nep-hpe New Economics Papers
on History and Philosophy of Economics
Issue of 2023‒11‒20
seven papers chosen by
Erik Thomson, University of Manitoba

  1. The birth of (a robust) Arbitrage Theory in de Finetti's early contributions By Marco Maggis
  2. Boisguilbert's use of political arithmetic to denounce the illusions and the disorder of the reign of Louis XIV. By Jean Daniel BOYER
  3. “Compensate the Losers?” Economic Policy and Partisan Realignment in the US By Ilyana Kuziemko; Nicolas Longuet Marx; Suresh Naidu
  4. Can Economists Predict Recessions? By Jeremy Majerovitz
  5. The Economics of Attention By George Loewenstein; Zachary Wojtowicz
  6. Is Arrow's Dictator a Drinker? By Jeffrey Uhlmann
  7. Industrial Policy and the Great Divergence By Réka Juhász; Claudia Steinwender

  1. By: Marco Maggis
    Abstract: \textit{Il significato soggettivo della probabilit\`a} (1931) by B. de Finetti \cite{deF} is unanimously considered the rise of `subjectivism', a notion which strongly influenced both Probability and Decision Theory. What is less acknowledge is that \cite{deF} posed the foundations of modern arbitrage theory. In this paper we aim at examining how de Finetti's contribution should be considered as the precursor of Asset Pricing Theory and we show how his findings relate to recent developments in Robust Finance.
    Date: 2023–10
  2. By: Jean Daniel BOYER
    Abstract: In this article we show that Boisguilbert could be considered a forerunner of the employment of quantitative analysis in economics. To ground our analysis, we examine Boisguilbert’s possible links with British political arithmetic and set out the influence this may have had on his thought and on his estimations of the wealth of the kingdom of France and the income of the king. Reconstructing the data Boisguilbert uses, we also show that his analysis of public revenues and good price is grounded on the distinction he makes between current and constant prices. On this basis, echoing Gramont’s analysis (1620), Boisguilbert seeks to reveal the monetary illusion to which he perceived his contemporaries as having fallen victim. Against popular opinion, Boisguilbert estimates that while the current revenues of Louis XIV have increased, his real revenues have in fact decreased. This proves that the French tax system is highly imperfect. According to his estimations, the real price of grain is also disproportionate: far from being too high, it is in fact half what it should be. We thus see Boisguilbert using quantitative analysis to identify the causes of the ruin of the kingdom of France, to dissipate the illusions of his contemporaries, and to propose ways of restoring the good order.
    Keywords: Boisguilbert, crisis, Gramont, monetary illusion, order, proportion, Petty, political arithmetic, quantitative analysis, wealth.
    JEL: B11 E02 E21 E31
    Date: 2023
  3. By: Ilyana Kuziemko; Nicolas Longuet Marx; Suresh Naidu
    Abstract: We argue that the Democratic Party’s evolution on economic policy helps explain partisan realignment by education. We show that less-educated Americans differentially demand “predistribution” policies (e.g., a federal jobs guarantee, higher minimum wages, protectionism, and stronger unions), while more-educated Americans differentially favor redistribution (taxes and transfers). This educational gradient in policy preferences has been largely unchanged since the 1940s. We then show the Democrats’ supply of predistribution has declined since the 1970s. We tie this decline to the rise of a self-described “New Democrat” party faction who court more educated voters and are explicitly skeptical of predistribution. Consistent with this faction’s growing influence, we document the significant growth of donations from highly educated donors, especially from out-of-district donors, who play an increasingly important role in Democratic (especially “New Democrat”) primary campaigns relative to Republican primaries. In response to these within-party changes in power, less-educated Americans began to leave the Democratic Party in the 1970s, after decades of serving as the party’s base. Roughly half of the total shift can be explained by their changing views of the parties’ economic policies. We also show that in the crucial transition period of the 1970s and 1980s, New Democrat-aligned candidates draw disproportionately from more-educated voters in both survey questions and actual Congressional elections.
    JEL: H20 J0 P0
    Date: 2023–10
  4. By: Jeremy Majerovitz
    Abstract: An analysis of 55 years of data from the Survey of Professional Forecasters suggests that quarter-ahead recession forecasts are fairly accurate but still have a great deal of uncertainty.
    Keywords: recessions; recession forecasts; forecasting; Survey of Professional Forecasters
    Date: 2023–09–26
  5. By: George Loewenstein; Zachary Wojtowicz
    Abstract: Attention is a pivotal resource in the modern economy and plays an increasingly prominent role in economic analysis. We summarize research on attention from both psychology and economics, placing a particular emphasis on its capacity to explain numerous documented violations of classical economic theory. We also propose promising new directions for future research, including attention-based utility, the recent proliferation of attentional externalities introduced by digital technology, the potential for artificial intelligence to compete with human attention, and the significant role that boredom, curiosity, and other motivational states play in determining how people allocate attention.
    Keywords: attention, motivation, behavioural bias, information, learning, education, artificial intelligence, machine learning, future of work
    JEL: D83 D90 D91 I00
    Date: 2023
  6. By: Jeffrey Uhlmann
    Abstract: We critique the formulation of Arrow's no-dictator condition to show that it does not correspond to the accepted informal/intuitive interpretation. This has implications for the theorem's scope of applicability.
    Date: 2023–10
  7. By: Réka Juhász; Claudia Steinwender
    Abstract: We discuss recent work evaluating the role of the government in shaping the economy during the long 19th century, a practice we refer to as industrial policy. We show that states deployed a vast variety of different policies aimed at, primarily, but not exclusively, fostering industrialization. We discuss the thin, but growing literature that evaluates the economic effects of these policies. We highlight some fruitful avenues for future study.
    Keywords: industrial policy, first wave of globalization, industrialization, infant industry protection, technology policy, transport infrastructure, telegraph, 19th century
    JEL: L50 N10 N40 N60
    Date: 2023

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