nep-hpe New Economics Papers
on History and Philosophy of Economics
Issue of 2017‒12‒18
seventeen papers chosen by
Erik Thomson
University of Manitoba

  1. Turgot, Smith and Steuart on Stadial Histories By José M. Menudo
  2. The Rural Economics of René de Girardin: Landscapes at the Service of l’Idéologie Nobiliaire By José M. Menudo; Nicolas Rieucau
  3. Garegnani, Ackley and the years of high theory at Svimez By Cesaratto, Sergio
  4. Efficient Market Hypothesis, Eugene Fama and Paul Samuelson: A reevaluation By Thomas Delcey
  5. Stagflation and the crossroad in macroeconomics: the struggle between structural and New Classical macroeconometrics By Aurélien Goutsmedt
  6. Reacting to the Lucas Critique: The Keynesians' Pragmatic Replies By Aurélien Goutsmedt; Erich Pinzón-Fuchs; Matthieu Renault; Francesco Sergi
  7. Milton Friedman and the case for flexible exchange rates and monetary rules By Harris Dellas; George S. Tavlas
  8. Développements récents de l'économie comportementale et expérimentale : Introduction By Nicolas Jacquemet; Fabrice Le Lec
  9. Economics is Thick By McCain, Roger A.
  10. Un récit historique alternatif sur l’indépendance des banques centrales: la doctrine et les pratiques avant la théorie ou l’art avant la science By Adriano Do Vale
  11. Replication in experimental economics: A historical and quantitative approach focused on public good game experiments By Nicolas Vallois; Dorian Jullien
  12. Unhappiness and Pain in Modern America: A Review Essay, and Further Evidence, on Carol Graham’s Happiness for All? By David G. Blanchflower; Andrew Oswald
  13. Nash-2 equilibrium: selective farsightedness under uncertain response By Sandomirskaia, Marina
  14. States of Nature and States of Mind: A Generalised Theory of Decision-Making, evaluated by application to Human Capital Development By Iain Embrey
  15. Incertitude et prise de décision – les fondements de la Théorie Générale By Angel Asensio
  16. Die Neutralitätstheorie des Geldes: Ein kritischer Überblick By Ulaş Şener
  17. Was Domar Right? Serfdom and Factor Endowments in Bohemia By Alexander Klein; Sheilagh Ogilvie

  1. By: José M. Menudo (Department of Economics, Universidad Pablo de Olavide)
    Abstract: The theory of the stages of society appeared in the mid-18th century. Following a successful reception over the course of the second half of the century, the four-stage theory was finally adopted by Classical Economics, holding that the exchange economy is the final outcome of a long period of economic development. This paper carries out a comparative analysis of the stadial histories of Turgot, Smith and Steuart. We found theories which were similar, but which were identical in the pre-eminence of the productive forces and economic organisation. Firstly, a number of dynamic principles are noted?i.e., a natural tendency to improve their conditions, a series of shocks that change the historical stage and the innovative capacity of some individuals. Secondly, the necessary conditions for the movement from the agricultural stage to commercial society do not coincide. Turgot requires an accumulation of capital, Smith uses the market and Steuart points to the artificial institutions created by merchants. This is the central point in order to understand the differences between their economic theories.
    Keywords: Turgot, History of Economic Thought, Development Enlightenment, and Economic Methodology.
    JEL: B31 B10 O20 B11 B41
    Date: 2017–12
  2. By: José M. Menudo (Department of Economics, Universidad Pablo de Olavide); Nicolas Rieucau (Université Paris 8)
    Abstract: René-Louis de Girardin is remembered for having invited Rousseau at Ermenonville estate. Girardin believed it was necessary to further the debate on gardens on the basis of a principle of continuity that rejects any idea of enclosure. This made it possible to establish an agricultural model that increased production, and finally allowed the monopoly in grain sales to be broken. At the service of l’idéologie nobiliaire, his analysis shows the existence of a form of economic thinking in the second half of the 18th century that, giving primacy to agriculture, nevertheless cannot fall within the paths of physiocrats and agronomes.
    Keywords: Turgot, History of Economic Thought, Development Enlightenment, and Economic Methodology.
