nep-hpe New Economics Papers
on History and Philosophy of Economics
Issue of 2020‒11‒02
twenty-two papers chosen by
Erik Thomson
University of Manitoba

  1. Revisiting the history of welfare economics By Roger E. Backhouse; Antoinette Baujard; Tamotsu Nishizawa
  3. Savage's response to Allais as Broomean reasoning By Franz Dietrich; Antonios Staras; Robert Sugden
  4. The Perverse Costly Signaling Effect on Cooperation under the Shadow of the Future By Kamei, Kenju
  5. On Ricardo’s Multilayered Method: Wage Taxation and Foreign Subsidies Considered By Wakamatsu, Naoyuki
  6. The Non-Ricardian Stationary State in Chapter 17 of the Principles of Political Economy and Taxation By Wakamatsu, Naoyuki
  7. J. S. Mill's Ethology and his Engagement with the 'Women's Cause' By Laura Valladao de Mattos
  8. A paradoxical convergence: French economists and the policy towards cartels from the 1870s to the eve of the Great Depression By David Spector
  9. The correspondence between Baumol and Galbraith (1957–1958) - An unsuspected source of managerial theories of the firm By Alexandre Chirat
  10. A silent revolution: How central bank statistics have changed in the last 25 years By Riccardo De Bonis; Matteo Piazza
  11. Neuroeconomics: reliable, scientifically legitimate and useful knowledge for economists? By Daniel Serra
  12. Das Wissenschaftsverständnis der Volkswirtschaftslehre in der Kritik: Implikationen für die Vision einer pluralen Ökonomik By Reinke, Rouven
  13. Ragnar Frisch 1933 model: And yet it rocks! By Vincent Carret
  14. Behavioural utilitarianism and distributive justice By Galanis, Giorgos; Veneziani, Roberto
  15. Roberts' Weak Welfarism Theorem: A Minor Correction By Hammond, Peter J.
  16. La politique économique aujourd'hui face à la Nation, l'Etat et les rapports de classe By Jérôme Maucourant; Bruno Tinel
  17. The Times They Are A-Changing? Exploring the potential shift away from the neoliberal political-economic paradigm By Laurie Laybourn-Langton; Laurie Macfarlane; Michael Jacobs
  18. Signaling moral values through consumption By Florian H. Schneider
  19. Environmental economics before Adam Smith By Richard S.J. Tol
  20. Classical views on Environmental Economics By Richard S.J. Tol
  21. The Emergence of Environmental Economics By Richard S.J. Tol
  22. Neoclassical views on Environmental Economics By Richard S.J. Tol

  1. By: Roger E. Backhouse (University of Birmingham and Erasmus University Rotterdam); Antoinette Baujard (Univ 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: Welfarism, non-welfarism, welfare, public policy, ethics, economics, individualism
    JEL: B21 B31 B41 D63 I31
    Date: 2020–10
  2. By: Claude Gamel (LEST - Laboratoire d'économie et de sociologie du travail - AMU - Aix Marseille Université - CNRS - Centre National de la Recherche Scientifique)
    Abstract: On deliberation in the public debate, Rawls' approach known as "justice as fairness" has been much more commented that the "difference principle" emerged from there as a major result: even though based on an equal initial position, "justice as fairness" paradoxically justifies an essential benchmark in the debate on inequalities. Indeed, the difference principle compresses many issues: distinguishing between naturel and social matters which both contribute to inequalities, defining a level of permitted inequalities we should have to tolerate not as just but effective ones, preserving market incentives in so far they contribute to value creation, which has later to be redistributed. The paper explores all these questions, that concern the philosophical-economic rationality of the principle and its political-societal applicability as well. In conclusion, its contribution to the debate on inequalities, which is beyond all doubt, seems rather economic than philosophical and is based on a liberal presupposition, which is rarely identified and recognised.
