Economic Thought

The value of rational choice theory for the social sciences has long been contested. It is argued here that, in the debate over its role, it is necessary to distinguish between claims that people maximise manifest payoffs, and claims that people maximise their utility. The former version has been falsified. The latter is unfalsifiable, because utility cannot be observed. In principle, utility maximisation can be adapted to fit any form of behaviour, including the behaviour of non-human organisms. Allegedly 'inconsistent' behaviour is also impossible to establish without qualification. This utility-maximising version of rational choice theory has the character of a universal 'explanation' that can be made to 'fit' any set of events. This is a sign of weakness rather than strength. In its excessive quest for generality, utility-maximising rational choice theory fails to focus on the historically and geographically specific features of socio-economic systems. As...

This paper seeks to examine the relationship and the interaction between institutions, policy and the labour market in the light of the ideas of the first generation of institutional economists, who, in contrast to neoclassicals, conceived of the economy as a nexus of institutions, underlining, therefore, the significant role of institutional and non-market factors in the functioning of an economic system. They also criticised those who define (economic) welfare only in terms of efficiency and satisfaction of consumer interests; institutionalists instead focus on issues related to justice, human self-development and labourers' welfare. In addition, early institutionalists paid considerable attention to the institutional framework of the labour market. In particular, the first generation of institutional economists highlighted the importance of institutions and other non-market parameters in determining the level of wages and employment (e.g. the role of the bargaining power of w...

This article summarizes some unorthodox aspects of the institutional approach to the markets as social structures (institutions). Demonstrated is the possibility to extend the new institutional analysis, based on the concepts of formal and informal rules, property rights, transaction costs, limited rationality and social networks, considering the role of social phenomena such as power, status competition and cognitive challenges of the greater selection opportunities. The conclusions of the proposed extended institutional approach are related to the problem of the long-term sustainability of the market society.

This research deals with a very important issue that has yet to be adequately addressed. It intends to examine the economic thought of Ibn Khaldoun as found in his al-Muqaddimah (i.e., the introduction). It is proposed that Ibn Khaldoun had unique and independent views on economics. The research concludes that economics is considered the brainchild of Ibn Khaldoun. The research also points out the influence of economics on interpreting history as well as its influence on production. Ibn Khaldoun's economic views on the theory of supply and demand are also examined. This study concludes by defining the strong relations between economy and sociology and the extent to which a government is permitted to interfere in the process of buying and selling. This is followed by an examination of the relation between economics and work based on cultural and scholarly aspects followed by an elaboration on the categories of jobs and their importance according to Ibn Khaldoun. This article appr...

Liberal thought (in the sense of classical liberalism) is based on the juxtaposition of consent to coercion. Autocracy and slavery were seen as based on coercion whereas today's political democracy and economic 'employment system' are based on consent to voluntary contracts. This paper retrieves an almost forgotten dark side of contractarian thought that based autocracy and slavery on explicit or implicit voluntary contracts. To answer these 'best case' arguments for slavery and autocracy, the democratic and abolitionist movements forged arguments not simply in favour of consent, but arguments that voluntary contracts to legally alienate aspects of personhood were invalid 'even with consent' – which made the underlying rights inherently inalienable. Once understood, those arguments have the perhaps 'unintended consequence' of making the neo-abolitionist case for ruling out today's self-rental contract, the employer-employee contract. The paper...

I say, in common with the rest of the Greeks, that the Athenians are wise. Now I observe, when we are collected for the Assembly, and the city has to deal with an affair of building, we send for builders to advise us on what is proposed to be built; and when it is a case of laying down a ship, we send for shipwrights; and so in all other matters which are considered learnable and teachable: but if anyone else, whom the people do not regard as a craftsman, attempts to advise them, no matter how handsome and wealthy and well-born he may be, not one of these things induces them to accept him; they merely laugh him to scorn and shout him down, until either the speaker retires from his attempt, overborne by the clamour, or the tipstaves pull him from his place or turn him out altogether by order of the chair. Such is their procedure in matters which they consider professional. But when they have to deliberate on something connected with the administration of the State, the man who rises ...

Liberal thought (in the sense of classical liberalism) is based on the juxtaposition of consent to coercion. Autocracy and slavery were seen as based on coercion whereas today's political democracy and economic 'employment system' are based on consent to voluntary contracts. This paper retrieves an almost forgotten dark side of contractarian thought that based autocracy and slavery on explicit or implicit voluntary contracts. To answer these 'best case' arguments for slavery and autocracy, the democratic and abolitionist movements forged arguments not simply in favour of consent, but arguments that voluntary contracts to legally alienate aspects of personhood were invalid 'even with consent'-which made the underlying rights inherently inalienable. Once understood, those arguments have the perhaps 'unintended consequence' of making the neo-abolitionist case for ruling out today's self-rental contract, the employer-employee contract. The paper h...

The paper argues that the notion of Pareto efficiency builds on two normative assumptions: the more general consequentialist norm of any efficiency criterion, and the strong no-harm principle of the prohibition of any redistribution during the economic process that hurts at least one person. These normative concerns lead to a constrained and static notion of efficiency in mainstream economics, ignoring dynamic efficiency gains from more equal allocations of resources. The paper argues that a weak no-harm principle instead ...

