'Let your science be human': Hume's economic methodology

This essay examines David Hume's economic methodology. The authorcharacterises Hume's understanding of human actions as interactionism.Its key point is that interactions generate the disinterestedview of ‘the spectator’ in the human mind. Humeapplies this idea of the disinterested spectator to the positionof social scientists in understanding social phenomena. ThusHume's approach to social science can be regarded as interpretive.The author also points out the difference between Hume's methodin social science and historical study. Considering this difference,the author argues that we should refer to Hume's social theoryrather than historical works in order to understand his economicmethodology.     

Time use, work and overlapping activities: evidence from Australia

The overlapping of activities is an important dimension of timeuse that has previously received little attention in economicanalysis. Most time-use studies have looked only at primaryactivities, ignoring the fact that individuals often performtwo or more activities simultaneously. This seriously underestimatesthe time spent on several economic activities such as childcareand housework which are also performed as secondary activities.Using a two-adult household sub-sample from the 1992 NationalAustralian Time Use Survey, this paper examines the incidenceand determinants of overlapping activities among 3,966 adultmale and female household members. It first shows that inclusionof overlapping activities in time-use measurements providesa better estimation of the economic contribution of individuals,especially in non-market production. Tobit models are then estimatedto examine the effects of economic, social and demographic factorson the incidence of overlapped work activity. The findings,which are found to be robust, showed that gender, householdlife cycle and composition, education, cultural norms, employmentstatus and level of income earnings influence the extent towhich individuals, particularly women, perform secondary workactivities. Conclusions are drawn in the final section of thepaper.     

Regulatory and Supervisory Independence and Financial Stability

Despite its importance, the issue of financial sector regulatoryand supervisory independence (RSI) has received only marginalattention in literature and practice. However, experience hasdemonstrated that improper supervisory arrangements have contributedsignificantly to the deepening of several recent systemic bankingcrises. In this paper we argue that RSI is important for financialstability for the same reasons that central bank independence(CBI) is important for monetary stability. The paper lays outfour key dimensions of RSI-regulatory, supervisory, institutionalbudgetary - and discusses ways to achieve them. We also discussinstitutional arrangements needed to make independence workin practice. The key issue in this respect is that agency independenceand accountability need to go hand in hand. The paper discussesa number of accountability arrangements. (JEL G18, G28, K23,L50).     

A history of post-Keynesian economics

John King, in his A History of Post Keynesian Economics Since1936, raises the question of whether there exists a body ofwork which can be called, collectively, post Keynesian. Thispaper presents some criteria for addressing this question, beginningwith the vision and the origins of some of the post-Keynesianideas, leading to an examination of certain features of thevarious groups, including their methodology and their approachesto uncertainty, their pricing theories and their growth theories.It is concluded that, although there is much diversity in thevarious groups, they are reconcilable when seen as referringto different aspects of the economic process and at differinglevels of abstraction.     

Efficiency and Equality in the Labour Market

I review theoretical arguments suggesting that certain labourmarket institutions can be justified for economic efficiencyreasons. In models with intrinsic market failures, "rigidities"like employment protection legislation and institutional wagecompression may push the economy closer to the efficient frontier.I discuss recent empirical evidence on income inequality, povertyand income mobility in OECD countries, and I conclude that thewelfare states of Northern Europe score relatively well on allcounts. Finally, I discuss labour market reforms that may improveefficiency without violating European voters' preference forequality.(JEL H30, J30, J50)     

A theorist's view of experiments

The paper springs from a position that economic theory is an abstract investigation of the concepts and considerations involved in real life economic decision making rather than a tool for predicting or describing real behavior. It is argued that when experimental economics is motivated by theory, it should not look to verify the predictions of theory but instead should focus on verifying that the considerations contained in the economic model are sound and in common use. It is argued that when theory is motivated by experiments, the theorist should not be hasty in adopting new functional forms but should try to identify the basic psychological themes which are revealed exposed by the experiment. Finally, some critical comments on the methodology of experimental economics are presented.     

Marx's Theory of Ground Rent: A Critical Assessment

This critical essay provides the reader with an up-to-date assessmentof Marx's relatively neglected theory of absolute ground rentby bringing together in a coherent manner his scattered observationsand arguments contained primarily in Capital, Vol. III and Theoriesof Surplus Value, Vol. II. It also reviews the extant secondaryliterature which suggests that within Marx's theory of rentis an embryonic theory of monopoly from which scholars can drawimportant insights into the history of economic thought andthe workings of mature capitalism. The paper is organized asfollows. After an introductory section, Section II providesthe reader with an overview of Marx's theory of differentialrent and compares it to that of Ricardo, particularly Marx'sdiscussion of differential rent II and whether nature is productiveof exchange value. Section III discusses Marx's theory of absoluterent in light of recent criticisms by prominent scholars andsuggests that what determines whether rent is paid on the marginalland is not technical backwardness or lower productivity oflabor per se, but a social relation, viz., the monopoly createdby the private ownership of land. The last section summarizesthe main arguments and suggests some avenues for future research.     

Accounting for Stability

There is no consensus about the causes of the reduction in businesscycle volatility seen in many major economies over the lastdecade. Using stylised models of the economies of the US, Euroarea, UK and Japan, we argue that economic stability has beenfostered by improved monetary policy and by associated changesin the behaviour of inflation, which has itself led to a reductionin the volatility of economic shocks. Our projections suggestthat a number of major economies could continue to enjoy anunusual degree of stability, granted average luck and currentinstitutions. (JEL E3, E52, F01)     

Ronald Coase's Method of Building More Realistic Models of Choice

This paper argues that Ronald Coase's major contributions to economic theory are best understood in terms of the distinct method he used to build more realistic models of choice. We call his method the benchmark-comparison method. It consists of building models of choice and then using them as benchmarks in the further investigation of economic interaction, either by comparing the benchmark models with observed interaction or by building additional models of choice, which may themselves function as benchmarks. The paper first describes the method then demonstrates how Coase used it in his two most famous papers. We go on to show how an understanding of the method confirms Coase's own statements about the continuity of his thought. Finally, we assess Coase's critique of Milton Friedman's positivist methodology and discuss a recent paper on Coase's methodology.     

Schumpeter and the theory of capitalist economic development

This paper gives a centenary appreciation of the contributions to economic thought of Joseph A. Schumpeter, with special focus on his work, The Theory of Economic Development (TED) it proceeds, first, by providing (in section 1) an overview of Schumpeter's life and works; second, by giving an interpretative exposition of the main themes of TED (in section 2) and Schumpeter's broader ‘economic sociology’ (in section 3) in terms of the place of these ideas in the history of economic thought; third, by examining the reception to TED and the impact of it and Schumpeter's dynamic methodology on the discipline (in section 4).