nep-hpe New Economics Papers
on History and Philosophy of Economics
Issue of 2016‒02‒12
eighteen papers chosen by
Erik Thomson
University of Manitoba

  1. Das Turgot Problem. The method of Economics By José M. Menudo
  2. Ecological Macreconomics: Introduction and Review By Armon Rezai; Sigrid Stagl
  3. Learning to trust, learning to be trustworthy By Ulrich Berger
  4. Happiness and Preferences in a Legality Social Dilemma Comparing the Direct and Indirect Approach By L. Becchetti; G. Corrado; V. Pelligra; F. Rossetti
  5. The prisoners' dilemma, congestion games and correlation By Forgó, Ferenc
  6. Ultimatum Concession Bargaining: an Experimental Study By Chiara Felli; Werner Güth; Esther Mata-Pérez; Giovanni Ponti
  7. A Critique of Modern Money Theory and the Disequilibrium Dynamics of Banking and Government Finance By Tianhao Zhi
  8. Crossing Boundaries, Displacing Previous Knowledge and Claiming Superiority: Is the Economics of Discrimination a Conquest of Economics Imperialism? By Cléo Chassonnery-Zaïgouche
  9. Bounded Rationality and Correlated Equilibria By Fabrizio Germano; Peio Zuazo-Garin
  10. Cognitive Hierarchies in the Minimizer Game By Ulrich Berger; Hannelore De Silva; Gerlinde Fellner-Röhling
  11. Experimental Methods for the General Economist: Five lessons from the Lab By Douglas D. Davis
  12. When economists and ecologists meet on Ecological Economics: two science paths around two interdisciplinary concepts By Olivier Petit; Franck-Dominique Vivien
  13. Are Women Naturaliter More Cooperative? An Experimental Investigation of the Vote-with-the-Wallet Game By L. Becchetti; V. Pelligra; A. Vásquez
  14. Economics and the Near-Death Experience of Democratic Governance By June Sekera
  15. States as Game Players The Example of Russia, China and Europe By Gérard Mondello
  16. Minimal Justice and Regime Change in Brian Orend’S Political Ethics By Arseniy D. Kumankov
  17. The better toolbox: Experimental Methodology in Economics and Psychology By Daniela Di Cagno; Werner Güth; Giacomo Sillari
  18. Elementary Logic for Philosophy of Science and Economic Methodology By Max Albert

  1. By: José M. Menudo (Department of Economics, Universidad Pablo de Olavide)
    Abstract: This paper examines A.R.J. Turgot’s explanation of the scope and method of economic science. We begin by highlighting two contradictory economic methodologies in Turgot’s writings according to the literature: one in his text on progress and another in his papers on concrete economic matters. An initial hypothesis in this paper holds that this ‘contradiction’ does not exist. To do so, we shall use his texts on scientific methodology, history of science and epistemology, mainly written during the decade of the fifties. The argument is that his taxonomy of sciences explains that the different methodologies observed by the literature, depending on the discipline, are the forms that the unit of science can take in each stage of the progress of the human spirit. A corollary to this hypothesis is that Turgot’s multi-disciplinary works describe a scene of the birth of economic science that is very removed from the political arena. Both debates on types of knowledge, the independence of disciplines, the specialized language and the association of authors are better explained from the sociology of science than from the history of political thought.
    Keywords: Turgot, History of Economic Thought, History of Science, Enlightenment, and Economic Methodology.
    JEL: B31 B10 Z13 B11 B41
    Date: 2016–02
  2. By: Armon Rezai (Vienna University of Economics and Business, Welthandelsplatz 1, 1020 Vienna, Austria); Sigrid Stagl (Vienna University of Economics and Business, Welthandelsplatz 1, 1020 Vienna, Austria)
    Abstract: The Great Recession of the past years has brought macroeconomics back. Many of the recession's phenomena, causes and consequences alike, cannot be understood using solely microeconomic decisionmaking. Over the past decades the economics profession has pursued the implications of rational choices and enshrined them in so-called "micro foundations" as a hallmark of modern economic theory. By focusing on the choices and actions of individual consumers, firms, or the government, however, one can easily miss important determinants of the economic system which only arise at the meso- or the macroeconomic levels where institutions, coordination, and complexity in general are important and sometimes even can take on a life of their own. To lesser extent, ecological economics has fallen prone to similar pitfalls by mostly focusing the unit of investigation on low-level, small-scale subsystems of the economy. There are, of course, notable exceptions including the early contributors Boulding and Georgescu-Roegen and the general interest of ecological economists in the field of (ecological) macroeconomics has been increasing.
