nep-hpe New Economics Papers
on History and Philosophy of Economics
Issue of 2020‒08‒17
eighteen papers chosen by
Erik Thomson
University of Manitoba

  1. The contradictions of Piketty’s thought By Filippo Gusella
  2. Women’s empowerment and economic development: a feminist critique of story telling practices in ‘Randomista' economics By Kabeer, Naila
  3. "The "Kansas City" Approach to Modern Money Theory" By L. Randall Wray
  4. A rethinking of Labrousse’s analyses of wheat price movements in 18th century France: Labrousse versus Labrousse? By Jean Daniel Boyer; Magali Jaoul-Grammare; Sylvie Rivot
  5. More replications do get published on top 5 general interest economics journal articles By Jan H. Höffler
  6. Shukranitisara: An early medieval treatise on economic policy By Deodhar, Satish Y.
  7. Checking if the Straitjacket Fits By Pagan, Adrian; Wickens, Michael R.
  8. Making replicability the norm starting with oneself and depersonalizing research debates By Jan H. Höffler
  9. Comparing economic theories or: Pluralism in economics and the need for a comparative approach to scientific research programmes By Heise, Arne
  10. Epidemics in the Neoclassical and New Keynesian Models By Martin S. Eichenbaum; Sergio Rebelo; Mathias Trabandt
  11. David Ricardo vs. Gottfried Haberler: When an Austrian mind matches an English classic mind. By Flavia G. Poinsot
  12. Ten Years After the Financial Crisis: What Have We Learned from the Renaissance in Fiscal Research? By Ramey, Valerie A
  13. Relaciones entre la Economía y la Teoría de la Evolución By Alfredo M. Navarro
  14. Managing the Maturity Structure of Marketable Treasury Debt: 1953-1983 By Kenneth D. Garbade
  15. Destabilizing the Global Monetary System: Germany’s Adoption of the Gold Standard in the Early 1870s By Johannes Wiegand
  16. The role of Open Science in economics. Results report from an online survey among researchers in economics at German higher education institutions in 2019 By Scherp, Guido; Siegfried, Doreen; Biesenbender, Kristin; Breuer, Christian
  17. Managing a New Policy Framework: Paul Volcker, the St. Louis Fed, and the 1979-82 War on Inflation By Kevin L. Kliesen; David C. Wheelock
  18. Do Any Economists Have Superior Forecasting Skills? By Qu, Ritong; Timmermann, Allan; Zhu, Yinchu

  1. By: Filippo Gusella
    Abstract: Thomas Piketty’s Capital in the Twenty-First Century is primarily an empirical investigation into the history of the distribution of income and wealth in developed countries. Piketty, however, goes beyond this approach, presenting a theory of the long-run tendency of wealth inequality and rooting his work deeply in economic theory. In this paper we review and develop the theoretical model of Piketty’s book. We can divide the model into two parts: firstly, the "fundamental laws of capitalism" and the change in the functional distribution of income are analysed. Secondly, the evolution of personal wealth distribution is examined. Alongside the development of the model, the paper points out two shortcomings. We show the contradiction of the original model in explaining the increase of the capital/income ratio with the change in the functional distribution of income. Moreover, we highlight the inconsistency between the definition of capital and the model proposed. The paper concludes by outlining alternative approaches to the problem, calling for a major rethinking about the causes of rising wealth inequality.
    Keywords: Piketty; economic inequality; fundamental laws of capitalism; functional distribution of income; economic growth
    JEL: D31 E25 P10
    Date: 2020–05
  2. By: Kabeer, Naila
    Abstract: The 2019 Nobel Prize in economics was awarded to three scholars on the grounds that their pioneering use of randomized control trials (RCTs) was innovative methodologically and contributed to development policy and the emergence of a new development economics. Using a critical feminist lens, this article challenges that conclusion by interrogating the storytelling practices deployed by “randomista” economists through a critical reading of a widely cited essay by Esther Duflo, one of the 2019 Nobel recipients, on the relationship between women’s empowerment and economic development. The paper argues that the limitations of randomista economics have given rise to a particular way of thinking characterized by piecemeal analysis, ad hoc resort to theory, indifference to history and context, and methodological fundamentalism. It concludes that the randomista argument that broad-based economic development alone – without focused attention to women’s rights – will lead to gender equality has not been borne out by recent data.
