nep-cbe New Economics Papers
on Cognitive and Behavioural Economics
Issue of 2007‒06‒18
nine papers chosen by
Marco Novarese
University of the Piemonte Orientale

  1. The Mirror-Neuron Paradox: How Far is Sympathy from Compassion, Indulgence, and Adulation? By Khalil, Elias
  2. Towards a Theoretical Foundation for a Multidisciplinary Economics By Piet Keizer
  3. Rational ignorance is not bliss: When do lazy voters learn from decentralised policy experiments? By Jan Schnellenbach
  4. Money, Happiness, and Aspirations: An Experimental Study By Michael McBride
  5. Experienced and Novice Investors: Does Environmental Information Influence on Investment Allocation Decisions? By Holm, Claus; Rikhardsson, Pall
  6. Beyond a better mousetrap: a cultural analysis of the adoption of ethanol in Brazil By Nardon, L.; Aten, K.
  7. When Knowledge Is Not Enough: HIV/AIDS Information and Risky Behavior In Botswana By Taryn Dinkelman; James Levinsohn; Rolang Majelantle
  8. Is there a "pessimistic" bias in individual beliefs ? Evidence from a simple survey By Clotilde Napp; Elyès Jouini; Selima Benmansour
  9. Characterizing the elephant: some thoughts on the future of cognitive style research   By Cools, E.; Van den Broeck, H.

  1. By: Khalil, Elias
    Abstract: The mirror-neuron system (MNS) becomes instigated when the spectator empathizes with the principal’s intention. MNS also involves imitation, where empathy is irrelevant. While the former may attenuate the principal’s emotion, the latter paradoxically reinforces it. This paper proposes a solution of the contradictory attenuation/reinforcement functions of fellow-feeling by distinguishing two axes: “rationality axis” concerns whether the action is efficient or suboptimal; “intentionality axis” concerns whether the intention is “wellbeing” or “evil.” The solution shows how group solidarity differs from altruism and fairness; how revulsion differs from squeamishness; how malevolence differs from selfishness; and how racial hatred differs from racial segregation.
    Keywords: Adam Smith; David Hume; Fellow-Feeling; Desire; Paris Hilton; Animal Rights; Comprehension; Understanding (empathy); Imitation; Status Inequality; Elitism; Authority; Pity: Obsequiousness; Racial Segregation; Racial Hatred; Rationality; Intentionality; Propriety; Impropriety; Revulsion; Stigler’s Crankcase Oil Problem; Social Preferences; Altruism; Assabiya (group solidarity); Fairness; Theory of Evil (spite/malevolence)
    JEL: D69 D01
    Date: 2007–06–11
  2. By: Piet Keizer
    Abstract: This article analyses the primary motives that set people in motion, namely the economic, the social and the psychic motive. By integrating the three basic analyses, we formulate an integrated paradigm and analysis that can flinction as a theoretical basis for a multidisciplinary economics. Orthodox economics analyses the force that results from the confrontation between humans and their natural environment. In such a situation humans are driven to maximise the utilities they derive from consuming scarce goods. Orthodox sociology analyses the force that results from the confrontation between (different groups of) humans. In such a situation humans are driven to maximise the status they derive from their position in the social structure, under the constraint of the norms that are set by the prevailing culture. Orthodox psychology analyses the force that results from the confrontation between the ‘I’ of a person and his ‘self. We distinguish between an actual and a true self The ‘I’ is a rational decision making centre that is assumed to minimise the difference between the actual self and the true self, thereby maximising the respect of the true self for the actual self (self-respect). The drive to maximize self-respect is contrianed by the limited power of the will. This article integrates the three orthodox approaches into one analytical process on the micro level and one on the macro level. Individuals operate in a cultural context, which is determined on the macro level, but have some discretionary room to take their own decisions.
