nep-hpe New Economics Papers
on History and Philosophy of Economics
Issue of 2017‒03‒12
sixteen papers chosen by
Erik Thomson
University of Manitoba

  1. The Economist as Plumber By Duflo, Esther
  2. Capitalism and Socialism: Review of Kornai's Dynamism, Rivalry, and the Surplus Economy By Xu, Cheng-Gang
  3. "How Germany's Anti-Keynesianism Has Brought Europe to Its Knees" By Jorg Bibow
  4. Risk and Cooperation: Experimental Evidence from Stochastic Public Good Games By Vesely, Stepan; Wengström, Erik
  5. Competition or conflict? Beyond traditional ordo-liberalism By Dold, Malte; Krieger, Tim
  6. Thomas Sargent face à Robert Lucas : une autre ambition pour la Nouvelle Economie Classique By Aurélien Goutsmedt
  7. Origins of happiness By Andrew Clark; Sarah Flèche; Richard Layard; Nattavudh Powdthavee; George Ward
  8. Does the reliability of institutions affect public good contributions? Evidence from a laboratory experiment By Jahnke, Björn; Fochmann, Martin; Wagener, Andreas
  9. Principles and Contributions of Total Quality Mangement (TQM) Gurus on Business Quality Improvement By Neyestani, Behnam
  10. Social theory, economic geography, space and place: reflections on the work of Ray Hudson By Diane Perrons
  11. Handbook of Game Theory and Industrial Organization: An Introduction By Marini, Marco A.; Corchon, Luis
  12. Capital after Capitalism The evolution of the concept of capital in the light of long-run sustainable reproduction of the species By Hanappi, Hardy
  13. Correlated Equilibrium in a Nutshell By Rabah Amir; Sergei Belkov; Igor V. Evstigneev
  14. The roles of nature and history in world development By Vernon Henderson; Tim Squires; Adam Storeygard; David Weil
  15. Recursive inspection games By Bernhard von Stengel
  16. A New Approach to Contest Models By Fausto, Cavalli; Mario, Gilli; Ahmad, Naimzada;

  1. By: Duflo, Esther
    Abstract: As economists increasingly help governments design new policies and regulations, they take on an added responsibility to engage with the details of policy making and, in doing so, to adopt the mindset of a plumber. Plumbers try to predict as well as possible what may work in the real world, mindful that tinkering and adjusting will be necessary since our models gives us very little theoretical guidance on what (and how) details will matter. This essay argues that economists should seriously engage with plumbing, in the interest of both society and our discipline.
    Date: 2017–02
  2. By: Xu, Cheng-Gang
    Abstract: Understanding the nature of capitalism has been a central theme of economics. The collapse of the East Bloc and the global financial crisis spurred the reemergence of the political economy as a new frontier and the revival of interest in the nature of capitalism. Kornai's book fills an important intellectual gap in understanding the dynamic nature of capitalism by comparing it with its mirror image, socialism. To further develop the themes contained in the book, serious challenges are posted theoretically and empirically, as well as in subjects, such as hybrid capitalism.
    Keywords: Capitalism; growth; innovation; Institution; Socialism; Soft-budget Constraint
    JEL: A10 B10 D02 E02 H11 O11 O12 O30 P10 P20 P30
    Date: 2017–02
  3. By: Jorg Bibow
    Abstract: This paper investigates the (lack of any lasting) impact of John Maynard Keynes's General Theory on economic policymaking in Germany. The analysis highlights the interplay between economic history and the history of ideas in shaping policymaking in postwar (West) Germany. The paper argues that Germany learned the wrong lessons from its own history and misread the true sources of its postwar success. Monetary mythology and the Bundesbank, with its distinctive anti-inflationary bias, feature prominently in this collective odyssey. The analysis shows that the crisis of the euro today is largely the consequence of Germany's peculiar anti-Keynesianism.
    Keywords: John Maynard Keynes; Mercantilism; Economic and Monetary Union; Euro Crisis
    JEL: B31 E30 E58 E65 N14
    Date: 2017–03
  4. By: Vesely, Stepan (Department of Psychology, Norwegian University of Science and Technology); Wengström, Erik (Department of Economics, Lund University)
    Abstract: Outcomes in social dilemmas often have a stochastic component. We report experimental findings from public good games with both correlated and independent risk across players. We find that the presence of both types of risk prevents the decay of cooperation typically observed in the standard deterministic public good game. The results further suggest that it is greater relative importance of social norms or warm glow giving, rather than risk sharing opportunities that foster cooperation in our stochastic public good game.
