nep-hpe New Economics Papers
on History and Philosophy of Economics
Issue of 2015‒07‒18
eighteen papers chosen by
Erik Thomson
University of Manitoba

  1. Networks in Manuel Castells’ theory of the network society By Anttiroiko, Ari-Veikko
  2. Slow and steady wins the race: approximating Nash equilibria in nonlinear quadratic tracking games By Dimitri Blueschke; Viktoria Blüschke-Nikolaeva; Ivan Savin
  3. Sraffa and the Labour theory of Value - a note By Anderaos de Araujo, Fabio
  4. Current Federal Reserve Policy Under the Lens of Economic History: A Review Essay By Williamson, Stephen D.
  5. How economists understand (or not) the relationship between the real and the financial economy. By Kenneth Hermele
  6. Structural interdependence in monetary economics: theoretical assessment and policy implications By Cavalieri, Duccio
  7. Mental Representation of Sharing Experimets: Analyzing Choice and Belief Data By Werner Güth; Charlotte Klempt; kerstin Pull
  8. Informational Robustness and Solution Concepts By Dirk Bergemann; Stephen Morris
  9. The "Self-Defeating Morality" of the Lockean Proviso By Makovi, Michael
  10. Best response cycles in perfect information games By Herings P.J.J.; Predtetchinski A.
  11. Uniqueness of optimal strategies in captain lotto games By Nadav Amir
  12. Kindleberger and Financial Crises By Piero Pasotti; Alessandro Vercelli
  13. Protecting Financial Stability in the Aftermath of World War I: The Federal Reserve Bank of Atlanta's Dissenting Policy By Eugene N. White
  14. The Free Solidarity Value By Bourheneddine Ben Dhaou; Abderrahmane Ziad
  15. Evidence Games: Truth and Commitment By Sergiu Hart; Ilan Kremer; Motty Perry
  16. Success rates in simplified threshold public goods games: A theoretical model By Feige, Christian
  17. Ethics, equity and the economics of climate change paper 2: economics and politics By Nicholas Stern
  18. The Antecedents and Aftermath of Financial Crises as told by Carlos F. Díaz Alejandro By Carmen M. Reinhart

  1. By: Anttiroiko, Ari-Veikko
    Abstract: This paper discusses the conceptualization of network in Manuel Castells’ theory of network society. Castells’ early academic works were built on the structural analysis of capitalism and social movements in response to the contradictions of capitalist society, without any explicit connection to network analysis. Networks gradually appeared in Castells’ works in the late 1980s, when he became interested in the configuration of the relationships between technology, economy, and society. The culmination of this phase was his opus magnum, The Information Age trilogy, which introduced network as a key concept of his macro theory, even though he remained laconic about the concept itself. This is paradoxical, for Castells became possibly the most prominent figure globally in adopting network terminology in macro sociological theory, but at the same time made hardly any empirical, theoretical or methodological contribution to social network analysis or network theory in general. This implies that ‘network’ in Castells’ social theory is not an analytical concept but rather a powerful metaphor that served to capture his idea of the new social morphology of late capitalism.
    Keywords: Manuel Castells, network, network society, The Information Age, social theory, political economy, capitalist society, late capitalism, informational city, social morphology
    JEL: A13 A14 B31 B51 B52 H11 H7 I0 J6 L16 L23 L5 O1 O2 O3 O33 P1 P16
    Date: 2015–07–15
  2. By: Dimitri Blueschke (Alpen-Adria Universität Klagenfurt, Austria); Viktoria Blüschke-Nikolaeva (Alpen-Adria Universität Klagenfurt, Austria); Ivan Savin (Chair of Microeconomics, Friedrich Schiller University Jena, Germany, and Chair for Economic Policy, Karlsruhe Institute of Technology, Germany, and Bureau d'Economie Theorique et Appliquee, France)
    Abstract: We propose a meta-heuristic approach for solving nonlinear dynamic tracking games. In contrast to more 'traditional' methods based on linear-quadratic (LQ) techniques, this derivative-free method is very flexible (e.g. to introduce inequality constraints). The meta-heuristic is applied to a three-player dynamic game and tested versus derivative-dependent method in approximating Nash solution in different game specifications. We demonstrate the superiority of the proposed approach in identifying Nash equilibria, where LQ methods are not applicable.
