nep-hpe New Economics Papers
on History and Philosophy of Economics
Issue of 2017‒04‒30
twenty-one papers chosen by
Erik Thomson
University of Manitoba

  1. Sender-Receiver Games with Cooperation By Forges, Françoise; Horst, Ulrich
  2. Best reply structure and equilibrium convergence in generic games By Marco Pangallo; Torsten Heinrich; J Doyne Farmer
  3. Anthropology of Freedom and Tax Justice: Between Exchange and Gift. Thoughts for an Interdisciplinary Research Agenda. By Silvestri, Paolo
  4. The 2016 Nobel Memorial Prize in Contract Theory By Schmidt, Klaus
  5. Enough and as Good: a Formal Model of Lockean First Appropriation By Brian Kogelmann; Benjamin Ogden
  6. Right-wing populism and market-fundamentalism: Two mutually reinforcing threats to democracy in the 21st century By Stephan Puehringer; Walter O. Oetsch
  7. Incentives to lose revisited: The NHL and its tournament incentives By Helena Fornwagner
  8. How Can Formal Norms Change Informal Norms? Douglass North’s Approach to Ideologies and Institutional Change By Ambrosino, Angela; Fiori, Stefano
  9. Historical Prevalence of Infectious Diseases, Cultural Values, and the Origins of Economic Institutions By Nikolaev, Boris; Salahodjaev, Raufhon
  10. Components of uncertainty By Vegard Høghaug Larsen
  11. Bicentenario de los Principios de David Ricardo By Juan Carlos de Pablo
  12. The social cost of contestable benefits By Arye Hillman; Ngo Van Long
  13. What do Editors Maximize? Evidence from Four Leading Economics Journals By David Card; Stefano DellaVigna
  14. Фирмата в Теорията на транзакционните разходи/The Firm as Transaction Cost Economics Concept By Tchipev, Plamen D
  15. Stabilité financière : définitions, fondements théoriques et politique macroprudentielle By ROUIESSI, Imane
  16. Politics, Not Economics, Ultimately Drives Inequality By Jon D. Wisman
  17. Is Western Democracy Backsliding? Diagnosing the Risks By Norris, Pippa
  18. Expulsions. Brutalité et complexité dans l’économie globale de Saskia Sassen By Eguzki Urteaga
  19. Deception and Self-Deception By Schwardmann, Peter; van der Weele, Joel
  20. Formation of coalition structures as a non-cooperative game By Dmitry Levando
  21. Playing the game the others want to play : Keynes’ beauty contest revisited By Kene Boun My; Camille Cornand; Rodolphe Dos Santos Ferreira

  1. By: Forges, Françoise (University of Paris-Dauphine); Horst, Ulrich (Humboldt University Berlin)
    Abstract: We consider generalized sender-receiver games in which the sender also has a decision to make, but this decision does not directly affect the receiver. We introduce specific perfect Bayesian equilibria, in which the players agree on a joint decision after that a message has been sent (\"talk and cooperate equilibrium\", TCE). We establish that a TCE exists provided that the receiver has a \"uniform punishment decision\" (UPD) against the sender.
    Keywords: sender-receiver game; commitment; cooperative solution; individual rationality;
    JEL: C72 C65
    Date: 2017–03–25
  2. By: Marco Pangallo; Torsten Heinrich; J Doyne Farmer
    Abstract: Game theory often assumes rational players that play equilibrium strategies. But when the players have to learn their strategies by playing the game repeatedly, how often do the strategies converge? We analyze generic two player games using a standard learning algorithm, and also study replicator dynamics, which is closely related. We show that the frequency with which strategies converge to a fixed point can be understood by analyzing the best reply structure of the payoff matrix. A Boolean transformation of the payoff matrix, replacing all best replies by one and all other entries by zero, provides a reasonable approximation of the asymptotic strategic dynamics. We analyze the generic structure of randomly generated payoff matrices using combinatorial methods to compute the frequency of cycles of different lengths under the microcanonical ensemble. For a game with $N$ possible moves the frequency of cycles and non-convergence increases with $N$, becoming dominant when $N > 10$. This is especially the case when the interactions are competitive.
