nep-hpe New Economics Papers
on History and Philosophy of Economics
Issue of 2017‒01‒29
seventeen papers chosen by
Erik Thomson
University of Manitoba

  1. Economics cannot isolate itself from political theory: a mathematical demonstration By Brendan Markey-Towler
  2. Fiscal pessimism in historical perspective : Tocqueville revisited By Fraile, Pedro
  3. The Missing Bretton Woods Debate over Flexible Exchange Rates By Douglas A. Irwin
  4. The Myopic Stable Set for Social Environments By Demuynck, Thomas; Herings, P. Jean-Jacques; Saulle, Riccardo; Seel, Christian
  5. Potterian Economics By Levy, Daniel; Snir, Avichai
  6. Reconsidering Communication Regarding Economic Phenomena. Some Hints from a Complexity Approach. By Piercarlo Frigero
  7. The Estimation of Network Formation Games with Positive Spillovers By Vincent Boucher
  8. Japanese colonialism in comparative perspective By Anne Booth; Kent Deng
  9. The Cultural Foundations of Happiness. By Conzo, Pierluigi; Aassve, Arnstein; Fuochi, Giulia; Mencarini, Letizia
  10. The Federal Reserve’s Evolving Monetary Policy Implementation Framework: 1914-1923 By Chabot, Benjamin
  11. The Moldable Young: How Institutions Impact Social Trust By Bergh, Andreas; Öhrvall, Richard
  12. The Cultural Foundations of Happiness By Pierluigi Conzo; Arnstein Aassve; Giulia Fuochi; Letizia Mencarini
  13. Knowledge as a Global Common and the Crisis of the Learning Economy By Ugo Pagano
  14. Neoclassical theories of stationary relative prices and the supply of capital By Fratini, Saverio M.
  15. Property, Possession and Knowledge By Ugo Pagano
  16. Beyond thirty: Treasury issuance of long-term bonds from 1953 to 1965 By Garbade, Kenneth D.
  17. Micro foundations in the Great Divergence debate: opening up a new perspective By Luca Zan; Kent Deng

  1. By: Brendan Markey-Towler
    Abstract: The purpose of this paper is to provide a confession of sorts from an economist to political science and philosophy. A confession of the weaknesses of the political position of the economist. It is intended as a guide for political scientists and philosophers to the ostensible policy criteria of economics, and an illustration of an argument that demonstrates logico-mathematically, therefore incontrovertibly, that any policy statement by an economist contains, or is, a political statement. It develops an inescapable compulsion that the absolute primacy and priority of political theory and philosophy in the development of policy criteria must be recognised. Economic policy cannot be divorced from politics as a matter of mathematical fact, and rather, as Amartya Sen has done, it ought embrace political theory and philosophy.
    Date: 2016–10
  2. By: Fraile, Pedro
    Abstract: This paper explores Alexis de Tocqueville´s thought on fiscal political economy as a forerunner of the modern school of preference falsification and rational irrationality. Although he initially shared the cautious optimism of most Classical economists with respect to taxes under extended suffrage, Tocqueville's view turned more pessimistic in the second volume of his Democracy in America. Universal enfranchisement and democratic governments would lead to higher taxes, more intense income redistribution and government control. Under democracy, the continuous search for unconditional equality would eventually jeopardized liberty and economic growth.
    Keywords: Equality; Rational irrationality; Mores; Enfranchisement; Preference falsification; Tocqueville's Cross; Income redistribution; Fiscal capacity; Social rights; Ricardian fiscal optimism; Extension of the franchise; Report on Pauperism; Democracy in America; Alexis de Tocqueville
    Date: 2016–12
  3. By: Douglas A. Irwin
    Abstract: The collapse of the gold standard in the 1930s sparked a debate about the merits of fixed versus floating exchange rates. Yet the debate quickly vanished: there was almost no discussion about the exchange rate regime at the Bretton Woods conference in 1944 because John Maynard Keynes and Harry Dexter White agreed that exchange rate stability through fixed but adjustable pegs was the right approach. In light of the difficult macroeconomic tradeoffs experienced under the gold standard a decade earlier, the outright rejection of floating exchange rates seems surprising. This paper explores the views of leading economists about the exchange rate provisions in the Bretton Woods agreement and examines why arguments for floating exchange rates were so quickly dismissed.