    Keywords: Dynamic games, Nash equilibrium, Differential Evolution
    JEL: C61 C63 C72 C73 E61
    Date: 2015–07–10
  3. By: Anderaos de Araujo, Fabio
    Abstract: An analysis of the invariable measure of prices proposed by the eminent Italian economist Piero Sraffa, who laid the foundations for a new approach in modern economics. Two mathematical appendices are also provided. The first one shows step by step the construction of the Standard Commodity, which is a consistent solution to the transformation of labour values into prices of production. In Appendix II there is a general numerical example of a price system with two industries which makes the understanding of the distribution of income between wages and profits easier. Using a software spreadsheet, for example, it is possible to make numerical simulations and make comparisons between the results obtained from the Sraffa price system with that obtained from Marx's. This is revised version of the original paper written few years ago.
    Keywords: Sraffa, Standard Commodity, labour values, income distribution
    JEL: A1 B00 B12
    Date: 2015–07–06
  4. By: Williamson, Stephen D. (Federal Reserve Bank of St. Louis)
    Abstract: This review essay is intended as a critical review of Humpage (2015), and it expands on the issues raised in that volume. Federal Reserve Policy during the financial crisis, and in its aftermath are addressed, along with the relationship to historical experience in the U.S. and elsewhere in the world.
    Keywords: Monetary policy; economic history
    JEL: E4 E5 N1
    Date: 2015–07–09
  5. By: Kenneth Hermele (Human Ecology Division, Lund University)
    Abstract: Economists’ attempts to understand the relationship between the real and the financial economy, and the impact of the latter on the former, go back to the origins of economics but they have gained renewed strength with the financial crisis of 2008 and the resulting economic crisis. The relationship real-finance is variously portrayed as being non-important, mutually beneficial, or destructive, real economic activities losing out to pure speculation and wasteful consumption patterns. The various economics’ traditions takes concerning the pro- and cons of the rise of finance capital is discussed, and summarized in a table. In the process, classical and neo-classical, as well as Marxist, Neo-Schumpeterian and Ecological perspectives are discussed (and summarized in the Appendix). Three levels of the economy are investigated: the financial, the real (where production of goods and services take place) and the real-real, where the physical pre-conditions for the other two are located. The conclusion is that the various sectors cannot be understood in isolation from each other, and that some of the recipes for a resumption of healthy balance between finance and the real economy forget to anchor this vision in a clear understanding the limits to growth supplied by Ecological Economics.
    Keywords: Real economy, real-real economy, fictitious capital, productive capital, neutrality of money, veil of money, bubbles, financial euphoria. Correlation Index
    Date: 2015–01–01
  6. By: Cavalieri, Duccio
    Abstract: This is a theoretical analysis of structural interdependence in monetary economics and of its connections with the theories of value and capital. Some recent attempts to integrate money and finance in the theory of income and expenditure – those of the ‘Stock-Flow Consistent Approach’ to macroeconomics, of ‘Modern Monetary Theory’ and of Circuit Theories – are examined. The surplus approach to the theory of value and capital is then formally considered in a model devoid of Sraffian misleading dichotomic connotations, where money plays a fundamental role and flows and stocks are coherently reconciled. In such framework, a method for measuring the unit cost of real capital is indicated and some reasons for reconsidering the traditional approaches to monetary theory and policy in a ‘late Marxian’ updated analytical perspective are highlighted.
    Keywords: monetary theory; monetary policy; fiscal policy; structural interdependence; Sraffian dichotomy; post-Keynesian economics; MEV.
    JEL: B22 E12 E44 E52 M41
    Date: 2015–07–10
  7. By: Werner Güth; Charlotte Klempt; kerstin Pull
    Abstract: We confront allocator participants with dierent sharing games in a within sub- jects design: the Nash demand game, the ultimatum game, the yes-no-game and the impunity game. We allow participants to opt out rather than play the game under consideration. Beside choice data we also collect belief data to learn more about the mental representations of sharing games.
    Date: 2015–03
  8. By: Dirk Bergemann (Cowles Foundation, Yale University); Stephen Morris (Dept. of Economics, Princeton University)
    Abstract: Consider the following "informational robustness" question: what can we say about the set of outcomes that may arise in equilibrium of a Bayesian game if players may observe some additional information? This set of outcomes will correspond to a solution concept that is weaker than equilibrium, with the solution concept depending on what restrictions are imposed on the additional information. We describe a unified approach encompassing prior informational robustness results, as well as identifying the solution concept that corresponds to no restrictions on the additional information; this version of rationalizability depends only on the support of players’ beliefs and implies novel predictions in classic economic environments of coordination and trading games. Our results generalize from complete to incomplete information the classical results in Aumann (1974, 1987) and Brandenburger and Dekel (1987) which can be (and were) given informational robustness interpretations. We discuss the relation between informational robustness and "epistemic" foundations of solution concepts.
