nep-hpe New Economics Papers
on History and Philosophy of Economics
Issue of 2017‒11‒26
ten papers chosen by
Erik Thomson
University of Manitoba

  1. From Wicksell to Le Bourva to Modern Monetary Theory: A Wicksell connection By Ehnts, Dirk; Barbaroux, Nicolas
  2. Friedman’s Presidential Address in the Evolution of Macroeconomic Thought By N. Gregory Mankiw; Ricardo Reis
  3. Tony Atkinson and his legacy By Aaberge, Rolf; Bourguignon, François; Brandolini, Andrea; Ferreira, Francisco H. G.; Gornick, Janet C.; Hills, John; Jäntti, Markus; Jenkins, Stephen P.; Micklewright, John; Marlier, Eric; Nolan, Brian; Picketty, Thomas; Radermacher, Walter J.; Smeeding, Timothy M.; Stern, Nicholas; Stiglitz, Joseph; Sutherland, Holly
  4. Economics: the architecture of inequality By Reeves, Aaron
  5. The Evolution of Cooperation: The Role of Costly Strategy Adjustments By Yaroslav Rosokha; Julian Romero
  6. How do risk attitudes affect pro-social behavior? Theory and experiment By Sean Fahle; Santiago Sautua
  7. Book review: economics rules By Thoma, Johanna
  8. Should We Reject the Natural Rate Hypothesis? By Olivier J Blanchard
  9. Book review: review of Peter Spiegler's Behind the model: a constructive critique of economic modelling. Cambridge: Cambridge University Press. 2015. 201pp. By Wüthrich, Nicolas
  10. Inequality, Good Governance and Endemic Corruption By Epstein, Gil S.; Gang, Ira N.

