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on History and Philosophy of Economics |
| By: | McCain, Roger (School of Economics LeBow College of Business Drexel University) |
| Abstract: | In Welfare Economics and the Theory of the State, Baumol (1952) argued that phenomena of the sort that came to be known as “market failures” (Bator 1958) marked out the domain of action of a liberal state in a predominantly market economy. More recently, as the influence of game theory on economics has become more important, economists have often made the contrast of cooperative and noncooperative solutions a basis for such a judgment, characterizing “market failures” as inefficient noncooperative outcomes and arguing that state action could be justified as realizing a cooperative solution. However, the development of cooperative game theory has made it difficult to formalize this informal argument. This paper revisits the issue, adapting ideas from effectivity theory in cooperative game theory for special cases in which limited money transfers are allowed. Representing the game in extensive form, money transfers are among the basic proper subgames of the underlying game. Because backward induction eliminates the transfers, transfers never occur in the noncooperative (subgame perfect Nash) equilibrium of the game. However, transfers may dominate non-transfer solutions and define the core of the cooperative game, in one or both of two senses. Examples are given in which cooperative solutions without transfers do not improve on the noncooperative equilibrium, but solutions in the effectivity cores with transfers provide plausible market and public policy solutions. For large-N games, following a tactic in The Theory of Games and Economic Behavior, the paper posits a fictitious N+1st player whose outcome set is null and whose only strategies are transfers. Since the N+1st player – “the state” – can be a member of any coalitions, some transfers may be available to any coalition. This model is used to characterize a Pigovian tax and to argue that the stability of the tax may depend on how the revenue from the tax is redistributed, suggesting a rationale for a proposal due to the Climate Leadership Council, a free-market conservative group. |
| Keywords: | cooperative; transfers; game theory; public policy |
| JEL: | C70 D70 H20 |
| Date: | 2021–01–11 |
| URL: | http://d.repec.org/n?u=RePEc:ris:drxlwp:2021_004&r=all |
| By: | Giovanni Razzu (Department of Economics, University of Reading) |
| Abstract: | We study the relationship between economics and duties, the latter considered as deep, intrinsic moral obligations that motivate individuals. We first define duty in a way that could be amenable to work within the tools of decision theory, distinguishing between perfect and imperfect duty-motivated choices. Finally, we apply standard decision theory to assess how duties relate to economics, particularly to rationality. Three main findings emerge. One, perfect duty-motivated choice is rational. Two, when imperfect duty is at play, rationality conditions can be violated. Third, by making use of the difference between two representations of the maximisation problem - the relational and the real valued utility function - we show that individuals motivated by duty can choose a maximal while optimising their preference rankings; instead, maximisation of utility may not be possible under duty-motivated choices that supervene the local non satiation assumption. |
| Keywords: | duties, decision theory, rationality, maximisation, optimisation |
| JEL: | B49 D01 D60 D91 |
| Date: | 2021–01–22 |
| URL: | http://d.repec.org/n?u=RePEc:rdg:emxxdp:em-dp2021-02&r=all |
| By: | Kenneth Lomas; Dave Cliff |
| Abstract: | In seeking to explain aspects of real-world economies that defy easy understanding when analysed via conventional means, Nobel Laureate Robert Shiller has since 2017 introduced and developed the idea of Narrative Economics, where observable economic factors such as the dynamics of prices in asset markets are explained largely as a consequence of the narratives (i.e., the stories) heard, told, and believed by participants in those markets. Shiller argues that otherwise irrational and difficult-to-explain behaviors, such as investors participating in highly volatile cryptocurrency markets, are best explained and understood in narrative terms: people invest because they believe, because they have a heartfelt opinions, about the future prospects of the asset, and they tell to themselves and others stories (narratives) about those beliefs and opinions. In this paper we describe what is, to the best of our knowledge, the first ever agent-based modelling platform that allows for the study of issues in narrative economics. We have created this by integrating and synthesizing research in two previously separate fields: opinion dynamics (OD), and agent-based computational economics (ACE) in the form of minimally-intelligent trader-agents operating in accurately modelled financial markets. We show here for the first time how long-established models in OD and in ACE can be brought together to enable the experimental study of issues in narrative economics, and we present initial results from our system. The program-code for our simulation platform has been released as freely-available open-source software on GitHub, to enable other researchers to replicate and extend our work |
| Date: | 2020–12 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2012.08840&r=all |
| By: | John List |
