History of economic thought

International audienceThe chapter provides an overview of the main areas of research in history of economic thought, that correspond to a classic division of phases of development of the economics discipline from its origins to its present state. Following the Journal of Economic Literature classification, the evolution of economics is subdivided into two phases—namely, history of economic thought through 1925 and since 1925; a shorter third part on recent developments is added to this basic scheme. Focus is on what each period contributed to the study of three foundational issues in economics, namely, the theory of individual economic behavior, the market mechanism as a coordinating device, and the respective roles of markets and governments in the regulation of economic systems. Reflection on these issues has progressively formed economists’ understanding of society and has then been extended to a broad range of social phenomena, from monetary and financial matters to health and the environment. These very issues have been the object of major controversies that have divided economists into different schools and have ultimately shaped the history of the discipline. In outlining these developments, similarities and differences between past and present theories are emphasized

Producer choice and technical unemployment: John E. Tozer's mathematical model (1838)

The paper presents Tozer's study of the effects of the mechanization of productive activities on employment as an effort to devise a mathematical model, as an analytical method that would be more general and robust than Ricardo's numerical examples. The contradictory nature of this achievement is emphasized: while with the help of algebra Tozer made significant progress in model building in economics, it is argued that his contribution to a deeper understanding of the phenomenon under study is much less satisfactory, due to the difficulties he faced in his effort to incorporate consumption and demand into a classical analytical framework

Agent-based Computational Economics: a Methodological Appraisal

This paper is an overview of "Agent-based Computational Economics (ACE)", an emerging approach to the study of decentralized market economies, in methodological perspective. It summarizes similarities and differences with respect to conventional economic models, outlines the unique methodological characteristics of this approach, and discusses its implications for economic methodology as a whole. While ACE rejoins the reflection on the unintended social consequences of purposeful individual action which is constitutive of economics as a discipline, the paper shows that it complements state-of the-art research in experimental and behavioral economics. In particular, the methods and techniques of ACE have reinforced the laboratory finding that fundamental economic results rely less on rational choice theory than is usually assumed, and have provided insight into the importance of market structures and rules in addition to individual choice. In addition, ACE has enlarged the range of inter-individual interactions that are of interest for economists. In this perspective, ACE provides the economist‘s toolbox with valuable supplements to existing economic techniques rather than proposing a radical alternative. Despite some open methodological questions, it has potential for better integration into economics in the future.Agent-based Computational Economics, Economic Methodology, Experimental Economics.

Escape the low-growth trap? Microfinance in Tanzania

Tanzania is a small-sized economy, with a large portion of the population below the poverty line of $2 a day, particularly in rural areas. Finscope 2009, a national survey, provides evidence that 56% of the population has no access to financial services, a proportion that has slightly grown over the last few years. The main reasons given by respondents for not having loans, bank accounts or savings are practical obstacles (especially geographical distance), costs and lack of information – thereby suggesting that there is a large unmet demand for “accessible” financial services. Microfinance has endeavoured to address these needs, devising solutions to provide the poorer segments of the population with credit and – to a lesser extent – insurance, leasing and transfers. However, the Tanzanian microfinance market is still tiny, young, and dominated by a small number of major organisations; it is mostly active in Dar es Salaam and Arusha, with limited penetration in rural areas. What are, then, the barriers to its growth, and what steps can be taken to overcome them? Our study of microfinance in Tanzania, now at the end of its second year, addresses these concerns by widening its perspective, from case studies of individual microfinance institutions (MFIs) to the whole set of actors and stakeholders that operate in the field. More precisely, we adopt a network approach that places emphasis on the structure of inter-organisational partnerships that relate MFIs to relevant stakeholders, funders, and regulators; by so doing, we aim to bring to light systemic issues and to identify suitable policy responses

Becker random behavior and the as-if defense of rational choice theory in demand analysis

In discussing rational choice theory (RCT) as an explanation of demand behavior, Becker (1962, Journal of Political Economy, 70, 1–13) proposed a model of random choice in which consumers pick a bundle on their budget line according to a uniform distribution. This model has then been used in various ways to assess the validity of RCT and to support as-if arguments in defense of it. This paper makes both historical and methodological contributions. Historically, it investigates how the interpretation of Becker random behavior evolved between the original 1962 article and the modern experimental literature on individual demand, and surveys six experiments in which it has been used as an alternative hypothesis to RCT. Methodologically, this paper conducts an assessment of the as-if defense of RCT from the standpoint of Becker’s model. It argues that this defense is ‘weak’ in a number of senses, and that it has negatively influenced the design of experiments about RCT

Mini-symposium on the future of history of economics: young scholars' perspective [Introduction]

International audienceThis symposium invited early-career scholrs to discuss the state of history of economics as a field and to propose possible directions for future research. Co-organized by Paola Tubaro and Erik Angner, this symposium took place at the Annual Meeting of the European Society for the History of Economic Thought (ESHET) in Porto, Portugal, on April 29, 2006. Three of the papers presented on that occasion were subsequently published in a special section of the Journal of the History of Economic Thought

