nep-hpe New Economics Papers
on History and Philosophy of Economics
Issue of 2018‒12‒17
twenty papers chosen by
Erik Thomson
University of Manitoba

  1. Paretian Fiscal Sociology By Michael McLure
  2. "Investment Decisions under Uncertainty" By Sunanda Sen
  3. Cognitive skills and the development of strategic sophistication By David Gill; Eduardo Fe
  4. Categorization and cooperation across games By Marco LiCalzi; Roland Muhlenbernd
  5. Cooperation Between Emotional Players By Andersson, Lina
  6. Conspiracy Against the Public – An Experiment on Collusion By Åshild A. Johnsen; Ola Kvaløy
  7. Job satisfaction, time allocation and labour supply By Gaetano Lisi
  8. The Causal Effect of Trust By Björn Bartling; Ernst Fehr; David B. Huffman; Nick Netzer
  9. Private vs Public incentives: an experiment on motivation crowding and social trust By Simone D'Alessandro; Caterina Giannetti; Pietro Guarnieri
  10. Monetary Theory and Policy: The Debate Revisited By Jean-Luc Gaffard
  11. Women in Economics: Stalled Progress By Shelly Lundberg; Jenna Stearns
  12. Historical Legacies and African Development By Stelios Michalopoulos; Elias Papaioannou
  13. Spleen: the failures of the cliometric school By Stefano Fenoaltea
  14. L'évolution méthodologique de l'étude de la consommation alimentaire sur Inra Sciences Sociales By Paolo Crosetto
  15. What exactly is public in a public good game? A lab-in-the-field experiment By Pietro Battiston; Simona Gamba; Matteo Rizzolli; Valentina Rotondi
  16. Thinking Outside the Box: Edgeworth, Pareto and the Early History of the Box Diagram By Michael McLure; Aldo Montesano
  17. Piketty’s (r – g) Law is Pareto’s Law: Consistent Analyses of Income Distribution Predicated on Inconsistent Definitions of Inequality By Jill Trinh; Michael McLure
  18. Clément Lenoble, L’Exercice de la pauvreté. Économie et religion chez les franciscains d’Avignon (XIIIe-XVe siècle), By Dewez Harmony
  19. When Fair Isn't Fair: Understanding Choice Reversals Involving Social Preferences By James Andreoni; Deniz Aydin; Blake Barton; B. Douglas Bernheim; Jeffrey Naecker
  20. Strategically Simple Mechanisms By Tilman Borgers; Jiangtao Li

  1. By: Michael McLure (Business School, The University of Western Australia)
    Abstract: This work is a draft chapter for the forthcoming book “James Buchanan: A Theorist of Political Economy and Social Philosophy”, which is being edited by Ricard E Wagner for Palgrave Macmillan. It considers Pareto’s treatment of fiscal issues, first as a middle age economist and subsequently as a mature age sociologist. It establishes that Pareto never regarded fiscal studies as a purely theoretical exercise. Even as an economist, he relegated ‘fiscal effects’ to the aspect of applied economics that he called the ‘concrete economic phenomenon’. Pareto’s fiscal sociology takes his observations from applied economics and subjects them to further analysis using his division between logical and non-logical action, with fiscal effects falling within the category of non-logical action. This chapter reviews those enhancements and subjects Paretian fiscal sociology to critical assessment. While the Paretian episode in fiscal sociology has now long passed, the study concludes by noting a number of its attributes that have continuing relevance.
    Keywords: Buchanan, Pareto, Public Finance, Sociology
    JEL: B13
    Date: 2018
  2. By: Sunanda Sen
    Abstract: Divergent trends, as observed, between growth in the financial and real sectors of the global economy entail the need for further research, especially on the motivations behind investment decisions. Investments in market economies are generally guided by call-put option pricing models--which rely on an ergodic notion of probability that conforms to a normal distribution function. This paper considers critiques of the above models, which include Keynes's Treatise on Probability (1921) and the General Theory (1936), as well as follow-ups in the post-Keynesian approaches and others dealing with "fundamental uncertainty." The methodological issues, as can be pointed out, are relevant in the context of policy issues and social institutions, including those subscribed to by the ruling state. As it has been held in variants of institutional economics subscribed to by John Commons, Thorstein Veblen, Geoffrey Hodgeson, and John Kenneth Galbraith, social institutions remain important in their capacity as agencies that influence individual behavior with their "informational-cognitive" functions in society. By shaping business concerns and strategies, social institutions have a major impact on investment decisions in a capitalist system. The role of such institutions in investment decisions via policy making is generally neglected in strategies based on mainstream economics, which continue to rely on optimization of stock market returns based on imprecise estimations of probability.
