In several accounts of what models are and how they function a specific view dominates. This view contains the following characteristics. First, there is a clear-cut distinction between theories, models and data and secondly, empirical assessment takes place after the model is built. This view in which discovery and justification are disconnected is not in accordance with several practices of mathematical business-cycle model building. What these practices show is that models have to meet implicit criteria of adequacy, such as satisfying (...) theoretical, mathematical and statistical requirements, and be useful for policy. In order to be adequate, models have to integrate enough items to satisfy such criteria. These items include besides theoretical notions, policy views, mathematisations of the cycle and metaphors also empirical data and facts. So, the main thesis of this chapter is that the context of discovery is the successful integration of those items that satisfy the criteria of adequacy. Because certain items are empirical data and facts, justification can be built-in. (shrink)

Rawls’ theory of justice is paradoxical, for it requires a society to aim directly to maximize the basic goods received by the least advantaged even if directly aiming is self-defeating. Rawls’ reasons for rejecting capitalist systems commit him to holding that a society must not merely maximize the goods received by the least advantaged, but must do so via specific institutions. By Rawls’ own premises, in the long run directly aiming to satisfy the difference principle is contrary to the interests (...) of the poor, though it is meant to aid them. -/- . (shrink)

The WTO Dispute Settlement System (DSS) has been the object of many studies in politics, law, and economics focusing on institutional design problems. This paper contributes to such studies by accounting for the argumentative nature and sophisticated features of the DSS through a philosophical analysis of the procedures through which it is articulated. Jürgen Habermas's discourse theory is used as a hermeneutic device to disentangle the types of ‘orientations’ (compromise, consensus, and mutual understanding) pertaining to DSS procedures. We show that (...) these latter are oriented primarily to put the parties in a position to reach mutual understanding. Such an orientation is no mere idiosyncrasy of the DSS but is the only one consistently conducive to the WTO's general aims, in response to the various types of disputes that may arise between its Members. Before closing, we bring our procedural considerations to bear on the reform proposals of the DSS. (shrink)

In a recent paper (Denis, 2004b) I argued that the neoclassical use of the concept of equilibrium was guilty of a hypostatisation: an equilibrium which is only an abstraction and extrapolation, the logical terminus of a component process taken in isolation, is extracted and one-sidedly substituted for the whole. The temporary is made permanent, and process subordinated to stasis, with clearly apologetic results. I concluded by suggesting that this hypostatisation exemplified the contrast between formal and dialectical modes of thought, and (...) that it may be in the application of a dialectical notion of equilibrium that the heterodoxy can make its most telling contribution. This paper develops the line of thought that, while heterodox currents may superficially appear as divided amongst themselves as they are from the orthodoxy, there is truly something profound uniting the apparently disparate heterodox trends: the adoption of a dialectical method. I draw on the work of Sciabarra (1995, 2000), who argues that making process primary, which we might expect of Austrian economists, is the essence of dialectics, which we might (wrongly, in his view) identify with Marxism. If this view is, as I believe, fundamentally correct, perhaps (a) we can only understand the method of neoclassical economics by contrasting it with a dialectical approach, and (b) we can explore the potential for common ground between the various heterodox currents by examining their attitude, both implicit and explicit, to dialectics. (shrink)

Bunge (2000) distinguishes two main methodological approaches of holism and individualism, and associates with them policy prescriptions of centralism and laissez-faire. He identifies systemism as a superior approach to both the study and management of society. The present paper, seeking to correct and develop this line of thought, suggests a more complex relation between policy and methodology. There are two possible methodological underpinnings for laissez-faire: while writers such as Friedman and Lucas fit Bunge’s pattern, more sophisticated advocates of laissez-faire, such (...) as Smith and Hayek, base their policy prescription in a methodology quite divergent from the individualism Bunge describes. (shrink)

methodology both of neoclassical and Austrian economics, as well as other approaches, from New Keynesianism to analytical Marxism. Yet there is considerable controversy as to what the phrase means. Moreover, the methodologies of those to whom the theoretical practice of MI is ascribed differ profoundly on the status of the individual economic agent: economics.