    JEL: B31 B10 O20 B11 B41
    Date: 2017–12
  3. By: Cesaratto, Sergio (University of Siena)
    Abstract: In the late 1950s, Svimez was an influential research centre on Italian economic and regional policies. It was advised and visited by top international development experts and by leading Italian economists. Pierangelo Garegnani, fresh from his seminal Ph.D. thesis on capital theory at Cambridge, wrote a report for Svimez, published in 1962, on the relevance of Keynes’ theory for economies at an intermediate stage of development, like Italy. Interestingly, in 1963 Gardner Ackley published a similar report for Svimez. The theoretical parts of Garegnani’s report were published in English in 1978-79 and 2015. In a final applied section, which has not yet been published, Garegnani estimates that a fuller utilisation of productive capacity would have allowed for the creation of 550 thousand additional jobs without problems relating to the balance of payments. In this section, Garegnani also raises several interesting theoretical issues. Ackley’s report is an econometric explanation of the Italian ‘economic miracle’ based on a demand-led growth supermultiplier model – a theoretical approach re-discovered by Bortis and Serrano, and recently taken up by Marc Lavoie and others. A comparison between these two genuine Keynesian approaches looks very promising.
    Keywords: Garegnani; Ackley; Svimez; Keynesian theory; growth theory
    JEL: B22 B24 B51
    Date: 2017–12
  4. By: Thomas Delcey (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique)
    Abstract: Two main claims are associated with the Efficient Market Hypothesis (EMH). First of all, the price changes are nearly random in the financial markets. Secondly, the prices reflect the economic fundamentals. The relation between these two claims remains unclear in the actual literature. The purpose of this article is to show that this confusion is not new but began during the theoretical construction of EMH in the 1960s. The analysis is based on the reading of their 1965 papers and on the archives of Paul Samuelson from the Paul A. Samuelson Papers, David M. Rubenstein Rare Book Manuscript Library at Duke University.
    Date: 2017–10–17
  5. By: Aurélien Goutsmedt (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, Chaire Energie & Prospérité - ENSAE ParisTech - École Nationale de la Statistique et de l'Administration Économique - Ecole Polytechnique - X - ENS Paris - Ecole Normale Supérieure de Paris - Institut Louis Bachelier)
    Abstract: The article studies the 1978 macroeconomics conference titled “After the Phillips Curve”, where Lucas and Sargent presented their fierce attack against structural macroeconometric models, “After Keynesian Macroeconomics”. The article aims at enlarging the comprehension of changes in macroeconomics in the 1970s. It shows: 1) that Lucas and Sargent dit not tackle directly the issue of the explanation of stagflation; 2) but that the struggle between different methodological stances in the conference cannot be separated from the way macroeconomists interpreted stagflation; 3) that it was not an opposition between being in favor or against microfounded models, but rather on the way we build microfoundations; 4) finally that the study of the 1978 conference opens the doors for scrutinizing the evolution of institution macroeconometric models of the 1970s which were not totally overthrown by Lucas and Sargent's arguments.
    Keywords: History of macroeconomics,Keynesian economics,Microfoundations,Structural Macroeconometric Models
    Date: 2017–10
  6. By: Aurélien Goutsmedt (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, Chaire Energie & Prospérité - ENSAE ParisTech - École Nationale de la Statistique et de l'Administration Économique - Ecole Polytechnique - X - ENS Paris - Ecole Normale Supérieure de Paris - Institut Louis Bachelier); Erich Pinzón-Fuchs (Universidad de los Andes [Bogota]); Matthieu Renault (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique); Francesco Sergi (University of Bristol [Bristol])
    Abstract: We illustrate how the Lucas Critique was called into question by Keynesian macroeconomists during the 1970s and 1980s. Our claim is that Keynesians' reactions were carried out from a pragmatic approach, which addressed the empirical and practical relevance of the Critique. Keynesians rejected the Critique as a general principle with no relevance for concrete macroeconometric practice; their rejection relied on econometric investigations and contextual analysis of the U.S. 1970s stagflation and its aftermath. Keynesians argued that the parameters of their models remained stable across this period, and that simpler ways to account for stagflation (such as the introduction of supply shocks into their models) provided better alternatives to improve policy evaluation.
