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on History and Philosophy of Economics |
| By: | Miguel D. Ramirez (Department of Economics, Trinity College) |
| Abstract: | This paper critically discusses the important and relevant—not to mention controversial— views of Ricardo and Marx on the impact of machinery on labor productivity, the organization of production, and the wages and employment prospects of the working class during the capitalism of their day. First, the paper turns to Ricardo’s assessment of the introduction of machinery and its likely effects on the laborer and the rate of profit and accumulation—one which went through a substantial revision (and reversal) between the first and third editions of his Principles of Political Economy and Taxation. Then we discuss Marx’s own critical analysis of the historical development of machinery and its impact on the labor process, the so-called “compensation principle,” and how the rising organic composition of capital ostensibly generates a “redundant or surplus-population”during the course of capitalism development. We highlight Marx’s intellectual debt to Ricardo (and John Barton) insofar as his theory of technological unemployment is concerned. Lastly, the paper summarizes the views of Ricardo and Marx and offers some concluding remarks. |
| Keywords: | : Capital; compensation principle; fixed vs. circulating capital; gross vs. net income; machinery; rate of surplus-value (profit); Say’s Law of Markets; surplus-population; time of production; turnover of capital |
| JEL: | B10 B12 B14 |
| Date: | 2017–11 |
| URL: | http://d.repec.org/n?u=RePEc:tri:wpaper:1706&r=hpe |
| By: | Hans-Werner Sinn |
| Abstract: | Marx made significant contributions to macroeconomics, laying the grounds for both Keynes’s theory of aggregate demand and Schumpeter’s theory of creative destruction. His law of the tendency of the rate of profit to fall parallels Alvin Hansen’s theory of secular stagnation which has recently received much attention among scholars studying the financial crises in Japan, the US and the Eurozone. This article argues that part of the new stagnation does not result from a natural exhaustion of investment possibilities, but from an overly loose central bank monetary policy that keeps zombie banks and their zombie clients alive and blocks the emergence of new start-up firms. |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_6463&r=hpe |
| By: | Bordo, Michael D; Monnet, Eric; Naef, Alain |
| Abstract: | The Gold Pool (1961-1968) was one of the most ambitious cases of central bank cooperation in history. Major central banks pooled interventions - sharing profits and losses- to stabilize the dollar price of gold. Why did it collapse? From at least 1964, the fate of the Pool was in fact tied to sterling, the first line of defense for the dollar. Sterling's unsuccessful devaluation in November 1967 spurred speculation and massive losses for the Pool. Contagion occurred because US policies were inflationary and insufficiently credible as well. The demise of the Pool provides a striking example of contagion between reserve currencies. |
| Keywords: | Bretton Woods; central bank cooperation; Gold Pool; international monetary system; reserve currencies; sterling crisis |
| JEL: | E42 F31 F33 N14 |
| Date: | 2017–11 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:12425&r=hpe |
| By: | Edwin M. Truman (Peterson Institute for International Economics) |
| Abstract: | This paper examines two episodes of international economic policy coordination: the efforts to modify the Bretton Woods international monetary system in the 1960s and early 1970s and to reform the system after the closing of the US official gold window on August 15, 1971. The paper examines the diagnoses of the problem in each episode, the treatments applied, and the results in the short run and longer run. In the short run, both episodes were failures. The international monetary system that emerged in the mid-1970s, while less systemic than some would like, has nevertheless stood the test of time, although proposals for its reform continue to be discussed. |
| Keywords: | balance of payments, Bretton Woods, capital flows, Committee of Twenty, exchange rates, gold, International Monetary Fund, international monetary system, special drawing rights |
| JEL: | F30 F32 F33 F53 |
| Date: | 2017–10 |
| URL: | http://d.repec.org/n?u=RePEc:iie:wpaper:wp17-11&r=hpe |
| By: | Hanappi, Hardy |
