nep-hpe New Economics Papers
on History and Philosophy of Economics
Issue of 2021‒06‒28
nine papers chosen by
Erik Thomson
University of Manitoba

  1. Capitalism, Populism and Democracy: Revisiting Samuelson’s Reformulation of Schumpeter By Emilio Ocampo
  2. Rupture and continuity in the original divide between micro-dynamics and macro-dynamics By Vincent Carret
  3. Shareholder Value or Public Purpose? From John Maynard Keynes and Adolf Berle to the Modern Debate By Suzanne J. Konzelmann; Victoria Chick; Marc Fovargue-Davies
  4. From ‘Capital and Ideology’ to ‘Democracy and Evidence’: A Review of Thomas Piketty By Ewan McGaughey
  5. Values in Welfare economics By Antoinette Baujard
  6. The credibility revolution in the empirical analysis of crime By Pinotti, Paolo
  7. Pratica degli affari e prescrizioni morali: interesse e sconto nei manuali di aritmetica mercantile (secoli XVI-XVIII) By Zanini, Andrea
  8. Rational inattention: a review By Maćkowiak, Bartosz; Matějka, Filip; Wiederholt, Mirko
  9. Fiscal versus Monetary Policy in the 1960s By Friedman, Milton

  1. By: Emilio Ocampo
    Abstract: In the 1970s and early 1980s Paul Samuelson reformulated the conditional prediction made by Joseph Schumpeter in Capitalism, Socialism and Democracy by replacing socialism with populism. According to Samuelson, “populist democracy” had attained its fullest development in the Southern Cone. He viewed Argentina as the paradigmatic case that proved his theory. Samuelson’s thesis was that a strong electoral demand for equality and antipathy to business had hindered sustained economic growth. At the time, Samuelson also believed the advanced Western economies could follow the same path as Argentina. The Reagan and Thatcher revolution proved him wrong. However, the emergence of populism in Europe and the US in recent years makes his reformulation of Capitalism, Socialism and Democracy seem more plausible. The objective of this paper is to review and critique Samuelson’s theory and to assess its relevance and usefulness today. Its main conclusions can be summarized as follows. First, Samuelson’s theory is incomplete and therefore has limited power to explain current or past populist waves. Secondly, his analysis of the Argentine case was based on an erroneous interpretation of Argentine history. Third, despite being an outlier, Argentina’s addiction to populism offers a cautionary tale.
    Keywords: Samuelson, Schumpeter, Capitalism, Socialism, Democracy, Populist Democracy, Argentina, Chile, Uruguay.
    JEL: B20 B30 N16 O54 P48
    Date: 2021–06
  2. By: Vincent Carret (UL2 UFR SEG - Université Lumière - Lyon 2 - UFR de Sciences économiques et de gestion - UL2 - Université Lumière - Lyon 2, 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)
    Abstract: In 1933, Ragnar Frisch introduced a distinction between micro-dynamics and macro-dynamics in his paper on "Propagation problems and impulse problems in dynamic economics." His claim that he proposed the first macro-dynamic analysis and that micro-dynamic schemes were limited to the dynamics of specific markets or behaviors had a lasting impact on the field. But the introduction of this separation created a narrative hiding what had been done before and introduced a tension between the two approaches. By going back to the content of micro-dynamic analysis, we are led to two lines of research that were pursued during the 1920s and early 1930s: cobweb models and intertemporal optimization. A pivotal economist for going beyond micro-dynamics was Jan Tinbergen, who had contributed to both these approaches, and went beyond with new analytical tools. However, the idea of intertemporal optimization met with some opposition when it was scaled up to the whole economic system. This prompted Frisch to propose his new approach, which met with immediate success as more schemes were proposed. Tinbergen was himself one of the first converts to macro-dynamics, but the links between the two approaches and the new tensions created by their separation remained. This tension between the newly created categories can be viewed as a result of opposing views on causality, which were rooted in differing mathematical approaches, a point explicitly made by the next generation.
    Keywords: micro-dynamic,macro-dynamic,Ragnar Frisch,Jan Tinbergen,Charles Roos,Paul Samuelson,cobweb,intertemporal optimization,causality
    Date: 2021–05–30
  3. By: Suzanne J. Konzelmann; Victoria Chick; Marc Fovargue-Davies
    Abstract: The debate about corporate purpose is a recurring one that has re-emerged today. What should be the guiding principles of business: the pursuit of profit or a contribution to public well-being? We trace key elements in this debate in the UK and the US from the interwar years, when John Maynard Keynes and Adolf Berle made important contributions, to the present. Both the earlier and the current debates are centred around whether we see business institutions as strictly private entities, transacting with their suppliers, workers and customers on terms agreed with or imposed upon these groups, or as part of society at large and therefore expected to contribute to what society deems to be its interests. Whether current developments will ultimately produce a shift in corporate purpose akin to the one that followed the Second World War remains to be seen. But the parallels to the interwar debates, and the uncertain economic, political and social environment in which they took place, are striking. Our objective is to see what might be learned from the past to inform the current direction of thought concerning capitalism and corporate purpose.
    Keywords: Corporate purpose, shareholder primacy, John Maynard Keynes, Adolf Berle
    JEL: B31 L21 P16
    Date: 2020–06
  4. By: Ewan McGaughey
