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on History and Philosophy of Economics |
| By: | Joerg Bibow |
| Abstract: | This paper revisits Keynes's writings from Indian Currency and Finance (1913) to The General Theory (1936) with a focus on financial instability. The analysis reveals Keynes's astute concerns about the stability/fragility of the banking system, especially under deflationary conditions. Keynes's writings during the Great Depression uncover insights into how the Great Depression may have informed his General Theory . Exploring the connection between the experience of the Great Depression and the theoretical framework Keynes presents in The General Theory , the assumption of a constant money stock featuring in that work is central. The analysis underscores the case that The General Theory is not a special case of the (neo-)classical theory that is relevant only to "depression economics"--refuting the interpretation offered by J. R. Hicks (1937) in his seminal paper "Mr. Keynes and the Classics: A Suggested Interpretation." As a scholar of the Great Depression and Federal Reserve chairman at the time of the modern crisis, Ben Bernanke provides an important intellectual bridge between the historical crisis of the 1930s and the modern crisis of 2007-9. The paper concludes that, while policy practice has changed, the "classical" theory Keynes attacked in 1936 remains hegemonic today. The common (mis-)interpretation of The General Theory as depression economics continues to describe the mainstream's failure to engage in relevant monetary economics. |
| Keywords: | John Maynard Keynes; Great Depression; Financial Crises; Central Banks; Interest Rates; Monetary Theory |
| JEL: | B2 B3 E44 E58 E65 G01 |
| Date: | 2020–10 |
| URL: | http://d.repec.org/n?u=RePEc:lev:wrkpap:wp_974&r=all |
| By: | André Lapidus (PHARE - Philosophie, Histoire et Analyse des Représentations Économiques - UP1 - Université Panthéon-Sorbonne) |
| Abstract: | This paper supports the contention that the general rules introduced by Hume in the Treatise on Human Nature (THN 1.3.15) are a selection mechanism for inductive inferences, which rejects two sources of inefficiency: (i) from emotional origin, which would reduce the uneasiness coming from a possible failure in the uniformity of nature; (ii) from cognitive origin, which would tolerate the possible overflow of the imagination on judgment. A growing consensus in recent decades, which distinguishes between two kinds of rules – extensive and corrective – is at the basis of this device. Whereas the extensive rules allow us to go beyond a singular experience and derive a wider range of inferences, the corrective rules, whose command opposes the philosopher to the vulgar, control and rectify the effects of extensive rules alone, so as to eliminate emotional and cognitive inefficiencies, and to make inferences that, borrowing the expression to Peirce, we will designate as abductive. |
| Abstract: | Cet article soutient la thèse selon laquelle les règles générales que Hume introduit dans le Traité de la nature humaine (THN 1.3.15) constituent un dispositif de sélection des inférences inductives écartant deux sources d'inefficacités : (i) d'origine émotionnelle, qui réduirait le malaise face à l'éventualité d'une faille dans l'uniformité de la nature ; (ii) d'origine cognitive, qui tolèrerait les possibles débordements de l'imagination sur le jugement. Un consensus grandissant depuis quelques décennies fait apparaître à la base de ce dispositif la distinction entre deux sortes de règles – extensives et correctives. Alors que les premières permettent de dépasser une expérience singulière pour en dériver une inférence de plus large portée, les secondes, dont la maîtrise oppose le philosophe au vulgaire, contrôlent et rectifient les effets des seules règles extensives, de façon à éliminer les inefficacités d'origines émotionnelle et cognitive et à réaliser des inférences qu'en empruntant l'expression à Peirce on désignera comme abductives. |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-01714256&r=all |
| By: | Laurie Bréban (PHARE - Philosophie, Histoire et Analyse des Représentations Économiques - UP1 - Université Panthéon-Sorbonne); André Lapidus (PHARE - Philosophie, Histoire et Analyse des Représentations Économiques - UP1 - Université Panthéon-Sorbonne) |
