nep-hpe New Economics Papers
on History and Philosophy of Economics
Issue of 2015‒08‒13
thirty-two papers chosen by
Erik Thomson
University of Manitoba

  1. On Britain’s Return to the Gold Standard: was there a ‘Pigou-McKenna School’? By Rogério Arthmar; Michael McLure
  2. Differential Games with (A)symmetric Players and Heterogeneous Strategies By Benteng Zou
  3. The Superiority of Economists By Marion Fourcade; Etienne Ollion; Yann Algan
  4. Mate Choice Mechanism for Solving a Quasi-Dilemma By Tatsuyoshi SAIJO; Junyi SHEN
  5. Credit, Indebtedness, and Speculation in the Marxian Paradigm: A Critical Analysis By Miguel Ramirez
  6. What is a minimum wage for? Empirical results and theories of justice By David Green
  7. Sraffa and the Labour Theory of Value - a note By Anderaos de Araujo, Fabio
  8. Who knows it is a game? On strategic awareness and cognitive ability By Fehr, Dietmar; Huck, Steffen
  9. Institutional Dynamics Under Revenue Volatility and Revenue-Dependent Lobbying Power: A Stochastic Differential Game Approach By Raouf Boucekkine; Fabien Prieur; Benteng Zou
  10. The symmetric equilibria of symmetric voter participation games with complete information By Nöldeke, Georg; Peña, Jorge
  11. Pigou, a Loyal Marshallian? By Karen Knight
  12. Financial Stability and Monetary Policy By Martin Hellwig
  13. The Impact of Monitoring in Infinitely Repeated Games: Perfect, Public, and Private By Masaki Aoyagi; V. Bhaskar; Guillaume R. Frechette
  14. A theory of knockout tournament seedings By Karpov, Alexander
  15. Multiculturalism and Moderate Secularism By Tariq Modood
  16. The Telegraph and the Bank: On the Interdependence of Global Communications and Capitalism, 1866-1914 By Simone M. Müller; Heidi J S Tworek
  17. Habit, Prisoner’s Dilemma and Americans’ Welfare Cost of Working Much More than Europeans By Maurice Schiff
  18. The past, present and future of banking history By Colvin, Christopher L.
  19. Dinner with Bayes: On the Revision of Risk Beliefs By Hammitt, James; Rheinberger, Christoph
  20. Market games as social dilemmas By Iván Barreda-Tarrazona; Aurora García-Gallego; Nikolaos Georgantzis; Nicholas Ziros
  21. A theory of wage setting behavior By Marco Fongoni; Alex Dickson
  22. Politics in the interest of capital: A not-so-organized combat By Woll, Cornelia
  23. How Market Economies Come to Live and Grow on the Edge of Chaos By Dominique, C-Rene
  24. Globalisation and Conflicts: A Theoretical Approach By Bonginkosi Mamba; André C Jordaan; Matthew Clance
  25. Means testing versus basic income: the (lack of) political support for a universal allowance By Cremer, Helmuth; Roeder, Kerstin
  26. Games Played on Networks By Yann Bramoullé; Rachel Kranton
  27. Economic theory and forecasting: lessons from the literature By Raffaella Giacomini
  28. The Power of (Non) Positive Thinking: Self-Employed Pessimists Earn More than Optimists By Dawson, Christopher; de Meza, David Emmanuel; Henley, Andrew; Arabsheibani, Reza
  29. Real and financial crises in the Keynes-Kalecki structuralist model: An agent-based approach By Bill Gibson; Mark Setterfield
  30. Capital Depreciation and Labor Shares Around the World: Measurement and Implications By Brent Neiman; Loukas Karabarbounis
  31. On the (in)compatibility of rationality, monotonicity and consistency for cooperative games By Calleja, Pere; Llerena Garrés, Francesc
  32. Eighteenth-century international trade statistics: Sources and methods By Loïc Charles; Guillaume Daudin

  1. By: Rogério Arthmar (Department of Economics, Universidade Federal do Espírito Santo, Vitória, Brazil); Michael McLure (Business School, University of Western Australia)
    Abstract: On 17 March 1925, Britain’s Chancellor of the Exchequer, Winston Churchill, held what is now regarded as a famous dinner with Sir Reginald McKenna, John Maynard Keynes, Sir John Bradbury and Sir Otto Niemeyer to discuss the merits, or otherwise, of Britain returning to the gold standard. Following that dinner, it has become popular to refer to the ‘Keynes-McKenna school’, with those two men being characterised as the ‘antagonists’ to the proposal for Britain to return to gold. However, in light of A. C. Pigou’s reading of McKenna’s evidence to the 1924-25 Chamberlain-Bradbury Committee, and Pigou’s September 1924 draft of that Committee’s report, it is evident that Pigou’s views on the subject largely aligned with those of McKenna. As a result, it is suggested in this paper that historical reference to the ‘Pigou-McKenna school’ as a school of thought that was supportive of Britain returning to the gold standard in principle, but not supportive of doing so prematurely, is a meaningful notion – and perhaps more meaningful than reference to the ‘Keynes-McKenna school’, which incorrectly implies that McKenna was opposed to Britain returning to the gold standard.
