nep-hpe New Economics Papers
on History and Philosophy of Economics
Issue of 2018‒06‒11
eight papers chosen by
Erik Thomson
University of Manitoba

  1. Comments On: Understanding and Misunderstanding Randomized Controlled Trails by Cartwright and Deaton By Imbens, Guido W.
  2. Revenu universel : L'état du débat By Guillaume Allegre; Henri Sterdyniak
  3. Theoretical and Methodological Context of (Post)-Modern Econometrics and Competing Philosophical Discourses for Policy Prescription By Jackson, Emerson Abraham
  4. Fairness in Winner-Take-All Markets By Björn Bartling; Alexander W. Cappelen; Mathias Ekström; Erik Ø. Sørensen; Bertil Tungodden
  5. Alexandre Lamfalussy and the monetary policy debates among central bankers during the Great Inflation By Ivo Maes; Piet Clement
  6. Public Goods Games and Psychological Utility: Theory and Evidence By Sanjit Dhami; Mengxing Wei; Ali al-Nowaihi
  7. Puppets on a String By Sweldens, S.T.L.R.
  8. Taxes and growth: new narrative evidence from interwar Britain By Cloyne, James; Dimsdale, Nicholas; Postel-Vinay, Natacha

  1. By: Imbens, Guido W. (Stanford University)
    Abstract: Deaton and Cartwright (DC2017 from hereon) view the increasing popularity of randomized experiments in social sciences with some skepticism. They are concerned about the quality of the inferences in practice, and fear that researchers may not fully appreciate the pitfalls and limitations of such experiments. I am more sanguine about the recent developments in empirical practice in economics and other social sciences, and am optimistic about the ongoing research in this area, both empirical and theoretical. I see the surge in use of randomized experiments as part of what Angrist and Pischke [2010] call the credibility revolution, where, starting in the late eighties and early nineties a group of researchers associated with the labor economics group at Princeton University, including Orley Ashenfelter, David Card, Alan Krueger and Joshua Angrist, led empirical researchers to pay more attention to the identification strategies underlying empirical work. This has led to important methodological developments in causal inference, including new approaches to instrumental variables, difference-in-differences, regression discontinuity designs, and, most recently, synthetic control methods (Abadie et al. [2010]). I view the increased focus on randomized experiments in particular in development economics, led by researchers such as Michael Kremer, Abhijit Banerjee, Esther Duflo, and their many coauthors and students, as taking this development even further.1 Nothwithstanding the limitations of experimentation in answering some questions, and the difficulties in implementation, these developments have greatly improved the credibility of empirical work in economics compared to the standards prior to the mid-eighties, and I view this as a major achievement by these researchers. It would be disappointing if DC2017 takes away from this, and were to move empirical practice away from the attention paid to identification and the use of randomized experiments. In the remainder of this comment I will discuss four specific issues. Some of these elaborate on points I raised in a previous discussion of D2010, Imbens [2010].
    Date: 2018–03
  2. By: Guillaume Allegre (Observatoire français des conjonctures économiques); Henri Sterdyniak (Observatoire français des conjonctures économiques)
    Abstract: Dans une situation de maintien d’un niveau élevé de chômage et de pauvreté, d’extension de la précarité du travail, de crainte de disparition des emplois du fait de l’automatisation, le projet de revenu universel s’est installé dans le débat économique et social en France comme dans d’autres pays développés. Il s’agirait de verser à toute personne résidante dans le pays une allocation mensuelle sans aucune condition de ressources, d’activité, de contrepartie. Dans le cadre de sa mission d’animation et d’éclairage du débat économique, l’OFCE a organisé, le 13 octobre 2016, une journée d’étude à laquelle ont été conviés des chercheurs qui avaient travaillé sur ce projet, pour le développer, le soutenir ou le critiquer. Un e-book rassemble la plupart des contributions qui ont été présentées et discutées durant cette journée, parfois revues compte-tenu des enseignements de la discussion. Les débats ont porté sur plusieurs points : Dans quel projet de société les propositions de revenu universel s’inscrivent-elles ? Quelles sont les modalités précises des projets en présence en termes de montant de l’allocation et d’insertion dans les dispositifs actuels de protection sociale ? Le revenu universel est-il finançable ? Quelles en seraient les conséquences financières pour les différentes catégories de ménages, en particulier pour ceux en situation de précarité financière ? Quel serait l’impact sur l’activité, l’emploi, le chômage, les salaires, les conditions de travail, en particulier sur les emplois pénibles, le travail à temps partiel, le travail précaire, les bas-salaires ? Le revenu universel est-il une réponse à la « fin du travail » ? Cette dernière est-elle une hypothèse crédible ? Quels sont les projets alternatifs pour lutter contre la pauvreté et la précarité du travail ?
    Keywords: revenu universel
    Date: 2017–03
  3. By: Jackson, Emerson Abraham
    Abstract: This research article was championed as a way of providing discourses pertaining to the concept of "Critical Realism (CR)" approach, which is amongst many othe forms of competing postmodern philosophical concepts for the engagement of dialogical discourses in the area of established econometric methodologies for effective policy prescription in the economic science discipline. On the the whole, there is no doubt surrounding the value of empirical endeavours in econometrics to address real world economic problems, but equally so, the heavy weighted use and reliance on mathematical contents as a way of justifying its scientific base seemed to be loosing traction of the intended focus of economics when it comes to confronting real world problems in the domain of social interaction. In this vein, the construction of mixed methods discourse(s), which favour that of CR philosophy is hereby suggested in this article as a way forward in confronting with issues raised by critics of mainstream economics and other professionals in the postmodern era.
    Keywords: Theoretical,Methodological Intervention,Critical Realism,Postmodern,Econometrics
    JEL: A12 B50 C18
    Date: 2018
