nep-hpe New Economics Papers
on History and Philosophy of Economics
Issue of 2017‒09‒17
thirteen papers chosen by
Erik Thomson
University of Manitoba

  1. Involuntary Unemployment versus "Involuntary Employment" : J.M. Keynes and Beyond By Yasuhiro Sakai
  2. The future of macroeconomics: Macro theory and models at the Bank of England By David Hendry; John Muellbauer
  3. Agent-Based Macroeconomics and Classical Political Economy: Some Italian Roots By Giovanni Dosi; Andrea Roventini
  4. Janos Kornai and General Equilibrium Theory By Mehrdad Vahabi
  5. The Revolution of Information Economics: The Past and the Future By Joseph E. Stiglitz
  6. Do the altruists lie less? By Rudolf Kerschbamer; Daniel Neururer; Alexander Gruber
  7. Ambiguity and the Centipede Game: Strategic Uncertainty in Multi-Stage Games By Eichberger, Jürgen; Grant, Simon; Kelsey, David
  8. The Paper Money of Colonial North Carolina, 1712-1774 By Cory Cutsail; Farley Grubb
  9. Démystifier l'énigme de l'entrepreneur [ Demystify the entrepreneur's enigma ] By Raouf Jaziri
  10. Régulation Theory: From Textbook to Research Agenda By Julien Vercueil
  11. What situation is this? Coarse cognition and behavior over a space of games. By Robert Gibbons; Marco LiCalzi; Massimo Warglien
  12. Are Ideas Getting Harder to Find? By Nicholas Bloom; Charles I Jones; John Van Reenen; Michael Webb
  13. (Mis-)Predicted Subjective Well-Being Following Life Events By Reto Odermatt; Alois Stutzer

  1. By: Yasuhiro Sakai (Faculty of Economics, Shiga University)
    Abstract: This paper is concerned with the important question of how and to what extent great economists such as Keynes, Knight, Hicks, Samuelson, Takata, and Morishima have been intermingled with each other. Our discussion focuses on the two key concepts in the labor markets; involuntary unemployment and "involuntary employment." On the one hand, there are so many persons in the street who are willing to work at the existing wages but cannot find jobs because of a shortage of the effective demand as a whole. This is clearly the issue of involuntary unemployment, which has been energetically tackled by J. M. Keynes and his followers since the 1930s.On the other hand, since the 1990s, there also have emerged so many people who must work unwillingly for their survivals at the minimal level of wages. This is a new issue of "involuntary employment" or "non-regular workers", which has recently been investigated by Nobuaki Takahashi, a rising Japanese economist. Although the Takahashi approach is an attractive one, it nevertheless seems to remain at the embryo stage, thus requiring further developments in many ways. The second Keynes would urgently be needed.
    Keywords: Keynes, involuntary unemployment,Takata,sociological factors,non-regular workers,Takahashi, "involuntary employment"
    JEL: B22 E12 E24
    Date: 2017–08
  2. By: David Hendry; John Muellbauer
    Abstract: Abstract The adoption as policy models by central banks of representative agent New Keynesian dynamic stochastic general equilibrium models has been widely criticised, including for their simplistic micro-foundations. At the Bank of England, the previous generation of policy models is seen in its 1999 medium-term macro model (MTMM). Instead of improving that model to correct its considerable flaws, many shared by other non-DSGE policy models such as the Federal Reserve’s FRB/US, it was replaced in 2004 by the DSGE-based BEQM. Though this clearly failed during and after the global financial crisis, it was replaced in 2011 by the DSGE COMPASS, complemented by a ‘suite of models’. We provide a general critique of DSGE models for explaining, forecasting and policy analyses at central banks, and suggest new directions for improving current empirical macroeconomic models based on empirical modelling broadly consistent with better theory, rather than seeking to impose simplistic and unrealistic theory.
    Keywords: DSGE, central banks, macroeconomic policy models, finance and the real economy, financial crisis, consumption, credit constraints, household portfolios, asset prices
    JEL: E17 E21 E44 E51 E52 E58 G01
    Date: 2017–09–05
  3. By: Giovanni Dosi; Andrea Roventini
    Abstract: In this work, we discuss how the rich academic milieu left by different Italian political economy traditions after WWII paved the way to the development of a new generation of macroeconomic agent-based models. The K+S (Dosi et al., 2010, 2016a), CATS (Delli Gatti et al., 2005, 2011) and EURACE (Cincotti et al., 2010; Teglio et al., 2012) families of agent- based models are at the frontier of an alternative macroeconomic research paradigm which considers the economy as a complex evolving system. The three families of models are presented in details and their empirical performance and policy exercises discussed.