    JEL: B22 F31 F33
    Date: 2017–01
  4. By: Demuynck, Thomas (universite libre de bruxelles); Herings, P. Jean-Jacques (General Economics 1 (Micro)); Saulle, Riccardo (General Economics 1 (Micro)); Seel, Christian (General Economics 1 (Micro))
    Abstract: We introduce a new solution concept for models of coalition formation, called the myopic stable set. The myopic stable set is defined for a very general class of social environments and allows for an infinite state space. We show that the myopic stable set exists and is non-empty. Under minor continuity conditions, we also demonstrate uniqueness. Furthermore, the myopic stable set is a superset of the core and of the set of pure strategy Nash equilibria in noncooperative games. Additionally, the myopic stable set generalizes and unifies various results from more specific environments. In particular, the myopic stable set coincides with the coalition structure core in coalition function form games if the coalition structure core is non-empty; with the set of stable matchings in the standard one-to-one matching model; with the set of pairwise stable networks and closed cycles in models of network formation; and with the set of pure strategy Nash equilibria in finite supermodular games, finite potential games, and aggregative games. We illustrate the versatility of our concept by characterizing the myopic stable set in a model of Bertrand competition with asymmetric costs, for which the literature so far has not been able to fully characterize the set of all (mixed) Nash equilibria.
    Keywords: Social environments, group formation, stability, Nash equilibrium
    JEL: C70 C71
    Date: 2017
  5. By: Levy, Daniel; Snir, Avichai
    Abstract: Recent studies in psychology and neuroscience find that fictional works exert strong influence on readers and shape their opinions and worldviews. We study the Potterian economy, which we compare to economic models, to assess how Harry Potter books affect economic literacy. We find that some principles of Potterian economics are consistent with economists’ models. Many others, however, are distorted and contain numerous inaccuracies, which contradict professional economists’ views and insights, and contribute to the general public’s biases, ignorance, and lack of understanding of economics.
    Keywords: Economic and Financial Literacy, Political Economy, Public Choice, Rent Seeking, Folk Economics, Harry Potter, Social Organization of Economic Activity, Literature, Fiction, Potterian Economy, Potterian Economics, Popular Opinion
    JEL: A13 A14 D72 D73 H00 H11 I20 P16 P48 P51 Z11 Z13
    Date: 2017–01–20
  6. By: Piercarlo Frigero (Department of Economics and Statistics (Dipartimento di Scienze Economico-Sociali e Matematico-Statistiche), University of Torino, Italy)
    Abstract: This paper, inspired by the notion of complexity and the use of network analysis, is presented as a short survey on communication in economics when it is addressed to people who approach the subject neither for study nor for professional purposes. Their perception of the economic system has also been shaped by events interpreted by opinion and political leaders. Its main contribution is an attempt to avoid current misunderstandings arising from a mechanical notion of the economic system and a consequent excess of confidence in what political economy can do in pursuing welfare. To do this, after a brief review of useful perceptions of phenomena both at system level and at firm level, we will propose some hints arising from complexity and network theory for an alternative viewpoint on political prescriptions and for a better appreciation of the entrepreneurial function. At the end, we will conclude with some teaching suggestions along with final remarks about understanding economics.
    Keywords: Complexity Economics, Economic Education and Teaching of Economics, Political Economy, Theory of the Firm.
    JEL: A20 B59 P47 L20
    Date: 2017–01
  7. By: Vincent Boucher
    Abstract: I present a strategic model of network formation with positive network externalities in which individuals have preferences for being part of a clique. I build on the theory of supermodular games (Topkis, 1979) and focus on the greatest Nash equilibrium of the game. Although the structure of the equilibrium network cannot be expressed analytically, I show that it can easily be simulated. I propose an approximate Bayesian computation (ABC) framework to make inferences about individuals' preferences, and provide an illustration using data on high school friendships.
