nep-evo New Economics Papers
on Evolutionary Economics
Issue of 2010‒09‒11
ten papers chosen by
Matthew Baker
City University of New York

  1. On the evolution of prize perceptions in contests By Boudreau, James W.; Shunda, Nicholas
  2. Trust is bound to emerge (In the repeated Trust Game) By Luciano Andreozzi
  3. Are Income and Consumption Taxes Ever Really Equivalent? Evidence from a Real-Effort Experiment with Real Goods By Blumkin, Tomer; Ruffle, Bradley; Ganun, Yosef
  4. Can Joe the Plumber Support Redistribution? Law, Social Preferences, and Sustainable Policy Design By Lester, Gillian
  5. Theory, Experimental Design and Econometrics Are Complementary (And So Are Lab and Field Experiments) By Glenn W. Harrison; Morten Lau; E. Elisabet Rutström
  6. Strategic Ignorance and the Robustness of Social Preferences By Grossman, Zachary
  7. Preferences for Redistribution and Pensions: What Can We Learn from Experiments? By Tausch Franziska; Potters Jan; Riedl Arno
  8. Estimating Subjective Probabilities By Steffen Andersen; John Fountain; Glenn W. Harrison; E. Elisabet Rutström
  9. The Methodologies of Neuroeconomics By Glenn Harrison; Don Ross
  10. The productivity of trust By Christian Bjørnskov; Pierre-Guillaum Meon

