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on History and Philosophy of Economics |
| By: | Kakarot-Handtke, Egmont |
| Abstract: | The present paper takes it as an indisputable fact that subjective-behavioral thinking leads, for deeper methodological reasons, with inner necessity to inconclusive filibustering about the agents’ economic conduct and therefore has to be replaced by something fundamentally different. The key argument runs as follows: (a) the subjective-behavioral approach can not, as a matter of principle, afford a correct profit theory, (b) without a correct profit theory it is impossible to comprehend how the monetary economy works, (c) without this knowledge economic policy proposals are unjustifiable, (d) thinking like an economist may be hazardous to the economy. |
| Keywords: | new framework of concepts; structure-centric; axiom set; objectivestructural; income; profit; General Complementarity; subjective-behavioral; methodological individualism; opus magnum |
| JEL: | E00 D00 A11 B41 |
| Date: | 2013–01–28 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:44046&r=hpe |
| By: | Saint-Paul, Gilles (University of Toulouse I) |
| Abstract: | When policymakers and private agents use models, the economists who design the model have an incentive to alter it in order to influence outcomes in a fashion consistent with their own preferences. I discuss some consequences of the existence of such ideological bias. In particular, I analyze the role of measurement infrastructures such as national statistical institutes, the extent to which intellectual competition between different schools of thought may lead to polarization of views over some parameters and at the same time to consensus over other parameters, and finally how the attempt to preserve influence can lead to degenerative research programs. |
| Keywords: | ideology, macroeconomic modelling, self-confirming equilibria, polarization, autocoherent models, intellectual competition, degenerative research programs, identification |
| JEL: | A11 E6 |
| Date: | 2012–12 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp7120&r=hpe |
| By: | John B. Taylor (Stanford University) |
| Abstract: | Research in the early 1980s found that the gains from international coordination of monetary policy were quantitatively small compared to simply getting domestic policy right. That prediction turned out to be a pretty good description of monetary policy in the 1980s, 1990s, and until recently. Because this balanced international picture has largely disappeared, the 1980s view about monetary policy coordination needs to be reexamined. The source of the problem is not that the models or the theory are wrong. Rather there was a deviation from the rule-like monetary policies that worked well in the 1980s and 1990s, and this deviation helped break down the international monetary balance. There were similar deviations at many central banks, an apparent spillover culminating in a global great deviation. The purpose of this paper is to examine the possible causes and consequences of these spillovers, and to show that uncoordinated responses of central banks to the deviations can create an amplification mechanism which might be overcome by some form of policy coordination. |
| Date: | 2013–01 |
| URL: | http://d.repec.org/n?u=RePEc:sip:dpaper:12-008&r=hpe |
| By: | Diacon, Paula-Elena |
| Abstract: | Abstract: The aim of this article is to provide a brief analysis of the current financial crisis, event that represents a major economic challenge and which reinforces the eternal dispute between the two economic thoughts: economic liberalization and government intervention. The analysis focuses on clarifying how these two concepts are represented, and the ways in which they have affected (or not) the recent events. Although the main variable in the crisis equation was supposed to be liberalization, this article finds out that it is the inadequate regulation that played an important role. In order to prevent such events, it is vital to properly understand the causes of the crisis and to identify the valuable lessons that can be learned. |
| Keywords: | financial crisis; economic liberalization; government intervention; regulation |
| JEL: | K20 B00 G01 |
| Date: | 2013–01–30 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:44089&r=hpe |
| By: | Aled Davies |
| Abstract: | How far were monetary targets imposed on the post-1974 Labour Government by international and domestic financial markets enthused with the doctrines of ‘monetarism’? The following paper attempts to answer this question by demonstrating the complex and contingent nature of the ascent of British ‘monetarism’ after 1968. It describes the post-devaluation valorisation of the ‘money supply’ which led investors to realign their expectations with the behaviour of the monetary aggregates. The collapse of the gobal fixed-exchange rate regime, coupled with vast domestic inflationary pressures after 1973, determined that investors came to employ the ‘money supply’ as a convenient new measure with which to assess the ‘soundness’ of British economic management. The critical juncture of the 1976 Sterling crisis forced the Labour Government into a reluctant adoption of monetary targets as part of a desperate attempt to regain market confidence. The result was to impose significant constraints on the Government’s economic policymaking freedom, as attempts were made to retain favourable money supply figures exposed to the short-term volatility of increasingly-globalised and highly-capitalized financial markets. |
