nep-hpe New Economics Papers
on History and Philosophy of Economics
Issue of 2018‒06‒18
nineteen papers chosen by
Erik Thomson
University of Manitoba

  1. Do pension participants want the freedom to choose or the freedom to snooze? By van Dalen, Harry; Henkens, Kene
  2. SOCIAL JUSTICE: SEN AGAINST HAYEK AND BOTH FACING RAWLS. An a contrario argument for the contractualist approach of liberalism. By Claude Gamel
  3. Destabilizing orders - Understanding the consequences of neoliberalism. Proceedings of the MaxPo Fifth-Anniversary Conference, Paris, January 12-13, 2018 By Andersson, Jenny; Godechot, Olivier
  4. Fairness in Winner-Take-All Markets By Bartling, Björn; Cappelen, Alexander W; Ekström, Mathias; Sørensen, Erik Ø.; Tungodden, Bertil
  5. We are Ninjas: How Economic History has Infiltrated Economics By Claude Diebolt; Michael Haupert
  6. Replication Studies in Economics: How Many and Which Papers Are Chosen for Replication, and Why? By Frank Mueller-Langer; Benedikt Fecher; Dietmar Harhoff; Gert G. Wagner
  7. Jean-Michel Grandmont - A Forthcoming Mind By Laurent Linnemer; Michael Visser
  8. Les réformes structurelles : philosophie sociale et choix politique By Jean-Luc Gaffard
  9. Monetary policy in perspective of Umer Chapra By Arikha, Dahlia
  10. Cooperation Creates Special Moral Obligations By Alexander W. Cappelen; Varun Gauri; Bertil Tungodden
  11. Is Inequality Increasing in r-g? The Dynamics of Capital’s Income Share in the UK, 1210-2013 By MADSEN, Jakob B
  12. Low Risk as a Predictor of Financial Crises By Jon Danielsson; Marcela Valenzuela; Ilknur Zer
  13. Experiments on macroeconomics: methods and applications By Camille Cornand; Frank Heinemann
  14. Die Theorie der fairen geometrischen Rendite By Sonntag, Dominik
  15. The economics of Edwardian imperial preference: what can New Zealand reveal? By Varian, Brian
  16. The Political Behavior of Wealthy Americans: Evidence from Technology Entrepreneurs By Broockman, David; Ferenstein, Greg F.; Malhotra, Neil
  17. Shedding Light on Our Economic and Financial Lives By Jeff Larrimore; Alex Durante; Kimberly Kreiss; Ellen A. Merry; Christina Park; Claudia R. Sahm
  18. The Engines of the Creative Response: Reactivity and Knowledge Governance. By Antonelli, Cristiano
  19. On the Macroeconomic Consequences of Over-Optimism By Paul Beaudry; Tim Willems

  1. By: van Dalen, Harry (Tilburg University, School of Economics and Management); Henkens, Kene (Tilburg University, School of Economics and Management)
    Abstract: Individual freedom of choice is a much heralded and cherished principle in democracies. Milton Friedman and colleagues at his alma mater, the University of Chicago, made this a cornerstone of their belief (Friedman & Friedman, 1990). The freedom of choice is the antidote to excessive government interference and an instrument which enables people to realize their goals and discipline agents and organizations. The call for freedom is getting louder as individualization of every life is becoming more and more visible and trust in institutions is eroding. Numerous sociologists of name and fame (Beck, 2002; Putnam, 2001) have documented this trend and predicted its dire consequences. Policy makers have translated this trend into privatizing tasks and services which were financed or provided on a collective scale. Of course, the question remains: do people really want to take the fate of their lives in their own hands? For simple products and services freedom can be safely entrusted to individuals, but for complex services with long lasting consequences freedom of choice may not be in the interest of citizens at all. This question will probably be at the forefront in debates about many reforms in social security, health care, pensions as governments are shifting risks from collective levels to the level of the individual.
    Date: 2018
  2. By: Claude Gamel (LEST - Laboratoire d'économie et de sociologie du travail - AMU - Aix Marseille Université - CNRS - Centre National de la Recherche Scientifique)
    Abstract: Concerning social justice, Hayek and Sen use methods which are unexpectedly close enough, when compared to Rawlsian contractualism (Gamel [2013]). They also exploit classical “markers” of the liberal thought (Adam Smith’s works, the role of the market, the recourse to the law), but they make of them various and even opposed uses. This second paradox leads to questioning the pragmatism of their respective approaches (“evolutionist” according to the former and “comparative” according to the latter), which provides Rawls’ non pragmatic “contractualism” with an a contrario argument. That non pragmatic approach is the philosophical basis of an “economics of liberal egalitarianism”.