    Keywords: empowerment; economic development; development
    JEL: J01
    Date: 2020–05–13
  3. By: L. Randall Wray
    Abstract: Modern money theory (MMT) synthesizes several traditions from heterodox economics. Its focus is on describing monetary and fiscal operations in nations that issue a sovereign currency. As such, it applies Georg Friedrich Knapp's state money approach (chartalism), also adopted by John Maynard Keynes in his Treatise on Money. MMT emphasizes the difference between a sovereign currency issuer and a sovereign currency user with respect to issues such as fiscal and monetary policy space, ability to make all payments as they come due, credit worthiness, and insolvency. Following A. Mitchell Innes, however, MMT acknowledges some similarities between sovereign and nonsovereign issues of liabilities, and hence integrates a credit theory of money (or, "endogenous money theory," as it is usually termed by post-Keynesians) with state money theory. MMT uses this integration in policy analysis to address issues such as exchange rate regimes, full employment policy, financial and economic stability, and the current challenges facing modern economies: rising inequality, climate change, aging of the population, tendency toward secular stagnation, and uneven development. This paper will focus on the development of the "Kansas City" approach to MMT at the University of Missouri-Kansas City (UMKC) and the Levy Economics Institute of Bard College.
    Keywords: Modern Money Theory (MMT); Functional Finance; Chartalism; State Theory of Money; Sectoral Balances; Kansas City Approach; Job Guarantee; Sovereign Currency
    JEL: B1 B2 B52 E12 E5
  4. By: Jean Daniel Boyer; Magali Jaoul-Grammare; Sylvie Rivot
    Abstract: Labrousse’s two investigations of cereal price movements (Labrousse 1933, 1944) suggest a sort of dualism in the arguments put forward in the two works (Morineau, 1966). Using contemporary data analysis and cliometrics, we propose to test different hypotheses that emerge from our reading of Labrousse (1933 and 1944). The first set of hypotheses relates to the long-term movement of grain prices. The second type of hypothesis relates to price cycles and price volatility. The originality of our approach in part relates to the very long runs of data drawn from different sources. Results of our study of the wheat price evolution partially questions Labrousse’s analysis.
    Keywords: intercycle, Labrousse, volatility, wheat price.
    JEL: B11 N13 N33 N53
    Date: 2020
  5. By: Jan H. Höffler
    Abstract: In their 2019 study “Replication studies in economics — How many and which papers are chosen for replication, and why?”, the authors conclude that “The replication probability is lower for articles published in top 5 economics journals.” This result is based on missampling. The authors’ own data shows that replication studies published in the top 50 economics journals refer clearly more often to studies published in the top 5 general interest journals in economics than to the other 45 economics journals.
    Keywords: Replication, Sample selection biases, Economics of science, Science policy, Economic methodology
    JEL: A14 B4 C12 C13 C83
    Date: 2020–08
  6. By: Deodhar, Satish Y.
    Abstract: Shukracharya’s treatise on political economy has been referred to in many ancient Indian texts such as the Arthashastra, Buddhacharitam and Mahabharata. However, that treatise has been lost. Fortunately, an abridged version titled Shukranitisara belonging to the early medieval period was discovered in the nineteenth century. While a few have written about Shukranitisara from the perspective of political science, nothing has been written from the perspective of economic policies. Among the four purusharthas or the life objectives, while Arthashastra had given primacy to artha or material wealth, Shukranitisara considers dharmic or ethical conduct as foremost for the economic decisions of the state and the householder. The treatise addresses issues of governance, breadth of vocations and sciences, public finance, prices, markets, contracts, labour relations, and advice to a householder. Quite a few economic policies mentioned in Shukranitisara are detailed and different as compared to Arthashastra, and remain relevant for policymaking even today.
    Date: 2020–08–04
  7. By: Pagan, Adrian; Wickens, Michael R.
    Abstract: This paper discusses, and provides new evidence on, the view that "theory, while essential, should be regarded as a flexible framework rather than a straightjacket, because features that the theory abstracts from may be important in practice". It considers how best to assess the empirical performance of tightly specified models such as DSGE models, and loosely specified models such as SVARs. These issues are illustrated using various New Keynesian models. We conclude that the challenge is to incorporate flexibility into the theory in such a way as to be compatible with both the theory and the data.
    Keywords: DSGE models; Model testing; SVARs
    JEL: C52 E3
    Date: 2019–11
  8. By: Jan H. Höffler
    Abstract: In their paper presented at the 2016 Annual Meeting of the Berkeley Initiative for Transparency in the Social Sciences (BITSS) and published as a comment “How to make replication the norm” in the journal Nature in February 2018, Paul Gertler, Sebastian Galiani and Mauricio Romero write about policies of journals in the social sciences and summarize their results about the replicability of articles published in economics journals. The comment is not replicable itself although the Berkeley Initiative that also funded the research officially has a – though vague - policy on replicability and the policy of the journal Nature says “authors are required to make materials, data, code, and associated protocols promptly available to readers without undue qualifications”, and “Nature Research titles will be required to include information on whether and how others can access the underlying data.” Here I describe how to get access to better information, how to improve documentation, and suggest that depersonalization is central for progress in transparency and debates in science.
