nep-hpe New Economics Papers
on History and Philosophy of Economics
Issue of 2017‒09‒24
sixteen papers chosen by
Erik Thomson
University of Manitoba

  1. The Contestable Marketplace of Ideas: Paul Samuelson’s Defense of Mainstream Economics through Textbook Making, 1967-1976 By Yann Giraud
  2. Henri Fayol et la théorie du chef d’entreprise : une nouvelle figure de l’autorité au tournant du XXe siècle By Armand Hatchuel; Blanche Segrestin
  3. Where Modern Macroeconomics Went Wrong By Joseph E. Stiglitz
  4. Addressing the malaise in neoclassical economics: A call for partial models By Wallace, Ronald L.
  5. Strategic Behavior of Moralists and Altruists, By Alger, Ingela; Weibull, Jörgen W.
  6. Strategic complexity and the value of thinking By David Gill; Victoria Prowse
  7. Ambiguity and the Centipede Game: Strategic Uncertainty in Multi-Stage Games By Jürgen Eichberger; Simon Grant; David Kelsey
  8. Approaches to the implementation of the sustainable development goals: Some considerations on the theoretical underpinnings of the 2030 Agenda By Josephsen, Lars
  9. The Macroeconomics of Rational Bubbles: A User's Guide By Alberto Martín; Jaume Ventura
  10. La « pensée résilience »: une opportunité pour une approche intégrée de la gestion de la sécurité des organisations et des territoires By Eric Rigaud
  11. S’appuyer sur les théories et concepts du capital social pour interpréter une politique locale de développement économique By Clément Marinos
  12. The impact of renewable versus non-renewable natural capital on economic growth By Laura Recuero Virto; Denis Couvet
  13. Agent-Based Modeling’s Open Methodology Approach: Simulation, Reflexivity, and Abduction By Davis, John B.
  14. The Origins of Financial Development: How the African Slave Trade Continues to Influence Modern Finance By Ross Levine; Chen Lin; Wensi Xie
  15. Are Ideas Getting Harder to Find? By Nicholas Bloom; Charles I. Jones; John Van Reenen; Michael Webb
  16. How was the Quantitative Easing Program of the 1930s Unwound? By Matthew Jaremski; Gabriel Mathy

  1. By: Yann Giraud (Université de Cergy-Pontoise, THEMA)
    Abstract: Historians of economics rarely consider textbooks as more than passive receptacles of previously validated knowledge. Therefore, their active role in shaping the discipline and its image is seldom addressed. In this paper, I study the making of Paul Samuelson’s successive editions of Economics from 1967 to 1976 as an instance of how textbooks stand at the crossroads between disciplinary knowledge, pedagogy and larger political and societal concerns. In the mid-1960s, Economics, now at its sixth edition, was at the height of its success. Considered one cornerstone of modern economics, it was also the center of a number of criticisms dealing with the current state of the economic discipline and its teaching in the universities. While the profession expressed its concern over the lack of relevance of economics to address the pressing issues of the day and pleaded for a new “problem-solving” approach to economic education, the late 1960s witnessed the emergence of a new generation of “radical” economists criticizing the economics orthodoxy. Their contention that mainstream theory had neglected the issues of class struggle and capitalist exploitation, found a favorable echo among an increasingly politicized population. Using archival materials, I show how Samuelson, helped by his editorial team at McGraw-Hill, attempted to take into account these changes in order to ensure the continuing success of subsequent editions of his text in an increasingly competitive market. While this study emphasizes Samuelson’s ambiguous attitude toward his contenders, revealing on the one hand his belief in a free marketplace of ideas and, on the other hand, his attachment to mildly liberal politics and aversion to Marxism, unchanged through revisions, it also shows that the textbook is a collective endeavor, embodying different stakeholders’ views and market forces. Therefore, those who are interested in studying textbooks as a way to retrace the development of economic knowledge should not necessarily postulate authorial intent.