    Keywords: Network Formation, Supermodular Games, Approximate Bayesian Computation
    JEL: D85 C11 C15 C72
    Date: 2016
  8. By: Anne Booth; Kent Deng
    Abstract: The paper examines the economic consequences of Japanese colonialism in Taiwan, Korea and Manchuria in the years from 1910 to 1945, and compares Japanese policies with those implemented by other colonial powers in Southeast Asia. In particular it addresses the writings of an influential group of American scholars who have published widely on Japanese colonial policies over the last fifty years. Their work has been used to support the argument that Japanese colonial policy was more developmental than that of other colonial powers, and laid the foundations for the stellar economic performance of Taiwan and the Republic of Korea in the decades after 1950. The paper challenges this argument by comparing a number of economic and social indicators in Korea, Taiwan and Manchuria with those from other Asian colonies and also from Thailand. The main conclusion is that while the Japanese colonies, especially Taiwan, score well on some indicators, they do less well on others. The idea of Japanese exceptionalism cannot be accepted uncritically.
    Keywords: Japan; West; colonies in Asia; state policies; growth and development
    JEL: N0
    Date: 2016–12
  9. By: Conzo, Pierluigi; Aassve, Arnstein; Fuochi, Giulia; Mencarini, Letizia (University of Turin)
    Abstract: The paper provides a framework for how culture affects happiness. According to self-determination theory, well-being is driven by the satisfaction of three basic psychological needs: autonomy, relatedness and competence. We assess if, and to what extent, generalized trust and the values of obedience and respect influence Europeans’ satisfaction of these needs, controlling for income and education. We find a positive and significant impact for generalized morality (high trust and respect, low obedience), which is robust to different checks for endogeneity, including instrumental variable regressions at country, regional and individual level and panel-data estimations.
    Date: 2017–01
  10. By: Chabot, Benjamin (Federal Reserve Bank of Chicago)
    Abstract: The Federal Reserve has relied upon a number of different monetary policy implementation frameworks throughout its history. This paper describes the original implementation framework that evolved between 1914 and 1923 in response to new policy objectives and changing market conditions.
    Keywords: Monetary policy implementation; standing facilities; open market operations
    JEL: E52 E58 E59
    Date: 2017–01–18
  11. By: Bergh, Andreas (Research Institute of Industrial Economics (IFN)); Öhrvall, Richard (Research Institute of Industrial Economics (IFN))
    Abstract: Social trust is linked to many desirable economic and social outcomes, but the causality between trust and institutions is debated. Using new data from a representative sample of 2,668 Swedish expatriates (surveyed in the SOM Institute’s Swedish Expatriate Survey 2014), we use variation in time spent in the new country to infer about the effect of country level institutions and norms (such as corruption perceptions, average trust levels and various aspects of economic freedom) on social trust. The results suggest that individual trust suffers in countries with high corruption, low trust and low legal quality. The effect is relatively small, occurs mainly during the first 3 to 10 years and is observed only among those aged less than 30 at the time of arrival in the new country. The results are robust to controlling for a large array of individual characteristics (including age), and support the view that social trust is sensitive to events that occur early in life. In contrast, after the age of approximately 30, trust seems to be a highly resilient personal trait.
    Keywords: Trust; Social norms; Institutions; Migration
    JEL: D13 D83 J62 Z13
    Date: 2016–09–07
  12. By: Pierluigi Conzo (Università di Torino, CSEF and Collegio Carlo Alberto); Arnstein Aassve (Università Bocconi, Dondena Centre for Research on Social Dynamics and Public Policy); Giulia Fuochi (Università di Padova); Letizia Mencarini (Università Bocconi, Dondena Centre for Research on Social Dynamics and Public Policy)
    Abstract: The paper provides a framework for how culture affects happiness. According to self-determination theory, well-being is driven by the satisfaction of three basic psychological needs: autonomy, relatedness and competence. We assess if, and to what extent, generalized trust and the values of obedience and respect influence Europeans’ satisfaction of these needs, controlling for income and education. We find a positive and significant impact for generalized morality (high trust and respect, low obedience), which is robust to different checks for endogeneity, including instrumental variable regressions at country, regional and individual level and panel-data estimations.
    Keywords: self-determination, culture, trust, subjective well-being, happiness, life satisfaction.
