nep-hpe New Economics Papers
on History and Philosophy of Economics
Issue of 2015‒12‒01
seventeen papers chosen by
Erik Thomson
University of Manitoba

  1. An investigation of early modern Quakers’ business ethics By Esther Sahle
  2. Other-Regarding Preferences and Reciprocity: Insights from Experimental Findings and Satisfaction Data By L. Becchetti; V. Pelligra; S.F. Taurino
  3. Disputed (Disciplinary) Boundaries. Philosophy, Economics, Value Judgments. By Silvestri, Paolo
  4. Essays on behavioural economics By Ester Manna
  5. The Relationship between Economic Theory and Experiments By David K. Levine; Jie Zheng
  6. The St. Petersburg paradox: an experimental solution By Da Silva, Sergio; Matsushita, Raul
  7. On strategic complementarities in discontinuous games By Pavlo Prokopovych; Nicholas C. Yannelis
  8. Is Neo-Walrasian Macroeconomics a Dead End? By Marchionatti, Roberto; Sella, Lisa
  9. A Discontinuity Model of Technological Change: Catastrophe Theory and Network Structure By Heinrich, Torsten
  10. Top Incomes and Human Well-Being Around the World By Richard V. Burkhauser; Jan-Emmanuel De Neve; Nattavudh Powdthavee
  11. Les « fondateurs » des sciences des organisations : F. W. Taylor et H. Fayol et al. By Yvon Pesqueux
  12. Towards a General Theory of the Stock Market By John Fender
  13. Principales aportes de las mujeres al pensamiento económico entre los siglos XVIII-XX. By Natalia Ramírez Virviescas
  14. The Federal Reserve’s counterparty framework: past, present, and future By Potter, Simon M.
  15. Improve the Economics of your Capital Project by Finding its True Cost of Capital By Schmal, Tom
  16. Market Efficiency and Crises: Don’t Throw the Baby out with the Bathwater By Ariane Szafarz
  17. Power politics and princely debts: why Germany’s common currency failed, 1549-1556 By Oliver Volckart

  1. By: Esther Sahle
    Abstract: During the late seventeenth century, when the Atlantic trade experienced unprecedented growth, Quakers emerged as the region’s most prominent trading community. Economic Historians credit the group and its business ethics with shaping the economic environment of early modern England and, consequently, its long term economic growth. This paper, however, argues that Friends’ business ethics were identical to those of their non-Quaker contemporaries. Using a wide range of both Quaker and non-Quaker sources, including sermons and merchant advice literature, this paper constitutes the first in-depth study of Quaker and non-Quaker business ethics. Having refuted the claim that the community’s commercial achievements reflect a unique blend of honesty, reliability, and swift payment of debts, the paper suggests an alternative explanation for Friends’ business success.
    Keywords: institutions; business ethics; religion; Quakers; economic thought; early modern England; seventeenth century history; eighteenth century history; trade; Protestantism
    JEL: B1 N00 N3
    Date: 2015–03
  2. By: L. Becchetti; V. Pelligra; S.F. Taurino
    Abstract: We measure satisfaction about experimental outcomes, personal and other participants’ behaviour after a multiperiod ‘hybrid contribution’ multiplayer prisoner’s dilemma (the Vote-with-the-Wallet game). Our work shows that participants who cooperated above median (which we define as strong cooperators) are significantly more satisfied with the game in proportion to their cooperative choice, irrespective of the material pay- off they obtain. On the contrary, their satisfaction for the other players’ behavior is negatively correlated with the extent of their own cooperative behavior and the non-cooperative behavior of the latter. The satisfaction of strong cooperators for their behavior in the game depends in turn on the share of their own cooperative choices. We document that a broader utility function including heterogeneity in expectations on other players’ behavior, other-regarding preferences, and a negative reciprocity argument may account for the combination of the behavioral and self-reported data.
    Keywords: Subjective Well-Being, social preferences, Vote-with-the-Wallet, lab experiment
    JEL: C72 C92 I31
    Date: 2015
  3. By: Silvestri, Paolo (University of Turin)
    Abstract: The paper aims to address the following two questions: what kind of discourse is that which attempt to found or defend the autonomy or the boundaries of a discipline? Why do such discourses tend to turn into normative, dogmatic-excommunicating discourses between disciplines, schools or scholars? I will argue that an adequate answer may be found if we conceive disciplines as dogmatics, where such discourses often take the form of a discourse on the foundation of a discipline, a foundation in the name of which the scholar speaks and with which he/she entertains an identity relationship. To this purpose I will re-examine the methodological discourses of (and debates between)Pareto, Croce and Einaudi on the demarcation issue between philosophy, economics and value-judgments as highly instructive to understand such issues.
