Economic Theory Commons^™

Does Starting School Before Labor Day Affect High School Retention And Graduation: Evidence From Virginia's Kings Dominion Law, Timothy M. Komarek, Jay K. Walker

Economics Faculty Publications

Several states have required K-12 public schools to start after Labor Day in an effort to aid the tourism and hospitality industry. However, little is known about how these policies impact educational outcomes. We examine the impact of Virginia's post-Labor Day school start law on high school retention and graduation rates. We use a difference-in-differences model to exploit exogenous variation in school division start dates. Our results show small differences of up to three weeks have little effect on high school dropout and graduation rates. Our findings inform the debate on post-Labor Day school start laws and compulsory attendance age …

Convergence In Income Inequality: Further Evidence From The Club Clustering Methodology Across States In The U.S., Nicholas Apergis, Christina Christou, Rangan Gupta, Stephen M. Miller

Economics Faculty Publications

This paper contributes to the sparse literature on inequality convergence by empirically testing convergence across states in the U.S. This sample period encompasses a series of different periods that the existing literature discusses -- the Great Depression (1929–1944), the Great Compression (1945–1979), the Great Divergence (1980-present), the Great Moderation (1982–2007), and the Great Recession (2007–2009). This paper implements the relatively new method of panel convergence testing, recommended by Phillips and Sul (2007). This method examines the club convergence hypothesis, which argues that certain countries, states, sectors, or regions belong to a club that moves from disequilibrium positions to their club-specific …

Governance By Economist: An Historical Note On The Keynesian Revolution, Lewis Karstensson

Economics Faculty Publications

An inferential analysis of the performance of the United States economy with respect to production, employment, and average price level over the twentieth century by presidential administration.

The Choice Of Technology And Equilibrium Wage Rigidity, Haiwen Zhou

Economics Faculty Publications

In this general equilibrium model, firms engage in oligopolistic competition and choose increasing returns technologies to maximize profits. Capital and labor are the two factors of production. The existence of efficiency wages leads to unemployment. The model is able to explain some interesting observations of the labor market. First, even though there is neither long-term labor contract nor costs of wage adjustment, wage rigidity is an equilibrium phenomenon: an increase in the exogenous job separation rate, the size of the population, the cost of exerting effort, and the probability that shirking is detected will not change the equilibrium wage rate. …

(Review) A Short History Of Ethics And Economics: The Greeks, Spencer J. Pack

Economics Faculty Publications

No abstract provided.

Comment, Dean D. Croushore

Economics Faculty Publications

No abstract provided.

Ethics And Critical Thinking, Jonathan B. Wight

Economics Faculty Publications

This chapter seeks to demonstrate that investigations in positive economics rely on ethical perspectives and practices, and further, that critical thinking requires a wider ethical viewpoint than normative economics generally permits. Positive economics generally relies, for example, on the unsung virtues of the investigator who demonstrates honesty and transparency in the search for truth. Ethical failures in this regard are not uncommon (DeMartino, 2011). But another unstated ethical perspective appears in the worldview from which a researcher sets out to model behavior. Modelers almost always assume that rationality requires that an economic actor undertake an action in pursuit of a …

Institutional Divergence In Economic Development, Jonathan B. Wight

Economics Faculty Publications

The Anglo-American capitalist model (AACM) encompasses a set of theories and policies that advance the classical objectives of individual autonomy, wealth acquisition, and economic growth. In the twentieth century, the neoclassical goal of short-run Pareto efficiency was added yet remains in possible tension with these other aims. The AACM generally upholds the primacy of markets as the means for achieving its normative ideals through private, decentralized actions, with some exceptions. In the modern political arena this ideology is associated with the Reagan-Thatcher revolution of the 1980s and provides a framework for many who oppose statist solutions to social problems (Steger …

Monopoly, Regulation, And Innovation, Matt Bogard

Economics Faculty Publications

Recently the Justice department has started investigations into alleged anti-trust violations by Monsanto. This has helped fuel a lot of already hyped discontent with one of the world’s leaders in innovative solutions for sustainable agriculture. This article discusses how the regulatory environment could possibly have contributed to more concentration and power in the biotech industry. Increasing regulation would likely have the opposite effect of creating a level playing field in the agriculture industry. From AgWeb, March 27,2010 http://www.agweb.com/blog/Economic_Sense_190/Monopoly_Regulation__and_Innovation_10771/

Commentary, Dean D. Croushore

Economics Faculty Publications

It is a pleasure to discuss Richard Anderson and Charles Gascon’s (2009) article on their attempt to develop a state-space model to measure potential output growth in the face of data revisions. They use the methodology of Cunningham et al. (2007) applied to real output, to see if they can develop a better measure of potential output than other researchers. Such an approach seems promising, and they develop a unique method to study the data.