| Abstract: | In the past several decades academics and policymakers have grappled with how to augment the traditional classroom approach to enhance critical thinking skill formation. In this not, I take a different approach. I begin by developing a Critical Thinking Hierarchy, where from the bottom of the hierarchy upwards two key skills evolve: developing/assimilating empirical evidence to update one's beliefs (connecting the dots with empiricism) and putting the puzzle pieces together with conceptual reasoning (connecting the dots with abstract thought). Skills lower down in the hierarchy must be achieved before individuals can gain skills higher up. A key aspect of the CT skill formation process revolves around student's maturation from "fast thinking" to "slow thinking". My overall approach is useful because it at once defines critical thinking, pinpoints where improvements must be made for development, and provides a classroom playbook to enhance critical thinking skill formation. |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:feb:artefa:00726&r=all |
| By: | Thierry Kirat (Université Paris-Dauphine; PSL Research Université; IRISSO CNRS); Frédéric Marty (Université Côte d'Azur, France; GREDEG CNRS) |
| Abstract: | This article discusses the institutionalization of the field of Law and Economics in the United States from the post-war period to the Reagan administration. It emphasizes the role of pro-market corporate foundations in the development of Law and Economics. It analyses individual and collective trajectories, including research projects, training programs led with judges, as well as leading academics contributions and judicial and administrative careers. It ultimately focuses on the impact of this institutionalization on judging methods. |
| Keywords: | Law and Economics, Foundations, Antitrust, Conservatism |
| JEL: | B21 B31 K21 N42 |
| Date: | 2021–03 |
| URL: | http://d.repec.org/n?u=RePEc:gre:wpaper:2021-03&r=all |
| By: | Javier Legris (Instituto Interdisciplinario de Economía Política de Buenos Aires - UBA - CONICET); Paulo Pascuini (Instituto Interdisciplinario de Economía Política de Buenos Aires - UBA - CONICET) |
| Abstract: | In Economics the notion of institution is not sufficiently defined, at least not in a formal way. In this paper, some elements of Searle’s foundation for the formal study of social phenomena are taken to propose a more comprehensive and formal characterization of the concept. Also, for the purposes of an intuitive understanding of the proposal’s attributes, it is tried out an application to the concept of institution in the case of New Institutional Economics, at least Williamson’s account (1975). |
| Keywords: | New Institutional Economics, Institution, John Searle, Philosophy of Sociality, Philosophy of Economics |
| JEL: | B41 B52 D23 |
| URL: | http://d.repec.org/n?u=RePEc:ake:iiepdt:201836&r=all |
| By: | Dukes, Ruth; Streeck, Wolfgang |
| Abstract: | This paper revisits the notions of contract and status found in classical sociology, legal theory, and labour law. Adopting an historical perspective, it explores the fragmentation of the status of industrial citizenship during the neoliberal period and discusses the enduring usefulness of the status/contract distinction in analyzing current trends in the regulation of working relations, including the spread of "gig" or platform-mediated work. Elements of status, it is argued, must always be present if work is to be performed and paid for as the parties require it. Claims to the contrary - for example, that the gig economy creates a labour market without search frictions and only minimal transaction costs: contracts without status - assume an undersocialized model of (monadic) social action that has no basis in the reality of social life (Durkheim, Weber). Still, status may come in a variety of forms that are more or less desirable from the perspective of workers, businesses, and society at large. The paper traces what it conceives as the privatization of status via contracts between employers and workers under the pressure of marketization and dominated by corporate hierarchies. Towards the end of the twentieth century, sociologists observed the division of workers into two groups or classes - core (with relatively well-paid and secure employment) and peripheral (low-paid and insecure). Thirty years later, gross inequalities of wealth and conceptions of the neoliberal self as ever-improving, ever-perfectible, are combining to create novel forms of status not fully anticipated by the literature. |
| Keywords: | contract and status,corporatism,entrepreneurialism,gig economy,industrial citizenship,industrial democracy,master and servant,precarity,industrielle Bürgerrechte,industrielle Demokratie,Korporatismus,master and servant,Prekarität,Unternehmertum,Vertrag und Status |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:mpifgd:2013&r=all |
| By: | Daniel P. Gross; Bhaven N. Sampat |
| Abstract: | Since the beginning of the COVID-19 pandemic, policymakers, researchers, and journalists have made comparisons to World War II. In 1940, a group of top U.S. science administrators organized a major coordinated research effort to support the Allied war effort, including significant investments in medical research which yielded innovations like mass-produced penicillin, antimalarials, and a flu vaccine. We draw on this episode to discuss the economics of crisis innovation. Since the objectives of crisis R&D are different than ordinary R&D (prioritizing speed, coordination, redundancy, and more), we argue that appropriate R&D policy in a crisis requires going beyond the standard Nelson-Arrow framework for research policy. |
| JEL: | H12 H56 N42 N72 O31 O32 O38 |
| Date: | 2021–01 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:28335&r=all |
| By: | Malte Dold; Tim Krieger |
