Role Of Economic Theory Research Articles

François Perroux on European integration: “L’application aveugle d’une ‘orthodoxie”

In the debate for and against European integration economists had an important part in so far as from the beginning European integration took on an essentially economic connotation. Among them Francois Perroux had a rather original position: he based his critique of European economic integration on a series of analytical tools that he developed in his critical reflection on the limits of a part of the dominant economic theory. The link between Perroux’s criticism of neoclassical economics and his position on European integration is particularly interesting because it makes Perroux’s position original and provocative among the various reflections on Europe and it gives us some important hints to further reflect on the role of economic theory and especially on the important tie between economic theory and policy.

A Review of Thomas Sowell’s Discrimination and Disparities

In Discrimination and Disparities, Thomas Sowell describes how economists think about the causes of disparities in socioeconomic outcomes. He cautions against government intervention to reduce disparities, noting that such interventions often have unintended consequences. In this review, I discuss the role of economic theory and empirical evidence in helping move society toward more equitable outcomes. I find far more reason to be hopeful about the role of government than Sowell does, but also argue for more experimentation and rigorous evaluation to be sure that our well-intentioned policies have their intended impacts. (JEL D63, J15, J16, J71, J78)

Маяк после Коуза: альтернативные способы предоставления благ и функции государства

This article attempts to answer the question of what determines the choice of the method to provide one or another public good. Why is one good given as a private one, another one as a club good, the third one as a purely public good, and the fourth one as a mix of different forms. In fact, this question includes the question of what the state should (and should not) do. The main part of the article presents a review of the discussion concerning the good, which played a special role in economic theory - the lighthouses. Although the classics of political economy of XIX - early XX centuries considered them as a striking example of pure public goods, the famous article by R. Coase [Coase, 1974] concludes that the services of lighthouses in England and Wales were not funded from general taxes, that is, they were not provided as public goods until the second third of XIX century. Further development of this discussion, which is still incomplete and relevant, leads to the understanding that lighthouse services are provided in different countries and/ or at different times as goods of various types. The same applies to almost any other goods. The concrete way of providing this good depends not only on the country and time, but also on how to estimate the specific offenses it provides. We conclude that there exist no private, public, etc. benefits by themselves, and a socially effective way of delivering benefits depends on the technologies and institutions available in the society.

Top Down or Bottom Up? Disentangling the Channels of Attention in Risky Choice

Economists have become increasingly interested in using attention to explain behavioral patterns both on the micro and macro level. This has resulted in several disparate theoretical approaches. Some, like rational inattention, assume a “top-down” model of executive optimization. Others, like salience theory, assume a “bottom-up” influence where attention is driven by contextual factors. This distinction is fundamental for the economic implications of attention, but so far there is little understanding of their relative importance. We propose a multi-attribute random utility model that unifies prior theoretical approaches by distinguishing between the impact of top-down and bottom-up attention. We accomplish this by separating agent-specific and decision-specific variation in attention and verify our framework in an eye-tracking experiment on risky choice. We find that both top-down and bottom-up attention are connected to important choice variables: both are associated with the weighting of the attributes of choice options, while top-down attention is additionally associated with measures of loss aversion. We discuss the insights regarding the nature of attention and its role in economic theory.

History of Utility Theory

The notion of utility began playing the central role in economic theory that it has maintained until today in the early 1870s, when it was used to explain the exchange value of commodities, that is, the ratio at which one commodity exchanges with other commodities or, in modern term, its relative price.

Economics Against Tyranny

The present work analyses the writings of Mises and Hayek on the relation between a liberal order and a free market, and the role of economic theory in advancing the appreciation of democratic institutions, considering the context of their expositions. Subsequently, it tries to address the contemporary state of political and economic affairs in the light of their teachings, highlighting missing aspects in today’s public debate and what should be taken into account for a coherent defense of the liberal order.

