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Can Experiments Falsify Expected Utility Theory?
Geoffrey M. Hodgson [pdf] [html]

[Key words: rationality, experimental economics, falsification, evolutionary psychology; JEL: B41, C90, D00]

Some recent articles debate the implications of the results of experimental economics. It is claimed by some that these results challenge the assumptions of expected utility theory. Others deny this. Both sides presume that the assumptions of rationality or expected utility-maximization are potentially falsifiable by empirical tests. This article contests this assumption. Building on previous work in economic methodology, it is argued that non-falsifiable assumptions, such as the standard rationality postulates, are potentially universal. Hence they can embrace any empirical phenomenon. That is both their strength and their weakness. The article concludes that the debate among experimental economists can only proceed if both sides accept the non-falsifiability of key propositions under dispute. That done, the protagonists can turn to the more pertinent questions such as the criteria for choosing theories. In particular, experimental economics may have a role in suggesting more narrow and context-specific behavioural assumptions for economic theory.

Moral Risk and Contracts: Certain Experimental Evidence
Julián Arévalo B. y Jair Ojeda J. [pdf] [html]

[Key words: moral risk, contracts, experimental evidence, asymmetric information; JEL: B41, C90, D89]

This paper shows one type of asymmetric information problems, their theoretical implications, the design of contracts that mitigate them, as well as some experimental evidence. Furthermore, by extrapolating the results, the paper tries to illustrate certain macroeconomic implications obtained under a controlled environment.

Nash and Von Neumann: Possible Worlds and Language Games
Boris Salazar
[pdf] [html]

[Key words: modal logic, possible worlds, rationality, language games, cooperative games, non-cooperative games; JEL: C70, C71, C72, C79]

Using language game notions and the equivalence between games, this document studies John Nash's decision of not playing the coalitional game proposed by John von Neumann. The key point is that Nash suggested hypothetical worlds that are incompatible with the kind proposed by von Neumann. And, at the root of this difference, lies their different notions of rationality.

Democracy not only Lives on Markets. The non Compliance of the Law and its Relation with Development, Justice and Democracy
Mauricio García Villegas
[pdf] [html]

[Palabras clave: non compliance of the law, law and economics, legitimacy, development, justice, democracy, institutions, new institutionalism; JEL: K00, K42, K49]

This article analyzes the non compliance of the law in Latin America, particularly in Colombia. The core of the paper is the contrast between two different approaches: the strategic vision which argues that this failure is a consequence of the lack of institutional capacity to impose effective penalties; and the rebellion vision, which explains the failure as an expression of values or ideologies. The article examines the doctrinal roots related with the strategic vision - the social capital theories, studies in Law and economics and the new institutionalism - their reception in our environment and their application in the context of the judicial reform. This critical examination highlights the analytical differences between these two visions and their implications in the justice system and the social law: even though both visions are partial, each one of them is partly true. Compliance of law can not be achieved only by imposing sanctions and incentives, or by promoting a unilateral favorer attitude for compliance of the law. Rational behavior must also be complemented by the perception of the legitimacy of the institutions. Market and the democracy are both equally essential for the existence of a Rule of law.

Institutions and Economic History: Approaches and Institutional Theories
Gonzalo Caballero
[pdf] [html]

[Key words: institutions, economic history, New Institutional Economics, Historical and Comparative Institutional Analysis; JEL: N00, B40, D23]

Recently, some papers have been published that examine the relation between economic history and institutional economics, and propose a closer relation between these two disciplines. This article shows how the theoretical and methodological foundations of the different institutionalist programs are enriching research in economic history, giving it more rigor. Furthermore, using papers from Hodgson, North and Greif, this article reviews the contributions of traditional institutionalism, New Institutional Economics and Historical and Comparative Institutional Analysis. It ends by proposing a research program that emphasizes the historical studies of institutions and enriches economic analysis. Economic history should not be seen as a subaltern discipline; it should be treated at the same level as economics, as Schumpeter wanted it.

Homicides in South America: Are the Poor Dangerous?
Mamadou Camara y Pierre Salama
[pdf] [html]

[Key Words: violence, homicides, poverty, South America; JEL: I39, O10]

This paper studies the evolution of violence in South America. It analyzes and discusses the influence of different economic variables on homicide rates, using an econometric test based on data of some South American countries during the period 1995-2000. It shows that this economic approach can be usefull but can also be dangerous when it leads to the wrong policies of social exclusion. Furthermore, it also shows how variables such rapid urbanization, low education, and inefficient regulations, together with corruption, play an important role in the generation of violence in South America. Finally, the paper recommends changing the way of perceiving economics and its social implications, by examining the interaction of this discipline with other social sciences.

Determinants of Household Income and Expenditures
Manuel Muñoz C.
[pdf] [html]

[Key Words: household behavior, household income, household expenditure, uncertainty; JEL: D10, D12, D19]

This empirical research analyzes the determinants of Colombian household revenues and expenditures. Using a life cycle model with data from the national household survey 1994-1995, the paper shows how the behavior of household income is mainly affected by demographic characteristics and by the social-occupational characteristics of its members. Expenditure behavior is determined principally by income and secondly by the social characteristics of the household and by the expenditure of other households with similar characteristics. The paper also analyzes the influence of income uncertainty on households expenditure, to see if the effect is due to a motive of precaution.


Revista de Economía Institucional
Universidad Externado de Colombia
Cra. 1 No. 12-68 Casa de las Mandolinas
Bogotá, Colombia
(571) 2826066 ext. 1307

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