Religion and the reception of marginalism in Britain

Did their religious beliefs play any role in the interest British economists took in marginal utility theory in the final third of the Nineteenth Century? I contrast the beliefs of the leading economists—Mill and his followers—who were unsympathetic to marginalism with the beliefs of those economists who embraced it. Mill’s followers were themselves sharply divided on key methodological questions, and I ask whether or not this division, too, may owe something to differing religious beliefs. I conclude, provisionally, that religion may indeed have played a significant role in determining the methodological predisposition of British economists between 1860 and 1900.     

The importance of higher-order beliefs to successful coordination

Beliefs about other players’ strategies are crucial in determining outcomes for coordination games. If players are to coordinate on an efficient equilibrium, they must believe that others will coordinate with them. In many settings there is uncertainty about beliefs as well as strategies. Do people consider these “higher-order” beliefs (beliefs about beliefs) when making coordination decisions? I design a modified stag hunt experiment that allows me to identify how these higher-order beliefs and uncertainty about higher-order beliefs matter for coordination. Players prefer to invest especially when they believe that others are “optimistic” that they will invest; but knowledge that others think them unlikely to invest does not cause players to behave differently than when they do not know what their partners think about them. Thus resolving uncertainty about beliefs can result in marked efficiency gains.     

Crusoe,Friday and the Raced Market Frame of Orthodox Economics Textbooks

ABSTRACT

‘Crusoe’ and ‘Friday’ signifiers necessarily evoke a world of racialised hierarchies. Economics textbooks are perhaps the sole remaining medium to simply wish away their resulting relations of power. These are the teaching aids that inspire students analytically to think of markets as pristine economic institutions and persuade them politically that they should want to will such institutions into being. Yet they all-too-often rely on the pedagogical device of the so-called Robinson Crusoe Economy, where the main characters from Defoe’s most famous novel are required to instinctively recognise their equality within voluntary contracting agreements so that each can act as the neoclassical homo economicus. In other words, economists’ Crusoe and Friday figures must behave antithetically to what has historically been implied by the ‘Crusoe’ and ‘Friday’ signifiers. But how can this be so, given how commonplace it was when Defoe’s characters were first introduced into economic theory in the 1850s to justify white settler colonialism on the grounds that ‘savage’ societies lacked the capacity to be self-governing? The raced market frame that emerged in practice from this assumption continues to be reproduced uncritically today by Crusoe’s and Friday’s presence in the textbook explanation of the most basic model of market exchange.     

Balkanization and assimilation: Examining the effects of state-created homogeneity

Charles Dickens was a reformer who sought to reform economic conditions. Convinced that the reforms proposed by the economists of his day would not benefit those victimized by the Industrial Revolution, he also sought to reform economics. Dickens' prime targets were McCulloch, Malthus, and Nassau Senior. Reviewing Dickens's efforts at social reform, Chesterton made the distinction between pessimistic reformers, who describe how bad people are under bad conditions, and optimistic reformers, who describes how good people are under bad conditions. The author draws similar parallels between mainstream economists and social economists.     

Do Economists Have a Fatherland? How Global and National Efficiency Considerations Influence Economists’ Policy Judgements

This study evaluates whether economists support economic policies such as free trade because they deem them to be good for their home country or because they increase global welfare. In a telephone survey, 100 German economists were asked to judge different policy proposals dealing with immigration, military exports and climate policy. Our results show that the acceptance of the policy proposals is strongly influenced by national efficiency judgements. In contrast, global efficiency judgements exert no significant positive effect on policy proposal acceptance. These effects even hold for economists who self‐reported a global perspective in the assessment of the policy proposals. These judgements might be based on the potentially erroneous assumption that their policy judgements, taken from a national perspective, are consistent with global interests.     

The Stories That Economists Tell: Mainstream,Hyman Minsky,and Institutional Views of Consumer Behavior

The financial crisis of 2008 provided an informal test of mainstream and institutional views of consumer behavior. The test posed by the financial crisis assumes the form of a “story.” A successful story provides a reasonably coherent explanation of events, confirming our beliefs and justifying our policies. First, the article examines the failure of mainstream economics to present a coherent story of consumer behavior. Ignoring the relevance of assumptions, as Milton Friedman advocated, leads economists to hypostasize the model, filtering information central to the crisis. Second, Minsky’s discussion of consumer behavior and its effect on cash inflows to businesses represents an institutional explanation regarding why John Maynard Keynes’s long-run vision did not occur. The third section expands on some of the themes addressed by Minsky, which are found among the contributions of institutional economists, focusing on efforts to mold institutions to increase cash inflows to corporations and protect those inflows.     