    Date: 2015
  2. By: Benteng Zou (CREA, Université de Luxembourg)
    Abstract: One family of heterogeneous strategies in differential games with (a)symmetric players is developed in which one player adopts an anticipating open-loop strategy and the other adopts a standard Markovian strategy. Via conjecturing principle, the anticipating open-loop strategic player plans her strategy based on the possible updating the rival player may take. These asymmetric strategies frame nondegenerate Markovian Nash Equilibrium, which could be subgame perfect for autonomous system with infinite time horizon. Except the stationary path, this kind of strategy makes the study of short-run trajectory possible, which usually are not subgame perfect. However, the short-run non-perfection provides very important policy suggestions. Differential game, Heterogeneous strategy, subgame perfect Markovian Nash Equilibrium, anticipating open-loop strategy
    JEL: C73 C72
    Date: 2015
  3. By: Marion Fourcade (University of California, Berkeley); Etienne Ollion (Université de Strasbourg); Yann Algan (Département d'économie)
    Abstract: In this essay, we analyze 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 their confidence 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.
    Keywords: Economist; Social science network; Field supremacy
    JEL: A11 A22 I23 J44
    Date: 2015
  4. By: Tatsuyoshi SAIJO (Research Center for Social Design Engineering, Kochi University of Technology); Junyi SHEN (Research Institute for Economics & Business Administration (RIEB), Kobe University, Japan)
    Abstract: Saijo, Okano, and Yamakawa (2014) showed that the mate choice mechanism for a symmetric prisoner's dilemma (PD) game implements cooperation in backward elimination of weakly dominated strategies (BEWDS), and it attained almost full cooperation in their experiment. First, this study shows that the mechanism works well in the class of quasi-dilemma (QD) games such as asymmetric PD games and coordination games. Second, the class of BEWDS- implementable games is exactly the same as the class of QD games. Third, the mechanism cannot implement cooperation in a subgame perfect equilibrium. Finally, we confirm that the mate choice mechanism works well experimentally for an asymmetric PD game.
  5. By: Miguel Ramirez (Department of Economics, Trinity College)
    Abstract: This paper contends that, in Chapters XVII, XXIX, XXX, and XXXI of Volume III of Capital, Marx develops an incisive conceptual framework in which excessive credit creation, indebtedness, and speculation play a critical and growing role in the reproduction of social capital on an extended basis; however, given the decentralized and anarchic nature of capitalist production, the credit system does so in a highly erratic and contradictory manner which only postpones the inevitable day of reckoning. The paper also highlights Marx’s relatively neglected but highly important analysis of the separation of ownership from management in the advanced capitalism of his day, England, and its modern-day implications for excessive risk-taking and debt-fueled speculation up until the eve of the crash. More importantly, the paper argues that in Vols. II and III Marx implicitly connected the expanding role of credit [which he associated with the development of capitalism] to a significant reduction in the turnover period of capital, thereby boosting the rate of surplus-value, and countering in a highly erratic and contradictory manner, the fall in the rate of profit. The growing role of credit has been relatively ignored in the Marxian literature as an important counteracting factor to the law of the declining rate of profit. It is not mentioned at all by Marx in his famous Chp. XIV, Vol. III of Capital where he discusses other important counteracting forces, nor by Engels [in this particular context] who edited both Vols. II and III.