    Abstract: Sur la délibération dans le débat public, la démarche de Rawls, dite de la « justice comme équité », a été beaucoup plus amplement commentée que le « principe de différence » qui en est pourtant un résultat majeur : bien que fondée sur une position initiale d'égalité, la «justice comme équité» justifie non sans paradoxe un repère essentiel dans le débat sur les inégalités. Le principe de différence condense en effet nombre de questionnements : distinction entre le naturel et le social dans l'origine des inégalités, définition d'un niveau d'inégalités acceptables qu'il serait non pas juste mais efficace de tolérer, préservation du rôle des incitations économiques à l'origine de la création de valeur, qu'il convient ensuite de redistribuer. Autant de questions, explorées dans le présent texte, qui concernent tant la rationalité philosophico-économique du principe que son applicabilité politique et sociétale. En conclusion, son apport indubitable dans le débat sur les inégalités semble moins philosophique qu'économique et repose sur un présupposé libéral rarement repéré et admis.
    Keywords: public debate,inequalities,difference principle,philosophy and economics,societal and political complexity,débat public,inégalités,principe de différence,philosophie et économie,complexité politique et sociétale
    Date: 2020
  3. By: Franz Dietrich (Centre d'Economie de la Sorbonne, Paris School of Economics); Antonios Staras (Institute of Economics - Cardiff University); Robert Sugden (School of Economics - University of East Anglia)
    Abstract: Leonard Savage famously contravened his own theory when first confronting the Allais Paradox, but then convinced himself that the had made an error. We examine the formal structure of Savage's ‘error-correcting’ reasoning in the light of (i) behavioural economists' claims to identify the latent preferences of individuals who violate conventional rationality requirements and (ii) John Broome's critique of arguments which presuppose that rationality requirements can be achieved through reasoning. We argue that Savage's reasoning is not vulnerable to Broome's critique, but does not provide support for the view that behavioural scientists can identify and counteract errors in people's choices
    Keywords: Savage; Allais Paradox; Broome; rationality; reasoning; behavioural economics
    JEL: B41 C18 D01 D81 D90
    Date: 2020–05
  4. By: Kamei, Kenju
    Abstract: A literature in the social sciences proposes that humans can promote cooperation with strangers by signaling their generosity through investment in unrelated pro-social activities. This paper studied this hypothesis by conducting a laboratory experiment with an infinitely repeated prisoner’s dilemma game under random matching. A novel feature of the experiment is that each player first decided how much to donate to a charitable organization, the British Red Cross, and then this donation information was conveyed to the player’s matched partner. Surprisingly, the donation activities significantly undermined cooperation. This negative effect of charitable-giving was consistently observed regardless of whether players had a post-interaction opportunity to punish the partners. A detailed analysis suggests that the negative effect (a) resulted from the transmission of the charitable-giving information, not from the fact that subjects engaged in the charitable-giving, and (b) was caused by mis-coordination between the two parties who can both costly signal their generosity. This suggests that letting players have an implicit costly signaling opportunity has damaging unintended consequences for their interactions among strangers. Possible ways to encourage players to use costly signaling for mutual cooperation, such as partner choice, are also discussed in the paper.
    Keywords: experiment; cooperation; prisoner’s dilemma; charitable-giving; costly signaling
    JEL: C73 C9 D91
    Date: 2020–09–26
  5. By: Wakamatsu, Naoyuki
    Abstract: This paper uses Ricardo’s work on taxation to exemplify his methodological approach of proceeding from abstract theory to practical theory and its correspondence with various facts. Ricardo’s method has been often considered abstract, based on his use of “strong cases.” However, Depoortère (2008) showed that Ricardo emphasized the relationship between theory and experience, and suggested that Ricardo’s method involved an approach leading from abstract theory to particular fact. This paper aims to further Depoortère’s conclusions, and to emphasize the multilayered nature of Ricardo’s method. While Ricardo’s method was based on “strong cases,” he made his arguments by incorporating disturbing factors into his strong cases appropriately according to circumstance.
