nep-hpe New Economics Papers
on History and Philosophy of Economics
Issue of 2015‒12‒08
fourteen papers chosen by
Erik Thomson
University of Manitoba

  1. Keynes´s Approach to Macroeconomic Modelling: a Popperian Reconstruction By Alfonso Palacio Vera
  2. Pigou on War Finance and State Action By Rogério Arthmar; Michael McLure
  3. Do People Seek to Maximize Their Subjective Well-Being? By Marc Fleurbaey; Hannes Schwandt
  4. Evidence Games : Truth and Commitment By Hart, Sergiu; Kremer, Ilan; Perry, Motty
  5. On Game-Theoretic Risk Management (Part Two) - Algorithms to Compute Nash-Equilibria in Games with Distributions as Payoffs By Stefan Rass
  6. Porter vs Krugman: History, Analysis and Critique of Regional Competiveness By Psofogiorgos, Nikolaos - Alexandros; Metaxas, Theodore
  7. Between aritmetic and accounting : the contribution of Lazare Moulin-Collin (1792-1850) By Luc Marco; Robert Noumen
  8. Civil Liability, Knight’s Uncertainty and Non-Dictatorial Regulator By Gérard Mondello
  9. Economics of paternalism: the hidden costs of self-commanding strategies By Christophe Salvat
  10. A Dainty Review of the Business and Economic History of Chile and Latin America By Bernardo Batiz-Lazo
  11. What drives motivated agents? The 'right' mission or sharing it with the principal By Tobias Regner; Hannes Koppel
  12. Rational Expectations and Farsighted Stability By Dutta, Bhaskar; Vohra, Rajiv
  13. The economic value of local social networks By Frank Ethridge; Maryann Feldman; Tom Kemeny; Ted Zoller
  14. Max Weber and the First World War: Protestant and Catholic living standards in Germany, 1915-1919 By Matthias Blum; Matthias Strebel

  1. By: Alfonso Palacio Vera (Departamento de Economía Aplicada III (Política Económica). Universidad Complutense de Madrid.)
    Abstract: We review Keynes´s attempt to deal with the `problem of induction´ since his Treatise on Probability and then argue that Popper´s `solution´ to the former, known as Popper´s evolutionary of knowledge and learning, is compatible with Keynes´s adoption of a conventional theory of knowledge in his later economic writings. We also argue that Keynes´s macro-theory as it appears in both his General Theory and his 1937 QJE paper can be (re)interpreted as an instance of a reformulated version of the `subjectivist´ version of Popper´s `Rationality Principle´ (RPs) according to which agents´ behaviour is appropriate or adequate to the problem-situation as the theorist believes that agents believe the former is. A number of further results follow from the previous arguments.
    Abstract: Repasamos el intento de Keynes de abordar el "problema de la inducción" en su Treatise on Probability y señalamos que la solución propuesta por Popper al mismo, conocido como la teoría popperiana del conocimiento y el aprendizaje es compatible con la adopción por parte de Keynes de una teoría convencionalista del conocimiento en su última etapa. También señalamos que la Teoría General y su artículo del año 1937 en el QJE pueden ser interpretados como un caso concreto de la versión `subjetivista´ del "Principio de Racionalidad" Popperiano, de acuerdo con el cual el comportamiento de los agentes económicos es adecuado al problema-situación tal y como el modelizador cree que los agentes perciben este último. De esta interpretación obtenemos una serie de resultados adicionales.
    Keywords: Popper, Keynes, Rationality Principle, Macro-models, and Induction.; Popper, Keynes, principio de racionalidad, modelos macroeconómicos e inducción.
    JEL: A12 B41 E12
    Date: 2015–12
  2. By: Rogério Arthmar (Universidade Federal do Espírito Santo, Brazil); Michael McLure (Business School, University of Western Australia)
    Abstract: This paper reviews Arthur C. Pigou’s intellectual contribution to the debates on economic policy during World War I in Britain, showing how many of his ideas on the subject can be traced back to his major pre-war work, Wealth and Welfare. Initially, we present Pigou’s arguments in favour of an increase in taxation and on how individual choices affect the distribution of war costs over time. Attention is also drawn to his understanding of the nature of inflation in Britain during the war, as well as to his remarks about the efficacy of state wartime controls continuing into the post-war era. Pigou’s rejection of Ricardian equivalence and his concerns with Britain’s massive national debt are considered in regard to the controversy over the convenience of a capital levy after the war. Lastly, his recommendations on European political and financial reconstruction are addressed, along with his specific proposals for state action in matters connected with national defence.