    Keywords: Paul Samuelson, economics textbooks, economic education, radical economics
    JEL: A14 B20 B3
    Date: 2017
  2. By: Armand Hatchuel (CGS i3 - Centre de Gestion Scientifique i3 - MINES ParisTech - École nationale supérieure des mines de Paris - PSL - PSL Research University - CNRS - Centre National de la Recherche Scientifique); Blanche Segrestin (CGS i3 - Centre de Gestion Scientifique i3 - MINES ParisTech - École nationale supérieure des mines de Paris - PSL - PSL Research University - CNRS - Centre National de la Recherche Scientifique)
    Abstract: Henri Fayol and business manager theory: a new figure of authority at the beginning of the 20th century Before he wrote his famous tract, Henri Fayol was a chief executive officer (CEO), an innovator and a scientist who considered scientific research to be a major responsibility for the head of company. However, as science became the driving force of a new industrial world, it also created an unprecedented connection to the future as it required what was “unknown” to be taken into consideration. This analysis encourages us to re-read Fayol as himself wanted to be read. Far from being universal and common, his administrative doctrine is made up of original ideas and concepts (prévoyance-foresight, inconnu-unknown, programme d’action-program of action, perfectionnement-improvement, constitution du corps social- constitution of the social body) whose theoretical and political impact has been under-estimated. As a result, Fayol was able to imagine a new type of business leader without relying on corporate language nor on the political economy of his time. His outline of a “political/creative” model for a business manager’s action draws from the heritage of the Enlightenment and from political and social philosophy. While this message should have marked a major turning point, Fayol’s originality was subsequently diluted. A century later, it still offers valuable theoretical resources to propose alternatives to a financialized conception of firms
    Abstract: Avant d’écrire son célèbre traité, Henri Fayol fut un dirigeant, innovateur et savant, qui considérait la recherche scientifique comme une responsabilité majeure du chef d’entreprise. Or, devenue le moteur du nouveau monde industriel, la science créait aussi un rapport inédit au futur, elle forçait à penser l’inconnu. Ce constat conduit à relire Fayol comme lui-même souhaitait être lu. Loin d’être universelle et banale, sa doctrine administrative apparaît alors composée de notions originales (prévoyance, inconnu, programme d’action, perfectionnement, constitution du corps social) dont la portée théorique et politique a été sous-estimée. Fayol peut ainsi penser un nouveau chef d’entreprise sans recourir ni à la langue des affaires ni à l’économie politique de son temps. C’est dans l’héritage des Lumières et dans la philosophie politique et sociale qu’il puise pour élaborer un modèle « créatif/politique » de l’action du dirigeant d’entreprise qui marque un tournant majeur même si son message a été ensuite banalisé. Un siècle après, retrouver Fayol offre encore une ressource théorique précieuse pour penser des alternatives à la conception financiarisée de l’entreprise
    Keywords: entreprise , économie : Fayol,innovation
    Date: 2016
  3. By: Joseph E. Stiglitz
    Abstract: This paper provides a critique of the DSGE models that have come to dominate macroeconomics during the past quarter-century. It argues that at the heart of the failure were the wrong microfoundations, which failed to incorporate key aspects of economic behaviour, e.g. incorporating insights from information economics and behavioural economics. Inadequate modelling of the financial sector meant they were ill-suited for predicting or responding to a financial crisis; and a reliance on representative agent models meant they were ill-suited for analysing either the role of distribution in fluctuations and crises or the consequences of fluctuations on inequality. The paper proposes alternative benchmark models that may be more useful both in understanding deep downturns and responding to them.
    JEL: A1 A2 E0 E1
    Date: 2017–09
  4. By: Wallace, Ronald L.
    Abstract: Economics is currently experiencing a climate of uncertainty regarding the soundness of its theoretical framework and even its status as a science. Much of the criticism is within the discipline, and emphasizes the alleged failure of the neoclassical viewpoint. This article proposes the deployment of partial modeling, utilizing Boolean networks (BNs), as an inductive discovery procedure for the development of economic theory. The method is presented in detail and then linked to the Semantic View of Theories (SVT), closely identified with Bas van Fraassen and Patrick Suppes, in which models are construed as mediators creatively negotiating between theory and reality. It is suggested that this approach may be appropriate for economics and, by implication, for any science in which there is no consensus theory, and a wide range of viewpoints compete for acceptance.
