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on History and Philosophy of Economics |
| By: | William, Lazonick |
| Abstract: | Edith Penrose’s 1959 book The Theory of the Growth of the Firm [TGF] provides intellectual foundations for a theory of innovative enterprise, which is essential to any attempt to explain productivity growth, employment opportunity, and income distribution. Properly understood, Penrose’s theory of the firm is also an antidote to the deception that is foundational to neoclassical economics: The theory, taught by PhD economists to millions upon millions of college students for over seven decades, that the most unproductive firm is the foundation of the most efficient economy. The dissemination of this “neoclassical fallacy” to a mass audience of college students began with Paul A. Samuelson’s textbook, Economics: An Introductory Analysis, first published in 1948. Over the decades, the neoclassical fallacy has persisted through 18 revisions of Samuelson, Economics and in its countless “economics principles” clones. This essay challenges the intellectual hegemony of neoclassical economics by exposing the illogic of its foundational assumptions about how a modern economy functions and performs. The neoclassical fallacy gained popularity in the 1950s, during which decade Samuelson revised Economics three times. Meanwhile, Penrose derived the logic of organizational learning that she lays out in TGF from the facts of firm growth, absorbing what was known in the 1950s about the large corporations that had come to dominate the U.S. economy. Also, during that decade, the knowledge base on the growth of firms on which economists could subsequently draw was undergoing an intellectual revolution, led by the business historian, Alfred D. Chandler, Jr. He was engaged in the first stage of a career that would span more than a half century, during which Chandler documented and analyzed the centrality to U.S economic development of what he would come to call “the managerial revolution in American business.” In combination, the works of Penrose and Chandler form intellectual foundations for my own work on the Theory of Innovative Enterprise—an endeavor that has enabled me, as an economist, to recognize not only the profound importance of organizational learning for economic theory but also the illogic of the neoclassical theory of the firm for our understanding of the central institution of a modern economy, the business corporation. In this essay, I argue that the key characteristic of the innovative enterprise is fixed-cost investment in the productive capabilities of the company’s employees to engage in organizational learning. The purpose of this investment in organizational learning is to develop a higher-quality product than was previously available. When successful, the development of the higher-quality product enables the firm to capture a large extent of the market, transforming high fixed cost into low unit cost. The result is sustainable competitive advantage that enables the growth of the firm, contributing to the growth of the economy as a whole. I argue that to get beyond the neoclassical fallacy, economists have to stop relying on constrained-optimization methodology. Rather, they need to be trained in a “historical transformation” methodology that integrates history and theory. It is a methodology in which theory serves as both a distillation of what we have learned from the study of history and a guide to what we need to learn about reality as the “present as history” unfolds. |
| Keywords: | Theory of the firm, Penrosian learning, Chandlerian history, innovative enterprise, economic performance, Paul Samuelson, neoclassical fallacy, constrained optimization, historical transformation |
| JEL: | A2 B3 N8 |
| Date: | 2020–01 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:99171&r=all |
| By: | Heise, Arne |
| Abstract: | This article takes an in-depth look at post-Keynesianism as a paradigmatic al-ternative to the dominant neoclassical mainstream. It quickly becomes clear that post-Keynesianism is not a unified school of thought, but rather an assortment of theoretical approaches that share certain methodological and epistemological similarities and characteristic postulates. The Article does not attempt to de-scribe the full array of Kaleckian, Kaldorian and Sraffian variants of post-Keynesian theory but instead analysis the paradigmatic and formal structure of one particular form of post-Keynesianism, the monetary theory of production in order to reconstruct these characteristic postulates from the axiomatic core of post-Keynesianism. It then sets out the theory of market participation, an alter-native theory of economic policy that builds on monetary production economics. |
| Keywords: | post-Keynesianism, heterodox economics, neoclassical economics, paradigms |
| JEL: | B41 B50 B59 E11 E12 E60 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:99280&r=all |
| By: | Icefield, William |
| Abstract: | [Nature and Logic] examines important questions in philosophy of logic, economics, computer science and physics. Can we infer from a non-instantiated property? What is nature of our physics theories, and their relations to tools of inference? What are problematic about contemporary theoretical macroeconomics? How should we build theoretical macroeconomics based on realistic knowledge of our monetary economy? Can problems in computer science be reduced to signal processing problems, and how do tools of renormalization help? In what ways do problems in computer science be approached from tools of inference? |
| Date: | 2020–03–08 |
