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on Cognitive and Behavioural Economics |
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Issue of 2022‒06‒27
eight papers chosen by Marco Novarese Università degli Studi del Piemonte Orientale |
| By: | Kelishomi, Moghaddasi Ali (Loughborough University); Sgroi, Daniel (University of Warwick) |
| Abstract: | We find a strong relationship between risk-loving preferences and cognitive ability which becomes stronger as adherence to the generalized axiom of revealed preference (a proxy for rationality) increases. Our results are taken from a field study of individuals at the very bottom of the income distribution in a developing nation. Our results for some of the poorest in the world support recent findings drawn from subjects in wealthy Western nations, suggesting there may be a stable relationship between risk preferences and cognitive ability for the human population as a whole irrespective of socio-economic status. |
| Keywords: | risk, cognitive ability, rationality, generalized axiom of revealed preference, field experiment, low incomes, developing nation |
| JEL: | I11 I12 I18 C93 D03 |
| Date: | 2022–04 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp15266&r= |
| By: | Blattman, Christopher (University of Chicago); Sheridan, Margaret A. Ph.D.; Jamison, Julian C.; Chaskel, Sebastian |
| Abstract: | In most societies, a small number of people commit most of the serious crimes and violence. Short-term studies have shown that cognitive behavioral therapy (CBT) can reduce such antisocial behaviors. There are some signs that these behavior changes may be temporary, however, especially from therapy on its own. This is unsettled, however, for there has been little randomized and long-term research on the question. We follow 999 high-risk men in Liberia 10 years after randomization into one of four arms: 8 weeks of a low-cost therapy; a \$200 cash grant; both therapy and cash; or a control group. Together, the two interventions cost just \$530 to deliver. We find that, a decade later, both therapy alone and therapy with economic assistance produce dramatic reductions in antisocial behaviors. Reported drug-selling and participation in thefts and robberies, for example, fall by about half. These impacts are greatest among the very highest-risk men. The effects of therapy alone, however, are somewhat smaller and more fragile. The effects of therapy plus economic assistance are more sustained and precise. Since the cash did not increase earnings for more than a few months after the grants, we hypothesize that the grant, and those few months of legitimate business activity, reinforced the learning-by-doing and habit formation embodied in CBT. Overall, the results suggest that highly-targeted CBT plus economic assistance could be an inexpensive and effective way to prevent violence, especially when policymakers are searching for alternatives to aggressive policing and incarceration. |
| Date: | 2022–05–16 |
| URL: | http://d.repec.org/n?u=RePEc:osf:socarx:q85ux&r= |
| By: | Congiu, Luca; Moscati, Ivan |
| Abstract: | In 2008, the behavioral economist Richard Thaler and the legal scholar Cass Sunstein published a book in which they advocated a novel approach to public policy based on the notion of a “nudge.” Roughly speaking, a nudge is an intervention in the decisional context that steers people's decisions by acting on their cognitive biases. The notion of a nudge generated an intense debate across different disciplines and proved popular with many policy makers around the world. The present article reviews the debate and research on nudges by focusing on three main dimensions: (1) the exact definition of nudges; (2) the justification of nudge policies, with a focus on “libertarian paternalism”; and (3) the effectiveness of nudges, both over time and in comparison with standard policies. |
| Keywords: | behavioral welfare economics; boosts; bounded rationality; libertarian paternalism; nudge |
| JEL: | D01 D90 M31 |
| Date: | 2022–02–01 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:115134&r= |
| By: | De Chiara, Alessandro; Engl, Florian (Universität Regensburg); Herz, Holger; Manna, Ester (Universitat de Barcelona) |
| Abstract: | Companies typically control various aspects of their workers' behaviors. In this paper, we investigate whether the hierarchical distance of the superior who imposes such control measures matters for the workers' ensuing reaction. In particular, we test, in a laboratory experiment, whether potential negative behavioral reactions to imposed control are larger when they are implemented by a direct superior rather than a hierarchically more distant superior. We find that hierarchical proximity indeed magni es such control aversion and discuss several potential channels for this result. |
| Keywords: | Control Aversion; Hierarchies; Delegation; Principal-Agent-Problem |
| JEL: | C92 D23 M12 |
| Date: | 2022–06–03 |
| URL: | http://d.repec.org/n?u=RePEc:fri:fribow:fribow00527&r= |
| By: | Christopher Blattman; Sebastian Chaskel; Julian C. Jamison; Margaret Sheridan |
