nep-hpe New Economics Papers
on History and Philosophy of Economics
Issue of 2017‒05‒21
seventeen papers chosen by
Erik Thomson
University of Manitoba

  1. The Economists and New Zealand Population: Problems and Policies 1900–1980s By Geoffrey T. F. Brooke; Anthony M. Endres; Alan J. Rogers
  2. Milton Friedman and Data Adjustment By Neil R. Ericsson; David F. Hendry; Stedman B. Hood
  3. Characterizations of solutions for games with precedence constraints By Michel Grabisch; Peter Sudhölter
  4. Cities of Commerce: how can we test the hypothesis? By Jérémie Gignoux; Guillaume Daudin
  5. Robust Social Decisions By Eric Danan; Thibault Gajdos; Brian Hill; Jean-Marc Tallon
  6. Longitudinal evidence for a midlife nadir in human well-being: Results from four data sets By Terence C. Cheng; Nattavudh Powdthavee; Andrew J. Oswald
  7. Decentralized Pricing and the equivalence between Nash and Walrasian equilibrium By Antoine Mandel; Herbert Gintis
  8. "Pragmatism and Institutional Economics Reinterpretedï¼ An application to the analysis of modern capitalismï¼ " (in Japanese) By Tokutaro Shibata
  9. Modelling Heterogeneity in the Resilience to Major Socioeconomic Life Events By Fabrice Etilé; Paul Frijters; David W. Johson; Michael A. Shields
  10. Satisfaction Guaranteed: When Moral Hazard meets Moral Preferences By James Andreoni
  11. Random Dictatorship and the Value in Cooperative Games with Incomplete Information By Andrés Salamanca
  12. Is Economics Useful for Public Policy? By James Alm
  13. Egalitarianism in Nontransferable Utility Games By Dietzenbacher, Bas; Borm, Peter; Hendrickx, Ruud
  14. What Has Publishing Inflation Forecasts Accomplished? Central Banks And Their Competitors By Siklos, Pierre
  15. Belief revision generalized: A joint characterization of Bayes' and Je¤rey's rules By Franz Dietrich; Christian List; Richard Bradley
  16. Mentalism Versus Behaviourism in Economics: A Philosophy-of-Science Perspective By Franz Dietrich; Christian List
  17. On the Joint Evolution of Culture and Institutions By Alberto Bisin; Thierry Verdier

  1. By: Geoffrey T. F. Brooke; Anthony M. Endres; Alan J. Rogers (New Zealand Work Research Institute, Auckland University of Technology, NZ)
    Abstract: We examine contrasting modalities of economic thought by economists on population problems and policies in NZ, 1900–1980s. Since the early 1900s NZ economists have been concerned with interactions between economic and demographic outcomes. During the inter war period Malthusian concerns were muted because NZ’s population growth approximated a stationary state. A ‘laissez faire’ position was articulated among some economists in terms of external migration flows; others debated the implications of a stationary population. The post WWII era ushered in a doctrine of ‘stable population Keynesianism’ based on optimistic neo-Malthusianism; that perspective clashed with contemporary views on population expansion and the promotion of immigration coextensive with the policy of planned industrialization. An intellectual void became apparent in the early 1980s, perhaps because concern with the dynamics of population change in a small, liberalized, open economy seemed misplaced. Lessons are drawn from this intellectual history that may inform modern debate on population policy, broadly conceived.
    Keywords: New Zealand, Population Policy, Migration, History of thought
    JEL: B2 F22 J11
    Date: 2016–08
  2. By: Neil R. Ericsson; David F. Hendry; Stedman B. Hood
    Abstract: When empirically modelling the U.S. demand for money, Milton Friedman more than doubled the observed initial stock of money to account for a "changing degree of financial sophistication" in the United States relative to the United Kingdom. This note discusses effects of this adjustment on Friedman's empirical models.
    Date: 2017–05–15
  3. By: Michel Grabisch (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics); Peter Sudhölter (UNIVERSITY OF SOUTHERN DENMARK)
    Abstract: We generalize the characterizations of the positive core and the positive prekernel to TU games with precedence constraints and show that the positive core is characterized by non-emptiness (NE), boundedness (BOUND), covariance under strategic equivalence, closedness (CLOS), the reduced game property (RGP), the reconfirmation property (RCP) for suitably generalized Davis-Maschler reduced games, and the possibility of nondiscrimination. The bounded positive core, i.e., the union of all bounded faces of the positive core, is characterized similarly. Just RCP has to be replaced by a suitable weaker axiom, a weak version of CRGP (the converse RGP) has to be added, and CLOS can be deleted. For classical games the prenucleolus is the unique further solution that satisfies the axioms, but for games with precedence constraints it violates NE as well as the prekernel. The positive prekernel, however, is axiomatized by NE, anonymity, reasonableness, the weak RGP, CRGP, and weak unanimity for two-person games (WUTPG), and the bounded positive prekernel is axiomatized similarly by requiring WUTPG only for classical two-person games and adding BOUND.
