nep-evo New Economics Papers
on Evolutionary Economics
Issue of 2010‒04‒04
eight papers chosen by
Matthew Baker
City University of New York

  1. Constrained Interactions and Social Coordination By Mathias Staudigl; Simon Weidenholzer
  2. On Non-binary Personal Preferences in Society, Economic Theory and Racial Discrimination By Naqvi, Nadeem
  3. In Vino Veritas: The Economics of Drinking By Jan Heufer
  4. Economic Policies, Socieconomic Factors and Overall Health: A Short Review By Drakopoulos, Stavros A.
  5. Inconsistency of fairness evaluation in simulated labot market. By Ch'ng , Kean Siang; Loke, Yiing Jia
  6. Why do People Punish the Rule Breakers?: The Sustainability of Social Norms By Singh, Indervir
  7. School Attendance and Child Labor - A Model of Collective Behavior By Strulik, Holger
  8. Overconfidence is a Social Signaling Bias By Burks, Stephen V.; Carpenter, Jeffrey P.; Goette, Lorenz; Rustichini, Aldo

  1. By: Mathias Staudigl; Simon Weidenholzer
    Abstract: We consider a co-evolutionary model of social coordination and network formation whereagents may decide on an action in a 2 £ 2- coordination game and on whom to establish costly links to. We ¯nd that a payo® dominant convention is selected for a wider parameter range when agents may only support a limited number of links as compared to a scenario where agents are not constrained in their linking choice. The main reason behind this result is that constrained interactions create a tradeo® between the interactions an agent has and those he would rather have. Further, we discuss convex linking costs and provide su±cient conditions for the payo® dominant convention to be selected in m£m coordination games.
    JEL: C72 D83
    Date: 2010–03
  2. By: Naqvi, Nadeem
    Abstract: This paper examines some of the consequences for economic theory of the replacement of binary personal preferences by non-binary personal preferences in an Arrow-Debreu society as in Debreu (1959), and reaches the conclusion that there is both much damage to existing theory and greater opportunity for providing formal explanations of such phenomena as discrimination, personal freedoms and power, among others, which are impossible to explain at a formal level on the basis of an economic theory that is founded on a choice theory that is based exclusively on binary relational personal preferences.
    Keywords: Choice theory; decision theory; preference; binary relational logic; non-binary relational logic; utility function; expected utility; game theory; theory of value; discrimination; race; gender
    JEL: E0 D0 B0 C0 J0
    Date: 2010–03–20
  3. By: Jan Heufer
    Abstract: It is argued that drug consumption, most commonly alcohol drinking, can be a technology to give up some control over one’s actions and words. It can be employed by trustworthy players to reveal their type. Similarly alcohol can function as a “social lubricant” and faciliate type revelation in conversations. It is shown that both separating and pooling equilibria can exist; as opposed to the classic results in the literature, a pooling equilibrium is still informative. Drugs which allow a gradual loss of control by appropriate doses and for which moderate consumption is not addictive are particularly suitable because the consumption can be easily observed and reciprocated and is unlikely to occur out of the social context. There is a tradeoff between the effi ciency gains due to the signaling eff ect and the loss of productivity associated with intoxication. Long run evolutionary equilibria of the type distribution are considered. If coordination on an exclusive technology is effi cient, social norms or laws can raise effi ciency by legalizing only one drug.
    Keywords: Asymmetric Information, Drinking, Drug Consumption, Signaling, Social Norms
    JEL: C72 D82
    Date: 2009–12
  4. By: Drakopoulos, Stavros A.
    Abstract: Many researchers have found that socioeconomic factors play a crucial role in determining physiological and psychological health levels of the population. This implies that socioeconomic inequalities tend to produce health inequalities. It is also generally accepted that the level of unemployment, income inequality and poverty levels are largely affected by economic policies and the economic cycles. They can also influence economic growth, human capital levels and thus productivity which play an important role on health inequalities. Economic policies can also influence the occurrence, frequency, duration and the strength of economic cycles which in turn influence socioeconomic factors and therefore health inequalities. Thus, this short review will discuss the conduct and the effects of economic policy on health inequalities especially during recessionary periods. The paper starts with a discussion of the need and of the instruments of economic policy and also its effectiveness in smoothing the economic cycle. It also examines the interplay between main policy targets such as unemployment and inflation with political considerations. Finally, it concentrates on the effects of economic policies for health inequalities in view of economic recessions.
    Keywords: Economic Policy; Health; Socio-economics
    JEL: H5 I1
    Date: 2010–03
  5. By: Ch'ng , Kean Siang; Loke, Yiing Jia