    JEL: B10 B14 B24
    Date: 2015–07
  6. By: David Green (Institute for Fiscal Studies and University of British Colombia)
    Abstract: I undertake a political economy exercise of a type described in John Rawls' A Theory of Justice; namely, one in which economic institutions are judged by how well they match the key principles in theories of distributive justice. My main contention is that such an exercise is integrally related not only to economics in general but to empirical economics in particular. I argue that most standard theories of justice place a large weight on self and social respect and that such respect has a lot to do with the position a person holds in the productive process - their wage and employment outcomes. That, in turn, means that assessments of justice in the real world hinge critically on how labour markets actually function in assigning wages and employment. The answers to these questions are ultimately empirical. I explore these ideas by examining one particular institution (the minimum wage) in relation to a set of the most prominent recent theories of distributive justice. This exercise leads to a different emphasis on what minimum wage related outcomes need study, and to a claim that minimum wage setting is related to standards of fairness.
    Date: 2014–10
  7. 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. Three 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. Appendix II 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. The third appendix regards a numerical example of changes in technical progress and its effects on distribution of income. There is also a fourth appendix on the inclusion of rent and interest in Sraffa's price system. This is revised version of the original paper written few years ago.
    Keywords: Sraffa, labour theory of value, Standard Commodity, prices of production, income distribution
    JEL: A1 A2
    Date: 2015–08–01
  8. By: Fehr, Dietmar; Huck, Steffen
    Abstract: We introduce the notion of strategic awareness in experimental games which captures the idea that subjects realize they are playing a game and thus have to form beliefs about others' actions. The concept differs from both, rule understanding and rationality. We then turn to experimental evidence from a beauty contest game where we elicit measures of cognitive ability and beliefs about others' cognitive ability. We show that the effect of cognitive ability is highly non-linear. Subjects' behavior below a certain threshold choose numbers in the whole interval and does not correlate with beliefs about others ability. In contrast, choices of subjects who exceed the threshold avoid choices above 50 and react very sensitively to beliefs about others' cognitive ability.
    Abstract: In diesem kurzen Artikel führen wir das Konzept von strategic awareness in Experimenten ein. Dieses neue Konzept beschreibt die Fähigkeit von Experimentteilnehmer, strategische Situationen zu erkennen und daher Erwartungen über das Verhalten von anderen zu bilden. Das Konzept unterscheidet sich sowohl von Rationalität als auch vom bloßen Verstehen von den Regeln eines Experiments. Wir demonstrieren das Konzept empirisch mit Hilfe von Daten eines Beauty Contest Games, in dem wir die kognitiven Fähigkeiten der Teilnehmer und ihre Einschätzungen über die kognitiven Fähigkeiten der anderen Teilnehmer erheben. Die Resultate zeigen, dass kognitive Fähigkeiten einen starken nicht-linearen Effekt auf die Entscheidungen in dem Beauty Contest Game haben. Das Verhalten von Experimentteilnehmer, die unter einer bestimmten Schwelle liegen, kann nicht von zufälligen Entscheidungen unterschieden werden und korreliert auch nicht mit deren Einschätzung über die kognitiven Fähigkeiten der anderen Teilnehmer. Im Gegensatz dazu vermeiden Teilnehmer, die über dieser Schwelle liegen, dominierte Entscheidungen und basieren ihre Entscheidungen auf ihrer Einschätzung über die kognitiven Fähigkeiten der anderen Teilnehmer.
