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on History and Philosophy of Economics |
| By: | Christoph K. Becker; Tigran Melkonyan; Eugenio Proto; Andis Sofianos; Stefan T. Trautmann |
| Abstract: | Bayesian Updating is the dominant theory of learning in economics. The theory is silent about how individuals react to events that were previously unforeseeable or unforeseen. Recent theoretical literature has put forth axiomatic frameworks to analyze the unknown. In particular, we test if subjects update their beliefs in a way that is consistent “reverse Bayesian”, which ensures that the old information is used correctly after an unforeseen event materializes. We find that participants do not systematically deviate from reverse Bayesianism, but they do not seem to expect an unknown event when this is reasonably unforeseeable, in two pre-registered experiments that entail unforeseen events. We argue that participants deviate less from the reverse Bayesian updating than from the usual Bayesian updating. We provide further evidence on the moderators of belief updating. |
| Keywords: | reverse Bayesianism, unforeseen, unawareness, Bayesian updating |
| JEL: | C11 C91 D83 D84 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_8662&r=all |
| By: | Edward Lane; L. Randall Wray |
| Abstract: | As the nation is experiencing the need for ever-increasing government expenditures to address COVID-19 disruptions, rebuild the nation's infrastructure, and many other worthy causes, conventional thinking calls for restoring at least a portion corporate taxes eliminated by the 2017 Tax Cuts and Jobs Act, especially from progressive circles. In this working paper, Edward Lane and L. Randall Wray examine who really pays the corporate income tax and argue that it does not serve the purposes most people believe. The authors provide an overview of the true purposes and incidence of corporate taxation and argue that it is inefficient and largely borne by consumers and employees, not shareholders. While the authors would prefer the elimination of the corporate profits tax, they understand the conventional thinking that taxes are necessary to help finance government expenditures--even if they disagree. Accordingly, the authors present alternatives to the corporate tax that shift the burden from consumers and employees to those who benefit the most from corporate success. |
| Keywords: | Corporate Taxes; Tax Incidence; Modern Money Theory (MMT); Richard and Peggy Musgrave; Beardsley Ruml; Tax Reform |
| JEL: | B52 E12 E6 E62 G30 H20 H25 |
| Date: | 2020–11 |
| URL: | http://d.repec.org/n?u=RePEc:lev:wrkpap:wp_979&r=all |
| By: | Tanweer Akram |
| Abstract: | This paper relates Keynes's discussions of money, the state theory of money, financial markets, investors' expectations, uncertainty, and liquidity preference to the dynamics of government bond yields for countries with monetary sovereignty. Keynes argued that the central bank can influence the long-term interest rate on government bonds and the shape of the yield curve mainly through the short-term interest rate. Investors psychology, herding behavior in financial markets, and uncertainty about the future reinforce the effects of the short-term interest rate and the central bank's monetary policy actions on the long-term interest rate. Several recent empirical studies that examine the dynamics of government bond yields substantiate the Keynesian perspective that the long-term interest rate responds markedly to the short-term interest rate. These empirical studies not only vindicate the Keynesian perspective but also have relevance for macroeconomic theory and policy. |
| Keywords: | Money; State Theory of Money; Chartalism; Monetary Theory; Central Bank; Government Bond Yields; Interest Rate; John Maynard Keynes |
| JEL: | E12 E40 E43 E50 E58 E60 F30 G10 G12 H62 H63 |
| Date: | 2020–11 |
| URL: | http://d.repec.org/n?u=RePEc:lev:wrkpap:wp_977&r=all |
| By: | Jana Friedrichsen; Katharina Momsen; Stefano Piasenti |
| Abstract: | Intentions play a fundamental role in many situations characterized by nonsimultaneous interaction from principal-agent settings in firms to the international task of protecting the environment and the climate. We experimentally investigate how decision makers (DMs) respond to perceived intentions of a matched partner and a stochastic, imperfectly informative outcome when choosing a reciprocating action. We vary if the DM observes their partner's action or only the outcome before taking their own decision. Observing no evidence of an outcome bias, we find that the DM reciprocates good intentions under full information. However, reciprocity of DMs is lower in the treatment where information on the partner's action is hidden. Our analysis suggests that this is driven by the partners? behavior. DMs select into being informed or uninformed based on their inclination to behave more or less prosocially. While information avoidance is frequent, we do not find evidence for moral wiggling. In line with the absence of moral wiggling, an analysis of subjects' beliefs speaks against strategic cynicism. |
| Keywords: | information avoidance, dictator game, public good game, moral wiggle room, intentions, reciprocity |
| JEL: | D91 C91 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:inn:wpaper:2020-31&r=all |
