Sociology of economics or sociology of economy? theoretical-methodological arguments for sociological economics

This paper makes a proposal for reintroducing sociological or social economics into contemporary economic science. Such a reintroduction is proposed to be substantive, by analyzing the social structuring of the economy, and formal, by including sociological/social economics in the current (JEL) classification system of economic disciplines (code A.15). Both epistemological and ontological arguments can be presented to support the proposal. Epistemological arguments invoke the presence of essential components of sociological economics in the development of economic thought, and ontological arguments stress the role of social factors in economic life. In this paper I present primarily epistemological (theoretical-methodological) arguments for sociological economics, and secondarily ontological ones. I show that the present designation, sociology of economics, is something different from sociological or social economics in that the former refers to economic epistemology (knowledge) and the latter to economic ontology (reality). I conclude that, in addition to a sociology of economic science, we need a sociology of economic life. There is nothing surprising in the habit of economists to invade the sociological field. A major part of their work—practically the whole of what they have to say on institutions and on the…[social] forces which shape economic behavior—inevitably overlaps the sociologist’s preserves. In consequence, a no man’s land or everyman’s land has developed that might conveniently be called economic sociology … [or sociological economics] (Schumpeter 1956:134). The author is grateful to two anonymous referees for their constructive comments on an earlier version of this article.     

Where are we in the political economy of reform?

We review the experiences of developing countries with market-oriented reforms, using the tools of modern political economy. We impose intellectual discipline by requiring that actors behave rationally using available information and that basic economic relationships such as budget constraints be accounted for. We attempt to integrate two approaches, one based on dynamic games played by interest groups, with one that focus on limited information and the dynamics of learning.

We describe the “starting point” as the set of “old” policies and we attempt to explain the dynamics (political, economic and informational) that lead to reform (section II). We analyze strategies for reformers subject to political constraints (section Ш). We evaluate the aggregate and distributional costs of reforms, emphasizing the importance of looking at the right counterfactuals (section IV).

We conclude by pointing to the challenges ahead: the second-stage institutional reforms necessary to take off from underdevelopment.     

Back to Buchanan? Explorations of welfare and subjectivism in behavioral economics

In light of behavioral findings regarding inconsistent individual decision-making, economists have begun to re-conceptualize the notion of welfare. One prominent account is the preference purification approach (PP), which attempts to reconstruct preferences from choice data based on a normative understanding of neoclassical rationality. Using Buchanan’s notion of creative choice, this paper criticizes PP’s epistemic, ontological, and psychological assumptions. It identifies PP as a static position that assumes the satisfaction of given ‘true preferences’ as the normative standard for welfare. However, following Buchanan, choice should be understood dynamically as a process whereby preferences constantly regenerate. Accordingly, the meaning of welfare emerges from an ongoing quest for individual self-constitution. If this holds true, then rationality axioms cannot serve as a priori normative standards. Instead, creative imagination and learning processes must remain central to any understanding of welfare in economics.     

Now or later? The political economy of public investment in democracies

This paper explores the impact of elections on public investment. Working with a sample of 67 presidential and parliamentary democracies between 1975 and 2012, we find that the growth rate of nominal public investment is higher at the beginning of electoral cycles and decelerates thereafter. The peak in public investment growth occurs 28 months before elections, and each month closer to the next election the growth rate of public investment declines by 0.7 percentage points. Other political variables, such as cabinet ideology and government fragmentation have less influence on short-term public investment dynamics. Fiscal rules and stronger institutions seem to attenuate the impact of elections on investment, but available information is insufficient to draw definitive conclusions. These results are robust to a number of controls, including for fixed elections.     

Buchanan’s constitutional political economy: exchange vs. choice in economics and in politics

This article discusses the methodological foundations of Buchanan’s constitutional political economy. We argue that Buchanan is a constitutional economist because he is an economist or a political economist. In other words, Buchanan is a constitutional economist—he insists on the necessity of focusing on constitutions and to analyze the “rules of the social game”—because he defines economics as a science of exchange. Buchanan’s definition of economics is not only specific, it is also opposed to the definition of economics that other economists retain and, above all, opposed to the definition of economics that many public choice theorists use. The latter have, in effect, adopted the Robbins 1932 definition of economics as a science of choice that Buchanan criticizes and rejects. Buchanan’s constitutional economics can be a branch of public choice only under certain conditions.

