nep-hpe New Economics Papers
on History and Philosophy of Economics
Issue of 2019‒11‒25
five papers chosen by
Erik Thomson
University of Manitoba

  1. "Too Bad to Be True". Swedish Economists on Keynes's 'The Economic Consequences of the Peace, 1919-1929' By Carlson, Benny; Jonung, Lars
  2. The benefit of the doubt: Willful ignorance and altruistic punishment By Stüber, Robert
  3. Econophysics deserves a revamping By Paolo Magrassi
  4. Working until you drop: Image concerns or prosocial motives? By Erkut, Hande; Shalvi, Shaul
  5. The Interplay of Economic, Social and Political Fragmentation By Steven J. Bosworth; Dennis J. Snower

  1. By: Carlson, Benny (Department of Economic History, Lund University); Jonung, Lars (Department of Economics, Lund University)
    Abstract: This paper examines the response of five prominent Swedish economists, David Davidson, Gustav Cassel, Eli Heckscher, Knut Wicksell and Bertil Ohlin, to John Maynard Keynes’s "The Economic Consequences of the Peace" and to the German reparations in the 1920s. When Keynes’s book appeared, Davidson and Cassel strongly endorsed it. Heckscher also agreed with Keynes – “a bright spot in a time of darkness” – in a long review entitled "Too bad to be true". Inspired by his Malthusian view, Wicksell found the reparations impossible to meet unless German population growth was arrested. Germany should settle for a stationary population in exchange for reduced reparations. The contacts between the Swedes and Keynes became close after Keynes’s book, in particular between Cassel and Keynes, competing for being the best-known economist in the world in the 1920s. The exchange of views took a new turn when Bertil Ohlin responded to an article by Keynes in The Economic Journal in 1929 on the transfer problem. In his comment, Ohlin summarized two previously overlooked articles from 1928 where he analyzed the transfer of the German reparations by using his theory of international trade. The famous Keynes-Ohlin discussion laid the foundation for the analysis of the transfer problem, bringing Ohlin international recognition. He emerged as the champion in this debate, which marked the end of academic interest in the German reparations in the interwar period. We also trace how Davidson, Cassel and Heckscher changed their appreciation of Keynes in the 1930s with the publication of the General Theory while Ohlin viewed the message of Keynes in the 1930s as consistent with the policy views of the Stockholm school of economics. We rely on newspaper and journal articles published by the Swedish economists, on half a dozen unpublished manuscripts by Wicksell as well as on the correspondence between Keynes and the Swedish economists.
    Keywords: John Maynard Keynes; David Davidson; Gustav Cassel; Eli Heckscher; Knut Wicksell; Bertil Ohlin; Treaty of Versailles; reparations; the transfer problem; United Kingdom; Germany; Sweden; Malthusianism; World War I.
    JEL: B13 E12 E44 F21 F35 F55 J11 N24 N44
    Date: 2019–11–18
  2. By: Stüber, Robert
    Abstract: Altruistic punishment is often thought to be a major enforcement mechanism of social norms. I present experimental results from a modified version of the dictator game with third-party punishment, in which third parties can remain ignorant about the choice of the dictator. I find that a substantial fraction of subjects choose not to reveal the dictator's choice and not to punish the dictator. I show that this behavior is in line with the social norms that prevail in a situation of initial ignorance. Remaining ignorant and choosing not to punish is not inappropriate. As a result, altruistic punishment is significantly lower when the dictator's choice is initially hidden. The decrease in altruistic punishment leads to more selfish dictator behavior only if dictators are explicitly informed about the effect of willful ignorance on punishment rates. Hence, in scenarios in which third parties can ignore information and dictators know what this implies, third-party punishment may only ineffectively enforce social norms.
    Keywords: Third-party punishment,Willful ignorance,Sorting,Social preference
    JEL: C91 D01 D63 D83
    Date: 2019
  3. By: Paolo Magrassi
    Abstract: The paper argues that attracting more economists and adopting a more-precise definition of dynamic complexity might help econophysics acquire more attention in the economics community and bring new lymph to economic research. It may be necessary to concentrate less on the applications than on the basics of economic complexity, beginning with expansion and deepening of the study of small systems with few interacting components, while until thus far complexity has been assumed to be a prerogative of complicated systems only. It is possible that without a thorough analysis at that level, the understanding of systems that are at the same time complex and complicated will continue to elude economics and econophysics research altogether. To that purpose, the paper initiates and frames a definition of dynamic complexity grounded on the concept of non-linear dynamical system.
    Date: 2019–11
  4. By: Erkut, Hande; Shalvi, Shaul
    Abstract: Working hard is costly, so people should work wisely. Yet, they do not always work efficiently, spending their effort on tasks that do not bring tangible benefits. One reason that potentially amplifies inefficient working is that people work in social environments where they are observed and where others' earnings also depend on their effort. In this paper, we investigate whether people work and earn more than they need, and if so why? We use laboratory experiments to disentangle two concerns that potentially lead people to work inefficiently hard, namely image concerns and prosocial motives. Our results suggest that people indeed overwork unnecessarily, and that this is mainly due to image concerns.
    Keywords: overworking,image concerns,social preferences
    JEL: C91 D91 J22
    Date: 2019
  5. By: Steven J. Bosworth; Dennis J. Snower
    Abstract: This paper examines how skill-biased growth can generate economic fragmentation (income dis-parities) that give rise to social fragmentation (the adoption of increasingly incompatible social identities and values), which generate political fragmentation (the adoption of increasingly incompatible economic policies). Our model of social fragmentation focuses on three values-driven identities: individualism (focused on status concerns), communitarianism (focused on the benefits of social affiliations), and multi-affilatedness (encompassing both individualistic and communitarian objectives). Our analysis shows how the high-, middle- and low-skilled people are drawn to individualistic, multi-affiliated and communitarian objectives, respectively. We show how skill-biased growth leads to an expansion of the individualistic and communitarian groups, at the expense of the tolerant multi-affiliates. Consequently, there is a narrowing of the moral foundations driving economic policy. We examine the conditions under which these developments increase size of the political constituency for protectionist-nationalist policies (which destroy productivity, compress the income distribution and promote the benefits of social affiliation).
    Date: 2019

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