nep-hpe New Economics Papers
on History and Philosophy of Economics
Issue of 2017‒07‒16
twelve papers chosen by
Erik Thomson
University of Manitoba

  1. Paternalism and the public household. On the domestic origins of public economics By Maxime Demarais-Tremblay
  2. Populism and the Economics of Globalization By Dani Rodrik
  3. The Wealth of Nations: Complexity Science for an Interdisciplinary Approach in Economics By Klaus Jaffe
  4. Beyond the traditional monetary circuit: endogenous money, finance and the theory of long-period effective demand By Sergio Cesaratto
  5. Infinite Idealizations and Approximate Explanations in Economics By Max Albert; Hartmut Kliemt
  6. Back to Buchanan? Explorations of welfare and subjectivism in behavioral economics By Dold, Malte
  7. Tony Atkinson and His Legacy By Brandolini, Andrea; Jenkins, Stephen P.; Micklewright, John
  8. The Legacy of Muhammad Hamidullah in Islamic Economics By Islahi, Abdul Azim
  9. The Changing Basis of Economic Responsibility: Zur Bedeutung und Rezeption von John Maurice Clarks Artikel zur ökonomischen Verantwortung By Haase, Michaela
  10. Al-Asadi and his work al-Taysir: A study of his socio-economic ideas By Islahi, Abdul Azim
  11. Some “unexpected proximities” between Schultz and Galbraith on human capital By Alexandre Chirat; Charlotte Le Chapelain
  12. How UK Banks are Changing Their Corporate Culture & Practice Following the Financial Crisis of 2007-08 By Ian W. Jones; Michael G. Pollitt

  1. By: Maxime Demarais-Tremblay (Centre d'Economie de la Sorbonne and Centre Walras-Pareto - Université de Lausanne)
    Abstract: The ancient Greek conception of oikonomia is often dismissed as irrelevant for making sense of the contemporary economic world. In this paper, I emphasise a tread that runs through the history of economic thought connecting the oikos to modern public economics. By conceptualising the public economy as a public household, Richard A. Musgrave (1910-2007) set foot in a long tradition of analogy between the practically oriented household and the state. Despite continuous references to the domestic model by major economists throughout the centuries, the analogy has clashed with liberal values associated with the public sphere since the eighteenth century. Musgrave's conceptualization of public expenditures represents one episode of this continuing tension. His defence of merit goods, in particular, was rejected by many American economists in the 1960s because it was perceived as a paternalistic intervention by the state. I suggest that the accusation of paternalism should not come as a surprise once the ‘domestic’ elements in Musgrave's conceptualisation of the public sector are highlighted. I develop three points of the analogy in Musgrave's public household (the communal basis, a central direction, and consumption to satisfy needs) which echo recurring patterns of thought about the state
    Keywords: public household; paternalism; liberalism; merit wants; merit goods; Richard A. Musgrave
    JEL: H40 B29 B40
    Date: 2017–06
  2. By: Dani Rodrik
    Abstract: Populism may seem like it has come out of nowhere, but it has been on the rise for a while. I argue that economic history and economic theory both provide ample grounds for anticipating that advanced stages of economic globalization would produce a political backlash. While the backlash may have been predictable, the specific form it took was less so. I distinguish between left-wing and right-wing variants of populism, which differ with respect to the societal cleavages that populist politicians highlight. The first has been predominant in Latin America, and the second in Europe. I argue that these different reactions are related to the relative salience of different types of globalization shocks.
    JEL: F02
    Date: 2017–06
  3. By: Klaus Jaffe
    Abstract: Classic economic science is reaching the limits of its explanatory powers. Complexity science uses an increasingly larger set of different methods to analyze physical, biological, cultural, social, and economic factors, providing a broader understanding of the socio-economic dynamics involved in the development of nations worldwide. The use of tools developed in the natural sciences, such as thermodynamics, evolutionary biology, and analysis of complex systems, help us to integrate aspects, formerly reserved to the social sciences, with the natural sciences. This integration reveals details of the synergistic mechanisms that drive the evolution of societies. By doing so, we increase the available alternatives for economic analysis and provide ways to increase the efficiency of decision-making mechanisms in complex social contexts. This interdisciplinary analysis seeks to deepen our understanding of why chronic poverty is still common, and how the emergence of prosperous technological societies can be made possible. This understanding should increase the chances of achieving a sustainable, harmonious and prosperous future for humanity. The analysis evidences that complex fundamental economic problems require multidisciplinary approaches and rigorous application of the scientific method if we want to advance significantly our understanding of them. The analysis reveals viable routes for the generation of wealth and the reduction of poverty, but also reveals huge gaps in our knowledge about the dynamics of our societies and about the means to guide social development towards a better future for all.
