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Neuroeconomics: New Heart for Economics or New Face of Economic Imperialism

Neuroeconomics: New Heart for Economics or New Face of Economic Imperialism

Journal of Institutional Studies, , Vol. 11 (no. 1),

Neuroeconomics is often seen as the result of neuroscience expansion into economics. However, economics itself has a substantial background of epistemic intervention by spreading rational choice modelling over sociology, political science and part of biology. Neuroeconomics contributes considerably to the economic imperialism progress by developing an important tendency. We would describe it as deeper universalization of economic (rational) behavior by its naturalization and transmuting it in completely biochemical phenomenon. The paper reviews the Paul Glimcher’s project of neuroeconomics as a specific version of economic imperialism claiming that the brain can be modeled using the principles of standard economic theory. Considering neuroeconomics as a methodological approach, the authors show that behind the ideas of reducibility of key economics’ concepts such as “choice” or “utility” to neuroscience data and of “direct transferring” the concepts from economics into neuroscience lies the intention to reinterpret and rewrite neuroscience and other life sciences in terms of economics. It could be done if one would demonstrate the identity of brain and logical or computer structure and if the mathematical models taken from economics would hold the economic semantics while applying to the brain activity. Turning “choice” and its “economic relatives” into the key concepts for interpreting the neural structures and their activity would open the way for neuroeconomics to become an imperial science on human, life or even nature itself.

Views: 880

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Enlarged Empirical Economics and the Quest for Validity: Facing the Ontological Intricacies of the Social Domain

Enlarged Empirical Economics and the Quest for Validity: Facing the Ontological Intricacies of the Social Domain

Journal of Institutional Studies, , Vol. 11 (no. 1),

This article focuses on the impact that the recent widening of empirical economics has on the quest for validity in this field. We begin by summarizing the continuous evolution from a primarily deductive economics to a more empirical one, especially emphasizing the broader experimental and survey-based evidence. Although these developments pave the way for an economics with greater empirical support, they also bring into this field the same validity concerns that mainstream economists naively thought to be avoidable (i. e., concerns with the external validity of experiments and with “test validity” issues largely addressed in other social sciences). We show how, ultimately, such developments force economists to confront some serious challenges and limitations in the quest for validity arising from four ontological peculiarities of the social domain: 1) the awareness of the inquiry on the part of the subject being studied; 2) the lack of relevant structural homogeneity between individuals’ shared psychological properties; 3) actions holistic dependence on the individuals’ complete past; and 4) the variable and holistic nature of cultural, conventionally mediated forms of interaction. We finally argue that openly acknowledging these problems would help economists to tone down their scientificity claims and avoid pseudo-scientific practices like endorsing assumptions refuted by experience.

Views: 724

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Meso-Level of Economy: Theoretical Approaches and Math Modeling

Meso-Level of Economy: Theoretical Approaches and Math Modeling

Journal of Institutional Studies, , Vol. 11 (no. 1),

In the paper we will present a retrospective analysis of the development of the mesoeconomic idea from the first mention of the term in research literature (Wittfogel, 1962) to research papers now being published. Three main trends of meso level understanding in modern English language heterodox economic literature can be identified: the Neo-Schumpeterian Interpretation, the Evolutionary Approach and Neo-Institutionalism. The paper will consider all three trends with a consistent approach, showing the interrelations, similarities, and differences between them. The analysis shows the main difference between the English-speaking and Russian-speaking traditions of mesoeconomic research. For the English-language work a typical feature is reflection on the need to overcome methodological individualism in economic research, to better understand the emerging processes and the institutionalization of the rules of interaction between economic individuals. The consideration by Russian or, more precisely, post-Soviet economists of mesoeconomic topics has been conditioned by the historical realities of transition from the Soviet planned economy to the market economy of post-Soviet Russia. We will also consider the mathematical models developed by Russian scientists as applied to mesoeconomic research. There are four main groups. The first group of models is based on Econophysics ideas. The second group develops agent-based models. The third group is based on the Optimal Multisectoral Interregional Models. The fourth group considers economic systems differentiated by the age of fixed capital. This fourth group includes math models based on the theory of the shifting mode of economic reproduction.