| Abstract: | Innovation in theory building usually follows the prescription of ‘normal science’ as described by Thomas Kuhn in his account on the history of theoretical physics, see [Kuhn, 1962]. What already had been postulated by Descartes, compare [Descartes, 1637], as a signum of science, namely the systematic advance towards smaller, more specialized, partial problems that are easier to solve, this procedure still prevails in the social sciences till today. Contrary to this piecemeal engineering approach, Joseph Schumpeter made the character mask of the revolutionary entrepreneur to his hero of progress – at least as far as innovation in the production of commodities is concerned, [Schumpeter, 1911]. Of course, history shows that both forms of innovation are alternating: If the slow advance and broadening of a prevailing mainstream gets stuck and the contradictions it produces start to accumulate quickly, then it is time for a revolution – in the material world (compare [Hanappi & Wäckerle, 2016]) as well as in its scientific correlate. It is time for a metamorphosis. In which direction a theoretical innovation in times of metamorphosis shall point clearly has to remain an unanswered question. The best characterization of its general methodological form still seems to be Schumpeter’s dictum. It is a new combination of (existing) elements. The existing elements typically should concern burning problems of the troubled mainstream (compare [Hanappi, 2016]), and the adjective ‘new’ means that they so far are not connected to each other in the stagnating mainstream approach. The global political economy as well as its theoretical reflection in mainstream theory undoubtedly currently is in a state that calls for a revolutionary metamorphosis. This paper therefore sets out to develop a new combination of three seemingly unconnected ideas, which each address a fundamental contradiction. The first idea concerns the contradiction between the rich and the poor parts of the global economy, the second idea concerns the driving force of progress of the human species and its impediments, and the third idea concerns the contradiction between syntax and semantics of the formal representation of the first two contradictions. Contrary to papers in ‘normal science’, which in a conclusion propose a solution for their research question, this paper avoids to pretend a finite horizon of its arguments. As is appropriate for a proposed theoretical innovation it just offers a new open-ended contribution to the rapidly evolving discourse in the middle of metamorphosis. |
| Keywords: | Political Economy, Innovation in Theory |
| JEL: | C50 P10 P16 |
| Date: | 2017–10–19 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:82511&r=hpe |
| By: | Guilhem Lecouteux (Université Côte d'Azur; GREDEG CNRS) |
| Abstract: | Bayesian game theorists claim to represent players as Bayes rational agents, maximising their expected utility given their beliefs about the choices of other players. I argue that this narrative is inconsistent with the formal structure of Bayesian game theory. This is because (i) the assumption of common belief in rationality is equivalent to equilibrium play, as in classical game theory, and (ii) the players' prior beliefs are a mere mathematical artefact and not actual beliefs hold by the players. Bayesian game theory is thus a Bayesian representation of the choice of players who are committed to play equilibrium strategy profiles. |
| Keywords: | Bayesianism, common belief in rationality, epistemic game theory, interactive epistemology, prior beliefs |
| JEL: | B21 C72 D81 |
| Date: | 2017–11 |
| URL: | http://d.repec.org/n?u=RePEc:gre:wpaper:2017-30&r=hpe |
| By: | Erhard Gloetzl (Institute for the Comprehensive Analysis of the Economy, Johannes Kepler University Linz, Austria;); Florentin Gloetzl (Institute for Ecological Economics, Department for Socioeconomics, Vienna University of Economics and Business, Austria;); Oliver Richters (University of Oldenburg, Department for Economics) |
| Abstract: | Since the beginnings of modern economics, economists sought to emulate the revolution in physics initiated by Newton’s ‘Principia’ (1687). Concepts from mechanics have influenced economic models both in terms of methodology and content. The aim of this theoretical paper is to put forward a novel economic modeling framework that extends the analogies between economics and classical mechanics from constrained optimization to constrained dynamics. We introduce the concepts of economic forces and economic power that bear striking resemblance to physical forces and the reciprocal value of mass. In this setup, the change of a variable is determined by the forces agents employ to change it according to their desire, their power to assert their interest, and constraint forces emerging from system constraints. The approach is based on a genuine dynamic out-of-equilibrium analysis and can incorporate heterogeneous agents, prisoner’s dilemma situations, and behavioral assumptions different from rationality and utility maximization. Thereby, it seeks to overcome some restrictions inherent to approaches based on optimization under constraint and provide an out-of-equilibrium foundation for equilibrium models. We transform a static textbook exchange model into a dynamic model, and reflect on advantages, extensions and caveats of our modeling approach. |
