nep-hpe New Economics Papers
on History and Philosophy of Economics
Issue of 2018‒12‒24
fourteen papers chosen by
Erik Thomson
University of Manitoba

  1. Ludwik Fleck's philosophy and sociology of science and the resilience of modern neoclassical economics: A case study By Heise, Arne
  2. Ragnar Frisch (1895-1973) By Bjerkholt, Olav
  3. Kuhn's Theorem for Extensive Games with Unawareness By Burkhard Schipper
  4. “Trust in times of economic crisis in Spain: Paradoxes for social capital theory” By Catalina Bolancé; Jordi Caïs; Diego Torrente
  5. CasP's 'Differential Accumulation' versus Veblen's 'Differential Advantage' By Bichler, Shimshon; Nitzan, Jonathan
  6. Strategic Teaching and Learning in Games By Burkhard Schipper
  7. The Half Life of Economic Injustice By Miles, David K
  8. The neutrality illusion: biased economics, biased training, and biased monetary policy. Testing the role of ideology on FOMC voting behaviour By Lepers, Etienne
  9. Economic history and contemporary challenges to globalization By O'Rourke, Kevin Hjortshøj
  10. Identity Politics and Trade Policy By Grossman, Gene; Helpman, Elhanan
  11. The differential effect of narratives By Adrian Hillenbrand; Eugenio Verrina
  12. A Model of Competing Narratives By Eliaz, Kfir; Spiegler, Ran
  13. Social spending as a driver of economic growth: has the theoretical consensus of the 1980s led to successful economic policies? By Sandrine Michel
  14. Attention please! By Olivier Gossner; Jakub Steiner; Colin Stewart

  1. By: Heise, Arne
    Abstract: [Introduction] Ludwik Fleck’s contribution to the sociology and philosophy of science has gone almost unnoticed to the present day (see Sady 2017). Although his ideas about the development of scientific knowledge as a collective effort organised in ‘thought collectives’ (‘Denkkollektive’) based on shared ‘thought styles’ (‘Denkstile’) may have been elaborated and honed in Thomas S. Kuhn’s works on scientific revolutions and paradigm shifts and those of Imre Lakatos on scientific research programs (srp), Fleck’s work is still insightful beyond Kuhn’s and Lakatos’ contributions, not so much with respect to what triggers scientific progress but rather what impedes the correction of scientific deceptions. While Kuhn and Lakatos built on the rationality of the scientific community not to follow paradigmatic lines or adhere to scientific research programs defeated by empirical falsification or the proof of logical inconsistency or having entered the ‘state of degeneration’, Fleck was more concerned with the sociological forces that explain the resilience of ideas and what today we would call ‘fake knowledge’ even in the face of mounting evidence that does not fit the established wisdom. In the following, Fleck’s philosophy and sociology of science will be briefly outlined in order to establish a ‘theory of the resilience of scientific misapprehension’. This theory will be tested against the development of modern neoclassical economics by singling out a case of extreme deviation of theoretical prediction from empirical evidence: minimum wages’ impact on employment.
    Date: 2018
  2. By: Bjerkholt, Olav (Dept. of Economics, University of Oslo)
    Abstract: Ragnar Frisch was a Norwegian economist and statistician. He is well known for his effort in founding in 1930 the Econometric Society, the first international association in economics. In Europe it was followed by the European Economic Association in the mid-1980s. Ragnar Frisch was awarded the first Prize in Economic Sciences in Memory of Alfred Nobel, jointly with Jan Tinbergen, "for having developed and applied dynamic models for the analysis of economic processes." Frisch appreciated this prize not quite as much as the Antonio Feltrinelli prize awarded to him in 1961 by the Accademia Nazionale dei Lincei, the old and famous Italian society of which Galileo Galilei was one of the first members. Frisch is remembered internationally for his contributions to econometrics, macroeconomics and a number of other fields. He is revered in Norway for his role as teacher of students of economics over a period of 40 years and for having founded the Institute of Economics of the University of Oslo. Frisch is also known as a coiner of terms, e.g. econometrics, macroeconomics and quite a few others. The article is an account of Frisch’s early years, his education as silversmith, study years abroad etc. It includes also his own account of his experiences during the World War II and his advice given to postwar students in 1949.
    Keywords: Ragnar; Frisch
    JEL: B31
    Date: 2018–12–10
  3. By: Burkhard Schipper (Department of Economics, University of California Davis)
    Abstract: We extend Kuhn's Theorem to extensive games with unawareness. This extension is not entirely obvious: First, extensive games with non-trivial unawareness involve a forest of partially ordered game trees rather than just one game tree. An information set at a history in one tree may consist of histories in a less expressive tree. Consequently, perfect recall takes a more complicated form as players may also become aware of new actions during the play. Second, strategies can only be partially an object of ex-ante choice in games with unawareness. Finally, histories that a player may expect to reach with a strategy profile may not be the histories that actually occur with this strategy profile, requiring us to define appropriate notions of equivalence of strategies.
    Keywords: perfect recall, mixed strategy, behavior strategy, unawareness.
