nep-hpe New Economics Papers
on History and Philosophy of Economics
Issue of 2020‒03‒02
thirteen papers chosen by
Erik Thomson
University of Manitoba

  1. Historical Natural Experiments: Bridging Economics and Economic History By Davide Cantoni; Noam Yuchtman
  2. The Principle of Population vs. the Malthusian Trap By Lueger, Tim
  3. The Marginalization of Absolute and Relative Income Hypotheses of Consumption and the Role of Fiscal Policy By Drakopoulos, Stavros A.
  4. On ‘Rusting’ Money Silvio Gesell’s Schwundgeld Reconsidered By Rehme, Günther
  5. The Past and Future of Econ 101: The John R. Commons Award Lecture By N. Gregory Mankiw
  6. A economia da política reabilitada: a formação e as controvérsias da teoria dos ciclos político-econômicos By Rafael Galvão de Almeida
  7. Liquidity preference in the Walrasian framework By Icefield, William
  8. La Sociale contre l’Etat providence. Prédation et protection sociale By Philippe Batifoulier; Nicolas Da Silva; Mehrdad Vahabi
  9. Connecting Silos : On linking macroeconomics and finance, and the role of econometrics therein By van der Wel, M.
  10. Is Scholarly Refereeing Productive (at the Margin)? By Hadavand, Aboozar; Hamermesh, Daniel S.; Wilson, Wesley W.
  11. The Third Function of Law Is to Transform Cultural Categories By Hoff,Karla; Walsh,James Sonam
  12. Concordance of professional ethical practice standards for the domain of Data Science: A white paper By Tractenberg, Rochelle E.
  13. The Microeconomics of Violent Conflict By Philip Verwimp; Patricia Justino; Tilman Brück

  1. By: Davide Cantoni; Noam Yuchtman
    Abstract: The analysis of historical natural experiments has profoundly impacted economics research across fields. We trace the development and increasing application of the methodology, both from the perspective of economic historians and from the perspective of economists in other subdisciplines. We argue that the historical natural experiment represents a methodological bridge between economic history and other fields: historians are able to use the cutting edge identification strategies emphasized by applied microeconomists; economists across subfields are able to scour history for useful identifying variation; development and growth economists are able to trace the historical roots of contemporary outcomes. Differences in fields suggest differences in scholars' aims of studying historical natural experiments. We propose a taxonomy of three primary motives that reflect priorities in different fields: historians aim to understand causal processes within specific settings. Economists across fields aim to identify "clean" historical events (in whatever context) to test hypotheses of theoretical interest or estimate causal parameters. And, growth and development economists aim to identify past variation that can be causally linked to contemporary outcomes of interest. We summarize important contributions made by research in each category. Finally, we close with a brief discussion of challenges facing each category of work.
    JEL: B00 N00 N01 N10 O10
    Date: 2020–02
  2. By: Lueger, Tim
    Abstract: In spite of two centuries of extensive debate, a consistent framework of the classical theory of population on which economists can universally agree has not been established. This means that either the theory lacks consistency or it has been misunderstood in important ways. This paper attempts to settle this issue by arguing that the latter was the case, revealing prevailing misconceptions. Since a large amount of these misconceptions most probably arose from the lack of a consistent nomenclature, the paper intends to clarify the classical theory of population by employing unambiguous definitions of the principle of population, the Malthusian trap, positive checks and preventive checks to population. The classical theory of population can then be applied to analyze the transition from economic stagnation to economic growth. As a result, numerous current theories trying to explain the transition to growth that are based on an increase of pro- duction will prove secondary when compared to the great preventive check.
