nep-hpe New Economics Papers
on History and Philosophy of Economics
Issue of 2016‒02‒17
six papers chosen by
Erik Thomson
University of Manitoba

  1. Top Incomes and Human Well-being Around the World By Burkhauser, Richard V.; De Neve, Jan-Emmanuel; Powdthavee, Nattavudh
  2. The science of monetary policy: an imperfect knowledge perspective By Stefano Eusepi; Bruce Preston
  3. Paradox Lost? By Easterlin, Richard A.
  4. The Importance of Peers for Compliance with Norms of Fair Sharing By Gächter, Simon; Gerhards, Leonie; Nosenzo, Daniele
  5. Liberale Wirtschaftspolitik im Zeichen der Debatte über säkulare Stagnation und Pikettys Kapitalismuskritik By Matthes, Jürgen
  6. Knowing me, imagining you: Projection and overbidding in auctions By Breitmoser, Yves

  1. By: Burkhauser, Richard V. (Cornell University); De Neve, Jan-Emmanuel (University of Oxford); Powdthavee, Nattavudh (London School of Economics)
    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: 2016–01
  2. By: Stefano Eusepi; Bruce Preston
    Abstract: New Keynesian theory identifies a set of principles central to the design and implementation of monetary policy. These principles rely on the ability of a central bank to manage expectations precisely, with policy prescriptions typically derived under the assumption of perfect information and full rationality. In consequence the prevailing policy regime is credible and correctly understood by market participants. Despite considerable advances in understanding, recent events have engendered a reevaluation of the theory and practice of monetary policy. The challenging macroeconomic environment bequeathed by the financial crisis has led many to question the efficacy of monetary policy, and, particularly, question whether central banks can influence expectations with as much control as previously thought. The objective of this survey is to review what is understood about the challenges to the New Keynesian paradigm posed by imperfect knowledge and to assess the degree of confidence with which one should hold the basic prescriptions of modern monetary economics.
    Date: 2016–02
  3. By: Easterlin, Richard A. (University of Southern California)
    Abstract: Or Paradox Regained? The answer is Paradox Regained. New data confirm that for countries worldwide long-term trends in happiness and real GDP per capita are not significantly positively related. The principal reason that Paradox critics reach a different conclusion, aside from problems of data comparability, is that they do not focus on identifying long-term trends in happiness. For some countries their estimated growth rates of happiness and GDP are not trend rates, but those observed in cyclical expansion or contraction. Mixing these short-term with long-term growth rates shifts a happiness-GDP regression from a horizontal to positive slope.
    Keywords: Easterlin Paradox, economic growth, income, happiness, life satisfaction, subjective well-being, transition countries, less developed nations, developed countries, long-term, short-term, trends, fluctuations
    JEL: I31 D60 O10 O5
    Date: 2016–01
  4. By: Gächter, Simon (University of Nottingham); Gerhards, Leonie (University of Hamburg); Nosenzo, Daniele (University of Nottingham)
    Abstract: A burgeoning literature in economics has started examining the role of social norms in explaining economic behavior. Surprisingly, the vast majority of this literature has studied social norms in asocial decision settings, where individuals are observed to act in isolation from each other. In this paper we use a large-scale dictator game experiment (N = 850) to show that the presence of "peers" in the decision setting faced by an individual can have a profound influence on the individual's perception of the decision situation and its underlying norms of sharing, as elicited in an incentive compatible way. However, we find limited evidence that this influence of peers in normative considerations translates into a corresponding effect in actual behavior. Partly, this is due to substantial heterogeneity in the extent to which dictators in our sample are willing to comply with norms of fair sharing.
    Keywords: social norms, norm compliance, peer effects, fair sharing, dictator game, framing, experiments
    JEL: A13 C92 D03
    Date: 2015–12
  5. By: Matthes, Jürgen
    Abstract: In jüngerer Zeit werden in der internationalen ökonomischen Debatte wirtschaftspolitische Forderungen laut, die deutlich von einer Nachfrageorientierung und weniger von einer angebotsorientierten liberalen Sicht geprägt sind. Sie gehen teilweise recht weit oder scheinen einer stabilitätsorientierten Wirtschaftspolitik entgegenzustehen. So wird beispielsweise vorgeschlagen, die fiskalpolitischen Regeln in Europa aufzuweichen, die extrem expansive Geldpolitik mit sehr niedrigen Zinsen für lange Zeit beizubehalten, die Inflation deutlich zu erhöhen, das Bargeld abzuschaffen, Schuldenschnitte bei Staaten durchzuführen sowie die Umverteilung von Einkommen und Vermögen stark zu erhöhen. Diese Forderungen erhalten aus verschiedenen Gründen hohes Gewicht in der öffentlichen internationalen Debatte. Erstens werden sie durch plakative Schlagworte in die öffentliche Debatte eingebracht. Das gilt zum einen für die Diskussion über eine vermeintlich drohende Säkulare Stagnation, zum anderen für die von Piketty angestoßene Kapitalismus- und Umverteilungsdebatte. Zweitens werden sie von prominenten ökonomischen Vertretern befürwortet. Zahlreiche renommierte internationale Makroökonomen äußern die Sorge vor einer Säkularen Stagnation - und auch der vormals wenig bekannte Piketty hat inzwischen einen hohen Grad an Bekanntheit erreicht. Drittens basieren diese Forderungen auf einem zunächst wohlfundiert erscheinendem makroökonomischem Fundament. [...]
    JEL: O4 E6 F53
    Date: 2016
  6. By: Breitmoser, Yves
    Abstract: People overestimate the probability that others share their values or preferences. I introduce type projection equilibrium (TPE) to capture such projection in Bayesian games. TPE allows each player to believe his opponents share his type with intermediate probability \rho. After establishing existence, I address my main question: How does projection affect behavior in games? I analyze auctions and distribution games. In auctions, projection implies an increased sense of competition, which induces overbidding in all (first-price) auctions. In addition, it biases the perceived value distribution, which induces cursed bidding in common value auctions. Thus, projection induces a hitherto neglected bias in bidding. It is novel in that it explains behavior across conditions and it is independently founded in psychology. I test projection equilibrium in multiple ways on existing data and find that it substantially improves on alternative concepts, both in isolation and in addition to them. The findings are cross-validated by testing projection of social preferences in distribution games.
    JEL: C72 C91 D44
    Date: 2015

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