    Keywords: David Ricardo; methodology; foreign subsidy; wage taxation
    JEL: B12 B31
    Date: 2020–10–14
  6. By: Wakamatsu, Naoyuki
    Abstract: This paper explains the non-Ricardian stationary state (NRSS) and the tax incidence in such a state concretely. In the NRSS, the corn becomes monopoly price, and the rent upon scarcity is caused into the price. In this regard, Hollander (1979) considered that Ricardo emphasized the rent upon scarcity in addition to the differential rent. However, Hollander derived the interpretation based on Buchanan’s words, rather than Ricardo’s. On the contrary, we attempt to derive the interpretation from Ricardo’s words in Chapter 17 of the Principles. We show that Hollander’s interpretation is more inherent in Ricardo himself.
    Keywords: David Ricardo; stationary state; rent; monopoly price; tax
    JEL: B12 B31
    Date: 2020–09–29
  7. By: Laura Valladao de Mattos
    Abstract: This paper intends to analyze Mill’s stance concerning an important Victorian issue: the role of women in society. Mill assumed the role of protagonist in this debate: in 1866, he presented an important petition in Parliament in favor of women’s suffrage and, in 1869, he published The Subjection of Women – an important benchmark in nineteenth century feminism. I argue that underlying his position in this debate was a specific view of human nature, which located the origin of the existing differences between men and women in prevailing social institutions and habits. Mill’s ethological analysis was central to his engagement in the women’s cause on at least three levels: (i) it challenged the scientific authority of the prevailing theories, which considered gender differences innate/natural, and thus, inevitable, and opened ample space for social reform; (ii) it oriented Mill’s reform agenda concerning women by pointing out the institutions and habits that produced and sustained the existing gender inequality; (iii) it furnished ammunition for the defense of the reforms, as it anticipated the great social improvement that women’s political, social and economic emancipation would produce.
    Keywords: J.S. Mill; Ethology; Women’s emancipation
    JEL: B12 J12 Z10
    Date: 2020–10–14
  8. By: David Spector (PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Panthéon-Sorbonne - ENS Paris - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, PSE - Paris School of Economics)
    Abstract: Just like in other industrial countries, cartelization was widespread in France after the 1870 decade. Cartels, and the public policy towards them, were frequently addressed in the public debate. This article deals with the stance taken by French economists on this subject until the Great Depression. Although they were divided in several groups that were in sharp disagreement on most scientific and policy issues, French economists were almost united in their lack of support for anti-cartel policy. The liberal economists'opposition stemmed from their general hostility to government intervention. Unlike in the English-speaking world, where many economists otherwise critical of government gradually became supportive of antitrust after mounting evidence had revealed the scope of certain kinds of exclusionary behavior, the French liberal economists remained constant in their opposition. The more reform-minded university professors, as well as the sociologists-economists of the Durkheimian school, were unenthusiastic about policies meant to safeguard competition because they viewed ‘excessive' market competition as destabilizing and wasteful. Finally, the most prominent experts in industrial economics, who were employed by large companies or professional organizations, also advocated a hand-off approach, in accordance with their employers'preferences.
    Date: 2020–10
  9. By: Alexandre Chirat (CRESE, Univ. Bourgogne Franche-Comté)
    Abstract: Baumol’s impact on the development of managerial theories of the firm is investigated here through material found in Galbraith’s archives. In 1957 Galbraith published a paper claiming that the impact of macroeconomic policies varies with market structures (competitive versus oligopolistic). This publication prompted Baumol (1958b) to send Galbraith a manuscript dealing extensively with a crucial question of managerial theories of the firm, namely, the “trade-off” between sales and profits. I argue that Baumol’s critiques and Galbraith’s answers largely explain the way Baumol (1958a, 1959) framed his alternative model of the behavior of big corporations. He reasoned in terms of maximization of sales with a profit constraint as their main objective. In return, Business Behavior, Value and Growth fostered the development of Marris’s (1964) and Galbraith’s (1967) theories of the corporation. Contrary to the narrative by Tullock (1978) in which the sales maximization hypothesis has two main branches – Baumol for the one and Galbraith-Marris for the other – I argue here that these branches are at least partially connected.