    JEL: C72 D83
    Date: 2017–11–01
  4. By: Catalina Bolancé (Department of Econometrics, Riskcenter-IREA, University of Barcelona, Avinguda Diagonal 690, 08034 Barcelona, Spain.); Jordi Caïs (Departament de Sociologia i Anàlisi de les Organitzacions); Diego Torrente (Department of Sociology, Faculty of Economics and Business Diagonal Avenue 696 08034 Barcelona.)
    Abstract: The theory of social capital suggests that trust in other individuals (social trust) and trust in institutions are closely related phenomena. People who trust more in other individuals also trust more in institutions, and vice versa. Some scholars argue that trust generates a climate of social cooperation and a sense of collaboration, which in turn promotes interest and participation in institutions. Despite the fact that both social trust and trust in institutions tend to decline when socioeconomic conditions worsen, the theory of social capital rarely takes economic variables into account. The economic crisis in Spain resulted in a paradox: a notable decline in trust in institutions, together with a surprising increase – rather than the expected decrease – in social trust. In this article we analyse the impact of a number of variables on social trust and trust in institutions before and during the economic crisis in Spain. The results confirm that economic factors had greater explanatory power for both types of trust during times of economic crisis, due mainly to increased inequality. However, the classic variables of the theory of social capital, such as how people view democracy or the extent of civic participation, continued to be significant. The data analysed here also highlight the possibility that the two types of trust did not track in a mutually supportive manner due to the emergence of the Movimiento 15M (“15M Movement”), which gave rise to the appearance of new political parties such as Podemos (“We Can”), on the extreme left of the electoral scale.
    Keywords: Social trust, trust in institutions, economic crisis, political movements, social capital, Spain. JEL classification:H12, I31, D73
    Date: 2018–12
  5. By: Bichler, Shimshon; Nitzan, Jonathan
    Abstract: This paper clarifies a common misrepresentation of our theory of capital as power, or CasP. Many observers tend to box CasP as an "institutionalist" theory, tracing its central process of "differential accumulation" to Thorstein Veblen's notion of "differential advantage". This view, we argue, betrays a misunderstanding of CasP, Veblen or both. As we show, CasP's notion of differential accumulation is not only different from, but also diametrically opposed to Veblen's differential advantage. Veblen, who wrote at the turn of the twentieth century, before the appearance of business indices and financial benchmarks, emphasized the absolute drive for "maximum profit" and saw strategic sabotage merely as a power means to an economic end. By contrast, CasP, which was developed at the end of the twentieth century, sees power not only as a means of accumulation, but also - and perhaps more importantly - as its ultimate purpose. Accumulators, it argues, are conditioned and driven to augment not their profits and assets as such, but their relative power, and this means that, as symbolic bearers of power, these profits and assets should be measured not absolutely, but relatively to those of others - hence the imperative of differential accumulation.
    Keywords: capital as power,differential advantage,differential accumulation,Thorstein Veblen
    Date: 2018
  6. By: Burkhard Schipper (Department of Economics, University of California Davis)
    Abstract: It is known that there are uncoupled learning heuristics leading to Nash equilibrium in all finite games. Why should players use such learning heuristics and where could they come from? We show that there is no uncoupled learning heuristic leading to Nash equilibrium in all finite games that a player has an incentive to adopt, that would be evolutionary stable or that could "learn itself". Rather, a player has an incentive to strategically teach such a learning opponent in order to secure at least the Stackelberg leader payoff. The impossibility result remains intact when restricted to the classes of generic games, two-player games, potential games, games with strategic complements or 2 x 2 games, in which learning is known to be "nice". More generally, it also applies to uncoupled learning heuristics leading to correlated equilibria, rationalizable outcomes, iterated admissible outcomes, or minimal curb sets. A possibility result restricted to "strategically trivial" games fails if some generic games outside this class are considered as well.
    Keywords: Learning in games, Interactive learning, Higher-order learning
    JEL: C72 C73
    Date: 2017–05–01
  7. By: Miles, David K
    Abstract: How much of today's income (GDP) is a result of unjust economic transactions? How much is a legacy of past acquisition of wealth (capital) which was itself unjust? To answer that question requires two things: first, a principle to determine what is, and what is not, a just acquisition of wealth or a just source of income; second, a means of using that principle to estimate what fraction of wealth and income is unjust. I use a principle put forward by Robert Nozick to provide the first of these things and then use some calculations based on standard neoclassical models of economic growth to illustrate its implications for the scale of unfairness today.
    Keywords: Distributive justice; Human Capital; income distribution; Solow growth model
    JEL: O15 P14 P26 P48
    Date: 2018–11
  8. By: Lepers, Etienne
    Abstract: This research is trying to shed light on two myths that are usually widespread: the first one being the idea of the academic economist as a neutral scientist finding uncontestable consensual truths, thanks to uncontestable empirical methods, the second, the idea of the central banker as a Weberian neutral bureaucrat setting aside personal beliefs to act mechanically for the common good. Deconstructing this ‘neutrality illusion’, this work argues that economics is actually a divided and ideologically marked discipline despite its aim at natural-science-type-legitimacy. It argues in a related discussion that such ideological bias also impedes a purely neutral conduct of monetary policy, undermining the very idea of central bank independence. Linking these two arguments, it argues that graduate training in economics is the first place for the formation of biased preferences, because of the substantial ideological sorting that exists across universities. Using a unique database on FOMC members’ votes and ideology, the paper tests this idea empirically and despite unavoidable caveats, finds robust evidence of a systematic impact of the ideological features of their alma mater on FOMC members’ voting behaviour – impact that we found more important than the other traditional determinants of central bankers’ actions.
