nep-hpe New Economics Papers
on History and Philosophy of Economics
Issue of 2016‒01‒18
seventeen papers chosen by
Erik Thomson
University of Manitoba

  1. Os economistas marxistas portugueses e a teoria das crises económicas By Ana Bela Nunes; Carlos Bastien
  2. Studiul economiei, sinteza unei aventuri By Schatteles, Tiberiu
  3. The Knowledge Transmission Mechanism and Austerity By Simon Wren-Lewis
  4. Rational Expectations and Farsighted Stability By Dutta, Bhaskar; Vohra, Rajiv
  5. Evidence Games : Truth and Commitment By Hart, Sergiu; Kremer, Ilan; Perry, Motty
  6. Higher Intelligence Groups Have Higher Cooperation Rates in the Repeated Prisoner's Dilemma By Proto, Eugenio; Rustichini, Aldo; Sofianos, Andis
  7. Comparative Statics and Heterogeneity By Finn Christensen
  8. ìColonial Virginiaís Paper Money Regime, 1755-1774: A Forensic Accounting Reconstruction of the Dataî By Farley Grubb
  9. The Concept of Law: A Brief Introduction to Jural Aspects of Classical Eurasianism By Bulat V. Nazmutdinov
  10. Political realism and models of the state - Antonio de Viti de Marco and the origins of Public Choice By Giuranno, Michele; Mosca, Manuela
  11. What Good is Happiness? By Marc Fleurbaey, Erik Schokkaert and Koen Decancq
  12. Bounded Rationality and Correlated Equilibria By Fabrizio Germano; Peio Zuazo-Garin
  13. An Experiment on Non-Zero Sum Colonel Blotto Games By Rafael Hortala-Vallve; Aniol Llorente-Saguer
  14. Causes and Consequences of the Protestant Reformation By Becker, Sascha O; Pfaff, Steven; Rubin, Jared
  15. Tiberiu Schatteles - Pionierat în abordarea si dezvoltarea economiei analitice în România By Iancu, Aurel
  16. The Capability Approach and Well-Being Measurement for Public Policy By Sabina Alkire
  17. Student Preconceptions and Learning Economic Reasoning By Isabel Busom; Cristina Lopez-Mayan

  1. By: Ana Bela Nunes; Carlos Bastien
    Abstract: The aim of this paper is to acknowledge the reflections of the Portuguese Marxist economists on the theory of economic crises. Although the references to Marx date back to the 1850s, both theoretical approaches and applied studies under this perspective were relatively late and superficial in Portugal. Relative backwardness of the Portuguese economy and other specificities to the Portuguese society were detrimental to the intellectual interest in the theory of economic crises. Anyway the approach to this subject by Marxist economists reveals the existence of three type of theories: the theory of the crisis in the business cycle, addressed from three different perspectives (the underconsumption theories, the disproportionality theories and the fall in the rate of profit theories); the theory of the crisis in the long cycle and the theory of the systemic crisis. Only after the Second World War II did the first relevant studies emerged and only after the 1970s did the academy appear sensitive to the subject. Meanwhile, the context of the late economic and financial crisis, that set in after 2007- 2008, resumed the topicality of the theory of economic crises, also from this heterodox perspective.
    Keywords: History of Economic Thought; Marxism; Crisis. JEL classification: B2, B5
    Date: 2015
  2. By: Schatteles, Tiberiu
    Abstract: This presentation was occasioned by the author's distinction with a Diploma Honoris Causa, for his past work, by the Romanian Academy. It outlines a synthesis of his epistemological approach to economics as a science, most particularly the differences between this science and the sciences of nature. The following differences are discussed in detail: [1] The object of physics, chemistry, biology etc. is essentially the same while the science advances. Instead the object of economics changes while the science tries to keep up with it. [2] The relationship between the science and its object; the agents of the economy may take cognizance and adapt their behaviour according to what science says, while atoms, molecules, cells, stars etc. are "indifferent". [3] The sciences of nature are the basis for the creation of a world parallel to that of nature, i.e. the "world" of the laboratory and technology. Economics always applies to the same world which it studies. [4] The economist is himself one of the many agents of the economy so that his experience can be a source of knowledge. Many comparative examples are given, including some concerning the author's past research jobs in Romania, and more recently in Canada. The theory of games is quoted as illustrating the relationship between the economist and the agents of the economy. It is a version of game theory first discussed by this author and outlined in several of his mentioned works.
    Keywords: economic epistemology, economic systems, mathematical and quantitative methods, theory of games, input-output analysis
    JEL: A12 C C01 C02 C5 C50 C70 D57
    Date: 2015–12
  3. By: Simon Wren-Lewis
    Abstract: How do economic policy mistakes happen? One view is that policy makers are benevolent, and errors arise because economic theories are inadequate. Another is that policy makers pursue sectional interests that may have no relation to any academic consensus on good policy. This paper examines a third alternative: policy makers want to do the right thing (although they have political preferences), and the academic consensus is correct, but policy makers do not follow it because they rely on imperfect intermediaries. I use this framework to examine the global switch to fiscal austerity in 2010.