    Keywords: Incomplete information, Informational robustness, Bayes correlated equilibrium, Interim corrrelated rationalizability, Belief free rationalizability
    JEL: C72 C79 D82 D83
    Date: 2014–12
  9. By: Makovi, Michael
    Abstract: Locke's theory of appropriation includes the “Lockean Proviso,” that one may appropriate ownerless resources only if one leaves enough for others. The Proviso is normative and obviously may be rejected on normative grounds. But it is less obvious that it may have to be rejected for positive reasons. According to Hoppe, private property is a means for minimizing social conflict under conditions of scarcity. But the Lockean Proviso would actually exacerbate social conflict. According to Demsetz, property emerges precisely when scarcity arises and there is not enough left for everyone. Accordingly, the Lockean Proviso may be logically incompatible with the very purposes of the establishment of property. Or the Proviso may constitute what Derek Parfit calls "self-defeating morality." Several adaptations of the Proviso – including Nozick's – are rejected as well, based on the impossibility of interpersonal comparisons of subjective utility and the problem of economic calculation.
    Keywords: Locke, Nozick, appropriation, proviso, property
    JEL: A13 D23 K3
    Date: 2015–08
  10. By: Herings P.J.J.; Predtetchinski A. (GSBE)
    Abstract: We consider n-player perfect information games with payoff functions having a finite image. We do not make any further assumptions, so in particular we refrain from making assumptions on the cardinality or the topology of the set of actions and assumptions like continuity or measurability of payoff functions. We show that there exists a best response cycle of length four, that is, a sequence 0, 1, 2, 3, 0 of pure strategy profiles where every successive element is a best response to the previous one. This result implies the existence of point-rationalizable strategy profiles. Whenpayoffs are only required to be bounded, we show the existence of an -best response cycle of length four for every 0.
    Keywords: Noncooperative Games;
    JEL: C72
    Date: 2015
  11. By: Nadav Amir
    Abstract: We consider the class of two-person zero-sum allocation games known as Captain Lotto games (Hart 2014). These are Colonel Blotto type games in which the players have capacity constraints. We show that the players’ optimal strategies are unique in most cases.
    Date: 2015–06
  12. By: Piero Pasotti (University of Siena); Alessandro Vercelli (University of Siena)
    Abstract: This paper aims to assess to what extent the contributions of Kindleberger to the explanation and control of financial crises may still be a source of valuable insights for the present. Kindleberger had the great merit, to be shared with Minsky, of having resumed in the early 1970s, after an eclipses of more than two decades, the investigation on the intrinsic instability of credit and its impact on financial crises. Though his pure model may be considered less pregnant than that of Minsky, it extends its scope to the international and political aspects of financial crises. In addition Kindleberger provides a powerful support to the model by rooting it in the empirical evidence systematically investigated since the early 18th century. The application of Kindleberger’s model has been successfully extended, with the collaboration of Aliber, also to the financial crises occurred after the publication of his major book (Kindleberger, 1978). This paper argues that Kindleberger’s insights are still invaluable to understand the subprime crisis and the ensuing Great recession and to design the institutions and policies necessary to resume a sustainable path of economic progress.
    Keywords: Kindleberger, Financial Crises, International Lender of Last Resort
    JEL: B26 E52 E58 F33 F34
    Date: 2015–02–01
  13. By: Eugene N. White
    Abstract: During the 1920-1921 recession, the Federal Reserve Bank of Atlanta resisted the deflationary policy sanctioned by the Federal Reserve Board and pursued by other Reserve banks. By borrowing gold reserves from other Reserve banks, it facilitated a reallocation of liquidity to its district during the contraction. Viewing the collapse of the price of cotton, the dominant crop in the region, as a systemic shock to the Sixth District, the Atlanta Fed increased discounting and enabled capital infusions to aid its member banks. The Atlanta Fed believed that it had to limit bank failures to prevent a fire sale of cotton collateral that would precipitate a general panic. In this previously unknown episode, the Federal Reserve Board applied considerable pressure on the Atlanta Fed to adhere to its policy and follow a simple Bagehot-style rule. The Atlanta Fed was vindicated when the shock to cotton prices proved to be temporary, and the Board conceded that the Reserve Bank had intervened appropriately.