    Keywords: Economic models,history of economic theory,complexity economics,computational modeling,Boolean networks,semantic view of theories
    JEL: B41
    Date: 2017
  5. By: Alger, Ingela; Weibull, Jörgen W.
    Abstract: Does altruism and morality lead to socially better outcomes in strategic interactions than selfishness? We shed some light on this complex and non-trivial issue by examining a few canonical strategic interactions played by egoists, altruists and moralists. By altruists we mean people who do not only care about their own material payoffs but also about those to others, and by a moralist we mean someone who cares about own material payoff and also about what would be his or her material payoff if others were to act like himself or herself. It turns out that both altruism and morality may improve or worsen equilibrium outcomes, depending on the nature of the game. Not surprisingly, both altruism and morality improve the outcomes in standard public goods games. In infinitely repeated games, however, both altruism and morality may diminish the prospects of cooperation, and to different degrees. In coordination games, morality can eliminate socially inefficient equilibria while altruism cannot.
    Keywords: altruism; morality; Homo moralis; repeated games; coordination games
    JEL: C73 D01 D03
    Date: 2017–08
  6. By: David Gill; Victoria Prowse
    Abstract: Response times are a simple low-cost indicator of the process of reasoning in strategic games. In this paper, we leverage the dynamic nature of response-time data from repeated strategic interactions to measure the strategic complexity of a situation by how long people think on average when they face that situation (where we categorize situations according to the characteristics of play in the previous round). We find that strategic complexity varies significantly across situations, and we find considerable heterogeneity in how responsive subjects’ thinking times are to complexity. We also study how variation in response times at the individual level across rounds a?ects strategic behavior and success. We find that ‘overthinking’ is detrimental to performance: when a subject thinks for longer than she would normally do in a particular situation, she wins less frequently and earns less. The behavioral mechanism that drives the reduction in performance is a tendency to move away from Nash equilibrium behavior. Overthinking is detrimental even though subjects who think for longer on average tend to be more successful. Finally, cognitive ability and personality have no e?ect on average response times.
    Keywords: Response time; decision time; thinking time; strategic complexity; game theory; strategic games; repeated games; beauty contest; cognitive ability; personality
    JEL: C72 C91
    Date: 2017–08
  7. By: Jürgen Eichberger (Alfred Weber Institut, Universität Heidelberg.); Simon Grant (Research School of Economics, Australian National University.); David Kelsey (Department of Economics, University of Exeter)
    Abstract: We propose a solution concept for a class of extensive form games with ambiguity. Speci?cally 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.
    Keywords: optimism, neo-additive capacity, dynamic consistency, consistent planning, centipede game, multi-stage game.
    JEL: D81
    Date: 2017
  8. By: Josephsen, Lars
    Abstract: The paper discusses the theoretical underpinning of the concept of sustainable development, especially in relation to follow-up and review, including ex post evaluation of progress. The purpose is to explore methodological aspects of applied approaches to the implementation process, e.g. ways to unravel possible interactions among the numerous SDGs and targets, and to assess trade-offs between interventions. The aim is to go beyond various sustainable development interpretations, by exploring how they perceive and approach implementation of the goals, taking the complexity of this substantial task into account. The paper surveys the theoretical economic underpinning of the 2030 Agenda and the role of neoclassical economic theory in this context. Implementation routes for sustainable development interpretations based on other theoretical frameworks are briefly sketched for comparison. The analysis leads to the claim that it is questionable whether interpretations of sustainable development founded on neoclassical economic theory - as the 2030 Agenda - are applicable in relation to every aspect of sustainability.
    Keywords: Sustainable development,2030 Agenda,Implementation of the SDGs,underpinning of the SDGs,SDGs and complexity
    JEL: Q01 O44
    Date: 2017
  9. By: Alberto Martín; Jaume Ventura
    Abstract: This paper provides a guide to macroeconomic applications of the theory of rational bubbles. It shows that rational bubbles can be easily incorporated into standard macroeconomic models, and illustrates how they can be used to account for important macroeconomic phenomena. It also discusses the welfare implications of rational bubbles and the role of policy in managing them. Finally, it provides a detailed review of the literature.
