nep-hpe New Economics Papers
on History and Philosophy of Economics
Issue of 2016‒05‒08
fifteen papers chosen by
Erik Thomson
University of Manitoba

  1. Communication, sequentiality and strategic power. A prisoners’ dilemma experiment By Luigi Mittone; Andrew Musau
  2. Social capital, perceptions and economic performance By Hernández, José; Guerrero-Luchtenberg, César
  3. The Heckscher-Ohlin-Samuelson model and the Cambridge capital controversies By Kazuhiro Kurose; Naoki Yoshihara
  4. Public bad conflicts: Cyclical Nash strategies and Stackelberg solutions By Halkos, George; Papageorgiou, George
  5. Inefficient Lock-in with Sophisticated and Myopic Players By Aidas Masiliunas
  6. Regrets, learning and wisdom By Damien Challet
  7. Social capital, institutions and policymaking By Marco Savioli; Roberto Patuelli
  8. Managing the Knowledge Commons: Interview with Carlo Vercellone - By Carlo Vercellone
  9. On Peer Effects: Contagion of Pro- and Anti-Social Behavior in Charitable Giving and The Role of Social Identity By Eugen Dimant
  10. "What We Could Have Learned from the New Deal in Confronting the Recent Global Recession" By Jan Kregel
  11. Redistributive Politics and the Tyranny of the Middle Class By Floris T. Zoutman; Bas Jacobs; Egbert L. W. Jongen
  12. Théorie du changement By Patricia Rogers; UNICEF Office of Research - Innocenti
  13. Patience and the Wealth of Nations By Thomas Dohmen; Benjamin Enke; Armin Falk; David Huffman; Uwe Sunde
  14. The Hungarian Connection: the 1956 Hungarian Revolution and its Impact on Mao Zedong’s Domestic Policies in the late 1950s By David Tibor Teszar
  15. The Agricultural Origins of Time Preference By Galor, Oded; Özak, Ömer

  1. By: Luigi Mittone; Andrew Musau
    Abstract: One shot two-player sequential game experiments are characterized by an asymmetry in the observed payoffs of participants. In the ultimatum game, for example, the distribution favors first-movers, whereas in the in- vestment game, it favors second movers. A comparison to sequential move games are symmetric simultaneous move games, which entail symmetry in actions and payoffs. We experimentally examine the role of first-mover anticipated communication on the inter-player strategic power dynamics that exist in a symmetric simultaneous move prisoners’ dilemma, and a sequential move investment game, and show that such communication has a significant effect in inducing payoff asymmetries in symmetric games.
    Keywords: strategic power, communication, prisoners’ dilemma, investment game, experiment
    JEL: C72 C91
    Date: 2016
  2. By: Hernández, José; Guerrero-Luchtenberg, César
    Abstract: This paper describes how social capital emerges, relates to economic performance and evolves in the long run. Using the concept of psychological equilibrium, two types of individuals are generated in the population regarding their willingness to cooperate. We propose an evolutionary (learning) process over those types driven by the total payoffs of the psychological game, and provide a complete description of its dynamics. Macro-perceptions, defined as the individual perception of how cooperative the society is as a whole, are key to explain convergence to the full social capital state in the long run.
    Keywords: Psychological Equilibrium, Belief-dependent Behavior, Evolutionary Games, Replicator Dynamics, Economic Development.
    JEL: C73 O1
    Date: 2016–04–16
  3. By: Kazuhiro Kurose (Tohoku University); Naoki Yoshihara (Department of Economics, University of Massachusetts Amherst)
    Abstract: This paper examines the validity of the factor price equalisation theorem (FPET) in relation to capital theory. Additionally, it presents a survey of the literature on Heckscher–-Ohlin-–Samuelson (HOS) models that treat capital as a primary factor, beginning with Samuelson (1953). Furthermore, this paper discusses the Cambridge capital controversy, which contends that marginal productivity theory does not hold when capital is assumed to be as a bundle of reproducible commodities instead of as a primary factor. Consequently, it is shown that under this assumption, the FPET does not hold, even when there is no reversal of capital intensity. This paper also demonstrates that the recent studies on the dynamic HOS trade theory generally ignore the difficulties posed by the capital controversies and are thereby able to conclude that the FPET holds even when capital is modelled as a reproducible factor. Our analysis suggests that there is a need for a basic theory of international trade that does not rely on factor price equalisation and a model that formulates capital as a bundle of reproducible commodities.
