nep-hpe New Economics Papers
on History and Philosophy of Economics
Issue of 2019‒01‒14
fourteen papers chosen by
Erik Thomson
University of Manitoba

  1. Impulses and Propagation Mechanisms in Equilibrium Business Cycles Theories: From Interwar Debates to DSGE "Consensus" By Muriel Dal-Pont Legrand; Harald Hagemann
  2. Ricœur, Rawls and the Aporia of the Just By Feriel Kandil
  3. Monetary theory and policy : the debate revisited By Jean-Luc Gaffard
  4. A Model of Competing Narratives By Kfir Eliaz; Ran Spiegler
  5. Economic History and Contemporary Challenges to Globalization By Kevin Hjortshøj O'Rourke
  6. Le débat de théorie et de politique monétaires revisité By Jean-Luc Gaffard
  7. Dishonesty, Social Information, and Sorting By AKIN, ZAFER
  8. Capitalism's Deniers By Nitzan, Jonathan; Bichler, Shimshon
  9. For Good Measure: Advancing Research on Well-Being Metrics Beyond GDP By Joseph Stiglitz; Jean-Paul Fitoussi; Martine Durand
  10. The institutionalization of Economic History in England, c.1900 By Alexandre Macchione Saes
  11. The welfare state and liberal democracy: A political economy approach By Heise, Arne; Serfraz Khan, Ayesha
  12. Beyond GDP: Measuring What Counts for Economic and Social Performance By Joseph Stiglitz; Jean-Paul Fitoussi; Martine Durand
  13. The Financial Alchemy that Failed By Miller, Marcus
  14. Fight or Flight : Endogenous Timing in Conflicts By van Leeuwen, Boris; Offerman, T.J.S.; van de Ven, J.

  1. By: Muriel Dal-Pont Legrand (Université Côte d'Azur, France; GREDEG CNRS); Harald Hagemann (University of Hohenheim, Stuttgart)
    Abstract: There is no doubt that DSGE (Dynamic Stochastic General Equilibrium) models which were considered benchmark models during the Great Moderation period, were challenged enormously when the global financial crisis developed. As business cycles models, their capacity to provide insights into the origins and mechanisms of propagation failed in the context of the crisis. This questions their validity also as a basis for economic policy advice. As a consequence, many economists are pleading for new benchmarks or for a deep reconsideration of both the theoretical and empirical sides of the arguments. Although no new consensus has yet emerged on possible "solutions" to or reorientations of the research program in this field, many economists are trying to understand where modern macroeconomics went wrong. As historians of economic thought, we propose to retrace the evolution of business cycles theory and of its empirical practices in order to better understand the way this literature today addresses macroeconomic volatility and eventually crises.
    Date: 2019–01
  2. By: Feriel Kandil (AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - Ecole Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique)
    Abstract: The article conducts a comparative study between Ricœur's and Rawls' thought on justice. Whereas Ricoeur focuses on the dialectic between the just and the good, Rawls is concerned with the ideal conditions under which a universal consensus on the principles of justice may be reached. Ricœur gives much importance to reading Rawls. He offers many commentaries, especially on Rawls's major contribution, A Theory of Justice. This chapter focuses on such comments and on the relating paradoxical interpretation of Rawls's approach to justice Ricœur provides. First, this chapter suggests that, with his interpretation of Rawls's major contribution, Ricœur contributes to put the light on the conflicts between the just and the good. These conflicts are the key elements of what may be referred to as the aporia of the just, which consists in the contradictory requirements coming from the just considered as a virtue of either institutions or individuals. Second, this chapter shows that whereas the aporia is a major problem in Rawls' approach to justice, it is at the core of the dialectic dynamic Ricœur sees within moral life. In his work, the aporia leads to what we call the three paradoxes of justice, which are the paradoxes with legal, distributive and political justice. Considering such paradoxes, Ricœur takes the ethics of practical wisdom as a necessary recourse. The latter provides fair decision makers with the resources needed for the aporia to be, if not resolved, at least eased.
    Keywords: social justice,distributive justice,legal justice,political justice,the just,the good,principles of justice,Kant,Aristotle,Ricœur,Rawls,political paradox,sense of justice
    Date: 2018–11
  3. By: Jean-Luc Gaffard (Observatoire français des conjonctures économiques)
    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: 2018–11
  4. By: Kfir Eliaz; Ran Spiegler
    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.
    Date: 2018–11
  5. By: Kevin Hjortshøj O'Rourke
    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.