  4. 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
  5. By: Ivo Maes (National Bank of Belgium and Robert Triffin Chair, Université catholique de Louvain and ICHEC Brussels Management School, Boulevard de Berlaimont 14, 1000 Brussels, Belgium); Piet Clement (Bank for International Settlements.)
    Abstract: The 1970s were a turbulent period in postwar monetary history. This paper focuses on how central bankers at the Bank for International Settlements (BIS), especially Alexandre Lamfalussy, the BIS’s Economic Adviser, responded to the Great Inflation. The breakdown of Bretton Woods forced central bankers to look for new monetary policy strategies as the exchange rate lost its central role. Lamfalussy, in his early years a Keynesian in favour of discretionary policies, moved to a "conservative Keynesian" position, acknowledging that a medium term orientation and the credibility of monetary policy were important to break inflationary expectations. However, Lamfalussy never moved to “monetarist” positions. Lamfalussy certainly acknowledged that monetary targets could reinforce the credibility and independence of monetary policy. However, he rejected mechanical rules. In essence he aimed for a middle position: rules applied with a pragmatic sense of discretion. In the early 1980s, with the rise of financial innovations, Lamfalussy would stress even more the limitations of monetary targeting. His focus turned increasingly to systemic financial stability risks, preparing the ground for the macroprudential approach of the BIS. In Lamfalussy's view, central banking remained an art, not a science.
    Keywords: Great Inflation, monetary policy, central banking, Alexandre Lamfalussy, BIS
    JEL: B22 E58 F44
    Date: 2018–04
  6. By: Sanjit Dhami; Mengxing Wei; Ali al-Nowaihi
    Abstract: We consider a theoretical model of a public goods game that incorporates reciprocity, guilt-aversion/surprise-seeking, and the attribution of intentions behind these emotions. In order to test our predictions, we implement the ‘induced beliefs method’ and a within-subjects design, using the strategy method. We find that all our psychological variables contribute towards the explanation of contributions. Guilt-aversion is pervasive at the individual-level and the aggregate-level and it is relatively more important than surprise-seeking. Our between-subjects analysis confirms the results of the within-subjects design.
    Keywords: public goods games, psychological game theory, reciprocity, surprise-seeking/guilt-aversion, attribution of intentions, induced beliefs method, within and between subjects designs
    JEL: D01 D03 H41
    Date: 2018
  7. By: Sweldens, S.T.L.R.
    Abstract: For more than a century, scholars in psychology have debated whether humans are ‘of two minds,’ that is, whether they have both conscious and unconscious thoughts, and whether both conscious and unconscious thought processes determine their behavior. According to Freud’s iceberg model, conscious thought is just the tip of the iceberg, with most of our thought processes taking place unconsciously. Marketing scholars and practitioners have embraced the iceberg model with great enthusiasm. They have incorporated models where people’s drives and motivations are built in layers, with only the top layer consciously accessible, but the real drivers hidden underneath. According to one of the most influential contemporary theories, human thinking is governed by dual systems. System 1, it is argued, is the evolutionarily oldest system, based in parts of the brain we share with lower animals, operates unconsciously, uncontrollably, with low effort, has huge capacity, is fast, nonverbal, parallel, and associative. System 2, conversely, is evolutionarily more recent, resides in our frontal cortex, operates consciously, controllably, with high effort, has small capacity, is slow, verbal, serial, and based on rules. Despite their intuitive appeal, dual system theories have been challenged in recent years. I discuss some of their more problematic aspects and the research I have conducted testing core propositions of the dual system approach. Especially my research on the way brands become more well-liked through advertising and conditioning procedures is highly relevant for the debate, but so is research on people’s risk perceptions and self-control performance. Overall, I have seen support for some of the key predictions of dual process theory, but no support at all for its strong claim that mental processes should clearly belong to one of two systems with highly separable features. I argue that we need to acknowledge that the human mind cannot be neatly divided into two complementary processing systems. Rather, we should recognize that thought processes can be characterized to a greater or lesser extent by some but not all the features of automaticity. Researchers should start recognizing the full complexity of the human mind and embrace research that is more detailed, more precise – and perhaps a bit less grand in its claims.
    Keywords: Consciousness, unconscious thought, dual processes, advertising, conditioning, marketing, consumer behavior
    JEL: C44 M31
    Date: 2018–05–18
  8. By: Cloyne, James; Dimsdale, Nicholas; Postel-Vinay, Natacha
    Abstract: The impact of fiscal policy on economic activity is still a matter of great debate. And, ever since Keynes first commented on it, interwar Britain, 1918-1939, has remained a particularly contentious case - not least because of its high debt environment and turbulent business cycle. This debate has often focused on the effects of government spending, but little is known about the effects of tax changes. In fact, a number of tax reforms in the period focused on long-term and social objectives, often reflecting the personality of British Chancellors. Based on extensive historiographical research, we apply a narrative approach to the interwar period in Britain and isolate a new series of exogenous tax changes. We find that tax changes have a sizable effect on GDP, with multipliers around 0.5 on impact and exceeding 2 within two years. Our estimates contribute to the historical debate about fiscal policy in the interwar period and are remarkably similar to the sizable tax multipliers found after WWII.
    Keywords: Macroeconomic Policy; Fiscal Policy; Taxation; Public Finance; Fiscal History; Multiplier; Narrative Approach
    JEL: E23 E32 E62 H2 H30 N1 N44
    Date: 2018–05

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