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on History and Philosophy of Economics |
| By: | Yasuhiro Sakai (Faculty of Economics, Shiga University) |
| Abstract: | The purpose of this paper is to discuss and compare two giants in the history of economic thought, J.M. Keynes and F.H. Knight, with special reference to risk, probability, and uncertainty. It is in 1921 that both of them published apparently published similar books on the economics of risk and uncertainty. While Knight's contribution on risk and uncertainty is now well recognized, Keynes's accomplishments on probability and uncertainty have been rather ignored in the shadow of his most famous book The General Theory of Employment, Interest and Money (1936). This paper aims to focus on his earlier yet equally important book A Treatise on Probability (1921), and shed a new light on his outstanding ideas and everlasting influences on his later work including The General Theory. It is really interesting to see that Keynes's concept of probability and uncertainty can be well compared to Knight's distinction between a measurable risk and a non-measurable uncertainty. |
| Keywords: | Keynes, Knight, risk, probability, uncertainty |
| Date: | 2016–03 |
| URL: | http://d.repec.org/n?u=RePEc:shg:dpapea:15&r=hpe |
| By: | Daron Acemoglu; Georgy Egorov; Konstantin Sonin |
| Abstract: | An influential thesis often associated with De Tocqueville views social mobility as a bulwark of democracy: when members of a social group expect to join the ranks of other social groups in the near future, they should have less reason to exclude these other groups from the political process. In this paper, we investigate this hypothesis using a dynamic model of political economy. As well as formalizing this argument, our model demonstrates its limits, elucidating a robust theoretical force making democracy less stable in societies with high social mobility: when the median voter expects to move up (respectively down), she would prefer to give less voice to poorer (respectively richer) social groups. Our theoretical analysis shows that in the presence of social mobility, the political preferences of an individual depend on the potentially conflicting preferences of her “future selves,” and that the evolution of institutions is determined through the implicit interaction between occupants of the same social niche at different points in time. When social mobility is endogenized, our model identifies new political economic forces limiting the amount of mobility in society – because the middle class will lose out from mobility at the bottom and because a peripheral coalition between the rich and the poor may oppose mobility at the top. |
| JEL: | D71 D74 |
| Date: | 2016–04 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:22174&r=hpe |
| By: | Wei Ma |
| Abstract: | This paper studies general equilibrium theory, for both complete and incomplete markets, under Knightian uncertainty. Noting that the preference represented by Knightian uncertainty induces a set of complete preferences, we set ourselves the task of inquiring the relationship between an equilibrium under Knightian uncertainty and its counterpart under the induced complete preferences. It is shown that they are actually equivalent. The importance of this result is due toits applications, among which the existence of equilibria under Knightian uncertainty and their computation follow at once from the existing knowledge on general equilibrium theory under complete preferences. Moreover, by means of that equivalence, we are in a position to investigate the problem of efficiency and indeterminacy of equilibria under Knightian uncertainty. |
| Keywords: | general equilibrium, Knightian uncertainty, Pareto optimality |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:rza:wpaper:588&r=hpe |
| By: | Kazuhiro Kurose; Naoki Yoshihara |
| 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. |
| Date: | 2016–03–31 |
| URL: | http://d.repec.org/n?u=RePEc:toh:tergaa:346&r=hpe |
| By: | Mathieu Lefebvre; Anne Stenger |
| Abstract: | This paper addresses the question of cooperative behaviours in the long run after the removal of incentives to contribute to a public good game. This question becomes central when looking both at cost-effectiveness of public program and sustainability of the funding institutions. This paper looks at the potential permanence effect of incentives by comparing nonmonetary and monetary, positive and negative, incentives to contribute in public-good game experiments. The results show first that both monetary and nonmonetary punishments and rewards significantly increase contributions compared to the baseline but monetary sanctions lead to the highest contributions while nonmonetary sanctions lead to the lowest contributions. Second, the four types of incentives do not display long-lasting effects. In every treatment, contributions fall to the level of the initial contributions in the baseline right after the withdrawal of the incentives. Third, the results show that there are no change of preferences following the introduction of the incentives since those who free-ride and have been highly sanctioned are those who contribute the less after the removal of the sanctions. Finally, one interesting result is the same efficiency of non-monetary and monetary rewards on contribution. These findings underline the importance of looking both at the type of incentives and to better understand the changes in behavior in institutional arrangements between individuals when long-lasting cooperation is sought. |
| Keywords: | Experiments, Monetary incentives, Non-monetary incentives, Rewards, Punishments, Long-lasting cooperation, Voluntary Contribution Mechanism. |
| JEL: | D81 C91 |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:ulp:sbbeta:2016-25&r=hpe |
| By: | Larbi Alaoui; Christian Fons-Rosen |
| Abstract: | This paper investigates the way different sides of grit influence behavior. We show that, in addition to grit's well-known upside in achieving economic success, it has a potential downside too. Specifically, we conduct an experiment using a game of luck and elicit each individual's intended plan of action and compare it to actual choice. We find that grittier individuals have a higher tendency to overplay. We then split grit into two new categories, tenacity and diligence, and obtain that tenacity alone captures the difficulty in respecting ex-ante preferences when this means accepting defeat. Both components of grit correlate with lower self-reported procrastination problems and higher self-esteem, with diligence being the more beneficial trait. Overall, the results indicate that diligence has a clear upside while tenacity has both the upside of not giving up and the downside of not letting go. |
| Keywords: | noncognitive skills, grit, tenacity, diligence |
| JEL: | C91 D03 I20 |
| Date: | 2016–04 |