    Abstract: Sur la justice sociale, Hayek et Sen font preuve d’une proximité méthodologique inattendue, en se démarquant l’un et l’autre du contractualisme rawlsien (Gamel [2013]). Ils exploitent aussi des « marqueurs » classiques de la pensée libérale (l’œuvre d’Adam Smith, le rôle du marché, le recours au droit), mais en font des usages différents, voire opposés. Ce second paradoxe met en cause le pragmatisme de leur démarche (« évolutionniste » pour le premier, « comparatiste » pour le second), ce qui consolide a contrario l’approche « contractualiste » non pragmatique de Rawls, socle philosophique d’une « économie de l’égalitarisme libéral ».
    Date: 2018–05–17
  3. By: Andersson, Jenny; Godechot, Olivier
    Abstract: Throughout the long postwar period, crisis was a conjectural phenomenon and the exception in a normalcy of growth and social progress. Many key concepts of the social sciences - indeed, our understanding of democracy, embedded markets, enlightened electorates, benevolent political elites, and problem-solving progressive alliances - seem inapt for understanding today's societal upheaval. In the wake of the financial crisis of 2008, we have witnessed the breakdown of majority alliances, the return of populism on a grand scale both in the Western world and globally, and the eruption into chaotic and sometimes violent social protests. The forces that underpinned the framework of welfare capitalism seem obsolete in the face of financial and political elites who are paradoxically both disconnected from national territory and sometimes in direct alliance with nationalist and populist movements. Politics of resentment, politics of place, and new politics of class interact in ways that we do not yet understand. Perhaps the greatest paradox of all is that neoliberalism has spawned authoritarianism. At the same time, these processes are not at all new, but must be put in the context of the socioeconomic and cultural cleavages produced by the shift to neoliberalism since the 1970s. The paper presents arguments by leading scholars in economic history, economic sociology, and political economy in brief thinknotes that were prepared for the MaxPo Fifth-Anniversary Conference on January 12 and 13, 2018, in Paris.
    Keywords: crisis,neoliberalism,elites,political economy,economic sociology
    Date: 2018
  4. By: Bartling, Björn (Department of Economics, NHH – Norwegian School of Economics); Cappelen, Alexander W (Department of Economics, NHH – Norwegian School of Economics); Ekström, Mathias (Department of Economics, NHH – Norwegian School of Economics); Sørensen, Erik Ø. (Department of Economics, NHH – Norwegian School of Economics); Tungodden, Bertil (Department of Economics, NHH – Norwegian School of Economics)
    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: 2018–05–07
  5. By: Claude Diebolt (CNRS, BETA, University of Strasbourg Strasbourg, France); Michael Haupert (University of Wisconsin-La Crosse)
    Date: 2018
  6. By: Frank Mueller-Langer (European Commission – JRC); Benedikt Fecher (Alexander von Humboldt Institute for Internet and Society); Dietmar Harhoff (Max Planck Institute for Innovation and Competition); Gert G. Wagner (Max Planck Institute for Human Development; DIW Berlin, German Socio Economic Panel Study (SOEP); Institute of Labor Economics (IZA))
    Abstract: We investigate how often replication studies are published in empirical economics and what types of journal articles are eventually replicated. We find that from 1974 to 2014 0.10% of publications in the Top 50 economics journals were replications. We take into account the results of replication (negating or reinforcing) and the extent of replication: narrow replication studies are typically devoted to mere replication of prior work while scientific replication studies provide a broader analysis. We find evidence that higher-impact articles and articles by authors from leading institutions are more likely to be subject to published replication studies whereas the probability of published replications is lower for articles that appeared in higher-ranked journals. Our analysis also suggests that mandatory data disclosure policies may have a positive effect on the incidence of replication.
    Keywords: Replication, economics of science, science policy, economic methodology
    JEL: A1 B4 C12 C13
    Date: 2018–04
  7. By: Laurent Linnemer; Michael Visser
    Abstract: This profile of Jean-Michel Grandmont is based on several interviews we had with him between September 2016 and April 2017. The interviews took place at our CREST offices, located at that time in Malakoff, just south of Paris. The objective of the profile is twofold. First, we trace the career of this highly influential mathematical economist who made seminal contributions to the fields of monetary economics, temporary equilibrium, business cycle theory, and aggregation of individual behavior. Second, we show how Grandmont and his colleagues contributed to changing the French landscape of economic research.
