Template-Type: ReDIF-Article 1.0
Author-Name: Tony Lawson
Title: Mathematical Modelling and Ideology in the Economics Academy: competing explanations of the failings of the modern discipline?
Abstract: The widespread and long-lived failings of academic economics are due to an over-reliance on largely inappropriate mathematical methods of analysis. This is an assessment I have long maintained. Many heterodox economists, however, appear to hold instead that the central problem is a form of political-economic ideology. Specifically, it is widely contended in heterodox circles that the discipline goes astray just because so many economists are committed to a portrayal of the market economy as a smoothly or efficiently functioning system or some such, a portrayal that, whether sincerely held or otherwise, is inconsistent with the workings of social reality. Here I critically examine the contention that a form of political-economic ideology of this sort is the primary problem and assess its explanatory power. I conclude that the contention does not fare very well. I do not, though, deny that ideology of some sort has a major impact on the output of the modern economics academy. However it is of a different nature to the form typically discussed, and works in somewhat indirect and complex ways. Having raised the question of the impact of ideology I take the opportunity to explore its play in the economics academy more generally.
Journal: Economic Thought
Pages: 1
Volume: 1
Issue: 1
Year: 2012
Month: July
File-URL: http://et.worldeconomicsassociation.org/papers/mathematical-modelling-and-ideology-in-the-economics-academy-competing-explanations-of-the-failings-of-the-modern-discipline/
File-Format: text/html
File-URL: http://et.worldeconomicsassociation.org/files/ETLawson_1_1.pdf
File-Format: Application/pdf
Handle: RePEc:wea:econth:v:1:y:2012:i:1:p:1

Template-Type: ReDIF-Article 1.0
Author-Name: Donald Gillies
Author-Email: donald.gillies@ucl.ac.uk
Author-Workplace-Name: University College London
Title: Economics and Research Assessment Systems
Abstract: This paper seeks to analyse the effects on Economics of Research Assessment Systems, such as the Research Assessment Exercise (or RAE) which was carried out in the UK between 1986 and 2008. The paper begins by pointing out that, in the 2008 RAE, economics turned out to be the research area which was accorded the highest valuation of any subject in the UK, even though economists were then under attack for failing to predict the global financial crash which had occurred a few months earlier. One aim of the paper is to explain this economics anomaly in research assessment. The paper goes on to point out a key difference between economics and the natural sciences. Most areas of the natural sciences are dominated for most of the time by a single, generally accepted, paradigm, whereas there are always in economics different schools of thought which have different and highly conflicting paradigms. Given this situation, it is argued that the effect of research assessment systems in economics is to strengthen the majority school in the subject (whatever that is), and weaken the minority schools. This conclusion is supported by empirical data collected by Frederic Lee for the UK. It is then shown that the greater the dominance of the majority school, the higher the overall valuation of the subject is likely to be, and this is used to explain the anomaly noted earlier. It is argued that research in economics flourishes better in a situation in which there are a number of different schools treated equally, than in one in which a single school dominates. The conclusion is that research assessment systems have a negative effect on research in economics and give misleading results. Instead of such systems, an attempt should be made to encourage pluralism in the subject.
Journal: Economic Thought
Pages: 2
Volume: 1
Issue: 1
Year: 2012
Month: July
File-URL: http://et.worldeconomicsassociation.org/papers/economics-and-research-assessment-systems/
File-Format: text/html
File-URL: http://et.worldeconomicsassociation.org/files/ETGillies_1_1.pdf
File-Format: Application/pdf
Handle: RePEc:wea:econth:v:1:y:2012:i:1:p:2

