nep-hpe New Economics Papers
on History and Philosophy of Economics
Issue of 2016‒01‒29
eleven papers chosen by
Erik Thomson
University of Manitoba

  1. Some notes on Gossen’s ‘submerged and forgotten’ approach to consumption and time By Sergio Nisticò
  2. The Legal Conceptions of Hans Kelsen and Eugen Ehrlich: Weighing Human Rights and Sovereignty By Mikhail Antonov
  3. Modes of infrastructure financing and the ‘Big Push’ in development economics By Joana Pais; José Pedro Pontes
  4. Complexity in Economics: an Up to Date View By Andrés Fernández Díaz
  5. Student preconceptions and learning economic reasoning By Isabel Busom Piquer; Cristina López-Mayán Navarrete
  6. The invisible hand and the rational agent are behind bubbles and crashes By Serge Galam
  7. Should we still use the concept of potential growth ? By Catherine Mathieu; Henri Sterdyniak
  8. Belief revision generalized: A joint characterization of Bayes' and Je¤rey's rules By Franz Dietrich; Christian List; Richard Bradley
  9. Teaching Economics and Providing Visual "Big Pictures" By Seyyed Ali Zeytoon Nejad Moosavian
  11. Who Should I Share Risk with? Gifts can tell : Theory and Evidence from Rural China By Wang, Ruixin

  1. By: Sergio Nisticò (University of Cassino and Lazio Meridionale)
    Abstract: Hermann Heinrich Gossen (1810-1858) — a civil servant who, in 1854, published at his expense the book Entwickelung der Gesetze des menschlichen Verkehrs und der daraus fließenden Regeln für menschliches Handeln — has traditionally been considered a forerunner of the neoclassical theory of consumption based on the law of diminishing marginal utility. It is only with the long-awaited publication, in 1983, of the English translation of Gossen’s book, that his editor, Nicholas Georgescu-Roegen, started to see in The Laws of Human Relations and the Rules of Human Action Derived Therefrom the roots of a wholly different theory of consumption in which the flow of calendar time plays a crucial and non-trivial role. By going through the works of Jevons, Menger and Walras, the paper argues that the logical and theoretical connection between Gossen’s approach to consumption choices and the marginalist school is unwarranted. Theoretical connections, if any, can be found between Gossen and the classical economists on the one hand and the English ‘liberal’ tradition of John Stuart Mill and J.M. Keynes on the other.
    JEL: B13 D01
    Date: 2016–01
  2. By: Mikhail Antonov (National Research University Higher School of Economics)
    Abstract: This paper considers the relevance of the legal conceptions put forward by Eugen Ehrlich and Hans Kelsen to the contemporary debate on human rights and their limits. It is asserted that the conceptions of Ehrlich and Kelsen adopt a multifaceted approach to the law and, at the same time, a philosophical perspective that secures human autonomy and freedom from “great narratives” and governmental intervention. This perspective opens up a variety of opportunities for better understanding the balance between individual and collective interests, and between the significance of rights and sovereignty. Both conceptions are still relevant to debates in the fields of international and constitutional law, and to legal philosophies about the limits of human rights and the epistemic conditions for identifying these rights, and how these rights can the same time lay claim to a universal character while remaining culturally embedded. The principle of relativity that underpins the Pure Theory of Law of Kelsen and the legal sociology of Ehrlich are of particular importance for discussing the “relative universality” of human rights
    Keywords: human rights, constitutionalization, Hans Kelsen, pure theory of law, Eugen Ehrlich, legal sociology, normativity, social conventions
    JEL: K10
    Date: 2016
  3. By: Joana Pais; José Pedro Pontes
    Abstract: In an economy where different agents undertake simultaneous and interdependent investments, this paper models the possibility that the outcome where some players invest and others do not invest is sustained in Nash equilibrium. It is well known that in models where all goods are financed through prices charged by the suppliers (“tolls” in the case of transport infrastructures), there are only two coordination equilibria: the “Big push” equilibrium, where every agent involved invests; and the “Poverty trap”, whenever none invests. We consider a two person simultaneous game, where the Government decides whether to build a highway and a firm producing a composite good decides whether to use it. Instead of resorting to tolls, the infrastructure is funded through an income tax that falls on wages. Having the Government supplying the highway and the firm not using it is a Nash equilibrium if the employment generated by the construction of the highway is intermediate and the rate of the wage income tax is high. The proliferation of unused transport infrastructures in Southern Europe seems to be related with low effects of public works upon the demand for labor and with demanddepressing “austerity” macroeconomic policies.
