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on History and Philosophy of Economics |
| By: | John Knight |
| Abstract: | This think-piece questions the normative value in the Chinese case of standard measures of aggregate income inequality such as the Gini coefficient. Evidence is adduced that people have narrow frames of reference and that they distinguish between income inequalities that they perceive to be fair and those that they perceive to be unfair. It is suggested that value judgements about what is fair or unfair can be guided by people’s own perceptions. People’s perceptions of unfairness can also be important to a government concerned to avoid social instability. The estimation of happiness functions can help to make the relevant distinctions. Examples are given of how fair and unfair inequalities might be identified. Unfairness might be more strongly perceived and felt in inequalities of economic power than in inequalities of income, although the former can in turn result in inequalities of income. An argument is made for China researchers to extend inequality research and research instruments towards an economics of fairness and unfairness. |
| Keywords: | Fairness; Frames of reference; Gini coefficient; Inequality of income; Inequality of economic power; Unfairness |
| JEL: | D31 D63 |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:csa:wpaper:2016-20&r=hpe |
| By: | Ifcher, John (Santa Clara University); Zarghamee, Homa (Barnard College) |
| Abstract: | Economics students have been shown to exhibit more selfishness than other students. Because the literature identifies the impact of long-term exposure to economics instruction (e.g., taking a course), it cannot isolate the specific course content responsible; nor can selection, peer effects, or other confounds be properly controlled for. In a laboratory experiment, we use a within- and across-subject design to identify the impact of brief, randomly-assigned economics lessons on behavior in games often used to measure selfishness: the ultimatum game (UG), dictator game (DG), prisoner's dilemma (PD), and public-goods game (PGG). We find that a brief lesson that includes the assumptions of self-interest and strategic considerations moves behavior toward traditional economic rationality in UG, PD, and DG. Despite entering the study with higher levels of selfishness than others, subjects with prior exposure to economics instruction have similar training effects. We show that the lesson reduces efficiency and increases inequity in the UG. The results demonstrate that even brief exposure to commonplace neoclassical economics assumptions measurably moves behavior toward self-interest. |
| Keywords: | economics instruction, self-interest, game theory, laboratory experiment, social preferences |
| JEL: | A2 D6 C9 C7 A1 |
| Date: | 2016–08 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp10171&r=hpe |
| By: | Joanna Dzionek-Kozlowska (Institute of Economics, Department of History of Economic Thought and Economic History, University of Lodz); Rafal Matera (Institute of Economics, Department of History of Economic Thought and Economic History, University of Lodz) |
| Abstract: | Acemoglu and Robinson’s theory presented in their famous Why Nations Fail, and other papers, should be placed among the institutional theories of economic development. Yet the problem is they strongly differentiate their concept from the so-called culture hypothesis, which they reject. This stance is difficult to accept, not only because of the significance of culture-related factors of economic development, but it is also difficult to reconcile with their own model. The aim of this paper is to demonstrate that such a strong rejection of the culture hypothesis is inconsistent with their own analysis, triggers some principal problems with understanding the basic notion of institution, and suggests Acemoglu and Robinson are only focused on considering formal institutions. The article concludes with the statement that, paradoxically, Acemoglu and Robinson’s unconvincing rejection of the culture hypothesis may be regarded as a justification of the importance of culture-related factors. |
| Keywords: | Institutional Economics, Daron Acemoglu, James Robinson, Institutions vs Culture Controversy, Economic Development |
| JEL: | B52 O10 Z10 |
| Date: | 2016–08 |
| URL: | http://d.repec.org/n?u=RePEc:ann:wpaper:9/2016&r=hpe |
| By: | Wey, Christian |
| Abstract: | Dieser Beitrag untersucht den Wettbewerb zwischen Gewerkschaften auf der Grundlage der Nash-Verhandlungstheorie. Es wird sowohl zwischen indirektem und direktem Wettbewerb als auch zwischen Tarifkonkurrenz und Tarifpluralität unterschieden. Als besonders ökonomisch problematisch werden zwei Entwicklungen identifiziert: erstens die Allgemeinverbindlicherklärung von Tarifabschlüssen als bindende Minimallöhne und zweitens die Rolle von Spartengewerkschaften. In beiden Fälle entsteht die Gefahr des Missbrauchs exzessiver Marktmacht auf Kosten von Außenseitern sowohl auf der Arbeitnehmer- als auch auf der Arbeitgeberseite, so dass eine Anwendung des wettbewerbsrechtlichen Instruments der Missbrauchskontrolle für diese Formen der Macht auf Arbeitsmärkten empfohlen wird. |
| Abstract: | This article analyzes competition between labor unions based on the Nash bargaining theory. It distinguishes between indirect and direct competition as well as between tariff-competition and tariff-plurality. Two developments are identified as particularly problematic: first, the use of extension rules to make tariff agreements generally binding, and second, the rise of craft unionism. In both instances there is well-founded concern of an abuse of market power at the cost of outsiders, which includes both non-organized employees and employers. Thus, in both cases applying competition rules to counter abusive practices appears to be advisable. |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:diceop:88&r=hpe |
| By: | Jim Engle-Warnick; Natalia Mishagina |
