nep-hpe New Economics Papers
on History and Philosophy of Economics
Issue of 2022‒09‒26
six papers chosen by
Erik Thomson
University of Manitoba

  1. Milton Friedman: An Early Advocate of Dollarization? By Emilio Ocampo
  2. Transatlantic Roads to Mont Pèlerin: "Old Chicago" and Freiburg in a World of Disintegrating Orders By Kolev, Stefan; Köhler, Ekkehard A.
  3. On The History and The Mathematics of The Wold-Juréen (1953) Utility Function, And Its Basis For The Modeling of Giffen Behavior By Sproule, Robert
  4. La política económica neoclásica en América Latina: génesis y consecuencias de cuatro décadas perdidas en el desarrollo latinoamericano, 1980-2020 By Sánchez-Masi, Luis
  5. A possibilist justification of the ontology of counterfactuals and forecasted states of economies in economic modelling By Imko Meyenburg
  6. Popular Personal Financial Advice versus the Professors By James J. Choi

  1. By: Emilio Ocampo
    Abstract: Milton Friedman’s longstanding advocacy in favor of floating exchange rates has contributed to a mistaken belief that he opposed currency board regimes or outright dollarization. Nothing could be further from the truth. Over a period of almost five decades Friedman consistently made it clear that he favored floating exchange rates for advanced nations but not for developing nations. In fact, he was one of the earliest advocates of dollarization for countries suffering from high and chronic inflation such as Argentina. Interestingly, it is rarely known that one of the earliest debates on the advantages and disadvantages of dollarization and currency boards took place in 1973 in Washington, D.C., during a Congressional Hearing which pitted Friedman against Argentine economist Ricardo Arriazu. The purpose of this brief note is to trace the evolution of Friedman’s thinking on the subject from the mid 1950s until his death and the events that influenced it.
    Keywords: Milton Friedman, Foreign Exchange Rate Regimes, Currency Boards, Dollarization, Monetary Policy, Argentina
    JEL: B2 B17 B3 B22 B27 F31 F32 O24
    Date: 2022–08
  2. By: Kolev, Stefan; Köhler, Ekkehard A.
    Abstract: This paper depicts the co-evolution of the political economies of the "Old Chicago" and Freiburg Schools. These communities within the "laissez-faire within rules" research program and the long-standing "thinking-in-orders" tradition emerged in the 1930s and culminated in the 1940s into a surprisingly coherent stream of institutional economic thought, crystallizing around the personalities of Henry C. Simons and Walter Eucken. We show how, in an age of disintegration of national and international orders of economy and society, the political economists at Chicago and Freiburg underwent a double transition: From students of equilibrium to students of order, as well as from students of various positive orders to defenders of a specific normative order. The normative order of the economy on both sides of the Atlantic was the competitive order and its rules-based framework. Along with shared angst amid disintegrating orders, personal transatlantic connections between the two communities are identified, starting in Berlin during the 1920s. We highlight the special role of Friedrich A. Lutz who, from the mid-1930s to Eucken's passing in 1950 and beyond, served as a lifeline between the isolated Freiburg School and US economists. Lutz's activities are embedded in a narrative of transatlantic conversations around Friedrich A. Hayek and the early meetings of the Mont Pèlerin Society.
    Keywords: Neoliberalism,Chicago School,Freiburg School,Mont Pèlerin Society,Henry C. Simons,Walter Eucken,Friedrich A. Lutz,Friedrich A. Hayek
    JEL: A11 B25 B31 H11 P16
    Date: 2021
  3. By: Sproule, Robert
    Abstract: Twenty years ago, Peter Moffatt (2002) posed this general question: “Is Giffen behavior compatible with the axioms of consumer theory?” The present paper addresses this very same question, but only as it applies to the Wold-Juréen (1953) utility function. In this paper, we demonstrate that the Wold-Juréen (1953) utility function exhibits both Giffenity and compatibility with the axioms of consumer theory. Our singular interest in the Wold-Juréen (1953) utility function stems from the fact that this utility function continues to be the preeminent theoretical benchmark in the study of Giffenity.
    Keywords: Wold-Juréen (1953) utility function,Slutsky decomposition,Giffen Behavior,Axioms of Consumer Theory
    JEL: A22 A23 D11
    Date: 2022
  4. By: Sánchez-Masi, Luis
    Abstract: The aim of this article is to examine the effectiveness of economic policies based on neoclassical principles which have been implemented in most of Latin American countries since the eighties. Since then, the region has been losing relative importance in the world. The lag in the last “four lost decades” es quite general and compelling. Rather than eliminating the asymmetric relationship between developed and underdeveloped countries, the historical evidence suggests it is perpetuated by the neoclassical economic policy. In Latin America the neoclassical principles such as free market and international free trade have tended to preserve the same productive structure, thus promoting an erratic development, which depends on the demand and prices of primary products. Until now, no underdeveloped country has reached the first world by applying economic policies based on neoclassical principles. The Asian countries which performed that transition applied policies and strategies opposed to neoclassical principles. Raul Prebisch’s analyses about the inconsistency of neoclassical economic policy with Latin American reality are today as valid as seven decades ago. However, for the great majority of Latin American economists is simply inconceivable that basic principles of neoclassical theory may produce adverse effects on underdeveloped countries. Latin America must rethink the economic policy and strategy for attaining its development.
    Keywords: Latin America; economic policy; neoclassical economics
    JEL: N16 O24
    Date: 2022–07–01
  5. By: Imko Meyenburg (ARU - Anglia Ruskin University)
    Abstract: Economists, like any other social scientist, apply various methodologies and theories in their research to ultimately tell true stories about the world we live in. Moreover, and specifically, they use counterfactual modelling and forecasting to also construct narratives of possible or future states of the economy, which evade classical empirical validation but nonetheless could be true. In this paper, we firstly claim that there is an intuitive notion that those statements about possible states of the economy, or its future state, could be true even in the absence of this empirical validation. To solve this problem, we will make use of modal logic and Lewisian possible world semantics, the idea that statements containing possibilities and necessities are true if they are true in some or all logically possible worlds. Furthermore, we argue that we can be ontologically committed to these postulated possible or future states of economies via commitment to said possible worlds. In other words, possible world semantics allows us to formally analyse our intuitions about the truthfulness of possibility statements arrived by from the use of postulated entities, economies, and worlds.
    Keywords: ontology,semantics,forecasts,epistemology,modelling,possible worlds,possible worlds JEL classification: B1,B16,B23,B59
    Date: 2022–08–18
  6. By: James J. Choi
    Abstract: I survey the advice given by the fifty most popular personal finance books and compare it to the prescriptions of normative academic economic models. Popular advice frequently departs from normative principles derived from economic theory, which should motivate new hypotheses about why households make the financial choices they do, as well as what financial choices households should make. Popular advice is sometimes driven by fallacies, but it tries to take into account the limited willpower individuals have to stick to a financial plan, and its recommended actions are often easily computable by ordinary individuals. I cover advice on savings rates, the advisability of being a wealthy hand-to-mouth consumer, asset allocation, non-mortgage debt management, simultaneous holding of high-interest debt and low-interest savings, and mortgage choices.
    JEL: D14 D15 G11 G4 G5
    Date: 2022–08

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