Beauty Contested. How much of Keynes’ remains in Behavioural Economics Beauty Contests?

In one of the most famous passages of economic literature, John Maynard Keynes (1936, p.156) likens the stock market to a beauty contest in which the winners are those who anticipate the average opinion. Recently there have been attempts at investigating the BC experimentally (Nagel 1995, Duffy & Nagel 1997, Ho et al. 1998, Bosch-Domenech et al. 2002, Güth et al. 2002). In Experimental Beauty Contests, participants choose a real number from a closed interval, e.g. I [0,100]. Whoever picks the number closest to p times the average (usuallywith p = 2/3) is the winner of a monetary reward. An experiment like this is dominance solvable: the process of iterated elimination of dominated strategies leads to the unique and stable equilibrium at which every player chooses zero, and every player wins. Keynes’ metaphor, on the other hand, referred to a situation in which not all participants can win, so that the goal of individual investors and speculators must be “to outwit the crowd” (p. 152). Despite the differences, the Keynesian theory of decision under uncertainty tallies with the behaviour observed in Experimental Beauty Contests.Beauty Contest, Behavioural Economics, Keynes, Reasoning.

What is Behavioural Economics Like?

Behavioural Economics’ milestones, Endowment Effect and Loss Aversion, have been recognized as ‘well documented,’ ‘robust,’ and ‘important’ even by the critics. But well documented, robust, and important what? Are these stylized facts, theoretical constructs, or psychological truths? Do they express genuine preferences or are they judgement mistakes? We discuss the problems with the nature of these claims in the lights of the goals of Behavioural Economics: to improve economics’ realisticness and to be considered mainstream. We argue that, under sensible interpretations of Loss Aversion and Endowment Effect, Behavioural Economics is neither more realistic than, nor part of the mainstream.Behavioural Economics, Decision-Making, Endowment Effect, Loss Aversion, Uncertainty

Coping with Complexity. Keynes and International Economic Relations in the Aftermath of WWI

In the attempt to deepen the understanding of Keynes's thought as an international macroeconomist, we explore the hypothesis of consistency between his general methodological approach to the economic material and his way of reasoning about international economic relations as shaped by WWI. We argue that the methodology of "The Economic Consequences of the Peace" reflects Keynes's attempt to cope with the attributes of the complexity characterizing the European settlement for the post-war period, and particularly 1) organic interdependence among variables at play, 2) irreducible dilemmas and situations of conflict, as well as 3) the need for external, public assistance to overcome the impasse and promote a "shared responsibilities" approach to the imbalances. Striking similarities appearing with the method of Keynes's economic diplomacy in the Forties call for further research in this sense.Keynes; complexity; international economic relations

“Veiling The Controversies with Dubious Moral Attitudes”? Creditors and Debtors in Keynes’s Ethics of International Economic Relations

This paper addresses the enduring insistence on the moral dimension of international economic relations in Keynes’s economics and diplomacy. The issue has so far raised scarce attention in the literature, which tend to attribute some outstanding failures of Keynes’s economic diplomacy to the presumed instrumental use Keynes made of moral arguments. The paper provides a comprehensive account of the ethical arguments used by Keynes in his lifelong attempt to design a fair international order, and aims to demonstrate that this moral dimension is part of a well-defined ethics of international relations which privileges national policy space and freedom to choose.John Maynard Keynes, international economic relations, ethics, complexity

The Economic Problem of Happiness. Keynes on Happiness and Economics

In their latest book (2008), Bruno Frey and the members of the research group he chairs at the University of Zurich announce that happiness research is leading a revolution in economics. More precisely, the revolutionary character of happiness economics would draw on measurement, on how people value goods and social conditions, as well as on policies. This paper aims to discuss critically this claim and what we identified as five crucial issues of mainstream happiness economics, i.e.: 1. the ambiguous relationship between income and happiness, 2. the “back to Bentham” approach, 3. problems of incommensurability, 4. heterogeneity and multidimensionality, 5. the scope of economics in relation to happiness. In so doing, we attempt to review John Maynard Keynes’s vision about happiness and economics, starting from a revisiting of his essay Economic Possibilities for Our Grandchildren in the light of his early unpublished writings on ethics as well as of the whole bulk of his writings in economics. We then provide reasons to argue that the rediscovery of Keynes’s legacy in this respect can be of help to point out and examine the most controversial aspects of today’s happiness research.Happiness, Happiness economics, John Maynard Keynes, Economic Possibilities for Our Grandchildren

Chapter 18 of the General Theory “Further Analysed”: The Theory of Economics as A Method

In 1987, Greenwald and Stiglitz accused Keynes’s summary of the General Theory in chapter 18 of relying upon “neoclassical and Marshallian tools”. A number of contributions have on the contrary emphasized the methodological importance of this chapter, which this paper revisits in the light of A Treatise on Probability. It thereby shows that the notions of cause and dependence used to discuss the relationships between independent and dependent variables of the General Theory are related to the concept of “independence for knowledge”, which concerns logical connections between arguments rather than material connections between events. We demonstrate that such logical connections established in chapter 18 are rediscussed in chapters 19-21, where Keynes allows for probable repercussions between the factors and removes the simplifying assumptions previously introduced. After stressing the methodological continuity this method provides with the analysis of credit cycles in A Treatise on Money, we argue that chapter 18 is an indispensable tool to decode the internal text structure of the General Theory. We thus characterize the latter as a vademecum to the complex economic world, the author providing an analytical method allowing – and requiring – the readers to emulate his efforts to grasp the complexity and interdependence of the economic material.John Maynard Keynes, The General Theory, complexity, economic methodology

What is Behavioural Economics Like?

Behavioural Economics’ milestones, Endowment Effect and Loss Aversion, have been recognized as ‘well documented,’ ‘robust,’ and ‘important’ even by the critics. But well documented, robust, and important what? Are these stylized facts, theoretical constructs, or psychological truths? Do they express genuine preferences or are they judgement mistakes? We discuss the problems with the nature of these claims in the lights of the goals of Behavioural Economics: to improve economics’ realisticness and to be considered mainstream. We argue that, under sensible interpretations of Loss Aversion and Endowment Effect, Behavioural Economics is neither more realistic than, nor part of the mainstream

What is Behavioural Economics Like?

Behavioural Economics’ milestones, Endowment Effect and Loss Aversion, have been recognized as ‘well documented,’ ‘robust,’ and ‘important’ even by the critics. But well documented, robust, and important what? Are these stylized facts, theoretical constructs, or psychological truths? Do they express genuine preferences or are they judgement mistakes? We discuss the problems with the nature of these claims in the lights of the goals of Behavioural Economics: to improve economics’ realisticness and to be considered mainstream. We argue that, under sensible interpretations of Loss Aversion and Endowment Effect, Behavioural Economics is neither more realistic than, nor part of the mainstream

: Matériaux de cours issus des formations Mutual Heritage

Cet ouvrage fait partie du projet Mutual Heritage : from historical integration to contemporary active participation, un projet sur la patrimoine architectural et urbain récent dans le monde méditerranéen. Il rassemble des matériaux de cours issus d'une de ses formations