    Date: 2017–07
  4. By: Sergio Cesaratto
    Abstract: The paper is a contribution to a long-run theory of effective demand with elements from monetary circuit theory, Modern Monetary Theory and endogenous finance analysis. Some shortcomings of the still influential neo-Kaleckian growth model and monetary circuit theory are underlined, and the Sraffian supermultiplier is indicated as the most promising heterodox approach to growth and instability in capitalism. The Sraffian supermultiplier allows full consideration of the autonomous components of aggregate demand as the ultimate sources of growth and instability in modern capitalism. Following Steindl, capital gains are included among these components. Autonomous demand and investment are typically fed by endogenous finance. The paper articulates the relation between autonomous demand and investment on one hand, and endogenous finance on the other, in the light of Keynes’s distinction between initial and final finance.
    Keywords: Supermultiplier, endogenous money, monetary circuit theory, modern monetary theory, autonomous demand
    JEL: B51 E11 E12 E42 E5
    Date: 2017–07
  5. By: Max Albert (University of Giessen); Hartmut Kliemt (University of Giessen)
    Abstract: If we take it that, at least in the social sciences, “realistic” implies “finite”, then countless economic models involving infinitary assumptions must obviously be classified as unrealistic—for example, models with infinitely divisible goods, a continuum of traders, consumers optimizing over an infinite time horizon, or players optimizing over an infinite number of interactions. We argue that unrealistic models involving infinities can, in principle, supply explanations in economics. We develop a concept of approximate explanation based on the “method of decreasing abstraction”, that is, the practice of approximating complex situations through a sequence of increasingly realistic models. Our account of approximate explanation renders the testing view of economic science compatible with scientific realism. However, compatibility does not extend to the folk theorems for infinitely repeated games, which are used widely in applied economics (e.g., in industrial economics) and beyond (e.g., spontaneous emergence of social order). Explanations based on these theorems are rejected by our criterion.
    Keywords: Approximate explanation; Folk theorems of game theory; Infinite idealizations; Method of decreasing abstraction; Methodology of economics; Unrealistic assumptions
    JEL: B40 B41 C73
    Date: 2017
  6. By: Dold, Malte
    Abstract: In light of behavioral findings regarding inconsistent individual decision-making, economists have begun to re-conceptualize the notion of welfare. One prominent account is the preference purification approach (PP), which attempts to reconstruct preferences from revealed choices based on a normative understanding of neoclassical rationality. Using Buchanan's notion of creative choice, this paper criticizes PP's epistemic, ontological, and psychological assumptions. It identifies PP as a static position that assumes the satisfaction of given 'true preferences' as the normative standard for welfare. However, following Buchanan, choice should be understood dynamically as a process whereby preferences constantly regenerate. Accordingly, the meaning of welfare emerges from an ongoing quest for individual self-constitution. If this holds true, then rationality axioms cannot serve as a priori normative standards. Instead, creative imagination and learning processes must re-main central to any understanding of welfare in economics.
    Keywords: Behavioral Welfare Economics,Creative Choice,James M. Buchanan,Rationality,Methodology,Subjectivism
    JEL: B41 D03 P46
    Date: 2017
  7. By: Brandolini, Andrea (Bank of Italy); Jenkins, Stephen P. (London School of Economics); Micklewright, John (University College London)
    Abstract: Tony Atkinson is universally celebrated for his outstanding contributions to the measurement and analysis of inequality, but he never saw the study of inequality as a separate branch of economics. He was an economist in the classical sense, rejecting any sub-field labelling of his interests and expertise, and he made contributions right across economics. His death on 1 January 2017 deprived the world of both an intellectual giant and a deeply committed public servant in the broadest sense of the term. This collective tribute highlights the range, depth and importance of Tony's enormous legacy, the product of over fifty years' work.
    Keywords: Anthony B. Atkinson, inequality, poverty, public economics
    JEL: D3 H00 I3
    Date: 2017–06
  8. By: Islahi, Abdul Azim
    Abstract: Dr. Muhammad Hamidullah is famous for his French translation of the Qur'an, and well-known for discovery, editing and bringing in light a number of rare and invaluable hadith manuscripts. He is also rightly acknowledged for his ground-breaking research works on international Islamic law, biography of the Prophet (peace be upon him), Islamic politics and archival heritage of Islam. A less known but significant aspect of his contribution is his pioneering works on Islamic Economics. Spread over more than fifty years he wrote scores of papers in English, Urdu, Arabic, French and Turkish. In fact it was he who coined the term "Islamic Economics" by which this discipline is known worldwide today. Many firsts in this subject belong to him. For instance: the first and the earliest record of the interest-free financial institution in the modern period, advocacy of mutuality as the basis for Islamic insurance, mutuality based Islamic finance, proposal for establishment of international interest-free monetary fund, federation of currencies for Muslim countries, etc. He also focused on topics such as nature of Islamic economic system, critiques of capitalism and communism, insurance, zakah and public finance, money and banking, partnership and equity finance, production and distribution, labor relations, et cetera. The present paper aims at introducing this aspect of his contribution and his legacy in Islamic economics.
