nep-hpe New Economics Papers
on History and Philosophy of Economics
Issue of 2018‒05‒07
28 papers chosen by
Erik Thomson
University of Manitoba

  1. Labour values and energy values By PARYS, Wilfried
  2. The Role of Financial Policy By Roger Farmer
  3. Substitutability and the Quest for Stability. By Jean-Sébastien Lenfant
  4. Three globalizations, not two: Rethinking the history and economics of trade and globalization By Thomas I. Palley
  5. Economizing on Scientific Debate By Olivier Godechot
  6. Static Stability in Games Part I: Symmetric and Population Games By Igal Milchtaich
  7. Was Pierson right? A synthetic control analysis of Reagan and Thatcher’s welfare state retrenchments By Federico Podestà
  8. The Political Economy of Ideas: On Ideas Versus Interests in Policymaking By Sharun Mukand; Dani Rodrik
  9. "Piketty is a Genius, but...": An Analysis of Journalistic Delegitimation of Thomas Piketty's Economic Policy Proposals By Rieder, Maria; Theine, Hendrik
  10. Fairness in winner-take-all markets By Björn Bartling; Alexander W. Cappelen; Mathias Ekström; Erik Ø. Sørensen; Bertil Tungodden
  11. On the question of the relevance of Economics as a science: Postmodern filosofia critique By Jackson, Emerson Abraham
  12. Social norms and tax compliance: Experiments and theory By López Pérez, Raúl; Ramírez Zamudio, Aldo.
  13. Observations on Cooperation. By Yuval Heller; Erik Mohlin
  14. The governor's dilemma: Competence versus control in indirect governance By Abbott, Kenneth W.; Genschel, Philipp; Snidal, Duncan; Zangl, Bernhard
  15. Decision Sciences, Economics, Finance, Business, Computing, and Big Data: Connections By Chang, C-L.; McAleer, M.J.; Wong, W.-K.
  16. The Biases of Others: Projection Equilibrium in an Agency Setting By Danz, David; Madarász, Kristóf; Wang, Stephanie
  17. Karl Marx als Klassiker: Freiheitsphilosoph, Systemdenker, ökonomischer Autodidakt, politischer Demagoge By Homann, Karl; Pies, Ingo
  18. Marx heute By Homann, Karl; Pies, Ingo
  19. Karl Marx und die katholische Soziallehre By Homann, Karl; Pies, Ingo
  20. The Economics of Justice as Fairness By Abatemarco, Antonio; Stroffolini, Francesca
  21. The principle of population vs. the Malthusian trap: A classical retrospective and resuscitation By Lüger, Tim
  22. Unternehmen handeln im öffentlichen Interesse By Pies, Ingo
  27. In Support of the Turner Hypothesis for the 19th Century American West: A Biological Response to Recent Criticisms By Scott A. Carson
  28. The Logic of Collective Action Revisited By Joachim Weimann; Jeannette Brosig-Koch; Timo Heinrich; Heike Hennig-Schmidt; Claudia Keser

  1. By: PARYS, Wilfried
    Abstract: In the history of economic thought various thinkers have been attracted by the problematic idea of a single cause of economic value. Today such ideas appear mostly in studies on the labour theory of value of Karl Marx. In 1867 his “Das Kapital” tried to explain the values of all commodities by a special common substance, the quantity of abstract labour embodied in them, i.e., the direct and indirect labour time necessary to produce them. Several well-known mainstream economists (for example, Wicksteed, Böhm-Bawerk, Wicksell and Pareto) quickly pointed out that labour was not the only common substance in commodities. Another problem was Marx’s deficient mathematics. In Marx’s system the same commodities can appear on the side of the inputs and on the side of the outputs. Today it is well-known that many analytical problems in such circular systems can be solved by means of simultaneous equations of the input-output type. Here the most original contributions were not made by leading economists mentioned above, but by rather unknown outsiders (Mühlpfordt, Dmitriev, Charasoff, Potron), whose pioneering works were neglected for decades. In December 1927, both Sraffa and Leontief, independently of each other, argued that the reduction of all commodities to labour values was not a unique process; from a formal point of view, it was possible to compute not only labour values, but also wheat values, coal values, etc. For various reasons, their insights of 1927 remained rather unnoticed for several decades. A few decades ago the high impact journal Science published some papers advocating the use of energy values, corresponding to the direct and indirect quantity of energy necessary to produce a commodity. The most conspicuous text of this type is the often cited paper “Embodied Energy