|
on History and Philosophy of Economics |
| By: | Claude Diebolt; Michael Haupert |
| Abstract: | 1993 Nobel laureates Robert Fogel and Douglass North were pioneers in the “new” economic history, or cliometrics. Their impact on the economic history discipline is great, though not without its critics. In this essay, we use both the “old” narrative form of economic history, and the “new” cliometric form, to analyze the impact each had on the evolution of economic history. |
| Keywords: | Cliometrics, Economic History, Methodology, Economics, History. |
| JEL: | A12 B41 C18 C80 N01 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:ulp:sbbeta:2017-04&r=hpe |
| By: | Nelson, Edward |
| Abstract: | This paper finds a significant influence of Milton Friedman on U.K. economic policy from the 1970s onward, and especially during the period of the Thatcher Government. The finding is based on a consideration of statements by policymakers and key economic advisers, as well as an analysis of Friedman’s commentary in the 1970s, 1980s, and 1990s on U.K. economic developments. It is shown that explicit acknowledgments of Friedman’s influence were given on the record over the years by Margaret Thatcher, Chancellor of the Exchequer Geoffrey Howe, Bank of England officials, and others in policy circles. Examples of Friedman’s influence include the absorption into U.K. policy doctrine of the permanent income hypothesis and the natural rate hypothesis, the rejection from 1979 onward of incomes policy as a weapon against inflation, and U.K. officials’ repeated appeals to monetary sovereignty when arguing against monetary union or a sterling peg. Evidence of influence by Friedman on privatization policy and on the official perspective on the current account deficit can also be discerned. Friedman had only limited personal interaction with U.K. policymakers, but his influence was felt in the adoption into actual U.K. policymaking of recommendations made in his writings and in the fact that those writings—which were studied closely by a number of senior U.K. economic advisers—helped alter economists’ conceptual framework in the United Kingdom and thereby fostered doctrinal changes in U.K. economic policy. The analysis in this paper also shows that two key critics of the Conservative party’s economic policy under Margaret Thatcher—Labour’s Harold Wilson and the Conservatives’ Edward Heath—had good reason to ascribe this policy partly to the influence of Friedman, whom each of them had met before the Thatcher era. |
| Keywords: | Milton Friedman, U.K. economic policy, incomes policy, monetarism, Thatcher Government, doctrine of economic policy. |
| Date: | 2017–02 |
| URL: | http://d.repec.org/n?u=RePEc:syd:wpaper:2017-01&r=hpe |
| By: | Roger E.A. Farmer |
| Abstract: | This paper explains the connection between ideas developed in my recent books and papers and those of economists who self-identify as Post Keynesians. My own work is both neoclassical and ‘old Keynesian’. Much of my published work assumes that people have rational expectations and that ‘animal spirits’ should be modeled as a new fundamental. I adopt a general equilibrium framework to model the macroeconomy. But although I write from a neo-classical tradition the themes I explore in my published writing have much in common with heterodox economics. This paper explains the common elements between these seemingly disparate traditions. I make the case for unity between Post-Keynesian and General Equilibrium Theory under the banner of Post-Keynesian Dynamic Stochastic General Equilibrium Theory. |
| JEL: | E0 E12 |
| Date: | 2017–01 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:23109&r=hpe |
| By: | Duncan Foley (Department of Economics, New School for Social Research) |
| Abstract: | The financial crisis of 2007-8 damaged the credibility of macroeconomic analysis based on price-taking Walrasian intertemporal general equilibrium models. This talk explores methodological alternatives, particularly stable Nash-Cournot equilibria of social interaction models that center on agents’ response to other agents’ actions rather than on agents’ forecasts of future paths of prices and production. Social interaction equilibria in conjunction with constraints from information theory highlight the social coordination problems at the root of macroeconomic policy questions. Equilibrium concepts enhance the explanatory power of economic theories in contrast with the limitations of disequilibrium dynamical systems analysis and agent-based modeling. Constrained maximum entropy methods offer a general approach to macroeconomic modeling. Various conceptions of equilibrium in economics arise from distinct conceptions of expectations. |
| Keywords: | Economic equilibrium, statistical equilibrium, Nash-Cournot equilibrium, expectations, maximum entropy |
| JEL: | B22 B40 C62 C72 D50 E12 |
| Date: | 2017–02 |
| URL: | http://d.repec.org/n?u=RePEc:new:wpaper:1703&r=hpe |