Macroeconomic Regimes, Technological Shocks and Employment Dynamics

AbstractThe debate about the impact of technology on employment has always had a central role in economic theory. At the same time, the nexus of technological progress and employment might depend on macroeconomic regimes. In this work we investigate the interrelations among technology, output and employment in the U.S. economy in growth recessions vs. growth expansions. More precisely, using U.S. data we estimate different threshold vector autoregressions (TVARs) with TFP, hours, and GDP, employing the latter as threshold variable, and assess the generalized impulse responses of GDP and hours as to TFP shocks. For our entire period of observation, 1957Q1–2011Q4, positive technology shocks, while spurring GDP growth, by and large, display a negative effect on hours worked in growth recessions, but they are not significantly different from zero in good times. Yet, since the mid eighties (1984Q1–2011Q4) productivity shocks increase hours worked in low growth periods. The results are mainly driven by the response of labor along the extensive margin (number of employees), and remain persistent so in the face of a battery of robustness checks.

Модели обучения в играх: обзор

This survey analyzes central ideas and the current state of the economic theory of learning in games. In game theory learning can be thought of as both an alternative to equilibria and as a way to better understand the nature of equilibria. Outside of game theory, theory of learning shows economic theory (for example, the classic Cournot oligopoly) in a new light, provides interesting theoretical problems, is nontrivial from econometric perspective. It can be studied with experimental methods. It also links economics to unexpected scientific disciplines: biology, philosophy of rationality and computer science. However, existing surveys are not particularly accessible to beginners and are not accessible at all in Russian. This survey intends to fill these gaps. It can serve both as an introduction and as a short reference. We analyze issues of classification as well as the models themselves. Theoretical descriptions are illustrated with concrete examples. Special attention is devoted to the empirical and experimental work. We also draw conclusions and hypothesize on perspectives of the field and its future role in economic theory.

COALITION FORMATION AND BARGAINING PROTOCOLS: A REVIEW OF THE LITERATURE

AbstractThis paper offers a review of the vast literature regarding bargaining and coalition formation. This topic has been generally described as the attempt to provide strategic foundations to cooperative solution concepts. It can therefore be seen as the linking ring between the non‐cooperative and the cooperative game‐theoretic approach to coalition formation. Its central role in economic theory and its relatively long history that goes back to the Nash program have fostered a large academic production, including surveys. Nonetheless, this paper will focus on an aspect that is often neglected in the dedicated surveys: the specificities of the bargaining protocols leading to different outcomes. Although generally downgraded to the rank of details, the differences in bargaining protocols, even when minor, can cause significant changes in fundamental aspects such as the possibility to reach full cooperation, the distribution of final pay‐offs and the time taken to reach an agreement. Focused on externalities‐free games, therefore on bargaining protocols sustaining solution concepts for cooperative games in characteristic function form, the paper aims at providing a brief but exhaustive review of the topic that could result in a very useful tool for any researcher approaching the subject of coalitional bargaining.

Directional marginal productivity: a foundation of meta-data envelopment analysis

Differential characteristics of the production function represent elasticity measures and marginal rates of production technologies; in particular, marginal productivity (MP) plays an important role in economic theory and applications. This study provides a theoretical foundation of directional marginal productivity (DMP) supporting the meta-data envelopment analysis (meta-DEA) which measures the efficiency via marginal-profit-maximized orientation. In addition, the segmented marginal rate of technical substitution is developed based on DMP. In fact, DMP is developed to address finding the improving direction of the efficient firm on the frontier towards the marginal profit maximization. This approach, which emphasizes “planning” over “efficiency evaluation”, forms the basis for transforming a typical “ex-post” DEA into an “ex-ante” DEA study. Two case studies show that the DMP provides an explicit span of directions for productivity improvement via a trade-off between these distinct directions.

Crisis, Austerity, and the Role of Economic Theory in Policy

The history of market systems reveals recurrent patterns of booms and busts over centuries, emanating precisely from the developed world. Economic historians speak of the Great Depressions of the 1840s, 1870s, and 1930s, and of the Great Stagflation of the 1970s, and course the current one which is the first Great Depression of the 21st century. The present crisis has exposed the weaknesses of orthodox economic theory which is built upon an idealized and utterly fictitious vision of capitalism characterized by optimal production and consumption outcomes and the automatic full employment of labor. This paradigm was utterly unable to recognize the build-up to the current crisis, and has failed to develop models relevant to our current circumstance. Alternative viewpoints, such as the one in this paper, have been almost entirely excluded from the conventional discourse. We need to open up a space for a more vigorous debate among competing views.