and Economic Valuation” by Robert Costanza (published in Science in 1980), claiming that both theory and empiry suggest a close connection between prices and energy values. The energy theory of value is usually discussed outside the networks of orthodox or marxian economics, but the empirical and theoretical studies on energy values and labour values show several remarkable cases of analogous arguments and imperfections, both trying to support the use of a single substance of economic value. My paper considers both theoretical and empirical aspects of such discussions on labour values and energy values. I also use a simple numerical example, to illustrate the computation of both labour values and energy values via two methods: via a system of simultaneous input-output equations and via subsystems (vertically integrated systems that produce only one net output). The two computation methods are well-known from the rich literature on labour values, but comparing energy values and labour values forces me to a generalisation of the notion of a subsystem: in order to define this notion unambiguously, I need to specify not only the net output of the subsystem, but also its net input. If the only net input of the subsystem is energy, I use the expression “energy subsystem”. This concept is needed to establish a percentage formula for the deviation of prices from energy values, analogous to my formula for the deviation of prices from labour values. By generalising Sraffa’s notion of subsystems it is possible to explain why supporters of labour values and energy values both present misleadingly “good” empirical results for their favourite theory. Both groups should be more aware of the non-uniqueness of their exaggerated claims for their one sided theories of value.
    Keywords: Marx, Sraffa, Leontief, Costanza, Energy values, Labour values, Input-output analysis
    JEL: B51 C67 D57 Q40
    Date: 2018–04
  2. By: Roger 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.
    JEL: E3 E4
    Date: 2018–04
  3. By: Jean-Sébastien Lenfant (CLERSE - Centre Lillois d’Études et de Recherches Sociologiques et Économiques - UMR 8019 - Université de Lille, Sciences et Technologies - ULCO - Université du Littoral Côte d'Opale - CNRS - Centre National de la Recherche Scientifique)
    Abstract: In this paper, I propose to interpret the history of stability analysis of a Walrasian exchange economy through the lenses of the concept of substitutability. A purely mathematical approach of this story does not seem sufficient to account for the way economists have studied the question of stability and how thay have reacted to the results of this research program. My point is that mathematical constraints kept apart, the concept of substituability has shaped the path followed by stability analysis since the publication of Value and Capital (Hicks, 1939) up to the Sonnenschein-Mantel-Debreu theorems and beyond. Thus, I uphold that firstly, the concept of substitutability allows to catch the heuristic behind the work on stability, and secondly, it allows replacing the importance of SMD results in a broader context, giving a more subtle view of the ups and down of general equilibrium theory as a research program.
    Keywords: stability, general equilibrium, gross substitutability, substitutability, complementarity, Hicks (John Richard), law of demand, Sonnenschein-Mantel-Debreu, methodology
    Date: 2018–03
  4. By: Thomas I. Palley
    Abstract: The conventional wisdom is there have been two globalizations in the modern era. The first began around 1870 and ended in 1914. The second began in 1945 and is still underway. This paper challenges that view and argues there have been three globalizations, not two. The first half of the paper provides empirical evidence for the three globalizations hypothesis. The second half discusses the analytical implications of the three globalization hypothesis. The Victorian first globalization and Keynesian era second globalization were driven by gains from trade, and those gains increased industrialized country real wages. The neoliberal third globalization has been driven by industrial reorganization motivated by distributional conflict. Trade theory does not explain the third globalization; capital's share has increased at the expense of labor's; and there can be no presumption of mutually beneficial gains from the third globalization.
    Keywords: Globalization, trade theory, barge economics.