    Keywords: Agent-Based Macroeconomics, Classical Political Economy, Macrodynamics, Complexity Theory, L. L. Pasinetti, P. Sylos Labini
    Date: 2017–09–09
  4. By: Mehrdad Vahabi (CEPN - Centre d'Economie de l'Université Paris Nord - Université Paris 13 - USPC - Université Sorbonne Paris Cité - CNRS - Centre National de la Recherche Scientifique)
    Abstract: This paper explores the evolution of Kornai's thought on General Equilibrium Theory (GET) and his position on mainstream economics. Three moments in this evolution will be highlighted starting by rejecting GET and advocating disequilibrium in Anti-Equilibrium (1971). While Kornai does not treat the 'equilibrium paradigm' as irrelevant, he suggests an alternative paradigm, namely economic systems theory that he further develops in the eighties as 'system paradigm'. Economics of Shortage (1980) marks a second phase in which Kornai distinguishes Walrasian equilibrium from normal state or Marshallian equilibrium. In this phase, he supports Marshallian equilibrium rather than disequilibrium. Finally By Force of Thought (2006) is a critical self-appraisal in which Kornai considers Anti-Equilibrium as a 'failure' and acknowledges GET as a benchmark of an ideal competitive market. He now advocates a Walrasian equilibrium as an abstract reference model but refuses to consider this model as a description of reality. In this sense, he refuses the New Classical economics. Paradoxically however, his original heterodox concept of 'soft budget constraint', irreconcilable with standard microeconomics, has been integrated in new microeconomics as an optimal intertemporal strategy of a maximizing agent in the absence of credible commitments. It will be argued that Kornai's so-called failure is rather related to his half-in, half-out mainstream position, while his institutionalist system paradigm is still a heterodox research project of the future.
    Keywords: Disequilibrium, Economic Systems Theory, General Equilibrium Theory,Marshallian and Walrasian Equilibrium, New Microeconomics, Normal State, System Paradigm
    Date: 2017–09–07
  5. By: Joseph E. Stiglitz
    Abstract: The economics of information has constituted a revolution in economics, providing explanations of phenomena that previously had been unexplained and upsetting longstanding presumptions, including that of market efficiency, with profound implications for economic policy. Information failures are associated with numerous other market failures, including incomplete risk markets, imperfect capital markets, and imperfections in competition, enhancing opportunities for rent seeking and exploitation. This paper puts into perspective nearly a half century of research, including recent advances in understanding the implications of imperfect information for financial market regulation, macro-stability, inequality, and public and corporate governance; and in recognizing the endogeneity of information imperfections. It explores the consequences of recent advances in technology and the policy challenges and opportunities they present for competition policy and policies regarding privacy and transparency. The paper notes the role that information economics played in stimulating other advances in economics, including contract theory and behavioral economics. It reinvigorated institutional economics, showing how institutions mattered, in some cases explaining institutional features that could not be well-understood in the conventional paradigm, and in others showing how institutional responses to market failures might or might not be welfare enhancing. The paper argues that the new paradigm provides a markedly different, and better, lens for looking at the economy than the older perfect markets competitive paradigm.
    JEL: B21 D82 D83
    Date: 2017–09
  6. By: Rudolf Kerschbamer; Daniel Neururer; Alexander Gruber
    Abstract: Much is known about heterogeneity in social preferences and about heterogeneity in lying aversion - but little is known about the relation between the two at the individual level. Are the altruists simply upright persons who do not only care about the well-being of others but also about honesty? And are the selfish those who lie whenever lying maximizes their material payoff? This paper addresses those questions in experiments that first elicit subject's social preferences and then let them make decisions in an environment where lying increases the own material payoff and has either consequences for the payoffs of others or no consequences for others. We find that altruists lie less when lying hurts another party but we do not find any evidence in support of the hypothesis that altruists are more (or less) averse to lying than others in environments where lying has no effects on the payoffs of others.
    Keywords: deception, lies, social preferences, distributional preferences, equality equivalence test
    JEL: C91 D63 D64
    Date: 2017–09–04
  7. By: Eichberger, Jürgen; Grant, Simon; Kelsey, David
    Abstract: We propose a solution concept for a class of extensive form games with ambiguity. Specifically we consider multi-stage games. Players have CEU preferences. The associated ambiguous beliefs are revised by Generalized Bayesian Updating. We assume individuals take account of possible changes in their preferences by using consistent planning. We show that if there is ambiguity in the centipede game it is possible to sustain 'cooperation' for many periods as part of a consistent-planning equilibrium under ambiguity. In a non-cooperative bargaining game we show that ambiguity may be a cause of delay in bargaining.
    Date: 2017–09–11
  8. By: Cory Cutsail; Farley Grubb
    Abstract: Beginning in 1712, North Carolina’s assembly emitted its own paper money and maintained some of its paper money in public circulation for the rest of the colonial period. This paper money has been reviled as an archetype of what was bad about the paper monies issued by American colonial legislatures. Yet little systematic analysis of North Carolina’s paper money has been undertaken. We correct that here. We reconstruct North Carolina’s paper money regime from original sources—providing yearly quantitative data on printings, net new emissions, redemptions and removals, amounts remaining in circulation, denominational structure, as well as the paper money’s current market value in pounds sterling. We identify different paper money regimes based on how the assembly structured and executed its paper money laws. We model and estimate how the market value of this money was determined. We compare the quantity theory of money with an asset-pricing model that treats the money as zero-coupon bonds to see which explains the observed market value of the paper money better. The asset-pricing model wins by a mile. Finally, we explore counterfactual redemption architectures to show how redemption affected monetary performance in periods of value collapse.