    Keywords: risk pooling; risk sharing; social norms; linear public goods game; cooperation decay; stable cooperation
    JEL: D03 D80 H41
    Date: 2017–03–02
  5. By: Dold, Malte; Krieger, Tim
    Abstract: According to the traditional ordo-liberal view of the Freiburg School, the central role of the state in economic affairs is to set up rules that create a competitive order within which private actors have sufficient incentives to coordinate their economic affairs efficiently. Underlying this view is the implicit assumption that, given the right institutional framework, competition within markets is mainly characterized by peaceful and conflict-free rivalry between actors that leads to an optimal allocation of resources. In such a setting, competition may be described as a "record-type" game. This view, however, ignores the possibility that competition itself may very well trigger conflict rather than having an appeasing effect. In this case, competition appears to be a "struggle-type" game in which competitors invest in conflict activities that are not efficiency enhancing but rather resource wasting. Against this background, ordo-liberalism has yet to provide a clear-cut distinction between competition and conflict. In addition, it fails to identify - in a normative way - which institutional and regulatory framework could hamper conflict sensitivity of economic competition, given the harmful effect of conflict on the security of property rights. Our contribution investigates how the ordo-liberal research program needs to be extended when introducing conflict.
    Keywords: ordo-liberalism,Freiburg School,conflict economics,competition
    JEL: B25 D02 D4 D63 D74
    Date: 2017
  6. By: Aurélien Goutsmedt (Centre d'Economie de la Sorbonne)
    Abstract: The article shows that Sargent's view of macroeconomics is in contrast with Lucas' one. According to the latter, assumptions in a model are un-realist, the model do not aim at representing reality. It is rather a simulation tool to enable the evaluation of different economic policies. The Lucasian ideal reflects a belief in a macroeconomist who is an engineer in charge of the production of a “software for economic policies” used by governmental authorities. And he is the one who handles the software to help policy choices on a scientific basis. Concerning Sargent, he believed that in order to replace the Keynesian paradigm, New Classical Economics had to be able to succeed in the same tasks. And one of these tasks was to advise political power by bringing some telescope to read current economic phenomenon and some intuitive ideas to debate on economic policy. Sargent sought to implement what he called the Rational Expectations Theory to some concrete cases (Poincaré Stabilization, German Hyperinflation, Thatcher and Reagan policies) to show the relevance of such a framework to think about current economic issues
    Keywords: History of Macroeconomics; Macroeconomics; New Classical School; Stagflation
    JEL: B22 E52 N12
    Date: 2017–02
  7. By: Andrew Clark; Sarah Flèche; Richard Layard; Nattavudh Powdthavee; George Ward
    Abstract: Understanding the key determinants of people's life satisfaction makes it possible to suggest policies for how best to reduce misery and promote wellbeing. A forthcoming book by Richard Layard and colleagues discusses evidence on the origins of happiness in survey data from Australia, Germany, the UK and the United States.
    Keywords: happiness, wellbeing, government, mental health
    Date: 2017–03
  8. By: Jahnke, Björn; Fochmann, Martin; Wagener, Andreas
    Abstract: Reliable institutions - i.e., institutions that live up to the norms that agents expect them to keep - foment cooperative behavior. We experimentally confirm this hypothesis in a public goods game with a salient norm that cooperation was socially demanded and corruption ought not to occur. When nevertheless corruption attempts came up, groups that were told that "the system" had fended off the attempts made considerably higher contributions to the public good than groups that only learned that the attempt did not aect their payoffs or that were not at all exposed to corruption.
    JEL: H41 A13 C91
    Date: 2016
  9. By: Neyestani, Behnam
    Abstract: Over the past few decades, Total Quality Management (TQM) gurus have been developed certain theories in the area of business quality improvement, which caused a huge paradigm shift in improving the quality of products and services. The main aim of this paper was to discuss regarding the key roles of TQM gurus such as Deming, Crosby, Juran, Feigenbaum, Ishikawa, and others in improving business quality within different organizations in 20th Century. Thus, a systematic literature review was performed to specify the concept of TQM principles and philosophies from the aforementioned TQM gurus. However, the literature review was provided invaluable insight on the understanding of the main ideas and philosophies proposed by these TQM gurus.
    Keywords: Contributions, Quality Management, TQM Gurus, Total Quality Management (TQM), and Principles.
    JEL: B2 B3 B31 F1 M11 M2 O1
    Date: 2017–02–01
  10. By: Diane Perrons
    Abstract: Economic geography, at its best, deploys economic and social theory to make sense of the economic, political and social transformation of regions and their impact on people’s lives and opportunities. Nowhere is this approach more evident than in the work of Ray Hudson, who has consistently focused on analysing the processes of combined and uneven development to explain the broad changes in the capitalist economy together with middle-level theories to account for the complexity of regional development in practice. In so doing he has created a powerful Geographical Political Economy that provides a deep understanding of the last four decades of economic restructuring and industrial transformation of the North-East Region of England and its impact on the lives of people living there. This article reflects on this aspect of Ray Hudson’s work in the context of his broader contributions to the academy.
    Keywords: Economic geography; space; place; social theory
    JEL: N0
    Date: 2017–01–23
  11. By: Marini, Marco A.; Corchon, Luis
    Abstract: We introduce here the volume Handbook of Game Theory and Industrial Organization, by L. C. Corchón and M. A. Marini (ed.), Edward Elgar, Cheltenam, UK and Northampton, MA, by describing its main aim and its basic structure.