    Date: 2018–04–06
  3. By: Drakopoulos, Stavros A.
    Abstract: In Keynes’ consumption theory absolute income is the major determinant of consumption, and the marginal propensity to consume determines the magnitudes of fiscal multipliers. Keynes employed a largely psychological analysis of consumption, rejecting the model of utility maximizing consumer. J. Duesenberry extended and improved Keynes’ approach by also emphasizing the role of psychological and social factors on consumption decisions (the relative income hypothesis). Similar conclusions regarding the role of income on consumption, and therefore support for Keynesian policies, are reached by Duesenberry’s analysis. The life-cycle hypothesis by Modigliani and Brumberg (1954), and the permanent income hypothesis by Friedman (1957), emerged as the two main alternatives to Keynes’ and Duesenberry’s approaches. Modern orthodox consumption theories are extensions of these two theories in a rational expectations framework. By employing the concept of forward looking, optimizing agents, current or relative income plays a minimal role in the life-cycle and permanent income hypotheses, and an even lesser role in contemporary orthodox consumption theories. Consequently, fiscal policy has a negligible effect on output and employment. The paper argues that Keynes and Duesenberry’s approaches were marginalized not because of their empirical or theoretical shortcomings, but because of emphasizing the psychological and social influences on consumption patterns, and because of not employing the intertemporal utility maximizing framework. The clear implication of the discussion is that the marginalization of absolute and relative income hypotheses was due to the dominance of a specific methodological framework that did not favour such approaches.
    Keywords: Consumption Function; Keynes; Duesenberry; Economic Methodology
    JEL: B20 B40 E21 E62
    Date: 2020–02
  4. By: Rehme, Günther
    Abstract: Silvio Gesell hypothesized that money depreciation is economically and socially beneficial, ideas that have often been contended. Here I analyze that in a Sidrauski model in which households additionally have a ‘love of wealth’-motive. It is shown Gesell’s claims may be valid in a demand-determined, short-run equilib- rium and why money depreciation overcomes the zero lower bound on nominal interest rates. However, for a typical long-run equilibrium introducing money de- preciation in isolation may be bad. But money depreciation, when coupled with expansionary monetary policy, is a necessary condition for a positive Mundell- Tobin effect on long-run real variables and so creates wealth in the model. It is found that this also holds in the transition to the long-run equilibrium. Hence, the spirit of Gesell’s hypotheses can be verified for a plausible, long-run environment.
    Date: 2018–06–25
  5. By: N. Gregory Mankiw
    Abstract: The introductory economics course, often called Econ 101, is where most economists get their start and where many students receive their only exposure to the field. This essay discusses the course’s evolution. It first looks back at how economics was taught at Harvard in the 19th century, based on a textbook by Professor Francis Bowen. It then looks ahead at how the introductory course may change as pedagogical tools improve, as society confronts new challenges, and as the field accumulates new knowledge.
    JEL: A2
    Date: 2020–01
  6. By: Rafael Galvão de Almeida (Cedeplar-UFMG)
    Abstract: Research in political business cycles is part of a larger program related to the economic analysis of politics with a macroeconomic focus, named New Political Macroeconomics. This article explores the historical evolution of the political business cycle literature, starting from the early writers on the topic (Kalecki, 1943; Åkerman, 1947). It then highlights the importance of Nordhaus (1975) for the theory. Elaborating the first theoretical model with empirical verification for the political business cycle, Nordhaus transformed a problem that was usually seen as microeconomic into a macroeconomic issue. Research flourished for a while, but the model underwent criticism because of its assumptions about voters, lack of definitive empirical verification, and because it did not conform to the tenets of rational expectations, thus causing interest in PBC models to wane. The latter went through a comeback after adapting to rational expectations (Rogoff, Siebert, 1988), and the formalization of conditional political business cycle models “solved” the problem of empirical verification, by arguing that political business cycles need specific conditions to happen. The paper concludes by reaffirming the importance of political business cycle models in creating a tradition that allowed the analysis with macroeconomic tools the issues of collective decision-making, previously a domain solely microeconomic.
    Keywords: political business cycle; political economy; public choice; new political macroeconomics; William Nordhaus
    Date: 2020–02
  7. By: Icefield, William
    Abstract: John Hicks argued that liquidity preference theory and loanable funds theory are equivalent, because in general equilibrium, Walras law dictates that one (for example, money) market is redundant when other markets (bond, commodities) are in equilibrium. While there are many other well-known criticisms of this point, I take a route that is rarely invoked - that liquidity preference can encode agent's reactions against risk of disequilibrium in a general equilibrium model. In such a case, money market may be in equilibrium, especially due to endogenous money, while other markets are in disequilibrium. In such a case, liquidity preference theory - or theory of money demand - determines rate of interest, as John Maynard Keynes asserted in General Theory, instead of loanable funds theory.