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Complementarity and Substitutability in the Consumption-Leisure Choice Under Equilibrium Price Dispersion: from the “Theorem of Lemons” to the Coase Theorem

Complementarity and Substitutability in the Consumption-Leisure Choice Under Equilibrium Price Dispersion: from the “Theorem of Lemons” to the Coase Theorem

Journal of Institutional Studies, , Vol. 11 (no. 1),

The rigidity of the classical ‘labor-leisure’ choice results in opposing views on the counterweight for the distorting effect of taxation on labor supply. The analysis of the consumption-leisure trade-off under the equilibrium price dispersion discovers the role of search as the vehicle for the consumption-leisure complementarity and substitutability. The consumption-leisure relationship emerges indirectly with the help of the search that decreases in the “common model” behavior, described by the Cobb-Douglas utility function, either ex ante, or ex post with regard to the purchase, both labor and leisure time. The trade-off between labor costs of purchase and search&care transaction costs appears in the form of the propensity to search. The model of the optimal consumer choice examines the consumption-leisure relationship and its elasticity with the help of the “theorem of lemons”. The self-deactivation of the market of used cars does not take place because the market is regulated by the equilibrium price per mile in the taxi, which is equal to the willingness to pay of consumers with zero transaction costs. Driving becomes a specific form of home production. Pleasant driving reduces the purchase price of a mile, substitutes leisure, and increases the elasticity of demand for the mileage. The demand for the mileage becomes elastic when consumers are willing to take care of their cars and to bear ex post search transaction costs. The willingness to take care supports the demand for good cars and the market does not fail. The idea of the willingness to take care of purchase challenges the concept of the endowment effect. When pre-purchase ex ante costs are equal to zero, the ‘willingness to pay – willingness to accept’ disparity takes place because the transfer of property rights redistributes the ex post costs of care between sellers and buyers in favor for the more efficient use of an asset. The costs of care like the costs of pre-purchase search can take either the monetary form of expenses or the physical form of efforts and time. When markets propose to customers search&care services for big-ticket items, consumers face the traditional “to produce or to buy” dilemma, now with regard to search-leisure substitutability. They reduce unpleasant search of necessities in malls in favor of leisure time and reduce leisure time by the pleasant search of luxuries in boutiques. Consumers can also purchase unpleasant maintenance costs and increase their leisure time but they are ready to spend money, efforts, and time on pleasant care that substitutes leisure. The propensity to search and the willingness to take care internalize negative externalities and the Coase theorem holds for the positive transaction costs.

Views: 745

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Institutional Features of the ECB Negative Interest Rate Policy

Institutional Features of the ECB Negative Interest Rate Policy

Journal of Institutional Studies, , Vol. 11 (no. 1),

In this work the research of the negative interest rate policy of the ECB has been conducted. The study explores the motivation of the ECB to moving towards a policy of negative interest rates, studies of the current experience of the ECB in applying this policy, highlights the specific features of this policy measure for the Eurozone, in particular, for its banking system. The analysis that was carried out from the work made a drawing of a number of conclusions possible. The institutional features of the Eurozone not only made it possible for the ECB to use the new measure of the monetary policy, they determined specifics of the implementation of the ECB of this measure. They also determined the response of the Eurozone economy to this policy. An analysis of the experience of applying the negative interest rate policy of the ECB confirmed the assumption that the application of a new non-standard policy measure (a negative interest rate policy) continued the implementation of the ECB’s old monetary policy strategy: the use of non-standard measures for improving the standard monetary policy impact mechanism.

Views: 824

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Innovation: Between the Coase Theorem and the Hobbes Theorem

Innovation: Between the Coase Theorem and the Hobbes Theorem

Journal of Institutional Studies, , Vol. 11 (no. 1),

The article discusses the prospects and boundaries of voluntary and mutually beneficial cooperation in the process of creation, dissemination and use of innovations. The paradigm of mutually beneficial transactions makes the organization of effective interactions in the innovation process through a voluntary agreement between the parties conceptually possible. The basis of cooperation is the creation and distribution of innovative rents. The main obstacles and limitations for voluntary and mutually beneficial cooperation, the nature of which in the peculiarities of the institutional structure of society, are analyzed. The “extended” version of the Coase theorem is formulated in relation to the innovation process. The possibilities and fundamental limitations of alternative innovation policy based on coercion (Hobbes theorem) are considered. The thesis that the structure of relations in innovative activity is formed as a spontaneous order is substantiated. The failure of effective interaction and cooperation in the implementation of innovation is a consequence of the absence of individual income and wealth at the expense of the overall growth of the surplus of the consumer and the manufacturer. As a result, the reorientation of economic agents from innovative rents to other sources of maximizing individual utility (economic rent). Collective actions aimed at creating innovation, technological progress and improving the efficiency of the national economy are replaced by collective cooperation and mutually beneficial actions to create and capture economic, administrative and political rent. The dominant factor that determines limits the motivation for cooperation in the field of innovation is the distribution of access to the rights and resources of the government. The main direction of institutional policy should be to overcome the "economy of power". Without this, it is impossible to motivate the use of new technologies and create conditions for long-term and sustainable economic growth.