The political economy of nature ∗

Suggestions are made for the development of a specific theory of mining by addressing the role of landed property, cartelization and monopolization. Each of these is seen as having a historically contigent relationship to the others and to the growth of mining capital. The spatial expansion of mining is examined as potentially leading to restructuring of, and conflict over, property relations, and cartelization of markets as tending to precede monopolization of production. The argument is illustrated by reference to the UK coal industry, the South African diamond industry and the US oil industry.     

The political economy of corporatism in medicine: Self-regulation or cartel management?

This paper seeks to explain why delegation of regulatory authority to medical associations (medical Corporatism) is so prominent in health care. It argues that the interests of politicians and physicians in limiting access to medical markets rather than the interests of patients in the control of quality of medical care determines this delegation. Recent trends in physician densities, their impacts on physician incomes, and rates of return to a medical career in several industrialized countries are adduced as evidence to support this claim.     

An anarchist’s reflection on the political economy of everyday life

James Scott has written a detailed ethnography on the lives of the peoples of upland Southeast Asia who choose to escape oppressive government by living at the edge of their civilization. To the political economist the fascinating story told by Scott provides useful narratives in need of analytical exposition. There remains in this work a “plea for mechanism”; the mechanisms that enable social cooperation to emerge among individuals living outside the realm of state control. Social cooperation outside the formal rules of governance nevertheless require “rules” of social intercourse and techniques of “enforcement” to ensure the disciplining of opportunistic behavior.     

David Hume's model of man: Classical political economy as “inspired” political economy

Abstract

The purpose of this paper is to analyse David Hume's model of man. We show that three major elements characterize his representation of man: first the weaknesses and limitations of human rationality; second, the psychological foundations of human behaviour, with a particular focus on the role of association in human cognition; and third, the collective dimension of individual learning through a process of communication based on sympathy. Therefore, we show that the theory of human nature and human cognition Hume proposes is different from the narrow view of man as homo ?conomicus that is used by mainstream economists.     

The political economy of lockdown: Does free media matter?

This paper studies the role of free media in how governments and the public responded to the COVID-19 pandemic. We first document the presence of policy and behavioural responsiveness during the early phase of the pandemic. Using a panel data of daily COVID-19 deaths, lockdown policies, and mobility changes in 155 countries, we find that governments were more likely to impose a lockdown, and citizens to reduce their mobility, as the initial number of deaths increased. To measure the role of media freedom on responsiveness given endogeneity in death reporting, we simulate deaths from a calibrated SEIR model as an instrument for reported deaths. Using this approach, we find evidence that the presence of free media mattered for the timing of early responses to COVID-19. Responsiveness to deaths was limited to citizens in free-media countries, and accounted for 40% of the difference in lockdown decision and mobility changes between free-media and censored-media countries. In support of the role of free media, we show that differences in responsiveness are not explained by a range of other country characteristics such as the level of income, education or democracy. We also find evidence that citizens with access to free media were better informed about the pandemic and had more responsive levels of online searches about COVID-19, supporting the view that free media served to inform the public on the risks of COVID-19.     

Why do scientists cheat? Insights from behavioral economics

Abstract

Based on a review of the books by Wible (2014), Stephan (2012), and Lanteri and Vromen (2014), I discuss three different ways in which behavioral economics can enrich the understanding of scientific misbehavior. First, behavioral economics suggests that economic theories of scientific misbehavior, such as the one by Wible (2014), should consider moral costs of cheating, i.e. costs that arise from an individual’s desire to do the “right thing.” Second, behavioral economics demonstrates several ways in which the features of the reward scheme in science,as described by Stephan (2012), can favor cheating. Her conclusion that shirking is rarely an issue in science seems optimistic. Third, behavioral economics indicates that individual characteristics matter for cheating. According to Lanteri and Vromen (2014), economists possess different characteristics than other researchers. Hence, the reaction to incentives may differ across disciplines. Considering these insights is important to assess how a goal such as the pursuit of truth can be achieved efficiently.     

The history of economics as economics?

Abstract

This paper critically evaluates the current decline of the relationship between economics and the history of economics, and proposes a framework called the panorama-cum-scenario model for the practice of the history of economics. Starting with the Hegelian thesis that the history of economics is economics itself, the paper argues that such a relationship is necessary but not sufficient because the history of economics is a metatheory addressed to economic theory. The history of economics needs a panoramic view of the subject and a scenario for the construction, interpretation, and evaluation of the system of economics. The panorama-cum-scenario model enables us to work on the history of economics not only by historical and rational reconstruction but also by global reconstruction. Nietzsche's anti-Hegelian viewpoint and Heidegger's hermeneutical standpoint are useful for identifying the role of historical research in developing economic knowledge based on the panorama-cum-scenario model. Several approaches to the history of economics are examined in light of the panorama-cum-scenario model. Schumpeter's history of economics is interpreted as an example of the panorama-cum-scenario model.     