| By: | Wei Ma |
| Abstract: | We study general equilibrium theory of complete markets in an otherwise standard economy with each household having an additive perturbed utility function. Since this function represents a type of stochastic choice theory, the equilibrium of the corresponding economy is defined to be a price vector that makes its mean expected demand equal its mean endowment. We begin with a study of the economic meaning of this notion, by showing that at any given price vector, there always exists an economy with deterministic utilities whose mean demand is just the mean expected demand of our economy with additive perturbed utilities. We then show the existence of equilibrium, its Pareto inefficiency, and the upper hemi-continuity of the equilibrium set correspondence. Specializing to the case of regular economies, we finally demonstrate that almost every economy is regular and the equilibrium set correspondence in this regular case is continuous and locally constant. |
| Keywords: | general equilibrium, Stochastic choice, Regular economy |
| Date: | 2017–01 |
| URL: | http://d.repec.org/n?u=RePEc:rza:wpaper:654&r=hpe |
| By: | Roberto Veneziani (Queen Mary University of London); Naoki Yoshihara (University of Massachusetts Amherst) |
| Abstract: | This paper analyses the normative and positive foundations of the theory of exploitation as the unequal exchange of labour (UEL). The key intuitions behind all of the main approaches to UEL exploitation are explicitly analysed as a series of formal claims in a general economic environment. It is then argued that these intuitions can be captured by one fundamental axiom - called Labour Exploitation - which defines the basic domain of all UEL exploitation forms and identifies the formal and theoretical framework for the analysis of the appropriate definition of exploitation. |
| Keywords: | Exploitation, Unequal Exchange of Labour, axiomatic analysis |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:ums:papers:2017-04&r=hpe |
| By: | Rotta, Tomas |
| Abstract: | In this paper I theorize the roles of effective demand and Say’s law in the Marxist theory of exploitation and accumulation. I claim that an exogenous rate of exploitation, or an exogenous functional distribution of income between profits and wages, implies deploying Say’s law, which leads profit rates not to equalize across sectors. Marx’s own procedure in Capital III of simultaneously supposing an exogenous rate of exploitation and profit rate equalization was therefore logically inconsistent. Once Keynes’ principle of effective demand is introduced, the rate of exploitation and hence the distribution of income between wages and profits become endogenous to aggregate demand. Profit rates then do equalize across sectors and prices of production can function as gravitational centers for market prices in a competitive economy. If we aim at developing a theory that is both empirically relevant and logically consistent, Marxist scholars must therefore drop Say’s law and incorporate Keynes’ principle of effective demand for a proper understanding of how capital accumulation determines the rate of exploitation, the functional distribution of income, and the equalization of profit rates. |
| Keywords: | Marxist accumulation theory; exploitation; income distribution; Keynes’ effective demand; Say’s law; evolutionary game theory; |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:gpe:wpaper:15511&r=hpe |
| By: | Frank Mueller-Langer; Benedikt Fecher; Dietmar Harhoff; Gert G. Wagner |
| Abstract: | Replication studies are considered a hallmark of good scientific practice. Yet they are treated among researchers as an ideal to be professed but not practiced. To provide incentives and favorable boundary conditions for replication practice, the main stakeholders need to be aware of what drives replication. Here we investigate how often replication studies are published in empirical economics and what types of journal articles are replicated. We find that from 1974 to 2014 less than 0.1% of publications in the top-50 economics journals were replications. We do not find empirical support that mandatory data disclosure policies or the availability of data or code have a significant effect on the incidence of replication. The mere provision of data repositories may be ineffective, unless accompanied by appropriate incentives. However, we find that higher-impact articles and articles by authors from leading institutions are more likely to be subject of published replication studies whereas the replication probability is lower for articles published in higher-ranked journals. |
| Keywords: | Replication, economics of science, science policy, economic methodology |
| JEL: | A1 B4 C12 C13 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:diw:diwwpp:dp1640&r=hpe |
| By: | Joerges, Christian; Kreuder-Sonnen, Christian |
