nep-hpe New Economics Papers
on History and Philosophy of Economics
Issue of 2015‒07‒25
24 papers chosen by
Erik Thomson
University of Manitoba

  1. Games with the Total Bandwagon Property By Jun Honda
  2. Major Defects of the Market Economy By Kakarot-Handtke, Egmont
  3. An application of econophysics to the history of economic thought: The analysis of texts from the frequency of appearance of key words By Trincado, Estrella; Vindel, José María
  4. The value in games with restricted cooperation By Emilio Calvo; Esther Gutiérrez-López
  5. Academics as Economic Advisers: Gold, the ‘Brains Trust,’ and FDR By Sebastian Edwards
  6. Idealizations of uncertainty, and lessons from artificial intelligence By Smith, Robert Elliott
  7. The Antecedents and Aftermath of Financial Crises as told by Carlos F. Díaz Alejandro By Reinhart, Carmen M.
  8. Relational environment and intellectual roots of 'ecological economics': An orthodox or heterodox field of research? By Teixeira, Aurora A. C.; Castro e Silva, Manuela
  9. Does Sunstein and Thaler’s Theory Have a Broad Scope? By Akira Inoue; Kazumi Shimizu; Yoshiki Wakamatsu; Daisuke Udagawa
  10. Was Gerschenkron right? Bulgarian agricultural growth during the Interwar period in light of modern development economics By Michael Kopsidis; Martin Ivanov
  11. Newton´s Laws of Motion and Price Theory By Tomáš R. Zeithamer
  12. Insider's Dilemma: a General Solution in a Repeated Game By Berardino Cesi; Walter Ferrarese
  13. Représentations sociales de la monnaie : contraste entre les citoyens et les porteurs de monnaies locales By Ariane TICHIT
  14. Which Way to Go? The Effects of the Great Recession on Economic Thought By HASAN BAKIR; SEVGINAZ ISIK; GORKEM BAHTIYAR
  15. Accounting for Adaptation in the Economics of Happiness By Miles Kimball; Ryan Nunn; Dan Silverman
  16. The economics of gender equality; a review of the literature in three propositions and two questions By Janneke Plantenga
  17. Tacit Collusion in Repeated Contests with Noise By Boudreau, James W.; Shunda, Nicholas
  18. Symmetric equilibria in stochastic timing games By Steg, Jan-Henrik
  19. Three Models of Noncooperative Oligopoly in Markets with a Continuum of Traders By Francesca BUSETTO; Giulio CODOGNATO; Sayantan GHOSSAL
  20. Peer Effects and Incentives By Matthias Kräkel
  21. Social cohesion: the prerequisite for use of soft power resources in international relations By Javad Nikmoeen
  22. Deepening the scope of the “economic model”: Functionalities, structures, mechanisms, and institutions By Stefan Schleicher
  23. The Measurement of Wealth: Recessions, Sustainability and Inequality By Joseph E. Stiglitz
  24. Bringing Financial Stability into Monetary Policy* By Leeper, Eric M.; Nason, James M.

  1. By: Jun Honda (Department of Economics, Vienna University of Economics and Business)
    Abstract: We consider the class of two-player symmetric n x n games with the total bandwagon property (TBP) introduced by Kandori and Rob (1998). We show that a game has TBP if and only if the game has 2^n - 1 symmetric Nash equilibria. We extend this result to bimatrix games by introducing the generalized TBP. This sheds light on the (wrong) conjecture of Quint and Shubik (1997) that any n x n bimatrix game has at most 2^n - 1 Nash equilibria. As for an equilibrium selection criterion, I show the existence of a ½-dominant equilibrium for two subclasses of games with TBP: (i) supermodular games; (ii) potential games. As an application, we consider the minimum-effort game, which does not satisfy TBP, but is a limit case of TBP.
    Keywords: Bandwagon, Nash Equilibrium, Number of Equilibria, Coordination Game, Equilibrium Selection
    JEL: C62 C72 C73
    Date: 2015–07
  2. By: Kakarot-Handtke, Egmont
    Abstract: When we characterize an argument that has no sound theoretical foundation as political, then what has been produced by economists so far is political economics. However, since the Classics and Marx all major economic schools have defended the claim that they were doing science. This claim has been convincingly rebutted. So, the task is still before us. The way forward is to move from behavioral to structural economics. In what we should be mostly interested are not so much the behavioral defects of economic agents but the structural defects of the market system and how to repair them.