    Date: 2018
  5. By: Olivier Godechot (Observatoire sociologique du changement)
    Abstract: The book Le négationnisme économique. Et comment s’en débarrasser by Pierre Cahuc and André Zylberberg has sparked a heated debate in the French press and academy. Its aim is to uncover the inadequacies, knowledge gaps, errors, and denials on the part of researchers and public actors who criticize economic science, and especially those who criticize the latter’s dominant current, the so-called mainstream economics. Its main targets are critical economists, particularly “heterodox” or “appalled economists,” but also intellectual figures from other scientific disciplines (Pierre Bourdieu, Michel Onfray, Dominique Méda, Axel Kahn), CEOs (Jean-Louis Beffa, Louis Gallois), politicians (Michel Rocard, Daniel Cohn-Bendit, Barbara Romagnan), and newspapers (Alternatives économiques). [First paragraph]
    Keywords: Mainstream economics; Scientific debate
    Date: 2018–01
  6. By: Igal Milchtaich (Bar-Ilan University)
    Abstract: Static stability in strategic games differs from dynamic stability in only considering the players’ incentives to change their strategies. It does not rely on any assumptions about the players’ reactions to these incentives and it is thus independent of the law of motion (e.g., whether players move simultaneously or sequentially). This paper presents a general notion of static stability in symmetric N-player games and population games, of which evolutionarily stable strategy (ESS) and continuously stable strategy (CSS) are essentially special cases. Unlike them, the proposed stability concept does not depend on the existence of special structures in the game such as multilinear payoff functions or unidimensional strategy spaces.
    Date: 2017–07
  7. By: Federico Podestà
    Abstract: Pierson’s highly-regarded book, Dismantling the Welfare State? Reagan, Thatcher, and the Politics of Retrenchment suffers from a serious methodological drawback. The author draws his conclusions about welfare state resilience by scrutinizing what happened to social policy structure during and at the end of the two governments selected, ending up by falling into the well-known ‘post hoc ergo propter hoc’ fallacy. The present paper sets out to replicate Pierson’s analysis in a counterfactual framework of causal inference. Adopting the synthetic control method, the trajectories of several UK and US welfare-state measures, observed in the presence of Thatcher and Reagan’s administration, were contrasted with corresponding trajectories reconstructed in the absence of neo-conservative governments. This exercise confirmed Pierson’s substantive conclusion: the neo-conservative revolution of the 1980s did not significantly alter the UK or USA welfare state.
    Keywords: Welfare state retrenchment, Synthetic control analysis, Neo-conservative politics, Reagan and Thatcher’s administration, Pierson’s book
    JEL: C54 D78 H53 H55
    Date: 2018–04
  8. By: Sharun Mukand; Dani Rodrik
    Abstract: We develop a conceptual framework to highlight the role of ideas as a catalyst for policy and institutional change. We make an explicit distinction between ideas and vested interests and show how they feed into each other. In doing so the paper integrates the Keynes-Hayek perspective on the importance of ideas with the currently more fashionable Stigler-Becker (interests only) approach to political economy. We distinguish between two kinds of ideational politics – the battle among different worldviews on the efficacy of policy (worldview politics) versus the politics of victimhood, pride and identity (identity politics). Political entrepreneurs discover identity and policy ‘memes’ (narratives, cues, framing) that shift beliefs about how the world works or a person’s belief of who he is (i.e. identity). Our framework identifies a complementarity between worldview politics and identity politics and illustrates how they may reinforce each other. In particular, an increase in identity polarization may be associated with a shift in views about how the world works. Furthermore, an increase in income inequality is likely to result in a greater incidence of ideational politics. Finally, we show how ideas may not just constrain, but also ‘bite’ the interests that helped propagate them in the first instance.
    JEL: D72 D78
    Date: 2018–03
  9. By: Rieder, Maria; Theine, Hendrik
    Abstract: The continuous rise of socio-economic inequality over the past decades with its connected political outcomes such as the Brexit vote in the UK, and the election of Donald Trump are currently a matter of intense debate both in academia and in journalism. A significant sign of the heightened interest was the surprise popularity of Thomas Piketty's Capital in the 21st Century. The book reached the top of the bestseller lists and was described as a "media Sensation" and Piketty himself as a "rock star Economist". This paper, drawing from a major international and cross-disciplinary study, investigates the print media treatment in four European countries of economic policy proposals presented in Capital. Applying social semiotic and critical discourse analysis, we specifically focus on articles which are in disagreement with these proposals and identify five categories of counterarguments used against Piketty: authorisation, moralisation, rationalisation, portrayal of victimhood and inevitability. Providing textual and linguistic examples we demonstrate how the use of linguistic resources normalises and conventionalises ideology-laden discourses of economic means (taxation) and effects, reinforcing particular views of social relations and class as common sense and therewith upholding and perpetuating power relations and inequalities.