    Keywords: Uncertainty; Probability; Weights; Investment; Keynes; Institutional Economics
    JEL: B25 E02 E12 E22 G01 G11
    Date: 2018–12
  3. By: David Gill; Eduardo Fe
    Abstract: In this paper, we investigate how observable cognitive skills influence the development of strategic sophistication. To answer this question, we study experimentally how psychometric measures of theory-of-mind and cognitive ability (or‘fluid intelligence')work together with age to determine the strategic ability and level-k behavior of children in a variety of incentivized strategic interactions. We find that better theory-of-mind and cognitive ability predict strategic sophistication in competitive games. Furthermore, age and cognitive ability act in tandem as complements, while age and theory-of-mind operate independently. Older children respond to information about the cognitive ability of their opponent, which provides support for the emergence of a sophisticated strategic theory-of-mind. Finally, theory-of-mind and age strongly predict whether children respond to intentions in a gift-exchange game, while cognitive ability has no influence, suggesting that different psychometric measures of cognitive skill correspond to different cognitive processes in strategic situations that involve the understanding of intentions.
    Keywords: Cognitive skills; theory-of-mind; cognitive ability; fluid intelligence; strategic sophistication; age; children; experiment; level-k; bounded rationality; non-equilibrium thinking; intentions; gift-exchange game; competitive game; strategic game; strategic interaction.
    JEL: C91 D91 J24
    Date: 2018–11
  4. By: Marco LiCalzi (Dept. of Management, Università Ca' Foscari Venice); Roland Muhlenbernd (Dept. of Management, Università Ca' Foscari Venice)
    Abstract: We study a model where agents face a continuum of two-player games and categorize them into a finite number of situations to make sense of their complex environment. Each agent can cooperate or defect, conditional on the perceived category. Agents may not share the same categorization. The games are fully ordered by one parameter, interpreted as the temptation to break joint cooperation by defecting. We prove that in equilibrium agents must share the same categorization. Most equilibria achieve less cooperation than it would be possible if agents could fully discriminate games. All the equilibira are evolutionary stable, but the only stochastically stable profile leads to defection everywhere, destroying all opportunities for cooperation. We then study agents' social learning when they imitate successful players over similar games, but lack any information about the categorization of other players. We show how imitation leads to a shared categorization that achieves higher cooperation than under full discrimination.
    Keywords: categorization, cooperation, evolutionary stability, learning by imitation, prisoners' dilemma, stag hunt
    JEL: C72 D91 C73 D83
    Date: 2018–11
  5. By: Andersson, Lina (Department of Economics, School of Business, Economics and Law, Göteborg University)
    Abstract: This paper uses the framework of stochastic games to propose a model of emotions in repeated interactions. An emotional player, who transitions between different states of mind as a response to observed actions taken by the other player, can be in either a friendly, a neutral, or a hostile state of mind. The state of mind determines the player's psychological payoff that together with a material payoff constitutes his utility. In the friendly (hostile) state of mind the player has a positive (negative) concern for the other player's material payoffs. Emotions can both facilitate and obstruct cooperation in the repeated prisoners' dilemma game. If finitely repeated, then a traditional player (who cares only for own material payoffs) can have an incentive to manipulate an emotional player into a friendly state of mind for future gains. If infinitely repeated, then two emotional players may require less patience to sustain cooperation. However, emotions can also obstruct cooperation if the players are either unwilling to punisheach other, or become revengeful when punished.
    Keywords: Emotions; cooperation; repeated prisoners dilemma; stochastic games
    JEL: C73 D01 D91
    Date: 2018–12
  6. By: Åshild A. Johnsen; Ola Kvaløy
    Abstract: We study to what extent collusive behavior is affected by the awareness of negative externalities. Theories of outcome-based social preferences suggest that negative externalities make collusion harder to sustain than predicted by standard economic theory, while sociological theories of social ties and intergroup comparisons suggest that bilateral cooperation can be strengthened if there exist outsiders that gain from cooperative break down. We investigate this in a laboratory experiment. Subjects play the infinitely repeated prisoner’s dilemma with and without a negative externality. The externality is implemented by letting subjects make a positive contribution to a public good if they choose to defect from cooperation, i.e. cooperation is collusive since the gains are at the expense of the public. We find that this negative externality increases collusive behavior. Subjects cooperate more if it hurts a third party.