    Keywords: Bubbles, credit, Business cycles, economic growth, ?nancial frictions, pyramid schemes
    JEL: E32 E44 O40
    Date: 2017–09
  10. By: Eric Rigaud (CRC - Centre de recherche sur les Risques et les Crises - MINES ParisTech - École nationale supérieure des mines de Paris - PSL - PSL Research University)
    Abstract: Resilience is an integrative concept that recently appeared in scientific thinking and encompasses two main ideas: response and sustainability of system in coping with stressful events. Although there is no consensus on a common definition of system resilience, different activities are developed in natural sciences, in humanities and in science of the engineer's allowing the emergence of a " resilience thinking " paradigm. This paradigm aims contributing to the study of the complexity of the dynamic of complex systems toward perturbations. Hypothesis of the paper is that " resilience thinking " is an opportunity for adopting an integrated approach for studying the safety of organisation and territories with connecting perspectives developed in natural sciences, humanities and sciences of engineers. For that, a literature survey on the diversity and the complexity of activities on resilience aiming to describe key principles of a " resilience thinking " will be firstly presented. Then, results will be mobilized to describe basement of an integrated approach of safety management for organisation and for territories. To conclude, a set of perspectives of research and development will be proposed.
    Abstract: La résilience est un concept intégrateur apparu récemment dans la pensée scientifique et qui recouvre les idées de réponse et de pérennité d'un système (individu, système sociotechnique, organisation, territoire, etc.) faisant face à des événements stressants. Bien qu'il n'y ait pas de consensus sur une définition de la résilience d'un système, différentes approches sont développées par les sciences de la nature, les sciences humaines et sociales et les sciences de l'ingénieur et font progressivement émerger une « pensée résilience » visant à permettre d'aborder la complexité de la dynamique des systèmes complexes face aux perturbations avec de nouveaux outils conceptuels. L'hypothèse de ce papier est que la « pensée résilience » représente une opportunité d'élaborer une approche intégrée de la gestion de la sécurité des organisations et des territoires en reliant les perspectives développées au sein des sciences de la nature, des sciences de l'ingénieur et des sciences humaines et sociales. Pour cela, une revue de la littérature relative à la diversité et à la complexité des travaux sur la résilience visant à décrire les principes de la « pensée résilience » est dans un premier temps proposé. Cette « pensée résilience » est mobilisée pour, dans un second temps, décrire les fondements d'une approche intégrée de la gestion de la sécurité des organisations et des territoires. Pour conclure, un ensemble de perspectives de recherche et développement seront proposés.
    Keywords: organisation,territoires,Résilience,complexité,adaptation,interdisciplinarité,sécurité
    Date: 2016–03–31
  11. By: Clément Marinos (ESO - Espaces et Sociétés - UNICAEN - Université Caen Normandie - UM - Université du Maine - UA - Université d'Angers - UN - Université de Nantes - AGROCAMPUS OUEST - UR2 - Université Rennes 2 - CNRS - Centre National de la Recherche Scientifique)
    Abstract: Une organisation ayant pour mission le développement économique, rassemblant des acteurs publics et privés d’un territoire, peut-elle conduire sa stratégie en s’appuyant sur le capital social, ses principes et ses théories ? Comme réponse à cette question de recherche, notre contribution a l’ambition de montrer que l’engagement des acteurs locaux joue un rôle déterminant dans le soutien au capital social, à la condition première que la stratégie de développement soit partagée. L’originalité de nos travaux réside dans l’analyse des rapports entre action publique locale et capital social. Le fait que le capital social puisse être considéré comme une ressource liée au territoire nous sert de fil conducteur. En termes de résultats, nous confirmons l’hypothèse que les parties prenantes du développement (collectivités, agences, universités, entreprises) mobilisent, de manière plus ou moins volontaire, les différentes dimensions du capital social pour élaborer et mettre en œuvre une stratégie territoriale activant les proximités.