    JEL: E58 G01 N12 N22
    Date: 2015–07
  14. By: Bourheneddine Ben Dhaou (CREM, UMR CNRS 6211, Normandy University, University of Caen Basse-Normandie); Abderrahmane Ziad (CREM, UMR CNRS 6211, Normandy University, University of Caen Basse-Normandie)
    Abstract: In this paper, we consider a cooperative game in which two types of players co-exist: solidary and non solidary players. Solidary players are able to support by consent at least one of their weaker partners without disadvantaging non-solidary players. We present a value of the game which takes ito account the types of players and satisfies some appropriate axioms: Efficiency, Additivity, Symmetry among players who have the same type, Conditional null player, and a new axiom, the Unaffected Allocation of nonsolidary players - (UA) - which is defined as follows: when players have the possibility to decide freely to be solidary, this should affect neither the allocations of non-solidary players, nor the outcome of the game.
    Keywords: Shapley value, Nowak and Radzik value, the free solidarity value, TU cooperative games
    JEL: C71 D60
    Date: 2015–05
  15. By: Sergiu Hart; Ilan Kremer; Motty Perry
    Abstract: An evidence game is a strategic disclosure game in which an agent who has different pieces of verifiable evidence decides which ones to disclose and which ones to conceal, and a principal chooses an action (a "reward"). The agent's preference is the same regardless of his information (his "type")—he always prefers the reward to be as high as possible—whereas the principal prefers the reward to fit the agent's type. We compare the setup where the principal chooses the action only after seeing the disclosed evidence, to the setup where the principal can commit ahead of time to a reward policy (the latter is the standard mechanism-design setup). We compare the setup where the principal chooses the action only after seeing the disclosed evidence to the setup where the principal can commit ahead of time to a reward policy (the mechanism-design setup). The main result is that under natural conditions on the truth structure of the evidence, the two setups yield the same equilibrium outcome.
    Date: 2015–05
  16. By: Feige, Christian
    Abstract: This paper develops a theoretical model based on theories of equilibrium selection in order to predict success rates in threshold public goods games, i.e., the probability with which a group of players provides enough contribution in sum to exceed a predefined threshold value. For this purpose, a prototypical version of a threshold public goods game is simplified to a 2 x 2 normal-form game. The simplified game consists of only one focal pure strategy for positive contributions aiming at an efficient allocation of the threshold value. The game's second pure strategy, zero contributions, represents a safe choice for players who do not want to risk coordination failure. By calculating the stability sets of these two pure strategies, success rates can be put in explicit relation to the game parameters. It is also argued that this approach has similarities with determining the relative size of the strategies' basins of attraction in a stochastic dynamical system (cf. Kandori, Mailath, and Rob, 1993, Econometrica, Vol. 61, p. 29-56).
    Keywords: threshold public good,coordination games,learning,equilibrium selection
    JEL: C73 H41
    Date: 2015
  17. By: Nicholas Stern
    Abstract: Both intergenerational and intratemporal equity are central to the examination of policy towards climate change. However, many discussions of intergenerational issues have been marred by serious analytical errors, particularly in applying standard approaches to discounting; the errors arise, in part, from paying insufficient attention to the magnitude of potential damages, and is part from overlooking problems with market information. Some of the philosophical concepts and principles of Paper 1 are applied to the analytics and ethics of pure-time discounting and infinite-horizon models, providing helpful insights into orderings of welfare streams and obligations towards future generations. Such principles give little support for the idea of discrimination by date of birth. Intratemporal issues are central to problematic and slow-moving international discussions and are the second focus of this paper. A way forward is to cast the policy issues and analyses in a way that keeps equity issues central and embeds them in the challenge of fostering the dynamic transition to the low-carbon economy in both developed and developing countries. This avoids the trap of seeing issues primarily in terms of burden-sharing and zero-sum games – that leads to inaction and the most inequitable outcome of all.
    JEL: J1
    Date: 2014
  18. By: Carmen M. Reinhart
    Abstract: Some of the best-known papers of Carlos F. Díaz Alejandro were about Latin America’s crises in the 1980s and 1930s. I will show data, figures and evidence here about the crises in the advanced economies 30 years later that fit the same narrative. His unadulterated words aptly describe modern problems across geographical borders and, in this case, income levels. This attests to his timeless insight and understanding. Because some of the observations he made have general applicability to the study of recurring patterns across crises, I have taken the liberty to label these as lessons.
    JEL: B26 E5 E6 F3 G01
    Date: 2015–07

This nep-hpe issue is ©2015 by Erik Thomson. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.