    Keywords: Economic, Scarcity, Social, Status, Psychic, Self-Respect, Rational, Will-Power, Multi-Disciplinary Economics, Isolated Abstraction
    JEL: B4
    Date: 2007–03
  3. By: Jan Schnellenbach (University of Heidelberg, Department of Economics)
    Abstract: A popular argument about economic policy under uncertainty states that decentralisation offers the possibility to learn from local or regional policy experiments. We argue that such learning processes are not trivial and do not occur frictionlessly: Voters have an inherent tendency to retain a given stock of policy-related knowledge which was costly to accumulate, so that yardstick competition is improbable to function well particularly for complex issues if representatives’ actions are tightly controlled by the electorate. Decentralisation provides improved learning processes compared to unitary systems, but the results we can expect are far from the ideal mechanisms of producing and utilising knowledge often described in the literature.
    Keywords: Policy decentralisation; fiscal competition; model uncertainty; collective learning.
    JEL: H73 O31 D83
    Date: 2007–05
  4. By: Michael McBride (Department of Economics, University of California-Irvine)
    Abstract: The past decade has witnessed an explosion of interest in the scientific study of happiness. Economists, in particular, find that happiness increases in income but decreases in income aspirations, and this work prompts examination of how aspirations form and adapt over time. This paper presents results from the first experimental study of how multiple factors -- past payments, social comparisons, and expectations -- influence aspiration formation and reported satisfaction. I find that expectations and social comparisons significantly affect reported satisfaction, and that subjects care relatively more about social comparisons once they have achieved a satisfactory outcome. These findings support an aspirations-based theory of happiness.
    Keywords: Satisfaction; Happiness; Adaptation; Experiment
    JEL: C91 I31
    Date: 2007–03
  5. By: Holm, Claus (Department of Management Science and Logistics, Aarhus School of Business); Rikhardsson, Pall (Department of Management Science and Logistics, Aarhus School of Business)
    Abstract: This paper examines the effect of environmental information on the investment <p> decisions of investors. The motivation for the experimental design <p> applied in this study is that unless actual decision making is observed, <p> the potential usefulness of environmental information (or lack <p> thereof) cannot be taken for granted. The study is based on an experiment <p> where groups of investors (varied by experience) were asked to <p> make investment allocation decisions based on financial information and <p> on supplementary environmental information (varied between cases). As <p> an investment allocation decision (varied by investment horizons) the <p> groups were asked to allocate funds to two companies based on the available <p> information. The findings suggest that environmental information has <p> the potential to influence investment allocation decisions. The findings <p> also suggest that the influence of environmental information on investment <p> allocation decisions is mitigated by the variables considered explicitly <p> in this study, i.e., the investment horizon (varied as short and long) <p> and investor experience (varied as novice and experienced investor). It is <p> concluded that because allocation decisions are multifaceted problems, <p> mixed results related to the influence of environmental information should <p> be expected
    Keywords: Environmental reporting; Environmental disclosures; Allocation; Decision making; Investment horizon; Investors; Experiment;
    Date: 2006–06–14
  6. By: Nardon, L.; Aten, K.
    Abstract: Complex technologies develop within technological systems, which include, in addition to discrete technologies, organizations such as manufacturing firms and investment banks; scientific elements, such as teaching and research programs; and legislative elements, such as regulations. The tangible aspects of such technologies do not alone determine their end configuration or success; rather, social and cultural practices, expectations, and relationships influence the development of technologies just as technologies influence these factors. We argue that culture provides actors with logic principles with which to construct action, influencing the trajectory of the technological system development, in a reinforcing system of path dependency. We analyze the case of ethanol adoption in Brazil and find that Brazil’s adoption of an ethanol-fueled transportation system derives from a pattern of adaptation in response to salient issues. We argue that a unique characteristic of Brazilian culture, the Brazilian Jeitinho - a logic of action of adaptation - influenced the development of the Brazil’s ethanol-fueled transportation system.