    Date: 2015
  3. By: Marc Fleurbaey; Hannes Schwandt
    Abstract: In a new survey we ask respondents, after a standard Subjective Well-Being (SWB) question, if they can think of changes in their lives that would improve their SWB score. If the SWB score is just one argument among others in the respondents' goals in life, they should easily find ways to improve it, at the expense of other dimensions they care about. Our results suggest that close to 90% of the respondents actually seek to maximize their SWB. The life satisfaction question appears the best contender as the "maximand" in the contest, before the ladder-of-life question and felt happiness. Among the other goals that people pursue and for which they are willing to sacrifice some of their SWB, the prominent appear to be about their relatives and about their future self.
    Keywords: Subjective well-being, life satisfaction, happiness, life goals, utility
    JEL: D03 D60
    Date: 2015–11
  4. By: Hart, Sergiu (Department of Economics, Institute of Mathematics, and Federmann Center for the Study of Rationality, The Hebrew University of Jerusalem.); Kremer, Ilan (Department of Economics, Business School, and Federmann Center for the Study of Rationality, The Hebrew University of Jerusalem; Department of Economics, University of Warwick); Perry, Motty (Federmann Center for the Study of Rationality, The Hebrew University of Jerusalem; Department of Economics, University of Warwick.)
    Abstract: An evidence game is a strategic disclosure game in which an informed agent who has some pieces of verifiable evidence decides which ones to disclose to an uninformed principal who chooses a reward. The agent, regardless of his information, prefers the reward to be as high as possible. We compare the setup where the principal chooses the reward after the evidence is disclosed to the mechanism-design setup where he can commit in advance to a reward policy. The main result is that under natural conditions on the truth structure of the evidence, the two setups yield the same equilibrium outcome.
    Date: 2015
  5. By: Stefan Rass
    Abstract: The game-theoretic risk management framework put forth in the precursor work "Towards a Theory of Games with Payoffs that are Probability-Distributions" (arXiv:1506.07368 [q-fin.EC]) is herein extended by algorithmic details on how to compute equilibria in games where the payoffs are probability distributions. Our approach is "data driven" in the sense that we assume empirical data (measurements, simulation, etc.) to be available that can be compiled into distribution models, which are suitable for efficient decisions about preferences, and setting up and solving games using these as payoffs. While preferences among distributions turn out to be quite simple if nonparametric methods (kernel density estimates) are used, computing Nash-equilibria in games using such models is discovered as inefficient (if not impossible). In fact, we give a counterexample in which fictitious play fails to converge for the (specifically unfortunate) choice of payoff distributions in the game, and introduce a suitable tail approximation of the payoff densities to tackle the issue. The overall procedure is essentially a modified version of fictitious play, and is herein described for standard and multicriteria games, to iteratively deliver an (approximate) Nash-equilibrium.
    Date: 2015–11
  6. By: Psofogiorgos, Nikolaos - Alexandros; Metaxas, Theodore
    Abstract: The subject of this study is to determine the competitiveness through an interdisciplinary approach of the theories of the new economic geography and regional economy. This article describes in detail the theory of competitiveness, which is defined differently by many authors, with particular emphasis on opposing views of Michael Porter and Paul Krugman. One of the first writers who stressed the importance of the geographical position was Michael Porter. In his model, the author emphasizes that the geographical concentration of firms enhances productivity, innovation and export sector. Following this theory, many authors have focused on the research of the "location problem ", which led to better connection of economics and geography. The result of these activities is the new guidelines that have been developed, such as the new theory of economic geography and regional economy. The new economic geography is mainly related to the Nobel prized, Paul Krugman, whose theories often conflict with those of Porter. This study initially sets out the views of both authors, in terms of competitiveness and then attempts to make a comparative analysis between the theories they developed.