Moral Reasoning In Economics, Jonathan B. Wight

Economics Faculty Publications

The Teagle discussion analyzes why economics teachers have become overly narrow in their pedagogical perspectives, thus pulling back from fully supporting the liberal arts agenda. In Chapter 1, Colander and McGoldrick (p. 6) observe that the generalist approach that excites students by asking "big think" questions across disciplinary boundaries fails to generate new knowledge, while the narrow "little think" questions that can be answered often fail to develop the critical thinking skills necessary for liberal education. As one example, the authors cite the decline of moral reasoning in economics, which was once center stage in Adam Smith's analysis of society. …

Aristotle's Difficult Relationship With Modern Economic Theory, Spencer J. Pack

Economics Faculty Publications

This paper reviews Aristotle's problematic relationship with modern economic theory. It argues that in terms of value and income distribution theory, Aristotle should probably be seen as a precursor to neither classical nor neoclassical economic thought. Indeed, there are strong arguments to be made that Aristotle's views are completely at odds with all modern economic theory, since, among other things, he was not necessarily concerned with flexible market prices, opposed the use of money to acquire more money, and did not think that the unintended consequences of human activity were generally beneficial. The paper argues however, that this interpretation goes …

An Economic Approach To Climate Change, Matt Bogard

Economics Faculty Publications

Economics is the study of choices, and how they are made compatible. The issue of global warming can be viewed in the context of a set of choices that lead to climate change. In a free society choices are made compatible via the price system. If prices do not reflect the true cost of carbon, then carbon intensive production and consumption choices may not be compatible given the choice sets across all members of society. For example, my choice to burn fossil fuels may be incompatible with your choice to live in a coastal area given certain climate change scenarios. …

The Ethical Lacunae In Friedman's Concept Of The Manager, Jonathan B. Wight, Martin Calkins

Economics Faculty Publications

This article challenges along two lines Milton Friedman's injunction that the sole role of the business manager is to maximize profits for shareholders using all legal and ethical means. First, it shows how Friedman overly narrows the manager's moral duties to consequentialist profit maximization and thereby fails to account for a wide range of values and virtues necessary for good management. Second, it illustrates how more oblique approaches to management as well as Adam Smith's virtue-based model better capture the moral imagination and relational aspects of leadership that are critical to good management today. In the end, this article suggests …

Smith’S Humean Criticism Of Hume’S Account Of The Origin Of Justice, Spencer J. Pack, Eric Schliesser

Economics Faculty Publications

Adam Smith criticizes David Hume's account of the origin of and continuing adherence to the rule of law for being not sufficiently Humean. Hume explained that adherence to the rule of law originated in the self-interest to restrain self-interest. According to Smith, Hume does not pay enough attention to the passions of resentment and admiration, which have their source in the imagination. Smith offers a more naturalistic and evolutionary account of the psychological preconditions of the establishment and morality of justice than Hume had. Smith severs the intimate connection that Hobbes and Hume made between justice and property.

Teaching The Ethical Foundations Of Economics: The Principles Course, Jonathan B. Wight

Economics Faculty Publications

When we analyze the source of humor, one ingredient is surely incongruity, the juxtaposition of opposites. So when Tom Lehrer, the consummate Harvard mathematician, openly calls for plagiarism, this is funny because it is exactly the opposite of what we expect - it is absurd. And yet, from the viewpoint of modern economics, is plagiarism really so absurd? We teach our students to maximize short-term profits (in a moral vacuum). We drill them that producers minimize private costs of production (without reference to ethical codes of conduct). We expect economic agents to operate with atomistic selfishness, assuring them that this …

(Review) Pierre Force, Self-Interest Before Adam Smith: A Genealogy Of Economic Science, Spencer J. Pack

Economics Faculty Publications

Pierre Force, Self-Interest Before Adam Smith: A Genealogy of Economic Science (Cambridge: Cambridge University Press, 2003), pp. ix, 279, $65.00. ISBN 0-52183060-5.

(Review) Self-Interest Before Adam Smith: A Genealogy Of Economic Science, Spencer J. Pack

Economics Faculty Publications

Pierre Force, Self-Interest Before Adam Smith: A Genealogy of Economic Science (Cambridge: Cambridge University Press, 2003), pp. ix, 279, $65.00. ISBN 0-521 83060-5.

Adam Smith And Greed, Jonathan B. Wight

Economics Faculty Publications

The virtues of greed have been widely promoted by some economists in the 20th century. Allegedly it is Adam Smith who provides this new dignity to greed (Lerner, 1937, ix). Kenneth Arrow and Frank Hahn in the General Equilibrium Analysis (1971), for example, implicitly assume that Adam Smith's self-interest is the greed that promotes economic efficiency (quoted in Evensky, 1993, 203). Walter Williams (1999), a devoted follower of Smith, writes in his column that, "Free markets, private property rights, voluntary exchange, and greed produce preferable outcomes most times and under most conditions." These pronouncements have become part of the cultural …

Teaching The Ethical Foundations Of Economics, Jonathan B. Wight

Economics Faculty Publications

Some economists consider their discipline a science, and thereby divorced from messy ethical details, the normative passions of right and wrong. They teach in a moral vacuum, perhaps even advocating economic agents' operating independently and avariciously, asserting that this magically produces the greatest good for society.