    Keywords: new framework of concepts; structure-centric; price mechanism; profit mechanism; structural stress; inefficiency mechanism; monetary order; indexation; growth imperative; theory inflicted unemployment; distribution mechanism
    JEL: B49 B59 C63 E10
    Date: 2015–07–17
  3. By: Trincado, Estrella; Vindel, José María
    Abstract: This article poses a new methodology applying the statistical analysis to the economic literature. This analysis has never been used in the history of economic thought, albeit it may open up new possibilities and provide us with further explanations so as to reconsider theoretical issues. With that purpose in mind, the article applies the intermittency of the turbulence in different economic texts, and specifically in three important authors: William Stanley Jevons, Adam Smith, and Karl Marx.
    Keywords: econophysics,history of economic thought,bibliometrics,applications of statistical analysis
    JEL: B16 B40 C18 Z11
    Date: 2015
  4. By: Emilio Calvo (Universidad de Valencia. ERI-CES); Esther Gutiérrez-López (Departamento de Economía Aplicada IV. Universidad del País Vasco U.P.V./E.H.U.)
    Abstract: We consider cooperative games in which the cooperation among players is restricted by a set system, which outlines the set of feasible coalitions that actually can be formed by players in the game. In our setting, the structure of this set system is completely free, and the only restriction is that the empty set belongs to it. An extension of the Shapley value is provided as the sum of the dividends that players obtain in the game. In this general setting, we offer two axiomatic characterizations for the value: one by means of component efficiency and fairness, and the other one with efficiency and balanced contributions.
    Keywords: TU-games; Restricted cooperation; Shapley value.
    JEL: C71
    Date: 2015–07
  5. By: Sebastian Edwards
    Abstract: In this paper I revisit the period leading to the abandonment of the gold standard by the U.S. in 1933. I analyze what the important players – and in particular FDR and the members of the advisory group known as the “Brains Trust” – thought about the gold standard. My conclusion is that during the primary and presidential campaigns, neither Roosevelt nor his inner circle had a strong view on gold or the dollar. They did believe in the need to experiment with different policies in order to get the country out of the slump. Tinkering with the value of the currency was a possible area for experimentation; but it was an option with a relatively low priority, lower than implementing a public works program, and passing a bill that included crops allotment. Until inauguration day FDR’s views on the gold standard were ambivalent and noncommittal; he was neither a diehard fan of the system, nor was he a severe critic.
    JEL: B2 B22 B26 E31 F31 N12 N22
    Date: 2015–07
  6. By: Smith, Robert Elliott
    Abstract: Making decisions under uncertainty is at the core of human decision-making, particularly economic decision-making. In economics, a distinction is often made between quantifiable uncertainty (risk) and un-quantifiable uncertainty (Knight, Uncertainty and Profit, 1921). However, this distinction is often ignored by, in effect, the quantification of unquantifiable uncertainty, through the assumption of subjective probabilities in the mind of the human decision makers (Savage, The Foundations of Statistics, 1954). This idea is also reflected in developments in artificial intelligence (AI). However, there are serious reasons to doubt this assumption, which are relevant to both AI and economics. Some of the reasons for doubt relate directly to problems that AI has faced historically, that remain unsolved, but little regarded. AI can proceed on a prescriptive agenda, making engineered systems that aid humans in decision-making, despite the fact that these problems may mean that the models involved have serious departures from real human decision-making, particularly under uncertainty. However, in descriptive uses of AI and similar ideas (like the modelling of decision- making agents in economics), it is important to have a clear understanding of what has been learned from AI about these issues. This paper will look at AI history in this light, to illustrate what can be expected from models of human decision-making under uncertainty that proceed from these assumptions. Alternative models of uncertainty are discussed, along with their implications for examining in vivo human decision-making uncertainty in economics.
    Keywords: uncertainty,probability,Bayesian,artificial intelligence
    JEL: B59
    Date: 2015
  7. By: Reinhart, Carmen M.
    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. These are primarily lessons about what to avoid.
