Classical economists and public debt

Classical economists had developed advanced theories of public debt. These theories, however, have received less attention compared with those of value and distribution. Classical theories of national debt at best receive cursory consideration and are only used to offer further justification to modern theories. Smith’s discussion of the unproductive role of the state and the Ricardian equivalence theorem are examples that are found routinely in the books of public finance or macroeconomics. As for the ideas of classical economists per se these are considered inappropriate for modern economies and are ignored even in books of history of economic thought. This paper takes issue with this view and argues that the ideas of classical economists on public debt might be more relevant nowadays than is commonly thought. (JEL: B12, B22)     

Another reconciliation between economists and forestry experts: OLG-arguments

Foresters often claim that the goal of good forest policy is to have a sustained forest yield, or even a maximum sustainable yield. They also claim that people wish to save a few extra trees for their children. This bequest motive is not modelled in the standard approach to the optimal rotation problem. In this paper, we present a standard version of an overlapping generation model augmented with a simple tree technology. We show in particular that the market equilibrium can be dynamically inefficient, and that a bequest motive in terms of trees can correct for the overaccumulation of capital that causes the inefficiency. The bequest motive also enables us to account for a harvesting intensity varying with age (young people typically cut more than elderly people) in spite of a perfect capital market.The crux of the argument is that a bequest motive is likely to increase the equilibrium interest rate and move the economy away from a maximum sustainable yield policy. It, however, improves efficiency and is able to explain empirical regularities that are not easily explained by a traditional perfect capital market approach to forestry.The author acknowledges comments from Karl-Göran Mäler, Stockholm School of Economics, participants in the economics-forestry economics seminar at the University of Umeå, and two anonymous referees.     

Heterogenesis of ends: Herbert Spencer and the Italian economists

The influence of Spencer's ideas is now generating a good deal of analysis. The aim of this paper is to highlight the importance of Spencer's work on economic thought. It also analyses the way in which this work was interpreted by the Italian economists. In particular, it investigates the influence of Spencer's theory of evolution on the thought of Pantaleoni (1857–1924) and Nitti (1868–1953). These two representative Italian scholars were on opposite sides for their economic methodology and the issue of government intervention in the economy. The paper clarifies whether their two divergent visions on social change could both be in accordance with Spencer ideas.     

Economists as subjects: Toward a psychology of economists

Economists can reflect on their own field of research and themselves in a number of ways. The philosophy of science has long been the dominant way to reflect on the work of scientists, to be joined in more recent times by both the sociology of science and the rhetoric of science. In this paper I do not argue that these approaches are wrong, but I do argue that they should be complemented with a study of the individual scientist. A psychology of economists, in other words, is called for. One important theory in recent psychological literature (social learning/cognitive theory) is introduced as an instance to indicate what kind of suggestions concerning the reflective position of individual scientists might be derived. It would be preferable from this perspective that scientists set high standards for themselves, have an open mind to what happens in different disciplines, and set high standards by which to judge others. Then follows a discussion where some potential objections to the approach in general, or to the specific psychological theory in particular, are refuted.     

Knowledge at work: Some neoliberal anachronisms

With a predilection for market solutions, neoliberalism upholds that the individual is generally the best judge of his or her interests. Yet markets are never universally applied as a mechanism of allocation and there are reasons, in principle, why capitalism will always have “missing markets.” Concentrating on the application and appropriateness of neoliberal theory to the workplace, this article argues that firms are not markets, despite some tendencies in modern theory to conflate the two. The employment contract is a key characteristic of modern firms, but neoliberal theory is often silent on the distinction between an employment contract and a contract for services, and largely ignores the asymmetrical rights of authority within contracts of employment. Furthermore, the social nature of knowledge represents a challenge to neoliberal theory and policy, because it sometimes makes it more difficult to define individual property rights. Accordingly, with the growth of the knowledge economy, neoliberalism to some extent is an anachronism.     

Psychology at work

We compare three wage–effort psychological games. In the first game, the agent’s motivation hinges on a degree of altruism influenced by the surprise generated by the principal’s wage offer. The agent works harder when the wage is greater than expected and vice versa when the wage is smaller than expected. Consistent equilibrium beliefs oblige the principal to randomize in order to surprise the agent, which results in the principal being worse off than if she were dealing with an unemotional agent. We then consider an intention-based reciprocity model and a model of guilt aversion. We find that guilt aversion may potentially yield the best outcome for the principal.     