| Keywords: | Economic Model; Economic dynamics; Disequilibrium economics; Classical Mechanics; Constrained Optimization; Constrained Dynamics; General Equilibrium; Edgeworth Box. |
| Date: | 2017–11 |
| URL: | http://d.repec.org/n?u=RePEc:old:dpaper:405&r=hpe |
| By: | Dirk Engelmann; Hans Peter Grüner |
| Abstract: | Optimal voting rules have to be tailored to the underlying distribution of preferences. This paper shows that the introduction of a stage at which agents may themselves choose voting rules according to which they decide in a second stage may increase the sum of individuals’ payoffs if players are not all completely selfish. Our experiments aim to understand how privately informed individuals choose voting rules and vote given these rules. In a setting with an asymmetric distribution of valuations groups that can choose a voting rule do better than those who decide with a given simple majority voting rule. |
| Keywords: | two-stage voting, Bayesian voting, experiments |
| JEL: | C91 D70 D82 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_6405&r=hpe |
| By: | Daniel Levy (International School of Economics at Tbilisi State University; Department of Economics, Bar-Ilan University; Department of Economics, Emory University; Rimini Center for Economic Analysis, ITALY;); Avichai Snir (Department of Banking and Finance, Netanya Academic College, Netanya 42365, ISRAEL) |
| Abstract: | Recent studies in psychology and neuroscience find that fictional works exert strong influence on readers and shape their opinions and worldviews. We study the Potterian economy, which we compare to economic models, to assess how Harry Potter books affect economic literacy. We find that some principles of Potterian economics are consistent with economists’ models. Many others, however, are distorted and contain numerous inaccuracies, which contradict professional economists’ views and insights, and contribute to the general public’s biases, ignorance, and lack of understanding of economics. |
| Keywords: | Economic and Financial Literacy, Political Economy, Public Choice, Rent Seeking, Folk Economics, Harry Potter, Social Organization of Economic Activity, Literature, Fiction, Potterian Economy, Potterian Economics, Popular Opinion |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:tbs:wpaper:17-002&r=hpe |
| By: | Francesco Fallucchi (University of East Anglia); R. Andrew Luccasen (Mississippi University for Women); Theodore L. Turocy (University of East Anglia) |
| Abstract: | We re-analyse participant behaviour in standard economics experiments studying voluntary contributions to a public good. Previous approaches were based in part on a priori models of decision-making, such as maximising personal earnings, or reciprocating the behaviour of others. Many participants however do not conform to one of these models exactly, requiring ad hoc adjustments to the theoretical baselines to identify them as belonging to a given behavioural type. We construct a typology of behaviour based on a similarity measure between strategies using hierarchical clustering analysis. We identify four clearly distinct behavioural types which together account for over 90% of participants in six experimental studies. The resulting type classification distinguishes behaviour across groups more consistently than previous approaches. |
| Keywords: | behavioural types, cluster analysis, cooperation, public goods |
| JEL: | C65 C71 H41 |
| Date: | 2017–08–08 |
| URL: | http://d.repec.org/n?u=RePEc:uea:wcbess:17-01r&r=hpe |
| By: | Bogliacino, Francesco; Codagnone, Cristiano |
| Abstract: | The article discusses whether and to what extent experiments can contribute to a research paradigm based on the study of human behaviour in complex evolving environments and on the problem of asymmetric adjustment among different components of economic system along certain trajectories, focusing on the possibility that experimental evidence may represent an external consistency check on this type of heterodox modelling. It considers the evidence on rationality of human agents, and the possibility to identify a microfoundation alternative to homo oeconomicus, discussing the evidence on humans as strong reciprocators, as trusting individuals and as embedded in social norms. |