Template-Type: ReDIF-Article 1.0
Author-Name: Richard van den Berg
Title: Richard Cantillon's Early Monetary Views?
Abstract: The monetary theories in Philip Cantillon's The Analysis of Trade (1759) differ in important respects from those found in Richard Cantillon's much more famous Essai sur la nature de Commerce en général (1759). Contrary to the received opinion that the Analysis was a poor translation of the Essai, it is argued in this paper that many of these differences are due to the fact that Philip based his book on an earlier draft of his cousin's great work. Comparisons between the two texts allow us to assess, for the first time, how Richard Cantillon's developed his ideas on the quantity theory of money, the price-specie-flow mechanism and the determination of the interest rate.
Journal: Economic Thought
Pages: 3
Volume: 1
Issue: 1
Year: 2012
Month: July
File-URL: http://et.worldeconomicsassociation.org/papers/richard-cantillons-early-monetary-views/
File-Format: text/html
File-URL: http://et.worldeconomicsassociation.org/files/ETVandenBerg_1_1.pdf
File-Format: Application/pdf
Handle: RePEc:wea:econth:v:1:y:2012:i:1:p:3

Template-Type: ReDIF-Article 1.0
Author-Name: Sheila C Dow
Title: Different Approaches to the Financial Crisis
Abstract: The economic crisis has exposed shortcomings in standard economic theory and provided an impetus for new economic thinking. But the theoretical debate in the wake of the crisis has been unduly constrained by the terms of the mainstream approach to economic theory. Like any approach, it is characterised by a way of framing reality, giving meaning to terms and setting criteria for good argument. It also determines how any economic theory is understood, whether from the history of economic thought or from the contemporary literature. But there are other approaches to economics which would open up the field to a much wider range of possibilities for new economic thinking. Addressing the challenge that any reader bases her understanding on her own approach, the purpose of this paper is to attempt to explain what it means to consider different approaches and why it matters for policy. This is done by discussing two features of the financial crisis which pose particular problems for economic theory. These are the role of changing market sentiment in driving asset prices on the one hand and the breakdown of trust relationships in banking on the other (the moral hazard issue). We will see how these are addressed by mainstream theory and by alternative approaches. First, market sentiment is discussed within the mainstream rational-optimising framework, where risk is quantifiable, and compared with the Keynesian approach based on the general uncertainty of knowledge, where reason, evidence and sentiment are integrated. The moral hazard issue is then discussed in its mainstream form in terms of rational opportunism and in its institutionalist form in terms of the foundation of social relations (including relations between institutions) in trust. It is shown that different ways of approaching theorising in each case imply different policy measures. It is argued further that an exclusively deductive mathematical approach to analysis of market sentiment and trust is unduly limiting and that a more pluralist approach would more fully address the issues.
Journal: Economic Thought
Pages: 4
Volume: 1
Issue: 1
Year: 2012
Month: July
File-URL: http://et.worldeconomicsassociation.org/papers/different-approaches-to-the-financial-crisis/
File-Format: text/html
File-URL: http://et.worldeconomicsassociation.org/files/ETDow_1_1.pdf
File-Format: Application/pdf
Handle: RePEc:wea:econth:v:1:y:2012:i:1:p:4

Template-Type: ReDIF-Article 1.0
Author-Name: Geoffrey M Hodgson
Author-Email: g.m.hodgson@herts.ac.uk
Author-Workplace-Name: Loughborough University London
Title: On the Limits of Rational Choice Theory
Abstract: The value of rational choice theory for the social sciences has long been contested. It is argued here that, in the debate over its role, it is necessary to distinguish between claims that people maximise manifest payoffs, and claims that people maximise their utility. The former version has been falsified. The latter is unfalsifiable, because utility cannot be observed. In principle, utility maximisation can be adapted to fit any form of behaviour, including the behaviour of non-human organisms. Allegedly 'inconsistent' behaviour is also impossible to establish without qualification. This utility-maximising version of rational choice theory has the character of a universal 'explanation' that can be made to 'fit' any set of events. This is a sign of weakness rather than strength. In its excessive quest for generality, utility-maximising rational choice theory fails to focus on the historically and geographically specific features of socio-economic systems. As long as such theory is confined to ahistorical generalities, then it will remain highly limited in dealing with the real world. Instead we have to consider the real social and psychological determinants of human behaviour.
Journal: Economic Thought
Pages: 5
Volume: 1
Issue: 1
Year: 2012
Month: July
File-URL: http://et.worldeconomicsassociation.org/papers/on-the-limits-of-rational-choice-theory/
File-Format: text/html
File-URL: http://et.worldeconomicsassociation.org/files/ETHodgson_1_1.pdf
File-Format: Application/pdf
Handle: RePEc:wea:econth:v:1:y:2012:i:1:p:5

