nep-evo New Economics Papers
on Evolutionary Economics
Issue of 2009‒10‒17
eight papers chosen by
Matthew Baker
City University of New York

  1. Recent Developments in Evolutionary Biology and Their Relevance for Evolutionary Economics By Karin Knottenbauer
  2. Darwinism in Economics and the Evolutionary Theory of Policy-Making By Christian Schubert
  3. How Sapient is Homo Economicus? The Evolutionary Origins of Trade, Ethics and Economic Rationality By Kaushik Basu
  4. Evolutionary Stability of Prospect Theory Preferences By Marc Oliver Rieger
  5. Environmental options and technological innovation: an evolutionary game model By Angelo Antocii; Simone Borghesi; Marcello Galeotti
  6. Confusion and Reinforcement Learning in Experimental Public Goods Games By Ralph-C. Bayer; Elke Renner; Rupert Sausgruber
  7. The Causal Effects of Ethnic Diversity: An Instrumental Variables Approach By Ahlerup, Pelle
  8. The Place of Nature in Economic Development By Partha Dasgupta

  1. By: Karin Knottenbauer
    Abstract: The paper gives attention to the question of whether the development of evolutionary theories in biology over the last twenty years has any implications for evolutionary economics. Though criticisms of Darwin and the modern synthesis have always existed, most of them have not been widely accepted or have been absorbed by the mainstream. Recent findings in evolutio¬nary biology have started to question again the main principles of the modern synthesis. These findings suggest amongst others that the phenomena of co-operation, communication, and self-organization have been under¬estimated, and that selection is not the predominant factor of evolution, but only one among many. Thus, in evolutionary economics, the question is whether the popular variation-retention-selection principle is still up to date. The implications for evolutionary economics with respect to analogies, generalized Darwinism, and the continuity hypothesis are also addressed.
    Keywords: Analogies, evo-devo, evolutionary economics, evolutionary biology, co-operation, genes, Lamarckism, modern synthesis, neo-Darwinism, selection, self-organization Length 18 pages
    Date: 2009–09
  2. By: Christian Schubert
    Abstract: According to the advocates of a "Generalized Darwinism" (GD), the three core Darwinian principles of variation, selection and retention (or inheritance) can be used as a general framework for the development of theories explaining evolutionary processes in the socio­economic domain. Even though these are originally biological terms, GD argues that they can be re-defined in such a way as to abstract from biological particulars. We argue that this approach does not only risk to misguide positive theory development, but that it may also impede the construction of a coherent evolutionary approach to "policy implications". This is shown with respect to the positive, instrumental and normative theories such an approach is supposed to be based upon.
    Keywords: Evolution, Selection, Darwinism, Ontology, Continuity Hypothesis, Evolutionary Theory of Policy-Making Length 30 pages
    JEL: A1 B4 B52 D6
    Date: 2009–09
  3. By: Kaushik Basu
    Abstract: The paper argues that economism and, in particular, the individual drive to maximize utility and amass profit are not enough to ensure the efficient functioning of an economy; and that even for elementary economic activities, such as trade, exchange and contracting to occur smoothly, it is essential that human beings be endowed with appropriate social norms, such as a critical level of trustworthiness. This, in turn, implies that an economy’s development can depend significantly on whether the citizen is endowed with the relevant norms. Where these norms come from and how they gather stability remain open questions, though we can get some important insights from theories of evolutionary processes.
    Keywords: ecomism, economic rationality, profit, elementary economic, economy development, theories, economics, evolutionary processes trade, exchange, utility, human beings, rationality,
    Date: 2009
  4. By: Marc Oliver Rieger (Institute of Mathematical Economics, Bielefeld University)
    Abstract: We demonstrate that in simple 2 X 2 games (cumulative) prospect theory preferences can be evolutionarily stable, i.e. a population of players with prospect theory preferences can not be invaded by more rational players. This holds also if probability weighting is applied to the probabilities of mixed strategies. We also show that in a typical game with infinitely many strategies, the "war of attrition", probability weighting is evolutionarily stable. Finally, we generalize to other notions of stability. Our results may help to explain why probability weighting is generally observed in humans, although it is not optimal in usual decision problems.
    Keywords: prospect theory, existence of Nash equilibria, evolutionary stability
    JEL: C70 C73 D81
    Date: 2009–10
  5. By: Angelo Antocii (Universita' degli Studi di Sassari); Simone Borghesi (Universita' degli Studi di Siena); Marcello Galeotti (Dipartimento di Matematica per le Decisioni, Universita' degli Studi di Firenze)
    Abstract: This paper analyzes the effects on economic agents’ behaviour of an innovative environmental protection mechanism that the Public Administration of a tourist region may adopt to attract visitors while protecting the environment. On the one hand, the Public Administration sells to the tourists an environmental call option that gives them the possibility of being (partially or totally) reimbursed if the environmental quality in the region turns out to be unsatisfactory (i.e. below a given threshold level). On the other hand, it offers the firms that adopt an innovative, non-polluting technology an environmental put option that allows them to get a reimbursement for the additional costs imposed by the new technology if the environmental quality is sufficiently good (i.e. above the threshold level).The aim of the paper is to study the dynamics that arises with this financial mechanism from the interaction between the economic agents and the Public Administration in an evolutionary game context.
    Keywords: environmental bonds, call and put options, technological innovation, evolutionary dynamics
    JEL: C73 H23 Q55
    Date: 2009–10
  6. By: Ralph-C. Bayer; Elke Renner; Rupert Sausgruber
    Abstract: We use a limited information environment to mimic the state of confusion in an experimental, repeated public goods game. The results show that reinforcement learning leads to dynamics similar to those observed in standard public goods games. However, closer inspection shows that individual decay of contributions in standard public goods games cannot be fully explained by reinforcement learning. According to our estimates, learning only accounts for 41 percent of the decay in contributions in standard public goods games. The contribution dynamics of subjects, who are identified as conditional cooperators, differ strongly from the learning dynamics, while a learning model estimated from the limited information treatment tracks behavior for subjects, who cannot be classified as conditional cooperators, reasonably well.
    Keywords: public goods experiments, learning, limited information, confusion, conditional cooperation
    JEL: C90 D83 H41
    Date: 2009–09
  7. By: Ahlerup, Pelle (Department of Economics, School of Business, Economics and Law, Göteborg University)
    Abstract: Ethnic diversity is endogenous to economic development in the long run. Yet the standard approach in economic research is to treat ethnic diversity as an exogenous factor. By identifying instruments for ethnic diversity, we correct this misspeci ca- tion and establish that ethnic diversity has an exogenous in uence on income levels, economic growth, corruption, and provision of public goods. Earlier results based on OLS estimations may have underestimated the negative e¤ects of high levels of ethnic diversity.<p>
    Keywords: economic development; ethnic diversity; instrumental variables; property rights
    JEL: O11 O43 P51
    Date: 2009–10–05
  8. By: Partha Dasgupta
    Abstract: Review of the most salient issues in ecological economics when the subject is applied to the field of economic development. The aim here has not been to be scholastic but to examine the lives of the world's poor so as to unearth the role of natural capital there. An account here of the processes that characterise human-nature interactions reads differently from the accounts in recent surveys of both development economics and environmental and resource economics are given. [SANDEE]
    Keywords: rural institutions, pollute, ecological economics, economic development, natural capital, human, nature, development econmics, environmental, resource, poor,
    Date: 2009

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