nep-hpe New Economics Papers
on History and Philosophy of Economics
Issue of 2019‒03‒04
nine papers chosen by
Erik Thomson
University of Manitoba

  1. The Great Recession and the teaching of macroeconomics: A critical analysis of the Blanchard, Amighini and Giavazzi textbook By Giancarlo Bertocco; Andrea Kalajzić
  2. Knapp's 'State Theory of Money' and its reception in German academic discourse By Ehnts, Dirk H.
  3. Toward a cognitive science of markets: Economic agents as sense-makers By Johnson, Samuel G. B.
  4. Teoría del valor en Valenzuela Feijóo: Una representación walrasiana de Marx By Goicoechea, Julio
  5. B for Brexit: A Survey of the Economics Academic Literature By Campos, Nauro F
  6. The Knightian Uncertainty Hypothesis: Unforeseeable Change and Muth’s Consistency Constraint in Modeling Aggregate Outcomes By Roman Frydman; Søren Johansen; Anders Rahbek; Morten Nyboe Tabor
  7. Marxisme By Fabien Tarrit
  8. Have Econometric Analyses of Happiness Data Been Futile? A Simple Truth about Happiness Scales By Chen, Le-Yu; Oparina, Ekaterina; Powdthavee, Nattavudh; Srisuma, Sorawoot
  9. Interview of Peter J. Hammond By Mongin, Philippe