    JEL: F02 N70
    Date: 2018–12
  6. By: Jean-Luc Gaffard (Observatoire français des conjonctures économiques)
    Abstract: L’article est dédié à reconsidérer l’analyse monétaire afin de mieux comprendre des choix erronés dans la conduite de la politique monétaire. Suivant le consensus en vigueur, l’économie de marché est intrinsèquement stable, étant seulement perturbée par les mauvais comportements du gouvernement et des banques. Nous maintenons, au contraire, que cette économie est instable et que la stabiliser requiert une politique économique discrétionnaire. Une telle position repose sur une approche analytique suivant laquelle l’organisation monétaire et financière des échanges est un outil qui facilite le fonctionnement des marchés Suivant cette perspective centrée sur l'hétérogénéité des marchés et des agents, et donc sur le rôle des institutions dans la détermination de la performance globale, il apparaît que les rigidités nominales et l'engagement financier sont les moyens qui assurent la stabilité de l’économie. La raison est que ces mesures empêchent les déséquilibres successifs et inévitables d’être explosifs.
    Keywords: Inflation; Marché; Monnaie; Stabilité
    JEL: E31 E32 E5 E61 E62
    Date: 2018–11
  7. By: AKIN, ZAFER
    Abstract: The dishonesty literature investigates how people behave when they are provided certain types of information. However, this approach predominantly ignores the fact that people -to some extent- can choose which information they want to be exposed to. By conducting a laboratory experiment, we study individuals’ decisions to choose which social information they would like to observe and the effect of this sorting on their engagement in unethical conduct. We find evidence that sorting exacerbates the prevalence of dishonesty, which is mainly driven by the ones who chose maximum information. Our results demonstrate that sorting is an important factor determining dishonest behavior and that previously observed levels of prevalence of dishonesty in the literature can be an underestimate of actual level of dishonest behavior in real-world situations.
    Keywords: Dishonesty; social norms; selection; laboratory experiments
    JEL: C91 D03
    Date: 2018–08–01
  8. By: Nitzan, Jonathan; Bichler, Shimshon
    Abstract: A new, capitalism-denying book is on the shelves, and it makes a stunning discovery: ‘Capitalism without competition is not capitalism’! Capitalist crisis, like climate change, tends to breed ‘capitalism deniers’. The problem, argue the deniers, lies not in capitalism but in its ‘distortions’. In its pure form, they maintain, capitalism is the best of all possible worlds. But to the deniers’ chagrin, contemporary capitalism is no longer pristine. Unlike its original, once-upon-a-time version, its current one is subject to distorting ‘imperfections’, ‘shocks’ and ‘exogenous’ events. And it is these aberrations – rather than capitalism itself – that should be blamed for the system’s misfortunes.
    Keywords: capitalism,competition,fundamentalism,ideology,neoclassical economics
    JEL: L L1 P
    Date: 2019
  9. By: Joseph Stiglitz (Columbia Business School); Jean-Paul Fitoussi (Département d'économie); Martine Durand (Organisation de Coopération et de Développement Économiques (OCDE))
    Abstract: The 2009 Commission on the Measurement of Economic Performance and Social Progress (“Stiglitz-Sen-Fitoussi” Commission) concluded that we should move away from over-reliance on GDP when assessing a country’s health, towards a broader dashboard of indicators that would reflect concerns such as the distribution of well-being and sustainability in all of its dimensions. This book includes contributions from members of the OECD-hosted High Level Expert Group on the Measurement of Economic Performance and Social Progress, the successor of the Stiglitz-Sen-Fitoussi Commission, and their co-authors on the latest research in this field. These contributions look at key issues raised by the 2009 Commission that deserved more attention, such as how to better include the environment and sustainability in our measurement system, and how to improve the measurement of different types of inequalities, of economic insecurity, of subjective well-being and of trust. A companion volume Beyond GDP: Measuring What Counts for Economic and Social Performance presents an overview by the co-chairs of the High Level Expert Group, Joseph E. Stiglitz, Jean-Paul Fitoussi and Martine Durand of the progress accomplished since the 2009 report, of the work conducted by the Group over the past five years, and of what still needs to be done.