Template-Type: ReDIF-Article 1.0
Author-Name: Irene van Staveren
Title: An Evolutionary Efficiency Alternative to the Notion of Pareto Efficiency
Abstract: The paper argues that the notion of Pareto efficiency builds on two normative assumptions: the more general consequentialist norm of any efficiency criterion, and the strong no-harm principle of the prohibition of any redistribution during the economic process that hurts at least one person. These normative concerns lead to a constrained and static notion of efficiency in mainstream economics, ignoring dynamic efficiency gains from more equal allocations of resources. The paper argues that a weak no-harm principle instead provides an endogenous efficiency criterion, which shifts attention away from equilibrium analysis in hypothetically perfect markets towards an evolutionary analysis of efficiency in real-world, non-equilibrium markets. Moreover, such an evolutionary notion of efficiency would be less normative than the Paretian concept.
Journal: Economic Thought
Pages: 6
Volume: 1
Issue: 1
Year: 2012
Month: July
File-URL: http://et.worldeconomicsassociation.org/papers/an-evolutionary-efficiency-alternative-to-the-notion-of-pareto-efficiency/
File-Format: text/html
File-URL: http://et.worldeconomicsassociation.org/files/ETVanStaveren_1_1.pdf
File-Format: Application/pdf
Handle: RePEc:wea:econth:v:1:y:2012:i:1:p:6

Template-Type: ReDIF-Article 1.0
Author-Name: Avner Offer
Title: Self-interest, Sympathy and the Invisible Hand : From Adam Smith to Market Liberalism
Abstract: Adam Smith rejected Mandeville's invisible-hand doctrine of 'private vices, publick benefits'. In The Theory of Moral Sentiments his model of the 'impartial spectator' is driven not by sympathy for other people, but by their approbation. The innate capacity for sympathy makes approbation credible. Approbation needs to be authenticated, and in Smith's model authentication relies on innate virtue, which is not realistic. An alternative model of 'regard' makes use of signalling and is more pragmatic. Modern versions of the invisible hand in rational choice theory and neo- liberalism are shown to be radical departures from the ethical legacy of Enlightenment and utilitarian economics, and are not consistent with Adam Smith's own position.
Journal: Economic Thought
Pages: 1
Volume: 1
Issue: 2
Year: 2012
Month: December
File-URL: http://et.worldeconomicsassociation.org/papers/self-interest-sympathy-and-the-invisible-hand/
File-Format: text/html
File-URL: http://et.worldeconomicsassociation.org/files/WEA-ET-1-2-Offer.pdf
File-Format: Application/pdf
Handle: RePEc:wea:econth:v:1:y:2012:i:2:p:1

Template-Type: ReDIF-Article 1.0
Author-Name: Nuno Ornelas Martins
Title: Mathematics, Science and the Cambridge Tradition
Abstract: In this paper the use of mathematics in economics will be discussed, by comparing two approaches to mathematics, a Cartesian approach, and a Newtonian approach. I will argue that while mainstream economics is underpinned by a Cartesian approach which led to a divorce between mathematics and reality, the contributions of key authors of the Cambridge tradition, like Marshall, Keynes and Sraffa, are characterised by a Newtonian approach to mathematics, where mathematics is aimed at a study of reality. Marshall was influenced by the Newtonian approach that still characterised many aspects of the Cambridge Mathematical Tripos, where the emphasis was on geometrical and mechanical examples rather than on symbolic (Cartesian) mathematics. Keynes, who criticised (Cartesian) symbolic mathematics, was indeed an admirer of Newton and of his method. Sraffa's mathematical constructions are also in line with the Newtonian approach where arithmetic and geometry were strictly separated, since Sraffa's mathematical constructions typically use arithmetic without engaging in the mixture between geometry and arithmetic that occurs in the Cartesian approach. View the Open Peer Discussion of this paper »
Journal: Economic Thought
Pages: 2
Volume: 1
Issue: 2
Year: 2012
Month: December
File-URL: http://et.worldeconomicsassociation.org/papers/mathematics-science-and-the-cambridge-tradition/
File-Format: text/html
File-URL: http://et.worldeconomicsassociation.org/files/WEA-ET-1-2-Martins.pdf
File-Format: Application/pdf
Handle: RePEc:wea:econth:v:1:y:2012:i:2:p:2

