nep-hpe New Economics Papers
on History and Philosophy of Economics
Issue of 2020‒09‒28
eleven papers chosen by
Erik Thomson
University of Manitoba

  1. Revisiting the history of welfare economics By Roger E. Backhouse; Antoinette Baujard; Tamotsu Nishizawa
  2. Some thought on Shiller’s narrative economics By Ho, Tung Manh; Lab, SDAG
  3. Special Interest Groups and Growth: A Meta-Analysis of Mancur Olsons Theory By Theresa Hager
  4. A Survey on the Washington Consensus and the Beijing Model: Reconciling Development Perspectives By Asongu, Simplice; Acha-Anyi, Paul
  5. Modern Money Theory, by defining money as state-issued debt instrument, failed to provide sufficient spending for securing full employment; but succeeded in blurring our understanding of money By Naba Kumar Adak
  6. Les « révolutions » dans la théorie du développement : éléments de synthèse By Driss El Ghoufi
  7. Normes et normativité en économie By Antoinette Baujard; Judith Favereau; Charles Girard
  8. The Quest for Economic Stability: A Study on Swedish Stabilization Policies 1873–2019 By Andersson, Fredrik N. G.
  9. An economics-based rationale for the Rawlsian social welfare program By Stark, Oded
  10. Le développement durable comme « théorie » ambiguë By Yvon Pesqueux
  11. On the value of life By Colignatus, Thomas

  1. By: Roger E. Backhouse (University of Birmingham and Erasmus University Rotterdam); Antoinette Baujard (Univ Lyon, UJM Saint-Etienne, GATE UMR 5824, F-42023 Saint-Etienne, France); Tamotsu Nishizawa (Teikyo University, Faculty of Economics, Tokyo)
    Abstract: Our forthcoming book, Welfare Theory, Public Action and Ethical Values challenges the belief that, until modern welfare economics introduced issues such as justice, freedom and equality, economists adopted what Amartya Sen called “welfarism.” This is the belief that the welfare of society depends solely on the ordinal utilities of the individuals making up the society. Containing chapters on some of the leading twentieth-century economists, including Walras, Marshall, Pigou, Pareto, Samuelson, Musgrave, Hicks, Arrow, Coase and Sen, as well as lesser-known figures, including Ruskin, Hobson and contributors to the literature on capabilities, the book argues that, whatever their theoretical commitments, when economists have considered practical problems they have adopted a wider range of ethical values, attaching weight to equality, justice and freedom. Part 1 explains the concepts of welfarism and non-welfarism and explores ways in which economists have departed from welfarism when tackling practical problems and public policy. Part 2 explores the reasons for this. When moving away from abstract theories to consider practical problems it is often hard not to take an ethical position and economists have often been willing to do so. We conclude that economics needs to recognise this and to become more of a moral science.
    Keywords: Welfarism, non-welfarism, welfare, public policy, ethics, economics, individualism
    JEL: B21 B31 B41 D63 I31
    Date: 2020
  2. By: Ho, Tung Manh; Lab, SDAG
    Abstract: The Nobel Prize-winning economist Robert Shiller published an article in the American Economic Review in 20171 and a book in 20192 , both carrying the term “narrative economics.”