    Date: 2007–06–15
  7. By: Taryn Dinkelman (Department of Economics, University of Michigan); James Levinsohn (University of Michigan Ford School of Public Policy and NBER); Rolang Majelantle (Department of Population Studies University of Botswana)
    Abstract: The spread of the HIV/AIDS epidemic is still fueled by ignorance in many parts of the world. Filling in knowledge gaps, particularly between men and women, is considered key to preventing future infections and to reducing female vulnerabilities to the disease. However, such knowledge is arguably only a necessary condition for targeting these objectives. In this paper, we describe the extent to which HIV/AIDS knowledge is correlated with less risky sexual behavior. We ask: even when there are no substantial knowledge gaps between men and women, do we still observe sex-specific differentials in sexual behavior that would increase vulnerability to infection? We use data from two recent household surveys in Botswana to address this question. We show that even when men and women have very similar types of knowledge, they have different probabilities of reporting safe sex. Our findings are consistent with the existence of non-informational barriers to behavioral change, some of which appear to be sex-specific. The descriptive exercise in this paper suggests that it may be overly optimistic to hope for reductions in risky behavior through the channel of HIV-information provision alone.
    JEL: I18 O10
    Date: 2006–07
  8. By: Clotilde Napp (DRM - Dauphine Recherches en Management - [CNRS : UMR7088] - [Université Paris Dauphine - Paris IX], CREST - Centre de Recherche en Économie et Statistique - [INSEE] - [ École Nationale de la Statistique et de l'Administration Économique]); Elyès Jouini (CEREMADE - CEntre de REcherches en MAthématiques de la DEcision - [CNRS : UMR7534] - [Université Paris Dauphine - Paris IX]); Selima Benmansour (DRM - Dauphine Recherches en Management - [CNRS : UMR7088] - [Université Paris Dauphine - Paris IX])
    Abstract: It is an important issue for economic and finance applications to determine whether individuals exhibit a behavioral bias toward pessimism in their beliefs, in a lottery or more generally in an investment opportunities framework. In this paper, we analyze the answers of a sample of 1,540 individuals to the following question: Imagine that a coin will be flipped 10 times. Each time, if heads, you win 10 Euros. How many times do you think that you will win? <br />The average answer is surprisingly about 3.9 which is below the average 5, and we interpret this as a pessimistic bias. We find that women are more "pessimistic" than men, as are old people relative to young. We also analyze how our notion of pessimism is related to more general notions of pessimism previously introduced in psychology.
    Keywords: pessimism; judged probability; lottery
    Date: 2007–06–06
  9. By: Cools, E.; Van den Broeck, H.
    Abstract: Considerable attention has been devoted to cognitive styles since the beginning of the previous century. Cognitive styles are extensively studied in diverse research domains. This large interest led to a wide diversity of cognitive style theories and studies. The development of the cognitive style field shows some similarity with the story of the ‘blind men and the elephant’, with researchers tending to study only one part of the whole, but none with full understanding. The aim of this article is to build further on previous suggestions for the advancement of the cognitive style field by focusing on six relevant, critical issues in the area of the theory, the measurement, and the practical relevance of cognitive styles: (1) the need for conceptual clarification to situate cognitive styles in the individual differences field, (2) the need for an overarching, contextualized individual differences model, (3) towards longitudinal, contextual research designs to find the origins of cognitive style, (4) the search for the fundamental cognitive style dimensions in the myriad of cognitive style models, (5) an evolution from self-report questionnaires to multi-source, multi-method approaches, and (6) bridging the relevance gap by different approaches of knowledge creation and knowledge dissemination. On the basis of an overview of past and present cognitive style research, we purport to suggest an agenda for future research in the field of cognitive styles. Ideally, cognitive style research evolves towards a ‘pragmatic science’, which combines high theoretical rigour with high practical relevance.
    Keywords: cognitive styles, review, future research agenda
    Date: 2007–06–16

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