| Keywords: | Experiments; Causality; Heuristics; Learning; Bounded Rationality; Altruism; Punishment; Trust; Norms |
| JEL: | C18 C9 D1 D3 |
| Date: | 2017–10 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:82479&r=hpe |
| By: | Jeremy Edwards |
| Abstract: | This paper investigates the Becker-Woessmann (2009) argument that Protestants were more prosperous in nineteenth-century Prussia because they were more literate, a version of the Weber thesis, and shows that it cannot be sustained. The econometric analysis on which Becker and Woessman based their argument is fundamentally flawed, because their instrumental variable does not satisfy the exclusion restriction. When an appropriate instrumental-variable specification is used, the evidence from nineteenth-century Prussia rejects the human-capital version of the Weber thesis put forward by Becker and Woessmann. |
| Keywords: | Protestantism, Weber thesis, human capital, instrumental variables |
| JEL: | Z12 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_6646&r=hpe |
| By: | Рубинштейн Александр Яковлевич; Городецкий Андрей Евгеньевич |
| Abstract: | Настоящий доклад следует рассматривать в качестве введения в новую тему исследований в научном направлении ИЭ РАН «Теоретическая экономика». Его содержание представляет собой описание авторского подхода к построению экономической теории современного государства, важными составляющими которой являются теория опекаемых благ и общая концепция изъянов смешанной экономики. Указанный подход лег в основу анализа патернализма, позволил выйти за пределы привычной для этой категории «отцовской заботы» государства о своих гражданах и предложить более общую трактовку данного понятия. Наряду с институциональным, распределительным и поведенческим провалами в работе описан особый вид изъянов смешанной экономики – «патерналистский провал», представляющий комбинацию изъянов общественного выбора и нерациональных действий госслужащих. Выделены четыре типа нерациональности бюрократии: дилетантизм, «эффект кассира», закон Паркинсона и своекорыстие чиновников. В докладе рассмотрены также теоретические и прикладные аспекты концепции консенсусной демократии, обеспечивающей либерализацию процессов принятия политических и экономических решений на основе институтов гражданского общества и гражданского контроля над деятельностью органов исполнительной власти. The present report should be considered as an introduction to a new theme of research in the scientific direction of the IE of the RAS (The Institute of Economics of the Russian Academy of Sciences) called “The Theoretical Economics”. Its content represents a description of the author’s approach to the construction of the economic theory of the modern state, the important components of which are the theory of patronized goods and the general concept of flaws of the mixed economy. The specified approach formed the basis of the analysis of paternalism, it allowed to go beyond the usual, the habitual for this category “paternal care” of the state about its citizens and to offer a more general interpretation of the given concept. Along with institutional, distributive and behavioral lailures, a special type of flaws of the mixed economy is described in the paper – it is a “paternalistic failure” that represents a combination of flaws of public choice and irrational actions of civil servants. Four types of irrationality of bureaucracy are highlighted, are singled out: these are dilettantism, the “cashier effect”, the law of Parkinson and the self-interest of bureaucrats. The report also examines the theoretical and applied aspects of the concept of consensus democracy, ensuring the liberalization of the processes of political and economic decision-making on the basis of the institutions of civil society and civil control over the activities of executive bodies. |
| Keywords: | patronized goods, meritorious goods, market failures, paternalism, failures of the state, managerial failure, bureaucracy, failure of “goodwill”, consensus democracy, institutions, civil society |
| JEL: | C70 C72 D5 D6 D7 H41 |
| URL: | http://d.repec.org/n?u=RePEc:rua:wpaper:a:pru175:a:pgo471:ye:2017:1&r=hpe |
| By: | Ricardo Reis |