    Abstract: Thomas Piketty’s Capital and Ideology (2020) is a major, encyclopaedic and data-driven contribution to the effort of constructing a better human civilisation. This review summarises the main argument: a positive thesis that in every society, ideology feeds laws and institutions that create inequality, and inequality then bolsters ideology; a normative thesis that we need a better ideology, including ‘participatory socialism’, to solve our biggest challenges. The review then complements and critiques three central issues in the argument, that (1) the true concentration of economic power, the votes in the economy, is even more extreme than inequality of wealth and income, (2) the legal construction of markets, through property, contract, corporate, or human rights law, can ‘pre-distribute’ income and wealth to a vast extent before tax, and (3) social justice means expanding (not merely correcting or re-distributing) everyone’s opportunity, creative capacity, and human potential, and helps everyone to develop their personality to the fullest. Social justice is an unparalleled force, and is still the best answer to far-right, authoritarian or other failed ideologies, which have escalated inequality and driven climate damage. Perhaps the greatest achievement of Piketty’s work could be to bring economics firmly back to the values in the Universal Declaration of Human Rights.
    Keywords: Capital, ideology, democracy, evidence, banks, asset managers, codetermination, economic power, social justice
    JEL: K10 K11 K22 K31
    Date: 2021–04
  5. 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)
    Abstract: This chapter focuses on the inner rationale and consequences of four different archetypal positions regarding how ethical and political values are tackled in welfare economics. Welfare economics is standardly associated with the welfarist framework, for which social welfare is based on individual utility only. Beyond this, we distinguish the value-neutrality claimfor which ethical values should be and are out of the scope of welfare economics-, the value confinement idealfor which ethical values are acceptable if they are minimal and consensual-, the transparency requirementfor which any ethical values may be acceptable in the welfare economics framework if explicit and formalized-, and the entanglement claimwhich challenges the very possibility of demarcation between facts and values.
    Keywords: Welfare economics,facts and values,value judgement,welfarism,transparency,demarcation,normative and positive,neutrality
    Date: 2021
  6. By: Pinotti, Paolo
    Abstract: I review recent developments in the economic analysis of crime, focusing in particular on organized crime and corruption. I first discuss the main challenges to the empirical identification of causal relationships -- namely, measurement error due to endogenous reporting of crime and the fact that randomized controlled trials are rarely an option when studying crime. I then discuss recent advancements made possible by the combination of detailed micro-data and quasi-experimental methods.
    Keywords: Economics of crime; identification; Measurement error; Quasi-experiments
    JEL: K42
    Date: 2020–06
  7. By: Zanini, Andrea
    Abstract: Catholic Church’s usury restrictions and their effects on business life have long attracted scholars’ attention. Several essays reconstruct the evolution of usury doctrine and its relations with the diffusion of new contracts and financial techniques to enable the payment of interest. This paper aims to investigate the real influence of the Church’s precepts on financial transactions starting from a different observation point. The most important source used in this work is commercial arithmetic textbooks printed in Italy from the beginning of the 16th century to the end of the 18th century and specifically devoted to businessmen. Although quite limited from a theoretical point of view, these books reflect coeval business practice. In particular, they contain several examples illustrating calculation techniques, including problems concerning interest and discount. Many authors try to give suggestions to their readers, as well as some ethical and moral advice, showing whether, in their opinion, a specific financial practice was licit or not. Therefore, these textbooks represent a useful source to shed light upon the influence of the Church’s usury precepts on the business world in the early modern age.
    Keywords: financial calculation, usury, commercial arithmetic, Italy, early modern age
    JEL: N23
    Date: 2021–06
  8. By: Maćkowiak, Bartosz; Matějka, Filip; Wiederholt, Mirko
    Abstract: We review the recent literature on rational inattention, identify the main theoretical mechanisms, and explain how it helps us understand a variety of phenomena across fields of economics. The theory of rational inattention assumes that agents cannot process all available information, but they can choose which exact pieces of information to attend to. Several important results in economics have been built around imperfect information. Nowadays, many more forms of information than ever before are available due to new technologies, and yet we are able to digest little of it. Which form of imperfect information we possess and act upon is thus largely determined by which information we choose to pay attention to. These choices are driven by current economic conditions and imply behavior that features numerous empirically supported departures from standard models. Combining these insights about human limitations with the optimizing approach of neoclassical economics yields a new, generally applicable model. JEL Classification: D8
    Keywords: information choice, rational inattention
    Date: 2021–06
  9. By: Friedman, Milton (The Johns Hopkins Institute for Applied Economics, Global Health, and the Study of Business Enterprise)
    Abstract: In this lecture, Milton Friedman reviews the role of fiscal and monetary policies on the course of the U.S. business cycle, during several episodes from 1961 to 1969. He relates these developments to shifts in contemporary popular and scientific opinion about the determinants of the business cycle. In each episode of expansion or contraction, he shows that monetary policy – in the sense of changes in the rate of growth of the quantity of money – decisively dominated over fiscal policy in determining the pace of economic activity and the rate of inflation. During the lecture, Friedman makes several digressions to explain the variability of the lag in effect of monetary policy, the reason why interest rates are a poor guide to the stance of monetary policy, and why the downward-sloping liquidity preference function is a poor model that fails to comport with the real world. He also explains why tax increases are not necessarily contractionary, and why tax decreases are not necessarily expansionary.
    Date: 2021–06–23

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