    Keywords: strategic awareness,cognitive ability,beauty contest
    JEL: C7 C9 D0
    Date: 2014
  9. By: Raouf Boucekkine (Aix-Marseille University (Aix-Marseille School of Economics), CNRS and EHESS); Fabien Prieur (INRA-LAMETA and University of Montpellier); Benteng Zou (CREA, University of Luxembourg)
    Abstract: We propose an analysis of institutional dynamics under uncertainty by the means of a stochastic differential lobbying game with two main ingredients. The first one is uncertainty inherent in the institutional process itself. The second one has to do with the crucial role of resource windfalls in economic and political outcomes, shaping lobbying power and adding a second source of uncertainty. First, we focus on uncertainty surrounding the institutional process only and show that its main consequence is the existence of multiple equilibria with very distinct features: symmetric equilibria which lead the economy to reach almost surely a stable pointwise institutional steady state in the long run even in the absence of the retaliation motive put forward by the deterministic lobbying literature, and asymmetric equilibria which only show up under uncertainty and do no allow for stochastic convergence to a steady state. Second, when accounting for the two sources of uncertainty together with resource revenue-dependent lobbying power, we show that revenue volatility tends to stabilize institutional dynamics compared to the deterministic counterpart.
    Keywords: institutional dynamics, lobbying games, state-dependent lobbying power, revenue volatility, stochastic differential games
    JEL: D72 C61 C63
    Date: 2015–07
  10. By: Nöldeke, Georg; Peña, Jorge
    Abstract: We characterize the symmetric Nash equilibria of the symmetric voter participation game with complete information introduced by Palfrey and Rosenthal (1983). Our results confirm their conjecture on the existence, multiplicity, and comparative statics of such equilibria and yield more precise information on how changes in team size affect the location of equilibria.
    Keywords: costly voting; mixed strategy equilibrium; participation games; polynomials in Bernstein form
    JEL: C72 D72
    Date: 2015–07
  11. By: Karen Knight (Business School, University of Western Australia)
    Abstract: This paper considers conceptions of A.C. Pigou as a “Marshallian” economist which have appeared in the literature. The specific objective of this paper is to identify differing perceptions of Pigou as a Marshallian by: identifying the key areas where scholars have perceived a certain continuity between Pigou’s work and Marshallian thought; identifying the key areas where scholars have perceived a certain discontinuity between Pigou’s work and Marshallian thought; and to reflect more systematically on the major characteristics scholars have attributed to the Cambridge School in its Marshallian form.
    Date: 2015
  12. By: Martin Hellwig (Max Planck Institute for Research on Collective Goods)
    Abstract: The paper gives an overview over issues concerning the role of financial stability in monetary policy. Historically, financial stability has figured highly among central banks’ objectives, with policy measures ranging from interest rate stabilization to serving as a lender of the last resort. With the ascent of macroeconomics, these traditional tasks of central banks have been displaced by macroeconomic objectives, price stability, full employment, growth. The financial crisis has shifted the focus back to financial stability concerns. Along with these developments, the shift from a specie standard to a pure fiat money system has widened the scope for central bank policies, which are no longer constrained by legal obligations attached to central bank money. The paper first surveys the evolution of financial-stability and macroeconomic-stability concerns in central banking and monetary policy. Then it discusses two major challenges: (i) What should be done to assess the relevance of financial stability concerns in any given situation? How should one deal with the fact that systemic interdependence takes multiple forms and is changing all the time and that many contagion risks cannot be measured? (ii) What is the relation between financial-stability and macroeconomic-stability objectives? To what extent do they coincide, to what extent are they in conflict? How should tradeoffs be handled and what can be done to reduce the risk of the central bank’s succumbing to financial dominance?
    Keywords: financial stability, Systemic Risk, monetary policy, central banking
    JEL: E58 E44 E42 E52
    Date: 2015–10
  13. By: Masaki Aoyagi; V. Bhaskar; Guillaume R. Frechette
    Abstract: This paper uses a laboratory experiment to study the effect of a monitoring structure on the play of the infinitely repeated prisoner's dilemma. Keeping the stage game fixed, we examine the behavior of subjects when information about past actions is perfect (perfect monitoring), noisy but public (public monitoring), and noisy and private (private monitoring). We find that the subjects sustain cooperation in every treatment, but that their strategies differ substantially in the three treatments. Specifically, we observe that the strategies are more complex under public and private monitoring than under perfect monitoring. We also find that the strategies under private monitoring are more lenient than under perfect monitoring, and less forgiving than under public monitoring.
