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on History and Philosophy of Economics |
| By: | Itzhak Gilboa (Department of Economics, HEC Paris-Barclay); Andrew Postlewaite (Department of Economics, University of Pennsylvania); Larry Samuelson (Department of Economics, Yale University); David Schmeidler (Department of Economics, Tel Aviv University) |
| Abstract: | We suggest that one way in which economic analysis is useful is by offering a critique of reasoning. According to this view, economic theory may be useful not only by providing predictions, but also by pointing out weaknesses of arguments. It is argued that, when a theory requires a non-trivial act of interpretation, its roles in producing predictions and offering critiques vary in a substantial way. We offer a formal model in which these different roles can be captured. |
| Date: | 2016–10–30 |
| URL: | http://d.repec.org/n?u=RePEc:pen:papers:16-004&r=hpe |
| By: | Blanchflower, David G.; Oswald, Andrew J. |
| Abstract: | In Happiness for All?, Carol Graham raises disquieting ideas about today’s United States. The challenge she puts forward is an important one. Here we review the intellectual case and offer additional evidence. We conclude broadly on the author’s side. Strikingly, Americans appear to be in greater pain than citizens of other countries, and most subgroups of citizens have downwardly trended happiness levels. There is, however, one bright side to an otherwise dark story. The happiness of black Americans has risen strongly since the 1970s. It is now almost equal to that of white Americans. |
| Keywords: | Financial Economics |
| Date: | 2018–02–02 |
| URL: | http://d.repec.org/n?u=RePEc:ags:uwarer:269079&r=hpe |
| By: | Feld, Lars P.; Köhler, Ekkehard A.; Nientiedt, Daniel |
| Abstract: | Germany's approach to solving the Eurozone crisis is supposedly based on the ideas of Walter Eucken (1891-1950), the founder of ordoliberalism. In this and other contexts, Eucken's work has been described as being in direct opposition to that of John Maynard Keynes. Our paper aims to clarify and differentiate the relationship between the two scholars by making two main points. First, we show that Eucken supported a proto-Keynesian stimulus programme at the height of the Great Depression, the so-called Lautenbach plan of 1931. Second, we critically examine Eucken's description of 'full employment policy', a strategy with obvious parallels to Keynesian economic policy. Additionally, the paper maintains that when comparing Eucken and Keynes, more emphasis should be given to the fact that the former favours a rule-based rather than discretionary approach to policy-making. |
| Keywords: | Ordoliberalism,Eurozone Crisis,Monetary Policy,Fiscal Policy,History of Economic Thought |
| JEL: | B31 D78 E63 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:aluord:1811&r=hpe |
| By: | Martín Leites (University of la República, Uruguay); Xavier Ramos (Universitat Autònoma de Barcelona, Spain) |
| Abstract: | Income comparisons are important for individual well-being. We examine the shape of the relationship between relative income and life satisfaction, and test empirically if the features of the value function of prospect theory carry on to experienced utility. We draw on a unique dataset for a middle-income country, that allows us to work with an endogenous reference income, which differs for individuals with the same observable characteristics, depending on the perception error about their relative position in the distribution. We find the value function for experienced utility to be concave for both positive and, at odds with prospect theory, also negative relative income. Loss aversion is only satisfied for incomes that are sufficiently distant from the reference income. Our heterogeneity analysis shows that the slope of the value function differs across individuals who care differently about income comparisons, people with different personality traits, or social beliefs. |
| Keywords: | Life satisfaction, relative income, loss aversion, prospect theory. |
| JEL: | D6 I31 |
| Date: | 2018–03 |
| URL: | http://d.repec.org/n?u=RePEc:inq:inqwps:ecineq2018-461&r=hpe |
| By: | Up Sira Nukulkit |
| Abstract: | In this paper, I investigate the question of "the effect of progress upon distribution" based on the analyses of Hicks, Robinson, Harrod, Salter, Kaldor, Samuelson, and Kennedy. The paper aims to address a neglected and controversial theoretical argument on neutral technical progress related to the measure of value that preceded and then continued to the period of the Cambridge Capital Theory Controversy. I focus on Kennedy's writings and his solutions to the complications between the measure of value and technical progress. Important intuitions behind the measure of value are crucial to the formulation of neutral technical progress in both the post-Keynesian and the neoclassical-Keynesian endogenous growth models. The paper concludes with mathematical illustrations of neutral technical progress theories. |
| Keywords: | Neutral balanced growth, Capital controversy, Growth and distribution JEL Classification: B22, 033, E12 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:uta:papers:2018_05&r=hpe |