    Keywords: factor price equalisation, capital as the bundle of reproducible commodities, reswitching of techniques, capital reversing
    JEL: B51 D33 F11
    Date: 2016–04
  4. By: Halkos, George; Papageorgiou, George
    Abstract: The first purpose of this paper is to study the dynamics of a general socially undesirable public evil and the possibility of cyclical Nash strategies in equilibrium. As a second result of the paper we found the analytical solutions of the hierarchical (Stackelberg) game for the public bad accumulation model. In both cases we use the differential game modeling, as the appropriate tool for the economic analysis that follows. The control setting is not the usual one, which assumes an accumulated stock of a public bad (e.g. pollutants, wastes or even tax evasion), but we claim that the disadvantage which is responsible for the unwished public evil accumulation is the use of the available inputs and equipment. Therefore, this could be a crucial assumption which possibly prevents the irreversibility of the public bad accumulation. As a continuation, we set as stock the available resources (inputs plus equipment) and the stress of the regulator is to reduce these resources. In the first case of Nash equilibrium, we find that the establishment of cyclical strategies, during the game between the agents in charge and the regulator, requires that the agents’ discount rate must be greater than the government’s discount rate, i.e., the agents in charge must be more impatient than the government (acting as the regulator). In the second case of the hierarchical setting, we provide the analytical expressions of the strategies as well as the steady state value of the resources’ stock. We use the notion of a public bad as the opposite meaning to the public good.
    Keywords: Public bad; cyclical policies; Nash equilibrium; Stackelberg equilibrium.
    JEL: C61 C62 D43 H21 Q50 Q58
    Date: 2016–04–11
  5. By: Aidas Masiliunas (Aix-Marseille University (Aix-Marseille School of Economics), CNRS & EHESS)
    Abstract: Path-dependence in coordination games may lead to lock-in on inefficient outcomes, such as adoption of inferior technologies (Arthur, 1989) or inefficient economic institutions (North, 1990). We aim to find conditions under which lock-in is overcome by developing a solution concept that makes ex-ante predictions about the adaptation process following lock-in. We assume that some players are myopic, forming beliefs according to fictitious play, while others are sophisticated, anticipating the learning process of the myopic players. We propose a solution concept based on a Nash equilibrium of the strategies chosen by sophisticated players. Our model predicts that no players would switch from the efficient to the inefficient action, but deviations in the other direction are possible. Three types of equilibria may exist: in the first type lock-in is sustained, while in the other two types lock-in is overcome. We determine the existence conditions for each of these equilibria and show that the equilibria in which lock-in is overcome are more likely and the transition is faster when sophisticated players have a longer planning horizon, or when the history of inefficient coordination is shorter.
    Keywords: Game theory, Learning, Lock-in, Farsightedness, Coordination
    JEL: C73 D83
    Date: 2016–04–19
  6. By: Damien Challet
    Abstract: This contribution discusses in what respect Econophysics may be able to contribute to the rebuilding of economics theory. It focuses on aggregation, individual vs collective learning and functional wisdom of the crowds.