Impact of heterogeneous beliefs and short sale constraints on security issuance decisions

Extant literatures discuss a firm's security issuance implications of heterogeneous beliefs with explicit assumption that short selling is forbidden. However, it is widely accepted that short sale constraints exist when investors are unable to short stock to the extent they desire. This paper presents a model to analyze how heterogeneous beliefs and short sale constraint conditions jointly affect a firm's security issuance decision. The main findings are: i) An increase in heterogeneity in investors' beliefs results in an increased likelihood of equity issuance over debt when public signal is favorable, whereas it results in a reduced likelihood when public signal is modestly adverse. ii) The tightness of short sale constraints has a positive effect on the likelihood of equity issuance only when public signal is highly favorable. These results indicate widely divergent conclusions about the relations between heterogeneous beliefs as well as short sale constraints and security issuance decision.     

经济学家、经济学与中国改革

本文回顾了中国经济学家伴随中国改革成长的历程 ,历数诸多为中国建立现代市场经济制度 ,进行过艰苦的理论和思想探索的经济学家 ;并通过具体实例说明经济学家通过对于现代经济科学认识的深化 ,在改革的重大关头和事件上所发挥的重要作用。中国改革的深入 ,对于经济科学的要求愈来愈高 ,经济学的新课题层出不穷。因此 ,本文提出亟需加快我国经济科学学科建设的若干建议。     

Qui docet discit

Academic economists play many roles; researchers, policy advisor, teacher, etc. While each of these roles is important for the career advancement of an economist, the most important role of academic economists is teaching future citizen economists. It is incumbent upon economists qua teacher to prepare them to make sense of the world they will inhabit. We must, therefore, not teach economics, at least at the introductory level, as if it is the first course on the way to a Ph.D., but as if it is the last class the students will ever take in economics. A consistently subjectivist economics is the best way to teach future citizen economists. When students understand economics as something that helps them make sense of the world, rather than a course in applied mathematics, they will be better citizen economists less likely to fall prey to those selling them free lunches.     

The duty of the firm in selling to the poor: A question of the person,justice, and subsidiarity

Mainstream economists do not address the question of the duty of the firm in selling to the poor. To them the issue is normative, and they have taken pains to delimit economics as a positive discipline. They separate value and fact, and engage themselves in questions relating to what is and not what should be. Forensic economists hold a different view. Firms are liable for damages due not just to deception and fraud but to negligence as well, and governments have consumer protection agencies to examine cases involving the duty of the firm well beyond deception and fraud. Social economists reject the argument based on libertarianism and individualism that the firm has only one purpose: increasing shareholder value. Social economists view the firm as having several constituencies — shareholders, managers, workers, customers, suppliers, neighbors, partners — and duties associated with each one. Those duties are grounded in the virtue of justice: to render to another that which is owed. The firm has a duty to its customers, its suppliers, and its employees deriving from the principle of equivalence; to its shareholders and employees from the principle of distributive justice; to its competitors and neighbors from the principle of contributive justice. This article argues that the firm has a special duty in selling to the poor which is grounded in the person of the one who is poor, the three principles of economic justice, and the principle of subsidiarity. Mainstream economists address poverty apart from consumer behavior as if the two were unrelated. This article brings the two together and in so doing helps throw light on the question of the duty of the firm in selling to the poor.     

The institutional determinants of self-governance: a comment on Edward Stringham’s <Emphasis Type="Italic">Private Governance</Emphasis>

Many pages would be require to discuss Private Governance’s important contributions, so I focus on a relatively minor flaw: chapter 9 on moral beliefs is inconsistent with Stringham’s general treatment of private governance institutions as endogenous. Moral beliefs are essentially depicted as unchanging, but they actually are endogenous too. Individuals can pursue wealth through cooperative interaction, which requires trust, creating incentives to develop beliefs that encourage ethical and benevolent behavior. Alternatively wealth can be taken from others through force and/or guile. Beliefs to facilitate involuntary transfers also are institutionalized. For instance, in order to benefit from coercive wealth transfers “in good conscience,” recipients have incentives to see their victims as enemies to justify a moral “right” to transfers. Changing moral beliefs is costly, however, so they tend to be fixed in the short term. Once it becomes apparent that existing beliefs significantly conflict with an individual’s interests, she is forced to question those beliefs. The impetus for rationalizing new beliefs arises. The direction of evolution can be predicted with a rational decision-making model. To illustrate the endogeneity of moral beliefs, three institutional settings are examined: “dignity culture,” “honor culture,” and “victimhood culture”.     