    Date: 2020–09–03
  3. By: Theresa Hager (Institute for Comprehensive Analysis of the Economy, Johannes Kepler University Linz, Austria)
    Abstract: This thesis treats the theory of Mancur Olson on the relationship between interest groups and growth and the empirical analyses regarding its validation. Mancur Olson has developed a comprehensive theory of economic growth that grounds on his 1965 published book The Logic of Collective Action. Herein the mechanisms and dynamics of interest groups and collective action are elaborated and discussed. The subsequent complex theory of economic growth presented in The Rise and Decline of Nations (1982) shows the impact of the prevailing constellation of interest groups in a country on its economic prospects. The book lead to widespread discourse and criticism and its conclusions were analyzed multiple times with econometric methods. However, the research presents divergent results as to whether Olson's theory can be validated or not. The thesis gives an overview of Olson’s theories and then discusses the criticism raised by other authors and own considerations. A meta-regression analysis is performed to synthesize the diverging results of various studies. Meta-regression analysis is a relatively new concept in economics. Its objective is to look at econometric evidence from a meta perspective and to use regression tools to find out if study characteristics exert an influence on the findings. It filters out the biases and allows a more objective view. The analysis is carried out on two levels: on the macro level using study characteristics and descriptive statistics and on the micro level using single regression results in a binary logistics model. The results allow a more differentiated look on Olson's theory and its tests. It is suggested that the theory is too comprehensive and complex to be covered by econometric methods. Therefore, any proper testing should include an examination of convoluting institutional aspects.
    Keywords: special interest-groups, Olson, meta-analysis, institutional economics, growth
    Date: 2020–09
  4. By: Asongu, Simplice; Acha-Anyi, Paul
    Abstract: Reconciling the two dominant development models of the Washington Consensus (WC) and Beijing Model (BM) remains a critical challenge in the literature. The challenge is even more demanding when emerging development paradigms like the Liberal Institutional Pluralism (LIP) and New Structural Economics (NSE) schools have to be integrated. While the latter has recognized both State and market failures but failed to provide a unified theory, the former has left the challenging concern of how institutional diversity matter in the development process. We synthesize perspectives from recently published papers on development and Sino-African relations in order to present the relevance of both the WC and BM in the long-term and short-run respectively. While the paper postulates for a unified theory by reconciling the WC and the BM to complement the NSE, it at the same time presents a case for economic rights and political rights as short-run and long-run development priorities respectively. By attempting to reconcile the WC with the BM, the study contributes at the same to macroeconomic NSE literature of unifying a development theory and to the LIP literature on institutional preferences with stages of development. Hence, the proposed reconciliation takes into account the structural and institutional realities of nations at different stages of the process of development.
    Keywords: Economic thought; Development; Beijing model; Washington Consensus; Africa
    JEL: B10 O11 O19 O55
    Date: 2019–01
  5. By: Naba Kumar Adak (Sabang Sajanikanta Mahavidyalaya, West Bengal)
    Abstract: The purpose of this paper is to explain MMT?s misconception and misrepresentation relating to money?s origin, character and function, and monetary & fiscal policies. The MMT is a conglomeration of different contradictory and already discarded theories put forward by earlier economists like Credit Theory of A. Mitchell Innes, State Theory or Chartalist Theory of money of Georg Friedrich Knapp, combination of Credit Theory and State Theory of money by Geoffrey Ingham (in his article ?Money is a Social Relation?), Functional Finance theory of Abba Lerner, Money theory of Keynes, Sectoral Balance Approach of Wynne Godley and so on. The MMT developed another unique theory called Consolidation between the Government and the Central Bank. Though MMT claims that it provides an alternative definition of money, yet, in reality, it does not want to explore what money is and how money had been evolved as a medium of exchange. The MMT argues that in the modern capitalist system, money is nothing but a numeraire or an account of credit (debt) and has no intrinsic value of its own and that money is neither pegged to any commodity nor a medium of exchange. The MMT, then, begins to impose this theory (money is a state-issued debt instrument) on the history of evolution of money. Therefore, their explanation does not reflect how money really evolved or what money really is.Other purpose of this paper is to explain that these concepts and theories of MMT are hypothetical and have no connection with how present economy is functioning. If the suggestion, of MMT for increasing budget-deficit without provisioning how the debt (for financing the deficit) will be redeemed, is followed blindly then the economy as a whole will be led to a catastrophe and collapse. This conceptual/ theoretical paper concludes that the MMT became a hotchpotch combination of impractical fanciful and arbitrarily concocted theories. Therefore, the MMT became the most un-intelligible theory. It is not at all functional. So, this exercise (criticism of MMT) is necessary in order to eliminate the negative impacts of the MMT on the theories and practices of economics at large.Another purpose of this paper is to show that the primary cause of most of the economic anomalies is money?s entrance into the economy from its issuer the central bank as debt. This paper suggests that economists should formulate such a theory that will free money from its debt nature. This paper concludes that the very nature of money?s origin as debt (from the central bank to the economy) is a systemic defect and this defect is primarily responsible for continuous economic downturn and frequent recession. However, the MMT does not try to find how this debt-nature of money can be eliminated. On the contrary, the MMT gives emphasis that money (even commodity money) should be recognized as nothing but a debt-instrument.Therefore, this paper implores that some theory should be constructed so that money can originate as ?debt-free?. If money originates free of debt only then sustainable economic growth can be secured.