How Do Forecasts Respond To Changes In Monetary Policy?, Laurence Ball, Dean D. Croushore

Economics Faculty Publications

Just as changes in atmospheric conditions affect weather forecasts, changes in monetary policy affect economic forecasts. When monetary policy shifts, forecasters change their predictions about growth and inflation. But does the economy change to the same extent that forecasts do? In this article, Laurence Ball and Dean Croushore examine forecasts from the Survey of Professional Forecasters to determine if forecasts and the economy respond in tandem or if there are significant differences.

Unpacking ‘Adam Smith: Critical Theorist?’, Spencer J. Pack

Economics Faculty Publications

This paper responds to Keith Tribe's provocative Journal of Economic Literature article, “Adam Smith: Critical Theorist?” There Tribe argued that most people most of the time grossly misread Smith, due, among other things, to their quite inadequate appreciation of Smith's linguistic, social, moral, and theological context. Against Tribe, the paper argues that Smith can profitably be read as both an eighteenth-century moralist and a twenty-first century critic. Smith can be a source of inspiration, wisdom and profundity for contemporary economists. Moreover, Smith can be successfully employed by modern economists to change, deepen, and broaden contemporary economic theory.

A Little Adam Smith Is A Dangerous Thing, Jonathan B. Wight

Economics Faculty Publications

Adam Smith was trying to counter medieval church theology, which held that any self-interested behavior was sinful and detrimental. Smith countered that self-interest could yield valuable outcomes for society as people pursued specialization and market trade. Much later these quotes would be used to justify the greedy and grasping personae of homo economicus, illustrating how a little Adam Smith can prove to be a dangerous thing. For example, Max Lerner in 1937 would say that Adam Smith "sanctified predatory impulses" and "gave a new dignity to greed." By the 1980s the movie Wall Street has the financial tycoon Gordon …

Does Free Trade Cause Hunger? Hidden Implications Of The Ftaa, Jonathan B. Wight

Economics Faculty Publications

Voluntary free trade has the potential, slowly and gradually over time, to create "general opulence" because it allows workers to acquire greater competency and specialization: in a word, workers become more productive. The creation of a Free Trade Area of the Americas (FTAA) would expand market areas and thereby potentially contribute to raising future living standards of workers. This paper seeks to analyze the theoretical basis for trade, provide an economic overview of FTAA countries, and analyze the winners and losers from trade.

(Review) Entrepreneurs, Institutions And Economic Change: The Economic Thought Of J. A. Schumpeter (1905-1925), Spencer J. Pack

Economics Faculty Publications

Entrepreneurs, Institutions, and Economic Change: The Economic Thought of J. A. Schumpeter (l905-1925). By Nicolo De Vecchi. Translated by Anne Stone. Brookfield, Vt.: Edward Elgar, l995. 192 pp. $80.00

(Review) Social Limits To Economic Theory, Spencer J. Pack

Economics Faculty Publications

Reviews the book Social Limits to Economic Theory by Jon Mulberg. New York: Routledge, l995. 200 pp. $19.95.

How Useful Are Forecasts Of Corporate Profits, Dean D. Croushore

Economics Faculty Publications

If forecasters predict higher earnings for corporations, the stock market will rise. Stock prices will drop with a forecast of lower earnings. But are such forecasts on the money? Dean Croushore uses data from the Survey of Professional Forecasters to check the accuracy of forecasts of corporate profits. The results show that, despite the volatility of corporate profits, the forecasts are rational.

(Review) The Myth Of Adam Smith, Spencer J. Pack

Economics Faculty Publications

The Myth of Adam Smith, By Salim Rashid. Cheltenham, UK: Edward Elgar, 1998. Pp. X, 227. $80.00

Will The Real Adam Smith Please Stand Up?: Teaching Social Economics In The Principles Course, Jonathan B. Wight

Economics Faculty Publications

Part of the difficulty of introducing social economics into the principles course is the perception that social economics is anathema to mainstream economics. As noted by Warren Samuels, however, "neoclassical economics is already a form of social economics" despite its "pretensions of methodological individualism and value-neutrality". Heilbroner also makes the case that the " ... the preponderance of great economists were aware of economics as explanation systems of particular socio-economic formations." Like it or not, economists err in omitting from their models what McCloskey calls "S" variables--variables representing the "social embeddedness" of values which direct human choices.

Low Inflation: The Surprise Of The 1990s, Dean D. Croushore

Economics Faculty Publications

For most of the 1990s, forecasters have been predicting an upturn in inflation. Yet, over that same period, the United States has experienced stable or declining inflation. Why have forecasts been at odds with reality? And why does it matter? In this article, Dean Croushore considers some answers to these questions and explains why inflation is the economic surprise of the decade.