| Abstract: | European Studies used to be dominated by legal and political science approaches which hailed the progress of European integration and its reliance on law. The recent set of crises which struck the EU have highlighted fundamental problems in the ways and means by which European integration unfolds. The quasi-authoritarian emergency politics deployed in the euro crisis is a radical expression of the fading prevalence of democratic processes to accommodate economic and social diversity in the Union. As we argue in this paper, however, the mainstreams in both disciplines retain a largely affirmative and apologetic stance on the EU's post-democratic and extra-constitutional development. While political science contributions mostly contend themselves with a revival of conventional integration theories and thus turn a blind eye to normatively critical aspects of European crisis governance, legal scholarship is in short supply of normatively convincing theoretical paradigms and thus aligns itself with the functionalist reasoning of the EU's Court of Justice. Yet we also identify critical peripheries in both disciplines which intersect in their critical appraisal of the authoritarian tendencies that inhere the crisis-ridden state of European integration. Their results curb the prevailing optimism and underline that the need for fundamental reorientations in both the theory and practice of European integration has become irrefutable. |
| Keywords: | European crisis,authoritarian tendencies,European Studies,European integration,europäische Krise,autoritäre Tendenzen,Europastudien,europäische Integration |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:wzbtci:spiv2016109&r=hpe |
| By: | Sebastian Goerg (Florida State University); David Rand (Yale University); Gari Walkowitz (University of Cologne) |
| Abstract: | We systematically investigate prisoner’s dilemma games and dictator games with valence framing. We find that give versus take frames influence subjects’ behavior and beliefs in the prisoner’s dilemma game but not in the dictator game. |
| Keywords: | Prisoner’s Dilemma, Dictator Game, Framing, Give, Take, Cooperation, Generosity |
| JEL: | A13 C72 C91 F51 Z13 |
| Date: | 2017–02 |
| URL: | http://d.repec.org/n?u=RePEc:fsu:wpaper:wp2017_02_01&r=hpe |
| By: | Claudio Sardoni (Department of Social Sciences and Economics, Sapienza University of Rome); Antonio Bianco (Dipartimento di Scienze Sociali ed Economiche, Sapienza University of Rome (Italy).) |
| Abstract: | The recently expanding macro-financial literature is facing the analytical challenge to analyse the working of modern market economies without losing touch with the factual role played by financial institutions. Mainstream macroeconomic models that embody a financial sector are characterized by the understanding of banks as intermediaries of loanable funds (deposit-taking paving the way for loan extension). This approach to banking is increasingly considered as a major flaw in macroeconomic thinking. The Post-Keynesian theory of inside money creation is gaining momentum even in mainstream circles. The present article highlights the key differences of these alternative doctrines from a money supply perspective, so to stress the key aspects of the monetary dimension of the so-called financial cycle and the fact that monetary policy alone has no impact on aggregate expenditure. |
| Keywords: | Financial Cycle, Money Supply, Banking, Inside Money, Liquidity Risk. |
| JEL: | E44 E51 |
| Date: | 2017–02 |
| URL: | http://d.repec.org/n?u=RePEc:saq:wpaper:3/17&r=hpe |
| By: | Schneider, Johannes; Balzer, Benjamin |
| Abstract: | We study the optimal design of alternative dispute resolution (ADR) mechanisms by a third-party mediator. ADR takes place before two litigants face each other in court. Litigation is a legal contest with players who are privately informed about the cost of collecting admissible evidence. Players update their beliefs after the mediation process, but before they decide on evidence collection. Different from standard mechanism design problems, the belief-system post-ADR is important for the outcome of the continuation game: within litigation, choice variables are strategic complements and the evidence supplied is driven by the belief system. There is an incentive for parties to misreport in ADR to profit from this deviation in litigation should ADR fail to resolve the conflict. We show that optimal ADR has to break down on-path in some cases to screen the players with respect to their costs. Furthermore, ADR induces truthful reporting by creating post-breakdown beliefs which are independent of own type-reports during ADR. To reduce inefficiency vis-à-vis symmetric litigation, optimal ADR induces asymmetric breakdown beliefs even for ex-ante symmetric types to increase the settlement rate compared to symmetric mechanisms. Independent of the set of parameters, ADR achieves settlement for the majority of cases. |