    Keywords: Functional finance, hierarchy of money, Modern Money Theory, credit theory of money, state theory of money, printing money, theory of consolidation between the government and the central bank, full employment, High Powered Money, barter through caste system, sectoral balance approach
    JEL: B59 E52 E62
  6. By: Driss El Ghoufi (INREDD - Innovation, Responsabilités et Développement Durable - Université Cadi Ayyad - Université Cadi Ayyad)
    Abstract: Trois ensembles de travaux dominent aujourd'hui la conception que l'on se fait de l'évolution de la théorie du développement : la nouvelle économie institutionnelle (ou New Institutional Economics), la perspective du développement humain et les approches environnementale et territoriale. Ils semblent partager la conception de la science selon laquelle celle-ci se développerait de façon continue par ajouts successifs de fragments qui ne remettraient pas en cause les postulats mêmes de la science économique ; au contraire, ils représentent la discontinuité entre la perspective des néo-classiques et celle des promoteurs des dimensions environnementale et territoriale. Il s'agit donc pour nous de fournir des éléments de compréhension de cette mosaïque ; éléments de compréhension seulement car, nous le verrons, aucune approche n'est parvenue à expliquer le surgissement d'une nouvelle théorie. Mots clés : Nouvelle économie institutionnelle, développement humain, développement territorial durable. Classification
    Date: 2020–08–28
  7. By: Antoinette Baujard (Univ Lyon, UJM Saint-Etienne, GATE UMR 5824, F-42023 Saint-Etienne, France); Judith Favereau (Université Lumière Lyon 2, Université de Lyon, Triangle UMR 5206); Charles Girard (Université Jean Moulin Lyon 3, Université de Lyon, IRPhiL EA 4187)
    Abstract: Cette introduction insiste sur les difficultés et les enjeux de la distinction entre les approches positives et normatives des normes. La vie collective est organisée par des normes, mais qu’elles ordonnent les comportements dans les faits n’impliquent pas qu’elles soient désirables. Une stricte description des normes peut nécessiter de prendre en compte les questions éthiques, lesquelles peuvent être traduites à l’aide de la méthode axiomatique ; choisir les normes en revanche est une activité de nature fondamentalement normative, qui interroge la légitimité des décisions et des évaluations. La possibilité même de démarcation entre positif et normatif ne va pas de soi : en particulier en économie du bien-être, les approches standards qui visent à éviter les jugements de valeur (le welfarisme) ou à les isoler (l’axiomatique) peuvent s’avérer problématiques. Pour conclure, nous présentons les quatre articles du numéro qui illustrent les quatre étapes de cette réflexion sur la normativité.
    Keywords: positif, normatif, normes, jugements de valeurs, éthique, régularités, démarcation
    JEL: A13 B41 D63
    Date: 2020
  8. By: Andersson, Fredrik N. G. (Department of Economics, Lund University)
    Abstract: There is a never-ending quest for a stable economy with full employment and low inflation. Economists have suggested and policymakers have experimented with different fiscal and monetary policy regimes since at least the beginning of the industrial revolution. In this paper, we study Swedish stabilization policies through six policy regimes between 1873 and 2019. We focus on discretionary stabilization policies by estimating policy shocks. We then explore how Swedish stabilization policies have evolved over time through these shocks: how different institutional setups affected the policies and how policymakers responded to key economic events such as financial crises and wars.