    Keywords: Balanced growth, Big Push, Spatial Concentration, Infrastructures Policy, noncooperative games.
    JEL: C72 R11
    Date: 2016–01
  4. By: Andrés Fernández Díaz (Departamento de Economía Aplicada III (Política Económica). Universidad Complutense de Madrid.)
    Abstract: It is well known that nonlinearity, economic dynamics, endogenity, and chaos, are some of the subjects closely related to complexity, and because of this all them must go on together towards a better knowledge of the behaviour of many systems in nature and society. It is for this reason that the progress and achievement as regard to the theory of complexity is reflected in related subjects, among which we emphasize the economic dynamics. Perhaps would be necessary a reconsideration of the idea or concept of complexity, especially if we are thinking in its relations with Economics. In this sense we try in this article to find a wider and open concept of complexity, taking into account that complex systems involves the integration of concepts from dynamics, information, computation, and evolution, and that as consequences of this integration would have to forge a new conceptual vocabulary and a new kind of mathematics. As an example we have chosen the analysis of capital market and time series, although there are many others works that have explored the potential applications of chaos theory to reveal “insights” into the structure and the dynamics of complex systems.
    Abstract: Es bien sabido que la nolinealidad, la dinámica caótica, la endogeneidad y el caos constituyen algunas de las materias estrechamente rela es por esta razón por lo que consideramos que todas ellas deben caminar conjuntamente hacia un mejor conocimiento del comportamiento de muchos sistemas en la naturaleza y en la sociedad. Recientemente se ha planteado la necesidad de una reconsideración de la idea o concepto de complejidad, especialmente en el campo de la Economía, y en este sentido tratamos en este artículo de encontrar una definición más amplia y abierta de la complejidad, teniendo en cuenta que los sistemas complejos implican o abarcan la integración de conceptos de dinámica, información, computación y evolución, y que como consecuencia de todo ello habría que forjar un nuevo tipo de vocabulario y una nueva clase de matemáticas. Como ejemplo de cuanto decimos en este trabajo, hemos elegido el mercado de capitales y las series temporales, aunque hay otros muchos casos en los que puede igualmente aplicarse la teoría del caos y su formalización en el marco de la estructura y la dinámica de los sistemas complejos.
    Keywords: Complex systems, complexity, economic dynamics, mathematics of chaos, computation, integration, capital market, time series.; Complejidad, sistemas complejos, nolinealidad, caos, computación, integración. Mercado de capitales, series temporales.
    Date: 2016
  5. By: Isabel Busom Piquer (Departament d'Economia Aplicada, Universitat Autonoma de Barcelona); Cristina López-Mayán Navarrete (Department of Economics, Universitat Autonoma de Barcelona)
    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 Y8
    Date: 2015–12
  6. By: Serge Galam
    Abstract: The substantial turmoil created by both 2000 dot-com crash and 2008 subprime crisis has fueled the belief that the two classical paradigms of economics, which are the invisible hand and the rational agent, are not appropriate to describe market dynamics and should be abandoned at the benefit of alternative new theoretical concepts. At odd with such a view, using a simple model of choice dynamics from sociophysics, the invisible hand and the rational agent paradigms are given a new legitimacy. Indeed, it is sufficient to introduce the holding of a few intermediate mini market aggregations by agents sharing their own private information, to recenter the invisible hand and the rational agent at the heart of market self regulation including the making of bubbles and their subsequent crashes. In so doing, an elasticity is discovered in the market efficiency mechanism due to the existence of agents anticipation. This elasticity is found to create spontaneous bubbles, which are rationally founded, and at the same time, it provokes crashes when the limit of elasticity is reached. Although the findings disclose a path to put an end to the bubble-crash phenomena, it is argued to be rationality not feasible.