    Date: 2015–07
  14. By: Karpov, Alexander
    Abstract: This paper provides nested sets and vector representations of knockout tournaments. The paper introduces classification of probability domain assumptions and a new set of axioms. Two new seeding methods are proposed: equal gap seeding and increasing competitive intensity seeding. Under different probability domain assumptions, several axiomatic justifications are obtained for equal gap seeding. A discrete optimization approach is developed. It is applied to justify equal gap seeding and increasing competitive intensity seeding. Some justification for standard seeding is obtained. Combinatorial properties of the seedings are studied.
    Keywords: elimination tournament; competitive intensity; fairness; economics of sport.
    Date: 2015–08–05
  15. By: Tariq Modood
    Abstract: What is sometimes talked about as the ‘post-secular’ or a ‘crisis of secularism’ is, in Western Europe, quite crucially to do with the reality of multiculturalism. By which I mean not just the fact of new ethno-religious diversity but the presence of a multiculturalist approach to this diversity, namely: the idea that equality must be extended from uniformity of treatment to include respect for difference; recognition of public/private interdependence rather than dichotomized as in classical liberalism; the public recognition and institutional accommodation of minorities; the reversal of marginalisation and a remaking of national citizenship so that all can have a sense of belonging to it. I think that equality requires that this ethno-cultural multiculturalism should be extended to include state-religion connexions in Western Europe, which I characterise as ‘moderate secularism’, based on the idea that political authority should not be subordinated to religious authority yet religion can be a public good which the state should assist in realising or utilising. I discuss here three multiculturalist approaches that contend this multiculturalising of moderate secularism is not the way forward. One excludes religious groups and secularism from the scope of multiculturalism (Kymlicka); another largely limits itself to opposing the ‘othering’ of groups such as Jews and Muslims (Jansen); and the third argues that moderate secularism is the problem not the solution (Bhargava).
    Keywords: Moderate Secularism, Multiculturalism, Muslims in Western Europe
    Date: 2015–07
  16. By: Simone M. Müller; Heidi J S Tworek
    Abstract: This article uses the example of submarine telegraphy to trace the interdependence between global communications and modern capitalism. It uncovers how cable entrepreneurs created the global telegraph network based upon particular understandings of cross-border trade, while economists such as John Maynard Keynes and John Hobson saw global communications as the foundation for capitalist exchange. Global telegraphic networks were constructed to support extant capitalist systems until the 1890s, when states and corporations began to lay telegraph cables to open up new markets, particularly in Asia and Latin America, as well as for strategic and military reasons. The article examines how the interaction between telegraphy and capitalism created particular geographical spaces and social orders despite opposition from myriad Western and non-Western groups. It argues that scholars need to account for the role of infrastructure in creating asymmetrical information and access to trade that have continued to the present day.
  17. By: Maurice Schiff
    Abstract: Europeans work much less than Americans. Some studies claim this is due to high taxes in Europe, which would benefit by adopting US tax rates and work time; others find that taxes have little or no impact on work time. I examine the hypothesis that Americans would benefit by reducing work time to Europe’s level. Empirical and experimental studies show utility falls as other people’s income rises. Due to its historical experience, Europe is able to internalize this and other negative externalities by restricting work time – through minimum vacation time and maximum weekly work hours – while the US is not, resulting in a Prisoner’s Dilemma “overworking trap” equilibrium. A simple model and work time data are used to derive the US welfare gain from reducing work time to Europe’s level. Findings are: i) parameter values are consistent with experimental results on the relative impact of own and other people’s income; ii) the welfare gain’s present value is about 120 percent of annual welfare; and iii) even if Europe's policy reduces work time excessively, it does remain beneficial as long as the reduction is less than twice the optimal one.