  1. By: Ehnts, Dirk; Barbaroux, Nicolas
    Abstract: In the aftermath of the Great Financial Crisis (GFC), and within the context of significant macroeconomic imbalances in the world economy, economists have shown renewed interest in the way central banks and financial systems work. The rise of Modern Monetary Theory (MMT) has relied on the examination of balance sheets, which has led to advancements in the understanding of the nuts and bolts of the financial system and the fundamental role of taxes, reserves, and deposits. While the school is associated with Post-Keynesian economics, we make the case that it could just as well be called Post-Wicksellian. The aim is not to argue for or against some label, but to make explicit the Wicksellian connection. In doing this, we bring forward old discussions and insights, which can be integrated into recent debates. MMT authors emphasize the importance of endogenous money and the examination of assets and liabilities in balance sheets. In our inquiry, we demonstrate that a horizontalist approach - adopted by MMT scholars - was already present in Wicksell (1898) and in the writings of French economist Jacques Le Bourva (1959, 1962). We examine the essential publications of the two authors and compare their views with the insights of MMT. By doing this, we hope to show continuity in monetary thought. MMT should not be seen as an intruder from the outside of monetary theory, but rather as a continuation and expansion of certain ideas that have long been part of the discipline. Identifying areas of disagreement between the three views should help bring clarity to the issues that are still disputed.
    Keywords: central banking,monetary policy,discretionary practices,Wicksell,Modern Monetary Theory,MMT
    JEL: E4 E51 E58
    Date: 2017
  2. By: N. Gregory Mankiw (Department of Economics Harvard University); Ricardo Reis (Centre for Macroeconomics (CFM); Economics Department London School of Economics (LSE))
    Abstract: This essay discusses the role of Milton Friedman's presidential address to the American Economic Association, which was given half a century ago and helped set the stage for modern macroeconomics. We discuss where macroeconomics was before this address, what insights Friedman offered, where researchers and central bankers stand today on these issues, and (most speculatively) where we may be heading in the future.
    Date: 2017–11
  3. By: Aaberge, Rolf; Bourguignon, François; Brandolini, Andrea; Ferreira, Francisco H. G.; Gornick, Janet C.; Hills, John; Jäntti, Markus; Jenkins, Stephen P.; Micklewright, John; Marlier, Eric; Nolan, Brian; Picketty, Thomas; Radermacher, Walter J.; Smeeding, Timothy M.; Stern, Nicholas; Stiglitz, Joseph; Sutherland, Holly
    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
    JEL: N0 E6
    Date: 2017–08–25
  4. By: Reeves, Aaron
    Abstract: Aaron Reeves surveys five books on the defining social, political and economic issue of our times. Review of 5 books on inequality: 1. Toxic Inequality: How America’s Wealth Gap Destroys Mobility, Deepens the Racial Divide, and Threatens Our Future by Thomas M. Shapiro 2. The Great Leveler: Violence and the History of Inequality from the Stone Age to the Twenty-First Century by Walter Scheidel 3. Basic Income: A Radical Proposal for a Free Society and a Sane Economy by Phillipe Van Parijs and Yannick Vanderborght 4. The Broken Ladder: How Inequality Affects the Way We Think, Live, and Die by Keith Payne 5. After Piketty: The Agenda for Economics and Inequality edited by Heather Boushey, J. Bradford DeLong and Marshall Steinbaum
    JEL: N0
    Date: 2017–03–16
  5. By: Yaroslav Rosokha; Julian Romero
    Abstract: We study the evolution of cooperation in the inde nitely repeated prisoner's dilemma when it is costly for players to adjust their strategy. Our experimental interface allows subjects to design a comprehensive strategy that then selects ac- tions for them in every period. We conduct lab experiments in which subjects can adjust their strategies during a repeated game but may incur a cost for doing so. We nd three main results. First, subjects learn to cooperate more when adjustments are costless than when they are costly. Second, subjects make more adjustments to their strategies when adjustments are costless, but they still make adjustments even when they are costly. Finally, we nd that cooperative strategies emerge over time when adjustments are costless but not when adjustments are costly. These results highlight that within-game experimentation and learning are critical to the rise of cooperative behavior. We provide simulations based on an evolutionary algorithm to support these results.
    Keywords: Inde nitely Repeated Games, Prisoner's Dilemma, Experiments, Co- operation, Strategies
    Date: 2017–07
  6. By: Sean Fahle; Santiago Sautua
    Abstract: We explore how risk preferences affect pro-social behavior in risky environments. We analyze a modified dictator game in which the dictator could, by reducing her own sure payoff, increase the odds that an unknown recipient wins a lottery. We first augment a standard social preferences model with reference-dependent risk attitudes and then test the model’s predictions for the dictator’s giving behavior using a laboratory experiment. As predicted by the model, giving behavior in the experiment is affected by the baseline risk faced by the recipient, the effectiveness of transfers in reducing baseline risk, and the dictator’s degree of loss aversion
    Keywords: other-regarding preferences; pro-social behavior; reference-dependent preferences; risk
    JEL: C91 D81 D91
    Date: 2017–11–02
  7. By: Thoma, Johanna
    Abstract: Economics Rules, Dani Rodrik, W. W. Norton & Company, 2015, xv + 253 pages.
    JEL: J1
    Date: 2017–08–28
  8. By: Olivier J Blanchard (Peterson Institute for International Economics)
    Abstract: Fifty years ago, Milton Friedman articulated the natural rate hypothesis. It was composed of two sub-hypotheses: First, the natural rate of unemployment is independent of monetary policy. Second, there is no long-run tradeoff between the deviation of unemployment from the natural rate and inflation. Both propositions have been challenged. Blanchard reviews the arguments and the macro and micro evidence against each and concludes that, in each case, the evidence is suggestive but not conclusive. Policymakers should keep the natural rate hypothesis as their null hypothesis but keep an open mind and put some weight on the alternatives.
    Keywords: Unemployment, Hysteresis, Inflation, Phillips Curve, Fluctuations
    JEL: E10 E2 E32
    Date: 2017–11
  9. By: Wüthrich, Nicolas
    JEL: J1
    Date: 2017–08
  10. By: Epstein, Gil S.; Gang, Ira N.
    Abstract: Can a society suffering contests between rich and poor achieve good governance in the face of endemic corruption? We examine a stylized poor state with weak institutions in which a “culture of evasion” damages state authority. Many evade tax payments, limiting the state’s economic development capability. In the face of extensive corruption, it is challenging for the state to establish and implement policies reflecting good governance; for example, a government that is accountable and transparent, efficient and effective, and follows the rule of law. The rich and poor possess different views on what is the appropriate level of enforcing proper payments of taxes due. The government needs to design an effective tax administration policy that minimizes corruption and is sensitive to the present and future needs of society. To do this it must understand what drives such widespread corruption.
    Keywords: corruption,tax administration,governance,rent-seeking
    JEL: O12 O15 D82 G38
    Date: 2017

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