    Keywords: History of macroeconomics,Lucas Critique,Keynesian macroeconometrics,Stagflation
    Date: 2017–10
  7. By: Harris Dellas (University of Bern and Bank of Greece); George S. Tavlas (Bank of Greece and University of Leicester)
    Abstract: Managed currency without definite, stable, legislative rules is one of the most dangerous forms of "planning." A free enterprise economy can function only within a legal framework of rules; and no part of that framework is more important than the rules which define the monetary system. In the past those rules have been empty and inadequate; but there is no tolerable solution to be found in resort to the wisdom of "authorities." No liberal can contemplate with equanimity the prospect of an economy in which every investment and business venture is largely a speculation in the future actions of the Federal Reserve Board. [Henry Simons (1935, p. 558)]
    Keywords: exchange rate systems; monetary rules; Taylor Rule.
    JEL: F02 F33 E52
    Date: 2017–10
  8. By: Nicolas Jacquemet (PSE - Paris School of Economics, CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique); Fabrice Le Lec (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique)
    Abstract: La méthode expérimentale a profondément influencé les développements récents de la sciencé economique. L'utilisation d'expériences, et son caractère quasi-systématiquè a partir des années 1990, a permis de développer uné evaluation empiriquè a la fois des hypothèses sur lesquelles repose l'analyse théorique (par exemple : combien d'acteurs sont nécessaires nécessairesà donner du sensàsensà la notion d'atomicité, qui se traduit empiriquement par des agents qui se comportent comme preneurs de prix ? Quel horizon temporel réplique la notion de jeu infiniment répété, dont la conséquence essentielle est de rendre les décisions contemporaines indépendantes desévénementsdesévénements futurs ?), mais aussi des prédictions de modèles spécifiques (l'´ equilibre offre-demande sur un marché, la formation des prix et l'allocation d'un bien dans le cadre d'une enchère). L'´ economie expérimentale a ainsi mis enévidenceenévidence la pertinence et la validité de certaines approches théoriques, malgré des hypothèses souvent très fortes sur les comportements individuels et sociaux, mais aussi leurs limites dans un certain nombre d'autres situations. Les deux lauréats du " Prix Nobel d'´ economie " (ou Prix de la Banque deSù ede en mémoire d'Alfred Nobel) dont la distinction fut explicitement motivée par leurs contributions expérimentales, illustrent parfaitement cette tension : les travaux de Vernon Smith montrent que, pour certaines institutions d'´ echanges bien définies, les marchés fonctionnent demanì ere très cohérente avec la théorie de la concurrence pure et parfaite, alors même que la plupart des hypothèses sous-jacentesàjacentesà cette théorie sont, au mieux, modérément satisfaites. A contrario, Daniel Kahneman, co-lauréat la même année, reçoit le prix pour la mise enévidenceenévidence de biais cognitifs et d'une tendance des individusàindividusà s'´ ecarter des canons de la rationalité mis en avant dans les modèles microéconomiques. Sur la base de cette tension et en lien trèstrèsétroit avec l'´ economie expérimentale, s'est développé un nouveau champ de recherche, l'´ economie comportementale, dont l'objectif est d'enrichir et amender l'approche théorique des décisions individuelles et sociales sur la base de régularités psy-chologiques. Il s'agit d'incorporer aux modèles canoniques les motivations non-monétaires et les inclinations moinségo¨ıstesmoinségo¨moinségo¨ıstes des individus, ou les raccourcis cognitifs sur lesquels ils peuvent se fonder, pour prendre leurs décisions ou encore d'´ eventuelles incohérences de com-portement. Les résultats de l'´ economie expérimentale, du moins les plus robustes et les plus souvent répliqués, ne font plusgù ere l'objet de débat au sein de la discipline, et l'approche comportementale s'est quantàquantà elle progressivement diffuséè a tous les champs de l'analyséanalysé economique.
    Date: 2017–09–01
  9. By: McCain, Roger A. (Drexel University)
    Abstract: Thick concepts, as understood in recent philosophy, are concepts that link fact and value in such a way that the factual part justifies the evaluation of the object described as good. Some philosophers argue that this complication in our understanding of valuative language calls on us to reconsider the maxim that "you can't get an ought from an is." Others argue that, since thick statements can be disentangled and treated as compounds of a descriptive and a valuative part, no such reconsideration is called for. Regardless how this disagreement is resolved, a person who uses a thick term with linguistic competence is expressing both a fact and a value (even if the value is not her own.) The terms commonly used in economics seem in this sense to be thick. Indeed, to the extent that they have to do with wants and their satisfaction, they must be thick, since a statement of want or satisfaction links fact and value in a way that is very much like the linkage that makes a term thick. Thus, as Little (1957) argued long ago, terms like "efficient" and "productive" are terms that unavoidably express facts as well as values -- they are thick. Orthodox economics clearly is a theory built of thick concepts, a thick theory. To that extent, economics per se is thick. For other schools of thought, some key concepts may also be thick, a possibility that would require inquiry largely beyond the scope of this study.