Crisis in Indian microfinance and a way forward: governance reforms and the Tamil Nadu model

In recent months, microfinance practitioners worldwide have been holding their breath over events unfolding in India. Beginning in summer 2010 with controversies surrounding the IPO of SKS, a large microfinance institution (MFI) and a major player in the market, the crisis subsequently exacerbated in the state of Andhra Pradesh, with borrowers defaulting on payments and taking their lives. Echoed by the media, hostility to microfinance rose to unprecedented levels and some politicians even encouraged borrowers not to pay back their micro-loans. In fear of deterioration of MFIs’ financial solidity, numerous banks suspended flows of funds to them, leaving them severely cash-strapped. Yet until recently, Indian MFIs were widely praised for their contribution to the fight against poverty. By providing financial services to low-income clients, particularly women who would otherwise have limited or no access to them, microfinance has enabled them to develop small businesses and to reduce the volatility of their incomes. Even tiny loans have often been sufficient to empower the Indian poor. How, then, can the current turbulence be explained? Our study of microfinance in India, now at the end of its second year, addresses these concerns in a twofold way. First, it has extended from the study of a single, focal partner institution to a more global picture of the whole set of inter-organisational partnerships that relate MFIs to relevant stakeholders and regulators; as such, it is best positioned to bring to light systemic issues and to identify suitable policy responses. Second, our analysis focuses on the state of Tamil Nadu, geographically close to Andhra Pradesh and similar to it in terms of size and maturity of the microfinance market, but where the crisis has not spread. It thus enables to identify differences in the operations of MFIs in the two states which, despite a common landscape, may explain their differential capacity to achieve financial and social performance. On this basis, our analysis aims to contribute to the definition of a more sustainable model of microfinance, possibly to be extended to other parts of India

An organization that transmits opinion to newcomers

We aim to identify the conditions under which social influence enables emergence of a shared opinion orientation among members of an organization over time, when membership is subject to continuous but partial turnover. We study an intra-organizational advice network that channels social influence over time, with a flow of joiners and leavers at regular intervals. We have been particularly inspired by a study of the Commercial Court of Paris, a judicial institution whose members are peer-elected businesspeople and are partly replaced every year. We develop an agent-based simulation of advice network evolution which incorporates a model of opinion dynamics based on a refinement of Deuant's relative agreement", combining opinion with a measure of "uncertainty" or openness to social influence. We focus on the effects on opinion of three factors, namely criteria for advisor selection, duration of membership in the organization, and new members' uncertainty. We show that criteria for interlocutor choice matter: a shared opinion is sustained over time if members select colleagues at least as experienced as themselves. Convergence of opinions appears in other congurations too, but the impact of initial opinion fades in time. Duration has an impact to the extent that the longer the time spent in the group, the stronger the possibility for convergence towards a common opinion. Finally, higher uncertainty reinforces convergence while lower uncertainty leads to coexistence of multiple opinions.social influence, advice networks, intra-organizational networks, opinion dynamics, agent-based simulation

Social media censorship in times of political unrest: a social simulation experiment with the UK riots

Following the 2011 wave of political unrest, extending from the Arab Spring to the UK riots, the formation of a large consensus around Internet censorship is underway. The present paper adopts a social simulation approach to show that the decision to “regulate”, filter or censor social media in situations of unrest changes the pattern of civil protest and ultimately results in higher levels of violence. Building on Epstein's (2002) agent-based model, several alternative scenarios are generated. The systemic optimum, represented by complete absence of censorship, not only corresponds to lower levels of violence over time, but allows for significant periods of social peace after each outburst

CAN OPINION BE STABLE IN AN OPEN NETWORK WITH HIERARCHY?AN AGENT-BASED MODEL OF THE COMMERCIAL COURT OF PARIS

The co-evolution of social networks and opinion formation has received increasing attention in recent years. As a contribution to the growing literature on this topic, we explore connections between empirical data representing the advice network of judges at the Commercial Court in Paris and an agent-based simulation protocol testing various hypotheses on the motives that drive agent behaviors. A previous work (Rouchier et al. 2007) had already modeled the dynamics of advice-seeking among judges and studied the implications of different rationality assumptions on the shape of the emerging network. Here, we add an influence model to the previously examined advice-seeking relationships in order to explore the possibility that there is a form of “culture” at the Court that harmonizes the opinions of members over time; we identify a set of relevant stylized facts, and we use new indicators to evaluate how agents choose with whom to interact within this framework. The basic assumptions we analyze are that they seek advice from senior judges who are higher up in the hierarchy, who enjoy high reputation, or who are similar to them. Our simulations test which criterion –or which combination of criteria– is most credible, by comparing both the properties of the emerging network and the dynamics of opinion at the Court to the stylized facts. Our results single out the combination of criteria that most likely guide individuals' selection of advisors and provide insight into their effects on opinion formation.Advice network ; Agent-Based Simulation ; Influence Model ; Opinion Dynamics ; Hierarchy ; Reputation