    Keywords: liquidity preference; loanable funds theory; disequilibrium; general equilibrium; Keynes; Walras law
    JEL: B22 B41 D59 E12 E20 E43
    Date: 2020–01–10
  8. By: Philippe Batifoulier (Centre d'Economie de l'Université de Paris Nord (CEPN)); Nicolas Da Silva (Centre d'Economie de l'Université de Paris Nord (CEPN)); Mehrdad Vahabi (Centre d'Economie de l'Université de Paris Nord (CEPN))
    Abstract: Ce travail a pour objet de relire l’histoire de l’Etat providence français à la lumière de la théorie d’un Etat prédateur. On oppose une approche de la protection sociale portée par l’Etat où la protection est un instrument de la prédation à une approche qualifiée de « La sociale » dominée par un « citizen welfare » et axée sur un auto gouvernement des individus. L’Etat providence est l'aboutissement de la guerre de masse moderne et la politique sociale (notamment la politique de population) est orientée vers les besoins de la guerre. Cependant bien qu’elle soit en partie le résultat de la guerre, la protection sociale trouve aussi ses racines en France dans l’affirmation d’un bien être porté par les citoyens eux-mêmes et non par l’Etat. Les origines de cette exception française remontent à la commune de 1871 et se poursuivent par la création du régime général de sécurité sociale en 1945/1946. On montrera que toute l’histoire de l’Etat-providence français consiste à se réapproprier le bien-être citoyen autogéré par un processus de réformes engagées à partir de 1947. Ce mouvement d'étatisation du "citizen welfare", en plus de constituer une dépossession du pouvoir politique d'auto-gouvernement des citoyens, s'est accompagné de la marchandisation des politiques sociales.
    Keywords: Etat providence, La Sociale, Etat prédateur, Marchandisation
    JEL: D6 D74 H1 H53 N4 O1
    Date: 2020–01
  9. By: van der Wel, M.
    Abstract: The crises of this century have stressed how intertwined macroeconomics and finance are in practice. This intertwinement was absent in most economic models. This led to calls for economists to step out of their specialized silos. Since then, the literature of macro-finance, which studies the relationship between asset prices and economic fluctuations, has been developed. In this inaugural address, I argue for a prominent role of econometrics to study the macro-finance interaction. Key elements such as mixed frequencies and the selection of factors can be incorporated using recent econometric advances. I discuss some of the results, such as estimation of continuous-time equilibrium models for macroeconomic and financial series, as well as characteristics of trading on financial markets after macroeconomic news releases. Finally, I discuss the outstanding challenges, which include developing a yield curve model based on macroeconomic foundations, modeling how financial markets anticipate news releases, and developing a macro-finance model for European bond markets taking into account the large heterogeneity across the continent.
    Keywords: Macro-Finance, Econometrics, Financial Econometrics, Fixed Income, Time Series Econometrics, Term Structure of Interest Rates, macro-economie, economische crises, econometrische modellen, financiering, obligaties, tijdreeksen
    JEL: C58
    Date: 2020–01–31
  10. By: Hadavand, Aboozar (Johns Hopkins University); Hamermesh, Daniel S. (Barnard College); Wilson, Wesley W. (University of Oregon)
    Abstract: In economics many articles are subjected to multiple rounds of refereeing at the same journal, which generates time costs of referees alone of at least $50 million. This process leads to remarkably longer publication lags than in other social sciences. We examine whether repeated refereeing produces any benefits, using an experiment at one journal that allows authors to submit under an accept/reject (fast-track or not) or the usual regime. We evaluate the scholarly impacts of articles by their subsequent citation histories, holding constant their sub-fields, authors' demographics and prior citations, and other characteristics. There is no payoff to refereeing beyond the first round and no difference between accept/reject articles and others. This result holds accounting for authors' selectivity into the two regimes, which we model formally to generate an empirical selection equation. This latter is used to provide instrumental estimates of the effect of each regime on scholarly impact.
