A Praxeological Theory of Interest Rates

This paper starts with the observation that the pure time preference theory leads to conflicting views concerning the effect of changes in productivity on the rate of interest. Subsequently, it reviews parts of the interest literature and concludes that the pure time preference theory does not qualify as a praxeological theory. Then, the paper combines Hülsmann’s theory of interest with the subjectivist capital theory of Lachmann and Kirzner and provides a praxeological theory that explains the rate of interest. The key to that theory is that cost reduction through the use of fixed capital must always be understood as relative to the costs of labor which the capital replaces. Since labor is non-specific and the price of labor therefore also constitutes the production costs of fixed-capital goods to a certain extent, the use of fixed capital necessarily entails a business surplus somewhere in the economic system. Since this surplus cannot dis-appear it qualifies as interest income. The size of this income is such that the interest rate corresponds to the marginal rate of substitution between labor and fixed capital as embodied in entrepreneurial actions.

Replicating a study of women and men in state government administration 30 years later

Purpose The purpose of this study is to examine data from a 2016 replication of a 1986 study of upper-level administrators in government agencies in the US State of Utah. The unique cultural context of this state is used to challenge Hakim’s preference theory; specifically, that the individual agency of work-oriented women is stronger than structural constraints, including culture. This study joins others that have questioned the preference theory’s applicability in certain cultural contexts. Design/methodology/approach A simple approach using difference-of-means t-tests shows that female respondents in 2016 are more like their male contemporaries than they are to their sister administrators 30 years prior. T-tests are also used to compare male respondents in 1986 and 2016. Findings Women in upper management in 2016 are more likely to be married and have preschool-aged children at home than they were in 1986. These results suggest that women are succeeding at the highest levels in state government administration and also adhering to strong cultural norms. Women’s views on labor market policies changed over time, as well. While women in 2016 are found to resemble their male counterparts in 2016 more than they resemble female respondents in 1986, variations in men’s responses in 1986 and 2016 are statistically no different from zero. Originality/value This study challenges the predictions of Hakim’s preference theory in the context of strong cultural norms that dictate separate gender roles. The results contradict the preference theory’s predictions and are consistent with critiques of its applicability across cultural contexts.

Summarized distributions of mass: a statistical approach to consumers’ consumption spaces

This paper focuses on logical aspects of choices being made by the consumer under conditions of uncertainty or certainty. Such logical aspects are found out to be the same. Choices being made by the consumer that should maximize her subjective utility are decisions studied by revealed preference theory. A finite number of possible alternatives is considered. They are mutually exclusive propositions identifying all quantitative states of nature of a consumption plan. Each proposition of it is expressed by a real number. This research work distinguishes it from its temporary truth value depending on the state of information and knowledge of the consumer. Since each point of the consumption space of the consumer belongs to a two-dimensional convex set, this article focuses on conjoint distributions of mass. Indeed, the consumption space of the consumer is generated by all coherent summaries of a conjoint distribution of mass. Each point of her consumption space is connected with a weighted average of states of nature of two consumption plans jointly studied. They give rise to a conjoint distribution of mass. The consumer chooses a point of a two-dimensional convex set representing that bundle of goods actually demanded by her inside of her consumption space. This paper innovatively shows that it is nothing but a bilinear and disaggregate measure. It is decomposed into two real numbers, where each real number is a linear measure. In this paper, different measures are obtained. They can be disaggregate or aggregate measures, where the latter are independent of the notion of ordered pair of consumption plans.

Liquidity Preference Theory or Loanable Funds Theory

In Keynes’s approach, interest rates are driven up by rises in demand for money and scaled down by rises in money supply. On the contrary, this paper argues that neither of these propositions will stand the test of scrutiny. Keynes traced demand for money to three main factors, the transaction, precautionary and speculative motives, but rises in demand associated with the transaction motive do not necessarily drive up the rate of interest. The paper shows also that the liquidity preference theory and the loanable funds theory are different theories and that the former is faulty, while the latter is correct.

Inclusion of Home-Centred Women

Firms are highly interested in better inclusion of women with childcare commitments, especially for leadership positions, as reward for higher work groups’ gender diversity is valuable. Gender diversity became topical issue in corporate social responsibility of companies. However, many firms report that gender diversity is stalled, due to conflicting stereotypes about social roles of employees. Hakim’s influential preference theory suggests explanations of how women choose between productive and reproductive work. According to it, there are three types of employed women: home-centred, work-centred and adaptive workers, who combine both. Three options for preference assume three alternative frames of reference. Inclusion-related initiatives aim to reshape such frames by addressing employees’ identity work through readjusting managerially inspired discourses. Current research narrows the focus to the most vulnerable of them – home-centred women. We referred to responses of 721 mothers with previous working experience, from the biggest cities in Russia to find answers to the following questions: what affects home-centred women in their decision to return to the same employer after the maternity leave and what causes them to quit. We enriched empirical analysis with a theoretical review of initiatives helping to readjust corresponding stereotypes.

Reward-specific satiety affects subjective value signals in orbitofrontal cortex during multicomponent economic choice

Sensitivity to satiety constitutes a basic requirement for neuronal coding of subjective reward value. Satiety from natural ongoing consumption affects reward functions in learning and approach behavior. More specifically, satiety reduces the subjective economic value of individual rewards during choice between options that typically contain multiple reward components. The unconfounded assessment of economic reward value requires tests at choice indifference between two options, which is difficult to achieve with sated rewards. By conceptualizing choices between options with multiple reward components (“bundles”), Revealed Preference Theory may offer a solution. Despite satiety, choices against an unaltered reference bundle may remain indifferent when the reduced value of a sated bundle reward is compensated by larger amounts of an unsated reward of the same bundle, and then the value loss of the sated reward is indicated by the amount of the added unsated reward. Here, we show psychophysically titrated choice indifference in monkeys between bundles of differently sated rewards. Neuronal chosen value signals in the orbitofrontal cortex (OFC) followed closely the subjective value change within recording periods of individual neurons. A neuronal classifier distinguishing the bundles and predicting choice substantiated the subjective value change. The choice between conventional single rewards confirmed the neuronal changes seen with two-reward bundles. Thus, reward-specific satiety reduces subjective reward value signals in OFC. With satiety being an important factor of subjective reward value, these results extend the notion of subjective economic reward value coding in OFC neurons.

The approach of Islamic economists to the prohibition of interest in the context of Böhm-Bawerk’s time preference theory of interest

Purpose Böhm-Bawerk’s time preference approach had significant importance among many other theories of interest. His assertion based on inherent human nature and the distinction he made between the positive and normative aspects of interest were remarkably authentic. As it is assumed that any efficient evaluation, judgment or regulation on the legitimacy of interest has to consider the theory of time preference, especially Böhm-Bawerk’s approach, the paper aimed to examine the Islamic economists’ response to the time preference theory of interest. Design/methodology/approach The paper presents Böhm-Bawerk’s time preference theory of interest. Then, it evaluates the Islamic economists’ views on the concepts of the time value of money and time preference qualitatively by scrutinizing the relevant literature. Findings It is observed that there is not any proper response of Islamic economists to the assertions of the causes of time preference. Responding to such challenges requires an approach that is mostly developed in the positive domain. Originality/value Although it is evident that interest is regarded as destructive in Islamic economics, the consideration is primarily normative. However, a convincing assertion also requires to be justified in the positive domain. Empirical works are exhibiting the problems with interest-based transactions. Besides, this paper raises the need for theoretical expositions of Islamic economists in response to the interest theories, which claim that the existence of interest is inevitable.