    JEL: E42 E51 G12 N11 N21
    Date: 2017–09
  9. By: Raouf Jaziri (IHEC Sousse - IHEC, COSTECH EA 2223 - Connaissance et Organisation des systèmes techniques - Université de Technologie de Compiègne)
    Abstract: Obviously, the concept of the entrepreneur is polyphonic and researchers in the field of entrepreneurship have not unanimously retained a consensual definition of this concept. This phenomenon has attracted so much the interest of social scientists in all disciplines such as economics, management, psychology, sociology, etc. However, the contribution of researchers in management science seems the most significant. This article aims to highlight all schools of thought and different streams of research on entrepreneurship. Besides, we try to explore all different previous studies dealing with the entrepreneur as a research subject. Finally, we try to stress research opportunities in the field of entrepreneurship.
    Abstract: Certes, le concept de l'entrepreneur est polyphonique et aucune définition consensuelle de ce concept n’a fait l'unanimité des chercheurs dans le domaine de l'entrepreneuriat. Ce phénomène a suscité beaucoup l’intérêt des chercheurs en sciences sociales toutes disciplines confondues : économie, gestion, psychologie, sociologie, etc. Cependant, l’apport des chercheurs en sciences de gestion semble le plus marquant dans ce champ de recherche. Cet article se veut faire les points sur les percées de toutes les écoles de pensée ainsi que les différents courants de recherche portant sur l’entrepreneuriat. Ensuite, nous prospectons les différents travaux et études antérieurs qui ont fait de l’entrepreneur leur objet de recherche. Enfin, nous tentons de jalonner les prémisses d’autres pistes de recherche porteuses de développement dans le champ de l’entrepreneuriat.
    Keywords: Entrepreneur,entrepreneurship,research
    Date: 2016–12
  10. By: Julien Vercueil (Inalco - Institut National des Langues et Civilisations Orientales)
    Abstract: Analyttcal book review devoted to Robert Boyer's "Economie politique des capitalismes. Théorie de la régulation et des crises" (La découverte, 2015).
    Keywords: Robert Boyer,Régulation theory,capitalism,crises
    Date: 2016–07–29
  11. By: Robert Gibbons (Massachusetts Institute of Technology); Marco LiCalzi (Dept. of Management, Università Ca' Foscari Venice); Massimo Warglien (Dept. of Management, Università Ca' Foscari Venice)
    Abstract: We study strategic interaction between agents who distill the complex world around them into simpler situations. Assuming agents share the same cognitive frame, we show how the frame affects equilibrium outcomes. In one-shot and repeated interactions, the frame causes agents to be either better or worse off than if they could perceive the environment in full detail: it creates a fog of cooperation or a fog of conflict. In repeated interaction, the frame is as important as agentsÕ patience in determining the set of equilibria: for a fixed discount factor, when all agents coordinate on what they perceive as the best equilibrium, there remain significant performance differences across dyads with different frames. Finally, we analyze some tensions between incremental versus radical changes in the cognitive frame.
    Keywords: categorization, frame, mental model, small world, culture, leadership.
    JEL: C79 D01 D23 L14 M14
    Date: 2017–09
  12. By: Nicholas Bloom; Charles I Jones; John Van Reenen; Michael Webb
    Abstract: In many growth models, economic growth arises from people creating ideas, and the long-run growth rate is the product of two terms: the effective number of researchers and their research productivity. We present a wide range of evidence from various industries, products, and firms showing that research effort is rising substantially while research productivity is declining sharply. A good example is Moore's Law. The number of researchers required today to achieve the famous doubling every two years of the density of computer chips is more than 18 times larger than the number required in the early 1970s. Across a broad range of case studies at various levels of (dis)aggregation, we find that ideas—and in particular the exponential growth they imply — are getting harder and harder to find. Exponential growth results from the large increases in research effort that offset its declining productivity.
    Keywords: economic growth, ideas, research effort, research productivity
    Date: 2017–09
  13. By: Reto Odermatt; Alois Stutzer
    Abstract: The correct prediction of how alternative states of the world affect our lives is a cornerstone of economics. We study how accurate people are in predicting their future well-being after facing major life events. Based on individual panel data, we compare people's life satisfaction forecasts reported in the first interview after a major life event with their actual evaluations five years later on. This is done after the individuals experience widowhood, unemployment, disability, marriage, separation or divorce. We find systematic prediction errors that seem at least partly driven by unforeseen adaptation after the first four of these events.
    Keywords: Adaptation; life satisfaction; life events; projection-bias; subjective well-being; utility prediction; unemployement
    JEL: D03 D12 D60 I31
    Date: 2017–09

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