nep-hpe New Economics Papers
on History and Philosophy of Economics
Issue of 2016‒04‒09
thirteen papers chosen by
Erik Thomson
University of Manitoba

  1. The Impossibility of Democratic Socialism: Two Conceptions of Democracy By Makovi, Michael
  2. Economic Philosophy of al-Mawardi: Economic Behavior in Adab al-Dunya wa-al-Din and al-Ahkam al-Sulthaniyah By Jaelani, Aan
  3. The economist quae political economist: Lionel Robbins and the economic adivisory council By Thiago Dumont Oliveira; Carlos Eduardo Suprinyak
  4. National Happiness and Genetic Distance: A Cautious Exploration By Proto, Eugenio; Oswald, Andrew J.
  5. Money, Social Capital and Materialism. Evidence from Happiness Data By Marcin Piekalkiewicz
  6. The legacy of Friedrich List: The expansive reproduction system and the Korean history of industrialization By Jun, Bogang; Gerybadze, Alexander; Kim, Tai-Yoo
  7. "Drop the dead donkey": a response to Steven Kates on the subject of Mill's fourth proposition on capital By Roy H Grieve
  8. Animal Spirits in a Monetary Model By Farmer, Roger E A; Platonov, Konstantin
  9. On the (Political) Origin of "Corporate Governance" Species By Massimiliano Vatiero
  10. Back in the bazaar: taking Pierre Bourdieu to a trading room By Olivier Godechot
  11. Big History, Global Corporations, Virtual Capitalism By Richard L. Nolan
  12. Improving the Teaching of Econometrics By David Hendry; Grayham E. Mizon
  13. Trading in Networks: Theory and Experiments By Syngjoo Choi; Andrea Galeotti; Sanjeev Goyal;

  1. By: Makovi, Michael
    Abstract: Andrei Shleifer and Robert W. Vishny (1994) have used Public Choice analysis to criticize market socialism. Peter J. Boettke (1995) and Peter T. Leeson and Boettke (2002) have argued that F. A. Hayek's Road to Serfdom (2007 [1944]) constituted a form of Public Choice analysis as well, in particular presaging an application of Arrow's Impossibility Theorem to democratic socialism. This essay demonstrates that additionally, Hayek's book adumbrated the distinction between liberal or limited democracy and illiberal or totalitarian democracy. This distinction between two conceptions of democracy provides another means of criticizing democratic socialism. The democratic political system and socialist economic system are fundamentally incompatible, making democratic socialism impossible, in the sense that democracy cannot fulfill for socialism what democratic socialists expect from it. Democratic socialism will fail, not because those in power will betray their trust or abuse their power, but because the fundamental institutional constraints of democracy are incompatible with socialist economics.
    Keywords: Hayek; Road to Serfdom; democratic socialism; market socialism; economic democracy; totalitarianism; public choice; government failure; liberal democracy; illiberal democracy; arrow; impossibility; rent seeking; rent-seeking
    JEL: A12 B24 B25 B51 B53 D70 P10 P20 P30 P50
    Date: 2016–03–21
  2. By: Jaelani, Aan
    Abstract: Economic behavior in the study of Islamic economics is the basis for the government to portray political ethics and ethical economic functions of individuals in functioning as a member of society. Secular ethics and religious ethics, according to al-Mawardi, as the code of conduct in conducting economic practices by the government and every member of society to uphold the principle of mashlahah (goodness). By the middle or moderate principles, both ethical underpinning for anyone in private and institutional (government) in carrying out economic activities to realize the happiness of the world and the hereafter
    Keywords: Philosophy of economics, behavioral economics, ethics, religion, Islamic Economic
    JEL: B31 B41 D01 D1 D6 H1 H5 N01 N25 N3 N35
    Date: 2016–03–25
  3. By: Thiago Dumont Oliveira (N/A); Carlos Eduardo Suprinyak (Cedeplar-UFMG)
    Abstract: This paper assesses Robbins's participation in the Economic Advisory Council in 1930, drawing mostly on The Lionel Robbins Papers held atthe LSE. The divergences between him and Keynes are highlighted and an attempt is made to shed some light on Robbins' overarching interest on the interplay of economics as a science and political economy as a broader field that includes normative considerations. This renders invalid criticisms related to the absence of ethical considerations in Robbins' approach to economics. Specifically, some elements that would resurface in Robbins' later works are identified, and it is argued that the Essay on the Nature and Significance of Economic Science should be situated within his larger purpose of illuminating the extent to which the science of economics could serve as an important tool – necessary, though not sufficient –to orient the formulation of public policies.