| Abstract: | In this paper we examine the relationship between prices and violations of the Generalized Axiom of Revealed Preference (GARP) in dictator games. Using new experimental data and a new algorithm that adjusts budget prices to eliminate GARP violations, we introduce a new measure of consistency of choices, and we identify a systemic relationship between prices and violations. We find that pushing prices away from extremes tends to eliminate the violations of most subjects, a phenomenon that we call “price insensitivity”. |
| Keywords: | Revealed Preference, GARP, Measures of Rationality, Dictator Game, |
| JEL: | C90 D11 D12 |
| Date: | 2016–08–24 |
| URL: | http://d.repec.org/n?u=RePEc:cir:cirwor:2016s-45&r=hpe |
| By: | David Laibson; John List |
| Abstract: | There are many great ways to incorporate behavioral economics in a first-year undergraduate economics class-i.e., the course that is typically called "Principles of Economics." Our preferred approach integrates behavioral economics throughout the course (e.g., see Acemoglu, Laibson, and List 2015). With the integrated approach, behavioral content plays a role in many of the chapters of the principles of economics curriculum, including chapters on optimization, equilibrium, game theory, intertemporal choice, probability and risk, social preferences, household finance, the labor market, financial intermediation, monetary policy, economic fluctuations, and financial crises. We prefer the integrated approach because it enables the behavioral insights to show up where they are conceptually most relevant. By illustration, it is best to combine a discussion of downward nominal wage rigidity (i.e., the idea that workers strongly resist nominal wage declines) with the overall discussion of the labor market. Whether or not an instructor integrates behavioral economics throughout the principles of economics course, it makes sense to pull central materials together and dedicate a lecture (or more) to a focused discussion of behavioral economics. This note describes our approach to such a lecture, emphasizing six key principles of behavioral economics. Our choice of content for a behavioral lecture is motivated by three factors. First, we include ideas that are conceptually important. Second, we include material that is practically important and personally relevant to our students-we have found that such content resonates long after the course ends. Third, we include content that relates to what has been (or will be) taught in the rest of the course, and therefore serves as a complement. We want students to see that behavioral economics is an integrated part of economics, not a freak show that is isolated from "the standard ingredients" in the rest of the economics course. This paper summarizes our approach to such a focused behavioral lecture. In Section I, we define behavioral economics and place it in historical context. In Section II, we introduce six modular principles that can be used to teach behavioral economics. We provide PowerPoint notes on our home pages, which instructors should feel free to edit and use. |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:feb:natura:00451&r=hpe |
| By: | Pradeep Dubey (SUNY); John Geanakoplos (Cowles Foundation, Yale University) |
| Abstract: | Status is greatly valued in the real world, yet it has not received much attention from economic theorists. We examine how the owner of a firm can best combine money and status to get her employees to work hard for the least total cost. We find that she should motivate workers of low skill mostly by status and high skill mostly by money. Moreover, she should do so by using a small number of titles and wage levels. This often results in star wages to the elite performers. By analogy, the governance of a society should pay special attention to the status concerns of ordinary citizens, which may often be accomplished by reinforcing suitable social norms. |
| Keywords: | Status, Incentives, Wages |
| JEL: | C70 I20 I30 |
| Date: | 2016–08 |
| URL: | http://d.repec.org/n?u=RePEc:cwl:cwldpp:1954r&r=hpe |
| By: | Susan Athey (Stanford GSB); Emilio Calvano (Università di Bologna and CSEF); Saumitra Jha (Stanford GSB) |
| Abstract: | We analyze the classic problem of sustaining trust when cheating and leaving trading partners is easy, and outside enforcement is difficult. We construct equilibria where individuals are loyal to smaller groups – communities - that allow repeated interaction. Hierarchies provide incentives for loyalty and allow individuals to trust agents to extent that the agents are actually trustworthy. We contrast these with other plausible institutions for engendering loyalty that require inefficient withholding of trust to support group norms, and are not robust to coalitional deviations. In communities whose members randomly match, we show that social mobility within hierarchies falls as temptations to cheat rise. In communities where individuals can concentrate their trading with pre-selected members, hierarchies where senior members are favored for trade sustain trust even in the presence of proximate non-hierarchical communities. We link these results to the emergence of trust in new market environments and early human societies |
| Date: | 2016–08–26 |
| URL: | http://d.repec.org/n?u=RePEc:sef:csefwp:451&r=hpe |
| By: | Müller, Stephan; von Wangenheim, Georg |
| Abstract: | We study the coevolution of cooperation, preferences and cooperative signals in an environment where individuals engage in a signaling-extended prisoner's dilemma. We identify a new type of evolutionary equilibrium - a transitional equilibrium - which is constituted and stabilized by the dynamic interaction of multiple Bayesian equilibria. A transitional equilibrium: (1) exists under mild conditions, and (2) can stabilize a population that is characterized by the heterogeneity of behavior, preferences, and signaling. We thereby offer an explanation for persistent regularities observed in laboratory and field data on cooperative behavior. Furthermore, this type of equilibria is least demanding with respect to differences in signaling costs between 'conditional cooperators' and 'opportunists.' Indeed, and quite surprisingly, a transitional equilibrium is consistent with 'conditional cooperators' bearing higher signaling cost in terms of fitness than 'opportunists.' |