    Keywords: general equilibrium, money, nonlinear dynamics
    JEL: B31 D50 D70 E30
    Date: 2018
  8. By: Jean-Luc Gaffard (Observatoire français des conjonctures économiques)
    Keywords: Dualisme; Engagement; Entrepreneuriat; Flexibilité; Stabilité
    JEL: D14 D2 D31 D63 E24 J24 L22 L26
    Date: 2018–04
  9. By: Arikha, Dahlia
    Abstract: This research is a type of qualitative research with a study approach profound literature. The study discussed was the thought of M. Umer Chapra in the field of Islamic monetary policy. Chapra's extensive experience in teaching and research economic field as well as a good understanding of Islamic Shari'ah, bringing on the conclusion that Islam is only the most appropriate alternative system for creating the welfare of mankind. It was shown Chapra in the discussion about instruments in monetary policy, the urgency of changing the banking system and on finally realize the concept of Islamic-style welfare state.
    Keywords: Monetary Policy, Reconstruction Conventional Bank, Islamic Welfare State
    JEL: E00 E52 E58 O42
    Date: 2018–03–17
  10. By: Alexander W. Cappelen; Varun Gauri; Bertil Tungodden
    Abstract: A large-scale economic experiment, conducted on a representative sample of the US popula- tion, shows that cooperation creates special moral obligations. Participants in the experiment, acting as impartial spectators, transferred significantly more money to an unlucky worker when two individuals had cooperated than when they had worked independently. We further show that the effect of cooperation is strongly associated with political affiliation, with Democrats attaching significantly more importance to cooperation as a source of moral obligation than Republicans. Our findings shed light on the foundations of redistributive preferences and may contribute to explain the often observed asymmetry in moral concern for different groups of individuals, both nationally and internationally.
    Keywords: cooperation, distributive justice, redistribution
    Date: 2018
  11. By: MADSEN, Jakob B
    Abstract: This paper provides the first very long term empirical examination of Piketty’s (2014) controversial hypothesis that inequality is increasing in r – g, (assets - real income). Using unique annual data on asset returns for a balanced portfolio and several other variables for the UK over the period 1210-2013, the study examines whether the dynamics in capital’s income share, SW, are governed by (r–g). The analysis confirms that r and g are robust and significant determinants of factor shares and that they have been the major forces behind the large inequality waves over the past eight centuries.
    Keywords: Inequality and the (r-g)-gap, dynamics of inequality, inequality in the UK, 1210-2013
    JEL: E1 E2 O4 N1 N30 P1
    Date: 2018–06
  12. By: Jon Danielsson; Marcela Valenzuela; Ilknur Zer
    Abstract: Reliable indicators of future financial crises are important for policymakers and practitioners. While most indicators consider an observation of high volatility as a warning signal, this column argues that such an alarm comes too late, arriving only once a crisis is already under way. A better warning is provided by low volatility, which is a reliable indication of an increased likelihood of a future crisis.
    Date: 2018–05–09
  13. By: Camille Cornand (Univ Lyon, CNRS, GATE UMR 5824, F-69131 Ecully, France); Frank Heinemann (Technische Universität Berlin, Chair of Macroeconomics, H 52 - Straße des 17. Juni 135 - 10 623 Berlin, Germany)
    Abstract: This chapter lays out in which respects laboratory experiments can be useful for macroeconomics and discusses some of the methods used in such experiments.
    Keywords: laboratory experiments, macroeconomics
    JEL: C9
    Date: 2018
  14. By: Sonntag, Dominik
    Abstract: The theory of fair geometric returns, F theory for short, rejects the generally accepted notion that volatility is the risk of risky assets. Instead, it claims that capital market volatility, in turn, constitutes the maximum achievable geometric return. In order to get to the point, F theory, in addition to its own ideas, resorts to information theoretical considerations (centrally Shannon, 1948). The starting point of the analysis is a specific initial observation concerning the geometric mean return (G): Consecutive geometric returns of fairly (properly) exchange-traded assets ex post almost always turn out to be unequal. The author proposes two consequences to be drawn from this observation, which can be made daily at the financial market: (1) E[G]≠G dominates E[G]=G. Then what is E[G]? When does E[G]=G hold? (2) Since (it seems) there is volatility in G, is this volatility usable as part of a contrarian "buy low, sell high" strategy? If yes, how? In answer to these and other questions, the master's degree candidate presents a formulae system along with qualitative context, which essentially comprises: a formula for the expected geometric mean return; a measure of the abnormal return on an asset; movement probabilities in relation to the return process; an equivalent to Claude Shannon's famous information flow formula; the (here so-called) concept of the fugue – a novel countercyclical investment strategy borrowed from music theory; as well as an F-theory consistent option price and self-insurance model.