| By: | Katarina Juselius (Department of Economics, University of Copenhagen) |
| Abstract: | This survey paper discusses the Cointegrated VAR methodology and how it has evolved over the last 30 years. The ?first section is a description of major steps in the econometric development of the CVAR model that facilitated serious real world applications. The next three sections are primarily methodological and discuss (i) difficulties and puzzles when confronting theory with the data, (ii) the formulation of a viable link between theory and the data, a so called theory-consistent CVAR scenario, and (iii) how all this was inspired by Trygve Haavelmo and his Nobel prize winning monograph "The Probability Approach to Economics". The next two sections discuss early applications of the Cointegrated VAR model to monetary transmission mechanisms, international transmission mechanisms and wage, price and unemployment dynamics. They report puzzling evidence, discuss the need for new theory, and propose a method for combining partial CVAR analyses into a larger macroeconomic model. The following sections propose a new, empirically-based, approach to macroeconomics in which imperfect knowledge based expectations replace so called rational expectations and in which the fi?nancial sector plays a key role for understanding the long persistent movements in the data. The last section argues that the CVAR can act as a "design of experiment for passive observations" and illustrates with several applications including unemployment dynamics under crises periods and aid effectiveness in South Saharan African countries. |
| Keywords: | Cointegrated VAR methodology, Linking theory and evidence, Empirically based macroeconomics |
| JEL: | B41 C32 C51 C52 |
| Date: | 2018–08–14 |
| URL: | http://d.repec.org/n?u=RePEc:kud:kuiedp:1807&r=hpe |
| By: | Rommel, Jens; Weltin, Meike |
| Abstract: | In an analysis of articles published in ten years of the American Economic Review, Deirdre McCloskey and Stephen Ziliak have shown that economists often fail to adequately distinguish economic and statistical significance. In this paper, we briefly review their arguments and develop a ten-item questionnaire on the statistical practice in the Agricultural Economics community. We apply our questionnaire to the 2015 volumes of the American Journal of Agricultural Economics, the European Review of Agricultural Economics, the Journal of Agricultural Economics, and the American Economic Review. We specifically focus on the “sizeless stare” and the negligence of economic significance. Our initial results indicate that there is room of improvement in statistical practice. Empirical papers rarely consider the power of statistical tests or run simulations. The economic consequences of estimation results are often not adequately addressed. We discuss the implications of our findings for the publication process and teaching in Agricultural Economics. |
| Keywords: | Research Methods/ Statistical Methods |
| Date: | 2017–08–15 |
| URL: | http://d.repec.org/n?u=RePEc:ags:gewi17:261998&r=hpe |
| By: | Giovanni Scarano |
| Abstract: | Since 2013 various eminent mainstream economists have proposed reviving the doctrine of “secular stagnation”. According to these authors, the only explanation for this new trend could be a negative Wicksellian natural rate of interest, produced by an excess of saving over investment at any positive interest rate. But the idea that the real world economy has entered into a new stagnation trend is really the other side of the coin in explaining the extraordinary long-term growth that characterised the aftermath of World War II. This peculiar growth period has been the main research objective of Régulation Theory, which found accumulation regimes and corresponding modes of regulation as its major determinants. In the paper the theoretical explanations of the new secular stagnation theory are compared with those of Régulation theory and with the original Marxist approaches that initially inspired the French régulation theorists. |
| Keywords: | Equilibrium Interest Rate, Business Cycles, Crisis, Rate of Profit, Profitability |
| JEL: | B51 E11 E12 E32 E43 |
| Date: | 2018–09 |
| URL: | http://d.repec.org/n?u=RePEc:rtr:wpaper:0241&r=hpe |
| By: | Valentin Zelenyuk (CEPA - School of Economics, The University of Queensland) |
| Abstract: | In this note we clarify a few important aspects about aggregation in effiency and productivity analysis. By doing so we also sketch a brief historical map on how the area of aggregation in effciency and productivity analysis has been developing to where it is now and its connection to classic studies in economic theory. |
| Keywords: | Aggregation, Scale Effciency, Industry Effciency, Duality. |
| JEL: | D24 C43 L25 |
| Date: | 2018–04 |
| URL: | http://d.repec.org/n?u=RePEc:qld:uqcepa:124&r=hpe |
| By: | Galí, Jordi |