  1. By: Giancarlo Bertocco; Andrea Kalajzić
    Abstract: The publication of the seventh edition of Blanchard’s textbook (Blanchard 2017) and of the third edition of the textbook authored by Blanchard, Amighini and Giavazzi (2017) represents a significant opportunity to assess the impact of the Great Recession on macroeconomic theory and on the teaching of macroeconomics. The authors acknowledge that the mainstream economic model presented in the previous editions of their textbooks is unable to offer a significant explanation of the causes of the crisis as it completely neglects the role of the financial system. They believe that the economics profession has learned the lesson of the crisis since economists understood the limitations of the theoretical model elaborated over the last decades. In the revised editions of their textbooks they present a new theoretical model taking into account the financial system. The objective of this work is twofold: i) to show that the new model does not allow to elaborate a coherent explanation of the Great Recession and: ii) to present the pillars of an alternative theoretical model based on the lessons of Keynes, Schumpeter and Minsky.
    Keywords: Financial markets, Crises, Keynes, Schumpeter, Minsky
    JEL: E10 E20 E30 E40 E44
    Date: 2019–02
  2. By: Ehnts, Dirk H.
    Abstract: In 1905, Georg Friedrich Knapp published The State Theory of Money in his native German, claiming that money is a "creature of law" and not connected to metals via some intrinsic value. When the English translation appeared in 1924, apparently at the wishes of John Maynard Keynes, the German version had run through four editions, upon which the last the translation builds. There also had been considerable debate about "Chartalism" - the idea that money derived its acceptance by legal means - in the German academic literature. Among others, Knut Wicksell and Georg Simmel commented on it. Since so far there has not been any English-language publication on this issue, it is deemed worthwhile to provide such. After presenting the main arguments that Knapp makes in his book, the academic reviews that followed are presented and evaluated.
    Keywords: chartalism,Modern Monetary Theory,monetary theory,public finance,deficit spending,taxation,value of money,metallism
    JEL: E40 E42 E51 F31 H20
    Date: 2019
  3. By: Johnson, Samuel G. B.
    Abstract: Behavioral economics characterizes decision-makers using psychologically-informed models. Cognitive science produces psychologically-informed models. Why don't these disciplines talk more? Here, the author presents several arguments for why cognitive science should inform behavioral economics - it characterizes internal psychological states, builds a richer conception of human nature, pays equal attention to cognition's successes and failures, embraces multidisciplinary insights, and avoids blind spots produced by behavioral economics' intellectual lineage. The author illustrates these principles using the cognitive science of sense-making - how humans understand information - including mental tools such as heuristics, stories, and theories. The science of mind can produce new insights to enrich economics.
    Keywords: cognitive science,behavioral economics,experimental economics,behavioral finance,economics methodology,information processing,decision-making under uncertainty
    JEL: A12 B4 D01 D11 D7 D8 D9
    Date: 2019
  4. By: Goicoechea, Julio
    Abstract: This paper examines the conceptual framework upon which José Valenzuela Feijóo unfolds a theory of value. The elementary form of value gives way to pairs of commodities which in spite of being ordinary, each is to function as money. The general economic equilibrium becomes a means to replace the total or expanded value form. The unit of account, after being reduced to a numeraire, is eliminated. Previously, in an isolated approach to Bortkiewicz, values and prices are to become, each, a self-contained system. The non-dogmatic version of Marx which he claims to provide is shown to be rooted in Walrasian precepts. To expose these precepts, he makes use of Marxian terminology. In an apparent antagonism with Walras, he disqualifies him harshly. The considerable resort to algebraic expressions by Valenzuela Feijóo is kept at a strict minimum.
    Keywords: Value theory, numeraire, general economic equilibrium, Walras, Marx
    JEL: D50
    Date: 2019–01–07
  5. By: Campos, Nauro F (Brunel University)
    Abstract: This paper surveys the economics academic literature on Brexit. It is organised in: pillars, channels, and consequences. The two building blocks to understand Brexit are the economic history of the UK-EU relationship and the literature on the political economy of globalisation and populism. The paper then reviews the evidence on the standard mechanisms through which the UK benefited from EU integration (trade, migration and FDI). Next it surveys the short-run effects of the vote and discuss expected long-term consequences of "Brexit proper." It concludes by identifying some main gaps in the economics literature on Brexit.
    Keywords: Brexit, migration
    JEL: F22 F10
    Date: 2019–02
  6. By: Roman Frydman (Department of Economics, New York University); Søren Johansen (Department of Economics, University of Copenhagen, Denmark); Anders Rahbek (Department of Economics, University of Copenhagen, Denmark); Morten Nyboe Tabor (Department of Economics, University of Copenhagen, Denmark)
    Abstract: This paper proposes the Knightian Uncertainty Hypothesis (KUH), a new approach to macroeconomics and finance theory. KUH rests on a novel mathematical framework that characterizes both measurable and Knightian uncertainty about economic outcomes. Relying on this framework and Muth’s pathbreaking hypothesis, KUH represents participants’ forecasts to be consistent with both uncertainties. KUH thus enables models of aggregate outcomes that 1) are premised on market participants’ rationality, and 2) accord a role to both fundamental and psychological (and other non-fundamental) factors in driving outcomes. The paper also suggests how a KUH model’s quantitative predictions can be confronted with time-series data.
    Keywords: Unforeseeable Change; Knightian Uncertainty; Muth’s Hypothesis; Model Ambiguity; REH; Behavioral Finance
    JEL: C02 C51 E00 D84 E00
    Date: 2019–02–21
  7. By: Fabien Tarrit (REGARDS - Recherches en Économie Gestion AgroRessources Durabilité Santé- EA 6292 - URCA - Université de Reims Champagne-Ardenne - SFR Condorcet - URCA - Université de Reims Champagne-Ardenne - UPJV - Université de Picardie Jules Verne - CNRS - Centre National de la Recherche Scientifique)
    Abstract: Le marxisme se conçoit comme un ensemble homogène de savoirs théoriques, à l'intersection de la philosophie, de l'économie, de la sociologie… dont le but est de proposer des outils pour comprendre et transformer le monde. Il a exercé une influence significative à la fois parmi les intellectuels et parmi les acteurs de la transformation sociale. Nous tâchons ici de le considérer du point de vue de la fonction qu'il se fixe, être une science, avec pour objectif l'étude du fonctionnement des sociétés, de leur évolution, de leurs contradictions. Aussi, le marxisme existe au-delà de Marx en tant que champ de la connaissance, et l'enjeu du présent texte est de dégager les principaux aspects par lesquels le marxisme vise à comprendre les fondements des sociétés humaines, et du capitalisme en particulier, afin précisément de le dépasser par la pensée. À ce titre, il présente une méthode spécifique et il a fait deux découvertes : le matérialisme historique et la plus-value, qui correspondent respectivement à une science générale de l'histoire et une science spécifique de l'économie capitaliste.
    Date: 2017–07
  8. By: Chen, Le-Yu (Academia Sinica); Oparina, Ekaterina (University of Surrey); Powdthavee, Nattavudh (University of Warwick); Srisuma, Sorawoot (University of Surrey)
    Abstract: Econometric analyses in the happiness literature typically use subjective well-being (SWB) data to compare the mean of observed or latent happiness across samples. Recent critiques show that com-paring the mean of ordinal data is only valid under strong assumptions that are usually rejected by SWB data. This leads to an open question whether much of the empirical studies in the economics of happiness literature have been futile. In order to salvage some of the prior results and avoid future issues, we suggest regression analysis of SWB (and other ordinal data) should focus on the median ra-ther than the mean. Median comparisons using parametric models such as the ordered probit and logit can be readily carried out using familiar statistical softwares like STATA. We also show a previously as-sumed impractical task of estimating a semiparametric median ordered-response model is also possi-ble by using a novel constrained mixed integer optimization technique. We use GSS data to show the famous Easterlin Paradox from the happiness literature holds for the US independent of any paramet-ric assumption.
    Keywords: ordered-response model, mixed-integer optimization, median regression, subjective well-being
    JEL: C24 C61 I31
    Date: 2019–02
  9. By: Mongin, Philippe (GREGHEC, CNRS & HEC Paris)
    Abstract: Following an initiative of Social Choice and Welfare, this is the result of an interview conducted by email exchange during the period from July 2017 to February 2018, with minor adjustments later in 2018. Apart from some personal history, topics discussed include: (i) social choice, especially with interpersonal comparisons of utility ; (ii) utilitarianism, including Harsanyi’s contributions ; (iii) consequentialism in decision theory and in ethics ; (iv) the independence axiom for decisions under risk; (v) welfare economics under uncertainty; (vi) incentive compatibility and strategy-proof mechanisms, especially in large economies ; (vii) Pareto gains from trade, and from migration; (viii) cost–benefit analysis and welfare measurement ; (ix) the possible future of normative economics
    Date: 2019

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