    Date: 2017–04
  3. By: Silvestri, Paolo (University of Turin)
    Abstract: With this paper I try to sketch a research agenda on the basis of which humanities and social sciences might interact with each other, searching for a human common ground in tax issues. To this purpose I shall proceed as follows: (§2) I will sketch two working hypotheses showing how and why tax system raises anthropological issues at the intersection of Philosophy of law, Politics and Economics; to restrict the field of enquiry, I will then analyse, firstly (§2.1), the most common theories of taxation – benefit-cost principle and ability-to-pay principle – usually meant as attempts to answer the demand for tax justice; and, secondly (§2.2), the issue of freedom in taxation as a problem of legal-political and economic obligation. I will then show how the research might gain some insight from both (§3.1) the literature on homo reciprocans, and (§3.2) the literature on gift-giving, which might allow us to better articulate the demands for justice and freedom, as well as to glimpse the human foundations of a new fiscal democracy.
    Date: 2015–09
  4. By: Schmidt, Klaus (University of Munich)
    Abstract: Oliver Hart and Bengt Holmström were awarded the 2016 Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel for their fundamental contributions to contract theory. This article offers a short summary and discussion of their path breaking work.
    Keywords: contract theory; nobel prize; optimal incentive schemes; incomplete contracts;
    JEL: B21 D23 D82 L20
    Date: 2017–03–25
  5. By: Brian Kogelmann; Benjamin Ogden
    Abstract: In developing a theory of the first appropriation of natural resources from the state of nature John Locke tells us that persons must leave enough and as good for others. Detailing exactly what this restriction requires divides right and left libertarians.Briefly, right libertarians interpret enough and as good as requiring no or very minimal restrictions on the first appropriation of natural resources, whereas left libertarians interpret enough and as good as requiring everyone be entitled to an equal share of unappropriated resources, able to claim no more beyond this equal share. This paper approaches the right versus left libertarian debate by developing a formal model that examines the welfare properties of different interpretations of the Lockean proviso. The model shows that underlying philosophical justifications for left libertarianism, when plausible assumptions hold, will be better served by a right libertarian proviso rather than a left libertarian one.
    Date: 2017–04
  6. By: Stephan Puehringer (Institute for Comprehensive Analysis of the Economy, Johannes Kepler University Linz, Austria); Walter O. Oetsch (Cusanus University, Germany)
    Abstract: The article compares market fundamentalism and right-wing populism on the basis of its core patterns of thinking and reasoning. Based on an analysis of the work of important founders of market fundamental economic thinking and the arguments brought forward by leading right-wing populist we find many similarities of these two concepts in their "inner images". Thus, we develop a scheme of the similar dual social worlds of right-wing-populism and market fundamentalism and offer some recent examples of market fundamentalism and right-wing populism mutually reinforcing each other or serving as a gateway for each other. We then apply our scheme for the analysis of the recent political developments and its ideological roots in the US under Donald Trump. The main conclusion of this article is that market fundamentalism and right-wing populism together must be seen as two mutually reinforcing threats to democracy in the 21st century.
    Keywords: Right-wing populism; market-fundamentalism; inner images; Donald Trump; patterns of thinking
    Date: 2017–03
  7. By: Helena Fornwagner
    Abstract: This paper analyzes data from a tournament, namely the National Hockey League regular scheduled season of games, which provides incentives to increase effort in order to reach the playoffs and incentives to decrease effort once a team has been eliminated from playoff considerations because of the entry draft. Our results show that teams indeed react to these dual incentives - they win more games when there is still a chance to reach the playoffs and lose more after being eliminated from playoff considerations. One can argue that losing more games after having no more chance to reach the playoffs could be the result of lower motivation or disappointment. This is the first study to show that this is not the only explanation for a higher amount of lost games. Instead, we find that there is a concrete strategy behind losing.
    Keywords: tournaments, dual incentives, National Hockey League, losing strategy
    JEL: C93 D03 L83 M52
    Date: 2017–04
  8. By: Ambrosino, Angela; Fiori, Stefano (University of Turin)
    Abstract: The paper argues that in North’s theory the reciprocal influence between organizations and institutions, and between informal and formal norms, is interpretable as a continuous alternation of bottom-up and top-down processes. Bottom-up processes arise from shared beliefs, and they concern how informal norms engender formal norms. Top-down processes explain how formal norms influence informal norms. North does not exhaustively deal with this latter process, although he provides elements which go in this direction. The concept of ideology illustrates this problem. It is conceived as the outcome of bottom-up processes whereby shared interpretations of reality emerge, but not as a tool used by norm entrepreneurs to trigger top-down processes of change in informal norms. Since formal norms incorporate ideologies, these processes concern how formal norms give shape to informal norms. The paper suggests that theories of social construction – with specific attention to legal studies, international relations inquiries, and Schumpeterian approaches – can integrate North’s view.