In a recent paper (Denis, 2004b) I argued that the neoclassical use of the concept of equilibrium was guilty of a hypostatisation: an equilibrium which is only an abstraction and extrapolation, the logical terminus of a component process taken in isolation, is extracted and one-sidedly substituted for the whole. The temporary is made permanent, and process subordinated to stasis, with clearly apologetic results. I concluded by suggesting that this hypostatisation exemplified the contrast between formal and dialectical modes of thought, and (...) that it may be in the application of a dialectical notion of equilibrium that the heterodoxy can make its most telling contribution. This paper develops the line of thought that, while heterodox currents may superficially appear as divided amongst themselves as they are from the orthodoxy, there is truly something profound uniting the apparently disparate heterodox trends: the adoption of a dialectical method. I draw on the work of Sciabarra (1995, 2000), who argues that making process primary, which we might expect of Austrian economists, is the essence of dialectics, which we might (wrongly, in his view) identify with Marxism. If this view is, as I believe, fundamentally correct, perhaps (a) we can only understand the method of neoclassical economics by contrasting it with a dialectical approach, and (b) we can explore the potential for common ground between the various heterodox currents by examining their attitude, both implicit and explicit, to dialectics. (shrink)

Hayek’s Challenge is subtitled ‘an intellectual biography’ of Hayek, and the publisher describes it as ‘the first full intellectual biography’ of Hayek (front flap). But Caldwell himself appears to disagree: it was ‘never my goal’ to write ‘a comprehensive intellectual biography’ (177, note 10). Further, the book has a ‘secret title’: Caldwell’s Challenge (4). To assess what Caldwell has done, it is important to be very clear about what he was trying to do. Caldwell spells out in detail, in engaging (...) autobiographical passages, that his own interest is very much in the area of methodology; and.. (shrink)

To understand the work of economic theorists it is often helpful to situate it in the context of the rhetorical strategy they were pursuing. Two ontologically distinct rhetorical strategies of laissez-faire may be distinguished by the way they articulate the individual interest with the general interest. A reductionist approach, exemplified by Friedman and Lucas, suggests that the properties and behaviour of an entity can be understood in terms of the properties and behaviour of the constituent lower-level components, taken in isolation. (...) The contrary – holistic – stance, viewing the qualities of phenomena as products of the inter-relations between their component parts, is characteristic of Smith and Hayek. While the reductionist approach naturally issues in a laissez- faire policy prescription, the holistic account is more problematic. Reconciling a holistic ontology with a reductionist policy prescription requires the intercalation of a black box, such as an evolutionary process or the invisible hand of a deity. (shrink)

The literature on common pool resource (CPR) governance lists numerous factors that influence whether a given CPR system achieves ecological long-term sustainability. Up to now there is no comprehensive model to integrate these factors or to explain success within or across cases and sectors. Difficulties include the absence of large-N-studies (Poteete 2008), the incomparability of single case studies, and the interdependence of factors (Agrawal and Chhatre 2006). We propose (1) a synthesis of 24 success factors based on the current SES (...) framework and a literature review; (2) the application of neural networks on a database of CPR management case studies in an attempt to test the viability of this synthesis. This method allows us to obtain an implicit quantitative and rather precise model of the interdependencies in CPR systems. Given such a model, every success factor in each case can be manipulated separately, yielding different predictions for success. This could become be a fast and inexpensive way to analyze, predict and optimize performance for communities world-wide facing CPR challenges. Existing theoretical frameworks could be improved as well. (shrink)

The numerous historical episodes of free banking have invariably ended in the establishment of central banking. Was the failure of free banking due to ?theory,? ?seignorage??the attempt by governments to use central banks for revenue purposes?or to ?crises?? Would a free banking system be stable, free of crises? This is the crux of the theoretical and historical debate.