| URL: | http://d.repec.org/n?u=RePEc:osf:osfxxx:btg7q&r=all |
| 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 World War Two (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: | B50 H10 H55 I30 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:99279&r=all |
| By: | Maurice Obstfeld |
| Abstract: | Fifty years ago, Harry G. Johnson published “The Case for Flexible Exchange Rates, 1969,” its title echoing Milton Friedman’s classic essay of the early 1950s. Though somewhat forgotten today, Johnson’s reprise was an important element in the late 1960s debate over the future of the international monetary system. The present paper has three objectives. The first is to lay out the historical context in which Johnson’s “Case” was written and read. The second is to examine Johnson’s main points and see how they stand up to nearly five decades of experience with floating exchange rates since the end of the Bretton Woods system. The third is to review the most recent academic critiques of exchange-rate flexibility and ask how fatal they are to Johnson’s basic argument. I conclude that the essential case for exchange rate flexibility still stands strong. |
| JEL: | F31 F33 F41 F42 |
| Date: | 2020–03 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:26874&r=all |
| By: | Polterovich, Victor |
| Abstract: | Anarchism has been rejected by modern science as an antihistorical and utopian concept. Even Kropotkin, who sought to provide scientific justification for anarchist views, in fact professed the ideology of the "Golden Age", according to which the idyll of collaboration, which had taken place before the emergence of states, was destroyed by their formation. He considered the state only as an instrument of exploitation of the population by the ruling class, without taking into account that the elite can perform functions vital to society. According to Kropotkin, not only the state, but also market competition is a mistake of evolution. He did not distinguish between positive (not directed against third parties) and negative collaboration. Kropotkin's tolerant attitude towards terrorism contradicts the very essence of his teachings. At the same time, a number of statements of Kropotkin's theory have been adopted by contemporary researchers. Kropotkin demonstrated the incorrectness of a straightforward understanding of Darwinism, noted the connection between mechanisms of collaboration and certain ethical norms, and drew attention to the importance of development of civil society. Decreasing the level of violence as institutions improve is the central idea of the theory of social orders, constructed by D. North and his co-authors; it echoes Kropotkin’s theory. A generalization of the same idea is the philosophy of collaboration (proposed by the author of this article), which shows that socio-economic development leads to a decrease in the role of violence embedded in the mechanisms of competition and power, and to an increase in the role of collaboration. It is shown that this trend is reinforced by the digital revolution. |
| Keywords: | anarchism, collaboration, power, competition, peering platform |
| JEL: | B14 B15 B31 B41 B5 L86 |
| Date: | 2020–03–20 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:99182&r=all |
| By: | Yvon Pesqueux (LIRSA - Laboratoire interdisciplinaire de recherche en sciences de l'action - CNAM - Conservatoire National des Arts et Métiers [CNAM], CNAM - Conservatoire National des Arts et Métiers [CNAM]) |
| Date: | 2020–03–26 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:halshs-02520138&r=all |
| By: | Toke Fosgaard (Department of Food and Resource Economics, University of Copenhagen); Lars Gårn Hansen (Department of Food and Resource Economics, University of Copenhagen); Erik Wengström (Department of Economics, Lund University; Department of Finance and Economics, Hanken School of Economics, Helsinki) |
| Abstract: | In many situations, social norms govern behavior. While the existence of a norm may be clear to someone entering the situation, it is often less clear precisely what behavior is required in order to comply with the norm. We investigate how people react to uncertainty about the prevailing norm using a modified version of the dictator game. Since the behavioral effects of social norms are tightly linked to the degree of anonymity in a situation, we also vary the extent to which subjects’ behavior is observable. We find that when behavior is anonymous, uncertainty about which norm guides partners reduces aggregate norm compliance. However, when others can observe behavior, introducing a small degree of norm uncertainty increases aggregate norm compliance. This implies that norm uncertainty may actually facilitate interaction as long as behavior is observable and uncertainty is sufficiently small. We also document that reactions to norm uncertainty are heterogeneous with one group of people reacting to norm uncertainty by increasing compliance (over-compliers), while another group reacts by reducing compliance (under-compliers). The main effect of increased observability operates through the intensive margin of the under-compliers; they reduce their negative reaction to norm uncertainty when their actions become more visible. |
| Keywords: | Social norms, Uncertainty, Audience |
| JEL: | C92 D9 |
| Date: | 2020–03 |
| URL: | http://d.repec.org/n?u=RePEc:foi:wpaper:2020_04&r=all |
| By: | Andreas Engert |