    Date: 2016–05
  7. By: Marco Savioli (Department of Economics, University of Bologna, Italy; The Rimini Centre for Economic Analysis, Italy); Roberto Patuelli (Department of Economics, University of Bologna, Italy; The Rimini Centre for Economic Analysis, Italy)
    Abstract: Economic processes, consisting of interactions between human beings, exploit the social capital of persons endowed with specific cultures, identities and education. By taking into account this complexity, we focus on the role of institutions and policymaking in the building of social capital and its relevance to the fulfilment of their objectives. Social capital, however, is elusive and has several dimensions with which to interpret its multifaceted functions in economics and society. We cannot forget that social capital is sometimes even undesirable for society, for instance when unethically used. Even so, it is widely accepted that social capital has stable and positive effects.
    Date: 2016–04
  8. By: Carlo Vercellone (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique)
    Abstract: Interview with Dr. Carlo Vercellone, one of the leading theorists of cognitive capitalism and economist at the CNRS Lab of The Sorbonne Economic Centre (Centre d'Economie de la Sorbonne, CES).
    Keywords: commons, knowledge based economy, Common property, cognitive capitalism
    Date: 2015–06–16
  9. By: Eugen Dimant (Philosophy, Politics and Economics, University of Pennsylvania)
    Abstract: Social interactions and the resulting peer effects loom large in both economic and social contexts. This is particularly true for the spillover of pro- and anti-social behavior in explaining how such behavior and norms spread across individual people, neighborhoods, or even cultures. Although we observe the outcomes of such contagion effects, little is known about the drivers and the underlying mechanisms, especially with respect to the role of social identity with one’s peers and the pro- and anti-sociality of behavior one is exposed to. We use a variant of a power-to-take dictator game to shed light on these aspects in a controlled laboratory setting. Our experiment contributes to the existing literature in two ways: first, using a novel approach of inducing social identification with one’s peers in the lab, our design allows us to analyze the spillover-effects of behavior under varied levels of social identity. Second, we study whether pro- and anti-social behavior are equally contagious. Our results suggest that anti-social behavior is more contagious than pro-social behavior and that the extent of social identification to one’s peers particularly drives the contagion of anti-social behavior. Our findings yield strong policy implications with regards to designing effective nudges and interventions to facilitate (reduce) pro- (anti-) social behavior.
    Keywords: anti-social behavior, behavioral contagion, charitable giving, peer effects, social identity
    JEL: C91 D03 D73 D81
    Date: 2016–04
  10. By: Jan Kregel
    Abstract: To the extent that policymakers have learned anything at all from the Great Depression and the policy responses of the 1930s, the lessons appear to have been the wrong ones. In this public policy brief, Director of Research Jan Kregel explains why there is still a great deal we have to learn from the New Deal. He illuminates one of the New Deal's principal objectives--quelling the fear and uncertainty of mass unemployment--and the pragmatic, experimental process through which the tool for achieving this objective—directed government expenditure--came to be embraced. In the search for a blueprint from the 1930s, Kregel suggests that too much attention has been paid to the measures deployed to shore up the banking system, and that the approaches underlying the emergency financial policy measures of the recent period and those of the 1930s were actually quite similar. The more meaningful divergence between the 1930s and the post-2008 policy response, he argues, can be uncovered by comparing the actions that were taken (or not taken, as the case may be) to address the real sector of the economy following the resolution of the respective financial crises.
    Date: 2016–03
  11. By: Floris T. Zoutman (NHH Norwegian School of Economics, Norway); Bas Jacobs (Erasmus University Rotterdam, the Netherlands); Egbert L. W. Jongen (CPB Netherlands Bureau for Economic Policy Analysis, The Hague; and Leiden University, the Netherlands)
    Abstract: The Netherlands has a unique tradition in which all major Dutch political parties provide CPB Netherlands Bureau for Economic Policy Analysis with highly detailed proposals for the tax-benefit system in every national election. This information allows us to quantitatively measure the redistributive preferences of political parties. For each political party we calculate social welfare weights by income level using the inverse optimal-tax method. We find that all political parties roughly give a higher social welfare weight to the poor than to the rich. Furthermore, left-wing parties attach higher social welfare weights to the poor and lower social welfare weights to the rich than right-wing parties do. However, we also discover two anomalies. First, all political parties give a much higher social welfare weight to middle incomes than to the working and non-working poor. Second, all Dutch political parties attach a slightly negative social welfare weight to the rich by setting top rates beyond the revenue-maximizing 'Laffer' rate. Finally, we detect a strong political status quo, since social welfare weights of all political parties hardly deviate from the welfare weights that are implied by the pre-existing tax-benefit system. We argue that political-economy considerations are key in understanding the political status quo and why middle-income groups are able to lower their tax burdens at the expense of both the low- and high-income groups.