The present monograph considers some macrohistorical trends along with the aspects of globalization. Macrohistory is history on the large scale that tells the story of the entire world or of some major dimensions of historical process. For the present study three aspects of macrohistory have been chosen. These are technological and political aspects, as well as the one of historical personality. Taken together they give a definite picture of unfolding historical process which is described from the beginning of human society (...) formation to the present day and near future. The combination in the monograph title of the two terms – macrohistory and globalization – is in no way artificial. On the contrary, the connection of these terms is organic at least as the real goal of macrohistory is to find mean-ing in the past so as to create new possibilities of meaning for the future. The analysis of globalization also includes three aspects: political, economic and futurological as today the world may well be regarded as being at the start of a new global reconfiguration. The author presents his ideas of the world prospective political and in some respects social-economic development basing on the analysis of macrohistory and contemporary globalization processes. The monograph also considers some global scenarios of the World System's near future. (shrink)

The article presents a verbal and mathematical model of medium-term business cycles (with a characteristic period of 7–11 years) known as Juglar cycles. The model takes into account a number of approaches to the analysis of such cycles; in the meantime it also takes into account some of the authors' own generalizations and additions that are important for understanding the internal logic of the cycle, its variability and its peculiarities in the present-time conditions. The authors argue that the most important (...) cause of cyclical crises stems from strong structural disproportions that develop during economic booms. These are not only disproportions between different economic sectors, but also disproportions between different societal subsystems; at present these are also disproportions within the World System as a whole. The proposed model of business cycle is based on its subdivision into four phases: – recovery phase (which could be subdivided into the start sub-phase and the acceleration sub-phase); – upswing/prosperity/expansion phase (which could be subdivided into the growth sub-phase and the boom/overheating sub-phase); – recession phase (within which one may single out the crash/bust/acute crisis subphase and the downswing sub-phase); – depression/stagnation phase (which we could subdivide into the stabilization subphase and the breakthrough sub-phase). The article provides a detailed qualitative description of macroeconomic dynamics at all the phases; it specifies driving forces of cyclical dynamics and the causes of transition from one phase to another (including psychological causes); a special attention is paid to the turning point from the peak of overheating to the acute crisis, as well as to the turning point from the downswing to recovery. The proposed mathematical model of Juglar cycle takes into account the following effects that are typical for the market economy: • positive feedbacks between various economic processes; • presence of a certain inertia, time lags in reactions of the economic subsystem to the change in conditions; • amplification by the financial subsystem of positive feedbacks and time lags in the economic subsystem; • excessive reaction to changing conditions during the acute crisis sub-phase. The authors suggest that the current crisis turns out to be rather similar to classical Juglar crises; however, there is also a significant difference, as the current crisis occurs at a truly global scale. Yet, due to this truly global scale of the current crisis, the possibilities of regulation with the national state's measures have turned out to be ineffective,whereas the suprastate regulation of financial processes hardly exists. It is shown that all these have led to the reproduction of the current crisis according to a classical Juglar scenario. (shrink)

People want things, and they tend to act in such a way as to get the things they want, to the best of their ability.1 Sometimes our wants conflict with each other, so that we are forced to choose between different things that we want. When this happens, we normally choose the thing that we want more, over the thing that we want less. Behaving in this way is what we call “rational”; more specifically, it is “instrumentally rational.” Instrumental rationality (...) consists in choosing the means that best achieves one’s goals, according to the information one has. (shrink)

Genesis of the scientific ideas and views on intellectual capital is characterized by various approaches highlighting the role of knowledge, skill and professional employees as a form of productive capital. This tendency is mostly revealed at the present stage of economic science development in transiting to an information society. In these conditions the holistic study of intellectual capital requires an expansion of the methodological research base using the evolutionary theory of economic development of the world community, general theory of complex (...) systems, theory of informational economics and other disciplines. Moreover, in Russia there are a number of problems associated with creating a necessary institutional and regulatory environment for protecting the intellectual property. According to the authors, the study of the intellectual capital is necessary from the institutional analysis perspective, as it allows to more accurately determine the current state of the legal status of intellectual assets in the economic activity of an enterprise. (shrink)

We propose an axiomatic approach to constructing the dynamics of systems, in which one the main elements 9e8 is the consciousness of a subject. The main axiom is the statements that the state of consciousness is completely determined by the results of measurements performed on it. In case of economic systems we propose to consider an offer of transaction as a fundamental measurement. Transactions with delayed choice, discussed in this paper, represent a logical generalization of incomplete transactions and allow for (...) a more rigorous approach to studying the properties of the algebra of economic measurements. Considering the behavior of an object as a sequence of actions and choices allows extending the obtained results to random systems, which include the subject's consciousness as one of its elements. The specifics, on which the description of fundamental measurements is based, allows easily transferring the formalism of Schwinger's theory of selective measurements (and the consequent quantum-mechanical formalism) to the economic and social systems. (shrink)

