|
on History and Philosophy of Economics |
| By: | Glötzl, Erhard |
| Abstract: | For more than 100 years economists have tried to describe economics in analogy to physics, more precisely to classical Newtonian mechanics. The development of the Neoclassical General Equilibrium Theory has to be understood as the result of these efforts. But there are many reasons why General Equilibrium Theory is inadequate: 1. No true dynamics. 2. The assumption of the existence of utility functions and the possibility to aggregate them to one “Master” utility function. 3. The impossibility to describe situations as in “Prisoners Dilemma”, where individual optimization does not lead to a collective optimum. This paper aims at overcoming these problems. It illustrates how not only equilibria of economic systems, but also the general dynamics of these systems can be described in close analogy to classical mechanics. To this end, this paper makes the case for an approach based on the concept of constrained dynamics, analyzing the economy from the perspective of “economic forces” and “economic power” based on the concept of physical forces and the reciprocal value of mass. Realizing that accounting identities constitute constraints in the economy, the concept of constrained dynamics, which is part of the standard models of classical mechanics, can be applied to economics. Therefore it is reasonable to denote such models as Newtonian Constraint Dynamic Models (NCD-Models). Such a framework allows understanding both Keynesian and neoclassical models as special cases of NCD-Models in which the power relationships with respect to certain variables are one-sided. As mixed power relationships occur more frequently in reality than purely one-sided power constellations, NCD-models are better suited to describe the economy than standard Keynesian or Neoclassic models. A NCD-model can be understood as “Continuous Time”, “Stock Flow Consistent”, “Agent Based Model”, where the behavior of the agents is described with a general differential equation for every agent. In the special case where the differential equations can be described with utility functions, the behavior of every agent can be understood as an individual optimization strategy. He thus seeks to maximize his utility. However, while the core assumption of neoclassical models is that due to the “invisible hand” such egoistic individual behavior leads to an optimal result for all agents, reality is often defined by “Prisoners Dilemma” situations, in which individual optimization leads to the worst outcome for all. One advantage of NCD-models over standard models is that they are able to describe also such situations, where an individual optimization strategy does not lead to an optimum result for all agents. This will be illustrated in a simple example. In conclusion, the big merit and effort of Newton was, to formalize the right terms (physical force, inertial mass, change of velocity) and to set them into the right relation. Analogously the appropriate terms of economics are force, economic power and change of flow variables. NCD-Models allow formalizing them and setting them into the right relation to each other. |
| Keywords: | Newtonian Constrained Dynamics, Disequilibrium Dynamics, Economics of Power, Closure, Prisoners Dilemma, Economics and Physics |
| JEL: | B22 B41 C02 C60 C72 E10 |
| Date: | 2015–03–29 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:66265&r=all |
| By: | BRESSER-PEREIRA, Luiz Carlos, |
| Abstract: | This paper, first, distinguishes new developmentalism, a new theoretical system that is being created, from really existing developmentalism – a form of organizing capitalism. Second, it distinguishes new developmentalism from its antecedents, Development Economics or classical developmentalism and Keynesian Macroeconomics. Third, it discusses the false opposition that some economists have adopted between new developmentalism and social-developmentalism, which the author understands as a form of really existing developmentalism; as theory, it is just a version of classical developmentalism with a bias toward immediate consumption. Finally, it makes a summary of new developmentalism – of its main political economy, economic theory and economic policy claims |
| Date: | 2015–07–23 |
| URL: | http://d.repec.org/n?u=RePEc:fgv:eesptd:395&r=all |
| By: | Makovi, Michael |
| Abstract: | Orwell's famous fictions, Animal Farm and Nineteen Eighty-Four criticized totalitarian forms of socialism from a Public Choice perspective, assuming that socialism would work as an economic system as long as the proper political institutions were in place to curb the potential for the abuse of power. This is contrasted with two novels by others who took the opposite approach: Richter's Pictures of the Socialistic Future and Hazlitt's Time Will Run Back. These two assumed that the political implementation of socialism would be perfect but that socialism would necessarily turn totalitarian because of the problem of economic calculation. These novels assumed away the Public Choice problem of institutions and the abuse of power and focused on the political implications of socialism as a purely economic system. Contrasting these two sets of novels shows how the Austrian and Public Choice schools criticize socialism in two entirely different ways. |
