nep-hpe New Economics Papers
on History and Philosophy of Economics
Issue of 2016‒06‒25
nineteen papers chosen by
Erik Thomson
University of Manitoba

  1. The Freedom of the Prices: Hayek's Road to Serfdom Reassessed By Makovi, Michael
  2. From realism to instrumentalism - and back? Methodological implications of changes in the epistemology of economics By Gräbner, Claudius
  3. Strategic schools under the Boston mechanism revisited By Bó, Inácio; Heller, C.-Philipp
  4. Narrativity from the Perspectives of Economics and Philosophy: Davis, Ross, Multipleselves Models... and Behavioral Economics By Tom Juille; Dorian Jullien
  5. The Disintegrating Force of Rationalism on Economics: What it means for Islamic Economics By Abdulkader Cassim Mahomedy
  6. A "fractal" solution to the chopstick auction By Christian Ewerhart
  7. Social capital, institutions and policymaking By M. Savioli; R. Patuelli
  8. Cognitive load and mixed strategies: On brains and minimax By Duffy, Sean; Naddeo, JJ; Owens, David; Smith, John
  10. John Bates Clark: primo marginalista statunitense ed economista sociale By Messori, Luciano; Orsini, Raimondello
  11. What are the equilibria in linear public-good experiments? By Ireneaus Wolff
  12. "Why has economics turned out this way?": A socio-economic note on the explanation of monism in economics By Heise, Arne
  13. Decisiveness, Peace, and Inequality in Games of Conflict By Juan A. Lacomba; Francisco M. Lagos; Ernesto Reuben; Frans Van Winden
  14. Monopolistic Competition Without Apology By Jacques-Francois Thisse; Philip Ushchev
  15. Pirated Economics By Babutsidze, Zakaria
  16. Another Solution for Allais Paradox: Preference Imprecision, Dispersion and Pessimism By Bayrak, Oben
  17. The Integration of Search in Macroeconomics: Interviews with David Andolfatto, Peter Diamond and Monika Merz By Samuel Danthine; Michel De Vroey
  18. Puncturing the Malthus delusion: structural change in the British economy before the industrial revolution, 1500-1800 By Patrick Wallis; Justin Colson; David Chilosi
  19. Group (Re-)formation in Public Good Games: The Tale of the Bad Apple By Grund, Christian; Harbring, Christine; Thommes, Kirsten

  1. By: Makovi, Michael
    Abstract: Recent debate has centered around the contemporary relevance and even the original validity of F. A. Hayek's Road to Serfdom. Was it directed against command socialism only or against welfare-state interventionism as well? Should the book even be read anymore? This essay takes a step back from the dichotomy between socialism and interventionism and explores two specific ideas of Hayek's which deserve renewed attention: first, his claim that economic liberty is the fundamental liberty and that political liberty is merely secondary in value. Second, Hayek's conception of the rule-of-law, which has implications for contemporary command-and-control regulation. Furthermore, that Hayek's philosophical conception of the rule-of-law in the Road to Serfdom is related to his economic theory of prices in “The Use of Knowledge in Society.” While Hayek's specific target in the Road to Serfdom was command socialism, his book embodied arguments which are more widely applicable and relevant today.
    Keywords: rule of law; liberty; freedom; rights; price system
    JEL: A12 B24 B25 B31 B53 D70 D82 K00 P10 P20 P50
    Date: 2016–06–17
  2. By: Gräbner, Claudius
    Abstract: We identify epistemological shifts in economics throughout the 20th century and discuss their methodological implications. After the realist research program of the Cowles commission and Lucas' rational expectations approach, several economists became dissatisfied with economic theory and initiated a shift towards instrumentalism. Recently, this movement has come under critique and a return to a realist epistemology focusing on identifying economic mechanisms is suggested. Such epistemological changes have important practical implications: they affect the discrimination among competing explanations and determine which research methods are accepted. We illustrate this by studying epistemological and methodological changes in development economics throughout the last century.
    Keywords: mechanism-based explanations, realism, instrumentalism, agent-based computational modeling, New Keynesian economics
    JEL: B20 B41 O1
    Date: 2016–06–11
  3. By: Bó, Inácio; Heller, C.-Philipp
    Abstract: We show that Ergin & Sönmez's (2006) results which show that for schools it is a dominant strategy to truthfully rank the students under the Boston mechanism, and that the Nash equilibrium outcomes in undominated strategies of the induced game are stable, rely crucially on two assumptions. First, (a) that schools need to be restricted to find all students acceptable, and (b) that students cannot observe the priorities set by the schools before submitting their preferences. We show that relaxing either assumption eliminates the strategy dominance, and that Nash equilibrium outcomes in undominated strategies for the simultaneous induced game in case (a) and subgame perfect Nash equilibria in case (b) may contain unstable matchings. We also show that when able to manipulate capacities, schools may only have an incentive to do so if students submit their preferences after observing the reported capacities.
