nep-hpe New Economics Papers
on History and Philosophy of Economics
Issue of 2016‒03‒29
fourteen papers chosen by
Erik Thomson
University of Manitoba

  1. Money priming and social behavior of natural groups in simple bargaining and dilemma experiments By Julija Michailova; Christoph Bühren
  2. The Theory of Economic Development of J.A. Schumpeter: Key Features By BAZHAL, IURII
  3. "Rational Expectations and Farsighted Stability" By Bhaskar Dutta; Rajiv Vohra
  4. On The Transmission of Continuous Cultural Traits By Cheung, Man-Wah; WU, JIABIN
  5. Tipping versus Cooperating to Supply a Public Good By Scott Barrett; Astrid Dannenberg
  6. On Signalling and Screening By Anastasios Dosis
  7. The enterprise is the actual place for the entrepreneurial function in economic theory By Eduard Braun
  8. An economic theory of religious belief By Strulik, Holger
  9. The tyranny puzzle in social preferences: an empirical investigation By Frank A. Cowell; Marc Fleurbaey; Bertil Tungodden
  10. Obama, Katrina, and the Persistence of Racial Inequality By Robert A. Margo
  11. Pancasila Economic and the Challenges of Globalization and Free Market In Indonesia By Jaelani, Aan
  12. The very idea of democracy at work By Richard Hyman
  13. Procrastination in Teams By Joshua S. Gans; Peter Landry

  1. By: Julija Michailova (Kozminski University); Christoph Bühren (University of Kassel)
    Abstract: We examine the effects of money priming and solidarity on individual behavior in three simple experiments: dictator game, ultimatum game, and prisoner’s dilemma. Our study comprises two money treatments and two neutral (control) treatments. Additionally, we control for the strength of social ties between experimental participants. Although our priming procedure is sufficient to remind people of the concept of money, it is not sufficient to induce systematically different behavior of the treatment groups compared to the control groups. Moreover, we do not find any significant differences between groups with strong vs. weak social ties. Since our findings contradict previous research, it calls for further investigation on the topic of how money priming influences economic behavior.
    Keywords: money priming; bargaining; dilemma; social behavior; natural groups; economic experiment
    JEL: C78 C9
    Date: 2015
    Abstract: This paper comprises translation into English the preface of Iurii Bazhal to the first Ukrainian edition of Joseph Schumpeter’s famous fundamental book “The Theory of Economic Development: An Inquiry into Profits, Capital, Credit, Interest, and the Business Cycle” that was translated in Ukrainian and published in 2011 in commemoration of its 100th anniversary. The paper reveals the contemporary significance of this classical book as the challenger on replacing the neoclassical approaches in capacity to become the mainstream of modern economic theory. It is shown the Schumpeter’s approach gives a new vision of driving forces for economic development where a crucial conceptual place belongs to category the innovation. Second part of the paper reviews modern Neo-Schumpeterian approaches which have substantiated the importance of the structural innovation technological change of national economy for economic development. The government must permanently analyze a compliance of the actual production structure in the country with the current and future technological paradigms.
    Keywords: Schumpeter, Dynamics of economic development, Innovation theory, Technological paradigm, Innovation policy
    JEL: B31 O11 O30 O40
    Date: 2016–02–25
  3. By: Bhaskar Dutta; Rajiv Vohra
    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.
    Date: 2015
  4. By: Cheung, Man-Wah; WU, JIABIN
    Abstract: This paper generalizes the discrete cultural transmission model proposed by Bisin and Verdier (2001) to continuous trait space. The resulting cultural evolutionary dynamic can be characterized by a continuous imitative dynamic in a population game in which a player's payoff is equal to the aggregate cultural intolerance he has towards other agents. We show that cultural heterogeneity is always preserved. In addition, we model each agent's cultural intolerance towards another agent as an increasing function of cultural distance --- the distance between that other agent's trait and his own trait in the trait space. This captures people's general tendencies of evaluating culturally more distant people with stronger biases, and it is most easily modeled on a continuous trait space. We find that the curvature of the cultural intolerance function plays an important role in determining the long-run cultural phenomena. In particular, when cultural intolerance is a convex function of cultural distance, only the most extremely polarized state is a stable limit point.
