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on History and Philosophy of Economics |
| By: | Roger E A Farmer |
| Abstract: | I review the contribution and influence of Milton Friedman’s 1968 presidential address to the American Economic Association. I argue that Friedman’s influence on the practice of central banking was profound and that his argument in favour of monetary rules was responsible for thirty years of low and stable inflation in the period from 1979 through 2009. I present a critique of Friedman’s position that market-economies are self-stabilizing and I describe an alternative reconciliation of Keynesian economics with Walrasian general equilibrium theory from that which is widely accepted today by most neo-classical economists. My interpretation implies that government should intervene actively in financial markets to stabilize economic activity. |
| Keywords: | Keynesian economics, monetarism, natural rate of unemployment |
| JEL: | E3 E4 |
| Date: | 2018–03 |
| URL: | http://d.repec.org/n?u=RePEc:nsr:niesrd:491&r=hpe |
| By: | Martin Shubik (Cowles Foundation, Yale University) |
| Abstract: | Money is a mystery and ?nancial institutions are often regarded as guardians and promoters of the mystery. These sketches are designed to help any reader interested in, but not technically trained in economics, understand markets, money, credit and the evolution of a mass market system set in the rich context of its political environment and society. We all want a good society. What is a good society is given by our joint vision, mutual respect and social concern but the implementation of the vision calls for the use and understanding of money, markets and ?nance. The e?icient functioning of a dynamic economy calls for the presence of money and ?nancial institutions. The great variety of ?nancial institutions in any advanced economy requires an understanding of what the whole looks like. Verbal description provides an overarching view of the mixture of history, law, philosophy, custom, habit, and political structure that supplies the background for the functioning of the economy. This has been vividly illustrated by Adam Smith, his teacher the Reverend Francis Hutcheson and his close friend David Hume. There are two di?erent but highly allied themes covered here. The ?rst explains the worth of economic theory and its importance while connecting it with the world of politics in which the economy dwells. The second is the application of economic thought to the operating problems of every society. The ?rst theme is covered in the ?rst nine chapters. Chapters 1, 2, and 3 supply the rich context of history, society, polity and law in which every economy is embedded. These chapters require no symbols or technical depth to be understood. In contrast Chapters 4 to 9 o?er a reasonably nontechnical exposition of some of the considerable development in formal economic theory pertaining to money and ?nancial institutions as economics becomes more scienti?c, balancing quantitative measures with quali?cations that help to explain what the numbers mean. The second theme is developed in Chapters 10-13 where economic theory with all of its abstractions has to be connected with social and political reality before it can be of use. This calls for both and understanding of physical and social facts, and an appreciation of the role of moral sentiment. Chapters 13 and 14 consider some alternative scenarios that we face in the near future. |
| Keywords: | Evolution of money, Coordination, Division of labor |
| JEL: | C70 D21 |
| Date: | 2018–03 |
| URL: | http://d.repec.org/n?u=RePEc:cwl:cwldpp:2118r&r=hpe |
| By: | John E. Roemer (Dept. of Political Science & Cowles Foundation, Yale University) |
| Abstract: | Economic theory has focused almost exclusively on how humans compete with each other in their economic activity, culminating in general equilibrium (Walras) and game theory (Nash). Cooperation in economic activity is, however, important, and is virtually ignored. Because our models influence our view of the world, this theoretical lacuna biases economists’ interpretation of economic behavior. Here, I propose models that provide micro-foundations for how cooperation is decentralized by economic agents. It is wrong, in particular, to view competition as decentralized and cooperation as organized only by central diktat. My approach is not to alter preferences, which is the strategy behavioral economists have adopted to produce cooperation, but rather to alter the way that agents optimize. Whereas Nash optimizers view other players in the game as part of the environment (parameters), Kantian optimizers view them as part of action. When formalized, this approach resolves the two major failures of Nash optimization from a welfare viewpoint -- the Pareto inefficiency of equilibria in common-pool resource problems (the tragedy of the commons) and the inefficiency of equilibria in public-good games (the free rider problem). An application to market socialism shows that the problems of efficiency and distribution can be completely separated: the dead-weight loss of taxation disappears. |