    Keywords: Mechanism Design,Two-Sided Matching,Boston Mechanism,School Choice
    JEL: C78 D63 D78 D82
    Date: 2016
  4. By: Tom Juille (University of Nice Sophia Antipolis; GREDEG CNRS); Dorian Jullien (University of Nice Sophia Antipolis; GREDEG CNRS)
    Abstract: Narrativity broadly refers to the way humans construct and use stories, be them the widely known ones in a given culture or the more private ones people tell to each other or to themselves. The main goal of this paper is to clarify the extent to which the notion of narrativity can play a role in economic analysis with respect to the representation of economic agents in models of individual behaviors. To do so, we scrutinize a set of contributions from a twofold perspective. From the perspective of economics, we seek to clarify the issues regarding which we, as economists, should be interest in narrativity. From the perspective of philosophy, we, as economic methodologists or philosopher of economics, seek to clarify the conceptual issues inherent to the notion of narrativity that are not trivial or can be of some use for economic analysis. To some extent, this twofold perspective on narrativity and economics has already been taken by John Davis (2009; 2011) and Don Ross (2005; 2014), who use the notion of narrativity to account for individuals’ sense of a unified self and identity, notably with respect to the recent surge of multipleselves models in economics. We propose to further Davis’ and Ross’ efforts in at least three respects: firstly, through a comparative study of their contributions focused on narrativity from the perspective of economics; secondly, by discussing the connections between their contributions and the set of existing contributions related to narrativity in behavioral economics that none of them discuss; and, thirdly, by taking, at least for the sake of argument, a philosophically critical perspective on narrativity.
    Keywords: narrativity, economic rationality, multipleselves models, behavioral economics, economics and philosophy
    JEL: B41 B49 D01 D03 E20
    Date: 2016–06
  5. By: Abdulkader Cassim Mahomedy
    Abstract: In the last of this three-part study, the impact of the two dominant epistemologies of modernity on economics is fully explained. The intrusion of their ideas profoundly shaped both the content and methodology of the discipline, eventually instigating the separation of the field from the other social sciences that invariably bear on economic decisions and outcomes. The economists, notwithstanding these interdisciplinary linkages, continued to pattern their field of study after the natural sciences, further alienating the discipline from the humanities. These developments set off several rounds of methodological controversies within economics, which split the profession into irreconcilable camps. These disputes are analysed, helping to clarify why deep divisions within the discipline persist up to this day. Mainstream economics then gravitated further towards quantification and mathematisation, the implications of which have been enormous for the discipline. Ethical and normative considerations were altogether explicitly banished from economic science. To overcome these limitations, Muslim economists attempted to erect a separate discipline of economics based on the ethical values of Islam, whilst remaining largely committed to the methodology of neoclassical economics. They have registered little success in this effort. The reasons for this are explained and an alternative framework, centred on the precept of Tawhid in the unity of knowledge, is then suggested.
    Keywords: Epistemology, Economics, Rationalism, intellectualism, empiricism, Islam, Islamic Economics, unity of knowledge
    JEL: A1 B1 B2 B4 B5 N01 Z1
    Date: 2016
  6. By: Christian Ewerhart
    Abstract: The present paper constructs a novel solution to the chopstick auction, and thereby disproves a conjecture of Szentes and Rosenthal (Games and Economic Behavior, 2003a, 2003b). In contrast to the existing solution, the identi fied equilibrium strategy allows a simple and intuitive characterization. Moreover, its best-response set has the same Hausdorff dimension as its support, which may be seen as a robustness property. The analysis also reveals some new links to the literature on Blotto games.
    Keywords: Chopstick auction, exposure problem, self-similarity, blotto games
    JEL: C02 C72 D44
    Date: 2016–06
  7. By: M. Savioli; R. Patuelli
    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.