| Abstract: | While there is much that is wrong with macroeconomics today, most critiques of the state of macroeconomics are off target. Current macroeconomic research is not mindless DSGE modelling filled with ridiculous assumptions and oblivious of data. Rather, young macroeconomists are doing vibrant, varied, and exciting work, getting jobs, and being published. Macroeconomics informs economic policy only moderately and not more nor all that differently than other fields in economics. Monetary policy has benefitted significantly from this advice in keeping inflation under control and preventing a new Great Depression. Macroeconomic forecasts perform poorly in absolute terms and given the size of the challenge probably always will. But relative to the level of aggregation, the time horizon, and the amount of funding, they are not so obviously worse than those in other fields. What is most wrong with macroeconomics today is perhaps that there is too little discussion of which models to teach and too little investment in graduate-level textbooks. |
| JEL: | E00 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_6446&r=hpe |
| By: | Sandro Casal (University of Milan); Francesco Fallucchi (University of East Anglia); Simone Quercia (University of Bonn) |
| Abstract: | We experimentally investigate the role of responders' moral concerns in three-player ultimatum bargaining. In our experiment, proposers can increase their share of the pie at the expenses of an NGO that conducts humanitarian aid in emergency areas. We find that responders are not willing to engage in 'immoral' transactions only when fully informed about proposers' behavior toward the NGO. Under complete information, their willingness to reject offers increases with the strength of the harm to the NGO. Moreover, the possibility to nullify the effects of the negative externality through rejection further increases their willingness to reject. We show that the latter result is better explained by a model of consequentialist moral concerns toward the NGO rather than deontological morality about own actions. |
| Keywords: | three-player ultimatum game, moral reasoning, experiment |
| JEL: | C72 C91 D6 |
| Date: | 2017–05–10 |
| URL: | http://d.repec.org/n?u=RePEc:uea:wcbess:16-05r&r=hpe |
| By: | Balázs Égert (OECD); Peter Gal (OECD); Isabelle Wanner (OECD) |
| Abstract: | This document describes the OECD’s new Structural Policy Indicators Database for Economic Research (SPIDER). The database compiles data from various existing databases. It contains indicators capturing structural policies (including institutions, framework condition policies and policies specifically related to labour markets and drivers of productivity and investment such as trade, skills and innovation). It also contains some basic macroeconomic indicators. The main idea of the database is to provide all the data needed for empirical analysis on structural policies in one place to facilitate empirical investigations. The indicators collected comprise three types of data: data with long-time series covering OECD countries, data covering a larger set of countries for a varying number of years, and finally a set of time-invariant indicators. The paper illustrates the use of the database on the basis of different growth regressions employed in the literature. |
| Keywords: | database, economic growth, economic research, emerging economies, indicators, OECD, structural policies |
| JEL: | C82 O11 O47 Y1 |
| Date: | 2017–11–17 |
| URL: | http://d.repec.org/n?u=RePEc:oec:ecoaaa:1429-en&r=hpe |
| By: | Sultan Orazbayev (UCL School of Slavonic and East European Studies) |
| Abstract: | Papers written by coauthors from different countries, on average, are published in better journals, have higher citations counts, and are evaluated more positively by peers. Similar `diversity premia' exist for inter-ethnic and inter-gender collaborations. Using data on collaborations among 34 thousand economists, this paper considers possible explanations for the positive quality-diversity correlation. After controlling for a range of relevant factors, the authors' position in the global research network plays an important role in explaining variation in the quality of collaboration, proxied by citation counts and simple impact factor of the journal in which the article is published. Access to non-redundant social ties in the global research network is associated with greater quality of the collaboration. Geographic, gender and ethnic diversity premia on collaboration quality disappear after controlling for the authors' global network position, suggesting that diversity is important only to the extent that it correlates with non-redundancy of social ties. |
| Keywords: | structural holes, diversity, collaboration networks |
| Date: | 2017–09 |
| URL: | http://d.repec.org/n?u=RePEc:see:wpaper:2017:4&r=hpe |