    Date: 2016–01
  3. By: Ulrich Berger (Department of Economics, Vienna University of Economics and Business)
    Abstract: Interpersonal trust is a one-sided social dilemma.Building on the binary trust game, we ask how trust and trustworthiness can evolve in a population where partners are matched randomly and agents sometimes act as trustors and sometimes as trustees. Trustors have the option to costly check a trustee's last action and to condition their behavior on the signal they receive. We show that the resulting population game admits two components of Nash equilibria. Nevertheless, the long-run outcome of an evolutionary social learning process modeled by the best response dynamics is unique. Even if unconditional distrust initially abounds, the trustors' checking option leads trustees to build a reputation for trustworthiness by honoring trust. This invites free-riders among the trustors who save the costs of checking and trust blindly, until it does no longer pay for trustees to behave in a trustworthy manner. This results in cyclical convergence to a mixed equilibrium with behavioral heterogeneity where suspicious checking and blind trusting coexist while unconditional distrust vanishes.
    Keywords: trust game, evolutionary game theory, reputation, best response dynamics
    JEL: C72 C90
    Date: 2016–01
  4. By: L. Becchetti; G. Corrado; V. Pelligra; F. Rossetti
    Abstract: We investigate players’ preferences in a multiplayer prisoner’s dilemma by comparing results from a direct (satisfaction based) and an indirect (choice based) approach. Both approaches provide strong evidence of preference heterogeneity, with players who cooperate above median being less affected in their choice by monetary payoffs vis-à-vis the public good component. The combination of a legality frame plus a conformity information design reduces further the relative preference (satisfaction) for the non-cooperative choice for such players. Our findings support the hypothesis that (part of the) players have, in addition to the standard self-interest component, an other-regarding preference argument that is further satisfied in the legality frame plus conformity design.
    Keywords: Analysis of Collective Decision-Making, Corruption, Laboratoty Experiment, Legality Game, Redistribution, conformity
    JEL: C92 D7 D73 H2
    Date: 2016
  5. By: Forgó, Ferenc
    Abstract: Social dilemmas, in particular the prisoners' dilemma, are represented as congestion games, and within this framework soft correlated equilibria as introduced by Forgó F. (2010, A generalization of correlated equilibrium: A new protocol. Mathematical Social Sciences 60:186-190) is used to improve inferior Nash payoffs that are characteristic of social dilemmas. These games can be extended to several players in different ways preserving some important characteristics of the original 2-person game. In one of the most frequently studied models of the n-person prisoners' dilemma game we measure the performance of the soft correlated equilibrium by the mediation and enforcement values. For general prisoners' dilemma games the mediation value is ∞, the enforcement value is 2. This also holds for the class of separable prisoners’ dilemma games.
    Keywords: prisoners' dilemma, congestion games, soft correlated equilibrium, mediation value, enforcement value
    JEL: C72
    Date: 2016
  6. By: Chiara Felli; Werner Güth; Esther Mata-Pérez; Giovanni Ponti
    Abstract: Unlike letting the Ultimatum Game be played in the strategy mode with monotonic response strategy, both players, the proposer as well as the responder, are allowed to concede. Proposers would concede by increasing second, third, ... binding offers. Similarly, responders concede by decreasing binding acceptance thresholds. Treatments differ in whether to avoid early conflict at least one party must concede. The other condition varies the number of possible concessions, namely, two versus four. Since accepting every positive (last) offer is weakly undominated, the benchmark outcome is the usual one with the smallest positive offer accepted (at least in last attempt). If concessions are necessary, the responder might prefer larger early acceptance thresholds allowing him to concede. Similarly, a proposer might begin by offering much less than what she is finally willing to concede. Our experimental findings confirm the hypothesis of more frequent and larger concessions by responder participants for whom the concessions are hypothetical and essentially mean to rely on weakly dominant behavior. According to our data, the need of concessions weakens the power advantage of the proposer. Surprisingly, the longer horizon does not improve the chances of an agreement, even when no concessions are needed.
    Keywords: Bargaining Experiments, Concession Making
    JEL: C72 C78
  7. By: Tianhao Zhi (Finance Discipline Group, UTS Business School, University of Technology, Sydney)
    Abstract: This paper critically reviews and examines the relationship between the origin of disequilibrium macroeconomic thinking by John Maynard Keynes, and the development of Keynesian disequilibrium macroeconomic models. Given that the two strands of literature are both plentiful, I will focus on discussing the essence of Keynesian disequilibrium thinking, and its implications of relevant models in the context of Keynes-Metzler-Goodwin and Weidlich-Haag-Lux approaches.