    Date: 2015
  4. By: Dutta, Bhaskar (Department of Economics 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. Classification -JEL: C71 ; D72 ; D74
    Date: 2015
  5. 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
  6. By: Proto, Eugenio (Department of Economics, University of Warwick); Rustichini, Aldo (Department of Economics, University of Minnesota); Sofianos, Andis (Department of Economics, University of Warwick)
    Abstract: Intelligence affects the social outcomes of groups. A systematic study of the link is provided in an experiment where two groups of subjects with different levels of intelligence, but otherwise similar, play a repeated prisoner's dilemma. Initial cooperation rates are similar, but increase in the groups with higher intelligence to reach almost full cooperation, while they decline in the groups with lower intelligence. Cooperation of higher intelligence subjects is payo sensitive and not automatic: in a treatment with lower continuation probability there is no difference between different intelligence groups.
    Keywords: Repeated Prisoner's Dilemma ; Cooperation ; Intelligence
    JEL: C73 C91 C92
    Date: 2015
  7. By: Finn Christensen (Department of Economics, Towson University)
    Abstract: This paper elucidates the role played by the heterogeneity of interactions between the endogenous variables in determining the behavior of an economic model. It is known that comparative statics are well-behaved if these interactions are relatively small, but the formal condition imposed on the Jacobian which typically captures this idea--diagonal dominance--ignores the distribution of the interaction terms. I provide a new condition on the Jacobian--mean positive dominance--which better captures a trade-off between the size and heterogeneity of interaction terms. In accord with Samuelson's (1947) correspondence principle, I also show that mean positive dominance yields stability and uniqueness results. Applications are provided to optimization problems, aggregative games, and competitive exchange economies.
    Keywords: comparative statics, heterogeneity, mean positive dominance, correspondence principle, B-matrix, uniqueness.
    JEL: D11
    Date: 2016–01
  8. By: Farley Grubb (Department of Economics, University of Delaware)
    Abstract: I reconstruct the data on Virginiaís paper money regime using forensic accounting techniques. I correct the existing data on the amounts authorized and outstanding. In addition, I reconstruct yearly data on previously unknown aspects of Virginiaís paper money regime, including printings, net new emissions, redemptions and removals, denominational structures, expected tax revenues, and specie accumulating in the treasury for paper money redemption. These new data form the foundation for narratives written on the social, economic, and political history of Virginia, as well as for testing models of colonial paper money performance.
    Keywords: bills of credit, data cloning, specie monies, tax revenues, treasury notes
    JEL: C82 E51 N11
    Date: 2015
  9. By: Bulat V. Nazmutdinov (National Research University Higher School of Economics)
    Abstract: Jurists and historians have rarely highlightened jural aspects of classical Russian Eurasianism. There have been several attempts to describe Eurasianist jural philosophy as a coherent system, but they were not fully relevant to the source material. The paper focuses on problems in the background of the creation of holistic Eurasianist jurisprudence during 1920s and 1930s. It emphasizes that the complexity of this process depended on different institutional and especially conceptual terms. The Eurasianists displayed several different approaches to Law whose distinctions were based on metajuridical grounds – phenomenological ideas in the work of Nickolai Alekseev, who argued for legal individualism; the “Alleinheit” theory found in the writings of Lev Karsavin; and a positivist theory in paper by Nickolai Dunaev. Based on published works of Eurasianists and unpublished archival materials, this research concludes that these juridical views were contradictory. These contradictions meant it was impossible to create a coherent Eurasianist jural theory using the terms derived from the authors mentioned, despite the fact that Eurasianist views have some specific characteristics
    Keywords: Eurasianism, ideocracy, legal order, legal theory, legal philosophy, legal schools, Natural Law, phenomenology, Russian philosophy.
    JEL: K10
    Date: 2015
  10. By: Giuranno, Michele; Mosca, Manuela
    Abstract: It is well known that one of the features of Public Choice, political realism, in Italy is embedded in a time-honored tradition going back to Machiavelli, and perpetuated by G. Mosca and Pareto in their political and sociological writings. The scientific spirit, which in their era led to the foundation of various social disciplines, fostered the application of economic analysis to the political sphere. In this context the initiator of the pure theory of public finance, Antonio de Viti de Marco (1858-1943), formulated an economic model of the state, consisting of two types of constitutional extremes: the absolute state, and the democratic state. In this work, we ask how this model may be reconciled to G. Mosca and Pareto’s theory of the ruling class, which De Viti de Marco agreed with. Finally, we analyze the validity of this theoretical construction for the interpretation of collusion, rent seeking and “clientelismâ€, i.e. the redistribution of extracted rent, which takes place in the form of discretionary allocation of public jobs, public contracts and other corporative favours. What emerges provides reasons to reflect upon for further developments in Public Choice.