| Abstract: | I take stock of the state of New Keynesian economics by reviewing some of its main insights and by providing an overview of some recent developments. In particular, I discuss some recent work on two very active research programs: the implications of the zero lower bound on nominal interest rates and the interaction of monetary policy and household heterogeneity. Finally, I discuss what I view as some of the main shortcomings of the New Keynesian model and possible areas for future research. |
| Date: | 2018–07 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:13095&r=hpe |
| By: | Charles F. Manski |
| Abstract: | Forthright characterization of scientific uncertainty is important in principle and serves important practical purposes. Nevertheless, economists and other researchers commonly report findings with incredible certitude, reporting point predictions and estimates. To motivate expression of incredible certitude, economists often suggest that researchers respond to incentives that make the practice tempting. This temptation is the "lure" of incredible certitude. I flesh out and appraise some of the rationales that observers may have in mind when they state that incredible certitude responds to incentives. I conclude that scientific expression of incredible certitude at most has appeal in certain limited contexts. It should not be a general practice. |
| JEL: | A11 D80 Z18 |
| Date: | 2018–08 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:24905&r=hpe |
| By: | Götte, Lorenz; Tripodi, Egon |
| Abstract: | We propose an experiment that prevents social learning and allows to disentangle mechanisms of social influence. Subjects observe another individual's incentives, but not their behavior. We find conformity: when individuals believe that incentives make others contribute more, they also increase their contributions. Conformity is driven by individuals who feel socially close to their partner. However, when incentives don't raise others' contributions, individuals reduce contributions. This pattern cannot be explained by incentive inequality (Breza et al., 2017). We conclude that norm adherence is weakened when incentives are ineffective. Our results show that information about others' economic environment generates social influence |
| Keywords: | Online Experiment; prosocial behavior; social influence |
| Date: | 2018–07 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:13078&r=hpe |
| By: | Mujcic, Redzo; Oswald, Andrew J. |
| Abstract: | Nearly 100 years ago, the philosopher and mathematician Bertrand Russell warned of the social dangers of widespread envy. One view of modern society is that it is systematically developing a set of institutions -- such as social media and new forms of advertising -- that make people feel inadequate and envious of others. If so, how might that be influencing the psychological health of our citizens? This paper reports the first large-scale longitudinal research into envy and its possible repercussions. The paper studies 18,000 randomly selected individuals over the years 2005, 2009, and 2013. Using measures of SF-36 mental health and psychological well-being, four main conclusions emerge. First, the young are especially susceptible. Levels of envy fall as people grow older. This longitudinal finding is consistent with a cross-sectional pattern noted recently by Nicole E. Henniger and Christine R. Harris, and with the theory of socioemotional regulation suggested by scholars such as Laura L. Carstensen. Second, using fixed-effects equations and prospective analysis, the analysis reveals that envy today is a powerful predictor of worse SF-36 mental health and well-being in the future. A change from the lowest to the highest level of envy, for example, is associated with a worsening of SF-36 mental health by approximately half a standard deviation (p <0.001). Third, no evidence is found for the idea that envy acts as a useful motivator. Greater envy is associated with slower -- not higher -- growth of psychological well-being in the future. Nor is envy a predictor of later economic success. Fourth, the longitudinal decline of envy leaves unaltered a U-shaped age pattern of well-being from age 20 to age 70. These results are consistent with the idea that society should be concerned about institutions that stimulate large-scale envy. |
| Keywords: | Financial Economics |
| Date: | 2018–02–02 |
| URL: | http://d.repec.org/n?u=RePEc:ags:uwarer:269078&r=hpe |
| By: | George J. Mailath (Department of Economics, University of Pennsylvania); Stephen Morris (Department of Economics, Princeton University); Andrew Postlewaite (University of Pennsylvania) |
| Abstract: | A law prohibiting a particular behavior does not directly change the payoff to an individual should he engage in the prohibited behavior. Rather, any change in the individual’s payoff, should he engage in the prohibited behavior, is a consequence of changes in other peoples’ behavior. If laws do not directly change payoffs, they are “cheap talk,” and can only affect behavior because people have coordinated beliefs about the effects of the law. Beginning from this point of view, we provide definitions of authority in a variety of problems, and investigate how and when individuals can have, gain, and lose authority. |
| Date: | 2016–11–08 |
| URL: | http://d.repec.org/n?u=RePEc:pen:papers:16-018&r=hpe |