    Keywords: Genesis of Islamic Economics, Hamidullah, Islamic Insurance, Zakah, Labour organization, Interest, Risk shifting, Federation of currencies, Mutuality.
    JEL: B3 B31
    Date: 2017
  9. By: Haase, Michaela
    Abstract: 2016 jährte sich das Erscheinen des Artikels von John Maurice Clark mit dem in der Überschrift genannten Titel im Journal of Political Economy zum hundertsten Mal. Clark legt in diesem Artikel seine Vorstellungen zur Entwicklung einer "economics of responsibility" und zur Wahrnehmung von "responsibility in the economy" dar. Diese Ideen werden hier vorgestellt und die Rezeptionsgeschichte des Artikels in ausgewählten Forschungsgebieten skizziert. Clarks Artikel ist ein wichtiger Beitrag zur Diskussion der ökonomischen Verantwortung und damit eines Themas, das in der Wirtschaftswissenschaft und in der Wirtschafts- und Unternehmensethik Beachtung finden sollte.
    Keywords: Institutionenökonomik,ökonomische Verantwortung,Social Value,CSR,Business Ethics,Behavioral Economics,Social Economics
    JEL: A11 A12 A13 B15 B31
    Date: 2017
  10. By: Islahi, Abdul Azim
    Abstract: Muḥammad bin Muḥammad bin Khalīl al-Asadī lived in A.H. 9th/ C.E. 15th century. The details of his birth, life and death remain obscure. He authored many works on the socio-economic problems of his time. All these works have disappeared without trace except one: al-Taysīr (the Facilitation). This surviving work is the only source of information about his life and his ideas. He suggested efficient market administration, public distribution of food, elimination of monopolies, monetary reform, management of public income and expenditure, embryonic quantitative use in production and distribution, and measurement of inflation. The depth and significance of his ideas remains largely unexplored. The present paper attempts to address this need.
    Keywords: Economics of al-Asadi, Monetary Reform, Mirror for Princes, Measurement of Inflation, al-Hisbah, Mamlūk Economics, Kitab al-Taysir
    JEL: B00 B3 B31
    Date: 2016–04–14
  11. By: Alexandre Chirat; Charlotte Le Chapelain
    Abstract: This contribution highlights some unexpected proximities between Galbraith and Schultz’s thoughts on human capital. Despite apparently strong methodological divergences, both authors analyze the issue of human capital investment in the light of the dynamics of the economic development process. This issue is formulated in Galbraith’s vocabulary in terms of the requirements of the planning system, and in terms of the needs of production activities deriving from the dynamics of growth in Schultz’s. But the logic underlying their analysis is of the same order. The emphasis on the needs of production leads the two authors to address the issue of student sovereignty in making allocative decisions regarding education. By highlighting these proximities, our study shows that Schultz’s thought on human capital must not be conflated, from a methodological point of view, with Becker’s and Mincer’s. We thus question the idea that the human capital research program is characterized by strong methodological unity, in particular that it is characterized by methodological individualism. That Becker and Mincer’s works rely on methodological individualism is not called into question; the idea that Schultz’s thought is grounded on it deserves more careful examination.
    Keywords: Human Capital, Education, Schultz, Galbraith, Methodological Individualism.
    JEL: B41 H52 I15 P46
    Date: 2017
  12. By: Ian W. Jones; Michael G. Pollitt
    Abstract: This paper looks at positive case studies of organisational change at significant UK banks in response to the financial crisis. We present examples of good practice, which specifically address the identified need to change the culture and practice of UK banking. Our aim is to identify cases that can be of value in teaching. Our research complements the existing research on ethical banking and on culture change in UK banking. We begin by reviewing some of the literature on the crisis as it relates to the culture of banking in the UK. We go on to document three case studies from each of five banks with a significant retail business in the UK – Barclays, Lloyds, TSB, Santander and Hoare. We finish with a conclusion that draws out some over-arching lessons on culture change in UK banking from our case studies.
    Keywords: Corporate Culture, Barclays, Lloyds, TSB, Santander and Hoare
    Date: 2016–09

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