    Keywords: infinitely repeated prisoner’s dilemma game, negative externality, cooperation, collusion, experiment
    JEL: C91
    Date: 2018
  7. By: Gaetano Lisi (University of Cassino and Lazio Meridionale)
    Abstract: This paper reinterprets the neoclassical theory of labour supply by introducing job satisfaction into the utility function of the worker. This integration is feasible and also straightforward from a theoretical point of view and, furthermore, it produces interesting results. Precisely, this extended version of the standard model of labour supply can describe situations in which working produces utility beyond consumption, with the result that the disutility of giving up leisure time is lowered or even reversed. As a result, the paper is able to reconcile the standard theory of labour supply with the well-established finding of happiness research, according to which working could yield substantial non-monetary benefits.
    JEL: J28 J22 J24
    Date: 2018–12
  8. By: Björn Bartling; Ernst Fehr; David B. Huffman; Nick Netzer
    Abstract: Trust affects almost all human relationships – in families, organizations, markets and politics. However, identifying the conditions under which trust, defined as people’s beliefs in the trustworthiness of others, has a causal effect on the efficiency of human interactions has proven to be difficult. We show experimentally and theoretically that trust indeed has a causal effect. The duration of the effect depends, however, on whether initial trust variations are supported by multiple equilibria. We study a repeated principal-agent game with multiple equilibria and document empirically that an efficient equilibrium is selected if principals believe that agents are trustworthy, while players coordinate on an inefficient equilibrium if principals believe that agents are untrustworthy. Yet, if we change the institutional environment such that there is a unique equilibrium, initial variations in trust have short-run effects only. Moreover, if we weaken contract enforcement in the latter environment, exogenous variations in trust do not even have a short-run effect. The institutional environment thus appears to be key for whether trust has causal effects and whether the effects are transient or persistent.
    Keywords: trust, causality, equilibrium selection, belief distortions, incomplete contracts, screening, institutions
    JEL: C91 D02 D91 E02
    Date: 2018
  9. By: Simone D'Alessandro; Caterina Giannetti; Pietro Guarnieri
    Abstract: Relying on a threshold public good game, we experimentally investigate the effect of two types of incentives on prosocial behaviours. On the one hand, a private type of incentive targets individuals by reducing their cost of contribution. On the other hand, a public type of incentive targets groups by providing an investment that directly support the achievement of the collective objective (i.e. the threshold in the public good game). Thus, we study how expectations on others determine the impact of incentives on prosocial behaviours and how incentives themselves affect these expectations in turn. We interpret this mutual relation as reflecting an endogenous relation between incentive provision and social trust.
    Keywords: Motivation crowding, Social Norms, Incentives
    JEL: C92 D04
    Date: 2018–11–01
  10. By: Jean-Luc Gaffard (OFCE Sciences-Po; Université Côte d'Azur; GREDEG CNRS; Institut Universitaire de France)
    Abstract: This paper is aimed at revisiting monetary analysis in order to better understand erroneous choices in the conduct of monetary policy. According to the prevailing consensus, the market economy is intrinsically stable and is upset only by poor behaviour by government or the banking system. We maintain on the contrary that the economy is unstable and that achieving stability requires a discretionary economic policy. This position relies upon an analytical approach in which monetary and financial organisations are devices that help markets to function. In this perspective, which focuses on the heterogeneity of markets and agents, and, consequently, on the role of institutions in determining overall performance, it turns out that nominal rigidities and financial commitment offer the means to achieve economic stability. This is because they prevent successive, unavoidable disequilibria from becoming explosive.
    Keywords: inflation, market, money, stability
    JEL: E31 E32 E5 E61 E62
    Date: 2018–12
  11. By: Shelly Lundberg (University of California Santa Barbara); Jenna Stearns (University of California, Santa Barbara)
    Abstract: In this paper, we first document trends in the gender composition of academic economists over the past 25 years, the extent to which these trends encompass the most elite departments, and how women’s representation across fields of study within economics has changed. We then review the recent literature on other dimensions of women’s relative position in the discipline, including research productivity and income, and assess evidence on the barriers that female economists face in publishing, promotion, and tenure. While underlying gender differences can directly affect the relative productivity of men and women, due to either differential constraints or preferences, productivity gaps do not fully explain the gender disparity in promotion rates in economics. Furthermore, the progress of women has stalled relative to that in other disciplines in the past two decades. We propose that differential assessment of men and women is one important factor in explaining this stalled progress, reflected in gendered institutional policies and apparent implicit bias in promotion and editorial review processes.