| JEL: | D82 D74 K41 |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc16:145686&r=hpe |
| By: | Chatelain, Jean-Bernard; Ralf, Kirsten |
| Abstract: | Macroeconomic theories of the 1980s faced accelerated depreciation when not sudden death. By contrast with econometrics and microeconomics and despite massive progress in access to data and the use of statistical softwares, macroeconomic theory appears not to be a cumulative science so far. When attempts are done to settle controversies by "nature" (testing the theories), they are designed to fail due to Gresham's law of selecting theories based on too many parameters, which are weakly or non-identified when testing them. Two examples are provided, one in growth theory and testing convergence, one in business cycles theory and testing inflation persistence. |
| Keywords: | Macroeconomic theory,Controversies,Identification,Economic Growth,Convergence,Inflation Persistence |
| JEL: | B22 B23 B41 C52 E31 O41 O47 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:esprep:149994&r=hpe |
| By: | Ugur, Mehmet |
| Abstract: | In this lecture, I review the theoretical origins of the empirical growth models. I begin with the Solow and AK models informed by neoclassical theory. I demonstrate that both models do not make an explicit distinction between capital accumulation and technological progress. They just lump together the physical and human capital. Then I discuss the Schumpeterian growth models with creative destruction and institutions (particularly democracy as a meta-institution). I demonstrate that the Schumpeterian models can address a wider range of questions – particularly those that cannot be addressed satisfactorily by neoclassical models. I conclude by arguing for innovations in growth modeling – particularly for innovations that involve explicit incorporation of product-market competition and non-linearities in the relationship between innovation and growth. |
| Keywords: | Endogenous growth; Capital accumulation; Technological progress; Growth models; Innovation |
| Date: | 2016–02 |
| URL: | http://d.repec.org/n?u=RePEc:gpe:wpaper:14665&r=hpe |
| By: | Michele Lombardi (Adam Smith Business School, University of Glasgow); Naomi Yoshihara (Department of Economics, University of Massachusetts Amherst) |
| Abstract: | This paper investigates the robustness of Dutta and Sen (2012) Theorem 1 to weaker notions of truth-telling. An individual honesty standard is modeled as a subgroup of the society, including the individual herself, for which she feels truth-telling concerns. An individual i is honest when she states her true preferences as well as rankings (not necessarily complete) of outcomes that are consistent with the true preferences of individuals in her honesty standard. The paper offers a necessary condition for Nash implementation, called partial-honesty monotonicity, and shows that in an independent domain of preferences that condition is equivalent to Maskin monotonicity. |
| Keywords: | Nash implementation; partial-honesty; non-connected honesty standards, independent domain |
| JEL: | C72 D71 D82 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:ums:papers:2017-07&r=hpe |
| By: | Yaofeng Fu; Ruokun Huang; Yiran Sheng |
| Abstract: | China's new labor law -- Labor Contract Law has been put into practice for over one year. Since its inception, debates have been whirling around the nation, if not the world. In this article, we take an economic perspective to analyze the possible impact of the core item -- open-ended employment contract, and we find that it deals poorly with adverse selection, with moral hazard problems arise, which fails to meet the expectations of law-makers and other parties. |
| Date: | 2017–02 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1702.03977&r=hpe |
| By: | Benndorf, Volker; Martinez-Martinez, Ismael |
| Abstract: | We examine the impact of behavioral noise on equilibrium selection in a hawk-dove game with a model that linearly interpolates between the one- and two-population structures in an evolutionary context. Perturbed best response dynamics generates two hypotheses in addition to the bifurcation predicted by standard replicator dynamics. First, when replicator dynamics suggests mixing behavior (close to the one-population model), there will be a bias against hawkish play. Second, polarizing behavior as predicted by replicator dynamics in the vicinity of the two-population model will be less extreme in the presence of behavioral noise. We find both e.ects in our data set. |
| Keywords: | evolutionary game theory,perturbed best response dynamics,experiment in continuous time,hawk-dove game |
| JEL: | C62 C73 C91 C92 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:dicedp:243&r=hpe |
| By: | Theo S. Eicher (University of Washington); David J. Kuenzel (Economics Department, Wesleyan University) |