    Keywords: Replication, Data sharing
    JEL: A14 C81
    Date: 2020–08
  9. By: Heise, Arne
    Abstract: Pluralism in economics appears to be a double-edged sword: we need more than one theory to grasp and explain the entire economic world, yet a plurality of possible explanations undermines the aspiration of the economic discipline to provide 'objective knowledge' in the singular of the 'one world one truth' conception. Therefore, pluralism is often equated with relativism and obscurantism. In this article, I will explore both the demand for pluralism and the fear of relativism and obscurantism, scrutinising each position in order to evaluate their respective justification and devising a methodological proposal that may appease both the defender and the sceptic of economic pluralism.
    Keywords: Pluralism,Methodology,Paradigm
    JEL: A11 B40 B50 E11 E12 E13
    Date: 2020
  10. By: Martin S. Eichenbaum; Sergio Rebelo; Mathias Trabandt
    Abstract: We analyze the effects of an epidemic in three standard macroeconomic models. We find that the neoclassical model does not rationalize the positive comovement of consumption and investment observed in recessions associated with an epidemic. Introducing monopolistic competition into the neoclassical model remedies this shortcoming even when prices are completely flexible. Finally, sticky prices lead to a larger recession but do not fundamentally alter the predictions of the monopolistic competition model.
    JEL: E1 H0 I1
    Date: 2020–06
  11. By: Flavia G. Poinsot
    Abstract: In many textbooks of international trade we read that the theory of comparative advantage, of Ricardo, determines its relative prices in function of the labor-cost theory. This approach, actually, emerges with Haberler by 1930s. For Haberler, the Ricardo’s theory of comparative advantage is robust, but not the labor-cost doctrine which, he assumes, Ricardo applies. Haberler, then, reformulates the theory from the Austrian outlook which rejects the classical labor theory of value. The process, epistemologically speaking, resembles that of a Lakatosian “research program”, because while the hard core, the theory of comparative advantage, does not change, the assumptions and the labor-cost theory are eliminated. However, would Ricardo agree with Haberler in that he based the theory of comparative advantage in the labor-cost hypothesis? And, why Haberler thinks, without doubt, that Ricardo adheres to the labor-cost theory? This paper is an attempt to answer these questions.
    Keywords: David Ricardo, Gottfried Haberler, theory of value, theory of comparative advantage, Austrian school of thoughts, epistemology
    JEL: B31 B53 B25 B12 F10
    Date: 2019–11
  12. By: Ramey, Valerie A
    Abstract: This paper takes stock of what we have learned from the “Renaissance” in fiscal research in the ten years since the financial crisis. I first discuss the new innovations in methodology and various strengths and weaknesses of the main approaches to estimating fiscal multipliers. Reviewing the estimates, I come to the surprising conclusion that the bulk of the estimates for average spending and tax change multipliers lie in a fairly narrow range, 0.6 to 1 for spending multipliers and -2 to -3 for tax change multipliers. However, I identify economic circumstances in which multipliers lie outside those ranges. Finally, I review the debate on whether multipliers were higher for the 2009 Obama stimulus spending in the United States or for fiscal consolidations in Europe.
    Keywords: Economics
    Date: 2019–01–01
  13. By: Alfredo M. Navarro
    Abstract: Este trabajo estudia la relación entre la economía, la biología y la teoría de la evolución. Comienza analizando la influencia que tuvieron tanto Malthus como los primeros economistas en el nacimiento de la teoría de la selección natural. Luego pasa revista a la relación inversa, es decir a la transmisión de ideas que corre de la teoría de la evolución hacia el pensamiento económico, para lo que se estudian las ideas de Marshall, Veblen, Hayek y Schumpeter, entre otros. Posteriormente analiza el estado actual de la denominada economía evolucionista, y analizando las contribuciones recientes más importantes, destacando la influencia de las ideas de Schumpeter. Finalmente se realizan algunas reflexiones sobre las cuestiones expuestas.
    Keywords: economía evolucionista, selección natural, rutinas
    JEL: A12 B15 B41 O30
    Date: 2019–11
  14. By: Kenneth D. Garbade
    Abstract: This paper examines the evolution of the maturity structure of marketable Treasury debt from 1953 to 1983. Average maturity contracted erratically from 1953 to 1960, expanded through mid-1965, contracted again through late 1975, and then expanded into the early 1980s. What accounts for these broad trends? In particular, what were the maturity objectives of Treasury debt managers? Were they able to achieve their objectives? Why or why not?