    Keywords: onel Robbins, Economic Advisory Council, Economics x Political Economy
    JEL: B20 B31
    Date: 2016–04
  4. By: Proto, Eugenio (University of Warwick); Oswald, Andrew J. (University of Warwick)
    Abstract: This paper studies a famous unsolved puzzle in quantitative social science. Why do some nations report such high levels of mental well-being? Denmark, for instance, regularly tops the league table of rich countries’ happiness; Britain and the US enter further down; some nations do unexpectedly poorly. The explanation for the longobserved ranking - one that holds after adjustment for GDP and other socioeconomic variables - is currently unknown. Using data on 131 countries, the paper cautiously explores a new approach. It documents three forms of evidence consistent with the hypothesis that some nations may have a genetic advantage in well-being.
    Keywords: Well-being; international; happiness; genes; 5HTT; countries JEL Classification: I30; I31
    Date: 2016
  5. By: Marcin Piekalkiewicz
    Abstract: Are unhappiness, high concern for money and scarcity of social capital different faces of the same phenomenon? Economists tend to treat these variables as distinct correlates of well-being. On the contrary, positive psychologists argue that they all relate to materialism, a system of personal values ascribing great importance in life to extrinsic motivations and low priority to intrinsic motivations. Using data from two European cross-sectional surveys and the German Socio-Economic Panel, I test the hypothesis that material interests, proxied by the effects of individual and reference income on well-being, are associated with low levels of social capital. The results suggest that people with scarce social capital tend to have greater material interests, whereas the negative effect of income comparisons on well-being is eliminated for individuals exhibiting the highest levels of social capital. The implication of such finding is that promoting social capital reduces people's material concerns and has positive impact on their well-being. The results from a country-level analysis additionally show that, since social capital moderates the importance of income for well-being on individual level, the well-being gap between income groups is significantly smaller in countries with higher social capital.
    Keywords: subjective well-being, life satisfaction, social capital, materialism, relative income, social comparisons, happiness inequality
    JEL: D31 I31 Z13
    Date: 2016–03
  6. By: Jun, Bogang; Gerybadze, Alexander; Kim, Tai-Yoo
    Abstract: This study revisits the theory of Friedrich List from a more comprehensive and modernized perspective and applies it to the Korean history of industrialization. Although List is well known as the scholar who insisted on the protection of infant industry, his argument on protectionism is a part of the broader picture depicted in his book The National System of Political Economy (1841). This study follows his theoretical legacy in various fields of study. Although we can find his theoretical influence in several fields of research such as the national innovation system, concept of national competitiveness, and theory of developmental state, these studies fail to embrace all the arguments of List. Additionally, theses models focus more heavily on the explanation of historical and regional development phenomena without providing general principles of economic development behind the phenomena. This study therefore aims to suggest the expansive reproduction system as a generalized and modernized version of List's theory and to show its example by using the Korean history of industrialization. Consequently, we argue that the economic development of Korea has been achieved by putting the theory of List into practice.
    Keywords: Friedrich List,Economic Development,Korean Economic History,Economic Policy
    Date: 2016
  7. By: Roy H Grieve (Department of Economics, University of Strathclyde)
    Abstract: Steven Kates has recently (2015a) attempted to explain and justify J S Mill’s paradoxical “fourth proposition on capital†, which states that “demand for commodities is not demand for labour†, a proposition which notoriously – over generations – has baffled many eminent commentators. Kates intends to resolve the puzzle by offering “a proper understanding of Say’s Law as it was understood by Mill and his contemporaries.†We conclude that Kates does indeed reveal the logic of Mill’s proposition, making it clear that from Mill’s lost “supply-side†perspective, it is in no way puzzling or paradoxical. However, at the same time it becomes evident that Mill’s whole position is undermined by his acceptance of the untenable belief that “demand is constituted by supply†, which leaves us with the clear understanding that his fourth proposition, despite Kates’s rationalisation and defence thereof, as well as certainly being paradoxical, is simply untrue.
    Keywords: Mill's fourth proposition on capital, Say's Law, wage-fund theory, Steven Kates
    JEL: B12
    Date: 2016–03
  8. By: Farmer, Roger E A; Platonov, Konstantin
    Abstract: We integrate Keynesian economics with general equilibrium theory in a new way. Our approach differs from the prevailing New Keynesian paradigm in two ways. First, our model displays steady state indeterminacy. This feature allows us to explain persistent unemployment which we model as movements among the steady state equilibria of our model. Second, our model displays dynamic indeterminacy. This feature allows us to explain the real effects of nominal shocks by selecting a dynamic equilibrium where prices are slow to respond to unanticipated money supply disturbances. Price rigidity arises as part of a rational expectations equilibrium in which the equilibrium is selected by beliefs. To close our model, we introduce a new fundamental that we refer to as the belief function.