| Abstract: | The development accounting literature identifies political institutions as fundamental development determinants. Forms of government or executive constraints are thought to shape economic institutions (e.g., property rights) which provide the necessary incentives for economic growth. The consensus in this literature is that European influence affects economic development, presumably via the adoption of European institutions. But how exactly did European influence in the distant past induce positive economic outcomes today? While previous approaches rely on “language,” “settler mortality,” “legal origins,” or the “number of European settlers” as indirect proxies of European influence, we propose a direct and quantifiable mechanism: the adoption of European constitutional features. We construct a dataset of all constitutional dimensions in all countries from 1800-2008, and find that nations experience growth spurts after adopting features of European constitutions. The growth effects are influenced (negatively) by periods of political turmoil, but they are independent of colonial backgrounds. These results imply that countries have been able to overcome adverse initial conditions over the last 200 years by adjusting European influence via the adoption of European constitutional features. Our constitutional dataset is also sufficiently detailed to identify which dimensions of European constitutions matter for development, namely legislative rules and provisions that curtail executive power. |
| Keywords: | Institutions, Constitutions, Economic Growth |
| JEL: | O10 P48 O43 |
| Date: | 2017–01 |
| URL: | http://d.repec.org/n?u=RePEc:wes:weswpa:2017-002&r=hpe |
| By: | Dietzenbacher, Bas (Tilburg University, Center For Economic Research) |
| Abstract: | This paper analyzes bankruptcy games with nontransferable utility as a generalization of bankruptcy games with monetary payoffs. Following the game theoretic approach to NTU-bankruptcy problems, we study some appropriate properties and the core of NTU-bankruptcy games. Generalizing the core cover and the reasonable set to the class of NTU-games, we show that NTU-bankruptcy games are compromise stable and reasonable stable. Moreover, we derive a necessary and sufficient condition for an NTU-bankruptcy rule to be game theoretic. |
| Keywords: | NTU-bankruptcy problem,; NTU-bankruptcy game,; compromise stability,; reasonable stability; game theoretic bankruptcy rule |
| JEL: | C71 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:tiu:tiucen:1cc9f5ff-f889-43ec-93af-c8db469243d4&r=hpe |
| By: | Nicolas Brisset (Université Côte d’Azur; GREDEG CNRS) |
| Abstract: | In this paper we try to show how the social and political acceptance of Roth's market design for kidney exchange provides some explanation of the rejection of market logic. We address three hypotheses generally cited as potential causes of the market rejection of certain goods: (I) the corrupting nature of money, (II) the idea that the market as such would be rejected, and (III) the assumption that the basis for market rejection would be the dominance it implied between seller and buyer. The example of the device developed by Roth, Ünver and Sönmez (2004, 2005) regarding the matching of organs from living donors suggests a fourth hypothesis: the market rejection of organs appears to be based not on the existence of potential domination but on the fact that this market presupposes such domination. In other words, economic domination appears to be a prerequisite for the organ trade: no domination, no market. |
| Keywords: | Market Design, Repugnance, Money, Coercion, Gift-giving |
| JEL: | B41 D47 D64 A14 |
| Date: | 2017–02 |
| URL: | http://d.repec.org/n?u=RePEc:gre:wpaper:2017-03&r=hpe |
| By: | Berlin, Martin (Swedish Institute for Social Research, Stockholm University); Fors, Filip (Swedish Institute for Social Research, Stockholm University) |
| Abstract: | - |
| Keywords: | - |
| Date: | 2017–02–09 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:sofiwp:2017_001&r=hpe |
| By: | Duncan Foley (Department of Economics, New School for Social Research) |
| Date: | 2017–02 |
| URL: | http://d.repec.org/n?u=RePEc:new:wpaper:1705&r=hpe |
| By: | Duncan Foley (Department of Economics, New School for Social Research) |
| Date: | 2017–02 |
| URL: | http://d.repec.org/n?u=RePEc:new:wpaper:1706&r=hpe |
| By: | Duncan Foley (Department of Economics, New School for Social Research) |
| Date: | 2017–02 |
| URL: | http://d.repec.org/n?u=RePEc:new:wpaper:1707&r=hpe |
| By: | Kenshiro Ninomiya (Faculty of Economics, Shiga University) |