    Keywords: gender, economics, tenure and promotion practices, promotion, tenure, publishing
    JEL: J16 J71 J21
    Date: 2018–12
  12. By: Stelios Michalopoulos; Elias Papaioannou
    Abstract: As Africa's role on the global stage is rising, so does the need to understand the shadow of history on the continent's economy and polity. We discuss recent works that shed light on Africa's colonial and precolonial legacies. The emerging corpus is remarkably interdisciplinary. Archives, ethnographic materials, georeferenced censuses, surveys, and satellite imagery are some of the sources often combined to test influential conjectures put forward in African historiography. Exploiting within-country variation and employing credible, albeit mostly local, identification techniques, this recent literature has uncovered strong evidence of historical continuity as well as instances of rupture in the evolution of the African economy. The exposition proceeds in reverse chronological order. Starting from the colonial period, which has been linked to almost all of Africa's post-independence maladies, we first review works that uncover the lasting legacies of colonial investments in infrastructure and human capital and quantify the role of various extractive institutions, such as indirect rule and oppression associated with concessionary agreements. Second, we discuss the long-lasting impact of the "Scramble for Africa" which led to ethnic partitioning and the creation of artificial modern states. Third, we cover studies on the multi-faceted legacy of the slave trades. Fourth, we analyze the contemporary role of various precolonial, ethnic-specific, institutional and social traits, such as political centralization. We conclude by offering some thoughts on what we view as open questions.
    JEL: N00 N10 N77 N87 N97 O10 O43 O55
    Date: 2018–11
  13. By: Stefano Fenoaltea
    Abstract: This paper argues that we cliometricians have failed as economists, because we did not drag the profession out of the nineteenth century and into the twentieth; that we have failed as historians, because we do not take measurement seriously, and misapprehend “the data”; and that we failed signally as economic historians, because we backcast “GDP” as if it measured gross domestic product.
    Keywords: cliometrics, economic history, economics
    JEL: A10 B40 N01
    Date: 2018–12–11
  14. By: Paolo Crosetto (GAEL - Laboratoire d'Economie Appliquée de Grenoble - Grenoble INP - Institut polytechnique de Grenoble - Grenoble Institute of Technology - INRA - Institut National de la Recherche Agronomique - CNRS - Centre National de la Recherche Scientifique - UGA - Université Grenoble Alpes)
    Abstract: Toute question scientifique peut être abordée d'une multitude de façons. La méthode utilisée dépend bien sûr de la discipline du chercheur, des données disponibles, des outils techniques et des statistiques mobilisables. Mais cela dépend aussi des paradigmes scientifiques existants, du consensus sur ce que constitue une réponse, des attentes de la société et du reste de la communauté scientifique. On va tracer ici les grandes lignes de l'évolution méthodologique vécue par la recherche sur l'alimentation dans le département SAE2 de l'Inra. On se focalisera sur les articles parus dans Inra Sciences Sociales, et en particulier sur les contributions des économistes.
    Keywords: consommation alimentaire,sciences sociales,analyse économique,comportement du consommateur,évolution de la recherche,INRA
    Date: 2018–10
  15. By: Pietro Battiston; Simona Gamba; Matteo Rizzolli; Valentina Rotondi
    Abstract: Are public good games really capturing individuals' willingness to contribute to real-life public goods? To answer this question, we conducted a lab-in-the-field experiment with communities who own collective goods. In our experiment, subjects voluntarily contribute to a common pool, which can either be subdivided in individual vouchers, as in standard public good games, or used to acquire collective goods, as it happens for real-life public goods. We show that participants' contributions are larger when the voucher is paid individually, suggesting that individuals' willingness to contribute to public goods may be overestimated when based on results from laboratory experiments.