| Keywords: | Kantian equilibrium, cooperation, tragedy of the commons, free rider problem, market socialism |
| JEL: | D50 D60 D70 |
| Date: | 2018–03 |
| URL: | http://d.repec.org/n?u=RePEc:cwl:cwldpp:2125&r=hpe |
| By: | Egbert, Henrik |
| Abstract: | This paper puts Marcel Mauss’s concept on money in the context of economic theories. Mauss articulated his thoughts on money in the first decades of the 20th century. They are considerably less known and discussed than his famous essay on ‘the gift’. Nevertheless, his contributions on the origin and function of money are worth being examined in economics as well as in economic-anthropological discourse. This essay relates Mauss’s ideas to microeconomic theories. The argument pursued is that his concepts on money are both compatible with neoclassical, and with New Institutional Economic theories. For this purpose, the text addresses three parallels. |
| Keywords: | Marcel Mauss; money; the gift; history of economic thought |
| JEL: | B15 Z10 Z13 |
| Date: | 2018–03–27 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:85522&r=hpe |
| By: | Michael D. Bordo; Pierre Siklos |
| Abstract: | Central banks have evolved for close to four centuries. This paper argues that for two centuries central banks caught up to the strategies followed by the leading central banks of the era; the Bank of England in the eighteenth and nineteenth centuries and the Federal Reserve in the twentieth century. It also argues that, by the late 20th century, small open economies were more prone to adopt a new policy regime when the old one no longer served its purpose whereas large, less open, and systemically important economies were more reluctant to embrace new approaches to monetary policy. Our study blends the quantitative with narrative explanations of the evolution of central banks. We begin by providing an overview of the evolution of monetary policy regimes taking note of the changing role of financial stability over time. We then provide some background to an analysis that aims, via econometric means, to quantify the similarities and idiosyncrasies of the ten central banks and the extent to which they represent a network of sorts where, in effect, some central banks learn from others. |
| Keywords: | monetamonetary policy regimes, inflation, small open economies |
| JEL: | E02 E31 E32 E42 E58 |
| Date: | 2017–05 |
| URL: | http://d.repec.org/n?u=RePEc:hoo:wpaper:17105&r=hpe |
| By: | Mongin, Philippe; Cozic, Mikaël |
| Abstract: | Nudge is a concept of policy intervention that originates in Thaler and Sunstein's (2008) popular eponymous book. Following their own hints, we distinguish three properties of nudge interventions: they redirect individual choices by only slightly altering choice conditions (here nudge 1), they use rationality failures instrumentally (here nudge 2), and they alleviate the unfavourable effects of these failures (here nudge 3). We explore each property in semantic detail and show that no entailment relation holds between them. This calls into question the theoretical unity of nudge, as intended by Thaler and Sunstein and most followers. We eventually recommend pursuing each property separately, both in policy research and at the foundational level. We particularly emphasize the need of reconsidering the respective roles of decision theory and behavioural economics to delineate nudge 2 correctly. The paper differs from most of the literature in focusing on the definitional rather than the normative problems of nudge. |
| Keywords: | nudge; liberal paternalism; policy analysis; behavioural economics; decision theory; rationality; decision biases; Thaler and Sunstein; Kahneman and Tversky |
| JEL: | D03 D18 D70 K32 K39 M38 |
| Date: | 2017–01–01 |
| URL: | http://d.repec.org/n?u=RePEc:ebg:heccah:1186&r=hpe |
| By: | Michael D. Bordo |