    Date: 2018–11
  10. By: Alexandre Macchione Saes
    Abstract: The paper presents the Economic History Society development, the world's first economic history association, taking into account the intellectual environment that was immersed the founding leaders and the debates between economic historians and economists in England. The economic history institutionalization in England, through the formation of its association, the organization of congresses and publications oriented to the community, should be seen not only as an indicator of the vitality of the area of the society of researchers, but also as an instrument of protection and appreciation of the area
    Keywords: Economic History Society; England; economic history
    JEL: N01 B52
    Date: 2018–12–20
  11. By: Heise, Arne; Serfraz Khan, Ayesha
    Abstract: This paper attempts to shed some light on the developments of welfare states in highly developed nations since WW2 within the context of a narrative which seeks to combine institutional distinctions, termed 'varieties of capitalism', with the historical regimes of regulation theory in a political economy perspective which puts interested political actors at centre stage. It will be argued that in a liberal democracy, the elite has the framing and agenda-setting power to 'manufacture a political will' according to its interests. The welfare state is not the result of a long social struggle on the part of the needy; rather, it results in its general features from the minimal state of meritocratic exigencies. Under the very peculiar circumstances of the post-WW2 era, this even translated into a rise in social welfare spending to more than a third of national income. The particular design of welfare state organisation was the subject-matter of political conflict, and a clear distinction between liberal and coordinated market economies can be attributed to cultural differences and institutional settings. Yet the core of the welfare state conception serves the interest of the meritocracy as much as those who benefit from social programmes and re-distribution. And the neoliberal attack on the welfare state since the 1980s is not a necessary re-calibration due to changing economic conditions or a growing lack of solidarity among the people but an expression of a modified cost-benefit analysis from the elite's perspective.
    Keywords: Welfare State,Keynesian National Welfare State,Schumpeterian Competition State,Elite,Agenda Theory
    JEL: B59 I31 P16 P31
    Date: 2018
  12. By: Joseph Stiglitz (Columbia Business School); Jean-Paul Fitoussi (Département d'économie); Martine Durand (Organisation de Coopération et de Développement Économiques (OCDE))
    Abstract: Metrics matter for policy and policy matters for well-being. In this report, the co-chairs of the OECD-hosted High Level Expert Group on the Measurement of Economic Performance and Social Progress, Joseph E. Stiglitz, Jean-Paul Fitoussi and Martine Durand, show how over-reliance on GDP as the yardstick of economic performance misled policy makers who did not see the 2008 crisis coming. When the crisis did hit, concentrating on the wrong indicators meant that governments made inadequate policy choices, with severe and long-lasting consequences for many people. While GDP is the most well-known, and most powerful economic indicator, it can’t tell us everything we need to know about the health of countries and societies. In fact, it can’t even tell us everything we need to know about economic performance. We need to develop dashboards of indicators that reveal who is benefitting from growth, whether that growth is environmentally sustainable, how people feel about their lives, what factors contribute to an individual’s or a country’s success. This book looks at progress made over the past 10 years in collecting well-being data, and in using them to inform policies. An accompanying volume, For Good Measure: Advancing Research on Well-being Metrics Beyond GDP, presents the latest findings from leading economists and statisticians on selected issues within the broader agenda on defining and measuring well-being.
    Date: 2018–11
  13. By: Miller, Marcus (University of Warwick and CAGE)
    Abstract: With his conception of successive ‘Ages of Capitalism’, Anatole Kaletsky provides a canvas broad enough to encompass the banking crisis of 2008 and much more. After briefly outlining the Four Ages he identifies, we focus on the period of the Great Moderation when Inflation Targeting seemed to have solved the problem macroeconomic management – until it ended in spectacular failure. The rapid growth of cross-border banking – with securitized assets funded by wholesale money – evidently posed threats to financial stability that had been ignored by a regime targeting consumer prices. We look at three: the pecuniary externalities exerted by asset price changes on investment banking; information failures leading to an exaggerated banking boom; and the risk of insolvency in the subsequent ‘bank run’. The financial system pre-crash was, it seems, flawed by two Fallacies of Composition: by regulation that reckoned making individual banks safe guaranteed systemic stability; and a business model that reckoned securitization ensured liquidity whenever necessary. Finally, we discuss how, in different countries, the law has variously been invoked to handle reckless banking.
    Keywords: JEL Classification:
    Date: 2019
  14. By: van Leeuwen, Boris (Tilburg University, Center For Economic Research); Offerman, T.J.S. (Tilburg University, Center For Economic Research); van de Ven, J. (Tilburg University, Center For Economic Research)
    Abstract: We study a dynamic game in which players compete for a prize. In a waiting game with two-sided private information about strength levels, players choose between fighting, fleeing, or waiting. Players earn a “deterrence value” on top of the prize if their opponent escapes without a battle. We show that this value is a key determinant of the type of equilibrium. For intermediate values, sorting takes place with weaker and more loss averse players fleeing before others fight. Time then helps to reduce battles. In an experiment, we find support for the key theoretical predictions, and document suboptimal predatory fighting.
    Keywords: fight-or-flight; contest; sorting; loss aversion; theory; experiment
    JEL: D74 D82 C92
    Date: 2018

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