    Keywords: Michael Porter, Paul Krugman, Regional Competitiveness
    JEL: R11 R19 R38
    Date: 2015–12
  7. By: Luc Marco (CEPN - Centre d'Economie de l'Université Paris Nord - Université Paris 13 - Université Sorbonne Paris Cité (USPC) - CNRS - Centre National de la Recherche Scientifique); Robert Noumen (CEPN - Centre d'Economie de l'Université Paris Nord - Université Paris 13 - Université Sorbonne Paris Cité (USPC) - CNRS - Centre National de la Recherche Scientifique)
    Abstract: The history of the small business schools in Province in the nineteenth century can be made through the works of his professors. The link between arithmetic and accounting is essential to understand the education at the average level for pupils having between 12 and 16 years. The rediscovery of a mathematician doubled by an accountant, Lazare Moulin-Collin, allows to understand the formation of the teachers and the experts in these domains. From new archival sources we rediscover the biography and the contents of his very interesting works.
    Abstract: L'histoire des petites écoles de commerce en Province au dix-neuvième siècle peut être faite au travers des ouvrages de ses professeurs. Le lien entre arithmétique et comptabilité est essentiel pour comprendre l'enseignement au niveau moyen pour des élèves ayant entre 12 et 16 ans. La redécouverte d'un mathématicien doublé d'un comptable, Lazare Moulin-Collin, permet de comprendre la formation des enseignants et des experts dans ces domaines. A partir de sources archivistiques nouvelles nous redécouvrons la biographie et le contenu de ses ouvrages très intéressants.
    Keywords: Arithmetic, accounting,Arithmétique, comptabilité
    Date: 2015–11–24
  8. By: Gérard Mondello (Université Nice Sophia Antipolis; GREDEG-CNRS)
    Abstract: This paper reviews the foundations of the unilateral standard accident model under Knightian uncertainty. It extends the Teitelbaum (2007)’s seminal article (who introduces radical uncertainty) by expanding it from producers to victims and from the probability distribution of accidents to the scale of damage. Mainly, it also considers a regulator who aggregates the agents’ preferences (Neghisi (1960) type). Under the condition that the troublemakers’ resources are sufficient to cover the damage, the article shows that uncertainty does not preclude, first, the determination of a socially optimal level of care, and second, whatever the civil liability regime (strict liability or negligence) it shows that they determine the same level of socially first-best care. The solution is inefficient only when the polluter’s wealth is insufficient to repair the victim’s losses.
    Keywords: unilateral accident, tort law, safety, large risks, ambiguity, pessimism and optimism, strict liability, negligence, ultra-hazardous activities
    JEL: D62 K13 K23 K32 Q52 Q58
    Date: 2015–12
  9. By: Christophe Salvat (TRIANGLE - Triangle : action, discours, pensée politique et économique - ENS Lyon - École normale supérieure - Lyon - UL2 - Université Lumière - Lyon 2 - Université Jean Monnet - Saint-Etienne - Institut d'Études Politiques [IEP] - Lyon - CNRS - Centre National de la Recherche Scientifique)
    Abstract: This paper proposes an economic assessment of paternalism by comparing different alternative responses to dynamically inconsistent behaviors consecutive to hyperbolic discounting. Two main types of action are possible, self-commanding strategies and paternalism. The first category includes personal rules and pre-commitment. The second can be subcategorized between coercive and non-coercive forms of paternalism, which are respectively associated (although it is debatable) with legal paternalism and with ‘nudges’. Despite being self-inflicted, self-commanding strategies are actually not cost free and can result in a dramatic cutback of people’s freedom of choice. Likewise, legal paternalism can, on occasion, be less harmful than personal rules or precommitment; similarly, nudges can be more invasive and less effective than their proponents want us to believe. The aim of this paper is not to propose any standardized form of response to irrational behavior (whatever that may mean) but to argue, on the contrary, that every case should be individually appraised. Individual situations can be remedied by self-commanding strategies or by paternalistic policies, either in isolation or in combination.
    Keywords: libertarian paternalism,paternalism,personal rules,self-confidence
    Date: 2015–11–17
  10. By: Bernardo Batiz-Lazo (Bangor University)
    Abstract: This introductory piece provides a context to the special edition on business and economic history of Chile and Latin America. It also provides an introduction to better understanding research and method in business history while inviting for this field to be further developed in Chile.
