nep-hpe New Economics Papers
on History and Philosophy of Economics
Issue of 2020‒10‒12
six papers chosen by
Erik Thomson
University of Manitoba

  1. Revisiting the history of welfare economics By Roger Backhouse; Antoinette Baujard; Tamotsu Nishizawa
  2. On measurement and continuity in neoclassical economics: The Pareto-Cassel controversy, 1899-1902 By Rogério Arthmar; Michael McLure
  3. "In the Long Run We Are All Herd: On the Nature and Outcomes of the Beauty Contest" By Lorenzo Esposito; Giuseppe Mastromatteo
  4. Normes et normativité en économie By Antoinette Baujard; Judith Favereau; Charles Girard
  5. How Macroeconomists Lost Control of Stabilization Policy: Towards Dark Ages By Jean Bernard Chatelain; Kirsten Ralf
  6. "Ecology, Economics, and Network Dynamics" By Harold M. Hastings; Tai Young-Taft; Chih-Jui Tsen

  1. By: Roger Backhouse (University of Birmingham [Birmingham], Erasmus University Rotterdam); Antoinette Baujard (GATE Lyon Saint-Étienne - Groupe d'analyse et de théorie économique - CNRS - Centre National de la Recherche Scientifique - Université de Lyon - UJM - Université Jean Monnet [Saint-Étienne] - UCBL - Université Claude Bernard Lyon 1 - Université de Lyon - UL2 - Université Lumière - Lyon 2 - ENS Lyon - École normale supérieure - Lyon); Tamotsu Nishizawa (Teikyo University)
    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: individualism,economics,Welfarism,non-welfarism,welfare,public policy,ethics
    Date: 2020
  2. By: Rogério Arthmar (Department of Economics, UFES); Michael McLure (Economics Discipline, Business School, University of Western Australia)
    Abstract: This paper explores the controversy over the use of mathematics in economics happened between 1899 and 1902 involving Vilfredo Pareto, Gustav Cassel, Knut Wicksell, and Gaetano Scorza, with Maffeo Pantaleoni playing the role of intermediary. It begins by recapping the content of Pareto’s early articles and his book Cours d’Économie Politique (1896-97), where he lays out his method of successive approximations, the mutual interdependence of economic phenomena, and Leibniz’s principle of continuity. After that, Cassel’s criticism of formalization in economics is presented, as firstly set forth in his Grundrisse einer elementaren preislehre (1899) and further developed in later works. Cassel’s own simplified system of equations for determining prices through the concept of scarcity is introduced. The next section covers a set of unpublished letters between Pareto, Pantaleoni, and Cassel sitting at the National Library of Sweden. These documents reveal significant aspects of academic life in Europe at the time, as well as the correspondents’ interests on pure theory. The last section reviews the reception of Cassel’s Grundriss by Wicksell, Scorza, and Pareto. A few appointments on the history of mathematics are included to indicate how the rift among the mentioned economists echoed the influence of French and German traditions in infinitesimal analysis and algebra.
    Keywords: utility, measurement, continuity, scarcity, general equilibrium
    JEL: B13 B16 B31
    Date: 2020
  3. By: Lorenzo Esposito; Giuseppe Mastromatteo
    Abstract: Since the 2008 crisis, the economics literature has shown a renewed interest in Keynes's "beauty contest" (BC) as a fundamental aspect of the functioning of financial markets. We argue that to understand the importance of the BC, psychological and informational factors are of small importance, and a dynamic-structural approach should be followed instead: the BC framework is paramount because it is rooted in the historical trajectory of capitalism and it is not simply a consequence of "irrational" (i.e., biased) agents. In this genuine form, the BC mechanism allows one to understand the main trends of a financialized world. Moreover, the conventional nature of financial markets provides a sound method for assessing different economic policies whose effectiveness depends on how much they can influence the convention itself. This alternative understanding of the BC can be used to start the needed rethinking of economics, urged by the crisis, that is for now reduced to studying the financial and psychological "imperfections" of the market.
    Keywords: Financial Crisis; Financialization; Behavioral Economics; Herd Behavior; Convention
    JEL: B15 E12 G01
  4. By: Antoinette Baujard (GATE Lyon Saint-Étienne - Groupe d'analyse et de théorie économique - CNRS - Centre National de la Recherche Scientifique - Université de Lyon - UJM - Université Jean Monnet [Saint-Étienne] - UCBL - Université Claude Bernard Lyon 1 - Université de Lyon - UL2 - Université Lumière - Lyon 2 - ENS Lyon - École normale supérieure - Lyon); Judith Favereau (TRIANGLE - Triangle : action, discours, pensée politique et économique - ENS Lyon - École normale supérieure - Lyon - UL2 - Université Lumière - Lyon 2 - IEP Lyon - Sciences Po Lyon - Institut d'études politiques de Lyon - Université de Lyon - UJM - Université Jean Monnet [Saint-Étienne] - CNRS - Centre National de la Recherche Scientifique); Charles Girard (IRPhiL - Institut de recherches philosophiques de Lyon - UJML - Université Jean Moulin - Lyon 3 - Université de Lyon)
    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
    Date: 2020
  5. By: Jean Bernard Chatelain; Kirsten Ralf
    Abstract: This paper is a study of the history of the transplant of mathematical tools using negative feedback for macroeconomic stabilization policy from 1948 to 1975 and the subsequent break of the use of control for stabilization policy which occurred from 1975 to 1993. New-classical macroeconomists selected a subset of the tools of control that favored their support of rules against discretionary stabilization policy. The Lucas critique and Kydland and Prescott's time-inconsistency were over-statements that led to the "dark ages" of the prevalence of the stabilization-policy-ineffectiveness idea. These over-statements were later revised following the success of the Taylor rule.
    Date: 2020–10
  6. By: Harold M. Hastings; Tai Young-Taft; Chih-Jui Tsen
    Abstract: In a seminal 1972 paper, Robert M. May asked: "Will a Large Complex System Be Stable?" and argued that stability (of a broad class of random linear systems) decreases with increasing complexity, sparking a revolution in our understanding of ecosystem dynamics. Twenty-five years later, May, Levin, and Sugihara translated our understanding of the dynamics of ecological networks to the financial world in a second seminal paper, "Complex Systems: Ecology for Bankers." Just a year later, the US subprime crisis led to a near worldwide "great recession," spread by the world financial network. In the present paper we describe highlights in the development of our present understanding of stability and complexity in network systems, in order to better understand the role of networks in both stabilizing and destabilizing economic systems. A brief version of this working paper, focused on the underlying theory, appeared as an invited feature article in the February 2020 Society for Chaos Theory in Psychology and the Life Sciences newsletter (Hastings et al. 2020).
    Keywords: Stability; Complexity; May-Wigner; Noise; Subprime Crisis; Liquidity Shock
    JEL: C02 C62 E17 H12
    Date: 2020–09

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