    Keywords: Thomas Piketty, Economic Inequality, economic ideology, Policy, Social Semiotics, Critical Discourse Analysis, economic discourse, media discourse, legitimation strategies
    Date: 2018–04
  10. By: Björn Bartling; Alexander W. Cappelen; Mathias Ekström; Erik Ø. Sørensen; Bertil Tungodden
    Abstract: The paper reports the first experimental study on people’s fairness views on extreme income inequalities arising from winner-take-all reward structures. We find that the majority of participants consider extreme income inequality generated in winner-take-all situations as fair, independent of the winning margin. Spectators appear to endorse a “factual merit” fairness argument for no redistribution: the winner deserves all the earnings because these earnings were determined by his or her performance. Our findings shed light on the present political debate on redistribution, by suggesting that people may object less to certain types of extreme income inequality than commonly assumed.
    Keywords: Winner-take-all reward structures, fairness, income inequality
    JEL: C91 D63
    Date: 2018–05
  11. By: Jackson, Emerson Abraham
    Abstract: This article has adopted an open discourse in addressing pertinent concerns about the scientific existence of economics as a discipline. In doing so, some (critical) Filosofia arguments have been provided in ensuring that a well balanced approach is taken on the subject. Obviously, the approach of Popperian falsification used by economic science to address scientific justification through its varied scientific platform of technology applications like EVIEWS, STATA, MatLab and many more, have been applauded. Albeit such advances, the views of modern and postmodern critics have also come out saliently in a bid to ensuring open discourses are brought to the fore as a way of adding scientific value to the subject matter. In concluding, it was acknowledged that more is needed in ensuring that economic science as practiced by economists takes an open approach to critical discourse(s), reflecting reality about its pursed scientific ventures, given the persistence of economic volatility manifested across the global community.
    Keywords: Economic Science,Scientific Methodology,Filosofia,Postmodern Critique
    JEL: B5 B41
    Date: 2018
  12. By: López Pérez, Raúl (Departamento de Análisis Económico (Teoría e Historia Económica). Universidad Autónoma de Madrid.); Ramírez Zamudio, Aldo. (Center for Economics, Banking and Finance Studies, Department of Economics, Universidad de Lima.)
    Abstract: We report data from an experiment in Peru where subjects anonymously decide how much of their endowment they donate to the Peruvian Government. The standard rational choice model and several well-known models of non-selfish preferences predict zero giving. Yet we observe that around 75% of the subjects give something (N = 164), with substantial heterogeneity. Our data is consistent with an account based on social norms: If compliance is not too costly, people comply with norms if (i) they perceive that such behavior sufficiently promotes social welfare and (ii) others are expected to respect norms as well (peer effects). Our paper contributes to a recent literature on tax morale emphasizing the importance of non-standard motivations on tax compliance and suggests that taxpayers are willing to give money to the government (e.g., paying taxes) if they believe that enough others give as well and that taxes are not wasted or ‘stolen’ by the government, but used to promote social welfare.
    Keywords: corruption, evasion, peer effects, social norms, tax compliance, tax morale
    JEL: C92 D91 H21 H26 H3
    Date: 2018–04
  13. By: Yuval Heller (Bar-Ilan University); Erik Mohlin
    Abstract: We study environments in which agents are randomly matched to play a Prisoner’s Dilemma, and each player observes a few of the partner’s past actions against previous opponents. We depart from the existing related literature by allowing a small fraction of the population to be commitment types. The presence of committed agents destabilizes previously proposed mechanisms for sustaining cooperation. We present a novel intuitive combination of strategies that sustains cooperation in various environments. Moreover, we show that under an additional assumption of stationarity, this combination of strategies is essentially the unique mechanism to support full cooperation, and it is robust to various perturbations. Finally, we extend the results to a setup in which agents also observe actions played by past opponents against the current partner, and we characterize which observation structure is optimal for sustaining cooperation.
    Keywords: Community enforcement; indirect reciprocity; random matching; Prisoner’s Dilemma; image scoring.
    JEL: C72 C73 D83
    Date: 2017–12
  14. By: Abbott, Kenneth W.; Genschel, Philipp; Snidal, Duncan; Zangl, Bernhard
    Abstract: No governor has sufficient capabilities to govern single-handedly; all governors rely on agents, and thus become principals. The "governor's dilemma" results from the tradeoff between agent competence and principal control. Competent agents are difficult to control because their policy contributions give them leverage over the principal; principal control impedes agent competence by constraining the development and exercise of agent capabilities. If a principal emphasizes control, it limits agent competence and risks policy failure; if it emphasizes competence, it provides opportunistic agents freedom to maneuver and risks control failure. This competence-control tradeoff applies in all governance domains: democratic or autocratic, domestic or international, public or private. We extend principal-agent theory by identifying four modes of indirect governance based on ex ante and ex post control relations: delegation, trusteeship, cooptation and orchestration. We then theorize the principal's choice among these modes as it seeks to balance competence and control. Finally, we analyze how the competence-control tradeoff contributes to dynamic instability within and across the modes of indirect governance.