The case of ‘payment-by-results’: re-examining the effects of an incentive programme in nineteenth-century English schools

Performance-based management is a recurring and controversial strategy for education reform. This paper examines a nineteenth-century English experiment in paying schools by results and uses concepts from personnel and behavioural economics to understand its decline. Like many recent education reforms, payment-by-results sought to bring schools and teachers under the ‘laws of supply and demand’. The unintended outcomes of the policy, which ultimately led to its end, included narrowing of the curriculum, cheating and manipulation by schoolteachers and managers, and increased risk and uncertainty in the teaching profession. The paper begins by exploring the role of economics principles in the drafting of the policy. It continues to explore how the programme unravelled, with special attention to issues of perverse incentives, teacher motivation, risk, and uncertainty. Building on recent studies of analogous modern experiments in performance-based management, this paper finds important parallels to current policy concerns. The lessons learned address the fundamental relationship between incentives and teacher motivation and the role of economic theory in education policy.

Sponsored search, market equilibria, and the Hungarian Method

Matching markets play a prominent role in economic theory. A prime example of such a market is the sponsored search market. Here, as in other markets of that kind, market equilibria correspond to feasible, envy free, and bidder optimal outcomes. For settings without budgets such an outcome always exists and can be computed in polynomial-time by the so-called Hungarian Method. Moreover, every mechanism that computes such an outcome is incentive compatible. We show that the Hungarian Method can be modified so that it finds a feasible, envy free, and bidder optimal outcome for settings with budgets. We also show that in settings with budgets no mechanism that computes such an outcome can be incentive compatible for all inputs. For inputs in general position, however, the presented mechanism—as any other mechanism that computes such an outcome for settings with budgets—is incentive compatible.

On Foreign Debt Sustainability of Developing Countries: Towards a Long Run Approach for Development

The role of economic theory is to suggest models and indicators that allow in identifying when foreign debt of a developing country is sustainable and when it is “excessive.” The IMF and the World Bank define the external debt sustainability of a country as its ability to meet the current and future external debt service obligations in full, without recourse to debt rescheduling or accumulation of arrears. This concept of sustainability focuses on the behaviour of the borrower (the borrower’s willingness and ability to repay its debt “in full”) rather than on the behaviour of the lender (based on the lender’s liquidity and investment alternatives) and implies that countries receiving external debt relief are in a situation of “excess debt”. But when creditors have to decide for some debt relief measures, they need to establish, by a sustainability analysis, the sustainable debt level of the borrower. This reasoning is evidently circular and shows how the traditional notion of sustainability is arbitrary. This is due to the characteristics of the sovereign debt relationship (Epstein and Gintis, 1992). The aim of this paper is to redefine the concept of foreign debt sustainability. We propose a long run dynamic approach based on a flow analysis rather than a stock analysis. In this approach we try to solve the problem of arbitrariness existing in the traditional approach on foreign debt sustainability.

Aggregating the Single Crossing Property

The single crossing property plays a crucial role in economic theory, yet there are important instances where the property cannot be directly assumed or easily derived. Difficulties often arise because the property cannot be aggregated: the sum or convex combination of two functions with the single crossing property need not have that property. We introduce a new condition characterizing when the single crossing property is stable under aggregation, and also identify sufficient conditions for the preservation of the single crossing property under multidimensional aggregation. We use our results to establish properties of objective functions (convexity, logsupermodularity), the monotonicity of optimal decisions under uncertainty, and the existence of monotone equilibria in Bayesian games.