    Keywords: TU games,restricted cooperation,game with precedence constraints,positive core,bounded core,positive prekernel,prenucleolus
    Date: 2016
  4. By: Jérémie Gignoux (PSE - Paris-Jourdan Sciences Economiques - ENS Paris - École normale supérieure - Paris - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique); Guillaume Daudin (LEDa - Laboratoire d'Economie de Dauphine - Université Paris-Dauphine)
    Abstract: This paper discusses Gelderblom’s hypothesis that urban competition (including a large number of competing cities, footloose foreign traders and municipal autonomy) was central to the rise of inclusive trade institutions in Europe. The first part discusses the precise behaviour of traders, town authorities and sovereigns underlying Gelderblom’s explanatory framework. The second part presents some challenges to the generalisation of the book’s thesis to the history of Europe, including Italy and Britain. The last part advances a short econometric exercise to check this generalisation. Urban competition combined with starting institutional quality does not emerge as a positive factor for the growth of European cities in general: this is interpreted as a call for more research rather a decisive counter-argument.
    Abstract: Cet article discute l’hypothèse de Gelerblom selon laquelle la compétition urbaine (incluant un grand nombre de villes concurrentes entre elles, des négociants se déplaçant facilement, et l’autonomie urbaine) a été centrale pour la généralisation d’institutions de commerce ouvertes à tous en Europe. La première partie examine le comportement précis des négociants, autorités municipales et souverains qui sont au coeur du schéma explicatif de Gelderblom. La deuxième partie présente quelques difficultés qui s’opposent à la généralisation de la thèse de l’ouvrage à l’ensemble de l’histoire européenne, notamment en Italie et en Grande-Bretagne. La dernière partie propose un petit exercice économétrique pour tester cette généralisation. La compétition urbaine combinée à des institutions de bonne qualité n’apparaît pas comme un facteur de croissance pour les villes urbaines dans leur ensemble : ce résultat est interprété plus comme un appel à plus de recherche qu’un contre-argument décisif.
    Keywords: Europe,modern history,urbanisation,institutions
    Date: 2017–03–24
  5. By: Eric Danan (THEMA - Théorie économique, modélisation et applications - Université de Cergy Pontoise - CNRS - Centre National de la Recherche Scientifique); Thibault Gajdos (LPC - Laboratoire de psychologie cognitive - AMU - Aix Marseille Université - CNRS - Centre National de la Recherche Scientifique); Brian Hill (GREGH - Groupement de Recherche et d'Etudes en Gestion à HEC - HEC Paris - Ecole des Hautes Etudes Commerciales - CNRS - Centre National de la Recherche Scientifique); Jean-Marc Tallon (PSE - Paris School of Economics)
    Abstract: We propose and operationalize normative principles to guide social decisions when individuals potentially have imprecise and heterogeneous beliefs, in addition to conflicting tastes or interests. To do so we adapt the standard Pareto principle to those preference comparisons that are robust to belief imprecision and characterize social preferences that respect this robust principle. We also characterize a suitable restriction of this principle. The former principle provides stronger guidance when it can be satisfied; when it cannot, the latter always provides minimal guidance.
    Keywords: D81,JEL Classification D71,Uncertainty, Social choice, Preference aggregation, Pareto dominance,Unambiguous preferences
    Date: 2016–09
  6. By: Terence C. Cheng; Nattavudh Powdthavee; Andrew J. Oswald
    Abstract: There is a large amount of cross-sectional evidence for a midlife low in the life cycle of human happiness and well-being (a ‘U shape’). Yet no genuinely longitudinal inquiry has uncovered evidence for a U-shaped pattern. Thus, some researchers believe the U is a statistical artefact. We re-examine this fundamental cross-disciplinary question. We suggest a new test. Drawing on four data sets, and only within-person changes in well-being, we document powerful support for a U shape in longitudinal data (without the need for formal regression equations). The article's methodological contribution is to use the first-derivative properties of a well-being equation.