    Keywords: governance,agent-principle theory,control,competence,Regieren,Prinzipal-Agenten Theorie,Kontrolle,Kompetenz
    Date: 2018
  15. By: Chang, C-L.; McAleer, M.J.; Wong, W.-K.
    Abstract: This paper provides a review of some connecting literature in Decision Sciences, Economics, Finance, Business, Computing, and Big Data. We then discuss some research that is related to the six cognate disciplines. Academics could develop theoretical models and subsequent econometric and statistical models to estimate the parameters in the associated models. Moreover, they could then conduct simulations to examine whether the estimators or statistics in the new theories on estimation and hypothesis have small size and high power. Thereafter, academics and practitioners could then apply their theories to analyze interesting problems and issues in the six disciplines and other cognate areas.
    Keywords: Decision sciences, economics, finance, business, computing, and big data, theoretical models, econometric and statistical models, applications
    JEL: A10 G00 G31 O32
    Date: 2018–03–01
  16. By: Danz, David; Madarász, Kristóf; Wang, Stephanie
    Abstract: We study strategic reasoning and the beliefs people form about the beliefs of others in the presence of private information. We find that while people naively project and think others have the same information as they do, they also anticipate the analogous projection of their differentially-informed opponents onto them. In turn, the typical person explicitly thinks that others form systematically biased beliefs. Specifically, our paper directly tests the model of projection equilibrium, Madarasz (2014, revised 2016), which posits a parsimonious one-to-one relationship between the partial extent to which a player projects and forms biased beliefs about the beliefs others,?, and the partial extent to which she anticipates but underestimate the same systematic bias in others' beliefs of her beliefs,?²². We find that the distribution of the partial extent to which players project onto others and the distribution of the partial extent to which they anticipate others' projection onto them is remarkably consistent with the tight link implied by the model.
    JEL: C9 D2 D8 D9
    Date: 2018–04
  17. By: Homann, Karl; Pies, Ingo
    Abstract: Dieser Kurzaufsatz versucht, Karl Marx als Klassiker ernst zu nehmen. Wir vertreten folgende Thesen: (1) Marx war ein Kämpfer für individuelle Freiheit. (2) Marx war ein Pionier des Systemdenkens. (3) Marx war ein ökonomischer Autodidakt. Als solchem ist ihm ein kapitaler Fehler unterlaufen. (4) Marx war ein sprachlich begnadeter Demagoge. Das macht seine Ideologie auch heute noch gefährlich.
    Keywords: Marx,Kapitalismus,Wettbewerb,Moral,Systemtheorie,Demagogie,Solidarität,Marx,Capitalism,Competition,Morality,System Theory,Demagogism,Solidarity
    Date: 2018
  18. By: Homann, Karl; Pies, Ingo
    Abstract: Dieser Kurzaufsatz versucht, Karl Marx als Klassiker ernst zu nehmen. Wir vertreten folgende Thesen: (1) Marx war ein Kämpfer für individuelle Freiheit. (2) Marx war ein Systemdenker, von dem sich die moderne Wirtschaftsethik auch heute noch fruchtbar inspirieren lassen könnte. (3) Marx war ein ökonomischer Autodidakt. Als solchem ist ihm ein kapitaler Fehler unterlaufen. (4) Marx war ein sprachlich begnadeter Demagoge. Das macht seine Ideologie auch heute noch gefährlich.
    Keywords: Marx,Kapitalismus,Wettbewerb,Moral,Systemtheorie,Demagogie,Solidarität,Capitalism,Competition,Morality,System Theory,Demagogism,Solidarity
    Date: 2017
  19. By: Homann, Karl; Pies, Ingo
    Abstract: In diesem Kurzaufsatz diskutieren wir die Gemeinsamkeiten und Unterschiede zwischen Karl Marx und der katholischen Soziallehre. Wir konzentrieren uns auf drei Vergleichspunkte: das Menschenbild, die soziale Frage und die Einstellung zum gesellschaftlichen Fortschritt.