    Keywords: Thick concepts; philosophy
    JEL: A10 A12
    Date: 2017–11–29
  10. By: Adriano Do Vale (Centre d'Economie de l'Université de Paris Nord (CEPN))
    Abstract: La fin des années 80 et les années 90 ont été marquées par une grande vague d’adoption de l’indépendance des banques centrales (IBC). Les manuels et les revues de la littérature adoptent souvent un récit historique standard la présentant comme une sucess story, comme l’application d’un consensus théorique. L’art aurait suivi le pas de la science. Cet article a comme finalité ultime de proposer un récit alternatif concernant l’IBC. Adoptant une perspective historique centrée sur la première partie des années 20, nous entendons démontrer que la doctrine des banquiers centraux et les pratiques, comprises en tant qu’adoption de l’IBC, précédent la théorie, l’art venant alors avant la science. Vue de façon normative par la littérature économique à partir des années 80, l’indépendance est pensée, dès les années 20, par les praticiens qui posent eux-mêmes les principes du central banking. Dans la nouvelle donne de l’après-guerre, marquée par l’absence de l’ancrage nominal autrefois fourni par l’étalon-or, l’IBC s’avère un arrangement institutionnel alternatif face à l’inflation. Elle est recommandée au niveau international et constitue un principe central de la doctrine du central banking avancé par le gouverneur anglais Montagu Norman. Comme pour le principe d’indépendance, les pratiques précèdent la théorie. On considère qu’il y a eu une première vague d’adoption de l’IBC dans la première moitié des années 20, bien avant la vague d’adoption de l’IBC de la fin des années 80 et des années 90. Suite à des expériences hyper-inflationnistes et dans le cadre de plans de stabilisation monétaire sous tutelle internationale, les banques centrales de l’Autriche (1923), de la Hongrie (1924) et de l’Allemagne (1922-24) deviennent légalement indépendantes.
    Keywords: années 20, doctrine, indépendance des banques centrales, pratiques, récit, théorie
    JEL: B52 E58 F33 N44 N14
    Date: 2017–11
  11. By: Nicolas Vallois (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique); Dorian Jullien (GREDEG - Groupe de Recherche en Droit, Economie et Gestion - CNRS - Centre National de la Recherche Scientifique - UNS - Université Nice Sophia Antipolis - UCA - Université Côte d'Azur - UCA - Université Côte d'Azur)
    Abstract: We propose a historical perspective on replication in experimental economics focused on public good games. Our intended contribution is twofold: in terms of method and in terms of object. Methodologically, we blend traditional qualitative history of economics with a less traditional quantitative approach using basic econometric tools to detect unnoticed historical patterns of replication. In terms of our object, we highlight a type of replication that we call " baseline replication " , which is not present in explicit methodological discussions, yet central in the specificity of experimental economics regarding replication in economics.
    Keywords: Experimental Economics, Replication, History of Economic Thought,Methodology, Public Good Experiments
    Date: 2017–11–28
  12. By: David G. Blanchflower; Andrew Oswald
    Abstract: In Happiness for All?, Carol Graham raises disquieting ideas about today’s United States. The challenge she puts forward is an important one. Here we review the intellectual case and offer additional evidence. We conclude broadly on the author’s side. Strikingly, Americans appear to be in greater pain than citizens of other countries, and most sub-groups of citizens have downwardly trended happiness levels. There is, however, one bright side to an otherwise dark story. The happiness of black Americans has risen strongly since the 1970s. It is now almost equal to that of white Americans.
    JEL: I3 I31
    Date: 2017–11
  13. By: Sandomirskaia, Marina
    Abstract: This paper provides an extended analysis of an equilibrium concept for non-cooperative games with boundedly rational players: a Nash-2 equilibrium. Players think one step ahead and account all profitable responses of player-specific subsets of opponents because of both the cognitive limitations to predict everyone's reaction and the inability to make more deep and certain prediction even about a narrow sample of agents. They cautiously reject improvements that might lead to poorest profit after some possible reasonable response. For $n$-person games we introduce a notion of reflection network consisting of direct competitors to express the idea of selective farsightedness. For almost every 2-person game with a complete reflection network, we prove the existence of Nash-2 equilibrium. Nash-2 equilibrium sets in the models of price and quantity competition, and in Tullock's rent-seeking model with 2 players are obtained. It is shown that such a farsighted behavior may provide a strategic support for tacit collusion.