    Keywords: Work, leisure, Europe, US, prisoner’s dilemma, overworking trap
    JEL: J22 D70
    Date: 2015–02
  18. By: Colvin, Christopher L.
    Abstract: This essay discusses trends in new banking history scholarship. It does so by conducting bibliometric content analysis of the entire literature involving the history of banks, bankers and banking published in all major academic journals since the year 2000. It places this recent scholarship in its historiographical context, and speculates on the future of the field.
    Keywords: banking history,bibliometrics
    JEL: N20 N21 N22 N23 N24 N25
    Date: 2015
  19. By: Hammitt, James; Rheinberger, Christoph
    JEL: D80 I12 I18
    Date: 2015–05
  20. By: Iván Barreda-Tarrazona; Aurora García-Gallego; Nikolaos Georgantzis; Nicholas Ziros
    Abstract: We study an experimental exchange market based on Shapley and Shubik (1977). Two types of players with different preferences and endowments independently submit quantities of the goods they wish to exchange in the market. We implement a case in which the Nash equilibrium involves minimum exchange or no trade at all. This is almost never confirmed by our laboratory data. On the contrary, after a sufficiently large number of periods, convergence close to full trade is obtained, which can be supported as an epsilon symmetric strategy evolutionary stable equilibrium. We also study cheap talk communication within pairs of traders from the same (horizontal) and opposite (vertical) sides of the market. As predicted by the theory, horizontal communication restricts trade, whereas vertical communication leads to higher bids, but always lower or equal than those achieved tacitly by learning alone. Vertical messages limit the collusive effect of horizontal communication when the former precede the latter. Results do not differ when players are allowed to choose the communication mode.
    Keywords: Efficiency, strategic market games, experiments, vertical communication, horizontal communication.
    Date: 2015–08
  21. By: Marco Fongoni (Department of Economics, University of Strathyclyde); Alex Dickson (Department of Economics, University of Strathyclyde)
    Abstract: Concerns for fairness, workers' morale and reciprocity influence firms' wage setting policy. In this paper we formalize a theory of wage setting behavior in a simple and tractable model that explicitly considers these behavioral aspects. A worker is assumed to have reference-dependent preferences and displays loss aversion when evaluating the fairness of a wage contract. The theory establishes a wage-effort relationship that captures the worker's reference-dependent reciprocity, which in turn influences the firm's optimal wage policy. The paper makes two key contributions: it identifies loss aversion as an explanation for a worker's asymmetric reciprocity; and it provides realistic and generalized microfoundation for downward wage rigidity. We further illustrate the implications of our theory for both wage setting and hiring behavior. Downward wage rigidity generates several implications for the outcome of the initial employment contract. The worker's reference wage, his extent of negative reciprocity and the firms’ expectations are key drivers of the propositions derived.
    Keywords: reference dependence, loss aversion, morale, reciprocity, employment contract, downward wage rigidity, wage setting behavior
    JEL: C78 J30 J41
    Date: 2015–07
  22. By: Woll, Cornelia
    Abstract: The rise in inequality has been explained with reference to organized groups and the lobbying of the financial sector. This article argues that the image of politics as organized combat is contradicted by empirical evidence on lobbying in the United States, and does not travel well to Europe. The power of finance does not operate through organized political influence. Rather, politics in the interest of capital unfolds as a structural feature of advanced economies over time. Tellingly, at the height of the financial crisis, one of the most promising strategies of institutions seeking government support was not organizing for combat, but collective inaction. Our challenge, then, is to explain how the power of finance has built up and is playing out in creating inequality. A more structural, less agency-focused perspective highlights how the rise of finance has been supported by actors that few would accuse of being finance-friendly, such as the European center-left parties and consumers. Reconceptualizing the power of finance has important implications for political solutions to rising inequality.
    Date: 2015
  23. By: Dominique, C-Rene
    Abstract: Summary: In a Hayek-Friedman-Lucas world, market economies are assumed to be natural, stable, and ergodic; hence, government policies are harmful to their efficiency. We develop a nonlinear dissipative dynamic model that shows that market economies instead live on the edge of chaos. We next appeal to the theory of differential equation to show that if they do not usually dissipate the totality of the information produced by their evolution it is due to a far-off self-organized equilibrium brought about by a spontaneous phase change originating in an optimal government policy.