Vested Interests and the Common Man as Seen Through Monetary and Fiscal Policy: Flooding Wall Street or Main Street?

There are many angles through which a critical observer can analyze the divergent class interests in most aspects of macroeconomic management. We examine the insistence of financial authorities of all major economies on reviving economic activity through monetary — and not fiscal — policy as a particularly clear example of favoring vested interests over the interests of the common man. Nearly a century after Thorstein Veblen wrote on the subject, one can find many parallel elements to the political landscape of the times. Today, the common man is often expressed by the “99%,” and many accept that the dominant vested interest is that of global banks. Unlike in Veblen’s times, economists today have many historical experiments in economic management that they can consult. By employing logic, historical experience, and an understanding of our current global finance-led capitalism, we offer a preliminary institutionalist analysis of the mechanisms of current monetary policy that “flood” Wall Street, while leaving employment, production, and investment — Main Street — all but forgotten. We then explain how vested interests have abandoned fiscal policy and left a deflationary macroeconomic environment.     

Producing Airpower: The Rise and Fall of Neo-Liberalism’s Defence Agenda

ABSTRACT

Few policy issues are more challenging than complex weaponry’s procurement and employment. Technology drives weapon costs upwards faster than economies are growing and militaries struggle to maintain increasingly sophisticated arms. Certain governments have adopted a reform agenda rooted in neo-liberal economic theory to address these challenges. Two broad policies – enhancing inter-firm competition for contracts and outsourcing activities to the private sector – emerged as central to this reform agenda. Although rarely presented as such, these reforms present a significant intellectual challenge to the hitherto predominant statist model for military power’s provision. Surprisingly, in light of neo-liberal policies’ adoption by militarily active states, no study has systematically examined these reforms’ content and impact. My article fills this lacuna by examining the state – the United Kingdom – that most consistently enacted neo-liberal defence reforms. To preview the conclusion, neo-liberal reforms initially generated small initial efficiencies, but then produced significant adverse consequences when pursued beyond a certain minimal level. Britain’s competition policy, for example, ultimately incentivized firms to consolidate into monopolies, which narrowed the scope for future competition and prevented the state from upholding fixed price contracts. Outsourcing, likewise, proved detrimental once policymakers sought to extend its scope beyond a limited range of simple services.     

宗教信仰、政治身份与企业投资偏好

文章运用企业家宗教信仰的直接调查数据,考察了企业家的个人宗教信仰对企业投资活动的影响。研究发现,相对于研发型投资,有宗教信仰的企业家偏好于风险相对较小的关系型投资;不同类型的宗教信仰对企业投资偏好具有不同的影响,笃信东方宗教的企业家相对于笃信西方宗教的企业家更加偏好于关系型投资;企业家的宗教信仰对投资偏好的影响因企业家是否具有政治身份而有所不同,相对于有政治身份的企业家,没有政治身份的企业家的宗教信仰会更加显著地正向影响关系型投资,表明政治身份可能会弱化宗教信仰在关系型投资中的作用。     

The duty of the firm in selling to the poor: A question of the person, justice, and subsidiarity

Mainstream economists do not address the question of the duty of the firm in selling to the poor. To them the issue is normative, and they have taken pains to delimit economics as a positive discipline. They separate value and fact, and engage themselves in questions relating to what is and not what should be. Forensic economists hold a different view. Firms are liable for damages due not just to deception and fraud but to negligence as well, and governments have consumer protection agencies to examine cases involving the duty of the firm well beyond deception and fraud. Social economists reject the argument based on libertarianism and individualism that the firm has only one purpose: increasing shareholder value. Social economists view the firm as having several constituencies — shareholders, managers, workers, customers, suppliers, neighbors, partners — and duties associated with each one. Those duties are grounded in the virtue of justice: to render to another that which is owed. The firm has a duty to its customers, its suppliers, and its employees deriving from the principle of equivalence; to its shareholders and employees from the principle of distributive justice; to its competitors and neighbors from the principle of contributive justice. This article argues that the firm has a special duty in selling to the poor which is grounded in the person of the one who is poor, the three principles of economic justice, and the principle of subsidiarity. Mainstream economists address poverty apart from consumer behavior as if the two were unrelated. This article brings the two together and in so doing helps throw light on the question of the duty of the firm in selling to the poor. An earlier version was presented as a paper at the midwest Economics Association annual meetings in Kansas City in March 1997.     