| Keywords: | Orwell; Richter; Hazlitt; democratic socialism; market socialism; totalitarianism |
| JEL: | A12 B24 B25 B31 B51 B53 D70 P11 P20 P30 Z11 |
| Date: | 2015–02–27 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:66360&r=all |
| By: | Zhou Zhou |
| Abstract: | We consider two-player non-zero-sum stopping games in discrete time. Unlike Dynkin games, in our games the payoff of each player is revealed after both players stop. Moreover, each player can adjust her own stopping strategy according to the other player's action. In the first part of the paper, we consider the game where players act simultaneously at each stage. We show that there exists a Nash equilibrium in mixed stopping strategies. In the second part, we assume that one player has to act first at each stage. In this case, we show the existence of a Nash equilibrium in pure stopping strategies. |
| Date: | 2015–08 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1508.06032&r=all |
| By: | Abito, Jose Miguel |
| Abstract: | I propose a strategy to identify structural parameters in infinitely repeated games without relying on equilibrium selection assumptions. Although Folk theorems tell us that almost any individually rational payoff can be an equilibrium payoff for sufficiently patient players, Folk theorems also provide tools to explicitly characterize this set of payoffs. I exploit the extreme points of this set to bound unobserved equilibrium continuation payoffs and then use these to generate informative bounds on structural parameters. I illustrate the identification strategy using (1) an infinitely repeated Prisoner's dilemma to get bounds on a utility parameter, and (2) an infinitely repeated quantity-setting game to get bounds on marginal cost and provide a robust test of firm conduct. |
| Keywords: | Repeated games, identification, dynamic games, bounds |
| JEL: | C1 C73 L4 |
| Date: | 2015–08–31 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:66378&r=all |
| By: | Conti-Brown, Peter (Stanford University) |
| Abstract: | The Federal Reserve System has come to occupy center stage in the formulation and implementation of national and global economic policy. And yet, the mechanisms through which the Fed creates that policy are assumed but rarely analyzed. These assumptions--of scholars, central bankers, and other policy-makers--are that the Fed's independent authority to make policy is created by law: specifically, the Federal Reserve Act with its creation of removability protection for actors within the Fed, long tenures for Fed Governors, and budgetary autonomy from Congress. This article analyzes these assumptions about law and argues that nothing about them is as it seems. Removability protection does not exist for the Fed Chair, but exists in unconstitutional form for the Reserve Bank presidents; the fourteen-year terms of the Governors are never served, giving every President since FDR twice the appointments the Federal Reserve Act anticipated; and the budgetary independence designed in 1913 bears little relationship to the budgetary independence of 2015. The article thus challenges the prevailing accounts of agency independence in administrative law and central bank independence in economics and political science, both of which focus on statutory mechanisms of creating Fed independence. It argues, instead, that the life of the Act--how its statutory terms are interpreted, how the legal and economic contexts change with the times, and how individual personalities influence policy-making--is more important to understanding Fed independence than the birth of the Act, the language passed by Congress. Fed independence is not simply a creature of statute, but an ecosystem of formal and informal institutional arrangements, within and beyond the control of the ac-tors and organizations most interested in controlling Fed policy. |
| Date: | 2015–04 |
| URL: | http://d.repec.org/n?u=RePEc:ecl:upafin:15-05&r=all |
| By: | Christian Schoder (Department of Economics, New School for Social Research) |
| Abstract: | By the aid of a simple but widely accepted model, the conventional micro-foundation of behavioral hypothesis postulated in post-Keynesian theory in the Kaleckian tradition is critically reviewed. Inconsistencies are identied along three dimensions: A methodological inconsistency arises from presenting macroeconomic arguments formally and microeconomic arguments verbally. An internal inconsistency prevails when the micro-considerations for dierent behavioral rules are mutually inconsistent. An ontological inconsistency arises since the postulated behavioral rules are invariant to endogenous changes in the micro-environment whereas the micro-considerations imply them to adjust endogenously. We arrive at two conclusions: First, re-visiting the issue of micro-foundation within the post-Keynesian framework may be a rewarding line of research. Second, the post-Keynesian research paradigm should be open to various forms of consistent micro-foundations as long as the economic mechanism characterized by the model are post-Keynesian. |