    Keywords: Keywords: Unstable manifolds, Lyapunov Spectrum, information dimension, metric entropy, edge of chaos, self-organized equilibria, endogenous growth.
    JEL: C61 C62 C65
    Date: 2015–08–04
  24. By: Bonginkosi Mamba (Department of Economics, University of Pretoria); André C Jordaan (Department of Economics, University of Pretoria); Matthew Clance (Department of Economics, University of Pretoria)
    Abstract: This paper is aimed at providing insights into the interplay between globalisation and conflicts through a theoretical literature review. The motivation is drawn from a large number of debates advocating globalisation as being a double edged sword. The main argument is drawn from the Liberal premise that globalization, through integration and economic interdependence dampens the likelihood of conflicts, whilst the opposite holds for Structuralist theorists. The key highlight from the study is that, different factors exist in determining the relationship between globalisation and conflicts hence furthering the study by means of conducting an evidence based research design is essential in interrogating and extending the current discourse.
    Keywords: Globalisation and Conflicts, Dyads Integration, Trade Agreements,Inter-State Wars, Intra-State Wars
    JEL: D74 F14 F18 F51 O19
    Date: 2015–08
  25. By: Cremer, Helmuth; Roeder, Kerstin
    Abstract: This paper studies the political economy of a basic income (BI) versus a means tested welfare scheme. We show in a very simple setting that if society votes on the type of system, its generosity as well as the “severity” of means testing (if any), a BI system could only emerge in the political equilibrium under very strong and empirically implausible conditions. Instead, the political process leads to a means tested system. The necessity to draw political support does affect the design of the system, but it only implies that means testing becomes less severe so that benefits are extended also to themiddle classes. However, a fully universal system is rejected by a majority.
    Keywords: Basic income, Means testing, Political support
    JEL: D3 D7 H2 H5
    Date: 2015–07
  26. By: Yann Bramoullé (Aix-Marseille University (Aix-Marseille School of Economics), CNRS & EHESS); Rachel Kranton (Duke University)
    Abstract: This chapter studies games played on fixed networks. These games capture a wide variety of economic settings including local public goods, peer effects, and technology adoption. We establish a common analytical framework to study a wide game class. We unearth new connections between games in the literature and in particular between those with binary actions, like coordination and best-shot games, and those with continuous actions and linear best replies. We review and advance existing results by showing how they tie together within the common framework. We discuss the game-theoretic underpinnings of key notions including Bonacich centrality, maximal independent sets, and the lowest and largest eigenvalue. We study the interplay of individual heterogeneity and the network and we develop a new notion - interdependence - to analyze how a shock to one agent affects the action of another agent. We outline directions for future research.
    Keywords: Network Games, fixed networks, peer effects, coordination, interdependence
    Date: 2015–03
  27. By: Raffaella Giacomini (Institute for Fiscal Studies and cemmap and UCL)
    Abstract: Does economic theory help in forecasting key macroeconomic variables? This article aims to provide some insight into the question by drawing lessons from the literature. The definition of "economic theory" includes a broad range of examples, such as accounting identities, disaggregation and spatial restrictions when forecasting aggregate variables, cointegration and forecasting with Dynamic Stochastic General Equilibrium (DSGE) models. We group the lessons into three themes. The first discusses the importance of using the correct econometric tools when answering the question. The second presents examples of theory-based forecasting that have not proven useful, such as theory-driven variable selection and some popular DSGE models. The third set of lessons discusses types of theoretical restrictions that have shown some usefulness in forecasting, such as accounting identities, disaggregation and spatial restrictions, and cointegrating relationships. We conclude by suggesting that economic theory might help in overcoming the widespread instability that affects the forecasting performance of econometric models by guiding the search for stable relationships that could be usefully exploited for forecasting.