    JEL: Z13 B52 D78
    Date: 2016–06
  8. By: Duffy, Sean; Naddeo, JJ; Owens, David; Smith, John
    Abstract: It is well-known that laboratory subjects often do not play mixed strategy equilibrium games according to the equilibrium predictions. In particular, subjects often mix with the incorrect proportions and their actions often exhibit serial correlation. However, little is known about the role of cognition in these observations. We conduct an experiment where subjects play a repeated hide and seek game against a computer opponent programmed to play either a strategy that can be exploited by the subject (a naive strategy) or designed to exploit suboptimal play of the subject (an exploitative strategy). The subjects play with either fewer available cognitive resources (under a high cognitive load) or with more available cognitive resources (under a low cognitive load). While we observe that subjects do not mix in the predicted proportions and their actions exhibit serial correlation, we do not find strong evidence these are related to their available cognitive resources. This suggests that the standard laboratory results on mixed strategies are not associated with the availability of cognitive resources. Surprisingly, we find evidence that subjects under a high load earn more than subjects under a low load. However, we also find that subjects under a low cognitive load exhibit a greater rate of increase in earnings across rounds than subjects under a high load.
    Keywords: bounded rationality, experimental economics, working memory load, cognition, learning, mixed strategies
    JEL: C72 C91
    Date: 2016–06–08
    Date: 2016
  10. By: Messori, Luciano (Associazione Italiana per la Cultura della Cooperazione e del Non Profit); Orsini, Raimondello (Associazione Italiana per la Cultura della Cooperazione e del Non Profit)
    Abstract: La fama di John Bates Clark (1847-1938) è legata soprattutto al suo contributo alla teoria marginalista della distribuzione del reddito e alla diffusione del marginalismo negli Stati Uniti. La sua opera di gran lunga più conosciuta è The Distribution of Wealth: A Theory of Wages, Interest and Profits, pubblicato nel 1899, che mostra come in un’economia statica la distribuzione della ricchezza tra i fattori di produzione sia proporzionale alla produttività marginale di ciascuno di essi. Nonostante la sua produzione scientifica abbia spaziato su un'ampia gamma di questioni, sia di teoria economica e sociale, sia di politica economica, con approcci metodologici anche molto diversi, già i suoi allievi diretti ed i suoi colleghi ebbero la tendenza a enfatizzare il suo ruolo di teorico, didatta e divulgatore dell'economia marginalista, e quindi principalmente i suoi contributi funzionali alla migliore definizione e sistematizzazione dell'analisi microeconomica neoclassica. Già nel 1927, in un volume pubblicato in occasione degli ottanta anni di Clark, il suo collega alla Columbia University, Jacob H. Hollander, scrive: The real work of John B. Clark as an economist lies within the thirteen years from 1886 to 1899.
    Keywords: John Bates Clark; economia marginalista;
    JEL: A10
    Date: 2016–05–05
  11. By: Ireneaus Wolff
    Abstract: Most social-preference models have been tailored to yield only a full-defection equilibrium in one-shot linear public-good situations. This paper determines the Nash-equilibrium sets that result from experiment participants’ elicited preferences. The data show that multiple equilibria are relatively frequent even in a standard three-player setting. In this perspective, the common finding of close-to-omnilateral defection at the end of repeated public-good games is surprising and raises the question of why the dynamics of play seem to select this equilibrium out of the existing equilibria.
    Keywords: Public good, social dilemma, Nash-equilibrium, conditional cooperation, social preferences
    Date: 2016
  12. By: Heise, Arne
    Abstract: The economic science has - lamented by some, applauded by others - turned into a monistic discipline. In this short research note, a socio-economic answer to the question of why this happened is provided by combining an economic approach to the market for economic ideas with a sociological approach of a scientific (power) field.
    Keywords: Pluralism,Monism,Standardization,Regulation
    JEL: B59 D43 I23 L15 Z13
    Date: 2016
  13. By: Juan A. Lacomba (Department of Economic Theory and Economic History, University of Granada.); Francisco M. Lagos (Department of Economic Theory and Economic History, University of Granada.); Ernesto Reuben (Columbia University.); Frans Van Winden (University of Amsterdam.)
    Abstract: In this paper, we study two games of conflict characterized by unequal access to productive resources and finitely repeated interaction. In the Noisy Conflict game, the winner of the conflict is randomly determined depending on a players’ relative conflict expenditures. In the Decisive Conflict game, the winner of the conflict is simply the player who spends more on conflict. By comparing behavior in the two games, we evaluate the effect that “decisiveness” has on the allocation of productive resources to conflict, the resulting inequality in the players’ final wealth, and the likelihood that players from long-lasting peaceful relations..
    Keywords: conflict; decisiveness; inequality; peace; rent seeking
    JEL: D72 D74 C92
    Date: 2016–05–30
  14. By: Jacques-Francois Thisse; Philip Ushchev (National Research University Higher School of Economics)
    Abstract: We provide a selective survey of what has been accomplished under the heading of monopolistic competition in industrial organization and other economic elds. Among other things, we argue that monopolistic competition is a market structure in its own right, which encompasses a much broader set-up than the celebrated constant elasticity of substitution (CES) model. Although oligopolistic and monopolistic competition compete for adherents within the economics profession, we show that this dichotomy is, to a large extend, unwarranted.