| Abstract: | In most societies, a small number of people commit the most serious violence. Short-term studies have shown that cognitive behavioral therapy (CBT) can reduce such antisocial behaviors. These behavior changes may be temporary, however, especially from therapy on its own. This is unsettled, however, for there has been little randomized, long-term research. We follow 999 high-risk men in Liberia 10 years after randomization into either: 8 weeks of a therapy; a $200 grant; both; or a control group. A decade later, both therapy alone and therapy with economic assistance produce dramatic reductions in antisocial behaviors. Drug-selling and participation in thefts and robberies, for example, fall by about half. These impacts are greatest among the highest-risk men. The effects of therapy alone, however, are smaller and more fragile. The effects of therapy plus economic assistance are more sustained and precise. Since the cash did not increase earnings for more than a few months, we hypothesize that the grant, and the brief legitimate business activity, reinforced the habit formation embodied in CBT. Overall, results suggest that targeted CBT plus economic assistance is an inexpensive and effective way to prevent violence, especially when policymakers are searching for alternatives to aggressive policing and incarceration. |
| JEL: | D83 K42 O15 O17 |
| Date: | 2022–05 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:30049&r= |
| By: | Gary Charness; Giovanni Di Bartolomeo; Stefano Papa |
| Abstract: | Social identity and communication are topics of increasing interest in management science. One's social identity tends to lead one to favor those belonging to one's group; this in-group bias may lead to problematic relationships. At the same time, communication has been found to have beneficial social consequences in controlled laboratory experiments. An important question is whether communication, by signaling a meeting of the minds, can improve trust and therefore outcomes between out-group members. We construct a simple weak mechanism of group favoritism that does in fact show in-group favoritism. When both paired individuals, one of whom will become the dictator, promise to make the pro-social dictator choice if they become dictator, favorable behavior is much more likely in all cases. But there is an intriguing pattern across group membership concerning the degree of improvement: Without mutual promises, people make more favorable choices for in-group members. Interestingly, this gap is eliminated by such promises. In this sense, strangers become partners. |
| Keywords: | Social identity; In-group bias; Communication; Exogenous variation |
| JEL: | A13 C91 D03 D64 D90 |
| Date: | 2022–06 |
| URL: | http://d.repec.org/n?u=RePEc:sap:wpaper:wp221&r= |
| By: | Julia M. Puaschunder (The New School, New York, USA) |
| Abstract: | Advances in Behavioral Economics and Finance Leadership are likely to show these three speculative trends and focus attention on: Ethics of Inclusion in the wake of social justice pledges will demand a comparative approach to understand the most contemporary responsibility challenges of our time. With the COVID-19 pandemic having exacerbated existing inequalities and rising new gaps within society, inequality alleviation will become essential in the post-COVID-19 era in the domains of access to affordable healthcare, finance, education, digitalization and sharing the burden to protect the environment. Law and Economics developments may aid in envisioning a transition to a more inclusive society. While the legal analysis grants insights about the disparate impact of policies, the economic analysis allows to study efficiency of burden sharing over time and with consideration of externalities. Digitalization offers unprecedented human advancement and democratization potential free from corruption. At the same time, shifting marketplaces to online virtual spaces opens gates for misinformation and disinformation being used in a competitive sense. Ethics of inclusion, Law and Economics advocacy and interdisciplinary dialogue building but also human-artificial intelligence algorithm compatibility are expected to become key advancements in behavioral economics and finance leadership of the future. |
| Keywords: | Artificial Intelligence, AI, Behavioral Economics, Coronavirus, COVID-19, Digitalization, Education, Environment, Finance, Finance Leadership, |
| Date: | 2021–12 |
| URL: | http://d.repec.org/n?u=RePEc:smo:lpaper:0140&r= |
| By: | Alexander J. Stewart; Nichola Raihani |
| Abstract: | Stereotypes are generalized beliefs about groups of people, which are used to make decisions and judgments about them. Although such heuristics can be useful when decisions must be made quickly, or when information is lacking, they can also serve as the basis for prejudice and discrimination. In this paper we study the evolution of stereotypes through group reciprocity. We characterize the warmth of a stereotype as the willingness to cooperate with an individual based solely on the identity of the group they belong to. We show that when stereotypes are coarse, such group reciprocity is less likely to evolve, and stereotypes tend to be negative. We also show that, even when stereotypes are broadly positive, individuals are often overly pessimistic about the willingness of those they stereotype to cooperate. We then show that the tendency for stereotyping itself to evolve is driven by the costs of cognition, so that more people are stereotyped with greater coarseness as costs increase. Finally we show that extrinsic "shocks", in which the benefits of cooperation are suddenly reduced, can cause stereotype warmth and judgement bias to turn sharply negative, consistent with the view that economic and other crises are drivers of out-group animosity. |
| Date: | 2022–05 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2205.12652&r= |