NATIONAL SECURITY AND INDUSTRIAL POLICY: THE NEED FOR A PUBLIC CHOICE PERSPECTIVE

This paper argues that the issues raised by the industrial policy debate are as much political as they are economic. There is every reason to believe that, without substantial reform of political institutions, efforts to administer a rational new industrial policy would soon degenerate into the type of inconsistent morass of special-interest-generated policies which industrial policy advocates rightfully criticize as our de facto set of industrial policies.
This important political dimension has been overlooked by many industrial policy advocates. An important exception is Robert Reich, who has proposed a new centralized industrial policy agency in hopes that the battle of conflicting interests would promote greater aggregate efficiency. We argue that on theoretical grounds, however, such centralization might either increase or decrease efficiency. The competition of the military services under the Defense Department gives us a close analogue for study. Unfortunately, however, our review of efficiency in defense policy suggests that this would be a very poor model on which to base a broader industrial policy. To promote substantial increases in defense and industrial policy efficiency appears to require that much more fundamental institutional reforms be considered.     

Epistemology and the tasks of feminist economics

This paper examines the implications of current epistemological debates for the work of feminist economists. Feminist economists must acknowledge (in accordance with recent developments in the study of science) that (a) inquirers can never be certain whether claims about the world are true; (b) scientific inquiry is permeated with “internal” and “external” values; and (c) beliefs are affected by inquirers' social locations. But feminists should not, it argues, embrace the “relativist” stance of some postmodern thinkers, or reject the ideal of “truth,” or argue that beliefs are strictly determined by inquirers' identities and interests. It seeks to outline an epistemological “middle ground” for feminist economics, between the extremes of exaggerated claims of certainty and a disempowering relativism.     

Estimating the effects of forward guidance in rational expectations models

Simulations of forward guidance in rational expectations models should be assessed using the “modest policy interventions” framework introduced by Eric Leeper and Tao Zha. That is, the estimated effects of a policy intervention should be considered reliable only if that intervention is unlikely to trigger a revision in private sector beliefs about the way that monetary policy will be conducted. I show how to constrain simulations of forward guidance to ensure that they are regarded as modest policy interventions and illustrate the technique using a medium-scale DSGE model estimated on US data. I find that many experiments that generate the large responses of macroeconomic variables deemed implausible by many economists – the so-called “forward guidance puzzle” – are not modest policy interventions. Those experiments should therefore be treated with caution, since they may prompt agents to believe that there has been a change in the monetary policy regime that is not accounted for within the model. More reliable results can be obtained by constraining the experiment to be a modest policy intervention. In the cases I study, the quantitative effects on macroeconomic variables are more plausible when this constraint is imposed.     

Economic reform, voting, and local political intervention: Evidence from India

This paper uses the Indian tariff reforms of the early nineties to estimate how voters hurt by economic reforms respond. Regions more hurt by the tariff reform increased their support for both the party that initiated their suffering and parties with similar preferences in favor of poverty-centric policies. This response is surprisingly sophisticated, where voters did not simply punish incumbents for negative income shocks and correctly discounted initial anti-reform stances by opposition parties that later turned out to be false. Furthermore, the strength of this voting response varied with both geography and local political incentives, suggesting that the economic effects of reforms might vary substantially in large and decentralized democracies.     

Monopoly pricing in the binary herding model

How should a monopolist price when selling to buyers who learn from each other’s decisions? Focusing on the case in which the common value of the good is binary and each buyer receives a binary private signal about that value, we completely answer this question for all values of the production cost, the precision of the buyers’ signals, and the seller’s discount factor. Unexpectedly, we find that there is a region of parameters for which learning stops at intermediate and at extreme beliefs, but not at beliefs that lie between those intermediate and extreme beliefs.