    Keywords: Fed; monetary policy; FOMC; central bank independence; dissent; ideological bias; educational training; freshwater; saltwater; economics science
    JEL: J1 F3 G3
    Date: 2017–06–07
  9. By: O'Rourke, Kevin Hjortshøj
    Abstract: The paper surveys three economic history literatures that can speak to contemporary challenges to globalization: the literature on the anti-globalization backlash of the nineteenth century, focused largely on trade and migration; the literature on the Great Depression, focused largely on capital flows, the gold standard, and protectionism; and the literature on trade and warfare.
    Keywords: deglobalization; Globalization
    JEL: F02 N70
    Date: 2018–12
  10. By: Grossman, Gene; Helpman, Elhanan
    Abstract: We characterize trade policies that result from political competition when assessments of well-being include both material and psychosocial components. The material component reflects, as usual, satisfaction from consumption. Borrowing from social identity theory, we take the psychosocial component as combining the pride and self-esteem an individual draws from the status of groups with which she identifies and a dissonance cost she bears from identifying with those that are different from herself. In this framework, changes in social identification patterns that may result, for example, from increased income inequality or heightened racial and ethnic tensions, lead to pronounced changes in trade policy. We analyze the nature of these policy changes.
    Keywords: political economy; populism; protectionism; social identity; tariff formation
    JEL: D78 F13
    Date: 2018–12
  11. By: Adrian Hillenbrand (Max Planck Institute for Research on Collective Goods); Eugenio Verrina (Max Planck Institute for Research on Collective Goods)
    Abstract: Narratives pervade almost any aspect of our life and play a particularly important role in moral and prosocial decision-making. We study how positive (stories in favor of a prosocial action) and negative (stories in favor of a selfish action) narratives influence prosocial behavior. Our main findings are that positive narratives increase giving substantially, especially for selfish types, compared to a baseline with no narratives. Negative narratives, on the other hand, have a differential effect. Prosocial types decrease their giving, while selfish types give more than in the baseline. We also find that positive narratives lead to a binary response (comply or not comply), while negative narratives induce a more gradual trade-off.
    Date: 2018–12
  12. By: Eliaz, Kfir; Spiegler, Ran
    Abstract: We formalize the argument that political disagreements can be traced to a "clash of narratives". Drawing on the "Bayesian Networks" literature, we model a narrative as a causal model that maps actions into consequences, weaving a selection of other random variables into the story. An equilibrium is defined as a probability distribution over narrative-policy pairs that maximizes a representative agent's anticipatory utility, capturing the idea that public opinion favors hopeful narratives. Our equilibrium analysis sheds light on the structure of prevailing narratives, the variables they involve, the policies they sustain and their contribution to political polarization.
    Keywords: Anticipatory Utility; model misspecification; narratives; Polarization; Political Competition
    Date: 2018–11
  13. By: Sandrine Michel (ART-Dev - Acteurs, Ressources et Territoires dans le Développement - CIRAD - Centre de Coopération Internationale en Recherche Agronomique pour le Développement - UPVD - Université de Perpignan Via Domitia - UM3 - Université Paul-Valéry - Montpellier 3 - UM - Université de Montpellier - CNRS - Centre National de la Recherche Scientifique, UM - Université de Montpellier)
    Abstract: The question of how this spending affects the economic growth is a question as old as economics. While the 19th century showed their countercyclical growth during the phase of depression of the business cycle followed by ratchet effects when economic context is improving, the 20th century has studied the causes of their growth. Economic causes insist first on the correction on income losses and then introduce causality as regards with the dynamics of capital accumulation. At the end of the 1980s, a new assumption (Lucas 1988, Fontvieille 1990) suggests that social spending would have become a driver of growth. This paper searches to verify this assumption. In order to do so, it focuses on the european pathway of social spending development since the 1960s to 2014. It is shown that insofar as social spending is still sensitive to the two last business cycle phase of depression, the 1980s assumption is not invalidated. But the assumption is not verified for other reasons than the expected ones. While social spending avoiding the fall of income used to be countercyclical, the other ones, dedicated to the production of the quality of the people, are becoming acyclical.
    Keywords: Economic History,Social spending,Economic growth,Economic Cycles,Endogeneous growth,Régulation Theory,Europe
    Date: 2018–10–17
  14. By: Olivier Gossner; Jakub Steiner; Colin Stewart
    Abstract: We study the impact of manipulating the attention of a decision-maker who learns sequentially about a number of items before making a choice. Under natural assumptions on the decision-maker's strategy, forcing attention toward one item increases its likelihood of being chosen.
    Keywords: Sequential sampling, marketing, persuasion, attention allocation
    JEL: D8 D91
    Date: 2018–11

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