    JEL: B21 B22 D21 D43
    Date: 2020–10
  10. By: Riccardo De Bonis (Bank of Italy); Matteo Piazza (Bank of Italy)
    Abstract: This work provides a comprehensive overview of the giant leap made by European central bank statistics over the last quarter century. We illustrate, first, the work that led to a brand new set of central bank statistics for the implementation of the common monetary policy in the euro area. We then focus on the most significant developments brought up by the financial crisis and by the institutional changes that accompanied it. The final part look at challenges lying ahead for official statistics, namely how to deal with digitalization and globalization.
    Keywords: Central bank statistics, data harmonisation
    JEL: C82 E59
    Date: 2020–09
  11. By: Daniel Serra (CEE-M - Centre d'Economie de l'Environnement - Montpellier - FRE2010 - UM - Université de Montpellier - CNRS - Centre National de la Recherche Scientifique - Montpellier SupAgro - Institut national d’études supérieures agronomiques de Montpellier - Institut Agro - Institut national d'enseignement supérieur pour l'agriculture, l'alimentation et l'environnement - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)
    Abstract: Thanks to the joint collaboration of economics, psychology, and neuroscience from the late 1990s, "neuroeconomics" sheds new light on decision-making analysis. As with any emerging discipline, however, neuroeconomics raises many practical and methodological questions resulting in debates and controversies that this article discusses by addressing three major issues concerning the contribution made so far to knowledge: Is it reliable? Is it scientifically legitimate? Is it useful for the economist? Without claiming to be exhaustive, this analytical framework enables understanding of the thrust of the major criticisms of neuroeconomics and at the same time the nature of the likely responses.
    Keywords: Decision-making processes,Neuroscience methods,Brain data,Design of experiments,Economic methodology,Philosophy of science,Computational models,Quantitative research
    Date: 2020–10–02
  12. By: Reinke, Rouven
    Abstract: [Einleitung] Kritik an der Volkswirtschaftslehre (VWL) scheint beginnend mit Karl Marx und John Maynard Keynes zu einem konstanten Begleiter der ökonomischen Disziplin zu gehören. Während diese Kritik im deutschsprachigen Raum im Zuge der gesellschaftspolitischen Öffnung der Universitäten durch heterodoxe Besetzungen von Lehrstühlen zumindest temporär Widerhall gefunden hat, ist seitdem eine in immer stärker werdende Dominanz des Mainstreams in Forschung und Lehre und eine gleichzeitige Marginalisierung kritischer Ansätze zu beobachten (Vgl. hier z.B. Heise et al. 2017) Zwar sind mit der Arbeitsgruppe Alternative Wirtschaftspolitik ("Memo-Gruppe") und dem Arbeitskreis "Politische Ökonomie" (AK PolÖK) institutionelle Sprachrohre einer heterodoxen Ökonomik entstanden, ein sicht- und hörbares Gegengewicht zum Mainstream1 konnte sich dadurch allerdings nicht etablieren. Erst durch die "post-autistische" Bewegung französischer Studierender und Nachwuchswissenschaftler zu Beginn der 2000er-Jahre scheint die Debatte um den Zustand der VWL neuen Schwung erhalten zu haben. Auch im deutschsprachigen Raum hat die kritische Auseinandersetzung mit dem ökonomischen Mainstream in Form des "Netzwerk Plurale Ökonomik" einen neuen institutionellen Raum gefunden. Dabei richtet sich die Kritik des Netzwerkes insbesondere gegen die Dominanz des neoklassischen Mainstreams. Damit ist allerdings auch eine dezidierte Forderung nach einer Neugestaltung der Disziplin verbunden. So wird neben einem theoretischen und methodischen Pluralismus auch eine stärke Integration interdisziplinärer Ansätze in die Lehre sowie eine didaktische Modernisierung mit reflexiven und wissenschaftstheoretischen Elementen gefordert (Vgl. International Student Initiative for Pluralism in Economics 2014; Netzwerk Plurale Ökonomik 2012, 2020). Von heterodoxen Ökonomen ist in der kritischen Debatte zur Verfasstheit der ökonomischen Disziplin auf der einen Seite eine grundsätzliche Ablehnung der gesamten Standardökonomik sowie die damit einhergehende Notwendigkeit einer wissenschaftlichen Revolution im Sinne Thomas Kuhns (Vgl. Davidson 2004) zu vernehmen. Auf der anderen Seite wird die Forderung nach einem paradigmatischen Pluralismus vorgetragen, der die Konkurrenz inkompatibler und inkommensurabler Forschungsprogramme (Lakatos 1974a, 1974b) bzw. Denkstile (Fleck 1980) explizit beinhaltet (Vgl. Dobusch und Kapeller 2012; Heise 2018). [...]
