nep-hpe New Economics Papers
on History and Philosophy of Economics
Issue of 2018‒09‒17
thirteen papers chosen by
Erik Thomson
University of Manitoba

  1. Second-best fairness under Limited information: The trade-off between false positives and false negatives By Cappelen, Alexander W.; Cappelen, Cornelius; Tungodden, Bertil
  2. El peligro de la sobrepoblación disminuye con el desarrollo de la civilización By Plata Arenas, Llzeth Daniela
  3. To Replicate or Not To Replicate? Exploring Reproducibility in Economics through the Lens of a Model and a Pilot Study By John List; Zacharias Maniadis; Fabio Tufano
  4. The trouble with human capital theory By Fix, Blair
  5. Different Cultural Layers: Different Effects on Development? By Judit Kapas
  6. The complexity of cake cutting with unequal shares By Agnes Cseh; Tamás Fleiner
  7. Methods Matter: P-Hacking and Causal Inference in Economics By Abel Brodeur; Nikolai Cook; Anthony Heyes
  8. Does Happiness Pay Revisited – New Evidence from the U.S.A. By Carol Graham; Diana Liu
  9. Should We Discount the Welfare of Future Generations? Ramsey and Suppes versus Koopmans and Arrow By Chichilnisky, Graciela; Hammond, Peter J.; Stern, Nicholas
  10. Tax Evasion with a Conscience By Dufwenberg, Martin; Nordblom, Katarina
  11. The Entitlement Effect in the Ultimatum Game - Does It Even Exist? By Elif E. Demiral; Johanna Mollerstrom
  12. Should I wait or should I lie? Path dependency and timing in repeated honesty decisions under frames By Christian Schitter; Stefan Palan
  13. The quest for fiscal rules By Feld, Lars P.

  1. By: Cappelen, Alexander W. (Dept. of Economics, Norwegian School of Economics and Business Administration); Cappelen, Cornelius (University of Bergen); Tungodden, Bertil (Dept. of Economics, Norwegian School of Economics and Business Administration)
    Abstract: In many important economic settings, limited information makes it impossible for decision makers to ensure that each individual gets what he or she deserves. Decision makers are then faced with the trade-off between giving some individuals more than they deserve, false positives, and giving some individuals less than they deserve, false negatives. We present the results from a large-scale experimental study of how people trade off these two mistakes in distributive choices. We find that a majority are more concerned with avoiding false negatives than With avoiding false positives, but we also document heterogeneity with respect to how people make this trade-off. The findings shed important light on people’s attitudes to a wide range of policies by providing novel evidence on an important dimension of people’s social preference.
    Keywords: Justice; false positives; false negatives; peoples social preference
    JEL: D63
    Date: 2018–08–28
  2. By: Plata Arenas, Llzeth Daniela
    Abstract: This document, written as an essay, recounts the thoughts of the well-known classical economist Thomas Roberth Malthus about his principles on population, mainly his theory about the population growth in which he indicates that food increases geometrically and individuals do it exponentially; however, the population growth has been affected by expert aspects that will be addressed in the present investigation.
    Keywords: Pensamiento económico, Roberth Malthus, población, crecimiento
    JEL: B0
    Date: 2018
  3. By: John List; Zacharias Maniadis; Fabio Tufano
    Abstract: The sciences are in an era o fan alleged "credibility crisis'. In this study, we discuss the reproducibility of empirical results, focusing on economics research. By combining theory and empirical evidence, we discuss the import of replication studies, and whether they improve our confidence in novel findings. The theory sheds light on the importance of replications, even when replications are subject to bias. We then present a pilot meta-study of replication in experimental economics, a subfield serving as a positive benchmark for investigating the credibility of economics. Our meta-study highlights certain difficulties when applying meta-research (Ioannidis et al., 2015) and systematizing the economics literature.
    Date: 2017
  4. By: Fix, Blair
    Abstract: Human capital theory is the dominant approach for understanding personal income distribution. According to this theory, individual income is the result of "human capital". The idea is that human capital makes people more productive, which leads to higher income. But is this really the case? This paper takes a critical look at human capital theory and its explanation of personal income distribution. I find that human capital theory's claims are dubious at best. In most cases, the theory is either not supported by evidence, is so vague that it is untestable, or is based on circular reasoning. In short, human capital theory is a barrier to the scientific study of income distribution.