    Keywords: monopolistic competition, oligopoly, product dierentiation, the negligibility hypothesis
    JEL: D43 L11 L13
    Date: 2016
  15. By: Babutsidze, Zakaria
    Abstract: We examine the data from illegal downloads of economics content from Sci-Hub over five-month period. The most pirated economics articles and the most pirated economics journals are identified. We analyze the contribution of this particular piracy engine toward open science (economics). We conclude that economics is benefitting from Sci-Hub: (a) as downloads are not pervasive, publishers are not losing much revenues; (b) as downloads are coming mostly from under-developed countries, the exposure to generated knowledge in the discipline has been extended.
    Keywords: Sci-Hub, Piracy, Economics
    JEL: A1
    Date: 2016–06–02
  16. By: Bayrak, Oben
    Abstract: Although there are alternative models which can explain the Allais paradox with non-standard preferences, they do not take the emerging evidence on preference imprecision into account. The imprecision is so far incorporated into these models by adding a stochastic specification implying the errors that subjects make. However, there is also the inherent part of the preference imprecision which does not diminish with experience provided in repeated experiments and these stochastic specifications cannot explain a significant portion of the observed behavior in experiments. Moreover, evidence on imprecision suggests that subjects exhibit higher imprecision for a lottery with a higher variance. This paper presents a new model for decision under risk which takes into account the findings of the literature. Looking at the indifference curves predicted by the new model, the new model acts like a mixture of Expected Utility Theory and Rank Dependent Utility Theory depending on which part of the probability triangle the lottery is located.
    Keywords: Allais Paradox, Independence Axiom, Preference Imprecision, Anomalies, Decision Theory, Decision under Risk and Uncertainty, Alternative Models
    JEL: A1 A10 B0 C0 C9 D0 D00 D01 D02 D03 D04 D10 D11 D8 D80 D81 D83 D89 G0 G02
    Date: 2016–05–31
  17. By: Samuel Danthine (CREST-ENSAI,); Michel De Vroey (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES))
    Abstract: Peter Diamond, Monika Merz, and David Andolfatto must all three be credited for having integrated a search perspective in macroeconomic theory. In a previous paper, “The Integration of Search in Macroeconomics: Two Alternative Paths”, we set ourselves the task of analyzing and comparing their respective contributions. To support our study, we conducted interviews with them. The present paper is an edited transcript of these three interviews.
    Keywords: Search and matching models, Diamond, Lucas, Andolfatto, Merz, Real Business Cycle models, Matching function, Unemployment
    JEL: B21 B40 D83 E24 J64
    Date: 2016–05–31
  18. By: Patrick Wallis; Justin Colson; David Chilosi
    Abstract: Accounts of structural change in the pre-modern British economy vary substantially. We present the first time series of male labour sectoral shares before 1800, using a large sample of probate and apprenticeship data to produce national and county-level estimates. England experienced a rapid decline in the agricultural share between the early seventeenth and the beginning of the eighteenth centuries, associated with rising agricultural and especially industrial productivity; Wales saw only limited changes. Our results provide further evidence of early structural change, highlighting the significance of the mid-seventeenth century as a turning point in English economic development.
    Keywords: Labour force; sectoral distribution; labour productivity; Britain; Wales
    JEL: N0
    Date: 2016–06
  19. By: Grund, Christian (RWTH Aachen University); Harbring, Christine (RWTH Aachen University); Thommes, Kirsten (Brandenburg University of Technology Cottbus)
    Abstract: We analyze how different previous roles as partners or strangers in public good games affect an individual's subsequent cooperation in a partner setting. We systematically vary a group's composition from all individuals being partner over blended groups of partners and strangers to all individuals being stranger in each round. Our results show that previous group composition does not affect cooperation in the subsequent partner setting with one exception: Groups cooperate significantly less compared to all other settings, when one stranger entered the group. We further analyze this situation in-depth and find that individuals may labor under an ultimate attribution error: They feel that the newcomer is a "bad apple". The cooperativeness towards the newcomer, but also among oldtimers is disturbed in this case. We conduct additional treatments to back up this result and to show how certain information can prevent such an error.
    Keywords: cooperation, economic experiments, group composition, public good game, teams
    JEL: C9 M5
    Date: 2016–06

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