    JEL: J1
    Date: 2017–02–01
  7. By: Antoine Mandel (PSE - Paris School of Economics, CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique); Herbert Gintis (Santa Fe Institute)
    Abstract: We introduce, in the standard exchange economy model, market games in which agents use private prices as strategies. We give conditions on the game form that ensure that the only strict Nash equilibria of the game are the competitive equilibria of the underlying economy. This equivalence result has two main corollaries. First, it adds to the evidence that competitive equilibria can be strategically stable even in small economies. Second, it implies that competitive equilibria have good local stability properties under a large class of evolutionary learning dynamics.
    Keywords: General equilibrium, Market games, Stability, Computational economics, Evolutionary game theory
    Date: 2016–03–01
  8. By: Tokutaro Shibata (Faculty of Economics, University of Tokyo)
    Abstract: The purpose of this paper is to reevaluate Pragmatism and Institutionalism as the tool of analysis of modern capitalism. In the first part, we propose a new human being model that we human beings depend on the custom and rearrange it. This new model is based on the theory of C. S. Peirce. In the second part, we argue that the transaction of incorporeal property and intangible property is the main cause of the financial business cycle and financial crisis. This argument is based on the theory of J. R. Commons.
  9. By: Fabrice Etilé (PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Panthéon-Sorbonne - ENS Paris - École normale supérieure - Paris - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique, INRA - Institut National de la Recherche Agronomique, PSE - Paris School of Economics); Paul Frijters (CEPR - Center for Economic Policy Research - CEPR, LSE - London School of Economics and Political Science); David W. Johson (Monash University [Malaysia]); Michael A. Shields (Monash University [Malaysia])
    Abstract: Using a novel, dynamic finite mixture model applied to 12 years of nationally representative panel data, we explore individual heterogeneity in the total psychological response (our measure of resilience) to ten major adverse life events, including serious illness, redundancy and crime victimisation. Importantly, this model takes into account that individuals are not randomly selected into adverse events, that some events are anticipated in advance of their occurrence, and that the immediate psychological response and the speed of adaptation may differ across individuals. Additionally, we generate a ‘standardised event’ in order to document the distribution of general resilience in the population. We find considerable heterogeneity in the response to adverse events, with the total psychological loss of people with low resilience being several times larger than the average loss. We also find that resilience is strongly correlated with clinical measures of mental health, but only weakly correlated with cognitive and non-cognitive traits. Finally, we find that resilience in adulthood to some extent is predictable by childhood socioeconomic circumstances; the strongest predictor we identify is good childhood health.
    Keywords: Psychological Health, Resilience, Life Events, Childhood, Panel,Data, Mixture Model
    Date: 2017–03
  10. By: James Andreoni
    Abstract: Theorists and policy analysts have convincingly argued that greater trust makes a more efficient society by eliminating costly contracts or expensive reputations. Concurrently, experiments suggest that reciprocity is a potent substitute for law when compliance with contracts is imperfectly enforced. This paper examines these issues within the context of a common trust-building contract device: satisfaction guaranteed. We find that satisfaction guaranteed indeed builds trust and improves efficiency. Interestingly, sellers offering a guarantee are more trustworthy than those who don't, even when honoring it is fully voluntary, but the guarantee only elicits the trust of buyers when it has legal backing.
    JEL: C92 D02 D4 K2
    Date: 2017–04
  11. By: Andrés Salamanca (TSE - Toulouse School of Economics - Toulouse School of Economics)
    Abstract: In this paper we define a bargaining solution for cooperative games with incomplete information. Our solution concept is inspired in Myerson's (Econometrica, 1983) theory on the informed principal problem and the random dictatorship procedure. It has the essential feature of generalizing the Maschler-Owen consistent value for non-transferable utility games. Our main results are individual rationality, incentive (second best) efficiency and existence of our cooperative solution. To obtain these results we restrict our analysis to cooperative games with stochastically independent types, private values and orthogonal coalitions.