Views: 660

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Quantitative and Digital Methods of Research in Economic History

Quantitative and Digital Methods of Research in Economic History

Journal of Institutional Studies, , Vol. 11 (no. 1),

This article analyzes new methods and approaches used in the literature on economic history at the present stage. Introduction of digital technologies in the economic history in the second decade of the 21st century, faces new challenges and new opportunities. Reducing the cost of digitizing information, leading to the accumulation of huge amounts of digitized data, leads to the emergence of new research methods and a number of specialists are already talking about a new methodological revolution. The authors show that in recent decades, as more and more historical texts such as periodicals, letters, diaries, personal archives, books, etc. are digitized, new methods for analyzing the data are emerging. The article describes some of the most interesting historical information resources that form the basis for numerous projects in the field of economic history, both at the macro and micro levels. In these projects data on prices and incomes from all over the world are investigated, including data for real and nominal GDP, wages, price indices, Dow Jones fluctuations since 1885, interest rates and exchange rates, and much more. The article shows how modern research uses mathematical, economic and digital methods that allow, firstly, to clarify existing theories, analyze much larger amounts of data and, in addition, contribute to the creation of new theoretical concepts.

Views: 682

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The Drivers of Institutional Change in a Post-Socialist Economy: the Case of Deposit Insurance Introduction in Russia

The Drivers of Institutional Change in a Post-Socialist Economy: the Case of Deposit Insurance Introduction in Russia

Journal of Institutional Studies, , Vol. 11 (no. 1),

The case of deposit insurance introduction in Russia may suggest that institutional change in transition economies was partly driven by subjective factors, and the choice of imported institutions was rather random. The circumstances under which explicit deposit insurance emerged in Russia might explain its subsequent (mal-)functioning and social costs. Material and institutional pre-conditions were missing at the time the topic of deposit guaranteeing came up in the parliament. The key actors (large banks controlling most household deposits and their depositors) did not demand hard a formal scheme of deposit protection. The advantage of an explicit protection scheme over the existing implicit one was unclear because of the prevalence of state-owned banks. I suggest that the introduction of deposit insurance was driven by a combination of factors such as: genuine good intentions of its proponents; demonstration effect of western experiences; the desire to disrupt the monopoly of Sberbank and boost the competitiveness of privately-owned commercial banks, probably stemming from ideological bias in favor of private ownership; and, last but not least, search for a new field of activity for deposit insurance initiators themselves. Despite the random selection, the institution of deposit guaranteeing fit well in the Russian setup because it was consistent with the long tradition of state paternalism.

Views: 690

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Institutional Determinants of Thermal Power Sector Economic Productivity

Institutional Determinants of Thermal Power Sector Economic Productivity

Journal of Institutional Studies, , Vol. 11 (no. 1),

In relation to development of the energy industry of Russia from the point of view of the recent economic developments such as, for example, economic and financial crisis, the phenomena in the market and investment constraints, as well as the issues of handling production assets and capital of electrical power corporations and enhancing the accuracy of development of thermal power plants asset management methods gain specific significance. It becomes apparent that certain substantial economic measures and reforms are needed for increasing the vitality of the power sector in general and thermal power plant sector in particular. Our paper focuses on the institutional determinants of the thermal power sector that are undertaken with a purpose of enhancing its economic and financial productivity. We analyze the neo-institutional standpoint which proclaims that reforming the energy sector involves reorganizing regulatory and governance frameworks involving market-based demand and supply conditions by slowly reducing the monopolistic features of manufacturing and distribution of power. Moreover, we investigate whether incomplete power industry reforms, or incompatible associations and associations originating out of reforms, have led to exacerbating power industry inefficiencies. Our results show that thermal power sector in Russia is in need of substantial re-organization and profound reforms that would increase its viability and economic productivity.