| Abstract: | The few pages that Adam Smith devoted to lotteries, mainly in the Wealth of Nations (1776) did not receive much attention. They nonetheless constituted an opportunity to introduce a sophisticated analysis of individual decision under risk. Through various examples, Smith pointed out a risk-seeking attitude, figured out in the paper in terms of inverse stochastic dominance. However, it is well-known that a contradiction occurs between such an attitude and the principle of an asymmetric sensitivity to favorable and unfavorable events, expressed by a concave function, introduced in the Theory of Moral Sentiments (1759). We argue that an appropriate solution to this difficulty should rest on Smith's emphasis on a universal tendency to overestimate the chance of gain, which leads to favor a rank-dependent utility approach within which optimism toward risk can compensate asymmetric sensibility in order to produce some kind of risk-seeking. The question raised by the coexistence of various attitudes toward risk illustrated by the figures of the entrepreneur (typically, the "projector" and the "sober man") gives rise to an extensive analysis, which aims at explaining, on moral grounds, how an initial attitude of risk-seeking can generate prudence before being transformed into risk-aversion. |
| Keywords: | asymmetric sensitivity,Adam Smith,risk,lotteries,stochastic dominance,rank-dependent utility,prudence,decision |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-00914222&r=all |
| By: | Sylvie Rivot (BETA) |
| Abstract: | The paper shows how Friedman gradually came to incorporate the expectations formation process in his account of macroeconomic disequilibria. It is shown that Friedman's early Monetarism relies on slowly adjusting prices and wages, mainly because of long-term contracts. When he first addressed the expectations issue in his work macroeconomic dynamics Friedman actually considered static expectations. In the mid-1960s his anticipationist critique of the Phillips curve led Friedman to place at the centre of the analysis the idea that private agents progressively adjust their forecasts to a new informational environment. Nevertheless, adaptive expectations involve backward-looking behaviour regarding the price structure, without taking account of the probable effect of discretionary policy on the economy in the future; hence economic agents make systematic forecasting errors. Friedman eventually considered forward-looking behaviour in the 1970s but stopped short of fully embracing the rational expectations approach to economic policy. In Friedman's later Monetarism there is an echo of Friedman's early joint work with Savage regarding attitudes towards risk based on the subjective probability approach. But this is the residual outcome of a very lengthy process. |
| Keywords: | Friedman, adaptive expectations, rational expectations, static expectations, dynamics, monetary economy |
| JEL: | B22 B31 |
| Date: | 2020–10 |
| URL: | http://d.repec.org/n?u=RePEc:gre:wpaper:2020-39&r=all |
| By: | Marc-Arthur Diaye (EPEE - Centre d'Etudes des Politiques Economiques - UEVE - Université d'Évry-Val-d'Essonne); André Lapidus (PHARE - Philosophie, Histoire et Analyse des Représentations Économiques - UP1 - Université Panthéon-Sorbonne) |
| Abstract: | Until recently, little attention has been paid to the consequences of Hume's theory of action upon intertemporal decision. Nonetheless, some of their specicities have been emphasized by G. Davis 2003, A. Lapidus 2000, 2010, and I. Palacios-Huerta 2003. Through recurring discussions, concerning situations of conicting choice between a close and a remote objective, which run from the Treatise, Book 2 (Hume 1739-40), to the second Enquiry (Hume 1751) to the Dissertation (Hume 1757), intertemporal decision appears, at least for a part of it, as an outcome of the role of the natural relation of contiguity in the formation of a structure of desires, dierent from the structure of pleasure. This paper shows, and expresses formally, that Hume's approach provides alternative conditions explaining on the one hand time-consistency and, on the other hand, time-inconsistency when the link between contiguity and the violence of the passions is taken into account. The possibility of time-inconsistency is acknowledged by Hume as giving rise to general aversion, therefore constituting a key argument for explaining the origin of government. |
| Keywords: | Hume,desire,passion,belief,pleasure,intertemporal decision,government |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-01372527&r=all |
| By: | Wible, James R.; Assistant, JHET |
| Abstract: | More than a century ago one of the most famous essays ever written in American economics appeared in the Quarterly Journal of Economics, “Why is Economics Not an Evolutionary Science?” There Thorstein Veblen claimed that economics was too dominated by a mechanistic view to address the problems of economic life. Since the world and the economy had come to be viewed from an evolutionary perspective after Darwin, it was rather straight forward to argue that the increasingly abstract mathematical character of economics was non-evolutionary. However, Veblen had studied with a first-rate intellect, Charles Sanders Peirce, attending his elementary logic class. If Peirce had written about the future of economics in 1898, it would have been very different than Veblen’s essay. Peirce could have written that economics should become an evolutionary mathematical science and that much of classical and neoclassical economics could be interpreted from an evolutionary perspective. |