    Keywords: Iterated thinking; Improving deviation; Direct competitor; Heterogeneous farsightedness; Tacit collusion
    JEL: C72 D03 D43 D70 L13
    Date: 2017–12–05
  14. By: Iain Embrey
    Abstract: Canonical economic agents act so as to maximise a single, representative, utility function. However there is accumulating evidence that heterogeneity in thought-processes may be an important determinant of individual behaviour. This paper investigates the implications of a vector-valued generalisation of the Expected Utility paradigm, which permits agents either to deliberate as per Homo-economics, or to act impulsively. That generalised decision theory is applied to explain irrational educational investment decisions, persistent social inequalities, the crowding-out effect, the pervasive influence of non-cognitive ability on socio-economic outcomes, and the dynamic relationships between non-cognitive ability, cognitive ability, and behavioural biases. These results suggest that the generalised decision theory warrants further investigation.
    Keywords: Decision Theory, Dual-Self, Behavioural Anomalies, Human Capital, Social Exclusion, Unemployment
    JEL: D01 D81 D91 I24 I31 J24 J64 B41
    Date: 2017
  15. By: Angel Asensio (CEPN - Centre d'Economie de l'Université Paris Nord - UP13 - Université Paris 13 - USPC - Université Sorbonne Paris Cité - CNRS - Centre National de la Recherche Scientifique)
    Abstract: La Théorie Générale est ici présentée comme une reconstruction de la théorie macroéconomique basée sur un réexamen de ses fondements microéconomiques en rapport avec l’incertitude fondamentale.
    Keywords: incertitude,esprits animaux, fondements microéconomiques, Théorie Générale , prise de décision
    Date: 2017–10–16
  16. By: Ulaş Şener
    Abstract: Ökonomen wie Wirtschaftspolitiker berufen sich auf die Neutralitätstheorie des Geldes, wenn sie eine Entpolitisierung der Geldpolitik fordern. Sowohl die Theorie der Geldneutralität als auch das Paradigma der Entpolitisierung der Geldpolitik sind jedoch problematisch. Die politökonomischen Entwicklungen nach der globalen Finanz- und Wirtschaftskrise 2007/2008 und die jüngsten Kontroversen über die Rolle und Bedeutung von Geld haben dies deutlich vor Augen geführt. Die vorliegende Arbeit diskutiert zunächst die konzeptionellen Grundlagen und theoretischen Modelle der Geldneutralität. Anschließend werden die zentralen theoretischen Annahmen und Aussagen der Neutralitätstheorie aus einer kritischen heterodoxen Perspektive hinterfragt. Es wird argumentiert, dass Geld eine nicht-neutrale Produktionskraft ist, die weder ökonomisch noch sozial neutral ist. Die Bedingungen, unter denen Geld verfügbar ist und zirkuliert, sind richtungsweisend für die ökonomische Entwicklung. Daher kann es auch kein neutrales Geld oder gar eine apolitische Geldpolitik geben.
    Keywords: Geldneutralität, Heterodoxe Ökonomik, Endogenität des Geldes
    Date: 2016–08
  17. By: Alexander Klein (University of Kent); Sheilagh Ogilvie (University of Cambridge Abstract: Do factor endowments explain serfdom? Domar (1970) conjectured that high land-labor ratios caused serfdom by increasing incentives to coerce labor. But historical evidence is mixed and quantitative analyses are lacking. Using the Acemoglu-Wolitzky (2011) framework and controlling for political economy variables by studying a specific serf society, we analyze 11,349 Bohemian serf villages in 1757. The net effect of higher land-labor ratios was indeed to increase coercion. The effect greatly increased when animal labor wasincluded, and diminished as land-labor ratios rose. Controlling for other variables, factor endowments significantly influenced serfdom. Institutions, we conclude, are shaped partly by economic fundamentals.)
    Keywords: serfdom; land-labor ratio; institutions; labor coercion; rural-urban interaction JEL Classification: J47, N33, O43, P48
    Date: 2017

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