    Date: 2015–12
  11. By: Marc Fleurbaey, Erik Schokkaert and Koen Decancq
    Abstract: In this paper we examine whether, and how, welfare economics should incorporate some insights from happiness and satisfaction studies. Our main point, based on the principle of respecting the individuals’ judgments about their own lives, is that one should not focus on reported satisfaction levels but on the ordinal preferences reported by individuals over the various dimensions of life. We illustrate with data from the Russian Longitudinal Monitoring Survey (RLMS) how to retrieve this information from happiness surveys. Creation-Date: 2009-04
  12. By: Fabrizio Germano (Universitat Pompeu Fabra and Barcelona Graduate School of Economics); Peio Zuazo-Garin (Universitat Rovira i Virgili, Department d’Economia, CREIP and BRiDGE)
    Abstract: We study an interactive framework that explicitly allows for nonrational behavior. We do not place any restrictions on how players’ behavior deviates from rationality. Instead we assume that there exists a probability p such that all players play rationally with at least probability p, and all players believe, with at least probability p, that their opponents play rationally. This, together with the assumption of a common prior, leads to what we call the set of p-rational outcomes, which we define and characterize for arbitrary probability p. We then show that this set varies continuously in p and converges to the set of correlated equilibria as p approaches 1, thus establishing robustness of the correlated equilibrium concept to relaxing rationality and common knowledge of rationality. The p-rational outcomes are easy to compute, also for games of incomplete information, and they can be applied to observed frequencies of play to derive a measure p that bounds from below the probability with which any given player chooses actions consistent with payoff maximization and common knowledge of payoff maximization.
    Keywords: strategic interaction, correlated equilibrium, robustness to bounded rationality, approximate knowledge, incomplete information, measure of rationality, experiments
    JEL: C72 D82 D83
    Date: 2015–11–02
  13. By: Rafael Hortala-Vallve (London School of Economics); Aniol Llorente-Saguer (Queen Mary University of London)
    Abstract: We study a version of the Colonel Blotto game where valuations across battlefields are heterogeneous and asymmetric. These games can exhibit unique pure strategy equilibria, some of which are non-monotonic with respect to the battlefield valuations. We test our theoretical predictions in the laboratory and find low initial levels of equilibrium play but substantial learning throughout the experiment. Learning is higher for games with monotonic equilibria. Finally, we find that deviations from equilibrium predictions benefit aggregate welfare.
    Keywords: Colonel Blotto, Non-zero sum, Experiments
    JEL: C92 D70
    Date: 2015–12
  14. By: Becker, Sascha O (Department of Economics, University of Warwick); Pfaff, Steven (University of Washington); Rubin, Jared (Chapman University)
    Abstract: The Protestant Reformation is one of the defining events of the last millennium. Nearly 500 years after the Reformation, its causes and consequences have seen a renewed interest in the social sciences. Research in economics, sociology, and political science increasingly uses detailed individual-level, city-level, and regional-level data to identify drivers of the adoption of the Reformation, its diffusion pattern, and its socioeconomic consequences. This survey takes stock of the research so far, tries to point out what we know and what we do not know, and which are the most promising areas for future research.
    Keywords: Protestant Reformation
    JEL: N33 Z12 R38 D85
    Date: 2016
  15. By: Iancu, Aurel (Institutul National de Cercetari Economice al Academiei Române)
    Abstract: This paper points out the first steps regarding the applied mathematics in economics made in Romania and the main role and scientific contributions of Prof. Tiberiu Schatteles in this important new way of the economic research.
    Keywords: analytical economics; economic research, input-output analysis; econometrics; theory of games
    JEL: C00 C70 C67
    Date: 2015–12
  16. By: Sabina Alkire
    Abstract: This chapter presents SenÕs capability approach as a framework for well-being measurement with powerful and ongoing relevance to current work on measuring well-being in order to guide public policy. It discusses how preferences and values inform the relative weights across capabilities, then draws readersÕ attention to measurement properties of multidimensional measures that have proven to be policy-relevant in poverty reduction. It presents a dual-cutoff counting methodology that satisfies these principles and outlines the assumptions that must be fulfilled in order to interpret ensuing indices as measuring capability poverty. It then discusses BhutanÕs innovative extension of this methodology in the Gross National Happiness Index and reflects upon whether it might be suited to other contexts. It closes with some remarks on relevant material in other Handbook chapters.
    Date: 2015–03
  17. By: Isabel Busom; Cristina Lopez-Mayan
    Abstract: Economic views held by the general public tend to differ significantly from those of economic experts. To what extent would these differences fade away if people were exposed to economic instruction? In this paper we identify first-year college students’ initial preconceptions about economic issues, explore some cognitive biases behind them, verify their persistence, and test whether beliefs are correlated to course performance. We conduct a survey at the beginning and the end of the semester on a sample of students taking an economic principles course. We find evidence of preconception persistence, inconsistencies and self-serving bias. Most students do not incorporate the newly learned tools into their thinking process, even if they perform well. Many economics senior students have some beliefs that are contradicted in a principles course. Instruction in economics could be more efficient if it explicitly addressed students’ preconceptions and biases, a path already taken in other disciplines.
    Keywords: economic education, student beliefs, cognitive bias, psychology, teaching of economics
    JEL: A12 A20 I21 Y8
    Date: 2015–12

This nep-hpe issue is ©2016 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.