    JEL: B26 E5 E6 F3 G01
    Date: 2015–07
  8. By: Teixeira, Aurora A. C.; Castro e Silva, Manuela
    Abstract: The way the fields are delineated has been the Achilles' heel of studies analyzing the status and evolution of given scientific areas. Based on van den Besselaar and Leydesdorff's (Mapping change in scientific specialities; a scientometric reconstruction of the development of artificial intelligence, 1996) contribution, the authors propose a systematic and objective method for delineating the field of ecological economics assuming that aggregated journal-journal citation relations is an appropriate indicator for the disciplinary organization of the sciences. They found that the relational scientific backbone of ecological economics comprises 7 main journals: American Journal of Agricultural Economics, Ecological Economics, Environment and Development Economics, Environmental and Resources Economics, Land Economics, Land Use Policy, and Journal of Environmental Economics and Management. From the 3727 articles published between 2005 and 2010 in the ecological economics field, and the corresponding 142 thousand citations two main outcomes emerged: 1) the intellectual frame of reference is overwhelmed by economists and environmental and resources economists with (renowned) ecological economists relatively underrepresented; 2) the building of an integrative knowledge domain is not apparent: on the one hand, ecological economics is seen to be an 'unbound' heterodox and multidisciplinary field, but on the other hand, and somewhat awkwardly, it is (still) heavily 'bound' by quantitative mainstream/ orthodox methodologies.
    Keywords: ecological economics,philosophy of science,bibliometrics
    JEL: C18 C8 Y10 Q57
    Date: 2015
  9. By: Akira Inoue (Ritsumeikan University); Kazumi Shimizu (Waseda University); Yoshiki Wakamatsu (Gakushuin University); Daisuke Udagawa (Hannan University)
    Abstract: Sunstein and Thaler’s theory aims to justify libertarian paternalism (LP), a particular version of paternalism which is in favor of policies that nudge people to choose in their own welfare-promoting direction. A normative ground of their theory for LP lies in understanding that human beings are devoid of rational capacities, as has been illuminated by many findings in cognitive psychology and behavioral economics. With this in hand, their theory goes so far as to endorse libertarian benevolence (LB), which is in favor of policies that nudge people to choose in a direction of promoting the welfare of third parties. In this paper, we examine whether this theory is broad enough so that LB can complement LP. To do so, we show the significance in their theory of a necessary (but implicitly presumed) condition for the LP- and LB-relevant cases, the condition of convergence. Since this condition is not easily met, the LP-relevant cases and especially the LB-relevant cases are much more limited than Sunstein and Thaler presume; the case of organ donation they regard as a typical LB-relevant case is exceptional. This seems a serious problem with Sunstein and Thaler’s theory, since it is meant to have a broad scope in such a way that nudges can reasonably be applied to some LB cases.
    Date: 2015–07
  10. By: Michael Kopsidis (Leibniz Institute of Agricultural Development in Transition Economies (Halle / Germany)); Martin Ivanov (Department of Philosophy, Sofia University)
    Abstract: The classical view of BulgariaÕs failed industrialization prior to the Second World War was established by Alexander Gerschenkron. According to his interpretation, an inherently backward small peasant agriculture and well-organized peasantry not only retarded growth in agriculture but obstructed any possible industrialization strategy. Following Hayami and Ruttan, we utilize the decomposition of farm labor productivity into land productivity, and land-to-man ratio to analyze the sources of growth in BulgariaÕs agriculture 1887-1939. Our results show that BulgariaÕs peasants did cross the threshold to modern growth during the Interwar period. Rich qualitative evidence supports the findings of our quantitative analysis that contrary to GerschenkronÕs view and conventional wisdom, BulgariaÕs peasants substantially contributed to the modernization of BulgariaÕs economy and society. We interpret our results in light of modern development economics, and conclude that agriculture formed no impediment to BulgariaÕs industrialization. The reasons that a Ôlarge industrial spurtÕ did not occur in Bulgaria until 1945 are not to be found in the agricultural sector.
    Keywords: Bulgaria, agricultural productivity, peasant agriculture, industrialization
    JEL: N53 N54 N13 N14 O13
    Date: 2015–07
  11. By: Tomáš R. Zeithamer (University of Economics, Prague, Faculty of Informatics and Statistics, Department of Mathematics)
    Abstract: The paper focuses on factual research in bibliographic and biographical databases showing that representatives of the Czech School of Economics took a leading role in the methodological use of applied and theoretical physics in the basic economic research, especially in the second half of the twentieth century.The linear and non-linear analytical structures of theoretical physics are compared with the analytical structures of commodity price theory in a market with nearly perfect competition. Newton´s equations of motion for the non-relativistic speed of instantaneous relative depreciation and instantaneous relative commodity prices over time are analyzed. Assuming that the market value of a commodity is fully determined exclusively by the value of the instantaneous commodity price, the price jerk equation acquires a form corresponding to the non-relativistic equation for jerk in mechanics, following from Newton´s second law of motion. In this paper price jounce and price crackle are defined.