| Keywords: | Post-Keynesian economics, micro-foundations, economic methodology, ontology |
| JEL: | B41 B50 E12 |
| Date: | 2015–08 |
| URL: | http://d.repec.org/n?u=RePEc:new:wpaper:1518&r=all |
| By: | Reinhart, Carmen M. (Harvard University) |
| Abstract: | Some of the best-known papers of Carlos F. Diaz 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 cities, I have taken the liberty to label these as lessons. |
| Date: | 2015–07 |
| URL: | http://d.repec.org/n?u=RePEc:ecl:harjfk:rwp15-035&r=all |
| By: | Heller, Yuval; Mohlin, Erik |
| Abstract: | We study environments in which agents from a large population are randomly matched to play a one-shot game, and, before the interaction begins, each agent observes noisy information about the partner's aggregate behavior. Agents follow stationary strategies that depend on the observed signal. We show that every strategy distribution admits a unique behavior if each player observe on average less than action of his partner. On the other hand, if each player observes on average more than one action, we show that there exists a stationary strategy that admits multiple consistent outcomes. |
| Keywords: | Markovian process, Random matching. |
| JEL: | C72 C73 D83 |
| Date: | 2015–08–13 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:66179&r=all |
| By: | Carlos Pedro Gon\c{c}alves |
| Abstract: | Econophysics has developed as a research field that applies the formalism of Statistical Mechanics and Quantum Mechanics to address Economics and Finance problems. The branch of Econophysics that applies of Quantum Theory to Economics and Finance is called Quantum Econophysics. In Finance, Quantum Econophysics' contributions have ranged from option pricing to market dynamics modeling, behavioral finance and applications of Game Theory, integrating the empirical finding, from human decision analysis, that shows that nonlinear update rules in probabilities, leading to non-additive decision weights, can be computationally approached from quantum computation, with resulting quantum interference terms explaining the non-additive probabilities. The current work draws on these results to introduce new tools from Quantum Artificial Intelligence, namely Quantum Artificial Neural Networks as a way to build and simulate financial market models with adaptive selection of trading rules, leading to turbulence and excess kurtosis in the returns distributions for a wide range of parameters. |
| Date: | 2015–08 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1508.06586&r=all |
| By: | Acharya, Avidit (Stanford University); Blackwell, Matthew (Harvard University); Sen, Maya (Harvard University) |
| Abstract: | The standard approach in positive political theory posits that action choices are the consequences of attitudes. Could it be, however, that an individual's actions also affect her fundamental preferences? We present a broad theoretical framework that captures the simple, yet powerful, intuition that actions frequently alter attitudes as individuals seek to minimize cognitive dissonance. This framework is particularly appropriate for the study of political attitudes and enables political scientists to formally address questions that have remained inadequately answered by conventional rational choice approaches--questions such as "What are the origins of partisanship?" and "What drives ethnic and racial hatred?" We illustrate our ideas with three examples from the literature: (1) how partisanship emerges naturally in a two party system despite policy being multidimensional, (2) how ethnic or racial hostility increases after acts of violence, and (3) how interactions with people who express different views can lead to empathetic changes in political positions. |
| Date: | 2015–06 |
| URL: | http://d.repec.org/n?u=RePEc:ecl:harjfk:rwp15-026&r=all |
| By: | S. I. Melnyk; I. G. Tuluzov |
| Abstract: | The algebra of transactions as fundamental measurements is constructed on the basis of the analysis of their properties and represents an expansion of the Boolean algebra. The notion of the generalized economic measurements of the economic quantity and quality of objects of transactions is introduced. It has been shown that the vector space of economic states constructed on the basis of these measurements is relativistic. The laws of kinematics of economic objects in this space have been analyzed and the stages of constructing the dynamics have been formulated. In particular, the principle of maximum benefit, which represents an economic analog of the principle of least action in the classical mechanics, and the principle of relativity as the principle of equality of all possible consumer preferences have been formulated. The notion of economic interval between two economic objects invariant to the selection of the vector of consumer preferences has been introduced. Methods of experimental verification of the principle of relativity in the space of economic states have been proposed. |