| Abstract: | The subprime loan mortgage crisis has revived scholarly interest in Minsky fs financial instability hypothesis. The related mathematical models present two types of Minskian financial structures, which we identify as the lenders f risk type (LR) and the hedge, speculative and Ponzi type (HSP) We construct macrodynamic models in a fixed and floating exchange rate sys- tem which considers both the LR and HSP financial structures. We examine the effects of international capital mobility and international lenders f risks and demonstrate the significance of the LR and HSP financial structures in the fixed and floating exchange rate system. We emphasize the significance of stable financial structures in order to stabilize dynamic systems in an open economy. |
| Keywords: | Minskian financial structure, financial fragility, financial instability,international capital mobility |
| JEL: | E12 E32 E43 |
| Date: | 2017–02 |
| URL: | http://d.repec.org/n?u=RePEc:shg:dpapeb:16&r=hpe |
| By: | Gill, David (Purdue University); Prowse, Victoria L. (Purdue University) |
| Abstract: | Response times are a simple low-cost indicator of the process of reasoning in strategic games (Rubinstein, 2007; Rubinstein, 2016). We leverage the dynamic nature of response-time data from repeated strategic interactions to measure the strategic complexity of a situation by how long people think on average when they face that situation (where we define situations according to the characteristics of play in the previous round). We find that strategic complexity varies significantly across situations, and we find considerable heterogeneity in how responsive subjects' thinking times are to complexity. We also study how variation in response times at the individual level across rounds affects strategic behavior and success. We find that 'overthinking' is detrimental to performance: when a subject thinks for longer than she would normally do in a particular situation, she wins less frequently and earns less. The behavioral mechanism that drives the reduction in performance is a tendency to move away from Nash equilibrium behavior. |
| Keywords: | response time, decision time, thinking time, strategic complexity, game theory, strategic games, repeated games, beauty contest, cognitive ability, personality |
| JEL: | C72 C91 |
| Date: | 2017–01 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp10518&r=hpe |
| By: | Angrist, Joshua (MIT); Pischke, Jörn-Steffen (London School of Economics) |
| Abstract: | The past half‐century has seen economic research become increasingly empirical, while the nature of empirical economic research has also changed. In the 1960s and 1970s, an empirical economist's typical mission was to "explain" economic variables like wages or GDP growth. Applied econometrics has since evolved to prioritize the estimation of specific causal effects and empirical policy analysis over general models of outcome determination. Yet econometric instruction remains mostly abstract, focusing on the search for "true models" and technical concerns associated with classical regression assumptions. Questions of research design and causality still take a back seat in the classroom, in spite of having risen to the top of the modern empirical agenda. This essay traces the divergent development of econometric teaching and empirical practice, arguing for a pedagogical paradigm shift. |
| Keywords: | econometrics, teaching |
| JEL: | A22 |
| Date: | 2017–01 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp10535&r=hpe |
| By: | Charles A. E. Goodhart |
| Abstract: | The history of central banking can be divided into periods of consensus about the roles and function of central banks, interspersed with periods of uncertainty, often following a crisis, in which central banks are searching for a new consensus. |
| JEL: | F3 G3 |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:69297&r=hpe |
| By: | Sushant Acharya; Jess Benhabib; Zhen Huo |
| Abstract: | We characterize the entire set of linear equilibria of beauty contest games under general information structures. In particular, we focus on equilibria in which sentiments, that is self-fulfilling changes in beliefs that are orthogonal to fundamentals and exogenous noise, can drive aggregate fluctuations. We show that, under rational expectations, there exists a continuum of sentiment-driven equilibria that generate aggregate fluctuations. Without having to take a stance on the private information agents might possess, we provide a general characterization of necessary and sufficient conditions under which a change in sentiments can have prolonged effects on aggregate outcomes and when it can only have short-lived effects. In addition, we also provide a practical way to characterize these equilibria. |
| JEL: | E20 E32 F44 |
| Date: | 2017–02 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:23136&r=hpe |
| By: | Müller, Julia; Li, Zhihua; Wakker, Peter P.; Wang, Tong V. |