Economists as subjects: Toward a psychology of economists

Economists can reflect on their own field of research and themselves in a number of ways. The philosophy of science has long been the dominant way to reflect on the work of scientists, to be joined in more recent times by both the sociology of science and the rhetoric of science. In this paper I do not argue that these approaches are wrong, but I do argue that they should be complemented with a study of the individual scientist. A psychology of economists, in other words, is called for. One important theory in recent psychological literature (social learning/cognitive theory) is introduced as an instance to indicate what kind of suggestions concerning the reflective position of individual scientists might be derived. It would be preferable from this perspective that scientists set high standards for themselves, have an open mind to what happens in different disciplines, and set high standards by which to judge others. Then follows a discussion where some potential objections to the approach in general, or to the specific psychological theory in particular, are refuted.     

The poverty of money:: Marxian insights for ecological economists

Karl Marx's philosophical, political and sociological analysis of the workings of capitalism provides insights regarding the character of monetary value (price) and the role of the market that are relevant to ecological economists. Ecological economists are divided over the utility of pricing components of ecological systems and the potential role of the market in achieving ecologically sustainable societies. In the Marxian-influenced socialist movements of the 19th and 20th centuries, similar issues were raised by those preoccupied with organising state policy and manipulating the market to achieve social justice. For example, at particular points in the Russian and Cuban revolutionary processes, the potential and limitations of monetary pricing and market exchange were debated in a heated and detailed way. In as much as ecological economists hold certain interests in common, it is worth reflecting on Marx's view of the human role within nature and analysing the discussions and experiences of Marxian experimenters in social transformation that relate specifically to exchange.     

Firm competition and incentive pay: Rent seeking at work

Empirical evidence shows that competition among firms generates steep incentives inside firms. Incentive pay stimulates productive investments but may generate inefficient rent-seeking investments. I show that competition reduces firms’ profits and thereby the inefficient investments, which makes steep incentives attractive.     

New Labour at work: long-term unemployment and the geography of opportunity

New Labour has placed great faith in active labour market policiesto address problems of long-term unemployment and poverty. Thispaper considers the effectiveness of welfare-to-work programmesin light of persistent regional employment disparities withinthe UK. It is argued that the government has proceeded froma flawed analysis of the causes and magnitude of long-term unemployment,framing the issue in terms of ‘worklessness’ andneglecting demand-side concerns of job availability and jobquality.     

Austerity and repressive politics: Italian economists in the early years of the fascist government

The historical forerunners of contemporary austerity are still largely unexplored. This essay considers the “liberal phase” of Fascist Italy (1922–1925) as a case study to explain austerity as a full-blown rationality, that is intrinsically, and simultaneously, theory and practice, encompassing the moral, the economic and the political. My explanation moves beyond the interpretation of austerity as the post-1980, neoliberal recipe of price deflation and budget cuts. The Italian case draws attention to a neglected connection: that between austerity and repression. Austerity was the guiding principle of the Fascist economic agenda during the 1920s. It served to extinguish the effects of the democratisation process of the post-WWI years. The paper examines the work of four distinguished economists, Maffeo Pantaleoni, Luigi Einaudi, Alberto De Stefani and Umberto Ricci, who – in different roles as professors, journalists, advisors, and policy-makers – can be considered the source, the guardians and the enforcers of Fascist austerity.     

Why environmental and resource economists should care about non-expected utility models

Experimental and theoretical analysis has shown that the conventional expected utility (EU) and subjective expected utility (SEU) models, which are linear in probabilities, have serious limitations in certain situations. We argue here that these limitations are often highly relevant to the work that environmental and natural resource economists do. We discuss some of the experimental evidence and alternatives to the SEU. We consider the theory used, the problems studied, and the methods employed by resource economists. Finally, we highlight some recent work that has begun to use some of the alternatives to the EU and SEU frameworks and discuss areas where much future work is needed.     

Between Calm and Passion: The Cooling-Off Period and Divorce Decisions in Korea

Research in behavioral economics suggests that a cooling-off period can address decision-making errors caused by projection bias, which drives people to make the wrong prediction when affected by an immediate emotional state. Using the unique, natural experiment of a mandated divorce cooling-off period in Korea, a difference-in-differences (DD) estimation of the impact of such a cooling-off period on divorce outcomes shows that the cooling-off period increases filing cancellation and reduces finalized divorce rates without any effect on initial divorce filing rates. Estimates indicate that the number of divorces finalized decreases by approximately 9 percent, and that this effect is consistent over the long run. Research also shows that couples who have undergone a prior separation period or have conclusive causes to divorce do not respond to the cooling-off period, suggesting that emotional state at the time of decision is the driving force of observed dynamic inconsistency.