| By: | Metin M. Cosgel (University of Connecticut) |
| Abstract: | Persecution and Toleration offers a novel and superb analysis of the birth of religious freedom. Rather than seek an ideational account of the rise of religious freedom, Johnson and Koyama investigate changes in the institutional environment that governed the relationship between religion and the state. These changes made it in the interest of policy makers in modern Europe to grant greater religious freedom by transitioning from identity rules to impersonal laws in maintaining order. The book introduces a new thought-provoking conceptual framework that can be extended to examine the complicated history of the state’s interaction with religion, comparative analysis of the relationship between state capacity and political legitimacy, and various other issues concerning the treatment of minorities and heterodox practices around the world. |
| Keywords: | Persecution and Toleration, religious freedom, state capacity, political legitimacy, legal order, identity rules, general laws, heterodox practices, minorities |
| JEL: | H10 K4 N4 O57 P48 Z12 |
| Date: | 2020–11 |
| URL: | http://d.repec.org/n?u=RePEc:uct:uconnp:2020-18&r=all |
| By: | Ralph, Lauren (The Johns Hopkins Institute for Applied Economics, Global Health, and the Study of Business Enterprise) |
| Abstract: | Economic sanctions have been an enduring and widespread policy tool, seeking to extract concessions from target countries by causing them economic pain. Due to their popularity amongst politicians, sanctions have attracted a breadth of research regarding their effectiveness and the potential consequences of utilization. This paper reviews the literature and presents over thirty researchers' thoughts on numerous aspects of economic sanctions. Topics include how to define a successful sanction, the various success rates of sanctions, the factors influencing the success of a sanction, and the reasons policymakers continue to use sanctions. Finally, the review examines contemporary dialogue on sanctions from U.S. politicians, which generally confirms the theories that sanctions are meant to signal values to the international community, punish those who violate norms and deter future negative action. |
| Keywords: | economic sanctions; foreign policy |
| Date: | 2019–01 |
| URL: | http://d.repec.org/n?u=RePEc:ris:jhisae:0131&r=all |
| By: | Scheuer, Niklas |
| Abstract: | We develop a theoretical model that jointly explains optimal choices and happiness. We work with constant elasticity of substitution functions for utility and happiness. Employing a choice framework, individuals are confronted with two options. When there exists a trade-off, we determine parametric conditions for which individual happiness and utility coincide as well as oppose each other. Comparing the empirical evidence of Benjamin et al. (2012), our model can explain three out of four possible happiness-utility combinations. Regarding how individuals actually decide, our findings suggest that this is partly random. This explanation accounts for the remaining 11.2 % of individuals. |
| Keywords: | Consumer Economics,Theory,General Welfare,Well-Being,Micro-Based Behavioral Economics |
| JEL: | D11 D91 I31 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc20:224517&r=all |
| By: | David Fettig; James A. Schmitz |
| Abstract: | The Covid-19 crisis has exposed the vast inequalities that exist within the US economy. As the virus has spread silently, it has laid bare other crises that face our nation---especially the economic vulnerabilities of the country's poor and marginalized. Many of these vulnerabilities can, in fact, be traced back to a single cause that itself has spread silently, but over the last several decades, not months: Monopolies. That monopolies are "silent spreaders of poverty and economic inequality" was well known to economic and legal scholars of the 1930s and 1940s. Wendell Berge, who was Assistant Attorney General for Antitrust in the 1940s, wrote: "Monopoly conditions have often grown up almost unnoticed by the public until one day it is suddenly realized that an industry is no longer competitive but is governed by an economic oligarchy." The harm caused by these monopolies that have mostly avoided detection often exist in markets with small firms, low concentration levels, and small price-cost margins, as in residential construction, or wreak their harm in public institutions, where prices and concentration have no meaning. While there has been a very welcome resurgence in the concern about monopolies in the last decade or so, this has primarily involved vast corporations, and often about their threat to democratic institutions. Though greatly welcomed, we should not let apprehension with these larger companies distract us from the many hidden monopolies that have silently spread harm to the poor for the last 100 years -- not just the last 10 or so. We should stand on the shoulders of giants that taught us this about monopolies, not only Berge, but Thurman Arnold, Henry Simons, and others. |
| Keywords: | Monopoly; Competition; Inequality; Cournot; Sabotage; Harberger; COVID-19; Thurman Arnold; Henry Simons; Silent spreaders; Housing |
| JEL: | D22 D42 K0 L0 L12 |
| Date: | 2020–09–22 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedmwp:89028&r=all |