| Date: | 2020–09–29 |
| URL: | http://d.repec.org/n?u=RePEc:osf:osfxxx:5nwsa&r=all |
| By: | Paganelli, Maria Pia; Simon, Fabrizio; Assistant, JHET |
| Abstract: | For Adam Smith a crime is not the result of a rational calculation of loss and gain, but the consequence of envy and a vain desire to parade wealth to attract the approbation of others, combined with a natural systematic bias in overestimating the probability of success. Similarly, Smith does not conceive of legal sanctions as a rational deterrent, but as deriving from the feeling of resentment. While the prevailing approach of the eighteenth century is a rational explanation of crime and a utilitarian use of punishment, Adam Smith instead builds his theory of criminal behavior and legal prosecution consistently on the sentiments. A well-functioning legal system is thus an unintended consequence of our desire to bring justice to the individual person, not the result of a rational calculation to promote the public good, just like a well-functioning economic system is the unintended consequence of our desire to better our own condition, not the result of a rational calculation to promote public good. |
| Date: | 2020–09–29 |
| URL: | http://d.repec.org/n?u=RePEc:osf:osfxxx:x82yh&r=all |
| By: | Morales Meoqui, Jorge |
| Abstract: | The paper features a new interpretation of David Ricardo’s famous numerical example in chapter 7 of the Principles. It claims that the only purpose of the four numbers was to illustrate the proposition that the relative value of commodities produced in different countries is not determined by the respective quantities of labour devoted to the production of each. This exception would apply until capital begins to move between countries as easily as it does within the same country. Moreover, the paper debunks some entrenched myths about the numerical example. It shows that Ricardo did not leave the terms of trade unspecified; that the purpose of the four numbers was not about measuring the gains from trade; and lastly, that Portugal had no productivity advantage over England. All of this marks a radical departure from the way scholars have interpreted Ricardo’s numerical example since the mid-nineteenth century. |
| Date: | 2020–10–01 |
| URL: | http://d.repec.org/n?u=RePEc:osf:osfxxx:dyt83&r=all |
| By: | van 't Klooster, Jens; Assistant, JHET |
| Abstract: | Recent interpretations of the early Methodenstreit (1871 – 1883) between Gustav Schmoller and Carl Menger no longer identify a substantial point of controversy. I reconstruct the debate to show that the pivotal topic was the scope of economics. Menger claims that his Principles of Economics more or less capture the full scope of the discipline, which Schmoller denies. I also discuss recent Menger scholarship, which follows Friedrich Hayek in situating Menger at the edges or even outside the marginalist mainstream. I argue that this interpretation wrongly denies Menger his pioneer status as, possibly the first, marginalist. |
| Date: | 2020–09–29 |
| URL: | http://d.repec.org/n?u=RePEc:osf:osfxxx:aq2bz&r=all |
| By: | Committee, Nobel Prize (Nobel Prize Committee) |
| Abstract: | Every day, auctions distribute astronomical values between buyers and sellers. This year’s Laureates, Paul Milgrom and Robert Wilson, have improved auction theory and invented new auction formats, benefitting sellers, buyers and taxpayers around the world |
| Keywords: | Auctions |
| JEL: | D44 |
| Date: | 2020–10–12 |
| URL: | http://d.repec.org/n?u=RePEc:ris:nobelp:2020_001&r=all |
| By: | Committee, Nobel Prize (Nobel Prize Committee) |
| Abstract: | The practice of selling valuable items to the highest bidder, or procuring valuable services fromthe lowest bidder, goes as far back in history as we have written records. The Greek historianHerodotus documented auctions in ancient Babylon already 2500 years ago.1In the RomanEmpire, creditors regularly used auctions to sell off assets confiscated from delinquent debtors.In more modern times, Stockholms Auktionsverk, the oldest surviving auction house in the worldwas founded by the Swedish Baron Claes Rålamb in 1674. In addition to confiscated assets,Stockholms Auktionsverk auctioned a wide range of goods on behalf of willing sellers—forexample, Sweden’s late 17thcentury king, Karl XI, offered a batch of hunting weapons for sale.Similar auction houses existed all around Europe. In 1744, Samuel Baker and George Leigh solda set of valuable books for a grand total of £826 at their newly established auction company. ThatLondon-based company was to become Sotheby’s, presently the world’s largest fine-arts auctionhouse. |