    Keywords: Cultural transmission, Continuous trait space, Cultural evolution, Imitative Dynamic, Polarization
    JEL: A14 C72 C73 D10 Z13
    Date: 2016–03–09
  5. By: Scott Barrett (Columbia University); Astrid Dannenberg (University of Kassel)
    Abstract: In some important multi-player situations, such as efforts to supply a global public good, players can choose the game they want to play. In this paper we conduct an experimental test of the decision to choose between a “tipping” game, in which every player wants to contribute to the public good provided enough other players contribute, and a prisoners’ dilemma, the classic cooperation game. In the prisoners’ dilemma, the first best outcome is attainable, but cannot be sustained as a Nash equilibrium. In the tipping game, only a second best outcome may be attainable, but there exists a Nash equilibrium that is strictly preferred to the one in the prisoners’ dilemma. We show that groups do significantly better when they choose the tipping game, and yet many groups repeatedly choose the prisoners’ dilemma, indicating a mistaken and persistent tendency to prefer a game with potentially higher payoffs to one having a strategic advantage.
    JEL: C72 C92 F53 H41
    Date: 2015
  6. By: Anastasios Dosis (ESSEC - ESSEC Business School - Essec Business School - Economics Department - Essec Business School, THEMA - Théorie économique, modélisation et applications - Université de Cergy Pontoise - CNRS - Centre National de la Recherche Scientifique)
    Abstract: The two games usually employed to model markets with asymmetries of information are the signalling game and the screening game. In the signalling game, an equilibrium may not be efficient due to the arbitrariness in the off-the-equilibrium-path beliefs. In the screening game, a pure strategy Nash equilibrium may fail to exist because of " cream-skimming " deviations. Perhaps surprisingly, I show how in a game that combines signalling and screening, an equilibrium generically exists and is efficient.
    Keywords: efficiency,existence,Signalling,screening,information economics
    Date: 2016–03–09
  7. By: Eduard Braun (Abteilung für Volkswirtschaftslehre, Technische Universität Clausthal (Department of Economics, Technical University Clausthal))
    Abstract: The enterprise is an historical phenomenon specific to capitalism. It is a fictional agent created by accounting and sanctioned by law. It is based on capital and its purpose is to yield monetary profit. Within the framework of the market economy, production is organized according to the decisions and actions of the aggregate of these artificially created agents. This paper demonstrates that the “entrepreneur” as used in economic theory is nothing but a personification of the enterprise. In the most renowned economic theories of entrepreneurship, the entrepreneurs are supposed to be in possession of the resources they employ. Yet the functions which these theories ascribe to the entrepreneurs implicitly presuppose that the latter not only possess resources, but that they actually own them. Without capital, which grants the power to obtain property rights in resources, entrepreneurs would not be able to bear the losses that come along with the entrepreneurial functions. The theories violate their own definitions by changing their object from a “pure” and property-less entrepreneur to a capital-owning agent. These theories can be reinterpreted, therefore, as applying not to the pure entrepreneur but to the capital-based enterprise. They then become theories of how and according to which principles enterprises organize the production process in capitalism. In contrast to the theoretical construct of the entrepreneur, enterprises are even present, though only implicitly, in neoclassical equilibrium analysis. They provide the setting of optimal decision making and therein constitute the tacit rationale of the notorious assumptions of complete foresight and perfect rationality.
    Keywords: Theory of the entrepreneur; Capitalist enterprises; Equilibrium
    JEL: D50 L26 P12
    Date: 2016
  8. By: Strulik, Holger
    Abstract: In this paper I consider how individuals allocate their time between church attendance (and other religious activities) and secular leisure activities. Moreover individuals use a cognitive style, which is either intuitive-believing or reflective-analytical. I assume that the full benefit from religious activities is achieved by intuitive believers. The model predicts that, ceteris paribus, wealthier individuals and individuals with higher cognitive ability are more likely to abandon the intuitive-believing cognitive style. They may continue to attend church but do so less frequently than intuitive believers. In general equilibrium, there exists a locally stable steady state where believing and frequent church attendance is widespread across the social strata. A sufficiently large negative shock (e.g. the Enlightenment, repeal of Sunday shopping laws), however, initiates the gradual secularization of society.