According to a theorem recently proved in the theory of logical aggregation, any nonconstant social judgment function that satisfies independence of irrelevant alternatives (IIA) is dictatorial. We show that the strong and not very plausible IIA condition can be replaced with a minimal independence assumption plus a Pareto-like condition. This new version of the impossibility theorem likens it to Arrow’s and arguably enhances its paradoxical value.

My philosophical case study concerns textbook presentations of the theory of demand. Does this theory contain anything more than just a collection of tautologies? In order to determine its empirical content, it must be viewed holistically. But then, the theory implies false factual claims. We can avoid this result by embracing the theory’s normative character. The resulting consequences will be illuminated with the new autodetermination thesis recently proposed in the philosophy of physics by Oliver Timmer. Applying his ideas to the (...) theory of demand reveals that the statements of this discipline simultaneously concern both values and facts. (shrink)

Economists have often attempted precise measurement of phenomena which involve vague predicates. Difficulties emerge in such attempts if vagueness is not explicitly acknowledged at the methodological level. In this paper, various accounts of vague concepts are used to think about the economics of poverty measurement. Approaches to dealing with vagueness in this context tend to involve 'epistemic' and 'fuzzy set theoretic' approaches. Indeed, only the fuzzy set theoretic literature takes on vagueness explicitly. It is argued that both these approaches (...) encounter significant difficulties, and that fuzzy set theoretic measures are hard to interpret intuitively. A 'supervaluationist' approach to the vagueness of poverty is developed. It is argued that this approach has much to recommend it and that some fuzzy measures can be interpreted intuitively as measures of vulnerability on this account. (shrink)

This paper analyzes the proposed use of combinatorial derivatives markets for event prediction, especially for catastrophic events such as terrorism, war, or political assasination. Following a presentation of the philosophical principles underlying these politico-economic tools, I examine case studies (U.S. DoD proposals) that evaluate their advantages and disadvantages in terms of both efficacy and moral considerations. I conclude that these markets are both fatally flawed due to internal conceptual contradictions and morally problematic.

A sketch of some of the implications of nudges.

In this paper I propose a framework to understand the transition in Foucault’s work from the disciplinary model to the governmentality model. Foucault’s work on power emerges within the general context of an expression of capitalist rationality and the nature of freedom and power within it. I argue that, thus understood, Foucault’s transition to the governmentality model can be seen simultaneously as a deepening recognition of what capitalism is and how it works, but also as a recognition of the changing (...) historical nature of the actually existing capitalisms and their specifically situated historical needs. I then argue that the disciplinary model should be understood as a contingent response to the demands of early capitalism, and argue that with the maturation of the capitalist enterprise many of those responses are no longer necessary. New realities require new responses; although this does not necessarily result in the abandonment of the earlier disciplinary model, it does require their reconfiguration according to the changed situation and the new imperatives following from it. (shrink)

I present a game-theoretic way to understand the situation describing Newcomb’s Problem (NP) which helps to explain the intuition of both one-boxers and two-boxers. David Lewis has shown that the NP may be modelled as a Prisoners Dilemma game (PD) in which ‘cooperating’ corresponds to ‘taking one box’. Adopting relevant results from game theory, this means that one should take just one box if the NP is repeated an indefinite number of times, but both boxes if it is a one-shot (...) game. Causal decision theorists thus give the right answer for the one-shot situation, whereas the one-boxers’ solution applies to the indefinitely iterated case. Because Nozick’s set-up of the NP is ambiguous between a one-shot and a repeated game, both of these solutions may appear plausible – depending on whether one conceives of the situation as one-off or repeated. If the players’ aim is to maximize their payoffs, the symmetric structure of the PD implies that the two players will behave alike both when the game is one-shot and when it is played repeatedly. Therefore neither the observed outcome of both players selecting the same strategy (in the PD) nor, correspondingly, the predictor’s accurate prediction of this outcome (in the NP) is at all surprising. There is no need for a supernatural predictor to explain the NP phenomena. (shrink)

Stimulating and thought-provoking," A Brief History of Liberty" offers readers a philosophically-informed portrait of the elusive nature of one of our most ...