    Keywords: publishing, refereeing, citations
    JEL: A1 I2
    Date: 2019–12
  11. By: Hoff,Karla; Walsh,James Sonam
    Abstract: How does law change society? In the rational actor model, law affects behavior only by changing incentives and information -- the command and coordination function of law. Under the view that humans are social animals, law is also a guidepost for social norms that regulate behavior -- the expressive function of law. This paper proposes a third function of law?the schematizing function -- based on cognitive research that shows that individuals cannot think without categories. Law makes possible new kinds of exemplars, role models, and social interactions that give people prototypes that transform the categories they use, thereby reframing their options and influencing their behavior. This paper illustrates the schematizing power of law with examples from field and natural experiments. Like the one-two punch in a boxing match, the command and schematizing functions of law together can change society in situations where the command function alone would be ineffective or backfire.
    Keywords: Gender and Development,Human Rights,Social Cohesion,Disability,Services&Transfers to Poor,Access of Poor to Social Services,Economic Assistance,Judicial System Reform
    Date: 2019–08–06
  12. By: Tractenberg, Rochelle E. (Georgetown University)
    Abstract: Data science is a discipline that has emerged at the intersection of computing and statistics – two disciplines with long standing guidance for ethical practice that feature professional integrity and responsibility. The 2018 National Academies of Science Report on Envisioning the Data Science Discipline recommends that “The data science community should adopt a code of ethics”, but due to its recency and to the diversity of paths into data science as a discipline, there is no real “community” that can do or organize this adoption. To support this recommendation, this white paper is an effort to document concordance across professional association practice standards, intended to support the ethical practice of data science by appealing to the consensus of these professional organizations on what constitutes ethical practice. The American Statistical Association (ASA) and the Association of Computing Machinery (ACM) recently revised their professional ethical practice standards in 2018. Both sets of guidance represent the perspectives of experienced professionals in their respective domains, but both organizations explicitly state that the guidelines apply to – should be utilized by – all who employ the domain in their work, irrespective of job title or training/professional preparation. Given that both statistics and computing are essential foundations for data science, their ethical guidance should therefore be a starting point for the community as it contemplates what “ethical data science” looks like. The work of analyzing concordance in ethical guidance begins with a qualitative examination of the overlap (similarly worded principles), alignment (thematically similar principles), and gaps (dissimilar principles) that exist between existing sets of standards. To that end, the ethical practice guidance has been thematically analyzed from the standards outlined by the ASA, ACM, the International Statistics Institute, Royal Statistical Society, and the Ethics in Action guidance drafted by the Institute of Electrical and Electronics Engineers (IEEE) Initiative on Ethics of Autonomous and Intelligent Systems. This synthesis is intended to capture similarities and differences in relevant practical guidelines, integrating professional organizational perspectives on what constitutes ethical practice in data science to support and strengthen the domain. Ultimately, guidelines for ethical data science that reflect the concordance of cognate disciplines can ensure coherent integration of the features of ethical practice into training of data scientists - for both the practitioner and those who use data science, or its outputs, in their work.
    Date: 2020–02–20
  13. By: Philip Verwimp (ECARES, Centre Emile Bernheim and Solvay Brussels School of Economics and Management, UniversiteÌ libre de Bruxelles, Belgium); Patricia Justino (Institute of Development Studies, Brighton, UK); Tilman Brück (ISDC - International Security and Development Center, Berlin, Germany, and Leibniz Institute of Vegetable and Ornamental Crops, Großbeeren, Germany)
    Abstract: In our brief review, we take stock of the emergence, in the last decade, of the “microeconomics of violent conflict†as a new subfield of empirical development economics. We start by de-bunking common misperceptions about the microeconomics of conflict and identify several contributions to economic theory and, in particular, to empirics, methods and data. We also show how the subfield is enriched through cooperation with scholars working in related disciplines. We expect future work to contribute inter alia to the evidence base on peacebuilding interventions, the development of post-conflict institutions, the behavior of firms in conflict areas and the role of emotions in decision-making. We note a disconnect between the rapidly evolving academic subfield on the one hand and the relatively limited use of knowledge thus generated by humanitarian and development organisations and policy makers working in and on conflict-affected areas. We conclude by suggesting that teaching in economics and the discipline-specific JEL codes have not yet kept pace with this recent intellectual development.
    Keywords: conflict, violence, war, data, methods JEL Classification: D74, C81, H56, O12
    Date: 2018–10

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