Template-Type: ReDIF-Article 1.0
Author-Name: Manuel Wörsdörfer
Author-Email: woersdoerfer@wiwi.uni-frankfurt.de
Author-Workplace-Name: Goethe University, Frankfurt, Germany
Title: Walter Eucken on Patent Laws: Are Patents Just ‘Nonsense upon Stilts’?
Abstract: As recent newspaper headlines show the topic of patents/patent laws is still heavily disputed. In this paper I will approach this topic from a theoretical-historical and history of economic thought-perspective. In this regard I will link the patent controversy of the nineteenth century with Walter Eucken's Ordoliberalism – a German version of neoliberalism. My paper is structured as follows: The second chapter provides the reader with a historical introduction. At the heart of this paragraph are the controversy and discourse on patent laws in nineteenth century Europe as well as the pro and contra arguments presented by the anti-patent/free-trade movement respectively by the advocates of patent protection. The focus of my paper is on the struggle for the protection of inventions and innovations in nineteenth century Germany, since Walter Eucken, main representative of the Freiburg School of Law and Economics, picks up the counter-arguments presented in the national debate and in particular by the Kongress deutscher Volkswirthe. The third chapter deals intensively with the question whether patent laws are just 'nonsense upon stilts' from an ordoliberal perspective. Here, Eucken's arguments against the current patent system are elaborated in great detail. The paper ends with a summary of my main findings. Read the Open Peer Discussion on this paper »
Journal: Economic Thought
Pages: 3
Volume: 1
Issue: 2
Year: 2012
Month: December
File-URL: http://et.worldeconomicsassociation.org/papers/walter-eucken-on-patent-laws-are-patents-just-nonsense-upon-stilts/
File-Format: text/html
File-URL: http://et.worldeconomicsassociation.org/files/WEA-ET-1-2-Worsdorfer.pdf
File-Format: Application/pdf
Handle: RePEc:wea:econth:v:1:y:2012:i:2:p:3

Template-Type: ReDIF-Article 1.0
Author-Name: Jamie Morgan
Title: Forecasting, Prediction and Precision: A Commentary
Abstract: Forecasting involves an underlying conceptualization of probability. It is this that gives sense to the notion of precision in number that makes us think of economic forecasting as more than simply complicated guesswork. We think of it as well-founded statement, a science and not an art of numbers. However, this understanding is at odds with the nature of social reality and the attributes of the forecaster. We should think differently about how we both anticipate and make the future and what this means. Foresight is perhaps a more appropriate term. This paper addresses two issues that rarely receive attention in the field of economics. First, why is there a continued high demand for economic forecasts despite their lack of success in anticipating significant turning points in any given system? Second, what are forecasts actually assuming about the nature of a system and the future state of the world? In the paper I approach these issues indirectly. My intention is to highlight their significance by setting out a series of arguments that encapsulate the characteristics of a forecaster required to match a common understanding of what forecasting is intended to do. The structure of this paper is unusual for a contribution in the field of economics. It follows a format more commonly used in analytical philosophy when the author wants to focus on a problem and where the intention is to provoke further questioning, rather than supply ready answers. As such, it should not be read as a comprehensive account of all possible approaches to methods or philosophies of forecasting and attendant issues of probability. Three points are worth stating at the outset as a guide to what follows:
  1. Forecasting tends to forget that it is conjecture and what that really means. Its scientism overburdens how it is articulated and how it is perceived