| Abstract: | Allan Meltzer was one of the leading monetary economists of the twentieth century. Allan was a key player in the debates over Monetarist and Keynesian doctrines as well as the debates over how to conduct monetary policy. He was always a strong advocate for rules-based monetary and lender of last resort policy. A salient part of his contribution was his monumental two volume History of the Federal Reserve 1913 to 1986 (2003 and 2010). In this essay, I present the main arguments of the History and provide an evaluation his contribution. |
| Keywords: | Meltzer, Federal Reserve, monetary economics, monetary policy |
| JEL: | N12 N22 |
| Date: | 2017–07 |
| URL: | http://d.repec.org/n?u=RePEc:hoo:wpaper:17107&r=hpe |
| By: | Alberto Abadie |
| Abstract: | Significance tests are probably the most common form of inference in empirical economics, and significance is often interpreted as providing greater informational content than non-significance. In this article we show, however, that rejection of a point null often carries very little information, while failure to reject may be highly informative. This is particularly true in empirical contexts that are typical and even prevalent in economics, where data sets are large (and becoming larger) and where there are rarely reasons to put substantial prior probability on a point null. Our results challenge the usual practice of conferring point null rejections a higher level of scientific significance than non-rejections. In consequence, we advocate a visible reporting and discussion of non-significant results in empirical practice. |
| JEL: | C01 C12 |
| Date: | 2018–03 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:24403&r=hpe |
| By: | Dietrich, Franz; Spiekermann, Kai |
| Abstract: | We give a review of jury theorems, including Condorcet's (1785) classic theorem and several later refinements and departures. The review comes with a critique of jury theorems from a social-epistemology perspective. We assess the plausibility of the theorems' conclusions and premises and the potential of jury theorems to serve as formal arguments for the 'wisdom of crowds'. In particular, we argue (i) that there is a fundamental tension between voters' independence and voters' competence, hence between the two premises of typical jury theorems; (ii) that the (asymptotic) conclusion that 'huge groups are infallible', reached by many jury theorems, is an artifact of unjustified premises; and (iii) that the (non-asymptotic) conclusion that 'larger groups are more reliable', also reached by many jury theorems, is not an artifact and should be regarded as the more adequate formal rendition of the 'wisdom of crowds'. |
| Keywords: | jury theorems, Condorcet jury theorem, social epistemology, wisdom of crowds |
| JEL: | C10 C12 D70 D71 D79 D82 D83 K0 |
| Date: | 2016–07 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:72951&r=hpe |
| By: | Breitmoser, Yves (HU Berlin); Vorjohann, Pauline (HU Berlin) |
| Abstract: | Why do people give when asked, but prefer not to be asked, and even take when possible? We show that standard behavioral axioms including separability, narrow bracketing, and scaling invariance predict these seemingly inconsistent observations. Specifically, these axioms imply that interdependence of preferences (\"altruism\") results from concerns for the welfare of others, as opposed to their mere payoffs, where individual welfares are captured by the reference-dependent value functions known from prospect theory. The resulting preferences are non-convex, which captures giving, sorting, and taking directly. Re-analyzing choices of 981 subjects in 83 treatments covering many variants of dictator games, we find that individual reference points are distributed consistently across studies, allowing us to classify subjects as either non-givers, altruistic givers, or social pressure givers and use welfare-based altruism to reliably predict giving, sorting, and taking across experiments. |
| Keywords: | social preferences; axiomatic foundation; robustness; giving; charitable donations; |
| JEL: | C91 D64 D03 |
| Date: | 2018–03–28 |
| URL: | http://d.repec.org/n?u=RePEc:rco:dpaper:89&r=hpe |
| By: | Nidhi Kaushal (Eng.at I.I.T. Roorkee, India); Sanjit Mishra (Eng.at I.I.T. Roorkee, India) |