| Keywords: | Austions |
| JEL: | D44 |
| Date: | 2020–10–12 |
| URL: | http://d.repec.org/n?u=RePEc:ris:nobelp:2020_002&r=all |
| By: | Olivier Accominotti (LSE); Stefano Ugolini (LEREPS) |
| Abstract: | This chapter presents a history of international trade finance - the oldest domain of international finance - from its emergence in the Middle Ages up to today. We describe how the structure and governance of the global trade finance market changed over time and how trade credit instruments evolved. Trade finance products initially consisted of idiosyncratic assets issued by local merchants and bankers. The financing of international trade then became increasingly centralized and credit instruments were standardized through the diffusion of the local standards of consecutive leading trading centres (Antwerp, Amsterdam, London). This process of market centralization/product standardization culminated in the nineteenth century when London became the global centre for international trade finance and the sterling bill of exchange emerged as the most widely used trade finance instrument. The structure of the trade finance market then evolved considerably following the First World War and disintegrated during the interwar de-globalization and Bretton Woods period. The reconstruction of global trade finance in the post-1970 period gave way to the decentralized market structure that prevails nowadays. |
| Date: | 2020–09 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2009.08668&r=all |
| By: | Burri, Susanne; Lup, Daniela; Pepper, Alexander |
| Abstract: | While there exist extensive literatures on both distributive justice and senior executive pay, and a number of authors (notably the French economist Thomas Piketty) have addressed the implications of high pay for distributive justice, the existing literature fails to address what senior executives themselves think about distributive justice and whether they consider high income inequalities to be morally acceptable. We address this gap by analysing a unique dataset comprising the views of over 1000 senior executives from across the world, which was constructed using a survey instrument designed by the authors based on a thought experiment resembling John Rawls’s original position. We report four main findings. First, executives conceptualise distributive justice in a pluralistic manner, endorsing different and sometimes apparently conflicting philosophical principles: to explain how this plurality can be accounted for we propose a novel field-theory framework for conceptualising beliefs about distributive justice. Second, executives support similar philosophical approaches at both society and company levels of analysis, thus countering the idea that companies should leave matters of distributive justice exclusively for governments to deal with via the tax system. Third, executives believe that they live in societies and work for companies that fall short of desirable distributive justice outcomes. Fourth, the distributive justice views of the executives in our sample fall into four distinct clusters that are correlated with certain socio-demographic markers. Finally, we note the distinction between distributive justice beliefs and behaviours, from which we derive a number of managerial and public policy implications. |
| Keywords: | Distributive justice; Empirical research; Executive compensation; High pay; Inequality; Springer |
| JEL: | R14 J01 |
| Date: | 2020–09–29 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:106592&r=all |
| By: | Jonathan F. Cogliano (University of Massachusetts Boston); Roberto Veneziani (Queen Mary University of London); Naoki Yoshihara (Kochi University of Technology) |
| Abstract: | his article surveys computational approaches to classical-Marxian economics. These approaches include a range of techniques { such as numerical simulations, agent-based models, and Monte Carlo methods { and cover many areas within the classical-Marxian tradition. We focus on three major themes in classical-Marxian economics, namely price and value theory; inequality, exploitation, and classes; and technical change, profitability, growth and cycles. We show that computational methods are particularly well-suited to capture certain key elements of the vision of the classical-Marxian approach and can be fruitfully used to make significant progress in the study of classical-Marxian topics. |