| Abstract: | In the aftermath of the Eurozone crisis, a battle of ideas emerged over whether ordoliberalism is part of the cause or the solution of economic problems in Europe. While German ordoliberals argued that their policy proposals were largely ignored before, during and after the crisis, critics saw too much ordoliberal influence, especially in form of austerity policies. We argue that neither view is entirely correct. Instead, we observe that the battle of ideas is largely independent of the countries’ actual responses to the Eurozone crisis: pragmatic self-interest on behalf of governments rather than their ideological convictions played a crucial role in political reactions. We explain this dynamic game-theoretically and highlight a number of reasons for the decoupling of the political-pragmatic debate from the ideological-academic discourse. In addition, we argue that ordoliberals themselves contributed to the ideological misuse of their own program: the ordoliberal Freiburg School ceased to be an active research program and instead grew to resemble a tradition which all too often disregarded the international academic discourse, in particular in macroeconomics. As a result, ordoliberal thinking was abused by its proponents and critics alike to emphasize their preconceived Weltanschauung (worldview).We end our paper with some thoughts on how a contemporary ordoliberalism can be constructively used to react to some of the challenges of the ongoing Eurozone crisis. |
| Keywords: | Freiburg School, ordoliberalism, Eurozone crisis, austerity, ideology |
| JEL: | B29 D43 E61 G18 P16 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_8811&r=all |
| By: | Rachel M. Gisselquist; Miguel Niño-Zarazúa; Melissa Samarin |
| Abstract: | This study draws on a rigorous systematic review?to our knowledge the first in this area?to take stock of the literature on aid and democracy. It asks: Does aid?especially democracy aid?have positive impact on democracy? How? What factors most influence its impact? In so doing, it considers studies that explicitly focus on 'democracy aid' as an aggregate category, its subcomponents (e.g. aid to elections), and 'developmental aid'. |
| Keywords: | Foreign aid, Democracy, Systematic review, democracy aid, Democratization |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:unu:wpaper:wp-2021-14&r=all |
| By: | Redding, Stephen |
| Abstract: | This paper reviews recent research on geography and trade. One of the key empirical findings over the last decade has been the role of geography in shaping the distributional consequences of trade. One of the major theoretical advances has been the development of quantitative spatial models that incorporate both exogenous first-nature geography (natural endowments) and endogenous secondnature geography (the location choices of economic agents relative to one another) as determinants of the distribution of economic activity across space. These models are sufficiently rich to capture firstorder features of the data, such as gravity equations for flows of goods and people. Yet they remain sufficiently tractable as to permit an analytical characterization of the properties of the general equilibrium and facilitate counterfactuals for realistic policy interventions. We distinguish between models of regions or systems of cities (where goods trade and migration take center stage) and models of the internal structure of cities (where commuting becomes relevant). We review some of key empirical predictions of both sets of theories and show that they have been remarkably successful in rationalizing the empirical findings from reduced-form research. Looking ahead, the combination of recent theoretical advances and novel geo-coded data on economic interactions at a fine spatial scale promises many interesting avenues for further research, including discriminating between alternative mechanisms for agglomeration, understanding the implications of new technologies for the organization of work, and assessing the causes, consequences and potential policy implications of spatial sorting. |
| JEL: | F10 J40 R10 R40 |
| Date: | 2020–09 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:108235&r=all |
| By: | O'Sullivan, Mary |
| Abstract: | In the inaugural issue of Past and Present, Eric Hobsbawm emphasised the complexity of workers’ and capitalists’ attitudes to new machines. Moreover, noting that: “only rarely were new machines immediate and obvious paying propositions”, he suggested the potential of a history of profit to understand the motivations for introducing machines and the consequences of their adoption. This article grapples with Hobsbawm’s “profit puzzle” to understand the implications of the adoption and use of the Boulton & Watt steam engine for capitalists and workers in Cornish copper mines between 1777 and 1791. It shows that the engine’s economic implications for the people who invested in, and worked, the Cornish copper mines were conditioned by a complex relationship between power and profit. Power is assigned three meanings in this analysis: steam power, which was crucial to the mining of copper and the costs of its production; imperial power, given fluctuating demand for copper from different parts of the British Empire; and market power since control over price setting on the British copper market had decisive implications for Cornish mining profits. The article shows that the evolving relationship between power and profit conditioned both the enthusiasm for the B&W engine in Cornwall and the subsequent hostility that Cornish miners and mining adventurers displayed towards the partners. More generally, it suggests the potential of studying the economic and social history of new machines through the lens of profit to understand the motivations for introducing machines and the consequences of their adoption. |
| Keywords: | Profit, Mining capitalism, New technology, British Empire, Steam engine |
| JEL: | N00 N73 N83 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:gnv:wpaper:unige:148291&r=all |