    Date: 2015–09
  4. By: Ester Manna
    Abstract: Traditional economic theory assumes that individuals are self-interested. They only care about their own well-being and disregard the impact of their actions on the others. However, the assumption of selfish individuals is unable to explain a number of important phenomena and puzzles. Individuals frequently engage in actions that are costly to themselves with no<p>apparent reward. Behavioural economics provides plausible explanations for these actions.<p>Individuals can be “boundedly rational" (Simon, 1955, and Kahneman et al. 1982) and/or can be driven by altruistic, equity and reciprocity considerations (see for an overview Fehr<p>and Schmidt, 2006). Over the past decade, researchers have applied behavioural economics<p>models to the study of organisations and how contracts should be designed in the presence<p>of non-standard preferences and asymmetric information or incomplete contracts (see for<p>an overview of the literature Köszegi, 2014).<p>In my current research, I try to be at the forefront of these new behavioural economics<p>applications into traditional industrial organisation and contract theory themes. The usual prescriptions of standard models can be misleading if potential differences in the agents' preferences are overlooked. Behavioural economics can make great progress if it takes into proper accountmarket and organisational features.
    Keywords: Economics -- Mathematical models; Economie politique -- Modèles mathématiques; Motivated Individuals; Delegation; Teamwork; Spatial Competition; Behavioural Economics
    Date: 2014–09–10
  5. By: David K. Levine; Jie Zheng
    Date: 2015–11–19
  6. By: Da Silva, Sergio; Matsushita, Raul
    Abstract: The St. Petersburg paradox refers to a gamble of infinite expected value, where people are likely to spend only a small entrance fee for it. There is a huge volume of literature that mostly concentrates on the psychophysics of the game; experiments are scant. Here, rather than focusing on the psychophysics, we offer an experimental, “physical” solution as if robots played the game. After examining the time series formed by one billion plays, we: confirm that there is no characteristic scale for this game; explicitly formulate the implied power law; and identify the type of -stable distribution associated with the game. We find an and, thus, the underlying distribution of the game is a Cauchy flight, as hinted by Paul Samuelson.
    Keywords: St. Petersburg paradox, alpha-stable distributions, Cauchy flight, power laws
    JEL: G00
    Date: 2015
  7. By: Pavlo Prokopovych (Kyiv School of Economics); Nicholas C. Yannelis (University of Iowa)
    Abstract: We study the existence of a pure strategy Nash equilibrium in normal-form games with strategic complementarities where the players' payoff functions are not necessarily upper semicontinuous in their own strategies. The new equilibrium existence results obtained in this paper cover examples to which the seminal works of Vives (1990), Milgrom and Shannon (1994), and Reny (1999) cannot be applied.
    Keywords: Discontinuous game; Strategic complementarities; Better-reply security; Directional single crossing; Increasing correspondence
    JEL: C65 C72
    Date: 2015–11
  8. By: Marchionatti, Roberto; Sella, Lisa (University of Turin)
    Abstract: After the ‘new Great Crisis’ exploded in 2008 it is widely recognized that mainstream macroeconomics - the last result of Lucas’s anti-Keynesian revolution of the 1980s which tried to give macroeconomics sound neo-Walrasian microeconomic bases - has failed to anticipate and then appraise the crisis. Has this crisis revealed a failure of this macroeconomics as a scientific theory? Mainstream macroeconomists defend their models on the basis of their alleged superiority in terms of clarity and coherence. The thesis of this paper is that this claim about superiority is false. The paper argues that the reasons for the failure of mainstream macroeconomics – in particular its poor predictive performance and interpretative weakness - reside in the implications of the neo-Walrasian legacy and the problems connected with the implementation of that programme.
    Date: 2015–06
  9. By: Heinrich, Torsten
    Abstract: Discontinuities as a crucial aspect of economic systems have been discussed both verbally - particularly in institutionalist theory - and formally, chiefly using catastrophe theory. Catastrophe theory has, however, been criticized heavily for lacking micro-foundations and has mainly fallen out of use in economics and social sciences. The present paper proposes a simple catastrophe theory model of technological change with network externalities and reevaluates the value of such a model by adding an agent-based micro layer. To this end an agent-based variant of the model is proposed and investigated specifically with regard to the network structure among the agents. While the macro level of the model produces a classical cusp catastrophe - a result that is preserved in the agent-based form - it is found that the behavior of the model changes locally depending on the network structure, especially if networks with features that resemble social networks (low diameter, high clustering, power law distributed node degree) are considered. While the present work investigates merely an aspect out of a large possibility space, it encourages further research using agent-based catastrophe theory models especially of economic aspects to which catastrophe theory has previously successfully been applied; aspects such as technological and institutional change, economic crises, or industry structure.
    Keywords: network structures; agent-based modeling; catastrophe theory; information and communication technology; preferential attachment networks; technological change
    JEL: C63 D85 L14 L86
    Date: 2015–02–26
  10. By: Richard V. Burkhauser; Jan-Emmanuel De Neve; Nattavudh Powdthavee
    Abstract: The share of income held by the top 1 percent in many countries around the world has been rising persistently over the last 30 years. But we continue to know little about how the rising top income shares affect human well-being. This study combines the latest data to examine the relationship between top income share and different dimensions of subjective well-being. We find top income shares to be significantly correlated with lower life evaluation and higher levels of negative emotional well-being, but not positive emotional well-being. The results are robust to household income, individual's socio-economic status, and macroeconomic environment controls.