  1. By: Boudreau, James W.; Shunda, Nicholas
    Abstract: We apply an indirect evolutionary approach to players' perceived prize valuations in contests. Evolution in finite populations leads to preferences that overstate the prize's material value and induce overexpenditure. We establish an equivalence between the behavior evolutionarily stable preferences induce and evolutionarily stable strategies.
    Keywords: Contest; Prize valuation; Preference evolution; Evolutionarily stable preferences
    JEL: D74 D72 C72 C73
    Date: 2010–08–25
  2. By: Luciano Andreozzi
    Abstract: This paper addresses the emergence of cooperation in asymmetric pris- oners' dilemmas in which one player chooses after having observed the other player's choice (Trust Game). We use the finite automata approach with complexity costs to study the equilibria of the repeated version of this game. We show that there is a small set of automata that form the unique Closed Under Rational Behavior (CURB) set for this game. This set contains two non-strict Nash equilibria, a cooperative and a non- cooperative one. We show that the cooperative equilibrium is the only (cyclically) stable set under the so called Best Response Dynamics.
    JEL: C70 C72
    Date: 2010
  3. By: Blumkin, Tomer (Ben Gurion University); Ruffle, Bradley (Ben Gurion University); Ganun, Yosef (Ben Gurion University)
    Abstract: The public finance literature demonstrates the equivalence between consumption and labor-income (wage) taxes. We introduce an experimental paradigm in which individuals make real labor-leisure choices and spend their earned income on real goods. We use this paradigm to test whether a labor-income tax and an equivalent consumption tax lead to identical labor-leisure allocations. Despite controlling for subjects’ work ability and inherent labor-leisure preferences and disallowing saving, subjects reduce their labor supply significantly more in response to an income tax than to an equivalent consumption tax. We discuss the economic implications of a policy shift to a consumption tax.
    Keywords: experimental economics, tax equivalence, income tax, consumption tax, behavioral economics
    JEL: C91 H22 H31
    Date: 2010–08
  4. By: Lester, Gillian
    Abstract: This article explores how to build political support for law reform designed to achieve economic redistribution. Specifically, I analyze and compare reforms that aim to redistribute by targeting benefits at low-income individuals through an income or means test, versus those that emphasize “universal†allocation of benefits, not conditioned on poverty. I argue that notwithstanding that we should expect universal provision (by definition) to achieve less redistribution than means testing, universalist policies ultimately may be more effective in achieving this goal because they are likely to be more politically durable, and–more intriguingly—to create social conditions that increase toleration for redistribution. I support this argument by drawing upon the growing body of research in psychology and economics suggesting that people have a mixture of self-regarding and other-regarding impulses, and that some forms of social organization are more likely than others to elicit pro-social behavior. Universalist programs, I argue, plausibly increase preferences for redistribution by tapping social norms of reciprocity, generating group identity effects based on a sense of common vulnerability, and serving as a “policy frame†that de-emphasizes the salience of low-income people as an undeserving “out-group.†I use a case study of recent social insurance legislation as a springboard for developing an empirical research agenda that would help evaluate the strength of my thesis. The analysis offered by this article has implications for contemporary intellectual debates in such areas as tax policy, public finance, behavioral law and economics, distributive justice, law and psychology, health law.
    Date: 2010–02–22
  5. By: Glenn W. Harrison; Morten Lau; E. Elisabet Rutström
    Abstract: Experiments are conducted with various purposes in mind including theory testing, mechanism design and measurement of individual characteristics. In each case a careful researcher is constrained in the experimental design by prior considerations imposed either by theory, common sense or past results. We argue that the integration of the design with these elements needs to be taken even further. We view all these elements that make up the body of research methodology in experimental economics as mutually dependant and therefore take a systematic approach to the design of our experimental research program. Rather than drawing inferences from individual experiments or theories as if they were independent constructs, and then using the findings from one to attack the other, we recognize the need to constrain the inferences from one by the inferences from the other. Any data generated by an experiment needs to be interpreted jointly with considerations from theory, common sense, complementary data, econometric methods and expected applications. We illustrate this systematic approach by reference to a research program centered on large artefactual field experiments we have conducted in Denmark. An important contribution that grew out of our work is the complementarity between lab and field experiments.
    Date: 2010–09
  6. By: Grossman, Zachary
    Abstract: How robust are social preferences to variations in the environment in which a decision is made? By varying the elicitation method and default choice in the `moral wiggle-room' game of Dana, Weber, and Kuang (2007), I examine the robustness and nature of the pattern of information avoidance in which many dictators in experiments-- if initially uncertain-- avoid learning whether their choice will help or hurt another person and choose selfishly. When ignorance is not the default choice, participants choose it much less frequently. However, when dictators express their outcome choice using the strategy method, most are willing to overcome the default choice and reveal the payoff state ex post. I conclude that people will employ strategic ignorance to avoid a morally-fraught decision if they can do so passively, but having to actively choose ignorance betrays its usefulness and leads to behavior largely consistent with models of preferences over outcomes. Thus while opportunities to create and exploit moral wiggle-room limit fair-minded behavior, environmental or psychological variables may reinforce the motivation that leads people to choose fair outcomes.
    Keywords: social preferences, strategic ignorance, moral wiggle-room, default effects, status quo bias, self- deception, self-signaling, dictator games
    Date: 2010–08–12
  7. By: Tausch Franziska; Potters Jan; Riedl Arno (METEOR)
    Abstract: Redistribution is an inevitable feature of collective pension schemes and economic experiments have revealed that most people have a preference for redistribution that is not merely inspired by self-interest. Interestingly, little is known on how these preferences interact with preferences for different pension schemes. In this paper we review the experimental evidence on preferences for redistribution and suggest some links to redistribution through pensions. For that purpose we distinguish between three types of situations. The first deals with distributional preferences behind a veil of ignorance. In the second type of situation, individuals make choices in front of the veil of ignorance and know their position. Finally, we discuss situations in which income is determined by interdependent rather than individual choices. In the closing parts of the paper we discuss whether and how these experimental results speak to the redistribution issues of pensions. For example, do they argue for or against mandatory participation? Should we have less redistribution and more actuarial fairness? How does this depend on the type of redistribution involved?Keywords: redistribution, fairness, pension, insurance, experiment
    Keywords: public economics ;
    Date: 2010
  8. By: Steffen Andersen; John Fountain; Glenn W. Harrison; E. Elisabet Rutström
    Abstract: Subjective probabilities play a role in many economic decisions. There is a large theoretical literature on the elicitation of subjective probabilities, and an equally large empirical literature. However, there is a gulf between the two. The theoretical literature proposes a range of procedures that can be used to recover subjective probabilities, but stresses the need to make strong auxiliary assumptions or "calibrating adjustments" to elicited reports in order to recover the latent probability. With some notable exceptions, the empirical literature seems intent on either making those strong assumptions or ignoring the need for calibration. We illustrate how the joint estimation of risk attitudes and subjective probabilities using structural maximum likelihood methods can provide the calibration adjustments that theory calls for. This allows the observer to make inferences about the latent subjective probability, calibrating for virtually any well-specified model of choice under uncertainty. We demonstrate our procedures with experiments in which we elicit subjective probabilities. We calibrate the estimates of subjective beliefs assuming that choices are made consistently with expected utility theory or rank-dependent utility theory. Inferred subjective probabilities are significantly different when calibrated according to either theory, thus showing the importance of undertaking such exercises. Our findings also have implications for the interpretation of probabilities inferred from prediction markets.
    Date: 2010–09
  9. By: Glenn Harrison; Don Ross
    Abstract: We critically review the methodological practices of two research programs which are jointly called 'neuroeconomics'. We defend the first of these, termed 'neurocellular economics' (NE) by Ross (2008), from an attack on its relevance by Gul and Pesendorfer (2008) (GP). This attack arbitrarily singles out some but not all processing variables as unimportant to economics, is insensitive to the realities of empirical theory testing, and ignores the central importance to economics of 'ecological rationality' (Smith 2007). GP ironically share this last attitude with advocates of 'behavioral economics in the scanner' (BES), the other, and better known, branch of neuroeconomics. We consider grounds for skepticism about the accomplishments of this research program to date, based on its methodological individualism, its ad hoc econometrics, its tolerance for invalid reverse inference, and its inattention to the difficulties involved in extracting temporally lagged data if people's anticipation of reward causes pre-emptive blood flow.
    JEL: A12 B41 C51 C81 C91 D87
    Date: 2010–09
  10. By: Christian Bjørnskov; Pierre-Guillaum Meon
    Abstract: This paper returns to one of the early questions of the literature on social trust, whether trust affects total factor productivity (TFP). Using both development and growth accounting, we find strong evidence of a causal effect of trust on the level and growth of TFP. Using a three-stage least-squares procedure, we moreover observe that the effect of trust on TFP runs entirely through property-rights institutions and not political institutions. Those findings resist a series of robustness checks.
    Keywords: Total factor productivity; Social trust
    JEL: Z13
    Date: 2010–08

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