    Date: 2017–03
  9. By: Nikolaev, Boris; Salahodjaev, Raufhon
    Abstract: It is widely believed that economic institutions such as competitive markets, the banking system, and the structure of property rights are essential for economic development. But why economic institutions vary across countries and what are their deep origins is still a question that is widely debated in the developmental economics literature. In this study, we provide an empirical test for the provocative hypothesis that the prevalence of infectious diseases influenced the formation of personality traits, cultural values, and even morality at the regional level (the so called Parasite- Stress Theory of Values and Sociality), which then shaped economic institutions across countries. Using the prevalence of pathogens as an instrument for cultural traits such as individualism, we show in a two-stage least squares analysis that various economic institutions, measured by different areas of the index of Economic Freedom by the Heritage Foundation, have their deep origins in the historical prevalence of infectious diseases across countries. Our causal identification strategy suggests that cultural values affect economic institutions even after controlling for a number of confounding variables, geographic controls, and for different sub-samples of countries. We further show that the results are robust to four alternative measures of economic and political institutions.
    Keywords: economic institutions, cultural values, pathogens
    JEL: B00 O1 O17
    Date: 2017–02
  10. By: Vegard Høghaug Larsen (Norges Bank (Central Bank of Norway))
    Abstract: Uncertainty is acknowledged to be a source of economic fluctuations. But, does the type of uncertainty matter for the economy's response to an uncertainty shock? This paper offers a novel identi cation strategy to disentangle different types of uncertainty. It uses machine learning techniques to classify different types of news instead of specifying a set of keywords. It is found that, depending on its source, the effects of uncertainty on macroeconomic variable may differ. I find that both good(expansionary effect) and bad (contractionary effect) types of uncertainty exist.
    Keywords: Newspaper, Topic model, Uncertainty, Business cycles, Machine learning
    JEL: D80 E32 E66
    Date: 2017–04–18
  11. By: Juan Carlos de Pablo
    Abstract: Hace exactamente 200 años David Ricardo publicó la primera edición de sus Principios de economía política y tributación. La ocasión es un buen pretexto para aprender y reflexionar sobre la persona del autor, las circunstancias en las cuales escribió la citada obra, sus ideas principales y la polvareda que generó. El paso del tiempo es inexorable. ¿De cuántos de los libros de economía publicados en 1817 nos acordamos un par de siglos después? El paso del tiempo también corrige la influencia de “detalles” que no fueron tales en su época. Antonio Salieri –un buen músico- consiguió trabajo estable, no su contemporáneo Wolfgang Amadeus Mozart, pero en la actualidad, ¿cuánta música escuchamos, escrita por uno y otro?
    Date: 2017–04
  12. By: Arye Hillman; Ngo Van Long
    Abstract: A major contribution of the public-choice school is the recognition by Gordon Tullock that contestable rents give rise to social losses because unproductive resource use. The contestable rents usually are politically assigned privileges. Contestable rents can also be found outside of government decisions. We describe the example of academia. The primary empirical question concerns the magnitude of the social loss from contesting rents. Direct measurement is impeded by lack of data and indeed denial that rent seeking took place. Contest models provide guidance regarding social losses. The social losses diminished because rent seeking in high-income democracies usually takes place by groups seeking collective objectives. Also accountability in democracies requires that rents be assigned in indirect ways that increase inefficiency in other respects. The proposal that rent seeking exists can have an ideological dimension. Une contribution majeure de l’école de choix public est la reconnaissance par Gordon Tullock que les privilèges contestables entraînent des pertes sociales à cause de l’utilisation de ressources improductives. Les privilèges contestables sont habituellement des privilèges attribués politiquement. Des privilèges contestables peuvent également être trouvés en dehors des décisions du gouvernement. Nous décrivons l’exemple du milieu universitaire. La principale question empirique concerne l’ampleur de la perte sociale des privilèges contestataires. La mesure directe est entravée par le manque de données et même le refus que la recherche de privilèges ait eu lieu. Les modèles de concours fournissent des conseils concernant les pertes sociales. Les pertes sociales ont diminué parce que la recherche de privilèges dans les démocraties à revenu élevé est généralement effectuée par des groupes qui ont des objectifs collectifs. En outre, la responsabilité dans les démocraties exige que les privilèges soient attribués de manière indirecte, ce qui augmentent l’inefficacité. La proposition selon laquelle la recherche de privilèges existe peut avoir une dimension idéologique.
    Keywords: Rent seeking; contests; political discretion; academic merit; ideology., Recherche de privilèges; concours; discrétion politique; mérite académique; idéologie.