| Date: | 2012–10–01 |
| URL: | http://d.repec.org/n?u=RePEc:oxf:wpaper:number-104&r=hpe |
| By: | Heidi Deneweth; Oscar Gelderblom; Joost Jonker |
| Abstract: | Building on recent work by Collins et al. this paper aims to explain the failure of corporate and public initiatives to alleviate poverty before the twentieth century by unravelling the financial rationale behind the various combinations of private efforts, family and neighbourhood help, financial intermediation, and government intervention tried by poor households in the eighteenth and nineteenth century. There existed several financial institutions whose functioning was very similar to modern microfinance institutions, yet none of them were in a position to help the poor. We find that in the Netherlands the boundary of formal financial markets moved down not because of financial innovation, but because of economic growth pushing up wages. Until the last quarter of the 19th-century poor households simply lacked the money to use newly established mutual insurances, savings- and loan banks. |
| Keywords: | microfinance, poverty, cash flow management, 19th century, Netherlands |
| Date: | 2013–02 |
| URL: | http://d.repec.org/n?u=RePEc:ucg:wpaper:0039&r=hpe |
| By: | David Comerford (University of Edinburgh) |
| Abstract: | The standard approach to the economics of climate change, which has its best known implementation in Nordhaus's DICE and RICE models (well described in Nordhaus's 2008 book, A Question of Balance) is not well equipped to deal with the possibility of catastrophe, since we are unable to evaluate a risk averse representative agent's expected utility when there is any significant probability of zero consumption. Whilst other authors attempt to develop new tools with which to address these problems, the simple solution proposed in this paper is to ask a question that the currently available tools of climate change economics are capable of answering. Rather than having agents optimally choosing a path (that divers from the recommendations of climate scientists) within models which cannot capture the essential features of the problem, I argue that economic models should be used to determine the savings and investment paths which implement climate targets that have been suggested in the physical science literature. |
| Keywords: | Climate Change, Catastrophe, Optimal Policy, Alternative Energy Investment; |
| JEL: | Q54 Q43 E22 H23 |
| Date: | 2013–01–25 |
| URL: | http://d.repec.org/n?u=RePEc:edn:esedps:216&r=hpe |
| By: | Roger Gordon; Gordon B. Dahl |
| Abstract: | To what degree do economists disagree about key economic questions? To provide evidence, we make use of the responses to a series of questions posed to a distinguished panel of economists put together by the Chicago School of Business. Based on our analysis, we find a broad consensus on these many different economic issues, particularly when the past economic literature on the question is large. Any differences are unrelated to observable characteristics of the Panel members, other than men being slightly more likely to express an opinion. These differences are idiosyncratic, with no support for liberal vs. conservative camps. |
| JEL: | A11 H0 J0 |
| Date: | 2013–01 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:18728&r=hpe |
| By: | B. Douglas Bernheim; Debraj Ray; Sevin Yeltekin |
| Abstract: | The absence of self-control is often viewed as an important correlate of persistent poverty. Using a standard intertemporal allocation problem with credit constraints faced by an individual with quasi- hyperbolic preferences, we argue that poverty damages the ability to exercise self-control. Our theory invokes George Ainslie’s notion of “personal rules,” interpreted as subgame-perfect equilibria of an intrapersonal game played by a time-inconsistent decision maker. Our main result pertains to situations in which the individual is neither so patient that accumulation is possible from every asset level, nor so impatient that decumulation is unavoidable from every asset level. Such cases always possess a threshold level of assets above which personal rules support unbounded accumulation, and a second threshold below which there is a “poverty trap”: no personal rule permits the individual to avoid depleting all liquid wealth. In short, poverty perpetuates itself by undermining the ability to exercise self-control. Thus even temporary policies designed to help the poor accumulate assets may be highly effective. We also explore the implications for saving with easier access to credit, the demand for commitment devices, the design of accounts to promote saving, and the variation of the marginal propensity to consume across classes of resource claims. |
| JEL: | C61 C63 D31 D91 H31 I3 O12 |
| Date: | 2013–01 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:18742&r=hpe |
| By: | Bellino, Enrico |