    JEL: A13 E02 P48 I31 Z13
    Date: 2017–01–13
  13. By: Ugo Pagano
    Abstract: This paper analyzes two interrelated problems characterizing a learning society. On the one hand, there is a tension between the non-rival nature of knowledge and its private appropriation. On the other hand, there is an institutional mismatch between the global public good nature of knowledge and the fragmentation of political power among different nations. We will argue that these two contradictions are a fundamental cause of economic stagnation and of inequality. The excessive monopolization of knowledge decreases the rate of growth but, at the same time, it increases the share of profits and shareholders’ wealth. The discounted rents of privatized knowledge are a clear example of what Joe Stiglitz has aptly named capitaldestructive wealth. Whereas the wealth (of few) increases, knowledge-capital decreases because its available uses are dramatically restricted.
    JEL: O34 O15 O16 P14
    Date: 2016–12
  14. By: Fratini, Saverio M.
    Abstract: In the traditional versions of the neoclassical theory of value and distribution, the stock of existing capital—understood as either an amount of value or an endowment of capital goods—was taken as given, together with the available quantities of labour and natural resources. This characteristic of the early neoclassical theories is analysed by the comparison with the modern neo-Walrasian models of stationary equilibrium, in which the stock of capital is not considered among the data. We show that the attempt to put capital on the same footing as labour and land—i.e. to present it as a factor of production—led the early neoclassical author to write the zero netaccumulation condition, which was required by the stationarity of relative prices, in the form of a market clearing condition between supply of and demand for capital. The rate of interest was then understood as the price to determine by this market. However, as is well known, the conception of capital as a factor of production—and of the rate of interest as the price for its use—did not work and involved several problems, some of which are discussed in this paper.
    Keywords: stationary relative prices; capital; net accumulation; Wicksell; Walras
    JEL: B13 B21 D24 D51 D91
    Date: 2017–01
  15. By: Ugo Pagano
    Abstract: As Hodgson has nicely pointed out, capitalism can be only understood if we accept that, unlike possession, property is a social construction and a relation among individuals. Unlike possession, property does not require a material thing on which it should be applied. Property rights can create fictitious commodities on intangible assets symbolizing the relationships among persons. The commoditization of knowledge and the emergence of contemporary intellectual monopoly capitalism must be understood in this framework. Knowledge is a non-rival good and its possession by others is not incompatible. Since we can all possess the same piece of knowledge, the so-called knowledge economy is often seen as place where capitalist relations should weaken. However this view confuses property with possession. In modern societies, intellectual property is becoming the most important part of capital. In spite of the non-rival possession of knowledge, intellectual property rights can be defined as the exclusive right to a piece of knowledge involving the corresponding restriction of others' liberties to use it. Modern intellectual monopoly capitalism is built on sophisticated property rights that should be not confused with any sort of primitive possession
    JEL: K11 K30 B15 B41
    Date: 2016–12
  16. By: Garbade, Kenneth D. (Federal Reserve Bank of New York)
    Abstract: Ever since the emergence of regular and predictable issuance of coupon-bearing Treasury debt in the 1970s, thirty years has marked the outer boundary of Treasury bond maturities. However, longer-term bonds were not unknown in earlier years. Seven such bonds, including one with a forty-year term, were issued between 1955 and 1963. This paper examines the circumstances that led to the issuance of these seven bonds.
    Keywords: Treasury debt management; long-term bonds; U.S. Treasury
    JEL: H63 N22
    Date: 2017–01–01
  17. By: Luca Zan; Kent Deng
    Abstract: Prevailing approaches in historical studies adopt a macro view and place an overwhelming emphasis on the Industrial Revolution as a major discontinuity in Western development. On the contrary, recent research in accounting, management and business history has suggested a different direction. When opting for a micro-level focus, crucial discontinuities in management and accounting in the West can be traced back to the Renaissance Period. The paper thus searches for ‘micro foundations’ in managing and accounting practices to address the on-going debate on the East-West divergence. Despite the obvious problems with source availability, we outline a new research agenda for the debate.
    Keywords: Great Divergence Debate; Venice Arsenal; accounting and capitalism; proto-industrial settings; premodern bureaucracies
    JEL: N0
    Date: 2017–01

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