    Keywords: Top income, life evaluation, well-being, income inequality, World Top Income Database, Gallup World Poll
    JEL: D63 I3
    Date: 2015–11
  11. By: Yvon Pesqueux (LIRSA - Laboratoire Interdisciplinaire de Recherche en Sciences de l'Action - Conservatoire National des Arts et Métiers [CNAM])
    Abstract: Les auteurs autour de F. W. Taylor et H. Fayol et al.
    Keywords: théorie des organisations
    Date: 2015–11–14
  12. By: John Fender
    Abstract: Although there are many stock markets anomalies which the Efficient Market Hypothesis (EMH) finds difficult to explain, it also has its strengths, and so far no alternative hypothesis has been developed which can explain what the EMH explains but which can also do a better job in explaining the phenomena with which it struggles. It is argued that the way forward is to postulate that the stock market can be in one of three states: a fundamental state, in which share prices are determined as in the EMH, a bubble or bull market state, in which share prices are above their fundamental levels but continue to rise because asset holders expect to sell the shares at even higher prices in the future, and a bear market state, in which shares are held exclusively by 'irrational' agents and rational agents cannot exploit the overvaluation because of short-selling constraints. It is also argued that heterogeneous rational expectations may help explain some features of stock market behaviour.
    Keywords: efficient market hypothesis, rational expectations, bubbles, bear markets, short-selling constraints
    JEL: G1
    Date: 2015–10
  13. By: Natalia Ramírez Virviescas
    Abstract: El Propósito central del presente escrito es destacar ciertos estudios realizados por pensadoras entre los siglos XVIII y XX, que han contribuido significativamente al desarrollo al pensamiento económico, principalmente a las líneas clásica y marxista, con el interés de resaltar su papel en la construcción de dichas teorías económicas. De este modo, a partir de una revisión bibliográfica se logra rescatar las ideas de varias mujeres que expusieron importantes puntos de vista teóricos, y que por razones sociales, culturales, entre otras, quedaron -en su mayoría- bajo la sombra de otro autor, o simplemente no tuvieron la divulgación necesaria para su reconocimiento académico.
    Keywords: Pensamiento económico, mujeres economistas, marxismo.
    JEL: B31 B54
    Date: 2015–11–19
  14. By: Potter, Simon M. (Federal Reserve Bank of New York)
    Abstract: Remarks at the 2015 Roundtable on Treasury Markets and Debt Management, Federal Reserve Bank of New York, New York City.
    Keywords: primary dealer system; Treasury Market Practices Group (TMPG); secondary market for Treasury Securities; counterparty risks; Ken Garbade; dealer surveillance; the Desk; transparency; daily reverse repurchase agreement (RRP)
    Date: 2015–11–19
  15. By: Schmal, Tom
    Abstract: Evaluating the risk behind capital projects can be one of management’s toughest calls. One reason is project risks are presented subjectively or as a metric without a practical relationship to return. The author addresses the problem by using a Monte Carlo simulation to find a project’s risk and uses that metric to find the project’s cost of capital. In this system, risk is determined by variation in free cash flow. Since every project in your company’s pipeline will have a free cash flow, every project, including those with financial leverage, can be evaluated using the same economic yardstick. Other benefits include better value projects, better presentation and accurate discount rates for NPV.
    Keywords: cost of capital, IRR, NPV, cash flow, Monte Carlo, capital project economics, risk-adjusted return, M-P5, variability, pure play, leverage, hurdle rate.
    JEL: D81 G32
    Date: 2015–11–26
  16. By: Ariane Szafarz
    Abstract: The essence of market efficiency is fair asset pricing, which is compatible with multiple price dynamics and speculative bubbles. However, many practitioners and financial academics criticize the efficient market hypothesis on the basis of highly volatile asset prices. I argue that the persisting confusion as to the nature of market efficiency is driven by the difficulty to grasp the financial interpretation of multiple solutions. Importantly, the confusion can mislead regulators when addressing volatility containment. Acknowledging the multiplicity of efficient price dynamics not only enriches the understanding of financial crises, but also helps designing appropriate regulations.
    Keywords: efficient markets; multiple solutions; rational expectations; speculative bubbles; volatility
    JEL: G14 G12 G10 B41
    Date: 2015–09–28
  17. By: Oliver Volckart
    Abstract: The article argues that in the first half of the sixteenth century the need to avoid rounds of competitive debasements was the primary motive for the creation of a common currency valid in the whole Holy Roman Empire. In the years 1549 to 1551, the estates came close to achieving this. In contrast to what is suggested in the literature, their attempt did not fail because the Empire was economically poorly integrated or the will to co-operate was lacking. Rather, it failed because during the talks, the estates lost sight of the original motive, the princes favouring a bimetallic system that they hoped would allow them deflating the real value of their debts, and Charles V undervaluing the taler in the hope that this would weaken political opponents. These decisions antagonised important actors; when it proved impossible to enforce them, the Empire’s common currency failed.
    Keywords: monetary history; currency union; early modern Germany
    JEL: E42 E52 N13 N23 N43
    Date: 2015–09

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