    Keywords: Inverse optimal-tax method; revealed social preferences; political parties; optimal taxation; income redistribution
    JEL: C63 D63 H21
    Date: 2016–04–25
  12. By: Patricia Rogers; UNICEF Office of Research - Innocenti
    Abstract: Une théorie du changement explique comment les activités sont censées produire un ensemble de résultats qui contribuent à la réalisation des impacts finaux prévus. Elle peut être élaborée pour tous les niveaux d’intervention : événement, projet, programme, politique, stratégie ou organisation.
    Keywords: research methodology;
    Date: 2016
  13. By: Thomas Dohmen (Universität Bonn); Benjamin Enke (University of Bonn); Armin Falk (Universität Bonn); David Huffman (University of Pittsburgh); Uwe Sunde (University of Munich)
    Abstract: According to standard dynamic choice theories, patience is a key driving factor behind the accumulation of the proximate determinants of economic development. Using a novel representative data set on time preferences from 80,000 individuals in 76 countries, we investigate the empirical relevance of this hypothesis in the context of a development accounting framework. We find a significant reduced-form relationship between patience and development in terms of contemporary income as well as medium- and long-run growth rates, with patience explaining a substantial fraction of development differences across countries. Consistent with the idea that patience affects national income through accumulation processes, patience also strongly correlates with human and physical capital accumulation, investments into productivity, and institutional quality. Additional results show that the relationship between patience, human capital, and income extends to analyses across regions within countries, and across individuals within regions.
    Keywords: time preference, comparative development, growth, savings, human capital, physical capital, innovation, institutions
    JEL: D03 D90 O10
    Date: 2016–04
  14. By: David Tibor Teszar
    Abstract: Despite being a highly relevant event in the history of the Cold War, the 1956 Hungarian revolution remains underanalyzed from the perspective of the People’s Republic of China. The domestic policy changes in the PRC that were influenced by the Hungarian uprising are equally undertreated in scholarly literature. For these reasons this paper examines the PRC’s changing perception of the nature of the 1956 Hungarian revolution and answers the question whether the Chinese leadership influenced Nikita Khrushchev and the Kremlin elite in favour of an armed intervention in Budapest. The second half of the article assesses the impact of the Hungarian crisis on Mao’s domestic policies in the late 1950s, particularly to the Hundred Flowers campaign and the AntiRightist campaign.
    Keywords: 1956 Hungarian Revolution; Cold War; Hungarian History; Mao Zedong; China; Soviet Union.
    JEL: Y8
    Date: 2015–10
  15. By: Galor, Oded; Özak, Ömer
    Abstract: This research explores the origins of the distribution of time preference across regions. It advances the hypothesis, and establishes empirically that geographical variations in the natural return to agricultural investment have had a persistent effect on the distribution of time preference across societies. In particular, exploiting a natural experiment associated with the expansion of suitable crops for cultivation in the course of the Columbian Exchange, the research establishes that pre-industrial agro-climatic characteristics that were conducive to higher return to agricultural investment, triggered selection and learning processes that had a persistent positive effect on the prevalence of long-term orientation in the contemporary era.
    Keywords: Time preference, Delayed Gratification, Economic Growth, Culture, Agriculture, Economic Development, Evolution, Comparative Development, Human Capital, Education, Smoking
    JEL: D14 D9 E2 I12 I25 J24 J26 O1 O3 O4 Z1
    Date: 2016–04–12

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.