This paper gives an account of the debate between F.A. Hayek and J.M. Keynes in the 1930’s written for the general public. The purpose for this is twofold. First to provide the general reader with a narrative of what happened, and pointers to further reading that are accessible to the non-specialist. Second, to discuss how academics can fruitfully bridge the gap between their specialist work and the public without reducing complex themes into one-dimensional narratives. I use the Keynes vs. Hayek debate as a case study on how this may be achieved.

The impact of the rate of absorption of EU funds on the rate of short-term economic growth, the rate of employment and the unemployment rate in the countries in Central and Eastern Europe in the period 2008-2015 is analyzed. A regression analysis of panel data is performed, following the least squares method (LSM). The results of the analysis show that the rate of absorption of EU funds has no statistically significant effect on the rate of short-term economic growth and the employment rate in the countries of this region, but that it affects the unemployment rate in them.

The paper examines the evolution in the patterns of human economic behavior across the history of economic thought. The author considers the development of the Homo Economicus concept in the view of the scarcity problem in economics and the Homo Socialis concept, with its extreme manifestation – Homo Sovieticus, attested in the former socialist countries of the world. In this context, the author examines the phenomenon of societal constraint on personality. Another prototype of economic behavior - Homo Informaticus and, its boundary manifestation - Homo Interneticus are discussed in the view of the informational constraint phenomenon. The author introduces the Homo Creativus ‘character’, whose behavior is characterized by the attempt to overcome the rational mind constraint. The paper considers the need to adopt the Homo Spiritualis paradigm within the frame of economic thought - a need already highlighted by notorious scholars. According to the writer the urge to develop this paradigm is implicitly determined by the spreading of the underground economy, the globalization and virtualization of the human activity, their impact on human personality. In her approach of the Homo Spiritualis concept the author supports the view that spirituality should not be confused with religion, although the two are related. In practical terms the issue of incorporating spirituality into economics and business courses is approached.

Liberal thought (in the sense of classical liberalism) is based on the juxtaposition of consent to coercion. Autocracy and slavery were seen as based on coercion whereas today's political democracy and economic 'employment system' are based on consent to voluntary contracts. This paper retrieves an almost forgotten dark side of contractarian thought that based autocracy and slavery on explicit or implicit voluntary contracts. To answer these 'best case' arguments for slavery and autocracy, the democratic and abolitionist movements forged arguments not simply in favour of consent, but arguments that voluntary contracts to legally alienate aspects of personhood were invalid 'even with consent' – which made the underlying rights inherently inalienable. Once understood, those arguments have the perhaps 'unintended consequence' of making the neo-abolitionist case for ruling out today's self-rental contract, the employer-employee contract. The paper...

This article summarizes the life and work of Irving Fisher – one of the most influential economists of the 20th century, famous in his lifetime for being a genius. Besides his groundbreaking contributions to economics, he is also a pathbreaker for topics related to mathematics, statistics, nutrition, health, political stability and peace. His contributions to economics, theoretical and applied, are still used in economics textbooks. This article provides a brief survey of Fisher’s work. It is closely related to the introduction of neoclassical theory in the US at the end of the 19th century. An overview of some of them and elaborate on his model of intertemporal choice are presented. This model is an important link between the general equilibrium theory, the theory of money, the theory of investment and the theory of consumption. The main reasons are being put forward for the Fisher’s work to sound contemporary in the new millennium.

El objetivo del artículo consiste en indagar acerca de dos características fundamentales de la racionalidad del sistema económico: la coherencia de los fines hacia los que se dirige la teoría económica y la conducta de los sujetos a la racionalidad del sistema. Para esto, se expone la idea de que el trasfondo teleológico de la teoría económica no puede decir nada acerca de la jerarquía de fines. Esta idea se deja ver sobre todo en el concepto de utilidad y en la hipótesis de la nueva economía clásica de expectativas racionales.
Abstract. The objective of the present paper consists in exploring two fundamental characteristics of the rationality of the economic system: The coherence of the ends towards which the economic theory is directed and the behavior of the subjects to the rationality of the system. For this, we present the idea that the teleological background of economic theory does not tell us anything about the hierarchy of ends. This idea is seen above all in the concept of utility and in the hypothesis of the new classical economy of rational expectations.

The paper consists of three parts. In the first part a monetary economy, based on credit money, is introduced. All financial instruments are considered as substitutes for money. In the second part the possibility of equilibrium convergence, under certain conditions, is ...

This paper is a study of the potential of Bulgarian small and middle-sized enterprises (SMEs) for growth and improving their competitive advantages on domestic and international markets. To this end an analysis of the main economic indicators as well as some hidden reserves for improving the latter are presented. The conditions and factors affecting the solutions to the above issues and some requirements to management are identified and assessed. The reasons for SMEs having fallen behind are given as well as some recommendations and guidelines to solve that problem.

