nep-hpe New Economics Papers
on History and Philosophy of Economics
Issue of 2019‒08‒26
six papers chosen by
Erik Thomson
University of Manitoba

  1. The dog that didn’t bark: the curious case of Lloyd Mints, Milton Friedman and the emergence of monetarism By Harris Dellas; George Tavlas
  2. Federal Reserve Structure, Economic Ideas, and Monetary and Financial Policy By Michael D. Bordo; Edward S. Prescott
  3. Moral Hazard and the Property Rights Approach to the Theory of the Firm By Schmitz, Patrick W.
  4. A conceptual exploration and critical inquiry into the theoretical foundation(s) of economic welfare measures By Jonas Van der Slycken; Brent Bleys
  5. The ESR at 50: A Review Article on Fiscal Policy Papers By David (David Patrick) Madden
  6. Wachstumszwang – eine Übersicht By Richters, Oliver; Siemoneit, Andreas

  1. By: Harris Dellas (University of Bern); George Tavlas (Bank of Greece)
    Abstract: Lloyd Mints has long been considered a peripheral figure in the development of monetary economics at the University of Chicago. We provide evidence showing that the standard assessment of Mints’s standing in Chicago monetary economics -- and in American monetary economics more broadly -- is mistaken. In light of the originality and the breadth of his monetary contributions, and given the degree to which those contributions shaped part of Milton Friedman’s monetary framework and were pushed forward by Friedman, we argue that, far from being a peripheral figure in the development of Chicago monetary economics, Mints played a catalytic role.
    Keywords: Lloyd Mints; Milton Friedman; monetarism; Chicago monetary tradition
    JEL: B22 E52
    Date: 2019–07
  2. By: Michael D. Bordo; Edward S. Prescott
    Abstract: The decentralized structure of the Federal Reserve System is evaluated as a mechanism for generating and processing new ideas on monetary and financial policy. The role of the Reserve Banks starting in the 1960s is emphasized. The introduction of monetarism in the 1960s, rational expectations in the 1970s, credibility in the 1980s, transparency, and other monetary policy ideas by Reserve Banks into the Federal Reserve System is documented. Contributions by Reserve Banks to policy on bank structure, bank regulation, and lender of last resort are also discussed. We argue that the Reserve Banks were willing to support and develop new ideas due to internal reforms to the FOMC that Chairman William McChesney Martin implemented in the 1950s. Furthermore, the Reserve Banks were able to succeed at this because of their private-public governance structure, a structure set up in 1913 for a highly decentralized Federal Reserve System, but which survived the centralization of the System in the Banking Act of 1935. We argue that this role of the Reserve Banks is an important benefit of the Federal Reserve’s decentralized structure by allowing for more competition in ideas and reducing groupthink.
    JEL: B0 E58 G28 H1
    Date: 2019–07
  3. By: Schmitz, Patrick W.
    Abstract: In the Grossman-Hart-Moore property rights theory, there are no frictions ex post (i.e., after non-contractible investments have been sunk). In contrast, in transaction cost economics ex-post frictions play a central role. In this note, we bring the property rights theory closer to transaction cost economics by allowing for ex-post moral hazard. As a consequence, central conclusions of the Grossman-Hart-Moore theory may be overturned. In particular, even though only party A has to make an investment decision, B-ownership can yield higher investment incentives. Moreover, ownership matters even when investments are fully relationship-specific (i.e., when they have no impact on the parties' disagreement payoffs).
    Keywords: Incomplete Contracts; Investment incentives; moral hazard; Ownership rights; relationship specificity
    JEL: D23 D86 G34 L23 L24
    Date: 2019–07
  4. By: Jonas Van der Slycken; Brent Bleys (-)
    Abstract: Economic welfare measures (EWM) such as the ISEW and the GPI are often argued to lack a sound theoretical foundation. However, we observe that the initial EWM were jointly inspired by Hicksian and Fisherian income. Welfare’s experiential nature is Fisherian-inspired, whereas seeing the consumption of community capital (e.g. the ecosystem) as a cost is Hicksian-inspired. As most scholars do not recognize this double theoretical foundation, two distinct welfare interpretations with different time and boundary dimensions are often conflated. EWM can be seen as either capturing the benefits and costs experienced, or as reflecting the benefits and costs of present economic activities (BCPA). The former interpretation excludes future costs, costs shifted abroad and capital changes as they are not experienced in the present, while the latter includes them. Recent developments reveal that EWM are converging toward the ex post established experiential Fisherian foundation formulated by Lawn (2003). Yet, this is not the only way forward as the BCPA-view offers an alternative to account for, for instance, the costs of present activities shifted abroad or to the future, whether they are experienced or not. To avoid inconsistencies, EWM’s standardization would greatly benefit from making explicit in future studies which interpretation is taken.
    Keywords: Index of Sustainable Economic Welfare (ISEW), Genuine Progress Indicator (GPI), theoretical framework, Fisherian income, Hicksian income, experiential welfare, cost-benefit analysis, cost-shifting, accountability, standardization, beyond GDP
    Date: 2019–08
  5. By: David (David Patrick) Madden
    Abstract: This article provides a broad overview of published research in the Economic and Social Review (ESR) in the broad areas of fiscal policy. It examines the patterns of publications and citations over time, those sub-areas which have seen the highest rate of publication and the nature of the data and techniques employed. The broad patterns which have emerged are that micro policy articles have increased in importance over the years with the availability of better quality data. Macro policy analysis remains important and has often concentrated upon episodes of fiscal crisis. In terms of citations, those papers which have been most heavily cited are overview papers, sometimes delivered by international scholars as invited presentations. There also seems to be a slight bias towards more recent publications with much work from the 1970s and 1980s largely ignored in terms of citations.
    Keywords: Fiscal policy; Review
    JEL: H2 H5 H6
    Date: 2019–08
  6. By: Richters, Oliver; Siemoneit, Andreas
    Abstract: Wachstumszwang (englisch "growth imperative") ist ein Begriff aus der Wirtschaftstheorie. Damit werden Mechanismen bezeichnet, die es für Privathaushalte, Unternehmen oder einen Staat zwingend notwendig machen, ökonomisch zu wachsen, um unerwünschte Wirkungen zu vermeiden. Ein Wachstumszwang würde erklären, warum Wirtschaftswachstum derart essentiell ist, dass ihm ökologische, aber auch gewisse soziale Ziele politisch untergeordnet und Grenzen des Wachstums bzw. planetare Grenzen überschritten werden. Dies führt zu politischen Forderungen nach der Überwindung dieser Sachzwänge. Ob und für wen ein Wachstumszwang vorliegt und welcher Mechanismus dafür verantwortlich wäre, ist innerhalb der verschiedenen Wissenschaften umstritten.
    Date: 2019

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