    Keywords: religiosity,church attendance,cognitive style,consumerism,fuzzy fidelity
    JEL: N30 D11 Z12 Z13
    Date: 2016
  9. By: Frank A. Cowell; Marc Fleurbaey; Bertil Tungodden
    Abstract: When forming their preferences about the distribution of income, rational people may be caught between two opposite forms of “tyranny.” Giving absolute priority to the worst-off imposes a sort of tyranny on the rest of the population, but giving less than absolute priority imposes a reverse form of tyranny where the worst-off may be sacrificed for the sake of small benefits to many well-off individuals. We formally show that this intriguing dilemma is more severe than previously recognised, and we examine how people negotiate such conflicts with a questionnaire-experimental study. Our study shows that both tyrannies are rejected by a majority of the participants, which makes it problematic for them to define consistent distributive preferences on the distribution.
    Keywords: social welfare; aggregation; questionnaire; income distribution
    JEL: C1
    Date: 2015–12–01
  10. By: Robert A. Margo
    Abstract: This paper is my presidential address to the Economic History Association. In it, I review and extend the economic history of racial differences in per capita income from 1870 to the present. Specifically, I revise pre-World War Two benchmark estimates of Black/White income ratios originally prepared by Robert Higgs. The Higgs benchmarks suggest that the Black/White income ratio increased from 1870 to 1900, but the trend was flat from 1900 to 1940. Compared with the Higgs benchmarks, mine show less convergence before 1900 but more between 1900 and 1940. When my new benchmarks are combined with standard post-World War Two census data they suggest that the underlying pace of Black/White income convergence has been absolutely slow, with the notable exceptions of the 1940s and the period of the modern Civil Rights Movement. I explore the interpretation of these long-run features with a model of intergenerational transmission of racial inequality in which racial differences in causal factors that determine income are initially enormous after the Civil War and which erode slowly across generations.
    JEL: J71 N31 N32
    Date: 2016–01
  11. By: Jaelani, Aan
    Abstract: The crisis of economy in Indonesia forces the government to reform its economic development paradigm. The new paradigm development refers to great attention of economic-societies such as cooperation. Those involve in the planning of national economic development as well as the planning of society development. This article aims to define the combination between Islamic economic and economic of Pancasila to pressure the identity of Indonesian state in globalization era.
    Keywords: Pancasila economic, Islamic economic, globalization, free market
    JEL: A11 B0 G18 H1 I2 N2 O57 P4 P5 Z12
    Date: 2016–03–08
  12. By: Richard Hyman
    Abstract: The employer-employee relationship involves the right to command on the one hand, the duty to obey on the other. Is democracy at work possible? This article explores some of the contrasting understandings of industrial democracy over time and across countries, discusses how the historical advance of rights and citizenship at work has been reversed under neoliberalism, and ends by considering how labour movements might fight to regain the achievements of previous decades.
    Keywords: citizenship; democracy; neoliberalism; solidarity; struggle
    JEL: R14 J01
    Date: 2015–12–14
  13. By: Joshua S. Gans; Peter Landry
    Abstract: Naively present-biased agents are known to be severe procrastinators. In team settings, procrastination can represent a form of free-riding that, in excess, can jeopardize a team's ability to meet a deadline. Here we show how naivete and present bias, despite their reputations, can be desirable traits in a teammate, enabling a team to optimize its performance while eliminating inefficient free-riding. These benefits emerge only from a more flexible specification (in comparison to existing models) as to how naive players reassess prior beliefs upon confronting present bias. By allowing the 'depth' and 'direction' of such reassessments to vary, our model links present-biased discounting theories to the recently-revived interest in modeling non-Bayesian reactions to null events, while offering a distinct approach reminiscent of level-k reasoning. Key themes from our results include the value of behavioral diversity, the opposite effects of 'introspection' and 'extrospection' on motivation, and that under- and over-thinking can both undermine efficiency.
    JEL: C72 D03 M11
    Date: 2016–01
  14. By: Oscar Volij (BGU)
    Keywords: Income inequality; Lorenz curves; bistochastic matrices; majorization
    JEL: C70 D63
    Date: 2016

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