    Keywords: monetary policy; fiscal policy; policy shocks; stabilization policies: financial crisis
    JEL: E42 E43 E52 E58 E62 E65
    Date: 2020–08–26
  9. By: Stark, Oded
    Abstract: We show that a social planner who seeks to allocate a given sum in order to reduce efficiently the social stress of a population, as measured by the aggregate relative deprivation of the population, pursues a disbursement procedure that is identical to the procedure adhered to by a Rawlsian social planner who seeks to allocate the same sum in order to maximize the Rawlsian maximin-based social welfare function. Thus, the constrained minimization of aggregate relative deprivation constitutes an economics-based rationale for the philosophy-based constrained maximization of the Rawlsian social welfare function.
    Keywords: Rawlsian social welfare function,Aggregate relative deprivation (ARD),Social stress,An algorithm of cost-effective policy response to ARD,Congruence of the algorithm with the Rawlsian social welfare program
    JEL: A13 D04 D63 H53 P51
    Date: 2020
  10. By: Yvon Pesqueux (EESD - Equipe en émergence sécurité défense - CNAM - Conservatoire National des Arts et Métiers [CNAM])
    Date: 2020–09–02
  11. By: Colignatus, Thomas
    Abstract: The national budget affects life and death via its allocations in areas such as traffic safety, flood control, public health and the like. When the cost-effectiveness of an intervention is evaluated, common effect measures are the number of lives extended (saved) and the expected life-years gained. The latter are usually adjusted for quality of life, giving QALYs, and discounted. In models that support decision making on the national aggregates, the subjects can be reduced to representative agents that are scored only on these dimensions. The lives extended measure is impartial to age and sex. The life-years measures however are biased in age and sex, since young people have a higher life expectancy than the old and women have a higher life expectancy than men, and policy advice might reflect that bias. It seems advisable to devise a measure that is more impartial and fair with respect to the age groups and the sexes. An alternative is to value a single life at 100%, and to measure the life-years gain with respect to that 100%. In addition, rather than fine-tune policy with interpersonal utility comparisons, one could choose a utility norm for the representative agent. A possible norm for time preference and diminishing marginal utility of life is the square root. The square root is easier to communicate than logarithmic utility or some rate of discount, but has comparable effect. A life of 100 years then has value 10, a life of 25 years has value 5, so that by age 25 half of life is passed. The considerations of both 100% range and square root utility lead to the following age & sex adjusted gain measure. When a person has age a, experiences an event (accident, disease) with a life expectancy of d years, but might have an intervention such that the life expectancy could become e, then the current effect measures are the single life saved and the absolute life-years gain x = e - d, but the proposed compromise gain measure is g[x | a, d] = Sqrt[x] / Sqrt[a + d + x]. The square root gives the utility of the representative agent, g gives the impact for interpersonal comparison, and aggregate utility is found by summing the gi over the individuals i. For example, saving (from acute death, d = 0) a baby (a = 0) has the same value, namely 1, whether it is a boy (life expectancy at birth, x = 75.94) or girl (x = 80.71) (data Statistics Netherlands 2002). As another example, let the unit share s = x / (a + e) be 25% for one person and 81% for another person so that the last person would weigh more than three times as much in this respect. For above gain measure, g = Sqrt[s] and the weight ratio becomes 50% / 90%, so that the last person now weighs less than half so that there is more equality. The paper compares various gain measures within the context of social welfare maximization. The update in 2020 has a more explicit discussion of Fair Innings (FI) and Proportional Shortfall (PS), and it is shown in a better manner that the UnitSqrt can be an acceptable compromise.
    Keywords: social welfare, decision making, risk, health, quality of life, cost-effectiveness, discounting, fair innings, proportional shortfall, unitsqrt
    JEL: D63 H51 I13 I14 J17
    Date: 2020–08–20

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