nep-hpe New Economics Papers
on History and Philosophy of Economics
Issue of 2017‒10‒08
fourteen papers chosen by
Erik Thomson
University of Manitoba

  1. Tony Atkinson and his legacy By Rolf Aaberge; François Bourguignon; Andrea Brandolini; Francisco H. G. Ferreira; Janet C. Gornick; John Hills; Markus Jäntti; Stephen P. Jenkins; Eric Marlier; John Micklewright; Brian Nolan; Thomas Piketty; Walter J. Radermacher; Timothy M. Smeeding; Nicholas H. Stern; Joseph Stiglitz; Holly Sutherland
  2. Yes we can! Teaching DSGE models to undergraduate students By Solis-Garcia, Mario
  3. The macroeconomics of rational bubbles: a user's guide By Alberto Martin; Jaume Ventura
  4. Neoliberalism and Regulatory Capitalism: Understanding the "Freer Markets More Rules" Puzzle By Vlad Tarko
  5. The circulation of worthless objects aids cooperation. An experiment inspired by the Kula By Giuseppe Danese; Luigi Mittone
  6. Happiness Convergence in Transition Countries By Guriev, Sergei; Melnikov, Nikita
  7. The Optimal Design of Round-Robin Tournaments with Three Players By Krumer, Alex; Megidish, Reut; Sela, Aner
  8. Do People Avoid Morally Relevant Information? Evidence from the Refugee Crisis By Freddi, Eleonora
  9. La experiencia de la Banca de Desarrollo en el Perú: 1990-2015 By Oscar Dancourt Masías; Renzo Jiménez Sotelo
  10. Partially-honest Nash implementation : a full characterization By Michele Lombardi; Naoki Yoshihara
  11. The limits to moral erosion in markets: social norms and the replacement excuse By Björn Bartling; Yagiz Özdemir
  12. Institutions et ordre politique dans le modèle économique algérien By Rachid Mira
  13. Financial Crises and the Central Bank: Lessons from Japan during the 1920s By Masato Shizume
  14. The Philosophy of Debt Alexander DOUGLAS, Abingdon: Routledge, 2016. 164 pp By Louis Larue

  1. By: Rolf Aaberge (Research Department, Statistics Norway and ESOP, Department of Economics, University of Oslo); François Bourguignon (Paris School of Economics); Andrea Brandolini (DG Economics, Statistics and Research, Bank of Italy); Francisco H. G. Ferreira (Development Economics Research Group, The World Bank); Janet C. Gornick (LIS and The Graduate Center, City University of New York); John Hills (London School of Economics); Markus Jäntti (Swedish Institute for Social Research, Stockholm University); Stephen P. Jenkins (London School of Economics); Eric Marlier (Luxembourg Institute of Socio-Economic Research (LISER)); John Micklewright (University College London); Brian Nolan (University of Oxford); Thomas Piketty (Paris School of Economics); Walter J. Radermacher (Former Director General of Eurostat); Timothy M. Smeeding (University of Wisconsin-Madison); Nicholas H. Stern (London School of Economics); Joseph Stiglitz (Columbia University); Holly Sutherland (Institute for Social and Economic Research, University of Essex)
    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, economic theory, economic policy
    JEL: A1 B32 D3 D6 H00 I3
    Date: 2017–09
  2. By: Solis-Garcia, Mario
    Abstract: Dynamic stochastic general equilibrium (DSGE) models have become the workhorse of modern macroeconomics and the standard way to communicate ideas among applied macroeconomists. Undergraduate students, however, often remain unaware of their existence. The lack of specialized knowledge can hurt them if they decide to attend graduate school. Indeed, many first-year PhD students discover that the material they are currently learning differs significantly from what they mastered in college. But this can change. In this essay, I describe how to teach a full-fledged macroeconomics course where DSGE models take center stage. I discuss how to arrange such a course within a one-semester time frame, detail the main components of instruction, and finish with some thoughts based on my teaching experience at Macalester College.
    Keywords: DSGE models, Bayesian estimation, undergraduate education, advanced macroe- conomics
    JEL: A22 B41 E30 E60
    Date: 2017–09–21
  3. By: Alberto Martin; 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, financial frictions, pyramid schemes
    JEL: E32 E44 O40
    Date: 2017–09
  4. By: Vlad Tarko (Department of Economics, Dickinson College)
    Abstract: Over the past four decades, across the OECD countries and beyond, we observe a simultaneous increase (a) in the number, the budgets and the staffing of regulatory agencies, as well as the number of regulations, and (b) of economic liberalization, as measured by economic freedom and doing business indices. This is the "freer markets, more rules" or "more capitalism, more regulations" puzzle. This puzzle provides a window into the underlining mechanisms behind the complex regulatory developments in advanced democracies and transition economies, showcasing both some convergence trends and some diversity of the regulatory national patterns. Before the recent post-financial crisis backlash, the neoliberal agenda of privatization and deregulation seems to have happened in a roundabout manner as a side-effect of regulatory capitalism, rather than by implementing the policy and institutional recommendations of authors like Hayek, Friedman, and Buchanan. Three common hypotheses about "neoliberalism" don't work very well: pro-market ideology as a driver of policy, rent-seeking in favor of deregulation, and markets outpacing attempts at government regulation. Two other hypotheses provide better insight: a heterogeneous regulatory environment allows private firms to engage in regulatory arbitrage, and political entrepreneurs under public finance constraints look for novel ways of obtaining tax revenues. The emerging picture provides a serious challenge to both critics and supporters of neoliberalism.