    Keywords: economic history, business history, Chile, Latin America
    JEL: N0 N01 N86
    Date: 2015–09
  11. By: Tobias Regner (School of Economics and Business Administration, Friedrich-Schiller-University Jena); Hannes Koppel (Alfred Weber Institute of Economics, University of Heidelberg)
    Abstract: Motivated agents are characterized by increasing their effort if their work generates not only a monetary return for them but also a benefit for a mission they support. While their motivation may stem from working for their preferred (i.e., the `right') mission, it may also be the principal's choice of the right mission (i.e., a mission preference match) that motivates them. We investigate experimentally to what extent these two motivations are driving the effect of a mission on agent effort. We find that agents care not only about the mission as such but also whether the principal shares this mission. Our analysis estimates the additional effect of a mission preference match to be as big as the effect of just working for the right mission. It seems that the full potential of `motivation by mission' is realized only when principals share as well as support the agents' mission, stressing the importance of the economics of identity in labor market settings.
    Keywords: Corporate Social Responsibility, experiment, labor market, incentives, principal agent, identity, mission, motivated agents
    JEL: C91 D03 J01 M14 M52
    Date: 2015–12–01
  12. By: Dutta, Bhaskar (University of Warwick); Vohra, Rajiv (Brown University)
    Abstract: In the study of farsighted coalitional behavior, a central role is played by the von Neumann-Morgenstern (1944) stable set and its modification that incorporates farsightedness. Such a modification was first proposed by Harsanyi (1974) and has recently been re-formulated by Ray and Vohra (2015). The farsighted stable set is based on a notion of indirect dominance in which an outcome can be dominated by a chain of coalitional ‘moves’ in which each coalition that is involved in the sequence eventually stands to gain. However, it does not require that each coalition make a maximal move, i.e., one that is not Pareto dominated (for the members of the coalition in question) by another. Nor does it restrict coalitions to hold common expectations regarding the continuation path from every state. Consequently, when there are multiple continuation paths the farsighted stable set can yield unreasonable predictions. We resolve this difficulty by requiring all coalitions to have common rational expectations about the transition from one outcome to another. This leads to two related concepts: the rational expectations farsighted stable set (REFS) and the strong rational expectations farsighted stable set (SREFS). We apply these concepts to simple games and to pillage games to illustrate the consequences of imposing rational expectations for farsighted stability.
    Keywords: stable sets ; farsightedness ; consistency ; maximality ; rational expectations ; simple games ; pillage games. JEL Classification Numbers: C71 ; D72 ; D74
    Date: 2015
  13. By: Frank Ethridge; Maryann Feldman; Tom Kemeny; Ted Zoller
    Abstract: The idea that local social capital yields economic benefits is fundamental to theories of agglomeration, and central to claims about the virtues of cities. However, this claim has not been evaluated using methods that permit more confident statements about causality. This paper examines what happens to firms that become affiliated with a highly-connected local individual or “dealmaker.” We adopt a quasi-experimental approach, combining difference-in-differences and propensity score matching to address selection and identification challenges. The results indicate that firms who link to highly-connected local dealmakers are rewarded with substantial gains in employment and sales when compared to a control group.
    Keywords: cities; economic development; social networks; social capital
    JEL: L14 O12 O18 R11
    Date: 2015–01
  14. By: Matthias Blum; Matthias Strebel
    Abstract: We assess informal institutions of Protestants and Catholics by investigating their economic resilience in a natural experiment. The First World War constitutes an exogenous shock to living standards since the duration and intensity of the war exceeded all expectations. We assess the ability of Protestant and Catholic communities to cope with increasing food prices and wartime black markets. Literature based on Weber (1904, 1905) suggests that Protestants must be more resilient than their Catholic peers. Using individual height data on some 2,800 Germans to assess levels of malnutrition during the war, we find that living standards for both Protestants and Catholics declined; however, the decrease of Catholics’ height was disproportionately large. Our empirical analysis finds a large statistically significant difference between Protestants and Catholics for the 1914-19 birth cohort, and we argue that this height gap cannot be attributed to socioeconomic background and fertility alone.
    Keywords: Germany, First World War, Religion, Protestantism, Catholicism, Economic History, Anthropometrics, Biological Standard of Living, Height, Stature
    JEL: N14 I20 I30
    Date: 2015–12

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