| Abstract: | Ellsberg and others suggested that decision under ambiguity is a rich empirical domain with many phenomena to be investigated beyond the Ellsberg urns. We provide a systematic empirical investigation of this richness by varying both the uncertain events, the outcomes, and combinations of these. Although ambiguity aversion is prevailing, we also find systematic ambiguity seeking, confirming insensitivity. We find that ambiguity attitudes depend on the source of uncertainty (the kind of uncertain event) but not on the outcomes. Ambiguity attitudes are closer to rationality (ambiguity neutrality) for natural uncertainties than for the Ellsberg urns, as appearing from the reductions of monotonicity violations and of insensitivity. Our rich domain serves well to test families of weighting functions for fitting ambiguity attitudes. We find that two-parameter families, capturing not only aversion but also insensitivity, are desirable for ambiguity even more than for risk. The Goldstein-Einhorn family performs best for ambiguity. |
| JEL: | D81 C91 D80 |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc16:145734&r=hpe |
| By: | Turner, John D. |
| Abstract: | This article outlines the development of English company law in the four centuries before 1900. The main focus is on the evolution of the corporate form and the five key legal characteristics of the corporation - separate legal personality, limited liability, transferable joint stock, delegated management, and investor ownership. The article outlines how these features developed in guilds, regulated companies, and the great mercantilist and moneyed companies. I then move on to examine the State's control of incorporation and the attempts by the founders and lawyers of unincorporated business enterprises to craft the legal characteristics of the corporation. Finally, the article analyses the forces behind the liberalisation of incorporation law in the middle of the nineteenth century. |
| Keywords: | Bubble Act,Company,Corporate Law,Legal Personality,Limited Liability,Transferable Shares,Unincorporated Company |
| JEL: | G10 G18 G30 K10 K20 N23 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:qucehw:201701&r=hpe |
| By: | Onaran, Özlem |
| Abstract: | This paper summarizes two main findings in the Post-Keynesian literature regarding the linkages between financialization, income distribution, accumulation and productivity. Firstly, at the core of secular stagnation lies the missing link between profits and investment. Secondly, rising inequality and financialization have been the main reasons for this missing link and hence the major brakes against capital accumulation and growth. The paper concludes with alternative progressive policies based on a coordinated policy mix of equality-led development and public investment. |
| Keywords: | wage share; inequality; wage-led growth; financialization; secular stagnation; public investment |
| Date: | 2016–05 |
| URL: | http://d.repec.org/n?u=RePEc:gpe:wpaper:15528&r=hpe |
| By: | Baier, Scott (Clemson University); Kerr, Amanda (Clemson University); Yotov, Yoto (School of Economics) |
| Abstract: | We review and interpret the main theoretical developments in the gravity literature from its very early, a-theoretical applications to the latest structural contributions. We also discuss challenges and implement methods to estimate empirical gravity equations. We finish with a presentation and examples of numerical simulations with the structural gravity model. Throughout the analysis we attempt to emphasize the links and importance of transportation costs for the trade literature and we outline avenues where we believe interdisciplinary contributions between the international trade and transportation economics fields will be most valuable. |
| Keywords: | Structural Gravity; Estimation; Simulation; Transportation Costs |
| JEL: | F10 F11 F14 F17 R40 |
| Date: | 2017–02–12 |
| URL: | http://d.repec.org/n?u=RePEc:ris:drxlwp:2017_005&r=hpe |
| By: | Knell, Markus; Stix, Helmut |
| Abstract: | Subjective views of the extent of inequality and preferences for redistribution depend on how people perceive the true income (wealth) distribution. We present a novel formal framework in which individuals look at reference groups when guessing the extent of inequality and derive its implications for four dimensions of inequality perceptions. First, we show that the presence of reference groups that put more weight on the own income class leads low (high) income individuals to overestimate (underestimate) their own position. Second, the framework implies that subjective estimates of the average income increases with the own income position. Third, it predicts that people in different income deciles will assess the "distributional shape" of society (e.g. pyramid or diamond) differently. Fourth, the subjective extent of inequality is lower for high-income individuals. While the previous literature has treated these aspects of inequality separately, our model demonstrates that they are connected and follow from a unified framework of reference group formation. This allows us to study these and to reconcile conflicting findings from the literature. We confront these predictions with survey data from 40 countries and find strong support for the model. |