| Keywords: | evolutionary game theory,cooperation,signaling |
| JEL: | C73 D64 D82 |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:cegedp:221r&r=hpe |
| By: | Haar, Brigitte |
| Abstract: | This paper is the outcome of a related broader project, exploring the explanatory power of the Legal Theory of Finance, which proposes a new institution-based analytical framework for the analysis of phenomena of financial markets. One of its most important theoretical assumptions, the legal construction of financial markets, is highlighted by the example of the private creation of money by structured finance products in this paper. Further implications can then be shown referring to pari passu clauses and collective action clauses, which are both exhibit a differential application of these legal rules according to the hierarchical status of the respective market participant, and can therefore endanger sovereign debt restructurings. Legal instruments to avoid this are briefly explored. An example of another key role of the law in crisis that is the task to resolve the tension between market discipline and financial stability is exemplified by the regulation of the OTC derivatives market and proposals of effective loss-sharing among CCPs. Related questions about the significance of legal rules to ensure financial stability are raised in the analysis of minimum capital requirements under Basel III. |
| Keywords: | law and finance,financial stability,financial contracts,structured finance,asset-backed securities,pari passu clauses,collective action clauses,otc derivatives markets,central counter parties,Basel III,coco bonds |
| JEL: | G38 K12 K20 K22 N20 O16 |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:safewp:141&r=hpe |
| By: | Jim Engle-Warnick; Diego Pulido; Marine de Montaignac |
| Abstract: | This paper reports results from an on-line economics experiment with head of household participants that explores the connection between trust and investment behavior. We show that trust is correlated with both the degree to which an investor makes decisions independently and the willingness to invest in an ambiguous asset. Our experiment is the first to suggest a link between trust, ambiguity, and investor independence. |
| Keywords: | trust, ambiguity, investment decisions, portfolio theory, artefactual field experiment, |
| JEL: | C91 C93 G02 G11 |
| Date: | 2016–08–24 |
| URL: | http://d.repec.org/n?u=RePEc:cir:cirwor:2016s-44&r=hpe |
| By: | Acheson, Graeme G.; Campbell, Gareth; Turner, John D. |
| Abstract: | This paper examines the origins of investor protection under the common law by analysing the development of shareholder protection in Victorian Britain, the home of the common law. In this era, very little was codified, with corporate law simply suggesting a default template of rules. Ultimately, the matter of protection was one for the corporation and its shareholders. Using c. 500 articles of association and ownership records of publicly-traded Victorian corporations, we find that corporations afforded investors with just as much protection as is present in modern corporate law and that firms with better shareholder protection had more diffuse ownership. |
| Keywords: | law and finance,ADRI,shareholder protection,corporate ownership,common law |
| JEL: | G32 G34 G38 K22 N23 N43 N83 |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:qucehw:201604&r=hpe |
| By: | Kirk Hamilton; John F. Helliwell; Michael Woolcock |
| Abstract: | We combine theory with data from different domains to provide an empirical analysis of the scale and variability of social capital as wealth. This is used to argue, given what we have learned in the literature on social capital, that the welfare returns to investing in trust could be substantial. Using social trust data from 132 nations covered by the Gallup World Poll, we present a range of estimates of social trust’s wealth-equivalent values. The estimates of the wealth embodied in social capital are very large, and with a structure and distribution quite different from those for physical capital. These estimates reflect values above and beyond what social trust contributes to supporting incomes and health. Although social trust is an important component of total wealth in all regions and country groupings, there are nonetheless big variations within and among regions, ranging from as low as 12% of total wealth in Latin America to 28% in the OECD. |
| JEL: | E21 E22 I31 |
| Date: | 2016–08 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:22556&r=hpe |
| By: | Matthew O. Jackson; Brian W. Rogers; Yves Zenou |
| Abstract: | We discuss social network analysis from the perspective of economics. We organize the presentaion around the theme of externalities: the effects that one's behavior has on others' well-being. Externalities underlie the interdependencies that make networks interesting. We discuss network formation, as well as interactions between peoples' behaviors within a given network, and the implications in a variety of settings. Finally, we highlight some empirical challenges inherent in the statistical analysis of network-based data. |
| Date: | 2016–08 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1608.07901&r=hpe |
| By: | Calleja, Pere; Llerena Garrés, Francesc |
| Abstract: | On the domain of cooperative games with transferable utility, we investigate how the main results in Hart and Mas-Colell (1989) vary when we replace self consistency by projected consistency or max consistency. As a consequence, we obtain several axiomatic comparison among the (weighted) Shapley value, the (weighted) surplus division solution and the prenucleolus. |
| Keywords: | Jocs cooperatius, 33 - Economia, |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:urv:wpaper:2072/266577&r=hpe |