nep-hpe New Economics Papers
on History and Philosophy of Economics
Issue of 2016‒06‒18
twenty-one papers chosen by
Erik Thomson
University of Manitoba

  1. Beyond rationality, towards reasonableness: Deliberative monetary valuation and Amartya Sen’s approach to rationality By Bartkowski, Bartosz; Lienhoop, Nele
  2. Double round-robin tournaments By Francesco De Sinopoli; Claudia Meroni; Carlos Pimienta
  3. Preference Cloud Theory: Imprecise Preferences and Preference Reversals By Bayrak, Oben; Hey, John
  4. Mean field games of timing and models for bank runs By Rene Carmona; Daniel Lacker
  5. Game Theory, Institutions and the Schelling-Bacharach Principle: Toward an Empirical Social Ontology By Cyril Hédoin; Lauren Larrouy
  6. Nash on a rotary : two theorems with implications for electoral politics By Basu,Kaushik; Mitra,Tapan
  7. It's the thought that counts: The role of intentions in noisy repeated games By Rand, David Gertler; Fudenberg, Drew; Dreber, Anna
  8. Theory of Mind Predicts Cooperative Behavior By Gregory DeAngelo; Bryan McCannon
  9. Evolution of Islamic Economics:Definition, nature, methodology, problems and challenges By Hasan, Zubair
  10. A Simple Intertemporal Model of Capabilities Expansion By Mercdo, Ruben
  11. Rationalizable partition-confirmed equilibrium By Fudenberg, Drew; Kamada, Yuichiro
  12. Corporate Crime and Plea Bargains By Uriel Procaccia; Eyal Winter
  13. How complex is agricultural economics? By Butler, Allan
  15. Contractual Knowledge: One Hundred Years of Legal Experimentation in Global Markets By Grégoire Mallard; Jérôme Sgard
  16. Socio-economic inequality: Relationship between Gini and Kolkata indices By Arnab Chatterjee; Asim Ghosh; Bikas K Chakrabarti
  17. Pluralism in economics: Inquiries into a Daedalean concept By Heise, Arne
  18. All Frames Created Equal are Not Identical: On the Structure of Kahneman and Tversky's Framing Effects By Dorian Jullien
  19. The 'Common Goood' in Pope Francis's Social Welfare Hypothesis By Amavilah, Voxi Heinrich
  20. Social Choice Theory: A Neglected Path to Possibility By Korpela Ville
  21. Le retour de l’économie keynésienne By Xavier Ragot

  1. By: Bartkowski, Bartosz; Lienhoop, Nele
    Abstract: Economic valuation is often deemed an important source of information for land-use policy. Stated preference methods (SPM) are a particularly potent class of economic valuation methods, but they are also particularly controversial. In response to accumulating criticism of SPM, deliberative monetary valuation (DMV) has been proposed as an alternative approach. DMV has gained considerable attention in recent years—however, being a combination of elements from neoclassical economic theory and from the theory of deliberative democracy, it lacks a consistent theoretical foundation, especially regarding rationality assumptions. In our paper, we aim at closing this gap and propose to found DMV on Amartya Sen’s approach to rationality. We show that his approach fits well the motivation for engaging with DMV and discuss its implications for the practice of DMV.
    Keywords: deliberative monetary valuation, communicative rationality, economic rationality, Land Economics/Use, Q51, Q57,
    Date: 2016–04
  2. By: Francesco De Sinopoli (Department of Economics, University of Verona); Claudia Meroni (Department of Economics, University of Verona); Carlos Pimienta (School of Economics, UNSW Business School, UNSW)
    Abstract: A tournament is a simultaneous n-player game that is built on a two-player game g. We generalize Arad and Rubinstein’s model assuming that every player meets each of his opponents twice to play a (possibly) asymmetric game g in alternating roles (using sports terminology, once "at home" and once "away"). The winner of the tournament is the player who attains the highest total score, which is given by the sum of the payoffs that he gets in all the matches he plays. We explore the relationship between the equilibria of the tournament and the equilibria of the game g. We prove that limit points of equilibria of tournaments as the number of players goes to infinity are equilibria of g. Such a refinement criterion is satisfied by strict equilibria. Being able to analyze arbitrary two-player games allows us to study meaningful economic applications that are not symmetric, such as the ultimatum game.
    Keywords: tournaments, asymmetric games, ultimatum game, double round-robin
    JEL: C72 C73 D70
    Date: 2016–05
  3. By: Bayrak, Oben; Hey, John
    Abstract: This paper presents a new theory, called Preference Cloud Theory, of decision-making under uncertainty. This new theory provides an explanation for empirically-observed Preference reversals. Central to the theory is the incorporation of preference imprecision which arises because of individuals’ vague understanding of numerical probabilities. We combine this concept with the use of the Alpha model (which builds on Hurwicz’s criterion) and construct a simple model which helps us to understand various anomalies discovered in the experimental economics literature that standard models cannot explain.