    Keywords: Menschenbild,soziale Frage,Fortschritt,Marx,Katholische Soziallehre,Institution,Ordnung,Solidarität,Marktwirtschaft,Concept of Man,Social Question,Progress,Marx,Catholic Social Ethics,Institution,Order,Solidarity,Market Economy
    Date: 2018
  20. By: Abatemarco, Antonio; Stroffolini, Francesca
    Date: 2017
  21. By: Lüger, Tim
    Abstract: In spite of two centuries of extensive debate, a consistent framework of the classical theory of population on which economists can universally agree has not been established. This means that either the theory lacks consistency or it has been misunderstood in important ways. This paper attempts to settle this issue by arguing that the latter was the case, revealing prevailing misconceptions. Since a large amount of these misconceptions most probably arose from the lack of a consistent nomenclature, the paper intends to clarify the classical theory of population by employing unambiguous definitions of the principle of population, the Malthusian trap, positive checks and preventive checks to population. The classical theory of population can then be applied to analyze the transition from economic stagnation to economic growth. As a result, numerous current theories trying to explain the transition to growth that are based on an increase of production will prove secondary when compared to the great preventive check.
    Keywords: Demographic Transition,Malthusian Trap,Unified Growth Theory,Classical Growth Theory,Positive Checks,Preventive Checks
    JEL: B12 J1 N3 O11
    Date: 2018
  22. By: Pies, Ingo
    Abstract: In diesem Interview wird erläutert, (a) dass Unternehmen dem Gemeinwohl dienen, indem sie innovative und produktive Wertschöpfung betreiben, (b) dass Gewinne ein Signal und eine Belohnung für gelungene Wertschöpfung sind, weil sie zum Ausdruck bringen, dass die freiwillige Zahlungsbereitschaft der Kunden die Produktionskosten übersteigt, und (c) dass dem Staat die ordnungspolitische Funktion zukommt, Märkte für das Ge-meinwohl in Dienst zu nehmen.
    Keywords: Wettbewerb,Gewinn,Ordnungspolitik,gesellschaftliche Verantwortung,Wertschöpfung,Competition,Profit,Order Politics,Social Responsibility,Value Creation
    Date: 2017
    Date: 2018
    Date: 2018
    Date: 2018
    Date: 2018
  27. By: Scott A. Carson
    Abstract: In 1893, Frederick Jackson Turner proposed that America’s Western frontier was an economic ‘safety-valve,’ a place where settlers could migrate when conditions in eastern states and Europe crystalized against their upward economic mobility. However, recent studies suggest the Western frontier’s material conditions may not have been as advantageous as Jackson proposed because settlers lacked the knowledge and human capital to succeed on the Plains and Far Western frontier. This study illustrates that current and cumulative net nutrition on the Central Plains improved during the late 19th and early 20th centuries, indicating that recent challenges to the Turner hypothesis are not well supported by net nutrition studies. Net nutrition improve with agricultural innovations and biotechnologies on the western frontier, and rural agricultural workers net nutrition was better than from elsewhere within the US.
    Keywords: nineteenth century black and white stature variation, urbanization, US Central Plains
    JEL: I10 J11 J71 N31
    Date: 2018
  28. By: Joachim Weimann; Jeannette Brosig-Koch; Timo Heinrich; Heike Hennig-Schmidt; Claudia Keser
    Abstract: Since Mancur Olson’s “Logic of collective action” it is common conviction in social sciences that in large groups the prospects of a successful organization of collective actions are rather bad. Following Olson’s logic, the impact of an individual’s costly contribution becomes smaller if the group gets larger and, consequently, the incentive to cooperate decreases with group size. Conducting a series of laboratory experiments with large groups of up to 100 subjects, we demonstrate that Olson’s logic does not generally account for observed behavior. Large groups in which the impact of an individual contribution is almost negligible are still able to provide a public good in the same way as small groups in which the impact of an individual contribution is much higher. Nevertheless, we find that small variations of the MPCR in large groups have a strong effect on contributions. We develop a hypothesis concerning the interplay of MPCR and group size, which is based on the assumption that the salience of the advantages of mutual cooperation plays a decisive role. This hypothesis is successfully tested in a second series of experiments. Our result raises hopes that the chance to organize collective action of large groups is much higher than expected so far.
    Keywords: public goods, large groups
    JEL: C90
    Date: 2018

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