| Date: | 2014–12 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1508.06225&r=all |
| By: | Mike Woodcock; Fernando Uscategui; David Corrales |
| Abstract: | The objective of this paper is to analyze the game of Hex through the use of Game Theory and Graph Theory. Hex is a game where each player must connect two opposite sides by a continuous path of pieces in a hexagonal grid within a rhombus-shaped board. The size of the board is usually 14×14 but the game can be found in a wide range of sizes such as 11×11 and 17×17. Although the strategy is not as deep as in chess, it is still complex, and just like chess, Hex is a no-chance game, and thus it is a perfect candidate to be examined using some formal tools. This game has some interesting features that make it more interesting; unlike chess, the game will never end in a tie, second, the number of possible movements is finite and third, the second player will always win, through this paper, we will show some of these features. |
| Keywords: | Game theory, Hex, Strategy, Hex Theorem, Strategy-stealing |
| JEL: | C72 C65 |
| Date: | 2015–08–05 |
| URL: | http://d.repec.org/n?u=RePEc:col:000176:013417&r=all |
| By: | Matthew D. Adler; Paul Dolan; Georgios Kavetsos |
| Abstract: | A large literature documents the correlates and causes of subjective well-being, or happiness. But few studies have investigated whether people choose happiness. Is happiness all that people want from life, or are they willing to sacrifice it for other attributes, such as income and health? Tackling this question has largely been the preserve of philosophers. In this article, we find out just how much happiness matters to ordinary citizens. Our sample consists of nearly 13,000 members of the UK and US general populations. We ask them to choose between, and make judgments over, lives that are high (or low) in different types of happiness and low (or high) in income, physical health, family, career success, or education. We find that people by and large choose the life that is highest in happiness but health is by far the most important other concern, with considerable numbers of people choosing to be healthy rather than happy. We discuss some possible reasons for this preference |
| Keywords: | Happiness; subjective well-being; preferences |
| JEL: | D6 H00 I00 I31 |
| Date: | 2015–08 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:63304&r=all |
| By: | Lee Stapleton (SPRU (Science Policy Research Unit), School of Business, Management & Economics, University of Sussex, Brighton, BN1 9SL, U.K.) |
| Abstract: | When do experts doubt or question their own previously published research and why? An online survey was designed and distributed across academic staff and postgraduate research students at different universities in Great Britain. Respondents (n = 202 - 244) identified the likelihoods of six different (quasi) hypothetical occurrences causing them to doubt or question work they have published in peer reviewed journals. They are: two objective and two semi-objective citation based metrics, plus two semi- objective metrics based on verbalised reactions. Only limited support is found from this study to suggest that the authors of primary research would agree with any judgements made by others about their research based on these metrics. The occurrence most likely to cause respondents to doubt or question their previously published research was where the majority of citing studies suggested mistakes in their work. In a multivariate context, only age and nationality are significant determinants of doubt beyond average likelihoods. Understanding and acknowledging what makes authors of primary research doubt their own research could increase the validity of those who pass judgement. |
| Keywords: | citations; criticism; experts; meta-analysis; peers; systematic reviews |
| Date: | 2015–08 |
| URL: | http://d.repec.org/n?u=RePEc:sru:ssewps:2015-24&r=all |
| By: | Bullard, James B. (Federal Reserve Bank of St. Louis) |
| Abstract: | August 13, 2015. Presentation. "Neo-Fisherianism." Expectations in Dynamic Macroeconomic Models, University of Oregon, Eugene, Oregon. |
| Date: | 2015–08–13 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedlps:247&r=all |
| By: | Alex Krumer (Ariel University,Israel); Reut Megidish (Sapir Academic College, Israel.); Aner Sela (BGU) |
| JEL: | D44 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:bgu:wpaper:1506&r=all |