    Keywords: human capital theory,income distribution,critique,hierarchy,productivity,power
    Date: 2018
  5. By: Judit Kapas (University of Debrecen)
    Abstract: This paper relies on the idea that culture has several layers which can be separated on the basis of the degree of stickiness between a particular cultural component and formal institutions. This procedure, by allowing us to focus on more specific questions as to how culture affects development, helps improve the somewhat controversial empirical results of the literature.As an extension of the theory of institutional stickiness (Boettke et al. 2008), I distinguish two cultural layers: a rigid and a slow-moving layer. The rigid layer includes values reflecting the most basic norms, judgments, and beliefs, which do not change. The slow-moving layer includes those cultural components that depend upon individuals? circumstances and the prevailing institutions, and can change if these change. The degree of stickiness between the slow-moving layer and institutions is very high because institutions find their roots directly in that cultural layer. However, the rigid layer and institutions are a bit ?farther? from one other, which allows a certain degree of divergence from a perfect correspondence between them. In the cross-country empirical analyses, including IV estimations, I check the hypotheses derived from this stickiness model, and focus on how a particular cultural layer operating in conjunction with institutions affects development. When it comes to the rigid layer proxied by individual values (Schwartz 1999), besides establishing that both values and institutions are strong determinants of development, I also find that their interaction acts as a separate factor. This means that values are not fully embodied in institutions. The effect of the slow-moving layer proxied by trust (WVS), however, is very different: trust does not exert an impact on development once institutions are controlled for, and there is no interaction between them, meaning that trust is crystallized in institutions. The results are very robust to alternative variables and specifications.
    Keywords: instututions, culture, economic development
    JEL: E02 O43
    Date: 2018–06
  6. By: Agnes Cseh (Hungarian Academy of Sciences, Centre for Economic and Regional Studies, Institute of Economics); Tamás Fleiner (Department of Computer Science and Information Theory, Budapest University of Technology and Economics)
    Abstract: An unceasing problem of our prevailing society is the fair division of goods. The problem of proportional cake cutting focuses on dividing a heterogeneous and divisible resource, the cake, among n players who value pieces according to their own measure function. The goal is to assign each player a not necessarily connected part of the cake that the player evaluates at least as much as her proportional share. In this paper, we investigate the problem of proportional division with unequal shares, where each player is entitled to receive a predetermined portion of the cake. Our main contribution is threefold. First we present a protocol for integer demands that delivers a proportional solution in fewer queries than all known algorithms. Then we show that our protocol is asymptotically the fastest possible by giving a matching lower bound. Finally, we turn to irrational demands and solve the proportional cake cutting problem by reducing it to the same problem with integer demands only. All results remain valid in a highly general cake cutting model, which can be of independent interest.
    Keywords: fair division, cake cutting, unequal shares, complexity
    JEL: C63 C78
    Date: 2018–08
  7. By: Abel Brodeur (Department of Economics, University of Ottawa, Ottawa, ON); Nikolai Cook (Department of Economics, University of Ottawa, Ottawa, ON); Anthony Heyes (Department of Economics, University of Ottawa, Ottawa, ON, and University of Sussex)
    Abstract: The economics 'credibility revolution' has promoted the identification of causal relationships using difference-in-differences (DID), instrumental variables (IV), randomized control trials (RCT) and regression discontinuity design (RDD) methods. The extent to which a reader should trust claims about the statistical significance of results proves very sensitive to method. Applying multiple methods to 13,440 hypothesis tests reported in 25 top economics journals in 2015, we show that selective publication and p-hacking is a substantial problem in research employing DID and (in particular) IV. RCT and RDD are much less problematic. Almost 25% of claims of marginally significant results in IV papers are misleading.
    Keywords: Research methods, causal inference, p-curves, p-hacking, publication bias.
    JEL: A11 B41 C13 C44
    Date: 2018
  8. By: Carol Graham (The Brookings Institution); Diana Liu (The Gallup Organization)
    Abstract: In this paper, we revisit our 2004 paper that found a strong positive association between happiness and future outcomes, based on data for Russia in the years 1995-2000. This paper takes advantage of a new Gallup panel for the U.S. for 2014-2016. We essentially duplicate our original method, and add some new specifications. We find remarkably similar patterns and associations between initial period happiness and later period outcomes in the U.S., based on a very different time and sample from Russia in the 1990’s. We believe that duplicating the earlier findings in a very different time and place is an important test of how robust this association is. We also find some new twists in the initial patterns that are interesting in their own right. The aim here is not only to show that the causality does not just run from the usual variables to higher or lower levels of well-being, but that the traits that subjective well-being metrics capture, such as happiness and hope, have their own independent role in the outcomes of the lives of myriad individuals around the world.