Hurricane Katrina: America's unnatural disaster

Acknowledgements Introduction: Truth Crushed to Earth Will Rise Again: Katrina and its Aftermath 1: Letters From a Native Son: Do You Know What It Means to Miss New Orleans / Mitchell F. Crusto 2: After Katrina: Laying Bare the Anatomy of American Caste / Bryan K. Fair 3: Hurricane Katrina and the Market for Survival: The Role of Economic Theory in the Construction and Maintenance of Disaster 4: The Internal Revenue Code Don't Care About Poor, Black People / Andre L. Smith 5: Judging Under Disaster: The Effect of Hurricane Katrina on the Criminal Justice System / Phyllis W. Kotey 6: From Worse to Where? African Americans, Hurricane Katrina and the Continuing Public Health Crisis / Alyssa G.Robillard 7: Failed Plans and Planned Failures: the Lower Ninth Ward, Hurricane Katrina and the Continuing Story of Environmental Injustice / Carlton Waterhouse 8: Still Up On the Roof: Race, Victimology and the Response to Hurricane Katrina / Kenneth B. Nunn 9: Governmental Liability for the Katrina Failure / Linda S. Greene 10: Katrina, Race, Refugees, and Images of the Third World 11: Been in the Storm so Long: Katrina, Reparations, and the Original Understanding of Equal Protection / D. Marvin Jones Epilogue Bibliography Index

Housing Studies and the Role of Economic Theory: An (Applied) Disciplinary Perspective

This paper is a disciplinary contribution to the Housing, Theory and Society debate on the role of theory in housing studies. The discipline in question is economics, but considered widely across the range of perspectives it offers. A pragmatic case is made for investigating applied economics from across the subject's spectrum provided they meet the criteria of being useful, insightful, interesting or novel and potentially testable. It is argued that this is consistent with a multidisciplinary approach to housing research. The paper also argues that recent trends in economics have contributed positively, particularly through the increasingly mainstream behavioural economics and finance school, an area of practical relevance to housing.

Entrepreneurship and economic development: the EMPRETEC showcase

The hypothesis that entrepreneurship is linked to economic growth finds it’s most immediate foundation in simple intuition, common sense and pure economic observation: activities to convert ideas into economic opportunities lie at the very heart of entrepreneurship. Entrepreneurship is a source of innovation and change, and as such spurs improvements in productivity and economic competitiveness. The entrepreneur has been a fundamental agent in most production, distribution and growth theories. The role of entrepreneurship as the driving force of economic growth found its most explicit foundation. Empretec was established in 1988 to promote entrepreneurship in developing countries. Empretec’s programs have been initiated in 27 countries plus additional centers in Brazil, assisting more than 80, entrepreneurs through local driven business support centers. The information collected for this paper was secondary data rather than conducting survey. Therefore, one objectives of this paper is to examine the exact nature of entrepreneurship and its role in economic theory.

The concept(s) and controversies of equilibrium

Equilibrium is one of the key concepts not only in economics, but in social science in general as well as the natural sciences. However, in no other field has it received, to my knowledge, such a central role, nor drawn as much sharp criticism. It’s claimed to be indispensible for economic modelling and theorizing, and yet at the same time it’s a major target for criticism. A recent debate about the concept has resulted in a number of articles and books on the topic, taking widely different stands on how equilibrium is to be understood, its role in economic theory and methodology, and what this role means for economics as a science. This book is a welcome and valuable contribution to this debate. The book has three parts. The first one deals with how economics has borrowed equilibrium concepts and methods from the natural sciences, the second with how equilibrium was conceptualised and used by some early economic theorists, and the third with issues concerning equilibrium in modern economic theory. The general impression from a first reading is of the immense number of different concepts grouped together as ‘‘the’’ concept of equilibrium, and the reader is left with a greater appreciation of why discussions of equilibrium in economics often become so confused. However, the book also raises crucial questions about the role of economics as a science, about the role of theories and models, and their relation to the real world which we aim to explain.

Interesting Questions in Freakonomics

Freakonomics is more about “entertainment” than it is a serious attempt at popularization. Consequently, rather than conduct a comprehensive fact check, I use the book as a springboard for a broader inquiry into social science research and take issue with the book's surprising premise that “Economics is a science with excellent tools for gaining answers but a serious shortage of interesting questions.” Using examples from Freakonomics, I argue that some of the questions the book addresses are “uninteresting” because it is impossible to even imagine what a good answer would look like. I conclude with some thoughts about the role of economic theory in generating interesting questions and/or answers.