    Keywords: animal spirits; belief function; Keynesian economics; Unemployment
    JEL: E12 E3 E4
    Date: 2016–03
  9. By: Massimiliano Vatiero (Istituto di Diritto (IDUSI), Facoltà di Economia, Università della Svizzera italiana, Lugano)
    Abstract: Although economies, business practices, and living standards have converged since WWII, corporate structures continue to differ among the advanced economies of the world. Looking at the diversity of corporate structures of large-sized firms around the world (and over time) would fascinate Charles Darwin. This work develops a critical review of the literature on political determinants of corporate governance through the Darwinian theory (including some Lamarckian aspects). As Darwin, in his work "On the Origin of Species", explicates the diversity of species of tortoises, finches, and iguanas of the Galapagos Islands, so Darwinism may contribute in understanding the origin and the persistence of corporate diversity. In particular, this article takes into account politics-driven variations, their inheritances, and the subsequent selection of advantageous "corporate" attributes.
    Keywords: Corporate governance, Darwin, politics, path-dependency
    JEL: G30 K22 J50
    Date: 2016–02
  10. By: Olivier Godechot (MaxPo, Sciences Po)
    Abstract: Drawing on Pierre Bourdieu's theory of aesthetic judgment, this text offers an inductive account of financial reasoning inside a trading room. Driven to maximise bank profits, trading room operators do not find ‘one best way’. Rather they choose among several possible winning strategies: mathematical arbitrage, economic analysis, chartist analysis. These strategies differ sharply from one another in their conception of the market, method, proximity to scholarly knowledge, and legitimacy. We show that the choice of one method depends on a system of tastes and distastes that are both historical – depending on individuals’ social and educational background – and relational – depending on the individual's relative position within the trading room viewed as a field.
    Keywords: finance; rationality; field theory; habitus; class
    Date: 2016–03
  11. By: Richard L. Nolan (Harvard Business School)
    Abstract: Homo sapiens has mastered its environment so thoroughly that, for the first time in history, a small minority of the population is capable of creating enough food and fuels to support not only itself, but a growing majority of the 6 billion people now living on earth. This unparalleled abundance is allowing our species to develop, distribute, and profit from innovation in nearly every corner of civilization. Now key elements of the modern world such as the speed and connectedness of digital communication, the dynamic movement of capital, and changing nature of political boundaries are propelling capitalism into a new form that can be characterized as "virtual capitalism." And global corporations in their size and global influence are leading the embodiment of virtual capitalism into the modern world.
    Date: 2016–03
  12. By: David Hendry; Grayham E. Mizon
    Abstract: Abstract: We recommend a major shift in the Econometrics curriculum for both graduate and undergraduate teaching. It is essential to include a range of topics that are still rarely addressed in such teaching, but are now vital for understanding and conducting empirical macroeconomic research. We focus on a new approach to macro-econometrics teaching, since even undergraduate econometrics courses must include analytical methods for time-series that exhibit both evolution from stochastic trends and abrupt changes from location shifts, and so confront the ‘non-stationarity revolution’. The complexity and size of the resulting equation specifications, formulated to include all theory-based variables, their lags and possibly non-linear functional forms, as well as potential breaks and rival candidate variables, places model selection for models of changing economic data at the centre of teaching. To illustrate our proposed new curriculum, we draw on a large UK macroeconomics database over 1860–2011. We discuss how we reached our present approach, and how the teaching of macroeconometrics, and econometrics in general, can be improved by nesting so-called ‘theory-driven’ and ‘data-driven’ approaches. In our methodology, the theory-model’s parameter estimates are unaffected by selection when the theory is complete and correct, so nothing is lost, whereas when the theory is incomplete or incorrect, improved empirical models can be discovered from the data. Recent software like Autometrics facilitates both the teaching and the implementation of econometrics, supported by simulation tools to examine operational performance, designed to be feasibly presented live in the classroom.
    Keywords: Teaching Econometrics, Model Selection, Theory Retention, Location Shifts,Indicator Saturation, Autometrics
    JEL: C51 C22
    Date: 2016–03–09
  13. By: Syngjoo Choi; Andrea Galeotti; Sanjeev Goyal;
    Abstract: We propose a model of posted prices in networks. The model maps traditional concepts of market power, competition and double marginalization into networks, allowing for the study of pricing in complex structures of intermediation such as supply chains, transportation and communication networks and financial brokerage. We provide a complete characterization of equilibrium prices. Our experiments complement our theoretical work and point to node criticality as an organizing principle for understanding pricing, efficiency and the division of surplus in networked markets.
    Keywords: Intermediation, competition, market power, double marginalization.
    JEL: C70 C71 C91 C92 D40
    Date: 2014–05–16

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