    Keywords: partnerships, public programs, local development,social capital,partenariats,politiques publiques,développement local,capital social
    Date: 2016–03–01
  12. By: Laura Recuero Virto (MNHN and MAEDI); Denis Couvet (MNHN)
    Abstract: This paper examines whether natural capital is a robust determinant of economic growth, distinguishing the contribution of direct and indirect effects in renewable and non-renewable natural capital. Our hypothesis is that renewable natural capital may have a rather indirect but more important impact on economic growth than non-renewable natural capital, particularly through human well-being. In contrast, non-renewable natural capital can be a source of immediate financial wealth, but can have adverse social and environmental effects. To test this hypothesis we use a data set on 83 countries for the period 1960-2009 to compare the relevance of proximate and fundamental theories to explain economic growth. We find some evidence of an indirect negative impact of renewable natural capital in wealth on economic growth through through human well-being and, more precisely, population growth rates and fertility. This is particularly the case for countries with higher levels of human development. In contrast, the share of non-renewable natural capital in wealth has a direct positive impact on economic growth in countries with lower income inequality and higher institutional quality. This finding reflects the effect of capital accumulation in the domestic economy, as capacity constrainst are relaxed. Finally, countries with higher income per capita, higher human development and higher institutional quality have a higher share of higher renewable natural capital per capita, although they also have a lower share of lower renewable natural capital in wealth. Such result emphasises that renewable natural capital is very necessary for people (per capita), hence isa primary concern for empowered countries, although such capital contributes less to wealth, and economic growth, in these countries . Our results question the way ‘wealth’ and economic growth are defined in economics when the effect of natural capital is examined.
    Keywords: natural capital, economic growth, renewable, non-renewable,
    JEL: O44 O47 Q20 Q30 Q32
    Date: 2017–09
  13. By: Davis, John B. (Department of Economics Marquette University)
    Abstract: This paper argues that agent-based modeling’s innovations in method developed in terms of simulation techniques also involve an innovation in economic methodology. It shows how Epstein’s generative science conception departs from conventional methodological reasoning, and employs what I term an open rather than closed approach to economic methodology associated with the roles that reflexivity, counterfactual reasoning, and abduction play in ABM. Central to this idea is that improvements in how we know something, a matter of method, determine whether we know something, a matter of methodology. The paper links this alternative view of economics and economic methodology to a social science model of economics and contrasts this with standard economics’ natural science model of economics. The paper discusses what this methodological understanding implies about the concept of emergence.
    Keywords: agent-based modeling, simulation, generative science, reflexivity, abduction, social science model of economics, emergence
    JEL: A12 B41 C63
    Date: 2017–09
  14. By: Ross Levine; Chen Lin; Wensi Xie
    Abstract: We assess how the African slave trade—which had enduring effects on social cohesion—continues to influence financial systems. After showing that the intensity with which people were enslaved and exported from Africa during the 1400 – 1900 period helps account for overall financial development, household access to credit, and firm access to finance, we evaluate three potential mechanisms linking the slave trade to modern finance—information sharing institutions, trust in financial institutions, and the quality of legal institutions. We discover that the slave trade is strongly, negatively related to the information sharing and trust mechanisms but not to the legal mechanism.
    JEL: G21 N27 O16 O55
    Date: 2017–09
  15. 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.
    JEL: O3 O4
    Date: 2017–09
  16. By: Matthew Jaremski; Gabriel Mathy
    Abstract: Outside of the recent past, excess reserves have only concerned policymakers in one other period: the Great Depression. The data show that excess reserves in the 1930s were never actively unwound through a reduction in the monetary base. Nominal economic growth swelled required reserves while an exogenous reduction in monetary gold inflows due to war embargoes in Europe allowed excess reserves to naturally decline towards zero. Excess reserves fell rapidly in early 1941 and would have unwound fully even without the entry of the United States into World War II. As such, policy tightening was at no point necessary and could have contributed to the 1937-1938 Recession.
    JEL: E32 E58 N12
    Date: 2017–09

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