| Keywords: | Computational Methods; Agent-Based Models; Classical Economists; Marx. |
| JEL: | C63 B51 B41 |
| Date: | 2020–10–01 |
| URL: | http://d.repec.org/n?u=RePEc:qmw:qmwecw:913&r=all |
| By: | Robin Hirsch |
| Abstract: | It is argued that Marxism, being based on contradictions, is an illogical method. More specifically, we present a rejection of Marx's thesis that the rate of profit has a long-term tendency to fall. |
| Date: | 2020–09 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2009.08269&r=all |
| By: | Saileshsingh Gunessee (University of Nottingham, Ningbo China); Tom Lane (University of Nottingham, Ningbo China) |
| Abstract: | Traditionally, students of economics have often been told that it is a non-experimental science. Using a quantitative and qualitative analysis of introductory economics textbooks, we track the historical evolution of this rhetoric from 1970 to the present day. We find that anti-experimental rhetoric was dominant and largely unchanged prior to the turn of the 21st century. Since then, there has been a growing trend towards textbooks making positive statements about the role of experimentation in economics. Remarks that experiments are impossible in economics have been (almost) eliminated only this decade, evidencing a sluggish change in rhetoric. We outline the evolution of statements over revised editions of influential textbooks and show that, while most have become considerably more supportive of experimental economics, there is substantial variation over when this happened. Interviews with key textbook authors confirm the historical trend of increased enthusiasm towards experiments, and suggest they are now accepted within the economic mainstream. Our results hold important implications for the research methodology of our science and how it is understood by current and former students. |
| Keywords: | Economic Methodology; Experimental Science; Economics Principles Textbooks; History of Economic Thought |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:not:notcdx:2020-16&r=all |
| 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. |
| Keywords: | Control, Stabilization Policy Ineffectiveness, Negative feedback, Dynamic Games |
| JEL: | B22 B41 C36 C61 C62 C73 E32 E52 E61 E62 |
| Date: | 2020–09–25 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:103244&r=all |
| By: | Daniel P. Gross; Bhaven N. Sampat |
| Abstract: | World War II was one of the most acute emergencies in U.S. history, and the first where the mobilization of science and technology was a major part of the government response. The U.S. Office of Scientific Research and Development (OSRD) led a major research effort to develop technologies and medical treatments that not only helped win the war, but also transformed civilian life, while laying the foundation for postwar science policy. Scholars and policymakers often make broad appeals to the World War II innovation model in other crises. In this essay we describe exactly how it worked. We do so first through a general overview of how OSRD approached several questions that may confront any crisis innovation effort: priority setting, selecting and engaging researchers, a funding mechanism, coordinating research efforts, and translation to practice. Next we present case studies of the radar, atomic fission, penicillin, and malaria research programs, illustrating how the principles applied in specific contexts, but also heterogeneity. We conclude by discussing lessons from OSRD, such as what makes crisis innovation policy different, how crisis innovation policy approaches may vary, and the limits to generalizing from World War II for contemporary crises. |
| JEL: | H12 H56 N42 N72 O31 O32 O38 |
| Date: | 2020–10 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:27909&r=all |
| By: | Niklas Potrafke; Fabian Ruthardt; Kaspar W\"uthrich |
| Abstract: | We investigate how protectionist policies influence economic growth. Our empirical strategy exploits an extraordinary tax scandal that gave rise to an unexpected change of government in Sweden. A free-trade majority in parliament was overturned by a comfortable protectionist majority in the fall of 1887. We employ the synthetic control method to select control countries against which economic growth in Sweden can be compared. We do not find evidence suggesting that protectionist policies influenced economic growth and examine channels why. Tariffs increased government revenue. However, the results do not suggest that the protectionist government stimulated the economy in the short-run by increasing government expenditure. |
| Date: | 2020–10 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2010.02378&r=all |