| URL: | http://d.repec.org/n?u=RePEc:bge:wpaper:899&r=hpe |
| By: | Roger E.A. Farmer; Konstantin Platonov |
| 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. |
| JEL: | E12 E3 E4 |
| Date: | 2016–03 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:22136&r=hpe |
| By: | James C. Cox; John A. List; Michael Price; Vjollca Sadiraj; Anya Samek |
| Abstract: | The literature exploring other regarding behavior sheds important light on interesting social phenomena, yet less attention has been given to how the received results speak to foundational assumptions within economics. Our study synthesizes the empirical evidence, showing that recent work challenges convex preference theory but is largely consistent with rational choice theory. Guided by this understanding, we design a new, more demanding test of a central tenet of economics—the contraction axiom—within a sharing framework. Making use of more than 325 dictators participating in a series of allocation games, we show that sharing choices violate the contraction axiom. We advance a new theory that augments standard models with moral reference points to explain our experimental data. Our theory also organizes the broader sharing patterns in the received literature. |
| JEL: | C9 C93 D01 D03 |
| Date: | 2016–05 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:22234&r=hpe |
| By: | Erhan Bayraktar; Alexander Munk |
| Abstract: | How do large-scale participants in parimutuel wagering events affect the house and ordinary bettors? A standard narrative suggests that they may temporarily benefit the former at the expense of the latter. To approach this problem, we begin by developing a model based on the theory of large generalized games. Constrained only by their budgets, a continuum of diffuse (ordinary) players and a single atomic (large-scale) player simultaneously wager to maximize their expected profits according to their individual beliefs. Our main theoretical result gives necessary and sufficient conditions for the existence and uniqueness of a pure-strategy Nash equilibrium. Using this framework, we analyze our question in concrete scenarios. First, we study a situation in which both predicted effects are observed. Neither is always observed in our remaining examples, suggesting the need for a more nuanced view of large-scale participants. |
| Date: | 2016–05 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1605.03653&r=hpe |
| By: | Venturini, Andrea |
| Abstract: | A standard assumption in the literature of strategic voting is the independence of signals. Each juror observes a signal at the interim stage of the game. Then she votes according to her private information in order to maximize her expected utility. This work introduces a dependency between signals, reflecting a more realistic situation, in which evidences can be incontrovertible. We give a full characterization of the symmetric equilibria in non-weakly dominated strategies and we provide a benchmark between the classical approach and this new one. |
| Keywords: | Voting, Bayesian Nash Equilibrium, Condorcet Theorem |
| JEL: | C72 D72 |
| Date: | 2015–11–19 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:71216&r=hpe |
| By: | Arnab Chatterjee |
| Abstract: | We are in the middle of a complex debate as to whether Economics is really a proper natural science. The 'Discussion & Debate' issue of this Euro. Phys. J. Special Topic volume is: 'Can economics be a Physical Science?' I discuss some aspects here. |
| Date: | 2016–05 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1605.01920&r=hpe |
| By: | Peter Temin (Massachusetts Institute of Technology) |
| Abstract: | I describe the American economy in the twenty-first century as a dual economy in the spirit of W. Arthur Lewis. Similar to the subsistence and capitalist economies characterized by Lewis, I distinguish a low-wage sector and a FTE (Finance, Technology, and Electronics) sector. The transition from the low-wage to the FTE sector is through education, which is becoming increasingly difficult for members of the low-wage sector because the FTE sector has largely abandoned the American tradition of quality public schools and universities. Policy debates about public education and other policies that serve the low-wage sector often characterize members of the low-wage sector as black even though the low-wage sector is largely white. This model of a modern dual economy explains difficulties in many current policy debates, including education, healthcare, criminal justice, infrastructure and household debts. |
| Keywords: | inequality, dual economy, race, education, criminal justice, Nixon, Reagan, political economy |
| JEL: | H53 J68 N32 |
| Date: | 2015–11 |
| URL: | http://d.repec.org/n?u=RePEc:thk:wpaper:26&r=hpe |
| By: | Harrison, Mark (University of Warwick) |
| Abstract: | In a command economy, centralized political priorities take precedence over market equilibrium, and government purchases cannot be refused. This chapter describes the antecedents, origins, evolution, and outcomes of the Soviet command economy from the Bolshevik Revolution to World War II. The Soviet command economy was built in two phases, 1917 to 1920, and 1928 onward, with a ‘breathing space’ between. The present account gives prominence to features of a command economy that, while missing from the first phase, were developed during the breathing space, and then helped to ensure the relative success of the second phase. These were features that assured secrecy, security, and the selection of economic officials for competence and party loyalty. Like any economy in the international system, the command economy had a comparative advantage: the production of economic and military power. |
| Keywords: | command economy, communism, corruption, economic growth, incentives, personnel, policy reform, power, secrecy, security, Soviet Union, violence, war economy JEL Classification: H12, N44, P21 |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:cge:wacage:283&r=hpe |
| By: | Shunsuke Nakaoka |
| JEL: | N0 |
| Date: | 2016–04 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:wpaper:66257&r=hpe |
| By: | Link, Albert N.; Antonelli, Cristiano (University of Turin) |
| Date: | 2015–10 |
| URL: | http://d.repec.org/n?u=RePEc:uto:labeco:201511&r=hpe |
| By: | Congressional Budget Office |
| Abstract: | This report examines the accuracy of CBO’s revenue projections since 1982, the earliest year for which the information necessary to assess the forecasts is available. On average, the agency’s projections have been a bit too high—more so for projections spanning six years than for those spanning two—owing mostly to the difficulty of predicting when economic downturns will occur. The overall accuracy of CBO’s revenue projections has been similar to that of the projections of other government agencies. |
| JEL: | H20 C53 |
| Date: | 2015–11–10 |
| URL: | http://d.repec.org/n?u=RePEc:cbo:report:508312&r=hpe |