nep-hpe New Economics Papers
on History and Philosophy of Economics
Issue of 2021‒08‒23
five papers chosen by
Erik Thomson
University of Manitoba

  1. Mr. Keynes and the “Classics”; A Suggested Reinterpretation By Gauti B. Eggertsson; Cosimo Petracchi
  2. Book review of "Michele Alacevich, ´Albert O. Hirschman: An intellectual biography´(New York: Columbia University Press, 2021), 352 pages, $35.00 (hardcover), ISBN: 9780231553308 By BIANCHI, ANA MARIA AFONSO FERREIRA
  3. Risks on Trade: The Activity of the Merchant in Thomas Aquinas's Commentary on the Sentences By Pierre Januard
  4. Financial Instability and Income Inequality: why the connection Minsky-Piketty matters for Macroeconomics By Filippo Gusella; Anna Maria Variato
  5. The First Doctrinal Consideration on "Transatlantic" Commercial Law: Tomás de Mercado’s Summa de tratos y contratos, 1569-1571 By Luisa Brunori

  1. By: Gauti B. Eggertsson; Cosimo Petracchi
    Abstract: This paper revisits and proposes a resolution to an empirical and theoretical controversy between Keynes and the “classics” (or monetarists). The controversy dates to Keynes’s General Theory (1936)—most famously formalized in Hicks’s (1937) classic Econometrica article, in which the IS-LM model is first formally stated. We first replicate empirical tests formulated in the late 1960s and ’70s and show that more recent data have more statistical power and resolve the empirical debate in favor of the Keynesians, at least according to the criteria of the literature at that time. We then show, using a simple dynamic stochastic general equilibrium (DSGE) model, that the empirical tests suffer from the Lucas (1976) critique, as the conclusion fundamentally depends upon the assumed policy regime. Nevertheless, we argue, this new empirical result is useful: it provides evidence for the existence of a “Keynesian policy regime” according to which traditional monetary expansion loses its impact in the absence of a policy regime change, in the sense of Sargent (1982).
    JEL: B0 B1 B22 E0 E12 E13 E4 E5 E50 E51 E52
    Date: 2021–08
    Abstract: Book review of Michele Alacevich´s recently published book, "Albert O. Hirschman: An intellectual biography", CUP, 2021.
    Date: 2021–08–11
  3. By: Pierre Januard (PHARE - Philosophie, Histoire et Analyse des Représentations Économiques - UP1 - Université Paris 1 Panthéon-Sorbonne)
    Abstract: Thomas Aquinas's short text on the activity of merchants in his early work the Commentary on the Sentences is a milestone in the understanding of trade and in the treatment of a deficit of information about the trade's finality and the intention of the merchant. Three levels of risk can thus be distinguished, relating to the licitness of the trade, the conditions of the trading activity, and the remuneration of merchants; and these in turn encounter three types of risk: analytical risks, commercial risks and strategic risks. The treatment of trade activity in the Commentary on the Sentences thus offers a new understanding of later works such as De regno and the Summa theologiae.
    Keywords: Thomas Aquinas,scholastics,trade,merchant,just price,risk
    Date: 2021–08–03
  4. By: Filippo Gusella; Anna Maria Variato
    Abstract: In recent years the names of Minsky and Piketty gained increasing notoriety to researchers because the two authors investigated issues of financial instability and income inequality, which represent both two unsolved macroeconomic problems of the new millennium, and evidence contradicting the long†run implications of mainstream macroeconomics. By combining these two names we set ourselves an ambitious goal, going beyond the technical aspects of the model presented in the paper. Indeed, not only we want to contribute directly to the debate meant at clarifying the controversial relationship between financial instability and income inequality; we also aim at addressing a broader issue which is the explanation of the reasons why a theoretical revolution in macroeconomics has not yet occurred, and why financial aspects still play a subordinate role to real factors in the explanation of growth and cycles. In this broader perspective Minsky and Piketty are assumed as extreme examples of the opposite poles of heterodoxy and orthodoxy. Both target and argumentative line of the contribution are quite unconventional, as usually financial instability and income inequality, are treated as separate if not independent issues of inquiry; and methodological reflection is no longer a customary explicit part of technical papers. We discuss possible reasons why these two circumstances happen. The theoretical framework proposed in this paper builds on Ferri (2016), who presents a class of demandled models in a medium†run time horizon. This class of models is not conventional too, though it belongs to “pedagogical models†, we consider especially relevant tool for macroeconomics. Among the different specifications investigated by the author, we select the nearest to possible comparison with Piketty (2014) and then we introduce corporate debt into the financial account of firms. Because of the non†linearity of the model, we explore its dynamic properties with numerical simulations. Such simulations are also performed to assess the parameters enabling to support the Financial Instability Hypothesis. Aiming at deepening the comprehension of robustness properties, we also consider analytic results from a linearized version of the model. Obviously, the criticism addressed to Piketty with respect to the definition and measurement of inequality can be extended to our model too, as we use the same expedient to check the evolution of inequality. This leads to emphasize the relevance of the issue of measurement as a critical one for future developments. Nevertheless, this does not impinge on the achievement of our purpose. Indeed, our analysis confirms the utility of pedagogical models. Furthermore, it underlines the need of a change of economic vision such that complexity comes as a substantial part of representation. In terms of future perspectives these considerations point out the need for macroeconomic epistemology to resume constructive dialectics: a mixture of plural narratives and foundations for new visions of economic policy. Those just proposed at the end of the paper differ from orthodox ones as they call for financial regulation, they underline qualitative aspects and heterogeneity; but such embryonal policy suggestions stem from the overall perspective described in the paper, a perspective rooted into Ferri’s notion of medium†run, and qualified by Minsky through an eclectic approach leading to networks of balance†sheets: two ways highly overlapping though not totally equivalent to represent the reality of and endogenously unstable capitalism lying at the edge of chaos.
    Keywords: Economic Inequality, Financial Instability Hypothesis, Endogenous Cycles
    JEL: B41 D31 E32
    Date: 2021
  5. By: Luisa Brunori (CHJ - Centre d'histoire judiciaire - UMR 8025 - Université de Lille - CNRS - Centre National de la Recherche Scientifique, Université de Lille)
    Abstract: The "Suma de tratos y contratos" (1569-1571) by Tomás de Mercado is the first legal treatise on trade that explicitly takes into account the specificities of Spanish trade with the Indias. Tomás de Mercado was faced with very profound changes in trade: long distances, large convoy sizes, the need for large amounts of funding, high risk, variations in prices and the value of money... From a theological-legal point of view, these upheavals posed new and complex questions. Mercado, advisor to the merchants of Seville and an excellent knowledge of New Spain, analyses the sudden transformation of economic and juridical practice with finesse and realism. The 'Suma' is thus an extraordinary real-time testimony to the profound transformations taking place in 16th century commerce. Moreover, faced with fundamental questions of moral order and juridical legitimacy, Mercado proposes legal solutions of high equilibrium in which theological imperatives are masterfully reconciled with the needs of transatlantic commercial practice.
    Keywords: Legal history,Business history,Early modern History,Law and Economics,Late scholasticism,Commercial law
    Date: 2021–06

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