    Keywords: Regulatory capture, Regulatory arbitrage, Independent regulatory agencies, Ideology, Rule of law, Crony capitalism
    JEL: P16 D72 K20 K23 L51
    Date: 2017–09
  5. By: Giuseppe Danese; Luigi Mittone
    Abstract: Many anthropological records exist of apparently worthless objects used in traditional societies, often part of larger institutional arrangements that were instrumental in favoring cooperation and reducing conflict. The most famous examples of such objects are probably the Kula necklaces and armbands first described by B. Malinowski. In our experiment subjects can send a token to another participant before each round of a repeated public good game. We use as tokens a bracelet built by the participants, a piece of cardboard provided by the experimenter, and an object brought from home by the participants. Contributions to the public good in the treatments featuring a bracelet and cardboard are significantly higher than in a control study. The home object was not equally useful in increasing contributions. Notwithstanding the cheap talk nature of the decision to send the token, both sending and receiving the token are associated with a significant increase in contributions.
    Keywords: Kula, worthless objects, cooperation, public goods games, signaling, kitoum
    JEL: C92 D01 H40
    Date: 2017
  6. By: Guriev, Sergei; Melnikov, Nikita
    Abstract: The "transition happiness gap" has been one of the most robust findings in the life satisfaction literature. Until very recently, scholars using various datasets on life satisfaction have shown that residents of post-communist countries were significantly less satisfied with their lives than their counterparts in non-transition countries (controlling for income and other correlates of life satisfaction). The literature has explained this finding by the great macroeconomic instability of 1990s, by a substantial decrease in the quality and accessibility of public goods, by the major increase in inequality, and by the rapid depreciation of pre-transition human capital. All these factors were expected to subside over time --- at least after the post-Great-Recession recovery. In this paper, we consider two most recent datasets -- the third wave of the Life in Transition Survey (administered in 2015-16) and the 2010-2016 waves of the annual Gallup World Poll. We find that by 2016 the transition happiness gap had closed. This "happiness convergence" has taken place both due to a "happiness recovery" in post-communist countries after the Great Recession and due to a decrease in life satisfaction in comparator countries in recent years. We also find that the convergence in life satisfaction was primarily driven by middle-income young educated individuals, regardless of gender.
    Date: 2017–10
  7. By: Krumer, Alex; Megidish, Reut; Sela, Aner
    Abstract: We study the optimal design of round-robin tournaments with three symmetric players. We characterize the subgame perfect equilibrium in these tournaments with either one or two prizes. Our results show that the players who wish to maximize their expected payoffs or their probabilities of winning have different preferences about the order of games under tournaments with one or two prizes. We analyze the optimal allocations of players for a designer who wishes to maximize the players' expected total effort in the tournaments with one and two prizes, and by comparing between them, it is demonstrated that in order to maximize the players' expected total effort the designer should allocate only one prize.
    Keywords: Multi-stage contests, all-pay auctions, first-mover advantage, second-mover advantage, round-robin tournaments
    JEL: D00 L00 D20 D44 O31
    Date: 2017–09
  8. By: Freddi, Eleonora (Tilburg University, Center For Economic Research)
    Abstract: Combining click data from a Swedish newspaper and administrative data on asylum seekers in Sweden, I examine whether a larger presence of refugees in a municipality induces people to avoid news that may encourage welcoming the newcomers. Exploiting the unexpected inflow of refugees to Sweden during 2015 and their exogenous allocation across Swedish municipalities, I find that people living in municipalities where the relative number of refugees has been larger read fewer articles about asylum seekers. I then identify articles that may raise feelings of compassion towards the refugees. The decrease in information acquisition is 36 larger for such empathic articles.