| Abstract: | The Ramsey (1928) accumulation path is characterized as a saddle-path in the standard presentations of the model based on the works of Cass (1965) and Koopmans (1965). From a mathematical stance a saddle-path is unstable: if the system is exactly on that path, it converges to the steady state of the system; if it diverges slightly from that path, it shifts indefinitely from the steady state. The 'transversality' condition is then invoked in the Ramsey model to prevent the system from following such divergent paths; from the economical point of view this condition can be interpreted as a perfect foresight assumption. This kind of instability, which is typical of infinite horizon optimal growth models, has been sometime considered to account for actual economic crises. The claim would seem to be grounded on the idea that if the consumer optimizes myopically, i.e., by only considering the current and the subsequent period, the ensuing dynamics diverges almost surely from the steady state equilibrium. Convergence requires perfect foresight. The present work aims to challenge this conclusion, which seems not inherent to the choice problem between consumption and savings, but it is due to the presumption that the consumer must face this problem in an infinite horizon setting. The Ramsey problem of selection of the accumulation path will be re-proposed here within a framework where consumer's ability to optimize over the future is assumed to be imperfect. However, the ensuing path will converge to the steady state, without assuming perfect foresight. Myopia is thus not ultimately responsible for the instabilities of the 'optimal' accumulation path. Explanations of instability phenomena of actual economic systems (crises, bubbles, etc.) must be sought in other directions, probably outside the strait-jacket of the optimization under constraint. |
| Keywords: | Ramsey model; transversality condition; bounded rationality; convergence; saddle path |
| JEL: | E22 B22 E21 |
| Date: | 2013–01–28 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:44024&r=hpe |
| By: | Gerhard Sorger; Tapan Mitra |
| Abstract: | Studying a one-sector economy populated by finitely many heterogeneous households that are subject to no-borrowing constraints, we confirm a conjecture by Frank P. Ramsey according to which, in the long run, society would be divided into the set of patient households who own the entire capital stock and impatient ones without any physical wealth. More specifically, we prove (i) that there exists a unique steady state equilibrium that is globally asymptotically stable and (ii) that along every equilibrium the most patient household owns the entire capital of the economy after some finite time. Furthermore, we prove that despite the presence of the no-borrowing constraints all equilibria are efficient. Our results are derived for the continuous-time formulation of the model that was originally used by Ramsey, and they stand in stark contrast to results that – over the last three decades – have been found in the discrete-time version of the model. |
| JEL: | D61 D91 E21 O41 |
| Date: | 2013–01 |
| URL: | http://d.repec.org/n?u=RePEc:vie:viennp:1301&r=hpe |
| By: | Grossbard, Shoshana (San Diego State University, California); Mukhopadhyay, Sankar (University of Nevada, Reno) |
| Abstract: | In this paper we examine how children affect happiness and relationships within a family by analyzing two unique questions in the National Longitudinal Study of Youth's 1997 cohort. We find that (a) presence of children is associated with a loss of spousal love; (b) loss of spousal love is associated with loss of overall happiness; but (c) presence of children is not associated with significant loss of overall happiness. If children reduce feelings of being loved by the spouse but do not reduce reported happiness even though spousal love induces happiness, then it must be the case that children contribute to parental happiness by providing other benefits. After ruling out some competing compensation mechanisms we infer that loss of spousal love is compensated with altruistic feelings towards children. |
| Keywords: | children, happiness, emotions, marriage, religion |
| JEL: | J13 D10 |
| Date: | 2012–12 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp7119&r=hpe |
| By: | Veenhoven, Ruut; Vergunst, Floris |
| Abstract: | The 'Easterlin Paradox' holds that economic growth in nations does not buy greater happiness for the average citizen. This thesis was advanced in the 1970s on the basis of the then available data on happiness in nations. Later data have disproved most of the empirical claims behind the thesis, but Easterlin still maintains that there is no long-term correlation between economic growth and happiness. This last claim was tested using the time trend data available in the World Database of Happiness, which involve 1531 data points in 67 nations that yield 199 time-series ranging from 10 to more than 40 years. The analysis reveals a positive correlation between GDP growth and rise of in happiness in nations. Both GDP and happiness have gone up in most nations, and average happiness has risen more in nations where the economy has grown the most; r =+0.21 p< 05. On average a 1% growth in income per capita per year was followed by a rise in average happiness on scale 0-10 of 0.00335; thus a gain in happiness of a full point would take 60 years with an annual economic growth of 5%. |
| Keywords: | happiness; economic growth; Easterlin Paradox; trend analysis |
| JEL: | O10 I31 Z10 D60 A10 H00 |
| Date: | 2013–01–23 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:43983&r=hpe |