Views: 703

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Investment, Financial and Institutional Drivers of Russian Industrial Recovery

Investment, Financial and Institutional Drivers of Russian Industrial Recovery

Journal of Institutional Studies, , Vol. 11 (no. 1),

Possibilities of recovering Russian industry are analyzed. The sector of market services is chosen as a recovery counterpart, which used to be in a rather poor state in the USSR and then within a short time achieved enormous success in the new market economy. Such achievements were attained through high return on assets in the service sector, calculated by the authors based on alternative estimates of production output, profit and asset costs. Official statistics announces industrial profit. These official data are erroneous. Their inaccuracy is due to the fact that statistics relies on underrated data about the asset costs in such estimates. The authors have calculated depreciation charges based on the asset replacement costs and then use them to estimate the actual costs in industrial activities. Our estimates confirm an enormous loss ratio of industrial operations. A goal is set to ensure high positive return on industry assets instead of their current unprofitability. It is suggested that the goal can be reached by redistributing the income of the population. Estimates are given for possible annual scope of withdrawing resources for the industry needs. The revenue from wholesale and foreign trade also can be a source of financial resources for the industrial needs. These sectors are currently used as tools for converting resources of industrial companies in the shadow income of their managers. Generated enormous resources will relieve a lot of industry sectors from taxation and subsidize industrial production for a number of years as well as R&D and manpower training necessary for industry revival. Contrary to the services sector, industry recovery dictates active involvement of the state. It appears that the role of the state is first of all to revive education and create a system of industrial engineering.

Views: 634

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Narrative Analysis of Institutional Traps of Education and Science in Russia

Narrative Analysis of Institutional Traps of Education and Science in Russia

Journal of Institutional Studies, , Vol. 11 (no. 1),

For last 30 years Russian science and education system has been experiencing constant, profound institutional transformation in order to increase the quality of education, it's access ability and with a point to encrease the effectiveness of science. This article is devoted to the attempt to analysis the results of undertaken reforms and evaluating the quality of economic institutions which coordinate the order of market agents of researching field. The analysis of narratives approach was chosen with the intention for estimating the quality of reforms undertaken. Narratives are defined to be stories in direct speech of actors themselves of researching field: professors, students, Master’s and graduated students of all forms of education, as soon as scientists and researchers of universities and research institutes and different levels of responsibility and competencies administrators. The "Integrum" database taken as the main source of information for searching for narratives. This informational base consists of 1250 Russian newspapers (federal and regional) and 500 journals which help us to select 250 narratives (stories in direct speech) of people who are directly involved in transformational process of education system and science being studied. The obtained results pointed out the number of stable ineffective rules and practices which have a negative impact on our researching area functioning and also made it possible to classify out a few groups of institutional traps such as: metric's trap, trap of raising level of bureacracy, trap of shortage of finansing, electronization and digitalization trap and trap of staff capacity. Each determined trap reflected in the article is also pointed out and argued with selected narratives.

Views: 1080

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The Monetary Reform of 1947 and its Role in the Restoration of the National Economy of the USSR: to the 100th Anniversary of the Financial University

The Monetary Reform of 1947 and its Role in the Restoration of the National Economy of the USSR: to the 100th Anniversary of the Financial University

Journal of Institutional Studies, , Vol. 11 (no. 1),

The authors of the collective monograph focused on the most topical theoretical and practical aspects of preparing and conducting the monetary reform of 1947. Regular attention was paid to organizational aspects in preparing monetary reform: the authors rightly examine and successfully analyze the work on the formulation of principles and methods for implementing the monetary reform of 1947 Conducted by experts from the Ministry of Finance and the State Bank of the USSR. In this regard, the collective monograph, without claiming a comprehensive analysis of the post-war restoration of the monetary system and the sphere of circulation, reflects the complex of modern views and approaches of economists, historians and sociologists in the following sections: preparation of the reform, its prerequisites; features of the exchange of cash and non-cash money; public response to ongoing activities; the role of reform in the socio-economic development of the USSR; theoretical understanding of the reform, its comparison with similar reforms abroad. In a separate section highlighted the issues of modern development of monetary systems in the era of globalization and digital technologies, and touched upon the expected future monetary reforms. The materials of the collective monograph are devoted to the analysis of the specific features of the implementation of the monetary reform of 1947 and the identification of its role in the restoration of the national economy. This reform is considered in the context of the post-war command and planning economy, its main socio-economic results are described in detail, convincing statistical data are given, on the basis of which a reasonable conclusion is made about the importance of monetary reform for boosting the post-war USSR economy. The undoubted advantage of the study is a wide source base, on the basis of which questions of the monograph are revealed. A significant part of the sources are archival materials.

Views: 641

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