    Keywords: Instantaneous relative depreciation, Newton´s laws of motion, market value, nearly perfect competition, price jerk, price jounce, price crackle
    JEL: A12 C65
  12. By: Berardino Cesi (DEF, University of Rome "Tor Vergata"); Walter Ferrarese (DEDI, University of Rome "Tor Vergata")
    Abstract: We show that in an infinitely repeated Cournot game when firms adopt stick and carrot strategies exogenous horizontal mergers are profitable regardless the size of the merged entity. We characterize an equilibrium in which the new entity maximizes its discounted intertemporal profit under the constraint that each outsider produces just enough to be better off after the merger. Once the merger has occurred each insider gains more than each outsider, therefore the insider's dilemma is completely solved.
    Keywords: Insider's dilemma, horizontal mergers, repeated games, stick and carrot strategy
    JEL: L11 L12
    Date: 2015–07–14
  13. By: Ariane TICHIT (Centre d'Etudes et de Recherches sur le Développement International(CERDI))
    Abstract: This article analyzes the social representations of money from survey data. More specifically, it tests how holders of a complementary currency project have a distinct perception of money compared to other citizens. The main results confirm the existence of significant differences between the two groups. The structure of their representations shows that money is less tied to official institutions, the symbol of the sovereign State, to work and wages than for the representative population group. This confirms a number of theoretical works that see these social innovations as protest projects of the standard system, questioning the sovereignty State currency and close to the concepts of unconditional income. Local currencies, by differences in social representations they contain, could well be generators of societal change.
    Keywords: social representations of money, survey data, Abric method, complementary currencies
    JEL: E42 D71
    Date: 2015–06
    Abstract: Crises have become one of the central concepts in macroeconomic policy issues for almost one century. Because it is crystal clear that the crises’ effects last at least a few years, then the recovery period lags behind. On the other hand, since the existing policies do not respond to the crisis, a new branch of economic school of thought arises or the existing one rises up again. After the Great Depression, Keynesian policies came forward causing the post-World War II era to be known as the ‘Golden Age of Capitalism’. But soon were tides to change. After the oil-price shocks, Monetarist school arose. The 1970s experienced the rise of the neo-liberal transformation, liberalization and rise of financial markets. Financial activity spread eventually everywhere as never before after this liberation movement. In addition to this, technological development occurred in financial services and more sophisticated and new financial instruments were produced in the financial sector. Gains in the financial sector increased and it captured power of industry sector. Neo-classical synthesis and the Efficient Market Hypothesis came to prominence. With all these, however, the global economy experienced another crisis named ‘The Great Recession’. Then, appropriate macroeconomic policy issues came to mind. Therefore, the paper argues that which directions of the economic schools of thought arose or came forward after the Great Recession.
    Keywords: Crises, the great recession, economic schools of thought
    JEL: A10 B22 G01
  15. By: Miles Kimball; Ryan Nunn; Dan Silverman
    Abstract: Reported happiness provides a potentially useful way to evaluate unpriced goods and events; but measures of subjective well-being (SWB) often revert to the mean after responding to events, and this hedonic adaptation creates challenges for interpretation. Previous work tends to estimate time-invariant effects of events on happiness. In the presence of hedonic adaptation, this restriction can lead to biases, especially when comparing events to which people adapt at different rates. Our paper provides a flexible, extensible econometric framework that accommodates adaptation and permits the comparison of happiness-relevant life events with dissimilar hedonic adaptation paths. We present a method that is robust to individual fixed effects, imprecisely-dated data, and permanent consequences. The method is used to analyze a variety of events in the Health and Retirement Study panel. Many of the variables studied have substantial consequences for subjective well-being - consequences that differ greatly in their time profiles.