    Keywords: incomplete information,Cooperative games,virtual utility
    Date: 2017–04–20
  12. By: James Alm (Department of Economics, Tulane University)
    Abstract: Economists have always played an important role in major public policy debates. Even so, I believe that the role of economists in these public policy discussions has often been misguided because it has typically relied upon "best practices", stated in the form of "general guidelines" or even "universal principles. However, "best practices" are not best if the specific situation does not conform with the assumptions that underlie the advice. So my first conclusion is a cautionary, and negative, one: Specific circumstances differ so profoundly across individuals, firms, markets, countries, and time that most any attempt to define "best practices" that apply in all circumstances will lead to profoundly misleading public policy recommendations. However, even if economics cannot identify "the" truth, it can often identify "a" truth. So my second conclusion is a more positive one: Economists should continue to develop multiple theories that inform public policies, but we should also focus our efforts on identifying and testing the critical assumptions that drive the results of these theories, recognizing that the validity of any assumptions will depend intimately on specific circumstances. I illustrate these two main conclusions with specific examples from my own work. I conclude with some "best practices" recommendations of my own, recognizing the obvious irony of such an effort.
    Keywords: Public economics, public policy, best practices.
    JEL: A1 B4 H8
    Date: 2017–05
  13. By: Dietzenbacher, Bas (Tilburg University, Center For Economic Research); Borm, Peter (Tilburg University, Center For Economic Research); Hendrickx, Ruud (Tilburg University, Center For Economic Research)
    Abstract: This paper studies egalitarianism in the context of nontransferable utility games by introducing and analyzing the egalitarian value. This new solution concept is based on an egalitarian negotiation procedure in which egalitarian opportunities of coalitions are explicitly taken into account. We formulate conditions under which it leads to a core element and discuss the egalitarian value for the well-known Roth-Shafer examples. Moreover, we characterize the new value on the class of bankruptcy games and bargaining games.
    Keywords: egalitarianism; NTU-games; egalitarian procedure; egalitarian value; egalitarian stability; constrained relative equal awards rule
    JEL: C71 D63
    Date: 2017
  14. By: Siklos, Pierre (Wilfrid Laurier University)
    JEL: E42
    Date: 2017–04–01
  15. By: Franz Dietrich (PSE - Paris School of Economics, CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique); Christian List (LSE - London School of Economics and Political Science); Richard Bradley (LSE - London School of Economics and Political Science)
    Abstract: We present a general framework for representing belief-revision rules and use it to characterize Bayes' rule as a classical example and Jeffrey's rule as a non-classical one. In Je¤rey's rule, the input to a belief revision is not simply the information that some event has occurred, as in Bayes' rule, but a new assignment of probabilities to some events. Despite their differences, Bayes' and Je¤rey's rules can be characterized in terms of the same axioms: responsiveness, which requires that revised beliefs incorporate what has been learnt, and conservativeness, which requires that beliefs on which the learnt input is 'silent' do not change. To illustrate the use of non-Bayesian belief revision in economic theory, we sketch a simple decision-theoretic application.
    Keywords: fine-grained versus coarse-grained beliefs,axio-matic foundations,Belief revision,subjective probability,Bayes's rule,Je¤rey's rule,unawareness
    Date: 2016
  16. By: Franz Dietrich (PSE - Paris School of Economics, CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique); Christian List (LSE - London School of Economics and Political Science)
    Abstract: Behaviourism is the view that preferences, beliefs, and other mental states in social-scientific theories are nothing but constructs re-describing people's behaviour. Mentalism is the view that they capture real phenomena, on a par with the unobservables in science, such as electrons and electromagnetic fields. While behaviourism has gone out of fashion in psychology, it remains influential in economics, especially in 'revealed preference' theory. We defend mentalism in economics, construed as a positive science, and show that it fits best scientific practice. We distinguish mentalism from, and reject, the radical neuroeconomic view that behaviour should be explained in terms of brain processes, as distinct from mental states.
    Keywords: scientific realism,decision theory,revealed preference,Mentalism,behaviourism
    Date: 2016
  17. By: Alberto Bisin; Thierry Verdier
    Abstract: Explanations of economic growth and prosperity commonly identify a unique causal effect, e.g., institutions, culture, human capital, geography. In this paper we provide instead a theoretical modeling of the interaction between culture and institutions and their effects on economic activity. We characterize conditions on the socio-economic environment such that culture and institutions complement (resp. substitute) each other, giving rise to a multiplier effect which amplifies (resp. dampens) their combined ability to spur economic activity. We show how the joint dynamics of culture and institutions may display interesting non-ergodic behavior, hysteresis, oscillations, and comparative dynamics. Finally, in specific example societies, we study how culture and institutions interact to determine the sustainability of extractive societies as well as the formation of civic capital and of legal systems protecting property rights.
    JEL: O10 P16 P48
    Date: 2017–04

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