    Keywords: Imprecise Preferences; Preference Reversals; Decision under Uncertainty; Anomalies in Expected Utility Theory
    JEL: D0 D00 D01 D02 D03 D04 D8 D80 D81
    Date: 2015
  4. By: Rene Carmona; Daniel Lacker
    Abstract: The goal of the paper is to introduce a set of problems which we call mean field games of timing. We motivate the formulation by a dynamic model of bank run in a continuous-time setting. We briefly review the economic and game theoretic contributions at the root of our effort, and we develop a mathematical theory for continuous-time stochastic games where the strategic decisions of the players are merely choices of times at which they leave the game, and the interaction between the strategic players is of a mean field nature.
    Date: 2016–06
  5. By: Cyril Hédoin (University of Reims Champagne-Ardenne, France); Lauren Larrouy (University of Nice Sophia Antipolis, France; GREDEG CNRS)
    Abstract: This article defends a methodological and theoretical claim according to which the combination of epistemic game theory with the recent developments in the so-called “theory of mind” is able to provide an empirically grounded and theoretically consistent perspective on the mechanisms through which institutions determine the individuals’ beliefs and choices. This move toward an empirical social ontology is captured through what we call the Schelling-Bacharach principle in game theory. According to it, game-theoretic analysis of coordination and cooperation should study how the players are actually reasoning in different game situations.
    Keywords: Social ontology, epistemic game theory, institutions, theory of Mind, Schelling-Bacharach principle
    JEL: B41 C72 D02
    Date: 2016–06
  6. By: Basu,Kaushik; Mitra,Tapan
    Abstract: The paper provides a complete characterization of Nash equilibria for games in which n candidates choose a strategy in the form of a platform, each from a circle of feasible platforms, with the aim of maximizing the stretch of the circle from where the candidate?s platform will receive support from the voters. Using this characterization, it is shown that if the sum of all players? payoffs is 1, the Nash equilibrium payoff of each player in an arbitrary Nash equilibrium must be restricted to the interval [1/2(n ? 1), 2/(n + 1)]. This implies that in an election with four candidates, a candidate who is attracting less than one-sixth of the voters can do better by changing his or her strategy.
    Keywords: ICT Economics,Economic Theory&Research,Common Property Resource Development,Coastal and Marine Environment,Disease Control&Prevention
    Date: 2016–06–08
  7. By: Rand, David Gertler; Fudenberg, Drew; Dreber, Anna
    Abstract: We examine cooperation in repeated interactions where intended actions are implemented with noise but intentions are perfectly observable. Observable intentions lead to more cooperation compared to control games where intentions are unobserved, allowing subjects to reach similar cooperation levels as in games without noise. Most subjects condition exclusively on intentions, and use simpler, lower-memory strategies compared to games where intentions are unobservable. When the returns to cooperation are high, some subjects are tolerant, using good outcomes to forgive attempted defections; when the returns to cooperation are low, some subjects are punitive, using bad outcomes to punish accidental defections.
    Date: 2015
  8. By: Gregory DeAngelo (West Virginia University, Department of Economics); Bryan McCannon (West Virginia University, Department of Economics)
    Abstract: Explanations for cooperation in Prisoner’s Dilemma games (PD) have generated significant interest. While institutional explanations, such as the role of repeated interactions and communication, have offered considerable explanatory ability, a psychological measure of Theory of the Mind (ToM) – Reading the Mind in the Eyes – of an individual’s ability to process social and emotional cognition offers new insights. Using this measure, we examine how ToM explains (un)cooperative behavior in a standard PD game. We find that subjects who have higher ToM are less cooperative in PD games and extract higher payoffs.
    Keywords: Cooperation, Experiment, Prisoner’s Dilemma, Reading Mind in the Eyes, Theory of the Mind
    Date: 2016–06
  9. By: Hasan, Zubair
    Abstract: Since the ill-conceived separation of finance from Islamic economics proper in the literature, the latter has landed in confusion and neglect. Of late, much concern is being voiced on this state of affairs; divergence of views on various aspects of the subject tends to grow, cohesive efforts are missing. It is in this context that the present paper takes a hurried look at the evolutionary process of the subject and examines the definition, nature and scope, the issue of methodology, system approach, the problems that seems to beset its growth, the challenges it faces and how can same of these be faced.