    JEL: C1 D6 I31
    Date: 2015–07
  16. By: Janneke Plantenga
    Abstract: So far, the economic case for gender equality and female empowerment has gained stronger attention in the case of developing countries where women have far less rights and opportunities compared to developed ones. Hence, the grounds supporting gender equality have been much stronger and much more researched in the former. In developed countries, although there are still large differences in labour force participation, income and power, there is at least a growing equality in opportunity, making it less easy to analyse the existing gender inequality in terms of restrictions which need to be lifted in order to reach a fair and efficient division of work. This paper offers a review of the literature on the economics of gender equality by way of organising it along three propositions and two questions. This way it is possible to combine very different strands of literature, ranging from rather formal explorations within theoretical micro-economics, to more empirically oriented macro-economic research on economic growth, and rather heterodox contributions from feminist economics, illustrating the richness of the debate and the different positions that can be taken.
    Date: 2015–07
  17. By: Boudreau, James W.; Shunda, Nicholas
    Abstract: We analyze the determinants of tacit collusion in an infinitely repeated contest with noise in the contest success function. Sustaining collusion via Nash reversion strategies is easier the more noise there is, and is more difficult the larger is the contest's prize value. An increase in the contest's number of players can make sustaining collusion either more or less difficult.
    Keywords: Contest, Conflict, Collusion, Noise
    JEL: C72 C73 D72 D74
    Date: 2015–07–17
  18. By: Steg, Jan-Henrik (Center for Mathematical Economics, Bielefeld University)
    Abstract: We construct subgame-perfect equilibria with mixed strategies for symmetric stochastic timing games with arbitrary strategic incentives. The strategies are qualitatively different for local first- or second-mover advantages, which we analyse in turn. When there is a local second-mover advantage, the players may conduct a war of attrition with stopping rates that we characterize in terms of the Snell envelope from the general theory of optimal stopping, which is very general but provides a clear interpretation. With a local first-mover advantage, stopping typically results from preemption and is abrupt. Equilibria may differ in the degree of preemption, precisely at which points it is triggered. We provide an algorithm to characterize where preemption is inevitable and to establish the existence of corresponding payoff-maximal symmetric equilibria.
    Keywords: Stochastic timing games, mixed strategies, subgame perfect equilibrium, Snell envelope, optimal stopping
    Date: 2015–07–17
  19. By: Francesca BUSETTO (Università degli Studi di Udine, Dipartimento di Scienze Economiche e Statistiche); Giulio CODOGNATO (Università degli Studi di Udine, Dipartimento di Scienze Economiche e Statistiche); Sayantan GHOSSAL (University of Warwick, Department of Economics)
    Abstract: In this paper, we reconstruct the main developments of the theory of noncooperative oligopoly in general equilibrium by focusing on the analysis of three prototypical models for pure exchange economies: the Cournot-Walras equilibrium model of Codognato and Gabszewicz (1991), the Cournot-Nash equilibrium model originally proposed by Lloyd S. Shapley and known as the “window†model, and the Cournot-Walras equilibrium model of Busetto et al. (2008). We establish in a systematic manner the relationship between the three notions of equilibrium proposed in these models and the notion of Walras equilibrium. We then investigate the relationships linking these three notions of equilibrium.
    Keywords: Noncooperative oligopoly, Cournot-Walras equilibria, Cournot-Nash equilibria
    JEL: C72 D51
    Date: 2013–12–01
  20. By: Matthias Kräkel
    Abstract: In a multi-agent setting, individuals often compare own performance with that of their peers. These comparisons in?uence agents? incentives and lead to a noncooperative game, even if the agents have to complete independent tasks. I show that depending on the interplay of the peer effects, agents?efforts are either strategic complements or strategic substitutes. I solve for the optimal monetary incentives that complement the peer effects and show that the principal prefers sequential effort choices of the agents to choosing efforts simultaneously.