    Keywords: Industrial Organization, Game Theory.
    JEL: C0 C7 C72 D2 D21 D22 D23 D24 D4 D42 D43 D44 D47 D8 I0 L1 L11 L15 L4 L44 L6 L7
    Date: 2016–12–15
  12. By: Hanappi, Hardy
    Abstract: The capitalist mode of production has fulfilled a most astonishing ‘historical mission’ for the human species. It enabled an explosion of labor productivity gains and the discovery of new utility dimensions. But this progress came at the price of accompanying explosion of contradictions, of unequal benefits and burdens across global and local classes of humans. This paper sets out to explore what will happen if capitalism is finally ending, if its mission collapses. To do so a workable definition of the essence of capitalism is needed, I propose this to be the ‘capitalist algorithm’ – for a detailed treatment see [Hanappi, 2013]. The most interesting question then concerns the social mechanisms that might overcome – revolutionize – what currently dominates the behavior of large production conglomerates as well as their military arms on a global level. Following the tradition of Hegel and Marx it can be assumed that a large part of the capitalist algorithm simply will have to vanish. But as history shows there also always is a remainder of a mode of production that in an inverted form (Hegel: negation, German Marxism: ‘Umstülpung’) becomes part of the next progressive mode of production. To identify what ‘Capital after Capitalism’ could be, what has to be abolished and what might survive in which form – remember the double meaning of Hegel’s concept ‘Aufhebung’ – is a central prerequisite for a proper understanding of the coming revolution of the current mode of production. Since each step on the ladder of global social evolution is also a step in social human consciousness, this step in understanding implies a direct impact in guiding the actions to accomplish this turnover.
    Keywords: Capitalism, Utopia, Political Economy, Mode of Production
    JEL: B00 B59 N10 P16
    Date: 2016–11–28
  13. By: Rabah Amir; Sergei Belkov; Igor V. Evstigneev
    Abstract: We analyze the concept of correlated equilibrium in the framework of two-player two-strategy games. This simple framework makes it possible to clearly demonstrate the characteristic features of this concept. We develop an intuitive and easily memorizable test for equilibrium conditions and provide a complete classification of symmetric correlated equilibria in symmetric games.
    Date: 2017
  14. By: Vernon Henderson; Tim Squires; Adam Storeygard; David Weil
    Abstract: Vernon Henderson and colleagues explore fundamental determinants of the location of economic activity.
    Keywords: agriculture, physical geography, development
    JEL: O13 O18 R12
    Date: 2017–03
  15. By: Bernhard von Stengel
    Abstract: We consider a sequential inspection game where an inspector uses a limited number of inspections over a larger number of time periods to detect a violation (an illegal act) of an inspectee. Compared with earlier models, we allow varying rewards to the inspectee for successful violations. As one possible example, the most valuable reward may be the completion of a sequence of thefts of nuclear material needed to build a nuclear bomb. The inspectee can observe the inspector, but the inspector can only determine if a violation happens during a stage where he inspects, which terminates the game; otherwise the game continues. Under reasonable assumptions for the payoffs, the inspector’s strategy is independent of the number of successful violations. This allows to apply a recursive description of the game, even though this normally assumes fully informed players after each stage. The resulting recursive equation in three variables for the equilibrium payoff of the game, which generalizes several other known equations of this kind, is solved explicitly in terms of sums of binomial coefficients. We also extend this approach to nonzero-sum games and “inspector leadership” where the inspector commits to (the same) randomized inspection schedule, but the inspectee acts legally (rather than mixes as in the simultaneous game) as long as inspections remain.
    Keywords: inspection game; multistage game; recursive game; Stackelberg leadership; binominal coefficients
    JEL: C72
    Date: 2016–03–02
  16. By: Fausto, Cavalli; Mario, Gilli; Ahmad, Naimzada;
    Abstract: The purpose of this paper is to propose a symmetric two player general contest model in order to study the relationship between equilibria and crucial structural parameters of the model. In particular, given a general specification of the players’ set of possible entries, of the agents’ utility functions, and of the rules that presides over outcomes, we aim to analyze the characteristics of the set of equilibria as a function of structural characteristics of the contest technology and of the outcome function. Focusing on three main cases, we study the effect of introducing spillover in the marginal productivity of agents’ efforts and in the polarization between agents’ goals. Firstly, we show that without spillover the equilibrium efforts’ intensity is uniquely connected to the ratio between marginal productivity of effort and polarization. Secondly, we are able to connect existence of multiple symmetric and asymmetric equilibria to the intensity of spillover effects into outcomes. Finally, we show that spillover in contest technology can imply the non-existence of equilibria.
    Keywords: symmetric contest, multiple equilibria, symmetric and asymmetric equilibria
    JEL: C72 D72 D74
    Date: 2017–03–03

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