    Keywords: Fair geometric return; expected geometric mean; (adjusted) S ratio; volatility; entropy; fugue.
    JEL: G0 G00 G01 G02 G1 G10 G11 G12 G13 G14 G15 G17
    Date: 2018–05–18
  15. By: Varian, Brian
    Abstract: In the Edwardian era, the British Dominions adopted policies of imperial preference, amid a period of rising imports from the United States and industrial Continental Europe. Hitherto, there has been no econometric assessment of whether these policies produced an intra-Empire trade diversion, as intended. This paper focuses on New Zealand’s initial policy of imperial preference, codified in the Preferential and Reciprocal Trade Act of 1903. New Zealand’s policy was unique insofar as it extended preference to only certain commodities. Using a commodity panel regression, this paper exploits the cross-commodity variation in the extension of preference, but finds no statistically significant effect of preference on either the Empire share or, specifically, the British share of New Zealand’s imports. This finding is corroborated by an alternative empirical approach involving propensity-score matching.
    Keywords: Imperial preference; tariffs; trade; empire; Britain; New Zealand
    JEL: H1 N25 P48
    Date: 2018–06
  16. By: Broockman, David (Stanford University); Ferenstein, Greg F.; Malhotra, Neil
    Abstract: American politics overrepresents the wealthy. But what policies do the wealthy support? Many accounts implicitly assume the wealthy are monolithically conservative and that increases in their political power will increase inequality. Instead, we argue there is substantial heterogeneity by industry, wherein the wealthy from an industry can share a distinctive set of political preferences. Consequently, how increases in the wealthy's influence affect inequality depends on which industries' rich are gaining influence and which issues are at stake. We demonstrate our argument with three original surveys, including the two largest surveys of wealthy Americans to date: one of technology entrepreneurs--a burgeoning wealthy demographic' and another of political campaign donors. We show that technology entrepreneurs support liberal redistributive, social, and globalistic policies but conservative regulatory policies--a bundle of preferences rare among other wealthy individuals. Consistent with our theoretical argument, we also present evidence that suggests these differences arise from their distinctive predispositions.
    Date: 2017–12
  17. By: Jeff Larrimore; Alex Durante; Kimberly Kreiss; Ellen A. Merry; Christina Park; Claudia R. Sahm
    Abstract: In November and December of 2017, we interviewed over 12,000 individuals, representative of all adults in the United States, about their economic and financial lives. Here we discuss the responses on three important economic issues: the role of economic conditions in the opioid epidemic; jobs with irregular schedules and varying income as a potential barrier to full employment; and how low rates of geographic mobility may relate to family support networks.
    Date: 2018–05–22
  18. By: Antonelli, Cristiano (University of Turin)
    Abstract: The notion of endogenous innovation as the outcome of the creative response of firms to out-of-equilibrium conditions is the cornerstone of the new evolutionary complexity. This essay explores the role of the reactivity of firms to out-of-equilibrium conditions and of knowledge governance in assessing the chances that creative responses actually take place as an alternative to adaptive responses. It implements a systemic frame able to show that: i) the levels of reactivity of firms enhance the research efforts of rims that try and cope with out of equilibrium conditions; ii) the actual rates of introduction of innovations and increase of total factor productivity are contingent upon the quality of knowledge governance, and iii) out-of-equilibrium conditions, as well as the amount of knowledge externalities are the endogenous outcome of the creative response.
    Date: 2017–06
  19. By: Paul Beaudry; Tim Willems
    Abstract: Is over-optimism about a country's future growth perspective good for an economy, or does over-optimism also come with costs? In this paper we provide evidence that recessions, fiscal problems, as well as Balance of Payment-difficulties are more likely to arise in countries where past growth expectations have been overly optimistic. To examine this question, we look at the medium-run effects of instances of over-optimism or caution in IMF forecasts. To isolate the causal effect of over-optimism we take an instrumental variables approach, where we exploit variation provided by the allocation of IMF Mission Chiefs across countries. As a necessary first step, we document that IMF Mission Chiefs tend to systematically differ in their individual degrees of forecast-optimism or caution. The mechanism that transforms over-optimism into a later recession seems to run through higher debt accumulation, both public and private. Our findings illustrate the potency of unjustified optimism and underline the importance of basing economic forecasts upon realistic medium-term prospects.
    Date: 2018–05–30

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