    Date: 2016–01
  7. By: Catherine Mathieu (OFCE-Sciences Po); Henri Sterdyniak (OFCE-SciencesPo)
    Abstract: The concepts of potential output level and growth survived the 2008 crisis and are still widely used in economic policy debates. The paperdiscusses thetheoretical foundations and empirical assessments of these concepts. Potential output may refer to different concepts, depending on the constraints taken into account. Potential output cannot be assessed without a complex macroeconomic analysis.The paper discusses recent empirical work on potential growth estimates, especially how theyintroduce abreakin potential growth after the 2008 crisis, and how the methods used often justifypro-cyclical policies. For the future,the problem isnot a slowdown in potential growth butthe inability of developed economies,underglobalisation constraints, to reach afull-employment growth
    Keywords: potential growth, euro area governance
    JEL: E63 O47
    Date: 2015–12
  8. By: Franz Dietrich (EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics, CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique); Christian List (LSE - London School of Economics); Richard Bradley (LSE - London School of Economics)
    Abstract: We present a general framework for representing belief-revision rules and use it to characterize Bayes' rule as a classical example and Jeffrey's rule as a non-classical one. In Je¤rey's rule, the input to a belief revision is not simply the information that some event has occurred, as in Bayes' rule, but a new assignment of probabilities to some events. Despite their differences, Bayes' and Je¤rey's rules can be characterized in terms of the same axioms: responsiveness, which requires that revised beliefs incorporate what has been learnt, and conservativeness, which requires that beliefs on which the learnt input is 'silent' do not change. To illustrate the use of non-Bayesian belief revision in economic theory, we sketch a simple decision-theoretic application.
    Keywords: Belief revision,subjective probability,Bayes's rule,Je¤rey's rule,axio-matic foundations,fine-grained versus coarse-grained beliefs,unawareness
    Date: 2016
  9. By: Seyyed Ali Zeytoon Nejad Moosavian
    Abstract: The goal of this paper is to investigate the importance of providing visual "big pictures" in the teaching of economics. The plurality and variety of concepts, variables, diagrams, and models involved in economics can be a source of confusion for many economics students. However, reviewing the existing literature on the importance of providing visual "big pictures" in the process of learning suggests that furnishing students with a visual "big picture" that illustrates the ways through which those numerous, diverse concepts are connected to each other could be an effective solution to clear up the mentioned mental chaos. As a practical example, this paper introduces a "big picture" that can be used as a good resource in intermediate macroeconomics classes. This figure presents twenty-seven commonly-discussed macroeconomic diagrams in the intermediate macroeconomics course, and gives little detail on some of these diagrams, aiming at helping students to get the whole picture at once on a single piece of paper. This macroeconomics big picture mostly focuses on the routes through which common diagrams in macroeconomics are connected to each other, and finally introduces the general macroeconomic equilibrium that is graphically derived through those connections.
    Date: 2016–01
  10. By: Sneha Master
    Abstract: Green Accounting is basically adoption of valuation of natural capital integration in planning for development. Incorporating green accounting into national economic accounts could provide a measure of sustainability; however, considerable advanced methods of measurement and valuation are needed. There are, of course, no substitutes for the life-sustaining services of nature and the question of when and how to account for this fact is the source of many ongoing debates in green accounting. Key words: Green accounting, accounting, legal, Critical
    Date: 2015–09
  11. By: Wang, Ruixin (Tilburg University, Center For Economic Research)
    Abstract: This paper studies how gift exchange may help to overcome limited commitment problem in risk sharing. When efficient contract enforcement is lacking, people rely on friends (or relatives) to share risk since emotional or moral cost of defaulting between friends can help to prevent moral hazard. The problem is how to distinguish between friends and non-friends? Gift expense serves as a signal of friendship since giving a gift is less costly for a friend than a non-friend due to altruism. The model re-evaluates the role of gift exchange in developing economies, and helps to rationalize the large amount of gift exchange in China (10% of living expenditure). As a signal, gift exchange improves the efficiency in risk sharing and facilitates favor exchange, but I also demonstrate that the welfare gains due to this improvement may be offset by increased inequality. By using a unique data set containing detailed records about gift exchange in rural China, the empirical study suggests gift expenses, as a signal, significantly increase the probability of risk sharing. I also show further empirical evidence to the theory by testing more model predictions.
    Keywords: gift exchange; risk sharing; emotinal collateral; signaling
    JEL: O16 O17 L14 D03
    Date: 2016

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.