| Abstract: | Principles have a significant place in the civilization. These standards were deep-rooted in the psychological framework of mind. In India, these ordinary strategies set up by ancient people have been accepted and followed in today’s modern world of competition. We have focused this research paper on the lessons of management from usual customs. We interviewed vegetable vendors to learn management lessons from their life. Data have been taken from the smaller regions. We found that they have conventional values for management of their business. They have a strong vision and set of beliefs, which stand them with profit in terms of values rather than money in the modern competitive world. The hypothesis included that the conventional management followed by common people has its strong place in modern society. We have described the supremacy of traditional management in India and its implication upon the modern management concepts of profit maximization. |
| Keywords: | Belief, Custom, Management, Strategy, Wisdom |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:smo:npaper:002&r=hpe |
| By: | Fabrizio Filioli Uranio (LARHRA - LAboratoire de Recherche Historique Rhône-Alpes - UMR5190 - UPMF - Université Pierre Mendès France - Grenoble 2 - ENS Lyon - École normale supérieure - Lyon - UL2 - Université Lumière - Lyon 2 - Université Jean Moulin - Lyon III - CNRS - Centre National de la Recherche Scientifique); Gaetano Sabatini (Università degli Studi Roma Tre) |
| Abstract: | This article aims at studying the formation process of personal identities of men forced to work at the oar in Naples at the end of the 16th century in comparison with the Kingdom of Valencia at the beginning of the 17th. At that time, Naples and Valencia were two of the most important slave markets as well as trading cities of the Spanish Empire. The research will take into account two types of sources that have remained largely unexplored by historiography to date, and especially a book dating back to 1585 detailing the biographies of 657 slaves. This will make it possible to focus in depth on slaves identities and in particular on the estimation process regarding their price. Who were the slaves? How was their price calculated? What was the relationship between their price and personal 'identity'? What was the difference between their use-value and trading value? In general, what were the negotiation processes underpinning the markets of men and what was the role played by the slaves themselves? These are the main questions the project aims to answer. The idea is that aspects involved in negotiation processes were at the same time economic, social and psychological, insofar as they significantly affected self-perception. |
| Abstract: | In questo articolo si intende studiare il processo di formazione delle identità personali dei forzati e degli schiavi delle galere a Napoli alla fine del XVI secolo, confrontadolo con dati relativi al Regno di Valencia al principio del XVII. In quella fase storica Napoli e Valencia erano certamente due tra i principali nodi commerciali e mercati della schiavitù dell'impero spagnolo. In questa ricerca vengono prese in considerazione due tipi di fonti diverse, rimaste per lo più inesplorate dalla storiografia. In particolar modo, si vuol mettere in evidenza il contenuto di un registro napoletano del 1585 che presenta le biografie di 657 schiavi, rendendo possibile far luce sulle identità degli schiavi e dei forzati e, soprattutto, sul processo di definizione del loro prezzo. Chi erano gli schiavi? Come veniva calcolato il loro prezzo? Qual era la relazione tra il loro prezzo e la loro identità personale? Qual era la differenza tra il loro valore d'uso e il loro valore di scambio? In generale quali erano i processi di negoziazione interni ai mercati? E qual era il ruolo svolto dagli stessi schiavi nella negoziazione? La proposta che qui si avanza è che nei processi di negoziazione agissero fattori non solo economici, ma anche sociali e psicologici, che potevano arrivare a riguardare la stessa percezione che gli schiavi avevano di sé. PAROLE CHIAVE: Schiavitù mediterranea, forzati, identità personali, valore d'uso, valore di scambio, processi di negoziazione. |
| Keywords: | forced men,personal identities,use value,trading value,negotiation processes,Mediterranean slavery |
| Date: | 2017–12–18 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:halshs-01728641&r=hpe |
| By: | Macher, Flora |
| Abstract: | The current literature is inconclusive on the relative importance of foreign and domestic factors in bringing about the Austrian financial crisis in 1931. This paper offers new data to bring further clarity to this issue and emphasises the importance of a domestic factor: universal banks’ exposure to industrial enterprises. Industrial enterprises were the universal banks’ main borrowers and creditors. During the 1920s they did not perform well, and made the universal banks insolvent. The Credit-Anstalt, which became an ‘acquirer of last resort’ for weak universal banks during the 1920s, may have avoided its own demise had it been spared of one bank’s, the Unionbank’s assets. |
