nep-evo New Economics Papers
on Evolutionary Economics
Issue of 2007‒07‒07
five papers chosen by
Matthew Baker
City University of New York

  1. Markets vs. Politics, Correcting Erroneous Beliefs Differently By Martin Gregor
  2. Thinking categorically about others: A conjectural equilibrium approach By Azrieli, Yaron
  3. Behavioural Economics and Drinking Behaviour: Preliminary Results from an Irish College Study By Liam Delaney; Colm Harmon; Patrick Wall
  4. Naïve Learning in Social Networks: Convergence, Influence and Wisdom of Crowds By Matthew O. Jackson; Benjamin Golub
  5. The Economics, Technology and Neuroscience of Human Capability Formation By James J. Heckman

  1. By: Martin Gregor (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic)
    Abstract: In the fields of social choice, public choice and political economics, the main difference between private and political choice is whether individual preferences are aggregated to make a decision. A much less studied difference is whether beliefs are aggregated to make a decision. In this paper, we argue that the need for aggregation creates different incentives for belief updates in private and political choice. We review contemporary theories of biased beliefs in politics: Bayesian misperceptions, behavioral anomalies, and rational irrationality. We examine assumptions and consequences of all the approaches vis-à-vis issues of common knowledge, stability, symmetry, and multiplicity of stable states. As a route for further analysis, we construct an evolutionary model including a coordination failure. Differences in learning dynamics make the political play of this baseline game Pareto-inferior to the private play.
    Keywords: public choice; political economics; beliefs; learning;
    JEL: B53 D72 D83
    Date: 2007–06
  2. By: Azrieli, Yaron
    Abstract: Inspired by the social psychology literature, we study the implications of categorical thinking on decision making in the context of a large normal form game. Every agent has a categorization (partition) of her opponents and can only observe the average behavior in each category. A strategy profile is a Conjectural Categorical Equilibrium (CCE) with respect to a given categorization profile if every player's strategy is a best response to some consistent conjecture about the strategies of her opponents. We show that, for a wide family of games and for a particular categorization profile, every CCE becomes almost Nash as the number of players grows. An equivalence of CCE and Nash equilibrium is achieved in the settings of a non-atomic game. This highlights the advantage of categorization as a simplifying mechanism in complex environments. With much less information in their hands agents behave as if they see the full picture. Some properties of CCE when players categorize `non-optimally' are also considered.
    Keywords: Categorization; Conjectural equilibrium; Large games.
    JEL: D84 D81 C72
    Date: 2007–05–14
  3. By: Liam Delaney (University College Dublin); Colm Harmon (University College Dublin and IZA); Patrick Wall (University College Dublin)
    Abstract: This paper examines the results of single-equation regression models of the determinants of alcohol consumption patterns among college students modelling a rich variety of covariates including gender, family and peer drinking, tenure, personality, risk perception, time preferences and age of drinking onset. The results demonstrate very weak income effects and very strong effects of personality, peer drinking (in particular closest friend), time preferences and other substance use. The task of future research is to verify these results and assess causality using more detailed methods.
    Keywords: alcohol, peer effects, time preferences
    JEL: I12
    Date: 2007–06
  4. By: Matthew O. Jackson (Stanford University); Benjamin Golub (Division of the Humanities and Social Sciences)
    Abstract: We study learning and influence in a setting where agents communicate according to an arbitrary social network and naïvely update their beliefs by repeatedly taking weighted averages of their neighbors’ opinions. A focus is on conditions under which beliefs of all agents in large societies converge to the truth, despite their naïve updating. We show that this happens if and only if the influence of the most influential agent in the society is vanishing as the society grows. Using simple examples, we identify two main obstructions which can prevent this. By ruling out these obstructions, we provide general structural conditions on the social network that are sufficient for convergence to truth. In addition, we show how social influence changes when some agents redistribute their trust, and we provide a complete characterization of the social networks for which there is a convergence of beliefs. Finally, we survey some recent structural results on the speed of convergence and relate these to issues of segregation, polarization and propaganda.
    Keywords: Social Networks, Learning, Diffusion, Bounded Rationality
    JEL: D85 D83 A14 L14 Z13
    Date: 2007–06
  5. By: James J. Heckman
    Abstract: This paper begins the synthesis of two currently unrelated literatures: the human capital approach to health economics and the economics of cognitive and noncognitive skill formation. A lifecycle investment framework is the foundation for understanding the origins of human inequality and for devising policies to reduce it.
    JEL: I1 J24
    Date: 2007–06

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