    Keywords: ublic goods, lab-in-the-field experiment, cooperation, group behavior, community, indivisibility
    Date: 2018–10
  16. By: Michael McLure (Business School, The University of Western Australia); Aldo Montesano (Bocconi University)
    Abstract: This study enhances McLure (2017) by considering the significance Edgeworth’s reciprocal demand curves to the early history of the Edgeworth box. In short, it clarifies Edgeworth’s and Pareto’s respective contributions to the development the Edgeworth box diagram by establishing the relationship between the ‘trade’ representations of Edgeworth’s Figures 1 and 5 and the associated ‘allocation’ representations of those two diagrams. A reconstruction of Edgeworth’s Figure 1 is also provided to make the implicit aspects of his treatment of production explicit. A new early history of the Edgeworth box diagram is also presented.
    Keywords: Box diagram, Edgeworth, Exchange, Pareto, Production
    JEL: B13
    Date: 2018
  17. By: Jill Trinh (Business School, The University of Western Australia); Michael McLure (Business School, The University of Western Australia)
    Abstract: On the face of it, Pareto’s law and Piketty’s (r – g) law are inconsistent, with Pareto arguing that real per capita economic growth is the solution to the problem of income inequality and Piketty arguing for redistribution to be funded from a wealth tax. This study, however, establishes that when the same definition of inequality is adopted by the two scholars, Piketty’s and Pareto’s laws are the same economic law. It also establishes that Piketty’s assertion that Pareto treats income distribution as “rock stable” overlooks the critical aspects of Pareto’s law that emphasise change.
    Keywords: distribution, inequality, growth, Pareto, Piketty
    JEL: B16 B31 D30 D31
    Date: 2018
  18. By: Dewez Harmony (CESCM - Centre d'Etudes Supérieures de Civilisation médiévale - Université de Poitiers - CNRS - Centre National de la Recherche Scientifique)
    Abstract: La conception de l'économie dans la doctrine mendiante, particulièrement franciscaine, au Moyen Âge est une question bien maîtrisée grâce aux travaux menés depuis les années 1970 par plusieurs historien. Cependant, la fonction des comptes dans l'économie conventuelle des mendiants demeure inégalement étudiée, au-delà de travaux comme ceux de Paul Bertrand sur les Mendiants liégeois. Les archives mendiantes sont partiellement en cause : souvent éparses et tardives, elles ne fournissent que rarement le substrat suffisant à une étude économique approfondie. C'est tout ce contexte qui explique l'intérêt de l'étude de Clément Lenoble sur le couvent franciscain d'Avignon entre le milieu du XIVe et la fin du XVe siècle, à travers le prisme d'une exceptionnelle série de registres des comptes journaliers de la communauté. Issu de sa thèse de doctorat dirigée par Jacques Chiffoleau et soutenue en 2010, cet ouvrage vient donc nourrir les travaux sur les rapports entre économie et religion chez les ordres mendiants.
    Keywords: pauvreté,Moyen Âge,Franciscians,Avignon
    Date: 2017
  19. By: James Andreoni; Deniz Aydin; Blake Barton; B. Douglas Bernheim; Jeffrey Naecker
    Abstract: In settings with uncertainty, tension exists between ex ante and ex post notions of fairness (e.g., equal opportunity versus equal outcomes). In a laboratory experiment, the most common behavioral pattern is for subjects to select the ex ante fair alternative ex ante, and switch to the ex post fair alternative ex post. One potential explanation embraces consequentialism and construes the reversals as manifestations of time inconsistency. Another abandons consequentialism, thereby avoiding the implication that revisions imply inconsistency. We test between these explanations by examining the demand for commitment, and contingent planning. The hypothesis of time-consistent non-consequentialism receives strong support.
    JEL: D03 D63
    Date: 2018–11
  20. By: Tilman Borgers; Jiangtao Li
    Abstract: We define and investigate a property of mechanisms that we call "strategic simplicity," and that is meant to capture the idea that, in strategically simple mechanisms, strategic choices require limited strategic sophistication. We define a mechanism to be strategically simple if choices can be based on first-order beliefs about the other agents' preferences and first-order certainty about the other agents' rationality alone, and there is no need for agents to form higher-order beliefs, because such beliefs are irrelevant to the optimal strategies. All dominant strategy mechanisms are strategically simple. But many more mechanisms are strategically simple. In particular, strategically simple mechanisms may be more flexible than dominant strategy mechanisms in the bilateral trade problem and the voting problem.
    Date: 2018–12

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