    JEL: D72 D73 D74
    Date: 2017–04–11
  13. By: David Card; Stefano DellaVigna
    Abstract: We study editorial decision-making using anonymized submission data for four leading economics journals: the Journal of the European Economics Association, the Quarterly Journal of Economics, the Review of Economic Studies, and the Review of Economics and Statistics. We match papers to the publication records of authors at the time of submission and to subsequent Google Scholar citations. To guide our analysis we develop a benchmark model in which editors maximize the expected quality of accepted papers and citations are unbiased measures of quality. We then generalize the model to allow different quality thresholds for different papers, and systematic gaps between citations and quality. Empirically, we find that referee recommendations are strong predictors of citations, and that editors follow the recommendations quite closely. Holding constant the referees' evaluations, however, papers by highly-published authors get more citations, suggesting that referees impose a higher bar for these authors, or that prolific authors are over-cited. Editors only partially offset the referees' opinions, effectively discounting the citations of more prolific authors in their revise and resubmit decisions by up to 80%. To disentangle the two explanations for this discounting, we conduct a survey of specialists, asking them for their preferred relative citation counts for matched pairs of papers. The responses show no indication that prolific authors are over-cited and thus suggest that referees and editors seek to support less prolific authors.
    JEL: A11 O3
    Date: 2017–03
  14. By: Tchipev, Plamen D
    Abstract: Abstract: Within the framework of the mainstream neoclassical model, the existence of the firm creates serious theoretical difficulties. Major attempt to overcome them, leads to application of the Transaction cost economics developed by Coase, Williamson, etc. On its own turn, it creates new contradictions, part of which are treated by the present paper from the point of evolutionary political economy.
    Keywords: Economic theory, Transaction cost economics, Theory of the Firm, Coase, Williamson.
    JEL: B25 B31 B52 L20
    Date: 2016–09
  15. By: ROUIESSI, Imane (Bank Al-Maghrib, Département de la Recherche)
    Abstract: Les coûts économiques et sociaux très élevés des crises financières ont amené les Banques centrales à inscrire la stabilité financière, en plus de la stabilité des prix, au cœur de leurs préoccupations. Néanmoins, la stabilité financière demeure une notion complexe dont la définition reste difficile à cerner et les objectifs des Banques centrales en la matière sont moins clairs et précis que dans le domaine monétaire. Ce papier a pour objectif de présenter une synthèse des réflexions sur cette nouvelle mission des Banques centrales. D’abord, il aborde les difficultés liées à la définition de ce concept. Ensuite, il examine les sources d’instabilité financière évoquées dans la littérature. Enfin, il met l’accent sur la politique macroprudentielle et son organisation institutionnelle.
    Keywords: stabilité financière; risque systémique; politique macroprudentielle
    JEL: E44 E58 G00
    Date: 2016–07–01
  16. By: Jon D. Wisman
    Abstract: Over the past 40 years, inequality has exploded in the U.S. and significantly increased in virtually all nations. Why? The current debate typically identifies the causes as economic, due to some combination of technological change, globalization, inadequate education, demographics, and most recently, Piketty’s claim that it is the rate of return on capital exceeding the growth rate. But to the extent true, these are proximate causes. They all take place within a political framework in which they could in principle be neutralized or reversed. Indeed, this mistake is itself political. It masks the true cause of inequality and presents it as if natural, due to the forces of progress, just as in pre-modern times it was the will of gods. By examining three broad distributional changes in modern times, this article demonstrates the dynamics by which inequality is a political phenomenon through and through. It places special emphasis on the role played by ideology -- politics’ most powerful instrument -- in making inequality appear as necessary.
    Keywords: Political power; Distribution; Legitimation; Ideology
    JEL: D63 B00 Z18 N3
    Date: 2017
  17. By: Norris, Pippa (Harvard University)
    Abstract: The predominantly sunny end-of-history optimism about democratic progress, evident in the late-1980s and early-1990s following the fall of the Berlin Wall, has turned rapidly into a more pessimistic zeitgeist. What helps us to understand whether we have reached an inflection point--and whether even long-established European and American democracies are in danger of backsliding? This essay draws on Juan Linz and Alfred Stepan's Problems of Democratic Transition and Consolidation which theorizes that consolidation occurs when three conditions are met: Culturally, the overwhelming majority of people believe that democracy is the best form of government, so that any further reforms reflect these values and principles. Constitutionally, all the major actors and organs of the state reflect democratic norms and practices. Behaviorally, no significant groups actively seek to overthrow the regime or secede from the state. Evidence throws new light on the contemporary state of each of Linz and Stepan's conditions in Western democracies. Culturally the data suggests that, when compared with their parents and grandparents, Millennials in Anglo-American democracies express weaker support for democratic values, but this is not a consistent pattern across Western democracies and post-industrial societies. It is also a life-cycle rather than a generational effect. Constitutionally, trends from estimates by Freedom House and related indicators provide no evidence that the quality of institutions protecting political rights and civil liberties deteriorated across Western democracies from 1972 to end-2016. Most losses occurred under hybrid regimes. Behaviorally, the most serious contemporary threats to Western liberal democracies arise from twin forces that each, in different ways, seek to undermine the regime: sporadic and random terrorist attacks on domestic soil, which damage feelings of security, and the rise of populist-authoritarian forces, which feed parasitically upon these fears.