    Keywords: externalities, moral hazard, other-regarding preferences
    JEL: C72 D03 D86
    Date: 2014–10
  21. By: Javad Nikmoeen (Shahrekord University of Medical Sciences)
    Abstract: Soft power is the ability to influence the behavior of others to achieve the desired results through attraction rather than enforcement or enticement.Joseph Nye, from Harvard University for the first time in 1990 in a book, entitled The Changing Nature of American Power spoke of America's soft power and explained the difference between the soft power and hard military and economic power and the reason that soft power is becoming more & more important than ever. In his book soft power: the means to success in world politics he developed the concept of soft power and mentioned culture, political values and foreign policy as soft power resources.In June 20th, 2010 at the opening session of the Parliamentary of Great Britain in his speech titled "Soft power and public diplomacy in the 21st century" he mentioned: the importance of addresser’s point of view, culture, economic resources, military power & government’s strategy as soft power resources. Also right now most of the governments are strengthening & expanding these resources for the increase of influence in the leading others behavior’s to reach the desired result internationally. The main question of this paper is: Are the governments capable of increasing their soft power internationally by taking the advantage of mentioned resources? Research hypothesis is that states without social cohesion aren’t capable of being attractive for other states and nations and will not be able to impose or extend their soft power. In fact, social cohesion is prerequisite for use of the soft power resources in the global scale.A society which discrimination and inequality, gap of labors and injustice, lack of public assistance and cooperation, distrust to governors, different values and unethical behaviors have domination in it and Comfort, hope, dynamism, human dignity and public satisfaction are disappeared from it, can not be attractive to other nations. The importance and role of social cohesion is high enough to be identified as a source of soft power.
    Keywords: soft power resources, social cohesion, international relations
  22. By: Stefan Schleicher
    Abstract: By responding to the warning voices about the failure of mainstream economics to provide policy advice to seemingly well-known problems as manifest in the ongoing economic crises, we put forward the proposition that the majority of deficiencies in this discipline results from two self-imposed restrictions. The first restriction refers to the limited scope in the perception of economic activities by focusing mainly on reproducible goods (including services) and a very few resources, as human capital and by production reproducible capital. The second restriction results from the interwoven relationships that describe economic structures and the coordinating mechanisms which operate on these structures by postulating market relationships that quite often turn out to be too simplistic or non-existing. We propose therefore two conceptual extensions. The first extension opens up the scope of economic activity both by introducing the functionalities of well-being and an extended list of stocks and flows of resources. The second extension separates the description of economic structures from the mechanisms that operate on them, which may be market or non-market based. Furthermore we will demonstrate how these extensions can be made operational in the context of analyzing the transition of energy systems.
    Date: 2015–07
  23. By: Joseph E. Stiglitz
    Abstract: This paper considers two central problems in our statistical frameworks which impair the ability to use wealth to assess economic sustainability or the impacts of economic downturns. Some increases in wealth may reflect increased economic rents—in particular, land and exploitation rents—and their capitalized value, unrelated to an increase in the productive capacity of the economy. Another major problem in our wealth accounts is the “missing capital” required to explain the marked decrease in economic output, at the time of the recession and in the years following, that cannot be fully accounted for by a decrease in measured inputs. When account is taken of this missing capital, the adverse effects of austerity appear much greater than suggested by the standard national income accounts.
    JEL: D31 E21 E22
    Date: 2015–07
  24. By: Leeper, Eric M. (Indiana University and NBER); Nason, James M. (zNorth Carolina State University and CAMA)
    Abstract: This paper arms central bank policy makers with ways to think about interactions between financial stability and monetary policy. We frame the issue of whether to integrate financial stability into monetary policy operating rules by appealing to the observation that in actual economies financial markets are incomplete. Incomplete markets create financial market frictions that prevent economic agents from perfectly sharing risk; in the absence of frictions, financial (in)stability would be of no concern. Overcoming these frictions to improve risk sharing across economic agents is, in our view, the intent of policies geared toward ensuring financial stability. There are many definitions of financial stability. Although the definitions share the notion that financial stability becomes an issue for policy makers when a breakdown in risk-sharing arrangements in financial markets has a negative effect on real economic activity, we give several examples that show this notion is too general for thinking about the role monetary policy might have in smoothing shocks to financial stability. Examples include statistical models that seek to separate “good” from “bad” changes in private-sector debt ag- gregates, new Keynesian policy prescriptions grounded in neo-Wicksellian natural rate rules, and a historical episode involving the 1920s Federal Reserve. These examples raise a cautionary flag for policy attempts to control the growth and the composition of debt that financial markets produce. We conclude with some advice for revising central banks’Monetary Policy Reports.
    Keywords: Financial frictions; incomplete markets; crises; new Keynesian; natural rate; monetary transmission mechanism
    JEL: E30 E40 E50 E60 G20 N12
    Date: 2015–07–01

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