| JEL: | D31 D63 D83 |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc16:145718&r=hpe |
| By: | Melt van Schoor |
| Abstract: | In evolutionary game theory, “minigames†with reduced strategy sets are sometimes analysed in lieu of more complex models with many strategies. Are these simplified versions up to the task of explaining pertinent dynamic features of the larger models? This paper looks at the ultimatum game, in which it is known that a noisy evolutionary model leads to stable dynamic equilibriums that are far away from the game’s unique subgame perfect solution. It is argued that a naive approach is unsatisfactory and that the minigame analysis is more useful when related to the full game explicitly. A constellation of embedded minigames is identified in the full game, one for each imperfect equilibrium of the full game, with each playing out on its own conditional frequency space. It is shown that the conditional frequency dynamics applicable to these minigames have the same form as a full game’s dynamics with a reduced strategy set. While the minigames thus identified are still not two-dimensional, it is shown that two critical variables in each can be treated separately from the others, and these indeed behave like the variables in a two-dimensional standalone minigame. A graphical analysis based on selection-mutation equilibrium loci allows a clear understanding of why stable imperfect equilibriums exist and which factors tend to stabilize particular equilibriums. For example, lower-offer equilibriums are easier to stabilize, because a) proposers have more to lose by deviating from them and b) responder mutation aims at a higher target for the relevant conditional frequency. |
| Keywords: | evolution, evolutionary game theory, ultimatum game, minigames, conditional frequencies |
| JEL: | C72 C73 |
| Date: | 2017–01 |
| URL: | http://d.repec.org/n?u=RePEc:rza:wpaper:657&r=hpe |
| By: | Kiryl Khalmetski; Bettina Rockenbach; Peter Werner |
| Abstract: | Information asymmetries in economic transactions are omnipresent and a regular source of fraudulent behavior. In a theoretical and an experimental analysis of a sender-receiver game we investigate whether sanctions for lying induce more truthtelling. The novel aspect in our model is that senders may not only choose between truth-telling and (explicit) lying, but may also engage in evasive lying by credibly pretending not to know. While we find that sanctions promote truth-telling when senders cannot engage in evasive lying, this is no longer true when evasive lying is possible. Then, explicit lying is largely substituted by evasive lying, which completely eliminates the otherwise positive effect of sanctions on the rate of truthtelling. As outlined in our model, the necessary prerequisite for such an ‘erosion’ effect is that evasive lying is perceived as sufficiently less psychologically costly than direct lying. Our results clearly demonstrate the limitations of sanctioning lying to counteract the exploitation of informational asymmetries and may explain the empirical evidence from the finance industry that sanctions for financial misconduct eventually appear to be not very efficient. |
| Date: | 2017–01–18 |
| URL: | http://d.repec.org/n?u=RePEc:kls:series:0092&r=hpe |
| By: | Ernesto Dal Bó; Frederico Finan; Olle Folke; Torsten Persson; Johanna Rickne |
| Abstract: | Can a democracy attract competent leaders, while attaining broad representation? Economic models suggest that free-riding incentives and lower opportunity costs give the less competent a comparative advantage at entering political life. Moreover, if elites have more human capital, selecting on competence may lead to uneven representation. This paper examines patterns of political selection among the universe of municipal politicians and national legislators in Sweden, using extraordinarily rich data on competence traits and social background for the entire population. We document four new facts that together characterize an “inclusive meritocracy.” First, politicians are on average significantly smarter and better leaders than the population they represent. Second, this positive selection is present even when conditioning on family (and hence social) background, suggesting that individual competence is key for selection. Third, the representation of social background, whether measured by parental earnings or occupational social class, is remarkably even. Fourth, there is at best a weak tradeoff in selection between competence and social representation, mainly due to strong positive selection of politicians of low (parental) socioeconomic status. A broad implication of these facts is that it is possible for democracy to generate competent and socially-representative leadership. |
| JEL: | H10 H70 J45 P16 |
| Date: | 2017–02 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:23120&r=hpe |