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The map is not the territory: An essay on the state of economics
John Kay [pdf][html]

[Keywords: macroeconomics, inductive reasoning, deductive reasoning, rational choice; JEL: E00, E27]

Much of modern economics, including in particular the dominant paradigms in macroeconomics and financial economics, proceeds on the basis that there is a “true” model of the world, which can be deduced from a set of axioms based around rational choice. But in reality there is, and can be, no model that describes “the world as it really is”. Models are useful –even indispensable– tools in economics but are necessarily partial, provisional, and context specific. Economics should be pluralist in approach, employing inductive as well as deductive reasoning. The map is not the territory.

Mathematical modelling and ideology in the economics academy
Tony Lawson

[Keywords: mathematical methods, economic analysis, heterodox economy; JEL: B41, B52, C18]

The widespread and long-lived failings of academic economics are due to an over-reliance on largely inappropriate mathematical methods of analysis. 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 so many economists are committed to a portrayal of the market economy as a 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.

Redistribution, inequality, and growth
Jonathan D. Ostry, Andrew Berg y Charalambos G. Tsangarides

[Key words: Redistribution, inequality, growth; JEL: O11, O15, O47, E62, H23]

This paper takes advantage of a recently-compiled cross-country dataset that distinguishes market inequality from net inequality and allows us to calculate redistributive transfers for a large number of country-year observations. Our main findings are: 1. More unequal societies tend to redistribute more. 2. Lower net inequality is robustly correlated with faster and more durable growth, for a given level of redistribution. 3. R edistribution appears generally benign in terms of its impact on growth; only in extreme cases is there some evidence that it may have direct negative effects on growth. Thus the combined direct and indirect effects of redistribution –including the growth effects of the resulting lower inequality– are on average pro-growth. While we should be cognizant of the inherent limitations of the data set and of cross-country regression analysis more generally, we should be careful not to assume that there is a big tradeoff between redistribution and growth. The best available macroeconomic data do not support that conclusion.

A review of rational expectations hypothesis
Cecilia Bermúdez [pdf][html]

[Key words: rational expectations, microfoundations, macroeconomic disequilibria; JEL: B40, B41]

The rational expectations hypothesis has dominated research programs in macroeconomics since the seventies. This methodological framework provided a dynamic foundation for macroeconomics that is completely consistent with the rational choice theory. However, this strategy has come at a high cost: it is no longer possible to conceive disequilibria processes at the aggregate level, and consequently, economic policy has become irrelevant. The aim of this work is to review the critical arguments aimed at the rational expectations hypothesis and to present another microfoundation strategy that can indeed explain disequilibria phenomena.

Estimation of scale equivalences
Manuel Muñoz Conde [pdf][Appendix][html]

[Key words: Adult equivalent, equivalence scales in consumption, Lewbel prices, poverty JEL: D00, D11]

The aim of this paper is to show the methodology and the main results of a scale estimation study of consumption equivalence. The prices in the estimation of the demand equations were obtained using a new methodology proposed by Lewbel and used by Perali. The estimation models support the conclusion that the calculations of equivalent scale obtained satisfy certain desirable properties in this type of measurement.

Peacebuilding and a new model of state-building: A reading of the first two agreements of Havana
Julián Arévalo Bencardino [pdf][html]

[Key words: Peace agreements, State building, democracy, institutions, Colombia, rural development, political participation; JEL: H7, F51, P25, P26, P48, D72]

This paper proposes a reading of the first two agreements between the Colombian government and the FARC-EP in the peace talks in Havana from the perspective of the relationship between peace building and State-building. The paper identifies four thematic dimensions of the agreements that reveal a new State-building model: the State's capacity to fulfill its main responsibilities, the change of political rules and institutions, citizen participation, and the element of citizenship building and reconciliation. It highlights the opportunity of the present peace talks in terms of institutional development and the guarantee of social, economic, cultural and political rights in Colombia, as well as the role of these transformations in preparing the State for facing possible challenges in the future.

Central Bank independence in Colombia since 1923. Institutional issues
Mauricio Avella Gómez [pdf][html]

[Keywords: : Central Bank, independence, banking history, functions of central banks; JEL: E58, N26]

A recurrent issue in discussions on central banks is that of their relative independence in performing the traditional role of monetary stabilization. In the Colombian experience, this controversy has been invariably present in debates on reform proposals of the Banco de la República since its foundation in 1923. This paper reviews in a historical perspective, how the concept of central bank independence evolved when such reforms were made.

Institutions and successful regional coffee production in Colombia
María Adelaida Fernández-Muñoz [pdf] [html]

[Keywords: Economic history, property rights in land, institutions and regional development, coffee; JEL: N96, Q15, D02, O13]

Institutions play a fundamental role in explaining different development paths of countries and regions. More equitable institutions provide better incentives and enhance overall long term performance. This paper analyses the effect of the institutional arrangements in the structure or land property rights from the nineteenth century, and through it, the success of regional coffee production in the twentieth century.

Democratic security policy 2002-2006: socio-economic impacts in rural areas
Gerson Javier Pérez Valbuena [pdf][html]

[Keywords: Labor participation, crime, regional economics; JEL: J21, K1, R23]

This paper exploits the structural change in the number of rural seizures to measure the impact of strengthening the security policy between 2002 and 2006 on the rural labor market in Colombia. The new policy produced dissimilar effects across gender, age-groups, and type of occupation. In general, there was a socioeconomic loss in terms of reductions in the adult labor supply and income, while for youths and children there was a differentiated effect by gender in labor participation. No significant connections were found with school enrollment.

Departmental Economic Cycles in Colombia, 1960-2011
Fredy Vásquez Bedoya, Sergio Iván Restrepo Ochoa, Mauricio Lopera Castaño y María Isabel Restrepo Estrada [pdf][html]

[Keywords: Economic cycles, filtering techniques, analysis shift-share; JEL: C80, E32, R11]

We estimated the GDP cycle for Colombia and some departments in the period 1960-2011. The Nelson and Plosser (1982) model of local lineal tendency is employed. The correlation coefficient between the cyclic component of the national and departmental GDP series is also employed. Thus, the co-movements between national and departmental economies are classified in three categories: strongly procyclical, procyclical and acyclic. The results show a diversity on the behavior of the departmental economic fluctuations with respect to the national one. Additionally, it is found that the strongly procyclical departmental economies are the richest and most diversified.


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