    Keywords: Islamic economics, methodology, economic systems
    JEL: A13 B4 P4
    Date: 2016–06–07
  10. By: Mercdo, Ruben
    Abstract: The “capabilities approach” due to Amartya Sen has become influential in the field of economic development, and it is up to a point the theoretical background of the Human Development Index. While the approach provides a rich conceptual framework to define the goals of development, its analysis of the means to achieve them seems lacking. Building on Kuklys and Robeyns interpretation of Sen’s theory, I show how take a first step to link goals and means in the capabilities approach using a simple modified model grounded on standard growth theory.
    Keywords: Economic growth; Capabilities Theory; Human Development Theory
    JEL: O1 O10 O11
    Date: 2015
  11. By: Fudenberg, Drew; Kamada, Yuichiro
    Abstract: Rationalizable partition-confirmed equilibrium (RPCE) describes the steady-state outcomes of rational learning in extensive-form games when rationality is common knowledge and players observe a partition of the terminal nodes. RPCE allows players to make inferences about unobserved play by others. We discuss the implications of this using numerous examples, and discuss the relationship of RPCE to other solution concepts in the literature.
    Date: 2015
  12. By: Uriel Procaccia; Eyal Winter
    Abstract: Corporate entities enjoy legal subjectivity in a variety of forms, but they are not human beings, and hence their legal capacity to bear rights and obligations of their own is not universal. This paper explores, from a normative point of view, one of the limits that ought to be set on the capacity of corporations to act "as if" they had a human nature, their capacity to commit crime. Accepted wisdom has it that corporate criminal liability is justified as a measure to deter criminal behavior. Our analysis supports this intuition in one subset of cases, but also reveals that deterrence might in fact be undermined in another subset of cases, especially in an environment saturated with plea bargains involving serious violations of the law.
    Date: 2016–03
  13. By: Butler, Allan
    Abstract: Recognition that an economy is complex is not new. Frederick von Hayek, for example, made explicit that markets are complex systems in the 1960s. Contemporary proponents of complexity, movement across the sciences including economics, argue that an economy is a complex system in which economic agents (whether consumers, banks, firms or farmers) continually adjust and react to market behaviour of others. A major claim by these 2 proponents is that economics is going through its most profound change in over a hundred years. A further claim is that the neoclassical era in economics, upon which many agricultural economics principles are grounded, is being replaced by the complexity era. Indeed, is there some evidence that concepts such as agent-based modelling path dependency, self-organisation and network analysis used by the complexity movement are making inroads into agricultural economics research? This paper through a survey of literature of leading agricultural economic journals and the online repository, AgEcon Search, seeks to understand the degree that concepts from the complexity movement are emerging in agricultural economics research. Are they merely an adjunct to standard economic modelling or does it represent a more profound change in the way of analysing an economy?
    Keywords: Agricultural Economics, Complexity Theory, Complex Adaptive Systems, Agent-Based Modelling, Literature Survey, Agricultural and Food Policy, B590 Current Heterodox Approaches: Other,
    Date: 2016–04
    Date: 2016
  15. By: Grégoire Mallard (Department of Anthropology and Sociology of Development); Jérôme Sgard (Centre de recherches internationales)
    Abstract: Contractual Knowledge: One Hundred Years of Legal Experimentation in Global Markets, edited by Grégoire Mallard and Jérôme Sgard, extends the scholarship of law and globalization in two important directions. First, it provides a unique genealogy of global economic governance by explaining the transition from English law to one where global exchanges are primarily governed by international, multilateral, and finally, transnational legal orders. Second, rather than focusing on macro-political organizations, like the League of Nations or the International Monetary Fund, the book examines elements of contracts, including how and by whom they were designed and exactly who (experts, courts, arbitrators, and international organizations) interpreted, upheld, and established the legal validity of these contracts. By exploring such micro-level aspects of market exchanges, this collection unveils the contractual knowledge that led to the globalization of markets over the last century.
    Keywords: law; globalization; global Markets; economic governance; financial crises
    Date: 2016–06
  16. By: Arnab Chatterjee; Asim Ghosh; Bikas K Chakrabarti
    Abstract: Socio-economic inequality is characterized from data using various indices. The Gini ($g$) index, giving the overall inequality is the most common one, while the recently introduced Kolkata ($k$) index gives a measure of $1-k$ fraction of population who possess top $k$ fraction of wealth in the society. Here, we show the relationship between the two indices, using both empirical data and analytical estimates. The significance of their relationship has been discussed.
    Date: 2016–06
  17. By: Heise, Arne
    Abstract: The state of contemporary economics had been a subject of discussion even before the most recent global financial crisis. The one-sidedness of the discipline has frequently been lamented and calls are often made for its pluralisation. Nevertheless, there is neither a consensus over the form of pluralism that is required (whether this is a theory, method, or paradigm pluralism, for example), nor agreement among economists over the underlying diagnosis of a lack of pluralism. Even the justification for this pluralistic norm - i.e. whether it should be seen in terms of an ethics of fairness and tolerance or as the imperative of academic freedom - remains disputed and is often unclear. The present paper aims to shed some light on these ambiguities.