    Date: 2020
  13. By: Vincent Carret (TRIANGLE - Triangle : action, discours, pensée politique et économique - ENS Lyon - École normale supérieure - Lyon - UL2 - Université Lumière - Lyon 2 - UJM - Université Jean Monnet [Saint-Étienne] - IEP Lyon - Sciences Po Lyon - Institut d'études politiques de Lyon - Université de Lyon - CNRS - Centre National de la Recherche Scientifique)
    Abstract: This article provides an analytical solution to Frisch's 1933 model. The Laplace transform and its inverse prove valuable to obtain an expression for the different components that make up Frisch's original solution. It also sheds a new light on the argument in Zambelli (2007), where the author argues that this model does not fluctuate. Unlike Zambelli, we show that we can obtain cyclical solutions. This work provides new insights on the vision contained in the model. It turns out that this vision was much larger than what is often remembered, in particular, we can show that Frisch tried to construct a model that would intertwine both cycles and growth. In addition, we are able to reconsider the link between Frisch's early work in statistics and the birth of macrodynamic models.
    Date: 2020–10–16
  14. By: Galanis, Giorgos (Goldsmiths, University of London and Centre for Research in Economic Theory and its Applications, University of Warwick.); Veneziani, Roberto (School of Economics and Finance, Queen Mary, University of London)
    Abstract: What are the distributive implications of utilitarianism? Is it compatible with a concern for equality, as many utilitarians have argued? We analyse these questions in the context of a pure allocation problem. We consider an in nitely-lived economy and, drawing on the behavioural literature, assume that individuals have reference-dependent preferences: agents' utility is a function of current consumption and a reference point which captures consumption habits, or the agents' upbringing. Assuming a history of inequalities in consumption and welfare, we show that the utilitarian allocation is equalising: starting from an unequal distribution, consumption and welfare inequalities decrease over time at the utilitarian optimum. However, even though agents are in a relevant sense identical, equality does not obtain at any finite time.
    Keywords: utilitarianism ; inequality ; reference dependent preferences JEL Codes: D63 ; D9
    Date: 2020
  15. By: Hammond, Peter J. (University of Warwick)
    Abstract: Roberts' "weak neutrality" or "weak welfarism" theorem concerns Sen social welfare functionals which are defined on an unrestricted domain of utility function profiles and satisfy independence of irrelevant alternatives, the Pareto condition, and a form of weak continuity. Roberts (1980) claimed that the induced welfare ordering on social states has a one-way representation by a continuous, monotonic real-valued welfare function defined on the Euclidean space of interpersonal utility vectors that is, an increase in this welfare function is sufficient, but may not be necessary, for social strict preference. A counter-example shows that weak continuity is insufficient; a minor strengthening to pairwise continuity is proposed instead and its sufficiency demonstrated.