    Keywords: Treasury debt management; maturity structure of debt; advance refundings
    JEL: G28 H63 N22
    Date: 2020–07–01
  15. By: Johannes Wiegand
    Abstract: In 1871-73, newly unified Germany adopted the gold standard, replacing the silver-based currencies that had been prevalent in most German states until then. The reform sparked a series of steps in other countries that ultimately ended global bimetallism, i.e., a near-universal fixed exchange rate system in which (mostly) France stabilized the exchange value between gold and silver currencies. As a result, silver currencies depreciated sharply, and severe deflation ensued in the gold block. Why did Germany switch to gold and set the train of destructive events in motion? Both a review of the contemporaneous debate and statistical evidence suggest that it acted preemptively: the Australian and Californian gold discoveries of around 1850 had greatly increased the global supply of gold. By the mid-1860s, gold threatened to crowd out silver money in France, which would have severed the link between gold and silver currencies. Without reform, Germany would thus have risked exclusion from the fixed exchange rate system that tied together the major industrial economies. Reform required French accommodation, however. Victory in the Franco-Prussian war of 1870/71 allowed Germany to force accommodation, but only until France settled the war indemnity and regained sovereignty in late 1873. In this situation, switching to gold was superior to adopting bimetallism, as it prevented France from derailing Germany’s reform ex-post.
    Keywords: Currency reform;Fixed exchange rates;Exchange rate regimes;Currency question;Gold;Bimetallism,Gold Standard,France,Germany,Flandreau,specie,silver specie,gold currency
    Date: 2019–02–15
  16. By: Scherp, Guido; Siegfried, Doreen; Biesenbender, Kristin; Breuer, Christian
    Abstract: The present quantitative study addresses Open Science practices among researchers in economics at German higher education institutions. In all, the study surveyed 300 scientists from business studies, economics, business informatics, industrial engineering and other economics-related subjects taught at universities, state and private universities of applied sciences, and other higher education institutions such as distance-learning colleges or dual colleges. The study collected information about familiarity, attitude, application, barriers, incentives and support requirements.
    Keywords: Open Science,Open Science practices,Open Access,Open Data,Transparency,Science
    Date: 2020
  17. By: Kevin L. Kliesen; David C. Wheelock
    Abstract: In October 1979, Federal Reserve Chairman Paul Volcker persuaded his FOMC colleagues to adopt a new policy framework that i) accepted responsibility for controlling inflation and ii) implemented new operating procedures to control the growth of monetary aggregates in an effort to restore price stability. These moves were strongly supported by monetarist-oriented economists, including the leadership and staff of the Federal Reserve Bank of St. Louis. The next three years saw inflation peak and then fall sharply, but also two recessions and considerable volatility in interest rates and money supply growth rates. This article reviews the episode through the lens of speeches and FOMC meeting statements of Volcker and St. Louis Fed president Lawrence Roos, and articles by Roos’ staff. The FOMC adopted monetarist principles to establish the Fed’s anti-inflation credibility but Volcker was willing to accept deviations of money growth from the FOMC’s targets, unlike Roos, who viewed the targets as sacrosanct. The FOMC abandoned monetary aggregates in October 1982, but preserved the Fed’s commitment to price stability. The episode illustrates how Volcker used a change in operating procedures to alter policy fundamentally, and later adapt the procedures to changed circumstances without abandoning the foundational features of the policy.
    Keywords: monetarism; inflation; money supply; Federal Open Market Committee; monetary policy; recession
    JEL: E42 E52 E58 N22
    Date: 2020–07–23
  18. By: Qu, Ritong; Timmermann, Allan; Zhu, Yinchu
    Abstract: To answer this question, we develop new testing methods for identifying superior forecasting skills in settings with arbitrarily many forecasters, outcome variables, and time periods. Our methods allow us to address if any economists had superior forecasting skills for any variables or at any point in time while carefully controlling for the role of "luck" which can give rise to false discoveries when large numbers of forecasts are evaluated. We propose new hypotheses and test statistics that can be used to identify specialist, generalist, and event-specific skills in forecasting performance. We apply our new methods to a large set of Bloomberg survey forecasts of US economic data show that, overall, there is very little evidence that any individual forecasters can beat a simple equal-weighted average of peer forecasts.
    Keywords: Bloomberg survey; Economic forecasting; multiple testing; superior predictive skills
    Date: 2019–11

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