The widespread and long-lived failings of academic economics are due to an overreliance on largely inappropriate formalistic methods of analysis. This is an assessment I have long maintained. Many heterodox economists, however, appear to hold instead that the central problem is a form of political-economic ideology. Specifically, it is widely contended in heterodox circles that the discipline goes astray just because many economists are committed to a portrayal of the market economy as a (overly) smoothly or efficiently functioning system or some such, a portrayal that, whether sincerely held or otherwise, is inconsistent with the workings of social reality. Here I critically examine the contention that a form of political-economic ideology of this sort is the primary problem and assess its explanatory power. I conclude that the contention does not fare very well. I do not, though, deny that ideology of some sort has a major impact on the output of the modern economics academy. Howe...

This article is a study of key theoretical aspects of the transaction cost concept, being vital for the economic development, such as their impact on structuring and allocating the property rights – incorporated in the general issue of the changes in the institutions within the paradigm of the new institutionalism. Unlike the theory of Coase, the outcome of the privatization process shows that the initial allocation of the property rights is very important. The available transaction costs prevent from aligning the private costs and the social costs by means of case-by-case negotiations – the holders of some property rights are not aware of the consequences of their business activities. The reforms, required for liberalization of the market, pursuant to the standard neoclassical economy give inefficient results in Bulgaria. Therefore according to the theory of D. North the reason could be the incompatibility among the formal institutions, on the one part, and the informal rules and i...

The transitional period is always connected to redistribution processes and change in the financial wealth of the economic agents. The examination of the redistribution of wealth and its dynamics is important related to the possibilities for a more complete study and rationalization of the changes that occurred in the economy. In this connection the dynamics of financial wealth of the institutional sectors in Bulgaria for the period 1990 – 2005 is assessed and analyzed. The main net creditors and debtors to the economy are differentiated and their behavior before and after the change of the monetary regime is examined. Econometric simulations are made on the main factors that determine the shift in the sector financial wealth. In the progress of the expose grounded is the hypothesis (which to a great extent is confirmed by the empirical results) for a functional relation between the dynamics of redistribution and the change of the monetary regime.

The policy of accelerated euro-integration sets stronger and stronger and in concrete dimensions the question for the dynamics of the Bulgarian export and its turning into a factor of the economic growth. The Bulgarian producers and exporter could not take advantage of the advantages of the expanded access to the European Union market, if they do not know the specifics of the business environment in EU and the requirements of the so-called euro-consumer. Analyzed are the main factors of the business environment in EU and are given directions for improvement of the marketing activity of the Bulgarian firms, which strive to settle a long presence on the EU market. The recommendations to them are based on concrete marketing study, in which carrying out participates the author of the article, as well as on the lessons of Peter Dracker from the American export boom. The decisions with strategic character by the export oriented firms concern choice of a method for exiting the EU market, s...

The goal of this paper is to exhibit computation of minimal variance portfolio and efficient portfolio frontier when there are more than two assets, by using matrix algebra applied on chosen stocks listed on Zagreb Stock Exchange.The research shows that, because of low correlation of underlying assets, it is possible to significantly reduce risks of investments by constructing portfolio of the stocks. It also shows that, if restriction on short selling are imposed this significantly reduces the possibility for diversification.

Within the discussion of ethics and economics some have considered designing a code of ethics for economists. But the idea of such a code is potentially problematic from a pluralist standpoint. Some possibilities are discussed here to show that any code concerning the behaviour of economists presumes a particular view of human nature and thus of professionalism. Further, issues of socio-economic power in the profession pose problems for the interpretation and implementation of some possible principles, notably those referring to standards of competence and truth-seeking. It is therefore concluded that any code of ethics should take the form of general guidelines, with primacy given to the ethics of pluralism: tolerance, even-handedness and open-mindedness, on which the interpretation of all other ethical considerations rests. Read the Open Peer Discussion on this paper » Read the discussion of this paper on the WEA's Ethics conference »

The paper focuses on the "stay or leave again" dilemma of Bulgarian return migrants. Data from a unique representative survey among households and their members who had been abroad during the period 2001-2005 is utilized. Special attention is paid on the satisfaction from the stay abroad and on the inclination of return migrants to leave again. Two binary regression models are estimated for this purpose. The independent variables reflect the socio-demographic profile and foreign experience of return migrants. Satisfaction is related to age, duration of the stay abroad, qualified job under official contract, and employment in services. Clear differences in satisfaction levels are found with respect to the region of stay: almost each fourth respondent returned from Southern Europe was not satisfied. Nevertheless, the majority of return migrants express a high likelihood to go abroad again. The availability of acquaintances residing abroad is found to be a strong determinant ...

The article aims at identifying and measuring the determinants of the European union enterprises’ relocation in Bulgaria and their impact on the relations between foreign and local enterprises; an area, in which positive effects concerning the recipient country are expected. The transnational enterprises are engaged with local subsidiary when the costs for technological and another specific transfer are lower than the export costs. The initiatives of the transnational companies depend on the contract enforcement system. Different practices of foreign investors’ entering the country are discussed - through privatization deals as well as through the "Greenfield" investments. The third part of the paper contains the results from covariance and fixed effect models (FEM) for the impact of different sector characteristics on the ratio of FDI and production output of respective manufacturing sector are presented.