nep-hpe New Economics Papers
on History and Philosophy of Economics
Issue of 2018‒05‒14
thirteen papers chosen by
Erik Thomson
University of Manitoba

  1. Utility Matters: Edmond Malinvaud and growth theory in the 1950s and 1960s By Matheus Assaf; Pedro Garcia Duarte
  2. Discovery and Equilibrium in Games with Unawareness By Schipper, Burkhard C
  3. On the question of the relevance of Economics as a science: Postmodern filosofia critique By Jackson, Emerson Abraham
  4. "Reflections on the New Deal: The Vested Interests, Limits to Reform, and the Meaning of Liberal Democracy" By John F. Henry
  5. Fairness in Winner-Take-All Markets. By Bartling, Björn; Cappelen, Alexander W.; Ekström, Mathias; Sørensen, Erik Ø.; Tungodden, Bertil
  6. La fin du Consensus ? La crise économique et la crise de la macroéconomie By Francesco Saraceno
  7. Macroéconomie et information imparfaite By Paul Hubert; Giovanni Ricco
  8. I see myself as an empirical Keynesian By Henri Sterdyniak
  9. Book Review: myths and macro: macroeconomics and the Phillips curve myth by James Forder By Goodheart, Charles
  10. Some Notes on the Concept of Social Capital: A Review of Perspectives, Definitions and Measurement By Motkuri, Venkatanarayana
  11. Stabilizing Cooperative Outcomes in Two-Person Games: Theory and Cases By Brams, Steven J.; Ismail, Mehmet S.
  12. Test der neoklassischen Produktionsfunktion By Quaas, Georg
  13. Is Envy Harmful to a Society’s Psychological Health and Wellbeing? A Longitudinal Study of 18,000 Adults By Mujcic, Redzo; Oswald, Andrew J.

  1. By: Matheus Assaf; Pedro Garcia Duarte
    Abstract: The present-day standard textbook narrative on the history of growth theory usually takes Robert Solow’s 1956 contribution as a key starting point, with extensions on the savings decision (done by David Cass and Tjalling Koopmans in 1965) being the next important development. However, such account is historically misleading because it organizes past developments based on theoretical concerns. Our goal is to tell a richer story about the developments of growth theory from the 1950s to the mid 1960s, in the activity analysis literature that started before Solow’s model and never had him as a central reference. We stress the role played by Edmond Malinvaud, and take his travel from the French milieu of mathematical economics to the Cowles Commission in 1950-1951 and back to France as a guiding line. The rise of turnpike theory in the end of the 1950s generated a debate on the choice criteria of growth programs, opposing the productive efficiency typical of these models to the utilitarian approach supported by Malinvaud and Koopmans. The Vatican Conference of 1963, where Koopmans presented a first version of his 1965 model, was embedded in this debate. We argue that Malinvaud’s (and Koopmans’s) contributions were crucial to steer the activity analysis literature towards a utilitarian analysis of growth paths.
    Keywords: Edmond Malinvaud; Optimal Growth; Tjalling Koopmans; History of Growth Theory
    JEL: B21 B22 B23
    Date: 2018–04–11
  2. By: Schipper, Burkhard C
    Abstract: Equilibrium notions for games with unawareness in the literature cannot be interpreted as steady-states of a learning process because players may discover novel actions during play. In this sense, many games with unawareness are ``self-destroying'' as a player's representation of the game may change after playing it once. We define discovery processes where at each state there is an extensive-form game with unawareness that together with the players' play determines the transition to possibly another extensive-form game with unawareness in which players are now aware of actions that they have discovered. A discovery process is rationalizable if players play extensive-form rationalizable strategies in each game with unawareness. We show that for any game with unawareness there is a rationalizable discovery process that leads to a self-confirming game that possesses a self-confirming equilibrium in extensive-form rationalizable strategies. This notion of equilibrium can be interpreted as steady-state of both a discovery and learning process.