    Keywords: social welfare functionals ; weak welfarism JEL codes: D71
    Date: 2020
  16. By: Jérôme Maucourant (Université Jean-Monnet de Saint-Etienne et Triangle); Bruno Tinel (Centre d'Economie de la Sorbonne)
    Abstract: How can we characterize the contradictions between the state and the nation, while taking into account the fact that real society is divided into classes? This paper analyses these elements based on the implications of a full employment policy following Kalecki's analysis. We also find that to articulate the notions of state, nation and social classes it is relevant to examine the idea of a dual nature of the state, of which certain elements are found in Marx. Finally, we address the current challenges of economic policy taking into account the trends that tend to erode the role of the state and nations
    Keywords: State; nation; social classes; economic policy; full employment; sovereignty
    JEL: B51 E12 E62 H50 P34
    Date: 2020–10
  17. By: Laurie Laybourn-Langton (Institute for Public Policy Research (IPPR), University College London (UCL)); Laurie Macfarlane (Institute for Innovation and Public Policy (IIPP), University College London (UCL)); Michael Jacobs (Sheffield Political Economy Research Institute (SPERI), University of Sheffield)
    Abstract: Modern economic history can be roughly split into different eras in which certain sets of ideas dominate politics and policy-making. This paper seeks to understand if a shift in the ‘political economic paradigm’ is currently under way by inspecting the state of debates across a range of economic policy areas. It introduces the concept of ‘orthodox’, ‘modified’ and ‘alternative’ paradigms, corresponding to the status quo, its modification in the face of disruption or changed political goals, and a fundamental break from that status quo, respectively. Its central conclusion is that a significant shift is under way in many economic policy areas in many mainstream economic institutions. This shift has mainly occurred from ‘orthodox’ paradigm approaches – those that might broadly be described as based on neoclassical principles – to a ‘modified’ approach that alters the neoclassical approach in many ways but maintains its fundamental basis. Little to no movement towards what might be described as truly ‘alternative’ paradigm approaches is yet under way, though some mainstream institutions are exhibiting openness to these ideas. As such, an overall paradigm shift away from the dominant neoliberal paradigm is not yet underway.
    Keywords: political-economic paradigm; neoliberalism; heterodox economics
    JEL: B20 B25 E00 H10 P16 P50
    Date: 2019–06
  18. By: Florian H. Schneider
    Abstract: Firms often discourage certain categories of individuals from buying their products, in contrast with typical assumptions about profit maximization. This paper provides a potential rationale for such firm behavior: consumers seek to signal that they have “good” moral values to themselves and others by avoiding products popular among people with “bad” values. In laboratory experiments, I provide causal evidence that demand for a product is lower if its customer base consists of individuals with undesirable moral values. This effect occurs for both observable and unobservable consumption and for products that do not possess any inherent moral or undesirable qualities.
    Keywords: Moral values, social image, self-image, signaling, consumption, experiments
    JEL: D12 C91 M3
    Date: 2020–10
  19. By: Richard S.J. Tol (Department of Economics, University of Sussex, Falmer, United Kingdom)
    Abstract: History of environmental and resource economics from Zhong Guan to Francois Quesnay
    Keywords: environmental economics, history of economics, undergraduate, video
    JEL: B11 Q50
    Date: 2020–06
  20. By: Richard S.J. Tol (Department of Economics, University of Sussex, Falmer, United Kingdom)
    Abstract: Video discussion of the history of environmental and resource economics from Adam Smith to John Stuart Mill
    Keywords: environmental economics, history of economics, undergraduate, video
    JEL: B12 Q50
    Date: 2020–06
  21. By: Richard S.J. Tol (Department of Economics, University of Sussex, Falmer, United Kingdom)
    Abstract: Video discussion of the history of environmental and resource economics from Kenneth Boulding to Michael Greenstone
    Keywords: environmental economics, history of economics, undergraduate, video
    JEL: Q50
    Date: 2020–06
  22. By: Richard S.J. Tol (Department of Economics, University of Sussex, Falmer, United Kingdom)
    Abstract: Video discussion of the history of environmental and resource economics from William Stanley Jevons to Arthur Cecil Pigou
    Keywords: environmental economics, history of economics, undergraduate, video
    JEL: B13 Q50
    Date: 2020–06

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