| Abstract: | The chapter provides an introduction to the social science of ‘collective intelligence’, the aggregation of individual judgments for purposes of collective decision making. It starts from the basic logic of the Condorcet jury theorem and summarizes the main determinants of the accuracy of collective cognition. The recent research has focused on developing and refining formal aggregation methods beyond majority voting. The chapter presents the main findings on the two general approaches, surveying and prediction markets. It then contrasts these techniques with informal deliberation as a basic and prevalent aggregation mechanism. One conclusion is that while deliberation is prone to herding and can distort collective judgment, it is also more versatile and robust than formal mechanisms. |
| JEL: | K0 K41 M10 |
| Date: | 2020–04 |
| URL: | http://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2020_166&r=all |
| By: | Yvon Pesqueux (CNAM - Conservatoire National des Arts et Métiers [CNAM], LIRSA - Laboratoire interdisciplinaire de recherche en sciences de l'action - CNAM - Conservatoire National des Arts et Métiers [CNAM]) |
| Date: | 2020–03–30 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:halshs-02524246&r=all |
| By: | Pierre Gervais (CRAN - Centre de Recherche sur l'Amérique du Nord - CREW - CREW - Center for Research on the English-speaking World - EA 4399 - Université Sorbonne Nouvelle - Paris 3) |
| Abstract: | The article raises the question of the possibility of historicizing quantification, which starts from a reflection on the categories used for this quantification. Beginning with an analysis of two specific examples from pre-or proto-industrial economies at the turn of the eighteenth to the nineteenth century, the article points out that quantification methods applied at the time used very different principles than would be used today in the same context. One case highlighted in the paper focuses on the definition of production costs around 1820 in one of the first fully mechanized textile mills in Waltham, Massachusetts. The other example from circa 1755 analyzes how Abraham Gradis, an important Bordeaux merchant, used the category of currency in his accounting. The article concludes that a truly historical approach to numbers should always start by studying the mindsets of the actors who generated these numbers in order to guarantee a historical understanding of the categories that governed this process. |
| Abstract: | La divergence croissante entre l'histoire et l'économie, prises en tant que disciplines scientifiques, se manifeste peut-être plus nettement qu'à tout autre égard dans l'emploi de la quantification en histoire, et particulièrement en histoire économique, où cet emploi semblerait aller de soi. L'usage du chiffre était central dans les grandes enquêtes quantifiées de l'école des Annales au milieu du siècle dernier, et il a même été possible de croire à sa généralisation dans les années 1970 avec l'apparition aux États-Unis de la «cliométrie», l'application à l'histoire de méthodes quantitatives (et souvent de théories) tirées de l'économie. Mais la situation a évolué en sens inverse à partir des années 1990. Si le traitement mathématico-statistique de données est devenu un élément de validation essentiel ces dernières décennies pour quiconque souhaite écrire dans les principales revues scientifiques en économie. |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-02523341&r=all |
| By: | Christoph Huber; Jürgen Huber |
| Abstract: | Worries about unethical behavior are a recurring issue in the finance industry, which has inspired a number of recent studies. We contribute to this ongoing discussion by investigating preferences for truthfulness within the finance industry in a controlled experiment with 415 financial professionals (and 270 students as a control group). Participants have to report one of two numbers, of which one is true, the other false, and where truth-telling is costly. In three main treatments we vary the situational context of subjects' decisions (abstract, neutral, finance context) by applying differently framed instructions. We find that contexts matter for financial professionals: they act more honestly in a financial context, while for a control group we find no such differences. Further variations on the financial decision situation do not worsen financial professionals' honesty. As driver of the observed behavior we find reputational concerns to play a major role in financial professionals' decisions. |
| Keywords: | dishonesty; cheating; financial professionals; framing, context-dependence; experiment |
| JEL: | A13 C91 D90 |
| Date: | 2020–03 |
| URL: | http://d.repec.org/n?u=RePEc:inn:wpaper:2020-03&r=all |
| By: | Yvon Pesqueux (CNAM - Conservatoire National des Arts et Métiers [CNAM], LIRSA - Laboratoire interdisciplinaire de recherche en sciences de l'action - CNAM - Conservatoire National des Arts et Métiers [CNAM]) |
| Date: | 2020–03–28 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:halshs-02523223&r=all |
| By: | Philippe Lorino (Accounting / Management Control Department - Essec Business School) |
| Date: | 2019–09–24 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-02386830&r=all |
| By: | Yvon Pesqueux (LIRSA - Laboratoire interdisciplinaire de recherche en sciences de l'action - CNAM - Conservatoire National des Arts et Métiers [CNAM], CNAM - Conservatoire National des Arts et Métiers [CNAM]) |
| Date: | 2020–03–25 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:halshs-02519081&r=all |
| By: | Yvon Pesqueux (LIRSA - Laboratoire interdisciplinaire de recherche en sciences de l'action - CNAM - Conservatoire National des Arts et Métiers [CNAM], CNAM - Conservatoire National des Arts et Métiers [CNAM]) |
| Date: | 2020–03–25 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:halshs-02518773&r=all |