    Date: 2014–09
  28. By: Dawson, Christopher (University of Bath); de Meza, David Emmanuel (London School of Economics); Henley, Andrew (Aberystwyth University); Arabsheibani, Reza (Swansea University)
    Abstract: Developing further the accumulating evidence that self-employment attracts optimists, this paper investigates the relationship between earnings and prior optimism. It finds that self-employed optimists earn less than self-employed realists. Amongst employees, optimists earn more. These results are consistent with biased expectations leading to entry errors. As a test of validity, we find that amongst the married, future divorcees have higher financial expectations but their realisations are no worse, suggesting our optimism measure captures an intrinsic psychological trait associated with rash decisions.
    Keywords: financial optimism, expectations, self-employment
    JEL: D84 M13
    Date: 2015–07
  29. By: Bill Gibson (University of Vermont); Mark Setterfield (Department of Economics, New School for Social Research)
    Abstract: Agent-based models are inherently microstructures - with their attention to agent behavior in a field context - and only aggregate up to systems with recognizable macroeconomic characteristics. One might ask why the traditional Keynes-Kalecki or structuralist (KKS) model would bear any relationship to the multi-agent modeling approach. This paper shows how KKS models might benefit from agent-based microfoundations, without sacricing traditional macroeconomic themes, such as aggregate demand, animal sprits and endogenous money. Above all, the integration of the two approaches gives rise to the possibility that a KKS system - stable over many consecutive time periods - might lurch into an uncontrollable downturn, from which a recovery would require outside intervention. As a by-product of the integration of these two popular approaches, there emerges a cogent analysis of the network structure necessary to bind real and financial agents into a integrated whole. It is seen, contrary to much of the existing literature, that a highly connected financial system does not necessarily lead to more crashes of the integrated system.
    Keywords: Systemic risk; crash; herding; Bayesian learning; endogenous money; preferential attachment; agent-based models.
    JEL: D58 E37 G01 G12 B16 C00
    Date: 2015–08
  30. By: Brent Neiman (University of Chicago); Loukas Karabarbounis (University of Chicago)
    Abstract: The labor share is typically measured as compensation to labor relative to gross value added ("gross labor share"), in part because gross value added is more directly measured than net value added. Labor compensation relative to net value added ("net labor share") may be more important in some settings, however, because depreciation is not consumed. In this paper we make three contributions. First, we document that gross and net labor shares generally declined together in most countries around the world over the past four decades. Second, we use a simple economic environment to show that declines in the price of capital necessarily cause gross and net labor shares to move in the same direction, whereas other shocks such as a decline in the real interest rate may cause the net labor share to rise when the gross labor share falls. Third, we illustrate that whether the gross or the net labor share is a more useful proxy for inequality during an economy's transition depends sensitively on the nature of the underlying shocks that hit the economy.
    Date: 2015
  31. By: Calleja, Pere; Llerena Garrés, Francesc
    Abstract: On the domain of cooperative transferable utility games, we investigate if there are single valued solutions that reconcile rationality, consistency and monotonicity (with respect to the worth of the grand coalition) properties. This paper collects some impossibility results on the combination of core selection with either complement or projected consistency, and core selection, max consistency and monotonicity. By contrast, possibility results show up when combining individual rationality, projected consistency and monotonicity.
    Keywords: Jocs cooperatius, 33 - Economia,
    Date: 2015
  32. By: Loïc Charles (Institut National d'études Démographiques (INED)); Guillaume Daudin (OFCE)
    Abstract: Trade statistics provide unique sets of data on early modern economies.They can help explore their economic geography. They are of interest for econ-omists interested in economic development and early globalization. They are crucial to understand the Industrial Revolution. Still, they have been under- utilized by economists and economic historians alike. This volume gives adetailed overview on the existing quantitative sources on European trade data, focusing on the eighteenth century. In the introduction we discuss the histo-riography of the use of early trade statistics in economic history and we present two recent projects conducted in France in this area: TOFLIT18 and RICardo. The volume includes twenty-three short essays that present the sources of Euro-pean early trade statistics. Seven additional papers discuss the methodologicalissues of using early trade statistics and illustrate how these statistics can be mobilized to produce new insights on European economic history.
    Keywords: Administrative history; Eighteen century; International trade statistics; Europpe; Globalization; Economie History
    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.