    Keywords: disequilibrium macroeconomics; nonlinear economic dynamics; John Maynard Keynes; Hyman Minsky
    JEL: B22 E5 E12 G21
    Date: 2016–02–01
  8. By: Cléo Chassonnery-Zaïgouche
    Abstract: Becker’s work on discrimination is commonly viewed as one of the first expressions of “economics imperialism”. This paper challenges this view by looking at previous and later works on discrimination. Two elements define economics imperialism: the crossing of established frontiers between approaches and disciplines and the intention of substituting one approach for another. Section 1 briefly presents the origins of economics imperialism and proposes a two-aspects definition of the concept. Section 2 contextualizes Becker’s model of discrimination as imperialism “within economics” rather than towards other social sciences. Section 3 characterizes Arrow’s statistical discrimination as a humble theoretical imperialism, calling for the complementarity of social sciences rather than for the superiority of economics. Section 4 states that empirical measurements of discrimination in economics are a type of empirical imperialism essentially because these methods replace other social sciences in their contexts of expertise.
    Keywords: Economics imperialism, Discrimination (history of), Racial discrimination, Statistical discrimination, Becker (Gary S.), Arrow (Kenneth J.)
    JEL: B40 B20 A14
    Date: 2015–12
  9. By: Fabrizio Germano (Universitat Pompeu Fabra and Barcelona Graduate School of Economics); Peio Zuazo-Garin (Universitat Rovira i Virgili, 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
    Date: 2015–11
  10. By: Ulrich Berger (Department of Economics, Vienna University of Economics and Business); Hannelore De Silva (Department Finance, Accounting and Statistics , Vienna University of Economics and Business); Gerlinde Fellner-Röhling (Institute of Economics, Ulm University)
    Abstract: Experimental tests of choice predictions in one-shot games show only little support for Nash equilibrium (NE). Poisson Cognitive Hierarchy (PCH) and level-k (LK) are behavioral models of the thinking-steps variety where subjects differ in the number of levels of iterated reasoning they perform. Camerer et al. (2004) claim that substituting the Poisson parameter tau = 1.5 yields a parameter-free PCH model (pfPCH) which predicts experimental data considerably better than NE. We design a new multi-person game, the Minimizer Game, as a testbed to compare initial choice predictions of NE, pfPCH and LK. Data obtained from two large-scale online experiments strongly reject NE and LK, but are well in line with the point prediction of pfPCH.
    Keywords: behavioral game theory, experimental games, Poisson cognitive hierarchy, level-k model, minimizer game
    JEL: C72 C90 D01 D83
    Date: 2016–01
  11. By: Douglas D. Davis (Department of Economics, VCU School of Business)
    Abstract: I review a series five primary results from experimental economics that impact on the economics profession as a whole. These results regard the relative (un)importance of subject sophistication in laboratory markets, the importance of gender on economic outcomes, the propensity for humans to behave in less than fully rational ways, the importance of trading institutions on economic performance and the behavioral relevance of economic theory. In overview, I find that economics as a profession has benefited from the use of experimental methods by fostering a dialogue between theorists and empiricists, better informing policy and improving data collection techniques.
    Date: 2016–01
  12. By: Olivier Petit (UA - Université d'Artois, CLERSE - Centre lillois d'études et de recherches sociologiques et économiques - CNRS - Centre National de la Recherche Scientifique - Université Lille 1 - Sciences et technologies); Franck-Dominique Vivien (Regards - EA 6292 - Laboratoire d'économie et gestion de Reims - URCA - Université de Reims Champagne-Ardenne)
    Abstract: Ecological economics essentially grew out of economists working in the environmental field and growing dissatisfied with the way that standard economics saw interactions between nature and societies and ecologists anxious to take human activities (including economic) into account in a much more direct way, within the dynamic of the ecosystems on which they depend. This clearly inscribed the new field of ecological economics within an interdisciplinary and even transdisciplinary perspective. In order to try to provide some thoughts on the evolution of this trend and the relationship between economists and ecologists, we have chosen to focus on two items 1 that are undoubtedly among the achievements of ecological economics, although their mobilization is far from uniform among the authors who make use of them: coevolution and ecosystem services. In order to do so, the itinerary of two authors recognized in the field of ecological economics will be examined: Richard B. Norgaard, whose work on the coevolutionary paradigm (Norgaard, 1994) is recognized as one of the foundations of ecological economics (Munda, 1997); Robert Costanza, who initiated work on the monetary valuation of ecosystem services 1 For the moment, we would like to use the generic term for the subject. We shall see later that these subjects may be alternatively (and often also simultaneously) used as metaphors, concepts, and instruments of public policy. 2 (Costanza et al., 1997) that is a marker in the field of ecological economics. What unites these two authors is a manifest interest in the work coming out of systems analysis in the 1970s-as we shall see, that interest ultimately led to fairly contrasting visions of the field of ecological economics.