    Keywords: Self-confirming equilibrium, conjectural equilibrium, extensive-form rationalizability, unawareness, extensive-form games, equilibrium, learning, discovery
    JEL: C72 D83
    Date: 2018–04
  3. 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: B41 B5
    Date: 2018–02–01
  4. By: John F. Henry
    Abstract: I subject some aspects of Roosevelt's "New Deal" to critical analysis, with particular attention to what is termed "liberal democracy." This analysis demonstrates the limits to reform, given the power of "vested interests" as articulated by Thorstein Veblen. While progressive economists and others are generally favorably disposed toward the New Deal, a critical perspective casts doubt on the progressive nature of the various programs instituted during the Roosevelt administrations. The main constraint that limited the framing and operation of these programs was that of maintaining liberal democracy. The New Deal was shaped by the institutional forces then dominant in the United States, including the segregationist system of the South. In the end, vested interests dictated what transpired, but what did transpire required a modification of the understanding of liberal democracy. The following paper provides a compressed account of this tradition of endogenous financial market instability.
    Keywords: Vested Interests; New Deal; Planning; Liberalism
    JEL: B52 N2 N4 P1
    Date: 2018–05
  5. By: Bartling, Björn (University of Zurich); Cappelen, Alexander W. (Dept. of Economics, Norwegian School of Economics and Business Administration); Ekström, Mathias (Dept. of Economics, Norwegian School of Economics and Business Administration); Sørensen, Erik Ø. (Dept. of Economics, Norwegian School of Economics and Business Administration); Tungodden, Bertil (Dept. of Economics, Norwegian School of Economics and Business Administration)
    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: 2018–04–30
  6. By: Francesco Saraceno (Observatoire français des conjonctures économiques)
    Abstract: Le Nouveau Consensus qui a dominé la macroéconomie à partir des années quatre-vingt reposait sur une structure fondamentalement néoclassique : des marchés efficients qui convergent seuls à l'équilibre naturel et un rôle très limité pour la politique macroéconomique (surtout monétaire) pour lisser les fluctuations. La crise a ébranlé ce Consensus en marquant le retour en force de l'activisme budgétaire et monétaire, au moins dans le débat académique. La profession s'interroge donc sur les piliers du Consensus, allant de la taille du multiplicateur à la mise en place des réformes, en passant par les liens entre cycle et tendance. Il est encore trop tôt pour savoir à quoi ressemblera la macroéconomie de demain. Mais il faut espérer qu'elle sera plus éclectique et ouverte.
    Keywords: Crise économique; Politique budgétaire; Nouveau Consensus; Réformes
    Date: 2017–12
  7. By: Paul Hubert (Observatoire français des conjonctures économiques); Giovanni Ricco (Observatoire français des conjonctures économiques)
    Abstract: Cet article présente les contributions théoriques et empiriques récentes à la littérature macroéconomique qui remettent en question l'hypothèse d’information parfaite. En prenant en compte les frictions informationnelles rencontrées par les agents économiques, il est possible d'expliquer certaines des régularités empiriques qui ne peuvent pas être expliquées par le cadre standard des anticipations rationnelles avec information parfaite. À titre d’exemple, nous montrons que l’estimation du signe, de l’ampleur et de la persistance des effets des politiques monétaires et budgétaires peuvent varier lorsque l’on prend en compte les frictions informationnelles auxquelles sont confrontés les acteurs économiques.
    Keywords: Frictions informationnelles; Information imparfaite; Politiques économiques
    Date: 2017–12
  8. By: Henri Sterdyniak (Observatoire français des conjonctures économiques)
    Abstract: Henri Sterdyniak is a scientific adviser at the OFCE research institute – the Observatoire français des conjonctures économiques – where he has been working for more than 30 years, among other posts as a director of the department ‘economics of globalization’. From 1985 until 2013 he was also a professor of economics at the University Paris Dauphine, France. He is also one of the founding members of the Économistes Atterrés (the Appalled Economists), an association of French economists who object to neoliberal policies, formed in 2010. He has written extensively on various topics, including empirical macroeconomics, monetary policies, fiscal policies, globalization, European policies, and more specifically social policies and retirement systems. He has published hundreds of articles and reports, lately with Catherine Mathieu.
    Keywords: Keynes; Economist
    Date: 2017–12
  9. By: Goodheart, Charles
    JEL: J1 F3 G3
    Date: 2018–04
  10. By: Motkuri, Venkatanarayana
    Abstract: This paper delves into various perspectives – philosophical, sociological, economic and financial / business or oganisational - in literature on the concept of social capital. It presents a review of the definitions in broad literature categorised under various perspectives. While doing so, the focus ultimately narrowed down to definitions of social capital in business or organisational studies.