    Keywords: information avoidance; refugee crisis; motivated beliefs; click data
    JEL: A13 D64 D83 J15 L82
    Date: 2017
  9. By: Oscar Dancourt Masías (Departamento de Economía de la Pontificia Universidad Católica del Perú); Renzo Jiménez Sotelo
    Abstract: Este trabajo analiza la experiencia con las entidades financieras estatales en el Perú y arguye que sus actividades de banca de desarrollo han perdido relevancia como instrumentos de política pública desde las reformas estructurales implementadas a inicios de los 90. Como todas las otras empresas estatales, desde entonces han estado sujetas a una regulación legal discriminatoria. Las cuatro empresas financieras estatales analizadas tienen objetivos y metas que no están integrados entre sí, duplican sus esfuerzos y no aprovechan las sinergias posibles de obtener, por lo que ninguna de estas instituciones representa un efectivo banco de desarrollo estatal tal como existe en otros países. JEL Classification-JEL:
    Keywords: Análisis financiero , Bancos de desarrollo , Bancos estatales , Credito bancario , Intermediación financiera
    Date: 2017
  10. By: Michele Lombardi (Adam Smith Business School, University of Glasgow); Naoki Yoshihara (Department of Economics, University of Massachusetts Amherst)
    Abstract: A partially-honest individual is a person who follows the maxim, "Do not lie if you do not have to" to serve your material interest. By assuming that the mechanism designer knows that there is at least one partially-honest individual in a society of more than 3 individuals, a social choice rule (SCR) that can be Nash implemented is termed partially-honestly Nash implementable. The paper offers a complete characterization of the n-person SCRs that are partially-honestly Nash implementable. It establishes a condition which is both necessary and sufficient for the partially-honest Nash implementation. If all individuals are partially-honest, then all SCRs that satisfy the property of unanimity are partially-honestly Nash implementable. The partially-honest Nash implementation of SCRs is examined in a variety of environments.
    Keywords: Nash implementation, pure strategy Nash equilibrium, partial-honesty, Condition mu^*
    JEL: C72 D71
    Date: 2017
  11. By: Björn Bartling; Yagiz Özdemir
    Abstract: This paper studies the impact of a key feature of competitive markets on moral behavior: the possibility that a competitor will step in and conclude the deal if a conscientious market actor forgoes a profitable business opportunity for ethical reasons. We study experimentally whether people employ the argument "if I don’t do it, someone else will" to justify taking a narrowly self-interested action. Our data reveal a clear pattern. Subjects do not employ the "replacement excuse" if a social norm exists that classifies the selfish action as immoral. But if no social norm exists, subjects are more inclined to take a selfish action in situations where another subject can otherwise take it. By demonstrating the importance of social norms of moral behavior for limiting the power of the replacement excuse, our paper informs the long-standing debate on the effect of markets on morals.
    Keywords: Replacement excuse, social norms, moral behavior, competition, markets, utilitarianism, deontological ethics
    JEL: C92 D02 D63
    Date: 2017–09
  12. By: Rachid Mira (Centre d'Economie de l'Université de Paris Nord (CEPN))
    Abstract: Notre étude sur longue période de l’économie politique algérienne, prend appui sur l’approche régulationniste inspirée du cadre d’analyse néoréaliste de Bruno Amable et Stefano Palombarini (2009) et des concepts néo institutionnalistes de Mushtaq Khan (2000, 2009) : elle considère que le développement économique de l’Algérie s’opère dans un contexte donné de distribution du pouvoir et d’institutions variées formelles et informelles, qui structurent des accords ou équilibres politiques sur la base de groupes sociaux soutenant la coalition au pouvoir et captant en retour des rentes distribuées. La confluence ou divergence d’intérêts politiques et économiques conditionne la réussite ou l’échec de politiques économiques et industrielles favorables à la croissance et au développement. Les institutions joueraient dans le processus de développement un rôle fondamental.
    Keywords: Political economy, Algeria, institutions, political power, development
    JEL: E02 H11 N17 N47 N57 O11 O14 O23
    Date: 2017–04
  13. By: Masato Shizume (Faculty of Political Science and Economics, Waseda University)
    Abstract: A series of financial crises following a boom during World War I marked the turning point for the emergence of prudential policy in Japan. An economic backlash after the war created mounting bad loans. After the Great Kanto Earthquake in 1923, the Bank of Japan (BOJ) introduced a special treatment facility for the devastated area. The BOJ hoped to rescue solvent but illiquid financial institutions, but the facility was abused by banks that were already in financial distress, paving the way toward a financial crisis. Banking panic spread nationwide in the spring of 1927. In 1928, the authorities introduced new arrangements for prudential policy with mergers and acquisitions, new types of regulations, and dual inspection by the Ministry of Finance and the BOJ. These arrangements restored financial stability while imposing a new constraint on monetary policy.
    Date: 2016–11
  14. By: Louis Larue (UNIVERSITE CATHOLIQUE DE LOUVAIN, Hoover Chair of economic and Social Ethics)
    Abstract: In "The Philosophy of Debt", Alexander Douglas claims that we collectively have a duty to sustain the institution of debt. I discuss this claim on two grounds. First, I argue that one would need a more thorough examination of the sorts of goods the institution of debt is supposed to sustain. Not all debts are beneficial, and not all forms of production are desirable. Second, I contend that individual agents may not always be able to go into debt. It is not at all clear, therefore, that they have a duty to promote and sustain this institution.
    Keywords: Debt, Economic Ethics, History of Economic Thought, Economic History
    JEL: B5 E5 Z13
    Date: 2017–10–02

This nep-hpe issue is ©2017 by Erik Thomson. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.