The second edition of this guide to Adam Smith's system of thought has been fully updated to reflect recent developments in Smith scholarship and Professor Skinner's experience of teaching Smith to a student audience. The material from the first edition has been extensively rewritten, and four new chapters have been added, covering Smith's essays on the exercise of human understanding, and his relationship to Francis Hutcheson, David Hume, and Sir James Steuart. -/- Professor Skinner places Smith's system of social, and (...) moral, science firmly within the context of contemporary British and Continental intellectual history, dealing in particular detail with the founders of the Scottish Enlightenment and with the French Physiocrats. A close reading of a broad range of texts, supported by a deep knowledge of contemporary institutional history, suggests the patters of their influence through the various recensions of Smith's extant works. The essays similarly explore Smith's own reception among his peers and successors. -/- The essays in this volume have been developed from Professor Skinner's lecture course on `The Age and Ideas of Adam Smith', taught to senior undergraduate and graduate students in political economy. Their relevance extends out to students of economic history, philosophy, and the history of ideas in the eighteenth century, as well as to all those involved in the study of Adam Smith. Each essay can be read as a self-contained unit, supported by a full bibliography and notes; the book as a whole expounds a single coherent argument which demonstrates how Smith's works are inter-related. (shrink)

In The Construction of Social Reality (1995), John Searle develops a theory of institutional facts and objects, of which money, borders and property are presented as prime examples. These objects are the result of us collectively intending certain natural objects to have a certain status, i.e. to ‘count as’ being certain social objects. This view renders such objects irreducible to natural objects. In this paper we propose a radically different approach that is more compatible with standard economic theory. We claim (...) that such institutional objects can be fully understood in terms of actions and incentives, and hence the Searlean apparatus solves a non-existent problem. (shrink)

Much recent work on the intellectual background of Austrian economics reveals an unfortunate lack of awareness of the distinct nature of the Austrian contribution to philosophy, from which the Austrian economists drew many of their ideas. The present essay offers a sketch of this contribution, contrasting Austrian philosophy especially with the modes of philosophy dominant in Germany. This makes it possible to throw new light on the relations on Mises, Kant and the Vienna circle, and it allows us also to (...) establish the extent to which Austrian economics might properly be seen as being allied to the German hermeneutic tradition of Dilthey, Gadamer, et al. The essay concludes with a criticism of the hermeneutic relativism recently canvassed by some Austrian economists, concentrating especially on the work of Don Lavoie, whose writing are treated as symptomatic of a wider and somewhat regrettable trend. (shrink)

The necessity to provide for a stable regional development as one of the main priorities of regional social and economic policies in the unstable world economics is justified. A wide classification of stability types in region development is considered and factors influencing the institutional stability are singled out.

[Working paper] Philosophers occasionally invoke Lipsey and Lancaster's "general theory of second best" to challenge the ideal guidance view, the view that ideal political principles can provide normative guidelines for our efforts to address injustice amidst unfavorable circumstances. Roughly, the theorem says: if certain conditions are met, then what we should do in nonideal circumstances does not necessarily approximate what we should do in ideal circumstances. But extant challenges to the ideal guidance view are based on mistaken interpretations of the (...) theorem's antecedent condition. I show that, once we understand the antecedent condition correctly, the theory of second best does not present as tough a challenge to the ideal guidance view as is typically believed. (shrink)

How do ideas evolve? Can one speak of scientific progress when there is more than one pathway of intellectual evolution in which different ideas emerge and flow in different directions? Is the history of economic analysis a compilation of a number of intellectual pathways? This essay argues that it is possible to understand the course of history as a number of overlapping, divergent, and endlessly changing pathways. Such pathways operate in different fashions. They sometimes lead to more coherent and high (...) levels of understanding. And sometimes they delay or obstruct advancement in intellectual history. In both cases, outcomes are unpredictable and multi-directional. (shrink)