    Date: 2017–03
  18. By: Eguzki Urteaga
    Abstract: Saskia Sassen acaba de publicar su último libro titulado Expulsions. Brutalité et complexité dans l’économie globale (Expulsiones. Brutalidad y complejidad en la economía global) (2016), en la editorial Gallimard en la cual publicó igualmente su anterior obra bajo el título La globalisation. Une sociologie (2009). Es preciso recordar que la autora es catedrática de sociología en la Universidad de Columbia y en la London School of Economics. Esta especialista de la globalización (Sassen, 1998), de las migraciones internacionales (Sassen, 1999) y de las grandes ciudades (Sassen, 1991), ha elaborado nuevos conceptos, tales como la noción de ciudades globales (global cities).
    Date: 2016–12–28
  19. By: Schwardmann, Peter (University of Munich); van der Weele, Joel (University of Amsterdam)
    Abstract: Why are people so often overconfident? We conduct an experiment to test the hypothesis that people become overconfident to more effectively persuade or deceive others. After performing a cognitively challenging task, half of our subjects are informed that they can earn money by convincing others of their superior performance. The privately elicited beliefs of informed subjects are significantly more confident than the beliefs of subjects in the control condition. By generating exogenous variation in confidence with a noisy performance signal, we are also able to show that higher confidence indeed makes subjects more persuasive in the subsequent face-to-face interactions.
    Keywords: Overconfidence; self-deception; motivated cognition; persuasion; deception;
    JEL: C91 D03 D83
    Date: 2017–03–23
  20. By: Dmitry Levando (National Research University Higher School of Economics)
    Abstract: Traditionally social sciences are interested in structuring people in multiple groups based on their individual preferences. This paper suggests an approach to this problem in the framework of a non-cooperative game theory. Definition of a suggested game includes a family of nested simultaneous non-cooperative finite games with intra- and inter-coalition externalities. In this family, games differ by the size of maximum coalition, partitions and by coalition structure formation rules. A result of every game consists of partition of players into coalitions and a payoff profile for every player. Every game in the family has an equilibrium in mixed strategies with possibly more than one coalition. The results of the game differ from those conventionally discussed in cooperative game theory, e.g. the Shapley value, strong Nash, coalition-proof equilibrium, core, kernel, nucleolus. We discuss the following applications of the new game: cooperation as an allocation in one coalition, Bayesian game, stochastic games and construction of a non-cooperative criterion of coalition structure stability for studying focal points
    Keywords: Non-cooperative Games; Nash equilibrium; Shapley value; strong equilibrium; core
    JEL: C71 C72 C73
    Date: 2017–02
  21. By: Kene Boun My (BETA - University of Strasbourg, 61 avenue de la Forˆet Noire - 67085 Strasbourg Cedex); Camille Cornand (Univ Lyon, CNRS, GATE L-SE UMR 5824, F-69130 Ecully, France); Rodolphe Dos Santos Ferreira (BETA-Strasbourg University, 61 avenue de la Forêt Noire - 67085 Strasbourg Cedex, France; Catolica Lisbon School of Business and Economics)
    Abstract: In Keynes’ beauty contest, agents make evaluations reflecting both an expected fundamental value and the conventional value expected to be set by the market. They thus respond to fundamental and coordination motives, respectively, the prevalence of either being set exogenously. Our contribution is twofold. First, we propose a valuation game in which agents strategically choose how to weight each motive. This game emphasises public information leads agents to favour the coordination motive. Second, we test the game through a laboratory experiment. Subjects tend to conform to theoretical predictions, except when fundamental uncertainty is low relative to strategic uncertainty.
    Keywords: dispersed information, public information, beauty contest, coordination, experiment
    JEL: D84 C92 E12
    Date: 2017

This nep-hpe issue is ©2017 by Erik Thomson. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.