    Keywords: ecological economics,coevolution,ecosystem services,interdisciplinarity
    Date: 2015–06–30
  13. By: L. Becchetti; V. Pelligra; A. Vásquez
    Abstract: We test for the existence of gender effects in a “vote with the wallet” multiplayer prisoner’s dilemma. Statics tests and dynamic econometric estimates find that women cooperate significantly more when we start with the baseline version of the game without introducing institutional legality frames, ex post redistribution schemes and conformity information designs. Women therefore reveal themselves as naturaliter more cooperative.
    Keywords: Gender Effects, lab experiment, Redistribution, conformity
    JEL: C92 D7 D73 H2
    Date: 2016
  14. By: June Sekera
    Abstract: In this paper I trace the connection between mainstream, market-centric economics and what James Galbraith has called “the collapse of the public governing capacity.” Marketization and its confederate, privatization, have led, sometimes intentionally, to the evisceration of governmental capacity, the downsizing of democracy and the dismantling of traditions of responsible public administration that are grounded in law and the Constitution.
    Date: 2015–05
  15. By: Gérard Mondello (GREDEG - Groupe de Recherche en Droit, Economie et Gestion - UNS - Université Nice Sophia Antipolis - CNRS - Centre National de la Recherche Scientifique)
    Abstract: This article highlights the importance of the use of credible and non-credible threats. Its main lesson is that cooperation is even stronger when based on long-term relationships which makes failures implausible. It reasonably well describes the relationships that exist between the Russian Federation and China (players 1 and 3), player 2 for example being Europe. Obviously, one may object that the United States are missing from the picture. In fact, adding a fourth partner would not have changed the global framework of the game but would have add in complexity. All in all, international relationsships analysis can usefully be studied in terms of classical game theory. However, this approach needs adaptations of standard game theory. Indeed, t these games are sequential and they mainly accept pure strategies as solution of the game but not mixed strategies which are non sense in this context. However, mixed strategies can be conceived in the cases of armed conflict. To conclude, even if not developed, the spirit of GO game motivated our paper in which cooperation between two players does not exclude competition. Players 1 and 3 of our representation understood that they could not permanently exclude on each other from the international scene. Then, they preferred delineate areas that give them the highest possible benefits. In the simple model we gave, Player-2 bears the brunt of this agreement.
    Keywords: Game theory, coalitions, geostrategy, threat-game
    Date: 2015–05–06
  16. By: Arseniy D. Kumankov (National Research University Higher School of Economics)
    Abstract: Brian Orend, one of the leading just war theorists, is best known today for elaborating jus post bellum principles while his works contain another distinctive component, concept of “minimally just” political community. This article explores Briand Orend’s conception of “minimally just” political community, especially the meaning of this concept for Orend’s version of just war theory. Orend uses Kantian political and moral philosophy in order to prove there are two key functions of state: protection of human rights and establishing order. Since human rights are universal, a state should assist in protection of human rights of every person, not only its citizen’s rights. This leads to situation when states avoid of harming foreigners and aggressive wars become banned. Orend call a state “minimally just” if it follows these rules. However, these states could violate non-intervention principle and start wars. A crucial point here is an idea that a “minimally just” state has a right to fight for the overthrow of the aggressive regimes and establishment of “minimal justice”. The author concludes that this notion helps Orend extend the list of just causes of war, though his original intention was limitation of cases when arms could be used
    Keywords: just war theory, war, just cause principle, Walzer, Orend, justice, humanitarian intervention, regime change
    JEL: Z
    Date: 2016
  17. By: Daniela Di Cagno; Werner Güth; Giacomo Sillari
    Abstract: In experimental economics one can confront a “don’t!â€, as in “do not deceive your participants!†as well as a “do!â€, as in “incentivize choice making!â€. Neither exist in experimental psychology. Furthermore, controversies exist in both fields regarding data collection methods, e.g. play, strategy (vector) method in strategic game experiments, and concerns for external and internal validity, e.g. field versus lab experiments. In addition to touching on these aspects, we suggest ways to enrich the dimensionality of choice data, if possible, when maintaining the revealed-motive approach. Finally, and most mportantly, we recommend to elicit not only choice data but also to collect supplementary data shedding light on how participants deliberate before deciding.
    Keywords: methodology, experiments, game theory
    JEL: B41 A12 C91 C70
  18. By: Max Albert (University of Giessen)
    Abstract: This paper covers those parts of elementary logic that are needed in an introductory course on philosophy of science and the methodology of economics. With this aim in mind, much of the technical material from standard logic courses can be dropped. Specifically, the exposition emphasizes the semantic side, with only a few remarks on syntacti- cal aspects. On the other hand, some philosophical and methodological remarks are in order to prepare the ground for methodological discus- sions. Where appropriate, exercises (including review questions and discussion questions) are provided. Solutions to selected exercises are given at the end of the paper.
    Date: 2015

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