nep-hpe New Economics Papers
on History and Philosophy of Economics
Issue of 2017‒08‒06
six papers chosen by
Erik Thomson
University of Manitoba

  1. "The Neoclassicals' Conundrum: If Adam Smith Is the Father of Economics, It Is a Bastard Child" By Oscar Valdes Viera
  2. Il paradosso di S. Pietroburgo, una rassegna By Ruggero Paladini
  3. Política cambial, conflito de classes e desenvolvimento econômico na perspectiva de Celso Furtado By Lúcio Otávio Seixas Barbosa; Frederico G. Jayme Jr; Fabrício J. Missio
  4. Nash equilibria for game contingent claims with utility-based hedging By Klebert Kentia; Christoph K\"uhn
  5. The Rise of New Corruption: British MPs during the Railway Mania of 1845 By Esteves, Rui; Geisler Mesevage, Gabriel
  6. Trade Balance and Border-Adjustment Taxes: Revisiting Decades-Old Literature By Razin, Assaf

  1. By: Oscar Valdes Viera
    Abstract: Neoclassical economists of the current era frequently pay lip service to Adam Smith's theories to certify the validity of natural-laws-based, laissez-faire policies. However, neoclassical theories are fundamentally disconnected from Adam Smith's notion of value, his understanding of the economic individual and their interactions in society, his methodology, and the field of study he afforded to political economy. Instead, early neoclassical economists parted ways with the theories of Adam Smith in an effort to construct economic laws that would validate the existing capitalist order as universal, natural, and harmonious.
    Keywords: Economic Thought; Classical School; Neoclassical Economics; Adam Smith; Economists
    JEL: A11 A13 B12 B13 B16 B20 B31
    Date: 2017–07
  2. By: Ruggero Paladini (Università Sapienza di Roma - Dipartimento di Studi Giuridici, Filosofici ed Economici)
    Abstract: In 1738 Daniel Bernoulli presented for the first time a study with a functional relationship between utility and wealth. The goal was to provide a solution to a "curious" paradox on probability theory. Almost three centuries after the St. Petersburg paradox is still debated. Two strands of research can be identified: the first, both theoretically and with surveys, examines the reasons for the subjective behavior of a player who is not willing to offer, if not a modest sum, to play a game that has an infinite expected value. The second one is the analysis by computer simulations of a large number of games, where unexpected statistical distributions emerge. From all of the studies it turns out that not only players offer very modest figures, but also that no gambling house will ever offer a St. Petersburg game.
    Keywords: expected value, utility function, fractal distributions.
    JEL: C18 D81
    Date: 2017–07
  3. By: Lúcio Otávio Seixas Barbosa (Planning Department of Minas Gerais (SEPLAG-MG)); Frederico G. Jayme Jr (Cedeplar-UFMG); Fabrício J. Missio (Cedeplar-UFMG)
    Abstract: The aim of this paper is to analyze the contributions of Celso Furtado regarding the role of exchange rate policy and its relation with social conflict in the economic growth of peripheral economies. For that, we regain Furtado’s analyses about the Venezuelan case and in The Economic Formation of Brazil. We highlight two main conclusions from such works: i) exchange rate appreciation due to natural resources curse harms economic growth; ii) exchange rate policy is mainly a phenomenon associated with political economy, in which social conflict emerges. Hence, we claim that Furtado’s thought is still actual.
    Keywords: Development, exchange rate policy, social conflict.
    JEL: B1 B5
    Date: 2017–07
  4. By: Klebert Kentia; Christoph K\"uhn
    Abstract: Game contingent claims (GCCs) generalize American contingent claims by allowing the writer to recall the option as long as it is not exercised, at the price of paying some penalty. In incomplete markets, an appealing approach is to analyze GCCs like their European and American counterparts by solving option holder's and writer's optimal investment problems in the underlying securities. By this, partial hedging opportunities are taken into account. We extend results in the literature by solving the stochastic game corresponding to GCCs with both continuous time stopping and trading. Namely, we construct Nash equilibria by rewriting the game as a non-zero-sum stopping game in which players compare payoffs in terms of their exponential utility indifference values. As a by-product, we also obtain an existence result for the optimal exercise time of an American claim under utility indifference valuation by relating it to the corresponding nonlinear Snell envelope.
    Date: 2017–07
  5. By: Esteves, Rui; Geisler Mesevage, Gabriel
    Abstract: In the 1840s, speculation in railway shares in the UK prompted the creation of hundreds of new railway companies. Each company needed to petition Parliament for the approval of new railway routes. In this paper, we investigate whether parliamentary regulation of the new railway network was distorted by politicians' vested interests. Drawing on methods from peer-effects analysis, we identify situations where MPs could have traded votes with specific colleagues in order to get their preferred projects approved (logrolling). We confirm that logrolling was both prevalent and significant. Our estimates suggest that at least a quarter of approved lines received their bills because of logrolling. Companies approved through logrolling also underperformed in the stock market during the railway bubble and after its final crash in 1847.
    Keywords: networks; railways; rent-seeking; voting
    JEL: D72 N44 N73
    Date: 2017–07
  6. By: Razin, Assaf
    Abstract: The relationship between the trade balance and tariffs puzzled economists for many decades. Prompted by current events, I revisit some of the old literature.
    JEL: F3
    Date: 2017–07

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