    Keywords: Social Capital
    JEL: A14 M10 M51 Z13
    Date: 2018–04
  11. By: Brams, Steven J.; Ismail, Mehmet S.
    Abstract: We analyze the 78 2 x 2 distinct strict ordinal games, 57 of which are conflict games that contain no mutually best outcome. In 19 of the 57 games (33%), including Prisoners’ Dilemma and Chicken, a cooperative outcome—one that is at least next-best for each player—is not a Nash equilibrium (NE). But this outcome is a nonmyopic equilibrium (NME) in 16 of the 19 games (84%) when the players start at this outcome and make farsighted calculations, based on backward induction; in the other three games, credible threats can induce cooperation. In two of the latter games, the NMEs are “boomerang NMEs,” whereby players have an incentive to move back and forth between two diagonally opposite NMEs, one of which is cooperative. In Prisoners’ Dilemma, the NE and one NME are not Pareto-optimal, but we conjecture that in all two-person games with strict preferences, there is at least one Pareto-optimal NME. As examples of NMEs that are not NEs, we analyze two games that plausibly model the choices of players in international relations: (i) no first use of nuclear weapons, a policy that has been adopted by some nuclear powers; and (ii) the 2015 agreement between Iran, and a coalition of the United States and other countries, that has forestalled Iran’s possible development of nuclear weapons.
    Keywords: Game theory, theory of moves, two-person games, international relations
    JEL: C70 D74 F50
    Date: 2018–04–19
  12. By: Quaas, Georg
    Abstract: The Cobb-Douglas production function has applications for firms, branches, industries, and for the macro-economies of nation-states as a whole. Throughout the course of his life, with the exception of his years as a senator, Paul H. Douglas consistently strived to gather all the supporting empirical evidence he could. Among others, he placed his hope in his former student, Paul A. Samuelson, and in Samuelson’s colleague Robert M. Solow, who pushed the production function forward “into new and more sophisticated fields.” Meanwhile, plenty of data on capital, labor, and output are available, but it seems as though no one is interested anymore in either the empirical evidence or the underlying logic of Solow’s sophisticated version of the old Cobb-Douglas theory. In this study, his method of segregating variations in output per head due to technical change from those due to changes in the availability of capital per head is applied to the (West) German economy. The temporal domain covers the development of the West German economy from 1950 to 1990 and after German unification, from 1991 to 2015. Even though it turns out that the underlying, true production functions are very similar, ex post prognoses of real wages with the help of the approximated first derivation of the complete production function are much better in the earlier than in the later period. This raises the question of whether factors are paid their marginal cost. Because the study is thought to serve as teaching material, certain mathematics concerning the production function are added. Several problems regarding the accurate testing of the function on the basis of Germany’s National Account dataset are discussed. Patterns that are consequences of the theory are confronted with empirical evidence resulting from 67 years of economic development. It might well be of political importance that the upward shift of the production function hypothetically caused by technical change has a tendency to fall.
    Keywords: production function, technical change, Cobb, Douglas, Solow, development of the German economy
    JEL: C12 C51 E23
    Date: 2018–04–25
  13. By: Mujcic, Redzo (Wirtschaftsuniversität Wien, Vienna); Oswald, Andrew J. (University of Warwick, CAGE, and IZA)
    Abstract: Nearly 100 years ago, the philosopher and mathematician Bertrand Russell warned of the social dangers of widespread envy. One view of modern society is that it is systematically developing a set of institutions - such as social media and new forms of advertising - that make people feel inadequate and envious of others. If so, how might that be influencing the psychological health of our citizens? This paper reports the first large-scale longitudinal research into envy and its possible repercussions. The paper studies 18,000 randomly selected individuals over the years 2005, 2009, and 2013. Using measures of SF-36 mental health and psychological well-being, four main conclusions emerge. First, the young are especially susceptible. Levels of envy fall as people grow older. This longitudinal finding is consistent with a cross-sectional pattern noted recently by Nicole E. Henniger and Christine R. Harris, and with the theory of socioemotional regulation suggested by scholars such as Laura L.Carstensen. Second, using fixed-effects equations and prospective analysis, the analysis reveals that envy today is a powerful predictor of worse SF-36 mental health and well-being in the future. A change from the lowest to the highest level of envy, for example, is associated with a worsening of SF-36 mental health by approximately half a standard deviation (p
    Date: 2018

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