    Keywords: well-being, happiness
    JEL: D31 I31 J39
    Date: 2018–09
  9. By: Chichilnisky, Graciela (Dept. of Economics, International Affairs Building, Columbia University); Hammond, Peter J. (Dept. of Economics, and CAGE (Competitive Advantage in the Global Economy), University of Warwick); Stern, Nicholas (Dept. of Economics, and Grantham Research Institute on Climate Change and the Environment, LSE)
    Abstract: Ramsey famously pronounced that discounting “future enjoyments” would be ethically indefensible. Suppes enunciated an equity criterion implying that all individuals’ welfare should be treated equally. By contrast, Arrow (1999a, b) accepted, perhaps rather reluctantly, the logical force of Koopmans’ argument that no satisfactory preference ordering on a sufficiently unrestricted domain of infinite utility streams satisfies equal treatment. In this paper, we first derive an equitable utilitarian objective based on a version of the Vickrey–Harsanyi original position, extended to allow a variable and uncertain population with no finite bound. Following the work of Chichilnisky and others on sustainability, slightly weakening the conditions of Koopmans and co-authors allows intergenerational equity to be satisfied. In fact, assuming that the expected total number of individuals who ever live is finite, and that each individual’s utility is bounded both above and below, there is a coherent equitable objective based on expected total utility. Moreover, it implies the “extinction discounting rule” advocated by, inter alia, the Stern Review on climate change.
    JEL: D63 D70 D90 Q54 Q56
    Date: 2018
  10. By: Dufwenberg, Martin (University of Arizona, University of Gothenburg); Nordblom, Katarina (Department of Economics, School of Business, Economics and Law, Göteborg University)
    Abstract: How do moral concerns affect tax compliance and the need for audits? We propose answers by exploring an inspection game, modified to incorporate belief-dependent taxpayer guilt, unawareness, and third-party audience effects. Novel conclusions are drawn regarding whose behavior is affected by moral concerns (it's the authority's more than the citizen's) and regarding policy, in particular fines vs. jail, the role of information campaigns, and the use of a principle of public access whereby tax returns are made public information.
    Keywords: tax evasion; guilt; inspection game; policy
    JEL: D03 H26 H83
    Date: 2018–08
  11. By: Elif E. Demiral; Johanna Mollerstrom
    Abstract: Since the seminal paper of Hoffman et al. (1994), an entitlement effect is believed to exist in the Ultimatum Game, in the sense that proposers who have earned their role (as opposed to having it randomly allocated) offer a smaller share of the pie to their matched responder. The entitlement effect is at the core of experimental Public Choice – not just because it concerns the topics of bargaining and negotiations, but also because it relates to the question about under which circumstances actors behave more rational. We conduct three experiments, two in the laboratory and one online, with more than 1,250 participants. Our original motivation was to study gender differences, but ultimately we could not replicate the entitlement effect in the Ultimatum Game in any of our three experiments. Potential reasons for why the replication attempts fail are discussed.
    Keywords: Ultimatum game, public choice, experiment, entitlement, negotiations, bargaining, replications, gender
    JEL: C7 C9 D72 J16
    Date: 2018
  12. By: Christian Schitter (Department of Banking and Finance, University of Graz); Stefan Palan (Department of Banking and Finance, University of Graz)
    Abstract: We experimentally investigate time and path dependency in sequences of decisions about whether to be honest under a gain, a lottery and a loss framing. We find only small timing patterns over rounds, but clear evidence for more dishonesty after streaks of unfavorable outcomes. The latter implies a systematic path dependency in repeated honesty decisions. We observe an increase in dishonesty from gain to lottery and from lottery to loss framing. Increased dishonesty generally appears earlier and faster under a loss compared to a gain or a lottery frame. Surprisingly, the most honest participants are also those most clearly exhibiting path dependency in reports, in line with a behavior akin to "moral accounting".
    Date: 2018–09–06
  13. By: Feld, Lars P.
    Abstract: James Buchanan pioneered the political economics of public debt 60 years ago. In this paper, we contrast his thinking of the burden of debt, the public choice mechanisms that lead to excessive debt and the demand for constitutional restraints on public debt with its development, its sustainability, the evidence on the political economy of debt and on the effects of institutions. It turns out that Buchanan farsightedly anticipated the problems that would emerge from excessive indebtedness in the developed world. The introduction of fiscal rules appear as a late triumph of Buchanan's thinking. However, socialism is dead, but Leviathan lives on. Opposition to sound fiscal policies has increasingly dominated the public debates since the Great Recession.
    Keywords: James Buchanan,Public Debt,Fiscal Commons Problems,Fiscal Rules
    JEL: H6 E6 D72 K39
    Date: 2018

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