    Abstract: Reciprocal behavior was often explained by perception of fairness derived from either agents’ intention or distributional outcome. In this paper, we demonstrated that fairness perception depended on the evaluability of the partner’s type. We conducted experiments to investigate how workers formed fairness perception on the employers. We found inconsistency in fairness evaluation in the two simulated worker-employer relations; workers derived fairness by comparing own wage with market wage in a one shot interaction, but workers derived fairness based on current and previous wage when interacting with same employer. The reversal of fairness perception suggested the role of evaluability of partners’ attribute in effort decision among workers.
    Keywords: Preference reversal; reciprocity; gift exchange; evaluability hypothesis;experiment.
    JEL: D86 B21 C92
    Date: 2010–01
  6. By: Singh, Indervir
    Abstract: This paper attempts to provide reasons for sustainability of social norms by considering internalization as the basic motivation behind the punishment behavior. A society requires people to implant the social norms in others, and punishing the rule breaker provides a person utility by letting him feel good through fulfilling his responsibility. The responsibility increases with closeness of relationship, therefore relatives and friends tend to punish the rule breaker harder. The breaking of a norm also acts as a 'bad name' for rule breaker's relatives and friends, which, further, prompts them to punish him. Since, punishing the rule breaker also benefits non-punishers, some people may start selling the punishment activity, if the benefited people, due to their internalization of the norm, pay punishers in the form of money, support etc.
    Keywords: social norms; internalization; bad name; power asymmetry
    JEL: D02 Z13
    Date: 2010
  7. By: Strulik, Holger
    Abstract: This paper theoretically investigates how community approval or disapproval affects school attendance and child labor and how aggregate behavior of the community feeds back towards the formation and persistence of an anti- (or pro-) schooling norm. The proposed community-model continues to take aggregate and idiosyncratic poverty into account as an important driver of low school attendance and child labor. But it provides also an explanation for why equally poor villages or regions can display different attitudes towards schooling. Distinguishing between three different modes of child time allocation, school attendance, work, and leisure, the paper shows how the time costs of schooling and child labor productivity contribute to the existence of a locally stable anti-schooling norm. It proposes policies that effectively exploit the social dynamics and initiate a permanent escape from the anti-schooling equilibrium. An extension of the model explores how an education contingent subsidy paid to the poorest families of a community manages to initiate a bandwagon effect towards "education for all". The optimal mechanism design of such a targeted transfer program is investigated.
    Keywords: School Attendance, Child Labor, Social Norms, Targeted Transfers
    JEL: I20 I29 J13 O12
    Date: 2010–02
  8. By: Burks, Stephen V. (University of Minnesota, Morris); Carpenter, Jeffrey P. (Middlebury College); Goette, Lorenz (University of Lausanne); Rustichini, Aldo (University of Minnesota)
    Abstract: Evidence from psychology and economics indicates that many individuals overestimate their ability, both absolutely and relatively. We test three different theories about observed relative overconfidence. The first theory notes that simple statistical comparisons (for example, whether the fraction of individuals rating own skill above the median value is larger than half) are compatible (Benoît and Dubra, 2007) with a Bayesian model of updating from a common prior and truthful statements. We show that such model imposes testable restrictions on relative ability judgments, and we test the restrictions. Data on 1,016 individuals' relative ability judgments about two cognitive tests rejects the Bayesian model. The second theory suggests that self-image concerns asymmetrically affect the choice to get new information about one’s abilities, and this asymmetry produces overconfidence (Kőszegi, 2006; Weinberg, 2006). We test an important specific prediction of these models: individuals with a higher belief will be less likely to search for further information about their skill, because this information might make this belief worse. Our data also reject this prediction. The third theory is that overconfidence is induced by the desire to send positive signals to others about one’s own skill; this suggests either a bias in judgment, strategic lying, or both. We provide evidence that personality traits strongly affect relative ability judgments in a pattern that is consistent with this third theory. Our results together suggest that overconfidence in statements is most likely to be induced by social concerns than by either of the other two factors.
    Keywords: IQ, field experiment, social signaling, self-image, Bayesian updating, overconfidence, numeracy, personality, MPQ
    JEL: D83 C93
    Date: 2010–03

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