profit more from higher economic freedom, in particular from reducing the regulatory burden. Culture moderates the effect: societies that are more tolerant and have a positive attitude toward the market economy profit the most.
    Keywords: economic freedom; happiness; life satisfaction; government size; institutions; economic freedom; happiness; government size
    Date: 2014–11–18
  17. By: Carol S. Leonard; Daniel Shestakov (RANEPA); Konstantin Yanovskiy (Gaidar Institute for Economic Policy)
    Abstract: In this paper we explore current understandings of the influence of political rights, among historical legacies, on economic development. We construct variables for selected political regimes for 1811-2010. We find significant association between individual rights and economic growth. We argue that current understanding of political regimes supportive of growth (Acemoglu, etc), should parse the concept of property rights to include the protection of the individual in their focus on private property rights protection, alone, respected in various forms of government, are insufficient; what matters is the security of individuals from arbitrary arrest, regardless of “type of regime”. Discretionary rights of rulers or democratic governments to arrest citizens undermines the protection of private property rights and other attributes classically given to democratic foundations of economic growth, for example, free press, freedom of the exercise of religious belief. We suggest, as a research agenda, that the power of the politically competitive system therefore comes from weakening discretionary authority over law enforcement
    Keywords: Rule of Law, Rule of Force, Personal Rights, Private Property Protection, Economic Growth
    JEL: P16 P50 N40 O40
    Date: 2014
  18. By: Jean-Luc Gaffard (OFCE)
    Abstract: Le livre de Thomas Piketty « Le Capital au XXIème siècle » est ambivalent. D’un côté, une lecture théorique trop simple, fondamentalement a-institutionnelle, retient un taux de croissance définitivement exogène et ignore l’hétérogénéité du capital, faisant de la répartition des revenus et des richesses une donnée technique sans influence en retour sur la croissance elle-même. D’un autre côté, les faits stylisés rassemblés et les intuitions qui y sont associées incitent réfléchir sur les tenants et aboutissants de la répartition des revenus et des patrimoines pour lui redonner une place centrale dans la théorie économique et lui restituer sa dimension sociale.
    Keywords: capital; distribution ; growth; rent; wealth
    JEL: D30 H20 O40
    Date: 2014–11
  19. By: Miller, Marcus; Zhang, Lei
    Abstract: Following the financial crisis of 2008/9, there has been renewed interest in what Greenwald and Stiglitz dubbed ‘pecuniary externalities’. Two that affect borrowers and lenders balance sheets in pro-cyclical fashion are described, along with measures that might help curb their destabilising effects. These ‘pecuniary externalities’ can be thought of as the unintended macroeconomic consequences of market conventions designed to check moral hazard. The issue of moral hazard is explicitly discussed in the context of a simple model of insurance, where there is no Arrow Debreu equilibrium to allocate risk efficiently; but there is a ‘noisy’ mixed-strategy Nash equilibrium. Our simple example is designed to reinforce the point made by Greenwald and Stiglitz (1986) – that when externalities are present, leaving things to the market may not be ‘constrained Pareto efficient’. While Central Bank policy may have shifted radically now that stability is an explicit objective of policy, the same cannot be said of the econometric models being used for macroeconomic forecasting – even those in Central Banks!
    Keywords: adverse selection; externalities; financial regulation; macro-prudential regulation; moral hazard
    JEL: E44 E58 G20 G21 G22 G28
    Date: 2014–05
  20. By: Lars P. Feld; Sarah Necker; Bruno S .Frey
    Abstract: This study investigates the determinants of economists’ life satisfaction. The analysis is based on a survey of professional, mostly academic economists from European countries and beyond. We find that certain features of economists’ professional situation influence their well-being. Happiness is increased by having more research time while the lack of a tenured position decreases satisfaction in particular if the contract expires in the near future or cannot be extended. Surprisingly, publication success has no effect on satisfaction. While the perceived level of external pressure also has no impact, the perceived change of pressure in recent years has. Economists may have accepted a high level of pressure when entering academia but do not seem to be willing to cope with the increase observed in recent years.
    Keywords: Happiness; academiclabormarket; extrinsicandintrinsicmotivation; publish or perish-culture
    JEL: I31 A11 J28
    Date: 2014–11
  21. By: Vicini, Andrea
    Abstract: This article, explore the origin of public choice compared with the traditional view of political science. The emphasize is on the methodology and the initial research program developed by Buchanan and Tullock.
    Keywords: Public Choice, Gordon Tullock, James Buchanan.
    JEL: H00 H11 H70
    Date: 2011–05
  22. By: Birg, Laura; Goeddeke, Anna
    Abstract: Do you believe that at Christmas time the gas prices, the economy and the number of suicides peak? Do you think that the value of presents you are giving to your beloved is of importance? We show in this paper that conventional wisdom about Christmas is often doubtful. Furthermore, we give an idea of how Santa Claus - and maybe you - is able to finance Christmas celebrations, why emergency departments are a place to especially avoid during this time of the year and why Christmas tree growers might care to explain the differences across species to you this year. We cannot clearly establish whether Christmas entails a welfare loss or gain, however, we give you an idea as to which institutional settings might reduce a potential welfare loss. Also, we give advice about which behaviours might get you more Christmas presents from Santa this year. Finally, we find that more research is needed to give conclusive reasons why Santa Claus actually brings presents to (nearly) everyone.
    Keywords: christmas,Santa Claus,Rudolph the Red-Nosed Reindeer,elves,presents,welfare
    JEL: A12 D1 D6 E3 H4 I1 Z1
    Date: 2014

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