    Keywords: pluralism,philosophy of science,heterodoxy,orthodoxy,mainstream
    JEL: B40 B41 B50
    Date: 2016
  18. By: Dorian Jullien (University of Nice Sophia Antipolis; GREDEG CNRS)
    Abstract: This paper revisits Daniel Kahneman and Amos Tversky's work on 'framing'. It shows how various conventions from economic theory allow the establishment of different equivalence relations between pairs of problems in framing experiments. Then, an exegesis of their comments on these experiments is conducted regarding the relation between their theoretical explanation through prospect theory and the positive/normative distinction in models of individual behaviors. Throughout, a methodological framework with a distinction between identity, equivalence and equality (borrowed to philosopher Craig Dilworth) is developed for a critical analysis of the relation between external frames (the empirical structure of a decision problem) and internal frames (the psychological representation of the decision problem by decision makers).
    Keywords: Framing, description invariance, extensionality, consequentialism, prospect theory, behavioral economics, Kahneman and Tversky
    JEL: D03 D81 B21 B40 B41
    Date: 2016–06
  19. By: Amavilah, Voxi Heinrich
    Abstract: In conventional welfare economics Pareto optimality requires competitive markets in which rational sellers use pure private resources to produce pure private goods and services for rational consumers. Although such theory acknowledges that market failures prevent Pareto optimality, it continues to advocate efficiency alone as the first best policy for society. Pope Francis has argued recently that the current economics of indifference to the common good is responsible for the enormous environmental damage to Earth (‘our common home’). He calls for an integral approach to consumption and production, one that takes the common good as the source and object of well-being. In that way consumption and production depend on the common good, and so too do associated time-discounted social satisfaction and surplus. This means that a socially desirable program is one that optimizes integral satisfaction and surplus, so that consumption and production functions are a system of endogenous (dynamical) simultaneous equations in which the utility of the integral person is a function of the social utility. I use insights from the economic models of resources (both exhaustible and renewable) to describe what the Pope means. The description is rather loose, but the implications of the exercise are wide and far-reaching. For example, I find that the socially efficient price is not Pareto efficient; it is one that allows for the marginal social utility, marginal social surplus, and marginal social royalty to the common good. In other words, under conventional welfare economics the marginal cost of generating the present value of the social surplus that eats up the present value of the rent to the common good guarantees the disutility of the integral person even as it meets the utility of the rational person. One policy implication of such a result recommends consideration of the common good as a key variable in both production and consumption. Precisely how that can be done is the direction in which future research must go. The question this result raises is about how to quantify the common good. For Pope Francis the level of analysis is integral subsidiarity, where the environment would be a good proxy for the common input to production and the common outputs are reduce poverty, inclusion (reduced inequality), and the protection of the common input.
    Keywords: Social welfare, papal social welfare, common good, Pareto optimality, integral individual, integral firm, integral optimality, Pope Francis’s social welfare hypothesis, rational individual, rational firm
    JEL: B59 D31 D62 D63 H44 I31 N5 Q32 Q5 Z13
    Date: 2016–06–04
  20. By: Korpela Ville (Department of Economics, University of Turku)
    Abstract: Often preferences of agents are such that any sensible goal of the collective must admit a tie between all alternatives. The standard formulation in mechanism design demand that in this case all alternatives are equilibrium outcomes of the social choice mechanism. However, as far as the idea of an equilibrium is to predict the outcome of a game, we could just as well demand that there are no equilibria at all. Although this may seem innocent, and in a technical sense that’s right, it is a neglected path to possibility.
    Keywords: Condorcet Criterion; Collective Decision Making; Implementation; Impossibility Result; Nash Equilibrium; Social Choice Theory
    JEL: C72 D71
    Date: 2016–05
  21. By: Xavier Ragot (OFCE)
    Abstract: Pre-crisis standard macroeconomic models, qualified as neo Keynesian, rely more on the concept of natural rate of interest than on global demand. But new insights in macroeconomic theory build far more realistic models, especially as regards labour and good and services markets. These models renew with the Keynes intuitions – under-consumption, savings paradox – and are more suitable to reality confrontation. The Keynesian or neo-classical pattern should no more be a political or theoretical stake but rather an empirical one. For example, recent econometric studies highlight that the American economy behaves as Keynesian during the biggest crisis but as non Keynesian during smaller ones. This should be a guide for policy makers.
    Keywords: Keynesian; Policy makers; Keynes intuition
    JEL: E12 E13 E17
    Date: 2016–03

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