Financial deepening and income inequality: Is there any financial Kuznets curve in China? The political economy analysis

The interconnectedness of financial deepening and income inequality has been a highly controversial discussion which has not been concluded despite many empirical and theoretical studies up to date. One of the basic building blocks for many research designs is the reliance upon the Kuznets inverted U-shaped curve which postulates that in the first phase of economic growth income inequality increases, peaks and then decreases to a tolerable level in the later phase after a certain income level had been attained. The role of financial deepening in financing economic growth is an indispensable and necessary condition enabling us to easily draw an analogy between financial deepening and income inequality in a financial version of the Kuznets curve. In spite of 30 years of economic and financial reforms in China, which represents a fairly young history of economic growth and development, there are many indicators that Chinese experience significantly deviates from the presupposed inverted U-shaped curve trajectory and its final equalizing effect. This paper relies on financial deepening data measured by monetary aggregate M2/GDP and domestic banking credit/GDP ratios in its claim that they significantly correlate with rising income inequality. The author’s intention consists not in claiming that financial deepening per se causes income inequality, but provides a political economy analysis of the specific institutional and power configuration which leads to their positive relationship. This configuration is determined by the prevailing banking model, the hukou system, financial repression and the decentralized authoritarian system. On the other hand, the absence of inequality-narrowing institutitons further aggravate the problem. All the aforementioned factors are geared at avoiding mechanical and spurious claims that financial deepening increases or decreases income inequality across countries. A historical institutionalism approach to explain China’s path related to the Kuznets curve prediction shows the central validity of open and inclusive institutions in generating inequality-narrowing benefits of financial deepening.     

Non-uniformity of job-matching in a transition economy – A nonparametric analysis for the Czech Republic

This study explores the properties and development of the matching technology in the Czech Republic during the transition to a market economy. Nonparametric additive modelling allows us to assess flexible functional forms, which comprise for instance CES and trans-log specifications. This enables us to evaluate the matching process locally for each combination of unemployment and vacancies rather than being restricted to global coefficients. Special interest is devoted to analysis and economic determinants of regional variation in the returns to scale of the matching function. Non-linearities are found in the partial adjustment process of unemployment outflows, and a negative coefficient on vacancies in some years. Moreover, increasing returns to scale in job-matching are found locally. Returns to scale are found to be negatively correlated to the share in employment in services and to outmigration, positively correlated to the employment share in industry, the unemployment rate and various measures of active labour market policies.     

Shadow economy and unemployment rate in USA: is there a structural relationship? An empirical analysis

This article aims to estimate the size of the US shadow economy (SE) using a structural equation approach and to evaluate if a structural relationship exists between the SE and the unemployment rate (UR) in the United States. The size of the SE is estimated to be decreasing over the last two decades. We corroborate the existence of a structural relationship between the SE and the UR by using a simple theoretical model. Furthermore, we extend the Okun's law to estimate the structural relationship between growth rate of official GDP, SE and UR. Our results indicate a significant positive relationship between the SE and the UR.     

Is ‘new’ behavioral economics ‘mainstream’?

When comparing ‘new’ and ‘old’ behavioral economics (BE), many argue that ‘new’ BE has close ties with what is often called ‘mainstream’ economics. The aim of this paper is to reframe the ‘old’ vs. ‘new’ BE debate and investigate the nature of the relationship between psychologists, behavioral economists, and ‘mainstream’ economists. This will lead us to develop the concept of ‘space of interaction’, building on Galison’s metaphor of ‘trading zones’, to emphasize the role of outsiders, strategic thinking, and negotiation in ‘new’ BE. By discussing some often implicit arguments in an otherwise disconnected literature, we seek to bring new arguments to the discussions through a careful study of those relationships in the history of ‘new’ BE and its more recent developments. Leaving aside the orthodox/heterodox contrast and comparative approaches, we hope to provide a different account of the changes in ‘new’ BE and its relationship with the ‘mainstream’.     

The effectiveness of conditionality and the political economy of policy reform: is it simply a matter of political will?

Although widely used by international financial institutions, policy conditionality often fails in the sense that countries do not fully implement it. Up to now most research has focused on the design of conditionality. This paper, however, uses political economy analysis to address the issue of non-compliance. Either governments agree to conditions with little intention of carrying them through, or circumstances change the benefit-cost ratio of compliance. Analysis of these circumstances points to ways in which conditionality might usefully be reformed.