| Keywords: | Great Depression; banking crisis; Credit-Anstalt; 1931; Central Europe; Austria |
| JEL: | N24 |
| Date: | 2018–02 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:wpaper:87151&r=hpe |
| By: | Karos, Dominik (General Economics 1 (Micro)); Rachmilevitch, Shiran (university of haifa) |
| Abstract: | A payoff allocation in a bargaining problem is midpoint dominant if each player obtains at least one n-th of her ideal payoff. The egalitarian solution of a bargaining problem may select a payoff configuration which is not midpoint dominant. We propose and characterize the solution which selects for each bargaining problem the feasible allocation that is closest to the egalitarian allocation, subject to being midpoint dominant. Our main axiom, midpoint monotonicity, is new to the literature; it imposes the standard monotonicity requirement whenever doing so does not result in selecting an allocation which is not midpoint dominant. In order to prove our main result we develop a general extension theorem for bargaining solutions that are order-preserving with respect to any order on the set of bargaining problems. |
| Keywords: | bargaining, egalitarianism, midpoint domination |
| JEL: | C71 C78 D61 D63 |
| Date: | 2018–03–29 |
| URL: | http://d.repec.org/n?u=RePEc:unm:umagsb:2018007&r=hpe |
| By: | Raymond Caraher (Hampshire College); Michael Ash (Department of Economics and School of Public Policy, University of Massachusetts, Amherst) |
| Abstract: | We replicate Ashraf and Galor (2013) and find that its conclusions concerning the association between human genetic diversity and economic development depend substantially on coding errors and sample selection. We correct the coding errors and add or update data on genetic diversity and population density from high-quality sources. We find little support for the hypothesis that variation in genetic diversity among subpopulations has a systematic relationship with economic development. |
| Keywords: | genetics, development |
| JEL: | N10 N30 N50 O10 O50 Z10 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:ums:papers:2018-05&r=hpe |
| By: | Henrik Egbert (Anhalt University of Applied Sciences) |
| Abstract: | This short note illustrates how social structures and behavior of scientists in the societal sub-system of open science resemble patterns analyzed in the Gift, an essay written by Marcel Mauss nearly 100 years ago. The presented analysis goes beyond existing interpretations of gift giving in science. The latter has mainly focused on the exchange of knowledge and citations. I argue that the Gift explains also identity, competition, co-opetition, rituals, and punishment. Mauss’s Gift is seen as a complementary model to existing economic and sociological approaches regularly used to analyze structures and behavior in open science. By accentuating such an anthropological approach, I conclude that the Gift provides explanations of the stability and the expansion of the open science community. |
| Keywords: | open science; scientific competition; gift; Marcel Mauss; reciprocity; anthropology of open science |
| JEL: | A12 A14 Z11 Z13 |
| Date: | 2018–04 |
| URL: | http://d.repec.org/n?u=RePEc:sko:wpaper:bep-2018-04&r=hpe |
| By: | Nicholas Oulton (Centre for Macroeconomics (CFM); National Institute of Economic and Social Research; Economic Statistics Centre of Excellence) |
| Abstract: | I propose a new explanation for the UK productivity puzzle. I graft the Lewis (1954) model onto a standard Solow growth model. What I call the neo-Lewis model is identical to the Solow model in good times. But in bad times foreign demand for a country’s exports is constrained below potential supply. This makes labour productivity growth depend negatively on the growth of labour input. I also argue that the neo-Lewis model can explain the fall in TFP growth, in the UK and elsewhere, after 2007. The predictions of the neo-Lewis model are tested on data for 23 advanced countries and also on a larger sample of 52 countries and find support. |
| Keywords: | Productivity, Slowdown, TFP, Capital, Lewis, Immigration |
| JEL: | E24 O41 O47 J24 F43 F44 |
| Date: | 2018–03 |
| URL: | http://d.repec.org/n?u=RePEc:cfm:wpaper:1809&r=hpe |